From: Cogliano, Gerain

Sent: Friday, February 19, 2016 2:04 PM To: Jones, Danielle < Danielle_Y_Jones@omb.eop.gov > Subject: EO 12866 RMP NPRM

--- RIA with new section on cost uncertainties

Attachments:

Hi Danielle,

Attached is the revised RIA for the RMP NPRM. This version includes the new section 5.7 and addresses the interagency comments and their resolution. Missing are the IRFA and UMRA sections, which we will
have early next week.

Thanks,

GerainAt t achments: E O 12866_RMP Modernization 2050

- AG8 2 NPRM RIA_20160219 redline.d ocx

***E.O. 12866 Review

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EO12866_RMP Modernization 2050

- AG82 NPRM RIA_ 20160219 20151217



# Regulatory Impact Analysis

Accidental Release Prevention Requirements: Risk Management Programs Under the Clean Air Act, Section 112(r)(7)

U.S. Environmental Protection Agency (EPA) Office of Land and Emergency Management (OLEM) Office of Emergency Management (OEM) 1200 Pennsylvania Avenue, NW (Mail Code 5104A)

Washington, DC 20460 USA***E.O. 12866 Review

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## December 2015



# ACRONYMS

Acronym Definition
CSB Ch emical Safety Board
EO Executive Order
EPCRA Emergency Planning and Community Right to Know Act
FEMA Federal Emergency Management Agency
FTE Full Time Equivalent
IST Inherently Safer Technology
LEPC Local Emergency Planning Committee
NAICS North Am erican Industrial Classification System
OCA Offsite Consequence Analysis
OSHA Occupational Safety and Health Administration
P1 Program Level 1
P2 Program Level 2
P3 Program Level 3
PHA Process Hazard Analysis
PSM Process Safety Management
RFI Re quest for Information
RIA Regulatory Impact Analysis
RMP Risk Management Plan
SDS Safety Data Sheets
STAA Safer Technolog y and Alternative s Analysis TQ Threshold Quantity***E.O. 12866 Review

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# EXECUTIVE SUMMARY

INTRODUCTION

In response to catastrophic chemical facili ty incidents in the United States, President Obama issued EO 13650, “Improving Chemical Facility Safety and Security,” on August 1, 2013

. The EO establishes the Chemical Facility Safety and Security Working Group (Working Group), co

- chaired by the Secreta ry of Homeland Security, the Administrator of EPA, and the Secretary of Labor or their designated representatives at the Assistant Secretary level or higher, and comprised of senior representatives of other Federal departments, agencies, and offices. 1 The EO requires the Working Group to carry out a number of tasks whose overall goal is to prevent chemical accidents, such as the explosion that occurred at the West Fertilizer facility in West, Texas, on April 17, 2013, which killed 15 people, most of whom

w ere first responders, caused multiple injuries, and resulted in extensive building damage to the town. 2

Section 6(a)(i) of EO 13650 requires the Working Group to develop options for improved chemical facility safety and security that identify “improvement s to existing risk management practices through agency programs, private sector initiatives, Government guidance, outreach, standards, and regulations.’’ Section 6(c) of EO 13650 requires the Administrator of EPA to review the Risk Management Program

. As part of this effort to solicit comments and information from the public regarding potential changes to EPA’s RMP regulations (40 CFR part 68), on July 31, 2014, EPA published a “Request for Information” notice or “RFI” (79 FR 44604).

EPA believes that th e RMP regulations have been effective in preventing and mitigating chemical
accidents in the United States ; however, EPA is proposing revisions in order to further protect human health and the environment from chemical hazards through advancement of proces s safety management (PSM) based on lessons learned

. These revisions are a result of a review of the existing Risk Management Program and information gathered from the RFI and EO listening sessions, and are proposed under the statutory authority provided b y section 112(r) of the Clean Air Act (CAA) as amended (42 U.S.C. 7412(r)).



### DESCRIPTION OF PROPOSED RULE AND ALTERNATIVES

The RIA analyzed the proposed new requirements and revisions to existing requirements as well as
several alternatives for each.

1 The White House. Executive Order

– Improving Chemical Facility Safety and Security. August, 2013. https://www.whitehouse.gov/the

- press

- office/2013/08/01/executive

- order

- improving

- chemical

- facility

- safety

and

- security

2 CSB. January 201 6 5 . Final Investigation Report, West Fertilizer Company Plant Fire and Explosion, West, TX, April 17, 2013. REPORT 2013

- 02

- I

- TX. http://www.csb.gov/west

- fertilizer

- explosion

- and

- fire

- /***E.O. 12866 Review

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Third

- Party Audits

— (proposed revisions apply to existing §§68.58 and 68.79 and new §§68.59 and 68.80)

The existing rule requires Program 2 and Program 3 processes to conduct a compliance audit at least once every 3 years

. The proposed rule would require facilit ies to contract with an independent third

party to conduct the next scheduled compliance audit following an RMP reportable accident or after an implementing agency determines that certain circumstances exist that suggest a heightened risk for an
accident

. The third party would have to be someone with whom the facility does not have an existing or recent relationship and who meets specific qualification criteria

. The proposed alternative is the low

cost one and would apply only for Program 2 and Program 3 processes after an RMP reportable accident or at the request of the implementing agency

. The medium cost alternative would apply every three years for all compliance audits conducted for all P3 processes

. The high cost alternative would apply every three years for all compliance audits conducted for Program 2 and Program 3 processes.

Root Cause Analysis

— (proposed revisions apply to §§68.60 and 68.81)

The proposed rule would require facilities to conduct a root cause analysis as part of an incident
investi gation following an RMP reportable accident or an inciden t that could reasonably have resulted in an RMP reportable accident (i.e., “near miss”)

. A root cause analysis is a formal process to identify underlying reasons for failures that lead to accidental releases

. These analyses usually require someone trained in the technique

. The low cost alternative would apply the provision only to RMP reportable accidents or near misses in P3 processes

. The proposed option is the higher cost alternative and would apply to RMP reportable accidents or near misses involving Program 2 and Program 3 processes.

Safer Technology and Alternatives Analysis (STAA)

— (proposed revisions apply to §68.67)

Under the proposed rule, facilities in NAICS codes 322 (paper manufacturin g), 324 (petroleum and coal products manufacturing), and 325 (chemical manufacturing) with P3 processes would be required to conduct a STAA for each process as part of their PHA, which occurs every 5 years

. The STAA requirement includes two parts: the ini tial analysis to identify alternatives, and a feasibility study to determine the costs and assess the reasonableness of implementing technology alternatives

. The proposed rule is the low cost alternative, which would apply to all facilities with P3 proces ses in NAICS codes 322, 324, and 325

. The medium cost alternative would apply the requirement to all P3 processes

. The high cost alternative would apply the requirement to all P3 processes and require facilities to implement feasible safer technology and alternatives.

Coordination Activities

— (proposed revisions apply to §§68.90, new 68.93, and 68.95)

Under the proposed rule, all facilities with Program 2 or Program 3 processes would be required to coordinate with local response agencies annually to determ ine response needs and ensure that response resources and capabilities are in place to respond to an accidental release of a regulated
substance

. The owner or operator would also be required to document coordination activities

. The proposed rule also inc ludes a provision enabling the LEPC or local emergency response official to require that the RMP

- facility owner or operator comply with the emergency response program requirements of***E.O. 12866 Review

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§68.95

. Section 68.95 requires the owner or operator to develop an emerg ency response program that includes an emergency response plan, procedures for use, inspection and maintenance of response equipment, training for responding employees, and procedures to review and update the program

. As a result of improved coordination between facility owners and operators and local emergency response officials, EPA believes that some facilities that are currently designated as non

- responding facilities may become responding facilities (i.e., develop an emergency response program in acco rdance with §68.95).

Alternatives to this provision are similar to the proposed requirements

. One alternative would eliminate the option for local officials to require that a facility owner or operator comply with the requirements of §68.95

. This altern ative, although the costs analyzed are the same as the proposed option , may result in
lower actual costs as l ocal officials ’ ability to require compliance with §68.95 may increase the likelihood
of current non

- responding facilities converting to responding facilities

. These costs of converting are estimated in a sensitivity analysis in this RIA. A second alternative is a high cost alternative and would require all facilities with Program 2 or Program 3 processes to comply with §68.95, regardless of local response capability

. This would be analogous to the requirements under the Oil Pollution Prevention regulation (40 CFR Part 112) where all facilities subject to the Facility Response Plan provisions at §112.20 are required to prepare and implement an emer gency response plan for oil discharges into navigable waters or adjoining shorelines.

Exercises

— (proposed revisions apply to new §68.96)

Notification Exercises

. All facilities with Program 2 or Program 3 processes would be required to
conduct a notificati on exercise annually to ensure that the emergency contact list is complete, accurate, and up

- to

- date.

Tabletop and Field Exercises

. The proposed rule would require responding facilities to conduct annual exercises of their emergency response plans and in vite local emergency response officials to participate

. Under the low cost alternative, facilities would conduct tabletop exercises annually

. Under the proposed option , which is the medium cost alternative, facilities would conduct a full field exercise at least once every five years, and tabletop exercises annually in the interim years

. Facilities with a n RMP reportable accident would also have to conduct a full field exercise within a year of an RMP reportable accident, but this may not impose any addi tional burden under the medium alternative as it would count as the required field exercise for the next 5

- year period

. Under the high cost alternative, facilities would conduct full field exercises annually.

Information Disclosure

— (proposed revisions app ly to new §68.205 and existing §68.210)

The proposed rule would require all facilities to disclose certain chemical hazard information to the public

. The facility or its parent company, if applicable, would have to make the information available in

an eas ily accessible manner, which might be presenting information on a company website, posting the information at public libraries, publishing it in local papers, or other means appropriate for particular
communities and facilities

. The information to be disc losed includes names and quantities of regulated***E.O. 12866 Review

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substances at the facility; Safety Data Sheets (SDS); accident history information; emergency response program information; and LEPC or local response agency contact information.

In addition, facility owners or operators would be required to provide
, upon request , to the LEPC or other local response agencies with information upon request, and updated annually
, on all of the following that apply to the facility: regulated substances; five

- year RMP reportable a ccident history; summaries of compliance audit reports; summaries of incident investigation reports; summaries of implementation of inherently safer technology (IST); and information on emergency response exercises, including schedules for upcoming exercis es

. Facilities owners or operators would be required to update this information annually.

Public Meeting s
— (proposed revisions apply to §68.210)

The proposed rule would require facilities to hold a public meeting for the local community at least once

every 5 years or within a year 30 days of a n RMP reportable accident

. The medium cost alternative would require P2 and P3 facilities to hold a public meeting at least once every 5 years and within 30 days
of a n RMP reportable accident. The high low cost alterna tive would require all facilities (i.e., including P1 facilities) to hold a public meeting at least once every 5 years and within 30 days of a n RMP reportable
accident

. applies the requirement to facilities with Program 2 or Program 3 processes

. The prop osed option is the higher cost alternative and would apply to all facilities (i.e., P1 facilities would also be affected)

.



### SUMMARY OF COSTS

Approximately 12,500 facilities have filed current RMPs with EPA and are potentially affected by the proposed rule c hanges

. These facilities range from petroleum refineries and large chemical manufacturers to water and wastewater treatment systems; chemical and petroleum wholesalers and terminals; food manufacturers, packing plants, and other cold storage facilities wi th ammonia refrigeration systems; agricultural chemical distributors; midstream gas plants; and a limited number of
other sources that use RMP

- regulated substances.

Exhibit A presents the number of facilities according to the latest RMP reporting as of Feb ruary 2015 by
industrial sector and chemical use

.
Exhibit A: Number of Affected Facilities by Sector

Sector NAICS Codes Total Facilities Chemical Uses

Administration of environmental quality programs (i.e., governments) 924 1,923 Use chlorine and other chemicals for
treatment***E.O. 12866 Review

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Agricultural chemical distributors/wholesalers 111, 112, 115, 42491 3,667 Store ammonia for sale; some in NAICS 111 and 115 use ammonia as a refrigerant

Chemical manufacturing 325 1,465 Manufacture, process, store

Chemical wholes alers 4246 333 Store for sale

Food and beverage manufacturing 311, 312 1,476 Use mostly ammonia as a refrigerant

Oil and gas extraction 211 741 Intermediate processing (mostly regulated flammable substances and flammable mixtures)

Other 44, 45, 48, 54, 56, 61, 72 247 Use chemicals for wastewater

treatment, refrigeration, store chemicals for sale

Other manufacturing 313, , 326, 327, 33 384 Use various chemicals in manufacturing process, waste
treatment

Other wholesale 423, 424 302 Use mostly ammonia as a refrigerant

Paper manufacturing 322 70 Use various chemicals in pulp and paper manufacturing

Petroleum and coal products manufacturing 324 156 Manufacture, process, store (mostly regulated flammable substances and flammable mixtures)

Petroleum wholesa lers 4247 276 Store for sale (mostly regulated flammable substances and flammable mixtures)

Utilities 221 (except 22131, 22132) 343 Use chlorine (mostly for water treatment)

Warehousing and storage 493 1,056 Use mostly ammonia as a refrigerant

Water/was tewater Treatment Systems 22131, 22132 102 Use chlorine and other chemicals

Total 12,542***E.O. 12866 Review

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Exhibit B presents a summary of the costs estimated in the analysis

. EPA estimates annualized costs of $ 162.6 158. 3 million at a 3% discount rate, and $ 165.3 161.0 million at a 7% discount rate

. T otal
undiscounted costs are $ 1. 6 1. 58 billion over the ten year time period, or $ 1.4 1. 4 billion and $ 1. 2 1.1 billion when discounted at 3 and 7 percent, respectively

. Exhibit B presents some elements that are beyond the pr oposed rule provisions, such as rule familiarization.

Exhibit B: Summary of Costs ( M illions, 201 4 dollars)

Cost Elements Total

Undiscounted Total

Discounted (3%) Total

Discounted (7%) Annualized

(3%) * Annualized

(7%)
Third Party Audits $49.5 $42.3 $34.8 $5.0 $5.0 Root Cause Analysis $8.4 $7.2 $5.9 $0.8 $0.8 Safer Technology and Alternatives $347.9 $296.7 $244.3 $34.8 $34.8

Coordination $62.7 $53.4 $44.0 $6.3 $6.3 New Responders  ̊ $311.1 $281.6 $250.3 $33.0 $35.6 Notification Drills $13.8 $11.8 $9.7 $1.4 $1.4 Exercise Costs $606.6 $517.4 $426.0 $60.7 $60.7 LEPC Disclosure $129.1 $100.1 $82.4 $11.7 $11.7 Public Disclosure $39.8 $33.9 $27.9 $4.0 $4.0 Public Meetings $47.5 $40. 5 $33.3 $4.7 $4.7 Rule Familiarization $2. 4 3 $2.3 $2.2 $0. 3 2 $0.3 Total Cost + $1,618.8 $1,387. 3 2 $1,161.1 $162.6 $165.3

Cost Elements Total

Undiscounted Total

Discounted (3%) Total

Discounted (7%) Annualized

(3%) * Annualized

(7%)
Third Party Audits $49

. 6 $42.3 $34.8 $5.0 $5.0 Root Cause Analysis $8.4 $7.2 $5.9 $0.8 $0.8 Safer Technology and Alternatives $347.9 $296. 8 $244.3 $34.8 $34.8

Coordination $62.7 $53.4 $44.0 $6.3 $6.3 New Responders  ̊ $311.1 $281.6 $250.3 $33.0 $35.6 Notification Drills $13.8 $11.8 $9.7 $1.4 $1.4 Exercise Costs $606.6 $517.4 $426.0 $60.7 $60.7 LEPC Disclosure $129. 2 $100. 2 $82. 5 $11.7 $11.7 Public Disclosure $39.8 $33.9 $27.9 $4.0 $4.0 Public Meetings $ 4.0 $ 3.4 $2.8 $0.4 $0.4 Rule Familiarization $2. 4 $2.3 $2.2 $0. 3 $0.3 Total Cost + $1,575. 4 $1,350. 2 $1, 130. 5 $158. 3 $161.0

* When annual costs for different years are equal to one another across the analysis time period, the annualized costs calculated using di fferent discount rates (e.g., 3 and 7 percent) are equal

.***E.O. 12866 Review

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 ̊ Reflects costs for some facilities to convert from “non

- responding” to “responding” as a result of improved coordination with local emergency response officials

+ Values may not sum due to rounding



### SUMMARY OF POTENTIAL BENEFITS

EPA had no data to proje ct the specific impact of each proposed rule element on the probability and magnitude of chemical accidents

. Indeed, the frequency and severity of the accidents themselves would be challenging to predict

. However, a review of t he RMP accident data and ot her data sources suggest ed that chemical accidents impose substantial costs on firms, employees, emergency responders, the community, and the broader economy

. This RIA constructs and presents data for a 10

- year baseline period, summarizing RMP accident im pacts and when possible monetizing them

. The average annual cost of RMP accidents during the baseline was $274 million

. However, the monetized impacts omit many important categories of accident impacts including lost productivity, the costs of

emergency response, transaction costs, property value impacts in the surrounding community (that overlap with other benefit categories) , and environmental impacts

. Also not reflected in the 10

- year baseline costs are the impacts of non

- RMP accidents at RMP faciliti es and any potential impacts of rare high consequence catastrophes

. A final omission is related to the information disclosure provision

. Reducing the probability of chemical accidents and the severity of the ir impacts , and improving
information disclosur e by chemical facilities , as the proposed provisions intend, would provide benefits to p otentially affected members of society.

Exhibit C summarizes all of the benefit categories qualitatively described in this RIA

. There are four broad benefit categories related to accident prevention and mitigation including prevention of RMP accidents, mitigation of RMP accidents, prevention and mitigation of non

- RMP accidents at RMP facilities, and prevention of major catastrophes

. The exhi bit explains each and identi fies ten associated specific benefit categories , ranging from avoided fatalities to avoided emergency response costs

. Exhibit
C also highlights and explains the information disclosu re benefit category and identifies two specific
benefits associated with i t : improved efficiency of property markets and allocation of emergency

resources

.

Exhibit C: Summary of Social Benefits of Proposed Rule Provisions

Broad Benefit Category Explanation Specific Benefit Categories

Accident Prevention Prevention of future R MP facility accidents***E.O. 12866 Review

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Accident Mitigation Mitigation of future RMP facility accidents  Reduced Fatalities

 Reduced Injuries

 Reduced Property Damage

 Fewer People Sheltered in Place

 Fewer Evacuations

 Avoided Lost Productivity

 Avoided Emergency Response Costs

 Avoided Transaction Costs

 Avoided Property Value Impacts*

 Avoide d Environmental Impacts Non

- RMP accident prevention and mitigation Prevention and mitigation of future non

- RMP accidents at RMP facilities

Avoided Catastrophes Prevention of rare bu t extremely high consequence events

Information Disclosure Provision of information to the public and
LEPCs  Improved efficiency of property markets

 Improved resource allocation
* These impacts partially overlap with several other categories, s uch as reduced health and environmental impacts***E.O. 12866 Review

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# TABLE OF CONTENTS

EXECUTIVE SUMMARY

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

CHAPTER 1: INTRODUCTION AND BACKGROUND

................................ ................................ ..... 12

1.1 H ISTORY

................................ ................................ ................................ ................................ ....................... 12 1.2 O RGANIZATION OF THE A NALYSIS

................................ ................................ ................................ .............. 17


### CHAPTER 2: PROVISIONS AND ALTERNATIVES

................................ ................................ .......... 19

2.1 A LTERNATIVES A NALYZED

................................ ................................ ................................ .......................... 20 2.2 A DDITIONAL C HANGES A SSOCIATED WITH L OCAL C OORDINATION A CTIVITIES

................................ ..... 22 2.3 S UMMARY OF A LTERNATIVES

................................ ................................ ................................ ...................... 24 2.4 I MPACTS TO G OVERNMENTS

................................ ................................ ................................ ........................ 26


### CHAPTER 3: UNIVERSE OF REGULATED FACILITIES

................................ ................................ .... 27

3.1 C URRENT RMP F ACILITIES

................................ ................................ ................................ ......................... 27 3.2 D IVISIONS U SED IN A NALYSIS

................................ ................................ ................................ ...................... 30 3.3 G OVERNMENT E NTITIES A FFECTED BY THE R ULE

................................ ................................ ..................... 36 3.4 L IMITATIONS

................................ ................................ ................................ ................................ ................ 37



### CHAPTER 4: COSTS OF PROPOSE D REVISIONS

................................ ................................ ........... 38

4.1. W AGE R ATES

................................ ................................ ................................ ................................ ................ 38 4.2 R ULE F AMILIARIZATION

................................ ................................ ................................ .............................. 39 4.3 P REVENTION P ROGRAM R ULE P ROVISIONS

................................ ................................ ................................ 39 4.4. E MERGENCY R ESPONSE P REPAREDNESS R ULE P ROVISIONS

................................ ................................ ..... 44 4.5. I NFORMATION A VAILABILITY R UL E P ROVISIONS

................................ ................................ ...................... 47 4.6 N EW R ESPONDERS

................................ ................................ ................................ ................................ ........ 50



### CHAPTER 5: TOTAL COSTS

................................ ................................ ................................ ........ 54

5. 1 A NALYTICAL A SSUMPTIONS

................................ ................................ ................................ ........................ 54 5.2 R ULE F AMILIARIZATION

................................ ................................ ................................ .............................. 55 5.3 P REVENTION P ROGRAM R ULE P ROVISIONS

................................ ................................ ................................ 56 5.4 E MERGENCY R ESPONSE P REPAREDNESS R EQUIREMENTS

................................ ................................ ......... 64 5.5 I NFORMATION D ISCLOSURE R ULE P ROVISIONS

................................ ................................ ......................... 6 9 5.6 N EW R ESPONDERS

................................ ................................ ................................ ................................ ........ 72 5.7 C OST U NCERTAINTIES A SSOCIATED WITH P REVENTION P ROGRAM P ROVISIONS

................................ ........... 78 5.8 T OTAL C OSTS

................................ ................................ ................................ ................................ ............... 83


### CHAPTER 6: BENEFITS

................................ ................................ ................................ ............... 86

6.1 B ENEFIT C ATEGORIES

................................ ................................ ................................ ................................ .. 86 6.2 N UMBER AND C OSTS OF B ASELI NE A CCIDENTS

................................ ................................ .......................... 91 6.3 B ENEFITS C OMPARED TO C OSTS

................................ ................................ ................................ ................. 99 6.4 A VOIDED C ATASTROPHES

................................ ................................ ................................ .......................... 100 6.5 A DDITIONAL B ENEFIT C ATEGORIES A SSOCIATED WITH A CCIDENT P REVENTION AND M ITIGATION

... 100 6.6 C ONCLUSIONS

................................ ................................ ................................ ................................ ............. 104



### CHAPTER 7: SMALL ENTITY IMPACTS

................................ ................................ ...................... 106

7.1 RMP A FFECTED S ECTORS

................................ ................................ ................................ ......................... 106 7.2 E STIMATING THE N UMBER OF S MALL E NTITIES

................................ ................................ ...................... 109 7.3 E CONOMIC I MPACT ON S MALL E NTITIES

................................ ................................ ................................ .. 114 7.4 C ONCLUSION

................................ ................................ ................................ ................................ ............... 133***E.O. 12866 Review

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### CHAPTER 8: ENVIRONMENTAL JUSTI CE

................................ ................................ .................. 134

8.1 B ACKGROUND AND C ONTEXT

................................ ................................ ................................ .................... 134 8.2 I DENTIFYING P OTENTIAL E NVIRONMENTAL J USTICE C ONCERNS A SSOCIATED WITH RMP F ACILITIES 135 8.3 A CTIONS T AKEN TO F ACILITATE “F AIR T REATMENT ”

................................ ................................ ............ 137 8.4 A CTIONS T AKEN TO F ACILITATE “M EANINGFUL I NVOLVEMENT ”

................................ .......................... 138


### CHAPTER 9: OTHER ANALYSES AND CONCLUSIONS

................................ ................................ 141

9.1 U NFUNDED M ANDATES R EFORM A CT

................................ ................................ ................................ ....... 141 9.2 E MPLOYMENT I MPACTS

................................ ................................ ................................ ............................. 141 9.3 L IMITATIONS AND C ONCLUSIONS

................................ ................................ ................................ .............. 142



### APPENDIX A

................................ ................................ ................................ ............................ 144

APPENDIX B

................................ ................................ ................................ ............................ 146***E.O. 12866 Review

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# CHAPTER 1: INTRODUCTION AND BACKGROUND

1.1 History

Serious chemical accidents occurring in the 1970s and 1980s, including accidents in Bhopal, India,
Seveso , Italy, and Pasadena, Texas led to a series of legislative reforms relating to chemical safety in
industrialized countries

. 3 4 In the United States, the Emergency Planning and Community Right to Know Act (EPCRA) was enacte d in 1986 to promote community emergency planning and prepared ness and provide local responders and the public with information about the chemical hazards in their community (42 U.S.C. 11002 et seq.)

. In 1990, s ections 112(r) and 304 of the Clean Air Act were enacted to help prevent severe chemical facility accident s

. Section 304 required the Occupational Safety and Health Administration (OSHA) to publish a chemical process safety standard to prevent accidental releases of chemicals that could pose a threat to employees

. Section 112(r) required the Environmental Pr otection Agency (EPA) to publish Accidental Release Prevention Program regulations to prevent chemical releases or minimize their consequences if they occur

. Section 112(r) required EPA to develop a list of at least 100 regulated substances which, in the c ase of an accidental release, are known to cause or may reasonably be anticipated to cause death, injury, or
serious adverse effects to human health or the environment (42 U.S.C 7412(r) )

. EPA was also required

to establish threshold quantities (TQs) for t hese substances
, which would determine the applicability of
rules to prevent accidental releases of these substances

. Section 112(r ) ( 7)(B) required EPA to promulgate reasonable regulations and appropriate guidance to provide, to the greatest extent practi cable, for the prevention and detection of accidental releases of regulated substances and for response to such releases by the owners or operators of the sources of such releases

. The section mandates that the regulations require the owner or operator of a stationary source “to prepare and implement a risk management plan to detect and prevent or minimize accidental releases of such substances from the stationary source, and to provide a prompt emergency response to any such releases in order to protect h uman health and the environment

. ” The section further mandates that the plan include:

 A hazard assessment to assess the potential effects of an accidental release of any regulated
substance

. This assessment shall include an estimate of potential release quantities and a determination of downwind effects, including potential exposures to affected populations

. Such assessment shall include a previous release history of the past 5 years, including the size, concentration, and duration of releases, and shall include an evaluation of worst case accidental releases;

3 Federal Emergency Management Agency. Phillips Petroleum Chemical Plant Explosion and F ire. October 1989. https://www.usfa.fema.gov/downloads/pdf/publications/tr

- 035.pdf

4 Nature 281, 521 (18 October 1979). http://www.nature.com/nature/journal/v281/n5732/pdf/281521a0.pdf***E.O. 12866 Review

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 A program for preventing accidental releases of regulated substances, including safety precautions and maintenance, monitoring and employee training measures to be used at the source; and

 A respon se program providing for specific actions to be taken in response to an accidental release of a regulated substance so as to protect human health and the environment, including procedures for informing the public and local agencies responsible for respondi ng to accidental releases, emergency health care, and employee training measures.

Finally, the section requires the owner or operator of an affected stationary source to develop and file a risk management plan with EPA, the Chemical Safety Board ( CSB) (al so established under the section), the State, and local response agencies.

OSHA adopted its process safety management standard (PSM) ( codified at 29 CFR 1910.119) in 1992 (57 FR 6403, Feb. 24, 1992)

. The PSM standard requires facilities to develop and imp lement an integrated approach to chemical process safety including the following elements: accurate , up

- to

- date diagrams of all process equipment, an analysis of the process hazards, standard operating procedures, training, maintenance, pre

- startup reviews , management of change, compliance audits, incident investigation, employee participation, hot

- work permits, contractor training, and emergency response

. The applicability of the PSM standard is driven by the presence of specific chemicals in quantities a bove
threshold s set in the standard.

EPA published its section 112(r) regulations in two stages

− a list of regulated substances and TQs in 1994 (59 FR 4478, January 31, 1994)
, and the risk management program requirements in 1996 ( 61 FR
31731 , June 20, 19 96 ) ; both are codified at 40 CFR part 68

. As required by section 112(r), p art 68 includes several major requirements that were not covered by the PSM standard

. These include a hazard assessment consisting of an offsite consequence analysis (OCA) and five

- year accident history, and the development and submission of a risk management plan (RMP) that summarizes a source’s risk management program

. EPA also required stationary sources to develop a management system to oversee the program and included emergenc y response program requirements beyond those contained
in the PSM standard

. RMPs were first submitted to EPA in June 1999 and must be updated at least every 5 years

. EPA has amended the rule a number of times to modify the list of substances
, to alter
da ta requirements
, and to address other issues

. T he primary requirements adopted in 1996 , however, remain in place.

The Risk Management Program rule establishes three program levels and requires facilit y owners or operators to conduct hazard assessments and submit RMPs regardless of the program level

. Program 1 (P1) requirements appl y to processes that would not affect the public in the case of a worst

- case release and with no accidents with specific off

- site consequences within the past five years

. P1 pro visions impose limited hazard assessment requirements and emergency response requirements.

Program 2 (P2) applies to processes not eligible for P1 or subject to Program 3 (P3), and imposes streamlined prevention program requirements, including safety infor mation, hazard review, operating***E.O. 12866 Review

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procedures, training, maintenance, compliance audits, and incident investigation elements

. P2 provisions also impose hazard assessment, management, and emergency response requirements

. P2 processes are primarily chlorine use at publicly owned water and wastewater facilities
, in States with out
OSHA

- approved State plans

. To further reduce the burden on facilities with P2 processes , EPA developed and published a number of industry

- specific guidance documents 5 and an OCA guid ance document

.
P3 requirements apply to processes not eligible for P1 and either subject to OSHA's PSM standard
, under
federal or S tate OSHA programs
, or classified in one of ten specified North American Industrial Classification System (NAICS) codes (1997 version) listed at 40 CFR 68.10(d)(1)

. The ten NAICS codes

are:

 32211 (pulp mills)  325192 (cyclic crude and intermediate manufacturing)

 32411 (petroleum refineries)  325199 (all other basic organic chemical manufacturing)

 32511 (petrochemical manufactu ring)  325211 (plastics material and resin manufacturing)

 325181 (alkali and chlorine manufacturing)  325311 (nitrogenous fertilizer manufacturing)

 325188 (all other basic inorganic chemical manufacturing)  32532 ( p esticide and other agricultural chemical

m anufacturing)

P3 requirements impose elements nearly identical to those in OSHA’s PSM standard as the accident prevention program

. The P3 prevention program includes requirements relating to the following :

 P rocess safety information

 Process Hazard A nalys is (PHA)

 O perating procedures

 Training

 M echanical integrity

 M anagement of change

 P re

- startup review

 C om pliance audits

 I ncident investigations

 E mployee participation

 H ot work permits , and

 C ontractors

.

5 There are guidance documents for propane storage, refrigeration, water/wastewater treatment, warehouses, chemical distributors, and others.***E.O. 12866 Review

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P3 provisions also impose the same hazard asses sment, management, and emergency response requirements that are required for P2.

The following flow chart demonstrates how facilit ies determine to which program level they are subject 6 :

Facilities 7 that are exempt from the OSHA PSM standard may be sub ject to EPA requirements under the
RMP rule

. This occurs for several reasons

. First, t he list s of substances regulated are not identical; for example, EPA lists aqueous ammonia at any solution that is 20 percent ammonia or more; OSHA covers it only at co ncentrations of 44 percent or more

. Second, b ecause federal OSHA has no authority over State and local government employee s, the OSHA PSM standard does not apply to publicly owned facilities (mainly water and wastewater treatment systems) in States where federal OSHA implements and enforces the standard (about half the States)

. Where States implement and enforce OSHA standards (referred to as State

- plan States), 8 the State is required to impose OSHA standards on State

6 http://www2.epa.gov/sites/production/files/2013

- 10/documents/chap

- 02

- final.pdf

7 Facilities are also commonly referred to as stationary sources, and the terms are used interchang eably throughout this document.

8 Twenty

- five states, Puerto Rico, and the Virgin Islands have OSHA

- approved State Plans. In these states, publicly owned water and wastewater treatment plants are typically in P2. Twenty

- two State Plans (21 states and o ne U.S.***E.O. 12866 Review

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and local government employees as a c ondition of delegation

. 9 Lastly, regulatory exemptions are not identical; for example, the OSHA PSM standard exempts normally unoccupied remote facilities, but the
RMP rule does not.

A pproximately 12,500 currently regulated facilities have filed RMPs for approximately 17,000 processes

. Most facilities have only one process, but certain industries , such as chemical manufacturing and petroleum refining, often have more than one regulated process ; about 100 facilities have more than 10 regulated processes

. The population of RMP facilities is dynamic

. Several thousand facilities have either
switched chemicals to non

- regulated substances , reduced chemical inventories below threshold quantities, or ceased operations and subsequently deregistered from the progr am since the first RMPs
were submitted in 1999

. However
, every year new facilities are registering and submitting new RMP s

. Although the accident histories submitted with RMPs have shown a reduction in the frequency of accidents since the beginning of th e program, there continue to be serious chemical releases

. RMP data for 2004 through 2013, the most recent 10 year period with complete information, show s that there are an average of 150 accidents each year with reportable impacts.

In April 2013, the Wes t Texas Fertilizer Company
, an RMP

- regulated facility in West, Texas, that stored anhydrous ammonia ( a n RMP

- and PSM

- regulated substance ) and ammonium nitrate ( not regulated
under the RMP rule or the PSM standard) caught fire, which led to a massive explos ion of the
ammonium nitrate

. Fifteen people, most of them firefighters, died and more than 160 members of the public were injured

. Two nearby school s , an apartment building
, a nursing home
, and much of the surrounding town were also damaged

. 10 In addition to this tragedy, a number of other serious incidents demonstrate a significant risk to the safety of American workers and communities

. On March 23, 2005, explosions at the BP Refinery in Texas City, Texas killed 15 and injured more than 170

. 11 On April 2, 2010, an explosion and fire at the Tesoro Refinery in Anacortes, Washington killed seven

. 12 On August 6, 2012, a fire at the Chevron Refinery in Richmond, California involving flammable fluid s endangered 19 Chevron employees and created a large plume of ch emicals that traveled across the Richmond, California area

.

territory) cover both private and state and local government workplaces. Public water and wastewater plants in these states are in P3. The remaining five State Plans (four states and one U.S. territory) cover state and local government workers on ly. Their public water/wastewater plants are P2. https://www.osha.gov/dcsp/osp/

9 Twenty

- six five states, Puerto Rico, and the Virgin Islands have OSHA

- approved State Plans. In these states, publicly owned wat er and wastewater treatment plants are typically in P2. Twenty

- two State Plans (21 states and one U.S. territory) cover both private and state and local government workplaces. Public water and wastewater plants in these states are in P3. The remaining s ix five State Plans ( five four states and one U.S. territory) cover state and local government workers only. Their public water/wastewater plants are P2. https://www.osha.gov/dcsp/osp/

10 CSB. January 201 6 5 . Fi nal Investigation Report, West Fertilizer Company Plant Fire and Explosion, West, TX, April 17, 2013. REPORT 2013

- 02

- I

- TX. http://www.csb.gov/west

- fertilizer

- explosion

- and

- fire

- /

11 U. S. Chemical Safety and Hazard Investigation Board (CSB). March 2007. Investigation Report: Refinery Explosion and Fire, Texas City, Texas, March 23, 2005. http://www.csb.gov/assets/1/19/ CSBFinalReportBP.pdf

. 12 CSB. May 2014. Investigation Report: Catastrophic Rupture of Heat Exchanger, Tesoro Anacortes Refinery, Anacortes, Washington, April 2, 2010. http://w ww.csb.gov/assets/1/7/Tesoro_Anacortes_2014

- May

- 01.pdf

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Nearly 15,000 residents sought medical treatment due to the release

. 13 On June 6, 2013, a fire and explosion at Williams Olefins in Geismar, Louisiana killed two and injured many more. 14

These inc idents highlight the regulatory need that this proposed rule modernization is addressing

. Section 112(r) of the Clean Air Act aimed to address low frequency and high consequence chemical

events

. These are catastrophic incidents which have large societal impacts when they occur, but very little likelihood for any individual chemical facility

. As such, market forces may not provide an incentive
for an y given company to invest in measures to prevent such accidents as they’re so unlikely to occur at
the indi vidual level

. However, looking across the United States and universe of regulated facilities, these accidents occur with sufficient frequency to warrant regulation.

In response to recent catastrophic chemical facility incidents such as the West explosion and others
, in
2013 President Obama issued Executive Order (EO) 13650 , entitled Improving Chemical Facility Safety and Security
, 15 which among other items, required EPA and OSHA to consider whether and how to update and modernize the RMP rule and PSM standa rd

. Both EPA and OSHA issued requests for information (RFI) to seek input from the public and the regulated community on potential revisions to
the rules. 16 EPA received a total of 579 public submissions on the RFI

. Several public comments were the
result of various mass mail campaigns 17 and contained numerous copies of letters or petition signatures

. Approximately 99,710 letters and signatures were contained in these several comments

. In general,
members of the public that submitted comments supported im posing more stringent requirements on facilities , including a requirement for industry to use inherently safer systems to prevent chemical
disasters

. The regulated industry opposed most suggested revisions to the rule as unnecessary and costly

. The propo sed rule is the result of EPA’s consideration of the comments
, as well as of
recommendations from the CSB
, the Agency’s experience gained through participation in EO 13650 listening sessions
, 18 and information gained by EPA through inspection of RMP facilit ies and
enforcement of the rule over the past six teen years

.


## 1.2 Organization of the Analysis

This regulatory impact analysis (RIA) is organized as follows:

13 CSB. January 2014. Regulatory Report: Chevron Richmond Refinery Pipe Rupture and Fire, Chevron Richmond Refinery #4 Crude Unit, Richmond, California, August 6, 2012. Report No. 2012

- 03

- I

- CA. http://www.csb.gov/assets/1/19/CSB_Chevron_Richmond_Refinery_Regulatory_Report.pdf

. 14 CSB. 2013. Ongoing Investigation of Williams Olefins Plant and Fire, Geis mar, LA. June 13, 2013. http://www.csb.gov/williams

- olefins

- plant

- explosion

- and

- fire

- /

. 15 https://www.whitehouse.gov/the

- press

- office/2013/08/01/executive

- order

- improving

- chemical

- facility

- safety

and

- security

16 OSHA’s RFI was published on December 9, 2013 (78 FR 73756) and EPA’s RFI was publishe d on July 31, 2014 (79 FR 44604).

17 The terms “form letter campaign” and “mass mail campaign” are used interchangeably throughout this report.

18 In 2013 and 2014, as part of the EO 13650 activities, the federal government held a dozen listening sessions,

s upplemented by two online webinars. F or a list of locations and link to the notes for these sessions go to http://www.regulations.gov/#!docketDetail;D=DHS

- 2013

- 0075

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 Chapter 2 describes the provisions that EPA is proposing to add or amend and the alternatives
that EPA considered for each provision analyzed in this document.

 Chapter 3 discusses the universe of regulated entities and the various divisions used in the analysis.

 Chapter 4 discusses the basis for cost estimates for each of the provisions and alternative s and presents the unit costs.

 Chapter 5 presents the total costs and 10

- year costs.

 Chapter 6 discusses the potential benefits of the rule.

 Chapter 7 presents the small entity impacts

.

 Chapter 8 presents the environmental justice analysis

 Chapter 9 discuss es other statutory and related analys e s

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# CHAPTER 2: PROVISIONS AND ALTERNATIVE S

This chapter presents a summary of the provisions in the proposed rule and the alternative s analyzed

. The provisions being proposed include revisions to existing prevention program and emergency response requirements as well as new requirements related to public disclosure of information

. For some provisions EPA considered three alternatives, which represent low, medium, and high costs.

The RIA analyzed the following propo sed new requirements and revisions to existing requirements as well as several alternatives for each :

1. Third

- Party Audits

— (proposed revisions apply to existing §§68.58 and 68.79 and new §§68.59 and 68.80): Revising the compliance audit provisions by requiri ng the next compliance audit following an RMP reportable accident 19 to be conducted by a third

- party.
2. Root Cause Analysis

- (proposed revisions apply to §§68.60 and 68.81): Revising the incident investigation provisions to require a root cause analysis follo wing an RMP reportable accident or an incident that could reasonably have resulted in a n RMP reportable accident ( i.e., “near miss”).
3. Safer Technology and Alternative s Analysis (STAA)

— (proposed revisions apply to §68.67): Revising the PHA provisions to add a requirement to conduct a STAA

- defined as “the integration of a variety of risk reduction or risk management strategies that work toward making a facility and its chemical processes as safe as possible” 20

- for a subset of P3 processes in specific NAICS codes.
4. Coordination Activities

— (proposed revisions apply to §§68.90 , new 68.93

, and 68.95): Reorganizing and clarifying existing requirements for all facilities with P2 and P3 processes to coordinate emergency response capabilities with local response age ncies and a dding a new requirement to coordinate annually , document these coordination activities, and allow the
LEPC to require that the chemical facility take responsibility for its own emergency response.
5. Exercises

— (proposed revisions apply to new §68.9 6): Adding new requirements for facilities to conduct exercises annually

. This includes an annual notification exercise that applies to both responding and non

- responding facilities

. Owners and operators of responding facilities must
conduct a field exer cise once every five years (and after a RMP reportable accident) and tabletop exercises annually, in the other years.
6. Information Availability Public Disclosure

— (proposed revisions apply to new §68.205 and existing §68.210): A dding a new requirement to make certain information available to the L ocal

19 RMP repo rtable accident means any accident that must be reported under the five

- year accident history requirements of §68.42, which is an accidental release from a covered process that resulted in deaths, injuries, or significant property damage on

- site, or known offsite deaths, injuries, evacuations, sheltering in place, property damage, or environmental damage.

20 EPA /OSHA Chemical Safety Alert: Safer Technology and Alternatives. June 2015. http://www2.epa.gov/sites/production/files/2015

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Page 20 of 150 E mergency P lanning C ommittee (LEPC) or local response agencies upon request

. In addition, the proposed rule would r evis e the public information availability requirements to simplify the presentation of existing publicly available information and help the public better understand the risks at the facility.
7. Public Meeting

— (proposed revisions apply to §68.210): A dding a new requirement to hold a public meeting at least once every 5 years
, a s well as after an RMP rep ortable accident

.


## 2.1 Alternatives Analyzed

Third

- Party Audits

— (proposed revisions apply to existing §§68.58 and 68.79 and new §§68.59 and 68.80)

The existing rule requires P2 and P3 processes to conduct a compliance audit at least once every 3 years

. Th e proposed rule would require facilities with P2 and/or P3 processes to contract with an independent
third

- party to conduct the next scheduled compliance audit following an RMP reportable accident or after an implementing agency 21 determines that certain ci rcumstances exist that suggest a heightened
risk for an accident

. The third party would have to be someone with whom the facility does not have an existing or recent relationship and who meets specific qualification criteria

. The low cost alternative (i. e., the proposed option) would apply only for P2 and P3 processes after an RMP reportable accident or at the request of the implementing agency

. The medium cost alternative would apply every three years for all compliance audits conducted for all P3 proce sses

. The high cost alternative would apply every three years for all compliance audits conducted for P2 and P3 processes.

Root Cause Analysis

— (proposed revisions apply to §§68.60 and 68.81)

The proposed rule would require facilities with P2 and/or P3 pro cesses to conduct a root cause analysis as part of an incident investigation following an RMP reportable accident or an incident that could reasonably have resulted in an RMP reportable accident (i.e., “near miss”)

. A root cause analysis is a formal proce ss to identify underlying reasons for failures that lead to accidental releases

. These analyses usually require someone trained in the technique

. The low cost alternative would apply the provision only to RMP reportable accidents or near misses in P3 pro cesses

. The medium/high cost
alternative (proposed option) would apply to RMP reportable accidents or near misses involving P2 and P3 processes.

Safer Technology and Alternatives Analysis (STAA)

— (proposed revisions apply to §68.67)

Under the proposed rul e, facilities in NAICS codes 322 (paper manufacturing), 324 (petroleum and coal products manufacturing), and 325 (chemical manufacturing) with P3 processes would be required to conduct a STAA for each process as part of their PHA, which occurs every 5 year s

. The STAA includes two parts: the initial analysis to identify alternatives, and a feasibility study to determine the costs and assess the reasonableness of implementing technology alternatives

. The proposed rule is the low cost

21 The implementing agency is the federal state, or local agency that is taking the lead for implementation and enforcement of part 68 or t he state or local equivalent.***E.O. 12866 Review

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alternative, which woul d apply to all facilities with P3 processes in NAICS codes 322 (Paper Manufacturing), 324 (Petroleum and Coal Product Manufacturing), and 325 (Chemical Manufacturing)

. The medium cost alternative would apply the requirement to all P3 processes

. The high cost alternative would apply the requirement to all P3 processes and require facilities to implement safer technology
and alternatives that are considered feasible

.

Coordination Activities

— (proposed revisions apply to §§68.90, new 68.93, and 68.95)

Under t he proposed rule, all facilities with P2 or P3 processes would be required to coordinate with local response agencies annually to determine response needs and ensure that response resources and capabilities are in place to respond to an accidental release of a regulated substance

. The owner or operator would also be required to document coordination activities

. The proposed rule also includes a provision enabling the LEPC or local emergency response official to require that the RMP

- facility owner

or opera tor comply with the emergency response program requirements of §68.95

. Section 68.95 requires the owner or operator to develop an emergency response program that includes an emergency response plan, procedures for use, inspection and maintenance of respon se equipment, training for responding employees, and procedures to review and update the program. As a result of improved coordination between facility owners and operators and local emergency response officials, EPA
believes that some facilities that are currently designated as non

- responding facilities may become responding facilities (i.e., develop an emergency response program in accordance with §68.95). For the proposed alternative, EPA conducted a sensitivity analysis estimating costs faced by RMP fa cilities that
converted from non

- responder to responder status (see Section 2.2 below)

.
Alternatives to this provision are similar to the proposed requirements

. One alternative would eliminate the option for local officials to require that a facility owne r or operator comply with the requirements of §68.95

. A second alternative is a high cost alternative and would require all facilities with P2 or P3 processes to comply with §68.95, regardless of local response capability 22

. This would be analogous to
the requirements under the Oil Pollution Prevention regulation (40 CFR Part 112) where all facilities subject to the Facility Response Plan provisions at §112.20 are required to prepare and implement an emergency response plan for oil discharges into navigabl e waters or adjoining shorelines.

Exercises

— (proposed revisions apply to new §68.96)

Notification Exercises

. All facilities with P2 or P3 processes would be required to conduct a notification exercise annually to ensure that the contact list to be used in an emergency is complete, accurate, and

up

- to

- date.

Tabletop and Field Exercises

. The proposed rule would require responding facilities to conduct annual exercises of their emergency response plans and invite local emergency response officials to partic ipate

. Under the low cost alternative, facilities would conduct tabletop exercises annually

. Under the

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proposed option , which is the medium cost alternative, responding facilities would conduct a full field exercise at least once every five years and tab letop exercises annually in the interim years

. Responding
f acilities with a n RMP reportable accident would also have to conduct a full field exercise within a year of an RMP reportable accident, but this may not impose any additional burden under the medi um alternative as it would count as the required field exercise for the next 5

- year period

. Under the high cost alternative, responding facilities would conduct full field exercises annually.

Information Availability Public Disclosure

— (proposed revisions a pply to new §68.205 and existing §68.210)

The proposed rule would require all facility owners or operators to provide , upon request, to the LEPC or other local response agencies with information on all of the following that apply to the facility: regulated substances; five

- year RMP reportable accident history; summaries of compliance audit reports; summaries of incident investigation reports; summaries of implementation of inherently safer technology (IST); and information on emergency response exercises, i ncluding schedules for upcoming
exercises

. Facilities owners or operators would be required to update this information annually.

In addition, all facilities would be required to disclose certain chemical hazard information to the public

. The facility or its parent company, if applicable, would have to make the information available in an easily accessible manner, which might be presenting information on a company website, posting the information at public libraries, publishing it in local papers, or other means appropriate for particular
communities and facilities

. The information to be disclosed includes names and quantities of regulated substances at the facility; Safety Data Sheets (SDS); accident history information; emergency response program informa tion; and LEPC or local response agency contact information.

Public Meeting

— (proposed revisions apply to §68.210)

The proposed rule would require facilities to hold a public meeting for the local community at least once every 5 years or within a year 30 day s of a n RMP reportable accident

. The low medium cost alternative would require P2 and P3 facilities to hold a public meeting at least once every five years and within 30 days of a n RMP reportable accident , and would apply applies the requirement to all faci lities with P2 or P3 processes

. The medium/ high cost alternative would also require all facilities (i.e., including P1 facilities) to hold a public meeting s at least once every five years and within 30 days of after a n n RMP reportable accident , but would apply it the requirement to all facilities (i.e., P1 facilities would also be affected)

.


## 2.2 Additional Changes Associated with Local Coordination Activities

As a result of improved coordination between facility owners and operators and local emergency

re sponse officials, EPA believes that some facilities that are currently designated as non

- responding facilities may become responding facilities

. Therefore, i n addition to the provisions listed above, the RIA estimates the costs associated with becoming a responding facility

. This includes the costs of***E.O. 12866 Review

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developing an emergency re sponse program in accordance with §68.95, purchasing and maintaining appropriate equipment, training personnel, conducting exercises
, and preparing the associated exercise reports f or LEPCs

.
In earlier rulemakings, EPA specified that if a facility owner or operator determined that the local

emergency responders did not have the training and equipment to respond to a release of a n RMP regulated substance at the facility , the n the faci lity owner or operator must take responsibility for being able to respond ; however, it has become clear that in practice this has not always been the case

. Information from EPA regional offices, State emergency organizations, and local response agencies h as shown that facilities are not always coordinating or communicating with local responders , as required
, and in some cases neither a facility n or its local response agency is prepared to respond to releases of regulated substances

.
The proposed rule would explicitly require a facility owner or operator with a Program 2 or Program 3 process to coordinate annually with local emergency responders to determine response needs and ensure that response resources and capabilities are in place to respond to an acci dental release of a regulated substance

. When the outcome of the response coordination activities demonstrates that local response capabilities are not adequate to respond, or upon the request of local responders, the facility owner or operator must devel op an emergency response program in accordance with §68.95.

EPA examined RMP data to estimate the percent of RMP facilities with Program 2 and/or 3 processes
that are non

- responders, which means they are relying on local authorities to respond to any relea ses of regulated substances at the facility. 23

Approximately 57 percent of facilities fell into this category

. M any of the se facilities are smaller facilities
in rural areas

. Unlike the other alternative s analyzed, the number and type of facilities that may convert from non

- responder status to responder is uncertain

. A previous FEMA analysis reported that approximately 76% of the population is covered by hazmat teams, which provides an indication of which
facilities might have to become respond ing facili ties

. 24 However, the distribution of regulated facilities does not necessarily match the US population, so EPA used data from that FEMA report to conduct a sensitivity analysis

. The RIA presents the costs associate d with 25 % , 50 % , and 75 % of the estimated
number of non

- respond ing facilities becoming respond ing facilities who are located in counties that do
not have hazmat teams

. The high cost alternative for coordination would require all P2 and P3 facilities to become responders

.

23 EPA. January 27, 2016. Technical Background Document for Notice of Proposed Rulemaking: Risk Management Programs under the Clean Air Act, Section 112(r)(7).

24 https://www.fema.gov/media

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## 2.3 Summary of Alternati ve s

Exhibit 2

- 1 presents the alternative s by rule requirement

. Where cells are merged, the requirements
are the same across the alternative s covered

. For provisions that include alternative options analyzed,

t he proposed rule provisions are highlighted i n gray.***E.O. 12866 Review

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- 1: Alternative s by Regulatory Provision

Rule Provision Low Alternative Medium Alternative High Alternative Prevention Program Elements

Third

- party Audit (§§68.58, 68.59, 68.79, and 68.80)) Next compliance audit

after RMP reportable acci dent (facilities with P2 and P3 processes) All compliance audits at facilities with P3 processes conducted every three years by a third

- party All compliance audits at facilities with P2 and P3 processes conducted every three years by a third

- party

Root Ca use Analysis (§§68.60 and 68.81) Applies to RMP

-

reportable acc idents and “near misses” involving P3 processes Applies to all RMP

- reportable accidents and “near misses” involving P2 and P3 processes

STAA (§68.67) F acilities with P3

processes in NAICS c odes 322, 324, 325 conduct STAA and feasibility analyses All facilities with P3 processes conduct STAA and feasibility analyses All P3 facilities conduct STAA and feasibility analyses and implement feasible alternatives

Emergency Planning and Response

Co ordination (§§68.90 , 68.93 and 68.95) All facilities with P2 and

P3 processes coordinate with local responders and document annually All P2 and P3 facilities coordinate and document annually; LEPC may require source to implement ER
program All P2 and P3 f acilities must comply with ER Program (i.e.
, become responding facilities) regardless of local capability.
Notification Exercises (§68.96) All facilities with P2 and P3 processes must verify their emergency notification contact

information annually

Tabl etop and Field Exercises (§68.96) Responding facilities

conduct tabletop exercise s annually Responding facilities conduct : a field exercise at least once every 5 years (and within one year of an RMP

- reportable accident); tabletop exercises in the other fo ur year s Responding facilities conduct a field exercise annually

Information Disclosure
Disclosure to LEPC (§68.205) All facilities make certain information available to the LEPC or local emergency response

officials upon request

. Disclosure to the Pub lic (§68.210) All facilities make certain chemical hazard information available to the public in an easily

accessible manner.

Public Meeting (§68.210) Facilities hold a public

meeting within 30 days of

an RMP

- reportable accident. P2 and P3 facilities ho ld a public meeting at least once every 5 years and immediately within 30 days after of an RMP

- reportable accident. All facilities hold a public meeting once every 5 years and immediately within 30 days after of an RMP

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## 2.4 Impacts t o Governments

The proposed rule imposes direct costs to local governments that own and operate RMP facilities (primarily water and wastewater systems, but also some power plants and swimming pools)

. The proposed rule also imposes indirect costs to local e mergency response and planning agencies to review new information that would be submitted and to participate in exercises at the invitation of facility owners and operators

. Although local agencies are not required to participate in exercises or review
do cuments, many will do so

. The RIA discusses and present s these costs separately

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# CHAPTER 3: UNIVERSE OF REGULATED FACILITIES

Approximately 12,500 facilities have filed current RMPs with EPA and are potentially affected by the proposed rule changes

. Th ese facilities range from petroleum refineries and large chemical manufacturers to water and wastewater treatment systems ; chemical and petroleum wholesalers and
terminals ; food manufacturers , packing plants, and other cold storage facilities with ammonia refrigeration systems ; agricultural chemical distributors ; midstream gas plants ; and a limited number of
other sources that use RMP

- regulated substances

. This chapter describes these facilities and how they are categorized for the purposes of the economic analysis.



## 3.1 Current RMP Facilities

Exhibit 3

- 1 presents the number of facilities according to the latest RMP reporting as of February 2015 by industrial sector and chemical use.

Exhibit 3

- 1: Number of Affected Facilities by Sector

Sector NAICS Codes Total Facilities Chemical Uses Administration of environmental quality programs (i.e., governments) 924 1,923 Use chlorine and other chemicals for treatment

Agricultural chemical distributors/wholesalers 111, 112, 115, 42491 3,667 Store ammonia for sale; some in NAICS 111 and 115 use ammonia as a refrigerant Chemical manufacturing 325 1,465 Manufacture, process, store Chemical wholesalers 4246 333 Store for sale Food and beverage manufacturing 311, 312 1,476 Use (mostly ammonia as a refrigerant)

Oil a nd gas extraction 211 741 Intermediate processing (mostly regulated flammable substances and flammable mixtures)

Other 44, 45, 48, 54, 56, 61, 72 248 247 Use chemicals for wastewater treatment, refrigeration, store chemicals for sale

Other manufacturing 3 13, 326, 327, 33 384 Use various chemicals in manufacturing process, waste
treatment

Other wholesale 423, 424 302 Use (mostly ammonia as a refrigerant)
Paper manufacturing 322 70 Use various chemicals in pulp and paper manufacturing Petroleum and coal
p roducts manufacturing 324 156 Manufacture, process, store (mostly regulated flammable***E.O. 12866 Review

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Page 28 of 150 substances and flammable mixtures)

Petroleum wholesalers 4247 276 Store for sale (mostly regulated flammable substances and flammable mixtures)

Utilities 221 (except 22 131, 22132) 343 Use chlorine (mostly for water treatment)
Warehousing and storage 493 1,056 Use mostly ammonia as a refrigerant Water/wastewater Treatment Systems 22131, 22132 102 Use chlorine and other chemicals Total 12,54 2

Exhibit 3

- 2: Chart of A ffected Facilities by Sector

The RMP rule applies to processes (i.e., activities involving regulated substances including any use, storage, manufacturing, handling, or on

- site movement of such substances, or combination of these
activities ) at facilities with regulated substances above threshold amounts

. M any facilities may handle
other chemicals that are not RMP

- regulated or have processes that are not subject to the rule

. In general
, the cost of implementing the rule provisions varies primarily by the complexity of the processes
involved

. The chemical manufacturers and refineries have more covered processes per facility and more complex issues to consider when evaluating hazards, designing exercises, conducting audits, 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000***E.O. 12866 Review

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investigating incidents, and exp laining information to responders and the public compared to facilities that simply store or use chemicals in simple processes (e.g., refrigeration systems and water and waste treatment systems)

. For the purposes of the cost analysis, therefore, all facil ities in NAICS 324 and 325 (petroleum and coal product s manufacturing and chemical manufacturing) are considered complex ; all other facilities are considered simple.

The proposed STAA provision is limited to P3 processes in three sectors that have had a hi gh frequency
of a cciden tal rele ases (NAICS codes 322, 324, and 325)

. These sectors were selected because they represent relatively complex processes that account for 49% of all RMP reportable accidents. 25 Exhibit
3

- 3 presents the number of process es for a ll facilities by program level and for the three sectors , as well as the number of facilities within each program level

.

Exhibit 3

- 3 : Number of Processes by Program Level and Sector

Program Level Facilities Processes

1 642 1,096
2 1
, 272 5,448
3 10
, 628 14,454 Total 12 , 542 2 0,998

STAA Sectors Processes NAICS 322 (P aper Manufacturing ) 97 NAICS 324 (Petroleum and Coal Products Manufacturing) 1,453 NAICS 325 (Chemical Manufacturing) 2,758
Total 4,308

To analyze the STAA provision, EPA separated the processes in the three sectors into those that are more likely to involve manufacturing and reacting chemicals under more extreme conditions (i.e., high temperatures and pressures) from those that involve mixing and using chemicals under less extreme
cond itions

. The former are the petroleum operations in NAICS 324, petrochemicals and other basic chemical manufacturing in NAICS 3251, and synthetics and resins in NAICS 3252

. All other chemicals manufacturing sectors (agricultural chemicals, drugs, paints, soaps, and others) were merged with pulp/paper mills in the cost analysis and are assumed to mix and use chemicals under less extreme
conditions

. Exhibit 3

- 4 presents the number of processes for the three sectors; NAICS codes 324, 3251,
and 3252 are furth er disaggregated by the facility size because the level of effort for a STAA is likely to increase as the size of these more complicated processes increases , as measured by the number of FTEs involved in the process at the facility

.

25 February 2015 RMP Database.***E.O. 12866 Review

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Page 30 of 150 Exhibit 3

- 4 : Number of Processes for STAA Sectors by Sector and Facility Size

Sector Processes Program 3 0

- 19 Full Time Equivalents ( FTE s) 20

- 99

FTE s 100+

FTE s NAICS 324 (Petroleum and Coal products M anufacturing ) 1,453 7 39 1,407
NAICS 325 (Chemical Manufacturing)

NAICS 3251 (Basic chemicals) 1,664 144 644 876
NAICS 3252 (Synthetics/Resins) 400 14 151 235
NAICS 32XX (Other Chemicals) 694
NAICS 322 (Paper Manufacturing) 97



## 3.2 Divisions Used in Analysis

The RMP rule imposes different requirements on facilities b ased on Program levels

. P3 processes are those that are not eligible for P1 and are subject to the OSHA PSM standard or are in certain NAICS codes (refineries, a limited number of chemical manufacturers, and pulp mills)

. Of the 2,442 processes in the sel ected NAICS codes, all but 10 are listed as subject to OSHA PSM; t wo of the non

- PSM processes
appear to have been misclassified ( a wastewater treatment facility and farm co

- op erative ) and three or four others may be subject to PSM (the substance listed is covered by OSHA at certain concentrations)

. 26

26 Some facilities listed only 5

- digit NAICS codes, so 10 other processes may be subject only to the RMP rule.***E.O. 12866 Review

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- 5 : Number of Facilities by Program Level

In July 2015, OSHA issued a new interpretation of its retail exemption , a policy that exempted certain employers under O S HA’ s 1992 definition of “ret ail facility

. ” Prior to this change, most facilities that classified themselves as agricultural chemical distributors and many other wholesalers listed themselves
as P2 , because they were exempt from the OSHA PSM standard

. The effect of the change in
int erpretation will make all of these facilities subject to OSHA’s PSM standard and, therefore, subject to Program 3 of the RMP rule

. To take that into account for this RIA , EPA has rec lassified all P2 facilities that listed themselves in NAICS 11, 12, 15, 4 24 (wholesalers), and 493 (warehouses) as P3

. As a consequence almost 85 percent of all RMP facilities (10,6 28 ) are now subject to P3 (See Exhibit 3

- 6 )

.

Most P2 facilities ( 935 out of 945 ) are publicly owned water/wastewater treatment facilities in Stat es where OSHA ( rather than the State) enforces OSHA rules 27

. As a result of this difference , approximately half of the water/wastewater treatment facilities have processes that are subject to P3 and half that are in P2 although there is no difference in th e processes covered

. The remaining P2 facilities are utilities that use aqueous ammonia and other facilities that use chemicals not subject to OSHA PSM. 28 Exhibit 3

- 6

27 For the reason why, please see Section 1.1 History above.

28 There are some facilities that list ed themselves as P2 that have either selected the wrong Program level on the RMP submission or have incorrectly indicated that they are not subject to PSM, as they handle OSHA PSM chemicals in quantities far above the OSHA threshold. Because there are errors in the other direction among the public systems (i.e., facilities in States not subject to PSM that listed t hemselves as P3,), the analysis did not attempt to correct the errors. P1 Facilities ( 642 ): Limited accident effects on public

P2 Facilities ( 1272 ): Not eligible for P1 or subject to P3

P3 Facilities ( 10628 ): Subject to OSHA PSM or in specified NAICS codes

Program 1 Program 2 Program 3***E.O. 12866 Review

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presents the number of facilities by sector and Program Level ; publicly owned water/waste water treatment systems in the Exhibit are listed under governments (NAICS 92), while privately owned and operated systems are listed under NAICS 2213.

Exhibit 3

- 6 : Number of Facilities by Sector and Program Level

Sector P1 P2 P3 Totals
NAICS 311 , 312 Fo od and Beverage Manufacturer 3 11 1,462 1,476

NAICS 322 Pulp and Paper 1 1 68 70 NAICS 324 Petroleum 13 3 140 156 NAICS 325 Chemical 53 76 1,3 36 1,466 Other Manufacturing 62 73 249 384 NAICS 4246 Chemical Distributors 6 0 327 333 NAICS 4247 Petroleum Distributors 14 0 262 276 NAICS 11, 12, 15, 42491 Agricultural 10 0 3,657 3,667 NAICS 211 Oil and Gas Exploration 310 41 390 741 NAICS 2213 Water/Wastewater* 1 10 91 102 NAICS 221, 222 Utilities 38 72 233 343 NAICS 493 Warehousing 70 0 986 1,056
NAI CS 423, 424 Other Wholesale 5 0 297 302
NAICS 92 Governments 15 935 973 1,923 Other 41 50 157 247 Total 642 1,272 10, 628 12,542 * Except gov ernment

- owned
, which appear as NAICS 92 Government.



### 3.2.1 Facilities A ffected by the STAA Requirement

For the me dium cost alternative considered for the STAA (all P3 processes), processes outside of the
three NAICS sectors discussed above were classified based on the level of effort needed to conduct the analysis

. Moderate level of effort processes were those in ot her manufacturing sectors and refrigeration systems

. Refrigeration systems were considered as moderate because they are usually large facilities that cool, chill, refrigerate, or freeze various food or beverage products

. Refrigeration systems occur in mu ltiple NAICS codes; the food and beverage manufacturers and refrigerated
warehouse s (NAICS 49312) were the main sectors, but they also occur in agriculture, wholesale, terminals, and retail

. Exhibit 3

- 7 presents the number of processes in each of these ca tegories

. Water treatment systems, utilities, and gas plants were estimated to require a relatively low level of effort

. Facilities that simply store chemicals for sale were estimated to require a very low level of effort to do an STAA because they gener ally have just tanks and loading/unloading equipment.***E.O. 12866 Review

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- 7 : Number of Other P3 Processes for STAA Alternatives by Type

Process Type/Level of Effort Number of P3 Processes Manufacturing/Refrigeration Systems/moderate 3,460 Water/Gas/Utilities/l ow 1,899 Storage/very low 4,881



### 3.2.2 U niverse Breakdown for Emergency Response Coordination and Exercise Requirements.

The proposed requirements associated with emergency response depend on whether a facility responds to releases with its own personn el (or contractors) or relies on local public emergency responders

. As explained above, the responding facilities were identified by examining information provided related to the emergency response plan in the RMP database

. Exhibit 3

- 8 presents the numbe rs of responding and

non

- responding facilities by complexity of the facility (refineries/chemical manufacturers as complex, all other facilities as simple) and by the number of full

- time equivalent (FTE) employees on site, which affects the number of peopl e involved in exercises

. The large manufacturers were further divided because, unlike most of the facilities in the retail and wholesale sectors, they operate 24/7 and therefore have fewer workers at the facility at any one time than the FTE count listed in the RMP

. For the analysis, large manufacturers were considered those with more than 300 FTE or potentially 100 FTE or more per shift (in general swing and night shifts have fewer employees onsite than the day shift if only because administrative person nel are not usually present)

. Hence, the analysis assigns costs to the 773 manufacturers with 100 to 300 FTE the same as if they were in the 20

- 99 FTE category for the response provisions.

Exhibit 3

- 8 : Responding and Non

- responding Facilities by FTE and C omplexity *

0

- 19 FTE 20

- 99

FTE 100+

FTE Total
Responding Facilities Simple 1
, 779 944 1
, 513 4,236 Complex (NAICS 324, 325) 145 480 545 1,170

Total 1,924 1,424 2,058 5,406 Non Responding Simple 4,943 963 775 6,681 Complex (NAICS 324, 325) 156 245 54 455

Total 5,099 1,208 829 7,136
Non

- Responding (not in County with Hazmat Team ) Simple 3,416 389 297 4,102 Complex 85 144 18 247

Total 3501 533 315 4349***E.O. 12866 Review

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- 19 FTE 20

- 99

FTE 100+

FTE Total
Responding Facilities
Simple 1, 640 880 1, 46 6 3,986 Complex (NAICS 324, 325) 141 459 534 1,134

Total 1,781 1,339 2,000 5,120 Non Responding Simple 4,728 899 731 6,358 Complex (NAICS 324, 325) 141 235 46 422

Total 4,869 1,134 777 6,780
Non

- Responding (not in County with Hazmat Team ) Simple 3,242 358 280 3,880 Complex 77 141 14 232

Total 3,319 499 294 4,112

* Note: Exhibit does not include RMP facilities with only P1 processes

A different way to classify f acilities as small or large is based on the Small Business Administration’ s standards for firms

. The classification of RMP facilities on that basis is presented in Chapter 7

.



### 3.2.3 Universe Breakdown for Provisions that Apply After an RMP Reportable Accident

Finally, the proposed third

- party audit and root cause analysis provi sions would apply only to facilities
that have a n RMP reportable accident (the root cause analysis provision would also apply to facilities
that have a “near miss ” ). The existing rule requires reporting for accidental releases from covered processes with impacts that resulted in deaths, injuries, or significant property damage onsite, or known offsite deaths, injuries, evacuations, sheltering in place, property damage, or environmental damage

. In practice, however, some facilities have reported accidental releases with no reported impacts

. For the purposes of this analysis, EPA used only the number of RMP reportable accidents, which are those accidents with reported impacts

. EPA analyze d the number of accidents reported during the prior 10

- year period

. The reason is that prior to 2004, some facilities were still completing initial implementation of the rule; 2013 is the mos t recent year for which there are complete data 29

. Exhibit 3

- 9 presents the
number of RMP reportable accidents per year for 2004 thro ugh 2013

. Exhibit 3

- 10 presents the number
of RMP reportable accidents by industry sector for the same total 10

- year timeframe.

Exhibit 3

- 9 : RMP Reportable (Impact) Accident by Year

Year Impact Accidents

2004 197
2005 152

29 A more detailed explanation is provided in Chapter 6.***E.O. 12866 Review

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Page 35 of 150 2006 140
2007 204
2008 168
2009 14 9
2010 128
2011 138
2012 118
2013 123
Total 1,51 7 Range 118

- 204 Average/Year 152***E.O. 12866 Review

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- 10 : RMP Reportable Accidents by Sector

Sector Total 10

- Year Accident Frequency per Facility (over 10 years) Refineries (NAICS 324) 169 1.08 Pulp and Paper (NAICS 322) 46 0. 66 Chemical Manufacturers (NAICS 325) 530 0.36
Food/Beverage Manufacturers (NAICS 311, 312) 2 70 0.18

Other Manufacturers (All other NAICS 31

- 33) 53 0. 14
Oil/Gas exploration (NAICS 211) 53 0. 07 Warehouses (NAICS 493) 72 0. 07

Other wholesalers ( All other NAICS 423, 424 ) 20 0. 07
Chemical/petroleum wholesalers (NAICS 4246, 4247 ) 38 0. 06 Water/POTW (NAICS 22131, 22132, 92) 75 0. 04 Agricultural Facilities (NAICS 11, 42491) 156 0. 04
All Other 4 3 5 0. 06



## 3.3 Government Entitie s Affected by the Rule

The rule affects governmental entities both directly and indirectly

. Most of the facilities are water or wastewater treatment facilities, but there are some large swimming pools covered as well

. Most of the government al entities ar e cities, but the universe includes larger special districts (e.g., the Metropolitan Water District of Southern California) as well as some federal facilities

. Of the governmental entities directly affected, 910 have one RMP facility, 268 have two regulat ed facilities, 60 have 3 facilities, 27 have 4 facilities, and 27 have 5 or more

. Not all facilities belonging to a governmental enti t y are located
in the entity

. There are fewer than 1,200 “parent” companies listed for publicly owned systems

. Because f acilities do not always list the owner or list variations of the owner’s name, it is not possible to develop an accurate estimate of the number of public entities affected by the rule

. It is clear, however, that some of the larger cities and counties have a substantial number of facilities

. For example, Los Angeles County owns and operates at least 33 facilities, which do not include the facilities owned by cities within the county.

Additionally, local or county governments will receive new information fi led by RMP

- regulated facilities as a result of the proposed rule and may voluntarily participate in exercises held by facilities

. Although this proposed rule doesn’t specify requirements for these government entities to review the information
submitted or to take part in exercises, EPA expects that many of them will do so and therefore this analysis considers those indirect costs to local governments

. The burden on any single local government will increase as the number of affected entities in its jurisdi ction increases

. Our cost estimates will***E.O. 12866 Review

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reflect this added burden

. There are 6,956 cities that have one or more RMP facilities

. Although most have only one RMP facilit y , a number have 20 or more
, and t here are counties with close to 200 RMP
facilities (e.g., Harris County, TX)

. Thus, those counties with many RMP facilities may have greater indirect costs due to the additional volume of submitted information and requests for participation in
exercises.



## 3.4 Limitation s

The analysis assumes that every f acility subject to the RMP rule has registered with EPA and filed an
RMP

. EPA recognizes that this may not be true

. EPA and delegated implementing agencies search for
and occasionally identif y regulated facilities that have failed to submit RMPs. Histori cally, relatively few of these “non

- filers” have been found, but we have little basis for determining the full extent of such

non

- compliance.

T he RMP database may include facilities that are no longer operational

. For this analysis, we removed
one refine ry (and nine processes) from the data because the facility appears to have closed in 2001 without following the requirements to deregister

. EPA recognizes there may be other facilities in the RMP database that are no longer operating.

The RMP facility pop ulation is dynamic

. The number of RMP facilities and processes is expected to change over the period of analysis because of firms that will grow, shrink, close, or open in the near or
distant future

. Despite these expected changes, the analysis relies on the number and nature of RMP facilities and processes that exist as of the February 2015 RMP database as a constant estimate of future RMP facilities/processes.

Finally, as discussed in more detail in Chapter 7, there are some problems with the data as f iled with
EPA

. There are a number of facilities that list NAICS codes that are inaccurately applied, which means some facilities have misclassified themselves as P2 instead of P3, and for public facilities as P3 instead of
P1 or P2

. For example: EPA iden tified storage and terminal areas that were listed as refineries; agricultural co

- operatives and refrigerated warehouses listed in multiple sectors; and large terminals listed as wholesalers, support for transportation, and warehouses

. Although EPA has at tempted to correct the most obvious problems, and the numbers in any category are EPA’s best estimate, they should be viewed as approximations.***E.O. 12866 Review

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# CHAPTER 4: COSTS OF PROPOSED REVISIONS

This chapter outlines the assumptions used to estimate the incremen tal costs of the proposed revisions to the Risk Management Program and the alternative options under consider ation

. EPA does not estimate the baseline c osts incurred to comply with the existing RMP regulations

. The Agency sought to quantify and monetize costs where possible

. When we were unable to quantify
costs

– for example, due to a high level of uncertainty about what actions would be taken as a result of the proposed change

– we present a potential range of costs

. The time frame of analysis is 10 y ears

. As

s everal of the proposed rule elements are required on a five year period, w e include d a time span long enough to capture two full periods

. Specific assumptions are outlined for each rule provision below

. The analysis employs a model facility

a pproach in which representative facility categories were developed to reflect a variety of features expected to influence costs (e.g., process complexity, number of full

- time employees, emergency response planning activities, etc.)

. Cost assumptions were developed for each model facility type and address ed factors such as number of staff hours involved in implementing a provision, equipment costs, and fixed costs for contractor involvement

. P revailing wage rates were used to estimate per facility costs fo r rule provisions

. With a model facility approach, the unit cost estimates represent averages that cover a wide variation in expected costs even within a single sector

. Given the high level of uncertainty associated with the costs of some of the provisio ns, however, attempting to project costs for a more disaggregated universe would imply a level of knowledge of future costs that does not exist.



## 4.1. Wage Rates

The Agency used the Bureau of Labor Statistics May 2014 Occupational Employment and Wage Esti mates 30 to construct a weighted wage rate for different occupation categories

. For all rule provisions, labor hours were assumed to be distributed across six general labor categories: Management, Corporate Management, Attorneys, Engineers, Production Staff , and Local Responders

. The weighted wage rates for complex facilities (NAICS codes 324 and 325) were estimated separately from simple facilities because wages paid by these facilities are higher than in wholesale and government sectors, which dominate th e simple facilities category

. For each of the NAICS codes representing industries in the simple facilities category that are affected by the proposed rule provisions (Food and Beverage, Agricultural Facilities, etc.), standardized BLS Occupation Titles we re identified to correspond to the six general labor categories

. The wage rates for each BLS Occupation Title were multiplied by a fringe benefits factor of 1.5 to create a loaded wage rate. 31

After loaded wage rates were established for each industry, th ey were combined to form a weighted average based on how prominent each industry wa s within its universe of facilities , either simple or complex

. Exhibit 4

- 1 presents the wage rates.

30 See http://www.bls.gov/oes/current/oes_nat.htm

. 31 The benefits mult iplier is based on an average for the sectors as estimated by BLS in its Employer Costs for Employee Compensation. BLS includes items such as sick leave and vacation as benefits. See http://www. bls.gov/news.release/ecec.nr0.htm***E.O. 12866 Review

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Page 39 of 150 Exhibit 4

- 1: Weighted

- Average Loaded Hourly Wage Rates (2014 Dollars)

La bor Category Simple Facilities Complex Facilities Management $74.99 $99.64 Corporate Management $82.47 $100.71 Attorneys $101.81 $113.33 Engineers $55.22 $76.21 Production Staff $28.51 $41.56 Local Responders $53.43 $53.43



## 4.2 Rule Familiarization

RMP facility staff would require some time to review the final rule and determine which provisions apply to the facility

. The time required for this review would be limited because most of the proposed provisions amend current requirements as opposed to introducing completely new provisions

. Many of the provisions are straightforward such as those regarding public disclosure

. Others apply only after a n RMP reportable accident or near miss such as root cause analysis ; relatively few facilities have
repor table releases or near misses

. Still others such as the safer technology alternatives analysis are expected to take time to understand ; however, appl y to a limited number of facilities in sectors that are familiar with the issues associated with the rule provision

. In addition to affected facilities, the analysis also assumed that all affected LEPC’s would need to review the rule to familiarize themselves with rules that affect facilities in their jurisdiction

. EPA projects that all facilities with simpl e processes would need
2 hour s to review the rule as would the few complex facilities in P1 and P2

. Complex facilities in P3 are projected to spend 4 hours reviewing the rule

. LEPC’s are projected to spend 1 hour reviewing the rule

. EPA Regional Office D elegated state and local implementing agencies are projected to spend 4 hours reviewing the rule. The unit costs are as follows:

 Simple facilities = 2 hour of management time or $ 149.97

 P1 and P2 complex facilities = 2 hour of management time or $ 199.28

.

 P3 complex facilities = 4 hours of management time or $ 398.56

.

 LEPC ' s = 1 hour of time or $53.43

 Delegated implementing agencies EPA Regional Offices = 4 hours of management time or $ 299.94



## 4.3 Prevention Program Rule Provisions

Third Party Compliance Audit s
The existing rule requires P2 and P3 facilities to conduct a compliance audit at least once every 3 years

. Th e proposed provision require s facilities that have had RMP reportable accidents to contract with an independent third party to conduct the audit

. The analysis estimated the cost of hiring a third party to conduct the audit based on the public comments that EPA received through the July 31, 2014, Request for Information

. Of the 14 comments providing input on the potential economic impacts of third

- party***E.O. 12866 Review

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Page 40 of 150

audits , several comments specifically provided point estimates for the third

- party auditor fee. 32 These estimates ranged between $10,000 and $20,000 for simpler facilities and up to $40,000 for complex facilities , and represented estimates for all a uditor fees, including travel expenses

. Thus, this RIA assumed $15,000 for simple facilities and $40,000 for complex facilities

. These expenses are considered incremental to the costs for compliance audits that are covered in the original rule, as simi lar levels of facility staffing would be required to work with the third

- party auditor (i.e., EPA does not expect the cost of the third

- party auditor to be offset by cost savings from reduced staff levels of effort related to auditing)

. In addition, the a nalysis projects that management time would be devoted to identifying auditors, selecting an auditor, and contracting with that entity for third

- party audit services.
The analysis estimates that the time required to contract for a third

- party audit would v ary with the complexity of the processes to be covered and multiple facility staff would be involved, except for the smallest category of facilities

. At a minimum, one manager and one engineer would be involved to identify potential auditors and write the statement of work on which the auditor would base its bid

. For larger firms that routinely contract and have contract departments, a contracts specialist and attorney would be part of the process

. Many large firms and all governments would have standard contract language

. Governments are estimated to spend more time on the contracting process, however, because most are required to solicit competitive bids and document the basis for the selection

. Private firms may use a similar process but are not requ ired to do so

. Private firms are likely to spend time negotiating contract language after the award

. In total, hourly assumptions and costs for a third

- part y audit are shown in Exhibit 4

- 2 :

Exhibit 4

- 2 : Hourly Assumptions and Unit Costs for Hiring Third Party Auditors

Facility Type Total Hours for Contracting Process Facility Labor Cost Auditor

Fee Total Facility

Cost Management Attorneys Engineers Simple w/ 0

- 19 FTEs 32 4 0 $2,807 $15,000 $17,807
Simple w/ 20

- 99 FTEs 44 4 18 $4,701 $15,000 $19 ,701 Simple w/ 100+ FTEs 30 4 56 $5,749 $15,000 $20,749
Complex w/ 0

- 19 FTEs 32 4 0 $3,642 $40,000 $43,642
Complex w/ 20

- 99 FTEs 44 4 18 $6,209 $40,000 $46,209
Complex w/ 100+ FTEs 30 4 56 $7,710 $40,000 $47,710

Small Government 30 0 25 $3,630 $15,000 $18,630

32 See comments 0638 and 0667

– These two comments from industry specifically provided point estimates on the costs of third party audits. One comment , received from J.R. Simplot Company, placed the cost of the audit betw een $36,000 and $40,000 for larger facilities, and approximately $20,000 for smaller, less complex facilities. and t T he other com ment , received from the American Coatings Association, indicated that third party audits “could cost some of its member compa nies at approximately $10,000 per facility

. ” Commented [GP1]: IA Comment #139 Perhaps EPA can take another look at the third party compliance audit costs. The cos ts appear low to DHS (See p. 38 of the RIA). This reviewer suggests that compliance costs are up to 60,000 dollars for complex facilities. (5 people for one week is 200 labor hours. At 200 dollars per hour, this comes out to 40,000 dollars already. The n you still need to add travel and per diem costs on top. In addition, time is needed to write up the report.
Commented [GP2R1]: The estimates EPA received through comments on the RFI included all auditor fees and expenses paid by the regulated company to the third party

a uditor, including fees for auditing, report writing, travel, etc. EPA acknowledges that some facilities will face co sts, and perhaps even auditor fees alone, up to $60,000 or higher, in order to comply with this provision. However, EPA’s estimate for both simple and complex facility auditor fees represents an average for each group of facilities, not a maximum estimate for any one facility. Within EPA’s economic model, the complex facility category includes some very large facilities containing large numbers of regulated processes, such as petroleum refineries, but also many smaller chemical manufacturing facilities with only 1 or 2 covered processes. The average number of covered processes for the complex facility category is 2.6, and the average number of processes for the simple category is 1.2. Therefore, EPA believes that its estimates for auditor fees represent reas onable central estimates for each category of facility. EPA added additional language to the RIA to clarify that the estimates include all third

- party auditor fees, including travel expenses.***E.O. 12866 Review

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Large Government 60 0 39 $8,951 $40,000 $48,951

Incident Investigation (Root Cause Analysis and Near Miss Investigation)

This proposed provision requires that facilities in specific program levels that have had a n RMP reportable accident or nea r miss incident conduct a root cause analysis, as part of their accident investigation, to determine the underlying reasons for the (near) failure

. A root cause analysis is a structured process led by a person trained in the methodology

. The time require d may vary considerably based on the complexity of the processes involved

. T his analysis assumes that complex facilities would require 48 total hours (entirely engineering time) for a root cause analysis and simple facilities would spend 8 total hours ( sp lit evenly between engineering and production time)

. For near miss incidents, the analysis assumes that complex facilities would require 72 hours (12 hours of management, 36 hours of engineering, and 24 hours of production) for a complete near miss incide nt investigation and 14 hours (6 hours of management, 4 hours of engineering, and 4 hours production) for simple facilities. 33 Root cause analyses for n ear miss incidents generally require more labor time across all categories because there are already inv estigation activities occurring with baseline accidents.

There are fewer additional hours required for RMP reportable accident root cause analyses because those accidents must a lready be investigated in the baseline and thus the effect of the proposed rule is only the net increase in labor for the root cause analysis

. The increased labor affects only the engineering category for complex facilities, and only the engineering and production labor categories for simple facilities . Root cause analyses for RMP reportable accidents are not expected to require additional management time beyond that already required for RMP reportable accidents. Management time is expected to be devoted primarily to decisions concerning resolution of corrective actions arising fro m the investigation, and these activities should require roughly the same amount of time whether corrective actions relate to root causes or other contributing causes. For simple facilities, additional labor for root cause analyses was assumed to be evenl y distributed between production staff and engineers. For complex facilities, all additional labor for root cause analysis was placed in the engineer labor category as a conservative estimation approach, as this category has a higher labor rate than produ ction.

F or near miss incidents that could reasonably have resulted in a catastrophic release, the existing rule already requires an incident investigation. However, EPA believes that in the baseline many facility owners and operators did not understand or comply with the existing near miss incident investigation requirements , so this analysis assumes some additional time will be required across all labor categories for near miss investigations

. The estimate of the time required for an incident investigatio n is based on estimates in the original RMP RIA, which relied on best professional judgement and comments on the original rule proposal received from industry 34 . The estimates in the original RMP RIA involved development of a labor model that assumed inves tigations would involve a team of management, technical, and production staff, and that

33 Assumptions based on EPA ’s industry knowledge of industry practice

. 34 Economic Analysis in Support of the Final Rule on RMP Regulations for the Chemical Accident Release Prevention, as Required by Section 112( r) of the CAA, May 21, 1996.***E.O. 12866 Review

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staff at larger and more complex facilities would require more hours to complete an investigation . This analysis used reduced labor assumptions for near misses because investigations of incidents that do not damage equipment or harm workers would be less difficult to conduct than those that have to recreate conditions that existed prior to the release. Simple facility costs are estimated to include $1,000 for a trained facilitator to assist with the investigation. Complex facilities generally have staff familiar with the methodology and would staff the root cause analysis in

- house. Exhibit 4

- 3 displays the hours assumed for each labor category for each type of facilit y, and the estimated cost per facility.

Exhibit 4

- 3: Unit Cost for Root Cause Analysis and Near Miss Investigation

Managers Engineers Production Other Costs Facility Cost Near Miss

- simple 6 4 4 $1,000 $1,785 Near Miss

- complex 12 36 24 $4,937 Accid ents

- simple 0 4 4 $1,000 $1,335 Accidents

- complex 0 48 0 $3,658

Safer Technology and Alternatives Analysis (STAA)

This proposed provision requires facilities with P3 processes in NAICS codes 322, 324, and 325 to conduct an STAA as part of their pro cess hazard analysis (PHA), which occurs every 5 years

. STAA is generally a process in which facility staff analyze their current processes and practices to determine if there are safer alternatives to their current operating practice

. This can range fro m small changes

– such as upgrading valves

– to large shifts like substituting less toxic or volatile chemicals

. This RIA divides the STAA process into three parts:

1. T he initial analysis to identify alternatives;
2. A feasibility study to determine the co sts and assess the reasonableness of implementing the change in light of other costs and programs; and
3. I mplementation of alternatives (implementation is not required under the proposed provision)

. Hourly labor assumptions for the initial analysis and th e feasibility study are based on guidelines published by the American Institute of Chemical Engineers / Center for Chemical Process Safety (AIChE/CCPS) and consultation with engineers who have extensive experience in performing hazard analyses. 35 AIChE/CCP S has published several guidelines addressing the subjects of hazard analysis and safer technologies. Among these are:

- Inherently Safer Chemical Processes

– A Life Cycle Approach, Second Edition (AIChE/CCPS,2009);

- Guidelines for Process Hazard Evaluation Procedures Methods , Second Edition (AIChE/CCPS, 1992); and,

- Guidelines for Hazard Evaluation Procedures, Third Edition (AIChE/CCPS, 2008).

In Guidelines for Hazard Evaluation Procedures, Third Edition , CCPS notes that “Inherent safety reviews can be conduct ed as separate studies using a form of HAZOP Study, or they can be incorporated into HAZOP

35 EPA consulted with engineers at ABS Consulting.***E.O. 12866 Review

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studies conducted for other purposes.” 36 Inherently Safer Chemical Processes

– A Life Cycle Approach expands on this concept, and also provides information on additi onal approaches to incorporating safer technologies into process hazard analyses, including checklist, “What

- If”, Failure Mode and Effects A nalysis, and other analytical methods. Based on this information, EPA developed a labor model for safer technologie s reviews adapted from the HAZOP study and What

- If/Checklist approaches, which are PHA methods commonly used by facilities subject to this proposed provision

. Guidelines for Process Hazard Evaluation Procedures Methods

, Second Edition contains information on the typical days of effort required to complete HAZOP and What

- If/Checklist PHAs for small/simple and large/complex facilities. 37 EPA adapted this information, and incorporated additional labor hours to account for the proposed rule’s requirement to det ermine the feasibility of inherently safer designs considered.

The estimated labor hours assumed facilitator and scribe labor costs, as well as facility team and management participation that increased with process complexity. Facilities in NAICS 322, 3 24, and 325 are expected to have staff qualified to conduct the analysis in

- house. All other facilities would be expected to hire a consultant to lead the team. Most of these other facilities use chemicals or store them, but often rely on engineering fir ms or maintenance contractors to design the equipment and do anything other than routine minor maintenance. They may not, therefore, have staff knowledgeable enough in the process and design to identify and evaluate alternatives. The technical feasibilit y assessment considers the extent of process redesign, its engineering implications, and possible costs. As stated, most facilities except the large facilities in NAICS 322, 324 and 325 are expected to seek help from consultants (i.e., engineering firms). Storage and distribution facilities, which generally are very simple (mostly large tanks with loading/unloading equipment) are not expected to need a consultant to assess feasibility because chemical substitution is not as great a possibility (these faci lities usually sell the chemical in question) and because the technical issues are limited. For example, most bulk anhydrous ammonia distributors are not likely to substitute another chemical for anhydrous ammonia

. Exhibit 4

- 4 displays the hours assumed for each task by labor category and type of facility, and the resulting per facility cost estimates.
Implementation of safer alternatives is not required under the proposed option. The high cost alternative would apply the requirement to all P3 processes and require facilities to implement feasible safer technologies and alternatives. However, EPA has not projected implementation costs for this option because of the high degree of uncertainty associated with such projections (see Chapter 5 for further exp lanation).

Exhibit 4

- 4: Hourly Assumptions and Unit Costs for STAA

Sector Labor Hours Facility Cost Initial Analysis Corporate Manager Engineer Consultant
Large facilities NAICS 324

- 325 608 $40,240 NAICS 322, Small/Medium 324, 325 252 $13,109 Othe r Manufacturers, Refrigeration Systems 100 $9,808 $17,429

36 “HAZOP” is an acronym for “Hazard and Operability Study,” which is one PHA methodology allowed under the RMP rule.

37 See Guidelines for Process Hazard Evaluation Procedures Met hods , Second Edition (AIChE/CCPS, 1992), Table 5.4.***E.O. 12866 Review

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Water/Gas Plants/Utilities 36 $6,000 $8,744 Storage Facilities 36 $6,000 $8,744

Feasibility Analysis Large facilities NAICS 324

- 325 24 80 $8,514 NAICS 322, Small/Medium 324, 325 16 80 $ 8,000 $15,708 Other Manufacturers 16 32 $8,000 $12,050 Water/Gas Plants/Utilities and Refrigeration Systems 8 32 $5,200 $8,444
Storage Facilities 8 32 $3,244



## 4.4. Emergency Response Preparedness Rule Provisions

4.4.1 Emergency Response Program Coor dination with Local Responders

This provision would require all facilities with P2 or P3 processes to coordinate with local responders annually to make them aware of the hazards at the facility

. If the facility is a non

- responder and relies on the local r esponse force then the coordination would primarily focus on any changes that have occurred at the facility and confirm existing response strategies or develop new ones

. If the facility is a responder and in charge of responding to its own chemical emergen cies then the coordination would primarily focus on informing local entities on what response capabilities are in place and how the community may be impacted. The analysis assumes that the coordination effort would average 4 hours of facility management t ime and 4 hours of time from LEPCs to participate in coordination activities. 38 EPA based this estimate on input from an EPA regional official 39 who regularly participated in emergency coordination meetings with local responders and regulated facilities. 40 T he time required for any particular facility may vary depending on a variety of factors including the familiarity of the local responders with the facility and its hazards. For many facilities, this coordination may already occur voluntarily in the baseli ne and would therefore not be an added cost; for others, it could take considerable time to arrange a personal meeting. In other words, EPA recognizes that there will be variability across facilities in this cost but adopts two cost estimates that vary on ly depending on whether the facility is simple or complex

. In addition to the coordination effort, the proposed rule also requires documentation of that effort. The analysis uses an average of 4 hours of management time and applies it across all applicab le facilities, as opposed to estimating current compliance with this provision. The estimates of labor hours and unit cost estimates are shown in Exhibit 4

- 5.

Exhibit 4

- 5: Hourly Labor and Unit Costs for Coordination with Local Responders

Facility Type Ma nagement LEPCs Facility Labor Cost

Complex Facilities 4 4 $514

39 September 01, 2015 email communication from Steve Mason, EPA Region 6 to Jim Belke, EPA Office of Emergency Management.

40 Se ptember 01 , 2015 email communication from Steve Mason, EPA Region 6 to Jim B elke, EPA Office of Emergency Management.***E.O. 12866 Review

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This proposed provision may lead to some current facilities who are non

- responders to convert from

non

- responder to responder status

. To estimate a range of poss ible impacts of non

- responder conversions, the analysis conducts a sensitivity analysis of how many conversions may happen among the population of facilities in counties without existing hazardous materials (hazmat) teams a m ong local emergency responders. The sensitivity analysis provides cost estimates for the conversion of 25 percent, 50 percent, and 75 percent of current facilities who are non

- responders and located in counties without a hazmat team.



### 4.4.2 Notification Drills

The proposed rule requires all facilities with P2 or P3 processes to conduct a notification drill, during which a facility member checks each person and agency on its emergency action contact list, to ensure that the contact information is accurate (e.g., that the person listed is still in that position and the phone numbers and email addresses are correct)

. As the contact list is somewhat limited (the number of organizations to be contacted must be small enough that the primary ones could be contacted quickly), the analysis estima ted that it would take no more than 2 hours of engineering staff time to verify the information

. The unit costs are shown in Exhibit 4

- 6.

Exhibit 4

- 6: Hourly Labor and Unit Costs for Notification Drills

Facility Type Engineers Facility Labor Cost
Complex Facilities 2 $152
Simple Facilities 2 $110



### 4.4.3 Facility Exercises

Responding facilities are facilities that intend to develop and implement the emergency response program required under §68.95 in order to respond to releases at their site

. The prop osed rule requires such facilities to conduct an annual exercise of their emergency response program developed in accordance with §68.95 and in accordance with the community emergency respon se plan developed under 42 U.S. C. § 11003. 41 At least once every 5 years, a full field exercise would be required; in other years, facilities may conduct a tabletop exercise where the participants work together to identify a scenario and then establish objectives for the response without actually mobilizing responders an d employees. The objectives for both field and tabletop exercises would include:

1. I dentifying who would be contacted in an emergency, 2. P rocedures and measures for emergency response after an accidental release of a regulated substance (e.g., what equipmen t would be deployed, who would be evacuated, how decisions on public notification would be made, who would contact the public, etc.), and 3. P roper first

- aid and emergency medical treatment necessary to treat accidental human
exposures.

41 Section 303 of Emergency Planning and Community Right

- to

- Know Act (42 U.S.C. § 11003)

. http://www.gpo.gov/fdsys /pkg/USCODE

- 2011

- title42/html/USCODE

- 2011

- title42

- chap116.htm

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In a field exercise , all of the steps of a response are carried out (e.g., responders and equipment would be deployed). The purpose of a field exercise is to evaluate the ability of the responders and other employees to implement the emergency response plan on which they ha ve been trained.
The cost of both types of exercises vary with the size and complexity of a facility. Every phase of the
process
– planning, exercise, and post

- action evaluation

– would require more time for larger and more complex facilities. Smaller fa cilities have a limited number of possible scenarios (from leaks to slow releases to total failure of a storage vessel)

. Larger facilities, and particularly those with complex chemical processes, have more possible failure modes and a greater possibility of the first release triggering additional releases or creating other risks. EPA developed estimates of the time associated with both types of exercises and the number of people who would be involved by seeking input from EPA regional staff who have routi nely participated in both types of exercises and by reviewing exercise reports provided by EPA region al office s. Labor hours and unit costs for tabletop and field exercises are presented in Exhibits 4

- 7 and 4

- 8, respectively.***E.O. 12866 Review

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- 7: Hourly Labor and Unit Costs for Table

- Top Exercises

Facility Type Management Engineers Production Emergency Responders Facility

Cost
Simple w/ 0

- 19 FTEs 24 34 11 26 $5,380
Simple w/ 20

- 99 FTEs 29 34 28 31 $6,507

Simple w/ 100+ FTEs 61 61 60 48 $12,218
Complex w/ 0

- 19 FTEs 24 34 11 26 $6, 829
Complex w/ 20

- 99 FTEs 29 34 28 31 $8,301
Complex w/ 100+ FTEs 84 92 98 78 $23,621

Exhibit 4

- 8: Hourly Labor for Field Exercises

Facility Type Management Engineers Production Emergency Responders Facility

Cost

Simple w/ 0

- 19 FTEs 30 38 23 60 $8,209
Simple w/ 20

- 99 FTEs 48 64 72 87 $13,835

Simple w/ 100+ FTEs 78 68 232 129 $23,111 Complex w/ 0

- 19 FTEs 30 38 23 60 $10,047
Complex w/ 20

- 99 FTEs 48 64 72 87 $17,301
Complex w/ 100+ FTEs 136 136 760 192 $65,758



## 4.5. Informat ion Disclosure Availability Rule Provisions

Public Disclosure Information Availability
This provision assumes two primary types of activities related to public disclosure: (1) disclosure to the community, and (2) disclosure to local emergency planning commi ttees and other emergency responders.
For disclosure to the community, facilities would be required to make certain information available to the public either on the facility’s website
, through file sharing
, or through some other means (e.g., providing inf ormation at a public library, or other public offices, or providing it via e

- mail upon request )

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The proposed information elements should be readily available to facility managers because most of the information is already compiled for compliance with var ious health and safety regulations

. The Safety Data Sheets are documents that OSHA requires every facility to have available for its employees , and which contain chemical hazard information required under 29 CFR 1910.1200

. The names and quantities of che micals and 5

- year accident history is are already collected for reporting in the RMP

. Especially for simple facilities, this information is unlikely to change much from year to year; the only cost associated with this element is the time required to collec t and review the information for
accuracy

. The analysis estimates that simple facilities would spend 2 hours per year reviewing the information to ensure that it is up

- to

- date

. Complex facilities may have more information to review because they may manuf acture, process, and use multiple regulated substances in multiple processes

. The analysis estimated that small complex facilities would spend 4 hours collecting and reviewing the information

. Large complex facilities were estimated to spend 16 hours per year because management and possibly counsel would need to ensure that the information was not subject to any restrictions related to security or confidential business concerns.
LEPC Information Availability
For disclosure to local emergency responders, t he provision would require facilities to draft and provide summaries of certain activities upon request

– compliance audits, any incident investigations, any implementation of IST, and exercise reports

. Facilities would also have to provide the 5

- year acc ident history, but this element is reported in the RMP and should require little effort beyond updating

. EPA estimates that the summaries would require corporate management and legal review to maintain organizational consistency (for corporations with mul tiple facilities) and removal of any legally sensitive materials, such as Chemical

- terrorism Vulnerability Information (CVI) or Confidential Business Information (CBI)

. Complex facilities, which have more covered processes that are subject to provisions, are projected to spend more time developing and reviewing information prior to submission to local agencies

. The analysis further estimates that LEPCs will require time to review materials as they are submitted. The amount of time required scales with th e complexity of the facility. The labor hour assumptions for each type of disclosure to the community and to local emergency responders are shown in Exhibit 4

- 9

. Exhibit 4

- 9 : Hourly Labor and Facility Costs

For Information Disclosure to the Community and to Local Emergency Responders

Provision/Facility Type Management Corporate Management Attorneys Engineers LEPCs Facility or Responder Costs Public Disclosure

– Small Complex 2 0 0 2 0 $352

Public Disclosure

– Large Complex 8 0 0 8 0 $1,407

Public Discl osure
– Simple 1 0 0 1 0 $130
Accident History

– Simple 0.5 0.5 0.5 1 0 $185
Accident History

– Complex 1 1 1 1 0 $390***E.O. 12866 Review

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Audit Report

– Simple 2 2 2 4 0 $739
Audit Report

– Complex 4 4 4 8 0 $1,864
Investigation Reports

- Simple 4 4 2 4 0 $1,054

Invest igation Reports

– Complex 8 4 8 12 0 $3,021

IST

– Simple 4 4 4 4 0 $1,258
IST

– Complex 8 4 8 16 0 $3,326 Exercise Reports

– Simple 2 1 1 4 0 $555
Exercise Reports

– Complex 2 2 2 8 0 $1,237

LEPC Review

– Simple 0 0 0 0 1 $53

LEPC Review

– Small Comp lex 0 0 0 0 2 $107

LEPC Review

– Large Complex 0 0 0 0 4 $214



### 4.5.1 Public Meeting

This provision would require all RMP facilities to hold a public meeting at least once every 5 years and immediately following (i.e., within 30 days of) an accident

. Th e analysis estimates that each facility would need to spend time planning for the meeting

– deciding when and where to hold the meeting, arranging the meeting space, developing and posting notices of the meeting, and developing materials to be presented an d distributed. In addition, at least two people from the facility would attend the meeting, which was estimated to take 4 hours of the attendees’ time; even if the meeting is only 2 hours, attendees would have to arrive early and would stay after the offi cial ending to talk with people, collect extra materials, and close up the meeting space.
For simple and small complex facilities, the analysis estimated that total time for preparation would be 12 hours and attendance would be 8 hours (2 managers for 4 ho urs each)

. For large complex facilities, where the information presented may be more complicated and subject to legal concerns (security and confidentiality), the analysis estimated that the facility staff would spend 24 hours preparing and reviewing pres entations and handouts; 4 facility staff (2 managers and 2 engineers) would attend the meeting

. The costs for space are expected to vary from nothing, when the meeting can be held in a public building, to between $500 and $1,000 when a meeting space must be rented or where the facility has to pay overtime to a custodian (e.g., at a public school)

. The materials distributed would also impose some costs, but most facilities may produce them in

- house

. It has been EPA’s experience after the passage of CSISSF RRA 42 that most facilities conducted meetings less than 1 day in length and used public facilities

. To arrive at a point estimate for the cost of a meeting room, the analysis took a sample

42 Chemical Safety Information, Site Security and Fuels Regulatory Relief Act***E.O. 12866 Review

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of meeting room costs from a variety of locations and used the aver age of $550. 43 The analysis further estimated that every facility would need to rent a meeting space, which likely overestimates the cost of this provision . Exhibit 4

- 10 displays the assumed hours by labor category and facility type, and the resulting esti mated facility costs.

Exhibit 4

- 10 : Hourly Labor and Unit Costs for Public Meetings

Facility Type Management Engineers Production Other Costs Facility Cost

Simple Facilities 8 8 4 $550 $1,706

Small Complex Facilities 8 8 4 $550 $2,123

Large Complex Faci lities 16 16 8 $550 $3,696



## 4 .6 New Responders

This cost provision is not a specific requirement of the proposed rule but addresses situations in which
current non

- responders may convert to being responders

. It also addresses one of the alternative optio ns ( the High Option ) under Emergency Response Program Coordination with Local Responders

. EPA is aware that some facilities have assumed that the public responders could respond to accidents at the facility when the communities do not, in fact, have nearb y responders with appropriate training and equipment for the hazards present at the facility (e.g., a hazardous materials or “hazmat” team)

. EPA used an existing analysis of hazmat team locations obtained from the Federal Emergency Management Agency (FEMA )

. Those data were compiled for the 2012 National Preparedness Report to characterize the existing coverage of hazmat teams

. 44

. The 2012 report found that “the nation has developed a mature set of assets for addressing hazardous materials incidents. ” The re were approximately 1,100 state and local hazmat teams identified, and the FEMA report concluded that 76% of the population is covered by these hazmat response teams

. 45

. EPA used those data to estimate the number of RMP facilities that could potentially be required to develop an emergency response program

. (See chapter 5 for more detail on this subject).
The cost estimate for facilities that need to become responders assumes seven types of activities:

 E mergency response plan development,

 T raining,

 Equ ipment purchase,

 T abletop exercises,

 F ield exercises,

 E mergency response program coordination with local emergency response officials, and

43 Meeting room price was determined using the average price of 17 meeting venues that could accommodate at least 2 0 + individuals. The analysis used meeting rooms from Chicago, Houston, Phoenix, Kansas City, Philadelphia, and Atlanta. Data were provided by evenues.com.

44 https://www.fema.gov/med ia

- library/assets/documents/26675

45 The approach for estimating the 76% was roughly based on the population in proximity to a hazmat team.***E.O. 12866 Review

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 P ublic disclosure of exercise reports.
For each activity category, the analysis categorizes facilities by complex ity and size according to FTEs.
Emergency response plan development, training, and equipment purchase all use hourly assumptions estimated based on the requirements set by the OSHA Hazardous Waste Operations and Emergency Response (HAZWOPER) Standard (29 CFR 1910.120(q)), which any employer whose employees respond to releases of hazardous materials must meet. 46 Any employer whose employees would respond to the hazmat incidents must develop an emergency response plan and train the workers on responding to t he particular hazards they may face

. Based on discussions with EPA staff involved in emergency response planning, complex facilities are assumed to require 32 hours of manager time, 40 hours of engineering time (5 engineers spending 8 hours each), and 32 hours of production staff time to develop an emergency response plan

. Simple facilities are assumed to require 16 hours of manager time, 16 hours of engineering time (4 engineers spending 4 hours each), and 8 hours of production staff time

. The analysis estimates that all new responders will develop a plan in year 1, and then they will expend 10 percent of the initial costs every year thereafter to maintain the plan.
Equipment purchase cost estimates were based on publicly available equipment vendor costs and EPA’s own experience of what would reasonably be required to respond to an incident

. The list of items and costs estimates is as follows:

Exhibit 4

- 11: New Responder Equipment Costs 47

Item Cost Per Item Number of Items Total Cost Level A Suit $1,750 6 $10,500 Tyvek Suit (bulk pack) $200 1 $200 Cryogenic Gloves $180 10 $1,800 Chemical Resistance Boots $150 6 $900
Vinyl Boot Covers $7.00 6 $42 Neoprene Boot Covers $100 6 $600 Nitrile Rubber Gloves $12 6 $72 Viton Rubber Gloves $10 6 $60 PVC/Nitr ile Gloves $56.95 6 $341.70 Self

- contained Breathing Apparatus $5,500 6 $33,000
Spare Bottles SCBA $800 6 $4,800 Chlorine Kit “A” $2,300 1 $2,300 Chlorine Kit “B” $2,500 1 $2,500
Non

- sparking Tool Kit $900 1 $900 Sledgehammer $55 3 $165 Bolt Cutter $85 1 $85 Sorbent Pad (100/bundle) $64 1 $64

46 The HAZWOPER standard uses the phrase “hazardous substances” but defines it to cover all DOT hazmat; regulated sub stances are a small subset of DOT hazmat.

47 Facility equipment costs are based on an estimate developed by EPA Region 6 emergency responders. Costs assume open market pricing for equipment needed to equip a six

- person hazardous materials response team. S ee email from Steve Mason, EPA Region 6, to Jim Belke, EPA Office of Emergency Management, of June 2, 2015.***E.O. 12866 Review

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Page 52 of 150 Item Cost Per Item Number of Items Total Cost Neutralizer (5 gallon bucket) $436 1 $436
Eye Wash Station $129 1 $129 Plastic Pools $10 3 $30
T otal $58,925
The analysis used a point estimate for equipment costs of $60,000 for complex facilities and l ocal government, and $50,000 for simple facilities, based on the number of staff who would be expected to use the equipment as fewer accidents occur at simple facilities relative to complex facilities

. In addition to plan development and equipment, the OSH A HAZWOPER Standard require s that any workers who may respond to hazmat releases to obtain training on proper procedures

. At a minimum, responders need 24 hours of classroom training; at least two responders in any team need more extensive training, 40 ho urs of classroom training, and 3 days of operational training

. A minimum hazmat team would include 5 responders; at least 4 responders are needed for any release 48 , and 1 other would need to be trained to ensure that a facility had a full complement at any time (to cover vacations/sick leave/travel)

. Complex facilities and governments are estimated to need at least 6 responders

. Because the training is generally available only in major cities, the analysis included travel time and per diem costs.

Most of the RMP facilities outside of the manufacturing sector are staffed only during the day, 5 days a week

. The analysis estimates that they would, therefore, have only one hazmat team comprised of a single 5

- person team

. Manufacturing plan t s generally operat e 24/7

. Based on EPA’s experience , the analysis estimated that chemical manufacturers and refineries would have hazmat teams of at least 6 people per shift, with 4 teams needed to cover the entire facility at all times. 49 Other manufacturing and large fac ilities were estimated to have a single 6

- person team that is on

- call for the off hours. Based on EPA’s experience, the cost of training ranges from $450 (for the 24

- hour course) to $1,600 (for the 72

- hour course). 50 The analysis, therefore, used $450 and $ 800 for the training fees and $100 per day for travel and expenses

. 51 Beyond the training fee, the facility would have to pay the employees for their time and travel costs

. Exhibits 4

- 12 and 4

- 13 present the hourly labor assumptions for emergency
respon se plan development and training, respectively:

Exhibit 4

- 12: Hourly Labor for New Responder Emergency Response Plan Development

48 This is the minimum number of responders necessary to meet the emergency site entry team and backup personnel requirements specified under 29 CFR 1910.120(q)(3)(v) and (vi).

49 A 3

- shift schedule requires 5 shifts of workers to operate 24/7.

50 Some vendors provide training that is exclusively on

- line and consequently considerably less expensive; OSHA has indicated in interpretation letters that such training is not sufficient to meet the requirements of the standard.

51 $100 per day is considered a blended average of likel y travel expenses. GSA per diem rates generally suggest hotel rates of between $89 to upwards of $200 depending on the area and tim e of year. Meals and incidental expenses are in addition to that amount. However, state and local officials are generally not allowed per diems if travel and training is within 50 miles of home offices and private employers may seek to take training that is close to their location to minimize travel or overnight stays. Commented [GP3]: IA Comment #140 Perhaps EPA can take another look at travel ex penses. The 100 dollars per day for travel and expenses seems low to DHS (See p. 50 of the RIA). The GSA rate for lodging in Washington, DC is at least 170 dollars. MIE is 69 dollars in DC. The GSA standard rate for lodging in non

- urban areas is 89 dol lars. In addition the MIE standard rate is 51 dollars.
Commented [GP4R3]: Added the following footnote on page 52 of the RIA: $100 per day is considered a blended average of likely travel expenses. GSA per diem rates generally suggest hotel rates of between $89 to upwards of $200 depending on the area and time of year. Meals and incidental expenses are in addition to that
amount. However, state and local officials are generally not allowed per diems if travel and training is within 50 miles of home offices and private emp loyers may seek to take training that is close to their location to minimize travel or overnight stays.***E.O. 12866 Review

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Facility Type Management Attorney Engineers Production Emergency Responders Facility

Cost Simple 16 0 16 8 0 $2,311 Complex and Local Government 32 0 40 32 0 $7,567

Exhibit 4

- 13: Hourly Labor for New Responder Training

Facility Type Management Attorneys Engineers Production Training Fees and Travel Expenses Facility

Cost Simple 0 0 72 80 $4,850 $11,107 Complex w/ 0

- 9 9 FTEs or Local Government 0 0 96 80 $5,600 $16,241

Complex w/ 100+ FTEs 0 0 384 320 $22,400 $64,964

New responders have ongoing costs that are different than the initial unit costs

. As required by OSHA, the analysis estimates that each of 5 trained st aff, for simple facilities, will need to undergo a refresher course annually that costs $100 per person

. For large complex facilities, the analysis estimates that all 24 trained staff will undergo the training

. In addition, it is estimated that staff tur nover will create additional initial training needs

. All facilities are estimated to train one new responder per year.
Assumptions for Tabletop and Field Exercises, and disclosure activities can be found in those respective sections of this chapter.

This portion of the analysis, although not a provision to itself, estimates the costs of non

- responders converting to responders

. Chapter 5 presents the total cost of the rule with a sensitivity analysis of 25 percent, 50 percent, and 75 percent of current no n

- responders not in a county with a Hazmat team converting to responder status

. One of the proposed options (t he high option ) for coordination with local responders requires all facilities to be responders ( 100 percent conversions )

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# CHAPTER 5: TOTAL COS TS

EPA considered multiple options representing a range of costs for m ost of the proposed rule provisions

. 52 This chapter presents the total costs of provisions by option, as well as total proposed rule

cost s , undiscounted , discounted, and annualized

. Co sts are projected over 10 years and discounted at 3 percent and 7 percent

. The time period was chosen because it is long enough for two rotations of the least frequent required activities ( which occur every five years ).

This chapter is organized as follow s:

 Section 5.1 presents the broad analytical assumptions used in the analysis focusing primarily on the annual frequency of rule provision activities.

 Section 5.2 shows the rule familiarization costs.

 Section 5. 3 describes the total costs associated with the proposed prevention program provisions

– third party compliance audits, incident investigation, and STAA.

 Section 5. 4 describes the total costs associated with the proposed emergency response preparedness provisions

– emergency response program coord ination with local responders, notification exercises, and facility exercises.

 Section 5. 5 describes the total costs associated with the proposed information sharing provisions

– information sharing with LEPCs, information sharing with the public, and pub lic meetings.

 Section 5. 6 describes the sensitivity analysis of total costs associated with the potential for
current non

- responding facilities to convert to responding facilities as a result of the proposed changes to the emergency response program coord ination provisions

. The analysis includes varying assumptions of the percentage of non

- responding facilities that may become responders.

 Section 5.7 shows the total costs for each rule provision option, as well as the total cost for the proposed rule.



## 5. 1 Analytical Assumptions

Annual Frequency

The analysis generally divided total costs into initial year costs and ongoing costs

. For provisions or options in which the activity occurs in several year increments, the annual frequency is a fraction

represen ting what portion of facilities would likely be implementing the provision in any given year

. For example, if an activity is expected to happen once every 5 years, the annual frequency would be 0.2, as 20 percent of the applicable facilities would likely be completing the activity in any given year

. The assumption that implementation would be distributed evenly across time (i.e., if facilities are required to conduct an activity once every 5 years, that one fifth would do it in any one year) may overstate the

52 See Chapter 2 for detailed presentation of the options considered.***E.O. 12866 Review

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costs for some years and understate them for others

. This issue primarily concerns the STAA and the medium and high options for third

- party audits

. The STAA is part of the PHA, which must be updated every 5 years

. If facilities have maintained that schedule from the first PHA they conducted (i.e., they have not had to update the PHA prior to the 5

- year anniversary, which would reset the clock for the next update), these costs may be concentrated over 1 to 3 years rather than distributed evenly over 5 years because facilities had 3 years to come into compliance with the original rule

. The same issue arises with
third

- party audits when applied to all compliance audits in the medium and high options; all of the costs could occur in a single year as fac ilities’ first audit may have occurred in 1999

. EPA, however, has no information on how frequently facilities have conducted PHAs or audits before the renewal date because of process or procedural changes, accidental releases, or information on risks that they thought
needed to be reconsidered.

Initial and Ongoing Costs

The analysis only used an ongoing cost when costs for years 2

- 10 were not the same as the initial cost components

. If costs for years 2

- 10 were the same as the initial year (with some var iation based on the annual frequency), then multiplying the initial cost by the annual frequency accounted for any continuing costs

. The only proposed rule provisions with ongoing costs different from the initial costs are found for new responders (Sectio n 5.5).

Capital Costs

The analysis did not monetize any capital costs (see the discussion on STAA implementation costs)

. The costs of equipment purchased for facilities becoming new responders has not been amortized . Although individual items of response equipment are relatively low cost, the overall cost of purchasing response equipment may cause some facilities to choose to finance response equipment purchases in order to spread the costs over several years , while others may treat them as an operating e xpense and pay in a single year

. By not amortizing responder equipment costs in this analysis, EPA is making the conservative assumption that facilities will pay these initial costs in a single year

.


## 5. 2 Rule Familiarization

EPA did not analyze any optio ns for rule familiarization, as this is not a provision of the rule, but rather a necessary cost of any rulemaking. All facilities and local governments are estimated to be affected by
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Page 56 of 150 Exhibit 5

- 1 : Rule Familiarization

Facility T ype Unit Cost Facilities Total Initial Cost

Simple $ 150 10
, 921 $ 1,637,844

P1 and P2 Complex $ 199 145 $ 28,896

P3 Complex $ 399 1476 $ 588,278

LEPCs $53 1724 $ 92,113 Delegated Implementing Agencies $300 14 $4,199

Total 1 4,266 $ 2, 3 51,330 47 ,130



## 5. 3 Pr evention Program Rule Provisions

Third

- party Compliance Audits

EPA analyzed three options for the proposed requirement that a facility hire a third

- party to conduct the compliance audit required under the existing rule

. Under the existing rule, P2 and P3 facilities must conduct a compliance audit at least once every 3 years.

Low Option (Proposed) : Applicable to P2 and P3 Facilities Following an Accident

The low option would impose the requirement for a third

- party auditor only on P2 or P3 facilities that had a reportable accidental release

. These facilities would be required to contract with a third

- party for their next scheduled compliance audit

. Accident numbers are based on the RMP data from RMP reportable accidents, referenced in Exhibit 3

- 9 , and ar e estimated based on the 10

- year annual average

. The RMP database contains data on accidents that have had reportable impacts, but also those without. Since this provision does not require third party audits for accidents without any reportable impacts, we deducted the number of accidents with no impacts from the total number of accidents in the RMP
database

. We also deducted the number of accidents that occurred at P1 facilities, as the proposed provision would only apply to P2 and P3 facilities

. The a nalysis projects that the annual number and distribution of accidents among types of facilities will remain the same and that in any one year, the number of facilities conducting a third

- party audit will be equal to the number of accidents

. 53 That is,
alth ough the approximately 148 third

- party audits for the P2 and P3 facilities that have a reportable release in 2016 may occur up to 3 years after the releases, depending on when the previous audit

53 EPA recognizes that subsequent to the current rule taking effect, accident rates may decrease but wishes to calculate a conservative cost estimate so assumes a constant accident rate.***E.O. 12866 Review

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occurred, the analysis projects that over time, about 148 fac ilities would conduct such an audit each

year. 54 The breakout for tot al costs is shown in Exhibit 5

- 2 :

Exhibit 5

- 2 : Total Annual Undiscounted Costs for Third

- party Compliance Audits (Low Option)

Facility Type Annual Frequency Unit Cost Facilities Total Ini tial Cost

Simple w/ 0

- 19 FTEs 1 $17,807 19 $338,329

Simple w/ 20

- 99 FTEs 1 $19,701 15 $295,509

Simple w/ 100+ FTEs 1 $20,749 39 $809,219

Complex w/ 0

- 19 FTEs 1 $43,642 3 $130,925

Complex w/ 20

- 99 FTEs 1 $46,209 13 $600,722

Complex w/ 100+ FTEs 1 $ 47,710 53 $2,528,654

Small Government 1 $18,630 3 $55,890

Large Government 1 $48,951 4 $195,803

Total 14 9 $4,955,052

Medium Option: Applicable to All P3 Facilities

Under the medium option, all P3 facilities would have to hire a third

- party to con duct compliance audits at the facility every three years. The analysis projects that a third of P3 facilities would, therefore, be conducting a third

- party audit every year. Facilit y numbers are based on the RMP data and can be
found in Exhibit 3

- 6 . The breakout for total c osts is presented in Exhibit 5

- 3

.

Exhibit 5

- 3: Total Annual Undiscounted Costs for Third

- party Compliance Audits (Medium Option)

Facility Type Annual Frequency Unit Cost Facilities Total Initial Cost

Simple w/ 0

- 19 FTEs 0.33 $17,807 5
, 4 88 $3 2,248,846

Simple w/ 20

- 99 FTEs 0.33 $19,701 1
, 0 93 $ 7,105,816

Simple w/ 100+ FTEs 0.33 $20,749 1
, 5 82 $1 0,832,330

54 The number of audits may be overstated because the number of facilities that had reportable releases over the
ten

- year period considered (1272) is lower than the number of releases reporte d (1516), according to the RMP accident database, as some facilities may have multiple accidents.***E.O. 12866 Review

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Page 58 of 150 Facility Type Annual Frequency Unit Cost Facilities Total Initial Cost

Complex w/ 0

- 19 FTEs 0.33 $43,642 2 55 $3 ,672,460

Complex w/ 20

- 99 FTEs 0.33 $46,209 6 65 $10, 140,641

Complex w/ 100+ FTEs 0.33 $47,71 0 57 2 $ 9,005,826

Small Government 0.33 $18,630 451 $2,772,718

Large Government 0.33 $48,951 522 $8,432,251

Total 10, 628 $8 4,210,888

High Option: Applicable to All P2 and P3 Facilities

Under the high option, all P2 and P3 facilities would have to hir e a third

- party to conduct compliance audits at the facility every three years

. The analysis projects that a third of P2 and P3 facilities would, therefore, be conducting a third

- party audit every year

. Facility numbers are based on the RMP data
and can be found in Exhibit 3

- 6

. The breakout for total c osts is presented in Exhibit 5

- 4

.

Exhibit 5

- 4 : Total Annual Undiscounted Costs for Third

- party Compliance Audits (High Option)

Facility Type Annual Frequency Unit Cost Facilities Total Initial Cost

Simple w/ 0

- 19 FTEs 0.33 $17,807 636 4 $37, 396,439

Simple w/ 20

- 99 FTEs 0.33 $19,701 807 $ 5,246,471

Simple w/ 100+ FTEs 0.33 $20,749 1
, 262 $ 8,641,214

Complex w/ 0

- 19 FTEs 0.33 $43,642 28 5 $ 4,104,515

Complex w/ 20

- 99 FTEs 0.33 $46,209 69 4 $ 10,582,865

Complex w / 100+ FTEs 0.33 $47,710 5 80 $ 9,131,781

Small Government 0.33 $18,630 972 $5,975,791

Large Government 0.33 $48,951 936 $15,119,899

Total 11,900 $ 96,198,975***E.O. 12866 Review

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Incident Investigation (Root Cause Analysis and Near Miss Investigation)

The RMP rule curren tly requires the owner or operator of a facility to investigate each incident which resulted in, or could reasonably have resulted in a catastrophic release (i.e., including a near miss)

. EPA is proposing to require a root cause analysis be conducted as p art of the incident investigation and analyzed three options:

Low Option: Applicable to P3 Accidents and Near Misses

The low option would require P3 facilities to conduct root cause analyses for any RMP reportable
in ac cident and to investigate and conduct a root cause analysis for near misses

. The current rule requires investigation of near misses as well, but due to significant non compliance with this provision
, the costs of near miss investigations are being included in this analysis. The analysis esti mates that
there would be one near miss for each RMP reportable in ac cident

. The number of actual near misses is unknown and depends on a judgment of the seriousness of an incident and belief that it could reasonably have resulted in a catastrophic release

. Industry estimates for the cost of incident investigation s vary widely

.

Exhibit 5

- 5 : Total Annual Undiscounted Costs for Root Cause Incident Investigation (Low Option)

Facility Type Unit Cost Facilities Total Initial Cost

P3 Near Miss

– Simple $1,78 5 75 $133,863

P3 Near Miss

– Complex $4,937 68 $335,695

P3 Accident

– Simple $1,335 75 $100,119

P3 Accident

– Complex $3,658 68 $248,758

Total 28 6 $818,435

Medium/High Option (Proposed) : Applicable to P2 and P3 Accidents and Near Misses

The mediu m/high option would apply the requirements for root cause analysis and near miss investigation to all P2 and P3 facilities

. Accident numbers are drawn from the RMP data on RMP reportable accidents, referenced in Exhibit 3

- 9

.

Exhibit 5

- 6: Total Undiscount ed Costs for Root Cause Incident Investigation (Medium/High Option)

Facility Type Unit Cost Facilities Total Initial Cost

P2 Near Miss

– Simple $1,785 5 $8,924***E.O. 12866 Review

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Page 60 of 150 P2 Near Miss

– Complex $4,937 1 $4,937

P3 Near Miss

– Simple $1,785 75 $133,863

P3 Near Miss

– Complex $4,937 68 $335,695

P2 Accident

- Simple $1,335 5 $6,675

P2 Accident

- Complex $3,658 1 $3,658

P3 Accident

- Simple $1,335 75 $100,119

P3 Accident

- Complex $3,658 68 $248,758

Total 298 $842,629

Safer Technology Alternative s Analysis

EPA analyzed three options for the proposed requirement to conduct an STAA, but monetized costs for only two of the options.

Low Option (Pr oposed

) : Applicable to a Subset of P3 Facilities

The low option would apply the rule provision to a subset of P3 process es
– those in NAICS codes 322 (pulp and paper manufacturing), 324 (petroleum and coal products manufacturing), and 325 (chemical manufacturing)

– and require owner/operators to conduct an initial evaluation and feasibility study of potential safer technolo gies every 5 years as part of the PHA

. EPA is not proposing to require implementation of any particular technology.

Exhibit 5

- 7: Total Undiscounted Costs for STAA (Low Option)

Facility Type Annual Frequency Unit Cost Processes Total Initial Cost

Paper and Small/Medium Complex 0.2 $2 8 ,817 1,783 $ 10,276,120

Large Complex 0.2 $48,754 2,514 $24,513,659

Total 4,297 $3 4,789, 7 79***E.O. 12866 Review

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Medium Option: Applicable to all P3 processes

The medium option would impose the requirement to conduct the initial analysis an d determine feasibility on all P3 processes every 5 years as part of the PHA

. Exhibit 5

- 8 presents the costs for the medium option

Exhibit 5

- 8: Total Undiscounted Costs for STAA (Medium Option)

Facility Type Annual

Frequency Unit Cost Processes Total Ini tial Cost

Initial Phase Analysis
Paper and Small/Medium Complex 0.2 $13,109 1,783 $4,674,512

Large Complex 0.2 $40,240 2,514 $20,232,785
Simple Manufacturing 0.2 $17,429 455 $1,586,062

Water/POTW 0.2 $8,744 1
, 178 $2,060,004

Intermediate Gas Processin g and Utilities 0.2 $8,744 721 $1,260,835

Refrigeration 0.2 $17,429 3
, 005 $10,474,982

Storage 0.2 $8,744 4
, 881 $8,535,553

Feasibility Analysis
Paper and Small/Medium Complex 0.2 $15,708 1,783 $5,601,609

Large Complex 0.2 $8,514 2,514 $4,280,874
Simpl e Manufacturing 0.2 $12,050 455 $1,096,566

Water/POTW 0.2 $8,444 1178 $1,989,522

Intermediate Gas Processing and Utilities 0.2 $8,444 721 $1,217,695

Refrigeration 0.2 $9

, 250 3005 $5, 559
, 357

Storage 0.2 $3,244 4881 $3,167,271

Total 14,537 $71, 737 , 62 8 *

* Total may not sum due to rounding***E.O. 12866 Review

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High Option

The high option for STAA would require all P3 facilities to implement any STAA options that the facility
determined are feasible

. Thus the costs for this option include the annual $ 71.7 million estimated above for initial and feasibility analyses plus implementation costs

. EPA has not projected implementation costs for this option because of several problems that result in a high degree of uncertainty associated
with such projections. First, what exactly facilities consider to be a safer or inherently safer change ha s various interpretations . EPA reviewed the IST implementation reported by New Jersey (NJ) 55 and Contra Costa County 56 , where State and local laws require the analysis, to evaluate what types o f changes might be expected from facilities

. Contra Costa County officials disagreed with categories made by oil
refineries and reclassified the majority of the items listed by three refineries from inherently safer to active or passive changes

– active b eing changes that require operator intervention and passive being
those that are automatic

. NJ and commenters on the NJ program labeled the majority of changes that
facilities claimed as IST as not IST

. The descriptors applied to IST

– minimization, subst itution, moderation, and simplification

– can often be applied to active and passive STAA measures, as well.

Second, the high option would require facilities to adopt feasible IST changes, and the judgement regarding feasibility is subjective and thus ver y difficult to predict. The proposed rule defines feasible to mean “capable of being successfully accomplished within a reasonable time, accounting for economic, environmental, legal, social, and technological factors

. Environmental factors would include consideration of potential transferred risks for new risk reduction measures .” For example, switching from chlorine to other water treatment methods is clearly technically possible; about half of the systems originally subject to the rule have made the s witch away from chlorine and avoided continued coverage
under the RMP rule

. Whether it is feasible for a particular system would be driven by various factors, including the risk posed by the facility (e.g., is it close to inhabited areas or at some dista nce)
, other demands on the operating government (e.g., does the system need to replace aging pipelines, install water monitors, increase sewage treatment capacity, etc.) , and perhaps other considerations

. Most RMP facilities pose a variety of risks to wor kers and the public; any investment in risk reduction would be assessed at each facility in the context of those other risks

. For example, most of the facilities with refrigeration systems subject to the rule are involved in food processing and storage; t he risks to the public of food contamination or spoilage from less effective refrigerant processes may outweigh the risk of an ammonia release when determining where to invest capital funds

. Many facilities subject to the rule have a wide range of environ mental regulatory requirements, from reducing air emissions and avoiding spills, treating effluents, to reducing greenhouse gas emissions

. Facilities may also have

55 NJ DEP. January 15, 2010. Inherently Safer Technology (IST) Implementation Summary. New Jersey Department of Environmental Protection (NJDEP), Trenton, NJ

. http://www.nj.gov/dep/rpp/brp/tcpa/downloads/IST_SUMWEB.pdf

56 CCHS. December 9, 2014. Annual Performance Review and Evaluation

- Industrial Safety Ordinance. Contra Costa Coun ty Health Services (CCHS), Contra Costa County, CA. http://cchealth.org/hazmat/pdf/iso/iso

- report.pdf

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requirements related to chemical security

. Some alternative refrigerants, such as CFCs and HCFCs, cause

ozone deplet ion

. Changing to a different refrigerant such as carbon dioxide, a cheap and non

- toxic refrigerant, would require different equipment to accommodate higher working pressures involved and may only be cost effective for new systems

. All of these , as well as other concerns, might be factored
into a facility owner’s decisions on where best to spend resources.

Third, the costs of STAA changes range widely

. A study of some human factors in the chemical process industry, presented in 2001, reported on changes that reduced risks to humans

. The cost of these
reduction s ranged from less than $1,000 to about $100,000 (in current dollars). 57 The costs of replacing chlorine in water treatment systems are far higher

. 58

. Construction costs ran ged from $650,000 to $13 million and operating costs ranged from cost

- savings to positive costs of $2.4 million or more a year

. EPA obtained information on the cost of replacing or modifying hydrogen fluoride (HF) which is used at the 47 refineries that u se it for alkylation

. C ost s for installation of technology that involve d reducing the volatility of HF by using an additive was estimated to range from $ 3.64 mill ion to $7 million. 59 The cost of conversion to use of a solid acid catalyst replacing HF is estimated at $50 million. 60 It cost s approximately $ 5 10 0 million to convert a n HF alkylation unit to sulfuric acid , however, conversion is
estimated to be one

- half to two

- thirds of the cost of installing a new sulfuric acid alkylation unit

. 61 Switching refr igerants from an anhydrous ammonia to an ammonia

- glycol system appears to typically cost $4 to $6 million

. 62 EPA has no t projected whether the larger quantity of sulfuric acid that a refinery would need to replace HF would increase costs or whether there w ould be other changes in the operating costs

. It is likely that any switch from ammonia, as the sole refrigerant, would increase the basic cost of refrigeration and increase other operating costs, as ammonia is generally more efficient (i.e., uses less en ergy) tha n other refrigerants

. Chemical substitution, in any case, would be possible at less than half the facilities; the rest either manufacture the regulated substances or store them for sale

. Some examples of lower cost measures include removing samp ling stations, replacing vessel sight glasses with magnetic level indicators, removing dead

- leg piping, using smaller diameter pipe or seal

less pumps, lowering storage inventories, and moderating process conditions such as operating temperature and pressu re.

EPA also has little information about the actual costs associated with somewhat larger projects that would replace, for example, piping or pumps with those made with stronger materials

. The costs of

57 Attwood, Dennis and David Fennell, “Cost

- effective Human Factors Techniques for Proc ess Safety,” CCPS International Conference and Workshop, October 2

- 5, 2001, Toronto, ON, CANADA

58 http://www.gpo.gov/fdsys/pkg/GAOREPORTS

- GAO

- 07

- 480/html/GAOR EPORTS

- GAO

- 07

- 480.htm

. http://www.gao.gov/assets/260/258480.pdf

59 See: http://www2.dupont.com/Clean_Technologies/en_US/assets/downloads/AlkyCurrentEvents2001.pdf

60 See: http://www.publicintegrity.or g/2011/03/28/3798/new

- oil

- refinery

- south

- dakota

- says

- it

- will

- use

alternative

- toxic

- acid

61 See: http://www.uspirg.org/sites/pirg/files/reports/Needless_Risk_USPIRG.pdf

62 See: http://yosemite.epa.gov/opa/admpress.nsf/0/1c6b8ee238fd17d185257996005b892f***E.O. 12866 Review

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these would be facility

- specific and could vary wi dely

. In short, as the previous examples indicate, a requirement to implement feasible STAA could add substantially to the cost of the rule.



## 5. 4 Emergency Response Preparedness Requirements

5.4 .1 Emergency Response Program Coordination with Local Respon ders

EPA analyzed two options related to coordination

. The current rule requires owners or operators of regulated facilities with Program 2 or 3 processes to coordinate with local response authorities and in some cases develop an emergency response progra m in accordance with §68.95 except when the stationary source is included in the community emergency response plan developed under section 303 of EPCRA (for sources with regulated toxic substances) or has coordinated response actions with the
local fire de partment (for sources with only regulated flammable substances)

Low/Medium Option (Proposed) : Applicable to Program 2 and 3 Facilities

The low/medium option enhances existing requirements by requiring Program 2 and 3 facilities to
coordinate annually with local emergency responders to ensure resources and capabilities are in place to respond to an accidental release

. This provision also requires facilities to document th eir

c oordination activities including the names of individuals involved, organizationa l affiliations, and more

. The purpose of the proposed revisions to the coordination requirement is to improve responders ’
understand ing of the risks at the facility and to better prepare them for a safe and timely response

. Coordination activities may in clude a review of the facility’s emergency action plan, (for non

- responding facilities) the facility’s emergency response plans (for responding facilities), and local response capabilities including providing information for the local community emergency r esponse plan

. Facility
counts are drawn from Exhibit 3

- 6

. This analysis assumes that facilities are not conducting coordination activities annually in the baseline, nor are they documenting those activities. The costs for the low and medium options are the same (the low option eliminates the provision allowing an LEPC to require that the facility comply with §68.95) 63

. The low and medium option s may also cause a portion of current

non

- responding facilities to convert to responders

. We estimate this expe cted additional cost in a sensitivity analysis presented in Section 5. 6

.

Exhibit 5

- 9: Total Undiscounted Costs for Coordination (Low/Medium Option)

Facility Type Annual Frequency Unit Cost Facilities Total Initial Cost

Simple P2/3 1 $ 514 10,345 $ 5,313,8 53

Complex P2/3 1 $ 612 1,555 $ 952,099

Total 11,900 $ 6,265,952

63 See Chapter 2 for a detailed description of alternative options for the coordination rule provision.***E.O. 12866 Review

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High Option: Applicable to All Current Non

- responding Facilities

This high option would require all current non

- responding facilities to comply with §68.95 and develop

emergency response c apabilities and an emergency response plan

. The number of non

- responding
facilities can be found in Exhibit 3

- 8

. EPA projects that all nonresponding facilities would develop the plan in year one, and then spend 10 percent of the initial development costs maintaining the plan annually in years 2

- 10

. EPA projects that all non

- responders would purchase the necessary equipment in the first year and then spend 10 percent of the initial purchase price annually for years 2

- 10 for maintenance and replacement. I n Exhibit 5

- 10, cost elements are presented by total initial costs, and maintenance costs, if applicable. If a sub

- provision has an ongoing maintenance cost, it is assumed that the initial cost will be incurred in year 1, and the ongoing cost will be incu rred in years 2

- 10. For facilities that do not have an ongoing cost, the initial cost will be incurred with the annual frequency provided.

Exhibit 5

- 10: Total Undiscounted Costs for Coordination and Developing an ER Program (High Option)

Facility Type Ann ual Frequency Unit Cost Facilities Total Initial Cost Maintenance Costs
Plan Development Simple <20 FTEs N/A $2,311 4
, 72 4 $10,9 1 8, 980 $1,09 1 ,8 98 Simple 20

- 99 FTEs N/A $2,311 899 $2,077,935 $207,793 Simple 100+ FTEs N/A $2,311 7 31 $1,6 89,622 $16 8,962 C omplex <20 FTEs N/A $7,567 14 4 $1,0 89,621 $10 8,962 Complex 20

- 99 FTEs N/A $7,567 23 5 $1,7 78,200 $17 7,820 Complex 100+ FTEs N/A $7,567 47 $ 355,640 $ 35,564 Subtotal $17,909,997 $1,791,000 Training Simple <20 FTEs N/A $11,107 4
, 071 $45,215,184 $11,078 ,537 Simple 20

- 99 FTEs N/A $11,107 774 $8,596,549 $2,106,310 Simple 100+ FTEs N/A $11,107 721 $8,007,897 $1,962,079 Complex <20 FTEs N/A $16,241 144 $2,338,694 $446,191 Complex 20

- 99 FTEs N/A $16,241 235 $3,816,619 $880,824 Complex 100+ FTEs N/A $64,9 64 47 $3,053,295 $582,527 Local Government N/A $16,241 788 $12,797,855 $2,953,571 Subtotal $83, 826 ,094 $20,010,039 Equipment Simple <20 FTEs N/A $50,000 4
, 071 $203,550,000 $20,355,000 Simple 20

- 99 FTEs N/A $50,000 774 $38,700,000 $3,870,000 Simple 100+ FTEs N/A $50,000 721 $36,050,000 $3,605,000 Complex <20 FTEs N/A $60,000 144 $8,640,000 $864,000 Complex 20

- 99 FTEs N/A $60,000 235 $14,100,000 $1,410,000 Complex 100+ FTEs N/A $60,000 47 $2,820,000 $282,000 Local Government N/A $60,000 788 $47,2 80,000 $4,728,000***E.O. 12866 Review

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Facility Type Ann ual Frequency Unit Cost Facilities Total Initial Cost Maintenance Costs

Subtotal $ 351,140,000 $35,114,000 Table Top Exercise Simple <20 FTEs 0.8 $5,380 4
, 724 $20,331,928 $0 Simple 20

- 99 FTEs 0.8 $6,507 899 $4,679,615 $0 Simple 100+ FTEs 0.8 $12,218 731 $7,144,981 $0 Complex <20 FTEs 0.8 $6,829 144 $7 86,690 $0 Complex 20

- 99 FTEs 0.8 $8,301 235 $1,560,535 $0 Complex 100+ FTEs 0.8 $23,621 47 $888,166 $0 Subtotal $35,391,915 Field Exercise Simple <20 FTEs 0.2 $8,209 4724 $7,756,324 $0 Simple 20

- 99 FTEs 0.2 $13,835 899 $2,487,452 $0 Simple 100+ FTEs 0.2 $23,111 731 $3,378,766 $0 Complex <20 FTEs 0.2 $10,047 144 $289,351 $0 Complex 20

- 99 FTEs 0.2 $17,301 235 $813,139 $0 Complex 100+ FTEs 0.2 $65,758 47 $618,121 $0 Subtotal $15,343,153 LEPC Disclosure

– Exercise Report Simple <20 FTEs 1 $ 555 4724 $2,622,482 $0 Simple 20

- 99 FTEs 1 $555 899 $499,071 $0 Simple 100+ FTEs 1 $555 731 $405,807 $0 Complex <20 FTEs 1 $1,237 144 $178,138 $0 Complex 20

- 99 FTEs 1 $1,237 235 $290,712 $0 Complex 100+ FTEs 1 $1,237 47 $58,142 $0 Subtotal $ 4,054, 354 Total 6,7 80 $507,665,513 $56,915,039

The initial cost of $507,665,513 is the cost that all facilities will incur when they begin complying with this provision and convert from being non

- responders to responders. The $56,915,039 is the cost that facilities will incur to maintain responder status in terms of maintaining equipment, response plans, and training

. Equipment costs make up approximately 70% of the costs of converting to an emergency responder

. It seems possible that some facilities wil l finance th e initial costs and spread them across multiple years

. Thus the current assumption that facilities must pay thes e initial costs in a single initial

year is conservative

. The initial costs for becoming res ponders includes training costs

– such as course fee s , labor hours, and travel costs

– plus the cost of acquiring equipment, all of which must occur in the first year in order to meet OSHA requirements. Maintenance costs include the cost of annual refresher training, the assumption that one n ew responder per year needs to be trained (to account for turnover),
as well as costs for equipment that needs to be repaired or replaced.

For activities that have an annual frequency rate

– all pertaining to facility exercises

– the annual frequency re presents how often facilities will need to implement that activity. As explained in section***E.O. 12866 Review

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5.1, an annual frequency of 0.2 for field exercises effectively means 20% of facilities will be implementing this requirement in the first year of becoming a respo nder. The total costs for these provisions represent the number of facilities that would be implementing that expenditure in the first year of becoming a responder.

Notification Exercises

EPA analyzed only one option for this provision.

Low/Medium/High Op tion: Applicable to all Program 2 and 3 Facilities

This provision would require all P2 and P3 facilities to conduct an annual notification exercise to verify that emergency contact information is up

- to

- date

. This includes verifying that notification conta ct information for emergency responders, Federal, state and local response agencies, and other accidental
release notification contacts is correct and includes functional phone numbers

. The breakout of costs is in Exhibit 5

- 11.

Exhibit 5

- 11: Total Undisco unted Costs for Notification Drills (All Options)

Facility Type Annual Frequency Unit Cost Facilities Total Initial Cost

Simple Facilities 1 $110 10,345 $1,142,519

Complex Facilities 1 $152 1
, 555 $237,021

Total 11,900 $1,379,540

Facility Exercises

EPA analyzed three options for emergency response exercises.

Low Option : Applicable to All P2 and P3 Responding Facilities

The low option would require all P2 and P3 responding facilities to conduct an annual tabletop exercise

. The breakout of costs are i n Exhibit 5

- 12.

Exhibit 5

- 12: Total Undiscounted Costs for Facility Exercises (Low Option)

Facility Type Annual Frequency Unit Cost Facilities Total Initial Cost

Simple <20 FTEs 1 $5,380 1640 $8,823,127***E.O. 12866 Review

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- 99 FTEs 1 $6, 507 880 $5,725,892
Simple 100+ FTEs 1 $12,218 1467 $17,923,542
Complex <20 FTEs 1 $6,829 141 $962,875
Complex 20

- 99 FTEs 1 $8,301 459 $3,810,029
Complex 100+ FTEs 1 $23,621 533 $12,590,231 Total 5,120 $49,835,696

Medium Option (Proposed) : Applicable to All P2 and P3 Respond ing Facilities

The medium option would require all responding P2 and P3 facilities to conduct a field exercise every 5 years and within one year after a n RMP reportable accident and conduct an annual table top exercise in
the other years

. Given this timel ine, the analysis used an annual frequency rate of 0.2 for the field exercise and 0.8 for the tabletop exercises

. The analysis also assumed that facilities with an accident
would have met their 5

- year field exercise requirement by conducting an exercise w ithin one year of the
accident , effectively pushing their next required field exercise out 5 more years . Therefore, post

accident exercises were assumed not to affect the cost s of this option

. The breakout of costs is in Exhibit 5

- 13.

Exhibit 5

- 13: Total Undiscounted Costs for Facility Exercises (Medium Option)

Facility Type Annual Frequency Unit Cost Facilities Total Initial Cost
Table Top Exercise Simple <20 FTEs 0.8 $5,380 1
, 640 $7,058,502 Simple 20

- 99 FTEs 0.8 $6,507 880 $4,580,713 Simple 100+ FTEs 0.8 $12,218 1
, 467 $14,338,834 Complex <20 FTEs 0.8 $6,829 141 $770,300 Complex 20

- 99 FTEs 0.8 $8,301 459 $3,048,023 Complex 100+ FTEs 0.8 $23,621 533 $10,072,185 Subtotal $39,868,557 Field Exercise Simple <20 FTEs 0.2 $8,209 1,640 $2,692,712
Sim ple 20

- 99 FTEs 0.2 $13,835 880 $2,434,880 Simple 100+ FTEs 0.2 $23,111 1,467 $6,780,643 Complex <20 FTEs 0.2 $10,047 141 $283,322 Complex 20

- 99 FTEs 0.2 $17,301 459 $1,588,217 Complex 100+ FTEs 0.2 $65,758 533 $7,009,760
Total 5,120 $60,658,091***E.O. 12866 Review

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Hi gh Option: Applicable to All P2 and P3 Responding Facilities

The high option would require all P2 and P3 responding facilities to conduct an annual field exercise

. The breakout of costs are in Exhibit 5

- 14.

Exhibit 5

- 14: Total Undiscounted Costs for Faci lity Exercises (High Option)

Facility Type Annual Frequency Unit Cost Facilities Total Initial Cost
Simple <20 FTEs 1 $8,209 1
, 640 $13,463,560 Simple 20

- 99 FTEs 1 $13,835 880 $12,174,402 Simple 100+ FTEs 1 $23,111 1
, 467 $33,903,213 Complex <20 FTEs 1 $ 10,047 141 $1,416,612 Complex 20

- 99 FTEs 1 $17,301 459 $7,941,083 Complex 100+ FTEs 1 $65,758 533 $35,048,801 Total 5,120 $103,947,670



## 5. 5 Information Disclosure Rule Provisions

5.5 .1 Public Meeting

EPA analyzed two three options for imposing a requ irement to hold a public meeting

. at least once every 5 years.

Low Option (Proposed): Public Meeting After a n RMP Reportable Accident

This option would r equire that facilities having any accident meeting the reporting criteria of §6 8.42 hold a public meeti ng wi thin 30 days of the an accident meeting the reporting criteria of §6 8.42

. Similar to our approach for estimating the costs for third

- party audits, a ccident numbers are based on the RMP
data from RMP reportable accidents, referenced in Exhibit 3

- 9, a nd are estimated based on the 10

- year annual average. As with third

- party audits, we deducted the number of accidents with no impacts from
the total number of accidents in the RMP database. However, unlike third

- party audits, w e did not
deduct the numb er of accidents that occurred at P1 facilities, as the proposed provision will apply to any RMP facility that has a n RMP

- reportable n accident, including P1 f acilities

. The breakout of costs for this option is in Exhibit 5

- 15.

Exhibit 5

- 15 : Total Undiscoun ted Costs for Public Meetings (Low Option)

Accident Type Annual Frequency Unit Cost Facilities Total Initial Cost
Complex 1 $3,696 82 $139,525.62 Simple 1 $ 1,706 70 $258,357.54 Total 152 $397,883.16***E.O. 12866 Review

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Low/ Medium Option: Public Meeting Every Five Years and After a n RMP Reportable Accident; Applicable
to All P2 and P3 Facilities

This option would require that all P2 and P3 facilities conduct a public meeting once every five years and immediately following a n RMP reportable n accident

. The analysis uses a n annual frequency of 0.2 to
account for this

. The breakout of costs is in Exhibit 5

- 1 6 5

.

Exhibit 5

- 1 6 5 : Total Undiscounted Costs for Public Meetings ( Low/ Medium Opti on)

Facility Type Annual Frequency Unit Cost Facilities Total Initial Cost

Small Complex 0.2 $2,123 528 $224,194

Large Complex 0.2 $3,696 1027 $759,179

Simple 0.2 $1,706 10345 $3,529,077

Total 11,900 $4,512,451

High Option (Proposed) : Public Meetin g Every Five Years and After a n RMP Reportable Accident; Applicable to All Facilities

Thi s option would require that all facilities conduct a public meeting once every 5 years and immediately following an accident (i.e., P1 facilities would also have to comply)

. The analysis uses an annual frequency of 0.2 to account for this

. The breakout o f costs is in Exhibit 5

- 1 7 6

.

Exhibit 5

- 1 7 6 : Total Undiscounted Costs for Public Meetings (High Option)

Facility Type Annual Frequency Unit Cost Facilities Total Initial Cost
Small Complex 0.2 $2,123 565 $ 239,905 Large Complex 0.2 $3,696 1056 $780,617
Si mple 0.2 $1,706 10921 $3,725,573 Total 12,542 $4,746,094

Information Sharing Availability

EPA analyzed one option (with multiple cost outcomes depending on whether the STAA provision would apply to a subset of P3 facilities (STAA low option) or whether it would apply for all P3 facilities (medium and high options) ) for the information sharing provisions for the LEPC or emergency response officials and the public.

LEPC or Emergency Response O fficials***E.O. 12866 Review

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This proposed provision would require the facility ow ner or operator to make information on regulated
substances
, compliance audit s , IST
, accident histor y , incident investigation s , and exercise s available annually to the LEPC or emergency response officials upon request

. Facilities owners or operators would be required to update this information annually. EPA had no information to determine how many LEPCs or emergency response officials would make such requests ; h owever, EPA expects that all regulated
facilities would incur costs to update the information an nually

. The provision to share compliance audit summaries applies to P2 and P3 facilities

. The provision for sharing IST implementation information is calculated based on the total number of processes for which this provision would apply

. The other

prov isions for providing accident histories and investigation report summaries to LEPCs or emergency response officials are based on a subset of P2 and P3 facilities that are expected to have RMP reportable accidents. Costs of providing emergency response exe rcise information to LEP Cs is based on the number of P2 and P3 responding facilities. 64

Information Sharing with the P ublic

This provision would require the facility to make information available annually in a manner that is easily accessible to the publ ic including: the names , quantities, and Safety Data Sheets of regulated substances used at the facility
, the facility’s five

- year accident history
, a summary of the emergency response program information reported in the RMP
, a summary of emergency exercis es conducted and a schedule for upcoming exercises
, and LEPC contact information.

Low/Medium/High Option: Applicable to All Facilities

This provision would require that all facilities collect information related to RMP compliance and
disclose it to the pub lic and local emergency response agencies

. This includes those with Program 1

processes . H owever, facilities in Program 1 are not required to generate some information ( e.g., they are not required to do compliance audits )

. The breakout of costs related to public disclosure and local

emergen cy responders is in exhibit E xhibit 5

- 1 8 7 :

Exhibit 5

- 1 8 7 : Total Undiscounted Costs for Information Sharing Provisions (All Options)

Facility Type Annual Frequency Unit

Cost Facilities (unless otherwise

noted) Total I nitial Cost

Public Disclosure

64 The provision to share information on the names and quantities of regulated substances is the same as similar to the public disclosure provision (the public disclosure provision does not require sharing chemical quantity information) and no additional costs are estimated for sending this information to the LEPCs or loc al emergency response officials.***E.O. 12866 Review

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Small Complex 1 $459 565 $259,090

Large Complex 1 $1,621 1
, 056 $1,711,295

Simple 1 $184 10
, 921 $2,005,498

LEPC Disclosure

Accident History

– Simple 1 $185 372 $68,767

Accident History

- Complex 1 $390 350 $136,464

Au dit Report

- Simple 0.33 739 10
, 345 $2,524,286

Audit Report

- Complex 0.33 $1,864 1
, 555 $956,740

Investigation Reports

- Simple 1 $1,054 372 $392,213

Investigation Reports

- Complex 1 $3,021 350 $1,057,418

STAA

– Simple 0.2 $1,258 1,783
processes $4 48,591

STAA

– Complex 0.2 $3,326 2,514
processes $1,672,335

Exercise Reports

– Simple 1 $555 3,987 $2,213,344

Exercise Reports

- Complex 1 $1,237 1,133 $1, 401,603

LEPC Review

- Simple 1 $53 10
, 921 $583,509

LEPC Review

- Small Complex 1 $107 565 $60, 376

LEPC Review

- Large Complex 1 $214 1
, 056 $225,688

Total $11,741,335



## 5. 6 New Responders

The proposed provision to improve coordination with local responders includes the possibility that local emergency response officials with jurisdiction may require that the owner or operator of the stationary
source maintain an in

- house emergency response capability. As a sensitivity analysis, EPA has examined different assumptions regarding the number of current non

- responding facilities (see Exhibit 3

- 8 f or numbers) that might develop and maintain such in

- house capability and thereby convert to responding
facilities

.***E.O. 12866 Review

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EPA faced a lack of information regarding the number of nonresponding facilities that might develop their own emergency response programs t o comply with the proposed rule’s coordination provision

. As a consequence, EPA performed a sensitivity analysis that examined a facility’s proximity to existing hazardous materials (hazmat) teams

. While this approach is less than ideal for a number of r easons explained below, the general idea was that proximity to an existing hazmat team reduces the likelihood that a facility will need to provide for its own emergency response

. EPA used an existing analysis of
hazmat team locations obtained from the Fed eral Emergency Management Agency (FEMA)

. Those data were compiled for the 2012 National Preparedness Report to characterize the existing coverage of
hazmat teams. 65 The 2012 report found that “the nation has developed a mature set of assets for addressing hazardous materials incidents. ” There were approximately 1,100 state and local hazmat teams identified, and the FEMA report concluded that 76% of the population is covered by these hazmat response teams. 66

Although the exact location of each hazmat team co uld not be identified from the FEMA data, it was possible to identify the county of each hazmat team (see Exhibit 5

- 1 9 8 )

. Using ArcGIS tools, the maps of

non

- responding facilities and hazmat team counties were merged and appear as Exhibit 5

- 20 19 . These
d ata provide the boundaries for a sensitivity analysis of the number of non

- responders that will become responders as a result of the proposed rule’s coordination requirements.

Approximately 38.5% of non

- responding facilities are located in counties with h azmat teams

. Having a hazmat team within the same county ma kes it more likely th at the RMP facility can rely on that team and not need to convert to responder status

. However, this may be an overestimate of the percent that will not convert because being located in a county with a hazmat team does not necessarily mean that every chemical handled by a particular facility is covered by that team

. On the other hand, it might underestimate hazmat team coverage as there are several states that have expended s ignificant effort to have their whole state covered by hazmat response

. For instance, Florida takes into account the location of RMP facilities in the planning of its hazmat response capabilities. 67 EPA’s county analysis does
not account for such statewide planning and coverage

. Since 38.5% of non

- responding facilities are in hazmat counties, 61.5% are not “covered ,” and might potentially have to become responders

. This represents the upper bound of our sensitivity analysis

. Full counts of facilities in and out of hazmat counties, broken down by the main facility categories, appear in Exhibit 5

- 2 1 0

.

65 https://www.fema.gov/media

- library/assets/documents/26675

66 The approach for estimating the 76% was roughly based on the population in proximity to a hazmat team

67 http://floridadisaster.org/hazmat/ http://www.floridadisaster.org/hazmat/serc/documents/2010 %20SERC%20AR

- final.pdf***E.O. 12866 Review

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Page 74 of 150 Exhibit 5

- 1 9 8 : Counties with Haz ardous Mat erial Teams***E.O. 12866 Review

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Page 75 of 150 Exhibit 5

- 20 19 Locations of Non

- Responding Facilities***E.O. 12866 Review

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Exhibit 5

- 2 1 0 : Sensitivity Analysi s of Percent of Non

- Responding Facilities that M ight Convert to Responder Status

Sector In a County with a Hazmat Team

Out In Percent All Non

- Responders 4,349 2,722 38.5% Food/Bev

. Manufacturers 204 294 59.0% Ag

. Facilities 2,328 742 24.2% Chem Who lesale 113 104 47.9% Warehouses 162 306 65.4% Other Wholesale 2,270 645 22.1% Oil Gas 262 75 22.3%
Water or POT W 654 703 51.8% Refineries 10 8 44.4% Chemical Manufacturers 237 184 43.7% Pulp and Paper 1 4 80.0%

Using 61.5 percent on the high

- end, the sensitivity analysis used this portion of the non

- responding RMP facility universe (equivalent to 4
, 112 facilities) to assume that 25%, 50%, and 75% of these non

respond ing facilities would need to become responding facilities

.

The unit cost breakdown is the same as presented in Exhibit 5

- 10

. Exhibits 5

- 2 2 1 , 5

- 2 3 2 , and 5

- 2 4 3 present new responder costs for 25 percent, 50 percent, and 75 percent of current non

- responding
facilities to become responders

. The components of the costs for this sensitivity analysis are described
above in Section 5.3.1 under the High Option alternative

.

Exhibit 5

- 2 2 1 : Total Undiscounted Costs for New Responders : 25% Conversion (Millions , 2014 Dollars)

Provision Type 25% Conversion Facilities Total Initial Cost Ongoing Cost s

Plan Development 1,028 $ 2.7 $ 0.3

Training 1,028 $ 12 .8 $ 3 .0

Equipment 1,028 $ 53 .9 $ 5 .4

Table Top Exercise 1,028 $ 5 .0 $0

Field Exercise 1,028 $ 2 .1 $0

LEPC Disclosure

– Exercise Report 1,028 $ 0.6 $0

Total * $ 77.1 $ 8 .7***E.O. 12866 Review

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*Totals may not sum due to rounding

Exhibit 5

- 2 3 2 : Total Undiscounted Costs for New Res ponders : 50% Conversion (Millions , 2014 Dollars)

Provision Type 50% Conversion Facilities Total Initial Cost Ongoing Costs

Plan Development 2
, 056 $ 5.4 $ 0.5

Training 2
, 056 $ 25.7 $ 6.1

Equipment 2
, 056 $ 107.7 $ 10.7

Table Top Exercise 2
, 056 $ 10.1 $0

Field Exercise 2
, 056 $ 4.2 $0

LEPC Disclosure

– Exercise Report 2
, 0 56 $ 1.2 $0

Total * $ 154.3 $ 17.4
*Totals may not sum due to rounding

Exhibit 5

- 2 4 3 : Total Undiscounted Costs for New Responders : 75 % Conversion (Millions , 2014 Dollars)

Provision Type 75% Conversion Facilities Total Initial Cost Ongoing Costs

Plan Development 3
, 084 $ 8.0 $ 0.8

Training 3
, 084 $ 38.5 $ 9.2

Equipment 3
, 084 $ 161.6 $ 16.2

Table Top Exercise 3
, 084 $ 15.1 $0

Field Exercise 3
, 084 $ 6.3 $0

LEPC Disclosure

– Exercise Report 3
, 084 $ 1.8 $0

Total * $ 231.4 $ 26.2
*Totals may not add due to rounding

For the medium (proposed) option, the analysis assumed 50% conversion of non

- responders.***E.O. 12866 Review

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## 5.7 Cost Uncertainties Associated with Prev ention Program Provisions

Introduction
The proposed rule includes three prevention program provisions

– third party audits, incident investigation/root cause analysis, and STAA

– involving information collection and analysis activ i ties on the part of the owner or operator . These provisions can lead to a wide range of outcomes, and therefore

costs , if and when the owner acts upon the findings and/or recommendations generated by the audit, investigation
, or analysis . In the case of third party a udits and in cident investigations, the existing rule requires the owner or operator to correct deficiencies identified during audits and to resolve incident report findings and rec ommendations. Thus, in the baseline, owner/operators would already take actions in respo nse to findings from the baseline versions of these two provisions. The proposed rule imposes the requirement of a third party audit in place of the baseline requirement for an audit that does not specify a third party, when a facility has experienced an a ccident. Similarly the proposed rule imposes the requirement of a root cause analysis in place of the baseline requirement for an incident investigation that does not specify targeting the root cause, when a facility has experienced an accident or a “near miss.” These provisions are proposed for facilities that have experienced accidents or near misses because the fact of the accident or near miss is a signal that a more objective, deeper analysis would be useful to ensure the facilities are in compliance and taking effective steps to remedy any underlying problems.

Unlike the third party audit and root cause provision, the proposed STAA provision applies to applicable facilities whether or not there has been an accident or near miss, targeting those that fall into the three NAICS codes, 322, 324, and 325, which have the highest accident rates. Also unlike the other two prevention provisions, the outcome of the STAA provision is not limited to ensuring compliance but goes beyond compliance to consideration of any potentially feasible safer alternative technologies. However,
for t he proposed STAA provision (unlike its high

- cost alternative that EPA is not proposing but explains
above in section 5.3 ) EPA would not require the owner to implement any inherently safer technologies (IST) determined to be feasible , but some owners may choose to implement IST voluntarily. This section examines the uncertainty associated with estimating the costs of actions that owners or operators may take as a result of developing a dditional information from these three provisions

.
Third party audits

Purpose of audit, potential for actions resulting from information collected

The purpose of a compliance audit is to examine whether the facility’s accident prevention program

– PHA, mec hanical integrity program, operating procedures, etc.

– is properly implemented and in compliance with 40 CFR part 68 requirements. Such an audit can result in a wide range of potential findings. The purpose of involving a third

- party to conduct the audi t following an accident is to ensure that the information gathered is from an unbiased source to look objectively at compliance with the RMP rule. Relative to the baseline audit requirement, EPA expects the third party audits to lead to a***E.O. 12866 Review

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different and mor e objective audit report that may result in more costly changes in facility processes; less costly changes; or changes with approximately the same cost as the baseline audit. One view is that we may expect more costly changes since the objectivity of the t hird party auditor may give less regard to ensuing costs. However, EPA believes that such changes that may require more up

- front costs than baseline audits could reduce the probability of another accident and bring the facility into compliance.

More effici ent allocation of resources

Rigorous auditing that takes advantage of expert advice provides a detailed and thorough examination of potential problems and constructs careful ideas to remedy those problems. In the baseline without the proposed rule, audits are being conducted with pot entially less expertise or with biased information. The remedies suggested by a third party audit are expected to be more efficient at identifying deficiencies and correcting risky situations than remedies that would occur in t he baseline. From this perspective, there is an expectation that the more efficient remedies suggested by third party audits will impose different costs but not necessarily additional costs. They may reveal underlying problems and
remedies that result in a more efficient allocation of the resources targeted at bringing the f acility into compliance with the RMP rule

. Examples of auditing results that could lead to additional expenditures

Examples of potential actions resulting from audits could include m ore frequent equipment inspections,
use of different or additional inspection methods, equipment upgrade or replacement, installation and
use of different or additional hazard controls, altering process operating conditions, materials, or chemistry, modificati on of operating procedures, additional training, staffing changes, etc. The wide scope of compliance audits and variation in potential follow up actions causes uncertainty in estimating expected costs. This uncertainty is exacerbated by a lack of informat ion about the incremental difference in changes that result from a third party audit compared to a baseline audit. Due to these uncertainties and this lack of information, EPA did not estimate the expected costs from follow

- up actions.

How do we charac terize these costs?

The nature of audits is to discover areas of facility operation that are not in compliance with existing rule
standards and identify actions to improve safety . This is true of existing audits as well as third

- party audits. Indeed, t h e purpose of the proposed third

- party audit provision is the same as the purpose of
the self

- audit provision in the current rule

– to identify and correct failures in the facility’s prevention

program. EPA believes that an accident occurring after a self

- audit suggests that the self

- audit may have been inadequate. EPA recognizes that coming into compliance may entail additional expenditures by facility owners. The cost of actions taken by facilities to come into compliance, however, are not
incremental e conomic costs of the proposed rule, inasmuch as they have already been accounted for in the regulatory analysis of the original RMP rule. However, EPA would like to understand better and***E.O. 12866 Review

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requests comment on how much, if any, additional spending is expecte d from actions taken due to third party auditor reports, relative to actions expected in response to auditor reports in the baseline. 68

Incident investigation/Root Cause Analysis

Purpose of investigation, potential for root cause provision to result in additional costs

The existing rule already requires incident investigations to be performed and findings to be addressed

. However, the proposed rule contemplates a more thorough “root cause” investigation to identify underlying causes of an incident

. The o utcome of a root cause investigation could reveal more
substantial system

- related reason s why an incident occurred and identify correctable failures in management systems . These underlying causes may not be identified under the baseline incident investig ation provision

.
Examples of investigation findings from the root cause analysis that might involve significant costs

Similar to the audit s, incident investigations can reveal a wide variety of incident causes. These can range from the immediate or proxim ate causes of an incident to its underlying, system

- related cause or causes. For example, an investigation may reveal that the immediate cause of an incident was equipment failure (e.g., failure of a corroded pipe), or operator error (e.g., an operator per formed procedural steps in an incorrect sequence). A deeper “root cause” investigation would go beyond these findings and identify the underlying reasons for why the equipment failed (e.g., underlying deficiencies in the facility’s mechanical integrity pr ogram) or why the operator made the error (e.g., underlying deficiencies in the facility’s operator training program).

The baseline incident investigation provision requires the owner or operator to determine “the factors
that contributed to the incident ,” but does not explicitly require the owner to perform a root cause investigation. Some regulated facilities may already interpret the baseline provision as requiring root cause investigations, but EPA believes that many others do not. Because the propo sed root cause investigation requirement is likely to result in many facilities identifying deeper system

- related causes of incidents, actions taken to resolve these causes may require greater expenditures than those taken for the baseline investigation re quirement, which may not lead to identification of system

- related causes. For example, instead of replacing a single piece of failed piping, a root cause investigation may lead to facility

- wide enhancements in piping inspections, and replacement of numero us additional piping sections where excessive corrosion was subsequently identified. Similarly, instead of providing additional training for a single operator, the root cause investigation may prompt a full overhaul of the facility’s operator training pro gram, including use of new training techniques, and additional training for all process operators. Root cause investigations may also reveal multiple systemic accident causes. For example, in addition to identifying systemic training problems, the invest igation may reveal that there

68 In the preamble to the proposed rule, EPA has requested public comment on the types of costs that result from independent audits (other than the cost of the audit) that are different from self

- audit costs.***E.O. 12866 Review

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were other underlying root causes such as an equipment design problem that led the operator to make the error ( e.g., confusing labeling or equipment configuration ), or unclear operating pr ocedures.

How do we characterize t hese costs?

Resolving such system

- related deficiencies is expected, on average, to require greater expenditures than resolving investigation findings related to baseline (i.e., non

- root

- cause) investigations. However, similar to audits, EPA expects that resolving underlying problems will, in the long term, reduce the probability and magnitude of a future accident. Similar to the audit, the incident investigation is intended to reveal deficient aspects of facility operations

– in this case, aspects that have caused an accident, and may cause future accidents. Just as with audit results, EPA recognizes that coming into compliance may entail additional expenditures by facility owners. The cost of actions taken by facilities to come into compliance, howeve r, are not incremental economic costs of the proposed rule, inasmuch as they have already been accounted for in regulatory analysis. Additionally, if a root cause investigation results in correction of a system

- related deficiency that would have eventuall y led to another accident, then it not only avoids inefficient expenditures for resolution of incident findings, but it also avoids the costs of future accidents that may have arisen from the same or similar causes. EPA requests comment on additional cost s that might occur due to root cause analysis, that are over and above costs that would occur in the baseline from the existing incident investigation requirement. 69

STAA

Purpose of STAA provisions

The proposed STAA requirement is intended to reveal potenti al opportunities for regulated facilities to eliminate or substantially reduce the hazards associated with regulated processes by performing a detailed analysis of alternative process technologies. The STAA provision requires the owner or operator to cons ider process hazard controls in the following order of preference : inherently safer technology or design, passive measures, active measures, and procedural measures. The provision also requires the owner or operator to determine the feasibility of the inh erently safer technologies and designs considered.

The STAA provisions are targeted at three sectors

– petroleum and coal products manufacturing, chemical manufacturing, and paper manufacturing

– that have had a high frequency of RMP

- reportable
accidents relative to other RMP

- regulated industry sectors. The baseline RMP requirements already require owners and operators of most facilities in these sectors to perform a PHA. The PHA provisions require facilities to identify, evaluate, and control process ha zards using appropriate engineering and administrative controls. However, the baseline requirement does not explicitly require the owner or operator to consider inherently safer technologies. EPA believes that requiring owners and operators of higher ris k facilities to consider safer technologies and alternatives

– with an emphasis on inherently

69 In the preamble to th e proposed rule, EPA has requested public comment on the types of costs that result from root cause investigations as compared to non

- root

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safer technologies

– may reveal alternative hazard controls that were not considered in the baseline PHA requirement.

The STAA provision is different than the a udit and investigation provisions because the proposal d oes not require implementation of any process or operational changes identified as feasible.
I mplementation, unlike the other two proposed prevention provisions, would be voluntary and thereby
move be yond the baseline and proposed RMP requirements.

In other words
, EPA believe s that some facilities may voluntarily implement inherently safer technologies as a result of conducting the STAA. This is, in part, because the proposed definition of “feasible” 70 may result in implementation of alternatives that previously were not considered feasible (i.e., where implementation barriers such as costs or environmental and legal factors had previously been judged as too high to warrant implementation). As a result of conducting a new STAA, the facility owner or operator may re

- assess and decide to implement an inherently safer alternative after reviewing the STAA and feasibility analysis.

Costs of implementing STAA

T he costs of implementing recommendations result ing from the STAA provision are uncertain
, but in some cases could be quite high . As explained in Section 5.3, the known costs of certain STAA changes range from less than $1000 to $50 million. However, it is possible that a facility owner or operator

wo uld voluntarily choose to implement a high cost change if they believe its benefits warranted the

expense

. EPA did not attempt to estimate the costs of voluntary implementation of STAA changes for
the same reasons it did not estimate implementation costs under the high option for this provision, where implementation of feasible STAA alternatives would be required

. For many significant STAA changes, the costs would be facility

- specific, and EPA has little information on the potential costs of large STAA pr ojects. Additionally, judgements regarding what changes are considered to be safer or inherently safer , and the feasibility of such change s, is subjective. These factors make it very difficult to

pre dict the costs of STAA changes and whether or not they w ould have occurred in the baseline

. Nevertheless, EPA seeks comment on whether information exists to project what changes facilities are likely to voluntarily undertake for the categories of facilities subject to this proposed provision. EPA particularly requests cost data or studies for implementation of IST changes from any commenters who may prefer the high option for this provision.

70 The proposed rule defines feasible to mean “ capable of being successfully accomplished within a reasonable time, accounting for economic, environmental, legal, social, and technological factors. Environmental factors would include consideration of potential transferred risks for new risk reduction measures. ”***E.O. 12866 Review

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## 5. 8 7 Total Costs

The analysis presents total costs as total undiscounted costs over the 10 year period of analysis , t otal discounted (3 percent and 7 percent), and annualized (3 percent and 7 percent)

. When annual costs for different years are equal to one another across the analysis time period, the annualized costs calculated using different discount rates (e.g., 3 an d 7 percent) are equal.

Exhibit 5

- 2 5 4 presents the total costs for all options

. Blue cells represent the proposed rule option

. Exhibit 5

- 2 6 5 presents the total cost for the proposed rule only.***E.O. 12866 Review

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- 2 5 4 : Total Costs (Millions , 2014 Dollars)

Cost El ements Low Option Medium Option High Option

Annualized (3%) Annualized

(7%) Annualized

(3%) Annualized

(7%) Annualized

(3%) Annualized

(7%) Third Party Audits $5.0 $5.0 $84.2 $84.2 $96.2 $96.2

Root Cause Analysis $0.8 $0.8 $0.8 $0.8 $0.8 $0. 8
Safer Technology and Alternatives $34.8 $ 34.8 35.8 $71.7 $71.7 $71.7 $71.7

Coordination $6.3 $6.3 $6.3 $6.3 $108.2 $116.9 New Responders $16.5 $17.8 $33.0 $35.6 $49.5 $53.5 Notification Drills $1.4 $1.4 $1.4 $1.4 $1.4 $1.4

Ex ercise Costs $49.8 $49.8 $60.7 $60.7 $103.9 $103.9
LEPC Disclosure $11.7 $11.7 $11.7 $11.7 $11.7 $11.7
Public Disclosure $4.0 $4.0 $4.0 $4.0 $4.0 $4.0 Public Meetings $ 0.4 4 .5 $ 0.4 4 .5 $4. 5 7 $4. 5 7 $4.7 $4.7
Rule Familiarization $0. 3 2 $0.3 $0. 3 2 $0.3 $0.3 $0.3

Total Cost * $ 13 0 .9 135.0 $ 132.3 136.4 $27 8. 6 $281. 3 $452. 6 $465. 2 * Totals may not sum due to rounding

Exhibit 5

- 2 6 5 : Total Cost of Proposed Rule ( Millions, 2014 Dollars)

Cost Elements Total

Undiscounted Total Disco unted

(3%) Total Discounted

(7%) Annualized

(3%) * Annualized

(7%) Third Party Audits $49.5 $42.3 $34.8 $5.0 $5.0

Root Cause Analysis $8.4 $7.2 $5.9 $0.8 $0.8
Safer Technology and Alternatives $347.9 $296.7 $244.3 $34.8 $34.8

Coordination $62.7 $53.4 $4 4.0 $6.3 $6.3 New Responders

 ̊ $311.1 $281.6 $250.3 $33.0 $35.6

Notification Drills $13.8 $11.8 $9.7 $1.4 $1.4 Exercise Costs $606.6 $517.4 $426.0 $60.7 $60.7 LEPC Disclosure $129.1 $100.1 $82.4 $11.7 $11.7 Public Disclosure $39.8 $33.9 $27.9 $4.0 $4.0 Public Meetings $ 4.0 47.5 $ 3.4 40.5 $ 2.8 33.3 $ 0.4 4.7 $ 0.4 4.7 Rule Familiarization $2. 4 3 $2.3 $2.2 $0. 3 2 $0.3

Total Cost + $1, 575.4 618.

8 $1,3 50.2 87.2 $ 1,130.3 1,161.1 $1 58. 3 62.6 $1 61.0 65.3

* + Totals may not sum due to rounding***E.O. 12866 Review

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In total, the proposed rule would cost $ 158,284,120 162, 631,853 (annualized 3 percent) or $ 160,962,918 165,31 0 ,570 (annualized 7 percent) including 50 percent conversion of new responders

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# CHAPTER 6: BENEFITS

Facilities subject to the RMP regulation pose significant risks to the public and the environment

. T hese risks stem from potential accidental chemical releases that can cause fires, explosions, and harmful vapor clouds

. Chemical accidents

- fires and explosions in particular

- not only kill and injure people, but can do great damage to property. Proper ty damage can include damage to goods produced, plant equipment and structures , and nearby industrial, commercial, and residential buildings , equipment, and furnishings

. Damage can also occur to the natural environment and negatively affect nearby ecosyst ems and wildlife

. Resources
, such as emergency personnel and equipment
, are diverted to address the fire, explosion
, or vapor cloud

. Properties located near the accident may lose value as a result of the perceived risks and other disamenities posed by pr oximity to the facility

. Risks posed by RMP facilities are reduced by lowering the probability and magnitude of accidents, which is the objective of the proposed rule

. Thus
, the benefits of the proposed rule include reductions in the number of people kil led, injured, and evacuated or otherwise inconvenienced by sheltering in place; reductions in the damage caused to property on

- site and off

- site including product, equipment, and buildings; reductions in damages to the environment and ecosystems; and reduc tions in resources diverted to extinguish fires and clean up affected areas

. The proposed rule would also provide other benefits, such as increased public information, which in addition to helping to minimize the impacts of accidents on the offsite public , could also lead to more efficient property markets in areas near RMP
facilities.



## 6 .1 Benefit Categories

Exhibit 6

- 1 illustrates the social benefits associated with each proposed rule provision. There are four primary social benefit categories identifie d by EPA . These include:

 Prevention of Future RMP Accidents : Several rule provisions would prevent accidents by triggering improvements in plant design, equipment, procedures, or operator training. Preventing serious accidents avoids numerous direct cos ts, including worker, responder, and public fatalities and injuries, public evacuations, public sheltering

- in

- place, and property and environmental damage. It also avoids indirect costs, such as lost productivity due to product damage and business interru ption both on

- site and off

- site , expenditure of emergency response resources and attendant transaction costs, and reduced offsite property values.

 Mitigation of Future RMP Accidents : Several rule provisions would reduce the impacts of
serious accidents b y promoting a more rapid and efficient response to these incidents. If a
serious chemical accident or major catastrophe occurs, mitigating its impacts benefits society by reducing the number of fatalities and injuries, reducing the magnitude of property d amage and***E.O. 12866 Review

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lost productivity both on

- site and off

- site , and reducing the extent of public evacuations, sheltering, and expenditure of emergency response resources.

 Improved Information : T hree rule provisions would result in providing improved information to emergency planners, emergency responders
, and the public. Providing improved information to emergency planners and responders is beneficial because it results in more efficient allocation of public response resources by improving the ability of planne rs and responders to make appropriate decisions concerning equipment, training, and procedures

. Improved information will also improve local contingency planning and training of emergency responders

. Providing better information to members of the public will allow people to make better decisions about where to live and work, what to do when an emergency occurs, and how to account for the market value of property located near RMP facilities.

 Prevention and Mitigation of Future non

- RMP Accidents at RMP Fac ilities : Actions that prevent or reduce the severity of accidents in RMP

- covered processes are also likely to prevent or mitigate non

- RMP accidents at the same facilities because the same or similar actions can be taken with regard to processes and equipm ent not subject to the regulation, often at minimal additional cost. For example, if an owner or operator implements operational safety policies to prevent or respond to an RMP

- related emergency , it will also improve their ability to respond to

any emerge ncy or accident at the facility because of the new operational safety policies.***E.O. 12866 Review

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- 1: Social Benefits of Proposed Rule Provisions

Rule Provision Social Benefits (primary social benefit in bold)

1. Third party audits Prevention of future RMP facility accidents Mitigation of future RMP facility accidents Prevention of future non

- RMP accidents at RMP facilities Mitigation of future non

- RMP accidents at RMP facilities 2. Root cause analysis

3. Safer technology and alternatives analysi s

4. Emergency coordination Mitigation of future RMP facility accidents Improved information Mitigation of future non

- RMP accidents at RMP facilities 5. Emergency response exercises

6. LEPC information disclosure Improved information Mitigat ion of future RMP facility accidents Mitigation of future non

- RMP accidents at RMP facilities

7. Public information availability Improved information Mitigation of future RMP facility accidents

8. Public meetings Improved information Mitigation o f future RMP facility accidents

As Exhibit 6

- 1 indicates, each rule provision would produce social benefits in multiple benefit categories. The primary social benefit category for each rule provision i s indicated in bold type

. Exhibit 6

- 1 indicates, f or example, that performing accident root cause analysis primarily will help prevent future similar accidents and that improved emergency coordination will primarily help mitigate future accident impacts

. The table suggests that providing better informati on to neighboring residents and businesses may improve the efficiency of their decisions about where to locat e

. Note that the table also identifies other benefit categories listed below the boldface primary one

. For example, better informed neighbors

may have improved responses to warnings that lower their potential exposure and panic, thereby***E.O. 12866 Review

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mitigating damages

. Additionally, residents who are extremely risk averse may decide to live further from RMP facilities after reviewing improved information, impr oving the efficiency of local real estate
markets.



### 6.1.1 Prevention

Proposed rule provisions 1, 2, and 3 involve changes to the rule’s accident prevention program elements
and are intended to lower the likelihood of future accidents of the same or similar type. Rule provision 1, which would require certain compliance audits to be conducted by an independent third party, should improve the objectivity of auditors and result in identification of safety problems and necessary process improvements before such deficie ncies can result in accidents

. Rule provision 2, the root cause analysis provision (that would apply after a n RMP reportable accident or near miss), should prevent future accidents by identifying the underlying causes and corrective actions for ser ious accidents and near
misses

. Over time, implementing the corrective actions and lessons learned through root cause analyses should prevent future accidents and result in a reduction of on

- site and offsite impacts

. Rule provision 3, the STAA analysis, should result in identification of potential process changes that, if implemented, would result in owners or operators using less hazardous substances, minimizing the amount of regulated substances present in a process, moderating process conditions, o r re ducing process complexity

. Such changes, if implemented, help prevent accidents by either eliminating the possibility of an accidental release entirely, by making a process more fault

- tolerant, such that a minor process upset or equipment malfunction does not result in a serious accidental release, and by making releases that may occur less sev ere

. The STAA analysis provision does not actually require the owner or operator to implement any changes, so it would only provide benefits if the facility volunta rily decides to implement changes

. EPA has not estimated the costs of implementation in the cost analysis. 71

In addition to preventing future accidents, provisions 1, 2, and 3 have additional social benefits, including mitigation of future RMP facility ac cidents, prevention of future non

- RMP accidents at RMP facilities, and mitigation of future non

- RMP accidents at RMP facilities

. These provisions can identify process improvements that result in less severe releases (e.g., an audit or investigation that i dentifies improvements to a release detection or mitigation system).



### 6.1.2 Mitigation

Proposed rule provisions 4 and 5 are primarily focused on improving emergency response capabilities

. F aster and better coordinated responses , including effective and e fficient notification of the public,
should reduce human health impacts and property damage, and limit the number of on

- site and off

- site impacts

. Bringing fires and releases under control more quickly and ensuring that workers and responders know the mos t effective actions to take for a particular facility under particular conditions could reduce the duration of incidents, the likelihood of injuries to emergency responders, and limit

71 Although the costs associated with th ose changes may in some cases be high, it is unlikely that a facility would implement costly changes unless it determined that its own private benefits (for example, there could be production efficiency improvements as well as safety enhancements) would eq ual or exceed those costs.***E.O. 12866 Review

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exposures
— particularly for long

- duration events

. For example, a f ood pl ant in New Orleans in St. Tammany parish
, Louisiana
, recently experienced an ammonia leak

. The plant, a nearby commercial facility, and an interstate highway were shut down for hours while hazardous material crews worked to
contain the leak

. 72

Improved eme rgency response to control fires could also prevent knock

- on impacts, such as additional explosions at facilities that store highly flammable gases, potentially resulting in a release of a regulated
substance

. For example, a propane fire at a Texas refine ry in 2007 caused a chlorine release, four injuries, total refinery evacuation, and a shutdown. 73 A 2009 natural gas explosion at a food manufacturing plant led to release of ammonia from the refrigeration system and 71 hospitalizations for toxic exposure. 74 Improving emergency response could also reduce the length of offsite exposures, which would lower the risk to the public.

The Emergency Coordination provision, number 4
, would require RMP facilities to keep written records
of coordination efforts with lo cal response agencies including dates, names, and affiliations of
individuals contacted. This provision should improve emergency responses by ensuring that appropriate capabilities are establis hed to respond to emergencies

. The Exercise p rovision , number 5
, would require almost all RMP facilities to perform notification exercises, and all responding RMP facilities to perform tabletop and field exercises

. Such exercises increase emergency response readiness, both for RMP facility owners or operators and l ocal responders, by testing emergency communications systems and emergency plans and by ensuring local and facility response personnel know what actions to take duri ng various accident scenarios

. Together, rule provisions 4 and 5 should mitigate the impac t of RMP facility accidents that may occur.

Improved coordination between facility owners and operators and the local emergency response officials and emergency exercises (when local responders are involved) also help s ensure that local
officials know wh at to tell the public when real accidental releases occur

. This improved information will lead to more efficient responses by the public.



### 6.1.3 Information Disclosure

Three of the proposed rule components (6, 7, and 8) directly target information provisio n

. Providing information to the public and local agencies has multiple benefits

. Better informing the public about chemicals at an RMP facility enables more efficient decisions in the mark etplace for nearby properties

. Nearby residents will be able to m ake more informed decisions about where to locate their homes and

72 Roberts, Faimon A. (2015) I

- 12 in St. Tammany and Tangipahoa Reopened After Ammonia Leak. The Advocate. Baton Rouge. October 16.

73 CSB Report, Valero Refinery Propane Fire , Final Report, July 9, 2008, http://www.csb.gov/valero

- refinery

propane

- fire/

. 74 CSB Report, ConAgra Natural Gas Explosion and Ammonia Release , Final Report, February 4, 2010, http://www.csb.gov/conagra

- natural

- gas

- explosion

- and

- ammonia

- release/

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businesses

. Those people who are more risk averse may prefer locating further away compared to

pe ople who are less risk averse

.
Better informing LEPCs enables more efficient decision

- maki ng regarding expenditures on equipment and training for emergency preparedness. B y improving information available to the public and LEPCs about the chemicals stored and processes used at RMP facilities, equipment, materials and training will
be better al igned with the risks presented by the RMP facility

. In addition, if local residents and businesses understand the potential risks from a facility accident, they will be better able to understand recommendations for sheltering in place or evacuation and ta ke appropriate actions should an actual incident occur, thereby mitigating the impacts of the event

. Such knowledge can also help develop trust between the facility and the community, which could limit unnecessary concern and make residents more willing t o act on recommendations.



### 6.1.4 Conclusion

The discussion in this section has qualitatively explained how the proposed rule provisions could prevent and mitigate accidents and improve information available to the public and LEPCs

. EPA has no data or empir ical estimates of the precise impact of each rule provision on the probability and magnitude of an accident, or on improved efficiency due to better information

. I n order to shed light on the existing landscape, however, in the next section EPA will descr ibe in detail the number and costs of accidents currently associated with RMP facilities. To the extent practica ble , the analysis monetizes the costs of damages to partially estimate the baseline costs that should decline due to the proposed rule

. It als o qualitatively discusses other benefits that are expected outcomes of the proposed rule.



## 6. 2 Number and Costs of Baseline Accidents

As part of the RMP Program, owners or operators of facilities subject to the rule must submit
information on accidents that occurred over the previous 5 years if they produced on

- site or offsite deaths, injuries, or property damage, or if they led to an evacuation, sheltering in place event, or offsite environmental damage

. The analysis reviewed these data for all facilities that reported accidents that occurred from 2004 through 2013 (the last year with complete data) to provide a 10

- year baseline. 75 The beginning of the 10

- year period was chosen as the earlies t date that would fully reflect the impacts of
the most recent RMP rule update.

Some accidents that occurred at RMP facilities during the 10

- year period were not reported to EPA
either because the facility closed subsequent to the accident , decommissioned the process, or removed the regulated substance from the process i nvolved in the accident before it was required to submit a report to the RMP database

. For example, a Praxair facility in St. Louis, Missouri, had a fire involving

75 The accidents included those that occurred at facilities that subsequently deregistered from the RMP Program. As such, some accidents analyzed may have occurred at facilities no longer subject to the RMP rule. Offsetting this, however, is the registration of new facilities subsequent to 2013.***E.O. 12866 Review

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propylene cylinders on June 24, 2005, that resulted in one fatality and significant offsite property damage. 76 MFG Chemical, in Dalton, Georgia, released a cloud of allyl alcohol on April 12, 2004, that led to 154 people being medically treated, 5 hospitalized for chemical exposure, and a community
evacuation. 77 Both of these facilities either cl osed or deregistered the affected process before the deadline for their subsequent RMP report

. Due to the omission of such accidents, the 10

- year baseline may under

- represent the number and magnitude of RMP chemical accidents.

The RMP data indicated that there were 1,517 RMP reportable accidents among the 2, 291 total
accidents in the 10

- year baseline. Facilities provided information for 774 accidents that had no reportable impacts so EPA dropped them from the baseline database

. The RMP accident database contains information on the initiating event and contributing factors for each accident

. The impacts reported should be those attributable to, or resulting from, direct exposure to toxic concentrations, radiant heat, or overpressures from accidental relea ses or from indirect consequences of a vapor cloud explosion from the accidental release

. However, EPA determined that there we re some accidents
where a release of a regulated substance was not the cause of the resulting impacts.

To address this difficult y, RMP reportable accidents were reviewed in detail based on industry knowledge and other resources, such as reports by the Chemical Safety Board, to ensure that only impacts attributable to the release of a regulated substance were included

. For example, for one accident, a review of the Chemical Safety Board report indicated that the initiating event was an explosion in a natural gas fuel line that led to a building collapse, the death of 4 workers, and in combination with a subsequent fire, the eventual release of ammonia. 78 The analysis included the
accident in the 10

- year baseline, and retained the injuries, but excluded the 4 deaths and the property damage because they preceded the regulated substance release

. In another case, EPA omits the
accident and damages from the analyzed data because it appears that a fire was accident al ly deliberately

set by a flare fired on July 4 by a neighbor

. 79

We indicate that one potential benefit of the proposed rule is prevention of “non

- RMP” accidents at
RMP facilitie s. Therefore, it is arguable that EPA should have counted these accidents and accident

76 CSB Report, Praxair Flammable Gas Cylinder Fire , Final Report, June 15, 2006, http://www.csb.gov/praxair

flammable

- gas

- cylinder

- fire/

. 77 CSB Report, MFG Chemical Inc. Toxic Gas Release , Final Report, April 11, 2006, http://www.csb.gov/m fg

chemical

- inc

- toxic

- gas

- release/

. 78 CSB Report, ConAgra Natural Gas Explosion and Ammonia Release , Final Report, February 4, 2010, http://www.csb.gov/conagra

- natural

- g as

- explosion

- and

- ammonia

- release/ http://www.csb.gov/conagra

- natural

gas

- explosion

- and

- ammonia

- release/

. 79 Fire at Patrick Cudahy meat packing plant in Cudahy, WI on Jul y 9, 2009, http://www.bizjournals.com/milwaukee/news/2011/12/23/navy

- sued

- for

- 326

- million

- in

- damages.html

. http://www.bizjournals.com/milwaukee/stories/2009/07/20/daily58.html http://www.bizjournals.com/milwaukee/stories/2009/07/20/daily58.html

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consequences in the baseline. However, EPA chose not to do so because it is a conservative approach to estimating the potential benefits of the proposed rule.



### 6. 2.1 On

- site RMP Reportable Accidents in the 10

- Year Baseline

Exhibit 6

- 2 presents the 10

- year data, by year, for on

- site impacts of accidents

. Deaths and injuries are
attributed to either employees or members of the public

.

Exhibit 6

- 2 : On

- site Impacts by Year

Year Impact

Accidents Employee

Deaths Employee

Injuries Public

Injuries Public

Deaths Value of

Property Damage

2004 197 6 211 46 0 $124,186,397
2005 152 16 370 6 0 $343,100,280
2006 140 3 193 11 0 $181,088,015
2007 204 5 188 60 0 $207,676,070
200 8 168 6 194 11 0 $514,472,444
2009 149 5 221 6 2 $87,029,904
2010 128 9 130 5 0 $114,845,119
2011 138 2 127 0 0 $108,642,919
2012 118 1 159 0 0 $86,245,834
2013 123 3 162 3 0 $287,608,254 Annual Average 151.7 5.6 195.5 14.8 0 $205,489,524

Total Repo rtable 1,517 56 1,955 148 2 $2,054,895,236

There were a total of 5 8 on

- site fatalities over the 10

- year analysis time period , which amounts to an
annual ave r age of 6 fatalities

. Several accidents involved multiple fatalities

. The la rgest accident durin g the time period was a refinery explosion in Texas City, Texas, in 2005 that killed 15 employees. 80 In 2010, a Tesoro refinery explosion in Anacortes, Washington, killed 7 employees 81 , and a 2004 explosion at Formosa Plastics in Illiopolis, Illinois, kille d 5 employees. 82 There were 5 accidents that killed 2
workers each
, and the remaining employee deaths were single

- fatality incidents

. There were two on

-

80 CSB. March 2007. Investigation Report: Refinery Explosion and Fire , Texas City, Texas, March 23, 2005. http://www.csb.gov/assets/1/19/CSBFinalReportBP.pdf

81 CSB. May 2014. Investigation Report: Catastrophic Rupture of Heat Exchanger, Tesoro Anacortes Refinery, Anacortes, Washington, April 2, 2010. http://www.csb.gov/assets/1/7/Tesoro_Anacortes_2014

- May

- 01.pdf

82 CSB. April 2004. Investigation Report: Vinyl Chloride Monomer Explosion, Formosa Plastics Corp., Illiopolis, Illinois, April 23, 2004. http://www.csb.gov/assets/1/19/Formosa_IL_Report.pdf

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site deaths to members of the public who were truck drivers loading a tank truck with ammonia when a li ne failure occurred

. 83

The RMP rule does not require facilities to disaggregate on

- site injuries by severity so it is not possible to determine from the RMP data alone, the severity of the on

- site injuries

. However, under the RMP accident history requireme nts, a n RMP reportable accident injury means “any effect on a human that results either from direct exposure to toxic concentration; radiant heat; or overpressure from accidental releases or from the direct consequences of a vapor cloud explosion (such as flying glass, debris, or other projectiles) from an accidental release and that requires medical treatment or hospitalization. ”
Medical treatment means “treatment, other than first aid, administered by a physician or registered professional personnel unde r standing orders from a physician” (40 CFR 68.3)

. For some accidents,

w here accident reports could be located from other sources, it appears that serious injuries (i.e., those requiring hospitalization) range from none (e.g., Leprino Foods August 2013 an d Tysons Meats 2012 where all workers were treated and released) to at least 50 percent of reported injuries (Delek Refining 2008); in the largest accident (BP 2005), 66 workers were hospitalized, and 110 others were treated for minor injuries. 84

. Injuries described in reports varied from those that were treated with first aid alone at the scene to severe burns and permanent disability

. Although the RMP rule limits reportable injuries to those that require medical treatment other than first aid, in some ac cidents, minor injuries treated with first aid have been reported. Regarding on

- site property damage, the property affected included buildings, machinery, equipment and other plant infrastructure

. Almost $677 million of the $ 2 billion in property damage reported occurred in accidents that had no other reportable impacts on

- site or offsite.



### 6.2 .2 Off s - S ite Reportable Impacts in the 10

- Year Baseline

Exhibit 6

- 3 presents the reported offsite impacts for the 10

- year baseline including members of the public or emergency responders who were injured or killed offsite, were required to evacuate or shelter

in

- place, or who incurred property damage as a result of the accident s

. Of the 1,517 reportable releases, 473 had reportable offsite impacts

. O ne member of the public was killed as a result of a release of a regulated substance; that person drove into an ammonia cloud moving across a highway 85

. There were approximately 50 incidents that listed offsite environmental damage but no other impacts

. Because environme ntal damage is reported only as true/false, there is no basis for estimating the costs associated with the damage; they are not presented in either Exhibit 6

- 2 or 6

- 3

.

83 http://www.startribune.com/rosemount

- okl ahoma

- firms

- fined

- in

- 2

- deaths/95895109/

84 CSB, OSHA, and press reports were reviewed for larger accidents. CSB has investigated relatively few of the accidents in the database and does not always detail the severity of injuries. OSHA focuses investigati ons primarily on fatal accidents or those involving multiple hospitalizations.

85 http://www.ntsb.gov/investigations/AccidentReports/Pages/HZM1201s.aspx***E.O. 12866 Review

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Page 95 of 150 Exhibit 6

- 3 : Offsite Impacts by Year

Year Impact

Accidents with Offsite Impacts Number

o f Deaths Hospital

Visits People

undergoing Other Medical Treatment Number of

people Evacuated Number

of people Sheltered in place Value of

Property Damage

2004 66 0 43 239 5,656 96,958 $1,414,834
2005 54 0 4 32 3,927 135,260 $687,996
2006 53 0 7 26 1,53 3 11,792 $833,000
2007 61 0 33 212 15,464 32,682 $122,980
2008 45 0 8 74 2,798 4,771 $318,191
2009 44 1 27 37 3,102 8,984 $7,750
2010 36 0 42 112 3,564 4,180 $2,475,500
2011 36 0 2 11 699 47,833 $235,104
2012 36 0 19 14,013 1,008 98,120 $1,536,600
2 013 42 0 4 51 838 11,085 $3,720,150 Annual Average 47.3 0.1 18.9 1,480.7 3,859 45,167 $1,135,211

Total Reportable 473 1 189 14,807 38,589 451,665 $11,352,105

In the 10

- year baseline, the total number of off

- site people seeking medical treatment, other than hospitalization, is skewed by a single incident where 14,000 people sought treatment for exposure to smoke and particles from a fire at a Chevron refinery in Richmond, CA
, in 2012

. 86 For sheltering in place,
six different accidents at the BP refinery in Texas City account for 257,000 people taking shelter which explains the high numbers for 2004 and 2005. 87



### 6 .2.3 Distribution of Accident Impacts across Sectors

In the 10

- year baseline, the data indicate that fatal accidents occurred primarily in the pe troleum refining, chemical manufacturing
, and pulp and paper sectors . Accidents in these sectors account ed for
all but 10 of the fatalities and includ ed the three accidents with the greatest impacts

. 88 These sectors also account for 87 percent of the ons ite property damage (refineries alone account for 59 percent of the total)

. This is not surprising as these facilities handle highly flammable gases that can explode and
burn

. These are also large facilities with interconnected processes that can incur e xtensive damage in an explosion

. The fatalities reported as RMP reportable impacts at refineries represent one third of all

86 CSB. January 2014. Regulatory Report: Chevron Richmond Refinery Pipe Rupture and Fire, Chevron Rich mond Refinery #4 Crude Unit, Richmond, California, August 6, 2012. Report No. 2012

- 03

- I

- CA. http://www.csb.gov/assets/1/19/CSB_Chevron_Richmond_Refinery_Regu latory_Report.pdf

. 87 CSB. March 2007. Investigation Report: Refinery Explosion and Fire, Texas City, Texas, March 23, 2005. http://www.csb.gov/assets/1/19/CSBFinalReportBP.pdf

. 88 Footn ote 51 identifies the three worst accidents.***E.O. 12866 Review

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employee on

- the

- job fatalities reported to the Bureau of Labor Statistics for that sector for the 10

- year period of 2004 to 2013. In the chemical manufacturing sector, RMP reported fatalities represent about 6 percent of worker on

- the

- job deaths in the se ctor for the period

. 89 Exhibit 6

- 4 presents a breakdown
of RMP reportable accidents, deaths, and injuries by sector

. The food and beverage manufacturers and warehouses are generally ammonia refrigeration systems; the agricultural chemical distributors store
ammoni a for use as a fertilizer.

Exhibit 6

- 4 : Accidents, Fatalities, and Injuries by Sector

Sector Total 10

- Year

Accidents Acc idents

per Facility Onsite

Fatalities 90 Injuries

Onsite Injuries

Offsite NAICS 324

- Petroleum and Coal Products Manufacturing 169 1.08 29 325 14,026

NAICS 325

- Chemical Manufacturing 530 0.36 15 585 378
NAICS 311, 312

- Food/Beverage Manufacturers 270 0 .18 3 598 326

NAICS 322

– Paper Manufacturing 46 0.66 1 59 2
NAICS 331, 332, 333, 334, 336, 339

- Other Manufacturing 53 0.14 1 66 14

NAICS 11, 12, 15, 42491

- Agricultural Chemical Distributors 156 0.04 2 157 161

NAICS 4246, 4247

- Chemical/petroleum wholesale 38 0.06 0 30 31

NAICS 4244, 4245

- Other wholesale 20 0.07 0 62 15

NAICS 493

– Warehouse 72 0.07 2 77 9 NAICS 22131, 22132

- Water/POTW 75 0.04 1 89 19

NAICS 211

- Oil/Gas exploration 53 0.07 1 25 11

Other 4 3 5 0.06 1 30 4

Total 1,517 56 2,1 03 14,996

89 The BLS data reflect only facility employees killed, not contractors, who are accounted for under other NAICS codes. Therefore, these data understate the number of workers who died in refinery accidents. http://www.bls.gov/iif/oshcfoi1.htm

90 Column excludes 3 public fatalities (see Exhibits 6

- 2 and 6

- 3).***E.O. 12866 Review

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### 6. 2.4 Monetized Costs of Chemical Accidents

While t he RMP data base provides values of property damage , it includes only counts of fatalities, non

fatal injuries, evacuations, and the number of people required to shelter

- in

- place

. EPA has appl ied estimates of the values of these impacts to better understand the magnitude of accident impacts during
the 10

- year baseline

. To monetize fatalities
, EPA applied the value of statistical life (VSL) recommended
in EPA’s Guidelines for Preparing Economic Analysis (2010) (hereafter the Guidelines )

. For non

- fatal injuries, EPA gathered data on hospital costs from the US Department of Health and Human Services (HHS) Agency for Healthcare and Research and Quality Data (20 1 2 )

. 91 Finally, for evacuations and

s helter

- in

- place events, values of labor time were drawn from the Bureau of Labor Statistics (20 14 ). 92

6.2.4.1 Fatalities and Injuries

Fatalities were valued using the Guideline ’s value of a statistical life ($7.9 million in 2008 dollars) inflated
to 2014 d ollars ($8 .6 million ).

In principle, valuation of injuries includes multiple components

. The Guidelines explain that the willingness to pay ( WTP ) to reduce the risk of experiencing an illness is the preferred measure of value for morbidity effects : “As described in Freeman (2003), this measure consists of four components:

• “Averting costs” to reduce the risk of illness; • “Mitigating costs” for treatments such as medical care and medication; • Indirect costs such as lost time from paid work, maintain ing a home, and pursuing leisure activities; and • Less easily measured but equally real costs of discomfort, anxiety, pain, and suffering

. ”

Unfortunately, data were not available to estimate the components identified in the first, third, and final
bulle ts

. These cost categories are omitted from EPA’s estimates
, which rely solely on the costs of
medical care

. For on

- site injury and offsite hospitalization, the analysis reviewed the accident data to determine the percentage of the accidents that involved explosions and fires and the percentage that
involved the release of toxics

. The analysis then used the HHS data 93 on the current costs for hospitalizations for poisoning (other than by medicinal substances) to transfer to injuries from toxic releases, fo r burns to transfer to injuries associated with fire, and for open wounds to transfer to injuries from explosions

. 94 Because the costs for open wounds and poisoning were close ($37,700 and $35,300, respectively)
, the analysis used the average of these two value s for on

- site injuries; the costs for burns was $100,000

. The analysis then created a weighted value of an on

- site injury based on the propensity
for a burn

- related injury versus other impacts (fires were involved in 18 percent of the injury incident s, open wounds were assumed to be the remainder of injury costs)

. This was approximately $50,000

. The

91 http://hcupnet.ahrq.gov

92 http://www.bls.gov/ oes/current/oes_nat.htm

93 http://hcupnet.ahrq.gov/

94 http://hcupnet.ahrq.gov/ See HCUP National (Nationwide) Inpatient Sample (NIS)

- specific diagnosis statistics

.***E.O. 12866 Review

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analysis used the cost of hospitalization for poisoning (rounded to $3 5 ,000) for hospitalizations associated with offsite injuries because in the 10

- yea r baseline these injuries were usually related to exposure to toxic chemicals

. For medical treatment, other than hospitalization (offsite), the analysis used an estimate of $1,000, which is above the $750 per person paid to the 14,000 people who sought

me dical treatment from the Richmond refinery fire, and slightly below the average emergency room cost; people offsite are generally seeking treatment for exposure to fumes, which usually involves relatively low cost treatments (e.g., oxygen, eye washes, skin washes).

The $50,000 cost estimate for on

- site injuries is inaccurate for several reasons

. As mentioned above for all injuries, hospital costs are only one of four categories of social costs incurred. EPA’s estimates are conservative by omitting three o f the four categories, due to a lack of data

. However, as an estimate of hospital costs , it is an over

- estimate for an unknown percentage of the injuries on

- site that did not require hospitalizations and may not involve any medical costs 95 Or for injuries and toxic exposures that led to hospitalizations and we re minor enough that the person wa s released within a day (the HHS cost
estimates are based on 3

- day stays for poisonings and injuries, 8 days for burns)

. However, i n the

o pposite direction , the $50,0 00 cost estimate is understated for those workers who were severely injured, for whom the medical costs would certainly have involved more than hospitalization

. There would be costs associated with further medical treatment, and physical and occupational therapy.

6

. 2.4 .2 Evacuations and Shelter

- in

- Place Events

The 10

- year baseline data do not provide any basis for estimating the time involved in the average evacuation or sheltering

. EPA assumes that sheltering

- in

- place is less disruptive than evacuation s

. To estimate costs for evacuations and sheltering

- in

- place, the analysis assum ed the value of time of affected people was $ 22.65 per hour, and that the sheltering s occupied 4 hours, and the evacuations 8
hours. 96

6

. 2.4 .3 Summar y of Monetized Accident Im pacts
The dominant monetized element of RMP facility reportable accidents is on

- site property damage, followed by onsite fatalities

. The total monetized 10

- year cost of the accidents is about $2.7 billion

. $2.6 billion of that is caused by on

- site impact s, and a bout $2. 5 billion is attributed to property damage
and fatalities

. Monetizing the values of accidents during the 10

- year baseline involved a high degree of uncertainty associated with the estimated unit values for on

- site injuries, off

- site hospit alization, evacuations, and sheltering

- in

- place. However, these components of cost are small relative to the total

95 Even for widely investigated accidents, few details on injury levels are available. For the most serious accident in the RMP data, the March 2005 BP explosion and fire, which killed 15 workers, the level of injury among the 170 listed (in the facility RMP) is not well described. The CSB report indicates that 180 people were injured in the accident, and that 114 of these received only first aid and the injuries for the remaining individuals were serious enough to require medical treatment, days away from work, and/or restricted work hours. One press report stated that several were severely injured.

96 BLS data put the mean hourly wage at $22.65 across all w orkers at the end of 2014. http://www.bls.gov /news.release/ecec.t01.htm***E.O. 12866 Review

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Page 99 of 150

cost of chemical accidents. Exhibit 6

- 5 summarizes the 10

- year baseline reportable accident impacts
and Exhibit 6

- 6 presents the monetized 10

- year baseline accident costs.

Exhibit 6

- 5 : Average Impacts per Year and Accident

10

- Year Total Ave rage /Year Average/Accident
Onsite
Fatalities 5 8 5. 8 0 0.03 8 Injuries 2,103 210 1.386 Property Damage $2,054,895,236 $205,489,524 $1,354,578
Offsite
Fatalities 1 0.10 0.001 Hospitalizations 189 19 0.125 Medical Treatment 14,807 1,481 9.76
Evacuations 38,589 3,859 25.44 Sheltering in Place 451,665 45,167 298 Property Damage $11,352,105 $1,135,211 $7,483

Exhibit 6

- 6 : Monetized Accident Costs p er Year and Accident

Unit Value 10

- Year Total Ave rage /Year Average/Accident
Onsite
Fatalities $8,583,113 $497,820,554 $49,782,055.40 $328,161.21 Injuries $50,000 $105,150,000 $10,515,000 $69,314 Property Damage $2,054,895,236 $205,489,5 24 $1,354,578
Onsite Total $2,657,865,790 $265,786,579 $1,752,053
Offsite
Fatalities $8,583,113 $8,583,113 $858,311 $5,658 Hospitalizations $36,000 $6,804,000 $680,400 $4,485
Medical Treatment $1,000 $14,807,000 $1,480,700 $9 ,761
Evacuations $181 $6,992,327 $699,233 $4,609 Sheltering in Place $91 $40,920,849 $4,092,085 $26,975 Property Damage $11,352,105 $1,135,211 $7,483
Offsite Total $89,459,394 $8,945,939 $58,971
Total $2,747,325,184 $274,732,518 $1,811,024



## 6.3 Benefits Compared to Costs

The 10

- year RMP baseline suggests that considering only the monetized impacts of RMP accidents
would mean that the rule’s costs likely outweigh the portion of impacts from improved prevention and mitigation th at were monetized. The annualized cost of the proposed ru le (estimated to range from***E.O. 12866 Review

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$ 130 millio n with no new responders to $ 162 million if 50 percent of non

- responders must become responders) is between 47 % and 6 0 % of the average annual monetized costs in the 10

- year baseline. However, the monetized impacts of RMP accidents omit important benefit categories including avoided impacts of non

- RMP accidents at RMP facilities; the information benefits described above ; and additional benefit categories not r eported in the RMP data that result from accident prevention and mitigation

. Additional benefit categories include lost product ivity ; avoided responder costs; avoided transaction costs; protected property values; and avoided environmental impacts; In addi tion, the proposed rule may cause a reduction in the probability or magnitude of a major catastrophe such as the toxic gas release at Bhopal or the explosion at Phillips in Pasadena, TX in 1989 . No such major catastrophes are reflected in the 10

- year base line. The following sections describe major catastrophes and additional benefit categories not covered by the RMP data that derive from accident prevention and mitigation.



## 6.4 Avoided Catastrophes

Congress, in enacting section 112(r), was focused on cata strophic accidents such as Bhopal, which are extremely rare, but very high consequence events. The large chemical facility accidents that have occurred in the US and Europe, since the beginning of the chemical era, have not approached this level of damage , although it is possible that one could do so. The single largest U.S. chemical accident, the explosion at Phillips, Pasadena, TX, in 1989 killed 23 workers ($197 million in current dollars), injured at least 150 more ($7.5 million), and did $1.4 billion in property damage. 97 The 10

- year baseline does not include a major catastrophe such as these. If the proposed revisions were to prevent or substantially mitigate even one accident of this magnitude, the benefits generated would be dramatic.



## 6. 5 Additi onal Benefit Categories Associated with Accident Prevention and Mitigation

The sections below present a discussion of benefits from the proposed rule provisions for which there is
either limited or no information in the RMP data

. EPA qualitatively describ es each category as a cost of
accidents

. The proposed rule is expected to reduce costs in each of these categories by an uncertain

amount

. In each case, data were unavailable to quantify expected impacts of the rule.

6

. 5 .1.1 Avoided Lost Product ivity
A major cost associated with some chemical releases that is not captured in the 10

- year

- baseline estimates presented above, is lost productivity that can result if a facility or process unit must be shut down or is destroyed

. The RMP data include estimate s of property damage but specifically exclude

97 Marsh, The 100 Largest Losses, 1974

- 2013, Large Property Damage Losses in the Hydrocarbon Industry, 23rd Edition. htt ps://uk.marsh.com/Portals/18/Documents/100%20Largest%20Losses%2023rd%20Edition%202014.pdf***E.O. 12866 Review

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estimates of lost productivity. 98 EPA has not estimated these costs because of a lack of data

. Such costs are highly variable based on the type of release, the extent of the damage, the location of the facility
, and product being produced

. Marsh, a risk management and energy consultancy, has collected data on 10,000 accidents in the petrochemical sector over 40 years and published 23 editions of its “100 Largest Losses” reports

. The se limited data suggest that lost productivity may range from zero to four to five times the cost of property damage. 99 M any releases of toxics do not result in property damage and, therefore, have a limited impact on business beyond the loss of the chemical itself

. Explosions and fi res, however, can produce substantial damage.

The Marsh accident summaries provide examples of the extent of damage and the impact on production, as well as on the variability in those impacts

. One refinery facility had $240 million in damage, but contin ued to operate; another with the same level of damage was shut down for 6 months

. Production units affected by major explosions have been shut down for weeks or months or more than a

year

. Some accident reports indicate production continued but at a redu ced rate for weeks or months

. A refinery accident that shuts down one or more units will affect the firm involved , especially if it has no other refinery in the area or its other units do not have the capacity to increase production

. Such
reduced product ion may , however, be offset by increased production at other firms. Refining capacity in the US is located primarily in the Gulf Coast and West Coast regions; accidents that shut down units in those areas are less likely to have economic impacts beyond th e firm owning the refinery if other nearby refineries can increase production

. Accidents at refineries in other regions could impose social costs because even if other refineries can produce more, the re may be higher cost s of transporting products longer distances.

Broader losses could occur in the petrochemical sector where some facilities may be one of the only sources for some products

. Even in that sector, however, losses may be limited to the firm involved

. For example, the 1989 explosion at the Ph illips plant in Pasadena, TX, which destroyed two units at the facility appears to have had a limited impact on the economy even though it was the only domestic source for one product. 100 Appendix A provides a list of the major US accidents cited by Marsh i n its 2013 publication, with losses adjusted by Marsh to 2013 dollars

. These accidents are limited to those that might have occurred at RMP facilities (offshore oil and distribution accidents were omitted) and to
those that were not the result of natural disasters where the damage was the result of flooding or wind,
rather than chemical releases

. The accident list does not include all serious accidents because Marsh excluded any accident that produced less than $130 million in property damage

. ( T he publi cation covers

98 EPA instructions for RMP submissions specifically direct the owner or operator not to include any losses incurred as a result of business interruption. See page 74 of the RMP*eSubmit Users’ Manual (EPA, March 2014); http://www.epa.gov/rmp/rmpesubmit

- users

- manual

. 99 Marsh, The 100 Largest Losses, 1974

- 2013, Large property damage losses in the Hydrocarb on Industry 23rd Edition. Marsh provides estimates of property damage in current dollars and in a few cases, business loss
costs.

100 http://www .nytimes.com/1989/10/25/us/reverberations

- for

- industries

- but

- not

- for

- us

- households.html***E.O. 12866 Review

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Page 102 of 150

accidents worldwide

. ) Nonetheless, the list indicates the range of property damage and the lost productivity

.

6

. 5 .1.2 Avoided Emergency Response Costs

EPA was unable to locate data summarizing the costs associated with responding to a chem ical release, fire, or explosion

. Very likely t hese costs vary widely depending on the incident

. A response may involve facility fire brigades, community fire departments, volunteer fire departments, and mutual aid

groups

. There is also the cost associa ted with equipment depreciation and fire suppressant used

. The
level of effort and equipment use can be seen in two incidents reported by Marsh

. For a 1999 refinery fire in CA, approximately 300 firefighters and 33 fire trucks participated in the two

- and

- a

- half

- hour
effort to control the fire

. Foam concentrate consumption totaled 3,200 gallons

. A 1989 explosion at a Louisiana refinery used approximately 48,000 gallons of foam concentrate, 200 fire brigade members, and 13 pumper units during the firefigh ting effort, which extinguished the fire approximately 14 hours after the initial explosion

. Foam concentrate costs between $20 and $60 per gallon; the cost of the fire suppressant alone for these two fires ranged from $64,000 to almost $2.9 million

. In sum, EPA expects that these costs are significant.

6

. 5 .1.3 Avoided Transaction Costs
One consequence of chemical accidents is often litigation. Particularly when the public is affected, facilities are often sued. For example, a 1988 refinery explosion le d to more than 5,000 property
claims 101 . There are substantial costs associated with making and responding to such claims and the litigation surround ing them, both on behalf of plaintiffs and defendants . Rule provisions that reduce the number or severity o f accidents could reduce the number of lawsuits and the amount of resources directed toward litigation.

6

. 5 .1.4 Avoided Property Value Impacts
Following an explosion or other chemical release at an RMP facility, the marketplace for nearby properties will a djust to reflect changes in perceived risk, changes in the aesthetic appeal of the surrounding area
, and potentially reduced ecological services

. An established literature in economics has estimated the impacts on nearby property values of a wide variety of contaminated, toxic, or potentially toxic sites. 102 A variety of paper s have specifically examined the impact on property prices of

101 See Marsh, Shell Norco explosion.

102 See Boyle and Kiel (2001) Boyle, M. A. and K. A. Kiel. 2001. A Survey of House Price Hedonic Studies of the Impact of Environment al Externalities. Journal of Real Estate Literature 9(2): 117

- 144.

or Banzhaf and McCormick (2007) Banzhaf, S. and E.McCormick, January 2007. Moving Beyond Cleanup: Identifying the Crucibles of Environmental Gentrification, NCEE Working Paper Series 200702 , National Center for Environmental Economics, U.S. Environmental Protection Agency. for reviews of the literature.***E.O. 12866 Review

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Page 103 of 150

hazardous industrial facilities, usually finding that prices increase with distance from the facility. 103 To improve underst anding of the benefits of the proposed rule, we targeted research on the property value impact of accidents , not simply proximity to hazardous facilities

. Several studies are particularly
relevant

. Carroll et al (1996) studied property prices in neighbor hoods surrounding the Pepcon chemical facility in Nevada before and after a dramatic explosion in 1988

. 104 Data were for almost 5,000 property transactions from 1986 to 1990. The explosion was followed by a 17.6% decline in property values in
the two close st towns of Green Valley and Henderson (located a mean distance from the Pepcon plant of 3.2 miles and 3.5 miles respectively)

. It was later announced that the Pepcon facility would be rebuilt over 100 miles away

. Local home prices rebounded by 38% after the announcement, suggesting that proximity to the plant prior to the explosion was suppressing property values.

Hansen et al. (2006) studied the effect of a 1999 fuel pipeline explosion in Bellingham, Washington

. 105 While the explosion was not from a che mical facility, its property value impacts may be comparable. 106 The data analyzed were a sample of Bellingham single family home sales located within a mile of two pipelines

. The sales transacted from 5 and a half years prior to the explosion to 5 years af ter

. Following the event, property prices were significantly adversely affected, with the mean property price discounted by 4.6% for a property 50 feet from the pipeline or 2.3% at 100 feet, 1.2% at 200 feet and 0.2% at 1,000 feet

. The authors concluded that the effect diminished over time.

These studies suggest that preventing or mitigating an accident at a chemical facility may prevent or mitigate property value losses in nearby neighborhoods

. Note that any avoided property value losses represent par t of society’s combined valuation of reduced risks to human health, reduced ecosystem services, and negative impacts on aesthetic appeal

. Property value losses would represent only nearby homeowners, not any other affected parties such as employees who do not reside in the immediate neighborhood.

6

. 5 .1.5 Avoided Environmental Impacts

In addition to information on deaths, injuries, property damage, evacuations, and sheltering in place, the RMP rule requires owners and operators to report within the five

- yea r accident history accidental

103 See Grislain

- Letremy and Katossky (2014) Grislain

- Letrémy, C. and A. Katossky 2014. The impact of hazardous industrial facilities on hous ing prices: A comparison of parametric and semiparametric hedonic price models. Regional Science and Urban Economics 49: 93

- 107. for a review of the literature. (Their Appendix A.1 summarizes findings.)

104 Carroll, T.M., Clauretie, T.M., Jensen, J. and W addoups, M. September 1996. The Economic Impact of a Transient Hazard on Property Values: The 1988 PEPCON Explosion in Henderson, Nevada. The Journal of Real Estate Finance and Economics, Volume 13, Issue 2, pp 143

- 167.

105 Hansen, J. L., E. D. Benson and D . A. Hagen. 2006. Environmental Hazards and Residential Property Values: Evidence from a Major Pipeline Event. Land Economics 82(4): 529

- 541.

106 An important difference between a pipeline and a chemical facility is that pipelines may not be as noticeable. Parts of the pipelines in Bellingham were buried. Unlike homes near the Pepcon plant, for the five

- year period prior to the Bellingham pipeline explosion, nearby property prices showed no effect of proximity to a pipeline. However, we are interested here in the impact of accidents or, for evaluating the proposed rule, the impact of accident prevention, so the house price effects of a pipeline explosion seem informative.***E.O. 12866 Review

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Page 104 of 150

releases that result in environmental damage. However, the environmental damage information contained in the RMP database is limited, for two reasons

. First, most releases of RMP

- regulated substances do not result in lingeri ng contamination issues because most regulated substances are either highly volatile toxics that will rapidly disperse in air, or highly flammable substances that ignite if
released in the presence of an ignition source. The other reason is that RMP accid ent history reports
indicate general categories of environmental damage (e.g., fish or animal kills, tree, l a wn, shrub, or crop damage, etc.), but do not contain any estimates of damage valuation, or other specific information on reported impacts.

Notwit hstanding these limitations, some RMP accidents d o result in environmental damage

. For example, in the 10

- year baseline there were approximately 50 incidents in which offsite environmental damage was the only impact reported

. Rule provisions that prevent or mitigate the extent of accidental
releases are therefore likely to prevent or reduce the environmental impacts associated with those releases, but these benefits cannot be quantified using the available data.



## 6. 6 Conclusions

It is not possible to est imate quantitative benefits for the proposed rule

. EPA has no data to project the specific impact on accidents made by each proposed rule provision

. The accidents themselves have highly variable impacts that are difficult to predict. However, i t is clea r from the RMP accident data and other data, such as that reported by Marsh, that chemical accidents can impose substantial costs on firms, employees, emergency responders, the community, and the broader economy. Reducing the risk
of such accidents and th e severity of the impacts when accidents occur, and improving information provision, as the proposed provisions intend, would provide benefits to the potentially affected members of society.

Exhibit 6

- 9 summarizes all of the benefit or accident cost catego ries described in this chapter

. There are four broad benefit categories related to accident prevention and mitigation including RMP accidents,

non

- RMP accidents at RMP facilities, and potential major catastrophes

. The exhibit explains each and
identifies ten associated specific benefit categories

. Exhibit 6

- 7 also highlights and explains the information disclosure benefit category and iden ti fies two specific benefits associated with it.

Exhibit 6

- 7 : Summary of Social Benefits

Broad Benefit Category Ex planation Specific Benefit Categories

Accident Prevention Prevention of future RMP facility accidents

Accident Mitigation Mitigation of future RMP facility accidents***E.O. 12866 Review

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Page 105 of 150  Reduced Fatalities

 Reduced Injuries

 Reduced Property Damage

 Fewer People Sheltered in Place

 Fewer Evacuations

 Avoided Lost Productivity

 Avoided Emergenc y Response Costs

 Avoided Transaction Costs

 Avoided Property Value Impacts*

 Avoided Environmental Impacts Non

- RMP accident prevention and mitigation Prevention and mitigation of future non

- RMP accidents at RMP facilities

Avoided Catastrophes Prevention of rare but extremely high consequence events

Information Disclosure Provision of information to the public and
LEPCs  Improved efficiency of property markets

 Improved resource allocati on * These impacts partially overlap with several other categories, such as reduced health and environmental impacts

To get a sense of the size of the population affected by the proposed rule provisions, EPA determine d
the number of people that would be affected by facility worst case scenarios and alternative release
scenarios. A worst case scenario varies slightly depending on which program level a substance is managed under, but generally identifies the largest potential reach and effect of a hypothetical accidental release. The alternative release scenario identifies the potential reach and effect under more
realistic circumstances than the worst

- case scenario. Using RMP data and MARPLOT, EPA was able to determine that the aggregate U.S. po pulation potentially impacted by worst case scenarios is approximately 177 million. The aggregate U.S. population potentially impacted by alternative release scenarios is approximately 40 million. 107 Although the 10

- year baseline of accidents does not incl ude a major catastrophe

– such as the Pasadena, TX explosion

– the population estimates do demonstrate that a significant portion of the U.S. population are at risk for these scenarios. Many of the provisions proposed in this rule are intended to reduce t he risks and impacts for this large portion of the country.

107 EPA. January 27, 2016. Technical Background Document for Notice of Proposed Rulema king: Risk Management Programs under th e Clean Air Act, Section 112(r) (7).***E.O. 12866 Review

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# CHAPTER 7: SMALL ENTITY IMPACTS

The Regulatory Flexibility Act as amended (RFA) (5 U.S.C. 601

- 612) requires agencies to determine whether a proposed rule will have a “significant economic impac t on a substantial number of small
entities. ” The Small Business Administration (SBA) sets the standard for defining a small entity by 5 or 6

- digit NAICS code, for businesses (13 CFR part 121); governments are considered small if they serve fewer than 50, 000 residents. 108 Although “significant economic impact” is not defined by either the RFA or SBA, EPA guidance considers provides example thresholds of one percent and three percent of

revenues. 109 This analysis, however, uses the more stringent one percent t hreshold because almost 39 percent of the small entities affected by the rule are agricultural chemical distributors; data from the Department of Agriculture indicates that net income in this sector is less than three percent of sales. 110

This chapter presen ts the analysis of potential impacts of the rule on small entities

. The first section discusses the industrial sectors reported by RMP facilities

. The second section describes the approach to determining how many facilities and firms subject to the rule are small based on SBA standards

. The third section discusses the economic impacts of the rule on small entities.



## 7.1 RMP Affected Sectors

The RMP rule affects a broad range of sectors (296 separate NAICS codes are listed in RMP filings; 240 of
these are associated with small entities)

. The primary sectors subject to the rule and the SBA standards for defining a small firm are shown in Exhibit 7

- 1

. A dollar value standard refers to firm revenues in millions; the full

- time

- equivalent (FTE) employees appli es to the firm’s total FTE, not the number at any
one location

. For governments, the standard is based on the population served

. The NAICS codes are presented at the 2 to 6

- digit level based on whether the SBA standard varies for the 5 and 6

- digit codes
and whether there are a substantial number of RMP facilities in the sector. 111 For example, the SBA standard for the wholesale trade sector, NAICS code 42, is the same across all codes (100 FTE).

108 Some small governments serve substantial populations associated with businesses, particularly irrigation districts that serve large farming areas, but few residences, and small ci ties that have large tourist

- related businesses.

109 See Chapter 2 of Final Guidance for EPA Rulewriters: Regulatory Flexibility Act, http://www.epa.gov/rfa/documents/Guidance

- RegFlexAct .pdf

. 110 http://www.usda.gov/wps/portal/usda/usdahome?contentid=2013/10/0199.xml

111 In some cases, NAICS codes are disaggregated to 5 digits and in others 6 digits. SBA does not include all 6

- digit codes in its regulation.***E.O. 12866 Review

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- 1: Industry Sector Small Entity Standards

NAICS Sec tor Standard NAICS Sector Standard

111 Crop Production $0.75m 3253 Pesticide, Fertilizer, and Other Agricultural Chemical Manufacturing 500 FTE

112 Animal Production and

Aquaculture $0.75m

- $15m 3254 Pharmaceutical and Medicine Manufacturing 750 FTE

115 Support Activities for Agriculture and Forestry $7.5m 3255 Paint, Coating, and Adhesive Manufacturing 500 FTE

211111 Crude Petroleum and

Natural Gas Extraction 500 FTE 3256 Soap, Cleaning Compound, and Toilet Preparation Manufacturing 500

- 750 FTE

221112 Fossil Fuel Electric Power

Generation 750 FTE 3259 Other Chemical Product and Preparation Manufacturing 500

- 750 FTE

22131 Water Supply and

Irrigation Systems $27.5m 326 Plastics and Rubber Products Manufacturing 500

- 1000 FTE

22132 Sewage Treatment

Facil ities $20.5m 327 Nonmetallic Mineral Product Manufacturing 500

- 1000 FTE

3111 Animal Food

Manufacturing 500 FTE 331 Primary Metal Manufacturing 500

- 1000 FTE

3112 Grain and Oilseed Milling 500

- 1000 FTE 332 Fabricated Metal Product Manufacturing 500

- 100 0 FTE

3113 Sugar and Confectionery

Product Manufacturing 500

- 750 FTE 333 Machinery Manufacturing 500

- 1000 FTE

3114 Fruit and Vegetable

Preserving and Specialty Food Manufacturing 500

- 1000 FTE 334 Computer and Electronic Product Manufacturing 500

- 1000 FTE

3115 Dairy Product

Manufacturing 500 FTE 335 Electrical Equipment, Appliance, and Component Manufacturing 500

- 1000 FTE

3116 Animal Slaughtering and

Processing 500 FTE 336 Transportation Equipment Manufacturing 500

- 1000 FTE

3117 Seafood Product

Pre paration and Packaging 500 FTE 337 Furniture and Related Product Manufacturing 500 FTE

3118 Bakeries and Tortilla

Manufacturing 500

- 750 FTE 339 Miscellaneous Manufacturing 500 FTE

3119 Other Food

Manufacturing 500 FTE 42 Wholesale Trade 100 FTE***E.O. 12866 Review

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3121 Bev erage Manufacturing 500 FTE 44422 Nursery, Garden Center, and Farm Supply Stores $11m

322 Paper Manufacturing 500

- 750 FTE 45431 Fuel Dealers 50 FTE

32411 Petroleum Refineries 1500 FTE 48691 Pipeline Transportation of Refined Product 1,500 FTE

32412 Asph alt Paving, Roofing,

and Saturated Materials Manufacturing 500 FTE 48821 Support Activities for Rail Transportation $15m

32419 Other Petroleum and

Coal Products Manufacturing 500

- 750 FTE 4931 General Warehousing and Storage $27.5m

3251 Basic Chemical

Man ufacturing 750

- 1000 FTE 56179 Other Services to Buildings and Dwellings $7.5m

3252 Resin and Synthetic

Rubber Manufacturing 750

- 1000 FTE 5621 5622 Waste Management $38.5m

92 Governments <50,000 residents served

The codes that some facilities listed in their RMP filings are problematic

. First, many firms list multiple
NAICS codes for their facilities

. Particularly for agricultural chemical distributors there is often no clear reason for assigning facilities to different NAICS codes when the activiti es appear to be the same (e.g., facilities named as agricultural co

- ops appear in NAICS 111, 115, 32531, 325312, 325313, 325314, 325193, 42451, 42459, 42491, 444, 453, and 493)

. For other facilities, the parent firm has listed its
facilities in the code a ppropriate for activities occurring at a specific location, but not appropriate for the firm (e.g., integrated gas exploration, production, and distribution companies have facilities in NAICS 211, 424, 486, and 488; integrated oil firms list facilities in NAICS 211, 213, 221, 324, 325, 424, and 541)

. Second, not all of the NAICS codes listed exist; some are clearly earlier versions of current codes (42269 rather than 42469) and were recoded, but others represent subsectors that do not exist, making them
di fficult to define

. Third, checks of some facilities indicate that the sector listed is incorrect; the only facility with less than 5 FTEs listed for NAICS 32511 (petrochemicals) is variously described in Internet sources as an aerosol packager (an officia l Missouri report), a paperboard company, or an agricultural chemical distributor (it was recoded to NAICS 32599)

. Finally, almost all of the governmental entities, which should be listed under NAICS code 92, listed themselves under other codes, primarily 2213 (water and wastewater treatment), but also under chemical manufacturing and waste management; all of
these were recoded to NAICS 924

. Some of the other facilities listed under NAICS 2213 belong to manufacturing plants

. The decision rules applied to re

- categorize firms into correct NAICS codes are
discussed below.***E.O. 12866 Review

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## 7.2 Estimating the Number of Small Entities

The RFA and the SBA standards apply to firms, not facilities (or establishments, the term used by the Economic Census) because the costs of the rule are ultimately borne by the firm, rather than the facility

. Therefore, to determine the number of small entities, the analysis identified the number of firms and
the size of those entities

. The RMP data include facility and parent company name as we ll as the number of full time equivalents (FTE) for the facility and the NAICS codes

. Although this information facilitates the small entity analysis, a review of the data indicated a substantial number of issues

. Parent company information was often mis sing and when present, incorrect

. For example, for one company with 68 facilities, 15 listed no parent company, 52 listed the company name, and only 1 listed the name of the foreign firm that owns the company

. Two cooperatives with 20 and 30 RMP faciliti es listed zero FTEs for every facility; research indicated that one is among the largest firms in its sector, with revenues of about $1 billion and a senior management team of 15 people

. The size of the parent cooperative for
the second could not be deter mined and, therefore, it was categorized as small

. Research on one facility determined that it was owned by another firm; that firm in turn was determined to own 8 companies, most of which have RMP facilities but none of which had identified the parent co mpany

. Particularly in the oil and gas sectors, where corporate structures include multiple divisions that are separate legal entities for management and tax purposes, and where mergers are frequent, facilities often list the
intermediate entities rather than the actual parent company or the entity that purchased the site rather
than the current owner.

To develop an estimate of the number of small entities, the analysis required a series of reviews of the data to identify the large entities and the small e ntities that were part of small firms owning multiple
facilities

. First, any facility that exceeded 1,500 FTE was categorized as large; 1,500 FTE is the highest threshold for large entities when the SBA standard is based on FTE

. Based on Economic Census data, it was determined that any facility of that size would also generate revenues high enough to exceed the highest revenue threshold of any covered sector

. Second, SBA sets its standards to ensure that while
most firms in a sector are classified as sma ll, the largest firms in a sector are not

. Any facility that belonged to the largest firms in the sector were classified as large (e.g., each of the 96 facilities that belong to Tysons Foods)

. Industry data on the largest firms in each of the major secto rs (agricultural chemical distributors, food manufacturers, chemical manufacturers, and oil and gas companies) were used to identify those firms

. The largest government entities were also identified in this screen (e.g., all federal entities; any State

- ow ned facility; water systems serving Los Angeles, New York City, Chicago, etc.).

The data were reviewed to identify parent companies that were clear from the facility name, but not included in the parent company field

. That made it possible to determine t he total FTE for facilities belonging to the same parent company and compare that number to the SBA standard (when in FTEs)

. If the total FTE exceeded the standard, all the facilities were classified as large

. Where the facilities
listed different NAICS codes, the analysis applied either the code used for a majority of the facilities or, if no single code dominated, the code with the highest threshold

. For example, if a firm had facilities in***E.O. 12866 Review

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sectors where the standards were 500 and 1000 FTE, the 1000 FT E standard was used to determine if the firm was large.

For remaining facilities, if there were multiple facilities belonging to a single firm and the total FTE approached the threshold or if the name included “USA” or “US holdings”, which implied an
inte rnational company, I nternet searches were conducted to identify whether the facilities belonged to a firm with other facilities or employees

. For example, a chemical company with 7 facilities with a total of less than 300 FTE was determined to belong to a Finnish firm with more 4,000 employees

. For oil and gas exploration facilities (NAICS 211), which often have general names (e.g., gas plant 1), EPA’s facility registry system was checked to determine which firm owned the facility

. 112

The RFA defines smal l governments as governments of cities, counties, towns, townships, villages, school districts, or special districts, with a population of less than fifty thousand. 113 Most governmental RMP facilities are water and wastewater treatment systems and listed a c ity or county as the owning entity

. A check of budgets that were available for some of the smallest cities indicated that the systems (1) are sub agencies of the city/county and (2) obtain some revenues from the general fund although
most of their revenue s are derived from user fees

. To determine which facilities belong to small governments, the population for the associated city or county was determined by checking the 2014
estimates from the Census

. For special water and irrigation districts, their Int ernet sites were checked for information on the population served

. Exhibit 7

- 2 presents the number of small and large facilities by program level

. Exhibit 7

- 3 presents the small/large breakdown by sectors.

Exhibit 7

- 2: Number of Facilities Owned by Small and Large Entities by Program Level

RMP Program Small Large Total Program 3 3,996 6,619 10,615 Program 2 695 590 1285 Program 1 219 423 642 Total 4 , 910 7 , 632 12 , 542
The number of small entities is likely to be overstated

. Particularly in the agricul tural chemical distributor sector, it was not possible to determine common ownership among facilities with common names (e.g., Farmers Cooperative)

. Not all of these facilities have websites and, when they do, they do not always provide information on own ership or locations

. Unless the names were identical and the
facilities located in the same State, the analysis assumed that they belonged to separate firms

. It is also likely that for many of these facilities the FTE reported are too low

. A number of t he agricultural chemical distributors listed multiple facilities at zero FTE even though they are open more than 8 hours a day, 5 days a week.

112 http://www.epa.gov/enviro/html/fii/index.html

113 5 U.S.C. 602.***E.O. 12866 Review

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The classification of facilities as Program 1, 2, or 3 is based solely on the RMP data submitted, but, as explai ned in Chapter 3, EPA has reclassified the wholesale facilities and certain others based on OSHA’s revised interpretation of the PSM retail exemption, which will move these facilities from Program 2 to Program 3

. A review of other facilities indicates tha t, in some cases, classifications in the RMP database are inappropriate

. For example, of the 701 water/wastewater facilities in State

- plan states, 661 listed themselves correctly as P3, but 40 (including those in a major city) listed themselves as P2. 114 Of the 1,194 publicly owned facilities in States where Federal OSHA implements the PSM standard, 893 listed themselves correctly as P2, but 301 said they are P3

. In addition, there are more than 500 other facilities that listed themselves as P2 (outside of the primary agricultural retail sectors); although many of these are, in fact, agricultural chemical distributors, others appear to be facilities that should be subject to P rogram 3

.

Exhibit 7

- 3: Program Level and Size by Sector

Program 1 Program 2 Progr am 3 Total NAICS Description Small Large Small Large Small Large
311 Food Mfr 1 2 6 5 357 1
, 014 1
, 385
312 Beverage/Ice 0 0 0 0 11 80 91
322 Paper/Pulp 0 1 0 1 5 63 70
324 Petroleum 5 8 0 3 21 119 156
325 Chemical 32 21 49 27 458 878 1
, 465 313, 321, 326, 327, 33 Other Manufacturing 33 29 34 39 113 136 384
4246 Chemical Distributors 2 4 0 0 91 236 333
4247 Petroleum Distributors 3 11 0 0 69 193 276 11, 12, 15, 42491 Agricultural 9 1 0 0 1
, 809 1
, 848 3
, 667
211 Oil and Gas Exploration 88 222 13 28 10 4 286 741
2213 Water/Wastewater 0 1 6 4 12 79 102
221 222 Utilities 22 16 35 37 80 153 343
493 Warehousing 11 59 0 0 267 719 1
, 056 423, 424 Other Wholesale 0 5 0 0 100 197 302
92 Governments 6 9 521 414 451 522 1
, 923

Other 7 34 31 32 48 96 248 Total 219 423 695 590 3 , 996 6 , 619 12 , 542

114 About half of the States have accepted delegation to enforce OSHA rules; OSHA refers to these as State

- plan States. As a condition of delegation, the State must impose OSHA standards on State and local governments. Federal OSHA has no authority over those governments, so in States where OSHA enforces the rules, they do not
ap ply to governments.***E.O. 12866 Review

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### 7.2.1. FIRMS

The RFA applies to firms, not facilities (or establishments, the term used by the Economic Census)

. For facilities owned by small firms, the analysis identified 1,296 parent companies and 1,184 facilities with

n o parent company, for a total of 2,480 firms that are small entities

. Because firms own facilities in different program levels it is not possible to disaggregate firms by program level accurately

. Exhibit 7

- 4 presents the data on small firms, disaggregat ed by the total FTE for all the RMP facilities operated by the
firms

. The exhibit presents firms in four groups: single locations where no parent company was identified; firms with single locations whose name indicated that it owned other presumably non

- R MP facilities at other locations; 115 facilities that listed a parent company, but had only one RMP location; and firms that listed a parent company and have multiple RMP facilities

. Firms with multiple locations were separated because the FTE counts for the se (and for parent companies) will understate the total FTE of the firm and, therefore, the revenue base

. Note that this exhibit does not include small governments.

Exhibit 7

- 4: Small Firms by FTE Totals

Firms <5 FTE 5

- 19 FTE 20

- 99

FTE 100+

FTE Total

Firm s Total RMP

Facilities

No Parent Company Single Location 187 355 376 230 1,148 1,148 Multiple locations 30 2 5 1 38 38 Parent Company Single RMP Location 67 238 325 188 818 818 Multiple RMP locations 53 154 193 76 476 1,928 Total 3 37 749 899 495 2480 3,932 * * Total RMP facilities excludes the 978 small government facilities.
This analysis also divides facilities by responder status

. There are a total of 1,404 small responding facilities and 3,289 small non

- responding facilities (i ncludes governments, but excludes P1 facilities)

. Exhibit 7

- 5 breaks down the number of small non

- government facilities that indicated in their RMPs that they are not responders, by FTE

. (Government facilities are excluded because FTEs do not reflect the size of the governmental entity. ) If any current non

- responding facilities should become responders as a result of the proposed revisions to the regulation, then costs to purchase and maintain equipment, train personnel, and conduct exercises increase ba sed on the number of people at the facility

. Appendix A provides a breakdown of the number of facilities by 3 and 5/6

- digit NAICS code by FTE and responder
status for non

- governmental facilities.

115 For example, X Cooperative, Y terminal/plant/location.***E.O. 12866 Review

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- 5: Non

- Governmental Non

- Responding Facilities by FTE

Non

- Responders
0

- 19 FTE 1,869
20

- 99 FTE 489
100+ FTE 179
Total 2,537

The proposed rule would impose the STAA requirements on facilities with P3 processes in three NAICS
codes

– 322 (paper and pulp), 324 (petroleum), and 325 (chemicals)

. Exhibit 7

- 6 presents the breakdown of facilities owned by small firms in those sectors by facility FTE.

Exhibit 7

- 6: P3 Facilities Owned by Small Firms and Subject to STAA by Facility Size and Sector

Facility Size
STAA Facilities 0

- 19 FTE 20

- 99 FTE 100+
NAICS 32 2 5
NAICS 324 1 9 11 NAICS 3251/3252 39 222 54
NAICS 3253

- 3259 40 66 37



### 7.2.2 GOVERNMENTS

As shown in Exhibit 7

- 3, there are a combined total of 972 facilities with P2 and P3 processes that are owned and operated by small governments (i.e., the gover nment serves less than 50,000 residents)

. Because governments that serve populations above 15,000 have revenues well above $10 million so that the costs of the rule would never exceed 1%, the analysis focused on those that served fewer than 15,000 people

. Exhibit 7

- 7 presents the number of all small governments and the number serving less than 15,000 by the number of RMP facilities they operate

. Three government facilities included in the number of small governments and number of small government non

- res ponders could not be classified by population; each is a special district for which information could not be located to determine
residents served

. Two are in very small rural areas and likely serve fewer than 5,000; the third is in a
suburb of Salt Lake City and appears to serve at least 25,000 residents.

Exhibit 7

- 7: Small Governments by the Number of RMP Facilities (P2 and P3) Operated

Category Number of Governments Number of Facilities

All Small Governments 689 972 Non Responders 524 750 Non Respond ers <15,000 Residents 257 364 Non Responders <10,000 Residents 165 210 Non Responders <5,000 Residents 58 75***E.O. 12866 Review

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Unlike the facilities operated by small firms that have multiple RMP facilities, water and wastewater systems operated by small governments are generally in the same town

. Where a small firm with multiple facilities may have to train response teams for each facility it operates, a small city or town is more likely to train a single response team to cover all of its facilities.

In addition to cit ies and local districts with RMP

- regulated facilities, cities and towns where other RMP

regulated facilities are located may also incur indirect costs associated with participation in exercises and with reviewing information submitted to the LEPCs or emerg ency response officials

. LEPCs are organized at both the city and county level depending on the location

. RMP facilities are located in
more than 1,000 counties and more than 5,000 cities/towns/villages

. The counties have from 1 to 187 facilities (the l atter is Harris County, TX, which covers Houston)

. Although in general the smallest counties have only one or two facilities, there are a few small counties with more than five.



## 7.3 Economic Impact on Small Entities

7.3.1 Costs for Small Entities

Under the proposed rule, all facilities would be required to make certain information available to the public and , upon request, to the LEPC

. Practically, P1 facilities would not have to spend more than an hour a year on this disclosure because the information disclosed to the public is information every facility should have readily available and because the additional information disclosed to the LEPC relates to provisions that do not apply to P1 facilities

. Therefore, the RIA has not considered P1 small
facil ities in the analysis of impacts.

P2 and P3 facilities would incur the same costs for the other proposed provisions except the STAA

. Each facility would be required to disclose information to the public annually, disclose information to LEPCs or

emergency response officials upon request, hold a public meeting at least once every 5 years, and coordinate with the local responders
, and conduct a notification drill annually

. If the facility is a responder, it would have to hold an annual exercise, including a t least one full field exercise every 5

years

. P3 facilities in NAICS codes 322, 324, and 325 would have to conduct an STAA as part their PHA every 5 years.

If a facility has an RMP reportable accident, it would incur costs for obtaining a third

- party to conduct their next scheduled compliance audit

. It would also incur additional costs to conduct a root cause analysis as part of the incident investigation , and to hold a public meeting within 30 days of the
accident

. Facilities would also be required to conduct investigations of near misses, including a root cause analysis

. Finally, if a facility has to become a responder, it would incur costs to develop an emergency response plan, train personnel to respond, purchase and maintain equipment, and conduct
exercises.

Exhibit 7

- 8 presents three sets of costs: low year, annualized, and high year (excludes costs incurred after an accident or a near miss)

. Low

- year costs represent costs for years in which routine annual costs apply

. These include costs for co ordinating with local responders, conducting notification exercises***E.O. 12866 Review

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(applies to all P2 and P3 facilities), conducting tabletop exercises (applies only to responders), and updating disclosure information to the LEPC and the public

. High

- year costs represen t a year in which every applicable provision would occur, except costs incurred after an accident or “near miss .” This includes the routine annual costs and periodic costs that apply either every 3 or 5 years (i.e., field exercise in lieu of a tabletop ex ercise, public meeting, all public disclosure requirements, and STAA)

. Because the STAA provisions would only apply to a subset of facilities (i.e., those in NAICS 322, 324, and 325), these facilities are broken out separately in the last two rows of the exhibit. Complex facilities are those categorized as NAICS 324 or 325 and simple facilities are all others. Annualized costs average the low costs incurred for four years with the high costs incurred every fifth year.

Exhibit 7

- 8: Low, Annualized, and Hi gh Year Combined Costs for Small Entities by Group

Low Year Cost Annualized High Year Cost P2 and P3 facilities (excludes P3 facilities subject to STAA) Simple Complex Simple Complex Simple Complex
Non Responder $548 $903 $1,182 $2,027 $3,217 $5,28 0 Responder 0

- 19 FTE $6,577 $8,969 $7,175 $9,471 $12,347 $20,357 Responder 20+ FTE $7,711 $10,442 $9,899 $13,490 $18,151 $24,437 P3 facilities subject to STAA Non Responder n/a $903 n/a $6,190 n/a $26,097 Responder <20 FTE n/a $8 ,969 n/a $13,635 n/a $41,174

Low Year Cost Annualized High Year Cost P2 and P3 facilities (excludes P3 facilities subject to STAA) Simple Complex Simple Complex Simple Complex
Non Responder $808 $1,223 $808 $1,223 $808 $1,223 Responder 0

- 19 FTE $6, 743 $9,289 $8,158 $10,898 $9,572 $12,507 Responder 20+ FTE $7,870 $10,761 $11,885 $15,261 $15,900 $19,761 P3 facilities subject to STAA Non Responder n/a $1,223 n/a $17,295 n/a $33,366 Responder <20 FTE n/a $9,289 n/a $26,970 n/a $44,650

Exhibi t 7

- 9 presents the incremental costs that current non

- responding facilities would incur to become responders

. These costs include developing an emergency response program pursuant to §68.95, employee training, and purchasing and maintain ing response and p ersonal protective equipment, but do
not include the cost of exercises

. The incremental cost would be added to the responder costs shown in
Exhibit 7

- 8

. The high

- year costs are the first year costs when the emergency response program would be developed, personnel trained, and equipment purchased

. The low

- year cost covers refresher training, training for new employees, and equipment maintenance and replacement

. The annualized cost is annualized over 10 years assuming the high year costs occur in the firs t year and the low year
costs in the nine subsequent years.***E.O. 12866 Review

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Page 116 of 150 Exhibit 7

- 9: Incremental Costs to Become a Responder

Low Annualized High Year Simple < 20 $5,402 $9,799 $49,367 Simple 20+ $6,038 $10,689 $52,546 Complex <20 $8,657 $15,877 $80,853
Go vernments $8,010 $14,449 $72,405

Governments are presented separately in Exhibit 7

- 9 because they would incur higher costs than other simple facilities as a consequence of operating a water treatment facility

. This is, in part, because they
would need more equipment, specifically chlorine cylinder repair kits as well as personal protective equipment for a higher number of people

. Governments are expected to train more people to ensure that an adequate number of personnel are available at all times; fi refighters may be busy with other critical responses when a release occurs so backups would be needed

. Governments also have fewer options than other RMP facility owners/operators

. A privately owned facility that is a non

- responder
can choose to remain a non

- responder if the local government is cap able to respond or if the owner/operator can help fund the local government to develop hazmat response capability

. If a public water system is operated by a city or town that does not have appropriate response capability (e.g., a hazardous materials, or hazmat, response team), the local government would need to develop a hazmat response capability unless the town is close to another community that has a hazmat team and is willing to respond

. Both public and pri vate facilities could hire emergency response

- action contractors to respond, but many and perhaps most of the small RMP facilities are in rural areas that are too far from contractors to make that a realistic option for releases that require a rapid respon se

. As discussed in Chapter 6, more than three quarters of RMP reportable in ac cidents last less than an hour.

As can be seen in Exhibit 7

- 8, a non

- responder with a simple process 116 would only need revenues of $ 81,000 118,000 for the annualized costs to be b elow one percent of its revenues ; the high

- year cost would require revenues above $320,000

. If that facility had to become a responder it would need revenues of $1 million to $5 million to have revenues that exceed one percent of costs (based on
annualize d and high

- year costs)

. As seen in Exhibits 7

- 8 and 7

- 9, small governments would need revenues of $ 816,000 to $957,000 700,000 to $1.33 million if they are already responders, but $ 1.5 million to $7.3 million 2.1 million to $8.5 million if they have to beco me responders

. Small chemical companies subject to STAA would need revenues above $ 2.7 million to $4.5 million 600,000 to $4 million if they do not need to become responders and almost $10 million if they do become responders.

If a simple facility has an a ccident its one

- year cost could be as high $ 52,000 20,696 ; for a complex facility, the cost could be as high as $ 88,000 53,979

. Because the third

- party audit would not necessarily occur in the same year as the accident, however, these costs could be distrib uted over time.

116 There are no simple processes at very small facilities that are subject to STAA.***E.O. 12866 Review

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### 7.3.2 Estimating Revenues for Small Entities

As is the case for most rules that affect small entities, almost all of the small entities are privately held and little if any information is available on their revenues

. To determine revenues, Census data on revenue per establishment from the 2007 Economic Census were calculated (by dividing total revenue by the number of establishments) and a deflator applied to increase revenues to 2013 dollars

. Revenue per establishment w as calculated from t he 2007 Economic Census by dividing total revenue by the number of establishments. A deflator was applied to increase revenues to 2013 dollars. (The Economic Census uses “establishment” to describe single locations and presents data on establishment and f irm levels; it does not, however, provide firm

- level data for all sectors.)

Exhibit 7

- 10 presents the data for the sectors with entities small enough to have revenues that might fall below the one percent threshold

. For some sectors, the Economic Census provides data only for 0

- 4 FTE; for others, it provides data for 1 FTE establishments, 2 FTE, and 3

- 4 FTE

. The Economic Census does not cover the agricultural sectors

. As noted above, most of the facilities in the agricultural sector appear to be agricul tural wholesalers
, so the analysis used the revenue estimate for NAICS 42491 for these

. The values listed for NAICS 325199 are for the chemical sector as a whole (NAICS 325) because the Census
did not include data for establishments this small for this se ctor

. Where cells are blank in the Exhibit, either there are no facilities that fall into the category or the Census does not list revenue data for the category. 117 Shaded cells indicate revenues that would exceed costs of the proposed rule by a factor of
1 00 or more even in the highest cost year for facilities that needed to become responders
, so any facility in that size category or above would not be potentially subject to a cost that would exceed one percent
of revenues

. Because the revenues for NAICS 2 11 are so high for the smallest facilities, no other data
are listed for that sector

. One percent of the highlighted revenues would exceed the cost of the proposed rule even in the highest cost year for facilities that needed to become responders, so any facility in that size category or above would not be potentially subject to a cost that would exceed one percent of revenues.

Column 2 provides two numbers: first, the number of facilities in the sector that are in size categories with revenues low enough that the cost of the rule could exceed one percent of revenues; and, second,
the number of non

- responders out of that total

. For example, there are 1,174 small agricultural
chemical distributors in NAICS 42491 with fewer than 10 FTE; 1,062 of them are no n

- responders

. Any

non

- responder that remains a non

- responder in that sector or any current responder should have revenues above the one percent threshold

. Any non

- responder that has to become a responder, however, would incur first year costs that exceed one percent of revenues.

The analysis used facility rather than firm

- level revenue for two reasons

. First, firm

- level data are not available for all sectors, particularly manufacturing

. Second, it is not possible to determine firm sizes for many of the facilities

. Focusing on facility level revenue is conservative

. If the costs for individual

117 Usually data are not presented because there are too few establishments in the size category and listing the data could reveal confidential information.***E.O. 12866 Review

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facilities that a firm owns do not exceed one percent of the facility revenues, the costs will not exceed one percent at the firm level

. For example, if a firm o wns three facilities, each of which has costs that do not exceed one percent of the revenue generated by the facility, the cost will not exceed one percent at the firm level where revenues will be at least the total of revenues from each facility

. It may not be the case, however, that if a firm owns facilities where the cost of the rule would exceed one percent at some facilities but not others that the costs would exceed one percent at the firm level.

The Census Bureau has not published recent data on re venues for cities (the most recent data are from 2002) and does not cover cities of less than 25,000 population

. The Census provides revenue data for total local government revenues by county (covering all governmental entities including special districts within the country) and a per capita revenue estimate

. The Census data indicated that the lowest per capita revenue for a covered county was about $1,024 in 2002 dollars ( DeKalb County, MO, with 2 facilities) ($1350 in 2014 dollars). 118 Two other sources ( one of which covers all Massachusetts cities and towns) indicated a range of $900 to more than $2,500 for expenditures per person. 119 The smallest town covered by the rule has about 150 residents and a number of others have fewer than 1,000, but in many
of t hese cases it is not clear whether the town owns and operates the facility or whether it is operated by a district that serves multiple communities

. In a few cases, EPA was able to locate budget data from small towns and special districts

. Revenues per r esident ranged from $196 for a special district that serves 9,200 people to $1400

. The sample, however, is so small that it would not be appropriate to generalize from it

. There are some exceptions on the high end as well

. One city with a population of less than 8,000 has revenues of close to $200 million (based on tourist business); another small city operates a combined water system, power system, and cable system; although the water system produces revenues of $2.5 million, the combined system reporte d revenues of $190 million

. For the purpose of the RFA determination, EPA has assumed that revenues per person would not exceed $1,000 and that any city of less than 10,000 that might need to become a responder could incur costs in the high cost year that would exceed one percent of revenues

. As shown in Exhibit 7

- 7, there are 165 small governments operating 210 facilities that are non

- responders and that serve fewer than 10,000 people.

There are a number of small governments that operate multiple RMP fac ilities

. Although government revenues do not increase based on the number of facilities, costs to local governments are not likely to scale in the same way as they do for private companies

. A local government that operates two or more
water and wastewate r treatment plants would, if needed, develop a single hazmat team because the

118 https://www.census.gov/statab/ccdb/cc07_tabB13.pd f http://censtats.census.gov/usa/usa.shtml

119 http://parca.samford.edu/LocalGovernment/municipal/Report%20Montgomery%20Revenue%20Comparisons%20 2010%204.2.10.pdf?Asp xAutoDetectCookieSupport=1 http://www.mass.gov/dor/local

- officials/municipal

- data

- and

- financial

- management/data

- bank

- reports/municipal

actual

- revenues

- and

- e xpenditures.htm l http://www.boston.com/yourtown/specials/snapshot/massachusetts_snapshot_expenditures_2012/ (expenditures per resident)***E.O. 12866 Review

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facilities are generally in the same town

. The government could hold a single public meeting, issue combined public information
, and hold joint exercises.

Small cities and count ies may also participate in emergency response exercises held by RMP facilities and may review information provided by these facilities to LEPCs or other local agencies

. These activities are voluntary, but it is reasonable to assume that local agencies wi ll spend some time on them

. Involvement in exercises would generally require less than 8 hours of any participant’s time or considerably less than one percent of any person’s annual working hours

. Reviewing information disclosed would take only one to fo ur hours per facility

. Unless a city has a substantial number of RMP facilities the effort required would not impose significant costs.

### ***E.O. 12866 Review

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### Exhibit 7

- 10: Average Revenue/Establishment for FTE Class (Economic Census)

Total # facilities/ # of

non responders where rule costs could > 1% rev FTEs

NAICS Code 0

- 4 1 2 3

- 4 5

- 9 10

- 19 20

- 49 50

- 99

111 75/62 $1,495,000 $3,329,000 $5,960,000 $11,640,000 $22,735,000

112 1/1 $1,495,000 $3,329,000 $5,960,000 $11,640,000 $22,735,000
115 130/85 $1,495,000 $3,329, 000 $5,960,000 $11,640,000 $22,735,000

211112 0 $13,888,000
221119 17/7 $1,837,168 $3,330,268 $6,225,566 $9,896,888

22121 0 $7,505,716 $22,926,662
32512 3/2 $2,692,000 $6,941,000 $13,381,000 $23,392,000
32518 7/2 $1,652,000 $6 ,207,000 $11,475,000 $23,285,000
325181 0 $1,652,000 $6,606,000
325188 1/1 $2,257,000 $6,207,000 $11,475,000 $23,285,000
32519 0 $1,424,000 $11,437,000 $34,910,000
325193 0 $14,208,000 $21,051,000 $88,511,000
325199 2/1 $1,424,000 $11,437,000 $34,910,000
325314 18/15 $1,192,000 $3,424,000 $6,211,000 $15,952,000
32532 4/1 $942,000 $28,422,000
32551 4/2 $662,000 $2,381,000 $5,342,000 $13,223,000
32552 1/1 $854,000 $3,099,000 $6,545,000 $16,207,000
32599 6/ 3 $720,000 $2,507,000 $6,907,000 $14,578,000
325998 6/4 $1,424,000 $3,329,000 $8,379,000 $17,995,000
42399 2/1 $851,039 $1,428,979
42451 11/11 $4,744,000 $9,671,000 $18,349,000 $42,265,000 $74,456,000

### ***E.O. 12866 Review

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Page 121 of 150 Total # facilities/ # of

non responders where rule costs could > 1% rev FTEs

NAICS Code 0

- 4 1 2 3

- 4 5

- 9 10

- 19 20

- 49 50

- 99

42459 20/16 $1,148,000 $5,184,000 $6,655,000 $15,718,000 $17,531,000 $56,881,000
42469 46/33 $1,973,000 $4,949,000 $5,806,000 $18,120,000 $28,325,000
42471 $11,807,000 $15,665,000 $11,807,000 $19,088,000 $37,556,000 $127,559,000
42491 1174/1062 $1,495,000 $3,329,000 $5,960,000 $11,640,000 $22,735,000

44422 6/5 $305,000 $595,000 $991,000 $1,798,000 $3,681,000 $6,247,000
453998 9/7 $478,000 $675,000 $1,134,000 $2,223,000
49311 14/13 $208,000 $378,000 $529,000 $836,000 $1,422,000 $2,477,000 $3,550,000
49312 53/53 $279 ,000 $420,000 $579,000 $1,125,000 $2,418,000 $4,516,000 $6,666,000
49313 37/28 $725,000 $781,000 $1,673,000 $2,373,000 $4,018,000
49319 25/12 $444,000 $736,000 $949,000 $1,220,000 $1,906,000
56179 14/14 $132,642 $239,000 $366,000 $661,000 $1,393, 000 $3,176,000

Total # facilities/ # of

non responders where rule costs could > 1% rev FTEs

NAICS Code 0

- 4 1 2 3

- 4 5

- 9 10

- 19 20

- 49 50

- 99

111 46 / 37 $1,495,000 $3,329,000 $5,960,000 $11,640,000 $22,735,000

112 1/1 $1,495,000 $3,329,000 $5,960,0 00 $11,640,000 $22,735,000

115 1 13 / 78 $1,495,000 $3,329,000 $5,960,000 $11,640,000 $22,735,000

211112 0 $13,888,000
221119 17 / 14 $1,837,168 $3,330,268 $6,225,566 $9,896,888

### ***E.O. 12866 Review

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Page 122 of 150 Total # facilities/ # of

non responders where rule costs could > 1% rev FTEs

NAICS Code 0

- 4 1 2 3

- 4 5

- 9 10

- 19 20

- 49 50

- 99

22121 0 $7,505,716 $22,926,662
32512 3 0 / 11 $2,692,000 $6,941,000 $13,381,000 $23,392,000
32518 13 / 3 $1,652,000 $6,207,000 $11,475,000 $23,285,000
325181 3/2 $1,652,000 $6,606,000
325188 2 /1 $2,257,000 $6,207,000 $11,475,000 $23,285,000
32519 0 $1,424,000 $11,437,000 $34,910,000
325193 0 $14,208,000 $21,051,000 $88,511,000
325199 7 /1 $1,424,000 $11,437,000 $34,910,000
325314 45 / 32 $1,192,000 $3,424,000 $6,211,000 $15,952,000
32532 5 /1 $942,000 $28,422,000
32551 4/2 $662,000 $2,381,000 $5,342,000 $13,223,000
32552 2 / 2 $854,000 $3,099,000 $6,545,000 $16,207,000
32599 9 / 2 $720,000 $2,507,000 $6,907,000 $14,578,000
325998 6/ 2 $1,424,000 $3,329,000 $8,379,000 $17,995,000
42399 2/1 $851,039 $1,428,979
42451 20 / 20 $4,744,000 $9,671,000 $18,34 9,000 $42,265,000 $74,456,000
42459 19 /16 $1,148,000 $5,184,000 $6,655,000 $15,718,000 $17,531,000 $56,881,000
42469 79 /3 1 $1,973,000 $4,949,000 $5,806,000 $18,120,000 $28,325,000
42471 $11,807,000 $15,665,000 $11,807,000 $19,088,000 $37,556,000 $127,559,000
42491 1 537 /1 371 $1,495,000 $3,329,000 $5,960,000 $11,640,000 $22,735,000
44422 16 /5 $305,000 $595,000 $991,000 $1,798,000 $3,681,000 $6,247,000
453998 7 / 5 $478,000 $675,000 $1,134,000 $2,223,000
49311 30 / 22 $208,000 $378,000 $5 29,000 $836,000 $1,422,000 $2,477,000 $3,550,000

### ***E.O. 12866 Review

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Page 123 of 150 Total # facilities/ # of

non responders where rule costs could > 1% rev FTEs

NAICS Code 0

- 4 1 2 3

- 4 5

- 9 10

- 19 20

- 49 50

- 99

49312 272 / 44 $279,000 $420,000 $579,000 $1,125,000 $2,418,000 $4,516,000 $6,666,000
49313 82 / 59 $725,000 $781,000 $1,673,000 $2,373,000 $4,018,000
49319 45 /1 3 $444,000 $736,000 $949,000 $1,220,000 $ 1,906,000
56179 14/14 $132,642 $239,000 $366,000 $661,000 $1,393,000 $3,176,000 Highlighted cells indicate facility categories where 1 percent of revenues, for any facility in that size category, or above, would exceed the costs of the proposed rule e ven in the highest cost year (including costs for non

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### 7.3.3 Initial Regulatory Flexibility Analysis

Pursuant to section 603 of the RFA, the EPA prepared an initial regulatory flexibility analysis (IRFA) that
examines the impact of the proposed rule on small entities along with regulatory alternatives that could minimize that impact.



### 7.3.3.1 Why EPA is Considering this Action

The purpose of this action is to improve safety at facilities that use and distribute hazardous che micals. In response to catastrophic chemical facility incidents in the United States, including the explosion that occurred at the West Fertilizer facility in West, Texas, on April 17, 2013 that killed 15 people, President Obama issued EO 13650, “ Improving Chemical Facility Safety and Security,” on August 1, 2013. Section 6(a)(i) of EO 13650 requires that various Federal agencies develop options for improved chemical facility safety and security, including modernizing regulations. As a result, EPA is propos ing revisions to the Risk Management Program (40 CFR part 68). For more information on EO 13650, see Section 1.1 of this
document.



### 7.3.3.2 Objectives of, and Legal Basis for, the Proposed Rule

EPA believes that the RMP regulations have been effective in pr eventing and mitigating chemical accidents in the United States; however, EPA is proposing believes that revisions in order to could further protect human health and the environment from chemical hazards through the advancement of process safety based on les sons learned. These revisions are a result of a review of the existing Risk Management Program and information gathered from the RFI and EO listening sessions, and are proposed under the statutory authority provided by CAA section 112(r) as amended (42 U.S .C. 7412(r)).



### 7.3.3.3 Estimate of the Number of Small Entities to which the Proposed Rule Will Apply

The RMP rule affects a broad range of sectors (296 separate NAICS codes are listed in RMP filings; 240 of these are associated with small entities). The RM P data include facility and parent company name as well as the number of full time equivalents (FTE) for the facility and the NAICS codes. To develop an estimate of the number of small entities, the analysis required a series of reviews of the data to iden tify the large entities and the small entities that were part of small firms owning multiple facilities. For more information on the analysis to estimate the number of small entities, see Section 7.2 of this document.



### 7.3.3.4 Projected Reporting, Recordke eping and Other Compliance Requirements of the Proposed Rule

Under the proposed rule, all facilities would be required to make certain information available to the public and , upon receiving a request, to the LEPC or local emergency response officials . Pro gram 1 facilities would not likely have to spend more than an hour a year on this disclosure because the information disclosed to the public is information every facility should have readily available and
because the additional information that would be pr ovided
, upon request , disclosed to the LEPC relates***E.O. 12866 Review

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to provisions that do not apply to Program 1 facilities. Therefore, the IRFA has not considered Program 1 small facilities in the analysis of impacts.

Program 2 and Program 3 facilities would incur the sa me costs for the other proposed provisions except the STAA. Each facility would be required to update information to be disclose d annually, hold a public meeting at least once every 5 years, and coordinate with the local responders
, and conduct a
notificat ion drill annually. If the facility is a responder, it would have to hold an annual exercise, including at least one full field exercise every 5 years. Program 3 facilities in NAICS codes 322, 324, and 325 would have to conduct an STAA as part their PHA ev ery 5 years.

If a facility has an accident, it would incur costs to hold a public meeting within 30 days of an RMP reportable accident. It would also incur costs for obtaining a third

- party to conduct their next scheduled compliance audit and . It would als o incur additional costs to conduct a root cause analysis as part of the incident investigation. Facilities would also be required to conduct root cause investigations of near
misses , including a root cause analysis . Finally, if a facility has to become a responder, it would incur costs to develop an emergency response plan, train personnel to respond, purchase and maintain equipment, and conduct exercises.

Section 7.3.1 of this document describes the costs of the proposed rule for small entities.



### 7.3.3.5 Related Federal Rules

The Risk Management Program is one of several programs regarding chemical facility safety and security. EO 13650 directed Federal agencies to identify ways to modernize policies, regulations, and standards to enhance safety and secur ity in chemical facilities. The EO established a Chemical Facility Safety and Security Working Group to oversee this effort, which is tri

- chaired by the EPA, DOL, and DHS. Members of the Working Group (at the management and staff level) regularly share inf ormation in order to coordinate activities on any work involving revisions in regulations, such as revisions to OSHA’s PSM standard and DHS’ CFATS regulations. These efforts also serve to avoid unnecessary duplication, overlap and conflicts with the Risk M anagement Program requirements.

OSHA’s 29 CFR 1910.119 PSM standard

Mandated by the CAAA of 1990 and issued in 1992, the PSM standard sets requirements for the management of highly hazardous substances to prevent and mitigate hazards associated with

catas trophic releases of flammable, explosive, reactive, and toxic chemicals that may endanger workers. The PSM standard covers the manufacturing of explosives and processes involving threshold quantities of flammable liquids and flammable gasses, as well as 13 7 other highly hazardous chemicals.

The OSHA PSM standard, similar to the EPA RMP rule, aims to prevent or minimize the consequence s of accidental chemical releases through implementation of management program elements that integrate technologies, procedur es, and management practices. The EPA RMP regulation closely tracks the accident prevention measures contained in the OSHA PSM standard because Section 112(r)(7)(D) of the***E.O. 12866 Review

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CAA requires EPA to coordinate the RMP regulation with “any requirements established for comparable purposes” by OSHA. Consequently, the OSHA PSM standard and EPA RMP regulation are closely aligned in content, policy interpretations, Agency guidance, and enforcement.

Since the inception of these regulations, EPA and OSHA have coordinated closely on their implementation in order to minimize regulatory burden and avoid conflicting requirements for regulated facilities. For example, owners and operators of RMP covered processes also subject to the OSHA PSM standard will generally have met th eir RMP accident prevention program obligations if they have properly implemented their PSM program.

Occupational Safety and Health Act General Duty Clause

Section 5(a)(1) of the Occupational Safety and Health (OSH) Act requires employers to provide its

em ployees with a workplace free from recognized hazards that are causing, or are likely to, cause death or serious physical harm.

EPA’s EPCRA regulations (40 CFR 350

- 372)

Following the 1984 release of approximately 40 tons of MIC into the air in Bhopal, Indi a, that killed over 3,700 people and the 1985 leak of 500 gallons of aldicarb oxime from a Union Carbide facility in Institute, West Virginia, Congress passed EPCRA in October 1986. 120 The purpose of EPCRA is twofold: (1)

t o encourage and support emergency p lanning efforts at the state and local levels, and (2) to provide the public and local governments with information concerning potential chemical hazards present in
their communities.

EPCRA created state and local infrastructure designed to (1) prepare for and mitigate the effects of a chemical incident and (2) ensure that information on chemical risks in the community is provided to the first responders and the public. These state and local entities are the SERCs, TERCs, LEPCs, and Tribal Emergency Plannin g Committees (TEPCs). Representatives on the LEPCs include local officials and planners, facility owners and operators, first responders, health and hospital personnel, environmental groups, and citizen/members of the public.

A central requirement of LEPC s and TEPCs is to develop a local emergency response plan. These plans are required to:

 Identify facilities and transportation routes of extremely hazardous substances and assess the risk based on chemical information from facilities;

 Describe on

- site an d offsite emergency response procedures;

 Designate a community coordinator and facility emergency coordinator(s) to implement the plan;

120 http://www.nytimes.com/1985/08/12/us/toxic

- cloud

- leaks

- at

- carbide

- plant

- in

- west

- virginia.html***E.O. 12866 Review

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 Describe emergency notification procedures;

 Describe how to determine the probable affected area and population by re leases (including identification of critical community receptors and assets);

 Describe local emergency equipment and facilities and the persons responsible for them;

 Describe evacuation plans;

 Identify the training program for emergency responders (inclu ding schedules); and

 Identify the methods and schedules for exercising emergency response plans.

Under the community right

- to

- know section of EPCRA, certain facilities that manufacture, process, or store any hazardous chemicals are required to submit an S DS or list of hazardous chemicals, grouped into hazard categories, to SERCs, TERCs, LEPCs, TEPCs, and local fire departments. Under the Hazard Communication Standard, OSHA requires SDSs that describe the properties, hazards, and health effects
of these che micals as well as emergency response procedures and appropriate personal protection equipment. Facilities must also annually report their inventories of all on

- site chemicals for which SDSs are required that are stored above reporting threshold quantities to SERCs, LEPCs, and local fire departments. LEPCs must use information about chemical inventories at facilities and SDSs in developing their local emergency plans; this information must also be available to the public.

CAA Section 112(r)(1) general duty c lause

The statute requires facility owners and operators to identify hazards; design, maintain and safely operate a facility; and prevent and minimize releases of any regulated substances under §112(r)(3) (40 CFR Part 130) and “any other extremely hazardou s substance.” 121

DHS’s 6 CFR part 27 CFATS r egulations ule 6 CFR part 27

The CFATS program, established in 2007, regulates chemical facilities that present a high level of security
risk to ensure they have security measures in place to reduce the risks associ ated with their possession of chemicals of interest (COI). There are 325 COI and 137 of the 140 RMP regulated substances are
included on the list of COI.

The CFATS program requires the development, submission, and implementation of Site Security Plans (SSP s) (or Alternative Security Programs in lieu of SSPs), which document the security measures high

- risk chemical facilities use to satisfy the applicable risk

- based performance standards (RBPS) under CFATS. These plans are not “one

- size

- fits

- all,” but in

- dep th, highly customized, and dependent on each facility’s unique circumstances.

121 Although the term “ any other extremely hazardous substance" is not defined, the legislative history of the 1990 CAA amendments indicates that the term would include any agent "which may or may not be listed or otherwise identified by any Government agency which may as the re sult of short

- term exposures associated with releases to the air cause death, injury or property damage due to its toxicity, reactivity, flammability, volatility, or corrosivity." See: http://www2.epa.gov/sites/production/files/2013

- 10/documents/gdcregionalguidance.pdf

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Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) requirements for explosives

ATF is responsible for enforcing Federal explosives laws that govern commerce in explosives in the United States, including licensing, storage, recordkeeping, and conduct of business. ATF conducts inspections of Federal explosives licensees who manufacture, import, sell, or store explosives in the United States to ensure that explosives are manag ed in accordance with Federal regulations found

at law. 27 CFR Part 555

. 

### 7.3.3.6 Description of Alternatives to the Proposed Rule

In section 2.1, we describe the various regulatory alternatives that were analyzed for each provision. In most cases, EPA chose regulatory alternatives that had reduced impacts on small businesses relative to other alternatives that EPA considered. In this section, we discuss each regulatory provision, explain whether and how the proposed provision minimizes impacts on small busine sses, and discuss additional recommendations resulting from the Small Business Advocacy Review (SBAR) Panel that could further mitigate small business impacts. EPA has requested comment on these recommendations in the preamble to the proposed rule.

Third P arty Audits

EPA evaluated three options for this provision and selected the lowest cost alternative, which would apply the requirement only to sources with P2 and/or P3 processes that have had a n RMP reportable
accident. The other alternatives would have r equired that all compliance audits be conducted by third parties for sources with either P3 processes or P2 and P3 processes. Limiting the applicability of this proposed provision to sources that have had RMP reportable accidents minimizes its impact to th e overall universe of RMP facilities, and particularly to small businesses. As indicated in Exhibit 5

- 24 2 5 , the estimated cost of the high option ($96.2 million annualized) is nearly 20 times higher than the estimated costs of the proposed option ($5.0 mil lion annualized). Furthermore, a majority of the costs for the proposed option would likely be borne by large businesses, as historically, most RMP accidents have
occurred at facilities that do not meet SBA small business criteria. Exhibit 7

- 11 shows the p ercentage of
accidents from 2004

- 2013 that occurred at small and large facilities.***E.O. 12866 Review

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Page 129 of 150 Exhibit 7

- 11: Percentage of Accidents at Small and Large RMP facilities, 2004

– 2013

Sector P1 P2 P3 Total Small Large Small Large Small Large

NAICS 325

- Chemical Manuf acturing 0 6 1 5 53 465 530

NAICS 311, 312

- Food/Beverage Manufacturers 0 0 2 0 58 210 270

NAICS 322

– Paper Manufacturing 0 0 0 0 9 37 46
NAICS 331, 332, 333, 334, 336, 339

- Other Manufacturing 0 0 4 0 12 27 43

NAICS 11, 12, 15, 42491

- Agricultural Chemical Distributors 0 0 0 0 91 65 156

NAICS 4246, 4247

- Chemical/petroleum wholesale 0 2 0 0 7 29 38

NAICS 4244, 4245

- Other wholesale 0 0 0 0 7 13 20

NAICS 493

– Warehouse 0 1 0 0 18 53 72

NAICS 324

- Petroleum and Coal Products Manufacturing 2 6 0 0 15 146 169

NAICS 22131, 22132

- Water/POTW 0 0 14 20 17 24 75

NAICS 211

- Oil/Gas exploration 4 4 1 0 10 34 53
Other 3 7 7 4 7 17 45
Total 9 26 29 29 304 1
, 120 1
, 517
While the proposed third party audit provision should have fairly low impact on sm all businesses, the SBAR panel made additional recommendations to further minimize the impacts of this provision on
small businesses. These include:

<List of SBAR recommendations for Third Party Audits>

Incident Investigation/Root Cause Analysis

In this ca se, EPA considered two potential regulatory options, and proposed the higher cost option, which would apply the requirement for an incident root cause analysis to all RMP

- reportable accidents and near misses involving P2 and P3 processes. The lower cost o ption would apply the requirement to accidents and near misses at only P3 processes. Although the Agency chose the higher cost option, this provision is estimated to be one of the least costly provision s of the proposed rule. In fact, the costs for both op tions considered were nearly indistinguishable

– as indicated in Exhibit 5

- 24 2 5 , both the low and proposed options are estimated to cost approximately $0.8 million annually. Therefore, EPA believes***E.O. 12866 Review

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that the additional safety benefit of requiring owners and operators of P2 processes to also conduct root cause analyses after incidents and near misses was warranted.

The SBAR panel also made recommendations to further minimize the impacts of this provision on small
businesses. These include:

<List of SBAR recom mendations for Incident Investigation/Root Cause Analysis>

STAA

For STAA, EPA examined three potential alternative regulatory options, and chose the least costly option. The proposed option, which would apply the STAA requirement to P3 processes in NAICS 3 22 ( p aper m anufacturing), 324 ( p etroleum and c oal p roducts m anufacturing), and 325 ( c hemical

m anufacturing), costs $34.8 million annually and is approximately half as costly as the medium option ($71.7 million annually) , which would apply the requirement t o all P3 processes, and likely far less costly than the high option, which would require implementation of feasible safer alternatives f or all P3

processes.

T he low

- cost STAA option not only minimizes the overall number of sources that are subject to it, b ut is also biased toward larger sources. This is because the three sectors selected for regulation under this proposed provision all have a lower percentage of small entities than the overall percentage of small entities within the RMP facility universe. A s indicated in Exhibit 7

- 12, approximately 39% of facilities regulated under the RMP regulation are owned by small entities. In comparison, NAICS 322 (paper manufacturing) has about 20 % RMP

- regulated small businesses within the sector
, while NAICS 324 (pet roleum and coal products manufacturing) and 325 ( chemical manufacturing) each have approximately 10% small businesses.

Exhibit 7

- 12: Percentage of Small Businesses in NAICS 322, 324, 325 and Overall

Sector Small Total Percentage Small

NAICS 322

– Paper Ma nufacturing 9 46 19.6%

NAICS 324

- Petroleum and Coal Products Manufacturing 17 169 10.1%

NAICS 325

- Chemical Manufacturing 54 530 10.2%

All Sectors 4,910 12,542 39.1%***E.O. 12866 Review

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The SBAR panel also made recommendations to further minimize the impacts of this pr ovision on small
businesses. These include:

<List of SBAR recommendations for STAA>

Emergency Response Program Coordination with Local Responders

The proposed option (medium option) would require all facilities with P2 or P3 processes to coordinate
with l ocal response agencies annually and doc ument coordination activities. This option would also allow the LEPC or local emergency response officials to require that the RMP

- facility owner or operator comply with the emergency response program requi rements of §68.95. EPA considered, but did not propose, the more stringent option of requiring all facilities with P2 or P3 processes to implement an emergency response program and respond to accid ental releases at the facility. The proposed option is
estimated to co st $6.3 million annually and is far less costly than the high option, which would likely have exceeded $100 million annually. Therefore, by selecting the medium option, EPA substantially reduced the cost impact for the many small entities that may rely on local response organizations to respond to accidental releases at the source (see Exhibit 3

- 8 and Appendix B for more information on the number, size, and industrial categories of non

- responding facilities).

While EPA does not believe it is necessary to re quire that all facilities develop an in

- house response capability, the Agency believes that non

- responding facilities, even if they are small businesses, must still coordinate with local public responders so that they are prepared to handle emergencies at the facility. EPA expects that these coordination activities will result in some sources, including some small entities, becoming responding facilities, which may involve additional costs for those facilities (see section 5.6).
EPA believes this is necessa ry to meet the objectives of Clean Air Act section 112(r), which requires the Agency to promulgate regulations to (among other things) provide for a prompt emergency response to any accidental releases in order to protect human health and the environment. We also note that the 2013 accident at West Fertilizer, which was one of several accidents that triggered the Executive Order that ultimately led to this rule proposal, occurred at a facility that would likely have been considered a small entity under the established SBA criteria. The Agency believes it is appropriate to require that such facilities conduct adequate emergency coordination, and if necessary, develop adequate emergency response capabilities, even if they are small.

The SBAR panel also made re commendations to further minimize the impacts of this provision on small
businesses. These include:

<List of SBAR recommendations for local coordination>

Emergency Notification Exercises

The proposed rule would require all facilities with P2 or P3 processe s to annually conduct an emergency notification exercise to ensure that their emergency contact list is complete, accurate, and up

- to

- date. This proposed provision is expected to be one of the least costly rule provisions at $1.4 million annually***E.O. 12866 Review

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(only the incident investigation root cause analysis and public meetings provision s is are estimated to cost less). Therefore EPA did not consider any alternatives to reduce the impact of this provision on small businesses, nor did the SBAR panel make any such recom mendations.

Emergency Exercises

The proposed option was the medium option, and would require responding facilities to conduct a full field exercise at least once every five years and tabletop exercises annually in the interim years. This option was substan tially less costly than the high option ($61 million vs $104 million annually), which would require annual field exercises. As this provision only affects responding facilities, which tend to more often be large facilities (see Exhibit 3

- 8), EPA has propos ed an option that mitigates the impact on
small entities. EPA also considered a low option that would only require annual tabletop exercises. This option would have saved approximately $11 million annually. We did not propose the low option because the Age ncy believes that periodic field exercises are an important component of a comprehensive emergency response program. Nevertheless, this was also a recommendation from the SBAR panel and we have requested comment on the low option provision in the preamble to the proposed rule.

The SBAR panel also made other recommendations to further minimize the impacts of this provision on small businesses. These include:

<List of SBAR recommendations for exercises >

Information Disclosure Availability

The re are three prop osed information disclosure requirements

. would apply to all facilities. Under the proposed requirements, all facilities would be required to make certain information available to the public

. and U pon receiving a request from their LEPC or local emergency response official, regulated
facilities w ould also be required to provide certain information to the LEPC or emergency response official s. Lastly, All facilities would also be required to hold public meetings once every 5 years, and within 30 days of any RMP reportable accident. In the preamble to the proposed rule, EPA has requested public comments on whether only all P2 and P3 regulated facilities should be required to hold a public meeting every five years and after a n RMP reportable accident , or whether a requirement for periodic and post

- accident public meetings should be limited to only P2 and P3 facilities . Although EPA has not proposed specific alternatives to minimize the impact of the information disclosure provisions on small businesses, the Agency believes that in general, smaller facilities will bear lower costs to comply with these provisions. By requiring certain i nformation disclosure elements (i.e., incident investigation and public meeting provisions) only following an RMP reportable acciden t , EPA is
minimiz ing e s its the impact to the overall universe of RMP facilities, and particularly to small businesses

. , as m M ost RMP reportable accidents have generally occurred at facilities that do not meet SBA small
business criteria (see Exhibit 7

- 11 )

. Also, S s mall facilities will generally have fewer processes, fewer chemicals, fewer accidental releases, etc., on which to provide information to LEPCs and the public.***E.O. 12866 Review

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The SBAR panel also made recommendations to further minimize the impacts of this prov ision on small
businesses. These include:

<List of SBAR recommendations for Information Disclosure>



## 7.4 Conclusion

It is possible that the costs of the rule would exceed one percent of revenues for some RMP small entities that are currently not responders

. The maximum number affected would be 1,442 . In years where the STAA analysis occurs or a field exercise occurs, the cost could exceed the threshold for a larger number of facilities

. The most significant cost for small entities, however, will be incurr ed by those that have to become responders; in the first year of compliance, when they have to pay for training and response equipment, the costs are likely to exceed one percent of revenues for many of the
facilities with fewer than 20 FTE

. Facilities ow ned and operated by governments serving fewer than 10,000 people may incur costs above one percent of their revenues in the initial year if the government has to train and equip a hazmat team

. These governments may be able to obtain funding to cover some training costs through grants from the Pipeline and Hazardous Materials Safety Administration of the U.S. Department of Transportation; local responders may also attend training course s offered by the Federal Emergency Management Agency at no cost (other t han travel and expenses).

In developing the proposed rule, EPA considered alternatives to reduce the impacts on small entities

. The proposal limits the STAA provision to high risk sectors, removing what could be a substantial burden
on other sectors that would probably have to hire consultants to conduct the analyses

. EPA considered limiting applicability of some provisions to P3 facilities, but with the shift in OSHA’s interpretation of the
retail facility exemption under the PSM standard , the effect of such a change was reduced (most P2 facilities will shift to P3)

. A substantial majority of P2 facilities that will remain are government water and wastewater treatment systems; because the only difference between those systems in P2 and those
in P3 is the applicability of OSHA PSM (i.e., there is no difference in the risk posed), EPA could not justify providing regulatory relief to these facilities who are in P3

. EPA did not consider exempting small facilities or governments from the requirement to become responders if the local agencies are not capable of responding or ask the facility to handle any accidents in

- house

. The smallest facilities that are not responders are too often in rural areas where there may be no hazmat response capability
within a re asonable distance and, in some cases, in areas with no local fire department

. When it enacted section 112(r)
, Congress clearly required facilities to ensure that there was a capability to respond to releases.***E.O. 12866 Review

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# CHAPTER 8: ENVIRONMENTAL JUSTICE

8.1 Back ground and Context

Executive Order 12898, “Federal Actions to Address Environmental Justice in Minority Populations and
Low

- Income Populations” (February, 1994) places a responsibility on federal agencies for “identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of its programs, policies, and activities on minority populations and low

- income populations in the United States[.]” This section explains how EPA has addressed environmental justi ce issues associated with this rulemaking.

Environmental risks may result from industrial or commercial activities by private actors, or from governmental activities or programs. When those risks are disproportionately borne by particular subpopulations , environmental justice is achieved through Fair Treatment and Meaningful
Involvement. 122

Fair treatment refers to efforts to prevent environmental risks and harms from disproportionately affecting a particular group of people.

Meaningful involvement ref ers to inclusion of potentially affected populations in decisions about activities or programs to address those risks. Meaningful involvement may include facilitating the involvement of populations potentially affected by those activities or programs.
It also entails ensuring that potentially affected populations have an opportunity to participate in decisions and influence decisions about those activities or programs. “Empowering communities” is a specific goal established by the OSWER Environmental Jus tice Task Force 123

EPA used the se principles in identifying and ameliorating environmental justice issues associated
with RMP facilities.

122 Guidance on Considering Environmental Justice During the Development of Regulatory Actions, US EPA, May 2015.

123 “OSWER Environmental Jus tice Task Force Draft Final Report”, EPA 540/R

- 94/004, April 1994. Also see

“ Integration of Environmental Justice into OSWER Policy, Guidance, and Regulatory Development” (OSWER directive No. 9200, 3

- 17, Sept 21, 1994)***E.O. 12866 Review

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## 8.2 Identifying Potential Environmental Justice Concerns Associated with RMP Facilities

At all facilities regulat ed under the Risk Management Program, an accidental release of a regulated
substance create s a hazard to surrounding communities and environments. These hazards include, for example, exposure to toxic substances, fires, explosions, and noxious gas clouds.

In undertaking actions in response to Executive Order 13650 124 , EPA sought to determine if there were environmental justice concerns associated with these risks from stationary sources regulated under the RMP rule. We assessed data using EPA tools and ce nsus information, and reviewed existing academic and gray literature on risks to populations of concern.



### 8.2.1 Assessment of risks to relevant populations, based on proximity

Facilities that are regulated under the Risk Management Program pose risks of f ire, explosion, and /or exposure to hazardous chemicals . Chemical hazards include burns
, corrosive damage to people and property, as well as exposure associated with acute toxicity. Exposure from these facilities may put local populations at risk through inhalation , ingestion, or dermal contact.

Exhibit 8

- 1 shows the demographics in the vicinity of RMP sites, using locational data from the RMP database and demographic data from EPA’s EJSCREEN tool

. 125

. The analysis shows that minority and
low

- income populat ions are more likely to be in proximity to those facilities (and thus at greater risk) than other populations

. 126

.

Exhibit 8

- 1: Demographic Profile of Key Populations

Location Population Low

- income Minority Linguistically isolated Total near RMP facilities 127 31.27

million 13,757,000 14,770,000 2,482,000

US Total 309.14

million 104,256,000 112,235,000 15,905,000

Demographics of population near RMP facilities 128 44% 47% 8%

124 “Improving Chemical Facility Sa fety and Security,” August 2013.

125 See http://www2.epa.gov/sites/production/files/2015

- 05/documents/ejscreen_technical_document_20150505. pdf

. 126 Demographic data on populations are from the American Community Survey 2008

- 2012, US Census Bureau

. https://www.census.gov/program s

- surveys/acs/news/data

- releases/2012/release.html#par_textimage_0

127 Not including facilities in Puerto Rico and Guam

128 This analysis counts each person for once for each RMP facility they are near. There is a likelihood of a small degree of double

- cou nting, therefore, for those who are in close proximity to two or more facilities. However, this effect is likely to be small, as the data shows that less than 5% of the US population is in close proximity to two or more RMP facilities.***E.O. 12866 Review

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Demographics of overall US population 34% 36% 5%

Difference in populations near RMP sites 29% greater 31% greater 60% greater

44% of people in proximity (defined as living within a one

- mile radius) to RMP sites are low

- income; the average in the US population is 34%

. Low

- income is defined here as less than twice the Census Bureau’s

p overty threshold.

47% of people in proximity to RMP sites are ethnic minorities, including any designation except for “Non

- Hispanic, White .” It therefore includes those identifying as Hispanic white or as multiracial white. The average in the US popu lation (overall) is 36%.

The other demographic indicator we examined was “linguistic isolation. ” This category consists of households where no one over age 14 speaks English well, and some other language is spoken at home. 8% of populations in proximity to RMP facilities are linguistically isolated, compared to only 5% in the general US population. This characteristic is important for understanding disproportionate impact, inasmuch as these people are less likely to be aware of risks, to understand them , and to know what to do to help protect themselves.

In comparison to the general US population, therefore, we can conclude that populations surrounding
RMP facilities are

 2 9% more likely to be low

- income

 3 1% more likely to be minorities, and

 60% more likely to be linguistically isolated.
To the extent that populations living closer to facilities are more likely to be exposed if a release occurs, RMP facilities pose a greater risk to these key demographic groups.



### 8.2.2 Assessment of risks to relevan t populations, in existing literature

Studies external to EPA have also examined these issues. A 2004 analysis by the University of Pennsylvania 129 examined risk to surrounding minority communities, based on an assessment of the potential for releases and property damages and injuries at RMP facilities. 130 The writers also compared

129 Elliott, M.R., et al, “Environmental Justice: frequency and severity of US chemical industry accidents and the socioeconomic status of surrounding communities” Journal of Epidemiology and Community Health 2004; 58:24

- 30.

130 Elliott, M.R., et al, “Environmental Justice: f requency and severity of US chemical industry accidents and the socioeconomic status of surrounding communities” Journal of Epidemiology and Community Health 2004; 58:24

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those risks with the demographics of surrounding communities. They found significant correlations between riskier facilities (larger and featuring more complex chemical processes ) with location in counties with larger African American populations. They concluded :

“ Thus, higher risk facilities are more likely to be found in counties with sizeable poor and/or minority populations that disproportionately bear the collateral environ mental, property, and
health risks. ”

In 2014, the Environmental Justice and Health Alliance for Chemical Policy Reform 131 found that the populations vulnerable to releases from chemical facilities are disproportionately black or Latino. 132 Compared to the US population as a whole, these vulnerable populations have higher rates of poverty, lower incomes, and education levels. In particular, this report focuses on the communities closest to the facilities (at the “ fence line ”).



### 8.2.3 Conclusions

Based on an alysis of RMP data and other studies, EPA concludes that there is evidence that risks from RMP facilities fall on minority and low

- income populations, to a significantly greater degree than those risks affect other populations.



## 8.3 Actions Taken to Fac ilitate “Fair Treatment”

Chapter 6 describes the reductions in risk that EPA anticipates to result from this rule. These include reducing the frequency of releases and accidents at RMP facilities, mitigating the damages when releases do occur, and improv ed information for affected communities and for emergency planners and responders.

To the extent that this rule results in reductions of risk to US populations overall, EPA anticipates that it
will result in greater risk reductions for minority communit ies and lower

- income communities, since they bear a larger portion of the risk. Note that this reduces the absolute disparity in risks, but not the
relative disparity in risk that is associated with proximity to RMP facilities. Thus, EPA believes that th is proposed rule will not have potential disproportionately high and adverse human health or environmental effects on minority, low income, or indigenous populations because it increases the level of environmental protection for all affected populations wi thout having any disproportionately high and adverse human health or environmental effects on any population, including any minority, low

- income or indigenous populations.

131 Who’s in Danger? A Demographic Analysis of Chemical Disaster Vulnerability Zone s , May 2014. The report was produced in collaboration with Coming Clean and The Center for Effective Government. http://comingcleaninc.org/whats

- new/whos

- in

- danger

- report

132 Who’s in Danger? A Demographic Analysis of Chemical Disaster Vulnerability Zones , May 2014. The report was produced in collaboration with Coming Clean and The Center for Effective Government. http://comingcleaninc.org/whats

- new/whos

- in

- danger

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## 8.4 Actions Taken to Facilitate “Meaningful Involvement”

Addressing environmental justice concerns entails meaningful involvement by affected communities. EPA has taken actions to ensure that these communities have a significant role in characterizing the risks
associated with RMP facilities . In addition, EPA has facilitated communiti es’ involvement in assessing problems concerning RMP facilities and policy options for addressing these problems.

EPA took a variety of steps to consult with communities that might be threatened by hazardous substances. In coordination with other agenci es undertaking reviews regarding EO 13650, EPA , along with other key federal agencies, conducted a series of listening sessions and public communication efforts regarding addressing potential hazards from RMP stationary sources and other facilities.

EPA p articipated in public sessions b etween November 2013 and January 2014 on the following dates :

 November 5, 2013, Texas City, TX

 November 15, 2013, Washington, DC

 November 19, 2013, Springfield, IL

 December 11, 2013, Orlando, FL

 January 9, 2014, Los Angel es CA

 January 14, 2014, Washington DC

 January, 2014 in Sacramento, CA

 February 27, 2014 in Newark, NJ

In addition, EPA participated in a webinar on the topic in November, 2013.

Representatives from a variety of stakeholder organizations presented inf ormation and statements to the federal agencies convening these sessions. Many of those giving testimony represented neighborhood and community groups, and especially groups with information regarding minority, low

income, and indigenous populations. P re senters from the following organizations provided information

on the risk to those populations from chemical facilities :

 Center for Health Environment and Justice

 Center for the Urban Environment

 Louisiana Bucket Brigade

 Louisiana Environmental Justice C ommunity Organizing Coalition

 Louisiana Environmental Action Network

 Mossville (LA) Environmental Action Now

 Just Transition Alliance

 East Yard Communities for Environmental Justice

 Communities for a Better Environment

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 Citizens for Clean Air and Clean Water

 Texas Environmental Justice Advocacy Service

 Environmental Justice Health Alliance

 Community In

- Power and Development Association

 Coalition for a Safe Environment

 Air Alliance Houston

 People not Pozos

– Esperanza Community Housing C orporation

 San Pedro Homeowners United

 Citizens for Responsible & Equal Environmental Protection

 Ironbound Community Corporation

As a result of these consultations, EPA gathered important information regarding environmental justice at communities impact ed by RMP facilities. 133

Topics addressed included:

 The association between high

- risk areas and low

- income areas

.

 Insufficient information received by local communities about hazards presented by nearby facilities, and the need for enhanced information s haring.

 Cumulative effects of risks in communities affected by multiple RMP facilities.

 The need for local communities to be able to participate in planning activities, and problems that occur when those opportunities not available.

 The need to help comm unities with information and planning to enable them to better understand chemical facility hazards and know what to do when a release of hazardous
materials occurs.

 Emphasizing the particular vulnerability of EJ communities to detrimental effects of disa sters, especially r egarding racial discrimination.

 The effects of existing health disparities, cumulative impacts of facilities, and limited resources available to community members to understand and help solve the risk problems.

 The process of n otif ying local communities when a chemical accident occurs is poor and irregular. Alarm and siren systems are often not effective.

 Inadequate communication between Local Emergency Planning Committees and local citizens.

 The need for addressing and incorporating environmental justice issues within disaster plans, such as evacuation, return and rebuilding, and understanding and addressing health

consequences.

These consultations provided invaluable information about impacts on poor and minority communities,
dire ctly from affected community members and environmental justice groups. They also provided a

133 Notes from the consultations and public comments can be found at: http://www.regulations.gov/#!documentDetail ;D=DHS

- 2013

- 0075

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means for involvement of these communities in developing policy options to address those risks. Several of the components of this proposed rule

– and their concom itant benefits

– are based on the
information and issues brought to EPA’s attention in these sessions.***E.O. 12866 Review

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# CHAPTER 9: OTHER ANALYSES AND CONCLUSIONS

9 .1 Unfunded Mandates Reform Act

The Unfunded Mandates Reform Act of 1995 ( 2 U.S.C. 1531

– 1538) requires a gencies to conduct a cost benefit analysis of any rulemaking that may impose a net costs of $ 100 million or more for state, local and tribal governments, in the aggregate, or the private sector in any one year

. It is possible that this proposal may result in expenditures of $ 100 million or more in a year

. The cost

- benefit analysis presented in this document meets the requirement of the Act.



## 9 .2 Employment Impacts

Executive Order 13563 “Improving Regulation and Regulatory Review” (76 FR 3821; January 18, 2011) requires Federal agencies to consider the employment impacts of regulatory policy

. Specifically, Executive Order 13563 states, “Our regulatory system must protect public health, welfare, safety, and our environment while promoting economic growth, i nnovation, competitiveness, and job creation. ” Economic research evaluating the employment impacts of environmental regulation has shown that the net employment effect is ambiguous. Several impacts are incurred by firms in regulated industries, and
the n et effect of the impacts should be evaluated jointly to determine the overall effect. Increasing production costs raise the cost of business operations; some of these new regulatory costs are labor costs, while others are capital costs. As production cos ts increase and firms pass along costs to consumers, output may decrease, which could cause a decrease in labor demand. There are also operational impacts incurred by regulated firms as they modify operations to comply with new regulatory requirements; th e direction of that impact on labor demand is a function of the interaction between the regulatory requirements and the firm’s labor intensity of production. In general, the net effect of an environmental regulation on employment in regulated sectors and the overall economy is
indeterminate

. See Berman and Bui (2001) for a theoretical model of employment effects of environmental regulation. 134

This RIA does not include a complete analysis of labor market effects of the proposed rule

. In general,
an envir onmental regulation can be understood as an increase in demand for a particular output: environmental quality

. Meeting this new demand can result in increased demand for the various factors of production (including labor)

. EPA has determined that the pro posed rule is unlikely to have significant impacts on employment. Even in a year where a large complex facility would have to conduct a field exercise, a third

- party audit, a root cause analysis, and a near miss investigation, the total labor
hours would represent about one FTE, but those hours would be distributed across many employees. About half of the total labor hours of that scenario is for the field exercise, which is estimated to involve

134 Berman, E. and L. T. M. Bui. 2001. Environmental Regulation and Productivity: Evidence from Oil Refineries. Review of Economics and Statistics 83(3): 498

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more than 60 facility staff. For simple non

- responding faci lities the annual labor cost would average less than 10 hours distributed among several workers. At most, perhaps a facility might need to hire another employee to comply with the rule or to cover the work that would otherwise have been done by those
work ers involved in compliance activities. The third

- party audit and root cause analysis provisions may generate work for consultants, but the number of hours involved per facility is less than a single FTE.



## 9

. 3 Limitations and Conclusions

As discussed in detail in Chapters 3 and 7, the data on which this analysis is based are necessarily
limited

. EPA has attempted to correct obvious errors, such as removing accidents reported more than once and reclassifying some facilities to more appropriate NAICS codes , but some issues related to facility employment size and ownership could not be resolved

. EPA could not add accidents that had not been reported or correct accident impact data where they may have been inaccurate.

The estimated costs for third

- party aud its
, and root cause analysis and public meetings project past accident rates into the future

. The near miss estimates assume one near miss for each accident, but whether this is accurate will depend on how individual facilities interpret what constitutes a near miss

. Some industry publications project much higher ratios of near misses to actual releases

. EPA has not defined near miss, but even if it had, deciding whether a series of events could have produced a release
that would meet the definition of c atastrophic release will always be a matter of opinion

. Similarly
, what constitutes safer technology is open to interpretation as is what is considered to be feasible

. In these circumstances, some operators may adopt a narrow interpretation
, while others may adopt a broad interpretation

. Questions related to interpretation apply to most performance

- based rules where there are few if any bright lines that define what constitutes compliance

. The result is that some
facilities may spend far more than estim ated , while others may spend less

.

The number of non

- responding facilities that may become responders and the costs they will incur are
unknown

. For the former, the analysis provides a range of conversion estimates to indicate the potential total costs

. In order to assess the cost to any individual facility for coming into compliance, however, EPA necessarily had to use estimates of the number of people who would be trained and the amount of equipment that would be purchased

. The analysis does not addre ss the possibility that a facility might have to acquire fire

- fighting expertise and equipment, which would impose additional

costs

. The sensitivity analysis conducted in Chapter 5 analyzed costs for 25 percent, 50 percent, and 75 percent of current non

- r esponders in counties without a Hazmat team to become responders.

The number of regulated facilities that will receive a request from their LEPC or emergency response
official s to provide chemical hazard information is also unknown. Unlike the approach to the non

responder conversions, EPA had no data to narrow the range of estimates

. However, f acilit y owners or operators would be required to update this information annually ; therefore, EPA expects that all regulated facilities would incur costs for this provision

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Finally, the analysis used a model facility approach so that each estimate represents the average for a group of facilities, not a point estimate for any one facility

. This analysis has attempted to develop reasonable central estimates recogn izing that the range of costs incurred by individual facilities could be
wide

. For example, the estimated third

- party auditor cost for a complex facility is the same for all complex facilities, but it is unlikely that an auditor would charge the largest f acility, which has more than 30 covered processes, the same amount as it would a facility with only one or two covered processes

. The number of people who would participate in field exercises will vary considerably based on facility
size and location

. Fa cilities of any size and complexity in urban industrial areas may involve more people
in a field exercise than the same facilities would if located at a considerable distance from other
facilities.

The benefits analysis is qualitative

. There were no data to connect the specific rule elements with specific reductions in expected probabilities or magnitudes of RMP chemical accidents

. In addition, many of the accident impacts expected to be reduced by the rule, such as lost productivity or
emergency respons e costs , could not be quantified even for the 10

- year baseline accident record

. Lack of data also meant that other benefits of the rule such as improved information could not be quantified.***E.O. 12866 Review

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# APPENDIX A

PROPERTY AND BUSINESS LOSSES IN THE PETROCHEMIC AL INDUSTRY***E.O. 12866 Review

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— PROPERTY AND BUSINESS LOSSES IN THE PETROCHEMICAL INDUSTRY

Location Date Property Damage $M (20 13 Dollars) Business

Loss $M Notes

Refinery Texas City 5/30/1978 $190
Petrochemical Delaware 10/29/1980 $140 Refinery Romeoville 7/23/1984 $450
Petrochemical Pampa 11/14/1987 $480 $240
Petrochemical Henderson 5/4/1988 $640 plant destroyed Refinery Norco 5/5/1988 $610 Refinery Richmond 4/10/1989 $190 25% of capacity lost for 5 months
Petrochemical Pasadena 10/23/1989 $1, 400 full production not restored for 2 years Refinery Baton

Rouge 12/24/1989 $140 refinery shut for 3 days, reduced capacity for 3 weeks Petrochemical Sea Drift 3/12/1991 $180 $165 production reduced for a year
Petrochemical Sterlington 5/1/1991 $240 $270 one unit destroyed Refinery Wilmington 10/8/1992 $150 production reduced by more than half for 7 months Petrochemical Belpre 5/27/1994 $330 production unit destroyed
Petrochemical Cedar

Bayou 10/20/1994 $240 includes business loss

Petrochemical Port Neal 12/13/1994 $370
Petrochemical Deer Park 9/22/1997 $230 Refinery Richmond 3/25/1999 $190 unit shut down for year Refinery Carson City 4/23/2001 $190 unit shut down for 2 months Refinery Lemont IL 8/14/2001 $370 unit shut down for year
Petrochemical Illiopolis 4/23/2004 $200 most of plant destroyed Refinery BP/TX 3/23/2005 $260
Petrochemical TX 4/29/2006 $250 plant closed for 6 months Refinery TX 2/28/2008 $240 plant continued to operate
Petrochemical Geismar 6/13/2013 $510 pl ant closed for almost a year

Source: Marsh, The 100 Largest Losses, 1974

- 2013, Large P roperty D amage L osses in the Hydrocarbon Industry, 23rd Edition

. https://uk.marsh.com/Portals/18/Documents/100%20Largest%20Losses%2023rd%20Edition%202014.pdf The table includes 24 accidents that reflect only U.S. incidents in the refinery and petrochemical sectors from 1978 forward, only incidents that may have b een related to a release of a regulated substance, and only damage unrelated to natural disasters

.***E.O. 12866 Review

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# APPENDIX B Number of Small Entities by NAICS Code and Facility FTE

Total and Non

- Responders***E.O. 12866 Review

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Number of Small Entities by Facility FTE and NAICS Code, Total and Non Responders

All Non

- Responders
NAICS 0

- 4 FTE 5

- 9 FTE 10

- 19 FTE 20

- 99

FTE NAICS 0

- 4 FTE 5

- 9 FTE 10

- 19 FTE 20

- 99

FTE 111 41 34 14 7 111 34 28 12 6
112 1 0 0 0 112 1
115 61 69 53 53 115 42 43 36 44
211 56 18 22 27 211 36 8 8 11
2 13 1 1 2 2 213 1
221 8 11 22 70 221 4 11 17 35
2213 9 0 6 2 2213 4 0 4 1
236 1 236 0 0 0 0
311 3 4 9 114 311 1 3 6 52
312 0 0 1 5 312 0 0 1 1
313 1 313 0 0 0 0
324 1 9 324 2
32512 1 2 0 1 32512 1 1 0 0
32518 4 3 6 21 32518 1 1 1 1
3 25181 0 0 2 3 325181 0 0 2 0
325188 0 1 4 15 325188 0 1 2 4
32519 0 0 2 5 32519 0 0 0 2
325193 0 0 2 110 325193 0 0 1 87
325199 1 1 6 39 325199 0 1 3 11
325314 4 6 8 5 325314 3 6 6 5
32532 2 1 1 7 32532 1 0 0 2
32551 1 1 2 9 32551 0 1 1 1
32552 0 0 1 5 32552 0 0 1 2
32599 1 2 3 6 32599 0 1 2 1
325998 0 1 5 24 325998 0 1 3 9
326 0 1 3 35 326 0 0 1 18
327 1 327 0 0 0 0
331 0 1 2 8 331 1 0 1 4
332 0 0 6 9 332 0 0 4 4
333 0 0 0 2 333 0 0 0 1
334 0 0 0 4 334 0 0 0 2
335 0 0 0 1 335 0 0 0 0
3 36 0 0 0 1 336 0 0 0 0
339 2 8 339 0 0 1 2
423 2 0 0 2 423 1 0 0 1
424 42 32 18 4 424 33 25 14 4
4246 21 25 21 24 4246 17 16 12 12***E.O. 12866 Review

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All Non

- Responders
NAICS 0

- 4 FTE 5

- 9 FTE 10

- 19 FTE 20

- 99

FTE NAICS 0

- 4 FTE 5

- 9 FTE 10

- 19 FTE 20

- 99

FTE 4247 34 15 13 7 4247 18 6 8 3
4249 766 408 212 79 4249 711 351 189 64
444 4 2 1 444 4 1 0 0
447 1 447 0 0 1 0
453 4 2 3 453 4 1 2 0
484 1 1 5 5 484 0 1 3 1
486 0 0 2 2 486 0 0 0 0
488 0 3 1 1 488 0 1 0 0
49311 3 3 3 5 49311 3 3 3 4
49312 9 5 17 52 49312 9 5 17 52
49313 18 10 3 5 49313 15 5 2 3
49319 6 5 6 12 49319 2 2 2 6
541 0 2 0 2 541 0 1 0 2
561 10 0 4 0 561 10 0 4 0
562 0 1 0 2 562 0 0 0 0