MEMORANDUM

TO: Record

FROM: Karen Milam, U.S. EPA, Office of Water (OW)

DATE: June 10th, 2016

SUBJECT: Summary of EPA Economics and Cost Approach for the Pretreatment 

Standards for Unconventional Oil and Gas Extraction Wastewater

(SGE01356).

Generally, with an Effluent Limitation Guideline and Standards rulemaking, a comprehensive 

cost analysis document (usually called a regulatory impact analysis document) accompanies the 

rule and preamble. As explained below, there is no need for such a comprehensive cost analysis

document here. However, EPA finds it appropriate to document the considerations that EPA 

used to conclude that this a zero discharge standard for this rulemaking is economically

achievable. Therefore, this memo summarizes EPA’s economic analysis for the Pretreatment 

Standards for Unconventional Oil and Gas Extraction wastewater. 

EPA cost analysis for Pretreatment Standards for Existing Sources (PSES):

The CWA section 301(b)(2)(A) requires that the technology basis for Best Available Technology 

(BAT) be “economically achievable,” among other factors. Categorical pretreatment standards 

for existing sources are technology-based and are analogous to Best Practicable Control 

Technology (BPT) and BAT effluent limitations guidelines, and thus the Agency typically 

considers the same factors in promulgating Pretreatment Standards for Existing Sources (PSES)

for toxic and non-conventional pollutants as it considers in promulgating BPT or BAT. See

Natural Resources Defense Council v. EPA, 790 F.2d 289, 292 (3rd Cir. 1986). Because these 

sources discharge toxic and nonconventional pollutants and are thus subject to BAT-based limits 

under CWA section 301(b)(2)(A), EPA considered the appropriate BAT factors – including 

economic achievability – in establishing PSES in this final rule.

The first step in determining whether a technology basis is economically achievable is an 

estimate of the incremental costs associated with applying that technology basis throughout the 

industry. Incremental costs are the costs for the regulation or policy action that constitute a 

change from the current world absent the proposed regulation or policy action (i.e., baseline). 

According to EPA’s December, 2010, Guidelines For Preparing Economic Analyses, section 5.1, 

“A baseline is defined as the best assessment of the world absent the proposed regulation or 

policy action.” Based on this description, the demarcation between the baseline and future state 

is the ‘regulation or policy action’ for which the economic analysis is being conducted. 

Based on the information reviewed as part of this rulemaking, the current world absent the 

regulation is that UOG operators do not send wastewater to POTWs. The regulation establishes a 

zero discharge standard (prohibiting discharge of pollutants in UOG wastewater to POTWs). 
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June 10, 2016

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Therefore, because industry does not currently discharge UOG wastewaters to POTWs, and the 

final rule is a zero discharge standard, the incremental cost for the final rulemaking is $0.

Accordingly, because industry is already meeting this requirement, no facilities will incur 

incremental costs for compliance with the promulgated PSES and, therefore, the promulgated 

PSES is economically achievable. 

EPA cost analysis for Pretreatment Standards for New Sources (PSNS):

In establishing Pretreatment Standards for New Sources (PSNS), the Agency typically considers 

the same factors as it considers in promulgating New Source Performance Standards (NSPS), 

which are based on Best Available Demonstrated Control Technology (BADCT), analogously to 

considering BPT and BAT in setting PSES. In establishing NSPS, EPA is required to “take into 

consideration” the cost of achieving effluent reductions. CWA Section 306(b)(1)(B). 

EPA has no data to suggest that the zero discharge requirement will be a barrier to entry for 

unconventional oil and gas producers. As explained in the preamble, there are multiple 

management alternatives to achieve zero discharge of pollutants in UOG wastewater and EPA 

has no data in the record, including comments, indicating that these alternatives would not 

continue to be available in the future. Although some commenters have suggested that zero 

discharge alternatives may not be available in the future, they did not provide any specific data 

supporting such statements. Such unsupported conjecture is not sufficient to refute EPA’s 

considered findings that – in light of the multiple options currently available for meeting zero 

discharge requirements, and factors suggesting the continued availability of such options across 

the industry – even if a particular zero discharge option was limited in a particular location or at 

a particular time for a particular facility, new sources would continue to have options available 

for meeting zero discharge requirements in the future. There is certainly no data in the record to 

suggest that all current zero discharge options would somehow be curtailed for new sources in 

the future. In addition, EPA has no data in the record, including comments, that future costs 

would be different. In addition, given that existing facilities already meet the zero discharge 

standard, new facilities would likewise be able to meet this standard at no cost disadvantage to 

existing facilities. EPA therefore determined that the final rule would not present a barrier to 

entry for new sources. 

Cost information in EPA’s record:

Although the previous sections explain how EPA determined that a zero discharge standard has 

an incremental cost of $0, this does not mean that EPA did not collect cost information, only that 

a comprehensive cost analysis was not needed to determine economic achievability. EPA’s 

record does contain cost figures for technologies and zero discharge wastewater management 

alternatives (e.g., underground injection control). Most of these cost numbers are collected in the 

Treatment Technology Report (DCN SGE01186). These costs consist of values reported by 

vendors, UOG operators, CWT operators, and in the literature. The costs are sometimes reported 

as a ball park number; may include a company’s amortization of capital costs with O&M added 

on (where the amortization rate or amortization period are not reported); and may be reported as 
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June 10, 2016

Page 3

a rental cost which may or may not include the full capital costs of the technology. These costs 

are not be comparable since there are regional differences and the data represents differing 

timeframes from 2005 through 2011. More details on the cost data collected by EPA is provided 

in the report and in the original sources, all of which are in the record for the rule. 

UOG Industry Profile Consideration:

EPA is aware of the two-year decrease in the price of oil and the 8-year decrease in the price of 

natural gas (based on the peak in price of natural gas in 2008) and the negative impact the 

depressed prices has had on the financial picture of oil and gas extraction (OGE) firms in 

general, and UOG firms, more specifically (see Industry Profile DCN SGE01277). However, 

because of data indicating that all UOG facilities are using wastewater management techniques 

other than sending their wastewater to a POTW even in these times of depressed prices, EPA 

reasonably concluded that these zero discharge management practices are economically 

achievable even at these times. Also note that no industry commenter’s suggested they could not 

afford to comply with the pretreatment standard or that the zero discharge standard is not 

economically achievable. EPA asked for comment on whether or not there are any existing 

onshore UOG extraction facilities that currently discharge UOG extraction wastewater to 

POTWs in the U.S. As well, EPA asked for comment on costs and benefits to POTWs, states, 

and localities associated with the proposed rule. With respect to both requests, EPA received no 

data in comments providing evidence of a facility that is currently sending its wastewater to 

POTWs. Therefore, EPA determined that if a facility is currently meeting the zero discharge 

standard, there is no additional cost that EPA is imposing, and the technology is economically 

achievable.