March 16, 2012 1 

# MEMORANDUM

Eastern Research Group, Inc.
110 Hartwell Avenue Lexington, MA 02421

Date: March 16, 2012

To: James Covington, EPA

From: Gina Salcedo and Cal Franz, ERG Re: Economic Impacts of ADF Collection and T reatment Requirements to Existing Airports with less than 60,000 gallons of Annual ADF Usage

For the final rule, EPA considered the following ADF collection and treatment requirements in its regulatory options

 Requirement 1: airports must collect and treat 20 percent of available ADF.

 Requirement 2: airports must collect and treat 40 percent of available ADF.

Summary of Economic Impact Analysis Results

198 existing airports fall within the scope of the fina l rule. 143 of these airports have annual ADF usage below 60,000 gallons. EPA examined the potential ec onomic impacts of applying the aircraft deicing fluid (ADF) collection and treatment requirements on these 143 existing airports.

Analytic Approach

Because most airports are publicly, or quasi-publicly, owned non-profit facilities, many traditional methods of determining economic achievability (s uch as a discounted cashflow analysis) are not appropriate. The economic impact analysis for the pr oposed effluent guideline relied on a revenue test to determine the economic achievability of the pr oposed options. Although industry comments on this analytic approach were unanimously negative, indus try was less forthcoming about suggesting alternate approaches.

To evaluate the impacts associated with the various collection options, we applied the same guidelines for revenue impacts as were used for proposal:

 0 percent < (estimated annualized compliance costs/operating revenues) < 1 percent:

o the option is generally considered affordable for an entity.

 1 percent < (estimated annualized compliance costs/operating revenues) < 3 percent:

o the option may be considered affordable if only a few entities are affected and the majority incurs costs less than one percent of revenues.

 3 percent < (estimated annualized compliance costs/revenues):

o the option is considered to be placing a heavy burden on an entity.

As shown in the Table below, with either 20% or 40% collection, a significant number of airports are experiencing costs that exceed 3% of revenue:

 Under the 20 percent collection and treatment re quirement, 95 airport (67 percent) incur costs between 0 and 1 percent of airport revenues, and 41 airports (29 percent) incur costs exceeding 3 percent of revenues.March 16, 2012 2  Under the 40 percent collection and treatment re quirement, 89 airport (62 percent) incur costs between 0 and 1 percent of airport revenues, but 46 airports (32 percent) incur costs exceeding 3 percent of revenues.

Annualized Compliance Costs as % of Total Airport Operating Revenues

Number of Airports in

Analysis Compliance Costs as a Percent of Airport Revenues a

> 0% ≥ 1% Not Analyzable < 1% < 3% ≥ 3%

Collect and Treat 20% of ADF

Number 143 95 2 41 5

Percent 100% 66.5% 1.4% 28.6% 3.5%

Collect and Treat 40% of ADF

Number 143 89 3 46 5

Percent 100% 62.3% 2.1% 32.1% 3.5%

a This analysis was performed before projected re gulatory costs for the collection and treatment were finalized, therefore the costs used in the revenue test are somewhat smaller than if final collection and treatment costs were used, and each airport’s ratio of compliance costs to airport revenues is somewhat smaller than it would be using the finalized compliance costs.