### i ECONOMIC ANALYSIS IN SUPPORT OF

FINAL RULE ON

RISK MANAGEMENT PROGRAM REGULATIONS

FOR CHEMICAL ACCIDENT RELEASE PREVENTION,

AS REQUIRED BY SECTION 112(r) OF THE CLEAN AIR ACT

Chemical Emergency Preparedness and Prevention Office

Office of Solid Was te and Emergency Response

U.S. Environmental Protection Agency

June 1996

TABLE OF CONTENTS

Page

EXECUTIVE SUMMARY

................................ ................................ ................................ ................................ ..... ES

- 1

BACKGROUND

................................ ................................ ................................ ................................ ....... ES

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REGULATORY TIERING OPTIONS EXAMINED IN THIS ANALYSIS

................................ ........... ES

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ESTIMATED NUMBER OF AFFECTED SUBSTANCES AND SOURCES

................................ ........ ES

- 5

UNIT TIME AND COST ESTIMATES

................................ ................................ ................................ ... ES

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Costs to the Regulated Co mmunity

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Government Costs

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ESTIMATED INITIAL COMPLIANCE COSTS

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Initial Compliance Costs to the Regulated Community

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ESTIMATED AVERAGE COST PER SOURCE

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ANNUALIZED NET COSTS

................................ ................................ ................................ ................... ES

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ESTIMATED BENEFITS

................................ ................................ ................................ ......................... ES

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ESTIMATED EFFECTS ON SMALL ENTITIES

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UNFUNDED MANDATES

................................ ................................ ................................ .................... ES

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COST TO GOVERNMENTS

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CHAPTER 1. INTRODUCTION

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1.1. THE CLEAN AIR ACT AM ENDMENTS OF 1990

................................ ................................ ......... 1

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1.2. CONSIDERATION OF OPTIONS

................................ ................................ ................................ ... 1

- 2

1.3. PURPOSE OF THE ANALYSI S

................................ ................................ ................................ ....... 1

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1.4. ORGANIZATION OF THIS REPORT

................................ ................................ ............................. 1

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CHAPTER 2. REGULATORY OPTIONS EXAMINED IN THIS ANALYSIS

................................ ...................... 2

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2.1. TIERS

................................ ................................ ................................ ................................ ................ 2

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2.1.1. Program 1

................................ ................................ ................................ ................................ ........ 2

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2.1.2. Program 2

................................ ................................ ................................ ................................ ........ 2

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2.1.3. Program 3

................................ ................................ ................................ ................................ ........ 2

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2.2. OPTIONS

................................ ................................ ................................ ................................ ........... 2

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2.2.1. Option 1

................................ ................................ ................................ ................................ .......... 2

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2.2.2. Option 2

................................ ................................ ................................ ................................ .......... 2

- 7

2.2.3. Option 3

................................ ................................ ................................ ................................ .......... 2

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2.3. STATUTORY LIMITATIONS

................................ ................................ ................................ ......... 2

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### TABLE OF CONTENTS

(Continued)

CHAPTER 3. ESTIMATION OF THE UNIVERSE OF AFFECTED SUBSTANCES AND SOURCES

........... 3

- 1

3.1. SELECTION OF DATA

................................ ................................ ................................ .................... 3

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3.1.1. Data Requirements

................................ ................................ ................................ .......................... 3

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3.1.2. TRI Database/Limitations

................................ ................................ ................................ ............... 3

- 2

3.2. ESTIMATION METHODOLOGY

................................ ................................ ................................ ... 3

- 3

3.2.1. Estimation of the Universe of Sources and Substances Affected

................................ .................... 3

- 3

3.2.2. Adjustments to the Universe of Sources and Substances

................................ ................................ 3

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3.2.3. Classification of Affected Sources and Substances by Size and Process Complexity

.................. 3

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3.2.4. Disaggregation of Universe of Sources Incurring Full and Partial Costs

................................ ...... 3

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3.2.5. Estimate of the Number of Substances

................................ ................................ ......................... 3

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3.2.6. Adjustments to the Universe of Sou rces and Substances for Attrition

................................ .......... 3

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3.3. RESULTS

................................ ................................ ................................ ................................ ........ 3

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CHAPTER 4. ESTIMATED BURDEN AND UNIT COSTS OF COMPLIANCE

................................ ................... 4

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4.1. METHODOLOGY

................................ ................................ ................................ ............................ 4

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4.2. UNIT COST ESTIMATES FOR PROGRAM 1

................................ ................................ ................ 4

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4.3. UNIT COST ESTIMATES FOR PROGRAM 2 AND PROGRAM 3

................................ .............. 4

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4.3.1. Activities Per Source

................................ ................................ ................................ ....................... 4

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4.3.2. Activities Per Regulated Substance

................................ ................................ ................................ 4

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4.3.3. Submission of the RMP

................................ ................................ ................................ ................ 4

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4.4. UNIT TIME AND COST ESTIMATES FOR ACTIVITIES PERFORMED BY THE

GOVERNMENT

................................ ................................ ................................ ................................ ........ 4

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4.4.1. RMP Costs to EPA

................................ ................................ ................................ ........................ 4

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4.4.2. Program Oversight and Assistance Costs to EPA

................................ ................................ ......... 4

- 11

4.4.3. Unit Time and Cost Estimates for Implementing Agencies

................................ .......................... 4

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4.4.4. Costs for Local Agencies and Others

................................ ................................ ............................ 4

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CHAP TER 5. ESTIMATED TOTAL COSTS OF COMPLIANCE

................................ ................................ .......... 5

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5.1. METHODOLOGY

................................ ................................ ................................ ............................ 5

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5.1.1. Compliance Cost Estimates

................................ ................................ ................................ ............. 5

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5.1.2. Average Initial Compliance Cost Per Source

................................ ................................ .................. 5

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5.1.3. Subsequent

- Year Cost Estimates

................................ ................................ ................................ .... 5

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5.1.4. Cost Estimates of EPA's Regulatory Options

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5.1.5. Cost Savings

................................ ................................ ................................ ................................ .... 5

- 9

5.2. ESTIMATED INITIAL COMPLIANCE COST TO INDUS TRY FOR REGULATORY

OPTIONS

................................ ................................ ................................ ................................ ................... 5

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5.2.1. Option 1

................................ ................................ ................................ ................................ ........ 5

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5.2.2. Option 2

................................ ................................ ................................ ................................ ........ 5

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5.2.3. Option 3

................................ ................................ ................................ ................................ ........ 5

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5.3. ESTIMATED TOTAL COSTS TO GOVERNMENT

................................ ................................ .... 5

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5.3.1. Total Costs to EPA for RMPs

................................ ................................ ................................ ....... 5

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5.3.2. Program Oversight and Assistance Costs to EPA

................................ ................................ ......... 5

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5.3.3. Total Costs for Implementation and Enforcement

................................ ................................ ........ 5

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CHAPTER 6. ESTIMATION OF BENEFITS OF RMP RULE

................................ ................................ ................ 6

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6.1. OVERVIEW OF DAMAGES

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6.1.1. Types of Damages

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### TABLE OF CONTENTS

(Continued)

6.1.2. Nature of the Accident: Toxic or Flammable Releases

................................ ................................ .. 6

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6.1.3. Magnitudes of Incidents

................................ ................................ ................................ .................. 6

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6.1.4. 6.1.5 Rule Coverage: Overlap Between EPA and OSHA

................................ .............................. 6

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6.2. ESTIMATED DAMAGES FROM TOXIC RELEASES

................................ ................................ .. 6

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6.2.1. Use of the ARIP Database

................................ ................................ ................................ ............... 6

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6.2.2. Comparison of ARIP to AHE

................................ ................................ ................................ ......... 6

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6.2.3. Number of Incidents

................................ ................................ ................................ ........................ 6

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6.2.4. Valuation of Incidents

................................ ................................ ................................ ..................... 6

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6.2.5. Additional Damages from Smaller Magnitude Events

................................ ................................ .... 6

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6.2.6. Additional Damages from Larger Magnitude Events

................................ ................................ ..... 6

- 9

6.3. ESTIMATED DAMAGES FROM FLAMMABLE SUBSTANCES

................................ .............. 6

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6.3.1. Database Construction

................................ ................................ ................................ .................. 6

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6.3.2. Number of Incidents

................................ ................................ ................................ ...................... 6

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6.3.3. Valuation of Incidents

................................ ................................ ................................ ................... 6

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6.4. TOTAL ESTIMATED BASELINE DAMAGES

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6.5. PROJECTED REDUCTIONS IN DAMAGES

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6.5.1. Expected Reduction in Dam ages for PSM Activities

................................ ................................ ... 6

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6.5.2. Expected Reduction in Damages for Non

- PSM Activities

................................ ........................... 6

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6.6. ESTIMATED REDUCTION IN DAMAGES

................................ ................................ ................. 6

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6.7. SENSITIVITY ANALYSES

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6.7.1. OSHA Program is More Effective

................................ ................................ ................................ 6

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6.7.2. Additional Spending under EPA Rule is More Cost

- Effective

................................ ..................... 6

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6.8. POTENTIAL ADDITIONAL BENEFITS

................................ ................................ ...................... 6

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6.8.1. Possible Damage Reductions Due to the Offsite Consequence Analyses

................................ ..... 6

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6.8.2. Possible Reductions in Damages Due to Routine Emissions

................................ ........................ 6

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6.9. QUALITATIVE BENEFITS

................................ ................................ ................................ ........... 6

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6.9.1. Moving Toward the Optimal Level of Prevention

................................ ................................ ........ 6

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6.9.2. Improving Information and Moving Tow ard the Optimal Level of Effort to Avert

Damages

................................ ................................ ................................ ................................ ..................... 6

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6.9.3. Other Benefits

................................ ................................ ................................ ............................... 6

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6.10. SUMMARY OF EXPECTED BENEFITS

................................ ................................ .................... 6

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CHAPTER 7. SMALL ENTITY AND UNFUNDED MANDATE ANALYSIS

................................ ...................... 7

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7.1. NUMBER AND CHARACTERISTICS OF REGULATED SMALL BUSINESSES

...................... 7

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7.1.1. Definition of "Small" Business

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7.1.2. Estimated Number of Small Entities

................................ ................................ ............................... 7

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7 .1.3. Estimated Compliance Costs Per Affected Entity

................................ ................................ ........... 7

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7.1.4. Data Sources

................................ ................................ ................................ ................................ ... 7

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7.1.5. Data on Small Governmental Entities

................................ ................................ ............................. 7

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7.2. ESTIMATED ECONOMIC IMPACTS ON SMALL ENTITIES

................................ ..................... 7

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7.3. ESTIMATED ECONOMIC IMPACT ON SMALL GOVERNMENTS

................................ ........... 7

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7.4. THE UNFUNDED MANDATE ANALYSIS

................................ ................................ ................... 7

- 9

7.5. CONCLUSION

................................ ................................ ................................ ................................ 7

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CHAPTER 8. CONCLUSIONS

................................ ................................ ................................ ................................ . 8

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8.1. UNCERTAINTIES

................................ ................................ ................................ ............................ 8

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8.2. IMPACT OF RULE CHANGES ON FINAL COSTS

................................ ................................ ...... 8

- 2

8.3. IMPA CT OF THE RULE ON INDUSTRY SECTORS

................................ ................................ .... 8

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### TABLE OF CONTENTS

(Continued)

8.4. COMPARISON OF COSTS AND BENEFITS

................................ ................................ ................. 8

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8.5. IMPACT OF IMPLEMENTATION ON GOVERNMENTS

................................ ............................ 8

- 5

8.6. IMPACT ON SMALL ENTITIES

................................ ................................ ................................ ..... 8

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8.7. UNFUNDED MANDATES

................................ ................................ ................................ .............. 8

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REFERENCES

................................ ................................ ................................ ................................ ....................... Ref

- 1

APPENDIX A. SUBSTANCES LISTED UNDER CAA SECTION 112(r)

................................ ............................. A

- 1

APPENDIX B. WAGE RATES AND UNIT COST TABLES

................................ ................................ ................. B

- 1

APPENDIX C. BASIS OF UNIT COST AND COMPLIANCE ESTIMATES

................................ ........................ C

- 1

APPENDIX D. COMPARISON OF ARIP AND AHE DATABASES

................................ ................................ .... D

- 1

APPENDIX E.

. DERIVATION OF UNIT DAMAGE ESTIMATES

................................ .............................. E

- 1

### ES

- 1 EXECUTIVE SUMMARY

Section 112(r) of the Clean Air Act (CAA) contains provisions related to chemical accident

prevention at stationary sour ces. The goal of these provisions is both to prevent accidental releases of

certain substances and minimize the consequences of such releases when they do occur. CAA section

112(r)(3) requires the U.S. Environmental Protection Agency (EPA) to promulgate a list of substances

that are known to cause, or may be reasonably anticipated to cause, death, injury, or serious adverse

effects on human health or the environment in the event of an accidental release to ambient air. EPA also

is required, under CAA sec tion 112(r)(5), to establish threshold quantities for each regulated substance at

the time of listing. EPA promulgated the list of regulated substances on January 31, 1994 (49 FR 4478);

the list includes 77 toxics, 63 flammables, and DOT Division 1.1 expl osives. The list of regulated

substances and threshold quantities will determine the need for owners and operators of sources 1 to

comply with subsequent regulations addressing the prevention and detection of accidental releases.

Specifically, under CAA s ection 112(r)(7), EPA must promulgate chemical accident prevention

regulations, which include the development of risk management programs that must cover a hazard

assessment, a prevention program, an emergency response program, and a risk management plan a s

specified in CAA section 112(r)(7)(B)(ii).

The purpose of this Economic Impact Analysis is twofold: (1) to describe the regulatory options

that the Agency considered for revising the risk management requirements proposed on October 20, 1993,

and March 13, 1995; and (2) to estimate the costs and benefits attributable to these regulatory options.

BACKGROUND

The chemical accident prevention regulations required under section 112(r)(7) must address, as

appropriate, the use, operation, repair, and main tenance of equipment to monitor, detect, inspect, and

control accidental releases, including training and maintenance of personnel. The regulations also include

requirements for the development and implementation of risk management plans. Section 112(r)( 7)(B)(ii)

specifies that risk management plans must include, at a minimum:

 A hazard assessment to estimate the potential effects of an accidental release of a regulated substance.

The owner or operator must consider how much of the substance could be re leased, and

which populations a release would affect. The owner or operator also must prepare a

five

- year release history for the regulated substance.

 A program for preventing accidental releases of regulated substances, including safety precautions,

ma intenance, monitoring, and employee training.

 An emergency response program that lists the steps to be taken to respond to and mitigate a release.

The plan must include procedures for notifying the public and local agencies when a

release occurs.

1 As used in this document, "source" means the entire stationary source (i.e., all units within the facility boundary);

"process" means the individual unit at the source affected by the rule.

### ES

- 2

In ad dition, risk management information, in the form of the risk management plan (RMP), must be

registered with EPA and provided to the implementing agency and state and local officials responsible for

emergency planning and response for the community. The Ad ministrator must develop guidelines to

assist sources in the preparation of these programs, including the preparation of model plans, if feasible.

EPA proposed its risk management program regulations on October 20, 1993 (58 FR 54190). In response

to comm ents, EPA published a supplemental notice (SNPRM) on March 13, 1995 (60 FR 13526). The

SNPRM solicited additional comments on six issues: hazard assessment requirements; approaches for

tiering regulatory requirements; state implementation; public partici pation; inherently safer technologies;

and additional accident reporting.

REGULATORY TIERING OPTIONS EXAMINED IN THIS ANALYSIS

In developing its final notice, EPA created three different risk management programs to take into

account both the level of potential hazard posed by stationary sources and the level of complexity of the

source and its processes. The risk management program requirements apply to processes at a stationary

source, not to the source as a whole. Any process with more than a thres hold quantity of a regulated

substance must meet the requirements of the rule. A source may have several processes, some of which

may be subject to different program levels. 2

Program 1:A simplified risk management program will include, in the RMP, the r egistration, data on the

worst

- case release, the five

- year accident history, and a certification that the

processes' worst

- case release would not reach any public receptors. Emergency

response actions must be coordinated with local responders.

Program 2: A streamlined risk management program will require sources to conduct an offsite

consequence analysis, document a five

- year accident history, assign

responsibility for implementation of the program to a person or position,

implement a seven

- step prevention program, have an emergency response

program, and submit an RMP.

Program 3:The risk management program will require sources to conduct an offsite consequence analysis,

document a five

- year accident history, assign responsibility for implementation

of th e program to a person or position, implement a 12

- step prevention program

that is identical to the OSHA process safety management (PSM) standard (29

CFR 1910.119), have an emergency response program, and submit an RMP.

Exhibit ES

- 1 presents the requiremen ts of each program level.

EPA analyzed three options in the development of the economic impact analysis. The options are

as follows:

Option 1:



### 2 Process is defined as any activity involving a regulated substance, including use and storage. Any group of vessels

that are interconnected or separate vessels that are located such that a regulated substance could be involved in a p otential

release are considered a single process.

### ES

- 3

 A source that can demonstrate that, under a worst

- case release from a process, the distance from the

point of release to any public receptor is greater than a distance to a specified endpoint,

may comply with Program 1 requirements for that process.

 Processes in SIC codes 2611, 2812, 2819, 2821, 2865, 2869, 2873, 2879, and 2911 will comply with

Program 3; 3 the SIC codes specified for Program 3 were selected based on the accident

histories of the individual industry sectors; in general, these SIC codes cover sources with

high volumes of regulated substances and complex processes (i.e., they manufacture or

re act substances, frequently at extreme conditions (e.g., high or low temperatures or

pressures));

 Processes that are already subject to the OSHA PSM standard will comply with Program 3. The

Program 3 prevention program is the same as the OSHA PSM standar d. To reduce

potential confusion, processes already subject to OSHA PSM standard were included in

Program 3 because they are already in compliance with the Program 3 prevention

program; the other risk management program requirements are the same for Progr am 2

and 3.

 All other processes will comply with Program 2. Program 2 processes generally involve storage and

loading of substances. Although the volume of chemicals may be high in some cases at

Program 2 processes, the processes themselves are relati vely simple and, in many cases,

subject to existing codes and standards designed to address safety issues.

 Option 2:All sources would comply with Program 3 requirements for all processes, with the final rule

requirements for offsite consequence analysis (OCA), which will be

based on reference tables, and for the RMP, which will require reporting

of data elements. Because few processes are expected to qualify for

Program 1, the primary difference between Options 1 and 2 is the

application of the Program 3 prevention program.

 Option 3:All sources would comply with Program 3 requirements, with the proposed rule requirements

for offsite consequence analysis and RMP, which required air dispersion

modeling and a detailed, text

- based RMP. The only differences between

Options 2 and 3 are the OCA and RMP requirements.

The analysis selected the options to highlight changes in regulatory requirements between the

proposed rule, supplemental notice, and the final rule. The supplemental notice included two changes

3 SIC code 2611

- pulp mills; 2812

- chlor

- alkali manufacturers; 2819

- industrial inorganics manufacturers; 2821

- plastic

and resins; 2865

- cyclic crudes and intermediates; 2869

- industrial organics manufactur ers; 2873

- nitrogen fertilizers; and

2911

- petroleum refineries.

### ES

- 4

EXHIBIT ES

- 1

PROGRAM REQUIREMENTS

PROGRAM 1 PROGRAM 2 PROGRAM 3

Hazard Assessment

Worst

- case release analysis Worst

- case and alternative release analysis Worst

- case and alternative release analysis

Five

- year accident history Five

- year ac cident history Five

- year accident history

Management

None Documentation of management system Documentation of management system

Prevention Program

Certify that no additional steps are necessary Safety Information

(MSDS, process parameters, specificatio ns) Process Safety Information

(chemical data, process technology, process

equipment)

Hazard Review Process Hazard Analysis

(formal analysis, trained team)

Operating Procedures

(operating procedures) Operating Procedures

(operating procedures, health a nd safety data)

Training (no documentation) Training

Maintenance (no documentation) Maintenance

Accident Investigation Accident Investigation

Compliance Audits Compliance Audits

Management of Change

Pre

- startup Review

Contractors

Employ ee Participation

Hot Work Permits

Emergency Response

Coordinate with local responders Emergency response plan and program Emergency response plan and program

RMP

Registration

Worst

- case release analysis

Five

- year accident history Registration

Worst

- case and alternative release analyses

Five

- year accident history

Prevention program

Emergency response

Certification Registration

Worst

- case and alternative release analyses

Five

- year accident history

Prevention program

Emergency response

Certification

### ES

- 5

from the proposed rule that have a significant impact on costs. First, the tiering approach moves the

majority of sources into Programs 1 and 2, with a reduced set of requirements. Second, the offsite

consequence analysis was changed to allow sources to use a guidance document that EPA has developed

to estimate the distance to an endpoint; this guidance eliminates the need to conduct air dispersion

modeling, which would have required consultants for most sources outside of the larger chemical

companies. The final rule added a third change that reduced costs, the shift of the RMP from a large, text

document to a set of data elements that can be submitted electronically.

Option 1 reflects the supplemental notice assignment of sources to tiers and its r equirements. The

supplemental notice did not specify the prevention program elements, beyond listing training,

maintenance, safety precautions, and monitoring as the core of good prevention practices. In response to

comments that the Agency needed to spe cify what constituted an adequate level of compliance with these

elements, EPA has provided seven specific requirements that constitute good prevention practices. These

elements clarify what EPA intended in its supplemental notice language and assist sour ces in

understanding the level of documentation they will be required to maintain. In general, EPA has sharply

reduced the documentation requirements for Program 2 sources.

Both Options 1 and 2 include the change to the RMP requirement. A comparison of the initial

compliance costs of Options 1 and 2 allows examination of the impact of tiering on the cost of the rule

because it represents the only difference between the options. Options 2 and 3 reflect the proposed rule

approach to the prevention prog ram (i.e., OSHA PSM would be applied to all sources). The difference

between the options is the changed requirements for the offsite consequence analysis and the RMP.

Comparison of the two options allows examination of the cost reduction that each of the se changes have

created.

ESTIMATED NUMBER OF AFFECTED SUBSTANCES AND SOURCES

To estimate the universe of potentially affected sources under each list and threshold option, EPA

used 1991 data from the TRI database, augmented to adjust for limitations o f TRI data (e.g., TRI covers

only manufacturers).

To facilitate development of cost estimates, affected manufacturing sources (i.e., SIC codes 20

through 39) were classified into 14 subcategories based on number of employees and complexity of

processes . Non

- manufacturers were classified into 20 subcategories.

Sources were further categorized into three groups:

 Those covered only by EPA and, therefore, subject to the full cost of complying with all elements of

the program options; this group inclu des primarily sources that are exempted from the

OSHA PSM rule (retailers, remote sources, and state or local governments in states

without a delegated OSHA program);

### ES

- 6

 Sources already covered by the OSHA PSM standard for all regulated substances on site; these sources

will incur costs to implement the statutorily mandated elements included only in EPA's

rule (i.e., registration, hazard assessments, emergency response drills, the RMP); and

 Sources with regulated substances covered by both OSHA and EPA an d substances listed only by EPA

(incremental substances); they will incur costs for complying with substance

- specific

elements for processes involving the incremental substances (i.e., safety information,

process hazard analysis or review, operating proced ures, training, maintenance,

compliance audits).

The total universe of sources was estimated to be 66,100 sources. Approximately 11,100 of these

are manufacturers. Because some sources may take steps, such as switching chemicals or reducing

inventori es, to avoid being covered by this rule, the estimate may represent an upper bound on the size of

the regulated community.

UNIT TIME AND COST ESTIMATES

Costs to the Regulated Community

Using industry experience and engineering expertise, burden and cos t estimates were developed

for each risk management program element for each class and category of source. Costs were developed

on a per substance or per source basis for each element of the program, as appropriate. This analysis

considers relevant only those costs directly related to complying with the risk management requirements

that are beyond any costs incurred already by sources under other similar regulations. However, because

the EPA rule would require sources to submit information about their pr evention activities and hazards to

the government and the public, sources already covered by the OSHA PSM standard or equivalent

industry programs were assumed to incur additional costs to upgrade their PSM programs to ensure a high

level of compliance.

Government Costs

Burden and unit cost estimates for government activities are divided into two groups: costs to

receive and make the RMPs available electronically, as well as to provide technical assistance and

training to states and industries; and cos ts to the implementing agency to implement and enforce the

program. Although EPA has not determined the manner and method of submission of the RMP, the

analysis assumed that sources would either file the RMPs electronically, on

- line, or fax copies in a fo rm

that can be optically scanned into a electronic format.

Costs for the implementing agency, which will implement and enforce the rule, were estimated

based on the time required for specific tasks in New Jersey and Delaware, which have state RMP

progr ams. The implementing agency, which will be EPA or a state agency in most cases, will have to

provide technical assistance to sources, review the RMPs, and conduct audits and inspections.

### ES

- 7

Costs for state and local governments that operate sources that m ay be required to comply with

the rule (drinking water systems, wastewater treatment systems, and electric utilities) are included in costs

to the regulated community and discussed in the unfunded mandate section.

ESTIMATED INITIAL COMPLIANCE COSTS

Initi al Compliance Costs to the Regulated Community

The rule provides sources three years to come into compliance with the rule. The rule, however,

is an on

- going requirement that will impose continuing costs as sources implement their risk management

progra ms. Initial compliance, therefore, covers the cost of meeting the requirements of the rule by the

three

- year compliance date. These costs are presented as a single figure, but are assumed to be incurred

over a three

- year period. Total costs to industry were estimated by multiplying the estimated unit costs of

compliance with the risk management program elements by the estimated number of affected sources.

Because many sources already implement some of the risk management requirements (e.g., training),

c osts were adjusted to account for the expected likelihood that a source is already in compliance with the

element. Estimated initial compliance costs to industry are as follows:

 $494 million for Option 1;

 $642 million for Option 2; and

 $1.22 billio n for Option 3.

As noted above, the difference in costs between Options 1 and 2 represents the effect of tiering

sources in different program levels. The difference between Options 2 and 3 represents the reduced

requirements for the offsite consequence analysis and RMP. EPA's final rule (Option 1) represents an

almost 60 percent reduction in the initial compliance costs from the rule as proposed.

ESTIMATED AVERAGE COST PER SOURCE

The average initial compliance cost per source was estimated by multip lying the unit cost of each

risk management elements by the adjustment factors for the expected likelihood that a source would

already be in compliance with the risk management program elements; the offsite consequence analysis

cost was multiplied by the a verage number of substances. The average cost of each program element was

then aggregated to estimate the average cost for manufacturers and non

- manufacturers, depending on

whether they were assumed to be already covered by another, similar regulation. C osts vary from $260

for a source with a single Program 1 process; $1,400 for a Program 2 retailer; $2,000 to $3,900 for a

drinking water systems covered by OSHA PSM; $17,000 for a Program 2 manufacturer; to $785,000 for

the largest chemical manufacturer wi th incremental substances.

### ES

- 8

ANNUALIZED NET COSTS

The annualized net cost (compliance cost minus cost savings) of the regulatory options was

estimated based on the assumption that affected sources will begin to incur costs immediately after

promulgation o f the final rule to be able to meet the statutory compliance deadline three years later. The

rule, however, requires continuing compliance with each of the elements. In the years subsequent to

initial implementation, costs will vary considerably because some rule elements require updates only

every three or five years, while others, such as training and maintenance, are on

- going costs. The

annualized cost is useful in that it provides the stream of equivalent payments in constant dollars that

industry ma y be expected to incur on an annual basis in the time period examined. The annualized costs

using a seven percent discount rate and the first 30 years net costs under each option were estimated to be:

Option 1: $97 million

Option 2: $142 million

Opti on 3: $246 million

Overall, EPA's final rule represents a reduction of 67 percent of the annualized net cost of the rule

as proposed.

ESTIMATED BENEFITS

The primary quantified benefits expected from EPA's risk management requirements will be a

reduc tion in damage from accidental releases of regulated substances not already regulated under the

OSHA PSM standard as well as additional reductions in damage from accidental releases of regulated

substances that are already regulated under the OSHA PSM stan dard. The types of damages or costs

considered in the analysis include threats to human health (death or injury), responses to these threats

(evacuations, sheltering in place) threats to the environment, and economic damages (lost production,

property dam ages, and litigation).

The analysis divided potential benefits into three categories:

 Benefits derived from available U.S. accident data, which are likely to include virtually all high impact

events;

 Benefits based on more probabilistic assessmen ts of potential impacts, such as effects of low

consequence events that may not be included in accident databases, effects of high

magnitude events such as Bhopal, which occur very rarely in the world, and increases in

safety that may be derived from makin g information available to the public; and

 Less certain benefits, including the value of the information made available to the public.

### ES

- 9

The benefits derived from existing data on U.S. accidents are based, for toxic substances, on data in the

Accidental R elease Information Program (ARIP) database, adjusted to account for underreporting (only

half of the ARIP questionnaires sent have been returned). The data were also adjusted upwards to make

the rate of evacuation and deaths consistent with the findings o f EPA's AHE database. Cost estimates

were developed for specific types of damages and multiplied by the estimate of such damages each year.

For flammables, the analysis combined several accident databases to create a database of releases to

define the nu mber of such releases and the impacts.

Because the rule is unlikely to result in a 100 percent reduction in accidental releases, the analysis

used an estimate of a 50 percent reduction, based on a small survey conducted by industry of the impact

of imp lementing the OSHA PSM standard. This estimate reflected the industry's own statements about

the impact of the rule. For processes already subject to the OSHA PSM standard, the analysis also

assumed that the standard would reduce accidents by 50 percent. EPA anticipates that sources will take

additional steps to upgrade their programs after coming into initial compliance with the OSHA standard.

The cost analysis assumed that sources would spend an additional 25 percent on training and

maintenance, and i n some sectors, capital improvements, and 50 percent more on management oversight.

Because it is unlikely that additional steps will result in the same proportion of accident reduction, the

analysis assumed that for these OSHA processes, the steps would b e half as effective. Therefore, the

analysis assumed that these actions would result in a 10 percent increase in accident prevention (assuming

a curvilinear relationship between spending and accident prevention, where increased spending levels

reduce acci dents at a decreasing rate). The analysis assumed that business losses for flammable accidents

were two times the cost of the damage, a rule of thumb used by the insurance industry.

For more probabilistic, or less certain benefits, the analysis estimate d the likelihood that a disaster

such as the Bhopal accident could occur in the U.S. in any one year. (Note that this understates the

likelihood of large

- scale disasters because other disasters have occurred, such as the Mexico City LPG

explosion that kil led more than 400 people; the likelihood and cost of these other disasters have not been

estimated.) The analysis also estimated damages that may occur from smaller magnitude events that do

not appear in existing accident databases because of the screenin g criteria used (e.g., an accident resulting

in an injury or fatality). Finally, the analysis considered reductions in accidents that may occur as the

result of conducting offsite consequence analyses and making that information available to the public.

The total quantifiable benefits estimated are shown in Exhibit ES

- 2. Because all options require sources

to complete a prevention program and because the data sources do not provide data that allow

disaggregation of benefits by program elements, the benef its are presented as the same for all options.

### ES

- 10

EXHIBIT ES

- 2

TOTAL ANNUALIZED NET COSTS AND BENEFITS

OPTIONS NUMBER OF

SOURCES ANNUAL NET

COST OF

PROGRAM ANNUAL

BENEFITS OF

PROGRAMS

Option 1 360 (Program 1)

40,200 (Program 2)

25,500 (Program 3) $ 97 million $174 million

Option 2 66,100 (Program 3) $142 million $174 million

Option 3 66,100 (Program 3) $246 million $174 million

Additional benefits could be provided by the information made available to the public in the

RMP, because members of so ciety rely on information to make efficient economic choices. These

benefits, however, were not quantified. Because any publicly available good tends to be underproduced

because of the "free rider" problem, it is difficult to observe the public's true wi llingness to pay for the

good and, hence, make decisions concerning the optimal amount of the good to provide.

ESTIMATED EFFECTS ON SMALL ENTITIES

The Regulatory Flexibility Act of 1980 requires federal agencies to determine whether proposed

regulatio ns will have a significant economic impact on a substantial number of small entities.

Small businesses were defined as those with fewer than 100 full

- time employees (FTEs). The

number of small manufacturers was estimated to be 960 sources with fewer t han 20 FTEs, and 2,000 with

between 20 and 99 FTEs. The number of small non

- manufacturers is more difficult to determine.

Virtually all retailer and wholesalers have fewer than 100 FTEs. Industry estimates, however, indicate

that about 80 percent of the affected retailers may be owned by larger companies; the analysis assumed

that 3,700 retailers were small businesses. No information was available to estimate the percentage of

wholesalers that might be owned by large corporations. The analysis assumed that all wholesalers were

small. The total number of small businesses, therefore, was estimated to be 8,160.

Small governmental entities were defined as those serving fewer than 50,000 people. Public

drinking water and waste water systems affected by t he rule generally serve a minimum of 10,000 people.

Approximately 980 water systems are estimated to serve between 10,000 and 25,000 people.

Approximately 500 water systems are estimated to serve between 25,000 and 50,000 people.

Consequently, 1,480 dri nking water systems would be considered small governmental entities. The

number of small POTWs was estimated to include all systems treating less than 10 mgd and 59 percent of

those treating between 10 and 25 mgd (based on the ratio of drinking water syst ems in this category that

serve populations below 50,000). Approximately 2,600 POTWs were estimated to serve between 10,000

and 25,000 people and 180 to serve between 25,000 and 50,000, for a total of 2,800 POTWs. A total of

approximately 4,300 small gov ernmental entities would be affected by this rule.

### ES

- 11

The total number of small entities affected by this rule was estimated to be 12,500 or 19 percent

of the affected universe.

No detailed analysis of the impact on small entities was performed because of the relatively low

cost of the rule for small entities. Initial costs are considerably less than one percent of sales for all small

manufacturers. Subsequent year costs will be even lower. Costs for non

- manufacturers are very low (less

than $1,000 per year for initial compliance). These sums do not impose a significant adverse burden on

these sources. Only chemical manufacturers with complex processes and 20 to 99 FTEs have initial costs

that exceed $6,000 per year. The costs for these sources, $29,0 00 to $31,000 per year for the first three

years, represent less than .5 percent of sales. It should be noted that all of the costs for small

manufacturers assume that the sources will take additional efforts, above their actions to comply with the

OSHA r ule, to improve the quality of the risk management programs. If they do not take additional

actions, their costs would be substantially lower.

The cost of initial compliance would add approximately $2,500 to the drinking water systems

costs. If these costs were recovered completely through higher rates, revenues would need to increase

less than 0.1 percent. A 1993 study of costs of drinking water systems indicated that the average annual

cost to household for systems serving 10,000 to 25,000 people i s $300.35 (1995 dollars). If the

compliance costs were passed on to consumers, their annual bills would rise $0.30. Relative costs to

larger systems and their customers are lower. It is reasonable to assume that the impact on POTWs would

be no greater t han it is on water systems because the costs of the program are approximately the same.

EPA is working with drinking water systems to develop a model risk management plan to ensure that the

burden on these sources is minimized.

UNFUNDED MANDATES

The Un funded Mandates Reform Act of 1995 (UMRA) requires the Agency to consider the total

impact of the rule on state and local governments. The rule imposes costs on large and small state and

local governmental entities, primarily water, wastewater, and electr ic utility authorities or special districts.

The analysis indicates, however, that the annualized cost of the final rule over 30 years for government

entities is $13 million, and $97 million per year for all sources. The total impact of the rule on all

r egulated sources, however, does exceed the $100 million level in the first year of initial compliance.

The rule also may impose implementation costs on state or local entities. State or local air

permitting authorities may be required to take steps to ensure that sources have complied with section

112(r) because it is an applicable requirement, which must be listed in an air permit. EPA is working

with air permitting authorities to minimize the burden on these agencies; any costs that may accrue to

pe rmitting authorities, however, can be covered by the permit fees, which the CAA Title V requires to be

set at a level to cover all direct and indirect costs of the program. Permitting authority costs, therefore, do

not constitute an unfunded mandate.

Im plementing agency costs may be substantial. No state, however, is required to seek delegation

of the program. States will be granted authority to serve as implementing agencies only if they

demonstrate that the state has the resources to implement and en force the rule, as specified in CAA

section 112(l). Because seeking delegation is voluntary, it does not constitute an unfunded mandate.

### ES

- 12

Although the CAA specifies that states and local response agencies shall receive the RMP, EPA

is planning to have th e RMPs submitted only to EPA in a form that will allow the Agency to make the

RMPs available electronically to all interested parties. This action will relieve states and local

governments of the burden of establishing and maintaining files of RMPs and of providing the documents

to the public.

COST TO GOVERNMENTS

Costs to develop and implement the submission of RMP will not be determined until EPA

specifies the approaches that will be used. To develop estimates for this analysis, EPA assumed that the

smallest businesses (those with fewer than 20 employees) will submit their RMPs using a fax. All other

sources will submit their data electronically through the Internet or other server.

Total costs to EPA for submission were estimated to be $183,000.

EPA was assumed to require staff to oversee the state programs, to provide training for state and

regional inspectors, and to conduct workshops for sources. EPA was estimated to incur the costs of $1

million per year for headquarters and regional oversigh t, $140,000 to hold training sessions for states over

the first three years, and $195,000 over five years to hold workshops for sources.

States are not required to implement and enforce the CAA section 112(r) program. They may

elect to do so and seek de legation through the process provided in CAA section 112(l). The analysis

considered two possibilities for implementation of the rule: EPA would serve as the implementing

agency (IA) for all states, or states would serve as IAs for all states. If EPA we re to be the IA for all

states, the annualized cost of the program implementation over 30 years would be $5.5 million. If states

serve as IAs for all states the annualized implementation costs would be $18 million. The reason for the

difference is that t he analysis assumed that the number of staff per region would be no greater than the

number of staff per state; based on current budgetary constraints, the level of staffing assumed per EPA

region is probably higher than would be available in the short ter m. The staffing level may, however, be

higher than needed at the state level, provided that the level of effort assumed for audits and inspections is

appropriate.

### 1

- 1 CHAPTER 1.

INTRODUCTION

The Clean Air Act Amendments of 1990, signed into law on November 15, 1 990, include

provisions related to chemical accident prevention; these provisions are contained in section 112(r) of the

Clean Air Act (CAA), as amended. The goal of these provisions is both to prevent accidental releases of

certain substances from occurr ing and minimize the consequences of such releases when they do occur.

CAA section 112(r)(3), requires the U.S. Environmental Protection Agency (EPA) to promulgate

a list of at least 100 substances that are known to cause, or may be reasonably anticipa ted to cause, death,

injury, or serious adverse effects to human health or the environment in the event of an accidental release

to ambient air. EPA also is required, under CAA section 112(r)(5), to establish threshold quantities for

each regulated substa nce at the time of listing. EPA promulgated the list of regulated substances on

January 31, 1994 (59 FR 4478); the list includes 77 toxics, 63 flammables, and DOT Division 1.1

explosives. The list is presented in Appendix A. EPA is proposing to amend th e list rule to delist

explosives and to exclude from threshold determination naturally occurring hydrocarbons prior to

processing.

The list of regulated substances and threshold quantities determines the need for owners and

operators of sources to comply with regulations addressing the prevention and detection of accidental

releases. Specifically, under CAA section 112(r)(7), EPA must promulgate chemical accident prevention

regulations. As specified in section 112(r)(7)(B)(ii), the Agency must require r isk management programs

that include a hazard assessment, a prevention program, and an emergency response program. In

addition, risk management plans (RMPs) must be registered with EPA and submitted to the state

government, and local authorities responsib le for handling accidental releases.

The purpose of this Economic Impact Analysis (EIA) is twofold: (1) to describe the regulatory

options that the Agency considered for developing risk management requirements; and (2) to estimate the

incremental costs and benefits attributable to these regulatory options.



### 1.1. THE CLEAN AIR ACT AM ENDMENTS OF 1990

The chemical accident prevention regulations required under section 112(r)(7) must address, as

appropriate, the use, operation, repair, and maintenance of equi pment to monitor, detect, inspect, and

control releases, including training and maintenance of personnel. These chemical accident regulations

also will include requirements for the development and implementation of risk management programs.

Section 112(r )(7)(B)(ii) specifies that the risk management programs must include, at a minimum:

 A hazard assessment to estimate the potential effects of an accidental release of a regulated substance.

The owner or operator must consider how much of the substance co uld be released, and

which populations a release could affect. The owner or operator also must prepare a five

year release history for the regulated substance.

### 1

- 2

 A program for preventing accidental releases of regulated substances, including safety precau tions,

maintenance, monitoring, and employee training.

 An emergency response program that lists the steps to be taken to respond to and mitigate a release.

The emergency response plan must include procedures for notifying the public and local

agencies w hen a release occurs.

The purpose of chemical accident prevention regulations is to provide sources with an integrated structure

for identifying and managing the hazards posed by highly hazardous substances. In addition, risk

management information, in t he form of a risk management plan (RMP), must be provided to the

implementing agency, and state and local officials responsible for emergency planning and response for

the community.

Section 112(r)(7)(E) forbids the operation of any source that, when req uired, fails to comply with

the regulations. The Administrator must develop guidelines to assist sources in the preparation of these

programs, including the preparation of model plans (i.e., generic RMPs for certain types of sources), if

feasible. Source s must complete their programs within three years after promulgation of the rule, or

within three years of listing of a regulated substance, whichever date is later. The Administrator must

establish an auditing system to regularly review RMPs and may requ ire revisions to any plan as

necessary. The source is responsible for updating the program periodically in response to changes in

procedures or equipment. Section 112(r)(7)(B)(iii) requires that any affected source must register its

RMP with EPA.

On October 20, 1993 (58 FR 54190), EPA proposed its risk management program rule. The

NPRM proposed an offsite consequence analysis covering a range of release scenarios including worst

case, a five

- year accident history, a prevention program, an emergency r esponse program, registration,

and an RMP. The prevention program was adapted from OSHA's process safety management (PSM)

standard (29 CFR 1910.119) and included the following requirements: a management system, process

safety information (PSI), process h azard analysis (PHA), standard operating procedures (SOPs), training,

maintenance (mechanical integrity), pre

- startup review, management of change, safety audits, and

accident investigation. All sources with more than a threshold quantity of a regulated s ubstance in a

process would be required to comply with all proposed requirements.

In response to comments, EPA published a supplemental notice to solicit additional comments on

six issues: the definition of worst

- case release; approaches for tiering reg ulatory requirements; state

implementation; public participation; inherently safer technologies; and accident reporting.



### 1.2. CONSIDERATION OF OPTIONS

To reflect the different levels of potential risks posed by sources and the different level of

complexity at these sources, EPA created three tiers of risk management programs:

 Program 1: A simplified risk management program will include, in the RMP, the registration, data on

the worst

- case release, the five

- year accident history, and a certification

that the processes' worst

- case release would not reach any public

### 1

- 3

receptors. Emergency response actions must be coordinated with local

responders.

 Program 2: A streamlined risk management program will require sources to conduct an offsite

consequence analys is, document a five

- year accident history, assign

responsibility for implementation of the program to a person or position,

implement a seven

- step prevention program, have an emergency

response program, and submit an RMP.

 Program 3:The risk management program will require sources to conduct an offsite consequence

analysis, document a five

- year accident history, assign responsibility for

implementation of the program to a person or position, implement a 12

- step prevention program that is identical to the OSHA PSM standard,

have an emergency response program, and submit an RMP.

EPA analyzed three options in the development of the economic impact analysis. The options are

as follows:

 Option 1:

_A source that can demonstrate that, under a worst

- case re lease from a process, the distance from the

point of release to any public receptor is greater than a distance to a specified

endpoint, may comply with Program 1 requirements for that process.

_Processes in SIC codes 2611, 2812, 2819, 2821, 2865, 2869, 2873, 2879, and 2911 will comply with

Program 3; 4 the SIC codes specified for Program 3 were selected based on the

accident histories of the individual industry sectors; in general, these SIC codes

cover sources with high volumes of regulated substances an d complex processes

(i.e., they manufacture or react substances, frequently at extreme conditions (e.g.,

high or low temperatures or pressures));

_Processes that are already subject to the OSHA PSM standard will comply with Program 3. The

Program 3 preve ntion program is the same as the OSHA PSM standard. To

reduce potential confusion, processes already subject to OSHA PSM standard

were included in Program 3 because they are already in compliance with the

Program 3 prevention program; the other risk manag ement program requirements

are the same for Program 2 and 3.

_All other processes will comply with Program 2. Program 2 processes generally involve storage and

loading of substances. Although the volume of chemicals may be high in some

cases at Program 2 processes, the processes themselves are relatively simple and,

in many cases, subject to existing codes and standards designed to address safety

issues.

4 SIC code 2611

- pulp mills; 2812

- chlor

- alkali manufacturers; 2819

- industrial inorganics manufacturers; 2821

- plastic and resins; 2865

- cyclic crudes and intermediates; 2869

- industrial organi cs manufacturers; 2873

- nitrogen

fertilizers; and 2911

- petroleum refineries.

### 1

- 4

 Option 2:All sources would comply with Program 3 requirements for all processes, with the final ru le

requirements for offsite consequence analysis (OCA), which will be

based on reference tables, and for the RMP, which will require reporting

of data elements. Because few processes are expected to qualify for

Program 1, the primary difference between Op tions 1 and 2 is the

application of the Program 3 prevention program.

 Option 3:All sources would comply with Program 3 requirements, with the proposed rule requirements

for offsite consequence analysis and RMP, which required air dispersion

modeling and a detailed, text

- based RMP. The only differences between

Options 2 and 3 are the OCA and RMP requirements.

The analysis selected the options to highlight changes in regulatory requirements between the

proposed rule, supplemental notice, and the final ru le. The supplemental notice included two changes

from the proposed rule that have a significant impact on costs. First, the tiering approach moves the

majority of sources into Program 1 and 2, with a reduced set of requirements. Second, the offsite

cons equence analysis was changed to allow sources to use a guidance document that EPA has developed

to estimate the distance to an endpoint; this guidance eliminates the need to conduct air dispersion

modeling, which would have required consultants for most so urces outside of the larger chemical

companies. The final rule added a third change that reduced costs, the shift of the RMP from a large, text

document to a set of data elements that can be submitted electronically.



### 1.3. PURPOSE OF THE ANALYSIS

This analys is provides estimates of compliance costs for each option. Federal, state, and local

government costs associated with the chemical accident prevention regulations also are provided.

The analysis presents the estimated benefits associated with increased prevention and detection of

accidental releases that may be attributable to the presence of a risk management program, including

reduced incidence of injury and death, environmental damage, and evacuation and sheltering of

surrounding populations. Finally , the impact on small entities of the options, as required by the

Regulatory Flexibility Act of 1980 and the Unfunded Mandates Reform Act of 1995, also is considered.



### 1.4. ORGANIZATION OF THIS REPORT

The remainder of this report is organized as follows:

 Ch apter 2 outlines the regulatory options considered for developing a risk management program.

 Chapter 3 estimates the universe of sources potentially affected by the rule and by each of the tiering

options.

 Chapter 4 presents the unit cost and total cos t estimates for compliance with each of the tiers.

### 1

- 5

 Chapter 5 provides estimates of the total annual costs associated with the regulatory tiering options.

 Chapter 6 estimates the benefits associated with the regulatory tiering options.

 Chapter 7 esti mates the effects of the regulatory options on small entities.

 Chapter 8 discusses limitations of the analysis and conclusions.

### 2

- 1 CHAPTER 2.

REGULATORY OPTIONS E XAMINED IN THIS ANAL YSIS

The Agency considered three options in developing the final risk manageme nt program

regulations. The options were selected to analyze the specific impacts of changes made between the

proposed rule, supplemental notice, and the final rule, specifically, the introduction of tiered requirements

and reductions in requirements for the offsite consequence analysis and the RMP.

To satisfy the requirements of section 112(r)(7)(B), the Agency's risk management program must

contain certain elements. For purposes of this analysis, these elements are divided into four basic

categories:

 Hazard assessment (offsite consequence analysis);

 Prevention program;

 Emergency response program;

 Risk management plan (includes the registration and five

- year accident history 5 ).

The CAA provides general guidance on what must be included in each element. The hazard

assessment must include an estimate of potential release quantities and downwind effects, including

potential exposure to populations. The assessment must consider worst

- case scenarios. The CAA

specifies that the prevention program must include safety precautions, maintenance, monitoring, and

employee training measures. The emergency response program must provide specific actions to be taken

in response to a release, including informing the public and local agencies, emergency healt h care, and

employee training. The CAA requires that all affected sources register their RMP with EPA. In addition,

CAA section 112(r)(7)(B)(ii) requires EPA to promulgate guidelines to assist sources in developing risk

management programs.

This chap ter first describes the requirements of the three tiers in Section 2.1, then outlines the

options in Section 2.2



### 2.1. TIERS

Exhibit 2

- 1 summarizes the requirements for the three program levels, described in greater detail

below.

5 The CAA includes in the hazard assessment the five

- year accident history and arguably some or all of the

elements of the process hazard analysis or review. Because the PHA is part of the OSHA PSM standard, EPA created

separate requirements to cover the offsite consequence analysis and the hazard analysis. Although the five

- year

accident history is part of the hazard assessment subpart of the rule, for the purpose of the cos t analysis it is included in

the RMP because it is basically a reporting requirement.

### 2

- 2

EXHIBIT 2

- 1

PROGRAM REQUI REMENTS

PROGRAM 1 PROGRAM 2 PROGRAM 3

Hazard Assessment

Worst

- case release analysis Worst

- case and alternative release analysis Worst

- case and alternative release analysis

Five

- year accident history Five

- year accident history Five

- year accide nt history

Management

None Documentation of management system Documentation of management system

Prevention Program

Certify that no additional steps are necessary Safety Information

(MSDS, process parameters, specifications) Process Safety Information

(chemical data, process technology, process

equipment)

Hazard Review Process Hazard Analysis

(formal analysis, trained team)

Operating Procedures

(operating procedures) Operating Procedures

(operating procedures, health and safety data)

Training (no documentation) Training

Maintenance (no documentation) Maintenance

Accident Investigation Accident Investigation

Compliance Audits Compliance Audits

Management of Change

Pre

- startup Review

Contractors

Employee Participation

Hot Work Pe rmits

Emergency Response

Coordinate with local responders Emergency response plan and program Emergency response plan and program

RMP

Registration

Worst

- case analysis

Five

- year accident history Registration

Worst

- case and alternative release analyses

F ive

- year accident history

Prevention program

Emergency response

Certification Registration

Worst

- case and alternative release analyses

Five

- year accident history

Prevention program

Emergency response

Certification



### 2.1.1. Program 1

Program 1 imposes minimal r equirements on affected sources. The source must certify that there

are no public receptors within the distance to an endpoint from a worst

- case release and that the process

had had no accidents in the previous five years that resulted in an adverse impac t to public health or the

environment. Therefore, no additional prevention steps would be reasonable. Sources must submit a

registration form and document the worst

- case release in the RMP. Emergency response actions must be

coordinated with local respo nse agencies.

### 2

- 3

2.1.2. Program 2

Program 2 would impose requirements for a streamlined risk management program. Sources

must implement a reduced list of risk management program requirements, as described below.

Hazard Assessment (Offsite Consequence Analysis )

The hazard assessment requirement under this option includes the statutorily mandated offsite

consequence analysis (OCA). The OCA provides estimates of the worst

- case releases and their

consequences. The offsite analyses must consider for a given rel ease rate and duration, the distances in

all directions that the substance would travel before it is dispersed enough to no longer pose a hazard to

public health and the environment. The analyses define the consequences of the worst

- case releases and

iden tify populations that could be exposed from such releases. EPA requires sources to complete a worst

case analysis assessment for regulated toxic substances and flammables as classes. Sources must analyze

alternative release scenarios for each listed toxi c above the threshold quantity and for flammables as a

class.

Under Options 1 and 2, EPA will provide lookup tables to help sources determine the impact

distances once the source defines the scenarios and determines release rates. Offsite populations are to be

defined in terms of readily available Census data; affected environments will be defined by location.

Under Option 3, sources would be required to conduct air dispersion modeling to determine distances and

identify offsite populations in detail.

Management

The source must assign responsibility for overseeing the development and implementation of the

program to one or more persons and document that organization through the use of a chart.

Prevention Program

Hazard Review . The hazard rev iew requires owners and operators of processes to examine the

processes and procedures to identify potential hazards. The analysis must review prevention and

mitigation measures. The review must be updated every five years.

Safety Information . The own ers/operators have to develop up

- to

- date safety information,

including MSDSs, equipment specifications, standards and codes used, and process parameters.

Operating Procedures. Owners and operators must establish standard operating procedures

(SOPs) for each operating phase, including the initial startup, normal operations, temporary operations as

the need arises, emergency operations (e.g., emergency shutdowns), normal shutdown, and startup

following a turnaround or after an emergency shutdown. They mus t be reviewed as often as necessary to

ensure that they reflect changes in current operating practice.

Employee training. Each operator must receive training on applicable procedures. Refresher

training must be provided at least once every three years to assure that the employee understands and

### 2

- 4

adheres to the current procedures. The owner or operator must ensure that employees are competent to

perform their jobs.

Maintenance. To maintain the mechanical integrity of the process, owners/operators must

develop procedures and train maintenance workers. Inspections and tests are required.

Compliance Audit

. At least once every three years, each owner or operator of an affected process

must conduct an audit. The audit evaluates the sources's compliance with the risk management

requirements and the safety of the source's operations. The source must develop a report of audit

findings. The source operator must keep records of each audit conducted.

Accident Investigation

. Each owner or operator must establish and implement procedures to

investigate each accidental release and each incident that had the potential to lead to offsite consequences.

The investigation should determine the cause of the release or incident, contributing factors, and steps th at

might prevent recurrences. The accident investigation report must be submitted to the owner or operator.

The owner or operator must document all actions taken in response to the findings and recommendations

and reasons for not addressing recommendatio ns. The report must be reviewed with all employees whose

work is within the process area where the accident occurred.

Emergency Response Program

If a source will have its employees handle, to any degree, a response to accidental releases of

regulated substances, the source must have an emergency response program that includes an emergency

response plan, procedures and measures for response, and procedures for notifying and alerting the

public. The emergency response plan must be coordinated with the l ocal emergency planning committee.

Sources that will rely exclusively on public responders or contractors to handle a release are not required

to develop a written plan.

Registration

The CAA requires that all affected sources register with EPA prior t o the effective date of the

regulation. The registration asks for the name and address of the source, the source's Dun and Bradstreet

number, the regulated substance on site, and quantities. The registration is part of the RMP.

Risk Management Plan (RM P)

Under Options 1 and 2, owners/operators must submit an RMP that presents an executive

summary of their risk management program, and data on each program element. The data can be

provided with numbers, checkoffs, or yes/no answers. The RMP will be su bmitted to EPA. EPA will

make it available on

- line to state and local entities and to the public. Under Option 3, source would be

required to submit the RMP as proposed, including a list of major hazards for each process, the

consequences of each hazard, risk reduction steps being taken for each hazard, and the consequences of

the risk reduction steps. The document would be filed as text, not data.



### 2.1.3. Program 3

Hazard Assessment

### 2

- 5

The same requirements as specified for Program 2 apply.

Management

The same requirements as specified for Program 2 apply.

Prevention Program

EPA's prevention program is identical to the OSHA PSM standard.

Process Hazard Analysis . The process hazard analysis requires owners and operators to have a

team conduct syste matic examinations of the processes and procedures to identify ways in which

equipment malfunction, human error, or external events could lead to an accidental release. The analysis

also reviews the efficacy of prevention and control measures to prevent a ccidental releases. The rule

allows sources to use one or more of six formal techniques, or a functional equivalent, but at least team

member must be trained in the technique. The process hazard analysis has to be revised every five years.

Process Sa

fety Information . The process hazard analysis is based on up

- to

- date chemical,

equipment, and process information. The process safety information (PSI) includes process chemistry

data as well as piping and instrumentation drawings (P&IDs) and other equip ment and design data.

Operating Procedures. Owners and operators must establish SOPs for each operating phase,

including the initial startup, normal operations, temporary operations as the need arises, emergency

operations (e.g., emergency shutdowns), n ormal shutdown, and startup following a turnaround or after an

emergency shutdown. Operating limits have to be identified, such as the consequences of deviation, the

steps required to correct and/or avoid deviation, and safety systems and their functions. The SOPs must

be readily accessible to employees who work in or maintain the process. They must be reviewed as often

as necessary to ensure that they reflect changes in current operating practice.

Employee training. Each operator must receive trainin g on applicable procedures. Refresher

training has to be provided at least once every three years to assure that the employee understands and

adheres to the current procedures. The owner or operator must ensure that employees are competent to

perform the ir jobs and document all training.

Maintenance. To maintain the mechanical integrity of the process, owners/operators must

maintain pressure vessels and storage tanks, piping systems, relief and vent systems and devices,

emergency shutdown systems, and controls, alarm, and interlocks through written procedures and

training. A schedule for inspections and tests is required; all inspections and tests must be documented.

Pre

- Startup Review . The owner or operator must conduct a pre

- startup review prior to initial

startup of a process or to start up following a substantial modification of the process. The pre

- startup

review is intended to ensure that all hazards of the new or modified process have been evaluated and to

confirm that SOPs, training, and ma intenance programs are in place (or have been updated) for the new or

modified process.

Management of Change. Each owner or operator must establish and implement procedures to

manage changes in processes and procedures. These procedures are intended to ensure that the technical

basis for the change is documented and that the consequences of each change in processes or procedures

### 2

- 6

are thoroughly analyzed prior to implementation of the change. The operator must ensure that process

safety information, SO Ps, and training programs are revised and that employees are trained prior to

implementation of the change, if a change results in revisions to procedures or operations. Each owner or

operator also must maintain copies of the source's procedures for manag ing changes in processes,

operations, and procedures. For each modified process or procedure subject to review, the owner or

operator must maintain records documenting the review, the findings of the review, and any additional

steps that were taken prior to implementation of the change.

Compliance Audit

. The same requirements as specified for Program 2 apply.

Accident Investigation

. The same requirements as specified for Program 2 apply.

Emergency Response Program

The same requirements as specifie d for Program 2 apply.

Registration

The same requirements as specified for Program 2 apply.

Risk Management Plan

The same requirements as specified for Program 2 apply.



### 2.2. OPTIONS

EPA considered three options that differ in how they assign sources t o the three Tiers and in the

stringency of two requirements. The options were selected to identify the impact of tiering and of

changes to requirements that EPA has adopted.



### 2.2.1. Option 1

A source that can demonstrate that, under a worst

- case release from a process, the distance from

the point of release to any public receptor is greater than a distance to a specified endpoint, may comply

with Program 1 requirements for that process.

Processes in SIC codes 2611, 2812, 2819, 2821, 2865, 2869, 2873, 2879, and 2911 will comply

with Program 3; 6 the SIC codes specified for Program 3 were selected based on the accident histories of

the individual industry sectors; in general, these SIC codes cover sources with high volumes of regulated

6 SIC code 2611

- pulp mills; 2812

- chlor

- alkali manufacturers; 2819

- industrial inorganics manufacturers; 2821

- plastic and resins; 2865

- cyclic crudes and intermediates; 2869

- industrial organics manufacturers; 2873

- nitrogen

fertilizers; and 2911

- petroleum refineries.

### 2

- 7

substances and complex p rocesses (i.e., they manufacture or react substances, frequently at extreme

conditions (e.g., high or low temperatures or pressures));

Processes that are already subject to the OSHA PSM standard will comply with Program 3. The

Program 3 prevention progr am is the same as the OSHA PSM standard. To reduce potential confusion,

processes already subject to OSHA PSM standard were included in Program 3 because they are already in

compliance with the Program 3 prevention program; the other risk management progr am requirements are

the same for Program 2 and 3.

All other processes will comply with Program 2. Program 2 processes generally involve storage

and loading of substances. Although the volume of chemicals may be high in some cases at Program 2

processe s, the processes themselves are relatively simple and, in many cases, subject to existing codes and

standards designed to address safety issues.



### 2.2.2. Option 2

Option 2 would impose Program 3 requirements on all sources, with the final rule requirements

for offsite consequence analysis, which provides reference tables to reduce the burden, and RMP, which

includes primarily data elements.



### 2.2.3. Option 3

Option 3 would impose Program 3 requirements on all sources, with the proposed rule

requirements for offsite consequence analysis, which required air dispersion modeling, and RMP, which

required a detailed text report on hazards and the prevention program.



### 2.3. STATUTORY LIMITATIONS

The CAA requires EPA to establish a threshold quantity for each regulated substance rather than

source

- specific thresholds; therefore, approaches used by state programs that apply criteria rather than

thresholds (e.g., Delaware) or that leave local authorities the discretion to impose the minimal federal

program requirements are not allo wed. The statute also does not provide for the total exemption of

classes of sources (e.g., small businesses, certain SIC codes) or the setting of different thresholds for

certain classes of sources, except for agricultural nutrients when held by a farmer . Taking these

limitations into consideration, this analysis considered options that are flexible enough to allow smaller

sources to develop relatively simple programs, yet still assure that larger and more complex sources will

use risk management program s for chemical accident release prevention.

### 3

- 1 CHAPTER 3.

ESTIMATION OF THE UN IVERSE

OF AFFECTED SUBSTANC ES AND SOURCES

This chapter explains the methodology used to estimate the universe of substances and sources in

the U.S. that may be affected by EPA's regu latory options. The risk management program options may

impose different costs on sources based on the number of regulated substances present above the

threshold, the complexity of the processes, and the size of the source. The analysis of the universe

i nvolves estimating the number of regulated substances per source and the number of sources within

various size and complexity combinations. Because the Occupational Safety and Health Administration's

(OSHA) process safety management (PSM) standard for hig hly hazardous chemicals imposes comparable

requirements on a similar universe of sources, the universe of sources and substances covered by both

EPA's options and OSHA's standard also must be estimated.

This chapter is organized in three sections. Sec tion 3.1 discusses the selection of the data used to

estimate the universe of potentially affected sources. Section 3.2 presents the methodology used to

estimate the number of regulated substances and the number of potentially affected sources in the U.S. , as

well as the methodology used to disaggregate the number of sources and substances by type of source,

size, process complexity, and whether the sources and substances were previously regulated by similar

risk management requirements. Section 3.2 also describes adjustments to the universe estimates to

account for industry sectors not adequately represented in the data. Finally, Section 3.3 provides

estimates of the adjusted universe of affected sources and regulated substances.



### 3.1. SELECTION OF DATA

3.1.1. Da ta Requirements

CAA section 112(r)(7) states that all sources with more than a threshold quantity of a regulated

substance present at the site must develop and implement risk management plans. The universe of

potentially affected sources, therefore, inc ludes both manufacturers and non

- manufacturers. To define the

universe, EPA sought a database that would cover all SIC codes, that would include all listed substances

with information on the maximum amount on site at any one time, 7 and that also would inc lude

information on the number of employees to allow disaggregation of the data by size of the source. To

identify such a database, EPA reviewed a number of EPA and other federal agency databases. EPA's

toxic release inventory (TRI) database covers only manufacturers (SIC codes 20

- 39), sets thresholds

based on annual throughput, and does not include sources with fewer than 10 full

- time employees. Other

7 This analysis is based on maximum quantity of a listed chemical on site as a trigger for determining facility

compliance with the listing and risk man agement program rules. The rule actually is based on maximum quantity of a

listed chemical in a process. No data are available to conduct an analysis by maximum quantity in process. The

difference may result in an overstatement of the regulated univers e and, therefore, an overestimate of costs.

### 3

- 2

national databases, such as the Emergency Response Notification System (ERNS), focus on releases of

haz ardous substances and a limited number of other pollutant incidents. EPA databases linked to permit

systems are limited by the willingness of states to submit and update data. OSHA's data provide

information on workplace releases.

A number of states have developed databases from the EPCRA section 312 data on annual source

chemical inventories. These databases satisfy some of the analytical requirements because they cover all

sources having a very broad range of substances, with thresholds at the thre shold planning quantity (TPQ)

for EHSs and 10,000 pounds for other substances. Section 312 of EPCRA does not, however, include

information on the number of employees. The State of New Jersey has a Right

- to

- Know database,

established under state law, that sets a reporting threshold of zero and includes employee size. After

discussion with state officials in Delaware and New Jersey and an examination of several state databases,

EPA determined that none of the state right

- to

- know databases were reliable eno ugh to use. State

officials said that many of the reports in their EPCRA databases are inaccurate because companies do not

understand the difference between mixtures and pure substances, or components of a compound and the

compound. Consequently, many of the reports appear to be erroneous; for example, non

- manufacturers

report chemicals used only in the manufacturing of plastics.

Because it is national in scope, EPA decided to rely on the TRI data for estimates of

manufacturers covered by the rule. N ew Jersey's database was used, in lieu of any other source, to

estimate wholesaler coverage and propane use. Other non

- manufacturing sectors were estimated based on

information collected from industry sources as discussed in Section 3.2.2. Public source estimates were

based on EPA data.



### 3.1.2. TRI Database/Limitations

TRI is a national database containing annual data filed by manufacturers that manufacture or

process 25,000 pounds of a TRI

- listed chemical annually, or use 10,000 pounds of such chemicals

annu ally. Sources report the maximum quantity on site, in ranges. Because of the cost of compliance

with TRI, it is likely that most companies are actually filing reports for the chemicals they have on site.

The TRI data, however, have some significant limi tations:

 Manufacturers with fewer than 10 full

- time employees (FTE) are exempt.

 Only 37 of the 112(r) substances are covered by TRI. These, however, include most of the large

volume toxic substances.

 TRI allows sources to report up to 12 Standar d Industrial Classification (SIC) codes, which makes it

very difficult to compare TRI numbers to census data. For example, using the first

- listed

SIC code in TRI reports, almost twice as many chlor

- alkali sources filed reports as the

1990 Census of Manufa cturers listed. (The Census lists a source under only one SIC

code.)

 Reporting is based on throughput, not maximum on site or in a process. Except for ammonia

refrigeration, where annual throughput may be low even though the system is large, it is

unli kely that many sources that meet the 112(r) thresholds will not meet TRI thresholds.

(Ammonia refrigeration units were estimated separately.)

### 3

- 3

 TRI maximum on site is reported in ranges, which makes identification of affected sources difficult.

For examp le, it is not possible to determine whether a source reporting 1,000 to 10,000

pounds of chlorine is actually covered by the 112(r) rule, which has a 2,500 pound

threshold for chlorine.

 TRI provides no information about the number of employees at a sourc e.

 The level of compliance is uncertain. In 1991, the base year for the data used, EPA estimated that

compliance averaged about 70 percent.



### 3.2. ESTIMATION METHODOLOGY

EPA's risk management requirements would impose different costs on different types of s ources

based on a number of factors. The cost of the program elements would vary with the complexity of the

source. Some elements, such as training, vary significantly based on the number of employees at a

source. To define the scope of the universe of affected sources under each list option and to characterize

the universe properly to apply unit cost estimates, each of the different source characteristics was

carefully analyzed. Section 3.2.1 describes the approach used to analyze the TRI data, which p rovide

estimates of the number of sources potentially affected because of the presence of acute toxics. Section

3.2.2 presents information on adjustments to the universe estimates to account for industry sectors that are

not covered by the data. Section 3.2.3 describes the methodology for disaggregating the estimated

universe into size and complexity categories. Section 3.2.4 describes the methodology for disaggregating

the universe into categories of sources incurring full and partial costs. Section 3. 2.5 explains how the

number of substances was estimated. Section 3.2.6 discusses potential attrition of sources because of

changes in practices.



### 3.2.1. Estimation of the Universe of Sources and Substances Affected

Exhibit 3

- 1 provides the actual number of s ources and listed chemicals reported to TRI for 1991

and the basis for estimating the number of sources and substances for each SIC code. The TRI data

presented include the number of unique sources that filed TRI reports for regulated chemicals; the numbe r

of regulated chemicals reported by these sources; and the number of unique chemicals reported in the

sector. For example, 2819 (industrial inorganics, nec), 296 sources filed TRI reports for regulated

substances; the sources filed 645 reports for indivi dual regulated substances; a total of 29 regulated

substances were covered in the 645 reports. The number of unique regulated substances reported is

included to provide an indication of the variety of chemical use in the sector.

For some sectors of th e chemical industry, particularly industrial inorganics, organics, and

synthetics and resins, for the petroleum refineries, for pulp and paper mills, and for the semi

- conductor

industry, TRI data were used only to help estimate the number of substances; se ctor coverage was based

on census numbers. For example, Census data indicate that there are 39 pulp

### 3

- 4

EXHIBIT 3

- 1

ESTIMATES OF MANUFACTURING SOURCES

TRI DATA Comments Estimate

Source/Chem

# Unique

112(r)

Chemicals

Reported ACTUAL TRI

IND USTRY/SIC Code Source Chemical

Food Processors

- 20 10 554 554 Ammonia not included in TRI estimates; SO 2 used in some sectors.

Assume TRI at 70% compliance. 790/790

Tobacco

- 21 2 11 14 Assume TRI at 70% compliance. 20/20

Textiles

- 22 6 161 202 Bromine and NO

x may be used. Assume TRI at 70% compliance. 230/320

Apparel

- 23 4 6 9 Assume TRI at 70% compliance. 10/10

Wood and Lumber

- 24 4 166 187 Assume TRI at 70% compliance. 240/270

Furniture

- 25 4 34 44 Assume TRI at 70% compliance. 50/60

P ulp Mills

- 261 7 89 299 Assume all covered; number based on Census data. Assume SO 2 use. 40/130

Paper Mills

- 262 9 126 295 Assume all covered; number based on Census data. Assume SO 2 use. 280/660

Paperboard Mills

- 263 7 66 147 Assume TRI at 70% compli ance. Assume SO 2 use. 90/210

Other Paper

- 264+ 7 43 54 Assume TRI at 70% compliance. 60/80

Printing Publishing

- 27 3 44 50 Assume TRI at 70% compliance. 60/70

Chlorine Alkalies

- 2812 28 54 195 Assume all covered; number based on Census data. 50/180

Industrial Gases

- 2813 20 77 124 All sources probably covered because of ammonia refrigeration systems. 590/980

### 3

- 5

EXHIBIT 3

- 1

ESTIMATES OF MANUFACTURING SOURCES

TRI DATA Comments Estimate

Source/Chem

# Unique

112(r)

Chemicals

Reported ACTUAL TRI

IND USTRY/SIC Code Source Chemical

Inorganic Pigments

- 2816 8 28 69 Assume TRI at 70%. 40/160

Industrial Inorganics

- 2819 29 296 645 Assume all with > 9 employees covered; n umber based on Census data. 450/1,620

Plastics Resins

- 2821 33 256 684 Assume all with > 9 employees covered; number based on Census data.

Chemicals added for non TRI substances. 390/2,020

Synthetic Rubber

- 2822 23 23 87 Assume all with > 9 employees covered; number based on Census data.

Chemicals added for non TRI substances. 50/310

Cellulosic Fibers

- 2823 5 3 9 Assume all with > 9 employees covered; number based on Census data.

Chemicals added for non TRI substances. 10/80

Non Cellulosic Fibers

- 2824 15 22 60 Assume all with > 9 employees covered; number based on Census data.

Chemicals added for non TRI substances. 60/430

Medicinals

- 2833 14 42 99 Assume TRI at 70%. Takes in most sources with >20 employees. 60/140

Pharmaceuticals

- 2834 17 90 162 Assume TRI at 70%. Takes in most sources with >100 employees. 130/230

Diagnostics

- 2835 1 1 1 Assume TRI at 70%. 1/1

Biologic Products

- 2836 2 5 6 Assume TRI at 70%. 7/8

Soaps

- 2841 11 91 127 Assume TRI at 70%. Takes in half of sources wi th >20 employees. 130/180

Polishes

- 2842 7 104 148 Assume TRI at 70%. Takes in half of sources with >20 employees. 150/220

### 3

- 6

EXHIBIT 3

- 1

ESTIMATES OF MANUFACTURING SOURCES

TRI DATA Comments Estimate

Source/Chem

# Unique

112(r)

Chemicals

Reported ACTUAL TRI

IND USTRY/SIC Code Source Chemical

Surface Agents

- 2843 13 45 105 Assume TRI at 50% because of non

- TRI chemicals. Takes in half of

sources with >20 employees. SO 3 and oleum may be used. 90/270

Toiletries

- 2844 6 23 27 Assume TRI at 50% because of non

- TRI chemicals. Takes in mostly

sources with >500 employees. 50/50

Paints

- 2851 12 91 117 Assume TRI at 70%. Takes in mostly sources with >100 employees. 130/170

Gum Wood Chemicals

- 2861 9 10 21 Assume all sources with >9 employees covered; number based on Census

data. 40/110

Cyclic Crudes Intermediates

- 2865 29 80 231 Assume all sources with >9 employees covered; number based on Census

data. Chemical added f

or non

- TRI substances. 150/780

Industrial Organics

- 2869 33 316 1,067 Assume all sources with >9 employees covered; number based on Census

data. Chemical added for non

- TRI substances. 500/2,910

Nitrogen Fertilizer

- 2873 10 75 169 All sources covered; number based on Census data. 150/340

Phosphatic Fertilizers

- 2874 7 33 52 Assume TRI at 70%. 50/70

Fertilizer Mixing

- 2875 4 58 61 Assume all sources with > 19 employees; number based on Census data. 110/110

Ag Chemicals

- 2879 22 49 117 Assume TRI at 70%. (most of sources with > 19 employees). 70/170

Adhesives Sealants

- 2891 9 38 51 Assume TRI at 70%. 50/70

### 3

- 7

EXHIBIT 3

- 1

ESTIMATES OF MANUFACTURING SOURCES

TRI DATA Comments Estimate

Source/Chem

# Unique

112(r)

Chemicals

Reported ACTUAL TRI

IND USTRY/SIC Code Source Chemical

Explosives

- 2892 4 16 29 Assume all with > 9 employees because of explosives; number based on

Census data. 70/130

Printing Ink

- 2893 4 13 13 Assume TRI at 50% because of non

- TRI chemicals. 30/30

Carbon Black

- 2895 6 20 45 Assume all covered (none < 10 employees); number based on Census

data. 20/50

Misc Chemicals

- 2899 25 170 320 Assume TRI at 50% because of non

- TRI chemicals. 340/660

Refi neries

- 2911 19 153 650 All are covered; number based on DOE data; flammables treated as a

class. 185/1,060

Other Petroleum Coal Products

- 295+ 6 39 50 Assume TRI at 50% because of non

- TRI chemicals. 80/100

Rubber and Plastic Products

- 30 13 206 294 Assume TRI at 70%. 290/420

Leather Products

- 31 4 29 30 Assume TRI at 70%. 40/40

Stone, Clay, Glass

- 32 12 169 252 Assume TRI at 70%. 240/360

Primary Metals

- 33 10 682 1,053 Assume TRI at 70%. 970/1,500

Fabricated Metals

- 34 8 1212 1,741 Assume TRI ; any higher level would cover sources with < 100 employees

who are unlikely to have the acids above the TQ. 1,200/1,740

Industrial Machinery

- 35 6 197 254 Assume TRI at 70%. 280/360

### 3

- 8

EXHIBIT 3

- 1

ESTIMATES OF MANUFACTURING SOURCES

TRI DATA Comments Estimate

Source/Chem

# Unique

112(r)

Chemicals

Reported ACTUAL TRI

IND USTRY/SIC Code Source Chemical

Electronics

- 36 7 474 773 Assume TRI at 70%. 680/1,100

Semiconductor s

- 3674 5 123 282 Whole industry with >9 employees affected by non

- TRI chemicals;

number based on Census data. 550/2,200

Transportation Equipment

- 37 13 324 493 Assume TRI at 70%. 460/700

Instruments

- 38 10 138 198 Assume TRI at 70%. 200/200

Misc

- 3 9 6 74 92 Assume TRI at 70%. 90/110

TOTAL 7,264 12,906 11,100/24,800

All estimates have been rounded to the nearest 10.

### 3

- 9

mills (SIC code 2611), therefore, only 39 sources were counted in that sector (TRI indicated 89 sources in

SIC code 2611). A rati o of chemicals to sources was developed from the TRI data and applied to the 39

sources to estimate the number of substances in SIC code 2611.

For sectors where TRI data were used to estimate the number of sources, the data were adjusted

based on a num

ber of factors:

 The likelihood that sources in a sector would be using non

- TRI regulated substances (e.g., semi

conductor manufacturers are likely to use such substances);

 Comparison with Census data to determine the number of sources with more than 10 0 employees.

(Based on discussion with industrial users, it seemed unlikely that any source with fewer

than 100 employees would store or use acids (the primary chemical on concern in the

metals industrial sectors) above the threshold quantities.)

 Estima ted compliance with TRI reporting requirements in 1991 (base year for the data). At that time,

EPA estimated that 70 percent of the sources covered by the rule were in compliance.

In general, outside of the chemical industry, compliance was estimated a t 70 percent unless the resulting

estimate would have included sources with fewer than 100 employees. Except as discussed above,

within the chemical sector, the TRI average rate of 70 percent compliance was used for most sectors 8

. For a few sectors, how ever, a 50 percent rate of compliance was applied because the primary listed

substances in use are not TRI chemicals and, therefore, TRI data may not adequately reflect the number

of sources covered. A 50 percent compliance rate was selected as a reasonab le estimate of the likely

number of sources using regulated substances in these sectors.



### 3.2.2. Adjustments to the Universe of Sources and Substances

The TRI database does not adequately represent certain large industry sectors: public drinking

water and was tewater treatment works, cold storage sources, propane and agricultural retailers, federal

sources, utilities, wholesalers, and gas processing. The analysis, therefore, was adjusted to account for

these sectors. Because data on these sources are generall y not available in databases, the analysis relied

on information collected from trade associations, who were asked to provide their best estimate of the

number of sources in their sectors using listed substances above the applicable threshold quantities.

Public sources . Discussions with officials in EPA's Office of Drinking Water and at the

American Water Works Association indicated that the public drinking water systems that treat more than

2 million gallons a day (mgd) and publicly owned treatment work s (POTWs) that treat more than 1 mgd

are likely to use chlorine in quantities above the threshold quantities. The number of public drinking

water sites in the U.S. was obtained from an EPA Office of Drinking Water analysis that estimated the

number of sep arate treatment sites for surface and ground water for systems serving varying populations.

Approximately 48 percent of the public systems are in states that have OSHA

- delegated worker safety

and health programs; they were assumed to be in compliance with state regulations at least as stringent as

8 Preliminary Analysis of TRI Tracking System Data, William Burch, Memo to Charles Elkins, Director, EPA/OTS,

September 12, 1988.

### 3

- 10

the OSHA PSM standard. The other 52 percent of the public drinking water systems were assumed to

have to comply with EPA's risk management requirements. A state

- by

- state estimate of the number of

POTWs in the U .S., by population served, was obtained from EPA's 1991 Pretreatment Program Report

to Congress (U.S. EPA, 21 W 4004). The number of drinking water sources was estimated at 4,140; the

number of POTWs was estimated at 3,145.

Utilities . Electric utilitie s use chlorine and hydrazine in their cooling towers and boilers. Some

larger utilities may use ammonia in scrubbers and may produce sulfur dioxide in sufficient quantities to

be covered for that chemical. The number of electric utilities is based on the 1994 Directory of Electrical

Utilities (McGraw Hill, 1994). The number of large utilities is based on the number of non

- hydroelectric

power plants producing 25 megawatts (MW) or greater, which are classified by the directory as major

producers. The numb er of small utilities is based on the number of such sources belonging to state, local,

district, or federal agencies and producing 10 MW. Smaller utilities produce very small quantities of

power and, therefore, are not expected to have more than a thresh old quantity of regulated substances on

site. The analysis estimated 1,100 large utilities and 570 small. Most utilities will be covered by the

OSHA PSM standard although some may be subject only to EPA's requirements if the only regulated

substance used is hydrazine. To account for this possibility, the analysis assumed that 10 percent of large

utilities and 20 percent of smaller utilities would not be subject to the OSHA standard. This estimate is

conservative because it is likely that most utilities will have several regulated substances on site.

Gas utilities also are likely to be covered because of their storage of natural gas (methane). The

American Gas Association estimated that there are approximately 1,800 gas utilities. All of these utiliti es

are subject to the OSHA PSM standard.

Cold storage sources. Cold storage systems use ammonia as a refrigerant. To estimate the

number of cold storage units, information was obtained from industry members through the International

Institute of Ammoni a Refrigeration (IIAR) and the International Association of Refrigerated Warehouses

(IARW). Discussions with IIAR and its members and a review of TRI data indicate that selected food

processors are likely to have large ammonia systems. To estimate the n umber of food processors likely

to be covered, the analysis used TRI data to identify sectors likely to have ammonia refrigeration systems

and assumed that all sources with more than 100 employees in these sectors would be covered. These

sectors include m eat packing, dairy products, frozen food (processors and distributors), and beer

manufacturers, as well as refrigerated warehouses. In addition, the analysis assumed that 10 percent of

wholesalers handling packaged frozen food, dairy products, poultry and poultry products, fish, meats, and

fresh fruits and vegetables would have large ammonia refrigeration systems. The analysis included 90

percent of the 724 public refrigerated warehouses listed in U.S. Department of Agriculture data. Private

warehouses w ere not included in the estimate to avoid possible double counting with food processors and

distributors. The total number of cold storage sources covered under the list is estimated at approximately

3,300 food processors, 1,800 food distributors, and 650 warehouses, for a total of 5,800 (all numbers were

rounded). All of these sources are subject to the OSHA PSM standard.

Retailers. Two groups of retailers are likely to store more than threshold quantities of listed

substances: propane distributors a nd agricultural retailers who sell ammonia as a fertilizer. Propane

retailers do not appear to fall into a specific SIC code. According to the National Propane Gas

Association, approximately 25,000 retailers sell propane. The Association estimated that only half of

these retailers have more than 10,000 pounds of propane on site. Therefore, 12,500 propane retailers

were added to the estimated universe.

### 3

- 11

Comments from agricultural retailers indicated that between 5,000 and 7,000 of these retailers

will h ave ammonia in quantities above 10,000 pounds on site. Therefore, the total number of retailers

covered by the rule was adjusted upward from 12,500 to 18,500 to include the agricultural retailers.

OSHA specifically exempts retailers from the OSHA PSM st andard. Consequently, all of these

sources are subject to only EPA's rule.

Propane users. Propane is used as a fuel or for heating at numerous sources. Manufacturers

may use propane directly as fuel for operating the source, as fuel for fork lifts, an d as a backup fuel when

the source has an interruptible natural gas contract. Other sources, such as hospitals, mobile home parks,

restaurants, hotels, and apartment buildings, especially in rural or mountainous areas, use propane for

heating. Institutio ns such as prisons also use propane for comfort heating. No data currently exist on the

number of such sources. New Jersey right

- to

- know data were used to estimate that 16,100 sources would

have more than 10,000 pounds of propane on site. This estimate is consistent with an extrapolation based

on Texas Railroad Commission data of propane sources in Texas, which indicate a national number of

approximately 17,000.

Some of the propane users may be subject to the OSHA PSM standard. OSHA exempts propane

wh en used as a fuel unless it is fueling a process that involves another chemical listed by OSHA. Because

there was no basis for estimating how many such processes might exist, the analysis assumed that all

propane users would be subject to only EPA's rule. This assumption will overstate the costs to some

degree.

Wholesalers . The wholesalers affected by this rule are primarily chemical distributors (SIC code

5169) although a few other wholesalers may also sell chemicals in bulk. Because TRI does not cov er this

sector, the number of wholesalers was based on New Jersey Right

- To

- Know data and extrapolated to the

nation assuming a 45 percent compliance rate. Most wholesalers are subject to OSHA. The analysis used

the New Jersey right

- to

- know data to estima te the number of wholesalers subject only to EPA.

Gas processing. In comments to the docket, API stated that 750 gas processing plants were

subject to the rule (see docket letter 425). In discussions, API estimated that half the processing plants are

c overed by the OSHA PSM standard and, therefore, would be subject only to the incremental elements of

EPA's rule.

Federal sources. Federal sources, such as military installations and Department of Energy

facilities, are potentially affected by the rule primarily because of the presence of chlorine for wastewater

treatment and the acids used for degreasing and metal work. According to discussions with EPA's Office

of Federal Facilities, approximately 1,600 federal facilities have notified EPA that they are potentially

subject to reporting under EPCRA. Because no other data are available on chemical use at federal

installations, this analysis used 1,600 as the number of federal sources potentially affected by the rule.

This number may overstate the pote ntial impact of the rule on federal facilities because EPCRA covers a

broader range of chemicals than does section 112(r). Because these sources are likely to have chlorine or

ammonia, the analysis assumed that all of them were subject to OSHA PSM for at least one chemical, but

that all had one other regulated substance listed only by EPA.

### 3

- 12

3.2.3. Classification of Affected Sources and Substances by Size and Process Complexity

The compliance burden on sources for implementing EPA's risk management requirements will

vary by the complexity of processes in which the regulated substance is used. For example, refineries

will have to expend greater resources to conduct process hazard analyses than will metal platers. To

ensure that the estimated unit costs reflect t he variation in the level of complexity of the process used at

an affected source, EPA categorized all non

- chemical manufacturers as low complexity. Most of these

sources use chemicals to treat water or wastes, degrease, or etch. Chemical manufacturers w ere

categorized as moderately complex or highly complex. SIC code 2911, petroleum refineries, were treated

separately. All small (< 20 employees) chemical manufacturers were considered moderately complex.

All medium to large sources in SIC codes 2812, 2 819, 2821, 2865, 2869, 2873, and 2879, were

considered highly complex; these sectors react substances and manufacture chemical feedstocks, produce

products, often using high

- temperature or pressure processes. All other medium and large chemical

companies (e.g., manufacturers of paints, toiletries, drugs) were considered moderately complex because

their processes generally less likely to involve extreme conditions or chemical reactions.

The compliance burden will vary according to the size of the source. Larger sources will have to

expend more resources to train employees because training costs are partly the result of the number of

employees to be trained. Other risk management program elements, such as safety audits, maintenance,

and pre

- startup review , are likely to require more resources at larger sources because the size of the

process alone will mean that each element will take more time to develop and implement. Accordingly,

the analysis separates manufacturing sources into 14 categories, based on Census size divisions because

Census data were used to estimate the number of affected sources:

 Small chemical and non

- chemical sources with 1 to 19 employees;

 Non

- chemical sources, moderately complex chemical sources, and highly complex chemical sou rces

with 20 to 99 employees;

 Non

- chemical and moderately complex chemical sources with more than 100 employees.

 High complexity chemical sources with the following: 100

- 249 employees; 250

- 499 employees; 500

-

999 employees; 1,000

- 2,499 employees; and 2,500 employees or greater.

 Refineries

— small (less than 30,000 barrels per day (bbl/d)); medium (30,000

- 60,000 bbl/d); and large

(>60,000 bbl/d).

Large high complexity chemical sources were divided into subcategories because these sources

are more l ikely than other large chemical manufacturers to have multiple processes and chemicals

affected by this rule. The number of covered processes at these sources is likely to rise as the size of the

source rises.

For non

- manufacturers, the number of employ ees was assumed not to be an appropriate measure

of size because, based on date from the EPCRA section 305(b) study and discussions with industry,

relatively few employees are usually needed for operations at both large and small sources. In addition,

the hazards at the source and the complexity of evaluating and managing those hazards were assumed to

be more directly related to the quantity of chemical on site. At manufacturing sources, the quantity of

chemicals used can be expected to be related to the number of employees, because the number of

### 3

- 13

employees reflects the size of the overall operation. For wholesalers, relatively few employees may

handle chemicals. For example, of the seven chemical distributors who responded to EPA's EPCRA

section 305(b) s urvey, only one had more than 20 employees handling chemicals, although five had more

than 100,000 pounds of a chemical on site; two had more than 200 million pounds of a chemical on site,

but had fewer than 12 employees. Ammonia refrigeration industry so urces indicate that few if any cold

storage sources will have more than eight employees working on the cold storage unit although some of

these units contain as much as 200,000 pounds of ammonia.

Utilities and public sources were subdivided based on capa city. As noted above, utilities were

divided into those that produced 10 to 25 MW and those that produced more than 25 MW of power,

considered major producers; systems that produce less than 10 MW were judged to be too small to

maintain threshold quantiti es of listed substances. Based on conversations with officials in states with

state RMP (Delaware and New Jersey) programs and on comment letters, the analysis divided drinking

water and POTWs into size categories to reflect the increasing level of comple xity as the size of the

system increases. The smallest systems may handle one

- ton cylinders of chlorine while the largest

systems may have several 90

- ton rail cars on site at all times. Using standard EPA size

- divisions, the

analysis divided drinking wat er systems and POTWs into four groups: those that treat 100 mgd or more;

those that treat 25 to 100 mgd; those that treat 10 to 25 mgd; and those that treat 1 to 10 mgd (POTW) or

2 to 10 mgd (drinking water).



### 3.2.4. Disaggregation of Universe of Sources Incurri ng Full and Partial Costs

Sources can be divided into three categories: those that are covered only by EPA's rule; those

that are covered by EPA and OSHA's PSM standard for substances covered by both rules; and those

covered by both rules and also have substances covered by only EPA. The cost burden for these three

groups are different. The first group will incur the full cost of complying with all of EPA's requirements.

The second group will incur only the costs for those elements not covered by the PSM standard

(registration, hazard assessment, emergency response drills, and the RMP). The final group will have

already complied with the source

- specific requirements (procedures for management of change, pre

startup review, and accident investigation) for the OSHA rule. No further costs should be incurred for

these elements. For the incremental substances (those covered by EPA but not by OSHA), these sources

will incur process

- specific costs (PHA, process safety information, SOPs, training, maintenanc e, and

audits) for each substance.

It was not feasible to define the number of sources that were covered by EPA and OSHA, with

and without additional EPA chemicals; to do so would have required examining each of the almost

25,000 TRI chemical reports t o determine what percentage of source reported only OSHA/EPA chemicals

and what percentage also reported EPA

- only chemicals. Consequently, the analysis did not assign a

number of sources to these groupings. Instead, costs for the prevention program eleme nts were estimated

based on the number of incremental sources (those not covered by OSHA for any substance) and the

number of incremental substances (the substances covered only by EPA). The costs of rule elements that

only EPA imposes (the RMP and OCA) w ere calculated based on the total number of sources and

substances because all sources have to comply with these provisions.

To determine the number of incremental sources and substances, the following assumptions were made.

### 3

- 14

 Based on expert knowledg e of chemical use in the affected industry sectors, all small and medium non

chemical manufacturers (mostly semi

- conductor and paper manufacturers) were assumed

to be covered by OSHA; semi

- conductor manufacturers are likely to have listed gases on

site abo ve the threshold quantity. Based on discussions with industrial sources, it seemed

that only large sources in the other non

- chemical manufacturing sectors would use listed

substances above the threshold quantity. For example, hydrochloric acid is the pri mary

substance triggering coverage of the metal and industrial equipment sectors; to meet the

threshold quantity, these sources would need to have approximately 42,000 pounds of

industrial concentration HCl on site. Smaller sources generally rely on frequ ent

deliveries of several barrels to meet their needs.

 Based on expert knowledge of chemical use in the industry, all chemical manufacturers and refineries

were assumed to be covered by OSHA for at least one substance. The high

- volume,

commodity chemica ls (chlorine, ammonia, flammable hydrocarbons) are covered by

OSHA and serve as feedstocks for affected chemical sources.

The TRI database does not distinguish between chemicals used as pure substances and those used

in solution. OSHA covers only pure s ubstances (except where a solution is indicated), but EPA will

cover aqueous solutions. In addition, EPA's list includes higher thresholds for solutions, making it

difficult to determine which TRI

- reported chemicals would be covered by the rule. For exam ple, TRI

reports include maximum on site in ranges of 1,000 to 10,000 pounds and 10,000 to 50,000 pounds.

Hydrogen chloride as a gas has a threshold quantity of 5,000 pounds, but as a mixture has a threshold

quantity of 15,000 pounds. A TRI report for HC l listing the maximum on site as in the first range would

be covered if it was held as a gas but not if it was held as solution. The estimates in this EIA account for

this difference as follows: sources in SIC codes 28 and 29 were assumed to use hydrogen chloride and

hydrogen fluoride as pure substances because they are likely to be producing it or reacting it; they would

be subject to OSHA PSM if the amount on site exceeded the thresholds; all other sources were assumed

to use these acids in aqueous solu tion and would be subject only to EPA, but at a higher solution

threshold, if applicable. This approach is conservative because it is possible that at least some of the

sources outside the chemical industry will handle the solutions at concentrations belo w those in EPA's

list; these users would not be subject to the rule.



### 3.2.5. Estimate of the Number of Substances

Although TRI does not cover many of the listed substances, the non

- TRI substances are primarily

used in the chemical industry. To estimate the nu mber of substances at high complexity sources, the TRI

data were used to estimate the number of chemicals. Adjustments were made to account for non

- TRI

chemicals. Generally in SIC codes 282, 2865, and 2869, two additional substances were added per source

primarily to reflect the use of flammables. Considerable uncertainty surrounds these additions; some

sources may have no additional substances while others could have five or more such substances,

especially where petroleum

- based flammables are used as f eedstocks. Two additional chemicals were

chosen because, although it may understate the number of substances in some cases, most of the non

- TRI

substances are also covered by the OSHA PSM standard and because flammables are treated as a class in

the offsi te consequence analysis requirements. Consequently, their presence imposes limited additional

costs to sources.

### 3

- 15

TRI data were used to estimate the number of incremental chemicals (those not covered by

OSHA PSM). The number of reports of the non

- OSHA su bstances with maximums on site above the

threshold quantity were identified by SIC code. Approximately 380 TRI reports were filed on non

- OSHA

chemicals for the SIC codes in Program 3 and 40 outside of these sectors, but still in the chemical

industry. Wi thin the SIC codes, the analysis allocated one chemical per source to the largest sources

(>1,000 FTE), 0.5 per source to those with >250 FTEs, 0.4 per source for those with >100 FTEs, and the

remaining 50 to sources with 20 to 99 FTEs. Although they refl ect reasonable assumptions, considerable

uncertainty surrounds these numbers. The TRI reports are not only general on quantity on site, but the

ability to distinguish between OSHA and EPA substances is complicated. OSHA covers some toxics as

flammables, but only in processes when held above atmospheric conditions. The total number of

incremental substances per sector is presented in Exhibit 3

- 2.

Because toluene di

- isocyanate (TDI) is the one toxic substance that may qualify for Program 1,

processes wit h TDI were assigned to Program 1. Of the 50 TDI reports in TRI that met the threshold

quantity, 25 were outside of the high complexity chemical sector, but were still submitted by chemical

companies. These reports were assigned to the category of large, moderately complex chemical

companies. The 25 processes in the Program 3 SIC codes were assigned equally to the five employee

size divisions of the large sources.



### 3.2.6. Adjustments to the Universe of Sources and Substances for Attrition

In New Jersey and Del aware, which have implemented risk management program regulations

under state law, a substantial number of sources removed themselves from coverage by reducing

inventories of substances, reducing the concentrations of solutions, or switching to non

- listed substances.

In New Jersey, 52 percent of the manufacturers that initially registered under the state law changed

substances or quantities before the full requirements were in effect. In Delaware, the attrition rate was 30

percent. In New Jersey, 90 perc ent of the public sources dropped out. In addition, information in EPA's

Accidental Release Information Program database indicates that 20 percent of the sources reporting

significant releases reduced inventories of chemicals in response to the release in cidents.

EPA recognizes that sources may take steps to eliminate the need to comply with the rule. The

analysis, however, does not attempt to estimate this change for two reasons: first, most of these changes

are likely to have already occurred in the case of commodity chemicals as the result of the OSHA PSM

standard; second, any such changes may result in costs to the source and perhaps an increased risk to the

community if a reduction in inventory results in more frequent transportation and unloading of hazardous

chemicals. Although it is expected that sources will not switch chemicals unless they believe the change

is cost

- effective, the analysis did not consider the change because it had no basis for estimating the

number of sources that would be li kely to make the changes or estimating the costs the sources would

incur (e.g., for equipment to handle chlorine substitutes). Similarly there was no basis for estimating the

degree to which risks would be decreased or increased (e.g., increased transport ation, substitution of a

substance that is not acutely toxic, but has chronic or carcinogenic effects). Consequently, the analysis

did not assume any reductions in the number of sources, which may create an upward bias to the cost

estimates.

### 3

- 16

3.3. RESULTS

Uni verse of Affected Sources

As described above, some costs apply to all sources and substances and some apply only to

incremental EPA sources and substances. The costs also vary by size and complexity of source. Exhibit

3

- 2 presents the estimated univers e of sources, substances, incremental sources, and incremental

substances for the manufacturers. Exhibit 3

- 3 presents the number of sources and substances for non

manufacturers.

None of the regulatory options considered in this EIA reduce the total nu mber of sources affected

by the rule. The options, however, impose different requirements and costs on various sources. For each

source category, Exhibit 3

- 4 presents the regulatory tier with which sources in the category would have to

comply and the rea son they were assigned to a specific Program level. Finally, Exhibit 3

- 5 presents the

number of sources and processes in each Program level under Option 1 (the other options assign all

sources to Program 3). EPA expects that more processes will be eligib le for Program 1 than the 410

listed in Exhibit 3

- 5, which includes only remote gas processing plants and TDI processes. Many

processes with flammables may meet the criteria for Program 1 because the distance to an endpoint from

a worst

- case release of a flammable is generally relatively small. Some flammable processes may,

therefore, have no public receptors with these distances. Because no data are available on the location of

these processes, however, this analysis assumed that no such processes would be eligible to be

conservative.

### 3

- 17

EXHIBIT 3

- 2

SOURCES AND SUBSTANCES FOR MANUFACTURERS

Total Sources Total Substances Incremental (non

OSHA) Sources Incremental (non

OSHA) Substances *

Chemical Manufacturers

< 20 FTEs 840 2,200 0 0

20

- 99 FT Es

SIC codes 283

- 5, 287

- 9 900 1,600 0 0

20

- 99 FTEs

SIC codes 281

- 2, 286 800 3,700 0 50

100+ FTEs

SIC codes 283

- 5, 287

- 9 840 1,500 0 40

SIC codes 281

- 2, 286

100

- 249 FTEs 360 1,300 0 150

250

- 499 FTEs 150 850 0 75

500

- 999 FTEs 80 700 0 45

1000

- 2499 FTEs 40 650 0 50

2,500+ FTEs 13 156 0 13

SIC Code 2911

< 30,000 bbl/d 61 290 0 0

30,000

- 60,000 bbl/d 39 190 0 0

60,000+ bbl/d 85 490 0 0

Other Manufacturers

< 20 FTEs 120 450 0 0

20

- 99 FTEs 300 1,150 0 0

100+ FTEs 6,500 9,900 1,280 1,600

* See Section 3.2.5 for a discussion of these estimates.

FTE means full

- time equivalent employees.

### 3

- 18

EXHIBIT 3

- 3

SOURCES AND SUBSTANCES FOR NON

- MANUFACTURERS

Number of Sources/EPA Only

Sources Number of Substances/EPA Only

Substances

Cold Storage 5,800/5,800 5,800/5,800

Retailers 18,500/18,500 18,500/18,500

Utilities 1,670/220 3,870/770

POTWs 3,145/1,688 6,290/3,270

Drinking Water Systems 4,140/2,150 7,300/3,800

Wholesalers 1,500/600 3,500/1,700

Gas Processors 725/360 725/360

Gas Ut ilities 1,800/0 1,800/0

Propane Users 16,100/16,100 16,100/16,100

Federal Sources 1,600/0 3,200/1,600

### 3

- 19

EXHIBIT 3

- 4

SOURCES AND PROGRAMS

PROGRAM REASON FOR PROGRAM LEVEL

Manufacturers (< 20 FTE) 3 OSHA PSM

Non

- Chemical Manufacturers (20

- 9 9 FTE) 3 OSHA PSM

Chemical Manufacturers (20

- 99 FTE) 3 SIC codes, OSHA PSM

Manufacturers (100+ FTE) 2 (1,280)

3 (5,220) Not OSHA PSM 9

OSHA PSM

Chemical Manufacturers (100+ FTE) 3 OSHA PSM

Refineries (100+ FTE) 3 OSHA PSM

Cold Storage 3 OSHA PSM

Retai lers 2 Not OSHA PSM 10

Electric Utilities 2 (220)

3 (1,450) Not OSHA PSM 11

OSHA PSM

POTWs 2 (1,690)

3 (1,460) Not OSHA PSM 4

OSHA PSM

Drinking Water 2 (2,150)

3 (1,990) Not OSHA PSM 4

OSHA PSM

Wholesalers 2 (600)

3 (900) Not OSHA PSM 2

OSHA PSM

Gas Proces sors 1 (360)

3 (360) No impacts

OSHA PSM

Gas Utilities 3 OSHA PSM

Propane Users 2 Not OSHA PSM 3

Federal Sources 3 OSHA

9 Acid solutions not covered by OSHA

10 Exempted by OSHA.

11 Exe mpted because OSHA rules do not apply to state or local governments unless the program is delegated to the

state.

### 3

- 20

EXHIBIT 3

- 5

TOTAL SOURCES AND PROCESSES BY PROGRAM LEVEL

PROGRAM 1 PROGRAM 2 PROGRAM 3

SOURCES 360 40,200 25,500

PROCESSES 410 47,700 43,800

NON OSHA

PROCESSES 410 47,700 373

### 4

- 1 CHAPTER 4.

ESTIMATED BURDEN AND UNIT COSTS OF COMPLI ANCE

This chapter provides the estimated burden and unit costs of developing risk management

programs for industry and government. The regulat ed community is expected to incur costs to become

familiar with the listing and risk management rulemakings, develop and register their RMPs, and prepare

and implement the risk management program elements for covered processes. EPA is expected to incur

co sts to develop a submission system for the RMP and provide assistance to sources on the risk

management program. The implementing agency (EPA or a state agency) is expected to incur costs to

review initial RMPs for completeness, provide technical assistan ce to sources, audit RMPs, and enforce

compliance with the requirements.

The unit for measuring compliance burden and costs to the regulated community varies by the

different risk management program elements. It was assumed that some activities, such as rule

familiarization and registration, will be performed once per source regardless of the number of regulated

substances or processes at a source. The burden and costs to conduct hazard assessments, however, were

estimated based on the number of regulat ed substances at a source. Other burdens and costs, such as the

process hazard analysis and standard operating procedures (SOPs), were estimated as functions of the

number of incremental (non

- OSHA) substances at a source. As a result, each unit cost esti mate for the

risk management program elements is presented on either a per source or per regulated substance basis as

appropriate. To derive the unit cost estimates for each program element, unit time estimates were

multiplied by the appropriate hourly wa ge rates for each category of labor that would be expected to

perform the required activity, based on industry estimates.

Section 4.1 presents the methodology for estimating the burden and unit cost estimates. Section

4.2 presents the cost estimates for compliance for sources that are eligible for Program 1 requirements.

Section 4.3 presents the unit cost estimates for compliance with the elements of Program 2 and Program

3. Section 4.4 provides the unit time and cost estimates for activities performed by the government under

the rule. Appendix B provides unit time and cost estimates for each industry sector for each rule element

discussed in this chapter. Appendix C provides a discussion of the basis of unit cost estimates.



### 4.1. METHODOLOGY

The unit c ost estimates are presented for affected manufacturers (i.e., sources in SIC codes 20

- 39)

by size and process complexity and for non

- manufacturers (e.g., public sources, private utilities, cold

storage sources) in terms of the amount and type of personnel time required to comply with the risk

management program elements. To estimate the unit costs per risk management program element, the

unit time burden per element was multiplied by the corresponding hourly wage rates for managerial,

technical, and produc tion personnel, as appropriate. For purposes of this analysis, management also

refers to senior level engineers. Corporate rate were used for those sectors (SIC codes 28 and 29) where

higher level reviews of RMPs can be expected.

### 4

- 2

Unit time estimates w ere developed for rule familiarization, source registration, and the risk

management program elements based on information from a variety of sources, including comments to

the docket, consultants working in states with risk management programs, industry, t rade groups, existing

studies on risk management programs, OSHA, and professional engineering judgment. This analysis

assumed that manufacturing sources have staff engineers and process engineers who are familiar with the

source and its operations; non

- ma nufacturing sources, however, were assumed to use an industry or EPA

model risk management program to provide guidance and reduce the technical burden. Unit compliance

costs are presented as the cost required to achieve compliance. When annualized, these costs were

distributed over the first three years of the program.

The estimated unit costs were based on three categories of labor and wage rates reported by the

American Institute for Chemical Engineers's (AIChE) annual survey of chemical engineer sala ries (for

management and technical salaries for the chemical and petroleum industry) and by the U.S. Bureau of

Labor Statistics (BLS) for all other industry sectors. Table 1 in Appendix B provides the full list of base

wage and benefit rates used, for eac h sector and the source of the rates. For any sector that may use

consultants for some part of the risk management program, an overhead load of 17 percent was added.

Exhibit 4

- 1 provides the overall wage rates used.

EXHIBIT 4

- 1

WAGE RATES

Management Technical Production Corporate

SIC 28 $61 $48 $25 $76.50

SIC 29 $61 $48 $31 $76.50

Other Mfr $40 $37 $23.30

Utility $32 $32 $31.50

State/Local $33.80 $35.40 $20.60

Retail $13 $13 $9

Wholesale $17.20 $17.20 $9

Federal $36 $25 $13.7 0

These rates include salary and fringe benefits (calculated at between 21.5 percent and 35.4 percent of

direct salary, based on BLS data for the sectors), plus the overhead charge; retail and wholesale rates are

not loaded with overhead because they ar e not expected to use consultants; the simplicity of the systems

and the guidance and model RMPs that EPA is developing will make it possible for these sources to

comply with the elements without seeking outside expertise. The guidance EPA has developed s hould

make it possible for all sources to comply without hiring consultants, but to be conservative, the analysis

applied overhead to other sectors. Throughout the analysis, all numbers have been rounded after

calculation; for example, the cost of managem ent time was calculated, then rounded to the nearest ten.

### 4

- 3

4.2. U NIT COST ESTIMATES FOR PROGRAM 1

Under Program 1, sources need only determine that there are no human receptors of concern that

could be affected by their worst

- case release and that they have h ad no accidental releases from the

process in the past five years that resulted in impacts offsite. EPA will specify the endpoints for

determining distances for specific quantities. Sources, therefore, need only refer to the distance table to

determine t he vulnerable area for their worst

- case release and identify whether any receptors of concern

are within that area. The owner/operator would then sign a certification form provided by EPA. The

primary burden for complying with Program 1 is to conduct and document a worst

- case release analysis.

For gas processors this effort was estimated to cost $110. For chemical manufacturers handling TDI, the

only other sources predicted to qualify for Program 1, the effort was estimated to vary between 6 and 12

hour s at $61 per hour, or $370 to $730. These estimates are the same as the estimates for the worst

- case

release part of the offsite consequence analysis unit cost calculations (see Appendix B, Table 8). The gas

processors, who would not have additional proc esses and, therefore, would have to complete a

registration were estimated to incur an additional $34 in costs to complete the form.



### 4.3. UNIT COST ESTIMATES FOR PROGRAM 2 AND PROGRAM 3

Unit cost estimates for the risk management program elements are present ed in terms of the

number of hours required for affected sources to do the following:

 Read and understand the proposed risk management requirements (rule familiarization);

 Conduct and document the hazard assessment;

 Develop and implement the preventi on program;

 Prepare the emergency response program; and

 Prepare and submit the RMP.

Unit cost estimates were developed on either a per source or per regulated substance basis,

depending on the activity. Specifically, burden and unit cost estimates f or rule familiarization,

registration, pre

- startup review, management of change, accident investigation, emergency response,

management, and the RMP were developed for each source. Three elements, adopted from the OSHA

PSM program

— employee participation , hot work permits, and contractors

— were not costed. These

elements are performed on a per source basis. All sources subject to these requirements under the final

rule have already developed them under the OSHA PSM standard. Consequently, no additiona l costs are

expected to be incurred under EPA's program.

Burden and unit cost estimates for the OCA, process hazard analysis, chemical and process safety

information (PSI), SOPs, training, refresher training, maintenance, and safety audits were develop ed for a

single substance. Documentation costs applied to both groups and were calculated separately for per

source and per substance costs for manufacturers.

### 4

- 4

The unit

- time estimates per labor category for each of the industry sectors for each element are

provided in the tables in Appendix B. Appendix C provides the basis for the unit

- cost estimates.



### 4.3.1. Activities Per Source

Rule Familiarization. This activity was expected to consist primarily of management time to

understand the risk management requ irements and technical time to determine how to meet them. Rule

familiarization was expected to be incurred only the first year after promulgation of the rule. Rule

familiarization will vary depending on whether a source is already covered by the OSHA PS M standard

and whether the source is subject to Program 2. Those sources will incur lower costs because they will

already be complying with the elements of the prevention program or because the requirements are less

complex. Some non

- manufacturers were a ssumed to have model RMPs and guidance that will be specific

to their industry, reducing the time required for rule familiarization.

Rule familiarization was estimated to require 136 hours (48 management, 88 technical) for

manufacturers covered only by EPA. 12 Non

- manufacturers covered by only EPA were estimated to

require 34 hours (12 management, 22 technical) to become familiar with the rule. Manufacturers covered

by OSHA were expected to spend 16 hours (4 management, 12 technical) to become familiar with the

requirements; non

- manufacturers and Program 2 non manufacturing sources were expected to spend 12

hours (4 management, 8 technical). Manufacturing Program 2 sources were expected to spend 68 hours

(24 management and 44 technical). The unit cost in the first year, therefore, is an estimated to range from

$156 for retailers to $5,176 for manufacturers covered only by EPA. Table 2 in Appendix B provides the

detailed estimates of time and cost. Appendix C explains the basis of the estimates.

Pre

- Startup Review. The owner or operator of a Program 3 process will be required to develop

written procedures for conducting a pre

- startup review prior to the initial startup of a process or to a

startup following a substantial modification of the process. The information needed to develop a pre

startup review was based on the process hazard analysis. The cost estimate is solely for the development

of the procedures, not for the conduct of a review. The technical burden for this element was assumed to

be 1 to 2 hours for non

- manufacturers that only handle or store regulated substances; 10 hours for

small/medium manufacturers and private utilities; and 16 hours for large non

- chemical manufacturers and

chemical manufacturers. The unit cost estimates for a p re

- startup review ranged from $13 for retailers to

$976 large manufacturers. In subsequent years (after initial compliance), sources were assumed to

conduct pre

- startup reviews every second year at a cost equal to the cost of developing procedures. Table

3 in Appendix B provides the detailed estimates of time and cost. Appendix C explains the basis of the

estimates.

Accident Investigation. Development of procedures to investigate each significant accidental

release was assumed to take the same time as development of pre

- startup review procedures. These costs

apply to sources with Program 2 or 3 processes.

The development of procedures was assumed to be a one

- time expense. Actual accident

investigations, which may occur in subsequent years, impose g reater costs. For small and medium

- sized,

12 This total is based on the assumption that facilities will take four times as long to read and understand the RMP

rule as they do to un derstand the requirements of EPCRA section 313, which requires 34 hours of rule familiarization.

### 4

- 5

non

- chemical manufacturers, investigations were assumed to take 4 hours, with a team of management,

technical, and production staff; management would take an additional 4 hours to write the report, and the

finding s would be reviewed with the source staff (0.5 hours per production worker). Small and medium

sized, moderately complex chemical manufacturers were assumed to conduct a 6

- hour investigation.

Large, non

- chemical manufacturers were assumed to conduct a 4

- h our investigation with a team of 5

staff. Medium, high complexity and large, moderately complex chemical companies were assumed to

conduct an 8

- hour, 5

- person team investigation and take 8 management hours to complete the report.

Complex chemical compani es were assumed to conduct a 40

- hour, 5

- person team investigation and take

20 management hours to complete the report. Staff review time would be 0.5 hours per production

worker for all but high complexity sources. The total cost of an accident investiga tion ranges from $680

to $52,000. Accident investigations for non

- manufacturers were assumed to require less time because of

the simple processes involved and cost $141 for retailers to $670 for large utilities. Manufacturers were

assumed to investigate one accident every five years, non

- manufacturers one every 10 years. Table 4 in

Appendix B provides the detailed estimates of time and cost. Appendix C explains the basis of the

estimates.

Management of Change . Each owner or operator of a Program 3 pr ocess must establish and

implement procedures to manage changes in processes and procedures. These procedures ensure that the

consequences of the change on safety are considered and that all the SOPs, training, and maintenance

programs are revised prior t o implementation. For non

- manufacturers, the time required to develop the

procedures was estimated to range from 1 hour for propane users and retailer to 110 hours plus 24 hours

of consultant time for large electric utilities. For manufacturers, the time required ranged from 34 hours

plus 16 hours of consultant time for the smallest sources to 596 hours for the largest chemical company.

Discussions with industry and consultants indicated that for manufacturers the process of developing

management of chan ge procedures is substantial because of the need to review current systems and

develop new procedures that can be integrated. Developing procedures for large chemical sources

involves studying the current system of managing change; drafting new procedures ; obtaining review by

affected groups within the source; revising the procedures; pilot testing the procedures; revising them;

training employees; and implementing the program. Total costs range from $100 for retailers to $27,000

for large chemical source s. Appendix C explains the basis of the estimates.

Actual management of change activities (as opposed to development of the procedures) involve

different elements. Under the rule, owners/operators must document the technical basis of the change,

review the hazards, update process safety documentation, review changes with staff, and train workers on

any new procedures. These activities were estimated to require from 12 hours for retailers to more than

500 hours for a large refinery, with costs ranging f rom $116 for retailers to $19,000 for large refineries.

In estimating costs for these activities, manufacturers were assumed to have one major change per year.

Based on information provided by officials in states with existing PSM programs, one percent o f non

manufacturers were estimated to have a major change per year. Table 5 in Appendix B provides the

detailed estimates of time and cost.

Emergency Response. Each Program 2 and 3 owner or operator was assumed to be required to

establish and implement an emergency response plan for responding to and mitigating releases of

regulated substances. Because all sources are required, under OSHA rules (29 CFR 1910.38 and

1910.120) to have emergency plans, there would be no additional costs for complying with EPA's

requirements.

Management . Implementation of the risk management program needs to be managed to ensure

that documentation is developed and maintained and that the program continues to function properly.

### 4

- 6

Retailers, propane users, and wholesalers w ere assumed to require a quarter hour per week ($170

- $520);

other sources were assumed to take an hour to three hours per week ($1,700 to $9,500). Table 6 in

Appendix B provides the detailed estimates of time and cost. Appendix C explains the basis of the

estimates.

Preparation of the RMP. The time required for the Option 1 and 2 RMP was estimated based

on the number of hours sources were expected to spend to complete each of the following sections:

 Executive summary (2 hours to 12 hours);

 Registrati on (.25 hours);

 Accident history (2 hours to 20 hours);

 Offsite consequence analysis (.5 hours to 5 hours);

 Prevention program (.5 hours to 15 hours); and

 Emergency response program (.25 hours).

The RMP consists of an executive summary, providing br ief text descriptions of the source, the

offsite consequence analysis, the prevention steps in use, the accident history, and the emergency

response plan. The remainder of the document consists of data elements that requirement, for the most

part, checkof

fs, numbers, or yes/no answers. Because sources will have already developed the

information required as part of their implementation of the risk management program, filling out the form

will require very limited time. The higher numbers are for sources w ith multiple chemicals and

processes; part of the prevention program data is process

- specific. An hour of corporate review was

included for all sources. For larger chemical companies and refineries, one to four hours of legal review

were also included. Costs were estimated to range from $75 for retailers to $3,700 for highly complex

chemical manufacturers. Table 7 in Appendix B provides the detailed estimates of the unit time and

costs. Appendix C explains the basis of the estimates.

Option 3 RMP. A ll affected sources were assumed to be required to prepare and submit an RMP

containing the following information: a summary of the offsite consequence analyses, the five

- year

accident history, a list of major hazards, the consequences of each hazard, the steps taken and planned to

address the hazards, and the consequences of these steps; a summary of the prevention program; a

summary of the emergency response program; and a description of the management system that

designates the person or persons respons ible for implementing the risk management program. Although

most of this information should be developed as the OCA and PSM elements are done, compiling the

information would take time. More important, this information is likely to be highly sensitive.

Consequently, the Option 3 RMPs are likely to require a substantial amount of management/legal review.

In developing revised estimates of the cost of the RMP, the following assumptions were used based on

expert judgment:

 The five

- year accident history w ill require a review of source records and, if records do not exist,

interviews. In practice, all of the toxic releases should have been reported to the National

Response Center, but they may not have been documented in sufficient detail.

Flammable relea ses will not have been reported unless they resulted in a fire or

explosion, when the local fire department was probably notified. Again, no

documentation may exist. Insurance records may need to be reviewed. Compilation of

the accident history must be performed for each substance covered by the rule.

_For highly complex sources, where the records are probably complete, the compilation could take 4

hours for sources with fewer than 500 employees. This record would then be

### 4

- 7

circulated to ensure completen ess (another 4 hours made up of short reviews).

The corporate attorneys would need to review it as well (8 hours). For sources

with more than 500 employees, the initial compilation and check were assumed

to take 16 hours.

_For other large/medium chemi cal sources, records will also be relatively complete. These sources have

fewer chemicals per site. Costs should equal one

- half those of the highly

complex sources.

 The OCA section would consist of a summary of the OCA results. For chemical companies, time

would be spent selecting the scenarios to include in the summary and drafting their risk

communication language. With revisions, this would probably take 16 hours per

substance with 8 additional hours of attorney review for sources with fewer than 5 00

employees, and 24 hours per substance with 8 hours legal/management review for

sources with more than 500 employees.

 The list of major hazards would require review of the findings of the PHA team and selecting those that

are major hazards. Conseque nces would need to be identified for each hazard included.

The source's response would have been documented; these documents need to be

reviewed and the implementation checked to ensure that the records are correct. The

majority of time would be spent se lecting the major hazards and cross

- walking these with

the management's documentation of its actions. Most of the cost would come from the

corporate and attorney review of the list. For each chemical or process, it would take 24

hours to develop the init ial list for sources with <500 employees. Corporate/legal review

is likely to take 8 hours. For sources with > 500 employees, initial compilation would

take 60 hours, with 16 hours of corporate and legal review.

 The summary of the prevention program is estimated to take 60 to 80 hours to draft and 8 to 16 hours to

vet.

 The summary of the response program will take 8 to 16 hours to draft and revise and 4 hours for

management review.

The total cost for the RMP, when drafted by the source, will avera ge from $15,800 to $300,000,

depending on the number of substances or processes that are covered.

Simple manufacturers, small chemical manufacturers, utilities, and gas processors were assumed

to hire consultants to draft their RMPs. The costs for thes e documents range from $5,000 to $7,500.

Other non

- manufacturers were assumed to complete a simple document based on model RMPs; the cost

for these was estimated at $1,000.



### 4.3.2. Activities Per Regulated Substance

Offsite Consequence Analysis . Each owner or operator of a source was assumed to be required

to develop OCAs based on worst

- case release scenarios and alternative release scenarios. The OCA

includes defining release scenarios, estimating release quantities and duration, modeling the dispersion,

d efining the distance the substance may travel before dispersing enough to no longer pose a threat, and

### 4

- 8

defining the population and environments within that distance. Sources were assumed to analyze

flammables as a class. Sources also were assumed to anal yze alternative release scenario per toxic.

Sources were assumed to used lookup tables to define impact distances. Offsite populations were

assumed to be defined using readily available Census data and local street maps; location information on

environme ntal receptors was assumed to be readily obtainable from local maps.

Non

- chemical manufacturing sources and non

- chemical manufacturers were assumed to spend

four hours per substance defining worst

- case scenarios, four hours per substance for alternative scenarios,

0.5 hours using the lookup tables and mapping the impact zones, and 4 hours obtaining population and

environmental data, for an estimated cost of $160 to $490. Chemical manufacturers were assumed to

spend between 4 and 18 hours on worst case, 4 and 12 hours on alternative scenarios, and the same

amount of time on mapping and defining receptors, for costs of $700 to $2,050. Table 8 in Appendix B

provides the detailed estimates of the unit time and costs. Appendix C explains the basis of the est imates.

Option 3 Hazard Assessment . The requirements for conducting the offsite consequence

analysis are the same, but under Option 3, EPA would require sources to conduct air dispersion modeling

to determine distances and define in detail populations p otentially affected. Based on discussions with

state and industry officials, as well as consultants doing these analyses under state programs, the analysis

assumed that all sources, except those with model RMPs, would hire consultants to conduct the analy ses at costs that range from $1,000 to $25,000 per substance. Even sources with model RMPs were assumed

to spend $1,000 to conduct the analysis and define offsite populations. The latter effort was assumed to

require as much as 40 hours of clerical time, based on discussions with consultants doing this work in

California.

Process Safety Information. For each Program 3 process, the owners/operators were assumed

to expend time to prepare up

- to

- date information on the properties and hazards of the regulat ed

substances, the process technology, and the chemical handling equipment. Much of this cost results from

the need to update or create piping and instrumentation drawings. The number of P&IDs per process was

assumed to vary from 1 for nonmanufacturers t o 80 P&IDs for the largest high complexity source. The

cost was estimated to vary from $52 for retailers to $94,000.

For Program 2 processes, much less information is required. For example, sources are not

required to develop P&IDs. Costs are estima ted to range from $30 for retailers to $770 for larger

chemical companies. Table 9 in Appendix B provides the detailed estimates of the unit time and costs.

Appendix C explains the basis of the estimates.

Process Hazard Analysis. Each Program 3 proces s was assumed to be required to conduct a

formal PHA, using a technique approved by a recognized engineering organization. This analysis

assumed that chemical manufacturers would conduct HAZOPs, non

- chemical manufacturers, What Ifs,

and non

- manufacturers either What Ifs or checklists. 13 Retailers, propane users, and small water and

wastewater treatment systems were assumed to use models that provide checklists. PHAs require mostly

senior level engineer time for manufacturers and have unit costs ranging fr om approximately $2,260 for a

What If to $73,800 per substance for a HAZOP at the most complex facility. Small and medium

13 HAZOP (hazard and operability) analysis is a systematic method in which process hazards and potential

operating problems are identified using a series o f guide words to investigation process deviations. HAZOPs usually

require teams of five or more, with specialists brought in as needed. What If analysis is a brainstorming approach in

which a group of people experienced in the process ask questions about possible events. A checklist is an experience

based list of hazards.

### 4

- 9

manufacturers were assumed to hire consultants as team leaders; consultants costs were estimated at

$1,000 per day. High complexity and large chemical companies were assumed to have staff available and

trained as team leaders.

Hazard Review . For Program 2, sources have to conduct a hazard review, which is less detailed

in its requirements. The analysis assumes that non

- manufactur ers will use either models or checklists to

conduct these reviews. Chemical manufacturers with processes subject to Program 2 would use What Ifs

rather than HAZOPs. Costs were estimated to range from $90 for retailers to $2,600 for large chemical

process es. Table 10 in Appendix B provides the detailed estimates of the unit time and costs. Appendix

C explains the basis of the estimates.

Operating Procedures. Each owner or operator of a Program 3 process was assumed to be

required to develop written SO Ps for each affected process. The estimated unit cost for developing SOPs

ranged from $100 for retailers where standard procedures can be provided in model RMPs to $31,000 for

high complexity sources. For Program 2 processes, the SOPs are less comprehens ive and, therefore, less

costly. Costs were estimated to range from $50 to $5,200. Table 11 in Appendix B provides the detailed

estimates of the unit time and costs. Appendix C explains the basis of the estimates.

Employee Training. It was assumed th at, for both Program 2 and 3 processes, each employee

would be required to be trained in all SOPs that apply to the employee's duties. Sources were estimated

to spend four hours of technical time for course development per hour of training given.

Managem ent/senior engineers in large, high complexity sources were estimated to spend four hours

reviewing the content of the course. The burden on production staff was developed by multiplying the

training time per employee by the average number of employees pe r process for each sector. The costs

were estimated to range from $155 for retailers to $258,000 for large refineries. Table 12 in Appendix B

provides the detailed estimates of the unit time and costs. Appendix C explains the basis of the estimates.

R efresher Training. Each employee was assumed to receive refresher training once every three

years. No new course development was assumed to be necessary. The estimated burden on production

staff was estimated by multiplying the refresher training time p er employee by the average number of

employees assumed for each type of source. Unit cost estimates for refresher training ranged from $60

for retailers to $100,000 for large refineries. Table 12 in Appendix B provides the detailed estimates of

the unit time and costs.

Maintenance . To maintain the mechanical integrity of the process, owners/operators must

maintain pressure vessels and storage tanks, piping systems, relief and vent systems and devices,

emergency shutdown systems, and controls, alarm, and interlocks through written procedures and

training. A schedule for inspections and tests is required. On

- going costs were based on estimates of the

number of hours of maintenance per year for each process. Initial costs were estimated to range from

$250 for retailers to $86,600 for large refineries; on

- going costs were estimated to range from $234 for

retailers to $64,500 for large refineries. Table 13 in Appendix B provides the detailed estimates of the

unit time and costs. Appendix C explains the basis of the estimates.

The purpose of the maintenance requirement is create a preventive maintenance system to

eliminate equipment breakdowns that can lead to accidental releases as well as costly downtime even if a

release does not occur. For the mos t part the inspections and tests can take place while equipment is in

service or will occur during routine maintenance. For many of the processes covered by this rule,

maintenance occurs during scheduled shutdowns/turnarounds. By identifying problem equi pment, the

source can repair or replace it, before it fails, on a schedule that allows the source to minimize any

### 4

- 10

disruption of the production process. If a source waits until a part fails, the process may be down while

the source waits for the delivery o f new equipment. One advantage of this approach is that parts can be

ordered while the process is running and replaced as soon as they are received. Therefore, costs for

downtime are not included in the maintenance costs. EPA expects that the program wi ll provide

productivity gains and has accounted for those in the cost savings (see section 5.1.5).

Compliance Audit. At least once every three years, each owner or operator of a Program 2 or 3

process was assumed to conduct an audit of the source. Th e source operator is required to keep records of

each audit conducted. Compliance audits were estimated to cost between $90 for retailers and $20,000

for large chemical manufacturers. Table 14 in Appendix B provides the detailed estimates of the unit

tim e and costs. Appendix C explains the basis of the estimates.

Documentation . For Program 3 processes, documentation was assumed to cost 10 percent of the

cost of management, training, and maintenance; 10 percent is a standard generally applied to accoun t for

documentation. For manufacturers, documentation costs ranged from $640 for source

- specific elements

and $980 for substance

- specific elements for a small company to $4,700 and $34,000 for a high

complexity manufacturer with more than 2,500 employees. For non

- manufacturers, documentation costs

ranged from $150 to $2,700. Program 2 processes were assumed to incur no documentation costs because

documentation requirements are not included in Program 2 elements. Documentation costs do not include

the co sts to develop PHA/hazard review or compliance audit reports, process safety information,

operating procedures, or the RMP. Although all of these are documents, the cost of developing them is

incorporated in the unit costs for the individual elements. In cluding them in documentation would be to

double count them.

Capital Improvements . Sources are required to respond to each PHA recommendation; many

of these are likely to require capital improvements. Industry sources estimated that the cost of such

i mprovements range from one to 10 times the cost of a HAZOP and up to 30 times the cost of simpler

PHA methods. Based on comments from states with existing RMP programs, the types of improvements

are expected to be relatively low cost mitigation, containme nt, or detection systems, or improved

instrumentation, such as backup gauges. These capital improvements are not related to documentation of

the risk management program. Because of the uncertainty involved in the implementation of

recommendations, the an alysis assumed that manufacturers, utilities, federal sources, and public sources

would spend, on average, the cost of their PHAs on capital improvements. Retailers, propane users, and

wholesalers, were assumed to incur no capital improvement costs.



### 4.3.3. Subm ission of the RMP

EPA has not determined the manner and method of RMP submission. Because not all sources

have computers, EPA will provide at least two methods of submission. For sources that do not have

computers or access to them, submission may be b y fax. Sources would be required to submit the RMP

data on a form that can be read by an Optical Character Recognition (OCR) reader. Such a system would

impose no costs on sources beyond those already incurred to complete the form. Sources with computer s

are likely to be encouraged to submit the data electronically through the internet or other server. The

costs to these sources would include the cost of any software needed if EPA does not provide it on

- line

and a $10 to $30 monthly Internet Connection charge. By the date of submission, most sources will

already have access to the Internet; therefore, the connection charge may not be properly applied to this

rule.

### 4

- 11

4.4. UNIT TIME AND COST ESTIMATES FOR ACTIVITIES PERFORMED BY THE

GOVERNMENT

4.4.1. RMP Costs to EPA

The analysis assumed that RMPs will be filed to a central point designated by EPA. Assistance

to sources completing the RMP were assumed to be part of the technical assistance provided, which is

discussed below.

As discussed above, EPA has not determined the method(s) of submission for the RMP. For

electronic submissions, a recent feasibility study conducted for EPA indicated that EPA's costs would

include the following: 14

Establishment of a home page$20,000

Internet server hardware and softw are< $10,000

Connection to the Internet$10,000 to $20,000

Staff to post receipts (1 FTE)$30,000

For OCR submissions, EPA's costs would include the following:

1 to 3 high

- speed scanners$10,000

- $50,000 each

Computer to process scanned forms$10,000

Con version software$25,000

Printing forms$.50/form

Postage$1.00/form

Staff to receive, load, interpret forms$30,000/FTE



### 4.4.2. Program Oversight and Assistance Costs to EPA

EPA was also assumed to oversee the state implementation programs and provide training t o

states and sources. Based on discussions with EPA, program oversight was assumed to require 1

technical FTE and 1/10 of a clerical FTE per region to review state programs, answer state questions, and

maintain files on state programs and memoranda betwee n regional staff and states, local agencies, and

sources. EPA was assumed to have 3 FTEs at headquarters for the program. The annual cost was

estimated to be $748,000 for regional technical support ($36 x 10 x 2080), $225,000 for headquarters

support, pl us $28,500 for clerical support ($13.70 x 2080) for a total of $1 million. These costs are above

any costs for implementing all or part of the program. The cost of any EPA enforcement was not

included in this element although enforcement actions may be ta ken even if states implement the program

for all sources.

14 CAA Section 112(r) Technology Assessment Report, Final. November 27, 1995.

### 4

- 12

EPA was also assumed to provide training courses for state and regional inspectors. Each

training course was assumed to last 10 days, based on a reduced version of OSHA's PSM compliance

inspector course. Costs were estimated as follows:

 10 days of training (100 hours x $36 = $3,600); assumes 8 hours of training, plus 2 hours of time

answering questions and preparing.

 Course development at 4 hours/per course hour (80 hours x 4 x $36 = $11,520)

.

 Clerical support for developing and compiling training material (24 hours x $13.7 = $329).

 On

- site support during training (80 hours x $13.7 = $1,096).

 Materials provided to trainees (500 pages x 40 trainees x $.10/page = $2,000).

 Registering att endees, answering questions (2 hours per attendee at $13.7 x 40 x 2 = $1,096).

 Administrative costs including scheduling presenters, producing signs, name tags, etc., and obtaining

equipment (150 hours x $13.7 + 50 x 25 = $3,305).

 Rental of site ($500/ day x 10 = $5,000).

Cost estimates are based on actual costs of developing, presenting, and organizing similar EPA

training programs. The total cost per session was estimated to be $27,900, with five sessions presented to

states for $140,000. States we re assumed to send an average of four people each.

EPA was also assumed to provide workshops for sources. The workshops were assumed to last 4

1/2 days (based on Chemical Safety Audit training programs), with 60 attendees per program. Costs were

estima ted on the same basis as inspector training, as follows:

 Presenters (45 hours at $36 hours = $1,620).

 Development of course (36 hours x 4 x $36 = $5,180).

 Clerical support (24 hours x $13.7 = $330).

 On

- site support (45 hours x $13.7 = $620).

 Mate rials (400 pages x 60 x $.1/page = $2,400).

 Registration (2 hours per registrant x $13.7 x 60 = $1,640).

 Advertising (developing brochures, compiling mailing list, mailing, etc.) (50 hours x $13.7 + 50 hours

x $25 = $1,940).

 Administrative (schedulin g and materials), $3,305 as above.

 Site ($500 per day for 5 days = $2,500).

### 4

- 13

Total course cost is $19,500. EPA was assumed to provide one course per region for a total of

$192,000.



### 4.4.3. Unit Time and Cost Estimates for Implementing Agencies

The CAA requ ires that the RMPs submitted to government authorities must be audited to

determine their adequacy. The implementing agency with the responsibility for review of RMPs and

enforcement may be either EPA or a state agency, once a state has an approved progra m. Costs for

implementation activities were based on the time needed to provide technical assistance and workshops,

conduct the initial review of the RMP, train inspectors, conduct audits or inspections, and manage the

program. Based on discussions with EPA, the following assumptions were made:

 Technical assistance was assumed to take .5 hours per non

- manufacturer sources and 1 hour per

manufacturer. Although some sources will require substantially more assistance, others

may seek no assistance. State and local agencies (4,000 total) were also assumed to

require technical assistance, at one hour per agency.

 Initial RMP review to determine the general adequacy of the document will vary with the size of the

document, which will be determined, in large part, by the number of substances affected.

Unit time was assumed to range from 1 hour for most non

- manufacturers to 12 hours for

large chemical manufacturing sources. The implementing agency was assumed to

conduct the completeness review for the air per mitting agency to eliminate duplicative

reviews.

 States were assumed to train an average of four inspectors by sending them to an 10

- day EPA course.

Costs were assumed to cover the trainees time, travel, and expenses; total costs per state

were estimate d to be $16,800. If states do not seek delegation of the program, this cost

will shift to EPA.

 Based on the time required by the New Jersey RMP program to conduct inspections and on EPA

experience, the average time required for inspections was assumed t o vary from 8 hours

for most non

- manufacturers to 80 hours for a very large chemical source or a large

refinery. This estimate includes the time required to prepare for the inspection, conduct

the inspection, and complete the formal report and any citatio ns. Implementing agencies

will determine, based on their own needs and priorities, the rate at which they inspect

sources. This analysis assumed that all chemical manufacturers and refineries will be

inspected once every five years, and non

- chemical manu facturers, cold storage sources,

federal sources, utilities, public sources, and wholesalers will be inspected once every 10

years. Other non

- manufacturers will be inspected once every 20 years.

 Each state was assumed to provide one workshop for sourc es at a cost of $19,200, as detailed in the

previous section.

 Each state and region implementing the program was assumed to require three senior staff (manager

and inspectors), an attorney (0.2 FTE), and a tenth FTE for clerical support, to implement

the program, develop budgets, oversee compliance and enforcement actions, report to

### 4

- 14

senior managers and legislative bodies, and track documentation. The total cost was

estimated $303,000 per implementing agency.

An alternate methodology for estimating the cost of implementing the rule is to use the current

costs to states implementing similar RMP rules. New Jersey's RMP program has an annual budget of

$2.5 million for 136 sources. Delaware collects $135,000 in fees and spends an additional $40,000 in

stat e funds to support the program covering 95 sources. Because implementation of the Delaware

program is closer to what may occur at the state level, given the difficulty of gaining approval for fees at

the state level, the analysis used the Delaware program to estimate a per source cost of $1,842 for

implementation.



### 4.4.4. Costs for Local Agencies and Others

Section 112(r) of the CAA requires that the RMP be submitted to the state in which the source is

located, and the local emergency planning bodies and respo nse agencies. The RMP is to be made

available to the public. Because EPA is planning to have the RMPs submitted electronically (or in a way

that will make translation to an electronic format simple) to EPA, local agencies will have access to the

RMPs thr ough on

- line databases, as will the public. Local agencies are not expected to incur any

additional costs to maintain RMPs or make them available, because EPA will assume those costs.

### 5

-- 1 CHAPTER 5. ESTIMATED TOTAL COST S OF COMPLIANCE

This chapter provides the estimated total costs of compliance with EPA's regulatory options.

Total costs were estimated by combining the universe of sources, substances, and incremental sources and

substances developed in Chapter 3 with the unit costs developed in Chapter 4, takin g into account rates of

prior source compliance with the risk management program elements under other regulations and

programs. This chapter presents both the initial compliance (first three years) and subsequent

- year costs

for each of the options. Secti on 5.1 provides the methodology for calculating the estimated total

compliance costs to industry, the average cost per source, and the cost

- savings expected for the proposed

rule. Section 5.2 presents the initial compliance costs for the three options. S ection 5.3 presents the total

costs, the present value of costs over the first 30 years, and the annualized costs for each of the options.

The estimated total costs to government are presented in section 5.4.



### 5.1. METHODOLOGY

As discussed in Chapter 3, th is analysis assumed that different types of sources would be affected

differently by the regulations. All sources with listed substances in processes above the applicable

thresholds were assumed to incur the costs of rule familiarization, registration, th e offsite consequence

analysis, and the RMP. Certain firms are already obligated to comply with some of the risk management

activities under OSHA's PSM standard. Because it is not appropriate to attribute to EPA's rule the costs

of complying with other r egulations or industry standards, this analysis made a further adjustment for the

expected likelihood that a firm would already be in compliance with some risk management requirements.

All cost estimates provided throughout this chapter represent the cost s attributable to EPA's regulatory

options only.



### 5.1.1. Compliance Cost Estimates

To estimate the total compliance costs to industry of the regulatory options, the universe of

affected sources was multiplied by the unit cost of each risk management program ele ment and the

expected level of current compliance. For rule familiarization and the RMP, the universe of sources was

multiplied by the unit costs of these per

- source activities. For the hazard assessment, the unit cost was

multiplied by the total number of substances. To estimate the total first

- year costs to industry for

developing and complying with the remaining risk management activities, the unit cost incurred for each

incremental source and regulated substance was multiplied by the estimated number of incremental

sources or regulated substances, adjusted for current compliance. These costs were added to derive the

total compliance costs of the program options.

Prior Compliance . Many of the elements of the prevention program are already in use b y many

sources. Because the rule would not require sources to redo these, total costs and average source costs

were adjusted to account for this prior compliance. For example, the rule allows the owner/operator to

certify that current employees are compe tent to perform their jobs and, therefore, do not need to receive

new training. The analysis assumes that all sources will certify such competence. Training costs,

therefore, were limited to new employees, estimated at 26 percent a year, based on the OSH A PSM RIA.

### 5

- 2

The estimated degree of prior compliance (Exhibits 5

- 1 and 5

- 2) represent the percent of affected

manufacturers and non

- manufacturers that were assumed to already be in compliance with the risk

management requirements. All affected sources we re assumed to have no prior compliance with certain

EPA

- specific risk management program elements, including rule familiarization, registration, the hazard

assessment, the RMP, and documentation. Other elements are similar in content to state risk managem ent

regulations, various programs developed by private organizations, and common industry practices.

Therefore, the adjustment factors for prior compliance were applied to the adjusted universe to more

accurately reflect the additional burden on sources a ttributable to EPA's risk management program

options. The basis for compliance estimates is presented in Appendix C.

Chemical Industry/Refineries . High complexity chemical companies and refineries are members

of trade associations (i.e., Chemical Manuf acturers Association (CMA) and the American Petroleum

Institute (API)), which require their members, as a condition of membership, to comply with industry

codes (CMA's Responsible Care and API's RP

- 750) that parallel the prevention program. Consequently,

the analysis assumed that the only costs associated with the prevention program for these sources were for

documentation of compliance, capital improvements, and additional efforts to improve training,

maintenance, and management oversight.

CMA member company names were obtained from CMA; the number of individual plant sites for

these companies was determined using the SRI Directory of Chemical Producers. Approximately 1,500

plants belong to CMA members; approximately 1,400 of these were assumed to be subject to the rule (the

remaining plants produce industrial gases not covered by the rule). Because of the concentration of CMA

membership in the production of chemicals, all chemical sources with more than 100 FTEs in SIC codes

281, 282, 286, 2873, and 2879 (a total of 623) were assumed to be members of CMA; their estimated

degree of compliance was assumed to be 100 percent (i.e., their costs were multiplied by zero) for PHA,

PSI, SOPs, compliance audits, management of change, pre

- startup reviews, and in cident investigations.

Based on the CMA membership list, approximately 50 percent of large moderately complex sources and

25 percent of sources in the listed SIC codes with 20 to 99 FTEs were assumed to be CMA members;

compliance ratios for these sources reflect the reduction for CMA membership.

Refineries of all sizes were assumed to be API members and, therefore, had 100 percent current

compliance for PHA, PSI, SOPs, safety audits, management of change, pre

- startup reviews, and accident

investigation s. The number of refineries was determined from DOE information.

By statute, sources have three years from the date of promulgation of the rule to come into

compliance with the risk management requirements. Therefore, most initial compliance costs were

assumed to be incurred equally over the three years after the expected date of promulgation in 1996. Rule

familiarization was assumed to occur in the first year, the RMP in the third year.

### 5

- 3

EXHIBIT 5

- 1

ESTIMATED DEGREE OF CURRENT COMPLIANCE WITH PROP OSED RULE

MANUFACTURERS

Element Non

- chemical

-

All < 20 FTEs

Chemical 20

- 99 FTEs

(SIC codes

283

- 5, 287

- 9) 20

- 99 FTEs

(SIC codes

281

- 2, 286) 100+ FTEs

(SIC codes

283

- 5, 287

- 9) 100+ FTEs

(SIC codes

281

- 2, 286,

291)

Pre

- Startup Review 0%

- 25% 0% 25% 40% 75% 100%

Management of Change 0% 0% 10% 60% 75% 100%

Accident Investigation 40% 40% 40% 40% 75% 100%

Management 0% 0% 0% 40% 75% 100%

Training 74% 74% 74% 80% 87% 100%

Refresher Training 25% 25% 25% 55% 75% 100%

PHA 0% 0% 0% 25% 75% 100%

PSI 0% 20% 20% 55% 75% 100%

Maintenance 40% 40% 40% 55% 75% 100%

Safety Audit 5% 5% 5% 30% 75% 100%



### EXHIBIT 5

- 2

ESTIMATED DEGREE OF CURRENT COMPLIANCE WITH PROPOSED RULE

NON

- MANUFACTURERS

Element Retailers

Propane

Users Large Utilities Sma ll Utilities Large Public

Sources 1

Gas Proc. Small Public

Sources Federal

Accident Inv. 0% 40% 0% 40% 0% 0%

Training 74% 74% 74% 74% 74% 74%

Refresher 0% 25% 25% 0% 0% 0%

PSI 0% 20% 0% 20% 20% 0%

SOPs 0% 40% 40% 40% 0% 40%

Maintenance 20% 40% 40% 40% 40% 40%

1 Large public sources, for this chart, are those that treat 25 mgd or more.

### 5

- 4

5.1.2. Average Initial Compliance Cost Per Source

The average initial compliance cost per source for the proposed rule was estimated by multiplying

the unit cost of each regulatory requirement by the estimated number of substances where appropriate.

The average cost of each program element was then summed to estimate the

average cost for manufacturers and non

- manufacturers, depending on whether they were assumed to incur

the full cost of compliance or only partial costs, and modified by the compliance factors for the expected

likelihood that a source would not already be in full compliance with the risk management program

elements. The adjustment factors for prior complia nce were applied to the costs rather than to the

universe of sources to estimate the average cost that a single source would incur. For example, if an

estimated 40 percent of all affected medium chemical manufacturers already provide maintenance, then

the average affected manufacturer was assumed to be 40 percent in compliance with the requirement.

Therefore, the estimated costs of compliance were multiplied by 0.60 to estimate the average cost

incurred by each medium chemical manufacturer for maintenance

.

Under the OSHA PSM standard, neither OSHA nor the states are notified that a source is subject

to the standard; information is available to the government only on request. The CAA mandates that

sources to submit information about their accident hist ory, potential release impacts, and prevention

activities to the government, which will make it available to the public. Because of the additional

analyses, which will help sources identify potential offsite impacts of accidental releases and the

governme ntal and public scrutiny, EPA expects that sources covered by OSHA PSM will take steps to

upgrade their initial compliance with the PSM rule to further reduce the likelihood of serious accidental

releases. Based on professional judgment, the analysis assu med that sources would concentrate additional

effort on those steps where further effort would be most likely to improve prevention; specifically the

analysis assumed that sources would concentrate on improving training, maintenance, capital

improvements, and management oversight. Other activities, such as PHAs and PSI, were assumed to

have been done adequately for OSHA; additional efforts to upgrade these would be unlikely to yield

benefits. In contrast, improved training and maintenance, capital improve ments, as well as management

oversight to ensure that the program is being properly implemented, have the potential to reduce the

likelihood of accidental releases, the majority of which are generally attributed to worker error or

equipment failure.

Fo r the purposes of the analysis, sources and processes covered by the OSHA PSM standard or

industry programs were assumed to have already spent 80 percent of the time estimated in this analysis

for training, maintenance, and capital improvements for sources newly subject to the Program 3

prevention program. To ensure that all programs for all processes operate at the same level, PSM sources

were, therefore, assumed to spend an additional 20 percent for these three elements. For management

oversight, OSHA s ources were assumed to have spent 60 percent of the time estimated for compliance in

this analysis and to commit resources to bring their level of management oversight to that estimated for

EPA processes. These costs for OSHA

- covered sources and processe s were not adjusted for current

compliance because it was assumed that these efforts were in addition to any current activities.

Exhibit 5

- 3 provides average cost per source, by industry group, for sources as follows:

 Program 2 costs (applies only to O ption 1); no processes covered by OSHA are in this category;

### 5

- 5

 Program 3 costs

—

_Sources covered only by EPA under Options 1 and 2 (no OSHA PSM processes) (low OCA and RMP

costs);

_Sources covered only by EPA under Option 3 (no OSHA PSM processes) (high OCA and RMP costs);

_Sources covered by EPA and OSHA with processes not covered by OSHA under Options 1 and 2 (low

OCA and RMP costs);

_Sources covered by EPA and OSHA with processes not covered by OSHA under Option 3 (high OCA

and RMP costs);

_Sources covered by EPA and OSHA with all processes covered by OSHA under Options 1 and 2 (low

OCA and RMP costs);

_Sources covered by EPA and OSHA with all processes covered by OSHA under Option 3 (high OCA

and RMP costs);



### 5.1.3. Subsequent

- Year Cost Estimates

This analysis also estimated the subsequent

- year costs (years 4 through 30) to industry for

complying with the risk management requirements for each of the options. Recurring costs for

implementing certain risk management program elements were estimated to be lower after the initial

compliance years because elements would only need to be updated to reflect changes. Exhibit 5

- 4

presents the estimated percent reduction in burden for each risk management program element.

The maintenance requirement must be im plemented annually. This analysis assumed that this

element would require the same amount of effort every year, but as described in Chapter 4.3.2, only the

inspection/testing costs recur.

The recurrence of risk management program requirements for manage ment of change, pre

- startup

reviews, and accident investigations are more difficult to predict because they will be triggered by source

specific changes and releases. Based on professional judgment, this analysis assumed that changes

requiring pre

- startup reviews would occur every second year, that one release requiring an investigation

would occur every five years, and the management of change procedures would be implemented annually

for manufacturers. Many changes will require new or revised PHAs; the c osts of these PHAs were not

included in the cost of management of change.

To compensate for the uncertainty of this estimate, management of changes was assumed to occur

annually rather than every second year with pre

- startup review. Capital improvemen ts were assumed to

start in the second year and be financed over 15 years, based on standard EPA assumptions for the useful

life of equipment.

### 5

- 6

EXHIBIT 5

- 3

AVERAGE INITIAL COMPLIANCE COST PER SOURCE

CHEMICAL MANUFACTURERS OTHER MANUFACTURERS

<19 FTEs 20

- 99 FTEs 100+ FTEs

SIC 2911 <19 FTEs 20

- 99

FTEs 100+

FTEs

SIC codes

283

- 5, 287

- 9 SIC codes

281, 2, 6 SIC codes

283

- 5, 287

- 9 SIC codes 281

- 2, 286

PROGRAM 2

Options 1/2 N/A N/A N/A $20,000 N/A N/A N/A N/A $17,000

PROGRAM 3

EPA On ly Options 1/2 N/A N/A N/A N/A N/A N/A N/A N/A $41,000

EPA Only Option 3 N/A N/A N/A N/A N/A N/A N/A N/A $53,000

EPA/OSHA Added EPA Substances

Options 1/2 N/A N/A $94,000 $71,000 $123,000

- $785,000 N/A N/A N/A $27,000

EPA/OSHA Added EPA Substances

Optio n 3 N/A N/A $169,000 $116,000 $259,000

- $1.7m N/A N/A N/A $39,000

EPA/OSHA, No Added Substances

Options 1/2 $11,000 $22,000 $88,000 $39,000 $101,000

- $708,000 $189,000

-

$616,000 $7,000 $9,000 $8,000

EPA/OSHA, No Added Substances

Option 3 $35,000 $54,000 $16 0,000 $79,000 $202,000

- $1.4m $418,000

-

$972,000 $29,000 $30,000 $20,000

N/A means that no sources are in the category.

### 5

- 7

5

- 7 EXHIBIT 5

- 3 (continued)

Public Utilities Cold

Storage Wholesalers Retailers Federal Gas

Processors Gas

Utilities

PROG RAM 1 $260

PROGRAM 2 $7,000

-

$11,000 9,000

-

$12,000 N/A $2,200 $1,400 $7,600 N/A N/A

PROGRAM 3

EPA Only Option 2 $11,000

-

$23,000 $25,000

-

$32,000 N/A $2,400 $1,600 N/A N/A N/A

EPA Only Option 3 $13,000

-

$34,000 $34,000

-

$55,000 N/A $5,100 $3,500 N/ A N/A N/A

EPA/OSHA Added EPA Substances

Option 2 N/A $4,500

-

$13,000 N/A $2,000 N/A $7,300 N/A N/A

EPA/OSHA Added EPA Substances

Option 3 N/A $14,000

-

$36,000 N/A $4,700 N/A $21,000 N/A N/A

EPA/OSHA, No Added Substances

Option 2 $2,000

-

$3,900 $3,300

-

$7,60 0 $2,400 $1,000 N/A N/A $800 $1,700

EPA/OSHA, No Added Substances

Option 3 $3,000

-

$15,000 $13,000

-

$31,000 $3,600 $3,700 N/A N/A $6,400 $11,000

N/A means that no sources are in the category.

### 5

- 8

EXHIBIT 5

- 4

ANNUAL PERCENT REDUCTION IN FIRST

- YEAR COSTS ASS UMED TO REFLECT THE

BURDEN FOR UPDATING RISK MANAGEMENT PROGRAM ELEMENTS IN

SUBSEQUENT YEARS



### RISK MANAGEMENT

PROGRAM ELEMENT PERCENT

REDUCTION

IN BURDEN HOURS FREQUENCY OF

UPDATE

Hazard Assessment 50% Every 5 years

PHA 50% Every 5 years

PSI 90% Every year

SOPs 90% Every year

Training 90% Every year

Refresher Training 0% Every 3 years

Maintenance 0% Every year (inspection,

testing, costs only)

Pre

- startup Review 0% Every 2 years

Management of Change 0% Every year

Comp liance Audit 0% Every 3 years

Accident Investigation 0% 1 Every 5 years

RMP 0% Every 5 years

### 5

- 9

Subsequent

- year costs were estimated by multiplying the unit cost of each risk management

program element, the adjusted universe of affected sources, and the estimated percent reduction in initial

unit

- time estimates, as appropriate. Total subsequent

- year costs for implementing the risk management

program do not include rule familiarization because these costs are incurred primarily in the first year.



### 5.1.4. Cos t Estimates of EPA's Regulatory Options

The total costs to industry of EPA's regulatory options were estimated for the first three years

following publication of the rule and the 27 subsequent years, based on an OMB recommendation to

provide costs over 3 0 years. It is necessary to present these future costs in current dollars to compare

them to the benefits accrued under the various options. The following formula was used to calculate the

costs in current dollars:

v i 

### where: v i 

### ...v n 

### =Se ries of cash flows in range



## Σ n i=1



### ---------- d =Discount rate

(1+d) i 

### n =Number of cash flows

i =Current iteration (1 through n) 15

There is a substantial body of literature concerning both the theory of discounting and the

appropr iate discount rate to use in analyzing a stream of costs. Based on OMB's current recommended

practice, this analysis used a seven percent discount rate.



### 5.1.5. Cost Savings

In addition to reducing the number and severity of accidental releases, the risk manag ement

program can be expected to improve the efficiency of source operations through a better trained work

force and fewer breakdowns. These improvements in operations can be expressed in terms of increased

productivity. Integrated risk management progra ms are expected to increase productivity in two primary

ways:

 Workers understand and are trained in running processes at greater efficiency, thereby lessening the

amount of wasted materials and the amount of product lost because it does not meet

specif ications; and

 Equipment will operate with fewer breakdowns through proper preventive maintenance.

15 v 1 v 2 v 3 v 4

--- +

--- +

--- +

--- + etc.

(1+d) 1 (1+d) 2 (1+d) 3 (1+d) 4

### 5

- 10

Equipments breakdowns can lead to accidental releases; benefits related to elimination of these

shutdowns are counted in the benefits analysis. The unp lanned shutdowns considered in the productivity

analysis are those that do not lead to accidental releases, but occur because some piece of equipment

breaks down or malfunctions and needs to be replaced or repaired. The article quoted in the next

paragrap h describes the impact of such non

- accident shutdowns on productivity and operability. Poorly

maintained equipment also leads to lost product through fugitive emissions. According to IIAR, one

ammonia refrigeration system in midwest lost 200,000 pounds o f ammonia through fugitive emissions

over the course of a year, the smell of the ammonia masked by odors from neighboring stock yards. The

cost of that loss was $50,000 (to replace the ammonia); proper maintenance and equipment may lessen

such losses.

I n a January 1995 article in Hydrocarbon Processing , I.S. Sutton wrote that "there is an

increasing interest to organize these [PSM] programs to improve overall reliability and operability." He

went on to state that "Improving plant reliability, particular ly by reducing the number of unscheduled

shutdowns, will improve safety, environmental performance, and operability." He detailed the reasons for

improving operability:

"If unplanned shutdowns can be avoided, then plant operability is improved by these r easons:

Increased production. If a plant can sell all the product that it can make, then any incremental

production can be very profitable because all fixed costs associated with production, such

as depreciation, rent, and salaries, are covered. Convers ely, incremental production

losses severely reduce profitability.

Productivity. Shutdowns reduce productivity for many reasons:

_Energy is wasted during plant restart;

_Raw materials are lost due to flaring and downgrading to fuel;

_Overtime must be all ocated for hourly paid workers;

_Transient effects such as reversible loss in catalyst selectivities occur;

Maintenance and equipment costs. Shutdowns increase other plant costs:

_Direct replacement cost of broken and damaged equipment;

_Labor costs of carrying out repairs;

_Need for larger inventories of spare parts.

More benefits. A final benefit to improved reliability that is difficult to measure, but is widely

recognized, is employee morale. "

OSHA, in developing the PSM standard, collected som e information and estimates of

productivity gains. A number of commenters cited improvements of operating efficiency as a benefit of

the program (testimony of CMA (Tr. 11/30/90 at 1050

- 1057), BP (Tr. 3/1/91 at 3052), Texaco (Tr. 3/1/91

at 3086

- 3088), Oryx Energy (Tr. 3/7/91 at 3722), and Exxon (Ex. 99 at 4). In addition, some commenters

submitted estimates of potential improvements. Ray Brandes, then of ICI Americas, estimated the

productivity gains at "5 to 8 percent ... in productivity from better unde rstanding of job tasks by workers

... and another 5 to 10 percent increase in material yield productivity for an overall gain of over 10

### 5

- 11

percent" (Ex. 11

- 87). A manager of a small plant predicted cost savings of 4 to 7 percent of the operating

budget (Wi lliam Toth, Ex. 131, Attachment III). A safety consultant, Ray E. Witter, in a December 11,

1989, letter to OSHA estimated productivity gains at 0.5 to 3 percent.

More recent articles on PSM indicate the predicted benefits are real. An article in Occup ational

Hazards in March 1994 reported that ITT's implementation of PSM led teams to identify opportunities for

savings of "nearly $1.5 million in annual operating costs at six sites." An article in Chemical Week in

November 16, 1994, reported on improved maintenance programs. One plant manager stated that he

expected savings "in excess of 20 percent of our maintenance budget, and the focus on equipment

reliability has yielded an increase in our effective capacity."

Other recent articles and conferenc e papers also cite improved productivity as a benefit of the

PSM program without providing specific estimates of gains. ("Training Personnel on Operating

Procedures," Bob Metz, Conference Proceedings, 1996 Process Plant Safety Symposium, vol. 2, p391;

"Sm all Business: Make the Most of PSM, Chemical Engineering Progress , February 1994, p 60;

"Process Safety: Dow Chemical USA Finds the Standard's Positive Side, Occupational Health and Safety

, Oct. 1992, p 36

- 37; "Build a Proper PSM Program from the Ground U p, Chemical Engineering Progress

, Jan. 1, 1995, p 47; "Commitment to PSM by Management Improves Business as well as Safety,

Occupational Health and Safety Letter , Sept. 5, 1995; "PSM Protect Works, American City and County

, June 1995, p 34.)

This analys is adopted the approach applied by OSHA in its RIA for the final PSM standard.

OSHA stated that chemical industry sources reported gains of between five and ten percent annually.

Across all industry sectors, OSHA estimated that productivity improves at a rate of 0.5 percent a year for

the first five years of implementation and 1 percent a year in subsequent years. OSHA calculated

productivity gains by multiplying the annual compensation of a production worker ($27 x 2080 hours) by

the number of workers a nd the percentage productivity gain.

This analysis adjusted the percentages. Based on professional judgment, for chemical

manufacturers the analysis selected a conservative assumption of a two percent productivity gain, with no

increase in the percent age over time. For other manufacturers, the analysis adopted OSHA's 0.5 percent,

with no increase in the percentage over time. The difference was based on the likelihood that chemical

manufacturers have greater opportunities for improving productivity be cause of the diverse and complex

ways in which they manufacture and process chemicals. Other manufacturers primarily use and store

substances, which limits the possibility of improved productivity. Non

- manufacturers were assumed to

have gains of 0.1 perc ent because the simple way they use the substances should limit the gains; retailers,

wholesalers, propane users, gas utilities, and gas processors were assumed to experience no gains because

it is not clear that their operations, which primarily involve l oading and unloading of regulated

substances, would experience productivity gains.

The analysis assumed that the gain would apply to all incremental substances (processes) in the

manufacturing sector and to those substances at electric utilities, publi c systems, cold storage systems and

federal sources. Because the analysis assumed that owners/operators of OSHA PSM processes would

spend an additional 20 percent for training and maintenance, the activities most likely to produce

productivity gains, the analysis assumed that productivity gains would be only 20 percent of those for

non

- OSHA processes (i.e., 0.4 percent productivity gain for chemical manufacturers, 0.1 percent for non

chemical manufacturers, and 0.02 percent for non

- manufacturers). The sal aries used were specific to the

sector and were based on total compensation, with no overhead load. The total cost savings were

### 5

- 12

estimated to be $108 million per year for all options because the savings are derived primarily from

activities carried out by all Program 2 and 3 sources, training and maintenance. Although OSHA, in its

analysis, applied cost savings immediately, this analysis did not apply them to the initial two compliance

years because some sources may not start activities immediately. The a nalysis assumed that cost savings

began in the third compliance year at one

- half the total and reached the full value in the first year after

initial compliance was achieved and continued on an annual basis. To be conservative, initial compliance

costs pr esented below do not reflect these savings, but annualized costs do include them (i.e., the cost

savings were subtracted from the compliance costs).

Exhibit 5

- 5 summarizes the assumptions used to estimate productivity gains, specifically the

number of workers used in the estimation, and the percentage gains for processes covered by OSHA and

those covered only by EPA. As the exhibit indicates, the analysis used the two percent productivity gain

for only 310 processes.



### 5.2. ESTIMATED INITIAL COMPLIANCE COST TO INDUSTRY FOR

REGULATORY OPTIONS

The regulatory options analyzed apply the tiers and rule elements to various sources affected.

The estimates presented are for the cost of complying with all required elements under the option in 1995

dollars. It shou ld be noted that when costs were annualized over 30 years (see Section 5.3), initial

compliance costs were assumed to be spent over the three years between the date of the final rule and the

compliance date.



### 5.2.1. Option 1

Under Option 1, processes that can demonstrate no public impacts from a worst

- case release

would only have to comply with Program 1. All OSHA PSM processes and all processes in SIC codes

2611, 2812, 2819, 2821, 2865, 2869, 2869, 2873, 2879, and 2911 would be required to comply with

Progra m 3. All other processes would be required to comply with the streamlined Program 2. The only

difference between Program 2 and Program 3 is the prevention program; in Program 2 the prevention

program is streamlined, with fewer requirements and reduced do cumentation; the Program 3 prevention

program is the OSHA PSM standard. The total initial compliance cost was estimated to be $494 million.

### 5

- 13

EXHIBIT 5

- 5

ASSUMPTIONS USED TO ESTIMATE PRODUCTIVITY GAINS

Industry Sectors #

Employees % of Gain Non

OSHA Processes # Non

OSHA

Processes % of Gain

OSHA

Processes # OSHA

Processes

Small Non

- Chemical

Manufacturers 6 .5% 0 .1% 450

Small Chemical Manufacturers 6 2% 0 .4% 2,200

Medium/Large Non

- Chemical

Manufacturers 30 .5% 1,600 .1% 9,350

Medium Chem ical Manufacturers

Small Refineries 30 2% 50 .4% 5,540

Large Chemical Manufacturers <

500 FTEs

Medium Refineries 50 2% 167 .4% 3,640

Large Chemical Manufacturers <

2500 FTEs

Large Refineries 75 2% 85 .4% 1,545

Large Chemical Manufacturers

2500+ FTEs 100 2% 8 .4% 143

Non

- Manufacturers

(Elec. Util., Drinking Water,

POTWs, Federal) 6 .1% 9,440 .02% 11,220

Non

- Manufacturers

(Retailers, Propane Users,

Wholesalers, Gas Utilities, Gas

Processers, Cold Storage) 0% 34,600 0% 9,760



### 5.2.2. Option 2

Option 2 would impose Program 3 (OSHA PSM) on all processes. The total cost was estimated

to be $642 million. The difference in costs between Options 1 and 2 reflects the higher costs to the large

non

- chemical manufacturers and non

- manufacturers who are not covered by OSHA and who would have

to implement the more costly PSM program under Option 2, but the streamlined Program 2 under Option

1. The costs to OSHA PSM and high complexity chemical manufacturers sources would be the same

under both Options.

### 5

- 14



### 5.2.3. Option 3

Opt ion 3 would impose Program 3 on all processes, with the OCA and RMP requirements of the

proposed rule, rather than the final rule. The cost difference between Options 2 and 3 is entirely the result

of the higher costs of the proposed OCA and RMP requireme nts. Under Option 3, OCA would cost

industry $307 million more than the OCA requirements of the final rule. The RMP would cost $267

million more under Option 3. Because these costs recur every five years, they would represent a

continuing burden on indu stry. The total initial compliance cost was estimated to be $1.22 billion.

The estimated total compliance costs to industry are presented on an element

- by

- element basis in

Exhibit 5

- 6; total compliance costs by industry sector are presented in Exhibit 5

- 7.

In Exhibit 5

- 6, no costs appear for pre

- startup reviews or management of change under Option 1

because all sources subject to these requirements are also subject to OSHA PSM. Because these

procedures are developed on a site, rather than a process

- sp ecific, basis, sources do not need to develop or

revise these to comply with EPA's rule. The only difference between Options 2 and 3 are the higher costs

for the RMP and OCA under Option 3.

In Exhibit 5

- 7, the costs per industry sector reflect both the differences in unit costs for different

types of sources and the number of sources. Although unit costs are far higher for large, high complexity

sources, there are relatively few of these sources; the number of sources declines as the size of the source

increases.

5.3TOTAL NET COSTS TO INDUSTRY

5.3.1 Subsequent Year Net Costs

This analysis presents subsequent

- year (i.e., years after a source is required to be in compliance)

as net costs (i.e., total costs minus cost savings) for a period of 27 year s, based on an OMB

recommendation that costs be presented for the first 30 years. Net costs will vary from year to year

because certain risk management program elements are not required to be updated yearly. Compliance

audits and hazard assessments, for example, must be updated every three years and five years,

respectively, as shown in Exhibit 5

- 4. Consequently, this analysis assumed that sources would incur the

full cost of updating these elements in the third and fifth subsequent year, respectively. Further, sources

would again incur the costs of updating the safety audits in the sixth and ninth years, and the hazard

assessments in the tenth year. Other risk management program elements, such as training and SOPs, must

be updated yearly; sources were assumed to incur these costs on an annual basis.

### 5

- 15

EXHIBIT 5

- 6

INDUSTRY INITIAL COMPLIANCE COSTS BY ELEMENT

ELEMENT OPTION 1 OPTION 2 OPTION 3

Registration $25,000 $25,000 $25,000

Rule Familiarization $50 million $54 million $54 million

Offsite Consequence Analysis $44 million $44 million $351 million

Management $37 million $50 million $50 million

Prevention Program

Process Safety Information $4 million $11 million $11 million

Process Hazard Analysis $12 million $38 million $38 mi llion

Operating Procedures $7 million $15 million $15 million

Training $23 million $23 million $23 million

Refresher Training $53 million $53 million $53 million

Maintenance (Mechanical Integrity) $114 million $114 million $114 million

Pre

- S tartup Review $2 million $2 million

Management of Change $27 million $27 million

Compliance Audits $19 million $19 million $19 million

Accident Investigation $1.6 million $1.6 million $1.6 million

Documentation $13 million $31 million $38 mil lion

Capital Improvements $100 million $144 million $145 million

Risk Management Plan $16 million $16 million $282 million

TOTAL $494 million $642 million $1.22 billion

### 5

- 16

EXHIBIT 5

- 7

INITIAL COMPLIANCE COST BY INDUSTRY SECTOR

# of Source s OPTION 1 OPTION 2 OPTION 3

NON CHEMICAL

MANUFACTURERS

< 19 FTEs 120 $785,000 $795,000 $3 million

20

- 99 FTEs 300 $2 million $2 million $8 million

100+ FTEs 6,500 $62 million $94 million $169 million

CHEMICAL MANUFACTURERS

< 19 FTEs 840 $8 mi llion $8 million $29 million

20

- 99 FTEs (SIC codes 283

- 5, 287

- 9) 900 $18 million $18 million $47 million

20

- 99 FTEs (SIC codes 281

- 2, 286) 800 $60 million $62 million $119 million

100+ FTEs (SIC codes 283

- 5, 287

- 9) 840 $24 million $26 million $60 millio n

SIC codes 281, 282, 286

FTE < 250 340 $26 million $31 million $65 million

FTE 250

- 499 150 $20 million $24 million $54 million

FTE 500

- 999 80 $19 million $22 million $49 million

FTE 1000

- 2499 40 $18 million $21 million $41 million

FTE 2500+ 13 $6 million $7 million $15 million

Sic code 2911

< 30 bbl/d 61 $10 million $10 million $23 million

30

- 60 bbl/d 39 $8 million $8 million $19 million

> 60 bbl/d 85 $32 million $32 million $62 million

NON MANUFACTURERS

Federal 1,600 $10 m illion $25 million $48 million

Cold storage 5,800 $14 million $14 million $22 million

Retailers 18,500 $22 million $30 million $66 million

Elec. Utilities 25 MW+ 1,100 $12 million $20 million $47 million

Elec. Utilities 10

- 25 MW 570 $2 million $4 milli on $10 million

POTWs

- 100mgd 45 $520,000 $1 million $2 million

POTWs

- 25mgd 180 $2 million $4 million $6 million

### 5

- 17

EXHIBIT 5

- 7

INITIAL COMPLIANCE COST BY INDUSTRY SECTOR

# of Source s OPTION 1 OPTION 2 OPTION 3

POTWs

- 10mgd 320 $3 million $3 million $5 million

POTWs

- 1mgd 2,600 $20 million $27 million $32 million

DW 100mgd 440 $5 million $10 million $ 15 million

DW 25mgd 1,530 $18 million $35 million $49 million

DW 10mgd 1,190 $9 million $13 million $20 million

DW 2mgd 980 $5 million $7 million $8 million

Wholesalers 1,500 $3 million $3 million $8 million

Gas Processors 725 $319,000 $1 million $6 m illion

Propane Users 16,100 $54 million $74 million $95 million

Gas Utilities 1,800 $2 million $3 million $21 million

TOTAL 66,088 $494 million $642 million $1.22 billion

FTE

— Full

- Time Employee

bbl/d

— barrels per day

MW

— Megawatt

POTW

— Publicly O wned Treatment Works

DW

- Drinking Water

mgd

— million gallons per da



### The present value of net costs of the rule for the first 30 years from the date of promulgation for

the options is estimated to be:

Option 1:$1.2 billion

Option 2:$1.8 billion

Opt ion 3:$3.1 billion

5.3.2Annualized Net Costs

The annualized net costs (compliance minus cost savings) of the regulatory options also were

estimated based on the assumption that affected sources would begin to incur costs immediately after

promulgation o f the final rule to be able to meet the statutory compliance deadline three years later. As

compared to the subsequent

- year net cost estimates, which are presented in real dollars and vary from

year to year depending on which risk management program eleme nts would be updated, the annualized

net cost is useful in that it provides the stream of equivalent payments in constant dollars that industry

may be expected to incur on an annual basis in the time period examined. Using the seven percent

### 5

- 18

discount rate (as discussed in section 5.1.4), this analysis estimated the annualized net costs for each of

the first three years (implementation period) and subsequent years. The annualized net costs are

presented in Exhibit 5

- 7 for the first three years (initial comp liance), the first 13 years (compliance plus

two full RMP cycles), and the first 30 years.

As the exhibit indicates, the annualized net costs decline as the period considered is extended.

The reasons for the decline include the following:

 Rule fami liarization occurs only in the first year;

 PHA and OCA costs are reduced after the initial compliance because only updates are required; other

elements occur annually after initial compliance but at a reduced rate.

 Capital improvements, which are cost ed over 15 years, do not occur in the later years.

The primary continuing costs are for training, maintenance, management, and documentation

(which varies by year depending on the activities being performed).

EXHIBIT 5

- 8

ANNUALIZED NET COSTS OF OPTIO NS

Years 1

- 3 Years 1

- 13 Years 1

- 30

Option 1 $118 million $101 million $97 million

Option 2 $165 million $146 million $142 million

Option 3 $366 million $265 million $246 million



### 5.3. ESTIMATED TOTAL COSTS TO GOVERNMENT

5.3.1. Total Costs to EPA fo r RMPs

Costs to develop and implement the submission of RMP will not be determined until EPA

specifies the approaches that will be used. To develop estimates for this analysis, EPA assumed that the

smallest businesses (those with fewer than 20 employees ) will submit their RMPs using a fax. All other

sources will submit their data electronically through the Internet or other server. As discussed in Chapter

7, approximately 6,160 sources were assumed to have fewer than 20 employees. The cost to print an d

mail forms to these sources was estimated to be $9,240. Only one scanner and one

- half an FTE would be

needed to handle the forms submitted. Total costs for submission were estimated to be as follows:

OCR Submissions

Forms and mailing$9,240

### 5

- 19

Scanner (1)$50,000

Computer$10,000

Conversion software$25,000

Staff (1/2 FTE)$15,000

Electronic Submissions

Home page$20,000

Internet server$10,000

Internet connection$20,000

Staff (1 FTE, G

- 5)$24,000

Total$183,000

To be conservative, the analysis used the hi gh end cost presented in Chapter 4 where a range was

possible. Given the trends in technology prices, it is possible that costs may be considerably lower by

1999 for some of these requirements. In addition, technology developments may result in different , more

cost

- effective approaches.



### 5.3.2. Program Oversight and Assistance Costs to EPA

EPA was assumed to require staff to oversee the state programs, to provide training for state and

regional inspectors, and to conduct workshops for sources. EPA was estimat ed to incur the costs of $1

million per year for headquarters and regional oversight, $140,000 to hold training sessions for states over

the first three years, and $195,000 over five years to hold workshops for sources.



### 5.3.3. Total Costs for Implementation and Enforcement

The CAA section 112(r) program will require that the RMPs prepared by sources be submitted

and audited by the government. These audits as well as inspections of sources for compliance with the

risk management program requirements may lead t o recommendations that the sources take additional

actions or to enforcement actions. As explained in Chapter 4, implementation costs have the following

components: technical assistance, workshops, staff for program management and implementation, initial

review of RMPs, and audits. These costs will vary over time. The analysis assumed that workshops

would continue for five years, technical assistance will continue, but the level of effort will decrease over

time as sources and government agencies become familiar with the rule. Initial review of the RMP will

occur over two years, starting in year four, and will recur every five years thereafter with the

resubmissions. Audits were assumed to begin in year four and continue every year thereafter. Program

management and regional oversight would begin in years two and three respectively and continue

thereafter. The analysis assumed that Program 1 sources imposed no implementation costs on the

implementing agency.

Two issues significantly affect the cost estimates for implementation: first, different costs will

apply depending on whether EPA or states serve as the implementing agency; second, the level of effort

the implementing agency (IA) spends on auditing and inspecting could substantially alter the total cost of

### 5

- 20

implementation. States are not required to serve as the implementing agency; to do so, they must seek

delegation from EPA under CAA section 112(l). The analysis considered two possibilities for the first of

these issues: EPA would serve as the IA for all states or states would serve as IAs for all states. If EPA

were to be the IA for all states, the annualized cost of the program implementation over 30 years would be

$5.5 million. If states serve as IAs for all states the annualized imple mentation costs would be $18

million. The reason for the difference is that the analysis assumed that the number of staff per region

would be no greater than the number of staff per state; based on current budgetary constraints, the level of

staffing assu med per EPA region is probably higher than would be available in the short term. The

staffing level may, however, be higher than needed at the state level, provided that the level of effort

assumed for audits and inspections is appropriate.

The number o f audits and inspections performed is a major component of on

- going costs. The

analysis assumed that medium and large Program 3 manufacturing sources would be audited every five

years; other manufacturing sources and most non

- manufacturers would be audite d once every 10 years,

and retailers, propane users, and gas utilities would be audited once every 20 years. Different levels of

effort would produce varying costs. For example, the implementation cost per source if EPA serves as

the IA would be $83; if the states serves as the IA the cost per source would be $275. In contrast, in

Delaware, where the state inspects each source every three years, the program cost per source is $1,800.

### 6

- 1 CHAPTER 6.

ESTIMATION OF BENEFI TS OF RMP RULE

The primary benefits expect ed from this rule are reductions in the damages to human health,

property, and the environment from accidents involving fires, explosions, and toxic releases at sources

covered by the rule. This chapter attempts to quantify these primary benefits and disc usses other less

certain benefits that may occur as a result of the rule. Following this introduction, Section 6.2 presents a

baseline estimate of the annual damages resulting from toxic releases. Section 6.3 presents estimated

annual damages resulting f rom flammable substances. Section 6.4 summarizes the total estimated annual

baseline damages. Section 6.5 shows the estimated annual percentage reduction in damages that may be

expected as a result of the rule. Section 6.6 derives an estimate of annual damage reductions by

multiplying the baseline damages by the estimated percentage reduction. Section 6.7 presents sensitivity

analyses considering the impact of two alternative assumptions on the benefits estimate. Section 6.8

discusses some of the other potential benefits estimated by EPA. Section 6.9 discusses other benefits,

which were not quantified, that EPA expects may occur as a result of the rule. Section 6.10 summarizes

the assumptions used in the analysis and the overall benefits expected from the rule.



### 6.1. OVERVIEW OF DAMAGES

The benefits expected from this rule arise primarily from the avoidance of chemical accidents and

the associated damages to human health, property, and the environment. The damages that have resulted

historically from the t ypes of accidents that will be covered under this rule fall into several categories. In

some cases, it is difficult to determine the direct effect this rule will have on mitigating certain categories

of these damages due to the uncertainty between the cau se of the accident and the impact that this rule

will have in preventing or mitigating future accidents of this nature. This section discusses the categories

of damages estimated, the uncertainties associated with these estimates, the types and magnitudes of

accidents considered in the analysis, and the overlap of coverage between the OSHA and EPA rules.



### 6.1.1. Types of Damages

The types of damages or costs considered in this analysis include threats to human health;

responses to these threats; threats to the environment; and economic damages. The human health threats

considered include deaths and injuries; the responses to these threats include hospitalizations, evacuations

and sheltering

- in

- place. The environmental damages examined include threats to wildl ife, soil, and water.

Finally, the economic damages include lost production, property damages, and litigation.

6.1.2 Certainty of Damage and Benefit Estimates

Because of severe data limitations and the complexity of the rules, the sources, and the pr ocesses affected by the rules, uncertainties are associated with the estimates of damages and benefits presented in

this chapter. As noted above, however, clear distinctions can be made among some of the categories of

damage and benefit estimates. In kee ping with the variability in the degree of uncertainty in the analysis,

the results of the analysis are presented in three groups: environmental, human health, and economic. The

### 6

- 2

greatest stress is placed on the damage estimates for which the best informat ion is available, with less

certain estimates labeled as such.



### 6.1.2. Nature of the Accident: Toxic or Flammable Releases

The types of accidents covered in this analysis include both releases of toxic substances and fires

or explosions caused by flammable sub stances. The two types are treated separately in this chapter

largely because of differences in the data used to estimate their occurrence. In addition, the categories of

damages affected and the severity of these damages vary between the two different t ypes of incidents.

For example, accidents involving toxic substances are expected to cause more severe environmental

damages than would a typical fire or explosion, as their effects are more difficult to contain within source

boundaries. In contrast, fir es and explosions are generally more costly to industry in terms of physical

damage and associated lost production opportunities. Releases of toxic substances, which played a key

role in motivating the development of the regulations, are discussed first.



### 6.1.3. Magnitudes of Incidents

Most of the analysis in this chapter is aimed, necessarily, at incidents that are both serious enough

to be reported and tracked, and frequent enough to leave a relatively reliable statistical record. EPA

recognizes, however, that many minor releases occur every year; in addition, in any given year there is at

least some chance of a catastrophic accident, well beyond the scale of those documented for this country.

This analysis attempts to take these "tails" of the size distri bution into account.



### 6.1.4. 6.1.5 Rule Coverage: Overlap Between EPA and OSHA

As described in the cost analysis in this report, EPA's rule will increase the number of sources

with process safety management programs and the number of sources conducting offsit e consequence

analyses. The effective coverage of these sources by these two components of the rule, however, differs

significantly. The offsite consequence component will affect all sources using listed substances above a

threshold. Because OSHA alrea dy has a program very similar to the process safety management

component of EPA's rule, however, EPA's process safety rule will mainly affect only those sources using

listed substances not on OSHA's list and sources exempted by OSHA. In the following sect ions, both the

damages from accidents involving the "full list" (all listed substances, including those also covered by

OSHA) and the "non

- OSHA" list (listed substances not covered by OSHA) are discussed, because both

are important to the analysis. A clea r distinction is made between the two, however, because of the

differences in estimating damage reductions between chemical substances solely on EPA's list and those

on both EPA's and OSHA's list.

### 6

- 3

6.2. ESTIMATED DAMAGES FROM TOXIC RELEASES

This section prese nts EPA's estimates of the annual number of toxic release incidents involving

substances on EPA's list, and of the average monetized damages resulting from any such release.

Damages are then estimated for both the full and "non

- OSHA" lists and for general , small magnitude, and

large magnitude toxic events. Because the number of serious releases derived by this analysis is fairly

small, evidence is presented to show that the results are probably in the right order of magnitude.



### 6.2.1. Use of the ARIP Database

Most of the analysis of the damages from toxic releases is based on data from the Accidental

Release Information Program (ARIP) database. ARIP, which is maintained by EPA, has 4,857 records of

chemical accident release events that occurred from October 19 86 through September 1993. The ARIP

database is a subset of the Emergency Response Notification System (ERNS) database, which is

used to store information on releases of oil and hazardous substances. As of 1993, when this analysis was

conducted, the ERN S database received in excess of 32,000 reports annually, of which approximately

6,000 were related to releases of CERCLA hazardous substances.

ARIP is designed to have information on all releases reported to the National Response Center

(NRC) that meet one or more of four criteria: (1) the quantity released was above a certain multiple of the

Reportable Quantity (RQ); (2) the release resulted in a death or injury; (3) the release was one in a trend

of frequent releases from the same source; or (4) the r elease involved an extremely hazardous substance

(EHS) as listed by EPA under section 302 of SARA/EPCRA.

The ARIP database was screened for all records involving EPA Section 112(r) substances (List

substances). Out of a total of 4,857 records, 2,931 re cords involved releases of 57 of the 77 toxic List

substances. As the time period covered by the database was six years and ten months, the estimated

annual rate of releases was found by dividing the total number of releases by 6.8. This rate was found t o

be 431 releases per year.

The database was further screened for records involving releases of List substances that are not

regulated under OSHA's PSM standards, because EPA can only claim full benefits for the rule's expected

effect on the reduction of accidents involving these substances. With the exception of releases involving

ammonia, chlorine, hydrochloric acid, and hydrofluoric acid, all other List substances that are also

regulated under OSHA were excluded from this data set. This screening lef t 1,828 records out of the

original total of 4,857 records.

It is assumed that a subset of releases involving chlorine, hydrochloric acid, and hydrofluoric acid

are not covered by OSHA regulations, and therefore that RMP requirements on sources handlin g such

chemicals may create additional benefits. More extensive analysis was required to separate out data on

releases of these chemicals that would not be covered by OSHA:

; OSHA only regulates hydrochloric and hydrofluoric acid in the anhydrous state, and it is

assumed that sources in the chemical production industry (SIC code 28) and petroleum industry

(SIC code 29) handle these two chemicals in the gaseous state. It is furthermore assumed that

### 6

- 4

sources in all other SIC categories handle these two chem icals in solutions, which are not covered

by OSHA. The database was modified to include only releases of hydrogen chloride and

hydrogen fluoride at sources in SIC codes other than 28 and 29. This left 1,756 records.

; OSHA does not regulate municipal wa ter treatment sources in states without a delegated

OSHA program. Therefore, additional benefits may result from RMP requirements on such

sources, which are significant users of chlorine. It is assumed that municipal water treatment

sources are listed un der several possible SIC classifications: (1) 4941

, drinking water; (2) 4952

, sewerage systems; (3) 4953

, refuse systems; (4) 4959

, sanitary services; (5) 9511

, air, water,

and solid waste management. All releases of chlorine occurring at sources not included in one of

these five SIC classification codes were deleted from the database. The remaining records

involving chlorine were reviewed based on the name and location of the source involved, to

determine which releases unambiguously occurred at tre atment plants. In addition, all records of

releases of chlorine at treatment sources in states that have delegated OSHA programs were

deleted. After the screening of the chlorine release records, 1,141 records remained.

; Although ammonia is regulated under OSHA's list, OSHA does not apply the rule to

agricultural retailers/wholesalers (SIC 5191). All accidents involving ammonia, which did not

occur at an agricultural retailer/wholesaler were dropped from the database. This left a total of

312 records

.

Final adjustments were made to the database to account for under

- reporting to ARIP. Using the

Emergency Response Notification System (ERNS) database, EPA identified approximately 9,500 releases

between October 1986 and September 1993 that meet the cri teria for inclusion in ARIP. While ARIP

questionnaires were mailed by EPA to sources or regional offices for each of these 9,500 releases, only

4,857 were returned and entered into the database. Therefore, it is assumed that the data in ARIP under

repres ented the actual number of chemical accidents by a factor of two.

Adjusting the ARIP data for non

- response is not believed to introduce significant bias into the

estimate of baseline toxic release damages due to the nature of the non

- response. It is the responsibility

of EPA Regions to administer the collection of ARIP data for their area. Unfortunately, some Regions

were not able to devote as many resources to the program as other Regions and, therefore, did not collect

data for their Regions. Adjusti ng the ARIP data for missing observations does not introduce significant

bias into the results, as missing observations are more highly correlated with regional differences in

administering the overall program than with small magnitude events that Regional and facility personnel

discounted in filing reports.



### 6.2.2. Comparison of ARIP to AHE

Because there are several possible sources of undercounting of serious releases in the

methodology presented above, and because the total numbers and magnitudes of the relea ses seen in the

ARIP database are moderately low, it is important to test these results against other sources of data to

determine whether they provide a reasonable basis for the baseline damage estimates. To check the

reasonableness of the damages found using the ARIP database, the analysis compared the annual reports

of injuries, evacuations, evacuees, and deaths in ARIP from the full List to comparable numbers from the

### 6

- 5

Acute Hazardous Events (AHE) database. 

### 16 In compiling AHE, EPA made a serious attempt to capture

all significant hazardous substance accidents in the U.S. over a period of years, using a wide variety of

data sources. EPA believes that AHE's coverage of severe accidents is relatively complete, particularly

for the most severe accidents. 

### 17

The comparison of ARIP (adjusted as described above) and AHE showed the two databases to be

comparable in terms of injury events, total injuries, and evacuations due to toxic substance releases at

fixed sources. These results provided some confidence tha t the adjusted ARIP database includes most of

the serious toxic release incidents: there is apparently little chance that ARIP includes only a small subset

of damages. The reader is referred to Appendix B of this analysis for further information.

On th e other hand, the adjusted ARIP results showed a significantly smaller ratio of fatalities to

injuries, and evacuees to evacuations, than did AHE. To allow for possible under

- reporting of fatalities in

ARIP, the ratio of deaths attributable to toxic relea ses was assumed to be the same as observed in AHE:

one death per 60 injuries. Similarly, the reported number of persons evacuated in ARIP was adjusted

upwards by a factor of four.

Because some incidents could be missed by both AHE and ERNS, the total d amage estimates are

probably understated to some degree. Because the chances that a release will be reported by the

responsible party, emergency personnel, or the news media rise for more serious incidents, EPA believes

that undercounting has relatively l ittle effect on the total damage estimate.



### 6.2.3. Number of Incidents

Exhibit 6

- 1 presents the baseline estimates of the total number of toxic substance releases.

Release estimates are provided for both total List substances and those List substances not cove red under

OSHA. The last column of the exhibit refers to the annual baseline estimate of releases after adjusting for

under

- reporting to ARIP. Exhibit 6

- 2 presents annual baseline estimates of the number of toxic release

effects that this analysis uses t o estimate baseline damages. The exhibit summarizes, for both the full list

and the subset, non

- OSHA list, the estimated number of individuals who are affected annually from a

toxic release, by incident category, as well as the estimated annual number of environmental and

economic effects occurring as a result of an accidental toxic release, by incident category.



### 6.2.4. Valuation of Incidents

To calculate a monetary value for the annual damages presented above, EPA multiplied the

annual number of each category of damages by a unit cost estimate for each category. These unit costs,

rounded to two significant digits, are presented in Exhibit 6

- 3. The basis for these unit cost estimates is

described in detail in Appendix C. Multiplying the estimated annual numb er of damage cases by the

16 The comparison was made using the full list compared to AHE's toxic incidents, rather than the non

- OSHA list

compared to a subset of AHE, to provide a larger set of data for making the comparison. EPA relied on ARIP data

because it provided more detail on individual inc idents than AHE.

17 Based on conversations with Fred Talcott, Office of Policy, Planning, and Education, EPA.

### 6

- 6

estimated damage per unit produces an estimate of the total damage from toxic releases, shown in Exhibit

6

- 4. For example, to calculate the estimated annual baseline economic damages related to List toxic

releases, the estimated annual number of litigation actions and disruptions of source operations resulting

from a toxic release (summarized in Exhibit 6

- 2) are multiplied by the respective damage resulting from

each type of incident (summarized in Exhibit 6

- 3)

. 18

18 (172 litigation actions * $80,000 per incident) + (862 disruptions of source operations * $8,900 per incident) =

$21.4 million, which is less t han the estimated $21.5 million in annual damages due to rounding.

### 6

- 7

EX HIBIT 6

- 1

BASELINE ESTIMATES OF ACCIDENTAL TOXIC RELEASES

(rounded to the nearest whole number)



### List Substances Number of Unique List

Substances Number of Releases in 6.8

Years Annual Number of

Releases Annual Releases

Adjusted for Under

Reporting Full List 57 2,931 431 862

Non

- OSHA 26 312 46 92

Source: ARIP

(adjusted).

EXHIBIT 6

- 2

ANNUAL BASELINE ESTIMATES OF ACCIDENTAL TOXIC RELEASE INCIDENTS

(rounded to the nearest whole number)



### Human Heal th Incidents Environmental Incidents Economic Incidents

List Substances Evacuees Sheltering in

Place Injuries Fatalities Soil Vegetation Groundwater Litigation Disruption of

Source

Operations Full List 45,403 1,624 1,186 20 29 16 1 172 862

Non

- OSHA 5,405 30 44 1 14 1 0 18 92

Source: ARIP (adjusted).

### 6

- 8

SUMMARY DAMAGE VALUATION FROM HAZARDOUS CHEMICAL RELEASES

(1995 dollars, rounded)



### Type of Damage and Value per Incident Source of Estimate for Value per Incident

Human

Health E vacuation

$290/person Cynthia B. Flynn and James A. Chalmers, "The Social and

Economic Effects of the Accident at Three Mile Island:

Findings to Date" (January 1980). Sheltering in place

$30/person Cynthia B. Flynn and Ja mes A. Chalmers, "The Social and

Economic Effects of the Accident at Three Mile Island:

Findings to Date" (January 1980). Injury 1



### $19,000 Ted Miller, Charles Calhoun, and W. Brian Arthur,

"Utility

- Adjusted Impairment Years: A Low

- Cost

Approach to Morbidity Valuation," in Estimating and

Valuing Morbidity in a Policy Context" (June 1989). Fatality

$5,400,000 EPA estimate.

Environment

al Soil contamination

$220,000 Fed eral Remediation Technologies Roundtable, "Synopses

of Federal Demonstrations of Innovative Site Remediation

Technologies" (May 1991); ARIP questionnaires. Vegetation damage

$54,000 Gaynor W. Dawson and Basil W. Mercer, Hazardous

Waste Manag ement (1986); ARIP questionnaires.

Groundwater contamination

$1,600,000 ICF Incorporated estimate.

Economic Litigation

$80,000/action EPA estimate (action is estimated to occur in 20 percent of

incidents). Disruption of s ource operations $8,900 U.S. Department of Commerce, "Survey of Current

Business" (April 1991); ARIP questionnaires.

1 

### To avoid overstating damages, this analysis assumes that the damage value per injury includes the

costs associated

with hospitaliza tion.

EXHIBIT 6

- 4

ESTIMATED BASELINE ANNUAL DAMAGE OF ACCIDENTAL TOXIC RELEASES

($ million)



### List Substances Human Health Environmental Economic Total 1



### Full List $142.8 $9.4 $21.5 $173.7

Non

- OSHA $6.3 $3.5 $5.8 $15.6

1 

### Total may not add exactly due to

rounding.

### 6

- 9

6.2.5. Additional Damages from Smaller Magnitude Events

EPA expects that events that do not cause serious damage to human health or the environment

probably make a fairly small contribution to aggregate damages, in spite of their large numbers. In

addition, EPA's rule was aimed at the problem of large

- scale releases with serious offsite consequences

rather than minor within

- plant events. For these reasons, relatively little effort has been devoted to

estimating the average damage caused by minor releases. EPA assumed for the purposes of this chapter

that all ERNS reports related to releases of CERCLA hazardous substances that are not serious enough to

warrant an ARIP questionnaire resulted from a minor release. It was als o assumed that the ratio of

releases involving List substances to total releases and the ratio of non

- OSHA substance releases to full

list releases, as reported in ERNS, are the same for small, low

- consequence events as for the incidents in

the ARIP databa se. Thus, it is assumed that approximately 2,776 small incidents involving List

substances occur annually, and 291 small incidents involve non

- OSHA substances. 

### 19

For a per

- incident damage estimate, EPA made the simple assumption that the costs per incide nt

are equal to one

- half of the estimated $8,900 value of lost production used for the more serious incidents,

or $4,450 per incident. 

### 20 Multiplying the estimated number of incidents per year by the assumed value

per incident yields annual damage estimates from small incidents of $12.4 million and $1.3 million per

year for the full list and the non

- OSHA list respectively. Note that some of these damages will be

prevented by OSHA's rule.



### 6.2.6. Additional Damages from Larger Magnitude Events

The Bhopal disast er, which could be said to have engendered this rule, was a singular event: no

other fixed

- source release of a toxic substance anywhere in the world, let alone the U.S., has killed or

injured nearly as many.

While the scale of this disaster increases th e urgency of preventive steps, the extreme rarity of

accidents of this magnitude greatly complicates any attempt to estimate the expected chance that it will be

repeated. The one available data point is insufficient to predict with any confidence whether or when a

similar incident could happen, where it might occur, or the substance it might involve. One might argue

that, because Bhopal is in India, there is no evidence that a catastrophe could happen in the United States.



### 19 If there are 6,000 ERNS reports annually involving CERCLA substances, and there are about 1,400 incidents

each year serious enough to warrant an ARIP questionnaire (calculated as the 9,5 00 questionnaires sent over 6.8

years), there are no more than 4,600 releases involving CERCLA substances that do not require an ARIP

questionnaire. As 2,931/4,857 or about 60 percent of the records in the ARIP database involve List substances, it is

assu med that 2,776 small releases involve List substances each year. Since non

- OSHA List substances cause

312/2,931 or about 10.5 percent of all List substance releases reported in ARIP, it is assumed that there are about

10.5 percent times 2,776 or 291 small releases per year involving non

- OSHA List substances.



### 20 Based on professional opinion, this estimate is the midpoint of a uniform distribution of the costs of lost

production with a lower bound of $0 and an upper bound of $8,900. Other damages are not estimated due to the low

magnitude of the events.

### 6

- 10

On the other hand, it has been pointed out that the source in Bhopal was owned by a American firm and

was similar to plants in the United States; it could be argued that the next disaster at an American

- owned

source could well be in the U.S. That no similar catastrophes have taken plac e in the U.S. does not by

itself mean that the annual probability of one occurring is much smaller than in the rest of the world.

Even if the annual probability for a catastrophe occurring in the U.S. were above zero (e.g., a two percent

chance per year) it would not be at all surprising to find that no disasters had occurred since the beginning

of the modern industrial era (i.e., in the past fifty years).

Faced with the fact that catastrophes can occur, but with very little information on their expecte d

frequency in the U.S., EPA explored two methods for constructing probability scenarios for catastrophic

chemical releases. The first approach assumed that the chance of an accident approximately as severe as

the one in Bhopal (with about 4,000 fatalitie s) is proportional to activity in the petroleum refining and

chemical industries. The second approach grouped disasters in terms of numbers of fatalities, and derived

a relationship between number of fatalities and the fraction of all disasters of that ma gnitude that took

place in the United States. These two approaches are described in more detail below.

Output Proportionality Approach

This approach uses the fact that there has been one Bhopal

- scale disaster recorded in the world

since the second wor ld war

- the beginning of the modern industrial era

- and that each year's output of

chemicals and refined petroleum in U.S. is equal to about one percent of the world's cumulative output

over the same time period. 

### 21 The approach assumes that the probabili ty of a disaster is proportional to

output of chemicals and refined petroleum, and that the world's experience of one disaster per 50 years of

cumulative output is a first approximation of the underlying relationship between output and risk. These

assumpt ions imply that there is a one percent chance that a disaster that kills on the order of 4,000 persons

will occur in the U.S. in any given year. 

### 22 The expected loss of life is therefore on the order of

4,000/100 or 40 deaths per year.

It is important to recognize that if a disaster of this scale occurs in the U.S., it will not necessarily

be caused by a substance that is covered exclusively by EPA's rule. It may instead be caused by a

substance that is covered by OSHA's rule. If so, the damages associat ed with it, and the potential for

averting them, should not be associated with EPA's rule. (In fact, the substance involved in the Bhopal

incident, methyl isocyanate, would be covered by OSHA rather than by EPA.) As a rough means of

adjusting for the dis tribution of potential disasters between substances on the full list and substances on

the non

- OSHA list, EPA is assuming that the chance that a given disaster will involve a substance on the

non

- OSHA list is equal to the ratio of the number of ARIP report s involving the non

- OSHA list to the

number of ARIP reports involving all list substances. This ratio is approximately one to ten; EPA will

therefore assume that only a tenth of the expected 40 fatalities

- or an expected total of four per year

- can

be r elated to non

- OSHA list substances. Assuming a value per statistical life saved of $5.4 million, these

damages can be valued at about $216 million and $21.6 million for the full List and the non

- OSHA list

substances, respectively.

21 OPPE analysis based on data from Chemical Manufacturers Association and U.S. Industrial Outlook

. 22 There is a two percent chance of a disaster on the scale of Bhopal occurring somewhere in the world in any

given year. The annual output of chemicals and refined petroleum in the U.S. equals 50 percent of that of the world.

Therefore, there is a one percent chance of a Bhopal

- scale disaster occurring in the U.S. in any given year.

### 6

- 11

Projected

- Fraction

- in

- U.S. Approach

For this approach, EPA notes that there is strong evidence that the fraction of the world's disasters

that fall on the U.S. falls steadily for disasters of greater magnitude. The U.S. has had about half of all

reported accidents with five fatalities, for example. The U.S. share of accidents with 10 fatalities,

however, drops to about 40 percent; its share of accidents with 20 fatalities falls to about 20 percent; and

its share of accidents with more than 50 fatalities falls below 10 percen t. 

### 23 The statistical trend toward a

smaller relative risk for the U.S. at larger magnitudes is very strong, with almost no chance that it could

have appeared randomly. Given the scatter in the data, shown in Exhibit 6

- 5, there is some chance that

the true relationship (between the scale of the disaster and the chance that a given disaster will occur in

the U.S.) will lie above most or all of the data points (See the upper 95 percent confidence band on the

exhibit). It is unlikely, however, that more than 15 percent of disasters with 100 or more fatalities will

take place in the U.S. 

### 24 The reason behind this relationship could involve differential reporting

efficiencies in the U.S. and the rest of the world for the smaller accidents, while the efficiencies probably

approach 100 percent everywhere for the worst accidents. Higher safety standards, lower population

densities, and a more effective system of medical care in the United States could also reduce the chances

of fatalities from very serious accident s here compared to the rest of the world.

If it is assumed that there is one disaster with about 4,000 fatalities in the world in 50 years, and if

the U.S. is likely to have no more than a 15 percent probability of suffering any given disaster of this

ma gnitude, then it can be estimated that the annual probability for the U.S. is about 0.15/50, or 1/300.

Given the magnitude of the disaster, the expected number of fatalities (for all hazardous substances at

fixed sources) would be 4,000 / 300, or just ove r 13 per year. Following the reasoning presented above

for distinguishing between full list and non

- OSHA list substances, EPA estimates (under this approach)

that about 1.3 fatalities can be expected per year from Bhopal

- scale accidents involving non

- OSHA list

substances. Assuming a value per statistical life saved of $5.4 million, these damages can be valued at

about $70 million and $7.0 million per year for the full List and the non

- OSHA List substances,

respectively.

For the purposes of this analysis , the output proportionality approach was chosen to represent the

expected additional damages from larger magnitude events. This approach was chosen based on the

simplicity of its design and assumptions.

23 Based on data from t he Fatal Hazardous Materials Accidents database developed by Resources for the Future

(RFF), using fixed source accidents only. This database is further described in section 6.3.

24 If the relationship were projected out to the scale of the actual Bhopal accident, the statistical relationship would

predict that no more than one or two percent of the World's catastrophes are likely to take place in the U.S. It may

not be safe to project out this far beyond the data points used for the statistical analysis, however.

### 6

- 12

EXHIBIT 6

- 5

RELATIONSHIP BETWEEN THE SCALE OF A DISASTER AND THE CHANCE

THAT A DISASTER WILL OCCUR IN THE U.S.



### 6.3. ESTIMATED DAMAGES FROM FLAMMABLE SUBSTANCES

This section discusses the processes used to construct a database of flammable related accidents

involving all EPA List substances and the subset of substances that are not subject to OSHA regulation.

Baseline damages attributable to these accidents are then estimated.



### 6.3.1. Database Construction

The list of chemicals regu lated under CAA 112(r) includes 63 flammable chemicals,

approximately 45 percent of the total number of List substances. All of these chemicals are also covered

under OSHA's 1992 PSM standard that deals with the risks involved in the storage, handling, an d

processing of highly hazardous materials. This standard emphasizes the application of management

controls, rather than specific engineering guidelines, when addressing the risks associated with handling

or working near hazardous chemicals. OSHA's rule, however, does exclude certain industries using

propane.

The database of flammable accidents used for estimating the benefits of this rule was drawn from

a number of different sources: (1) the Acute Hazardous Events (AHE) database; (2) the Fatal Hazardo us

Materials Accidents database; (3) the Major Hazard Incident Data Service (MHIDAS) database; and (4)

the Nexus on

- line access to newspaper and periodical articles. (The ARIP database does not include data

on flammable related incidents.) Each of these sources is described in greater detail below:

### 6

- 13

; The AHE database was developed by EPA to provide a perspective on the magnitude of chemical

accidents in the United States. The database emphasizes incidents resulting in deaths, injuries, or

evacuations. The database also emphasizes events involving the release of hazardous chemicals

into the air. It contains information, drawn from various newspapers and government records, on

roughly 11,000 separate events that occurred between 1982 and 1987.

; The Fat al Hazardous Materials Accidents database was developed by Resources for the Future

(RFF). It was developed to document the record of industrial hazardous materials accidents in the

U.S. and elsewhere since World War II. It contains information, drawn fr om more than thirty

different sources, on accidents occurring during the period 1945 through 1991. The database

includes domestic accidents that involved at least one death or foreign accidents that involved at

least five deaths.

; MHIDAS is a world

- wide database maintained by the Safety and Reliability Business (SRB) of

AEA Technology and the UK Health and Safety Executive. It currently contains more than 6,500

records of incidents involving hazardous substances that have had offsite impacts.

; Nexus r esearch was conducted for newspaper articles involving propane accidents that were not

captured in the above mentioned databases. Generally, this search was used to identify smaller

and less severe incidents that the other databases may have omitted.

Pr opane is the only flammable List substance that is not fully covered under OSHA's PSM

standard. OSHA's standard specifically excludes propane fuel users, retailers, and remote sources (gas

processors) from compliance. EPA's regulation, however, will not exclude these sources if they exceed a

10,000 pound threshold. These sources, which are excluded from OSHA's regulation, are the only ones

for which EPA is able to claim full benefits for any reduction or mitigation of accidental flammable

incidents.

Al l records from the above databases involving propane accidents were analyzed to construct a

database of accidents at sources that would not have been covered under OSHA's regulation. To do this,

the following criteria were applied:

; OSHA also regulates all sources using propane in their processes with the exception of propane

retailers and those sources using propane as a fuel. Consequently, all propane

- related accidents

involving sources that do not use propane as a feedstock, such as refineries, were excluded.

; All records of accidents that occurred at sources such as restaurants, shops, and homes were

omitted from the database due to the likelihood that these sources do not store over 10,000

pounds of the fuel on site.



### 6.3.2. Number of Incidents

A total of 416 flammable casualty events were identified involving List chemical substances. Out

of this total, 44 records were identified as propane accidents having occurred at sources that would not

have been regulated under OSHA's recent standard. Exhibit 6

- 6 presents the baseline estimates of the

total number of flammable accidents. Exhibit 6

- 7 presents findings on the annual number of baseline

### 6

- 14

incidents for flammable accidents.



### 6.3.3. Valuation of Incidents

To estimate annual losses for all categories except property damage and lost production, EPA

multiplied the annual number of each category of damages by the unit cost estimate for each category as

determined in Section 6.2. The unit costs for flammable

- related incidents are presented in Exhibit 6

- 8.

The d atabases analyzed for flammable

- related incidents were not as detailed as the ARIP database in

providing damages associated with incidents. Given the lack of available data concerning the damages

associated with sheltering in place and environmental incid ents, it was assumed that no damages were

associated with either of these categories. Intuitively, the omission of damages associated with sheltering

in place would only slightly underestimate actual damages due to its low monetary value per incident.

Fu rthermore, the omission of environmental damages probably also does not greatly underestimate total

damages because these damages are not typically associated with flammable

- related incidents, but are

more often associated with the release of toxic substan ces, which have the ability to remain in the

environment after their release.

EXHIBIT 6

- 6

BASELINE ESTIMATES OF ACCIDENTAL FLAMMABLE ACCIDENTS

(rounded to the nearest whole number)



### List Substances Number of Unique

List Substances Total Nu mber of

Releases Annual Number of

Releases

Full List 43 416 9

Non

- OSHA 1 44 1

Source: ARIP

(adjusted).

EXHIBIT 6

- 7

ANNUAL BASELINE ESTIMATES OF FLAMMABLE INCIDENTS

(rounded to the nearest whole number)



### Human Health Economi c

List Substances Evacuees Injuries Fatalities Litigation Property

Damage Lost

Production

Full List 1,853 30 6 2 9 9

Non

- OSHA 297 6 1 1 1 1

### 6

- 15

EXHIBIT 6

- 8

SUMMARY DAMAGE VALUATION FROM HAZARDOUS CHEMICAL RELEASES

(1995 dollars, rou nded)



### Type of Damage and Value per Incident Source of Estimate for Value per Incident

Human

Health Evacuation

$290/person Cynthia B. Flynn and James A. Chalmers, "The Social

and Economic Effects of the Accident at Three Mile

Islan d: Findings to Date" (January 1980).

Injury 1



### $19,000 Ted Miller, Charles Calhoun, and W. Brian Arthur,

"Utility

- Adjusted Impairment Years: A Low

- Cost

Approach to Morbidity Valuation," in Estimating and

Valuing Morbid ity in a Policy Context" (June 1989).

Fatality

$5,400,000 EPA estimate.

Economic Litigation

$80,000/action EPA estimate (action is estimated to occur in 20 percent

of incidents).

Property Da mage

$37.5 million ICF analysis (median value of minimum reported

damages).

Lost Production

$75 million Marsh & McLennan, adjusted ratio (twice the property

damage estimate).

1 

### To avoid overstating damages, this analysis assumes that the damage value p er injury includes the

costs associated

with hospitalization.

For purposes of this analysis, lost production damages are estimated using a 2

- to

- 1 loss ratio

between business interruption and property damage. The insurance industry cites a 4

- to

- 1 los s ratio

between business interruption and property damage. 

### 25 However, for the purposes of this analysis, it is

recognized that while businesses suffering a shutdown due to an accident lose sales revenue, they also

save some of their operating costs, such a s material inputs, energy, and miscellaneous other expenditures.

Therefore, the 4

- to

- 1 loss ratio was further adjusted based on a general review of select chemical

company financial statements that showed the cost of sales, less labor costs, was about one

- half of net

sales. Consequently, the M & M ratio was adjusted by one

- half, to avoid overstating actual societal

losses associated with property damage losses. Estimates for property damages are based on estimates

found in the original data records, whic h have been updated to 1995 dollars. 

### 26 Exhibit 6

- 9 presents the

estimated annual baseline cost for the associated damages. Annual baseline estimates are provided for

human health and economic effects, including property damages. These estimates were cal culated in the

same manner as for toxic release incidents. For example, to estimate the annual baseline damages

associated with human health effects, the annual number of evacuees, injuries, and fatalities was

25 Marsh and McLennan, “Large Property Damage Losses in the Hydrocarbon

- Chemical Industries: A Thirty Year

Review,” 15th edition, David Mahoney, editor.

26 Missing estimates for the listed chemicals that are also OSHA flammable substances were assigned the median

property damage value of $37.5 million, for the non

- OSHA list flammable substance data base they were assigned

the median property damage value for those reported incidents of $1.8 million. The median property damage was

used for OSHA and non

- OSHA substances because in both cases, the median value was less than the average. This

was done in an effort to avoid over

- estimating the true benefits of the program.

### 6

- 16

multiplied by their respective value per inci dent.

EXHIBIT 6

- 9

ANNUAL BASELINE DAMAGE OF FLAMMABLE ACCIDENTS

($ million)



### List Substances Human Health Economic Total 1



### Full List $36.1 $1,020.6 $1,056.7

Non

- OSHA $6.6 $38.0 $44.6

1 

### Total may not add exactly due to rounding.

The Agency recognizes that the estimated baseline damages resulting from flammable

- related

accidents are particularly high in relation to the damages from toxic

- related accidents. Intuitively, one

would expect flammable

- related damages to be higher due t o the associated destruction of capital that is

normally not associated with a toxic accident. The Agency assumed that the associated property damage

for flammable accidents was on average $37.5 million per facility in 1995 dollars. This number was

based on the reported lower

- bound median property damage value in the flammable accidents database

developed by EPA to identify flammable

- related accidents that have occurred at facility types that will be

regulated under this rulemaking. A 1991 report condu cted by M&M Protection Consultants (M&M)

supports this estimate. The report analyzed the trend of large property damage losses that occurred in the

hydrocarbon

- chemical industries for the past 30 years. The report found that over time, the magnitude of

t he property losses had increased significantly. On average, petrochemical plants suffered $47.0 million

per accident, refineries $44.6 million, and gas processing plants $55.5 million, in 1991 dollars.

Furthermore, the report found that the total propert y damage dollar loss to industry has increased from

$0.34 billion for the 1962 through 1966 period to almost $3.0 billion for the 1987 through 1991 period (in

1991 dollars). The most recent series of M&M data suggests that annual property damages are abou t

$600 million in 1991 dollars, compared to EPA’s more conservative estimate of about $300 million in

1995 dollars.

The report hypothesizes that the increasing magnitude of property damage losses is most likely

the result of attempts by the manufacturing industries to achieve greater economies of scale and efficiency

by expanding the operating size of their facilities. For example, the report states that in 1970, a

petrochemical plant with an ethylene production capacity of 500 million pounds per year wa s considered

large; in 1991 large plants produced three times that amount. In addition, the report found that facilities

are designed differently to economize on operation costs. For example, some plants have reduced the

spacing throughout their process units to lower the cost of piping, wiring, and energy losses. Process

equipment such as heat exchangers and air coolers are more often arranged vertically rather than spread

horizontally. The net result of these changes is a greater concentration of ass ets in a small area of the

plant and consequently a larger total dollar exposure for a single loss accident. The report also notes that

increased regulatory safety, and environmental concerns have in many cases increased the cost of permits,

debris remova l, and cleanup associated with large property damage losses.

### 6

- 17

6.4. TOTAL ESTIMATED BASELINE DAMAGES

To facilitate comparison of the estimates of benefits and costs, baseline damages are presented

according to the three program levels discussed previously in the analysis. Sources in SIC codes 2611,

2812, 2819, 2821, 2865, 2869, 2873, 2879, and 2911 and processes already covered by the OSHA PSM

standard are assumed to comply with Program 3. 

### 27 Consequently, baseline damages originating

from these sources are as sumed to be impacted by Program 3 requirements. All other accidents are

assumed to originate from sources subject to Program 2 requirements. No baseline damages are

assumed to originate from sources impacted under Program 1, as the requirements of the Pr ogram do not

impose any additional prevention requirements on industry beyond what is currently practiced.

Exhibit 6

- 10 shows the total annual expected damages resulting from both the full list of EPA

regulated chemicals and the EPA list of chemicals tha t are also not regulated under OSHA, by program

level. Because only the database for toxic

- related incidents included a sources SIC code, baseline

damages for other categories were scaled between program levels using the ratio of toxic related damages

for Program 2 and Program 3. For purposes of constructing the baseline, all regulated sources using listed

chemicals are assumed to undergo full compliance with the regulatory requirements associated with each

program. The exhibit shows that no quantitative damages are subject to Program 1 requirements, as the

requirements of the Program do not impose any additional prevention requirements on industry beyond

what is currently practiced. Consequently, no quantified benefits can be claimed for Program 1 sourc es. However, imposing the requirements of this rule on Program 1 sources may provide qualitative benefits

as described in Section 6.9.

EXHIBIT 6

- 10

TOTAL ANNUAL DAMAGES SUBJECT TO PROGRAM LEVEL

($ million)



### Regulated Chemical Substanc es Program 1 Program 2 Program 3 Total 1



### General Toxic Events Full List

- $13.4 $160.4 $173.8

Non

- OSHA

- $13.4 $2.3 $15.7

Small Magnitude Toxic

Events Full List

- $1.1 $11.3 $12.4

Non

- OSHA

- $1.1 $0.2 $1.3

Large Magnitude Toxic

Events Fu ll List

- $18.4 $197.5 $215.9

Non

- OSHA

- $18.4 $3.1 $21.5

Flammables Full List

- $38.1 $1,018.6 $1,056.7

Non

- OSHA

- $38.1 $6.5 $44.6

Total 1 

### Full List

- $71.0 $1,387.8 $1,458.8

Non

- OSHA

- $71.0 $12.1 $83.1

1 

### Total may not add exac tly due to rounding.

27 SIC code definitions are as follows: 2611

- pulp mills; 2812

- alkalies and chlorine; 2819

- industrial inorganic

chemicals; 2821

- plastics materials and resins; 2865

- cyclic crudes and intermediates; 2869

- industrial organic

chemicals; 2873

- nitrogenous fertilizers; 2879

- agricultural chemicals; and 2911

- petroleum refining.

### 6

- 18

6.5. PROJECTED REDUCTIONS IN DAMAGES

To estimate the percentage reduction in the damages from releases that can be attributed to the

presence of a risk management program, this analysis relies on the findings of a small industrial survey,

which collected data on the costs and benefits of OSHA's PSM standard. The survey findings are used as

an estimate of the effectiveness of EPA's program because many of the requirements for the RMP are

similar to OSHA's PSM.



### 6.5.1. Expected Reduction i n Damages for PSM Activities

This section develops a reasonable estimate for EPA's program effectiveness for non

- OSHA List

substances based on the results of a 1992

- 1993 industry survey, conducted by JBF Associates, on the

costs and benefits of process safety management. 

### 28 The study surveyed 84 sources, representing a total

of 25 companies, that have implemented process safety management techniques (PSM) at the work place

to control process

- related hazards.

As part of the survey, companies were asked t o estimate their reduction in losses attributable to

the OSHA PSM program for three separate categories: source operations, environmental damages, and

employee/public harm. Companies were asked to estimate their losses both before and after PSM

implement ation. Exhibit 6

- 11 presents the average estimate per respondent. The average percent

reduction in losses across all categories of losses

-- source operations, environmental damages, and

employee/public harm

-- is computed to be approximately 50 percent. This estimate corresponds to the

estimated effectiveness assumed by OSHA in its final rule for the first five years of the OSHA PSM

program. Based on these results, EPA has assumed that the PSM portion of the RMP program will result

in a 50 percent redu ction in damages for non

- OSHA List substances.

EXHIBIT 6

- 11

PROCESS SAFETY MANAGEMENT BENEFIT ESTIMATES



### Source Operations Environmental Damages Employee/Public Harm

Before PSM After PSM Before PSM After PSM Before PSM After PSM

A verage (million) $0.95 $0.41 $0.3 $0.16 $.25 $0.13

Percent

Reduction 57% 47% 48%

28 "T he Cost and Benefits of Process Safety Management, Industry Survey Results," William G. Bridges, JBF

Associates, Inc., Knoxville, TN, 1993.

### 6

- 19

6.5.2. Expected Reduction in Damages for Non

- PSM Activities

EPA also expects that the RMP rule will reduce the number and severity of releases of List

substances beyond PSM act ivities. The addition of the EPA rule is expected to increase both the level

and quality of compliance with the OSHA standard because of the greater stringency of the RMP

requirements compared to the OSHA rule and the review of a source's program by the g overnment and

the public. Under OSHA, the government is not notified that a source is covered and no review occurs

unless a source is inspected.

The additional reduction in damages achieved with the RMP rule is estimated based on the

increase in spendin g on PSM activities under the RMP rule for List substances also covered by OSHA

and the level of benefits (i.e., damage reductions) already achieved by the OSHA PSM program. As

discussed in Chapter 5, spending on PSM activities associated with List substa nces covered by OSHA is

expected to increase by approximately 25 percent under the RMP program. EPA expects that these

additional costs will be incurred primarily for improved training of personnel, better maintenance and

oversight practices, and other ac tivities that are expected to reduce damages beyond what has been

achieved by the OSHA program.

Although OSHA had estimated that five years after the implementation of the PSM program,

accidents at complying sources would decrease by 80 percent, EPA b elieves that this may have been an

overly optimistic assumption. For the purposes of this analysis, EPA assumes that PSM activities achieve

only a 50 percent reduction in accident losses, as estimated by OSHA for the first five years of its PSM

program. Thus, EPA believes that the non

- PSM activities of the RMP rule will reduce the number and

severity of incidents comprising the remaining 50 percent of damages not addressed by PSM.

To estimate the additional reduction in damages resulting from a 25 per cent increase in spending

on non

- PSM activities, EPA first assumed that there are declining returns in terms of the resulting

percentage reduction in damages for each additional dollar spent on accident prevention activities. In

other words, each addition al dollar spent on these activities is assumed to achieve a smaller percentage

reduction in accidental losses. According to economic theory, a source would perform the more cost

effective activities before less cost

- effective activities in order to maximi ze the returns on expended

dollars. Consistent with this theory, EPA made the simple assumption that for sources already regulated

under the OSHA PSM program, doubling their current level of spending on accident prevention activities

would reduce remainin g damages by 50 percent. Consequently, if twice as much money was spent on

non

- PSM and other activities than is currently spent to achieve a 50 percent reduction in damages, the

program would reduce remaining damages by an additional 25 percent, for a tot al damage reduction of 75

percent. Exhibit 6

- 12 illustrates this concept.

### 6

- 20

Percent

Reduction

in Damages 50%

50% 6 75

Spending Level $ 1 

### 100% 2x

1.25

x 1x Refer to original document. This fi gure didn’t make it in the WordPerfect/Word

conversion. BD

EXHIBIT 6

- 12

ADDITIONAL REDUCTIONS IN DAMAGES

f OR OSHA

- COVERED SO URCES

1 

### x represents baseline expenditures.

### 6

- 21

Based on this assumed relationship between spending on non

- PSM activities and the resulting

percentage reduction in damages, an estimated 25 percent increase in accident prevention sp ending by

facilities covered under this rule is estimated to further reduce remaining baseline damages by ten percent,

for a total estimated reduction in baseline damages (i.e., before implementation of a PSM program) for

regulated sources of 60 percent. 

### 29 This estimation procedure may underestimate the additional benefits

achieved by the EPA program if the spending under the EPA program is actually more cost

- effective than

PSM spending under the OSHA program. For the purposes of this analysis, however, it is assumed that

the implementation of RMP activities will reduce estimated baseline damages for non

- OSHA List

substances by 60 percent and for OSHA List substances by an additional ten percent, as they are already

required under OSHA to practice PSM activ ities.



### 6.6. ESTIMATED REDUCTION IN DAMAGES

Multiplying the damages from incidents involving toxic and flammable substances by estimates

of the percentage reduction that could be provided by the rule yields an estimate of the rule's damage

reduction benefits. This calculation was performed in two parts. First, a best estimate of damage

reductions for non

- OSHA List substances was calculated assuming total damages are reduced by 60

percent. Second, a best estimate of the expected damage reduction for the rema ining List substances was

calculated assuming total baseline damages are reduced by an additional 10 percent. For the

purpose of this analysis, EPA did not differentiate between the effectiveness of different programs

because that information is currently unavailable, and an attempt to do so would be based on subjective

opinion without the support of any empirical evidence.

Exhibit 6

- 13 presents the effects of reducing baseline damages for both toxic and flammable

related substances for non

- OSHA and othe r List substances. The less certain damage reductions (i.e.,

small and large magnitude toxic events) are shown along with the categories of damage reductions for

which there is more data. Because the differences in regulatory options are all quite simila r, the Agency

believes that the estimated benefits attributed to this rulemaking are not greatly biased when compared to

the costs of each regulatory option. 

### 30 Because the program is generally phased

- in over a three years

time

- period, the Agency correspond ingly phased

- in the stream of expected benefits. Beginning in the

third year, all sources are assumed to be in full compliance. The exhibit shows estimated benefits for the

first year to be $61.9 million, which increases to an estimated annual reduction i n damages of $187.4

29 The reduction in damages is approximated assuming a curve

- linear relationship between the level of spending

and t he reduction in damages when moving from the current spending level (1x) to twice the current spending level

(2x). Thus, if a spending level of 1x results in a 50 percent reduction in baseline damages, and a spending level of

2x is assumed to result in a 75 percent reduction (one

- half of the remaining damages from 1x spending), then a

spending level of 1.25x would be expected to result in a 60 percent reduction in baseline damages [1

- (1/(2 * 1.25)

], or a ten percent additional reduction in total damages

. 30 Benefits were not associated with specific rule elements because the data sources used for the analysis (ARIP,

AHE, RFF, MHIDAS, M&M) do not provide enough detail concerning the facility programs and processes in place

at the time of the accident. Co nsequently, it is difficult to determine the degree to which specific rule

- related

requirements would have decreased the likelihood of the accident having occurred. Although a great deal of time

and effort was expended by the Agency to identify accidents that occurred at facilities that will be affected by this

rulemaking, EPA recognized the difficulty in determining the benefits of the rulemaking by rule elements due to the

data limitations. Consequently, the Agency devoted greater effort on developing a rule that would minimize the

economic impact to industry while still complying with the requirements of the statute.

### 6

- 22

million beginning in the third year. Total estimated annualized benefits are about $174 million.

EXHIBIT 6

- 13

ANNUAL EXPECTED BENEFITS

($ million)



### Regulated Chemical Substances Year 1 Year 2 Year 3 Years 1

- 30

(annu alized) 1



### General Toxic Events Full List $8.3 $16.6 $25.2 $23.3

Non

- OSHA $3.1 $6.2 $9.4 $8.7

Small Magnitude Toxic

Events Full List $0.6 $1.2 $1.9 $1.7

Non

- OSHA $0.3 $0.5 $0.8 $0.7

Large Magnitude Toxic

Events Full List $10.7 $21.4 $32.4 $30.0

Non

- OSHA $4.3 $8.5 $12.9 $12.0

Flammables Full List $42.2 $84.4 $127.9 $118.4

Non

- OSHA $8.8 $17.6 $26.7 $24.7

Total 2 

### Full List $61.9 $123.7 $187.4 $173.5

Non

- OSHA $16.5 $32.9 $49.9 $46.2

1 

### Annualized using a 7 pe rcent discount

rate.

2 

### Total may not add exactly due to

rounding.

The benefits reflected in Exhibit 6

- 13 for the full list consider only the additional effect the rule

will have on processes already regulated under the OSHA PSM program. Be nefits from the rule are not

explicitly reduced for any potential benefits from voluntary programs, such as CMA and API PSM

programs. This adjustment was not made because the extent of participation and the compliance with

such programs is unknown and bec ause the data did not allow this type of estimation. 

### 31

6.7. SENSITIVITY ANALYSES

This section examines the change in the estimated benefits under alternative assumptions



### 31 In addition, some overlap in the time frame between the voluntary programs and the EPA databases indicate that

some damages may have be en avoided by these programs, thereby implicitly reducing the estimated baseline

damages. While costs were discounted in the analysis for toxic substance processes not covered by the OSHA PSM

but that are covered by CMA and API programs, the magnitude of these costs is so small (applying to only 370 of

the more than 90,000 processes) that the final estimates are not considered to be overstated.

### 6

- 23

regarding the effectiveness of the OSHA program and the additional reduction in damages a chieved by

implementing the EPA RMP program for these facilities. The base analysis assumes that the OSHA

program achieves only a 50 percent reduction in damages and that the additional spending associated

with adding the EPA program has the same effecti veness, in terms of reducing total damages, as an

increase in spending under the OSHA program. These sensitivity analyses consider the impact of two

alternatives on the benefits estimate for OSHA

- covered processes:

(1) The OSHA program achieves 80 percen t effectiveness; and

(2) The additional spending associated with adding the EPA program is twice as cost

- effective as

additional spending under the OSHA PSM program.



### 6.7.1. OSHA Program is More Effective

If, as OSHA assumes, their PSM program will reduce dam ages by 80 percent after the first five

years, the addition of the EPA RMP program can only reduce the number and severity of incidents

comprising the remaining 20 percent of damages not addressed by OSHA. Because a rigorous analysis of

OSHA’s benefit met hodology was not undertaken, EPA has conservatively estimated that the

implementation of its rule will still result in a 50 percent reduction in remaining incidents, even if

OSHA’s PSM standards may result in an eventual 80 percent reduction in OSHA

- regula ted facility

incidents. For this alternative analysis, EPA assumes that a doubling of the current spending level would

reduce the remaining damages by 50 percent, for a 10 percent additional reduction in total damages.

Exhibit 6

- 14 illustrates this conce pt.

### 6

- 24

Percent Reduction

in Damages 84%

Spending Level $ 1 

### 2x 1.25x 1x 80%

90% EXHIBIT 6

- 14

OSHA PROGRAM ACHIEVES 80 PERCENT EFFECTIVENESS



### Refer to original document. This fi gure didn’t make it in the WordPerfect/Word

conversion. BD

1 

### x represents baseline expenditures.

### 6

- 25

Using this assum ed relationship, the 25 percent increase in spending associated with the EPA

RMP rule is estimated to reduce total damages for OSHA processes by an additional four percent (for a

combined reduction in damages of 84 percent under both the OSHA and EPA progr ams). 

### 32 Under this

alternative, the total benefits associated with the EPA RMP rule are about $97 million or about $76

million less than the best estimate. Exhibit 6

- 15 shows the breakdown of benefits by category.

EXHIBIT 6

- 15

TOTAL ANNUAL EXP ECTED BENEFITS

- SENSITIVITY ANALYSIS 1

($ million)



### Regulated Chemical Substances Year 1 Year 2 Year 3 Years 1

- 30

(annualized) 1



### General Toxic Events Full List $5.2 $10.4 $15.7 $14.6

OSHA $2.1 $4.2 $6.3 $5.8

Small M agnitude Toxic

Events Full List $0.4 $0.8 $1.2 $1.1

OSHA $0.1 $0.3 $0.4 $0.4

Large Magnitude Toxic

Events Full List $6.8 $13.7 $20.7 $19.2

OSHA $2.6 $5.1 $7.8 $7.2

Flammables Full List $22.2 $44.4 $67.2 $62.2

OSHA $13.4 $26.7 $40.5 $37.5

Total 2 

### Fu ll List $34.6 $69.3 $104.9 $97.1

OSHA $18.2 $36.3 $55.0 $50.9

1 

### Annualized using a 7 percent discount

rate.

2 

### Total may not add exactly due to rounding.

6.7.2. Additional Spending under EPA Rule is More Cost

- Effective

In the original analysis, the non

- PSM spending associated with adding the EPA rule for

substances covered by the OSHA PSM program is assumed to further reduce damages by 10 percent.

It could be argued that the additional spending that occurs as a result of implementing the EPA RMP

program for OSHA

- covered processes would be more cost

- effective (i.e., achieve a greater additional

percentage reduction in damages) because sources have a choice regarding what process activities they

spend the additional money on (as opposed to OSHA) and , therefore, are expected to expend the

additional resources on more cost

- effective activities, such as increased and improved training,

32 Using the same functional form as originally used, y = 1

- 1/(2x), y = 0.8 when x = 2.5. Doubling x to 5.0 re sults

in a y of 0.9. Increasing x = 2.5 by a factor of 1.25 results in a y of 0.84, or a four percent increase.

### 6

- 26

maintenance, and oversight. 

### 33

Assuming that non

- PSM spending is twice as effective as originally estimated, for OSHA

processes only, an additional 25 percent increase in EPA program

- related spending would result in an

additional 30 percent reduction in total baseline damages (assuming the OSHA program reduces damages

by 50 percent without the EPA program). 

### 34 Exhibit 6

- 1 6 illustrates the effect of assuming that spending

under the EPA program is more cost

- effective.

33 Technically, this would imply that non

- OSHA covered processes would also achieve the same additional

benefits as OSHA covered processes for non

- PSM spending. This simple analysis, however, only looked at the

effect on OSHA

- covered processes to maintain a conservative estimate of benefits.

34 Again. assuming the original functional form, y = 1

- 1/(2x), if x is twice as effective as original ly estimated,

then y = 1

- 1/[(2*(2*1.25)] = 0.8, or a 30 percent increase.

### 6

- 27

Spending Level $ 1 

### Percent

Redu ction

in Damages A B

50% 80% 100%

1.25

x 1x A: OSHA Program

B: EPA Program with

Greater Cost

Effectiveness EXHIBIT 6

- 16

ADDITIONAL SPENDING UNDER EPA RULE IS MORE COST

- EFFECTIVE

THAN ADDITIONAL OSHA

- RELATED EXPENDITURES



### Refer to original document. This fi gure didn’t make it in the WordPerfect/Word

conversion. BD

1 

### x represents baseline expenditures.

### 6

- 28

Thus, assuming the additional spending associated with the EPA RMP rule is twice as effective at

reducing damages th an could be expected from additional spending under OSHA, the total annualized

benefits associated with the EPA RMP rule are estimated at about $428.2 million, or about $255 million

greater than the best estimate. Exhibit 6

- 17 shows the breakdown of benef its by category.



### 6.8. POTENTIAL ADDITIONAL BENEFITS

In addition to the primary benefits discussed in the preceding sections of this chapter, additional

potential benefits can also be included in the analysis. For the purposes of this analysis, however, EPA

chose not to include these estimates with the overall estimated quantified benefits because a rigorous

approach was not used to estimate the magnitude of these benefits compared to that of the other estimated

benefits. This section specifically considers the possible damage reductions

attributable to offsite consequence analyses and to a reduction in routine emissions, which the proposed

rule may affect.

EXHIBIT 6

- 17

TOTAL ANNUAL EXPECTED BENEFITS

- SENSITIVITY ANALYSIS 2

($ million)



### R egulated Chemical Substances Year 1 Year 2 Year 3 Years 1

- 30

(annualized) 1



### General Toxic Events Full List $18.8 $37.5 $56.8 $52.6

OSHA $15.6 $31.3 $47.4 $43.9

Small Magnitude Toxic

Events Full List $1.4 $2.7 $4.1 $3.8

OSHA $1.1 $2.2 $3.3 $3.1

Lar ge Magnitude Toxic

Events Full List $23.5 $47.0 $71.3 $66.0

OSHA $19.2 $38.5 $58.3 $54.0

Flammables Full List $109.0 $218.0 $330.4 $305.8

OSHA $100.2 $200.4 $303.6 $281.0

Total 2 

### Full List $152.7 $305.3 $462.6 $428.2

OSHA $136.2 $272.4 $412.7 $382.0

1 

### Annualized using a 7 percent discount rate.

2 

### Total may not add exactly due to rounding.

### 6

- 29

6.8.1. Possible Damage Reductions Due to the Offsite Consequence Analyses

EPA's rule requires all facilities using List substances in quantities above the t hreshold to perform

an offsite consequence analysis, and to make the results available to the potentially affected communities.

Because the OSHA rule does not have a comparable provision, any benefits of EPA's provision could be

applied to damages from al l substances on the List, not only from the non

- OSHA list. In addition, these

benefits can be applied in theory to the potential damages from low probability/high consequence

incidents as well as to the more common types of accidents.

The availability of the information generated by the offsite consequences analyses may provide

benefits by leading to reductions in the number and severity of releases at the facilities that perform the

offsite consequence analyses because facilities would become more awar e of potentially dangerous

practices as a result of conducting an offsite consequence analysis and would therefore act to minimize

the possibility of the occurrence of such a situation. This section explains why these reductions may take

place, and then s hows why most of these potential reductions are not counted as benefits of the RMP rule.

The dissemination of information on potential releases could ultimately have an impact on the

chance that a release would occur. Based on the Agency's experience wi th another piece of

environmental legislation, the Emergency Planning and Community Right

- to

- Know Act of 1986

(EPCRA), facilities are required to account for routine releases of toxic substances into the environment.

The Toxic Release Inventory (TRI), whi ch is mandated under section 313 of EPCRA, allows citizens to

become aware of the number, quantity, and hazards of toxic chemicals stored in their communities, which

has encouraged them to actively seek to work with local facilities to develop strategies c apable of

reducing environmental and health risks.

TRI requires that certain facilities submit information on their toxic emissions, which is made

available to the public. The availability of TRI information has led to more frequent meetings between

cit izen groups and industry. This increased contact has led to plant tours, citizen inspections, the

establishment of community advisory boards to monitor industrial activities, and the creation of "Good

Neighbor Agreements" with specific facilities. 

### 35 In Ca lifornia's Silicon Valley, for example, citizens

used TRI data to pressure the state's largest emitter of ozone

- depleting CFC’s, IBM, into eliminating

CFC’s altogether. In Akron, Ohio, TRI information was used to pressure BF Goodrich into publicly

announc ing a 70 percent reduction goal in its emissions of air toxics. 

### 36 The Clean Water Action/Clean

Water Fund used TRI data on the Houston Ship Channel in a report arguing that the channel be included

in the Texas Water Commission's list of Toxic Impaired Wate rs. 

### 37

The effects of the public availability of TRI information have been quantified in a study

investigating whether pollution data released by EPA in the June 1989 TRI were “news” to journalists and

investors. The study found that the greater the amoun t of air emissions, land releases, underground

injections, waste shipped offsite, or chemical submissions reported by a firm, the more likely it was to

receive media coverage. Firms reporting TRI information lost on average $4.1 million in stock value on

35 Lynn, Frances M., Jack D. Kartez and Cheryl Connelly. The Toxics Release Inventory: Environmental

Democracy in Action , Office of Pollution Prevention and Toxics (OPPT), Januar y 1992, p.3.

36 Orum, Paul, Richard Schrader and Jeffrey Tryens. Making the Difference: Using the Right

- to

- Know in the

Fight Against Toxics , The National Center for Policy Alternatives, Washington, D.C., pp. 1 and 16.

37 Ibid. , p.3.

### 6

- 30

the day the data were released. The greater the number of different chemical submissions reported by a

firm, the larger the drop in stock value for the company. 

### 38

However, the magnitudes of the reductions resulting from the offsite consequence provisions may not be as dramatic as those attributed to the TRI system. The releases spotlighted by the TRI were

routine, legal releases that firms may have seen little reason to

minimize before TRI resulted in adverse publicity. Many facilities might, therefore , have had numerous,

inexpensive opportunities for reducing releases (such as improved valve maintenance schedules) that had

been neglected in the past because of the lack of sufficient economic or regulatory incentives. However,

the situation is differen t with accidental releases of hazardous substances. Firms have always faced

disruptions in their operations and liability for damages in the event of accidental releases of hazardous

substances, and there are now regulations requiring that firms take spec ial actions to project and prevent

these accidents. Thus, even if firms are motivated by publicity resulting from the offsite consequence

analysis to further reduce the risks of a release, there are unlikely to be many additional, low

- cost actions

open to those firms.

It is possible that some firms will be motivated by the publicity surrounding their offsite

consequences analysis to take some additional actions to reduce risks even if these actions, such as

improvements in capital equipment or training , are expensive. For two reasons, however, the damage

reductions that would result from these actions are not counted as benefits of this rule. First, these

additional actions are voluntary; they are not required by the rule, and so cannot be directly at tributed to

it. Second, because the costs of these actions are not included in the analysis of the costs of the rule, it

would be inconsistent to include the associated damage reductions in the analysis of the benefits.

It is still possible that knowi ng the offsite consequences of potential releases, and knowing that

the surrounding community has access to this information, will induce facilities to implement their risk

reduction measures more conscientiously. As a result, existing risk reduction prog rams could be more

effective, without necessarily costing more. EPA would argue that the resulting reduction in damages

should be credited to the rule's offsite consequence provisions.

Unfortunately, this potential effect (of reducing risks without tak ing costly actions) is very

difficult to quantify. Because of the efforts already expected to be devoted to minimizing releases, and

because additional efforts that require expenditures of resources are excluded, EPA assumed that the

effect of the offsite consequence provisions will be quite small. Accordingly, EPA conservatively

assumed that the offsite consequence provisions will result in a one percent reduction in baseline

damages, for an annualized benefit of $13.5 million. The benefits calculated a s a result of this assumption

should not be considered certain.



### 6.8.2. Possible Reductions in Damages Due to Routine Emissions

38 Hamilton, James T. “Pollution as News: Media and Stock Market Reactions to the Toxics Release Inventory

Data,” Journal of Environmental Economics and Management , 1995, p.112.

### 6

- 31

EPA also suspects that this rule may also influence the number and quantity of routine emissions

for affected sources. This subsect ion presents upper

- bound estimates of EPA's program's effectiveness in

reducing the number and quantity of toxic air emissions in general, and hydrocarbon emissions in

particular. These estimates are based on the State of New Jersey's experience with a ru le similar to that of

EPA. The State of New Jersey's Toxic Catastrophe Prevention Act (TCPA) was signed into law on

January 8, 1986. TCPA was adopted by the State after a period of special concern for public safety

created by several releases of hazardou s substances, some in New Jersey, during the fall of 1984 and early

1985. The Bhopal accident played a significant role in convincing public officials of a need for such a

law. TCPA mandates that owners or operators of facilities that handle extraordinar ily hazardous

substances (EHSs) in the state to institute and implement risk management programs to prevent their

release. On June 20, 1988, the New Jersey Department of Environmental Protection and Energy adopted

rules in support of TCPA.

To estimate t he potential effectiveness of EPA's program in reducing routine emissions of toxic

substances, the trend of toxic air emissions in New Jersey has been analyzed in comparison to the trend in

the rest of the U.S. Data were collected from the TRI database fo r the period 1987 through 1993.

Exhibit 6

- 18 presents information concerning the number of toxic air emissions reported by New

Jersey and the rest of the U.S. Emissions for California, Delaware, and New Jersey were omitted from

the figures for the rest of the U.S., as these three states implemented risk management regulations during

the 1987 through 1993 period of study. Although the California and Delaware programs have been

EXHIBIT 6

- 18

NUMBER OF TOXIC AIR EMISSIONS REPORTED BY NEW JERSEY AND THE U. S.



### Year NJ U.S. 1 

### NJ as a percentage of

the U.S. 1



### 1987 2,431 49,021 4.96%

1988 2,529 55,601 4.55%

1989 2,612 58,835 4.44%

1990 2,588 60,700 4.26%

1991 2,284 58,390 3.91%

1992 2,148 56,811 3.78%

1993 2,034 54,965 3.70%

1 

### Excludes emiss ions from the states of California, Delaware, and New Jersey

implemented in different ways on a different schedule, inclusion of release data from these states could

bias the results.

While the number of toxic releases decreased both in New Jersey and i n the rest of the U.S., New

Jersey showed a much greater decline. Between 1988, the year of the New Jersey program's

### 6

- 32

implementation, and 1993, New Jersey's emissions fell almost 20 percent, while U.S. emissions dropped

only one percent. In fact, if the U .S. had followed the same trend in toxic air emissions as did New Jersey

over that six year period, the annual number of U.S. emissions would have fallen from 55,601 reported

releases to 44,718 reported releases, indicating that a total of 10,247 releases, or 2,049 releases per year,

could have been avoided. This analysis considers 2,049 releases to be an upper

- bound estimate of the

annual number of toxic air emissions that may be avoided nationally as a result EPA's program.

While the drop in the number of toxic releases reported by New Jersey is significant, an even

greater decline can be seen in the actual quantities of toxics emitted. Information concerning the

quantities of toxic air emissions reported by New Jersey and the rest of the U.S. is prese nted in Exhibit 6

- 19. The exhibit shows that between 1988 and 1993, the quantity of U.S. toxic emissions fell

approximately 39 percent, while the quantity of New Jersey's emissions dropped more than 61 percent. If

the U.S. had followed the trend seen in New Jersey, the national quantity of emitted toxics would have

significantly decreased, from 1.3 million tons to 500 thousand tons. Therefore, an additional 300

thousand tons, or 60 thousand tons a year, may potentially be avoided by the implementation of EPA's

program. This figure is considered to be an upper

- bound estimate.

EXHIBIT 6

- 19

QUANTITIES OF TOXIC AIR EMISSIONS REPORTED BY NEW JERSEY AND THE U.S.

(thousand tons)



### Year NJ U.S. 1 

### NJ as a percentage of

the U.S. 1



### 1987 22.5 1,300 1.6 8%

1988 20.0 1,300 1.52%

1989 16.0 1,200 1.30%

1990 12.9 1,100 1.17%

1991 11.4 1,000 1.17%

1992 10.3 900 1.17%

1993 7.7 800 0.97%

1 

### Excludes emissions from the states of California, Delaware, and New Jersey

To quantify the benefits associated wi th the upper

- bound estimate of the quantity of potentially

reduced routine toxics, this analysis assumes that for each ton of TRI substances released, approximately

two tons of hydrocarbons are released. 

### 39 Consequently, an estimated 100 thousand tons of hy drocarbon

emissions could be avoided. Additionally, each ton of hydrocarbons released has been estimated to

39 Based on information provided by Tom Walton, EPA, Office of Air Quality, Planning, and Standar ds.

### 6

- 33

generate up to $500 in social damages annually in non

- attainment areas. Given that 29 percent of the

U.S. population lives in non

- attainment areas , a total estimated social cost of $16.7 million may therefore

be avoided as a result of the implementation of EPA's program. 

### 40

The above analysis presents upper

- bound estimates for the effectiveness of EPA's program.

Actual benefits from its implementat ion may range from zero to $16.7 million. In addition, many factors

were not considered in the analysis, including, but not limited to, any changes in the actual amounts of

toxics manufactured, processed, or used in the U.S. over the period studied, any o ther factors that could

have caused a decline in releases over the period not due to the implementation of a RMP, and any non

linearity in the trend of the data.

The results of this analysis of potential additional benefits are shown in Exhibit 6

- 20. Th e exhibit

presents an estimate of the damage reductions that could result from the implementation of the proposed

rule. Expected annual potential additional benefits could total $37.4 million, once the program is fully

implemented.

EXHIBIT 6

- 20

TOTAL A NNUAL POTENTIAL BENEFITS

($ million)



### Category Year 1 Year 2 Year 3 Years 1

- 30

(annualized) 1



### Offsite Consequence

Analysis $4.8 $9.6 $14.6 $13.5

Routine Emissions $5.5 $11.0 $16.7 $15.5

Total 2 

### $13.3 $26.6 $40.4 $37.4

1 

### Annualized us ing a 7 percent discount rate.

2 

### Total may not add exactly due to rounding.

40 $500 is considered to be a conservative estimate for the social damages generated by one ton of hydrocarbons in

non

- attainment areas. See "Meeting the 15 Percent Rate of Progress Requirement under the Clean Air Act: A Menu

of Options," STAPPA and A LAPCO, September 1993, p.20. Other figures as high as $3,050 per ton have been

proposed. See the EPA Energy Policy Branch working paper "A Cost

- Effective Accelerated Scrappage Program for

Urban Automobiles," William Schroeer, January 1991 draft, p.5. Du e to this wide variation in data, this analysis has

adopted the conservative estimate.

### 6

- 34

6.9. QUALITATIVE BENEFITS

The preceding sections presented estimates of the damages from releases, and the extent to which

the proposed rule might reduce these damages. Additional b enefits, which are not so easily quantified,

could also be attributed to implementing the RMP rule. These benefits include those resulting from

efficiency gains, as well as from increased technology transfer, indirect cost savings,

and increased goodwill. The benefits expected to accrue to society through efficiency gains, are realized

in two ways:

(1) By requiring industry to examine the external benefits associated with their provision of accident

risk reduction, so that they provide a more socially op timal level of accident prevention measures;

and

(2) By making information available to the public as a result of the offsite consequence provisions

and the risk management plan, thereby enabling communities and individuals to make better

decisions regard ing the efficient amount of effort to expend to avert damages.

The efficiency gains to society in moving toward the socially optimal level of prevention and averting

behavior increases social welfare, which represents potential benefits associated with the implementation

of the RMP rule. Unfortunately, it is difficult to quantify such efficiency gains and estimate the impact on

social welfare. Consequently, this section only discusses the reasons why such inefficiencies may exist

and how implementing t he RMP program may correct for these inefficiencies; it does not attempt to

quantify these benefits.



### 6.9.1. Moving Toward the Optimal Level of Prevention

The motivation behind establishing environmental regulations that require industry to reduce

pollution a nd take additional steps to prevent accidents is that the marginal costs of undertaking such

actions for any individual source will be less than the marginal benefits realized by society. Because

individual sources frequently do not factor in the social b enefits associated with their prevention actions,

they will engage in less than the socially efficient amount of prevention. For example, industry may be

able to quantify the benefits they realize through increased accident prevention measures, but they m ay

neglect to realize that, in some cases, the surrounding population may want even greater accident

prevention measures to be provided, which would ensure them greater peace of mind. As long as the

surrounding population would be willing to pay more for this increased protection than it costs a source to

provide, then society would benefit from increased provision of accident prevention, even if a source does

not perceive the increased provision to be cost

- effective. By requiring such a source to underta ke

additional prevention activities through regulation, social welfare is increased, as the gain in social

benefits is greater than the costs of providing increased risk reduction.

Exhibit 6

- 21 illustrates how an industrial source will engage in an ineff iciently low amount of

prevention (P

o 

### ) when faced with their own marginal cost (MC) and marginal benefits (MB) of prevention

actions. Prevention of P

o 

### is sub

- optimal because the marginal social benefits of additional prevention are

greater than the margin al cost of providing additional prevention. The socially optimal level of

### 6

- 35

MC Individual Source



### P

o 

### P*

Prevention By Source (P) MB Social



### MB Individual Source 

### X Y

Z $ prevention (P * 

### ) is determined by the point at which the social marginal benefit of increasing prevention by

one unit is equal to the marginal cost of providing that prevention. Reg ulations that require the source to

move from sub

- optimal P

o 

### to socially optimal P * 

### increase net social benefits by an amount equal to the

area XYZ in the exhibit, as the increase in costs (area P o 

### XZP * 

### ) is less than the increase in benefits (area

P o 

### YZP * 

### ).



### 6.9.2. Improving Information and Moving Toward the Optimal Level of Effort to Avert

Damages

As part of EPA's RMP rule, industries are required to conduct offsite consequence analyses of

worst

- case and more likely release scenarios to the surrounding community. Sources are required to

make this information available to the public. Members of society rely on information to make sound and

efficient economic decisions. In most cases, information has the characteristics of a publicly provided

good. In other word s, no one individual can be easily excluded from using information once

it is provided. Because any publicly provided good tends to be under

- produced due to the "free

- rider"

problem, it is difficult to observe the public's true willingness to pay for the good and hence make

decisions concerning the optimal amount of the good to provide. 

### 41

EXHIBIT 6

- 21

MARGINAL COSTS AND BENEFITS OF PREVENTION BY A SOURCE

41 Publicly provided goods, by definition, are available for use to all members of society without exclusion.

Because no member of society can be excluded from enjoying the benefits of a public good, individuals have an

incentive to understate their true preference of supply for public goods in an attempt to pay a disproportionately

smaller share of the costs of providing the good relative to the benefits they enjoy (i.e ., the free

- rider problem). If all

members of society behave in this manner, then the socially optimal amount of publicly provided goods will be

under produced.

### 6

- 36

For an economy to be operating efficiently, economic theory a sserts that market participants need

access to complete information concerning market characteristics to optimize their transactions. Market

clearing prices and social behavior may become distorted when individuals have to make decisions based

on imperfec t information. In such a scenario, some individuals would value an increase in market

information that would allow them to make more efficient economic choices.

With respect to the risk of damages inflicted by an industrial accident, individuals and

c ommunities will make decisions regarding their level of effort to avoid damages based on their perceived

level of risk of incurring such damages and the cost of taking steps to reduce their risk. Damage averting

behavior by individuals and communities cou ld include such actions as adjusting zoning and housing

location decisions, devoting limited resources to establish special procedures and training for fire fighting

and other emergency response personnel to respond to an accident, and maintaining addition al emergency

and medical equipment in case of an accident. Lack of information on the true level of risk and

prevention efforts being taken by nearby sources may lead individuals and communities to expend an

inefficient amount of resources on damage avert ing behavior. For example, if individuals in a community

overestimate the level of risk posed by a nearby source, for example, they may spend too much to live

farther away, incurring additional housing and/or travel costs, because they believe they need t o live that

far away from a source to reduce their risk of damage. In addition, homes located closer to a source that

are thought to be "high" risk may be priced too low if the true risk is lower than perceived by the housing

market.

Exhibit 6

- 22 illus trates the potential efficiency gains from making additional information

available to the public that enables them to better estimate the true risk presented by a source and the

marginal benefits that can be gained from additional efforts to avoid damages. Graph A presents the case

in which community members are overestimating the level of risk presented by a source. In this case,

community members will expend an inefficiently high amount of resources to avert damages, A

o 

### , which

is greater than the optima l level of effort, A * 

### . A

o 

### is inefficient because the true social marginal benefit of

the extra effort to avert damages, given the actual level of risk, is less than the marginal cost of the

additional effort at this point. Graph B presents the opposite c ase in which community members are

underestimating the level of risk and not compensating for the lack of sufficient prevention effort by the

source, resulting in an inefficiently low level of effort being expended on averting behavior, A

o 

### , which is

lower than A *



### .

The area XYZ in Graph A and area ABC in Graph B represent the potential efficiency gains that

can be achieved by increasing the information available and moving to an efficient level of effort to avert

damages. These efficiency gains represent expected increases in social welfare, and thus, potential

benefits attributable to the RMP rule.

As an example, consider a real estate market surrounding a regulated source. In a competitive

market, individuals with a high aversion to risk would tend to locate further away from a risk source than

individuals with lower levels of risk aversion. These individuals would be willing to pay a

premium to reduce their risk exposure. Absence of information, however, may cause distortions in the

marketplace as i ndividuals are not able to correctly estimate the amount of risk the location of a house

poses. Individuals with high levels of risk aversion may end up choosing housing with high risks.

Several studies have attempted to test whether there is an implici t value of risk embedded in

household prices. Although no study has looked specifically at residential property values surrounding

### 6

- 37

sources using extremely hazardous substances, several studies have looked at residential property values

surrounding similar risk

- imposing sites. These studies report mixed findings concerning the degree to

which residential property values are influenced by the distance from a site.

Greenberg and Hughes (1993) found through a survey of New Jersey tax assessors that nearly 2 0

percent of the assessors reported that proximity to a hazardous waste site lowered the appreciation of

property values within 1/4 mile of the site. However, they also found that many other sites were not

significantly impacted by proximity to a hazardou s waste site because housing valuation was more

heavily influenced by factors such as taxes, planning policies, and the economic recession.

Smith and Desvousges (1986) conducted a study in which they attempted to estimate a demand

model to describe a h ousehold's demand for distance from a landfill with hazardous wastes. Their

findings indicate that the average household would realize a consumer surplus of $330 to $495 annually

for each mile between its residence and a landfill containing hazardous wast es. A later study by the

authors (1987) attempted to measure the values for reductions in the risks of exposure and premature

death from hazardous wastes. The authors found in this study that the average values for reductions in

### 6

- 38

$

A* MC Av erting Damages



### MB Perceived Risk



### MB True Risk



### A

o



### Effort To Avert Damages (A) X

Z

MC Averting Damages



### A B $

C

A

o 

### A*

Effort to Avert Damages (A) MB Perceived Risk 

### Y

MB True Risk 

### EXHIBIT 6

- 22

MARGINAL COS TS AND BENEFITS OF EFFORTS BY INDIVIDUALS

AND COMMUNITIES TO AVERT DAMAGES

GRAPH A

GRAPH B

### 6

- 39

the risk of premature death due to hazardous waste exposures were approximately constant over large

differences in the level of the baseline risk. This finding, however, implies that the estimated marginal

valuation of risk decreases as the level of risk increases.

Other authors have looked at the effect of distance a nuclear power plant exerts on surrounding

residential property value. Gamble and Downing (1982) could not find any evidence to support their

hypothesis that nuclear power plants had an adverse effect on residential property values. In a later study,

the authors examined the proper ty values surrounding the Three Mile Island nuclear power plant before

and after the accident. Again, they could not find any evidence to support their hypothesis that the power

plant influenced residential property values.

A recent study conducted for EPA's Office of Solid Waste looked at hazardous waste sources and

residential property values. 

### 42 The authors examined the public perception of treatment, storage, and

disposal sources that are regulated under RCRA. Preliminary results showed statistically significant

relationships between housing prices and distance to sources. The authors state that changes in housing

prices over time appear to be consistent with the hypothesis that key contamination events can affect

housing prices. EPA believes that t he results from this study support the assumption that property values

surrounding sources covered under the RMP rule would behave in a similar manner. As a result, there are

expected to be benefits associated with increasing the amount of information ava ilable to the public on the

potential risk posed by a source, as previously described.

EPA research shows that approximately 85 million people live within a five

- mile radius of a

regulated source. This is equivalent to approximately 35 million household s, or a third of the nation's

total household population. This population is expected to benefit directly from the information provided

by industries' offsite consequence analysis, which is required to be conducted and made available to the

public under t his rule. Due to difficulties associated with computing the value society places on the

information provided under this rule, EPA has not pursued quantifying these benefits. However, this

omission does not imply that these benefits are not real and recog nized by society.



### 6.9.3. Other Benefits

In addition to the potential efficiency gains from increasing prevention efforts by sources and by

providing the public with additional information, EPA believes that this rule has several other categories

of benefits that are not currently quantified. Based on the similar rule in the State of New Jersey, it is

believed that this rule will contribute to the improved transfer and adoption of new and improved

technologies between industries. The New Jersey rule has serv ed as an impetus for industries to adopt

innovative new technologies into their production processes. The result, presumably, is more efficient

production processes for the sources with decreased risks in associated accidents. The State has also

shared i nformation on state of the art technologies and has required their use in certain higher risk

sources.

In a similar fashion, the State of California has noted that industries covered under a similar rule

42 "Hazardous Waste Sources and Residential Property Values, Preliminary Results in Support of Benefits

Estimation for the Corrective Action Rule," ABT Associates, July 15, 1992.

### 6

- 40

have identified in their review of their product ion processes wasted hazardous and non

- hazardous

materials that comprised a costly input into the production process. This has resulted in cost savings on

extremely hazardous substance chemicals that are used in the industrial processes, other raw materia ls,

and hazardous waste collection and disposal.

EPA has also elected not to quantify the effect the rule will have on the increased good will that

surrounding communities would extend toward industry. In essence, the rule will serve as an

encouragement for industries and surrounding communities to begin an open dialogue concerning

community safety. EPA believes that communities will realize both the emotional well being and

satisfaction of living in a safer community and the financial security of livin g in a community with stable

or increasing property values. In addition, industry will benefit when attempting to expand or alter their

sources or obtain permits because of the improved community trust and acceptance of their existing

sources. This shoul d benefit industry financially as they may expect to incur lower costs in seeking

approval for planned sources.

Thus, the RMP rule is expected to result in a net increase in social welfare resulting from the

reduction in total damages to society from acc idents, the movement toward a more efficient level of

prevention by sources and effort by individuals and communities to avert damages, as well as the

additional potential benefits from technological developments and indirect cost savings that are realized

and improvements in good will and perceived quality of life for individuals living in affected

communities.



### 6.10. SUMMARY OF EXPECTED BENEFITS

The primary benefits expected from the rule are reductions in the damages from accidents

involving toxic release s and flammable substances. Three categories of damages were estimated: threats

to human health and responses to these threats, threats to the environment, and economic damages. The

human health threats considered include deaths and injuries; the respons es to these threats include

hospitalizations, evacuations, and sheltering in place. The environmental damages examined include

threats to wildlife, soil, and water. Finally, the economic damages include lost production, property

damages, and litigation.

These damages were estimated for each of four categories of accidents: general toxic events,

small magnitude toxic events, large magnitude toxic events, and incidents involving flammables. To

facilitate the comparison of benefits with costs, damages wer e estimated according to the program levels

described in the cost section of the analysis. Damages were estimated for both EPA List substances and

the subset of those substances not currently subject to OSHA regulation. These estimates are presented

agai n in Exhibit 6

- 23. Total annual baseline damages are estimated at about $1.5 billion.

An estimate of overall damage reduction was derived by multiplying these baseline damages by

the percentage reduction in damages that might be expected as a result of t he rule. The results of this

analysis are summarized in Exhibit 6

- 24.

Two sensitivity analyses were performed to consider the impact of two alternative assumptions

on the benefits estimate. Other potential benefits were also estimated. Due to the unc ertainty of these

estimates, however, these benefits were not included in the final estimation of the dollar value of benefits,

although the Agency recognizes the existence of these, as well as additional, qualitative benefits.

### 6

- 41

EXHIBIT 6

- 23

TO TAL ANNUAL DAMAGES SUBJECT TO PROGRAM LEVEL

($ million)



### Regulated Chemical Substances Program 1 Program 2 Program 3 Total 1



### General Toxic Events Full List

- $13.4 $160.4 $173.8

Non

- OSHA

- $13.4 $2.3 $15.7

Small Magnitude Toxic

Events Full List

- $1.1 $11.3 $12.4

Non

- OSHA

- $1.1 $0.2 $1.3

Large Magnitude Toxic

Events Full List

- $18.4 $197.5 $215.9

Non

- OSHA

- $18.4 $3.1 $21.5

Flammables Full List

- $38.1 $1,018.6 $1,056.7

Non

- OSHA

- $38.1 $6.5 $44.6

Total 1 

### Full List

- $ 71.0 $1,387.8 $1,458.8

Non

- OSHA

- $71.0 $12.1 $83.1

1 

### Total may not add exactly due to rounding.

EXHIBIT 6

- 24

ANNUAL EXPECTED BENEFITS

($ million)



### Regulated Chemical Substances Year 1 Year 2 Year 3 Years 1

- 30

(annualized) 1



### Gen eral Toxic Events Full List $8.3 $16.6 $25.2 $23.3

Non

- OSHA $3.1 $6.2 $9.4 $8.7

Small Magnitude Toxic

Events Full List $0.6 $1.2 $1.9 $1.7

Non

- OSHA $0.3 $0.5 $0.8 $0.7

Large Magnitude Toxic

Events Full List $10.7 $21.4 $32.4 $30.0

Non

- OSHA $4.3 $8.5 $12.9 $12.0

Flammables Full List $42.2 $84.4 $127.9 $118.4

Non

- OSHA $8.8 $17.6 $26.7 $24.7

Total 2 

### Full List $61.9 $123.7 $187.4 $173.5

Non

- OSHA $16.5 $32.9 $49.9 $46.2

1 

### Annualized using a 7 percent discount

rate.

2 

### Total may not add exactly due to

rounding.

### 7

- 1 CHAPTER 7.

SMALL ENTITY AND UNF UNDED MANDATE ANALYS IS

The Regulatory Flexibility Act of 1980 requires federal agencies to determine whether

proposed regulations will have a significant economic impact on a substantial number of small

entities. In addition, the Unfunded Mandates Regulatory Reform Act of 1995 requires analysis

of rules that impose significant burdens on state, local, and tribal governments. This chapter

presents an analy sis of the estimated economic impacts on small entities of EPA's regulation for

implementing Risk Management Programs for Chemical Accidental Release Prevention under 40

CFR Part 68.

 Section 7.1 describes the estimated number and characteristics of th e small entities that

would be regulated by the rule.

 Section 7.2 presents the estimated economic impacts of EPA's requirements for Risk

Management Programs on those entities.

 Section 7.3 presents conclusions of this analysis.

7.1. NUMBER AND CHARACTERIS TICS OF REGULATED SMALL BUSINESSES

7.1.1. Definition of "Small" Business

The Regulatory Flexibility Act specifies that either the U.S. Small Business

Administration's (SBA's) definition of "small" business (generally any business that is

independently owned or operated and not dominant in its field) or another appropriate

regulation

- specific definition of "small" business may be used. For this analysis of the Risk

Management Programs regulation, which covers a multitude of SIC codes, EPA developed its

own defi nition: small businesses are those with fewer than 100 employees. This definition was

adopted primarily for two reasons:

 SBA's definition of small for some of the affected SIC codes (e.g., wholesalers) is based

on a cutoff of 100 employees, although for most of the SIC codes the cutoff is

based on 500 or more employees.

 Compliance costs are generally incurred at the source level, as opposed to the business

or enterprise level; however, many sources that had fewer than 100 employees

### 7

- 2

had no larger c orporate structure to support them or to help carry the burden of

compliance costs (i.e., they were whole businesses or enterprises in themselves).

In other words, manufacturers with fewer than 100 employees as a general rule

only operated one affected so urce. There are, however, some exceptions to this;

for example, sources in SIC code 2813, industrial gases, frequently have very few

employees at a single site, but are owned by larger companies.

Notwithstanding the adopted definition of small business, this analysis presents impacts

of the proposed regulation for two categories of small businesses: (1) those with fewer than 20

employees, and (2) those with 20 to 99 employees. This approach was employed to more clearly

determine how the costs of comply ing with the proposed regulation would impact small

businesses, particularly those with the most limited financial resources.

Based on EPA guidance, small governmental entities are defined as those with

populations of less than 50,000.

7.1.2. Estimated Number of Small Entities

As indicated in Chapter 3, the number of small manufacturers was estimated to be 960

sources with fewer than 20 FTEs; 2,000 regulated source have between 20 and 99 FTEs. The

number of small non

- manufacturers is more difficult to determ ine. Virtually all retailer and

wholesalers have fewer than 100 FTEs. Estimates from the ammonia and propane retailers

association, however, indicate that as many as 80 percent of the retailers are owned by larger

companies; the analysis assumed that 3,7 00 retailers (20 percent of the total) were small

businesses. No information was available to estimate the percentage of wholesalers that might

be owned by large corporation. The analysis assumed that all 1,500 wholesalers were small.

The total number o f small businesses, therefore, was estimated to be 8,160.

Public drinking water and waste water systems affected by the rule generally serve a

minimum of 10,000 people. Approximately 980 water systems are estimated to serve between

10,000 and 25,000 peo ple. Approximately 500 water systems are estimated to serve between

25,000 and 50,000 people. Consequently, 1,480 drinking water systems would be considered

small governmental entities. It should be noted that this number represents the number of

treatm ent systems, not the number of drinking water sites, which is how the number of these

sources is generally presented in this analysis. Most of these systems, however, have only one

treatment site. The number of small POTWs was estimated to include all sy stems treating less

than 10 mgd and 59 percent of those treating between 10 and 25 mgd (based on the ratio of

drinking water systems in this category that serve populations below 50,000). Approximately

2,600 POTWs were estimated to serve between 10,000 an d 25,000 people and 180 to serve

between 25,000 and 50,000, for a total of 2,800 POTWs. The smallest utility affected by the rule

produces at least 10 megawatts of power; none of these utilities would be considered small. A

total of approximately 4,300 s mall governmental entities would be affected by this rule.

### 7

- 3

The total number of small entities affected by this rule was estimated to be 12,500 or 19

percent of the affected universe.

7.1.3. Estimated Compliance Costs Per Affected Entity

The compliance costs developed in Chapter 5 were used to determine whether the

proposed regulation would have a significant economic impact on a substantial number of small

businesses. As indicated in that chapter, the magnitude of the costs that regulated entities are

expect ed to incur depends on a number of factors, including the type of sources operated (i.e.,

manufacturing or non

- manufacturing), the complexity of the processes and operations at those

sources, the type of chemical substances used or present at those sources . This last item was

integral in determining whether regulated entities may already be in compliance with certain

requirements of EPA's Risk Management Programs regulation because they are affected by

OSHA's PSM standard and, thus, are already required to incur costs to comply with those or

similar regulations. Exhibits 7

- 1 and 7

- 2, respectively, summarize the initial annual costs per

source for manufacturers and for non

- manufacturers under the final rule (Option 1).

7.1.4. Data Sources

The financial data use d in this analysis were obtained from SBA's FINSTAT database,

which contains mean and median statistics on enterprises (or businesses) for the years 1976

-

1983. 43 The data in the FINSTAT database were originally collected by Dun & Bradstreet as

part of its credit reporting services. The data were voluntarily supplied to Dun & Bradstreet by

firms seeking credit; consequently, they may not be representative of all small businesses.

The biggest limitation of the data is their age: 1982 was the most recent full

- year for

which data were supplied. To facilitate analyses using estimated 1995 compliance costs, the

financial data obtained from FINSTAT were inflated to 1995 dollars using the Bureau of Labor

Statistics' Employment Cost Index. Estimating the curr ent financial performance of businesses

from historical performance data in this manner assumes that profit margins and revenue growth

rates have remained constant. In other words, this approach assumes that the financial condition

of businesses has remain ed constant in real terms and will remain constant in the future, an

assumption that may not represent reality. Particularly for some sectors, 1982 data do not reflect

other regulatory costs imposed since that time that could be expected to affect financi al

performance. However, despite these drawbacks, the FINSTAT data represent the largest

publicly available financial database on small privately held firms.

43 U.S. Small Business Administration, FINSTAT Analysis V , 1985.

### 7

- 4

Data in the database are classified by two

- digit SIC code and organized into the following

empl oyment size ranges: 1 to 9 employees, 10 to 19 employees, 20 to 49 employees, 50 to 99

employees, and 100 or more employees. Mean values in the FINSTAT data are generally higher

than median values, indicating that larger firms within a given SIC code

- emp loyment size

category have a disproportionate effect on the mean financial values. This finding supported the

approach to use median values for this analysis. Because this analysis divided small businesses

into categories that overlapped those used by FI NSTAT, a weighted

- average approach was used

to aggregate certain financial data provided by FINSTAT for firms with 1 to 9 and 10 to 19

employees and for firms with 20 to 49 employees and 50 to 99 employees. 44

44 To aggregate the financial data in employment size categories 1 to 9 and 10 to 19, for example , the number of

data points or businesses reporting financial data (designated "N") in each employment size category were used to

develop weights. Specifically, if N 1 and N 2 are the number of data points in size categories 1 to 9 and 10 to 19,

respectivel y, then the estimated median sales for employment size 1 to 19 was calculated as follows:

Sales = (( Sales 1 x N 1 ) + ( Sales 2 x N 2 ))/( N 1 + N 2 ).

### 7

- 5

EXHIBIT 7

- 1

ESTIMATED ANNUALIZED INITIAL COMPLIANCE COST PER SOURCE FOR MANUFACTURERS

FTE < 20 FTE 20

- 99

Non

- Chemical Chemical Non

- Chemical Chemical

(SIC 283, 284, 285, 287,

289) Chemical

(SIC 281, 282, 286)

Program 2 N/A N/A N/A N/A N/A

Program 3

OSHA Only $2,300 $3,600 $3,0 00 $7,300 $29,000

Program 3

Additional EPA

Processes N/A N/A N/A N/A $31,000

### 7

- 6

EXHIBIT 7

- 2

ESTIMATED ANNUALIZED INITIAL COMPLIANCE COST PER SOURCE FOR NON MANUFACTURERS

Retailers Wholesalers Public 10 mgd Public 1

- 2 mgd *

Program 2 $500 $700 $2,500 $2,400

Program 3

OSHA N/A $370 $800 $800

Program 3

Additional EPA

Processes N/A $800 N/A N/A

* Based on POTW unit costs, which are slightly higher than drinking water system costs.

N/A means no sources are in this category.

Program 1 is not included because its costs are negligible.

SIC code 281 (industrial inorganics); 281 (plastics and resins); 286 (industrial organics); 283 (pharmaceuticals); 284 (toile tries); 285 (paint); 287 (agricultural chemicals); 289 (other chemicals.

### 7

- 7

Exh ibits 7

- 3 through 7

- 5 present financial profiles of median manufacturers (with fewer

than 20 employees and with 20 to 99 employees) and of median non

- manufacturers (with fewer

than 20 employees) for which data were available.

The financial profiles of small manufacturers presented in Exhibits 7

- 3 and 7

- 5 show

significant variation between manufacturers with fewer than 20 employees and those with 20 to

99 employees, both within and between SIC codes. For example, most median manufacturers

with fewer tha n 20 employees have sales between the range of $430,000 and $900,000, whereas

most median manufacturers with 20 to 99 employees have sales between the range of $2.4

million and $5.6 million. Similarly, net income, total assets, and total debt are each on average

at least three times larger for the median manufacturer with 20 to 99 employees than for the

median manufacturer with fewer than 20 employees. Interestingly, however, median

manufacturers with fewer than 20 employees generally have lower debt leve ls in relation to the

size of their sales, net income, and assets, and higher net income levels in relation to the size of

their sales than do median manufacturers with 20 to 99 employees. Also, net income of

manufacturers with fewer than 20 employees fal ls within a relatively narrow range ($19,000 to

$34,000), whereas that for manufacturers with 20 to 99 employees is much more variable,

ranging from $50,000 to $210,000. In both groups of small manufacturers, manufacturers in the

chemical and allied produ cts industry have nearly the highest values for each of the financial

variables.

Sales, net income, assets, and debt for small non

- manufacturers (all of which were

assumed to have fewer than 20 employees) in almost all cases are larger, although not much

larger, than those for manufacturers with fewer than 20 employees (see Exhibit 7

- 5). The

relative size of these variables, however, more closely mirrors that found in the profiles for

manufacturers with 20 to 99 employees than it does for manufacturers w ith fewer than 20

employees.

7.1.5. Data on Small Governmental Entities

The economic resources available to the entities operating drinking water and wastewater

treatment systems is based on two EPA studies. In 1986, EPA surveyed community drinking

water syst ems to determine, among other things, revenues. 45 A 1993 study on the impacts of

the Safe Drinking Water Act amendments on costs to local systems used the 1986 to consider the

ability of households to absorb the costs of the amendments. 46 Average revenue s of drinking

water systems serving 10,000 to 25,000 people are $2.7 million (1995 dollars). The 1993 study

45 US EPA, Final Descriptive Summary 1986 Survey of Community Water Systems , RTI/7805/02

- 02F,

Octobe r 23, 1987.

46 ICF, Inc., Affordability of the 1986 SDWA Amendments to Community Water Systems , September 30,

1993.

### 7

- 8

indicated that the average annual cost to household served by these systems is $300.35 (1995

dollars). Costs to larger systems and their customers are lower. Data are not available on

POTWs, but it is reasonable to assume that the revenues of these systems would be at least as

high because their costs for treatment may be higher than the cost of treating drinking water.

EXHIBIT 7

- 3

FINANCIAL PROF ILES OF MEDIAN MANUFACTURERS WITH FEWER THAN 20 EMPLOYEES

(1995 dollars)

Business/Source Category SIC

Code Sales Net Income Assets Debt

Chemical and Allied Products 28 $909,000 $35,000 $416,000 $134,000

EXHIBIT 7

- 4

FINANCIAL PROFILES OF MED IAN MANUFACTURERS WITH 20 TO 99 EMPLOYEES

(1995 dollars)

Business/Source Category SIC

Code Sales Net Income Assets Debt

Chemical and Allied Products 28 $5,783,000 $133,000 $2,531,000 $1,163,000

Petroleum and Coal Products 29 $9,468,000 $218,0 00 $3,936,000 $1,826,000

EXHIBIT 7

- 5

FINANCIAL PROFILES OF MEDIAN NON

- MANUFACTURERS

WITH FEWER THAN 20 EMPLOYEES

(1995 dollars)

Business/Source Category SIC

Code Sales Net Income Assets Debt

Retailers 50/51 $1,525,000 $34,000 $489,000 $2 16,000

Wholesalers 50/51 $1,525,000 $34,000 $489,000 $216,000

### 7

- 9

7.2. ESTIMATED ECONOMIC IMPACTS ON SMALL ENTITIES

No detailed analysis of the impact on small entities was performed because of the

relatively low cost of the final rule for small businesses. Initial costs are considerably less than

one percent of sales for all small manufacturers. Subsequent year costs will be even lower.

Costs for non

- manufacturers are very low (less than $1,000 per year for initial compliance).

These sums do not impose a significant adverse burden on these sources. Only chemical

manufacturers with complex processes and 20 to 99 FTEs have initial costs that exceed $6,000

per year. The costs for these sources, $21,000 to $24,000 per year for the first three years,

repres ent less than .5 percent of sales. It should be noted that all of the costs for small

manufacturers assume that the sources will take additional efforts, above their actions to comply

with the OSHA rule, to improve the quality of the risk management progr ams. If they do not

take additional actions, their costs would be substantially lower.

7.3. ESTIMATED ECONOMIC IMPACT ON SMALL GOVERNMENTS

A significant number of small governmental entities will be affected by the rule. A

detailed analysis of the impact s on these entities was not performed, however, because like the

small businesses discussed above, these entities will incur relatively low costs to comply with

this rule. The cost of compliance with the risk management program rule would add

approximatel y $2,500 to the drinking water systems costs. If these costs were recovered

completely through higher rates, revenues would need to increase less than 0.1 percent. The

1993 study indicated that the average annual cost to household for systems serving 10, 000 and

25,000 people is $300.35 (1995 dollars). If the compliance costs were passed on to consumers,

their annual bills would rise $0.30. Relative costs to larger systems and their customers are

lower. It is reasonable to assume that the impact on POTW s would be no greater than it is on

water systems because the costs of the program are approximately the same. It should be noted

that EPA is working with drinking water systems to develop a model risk management plan to

ensure that the burden on these so urces is minimized.

7.4. THE UNFUNDED MANDATE ANALYSIS

The Unfunded Mandate Reform Act of 1995 (UMRA) requires the Agency to consider

the total impact of the rule. The rule imposes costs on large and small state and local

governmental entities, primarily water, wastewater, and electric utility authorities or special

districts. The analysis indicates that the annualized cost of the final rule over 30 years for all of

these sources is $13 million. The total impact of the rule on all regulated sources, howe ver, does

exceed the $100 million level in the first year of initial compliance. The costs thereafter are

below this UMRA trigger.

### 7

- 10

CAA section 112(r)(7) mandates the promulgation of this rule. In developing the rule,

EPA conducted the cost/benefit an alysis contained in this document to evaluate the impacts of

the rule on regulated sources. EPA has adopted a number of changes to the rule that have

reduced the cost of the rule by more than 50 percent and is continuing to work with industry

sectors to d evelop models that will lessen the burden of compliance. Because the analysis

indicates that the benefits of the rule exceed the costs, EPA did not separately estimate the

impact on the national economy.

The CAA provides no funding for compliance with t his rule. The analysis, however,

indicates that the rule imposes no disproportionate effect on any regions or on state, local, or

tribal governments. The majority of the costs of the rule will fall on chemical manufacturers and

refineries. The concentra tion of costs in these sectors is the result of the larger number of

chemicals and processes at these sources, the higher degree of complexity to be addressed in

hazard analyses, training, maintenance, operating procedures, and safety information, and the

greater number of employees (which affects training costs).

The rule also may impose implementation costs on state or local entities. State or local

air permitting authorities may be required to take steps to ensure that sources have complied with

se ction 112(r) because it is an applicable requirement, which must be listed in an air permit.

EPA is working with air permitting authorities to minimize the burden on these agencies; any

costs that may accrue to permitting authorities, however, can be cove red by the permit fees,

which the CAA Title V requires to be set at a level to cover all direct and indirect costs of the

program. Permitting authority costs, therefore, do not constitute an unfunded mandate.

Implementing agency costs, as discussed in C hapter 5, may be substantial. No state,

however, is required to seek delegation of the program. States will be granted authority to serve

as implementing agencies only if they demonstrate that the state has the resources to implement

and enforce the rule , as specified in CAA section 112(l). Because seeking delegation is

voluntary, it does not constitute an unfunded mandate.

Although the CAA specifies that states and local response agencies shall receive the

RMP, EPA is planning to have the RMPs submitt ed only to EPA in a form that will allow the

Agency to make the RMPs available electronically to all interested parties. This action will

relieve states and local governments of the burden of establishing and maintaining files of RMPs

and of providing the documents to the public.

### 7

- 11

7.5. CONCLUSION

The Regulatory Flexibility Act of 1980 requires federal agencies to assess whether

proposed regulations will have a significant economic impact on a substantial number of small

entities. Although the rule will aff ect a substantial number of small entities, based on this

analysis, EPA's final risk management program requirements does not impose a significant

adverse burden on these small entities.

A number of the decisions EPA adopted in the final rule, specific ally the adoption of

tiers, the reduced requirements for the RMP, and the development of guidance for offsite

consequence analyses to eliminate the need for air dispersion modeling, have significantly

reduced the burden on small entities. For small busine sses, estimated costs have been reduced

by more than 50 percent. The impact on small governments is less because EPA has always

been committed to developing model guidance for public systems to reduce their burdens.

Without such guidance, small governmen ts probably would have had to hire consultants to

conduct dispersion modeling, leading to significantly higher costs.

The Unfunded Mandates Regulatory Reform Act of 1995 requires analysis of rules that

impose significant burdens on state, local, and trib al governments; significant burden is defined

as an aggregate annual cost of $100 million or more. EPA has determined that the risk

management program rule contains a federal mandate that may result in expenditures of $100

million or more, but only in the initial compliance year; after sources are in compliance, annual

costs will fall below $100 million.

### Refs

- 1 CHAPTER 8.

CONCLUSIONS

This chapter discusses the uncertainties associated with the analysis presented in this

document and the findings of the ana lysis.

8.1. UNCERTAINTIES

All analyses have to address uncertainties related to the data used and assumptions made

about future behavior. Recently, reviews of past EIAs and subsequent experience with

implementing rules have shown that predictions of both EP A and industry have tended to

overstate the costs of rule implementation. This analysis has attempted to identify those areas of

uncertainty associated with it to define the limits of the estimated impacts and the direction of

possible errors.

In genera l, the estimates of the regulated universe are based on limited data. The TRI

data used, while the best data available, nonetheless do not cover all substances regulated under

section 112(r). The TRI data do, however, include the commodity chemicals that are used

outside of the chemical manufacturing sector; in addition, the analysis used other information

sources to address gaps in the TRI data. TRI, and all other reporting requirements, also specify

maximum on site; this rule applies to maximum in a pr ocess. In considering the impact of these

data limitations, it appears that the universe of affected sources is likely to have been

overestimated. To the extent that the estimate is overestimated, it is probably for two reasons.

First, fewer sources may have a threshold quantity in a process than the data, based on the

presence of a threshold quantity at a site, indicate. The extent of this overestimate is unknown.

Second, some sources will switch chemicals or reduce inventories to eliminate the need t o

comply with the rule; in states with state RMP programs, these actions have reduced the number

of affected sources substantially. Overall, therefore, it is likely that the estimates used for the

universe in this analysis represent an upper bound.

The major source of uncertainty on the cost estimates is the degree to which sources are

already in compliance with the rule because of existing programs, either regulatory or voluntary.

Many of the requirements of the rule reflect good operating practices at any source. For

example, workers should be trained to operate equipment properly. This consideration is

particularly relevant to Program 2 sources because their requirements can generally be met by

using good practices and meeting codes and standards th at already apply to them. The analysis

used conservative estimates of current compliance, which may lead to an overestimation of the

costs.

### 8

- 2

A second concern on the cost estimates is the extent to which sources may hire

consultants to develop their ris k management programs. The final rule was specifically

developed to limit the need for outside help, in part because of the high costs associated with

hiring such consultants. The model risk management programs being developed should

eliminate the need f

or outside assistance. Nonetheless, some sources may elect to seek such help

because they lack the time or staff resources. To the extent that this occurs, actual costs of the

program will be higher.

Given the likelihood that the universe is overestima ted and that Program 2 sources (the

majority of sources) may already be complying with many of the rule elements, the costs of

compliance may be overstated to some degree.

On costs to implementing agencies, the analysis indicates considerable uncertainty about

the estimates because it is currently unclear how many states will elect to implement the program

and, therefore, for how many states EPA will serve as the implementing agency. Also unknown

is the level of effort that EPA and the states will be abl e to fund. Although the analysis makes

reasonable estimates on these issues and presents a range of possible costs, the estimates of these

costs are likely to contain a greater degree of uncertainty than the estimates of costs to industry.

A number of u ncertainties exist in the benefits analysis. The analysis is based on existing

accident data reported to the federal government. These data are generally believed to be

incomplete although the most severe releases are likely to have been captured. Incre ases in the

number of accidents reported in recent years indicate that there has been considerable

underreporting in the period covered by the data used in this analysis. The data used to estimate

releases of flammables are even more likely to be incomple te as they are complied from various

sources, some of which included only the most severe releases. The baseline data on which the

rest of the benefits analysis rests, therefore, probably understate the number of releases involving

regulated substances. A second problem is that damages were estimated using the average of

past damages. For flammables, in particular, the assumption that average past damages represent

average future damages is probably conservative. According to Marsh & McLennan's analysis

, the damages from major accidents has risen dramatically in recent years as plant sites became

larger and more likely to be constructed vertically.

As discussed in Chapter 6, the benefits associated with the rule are highly dependent on

the assumption s about the rule's effectiveness. If the OSHA PSM rule is more effective that

estimated, the benefits of this rule would be lower than estimated. If this rule increases the

effectiveness of the prevention activities to a greater extent than estimated, th e benefits could be

higher.

8.2. IMPACT OF RULE CHANGES ON FINAL COSTS

EPA selected options to highlight changes in regulatory requirements between the

proposed rule, supplemental notice, and the final rule. The supplemental notice included two

### 8

- 3

changes from the proposed rule that have a significant impact on costs. First, the tiering

approach moves the majority of sources into Program 1 and 2, with a reduced set of

requirements. Second, the offsite consequence analysis was changed to allow sources to use a

guidance document that EPA has developed to estimate the distance to an endpoint; this

guidance eliminates the need to conduct air dispersion modeling, which would have required

consultants for most sources outside of the larger chemical companies. The f inal rule added a

third change that reduced costs, the shift of the RMP from a large, text document to a set of data

elements that can be submitted electronically.

Option 1 reflects the supplemental notice assignment of sources to tiers and the final rule

requirements. The supplemental notice did not specify the prevention program elements, beyond

listing training, maintenance, safety precautions, and monitoring as the core of good prevention

practices. In response to comments that the Agency needed to specify what constituted an

adequate level of compliance with these elements, EPA has provided seven specific requirements

that constitute good prevention practices. These elements clarify what EPA intended in its

supplemental notice language and assis t sources in understanding the level of documentation

they will be required to maintain. In general, EPA has sharply reduced the documentation

requirements for Program 2 sources.

One difference between the supplemental notice and the final rule is not reflected in this

analysis. Under the supplemental notice, processes in the specified SIC codes at sources with 20

to 99 employees would have had eight years to come into compliance with the Program 3

prevention program. Based on comments that opposed th e phase

- in and on the very limited

number (50) of processes that would be affected, EPA did not include the phase

- in in the final

rule. The cost impact of this minor change was so small that the analysis did not consider it.

Both Options 1 and 2 inclu de the change to the RMP requirement. A comparison of the

initial compliance costs of Options 1 and 2 allows examination of the impact of tiering on the

cost of the rule because tiering represents the only difference between the options.

Initial Complian ce Cost

Option 1$494 million

Option 2$642 million

Options 2 and 3 reflect the proposed rule approach to the prevention program (i.e., OSHA

PSM would be applied to all sources). The differences between the options are the changed

requirements for the of

fsite consequence analysis and the RMP. Comparison of the two options

allows examination of the cost reduction made possible by each of these changes. The reduction

in initial compliance costs from the changes are as follow:

### 8

- 4

Proposed RuleFinal Rule

Of fsite consequence analysis$351 million$44 million

RMP$283 million$16 million

In short, the rule changes have reduced the cost of initial compliance by more than $700

million dollars. On an annualized basis, EPA's changes have reduced the net costs from $221

million to $72 million, a 67 percent reduction.

8.3. IMPACT OF THE RULE ON INDUSTRY SECTORS

The rule imposes most of its costs on manufacturers, especially chemical manufacturers

and petroleum refineries. The 4,190 chemical manufacturers and refineries constitute 6 percent

of the universe of regulated sources, but will incur 52 percent of the costs, with most of the costs

being borne by sources with more than 100 employees. Manufacturers (including chemical

companies) comprise 17 percent of the univers e and bear 66 percent of the costs. The

concentration of costs in these sectors is the result of the larger number of chemicals and

processes at these sources, the higher degree of complexity to be addressed in hazard analyses,

training, maintenance, oper ating procedures, and safety information, and the greater number of

employees (which affects training costs).

8.4. COMPARISON OF COSTS AND BENEFITS

The analysis considered the annualized net costs (compliance costs minus cost savings)

and benefits to sources , which are presented in Exhibit 8

- 1. As the Exhibit indicates, the annual

benefits will exceed annual costs after the first year of implementation. Cumulative benefits

exceed cumulative costs by the third year on compliance; the cumulative difference in benefits

over costs increases over time.

EXHIBIT 8

- 1

ANNUALIZED NET COSTS AND BENEFITS OF THE FINAL RULE

INITIAL COMPLIANCE YEARS SUBSEQUENT

YEARS

(4

- 30)

1 2 3

NET COSTS $144 million $92 million $73 million $75 million

BENEFITS $62 mil lion $124 million $187 million $174 million

### 8

- 5

8.5. IMPACT OF IMPLEMENTATION ON GOVERNMENTS

As discussed above, the costs to implementing agencies and EPA are highly uncertain

because (1) it is not known how many states will elect to implement and enforce the program and

(2) because the level of effort that either EPA or the state will be able to fund is unclear. The

analysis presents a range of implementation costs, from annualized costs of $5.5 million to $18

million. If states have the resources to impleme nt the program at the level that states with

existing RMP programs have, costs will be considerably higher.

8.6. IMPACT ON SMALL ENTITIES

Approximately 12,500 small entities (19 percent of the universe) will be affected by this

rule. Of these, 8,200 are sma ll businesses and 4,300 are small governments. The impact of the

rule on these sources is not significant because the cost of the rule is relatively low per source,

representing less than 1 percent of sales for businesses and 0.05 percent of general reven ues for

local governments. EPA is working with industry and developing model risk management

programs for many small businesses to ensure that the burden of compliance is minimized.

8.7. UNFUNDED MANDATES

The Unfunded Mandates Regulatory Reform Act of 1995 requires analysis of rules that

impose significant burdens, defined as an aggregate annual cost of $100 million or more. EPA

has determined that the risk management program rule contains a federal mandate that may result

in expenditures of $100 million or more in the initial year of compliance.

### Refs

- 1 REFERENCES



### Publications

ABT Associates, "Hazardous waste sources and residential property values, preliminary

results in support of benefits estimation for the corrective action rule," July 15, 1992.

Accidental Release Information Reports database, U.S. EPA.

Acute Hazardous Events database, U.S. EPA.

"AIChE 1994 Salary Survey Report," Chemical Engineering Process , June 1994.

Bridges, William, "The costs and benefits of process safety manageme nt," JBF

Associates, 1994.

"Build a Proper PSM Program from the Ground Up, Chemical Engineering Progress

, Jan. 1, 1995, p 47.

"Commitment to PSM by Management Improves Business as well as Safety,

Occupational Health and Safety Letter , Sept. 5, 1995

.

Dawson, G. and B.W. Mercer. Hazardous Waste Management , 1986.

1994 Directory of Electrical Utilities, McGraw Hill, New York, NY, 1994.

Fatal Hazardous Materials Accidents database, Resources for the Future.

Federal Remediation Technologies Roundtabl e, "Synopses of federal demonstrations of

innovative site remediations technologies," May 1991.

Fisher, A., L.G. Chestnut, and D.M. Violette. "The value of reducing risks of death: a

note on new evidence," Journal of Policy Analysis and Management , 8:1 , Fall 1989.

Flynn, C.B., and J.A. Chalmers. "The social and economic effects of the accident at

Three Mile Island: Findings to date," Nuclear Regulatory Commission, January 1980.

Guidelines for Hazard Evaluation Procedures , 2nd ed., AIChE/CCPS, New York, NY,

1992.

Hamilton, James T. "Pollution as news: media and stock market reactions to the Toxics

Release Inventory data," Journal of Environmental Economics and Management , 1995.

"HSE Program Shows Benefits at ITT," Occupational Hazards , March 1994, v56,n6, p

100.

### Refs

- 2

ICF, Inc., Affordability of the 1986 SDWA Amendments to Community Water Systems

, September 30, 1993.

"Large Property Damage Losses in the Hydrocarbon

- Chemical Industries, A Thirty Year

Review," Marsh and McLennan, 15th edition, David Mahoney, ed.

Lynn, F.M., J.D. Kartez, and C. Connelly. The Toxics Release Inventory: Environmental

Democracy in Action , Office of Pollution Prevention and Toxics, U.S. EPA, January 1992.

Bob Metz, "Training Personnel on Operating Procedures," C onference Proceedings, 1996

Process Plant Safety Symposium, vol. 2, p391.

MHIDAS database, UK Health and Safety Executive.

Miller, Ted, "Benefit

- cost analyses of health and safety: conceptual and empirical

issues," December 1986.

Miller, Ted, C. C alhoun, and W. B. Arthur. "Utility adjusted impairment years: a low

cost approach to morbidity valuation," in Estimating and Valuing Morbidity in a Policy Context,

June 1989.

New Jersey Right

- to

- Know Database, 1988.

"Plant Maintenance Comes Into Its O wn," Chemical Week , November 16, 1994.

"Process Safety: Dow Chemical USA Finds the Standard's Positive Side, Occupational

Health and Safety , Oct. 1992, p 36

- 37.

"PSM Protect Works, American City and County , June 1995, p 34.

Orum, Paul, R. Schrade r, and J. Tryens. "Making the Difference: Using the right

- to

know in the fight against toxics," The National Center for Policy Alternatives, Washington, DC.

Rich, Gerald A., "Air Toxics: Prevention and mitigation," Pollution Engineering , June

1989.

"Small Business: Make the Most of PSM, Chemical Engineering Progress , February

1994, p 60.

SRI, Directory of U.S. Chemical Producers 1994, Menlo Park, CA, 1994.

Sutton, I.S., "Integrated Management Systems Improve Plant Reliability," Hydrocarbon

Proc essing , January 1995, v 74, n 1, p63

- 64.

### Refs

- 3

TRI database, 1991, U.S. EPA.

U.S. Bureau of Census, Census of Manufacturers , 1987, 1992.

U.S. Bureau of Census, County Business Patterns , 1992.

U.S. Bureau of Census, Statistical Abstract of the United St ates 1995

.

U.S. Bureau of Labor Statistics, Employer Costs for Employee Compensation , March

1995.

U.S. Department of Agriculture/National Agricultural Statistics Service, "Capacity of

Refrigerated Warehouses," February 15, 1990.

U.S. Department of Co mmerce, Survey of Current Business , April 1991.

U.S. Energy Information Administration, Petroleum Supply Annual 1993

.

U.S. EPA, Final Descriptive Summary 1986 Survey of Community Water Systems

, RTI/7805/02

- 02F, October 23, 1987.

U.S. EPA, Review of Emergency Systems, Report to Congress under EPCRA section

305(b) , 1988.

U.S. EPA, National Pretreatment Program, Report to Congress , July 1991 (21 W 4004).

U.S. EPA, Summary and Response to Comments on the Risk Management Program Rule

under CAA sectio n 112(r) , 1996.

U.S. OSHA, Final Regulatory Impact and Regulatory Flexibility Analysis of the Final

Standard for Process Safety Management of Highly Hazardous Chemical (§ 1910.119, Subpart

H) , January 1992.

U.S. Small Business Administration, FINSTAT A nalysis V , 1985.

Organizations/Individuals

American Gas Association.

American Petroleum Institute. Ken Leonard.

American Water Works Association. Vern Achtermann, Alan Roberson.

Battelle. Wyne Simmons.

Bonar Engineers. Hank Bonar.

Chevron. Rob ert Sandilos, Gerald Walker.

### Refs

- 4

Chlorine Institute. Art Dungan.

R.A. Cole and Associates, Inc. Ronald Cole.

A. Epstein and Sons. Ron Vallant.

EQE. David W. Jones.

Fairfax County (VA) POTW.

International Association of Refrigerated Warehouses. Mike Shaw.

International Institute of Ammonia Refrigeration. Kent Anderson.

JBF Associates. Steve Arendt, William Bridges.

National Association of Chemical Distributors. Chris Cathcart.

National Propane Gas Assocation. Bill Butterbaugh.

William V. Richa rds, Inc. William Richards.

SAIC. Geoffry Kaiser, Ray Brandes.

St. Auwn & Ruff. Burt Nisely.

State of California. Fred Lercari, Office of Emergency Services.

State of Delaware. Robert Barrish, Richard Antoff, Department of Natural Resources

State of Louisiana. Bob Hayes, Office of State Police.

State of Maryland. Marcia Ways, Department of the Environment.

State of New Jersey. Reginald Baldini, Allen Edwards, Department of Environmental

Protection.

State of Oregon. Dennis Walthall, State Fi re Marshall's Office.

State of Virginia. Tim Petrie, SARA Title 3 Data.

State of Texas Railroad Commission.

Sutton, Leach, Lindstrom. Carey Faber.

Technica.

U.S. EPA Office of Ground Water and Drinking Water.

U.S. OSHA. Robert Blicksilver.

### App. A-1

APPENDIX A.

SUBSTANCES LISTED UNDER CAA SECTION 112(r)

Toxic Substances Listed Under CAA Section 112(r)

CAS No. Chemical Name OSHA

PSM TRI

List

107

- 02

- 8 Acrolein * **

107

- 13

- 1 Acrylonitrile **

814

- 68

- 6 Acrylyl chloride *

107

- 18

- 6 Ally l alcohol **

107

- 11

- 9 Allylamine *

7664

- 41

- 7 Ammonia (anhydrous) * **

7664

- 41

- 7 Ammonia (conc 20% or greater) * **

7784

- 34

- 1 Arsenous trichloride

7784

- 42

- 1 Arsine *

10294

- 34

- 5 Boron trichloride *

7637

- 07

- 2 Boron trifluoride *

353

- 42

- 4 Boron trifluoride compound with methyl ether (1:1)

7726

- 95

- 6 Bromine *

75

- 15

- 0 Carbon disulfide **

7782

- 50

- 5 Chlorine * **

10049

- 04

- 4 Chlorine dioxide * **

67

- 66

- 3 Chloroform **

542

- 88

- 1 Chloromethyl ether * **

107

- 30

- 2 Chlorom ethyl methyl ether * **

4170

- 30

- 3 Crotonaldehyde

123

- 73

- 9 Crotonaldehyde, (E)

-

### A pp. A

- 2

CAS No. Chemical Name OSHA

PSM TRI

List

506

- 77

- 4 Cyanogen chloride *

108

- 91

- 8 Cyclohexylamine

19287

- 45

- 7 Diborane *

75

- 78

- 5 Dimethyldichlorosilane *

57

- 14

- 7 1,1

- Dimethylhydrazine * **

1 06

- 89

- 8 Epichlorohydrin **

107

- 15

- 3 Ethylenediamine

151

- 56

- 4 Ethyleneimine * **

75

- 21

- 8 Ethylene oxide * **

7782

- 41

- 4 Fluorine *

50

- 00

- 0 Formaldehyde (solution) * **

110

- 00

- 9 Furan *

302

- 01

- 2 Hydrazine **

7647

- 01

- 0 Hydrochlori c acid (conc 30% or greater) **

74

- 90

- 8 Hydrocyanic acid * **

7647

- 01

- 0 Hydrogen chloride (anhydrous) * **

7664

- 39

- 3 Hydrogen fluoride/Hydrofluoric acid (conc 50% or

greater) * **

7783

- 07

- 5 Hydrogen selenide *

7783

- 06

- 4 Hydrogen sulfide *

1 3463

- 40

- 6 Iron, pentacarbonyl

- *

78

- 82

- 0 Isobutyronitrile

108

- 23

- 6 Isopropyl chloroformate

126

- 98

- 7 Methacrylonitrile *

74

- 87

- 3 Methyl chloride * **

79

- 22

- 1 Methyl chloroformate *

60

- 34

- 4 Methyl hydrazine * **

### A pp. A

- 3

CAS No. Chemical Name OSHA

PSM TRI

List

624

- 83

- 9 Methy l isocyanate * **

74

- 93

- 1 Methyl mercaptan *

556

- 64

- 9 Methyl thiocyanate

75

- 79

- 6 Methyltrichlorosilane *

13463

- 39

- 3 Nickel carbonyl *

7697

- 37

- 2 Nitric acid (conc 80% or greater) * **

10102

- 43

- 9 Nitric oxide *

8014

- 95

- 7 Oleum (fuming sulfuric acid) *

79

- 21

- 0 Peracetic acid * **

594

- 42

- 3 Perchloromethylmercaptan *

75

- 44

- 5 Phosgene * **

7803

- 51

- 2 Phosphine *

10025

- 87

- 3 Phosphorus oxychloride *

7719

- 12

- 2 Phosphorus trichloride *

110

- 89

- 4 Piperidine

107

- 12

- 0 Pr opionitrile

109

- 61

- 5 Propyl chloroformate

75

- 55

- 8 Propyleneimine **

75

- 56

- 9 Propylene oxide **

7446

- 09

- 5 Sulfur dioxide (anhydrous) *

7783

- 60

- 0 Sulfur tetrafluoride *

7446

- 11

- 9 Sulfur trioxide *

75

- 74

- 1 Tetramethyllead *

5 09

- 14

- 8 Tetranitromethane

7550

- 45

- 0 Titanium tetrachloride **

584

- 84

- 9 Toluene 2,4

- diisocyanate **

### A pp. A

- 4

CAS No. Chemical Name OSHA

PSM TRI

List

91

- 08

- 7 Toluene 2,6

- diisocyanate **

26471

- 62

- 5 Toluene diisocyanate (unspecified isomer) **

75

- 77

- 4 Trimethylchlorosilane

108

- 05

- 4 V inyl acetate monomer **

### A pp. A

- 5

Flammable Substances Listed Under CAA Section 112(r)

CAS No. Chemical Name TRI

List

75

- 07

- 0 Acetaldehyde *

74

- 86

- 2 Acetylene

598

- 73

- 2 Bromotrifluorethylene

106

- 99

- 0 1,3

- Butadiene *

106

- 97

- 8 Butane

106

- 98

- 9 1

- Butene

107

- 01

- 7 2

- Butene

25167

- 67

- 3 Butene

590

- 18

- 1 2

- Butene

- cis

624

- 64

- 6 2

- Butene

- trans

463

- 58

- 1 Carbon oxysulfide *

7791

- 21

- 1 Chlorine monoxide

557

- 98

- 2 2

- Chloropropylene

590

- 21

- 6 1

- Chloropropylene

460

- 19

- 5 Cyanogen

75

- 19

- 4 Cyclopropane

4109

- 96

- 0 Dichlorosilane

75

- 37

- 6 Difluoroethane

124

- 40

- 3 Dimethylamine

463

- 82

- 1 2,2

- Dimethylpropane

74

- 84

- 0 Ethane

107

- 00

- 6 Ethyl acetylene

75

- 04

- 7 Ethylamine

75

- 00

- 3 Ethyl chloride *

74

- 85

- 1 Ethylene *

### A pp. A

- 6

CAS No. Chemical Name TRI

List

60

- 29

- 7 Ethyl ether

75

- 08

- 1 Ethyl mercaptan

109

- 95

- 5 Ethyl nitrite

1333

- 74

- 0 Hydrogen

75

- 28

- 5 Isobutane

78

- 78

- 4 Isopentane

78

- 79

- 5 Isoprene

75

- 31

- 0 Isopropylamine

75

- 29

- 6 Isopropyl chloride

74

- 82

- 8 Methane

74

- 89

- 5 Methylamine

563

- 45

- 1 3

- Methyl

- 1

- butene

563

- 46

- 2 2

- Methyl

- 1

- butene

115

- 10

- 6 Methyl ether

107

- 31

- 3 Methyl formate

115

- 11

- 7 2

- Methylpropene

504

- 60

- 9 1,3

- Pentadiene

109

- 66

- 0 Pentane

109

- 67

- 1 1

- Pent ene

646

- 04

- 8 2

- Pentene, (E)

-

627

- 20

- 3 2

- Pentene, (Z)

-

463

- 49

- 0 Propadiene

74

- 98

- 6 Propane

115

- 07

- 1 Propylene *

74

- 99

- 7 Propyne

7803

- 62

- 5 Silane

### A pp. A

- 7

CAS No. Chemical Name TRI

List

116

- 14

- 3 Tetrafluoroethylene

75

- 76

- 3 Tetramethylsilane

10025

- 78

- 2 Trichlo rosilane

79

- 38

- 9 Trifluorochloroethylene

75

- 50

- 3 Trimethylamine

689

- 97

- 4 Vinyl acetylene

75

- 01

- 4 Vinyl chloride *

109

- 92

- 2 Vinyl ethyl ether

75

- 02

- 5 Vinyl fluoride

75

- 35

- 4 Vinylidene chloride *

75

- 38

- 7 Vinylidene fluorid e

107

- 25

- 5 Vinyl methyl ether

### App.B-1 APPENDIX B.

WAGE RATES AND UNIT COST TABLES

### App. B

- 2

*** DRAFT 2/17/15 *** Table 1

WAGE RATES AND SOURCES

Wages ($) Source Benefit

Load Source Loaded

w/Overhead ($) Loaded w/o Overhead ($)

Chem Engineers

'Low (indirect

supervision ) 28.22 AIChE 0.295 BLS 42.76 36.54

'Medium (supervise

team) 31.9 AIChE 0.295 BLS 48.33 41.31

' High (manage dept) 40.14 AIChE 0.295 BLS 60.82 51.98

' Co. Management 50.48 AIChE 0.295 BLS 76.48 65.37

White Collar

- Other

SIC 49 20.49 BLS 0.314 BLS Tbl16 31.50 26.92

Other Manufacturers

Technical 18.16 BLS 0.318 BLS 28.00 23.93

Professional 24.74 BLS 0.293 BLS 37.43 31.99

Manage ment 26.63 BLS 0.288 BLS 40.13 34.30

Production Worker

Wages

SIC 28 15.72 BLS 0.354 BLS 24.90 21.28

SIC 29 19.55 BLS 0.354 BLS 30.97 26.47

SIC 26 14.27 BLS 0.354 BLS 22.61 19.32

O ther Mfr 14.7 BLS 0.354 BLS Tbl10 23.29 19.90

Public Utility 17.88 BLS 0.338 BLS Tbl16 27.99 23.92

Retail

White collar/sales 10.47 BLS 0.232 BLS Tbl10 15.09 12.90

Blue Collar 7.3 BLS 0. 217 BLS Tbl10 10.39 8.88

Wholesale 13.54 BLS 0.272 BLS Tbl10 20.15 17.22

Clerical 10.47 BLS 0.285 BLS 15.74

State/Local Gvt

Management 22.08 BLS 0.31 BLS Tbl4 33.84 28.92

Techical 23.91 BLS 0.267 BLS Tbl4 35.44 30.29

Clerical 10.59 BLS 0.338 BLS 16.58 14.17

Blue Collar 12.99 BLS 0.354 BLS Tbl4 20.58 17.59

Federal

GS 13 23.5 OPM 0.304 BLS 35.85 30.64

GS 11 16.49 OPM 0.304 Average 25.16 21.50

GS 5 8.99 OPM 0.304 State 13.72 11.72

### App. B

- 3

*** DRAFT 2/17/15 *** BLS , Employer Costs for Employee Compensation, March 1995

AIChE 1994 Salary Survey Report, Chemical Engineeri ng Process, June 1994

Loaded means wages plus benefits; overhead load is 17 percent.

UNIT COST TABLES

Table 2

RULE FAMILIARIZATION

Mgt

(hrs) Tech

(hrs) Total

($)

Chem Mfr EPA 48 88 7,152

Other Mfr EPA 48 88 5,176

Other Mfr Program

2 24 44 2,588

ChemMfr OSHA 4 12 820

Other MFR Osha 4 12 604

Utility EPA 12 22 1,088

Utility OSHA 4 8 384

Public EPA 12 22 1,184

Public OSHA 4 8 418

Retail Model 4 8 156

Retail EPA 12 22 442

Propane User

Model 4 8 456

Propane User EPA 12 22 1,294

Wholesale EPA 12 22 585

Wholesale OSHA 4 8 206

Federal OSHA 4 8 344

Gas Processors 4 0 160

Table 3

ACCIDENT INVESTIGATION AND P RE

- STARTUP REVIEW PROCEDURES

Hours Total

Chemical mfrs 16 $ 976

Large non

- chemical mfrs 16 $ 640

Small medium non

- chemical mfrs 10 $ 400

Utility 10 $ 320

Retail 1 $ 13

Wholesale 2 $ 34

Federal 2 $ 72

Public Model 1 $ 34

User 1 $ 40

Table 4

### App. B

- 4

*** DRAFT 2/17/15 *** ACCIDENT INVESTIGATION

no employ Mgt

(hrs) Tech

(hrs) Prod

(hrs) Review

(hrs) TOTAL

Small non

- chem mfr 10 8 4 4 0.50 $ 678

Small chem mfr 10 10 6 6 0.50 $ 1,173

Medium non

- chem mfr 50 8 4 4 0.50 $ 1,144

Medium chem mfr 50 10 12 6 0.50 $ 1,961

Medium h igh

complexity 50 24 32 16 0.50 $ 4,025

Large non

- chem mfr 150 8 8 8 0.50 $ 2,550

Large chem mfr 150 16 16 16 0.50 $ 4,019

SIC 28 high complexity

FTE <250 150 1 00 80 80 1 $ 15,690

FTE <500 300 100 80 80 1 $ 19,440

FTE <1000 600 100 80 80 1 $ 26,940

FTE <2500 1,200 100 80 80 1 $ 41,940

FTE 2500+ 1,600 100 80 80 1 $ 51,940

Sic2911

Small 50 100 80 80 1 $ 13,970

Medium 150 100 80 80 1 $ 17,070

Large 300 100 80 80 1 $ 21,720

Federal Facitities 10 8 4 4 0.50 $ 511

Cold storage 3 8 4 4 0.50 $ 596

Retailers 10 6 0 2 0.50 $ 141

Utilities large 10 8 4 4 0.50 $ 668

Utilities small 10 8 4 4 0.50 $ 668

POTWs

- 100mgd 10 8 4 4 0.50 $ 597

POTWs

- 25mgd 10 8 4 4 0.50 $ 597

POTWs

- 10mgd 10 6 2 2 0.50 $ 418

POTWs

- 1 mgd 10 6 2 2 0.50 $ 418

DW 100mgd 10 8 4 4 0.50 $ 597

DW 25 mgd 10 8 4 4 0.50 $ 597

DW 10 mgd 10 6 2 2 0.50 $ 418

DW 2mgd 10 6 2 2 0.50 $ 418

Wholesaler s 10 6 0 2 0.50 $ 166

Gas Processors 10 6 2 2 0.50 $ 477

Propane Users 10 6 0 2 0.50 $ 403

### App. B

- 5

*** DRAFT 2/17/15 *** Table 5

MANAGEMENT OF CHANGE

— INITIAL AND ONGOING

INITIAL COSTS

DEVELOP MENT

(hrs) REVIEW

(hrs) Total ($)

Consultant Mgt Tech Prod Mgt Tech Prod

Small non

- chem mfr 16 8 8 4 4 10 3,157

Small chem mfr 16 8 8 4 4 10 3,558

Medium non

- chem mfr 16 8 8 8 4 4 30 3,809

Medium chem mfr 16 8 8 8 4 4 30 4,258

Medium high complexity 32 32 16 8 8 30 5,510

Large non

- chem mfr 24 16 16 16 8 8 50 6,386

lar ge chem mfr 32 32 16 8 8 50 6,010

SIC 28 high complexity

FTE <250 32 32 16 8 16 50 6,394

FTE <500 48 48 24 8 16 50 8,338

FTE <1000 80 80 40 16 32 75 14,107

FTE <2500 120 120 60 16 32 75 18,967

FTE +2500 160 160 80 32 64 100 26,964

Small Refinery 32 32 16 8 8 50 6,406

Medium Refinery 48 48 24 8 16 50 8,782

Large Refinery 120 120 60 16 32 75 19,777

Federal Facilities 16 8 8 4 4 10 2,869

Retailers 1 10 103

Utilites large 24 16 16 16 8 8 50 6,615

Utilities small 16 8 8 4 4 10 3,083

POTWs/DW 16 8 8 4 4 10 3,036

Wholesalers 1 10 107

Gas Processors 0 8 8 4 4 10 1,157

Propane Users 0 1 0 0 0 10 273

MANAGEMENT OF CHANGE

- ONGOING

Tech Basis Haz Rev Update Doc Review Chang es Train Total

Tech Prod Tech Prod

Small non

- chem mfr 1 4 8 2 10 2 10 1,110

Small chem mfr 1 4 8 2 10 2 10 1,381

Medium non

- chem mfr 1 4 8 4 30 4 30 2,190

Medium chem mfr 1 6 8 4 30 4 30 2,695

Medium high complexity 1 16 12 8 30 8 30 3,881

Large non

- chem mfr 1 4 8 8 50 8 50 3,418

large chem mfr 2 16 12 8 50 8 50 4,942

SIC 28 high complexity

FTE <250 2 16 12 8 50 8 50 4,942

FTE <500 2 24 16 12 50 12 50 6,006

FTE <1000 2 32 16 16 75 16 75 8,128

FTE <2500 3 48 20 24 75 24 75 10,125

FTE +2500 4 64 20 30 100 30 100 12,988

Small Refinery 2 16 12 12 30 12 30 4,686

### App. B

- 6

*** DRAFT 2/17/15 *** Medium Refinery 3 24 16 16 50 16 50 7,051

Large Refinery 4 48 20 24 200 24 200 18,836

Federal Fac 1 4 8 2 10 2 10 754

Retailers 0 .5 0.5 0.5 5 0.5 5 116

Utilities 1 4 8 2 10 2 10 1,174

POTWs/DW 1 2 2 2 10 2 10 726

Wholesalers 0.5 0.5 0.5 5 0.5 5 124

Gas Processors 1 4 8 2 10 2 10 1,110

Propane Users 0.5 0.5 0.5 5 0.5 5 309

Table 6

MANAGEMENT

Mgt

(hrs) Total

Retail 13 $ 169

Propane Users 13 $ 520

Wholesale 13 $ 224

Small/Medium Non Chemical Mfr 52 $ 2,080

Small Chemical Mfr 52 $ 3,172

Medium Chemical Mfr 78 $ 4,758

Lrarge Non Chemical Mfr 78 $ 3,120

Small Utility 52 $ 1,664

Large Utility 52 $ 1,664

Small Public 52 $ 1,758

Large Public 52 $ 1,758

Chemical Mfr FTE <1000 104 $ 6,344

Chemical Mfr FTE>1000 156 $ 9,516

Refineries 156 $ 9,516

### App. B

- 7

*** DRAFT 2/17/15 *** TABLE 7

RMP COSTS

# Hours Rate Total Corp Review Rate Total

Program 1 0.25 61 15 76 34

Program 2 # Hours Rate Total Corp Review Rate Total

1 sub Ex Sum 2.00 Retail

Registration 0. 25 13 72 13 75

Accident History 2.00

OCA 0.50 Public

Prevention 0.50 34 187 34 196

ER 0.25

Total 5.50 Mfr

40 220 40 230

2 sub Ex Sum 2.50 Public

Regis tration 0.25 34 247 34 255

Accident History 3.00 Mfr

OCA 0.75 40 290 40 300

Prevention 0.50 Chem Mfr

ER 0.25 61 442 76 461

Total 7.25 Wholesale 125 17 129

3 sub Ex S um 3.00 Utility

Registration 0.25 32 282 32 296

Accident History 4.00 Mfr

OCA 1.00 40 360 40 370

Prevention 0.50 Chem Mfr

ER 0.25 61 549 76 568

Total 9.00

4 sub Ex Sum 3.50 Utility

Registration 0.25 32 344 32 352

Accident History 5.00 Mfr

OCA 1.25 40 430 40 440

Prevention 0.50 Chem Mfr

ER 0.25 61 656 76 675

Total 10.75

### App. B

- 8

*** DRAFT 2/17/15 *** RMP COS TS (continued)

Program 3 # Hours Rate Total Corp Review Rate Total

‘1 sub Reg 0.25 Retail Corp .25

ER 0.25 13 75 13 78

Prevention 0.25 Public

Prevention Process 0.50 34 196 34 204

OCA

- Worst c ase 0.25 Mfr

OCA

- Alternative 0.25 40 230 40 240

Ex Sum 2.00

Accident history 2.00 ChemCorp .5 Leg al 1 hr

5.75 61 351 76 489

2 sub Reg/ER/Prevention 0.75 Public

Prevention

- Proc 1.00 32 315 34 323

OCA 1.00 Wholesale

ExSum 2.50 17 159 17 163

Accident history 4.00

Total 9.25 Chem 564 76 702

4 sub Reg/ER/Prevention 0.75

Prev ention

- Proc 2.00

OCA 2.00

ExSum 3.00

Accident history 8.00

Total 15.75 961 76 1,099

6 sub Reg/ER/Prevention 0.75

Prevention

- Proc 3.00

OCA 3.00

ExSum 4.00

Accident history 12.00 corp 1 legal 2

Total 22.75 1,388 76 1,664

10 sub/12 proc Reg/ER/Prevention 0.75

Prevention

- Proc 6.00

OCA 5.00

Ex Sum 8.00

Accident history 20.00

Total 39.75 2,425 76 2,701

10 sub/30 proc Reg/ER/Prevention 0.75

Prevention

- Proc 15.00

OCA 5.00

ExSum 12.00

Acci dent history 20.00 1hr corp 4hr legal

Total 52.75 3,218 76 3,694

4 sub/25 proc Reg/ER/Prevention 0.75

Prevention

- Proc 12.50

### App. B

- 9

*** DRAFT 2/17/15 ***

OCA 2.00

ExSum 3.00

Accident history 8.00

Total 26.25 1,601 76 2,077

Table 8

OFFSITE CONSEQUENCE ANALYSIS

# Staff Worst

(hrs) Alternative

(hrs) Mappin

g

(hrs) Population/Env.

(hrs) Total

($)

MANUFACTURERS

small non

- chemical 2 2 2 0.50 4 $ 487

small chemical 2 2 2 0.50 4 $ 704

medium non

- chemical 2 2 2 0.50 4 $ 487

medium chemical 2 3 3 0.50 4 $ 948

medium high complexity 2 3 3 0.50 4 $ 948

l arge non

- chemical 2 2 2 0.50 4 $ 487

large chemical 2 3 3 0.50 4 $ 948

high complexiity SIC 28

FTE <250 2 4 4 0.50 4 $ 1,1 92

FTE <500 2 4 4 0.50 4 $ 1,192

FTE <1000 2 5 4 0.50 4 $ 1,314

FTE <2500 2 6 4 0.50 4 $ 1,436

FTE 2500+ 3 6 4 0.50 4 $ 2,046

Sic2911

Small 2 4 4 0.50 4 $ 1,192

Medium 2 4 4 0.50 4 $ 1,192

Large 3 4 4 0.50 4 $ 1,680

NON

- MANUFACTURERS

Federal Facilities 2 2 2 0.50 4 $ 401

Cold storage 2 2 2 0.50 4 $ 487

Retailers 2 2 2 0.50 4 $ 163

Utilities large 2 2 2 0.50 4 $ 400

Utilities small 2 2 2 0.50 4 $ 400

POTWs 2 2 2 0.50 4 $ 430

Drinking water 2 2 2 0.50 4 $ 430

Wholesalers 2 2 2 0.50 4 $ 215

Gas Utility 2 2 2 0.50 4 $ 400

Propane Users 2 2 2 0.50 4 $ 487

Gas Processors 2 2 0 0.50 1 $ 112

### App. B

- 10

*** DRAFT 2/17/15 *** Table 9

PROCESS SAFETY INFORMATION

Block Flow

(hrs) Parameters

(hrs) Chemistry

(hrs) P&IDs # P&IDs

(hrs) Other Doc

(hrs) Total

($) Program 2

($)

MAN UFACTURERS

small non chemical 1 1 0 1 16 8 962

small chemical 2 2 1 4 16 8 3,696

medium non chemical 1 1 0 1 16 8 962

medium chemical 2 2 1 4 24 8 5,232

384

medium high complexity 3 3 1 6 24 12 7,824

large non chemical 1 1 0 1 16 12 1,110

444

large chemical 3 3 1 6 24 16 8,016

768

SIC 28 High Complexity

FTE <250 3 3 1 6 24 16 8,016

FTE <500 3 3 1 10 24 16 12,624

FTE <1000 4 4 1 30 24 24 36, 144

FTE <2500 4 4 1 60 24 24 70,704

FTE +2500 4 4 1 80 24 24 93,744

Small Refinery 3 3 1 30 24 16 35,664

Medium Refinery 3 3 1 50 24 24 59,088

Larg e Refinery 3 3 1 80 24 24 93,648

NON MANUFACTURERS

Federal Facilities 1 1 0 1 16 8 650

200

Retailers 1 1 0 1 0 2 52

26

Utilities large 1 1 0 1 8 8 576

256

Utilities small 1 1 0 1 8 8 576

POTWs/DW >25 mgd 1 1 0 1 8 8 637

283

POTWs/DW <25 mgd 1 1 0 1 8 4 496

142

Wholesalers 0 0.5 0 0 0 4 77

69

Gas Processors 1 1 0 1 16 8 962

296

Propane Users 1 1 0 1 0 2 148 74

### App. B

- 11

*** DRAFT 2/17/15 *** Table 10

PROCESS HAZARD ANALYSIS/HAZARD REVIEW

Technique Hours Total ($)

Mgt Tech Prod Consultant Report Training

Retailers Model 1 1 4 1 87

Propane Users Model 1 1 4 1 263

POTW/DW <25 mgd Model 2 2 4 2 312

POTW/DW > 25 mgd Checklist 4 4 4 4 2 420

Small non

- chem mfr What If 8 8 8 24 2,256

Medium non

- chem mfr What If 8 8 8 8 24 2,442

Large non

- chem mfr Checklist 4 4 4 4 494

Large non

- chem mf r What If 16 16 16 16 40 4,378

POTW/DW >25 mgd What If 16 16 16 16 40 4,248

Utilities What If 24 24 24 60 6,192

Utilities Checklist 4 4 4 4 2 1,012

Wholesalers Checklist 4 4 4 4 242

Gas Processors What If 16 16 16 40 3,200

Federal What If 16 16 16 16 40 4,059

Small chemical mfr HAZOP 160 40 80 19,640

Medium chemical mfr HAZOP 240 60 120 29,460

Medium chemical mfr What If 16 16 16 8 2,632

Mediu m high complexity HAZOP 320 80 160 39,280

Large chemical mfr What If 16 16 16 8 2,632

Large chemical mfr HAZOP 320 160 29,280

SIC 28 High Complexity

FTE < 250 HAZOP 400 200 36,600

FTE < 500 HAZOP 560 200 46,360

FTE < 1000 HAZOP 720 200 56,120

FTE <2500 HAZOP 800 250 64,050

FTE >2500 HAZOP 960 250 73,810

Small refinery HAZOP 400 200 36,600

Medium refinery HAZOP 800 250 64,050

Large Refinery HAZOP 960 25 0 73,810

### App. B

- 12

*** DRAFT 2/17/15 *** Table 11

OPERATING PROCEDURES

Development

(hrs) Review

(hrs) Total ($) Program 2

Total ($)

Mgt Tech Prod Mgt Tech Prod

Small non

- chem mfr 4 4 4 10 622

Small chem mfr 8 8 1 4 10 1,026

Medium non

- chem mfr 4 4 4 30 1,088

Medium chemical mfr 8 8 1 4 30 1,526

Medium high complexity 16 16 1 4 30 2,171

Large non chem ical 8 8 4 50 1,795 630

Large chemical 8 48 48 4 20 50 5,714 5,196

SIC 28 High Complexity

FTE <250 32 64 64 4 20 50 7,614

FTE < 500 40 80 80 8 40 50 11,206

FTE <1000 60 120 120 8 80 75 17,403

FTE <2500 80 160 160 8 120 75 23,463

FTE +2500 100 200 200 8 160 100 30,148

Small Refinery 40 80 80 8 40 50 16,378

Medium Refinery 60 120 120 8 80 75 18,573

Large Refinery 100 200 200 8 160 100 30,728

Federal Facilities 4 8 4 2 4 20 845 571

Retailers 4 5 97 52

Utilities large 8 8 4 10 951 636

Utilities small 4 4 4 10 697 382

POTWs/DW >25 mgd 4 4 4 10 572 366

POTWs/DW <25 mgd 4 4 4 10 572

366

Wholesalers 4 10 159

69

Gas Processors 8 8 1 4 10 1,087

Propane Users 4 5 277 160

### App. B

- 13

*** DRAFT 2/17/15 *** Table 12

TRAINING/REFRESHER TRAINING

TRAINING REFRESHER

no employ hr/emply crs dvlp +teach mgt rvw tota l hr/employee Total

Small non

- chem mfr 10 4 20 $ 1,672 2 $ 540

Small chem mfr 10 8 40 $ 3,920 4 $ 1,192

Medium non

- chem mfr 30 4 20 $ 3,536 2 $ 1,472

Medium chem mfr 30 8 40 $ 7,920 4 $ 3,192

Medium high complexity 30 24 120 $ 23,760 8 $ 6,384

Large non

- chem mfr 50 8 40 $ 10,800 3 $ 3,606

Large chem mfr 50 24 120 $ 35,760 8 $ 10,384

SIC 28 high comp exity 0 $

- $

-

FTE <250 50 32 160 4 $ 47,924 12 $ 15,576

FTE <500 50 32 160 4 $ 47,924 12 $ 15,576

FTE <1000 75 32 160 4 $ 67,924 12 $ 23,076

FTE <2500 75 40 200 4 $ 84,844 16 $ 30,768

FTE 2500+ 100 40 200 4 $ 109,844 16 $ 40,768

Sic2911 0 $

- $

-

Small 30 40 200 4 $ 47,044 16 $ 15,648

Medium 50 40 200 4 $ 71,844 16 $ 25,568

Large 200 40 200 4 $ 257,844 16 $ 99,968

Federal Facilities 10 4 20 $ 1,048 1 $ 162

Cold storage 2 4 20 $ 926 1 $ 98

Retailers 5 2 5 $ 155 1 $ 58

Utilities large 10 8 40 $ 3,800 3 $ 1,041

Utilities small 10 8 20 $ 3,160 1 $ 347

POTWs

- 100mgd 10 8 40 $ 3,064 3 $ 724

POTWs

- 25mgd 10 8 40 $ 3,064 3 $ 724

POTWs

- 10mgd 5 4 20 $ 1,120 3 $ 415

POTWs

- 1 mgd 5 4 20 $ 1,120 1 $ 138

DW 100mgd 10 8 40 $ 3,064 3 $ 724

DW 25 mgd 10 8 40 $ 3,064 3 $ 724

DW 10 mgd 5 4 20 $ 1,120 3 $ 415

DW 2mgd 5 4 20 $ 1,120 1 $ 138

Wholesalers 10 2 10 $ 352 1 $ 107

Gas Processors 10 8 40 $ 3,344 3 $ 810

Propane Users 10 2 5 $ 651 1 $ 270

Gas Utilities 10 $

- $

-

### App. B

- 14

*** DRAFT 2/17/15 *** Table 13

MAINTENANCE

— INITIAL & ONGOI NG

DEVELOPMENT TRAINING MAINTENANCE TOTAL ONGOING

Mgt

(hrs) Tech

(hrs) Prod

(hrs) Hr/Empy Hrs/Yr

Small non

- chem mfr 1 4 2 4 52 $ 2,970 $ 1,212

Small chem mfr 1 6 3 8 104 $ 6,560 $ 2,600

Medium non

- chem mfr 1 4 2 4 52 $ 2,970 $ 1,212

Medium chem mfr 2 6 3 8 104 $ 6,621 $ 2,600

Medium high complexity 3 12 6 16 416 $ 18,381 $ 10,400

large non

- chemical mfr 1 4 2 4 52 $ 2,970 $ 1,212

Large chemical mfr 4 16 8 16 416 $ 18,684 $ 10,400

SIC 28 high complexity

FTE <250 6 24 16 16 1,040 $ 34,990 $ 26,000

FTE <500 8 32 24 24 1,300 $ 45,732 $ 32,500

FTE <1000 12 40 32 24 1,560 $ 53,060 $ 39,000

FTE <2500 16 48 40 32 2,080 $ 70,424 $ 52,000

FTE 2500+ 24 64 48 32 2,080 $ 71,880 $ 52,000

Sic2911

Small 24 64 48 32 2,080 $ 86,568 $ 64,480

Medium 24 64 48 32 2,080 $ 86,568 $ 64,480

Large 24 64 48 32 2,080 $ 86,568 $ 64,480

Federal Facilities 1 4 2 1 52 $ 1,113 $ 712

Cold srorage 1 52 $ 1,593 $ 1,212

Utilities large 1 4 2 1 104 $ 4,000 $ 3,328

Utilities small 1 4 2 1 104 $ 4,000 $ 3,328

POTWs

- 100mgd 1 4 2 1 104 $ 4,423 $ 3,682

POTWs

- 25mgd 1 4 2 1 104 $ 4,423 $ 3,682

POTWs

- 10mgd 1 4 2 1 52 $ 2,583 $ 1,841

POTWs

- 1 mgd 1 4 2 1 52 $ 2,583 $ 1,841

DW 100mgd 1 4 2 1 104 $ 4,423 $ 3,682

DW 25 mgd 1 4 2 1 104 $ 4,423 $ 3,682

DW 10 mgd 1 4 2 1 52 $ 2,583 $ 1,841

DW 2mgd 1 4 2 1 52 $ 2,583 $ 1,841

Retailers 1 26 $ 247 $ 234

Users 1 26 $ 646 $ 606

Gas Processors 1 4 2 1 52 $ 2,704 $ 1,924

### App. B

- 15

*** DRAFT 2/17/15 *** Table 14

COMPLIANCE AUDITS

Corp/Co

ns

(hrs) Mgt

(hrs) Report

(hrs) Response

(hrs) Total

Small non

- chem mfr 8 8 8 4 $ 1,800

Small chem mfr 8 8 8 8 $ 2,464

Medium non

- chem mfr 8 8 8 4 $ 1,800

Medium chem mfr 8 8 8 8 $ 2,464

Medium high complexity 16 16 16 8 $ 3,440

Large non

- chem mfr 8 8 8 4 $ 1,800

Large chem mfr 24 48 24 16 $ 7,204

SIC 28 High complexity

FTE <250 24 48 24 16 $ 7,204

FTE <500 64 64 40 24 $ 12,704

FTE <1000 80 80 40 24 $ 14,904

FTE <2500 80 120 40 24 $ 17,344

FTE +2500 120 120 40 24 $ 20,404

Small Refinery 2 4 48 24 16 $ 7,204

Medium Refinery 64 64 40 24 $ 12,704

Large Refinery 80 120 40 24 $ 17,344

Federal Faciilities 8 8 8 4 $ 1,720

Retailers 4 2 1 $ 91

Utilities large 8 8 8 4 $ 1,640

Utilities small 8 4 2 $ 448

POTWs/DW >25 mgd 8 8 4 4 $ 1,541

POTWs/DW <25 mgd 8 4 1 $ 439

Wholesalers 2 2 1 $ 86

Gas Processors 8 4 1 $ 520

Propane Users 0 4 2 1 $ 280

### App. C-1 APPENDIX C.

BASIS OF UNIT COST AND COMPLIANCE ESTIMATES

### App. C

- 2

*** DRAFT 2/17/15 *** 

### BASIS OF UNIT COST ESTIMATES

ELEMENT BASIS AND COMMENTS

Rule Familiari zation TRI estimates as a baseline. TRI ICRs estimate that sources spend 34 hours on rule

familiarization. Because of the complexity of this rule, in comparison with TRI,

sources that must comply with Program 3 and that are not covered by OSHA PSM

were a ssumed to spend 4 times as long on this rule as on TRI because of the greater

complexity of this rule. Program 2 manufacturing sources were assumed to spend half

the time that Program 3 sources spend (or twice TRI). Manufacturers covered by

OSHA were ass umed to spend 16 hours based on professional judgment of the time

needed to read and understand the OCA and RMP requirements; they are already

familiar with PSM. All manufacturers are either covered by OSHA or are in Program

2. The full costs, therefore, are never applied.

Nonmanufacturers in Program 2 without models were assumed to spend 34 hours (the

same as TRI). Nonmanufacturing sources with models were assumed to spend 12

hours, based on professional judgment. Depending on the models and their

com plexity, this estimate may be high or low.

Accident Investigation

and Pre

- Startup Review

Procedures Professional judgment; reviewed by Delaware.

These costs reflect only the time to develop the procedures. No comments were

received on these costs.

Accid ent Investigations Professional judgment; reviewed by Delaware.

One utility stated that an investigation would cost $3,500 to $7,400. The Texas

Chemical Council estimated an investigation would require 4 to 12 people full time for

several days, plus a wee k to write and review the report, or between 170 and 420

hours. The EIA estimated 260 hours of professional time for larger chemical

companies. The EIA also includes the cost of reviewing the results with employees,

as required by the rule.

The EIA reduc ed the level of effort of other sources to reflect the less complex

processes.

Management of

Change Professional judgment and comments; reviewed by Delaware.

A commenter and a consultant indicated that it could cost $30,000 to develop

procedures for a l arge source. Estimates were developed to approach this cost for high

complexity sources and backed down for smaller, simpler sources. These are the costs

for developing procedures only.

Estimates for actual implementation of the procedures based on profe ssional

judgment.

Management Professional judgment; reviewed by Delaware.

This element is not related to the management system requirement. It covers the time

needed to oversee the implementation of the program, to ensure that procedures are

being follow ed and that documents are being maintained. Commenters estimated that

the costs would be $1,280 for a medium refinery to $15,000 for a utility (Southern Co.

Services) or chemical companies. The utility estimated it would require one person,

quarter time. The EIA estimates are between these numbers. This activity is not

technically required by the rule, but is a necessary adjunct.

RMP Based on professional judgment of engineering consultants who reviewed the mock

RMP and estimated the time needed to com plete the form.

Offsite Consequence

Analysis Professional judgment; reviewed by Delaware state RMP staff.

These estimates assume that sources will use EPA's guidance or models. Therefore,

no costs are included for dispersion modeling. The estimates for sources with multiple

### App. C

- 3

*** DRAFT 2/17/15 *** ELEMENT BASIS AND COMMENTS

substances are somewhat high because each unit cost includes hours for identifying

populations and environmental receptors; in reality, sources would probably do this

once for environmental receptors.

The time for defining and analyzi ng scenarios is assumed to be greater for complex

sources where more screening analyses will be needed.

PSI Professional judgment; reviewed by Delaware.

Commenters provided estimates of $12,500 for a medium utility and $250,000/unit for

a refinery (it is not clear what a unit is).

Bridges reported costs/P&ID as ranging from $250 to $3,000. (Bridges, William.

"The costs and benefits process safety management. JBF Associates) The EIA costs

for similar sources range from $590 to $2,450/P&ID.

PHAs Based on time estimates from a study of PHA techniques. Rich, Gerald A., "Air

Toxics: Prevention and Mitigation," Table 5

— Estimated lower bound costs for

various hazard identification and evaluation procedures for one process unit, Pollution

Engineering , June 1 989, pp. 66

- 89.

The analysis applied the high end costs to the largest, most complex sources and

backed the numbers down from there for smaller sources based on professional

judgment. Rich estimated HAZOPs would require 320 to 960 hours. The EIA applied

these numbers to large chemical companies and refineries and reduced the low

- end

number for smaller chemical companies. Rich estimated What Ifs would require 72 to

120 hours. The EIA used 56 hours because the processes are not in the chemical

industry an d, therefore, should require less time. Also these What Ifs are not PHAs

under Program 3, but Hazard Reviews under Program 2.

The EIA PHA costs range from $19,600 to $73,000. Bridges' data provides a range of

costs from $5,000 to $300,000 per PHA, with m ost between $16,000 and $75,000.

The Hazard Review costs (models, checklists) were based on professional judgment

and reviewed by Delaware.

SOPs Professional judgment; reviewed by Delaware.

Commenters estimates ranged from $3,900 to $7,700, but were for n on

- manufacturing

sources. NJ provided estimates for medium chemical source of $9,600 and a large (<250 FTE)

chemical company of $12,000. EIA estimates were $2,200 and $7,600 respectively.

Program 2 estimates were based on Program 3 estimates, but reduced based a lesser

level of review. Generally Program 2 SOPs have less material.

Training Professional judgment; reviewed by Delaware.

Course development was assumed to take four hours per every hour of training, based

on a standard training rule of thumb (a lso used by OSHA in its PSM RIA).

Course length was based on knowledge of industry training practices drawn from

reports under EPCRA 305(b) surveys. The largest sources reported providing week

long training. This figure was reduced for smaller and less c omplex sources.

Utility and large public sources estimates are consistent with information provided by

a large utility (Southern Co. Services), which reported providing 8 hours of training

for their systems.

NJ estimate for a medium chemical source is cons iderably lower, $6,000 versus

$7,900 or $24,000 depending on which SIC code the source was in.

Maintenance Professional judgment; reviewed by Delaware.

On

- going costs were based on the number of hours a year maintenance will be

performed. Estimates are c onsistent with data submitted by the Texas Chemical

Council, which indicated that sources spent between 1,300 and 1,900 hours per year

per process on certified valve service alone. The EIA estimated that the larger

### App. C

- 4

*** DRAFT 2/17/15 *** ELEMENT BASIS AND COMMENTS

chemical companies and refineries would spend 2,080 hours/process to reflect the

variety of maintenance needed for each process.

NJ supported EPA's estimates.

Compliance Audits Professional judgment; reviewed by Delaware.

The only comments on these costs were for gas fields (no longer covered), estimates

range from $200 to $2,500, and a utility ($2,600).

### App. C

- 5

*** DRAFT 2/17/15 *** BASIS OF COMPLIANCE ESTIMATES

ELEMENT BASIS/COMMENTS

Pre

- Startup Review For smaller firms and non

- manufacturers, based on professional judgment that firms

will not have written pr ocedures.

Based on OSHA PSM RIA for 25 percent for large companies and chemical

companies outside of CMA members; the 65 percent for SIC codes 281, 282, 286, 20

- 99 FTEs represents a recognition that some of these companies are CMA members.

All other chemic al companies are assumed to be CMA members or refineries and,

therefore, in compliance with industry standards that include this element.

Management of

Change For smaller firms and non

- manufacturers, based on professional judgment that firms

will not have written procedures. OSHA used 0 percent for some sectors.

For non CMA chemical companies with 20 to 99 FTEs, 10 percent is the rounded

value assigned by OSHA (OSHA used 12 and 15 percent for these firms). Note that

none of these sources actually have to do this because they are OSHA PSM or are

Program 2.

The 65 percent for SIC codes 281, 282, 286, 20

- 99 FTEs represents a recognition that

some of these companies are CMA members.

All other chemical companies are assumed to be CMA members or refineries and,

therefore, in compliance with industry standards that include this element.

Accident Investigation For manufacturers (other than CMA firms), based on a study of paper industry

conducted by JBF Associates, which found that 36 percent of smaller companies and

60 percent of larger ones had such procedures. CMA members and refineries are

assumed to be in compliance with industry standards.

Utilities and larger public sources are assumed to have the same characteristics as

small manufacturers. For other non

- manufacturers, based on professional judgment

that they will not have formal procedures.

Management For smaller firms and non

- manufacturers, based on professional judgment that firms

will not such systems and that only 40 percent of large manufacturers wi ll.

The 65 percent for SIC codes 281, 282, 286, 20

- 99 FTEs represents a recognition that

some of these companies are CMA members.

All other chemical companies are assumed to be CMA members or refineries and,

therefore, in compliance with industry standar ds that include this element.

Training The rule allows sources to certify that current employees are competent. The EIA

assumes that all sources will so certify. The 10 percent rate reflects the need to train

newly hired workers, with an assumed 10 perc ent turnover.

Refresher Training For non

- CMA/refinery manufacturers and utilities, based on JBF study of paper

industry. Smaller CMA companies are assumed to have the same rate as large non

CMA chemical companies. Large CMA firms and refineries were ass umed to be in

compliance with industry standards.

For other non

- manufacturers, based on professional judgment that they will not have

formal refresher training as required.

PHA Based on professional judgment that smaller firms will not have conducted form al

PHAs. (Note that all of these are covered by PSM so the compliance factors are not

relevant.) The 60 percent for smaller chemical and large non

- CMA chemical

companies based on OSHA RIA. Large CMA firms and refineries were assumed to be

in compliance with industry standards.

PSI Based on professional judgment that non

- chemical firms will not have up

- to

- date PSI

and that only 20 percent to 40 percent of chemical firms and utilities will. Large CMA

firms and refineries were assumed to be in compliance with industry standards.

### App. C

- 6

*** DRAFT 2/17/15 *** ELEMENT BASIS/COMMENTS

SOPs Because the PSM rule includes elements not in standard SOPs, no Program 3 sources

were assumed to be in compliance.

Based on professional judgment that 40 percent of utilities, larger public sources, and

federal sources wou ld have procedures that meet the Program 2 requirements.

(Consistent with OSHA estimate for utilities.)

Maintenance Based on JBF study for non

- CMA manufacturers, utilities, large public sources,

federal sources. Large CMA firms and refineries were assum ed to be in compliance

with industry standards.

Safety Audit Based on JBF study for non

- CMA manufacturers. Large CMA firms and refineries

were assumed to be in compliance with industry standards.

JBF study was used where possible because it consid ered actual compliance rates and because its findings tended to

be lowered than OSHA estimates. In general, the analysis assigned the most conservative number.

Note that many of these factors are never applied because no sources are subject to the requir ements. For example,

no manufacturers are subject to pre

- startup, accident investigation, management of change because all sources

subject to Program 3 are already OSHA PSM sources. No non

- chemical manufacturers or small and medium,

moderately complex ch emical companies have to comply with PSI, PHA, SOPs, training, refresher training,

maintenance, or audits because they have no non

- PSM processes.

### D-1 

### APPENDIX D.

COMPARISON OF ARIP AND AHE DATABASES

APPENDICES D & E BELOW WERE PULLED FROM THE END OF THE CHAPTER 6 FILE.

THEY SHOULD BE COMPARED WITH APPENDICES D & E PDF FILES. I AM NOT SURE

THESE ARE THE FINAL VERSIONS. BD

### D

- 2

AHE was compared to ARIP in six areas: numbers of events with injuries; total injuries; numbers

of evacuations; total persons evacua ted; numbers of events with deaths; and total deaths. For

comparability, ARIP cases were scaled up by a factor of two to reflect the fact that only half of the ARIP

questionnaires that were sent out (in response to ERNS reports that triggered one or more ARIP criteria)

were returned. In addition, the AHE values by five, and the ARIP values by 6.8, in order to place both

measures on an annual basis. Only the List chemical reports from ARIP (both OSHA and non

- OSHA)

were used; to the extent that there are a dditional injuries etc. that are not included, this will distort the

comparison.

AHE reports were adjusted to count only toxic releases from fixed sources, using the percentages

presented in part A of the appendix to the AHE final report. It was assumed that the percentage of

persons affected by toxicity (as opposed to fire) was equal to the percentage of events caused by toxicity.

Injury Events

AHE: 606 injury events at fixed sources per 5 years, or 121 events per year; 71.9 percent of injury

events at fixed sources were toxicity related; 0.719 * 121 = 87 events per year from toxics at

fixed sources.

ARIP: 404 reported injury events per 6.8 years, or about 60 reported events per year; after correcting for

underreporting, there are about 120 events pe r year. This is comparable to the 87 events in AHE

Injuries

AHE: 8,503 injuries events at fixed sources per 5 years, or about 1,700 injuries per year; 71.9 percent of

injury events at fixed sources were toxicity related; 0.719 * 1,700 = 1,220 injuries per year from

toxics at fixed sources (assuming that the same percentage applies to numbers of injured)

ARIP: 4,096 reported injuries per 6.8 years, or about 600 reported injuries per year; after correcting for

underreporting, there are about 1,200 inju ries per year. This is very close to the 1,220 injuries per

year in AHE.

Evacuations

AHE: There were 253 evacuation events for which numbers of persons evacuated was reported at fixed

sources per five years, or about 50 per year; 62.1 percent of these were related to toxicity; 0.621 *

50 = 31 evacuations per year as a result of toxicity. Fewer than half of all evacuation reports

included the number of persons evacuated

-- 405 out of 829. Adjusting for this degree of

undercounting by multiplying 31 ti mes 829/405 yields 63 evacuations per year.

ARIP: 257 evacuation events per 6.8 years, or about 38 events per year; adjusting for undercounting

gives 38 * 2 or 76 evacuations per year. This rate is comparable to the rate shown in AHE if it is

adjusted fo r the reports that did not include numbers evacuated.

### D

- 3

Persons Evacuated

AHE: There were 235,241 persons reported evacuated near fixed sources per five years, or about 47,000

per year; 62.1 percent of the events were related to toxicity; 0.621 * 47,000 = 29,200 evacuated

per year as a result of toxicity. As noted, fewer than half of all evacuation reports included the

number of persons evacuated; these reports are likely to be smaller than the average event for

which a magnitude was provided; I suggest m ultiplying the 29,200 evacuees per year by 1.5 to

correct (roughly) for this undercounting. Multiplying 29,200 by 1.5 yields almost 44,000 persons

evacuated per year.

ARIP: 38,593 evacuated per 6.8 years, or 5,675 per year; adjusting for undercounting gi ves 5,675 * 2 or

11,351 evacuated per year. This rate is only a quarter of the rate shown in AHE.

Fatal Events

AHE: There were 98 events involving deaths at fixed sources in 5 years, or about 20 events per year.

Just under 40 percent of these events i nvolved toxicity; 0.4 * 20 = 8 death events per year.

ARIP: ARIP contains only 6 fatal events in 6.8 years, or under one per year; adjusting for undercounting

yields 2 fatal events per year. This is only a quarter of the reported events in AHE.

Numbers of Deaths

AHE: There were 259 deaths at fixed sources in 5 years, or about 52 deaths per year. Just under 40

percent of the fatal events involved toxicity; 0.4 * 52 = 20 deaths per year.

ARIP: ARIP contains only 8 fatalities in 6.8 years, or just over o ne per year; adjusting for undercounting

yields about 2 deaths per year. This is an order of magnitude lower than the reported events in

AHE.

Conclusions

ARIP is roughly comparable to AHE (once the rate of under

- responses to the questionnaires is

allow ed for) in injuries, injury events, and evacuation events. In terms of numbers of persons evacuated,

numbers of fatal accidents, and numbers of persons killed, however, ARIP appears to seriously

undercount in comparison to AHE. EPA assumed, therefore, fo r the purposes of the benefits analysis,

that one person is killed for every sixty injuries (since, in AHE, there are 20 deaths per 1,220 injuries). In

addition, the number of persons reported in ARIP to have been evacuated in each evacuation event has

be en scaled up by a factor of four to match the rate seen in AHE.1 

### E-1 

### APPENDIX E.

.

DERIVATION OF UNIT DAMAGE ESTIMATES

### E

- 2

This appendix shows how the unit damage estimates used in Chapter 6 were developed.

Types of Damages: Economic Consequences

Impacts on Sourc e Operations

One of the most costly effects of any accidental release of a toxic chemical is the disruption of

manufacturing operations during and after the release. In most cases, the process line at which a

significant chemical release occurred will h ave to be shut down to identify and stop the release. In many

cases, this also will force other process lines to shut down either because they are located close to the

release area, they depend on inputs from the process line at which the release occurred , or other inputs

into the process line must be halted in order to identify or correct the release. In some cases, the entire

source may be shut down while the release is addressed.

Indeed, it is not uncommon for the shutdown of process lines and other source operations to

extend well beyond the time period of the release itself. Investigating the cause of the release may delay

start

- up, because until the cause is identified with certainty, the risks of restarting operations may be

extremely high. It c an take several days to restart operations after a temporary shutdown. Many

significant chemical releases are caused by equipment failure, or other problems that must be corrected.

Thus, several chemical releases will result in at least a partial shutdow n of source operations lasting

substantially longer than the duration of the release; this is likely to be even more true for significant

chemical releases because they are more likely to result in injuries, fire or explosion, or environmental

damage.

Be cause source operations are likely to be disrupted as the immediate result of any significant

release of toxic chemicals, it is important to estimate the magnitude of this disruption. For purposes of

this analysis, a rough estimate of the average value of production lost during source shut downs during

and after a significant chemical release was developed based on the average duration of releases recorded

on ARIP questionnaires (approximately 61⁄2 hours) and on the average annual gross national product

(GNP ) of sources in each industry affected by the list options. The average value of production lost as a

result of accidental chemical releases was estimated to be $8,680 per toxic release.

Because most releases of propane occur as a result of the faulty transfer of propane between

storage containers, it is likely that source operations will be disrupted far less frequently as a result of

propane releases than as a result of releases of toxic chemicals. On the other hand, a propane release that

leads to a vapor cloud explosion is likely to cause severe damage to the source, with an average cost

substantially in excess of $8,680 per explosion. Unfortunately, no data were available with which to

estimate the effects of propane releases on source operations. To reflect the reduced likelihood of

disruption associated with propane releases, as well as the increased cost associated with vapor cloud

explosions, this analysis made the simplifying assumption that one

- tenth of all propane releases would

result in d isruption, costing as much on average as source down time associated with toxic chemical

releases.

It is important to note that the derived value of $8,680 per incident for lost production is likely to

significantly underestimate true losses attributable to plant shutdowns. The primary reason for this likely

### E

- 3

underestimation is that few data are available on the average time a source, or part of a source, will cease

operating because of a significant chemical release; ARIP data do indicate the duration of the release but

not source shutdown time. This analysis made the conservative assumption, therefore, that sources would

lose production during the release event and would start

- up operations immediately following the

cessation of the release. Although s hutdown of the affected process line and of related or nearby process

lines may last significantly longer than the duration of the release itself, exactly how much longer is

unknown. In addition, lost production at an affected source was estimated by mult iplying the average

annual GNP by the ratio of the release time over the total number of minutes in a year. This approach

assumed that the affected source operated continuously; however, others may have operated for as little as

one

- fourth of the total nu mber of minutes during the year. Because accidental releases are more likely to

occur while process lines are in operation, and because repairs and other corrective actions are more

likely to occur when process lines are shut down, the analysis may tend t o underestimate GNP lost in

those sources that did not operate continuously. However, if at times only the affected process line is shut

down while other process lines continue to operate undisturbed, this analysis may have overestimated lost

GNP per rele ase.

Litigation

Because responsible parties are liable for response costs and remediation of environmental

damages resulting from releases of hazardous substances covered under CERCLA, parties can be

expected to litigate in many cases to avoid or minimi ze payments for which they are responsible.

Although these payments represent merely financial transfers from one party to another, the resources

devoted to the litigation itself represent a real resource cost to society. EPA estimates that it has litiga ted

approximately 20 percent of all removal actions conducted each year by the federal government.

EPA also has estimated that the average duration of litigation associated with removal and

remedial activities is approximately 142 days and that the avera ge cost of such litigation is approximately

$28,000 for the first year. Based on these estimates and an assumption of 220 working days per year,

EPA's average cost of litigation for a typical removal action was estimated at approximately $18,000 per

actio n.

Because removal actions generally involve just one responsible private party, private sector time

expenditures for a typical litigation can be assumed to be approximately equal to EPA time expenditure.

Based on a 1987 study conducted by the General A ccounting Office, private sector attorneys in

comparable positions are paid slightly more than three times as much, on average, as EPA Superfund

attorneys. Using this ratio, EPA has estimated private sector litigation costs at approximately $56,000 per

ac tion. Thus the total real cost to society of litigation associated with removal actions was estimated at

approximately $80,292 per action, updated to 1995 dollars.

Environmental Damages

Soil Contamination. Although there are several possible ways with which to estimate a dollar

equivalent cost of soil contamination, perhaps the most straightforward method is to estimate the

expenditure required to remediate the average incident of soil contamination. Unfortunately, remediation

costs depend on a wide v ariety of factors, including the quantity of soil contaminated, the topography and

soil characteristics of the site, the particular remediation technology selected, and the distance that

### E

- 4

contaminated soil or treated waste must be transported for treatment or disposal. While the ARIP

questionnaires do not include detailed information on these or other relevant parameters, they do provide

some information regarding the relative frequency with which particular technologies are used in the

treatment and dispos al of contaminated soil.

In addition to this ARIP information, estimates of the per

- unit cost of different treatment and

disposal technologies are presented in a text by Gaynor W. Dawson and Basil W. Mercer entitled

Hazardous Waste Management . Using the se cost estimates, several simplifying assumptions, and ARIP

data on remediation technologies as well as on the quantities and types of chemicals released in events

resulting in soil contamination, the average remediation cost of soil contamination caused by accidental

chemical releases was estimated at approximately $210,723 per incident.

Vegetation Damage. Like the cost per incident of soil contamination, perhaps the most

straightforward means of estimating the dollar equivalent cost of vegetation dama ge is to estimate the cost

of remediating the average incident of vegetation damage reported on completed ARIP questionnaires.

This process is complicated, however, by the lack of information on vegetation damage incidents beyond

the quantity and type of contaminant released. In the case of vegetation damage, the cost of remediation

would depend most strongly on the size of the area damaged, the topographical and soil characteristics of

the site, and the type of plants suited to revegetation of the damage d area. Based on expert opinion and

the quantities and types of contaminants released into the air as well as into other media, it was estimated

that the average cost of revegetating damaged areas would be at least $52,761.

Groundwater Contamination. I n principle, the value per incident of groundwater

contamination avoided can be estimated on the basis of the average cost of remediating groundwater

contamination. No data are available, however, with which to estimate the average severity of incidents

o f groundwater contamination resulting from significant accidental chemical releases. Based on

anecdotal observations of these incidents, the cost of groundwater contamination was estimated to be at

least $1,582,838 per incident.

Human Health Effects

Injuries. Although there is disagreement as to the most appropriate way to assign a dollar value

to human injuries, one of the most widely accepted methods is to estimate the total amount that

individuals subject to a particular kind of injury would be wi lling to pay to avoid that injury. For

example, a recent paper by Ted Miller, Charles Calhoun, and W. Brian Arthur entitled "Utility

- Adjusted

Impairment Years: A Low

- Cost Approach to Morbidity Valuation" cites an estimate of $12,800 in 1985

dollars for th e average willingness

- to

- pay to avoid injuries resulting from motor vehicle crashes. This

paper also cites five other willingness

- to

- pay estimates, ranging from $10,500 to $21,500 in 1985 dollars,

for the cost of workplace injuries.

These estimates prob ably underestimate significantly the cost that should be applied to injuries

resulting from accidental releases of toxic chemicals, for two reasons. First, it has been noted that people

are willing to pay more to avoid certain types of injuries, including chemical release injuries in particular

and involuntary injuries in general. Second, injuries resulting from chemical releases are likely to be

more severe than injuries sustained in many workplace settings; this is indicated by the fact that almost

thre e

- fifths of the injuries recorded on completed ARIP questionnaires required hospitalization.

### E

- 5

Notwithstanding these concerns, the average value of $14,133 for the six studies cited was used

as a reasonable (though conservative) estimate of the value of injuries avoided by implementing a risk

management program. This figure was adjusted to 1995 dollars using the Gross Domestic Product

Inflator (GDPI), which resulted in an estimated cost of approximately $19,469 per injury.

Fatalities. EPA estimates the value of a fatality to be approximately $5.4 million.

Evacuation and Sheltering in Place

Very few researchers have devoted any attention to the issue of how to estimate the dollar

equivalent cost of evacuating members of the public or of sheltering people in their homes. Theoretically,

the most appropriate way of attaching a dollar value to incidents of evacuation or of sheltering in place

would be to estimate the price that residents would be willing to pay to avoid evacuation or sheltering.

Unfortunately, no work at all has been done to estimate the cost of an evacuation or sheltering using this

willingness- to -pay approach.

An alternative approach, theoretically less satisfactory but practically more realistic, is to estimate

the actual additional costs that individuals bear as the result of an incident requiring evacuation or

sheltering in place. Unfortunately, there appears to be only one study that attempted to measure the actual

cost to each evacuated or sheltered household. Following the accident at Three Mile Island Nuclear

Station, the Nuclear Regulatory Commission financed a report entitled "The Social and Economic Effects

of the Accident at Three Mile Island: Findings to Date," published in 1980. On the basis of a telephone

survey of evacuated and sheltered households, this report provided cost figures that could be used to

estimate the average per-household cost of evacuation or sheltering in place. More recent research shows

that these costs to evacuated households are much greater in magnitude than the costs to the authorities

The average cost of evacuations was estimated at approximately $277 per person evacuated. The

average cost of sheltering in place was substantially lower, approximately $29 per person sheltered.

These estimates were updated to 1995 dollars, resulting in $285 and $30, respectively.



### THE FOLLOWING APPENDICES D & E (IN PDF FILE ONLY) WERE ADDED BECAUSE THEY

WERE IN A SEPARATE FILE I RECEIVED. WAS UNSURE WHICH WAS THE LATEST

VERSION SO I ADDED THEM AT THE END. THEY ARE NOT INCLUDED IN THE TOC OR

THE BOOKMARKS. BD