i 

ECONOMIC ANALYSIS IN SUPPORT OF 

FINAL RULE ON 

RISK MANAGEMENT PROGRAM REGULATIONS 

FOR CHEMICAL ACCIDENT RELEASE PREVENTION, 

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

Chemical Emergency Preparedness and Prevention Office 

Office of Solid Waste and Emergency Response 

U.S. Environmental Protection Agency 

June 1996 

TABLE OF CONTENTS

 Page 

EXECUTIVE SUMMARY .....................................................................................................................................ES-1

BACKGROUND .......................................................................................................................................ES-1

REGULATORY TIERING OPTIONS EXAMINED IN THIS ANALYSIS ...........................................ES-2

ESTIMATED NUMBER OF AFFECTED SUBSTANCES AND SOURCES ........................................ES-5

UNIT TIME AND COST ESTIMATES ...................................................................................................ES-6

Costs to the Regulated Community ...........................................................................................................ES-6

Government Costs .....................................................................................................................................ES-6

ESTIMATED INITIAL COMPLIANCE COSTS.....................................................................................ES-7

Initial Compliance Costs to the Regulated Community ............................................................................ES-7

ESTIMATED AVERAGE COST PER SOURCE ....................................................................................ES-7

ANNUALIZED NET COSTS ...................................................................................................................ES-8

ESTIMATED BENEFITS .........................................................................................................................ES-8

ESTIMATED EFFECTS ON SMALL ENTITIES .................................................................................ES-10

UNFUNDED MANDATES ....................................................................................................................ES-11

COST TO GOVERNMENTS .................................................................................................................ES-12

CHAPTER 1. INTRODUCTION ...............................................................................................................................1-1

1.1. THE CLEAN AIR ACT AMENDMENTS OF 1990 .........................................................................1-1

1.2. CONSIDERATION OF OPTIONS ...................................................................................................1-2

1.3. PURPOSE OF THE ANALYSIS.......................................................................................................1-4

1.4. ORGANIZATION OF THIS REPORT .............................................................................................1-4

CHAPTER 2. REGULATORY OPTIONS EXAMINED IN THIS ANALYSIS ......................................................2-1

2.1. TIERS ................................................................................................................................................2-1

2.1.1. Program 1 ........................................................................................................................................2-2

2.1.2. Program 2 ........................................................................................................................................2-3

2.1.3. Program 3 ........................................................................................................................................2-4

2.2. OPTIONS ...........................................................................................................................................2-6

2.2.1. Option 1 ..........................................................................................................................................2-6

2.2.2. Option 2 ..........................................................................................................................................2-7

2.2.3. Option 3 ..........................................................................................................................................2-7

2.3. STATUTORY LIMITATIONS .........................................................................................................2-7
TABLE OF CONTENTS 

(Continued)

CHAPTER 3. ESTIMATION OF THE UNIVERSE OF AFFECTED SUBSTANCES AND SOURCES ...........3-1

3.1. SELECTION OF DATA ....................................................................................................................3-1

3.1.1. Data Requirements ..........................................................................................................................3-1

3.1.2. TRI Database/Limitations ...............................................................................................................3-2

3.2. ESTIMATION METHODOLOGY ...................................................................................................3-3

3.2.1. Estimation of the Universe of Sources and Substances Affected ....................................................3-3

3.2.2. Adjustments to the Universe of Sources and Substances ................................................................3-9

3.2.3. Classification of Affected Sources and Substances by Size and Process Complexity ..................3-12

3.2.4. Disaggregation of Universe of Sources Incurring Full and Partial Costs ......................................3-13

3.2.5. Estimate of the Number of Substances .........................................................................................3-14

3.2.6. Adjustments to the Universe of Sources and Substances for Attrition ..........................................3-15

3.3. RESULTS ........................................................................................................................................3-16

CHAPTER 4. ESTIMATED BURDEN AND UNIT COSTS OF COMPLIANCE ...................................................4-1

4.1. METHODOLOGY ............................................................................................................................4-1

4.2. UNIT COST ESTIMATES FOR PROGRAM 1 ................................................................................4-3

4.3. UNIT COST ESTIMATES FOR PROGRAM 2 AND PROGRAM 3 ..............................................4-3

4.3.1. Activities Per Source .......................................................................................................................4-4

4.3.2. Activities Per Regulated Substance ................................................................................................4-7

4.3.3. Submission of the RMP ................................................................................................................4-10

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

GOVERNMENT ........................................................................................................................................4-11

4.4.1. RMP Costs to EPA ........................................................................................................................4-11

4.4.2. Program Oversight and Assistance Costs to EPA .........................................................................4-11

4.4.3. Unit Time and Cost Estimates for Implementing Agencies ..........................................................4-13

4.4.4. Costs for Local Agencies and Others ............................................................................................4-14

CHAPTER 5. ESTIMATED TOTAL COSTS OF COMPLIANCE ..........................................................................5-1

5.1. METHODOLOGY ............................................................................................................................5-1

5.1.1. Compliance Cost Estimates.............................................................................................................5-1

5.1.2. Average Initial Compliance Cost Per Source ..................................................................................5-4

5.1.3. Subsequent-Year Cost Estimates ....................................................................................................5-5

5.1.4. Cost Estimates of EPA's Regulatory Options .................................................................................5-9

5.1.5. Cost Savings....................................................................................................................................5-9

5.2. ESTIMATED INITIAL COMPLIANCE COST TO INDUSTRY FOR REGULATORY 

OPTIONS ...................................................................................................................................................5-12

5.2.1. Option 1 ........................................................................................................................................5-12

5.2.2. Option 2 ........................................................................................................................................5-13

5.2.3. Option 3 ........................................................................................................................................5-14

5.3. ESTIMATED TOTAL COSTS TO GOVERNMENT ....................................................................5-18

5.3.1. Total Costs to EPA for RMPs .......................................................................................................5-18

5.3.2. Program Oversight and Assistance Costs to EPA .........................................................................5-19

5.3.3. Total Costs for Implementation and Enforcement ........................................................................5-19

CHAPTER 6. ESTIMATION OF BENEFITS OF RMP RULE ................................................................................6-1

6.1. OVERVIEW OF DAMAGES ...........................................................................................................6-1

6.1.1. Types of Damages ...........................................................................................................................6-1
TABLE OF CONTENTS 

(Continued)

6.1.2. Nature of the Accident: Toxic or Flammable Releases ..................................................................6-2

6.1.3. Magnitudes of Incidents ..................................................................................................................6-2

6.1.4. 6.1.5 Rule Coverage: Overlap Between EPA and OSHA ..............................................................6-2

6.2. ESTIMATED DAMAGES FROM TOXIC RELEASES ..................................................................6-3

6.2.1. Use of the ARIP Database...............................................................................................................6-3

6.2.2. Comparison of ARIP to AHE .........................................................................................................6-4

6.2.3. Number of Incidents........................................................................................................................6-5

6.2.4. Valuation of Incidents .....................................................................................................................6-5

6.2.5. Additional Damages from Smaller Magnitude Events ....................................................................6-9

6.2.6. Additional Damages from Larger Magnitude Events .....................................................................6-9

6.3. ESTIMATED DAMAGES FROM FLAMMABLE SUBSTANCES ..............................................6-12

6.3.1. Database Construction ..................................................................................................................6-12

6.3.2. Number of Incidents......................................................................................................................6-13

6.3.3. Valuation of Incidents ...................................................................................................................6-14

6.4. TOTAL ESTIMATED BASELINE DAMAGES ............................................................................6-17

6.5. PROJECTED REDUCTIONS IN DAMAGES ...............................................................................6-18

6.5.1. Expected Reduction in Damages for PSM Activities ...................................................................6-18

6.5.2. Expected Reduction in Damages for Non-PSM Activities ...........................................................6-19

6.6. ESTIMATED REDUCTION IN DAMAGES .................................................................................6-21

6.7. SENSITIVITY ANALYSES ...........................................................................................................6-22

6.7.1. OSHA Program is More Effective ................................................................................................6-23

6.7.2. Additional Spending under EPA Rule is More Cost-Effective .....................................................6-25

6.8. POTENTIAL ADDITIONAL BENEFITS ......................................................................................6-28

6.8.1. Possible Damage Reductions Due to the Offsite Consequence Analyses .....................................6-29

6.8.2. Possible Reductions in Damages Due to Routine Emissions ........................................................6-30

6.9. QUALITATIVE BENEFITS ...........................................................................................................6-34

6.9.1. Moving Toward the Optimal Level of Prevention ........................................................................6-34

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

Damages .....................................................................................................................................................6-35

6.9.3. Other Benefits ...............................................................................................................................6-39

6.10. SUMMARY OF EXPECTED BENEFITS ....................................................................................6-40

CHAPTER 7. SMALL ENTITY AND UNFUNDED MANDATE ANALYSIS ......................................................7-1

7.1. NUMBER AND CHARACTERISTICS OF REGULATED SMALL BUSINESSES ......................7-1

7.1.1. Definition of "Small" Business .......................................................................................................7-1

7.1.2. Estimated Number of Small Entities ...............................................................................................7-2

7.1.3. Estimated Compliance Costs Per Affected Entity ...........................................................................7-3

7.1.4. Data Sources ...................................................................................................................................7-3

7.1.5. Data on Small Governmental Entities .............................................................................................7-7

7.2. ESTIMATED ECONOMIC IMPACTS ON SMALL ENTITIES .....................................................7-9

7.3. ESTIMATED ECONOMIC IMPACT ON SMALL GOVERNMENTS ...........................................7-9

7.4. THE UNFUNDED MANDATE ANALYSIS ...................................................................................7-9

7.5. CONCLUSION ................................................................................................................................7-11

CHAPTER 8. CONCLUSIONS .................................................................................................................................8-1

8.1. UNCERTAINTIES ............................................................................................................................8-1

8.2. IMPACT OF RULE CHANGES ON FINAL COSTS ......................................................................8-2

8.3. IMPACT OF THE RULE ON INDUSTRY SECTORS ....................................................................8-4
TABLE OF CONTENTS 

(Continued)

8.4. COMPARISON OF COSTS AND BENEFITS .................................................................................8-4

8.5. IMPACT OF IMPLEMENTATION ON GOVERNMENTS ............................................................8-5

8.6. IMPACT ON SMALL ENTITIES .....................................................................................................8-5

8.7. UNFUNDED MANDATES ..............................................................................................................8-5

REFERENCES ....................................................................................................................................................... Ref-1

APPENDIX A. SUBSTANCES LISTED UNDER CAA SECTION 112(r) ............................................................. A-1

APPENDIX B. WAGE RATES AND UNIT COST TABLES ................................................................................. B-1

APPENDIX C. BASIS OF UNIT COST AND COMPLIANCE ESTIMATES ........................................................ C-1

APPENDIX D. COMPARISON OF ARIP AND AHE DATABASES .................................................................... D-1

APPENDIX E. . DERIVATION OF UNIT DAMAGE ESTIMATES .............................................................. E-1
ES-1

EXECUTIVE SUMMARY 

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

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

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

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

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

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

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

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

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

substances and threshold quantities will determine the need for owners and operators of sources1 to 

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

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

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

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

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

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

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

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

BACKGROUND 

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

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

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

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

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

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

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

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

five-year release history for the regulated substance. 

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

maintenance, monitoring, and employee training. 

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

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

release occurs. 

1

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

"process" means the individual unit at the source affected by the rule. 
ES-2

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

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

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

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

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

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

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

tiering regulatory requirements; state implementation; public participation; inherently safer technologies; 

and additional accident reporting. 

REGULATORY TIERING OPTIONS EXAMINED IN THIS ANALYSIS 

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

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

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

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

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

may be subject to different program levels.2

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

worst-case release, the five-year accident history, and a certification that the 

processes' worst-case release would not reach any public receptors. Emergency 

response actions must be coordinated with local responders. 

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

consequence analysis, document a five-year accident history, assign 

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

implement a seven-step prevention program, have an emergency response 

program, and submit an RMP. 

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

document a five-year accident history, assign responsibility for implementation 

of the program to a person or position, implement a 12-step prevention program 

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

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

Exhibit ES-1 presents the requirements of each program level. 

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

as follows: 

Option 1: 

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

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

release are considered a single process.
ES-3

A source that can demonstrate that, under a worst-case release from a process, the distance from the 

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

may comply with Program 1 requirements for that process. 

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

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

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

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

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

pressures)); 

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

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

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

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

program; the other risk management program requirements are the same for Program 2 

and 3. 

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

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

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

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

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

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

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

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

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

application of the Program 3 prevention program. 

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

for offsite consequence analysis and RMP, which required air dispersion 

modeling and a detailed, text-based RMP. The only differences between 

Options 2 and 3 are the OCA and RMP requirements. 

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

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

 3 SIC code 2611-pulp mills; 2812-chlor-alkali manufacturers; 2819-industrial inorganics manufacturers; 2821-plastic 

and resins; 2865-cyclic crudes and intermediates; 2869-industrial organics manufacturers; 2873-nitrogen fertilizers; and 

2911-petroleum refineries. 
ES-4

EXHIBIT ES-1 

PROGRAM REQUIREMENTS

PROGRAM 1 PROGRAM 2 PROGRAM 3

Hazard Assessment

Worst-case release analysis Worst-case and alternative release analysis Worst-case and alternative release analysis

Five-year accident history Five-year accident history Five-year accident history

Management

None Documentation of management system Documentation of management system

Prevention Program

Certify that no additional steps are necessary Safety Information

(MSDS, process parameters, specifications)

Process Safety Information

(chemical data, process technology, process 

equipment)

Hazard Review Process Hazard Analysis

(formal analysis, trained team)

Operating Procedures

(operating procedures)

Operating Procedures

(operating procedures, health and safety data)

Training (no documentation) Training

Maintenance (no documentation) Maintenance

Accident Investigation Accident Investigation

Compliance Audits Compliance Audits

Management of Change

Pre-startup Review

Contractors

Employee Participation

Hot Work Permits

Emergency Response

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

RMP

Registration

Worst-case release analysis

Five-year accident history

Registration

Worst-case and alternative release analyses

Five-year accident history

Prevention program

Emergency response

Certification

Registration

Worst-case and alternative release analyses

Five-year accident history

Prevention program

Emergency response

Certification
ES-5

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

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

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

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

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

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

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

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

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

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

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

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

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

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

reduced the documentation requirements for Program 2 sources. 

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

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

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

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

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

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

created. 

ESTIMATED NUMBER OF AFFECTED SUBSTANCES AND SOURCES 

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

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

only manufacturers). 

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

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

processes. Non-manufacturers were classified into 20 subcategories. 

Sources were further categorized into three groups: 

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

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

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

without a delegated OSHA program); 
ES-6

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

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

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

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

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

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

process hazard analysis or review, operating procedures, training, maintenance, 

compliance audits). 

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

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

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

the regulated community. 

UNIT TIME AND COST ESTIMATES 

Costs to the Regulated Community 

Using industry experience and engineering expertise, burden and cost estimates were developed 

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

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

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

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

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

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

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

level of compliance. 

Government Costs 

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

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

training to states and industries; and costs to the implementing agency to implement and enforce the 

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

analysis assumed that sources would either file the RMPs electronically, on-line, or fax copies in a form 

that can be optically scanned into a electronic format. 

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

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

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

provide technical assistance to sources, review the RMPs, and conduct audits and inspections. 
ES-7

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

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

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

ESTIMATED INITIAL COMPLIANCE COSTS 

Initial Compliance Costs to the Regulated Community 

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

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

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

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

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

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

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

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

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

$494 million for Option 1; 

$642 million for Option 2; and 

$1.22 billion for Option 3. 

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

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

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

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

ESTIMATED AVERAGE COST PER SOURCE 

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

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

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

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

then aggregated to estimate the average cost for manufacturers and non-manufacturers, depending on 

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

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

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

the largest chemical manufacturer with incremental substances. 
ES-8

ANNUALIZED NET COSTS 

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

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

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

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

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

every three or five years, while others, such as training and maintenance, are on-going costs. The 

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

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

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

Option 1: $97 million 

Option 2: $142 million 

Option 3: $246 million 

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

as proposed. 

ESTIMATED BENEFITS 

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

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

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

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

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

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

property damages, and litigation). 

The analysis divided potential benefits into three categories: 

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

events; 

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

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

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

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

Less certain benefits, including the value of the information made available to the public. 
ES-9

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

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

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

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

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

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

define the number of such releases and the impacts. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The total quantifiable benefits estimated are shown in Exhibit ES-2. Because all options require sources 

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

disaggregation of benefits by program elements, the benefits are presented as the same for all options. 
ES-10

EXHIBIT ES-2

TOTAL ANNUALIZED NET COSTS AND BENEFITS

OPTIONS NUMBER OF 

SOURCES

ANNUAL NET 

COST OF 

PROGRAM 

ANNUAL 

BENEFITS OF 

PROGRAMS

Option 1 360 (Program 1)

40,200 (Program 2)

25,500 (Program 3)

$97 million $174 million

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

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

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

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

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

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

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

ESTIMATED EFFECTS ON SMALL ENTITIES 

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

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

Small businesses were defined as those with fewer than 100 full-time employees (FTEs). The 

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

between 20 and 99 FTEs. The number of small non-manufacturers is more difficult to determine. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

approximately 4,300 small governmental entities would be affected by this rule. 
ES-11

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

of the affected universe. 

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

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

manufacturers. Subsequent year costs will be even lower. Costs for non-manufacturers are very low (less 

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

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

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

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

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

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

actions, their costs would be substantially lower. 

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

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

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

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

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

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

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

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

burden on these sources is minimized. 

UNFUNDED MANDATES 

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

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

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

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

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

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

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

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

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

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

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

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

not constitute an unfunded mandate. 

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

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

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

section 112(l). Because seeking delegation is voluntary, it does not constitute an unfunded mandate. 
ES-12

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

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

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

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

to the public. 

COST TO GOVERNMENTS 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

appropriate. 
1-1

CHAPTER 1.

INTRODUCTION 

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

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

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

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

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

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

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

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

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

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

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

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

processing. 

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

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

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

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

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

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

government, and local authorities responsible for handling accidental releases. 

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

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

incremental costs and benefits attributable to these regulatory options. 

1.1. THE CLEAN AIR ACT AMENDMENTS OF 1990 

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

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

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

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

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

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

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

which populations a release could affect. The owner or operator also must prepare a fiveyear release history for the regulated substance. 
1-2

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

maintenance, monitoring, and employee training. 

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

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

agencies when a release occurs. 

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

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

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

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

the community. 

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

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

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

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

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

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

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

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

RMP with EPA. 

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

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

case, a five-year accident history, a prevention program, an emergency response program, registration, 

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

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

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

maintenance (mechanical integrity), pre-startup review, management of change, safety audits, and 

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

process would be required to comply with all proposed requirements. 

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

six issues: the definition of worst-case release; approaches for tiering regulatory requirements; state 

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

1.2. CONSIDERATION OF OPTIONS 

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

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

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

the worst-case release, the five-year accident history, and a certification 

that the processes' worst-case release would not reach any public 
1-3

receptors. Emergency response actions must be coordinated with local 

responders. 

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

consequence analysis, document a five-year accident history, assign 

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

implement a seven-step prevention program, have an emergency 

response program, and submit an RMP. 

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

analysis, document a five-year accident history, assign responsibility for 

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

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

have an emergency response program, and submit an RMP. 

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

as follows: 

Option 1: 

_A source that can demonstrate that, under a worst-case release from a process, the distance from the 

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

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

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

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

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

cover sources with high volumes of regulated substances and complex processes 

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

high or low temperatures or pressures)); 

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

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

reduce potential confusion, processes already subject to OSHA PSM standard 

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

Program 3 prevention program; the other risk management program requirements 

are the same for Program 2 and 3. 

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

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

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

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

issues. 

 4 SIC code 2611-pulp mills; 2812-chlor-alkali manufacturers; 2819-industrial inorganics manufacturers; 2821-

plastic and resins; 2865-cyclic crudes and intermediates; 2869-industrial organics manufacturers; 2873-nitrogen 

fertilizers; and 2911-petroleum refineries. 
1-4

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

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

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

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

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

application of the Program 3 prevention program.

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

for offsite consequence analysis and RMP, which required air dispersion 

modeling and a detailed, text-based RMP. The only differences between 

Options 2 and 3 are the OCA and RMP requirements.

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

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

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

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

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

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

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

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

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

1.3. PURPOSE OF THE ANALYSIS

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

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

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

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

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

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

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

1.4. ORGANIZATION OF THIS REPORT

The remainder of this report is organized as follows:

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

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

options.

Chapter 4 presents the unit cost and total cost estimates for compliance with each of the tiers. 
1-5

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

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

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

Chapter 8 discusses limitations of the analysis and conclusions.
2-1

CHAPTER 2.

REGULATORY OPTIONS EXAMINED IN THIS ANALYSIS

The Agency considered three options in developing the final risk management program 

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

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

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

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

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

categories:

Hazard assessment (offsite consequence analysis);

Prevention program;

Emergency response program;

Risk management plan (includes the registration and five-year accident history5).

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

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

potential exposure to populations. The assessment must consider worst-case scenarios. The CAA 

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

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

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

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

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

management programs. 

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

options in Section 2.2

2.1. TIERS

Exhibit 2-1 summarizes the requirements for the three program levels, described in greater detail 

below.

 

 5 The CAA includes in the hazard assessment the five-year accident history and arguably some or all of the 

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

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

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

the RMP because it is basically a reporting requirement.
2-2

EXHIBIT 2-1

PROGRAM REQUIREMENTS

PROGRAM 1 PROGRAM 2 PROGRAM 3

Hazard Assessment

Worst-case release analysis Worst-case and alternative release analysis Worst-case and alternative release analysis

Five-year accident history Five-year accident history Five-year accident history

Management

None Documentation of management system Documentation of management system

Prevention Program

Certify that no additional steps are necessary Safety Information

(MSDS, process parameters, specifications)

Process Safety Information

(chemical data, process technology, process 

equipment)

Hazard Review Process Hazard Analysis

(formal analysis, trained team)

Operating Procedures

(operating procedures)

Operating Procedures

(operating procedures, health and safety data)

Training (no documentation) Training

Maintenance (no documentation) Maintenance

Accident Investigation Accident Investigation

Compliance Audits Compliance Audits

Management of Change

Pre-startup Review

Contractors

Employee Participation

Hot Work Permits

Emergency Response

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

RMP

Registration

Worst-case analysis

Five-year accident history

Registration

Worst-case and alternative release analyses

Five-year accident history

Prevention program

Emergency response

Certification

Registration

Worst-case and alternative release analyses

Five-year accident history

Prevention program

Emergency response

Certification

2.1.1. Program 1

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

are no public receptors within the distance to an endpoint from a worst-case release and that the process 

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

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

registration form and document the worst-case release in the RMP. Emergency response actions must be 

coordinated with local response agencies.
2-3

2.1.2. Program 2

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

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

Hazard Assessment (Offsite Consequence Analysis)

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

consequence analysis (OCA). The OCA provides estimates of the worst-case releases and their 

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

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

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

identify populations that could be exposed from such releases. EPA requires sources to complete a worstcase analysis assessment for regulated toxic substances and flammables as classes. Sources must analyze 

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

class. 

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

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

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

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

identify offsite populations in detail.

Management 

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

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

Prevention Program

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

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

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

Safety Information. The owners/operators have to develop up-to-date safety information, 

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

Operating Procedures. Owners and operators must establish standard operating procedures 

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

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

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

ensure that they reflect changes in current operating practice.

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

training must be provided at least once every three years to assure that the employee understands and 
2-4

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

perform their jobs. 

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

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

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

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

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

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

Accident Investigation. Each owner or operator must establish and implement procedures to 

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

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

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

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

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

work is within the process area where the accident occurred. 

Emergency Response Program

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

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

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

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

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

to develop a written plan. 

Registration

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

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

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

Risk Management Plan (RMP)

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

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

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

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

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

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

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

2.1.3. Program 3 

Hazard Assessment
2-5

The same requirements as specified for Program 2 apply.

Management

The same requirements as specified for Program 2 apply.

Prevention Program

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

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

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

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

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

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

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

Process Safety Information. The process hazard analysis is based on up-to-date chemical, 

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

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

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

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

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

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

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

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

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

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

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

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

perform their jobs and document all training. 

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

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

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

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

Pre-Startup Review. The owner or operator must conduct a pre-startup review prior to initial 

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

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

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

modified process. 

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

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

basis for the change is documented and that the consequences of each change in processes or procedures 
2-6

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

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

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

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

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

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

steps that were taken prior to implementation of the change.

Compliance Audit. The same requirements as specified for Program 2 apply.

Accident Investigation. The same requirements as specified for Program 2 apply.

Emergency Response Program

The same requirements as specified for Program 2 apply.

Registration

The same requirements as specified for Program 2 apply.

Risk Management Plan

The same requirements as specified for Program 2 apply.

2.2. OPTIONS 

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

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

changes to requirements that EPA has adopted.

2.2.1. Option 1

A source that can demonstrate that, under a worst-case release from a process, the distance from 

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

with Program 1 requirements for that process. 

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

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

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

 

 6 SIC code 2611-pulp mills; 2812-chlor-alkali manufacturers; 2819-industrial inorganics manufacturers; 2821-

plastic and resins; 2865-cyclic crudes and intermediates; 2869-industrial organics manufacturers; 2873-nitrogen 

fertilizers; and 2911-petroleum refineries.
2-7

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

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

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

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

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

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

the same for Program 2 and 3. 

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

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

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

standards designed to address safety issues.

2.2.2. Option 2

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

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

includes primarily data elements.

2.2.3. Option 3

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

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

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

2.3. STATUTORY LIMITATIONS

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

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

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

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

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

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

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

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

use risk management programs for chemical accident release prevention. 
3-1

CHAPTER 3. 

ESTIMATION OF THE UNIVERSE

OF AFFECTED SUBSTANCES AND SOURCES

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

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

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

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

involves estimating the number of regulated substances per source and the number of sources within 

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

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

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

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

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

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

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

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

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

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

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

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

3.1. SELECTION OF DATA

3.1.1. Data Requirements

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

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

potentially affected sources, therefore, includes both manufacturers and non-manufacturers. To define the 

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

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

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

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

toxic release inventory (TRI) database covers only manufacturers (SIC codes 20-39), sets thresholds 

based on annual throughput, and does not include sources with fewer than 10 full-time employees. Other 

 

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

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

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

difference may result in an overstatement of the regulated universe and, therefore, an overestimate of costs.
3-2

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

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

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

information on workplace releases. 

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

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

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

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

information on the number of employees. The State of New Jersey has a Right-to-Know database, 

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

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

EPA determined that none of the state right-to-know databases were reliable enough to use. State 

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

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

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

report chemicals used only in the manufacturing of plastics. 

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

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

estimate wholesaler coverage and propane use. Other non-manufacturing sectors were estimated based on 

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

based on EPA data.

3.1.2. TRI Database/Limitations

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

process 25,000 pounds of a TRI-listed chemical annually, or use 10,000 pounds of such chemicals 

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

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

The TRI data, however, have some significant limitations: 

Manufacturers with fewer than 10 full-time employees (FTE) are exempt. 

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

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

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

SIC code in TRI reports, almost twice as many chlor-alkali sources filed reports as the 

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

code.)

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

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

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

(Ammonia refrigeration units were estimated separately.)
3-3

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

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

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

threshold for chlorine.

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

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

compliance averaged about 70 percent.

3.2. ESTIMATION METHODOLOGY

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

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

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

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

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

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

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

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

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

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

the universe into categories of sources incurring full and partial costs. Section 3.2.5 explains how the 

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

changes in practices.

3.2.1. Estimation of the Universe of Sources and Substances Affected 

Exhibit 3-1 provides the actual number of sources and listed chemicals reported to TRI for 1991 

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

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

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

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

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

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

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

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

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

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

on census numbers. For example, Census data indicate that there are 39 pulp
3-4

EXHIBIT 3-1

ESTIMATES OF MANUFACTURING SOURCES

TRI DATA Comments Estimate 

Source/Chem

# Unique 

112(r) 

Chemicals

Reported

ACTUAL TRI

INDUSTRY/SIC Code Source Chemical

Food Processors - 20 10 554 554 Ammonia not included in TRI estimates; SO2 used in some sectors. 

Assume TRI at 70% compliance.

790/790

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

Textiles - 22 6 161 202 Bromine and NOx may be used. Assume TRI at 70% compliance. 230/320

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

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

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

Pulp Mills - 261 7 89 299 Assume all covered; number based on Census data. Assume SO2 use. 40/130

Paper Mills - 262 9 126 295 Assume all covered; number based on Census data. Assume SO2 use. 280/660

Paperboard Mills -263 7 66 147 Assume TRI at 70% compliance. Assume SO2 use. 90/210

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

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

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

Industrial Gases - 2813 20 77 124 All sources probably covered because of ammonia refrigeration systems. 590/980
3-5

EXHIBIT 3-1

ESTIMATES OF MANUFACTURING SOURCES

TRI DATA Comments Estimate 

Source/Chem

# Unique 

112(r) 

Chemicals

Reported

ACTUAL TRI

INDUSTRY/SIC Code Source Chemical

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

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

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

Chemicals added for non TRI substances.

390/2,020

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

Chemicals added for non TRI substances.

50/310

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

Chemicals added for non TRI substances.

10/80

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

Chemicals added for non TRI substances.

60/430

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

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

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

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

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

Polishes - 2842 7 104 148 Assume TRI at 70%. Takes in half of sources with >20 employees. 150/220
3-6

EXHIBIT 3-1

ESTIMATES OF MANUFACTURING SOURCES

TRI DATA Comments Estimate 

Source/Chem

# Unique 

112(r) 

Chemicals

Reported

ACTUAL TRI

INDUSTRY/SIC Code Source Chemical

Surface Agents - 2843 13 45 105 Assume TRI at 50% because of non-TRI chemicals. Takes in half of 

sources with >20 employees. SO3 and oleum may be used.

90/270

Toiletries - 2844 6 23 27 Assume TRI at 50% because of non-TRI chemicals. Takes in mostly 

sources with >500 employees.

50/50

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

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

data.

40/110

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

data. Chemical added for non-TRI substances.

150/780

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

data. Chemical added for non-TRI substances.

500/2,910

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

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

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

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

Adhesives Sealants - 2891 9 38 51 Assume TRI at 70%. 50/70
3-7

EXHIBIT 3-1

ESTIMATES OF MANUFACTURING SOURCES

TRI DATA Comments Estimate 

Source/Chem

# Unique 

112(r) 

Chemicals

Reported

ACTUAL TRI

INDUSTRY/SIC Code Source Chemical

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

Census data.

70/130

Printing Ink - 2893 4 13 13 Assume TRI at 50% because of non-TRI chemicals. 30/30

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

data.

20/50

Misc Chemicals - 2899 25 170 320 Assume TRI at 50% because of non-TRI chemicals. 340/660

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

class. 

185/1,060

Other Petroleum Coal Products - 295+ 6 39 50 Assume TRI at 50% because of non-TRI chemicals. 80/100

Rubber and Plastic Products - 30 13 206 294 Assume TRI at 70%. 290/420

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

Stone, Clay, Glass - 32 12 169 252 Assume TRI at 70%. 240/360

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

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

who are unlikely to have the acids above the TQ.

1,200/1,740

Industrial Machinery - 35 6 197 254 Assume TRI at 70%. 280/360
3-8

EXHIBIT 3-1

ESTIMATES OF MANUFACTURING SOURCES

TRI DATA Comments Estimate 

Source/Chem

# Unique 

112(r) 

Chemicals

Reported

ACTUAL TRI

INDUSTRY/SIC Code Source Chemical

Electronics - 36 7 474 773 Assume TRI at 70%. 680/1,100

Semiconductors - 3674 5 123 282 Whole industry with >9 employees affected by non-TRI chemicals; 

number based on Census data.

550/2,200

Transportation Equipment - 37 13 324 493 Assume TRI at 70%. 460/700

Instruments - 38 10 138 198 Assume TRI at 70%. 200/200

Misc - 39 6 74 92 Assume TRI at 70%. 90/110

TOTAL 7,264 12,906 11,100/24,800

All estimates have been rounded to the nearest 10.
3-9

mills (SIC code 2611), therefore, only 39 sources were counted in that sector (TRI indicated 89 sources in 

SIC code 2611). A ratio of chemicals to sources was developed from the TRI data and applied to the 39 

sources to estimate the number of substances in SIC code 2611. 

For sectors where TRI data were used to estimate the number of sources, the data were adjusted 

based on a number of factors:

The likelihood that sources in a sector would be using non-TRI regulated substances (e.g., semiconductor manufacturers are likely to use such substances);

Comparison with Census data to determine the number of sources with more than 100 employees. 

(Based on discussion with industrial users, it seemed unlikely that any source with fewer 

than 100 employees would store or use acids (the primary chemical on concern in the 

metals industrial sectors) above the threshold quantities.)

Estimated compliance with TRI reporting requirements in 1991 (base year for the data). At that time, 

EPA estimated that 70 percent of the sources covered by the rule were in compliance. 

In general, outside of the chemical industry, compliance was estimated at 70 percent unless the resulting 

estimate would have included sources with fewer than 100 employees. Except as discussed above, 

within the chemical sector, the TRI average rate of 70 percent compliance was used for most sectors8. 

For a few sectors, however, a 50 percent rate of compliance was applied because the primary listed 

substances in use are not TRI chemicals and, therefore, TRI data may not adequately reflect the number 

of sources covered. A 50 percent compliance rate was selected as a reasonable estimate of the likely 

number of sources using regulated substances in these sectors.

3.2.2. Adjustments to the Universe of Sources and Substances

The TRI database does not adequately represent certain large industry sectors: public drinking 

water and wastewater treatment works, cold storage sources, propane and agricultural retailers, federal 

sources, utilities, wholesalers, and gas processing. The analysis, therefore, was adjusted to account for 

these sectors. Because data on these sources are generally not available in databases, the analysis relied 

on information collected from trade associations, who were asked to provide their best estimate of the 

number of sources in their sectors using listed substances above the applicable threshold quantities.

Public sources. Discussions with officials in EPA's Office of Drinking Water and at the 

American Water Works Association indicated that the public drinking water systems that treat more than 

2 million gallons a day (mgd) and publicly owned treatment works (POTWs) that treat more than 1 mgd 

are likely to use chlorine in quantities above the threshold quantities. The number of public drinking 

water sites in the U.S. was obtained from an EPA Office of Drinking Water analysis that estimated the 

number of separate treatment sites for surface and ground water for systems serving varying populations. 

Approximately 48 percent of the public systems are in states that have OSHA-delegated worker safety 

and health programs; they were assumed to be in compliance with state regulations at least as stringent as 

 

 8 Preliminary Analysis of TRI Tracking System Data, William Burch, Memo to Charles Elkins, Director, EPA/OTS, 

September 12, 1988.
3-10

the OSHA PSM standard. The other 52 percent of the public drinking water systems were assumed to 

have to comply with EPA's risk management requirements. A state-by-state estimate of the number of 

POTWs in the U.S., by population served, was obtained from EPA's 1991 Pretreatment Program Report 

to Congress (U.S. EPA, 21 W 4004). The number of drinking water sources was estimated at 4,140; the 

number of POTWs was estimated at 3,145.

Utilities. Electric utilities use chlorine and hydrazine in their cooling towers and boilers. Some 

larger utilities may use ammonia in scrubbers and may produce sulfur dioxide in sufficient quantities to 

be covered for that chemical. The number of electric utilities is based on the 1994 Directory of Electrical 

Utilities (McGraw Hill, 1994). The number of large utilities is based on the number of non-hydroelectric 

power plants producing 25 megawatts (MW) or greater, which are classified by the directory as major 

producers. The number of small utilities is based on the number of such sources belonging to state, local, 

district, or federal agencies and producing 10 MW. Smaller utilities produce very small quantities of 

power and, therefore, are not expected to have more than a threshold quantity of regulated substances on 

site. The analysis estimated 1,100 large utilities and 570 small. Most utilities will be covered by the 

OSHA PSM standard although some may be subject only to EPA's requirements if the only regulated 

substance used is hydrazine. To account for this possibility, the analysis assumed that 10 percent of large 

utilities and 20 percent of smaller utilities would not be subject to the OSHA standard. This estimate is 

conservative because it is likely that most utilities will have several regulated substances on site.

Gas utilities also are likely to be covered because of their storage of natural gas (methane). The 

American Gas Association estimated that there are approximately 1,800 gas utilities. All of these utilities 

are subject to the OSHA PSM standard.

Cold storage sources. Cold storage systems use ammonia as a refrigerant. To estimate the 

number of cold storage units, information was obtained from industry members through the International 

Institute of Ammonia Refrigeration (IIAR) and the International Association of Refrigerated Warehouses 

(IARW). Discussions with IIAR and its members and a review of TRI data indicate that selected food 

processors are likely to have large ammonia systems. To estimate the number of food processors likely 

to be covered, the analysis used TRI data to identify sectors likely to have ammonia refrigeration systems 

and assumed that all sources with more than 100 employees in these sectors would be covered. These 

sectors include meat packing, dairy products, frozen food (processors and distributors), and beer 

manufacturers, as well as refrigerated warehouses. In addition, the analysis assumed that 10 percent of 

wholesalers handling packaged frozen food, dairy products, poultry and poultry products, fish, meats, and 

fresh fruits and vegetables would have large ammonia refrigeration systems. The analysis included 90 

percent of the 724 public refrigerated warehouses listed in U.S. Department of Agriculture data. Private 

warehouses were not included in the estimate to avoid possible double counting with food processors and 

distributors. The total number of cold storage sources covered under the list is estimated at approximately 

3,300 food processors, 1,800 food distributors, and 650 warehouses, for a total of 5,800 (all numbers were 

rounded). All of these sources are subject to the OSHA PSM standard.

Retailers. Two groups of retailers are likely to store more than threshold quantities of listed 

substances: propane distributors and agricultural retailers who sell ammonia as a fertilizer. Propane 

retailers do not appear to fall into a specific SIC code. According to the National Propane Gas 

Association, approximately 25,000 retailers sell propane. The Association estimated that only half of 

these retailers have more than 10,000 pounds of propane on site. Therefore, 12,500 propane retailers 

were added to the estimated universe.
3-11

Comments from agricultural retailers indicated that between 5,000 and 7,000 of these retailers 

will have ammonia in quantities above 10,000 pounds on site. Therefore, the total number of retailers 

covered by the rule was adjusted upward from 12,500 to 18,500 to include the agricultural retailers. 

OSHA specifically exempts retailers from the OSHA PSM standard. Consequently, all of these 

sources are subject to only EPA's rule. 

Propane users. Propane is used as a fuel or for heating at numerous sources. Manufacturers 

may use propane directly as fuel for operating the source, as fuel for fork lifts, and as a backup fuel when 

the source has an interruptible natural gas contract. Other sources, such as hospitals, mobile home parks, 

restaurants, hotels, and apartment buildings, especially in rural or mountainous areas, use propane for 

heating. Institutions such as prisons also use propane for comfort heating. No data currently exist on the 

number of such sources. New Jersey right-to-know data were used to estimate that 16,100 sources would 

have more than 10,000 pounds of propane on site. This estimate is consistent with an extrapolation based 

on Texas Railroad Commission data of propane sources in Texas, which indicate a national number of 

approximately 17,000. 

Some of the propane users may be subject to the OSHA PSM standard. OSHA exempts propane 

when used as a fuel unless it is fueling a process that involves another chemical listed by OSHA. Because 

there was no basis for estimating how many such processes might exist, the analysis assumed that all 

propane users would be subject to only EPA's rule. This assumption will overstate the costs to some 

degree. 

Wholesalers. The wholesalers affected by this rule are primarily chemical distributors (SIC code 

5169) although a few other wholesalers may also sell chemicals in bulk. Because TRI does not cover this 

sector, the number of wholesalers was based on New Jersey Right-To-Know data and extrapolated to the 

nation assuming a 45 percent compliance rate. Most wholesalers are subject to OSHA. The analysis used 

the New Jersey right-to-know data to estimate the number of wholesalers subject only to EPA. 

Gas processing. In comments to the docket, API stated that 750 gas processing plants were 

subject to the rule (see docket letter 425). In discussions, API estimated that half the processing plants are 

covered by the OSHA PSM standard and, therefore, would be subject only to the incremental elements of 

EPA's rule. 

Federal sources. Federal sources, such as military installations and Department of Energy 

facilities, are potentially affected by the rule primarily because of the presence of chlorine for wastewater 

treatment and the acids used for degreasing and metal work. According to discussions with EPA's Office 

of Federal Facilities, approximately 1,600 federal facilities have notified EPA that they are potentially 

subject to reporting under EPCRA. Because no other data are available on chemical use at federal 

installations, this analysis used 1,600 as the number of federal sources potentially affected by the rule. 

This number may overstate the potential impact of the rule on federal facilities because EPCRA covers a 

broader range of chemicals than does section 112(r). Because these sources are likely to have chlorine or 

ammonia, the analysis assumed that all of them were subject to OSHA PSM for at least one chemical, but 

that all had one other regulated substance listed only by EPA. 
3-12

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

The compliance burden on sources for implementing EPA's risk management requirements will 

vary by the complexity of processes in which the regulated substance is used. For example, refineries 

will have to expend greater resources to conduct process hazard analyses than will metal platers. To 

ensure that the estimated unit costs reflect the variation in the level of complexity of the process used at 

an affected source, EPA categorized all non-chemical manufacturers as low complexity. Most of these 

sources use chemicals to treat water or wastes, degrease, or etch. Chemical manufacturers were 

categorized as moderately complex or highly complex. SIC code 2911, petroleum refineries, were treated 

separately. All small (< 20 employees) chemical manufacturers were considered moderately complex. 

All medium to large sources in SIC codes 2812, 2819, 2821, 2865, 2869, 2873, and 2879, were 

considered highly complex; these sectors react substances and manufacture chemical feedstocks, produce 

products, often using high-temperature or pressure processes. All other medium and large chemical 

companies (e.g., manufacturers of paints, toiletries, drugs) were considered moderately complex because 

their processes generally less likely to involve extreme conditions or chemical reactions.

The compliance burden will vary according to the size of the source. Larger sources will have to 

expend more resources to train employees because training costs are partly the result of the number of 

employees to be trained. Other risk management program elements, such as safety audits, maintenance, 

and pre-startup review, are likely to require more resources at larger sources because the size of the 

process alone will mean that each element will take more time to develop and implement. Accordingly, 

the analysis separates manufacturing sources into 14 categories, based on Census size divisions because 

Census data were used to estimate the number of affected sources:

Small chemical and non-chemical sources with 1 to 19 employees;

Non-chemical sources, moderately complex chemical sources, and highly complex chemical sources 

with 20 to 99 employees; 

Non-chemical and moderately complex chemical sources with more than 100 employees.

High complexity chemical sources with the following: 100-249 employees; 250-499 employees; 500-

999 employees; 1,000-2,499 employees; and 2,500 employees or greater.

Refineries — small (less than 30,000 barrels per day (bbl/d)); medium (30,000-60,000 bbl/d); and large 

(>60,000 bbl/d).

Large high complexity chemical sources were divided into subcategories because these sources 

are more likely than other large chemical manufacturers to have multiple processes and chemicals 

affected by this rule. The number of covered processes at these sources is likely to rise as the size of the 

source rises.

For non-manufacturers, the number of employees was assumed not to be an appropriate measure 

of size because, based on date from the EPCRA section 305(b) study and discussions with industry, 

relatively few employees are usually needed for operations at both large and small sources. In addition, 

the hazards at the source and the complexity of evaluating and managing those hazards were assumed to 

be more directly related to the quantity of chemical on site. At manufacturing sources, the quantity of 

chemicals used can be expected to be related to the number of employees, because the number of 
3-13

employees reflects the size of the overall operation. For wholesalers, relatively few employees may 

handle chemicals. For example, of the seven chemical distributors who responded to EPA's EPCRA 

section 305(b) survey, only one had more than 20 employees handling chemicals, although five had more 

than 100,000 pounds of a chemical on site; two had more than 200 million pounds of a chemical on site, 

but had fewer than 12 employees. Ammonia refrigeration industry sources indicate that few if any cold 

storage sources will have more than eight employees working on the cold storage unit although some of 

these units contain as much as 200,000 pounds of ammonia.

Utilities and public sources were subdivided based on capacity. As noted above, utilities were 

divided into those that produced 10 to 25 MW and those that produced more than 25 MW of power, 

considered major producers; systems that produce less than 10 MW were judged to be too small to 

maintain threshold quantities of listed substances. Based on conversations with officials in states with 

state RMP (Delaware and New Jersey) programs and on comment letters, the analysis divided drinking 

water and POTWs into size categories to reflect the increasing level of complexity as the size of the 

system increases. The smallest systems may handle one-ton cylinders of chlorine while the largest 

systems may have several 90-ton rail cars on site at all times. Using standard EPA size-divisions, the 

analysis divided drinking water systems and POTWs into four groups: those that treat 100 mgd or more; 

those that treat 25 to 100 mgd; those that treat 10 to 25 mgd; and those that treat 1 to 10 mgd (POTW) or 

2 to 10 mgd (drinking water).

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

Sources can be divided into three categories: those that are covered only by EPA's rule; those 

that are covered by EPA and OSHA's PSM standard for substances covered by both rules; and those 

covered by both rules and also have substances covered by only EPA. The cost burden for these three 

groups are different. The first group will incur the full cost of complying with all of EPA's requirements. 

The second group will incur only the costs for those elements not covered by the PSM standard 

(registration, hazard assessment, emergency response drills, and the RMP). The final group will have 

already complied with the source-specific requirements (procedures for management of change, prestartup review, and accident investigation) for the OSHA rule. No further costs should be incurred for 

these elements. For the incremental substances (those covered by EPA but not by OSHA), these sources 

will incur process-specific costs (PHA, process safety information, SOPs, training, maintenance, and 

audits) for each substance. 

It was not feasible to define the number of sources that were covered by EPA and OSHA, with 

and without additional EPA chemicals; to do so would have required examining each of the almost 

25,000 TRI chemical reports to determine what percentage of source reported only OSHA/EPA chemicals 

and what percentage also reported EPA-only chemicals. Consequently, the analysis did not assign a 

number of sources to these groupings. Instead, costs for the prevention program elements were estimated 

based on the number of incremental sources (those not covered by OSHA for any substance) and the 

number of incremental substances (the substances covered only by EPA). The costs of rule elements that 

only EPA imposes (the RMP and OCA) were calculated based on the total number of sources and 

substances because all sources have to comply with these provisions. 

To determine the number of incremental sources and substances, the following assumptions were made. 
3-14

Based on expert knowledge of chemical use in the affected industry sectors, all small and medium nonchemical manufacturers (mostly semi-conductor and paper manufacturers) were assumed 

to be covered by OSHA; semi-conductor manufacturers are likely to have listed gases on 

site above the threshold quantity. Based on discussions with industrial sources, it seemed 

that only large sources in the other non-chemical manufacturing sectors would use listed 

substances above the threshold quantity. For example, hydrochloric acid is the primary 

substance triggering coverage of the metal and industrial equipment sectors; to meet the 

threshold quantity, these sources would need to have approximately 42,000 pounds of 

industrial concentration HCl on site. Smaller sources generally rely on frequent 

deliveries of several barrels to meet their needs.

Based on expert knowledge of chemical use in the industry, all chemical manufacturers and refineries 

were assumed to be covered by OSHA for at least one substance. The high-volume, 

commodity chemicals (chlorine, ammonia, flammable hydrocarbons) are covered by 

OSHA and serve as feedstocks for affected chemical sources.

The TRI database does not distinguish between chemicals used as pure substances and those used 

in solution. OSHA covers only pure substances (except where a solution is indicated), but EPA will 

cover aqueous solutions. In addition, EPA's list includes higher thresholds for solutions, making it 

difficult to determine which TRI-reported chemicals would be covered by the rule. For example, TRI 

reports include maximum on site in ranges of 1,000 to 10,000 pounds and 10,000 to 50,000 pounds. 

Hydrogen chloride as a gas has a threshold quantity of 5,000 pounds, but as a mixture has a threshold 

quantity of 15,000 pounds. A TRI report for HCl listing the maximum on site as in the first range would 

be covered if it was held as a gas but not if it was held as solution. The estimates in this EIA account for 

this difference as follows: sources in SIC codes 28 and 29 were assumed to use hydrogen chloride and 

hydrogen fluoride as pure substances because they are likely to be producing it or reacting it; they would 

be subject to OSHA PSM if the amount on site exceeded the thresholds; all other sources were assumed 

to use these acids in aqueous solution and would be subject only to EPA, but at a higher solution 

threshold, if applicable. This approach is conservative because it is possible that at least some of the 

sources outside the chemical industry will handle the solutions at concentrations below those in EPA's 

list; these users would not be subject to the rule.

3.2.5. Estimate of the Number of Substances 

Although TRI does not cover many of the listed substances, the non-TRI substances are primarily 

used in the chemical industry. To estimate the number of substances at high complexity sources, the TRI 

data were used to estimate the number of chemicals. Adjustments were made to account for non-TRI 

chemicals. Generally in SIC codes 282, 2865, and 2869, two additional substances were added per source

primarily to reflect the use of flammables. Considerable uncertainty surrounds these additions; some 

sources may have no additional substances while others could have five or more such substances, 

especially where petroleum-based flammables are used as feedstocks. Two additional chemicals were 

chosen because, although it may understate the number of substances in some cases, most of the non-TRI 

substances are also covered by the OSHA PSM standard and because flammables are treated as a class in 

the offsite consequence analysis requirements. Consequently, their presence imposes limited additional 

costs to sources.
3-15

TRI data were used to estimate the number of incremental chemicals (those not covered by 

OSHA PSM). The number of reports of the non-OSHA substances with maximums on site above the 

threshold quantity were identified by SIC code. Approximately 380 TRI reports were filed on non-OSHA 

chemicals for the SIC codes in Program 3 and 40 outside of these sectors, but still in the chemical 

industry. Within the SIC codes, the analysis allocated one chemical per source to the largest sources 

(>1,000 FTE), 0.5 per source to those with >250 FTEs, 0.4 per source for those with >100 FTEs, and the 

remaining 50 to sources with 20 to 99 FTEs. Although they reflect reasonable assumptions, considerable 

uncertainty surrounds these numbers. The TRI reports are not only general on quantity on site, but the 

ability to distinguish between OSHA and EPA substances is complicated. OSHA covers some toxics as 

flammables, but only in processes when held above atmospheric conditions. The total number of 

incremental substances per sector is presented in Exhibit 3-2.

Because toluene di-isocyanate (TDI) is the one toxic substance that may qualify for Program 1, 

processes with TDI were assigned to Program 1. Of the 50 TDI reports in TRI that met the threshold 

quantity, 25 were outside of the high complexity chemical sector, but were still submitted by chemical 

companies. These reports were assigned to the category of large, moderately complex chemical 

companies. The 25 processes in the Program 3 SIC codes were assigned equally to the five employeesize divisions of the large sources.

3.2.6. Adjustments to the Universe of Sources and Substances for Attrition

In New Jersey and Delaware, which have implemented risk management program regulations 

under state law, a substantial number of sources removed themselves from coverage by reducing 

inventories of substances, reducing the concentrations of solutions, or switching to non-listed substances. 

In New Jersey, 52 percent of the manufacturers that initially registered under the state law changed 

substances or quantities before the full requirements were in effect. In Delaware, the attrition rate was 30 

percent. In New Jersey, 90 percent of the public sources dropped out. In addition, information in EPA's 

Accidental Release Information Program database indicates that 20 percent of the sources reporting 

significant releases reduced inventories of chemicals in response to the release incidents.

EPA recognizes that sources may take steps to eliminate the need to comply with the rule. The 

analysis, however, does not attempt to estimate this change for two reasons: first, most of these changes 

are likely to have already occurred in the case of commodity chemicals as the result of the OSHA PSM 

standard; second, any such changes may result in costs to the source and perhaps an increased risk to the 

community if a reduction in inventory results in more frequent transportation and unloading of hazardous 

chemicals. Although it is expected that sources will not switch chemicals unless they believe the change 

is cost-effective, the analysis did not consider the change because it had no basis for estimating the 

number of sources that would be likely to make the changes or estimating the costs the sources would 

incur (e.g., for equipment to handle chlorine substitutes). Similarly there was no basis for estimating the 

degree to which risks would be decreased or increased (e.g., increased transportation, substitution of a 

substance that is not acutely toxic, but has chronic or carcinogenic effects). Consequently, the analysis 

did not assume any reductions in the number of sources, which may create an upward bias to the cost 

estimates.
3-16

3.3. RESULTS

Universe of Affected Sources

As described above, some costs apply to all sources and substances and some apply only to 

incremental EPA sources and substances. The costs also vary by size and complexity of source. Exhibit 

3-2 presents the estimated universe of sources, substances, incremental sources, and incremental 

substances for the manufacturers. Exhibit 3-3 presents the number of sources and substances for nonmanufacturers. 

None of the regulatory options considered in this EIA reduce the total number of sources affected 

by the rule. The options, however, impose different requirements and costs on various sources. For each 

source category, Exhibit 3-4 presents the regulatory tier with which sources in the category would have to 

comply and the reason they were assigned to a specific Program level. Finally, Exhibit 3-5 presents the 

number of sources and processes in each Program level under Option 1 (the other options assign all 

sources to Program 3). EPA expects that more processes will be eligible for Program 1 than the 410 

listed in Exhibit 3-5, which includes only remote gas processing plants and TDI processes. Many 

processes with flammables may meet the criteria for Program 1 because the distance to an endpoint from 

a worst-case release of a flammable is generally relatively small. Some flammable processes may, 

therefore, have no public receptors with these distances. Because no data are available on the location of 

these processes, however, this analysis assumed that no such processes would be eligible to be 

conservative.
3-17

EXHIBIT 3-2

SOURCES AND SUBSTANCES FOR MANUFACTURERS

Total Sources Total Substances Incremental (nonOSHA) Sources

Incremental (nonOSHA) Substances*

Chemical Manufacturers

< 20 FTEs 840 2,200 0 0

20-99 FTEs 

SIC codes 283-5, 287-9

900 1,600 0 0

20-99 FTEs 

SIC codes 281-2, 286

800 3,700 0 50

100+ FTEs 

SIC codes 283-5, 287-9

840 1,500 0 40

SIC codes 281-2, 286

100-249 FTEs 360 1,300 0 150

250-499 FTEs 150 850 0 75

500-999 FTEs 80 700 0 45

1000-2499 FTEs 40 650 0 50

2,500+ FTEs 13 156 0 13

SIC Code 2911

< 30,000 bbl/d 61 290 0 0

30,000-60,000 bbl/d 39 190 0 0

60,000+ bbl/d 85 490 0 0

Other Manufacturers

< 20 FTEs 120 450 0 0

20-99 FTEs 300 1,150 0 0

100+ FTEs 6,500 9,900 1,280 1,600

* See Section 3.2.5 for a discussion of these estimates.

FTE means full-time equivalent employees. 
3-18

EXHIBIT 3-3

SOURCES AND SUBSTANCES FOR NON-MANUFACTURERS

Number of Sources/EPA Only 

Sources

Number of Substances/EPA Only 

Substances

Cold Storage 5,800/5,800 5,800/5,800

Retailers 18,500/18,500 18,500/18,500

Utilities 1,670/220 3,870/770

POTWs 3,145/1,688 6,290/3,270

Drinking Water Systems 4,140/2,150 7,300/3,800

Wholesalers 1,500/600 3,500/1,700

Gas Processors 725/360 725/360

Gas Utilities 1,800/0 1,800/0

Propane Users 16,100/16,100 16,100/16,100

Federal Sources 1,600/0 3,200/1,600
3-19

EXHIBIT 3-4

SOURCES AND PROGRAMS

PROGRAM REASON FOR PROGRAM LEVEL

Manufacturers (< 20 FTE) 3 OSHA PSM

Non-Chemical Manufacturers (20-99 FTE) 3 OSHA PSM

Chemical Manufacturers (20-99 FTE) 3 SIC codes, OSHA PSM

Manufacturers (100+ FTE) 2 (1,280)

3 (5,220)

Not OSHA PSM9

OSHA PSM

Chemical Manufacturers (100+ FTE) 3 OSHA PSM

Refineries (100+ FTE) 3 OSHA PSM

Cold Storage 3 OSHA PSM

Retailers 2 Not OSHA PSM10

Electric Utilities 2 (220)

3 (1,450)

Not OSHA PSM11

OSHA PSM

POTWs 2 (1,690)

3 (1,460)

Not OSHA PSM4

OSHA PSM

Drinking Water 2 (2,150)

3 (1,990)

Not OSHA PSM4

OSHA PSM

Wholesalers 2 (600)

3 (900)

Not OSHA PSM2

OSHA PSM

Gas Processors 1 (360)

3 (360)

No impacts

OSHA PSM

Gas Utilities 3 OSHA PSM

Propane Users 2 Not OSHA PSM3

Federal Sources 3 OSHA 

 

 9 Acid solutions not covered by OSHA

 10 Exempted by OSHA.

 11 Exempted because OSHA rules do not apply to state or local governments unless the program is delegated to the 

state.
3-20

EXHIBIT 3-5

TOTAL SOURCES AND PROCESSES BY PROGRAM LEVEL

PROGRAM 1 PROGRAM 2 PROGRAM 3

SOURCES 360 40,200 25,500

PROCESSES 410 47,700 43,800

NON OSHA 

PROCESSES

410 47,700 373
4-1

CHAPTER 4.

ESTIMATED BURDEN AND UNIT COSTS OF COMPLIANCE

This chapter provides the estimated burden and unit costs of developing risk management 

programs for industry and government. The regulated community is expected to incur costs to become 

familiar with the listing and risk management rulemakings, develop and register their RMPs, and prepare 

and implement the risk management program elements for covered processes. EPA is expected to incur 

costs to develop a submission system for the RMP and provide assistance to sources on the risk 

management program. The implementing agency (EPA or a state agency) is expected to incur costs to 

review initial RMPs for completeness, provide technical assistance to sources, audit RMPs, and enforce 

compliance with the requirements.

The unit for measuring compliance burden and costs to the regulated community varies by the 

different risk management program elements. It was assumed that some activities, such as rule 

familiarization and registration, will be performed once per source regardless of the number of regulated 

substances or processes at a source. The burden and costs to conduct hazard assessments, however, were 

estimated based on the number of regulated substances at a source. Other burdens and costs, such as the 

process hazard analysis and standard operating procedures (SOPs), were estimated as functions of the 

number of incremental (non-OSHA) substances at a source. As a result, each unit cost estimate for the 

risk management program elements is presented on either a per source or per regulated substance basis as 

appropriate. To derive the unit cost estimates for each program element, unit time estimates were 

multiplied by the appropriate hourly wage rates for each category of labor that would be expected to 

perform the required activity, based on industry estimates.

Section 4.1 presents the methodology for estimating the burden and unit cost estimates. Section 

4.2 presents the cost estimates for compliance for sources that are eligible for Program 1 requirements. 

Section 4.3 presents the unit cost estimates for compliance with the elements of Program 2 and Program 

3. Section 4.4 provides the unit time and cost estimates for activities performed by the government under 

the rule. Appendix B provides unit time and cost estimates for each industry sector for each rule element 

discussed in this chapter. Appendix C provides a discussion of the basis of unit cost estimates.

4.1. METHODOLOGY 

The unit cost estimates are presented for affected manufacturers (i.e., sources in SIC codes 20-39) 

by size and process complexity and for non-manufacturers (e.g., public sources, private utilities, cold 

storage sources) in terms of the amount and type of personnel time required to comply with the risk 

management program elements. To estimate the unit costs per risk management program element, the 

unit time burden per element was multiplied by the corresponding hourly wage rates for managerial, 

technical, and production personnel, as appropriate. For purposes of this analysis, management also 

refers to senior level engineers. Corporate rate were used for those sectors (SIC codes 28 and 29) where 

higher level reviews of RMPs can be expected.
4-2

Unit time estimates were developed for rule familiarization, source registration, and the risk 

management program elements based on information from a variety of sources, including comments to 

the docket, consultants working in states with risk management programs, industry, trade groups, existing 

studies on risk management programs, OSHA, and professional engineering judgment. This analysis 

assumed that manufacturing sources have staff engineers and process engineers who are familiar with the 

source and its operations; non-manufacturing sources, however, were assumed to use an industry or EPA 

model risk management program to provide guidance and reduce the technical burden. Unit compliance 

costs are presented as the cost required to achieve compliance. When annualized, these costs were 

distributed over the first three years of the program. 

The estimated unit costs were based on three categories of labor and wage rates reported by the 

American Institute for Chemical Engineers's (AIChE) annual survey of chemical engineer salaries (for 

management and technical salaries for the chemical and petroleum industry) and by the U.S. Bureau of 

Labor Statistics (BLS) for all other industry sectors. Table 1 in Appendix B provides the full list of base 

wage and benefit rates used, for each sector and the source of the rates. For any sector that may use 

consultants for some part of the risk management program, an overhead load of 17 percent was added. 

Exhibit 4-1 provides the overall wage rates used. 

EXHIBIT 4-1 

WAGE RATES

Management Technical Production Corporate

SIC 28 $61 $48 $25 $76.50

SIC 29 $61 $48 $31 $76.50

Other Mfr $40 $37 $23.30

Utility $32 $32 $31.50

State/Local $33.80 $35.40 $20.60

Retail $13 $13 $9

Wholesale $17.20 $17.20 $9

Federal $36 $25 $13.70

These rates include salary and fringe benefits (calculated at between 21.5 percent and 35.4 percent of 

direct salary, based on BLS data for the sectors), plus the overhead charge; retail and wholesale rates are 

not loaded with overhead because they are not expected to use consultants; the simplicity of the systems 

and the guidance and model RMPs that EPA is developing will make it possible for these sources to 

comply with the elements without seeking outside expertise. The guidance EPA has developed should 

make it possible for all sources to comply without hiring consultants, but to be conservative, the analysis 

applied overhead to other sectors. Throughout the analysis, all numbers have been rounded after 

calculation; for example, the cost of management time was calculated, then rounded to the nearest ten. 
4-3

4.2. UNIT COST ESTIMATES FOR PROGRAM 1

Under Program 1, sources need only determine that there are no human receptors of concern that 

could be affected by their worst-case release and that they have had no accidental releases from the 

process in the past five years that resulted in impacts offsite. EPA will specify the endpoints for 

determining distances for specific quantities. Sources, therefore, need only refer to the distance table to 

determine the vulnerable area for their worst-case release and identify whether any receptors of concern 

are within that area. The owner/operator would then sign a certification form provided by EPA. The 

primary burden for complying with Program 1 is to conduct and document a worst-case release analysis. 

For gas processors this effort was estimated to cost $110. For chemical manufacturers handling TDI, the 

only other sources predicted to qualify for Program 1, the effort was estimated to vary between 6 and 12 

hours at $61 per hour, or $370 to $730. These estimates are the same as the estimates for the worst-case 

release part of the offsite consequence analysis unit cost calculations (see Appendix B, Table 8). The gas 

processors, who would not have additional processes and, therefore, would have to complete a 

registration were estimated to incur an additional $34 in costs to complete the form.

4.3. UNIT COST ESTIMATES FOR PROGRAM 2 AND PROGRAM 3

Unit cost estimates for the risk management program elements are presented in terms of the 

number of hours required for affected sources to do the following:

Read and understand the proposed risk management requirements (rule familiarization);

Conduct and document the hazard assessment;

Develop and implement the prevention program;

Prepare the emergency response program; and

Prepare and submit the RMP.

Unit cost estimates were developed on either a per source or per regulated substance basis, 

depending on the activity. Specifically, burden and unit cost estimates for rule familiarization, 

registration, pre-startup review, management of change, accident investigation, emergency response, 

management, and the RMP were developed for each source. Three elements, adopted from the OSHA 

PSM program — employee participation, hot work permits, and contractors — were not costed. These 

elements are performed on a per source basis. All sources subject to these requirements under the final 

rule have already developed them under the OSHA PSM standard. Consequently, no additional costs are 

expected to be incurred under EPA's program. 

Burden and unit cost estimates for the OCA, process hazard analysis, chemical and process safety 

information (PSI), SOPs, training, refresher training, maintenance, and safety audits were developed for a 

single substance. Documentation costs applied to both groups and were calculated separately for per 

source and per substance costs for manufacturers. 
4-4

The unit-time estimates per labor category for each of the industry sectors for each element are 

provided in the tables in Appendix B. Appendix C provides the basis for the unit-cost estimates.

4.3.1. Activities Per Source

Rule Familiarization. This activity was expected to consist primarily of management time to 

understand the risk management requirements and technical time to determine how to meet them. Rule 

familiarization was expected to be incurred only the first year after promulgation of the rule. Rule 

familiarization will vary depending on whether a source is already covered by the OSHA PSM standard 

and whether the source is subject to Program 2. Those sources will incur lower costs because they will 

already be complying with the elements of the prevention program or because the requirements are less 

complex. Some non-manufacturers were assumed to have model RMPs and guidance that will be specific 

to their industry, reducing the time required for rule familiarization. 

Rule familiarization was estimated to require 136 hours (48 management, 88 technical) for 

manufacturers covered only by EPA.12 Non-manufacturers covered by only EPA were estimated to 

require 34 hours (12 management, 22 technical) to become familiar with the rule. Manufacturers covered 

by OSHA were expected to spend 16 hours (4 management, 12 technical) to become familiar with the 

requirements; non-manufacturers and Program 2 non manufacturing sources were expected to spend 12 

hours (4 management, 8 technical). Manufacturing Program 2 sources were expected to spend 68 hours 

(24 management and 44 technical). The unit cost in the first year, therefore, is an estimated to range from 

$156 for retailers to $5,176 for manufacturers covered only by EPA. Table 2 in Appendix B provides the 

detailed estimates of time and cost. Appendix C explains the basis of the estimates.

Pre-Startup Review. The owner or operator of a Program 3 process will be required to develop 

written procedures for conducting a pre-startup review prior to the initial startup of a process or to a 

startup following a substantial modification of the process. The information needed to develop a prestartup review was based on the process hazard analysis. The cost estimate is solely for the development 

of the procedures, not for the conduct of a review. The technical burden for this element was assumed to 

be 1 to 2 hours for non-manufacturers that only handle or store regulated substances; 10 hours for 

small/medium manufacturers and private utilities; and 16 hours for large non-chemical manufacturers and 

chemical manufacturers. The unit cost estimates for a pre-startup review ranged from $13 for retailers to 

$976 large manufacturers. In subsequent years (after initial compliance), sources were assumed to 

conduct pre-startup reviews every second year at a cost equal to the cost of developing procedures. Table

3 in Appendix B provides the detailed estimates of time and cost. Appendix C explains the basis of the 

estimates.

Accident Investigation. Development of procedures to investigate each significant accidental 

release was assumed to take the same time as development of pre-startup review procedures. These costs 

apply to sources with Program 2 or 3 processes.

The development of procedures was assumed to be a one-time expense. Actual accident 

investigations, which may occur in subsequent years, impose greater costs. For small and medium-sized, 

 

 12 This total is based on the assumption that facilities will take four times as long to read and understand the RMP 

rule as they do to understand the requirements of EPCRA section 313, which requires 34 hours of rule familiarization.
4-5

non-chemical manufacturers, investigations were assumed to take 4 hours, with a team of management, 

technical, and production staff; management would take an additional 4 hours to write the report, and the 

findings would be reviewed with the source staff (0.5 hours per production worker). Small and mediumsized, moderately complex chemical manufacturers were assumed to conduct a 6-hour investigation. 

Large, non-chemical manufacturers were assumed to conduct a 4-hour investigation with a team of 5 

staff. Medium, high complexity and large, moderately complex chemical companies were assumed to 

conduct an 8-hour, 5-person team investigation and take 8 management hours to complete the report. 

Complex chemical companies were assumed to conduct a 40-hour, 5-person team investigation and take 

20 management hours to complete the report. Staff review time would be 0.5 hours per production 

worker for all but high complexity sources. The total cost of an accident investigation ranges from $680 

to $52,000. Accident investigations for non-manufacturers were assumed to require less time because of 

the simple processes involved and cost $141 for retailers to $670 for large utilities. Manufacturers were 

assumed to investigate one accident every five years, non-manufacturers one every 10 years. Table 4 in 

Appendix B provides the detailed estimates of time and cost. Appendix C explains the basis of the 

estimates.

Management of Change. Each owner or operator of a Program 3 process must establish and 

implement procedures to manage changes in processes and procedures. These procedures ensure that the 

consequences of the change on safety are considered and that all the SOPs, training, and maintenance 

programs are revised prior to implementation. For non-manufacturers, the time required to develop the 

procedures was estimated to range from 1 hour for propane users and retailer to 110 hours plus 24 hours 

of consultant time for large electric utilities. For manufacturers, the time required ranged from 34 hours 

plus 16 hours of consultant time for the smallest sources to 596 hours for the largest chemical company. 

Discussions with industry and consultants indicated that for manufacturers the process of developing 

management of change procedures is substantial because of the need to review current systems and 

develop new procedures that can be integrated. Developing procedures for large chemical sources 

involves studying the current system of managing change; drafting new procedures; obtaining review by 

affected groups within the source; revising the procedures; pilot testing the procedures; revising them; 

training employees; and implementing the program. Total costs range from $100 for retailers to $27,000 

for large chemical sources. Appendix C explains the basis of the estimates.

Actual management of change activities (as opposed to development of the procedures) involve 

different elements. Under the rule, owners/operators must document the technical basis of the change, 

review the hazards, update process safety documentation, review changes with staff, and train workers on 

any new procedures. These activities were estimated to require from 12 hours for retailers to more than 

500 hours for a large refinery, with costs ranging from $116 for retailers to $19,000 for large refineries. 

In estimating costs for these activities, manufacturers were assumed to have one major change per year. 

Based on information provided by officials in states with existing PSM programs, one percent of nonmanufacturers were estimated to have a major change per year. Table 5 in Appendix B provides the 

detailed estimates of time and cost.

Emergency Response. Each Program 2 and 3 owner or operator was assumed to be required to 

establish and implement an emergency response plan for responding to and mitigating releases of 

regulated substances. Because all sources are required, under OSHA rules (29 CFR 1910.38 and 

1910.120) to have emergency plans, there would be no additional costs for complying with EPA's 

requirements. 

Management. Implementation of the risk management program needs to be managed to ensure 

that documentation is developed and maintained and that the program continues to function properly. 
4-6

Retailers, propane users, and wholesalers were assumed to require a quarter hour per week ($170- $520); 

other sources were assumed to take an hour to three hours per week ($1,700 to $9,500). Table 6 in 

Appendix B provides the detailed estimates of time and cost. Appendix C explains the basis of the 

estimates. 

Preparation of the RMP. The time required for the Option 1 and 2 RMP was estimated based 

on the number of hours sources were expected to spend to complete each of the following sections: 

Executive summary (2 hours to 12 hours); 

Registration (.25 hours); 

Accident history (2 hours to 20 hours); 

Offsite consequence analysis (.5 hours to 5 hours); 

Prevention program (.5 hours to 15 hours); and 

Emergency response program (.25 hours). 

The RMP consists of an executive summary, providing brief text descriptions of the source, the 

offsite consequence analysis, the prevention steps in use, the accident history, and the emergency 

response plan. The remainder of the document consists of data elements that requirement, for the most 

part, checkoffs, numbers, or yes/no answers. Because sources will have already developed the 

information required as part of their implementation of the risk management program, filling out the form 

will require very limited time. The higher numbers are for sources with multiple chemicals and 

processes; part of the prevention program data is process-specific. An hour of corporate review was 

included for all sources. For larger chemical companies and refineries, one to four hours of legal review 

were also included. Costs were estimated to range from $75 for retailers to $3,700 for highly complex 

chemical manufacturers. Table 7 in Appendix B provides the detailed estimates of the unit time and 

costs. Appendix C explains the basis of the estimates. 

Option 3 RMP. All affected sources were assumed to be required to prepare and submit an RMP 

containing the following information: a summary of the offsite consequence analyses, the five-year 

accident history, a list of major hazards, the consequences of each hazard, the steps taken and planned to 

address the hazards, and the consequences of these steps; a summary of the prevention program; a 

summary of the emergency response program; and a description of the management system that 

designates the person or persons responsible for implementing the risk management program. Although 

most of this information should be developed as the OCA and PSM elements are done, compiling the 

information would take time. More important, this information is likely to be highly sensitive. 

Consequently, the Option 3 RMPs are likely to require a substantial amount of management/legal review. 

In developing revised estimates of the cost of the RMP, the following assumptions were used based on 

expert judgment: 

The five-year accident history will require a review of source records and, if records do not exist, 

interviews. In practice, all of the toxic releases should have been reported to the National 

Response Center, but they may not have been documented in sufficient detail. 

Flammable releases will not have been reported unless they resulted in a fire or 

explosion, when the local fire department was probably notified. Again, no 

documentation may exist. Insurance records may need to be reviewed. Compilation of 

the accident history must be performed for each substance covered by the rule. 

_For highly complex sources, where the records are probably complete, the compilation could take 4 

hours for sources with fewer than 500 employees. This record would then be 
4-7

circulated to ensure completeness (another 4 hours made up of short reviews). 

The corporate attorneys would need to review it as well (8 hours). For sources 

with more than 500 employees, the initial compilation and check were assumed 

to take 16 hours. 

_For other large/medium chemical sources, records will also be relatively complete. These sources have 

fewer chemicals per site. Costs should equal one-half those of the highly 

complex sources.

The OCA section would consist of a summary of the OCA results. For chemical companies, time 

would be spent selecting the scenarios to include in the summary and drafting their risk 

communication language. With revisions, this would probably take 16 hours per 

substance with 8 additional hours of attorney review for sources with fewer than 500 

employees, and 24 hours per substance with 8 hours legal/management review for 

sources with more than 500 employees. 

The list of major hazards would require review of the findings of the PHA team and selecting those that 

are major hazards. Consequences would need to be identified for each hazard included. 

The source's response would have been documented; these documents need to be 

reviewed and the implementation checked to ensure that the records are correct. The 

majority of time would be spent selecting the major hazards and cross-walking these with 

the management's documentation of its actions. Most of the cost would come from the 

corporate and attorney review of the list. For each chemical or process, it would take 24 

hours to develop the initial list for sources with <500 employees. Corporate/legal review 

is likely to take 8 hours. For sources with > 500 employees, initial compilation would 

take 60 hours, with 16 hours of corporate and legal review. 

The summary of the prevention program is estimated to take 60 to 80 hours to draft and 8 to 16 hours to 

vet.

The summary of the response program will take 8 to 16 hours to draft and revise and 4 hours for 

management review.

The total cost for the RMP, when drafted by the source, will average from $15,800 to $300,000, 

depending on the number of substances or processes that are covered. 

Simple manufacturers, small chemical manufacturers, utilities, and gas processors were assumed 

to hire consultants to draft their RMPs. The costs for these documents range from $5,000 to $7,500. 

Other non-manufacturers were assumed to complete a simple document based on model RMPs; the cost 

for these was estimated at $1,000. 

4.3.2. Activities Per Regulated Substance

Offsite Consequence Analysis. Each owner or operator of a source was assumed to be required 

to develop OCAs based on worst-case release scenarios and alternative release scenarios. The OCA 

includes defining release scenarios, estimating release quantities and duration, modeling the dispersion, 

defining the distance the substance may travel before dispersing enough to no longer pose a threat, and 
4-8

defining the population and environments within that distance. Sources were assumed to analyze 

flammables as a class. Sources also were assumed to analyze alternative release scenario per toxic. 

Sources were assumed to used lookup tables to define impact distances. Offsite populations were 

assumed to be defined using readily available Census data and local street maps; location information on 

environmental receptors was assumed to be readily obtainable from local maps.

Non-chemical manufacturing sources and non-chemical manufacturers were assumed to spend 

four hours per substance defining worst-case scenarios, four hours per substance for alternative scenarios, 

0.5 hours using the lookup tables and mapping the impact zones, and 4 hours obtaining population and 

environmental data, for an estimated cost of $160 to $490. Chemical manufacturers were assumed to 

spend between 4 and 18 hours on worst case, 4 and 12 hours on alternative scenarios, and the same 

amount of time on mapping and defining receptors, for costs of $700 to $2,050. Table 8 in Appendix B 

provides the detailed estimates of the unit time and costs. Appendix C explains the basis of the estimates.

Option 3 Hazard Assessment. The requirements for conducting the offsite consequence 

analysis are the same, but under Option 3, EPA would require sources to conduct air dispersion modeling 

to determine distances and define in detail populations potentially affected. Based on discussions with 

state and industry officials, as well as consultants doing these analyses under state programs, the analysis 

assumed that all sources, except those with model RMPs, would hire consultants to conduct the analyses 

at costs that range from $1,000 to $25,000 per substance. Even sources with model RMPs were assumed 

to spend $1,000 to conduct the analysis and define offsite populations. The latter effort was assumed to 

require as much as 40 hours of clerical time, based on discussions with consultants doing this work in 

California.

Process Safety Information. For each Program 3 process, the owners/operators were assumed 

to expend time to prepare up-to-date information on the properties and hazards of the regulated 

substances, the process technology, and the chemical handling equipment. Much of this cost results from 

the need to update or create piping and instrumentation drawings. The number of P&IDs per process was 

assumed to vary from 1 for nonmanufacturers to 80 P&IDs for the largest high complexity source. The 

cost was estimated to vary from $52 for retailers to $94,000. 

For Program 2 processes, much less information is required. For example, sources are not 

required to develop P&IDs. Costs are estimated to range from $30 for retailers to $770 for larger 

chemical companies. Table 9 in Appendix B provides the detailed estimates of the unit time and costs. 

Appendix C explains the basis of the estimates.

Process Hazard Analysis. Each Program 3 process was assumed to be required to conduct a 

formal PHA, using a technique approved by a recognized engineering organization. This analysis 

assumed that chemical manufacturers would conduct HAZOPs, non-chemical manufacturers, What Ifs, 

and non-manufacturers either What Ifs or checklists.13 Retailers, propane users, and small water and 

wastewater treatment systems were assumed to use models that provide checklists. PHAs require mostly 

senior level engineer time for manufacturers and have unit costs ranging from approximately $2,260 for a 

What If to $73,800 per substance for a HAZOP at the most complex facility. Small and medium 

 

 13 HAZOP (hazard and operability) analysis is a systematic method in which process hazards and potential 

operating problems are identified using a series of guide words to investigation process deviations. HAZOPs usually 

require teams of five or more, with specialists brought in as needed. What If analysis is a brainstorming approach in 

which a group of people experienced in the process ask questions about possible events. A checklist is an experiencebased list of hazards.
4-9

manufacturers were assumed to hire consultants as team leaders; consultants costs were estimated at 

$1,000 per day. High complexity and large chemical companies were assumed to have staff available and 

trained as team leaders. 

Hazard Review. For Program 2, sources have to conduct a hazard review, which is less detailed 

in its requirements. The analysis assumes that non-manufacturers will use either models or checklists to 

conduct these reviews. Chemical manufacturers with processes subject to Program 2 would use What Ifs 

rather than HAZOPs. Costs were estimated to range from $90 for retailers to $2,600 for large chemical 

processes. Table 10 in Appendix B provides the detailed estimates of the unit time and costs. Appendix 

C explains the basis of the estimates.

Operating Procedures. Each owner or operator of a Program 3 process was assumed to be 

required to develop written SOPs for each affected process. The estimated unit cost for developing SOPs 

ranged from $100 for retailers where standard procedures can be provided in model RMPs to $31,000 for 

high complexity sources. For Program 2 processes, the SOPs are less comprehensive and, therefore, less 

costly. Costs were estimated to range from $50 to $5,200. Table 11 in Appendix B provides the detailed 

estimates of the unit time and costs. Appendix C explains the basis of the estimates.

Employee Training. It was assumed that, for both Program 2 and 3 processes, each employee 

would be required to be trained in all SOPs that apply to the employee's duties. Sources were estimated 

to spend four hours of technical time for course development per hour of training given. 

Management/senior engineers in large, high complexity sources were estimated to spend four hours 

reviewing the content of the course. The burden on production staff was developed by multiplying the 

training time per employee by the average number of employees per process for each sector. The costs 

were estimated to range from $155 for retailers to $258,000 for large refineries. Table 12 in Appendix B 

provides the detailed estimates of the unit time and costs. Appendix C explains the basis of the estimates.

Refresher Training. Each employee was assumed to receive refresher training once every three 

years. No new course development was assumed to be necessary. The estimated burden on production 

staff was estimated by multiplying the refresher training time per employee by the average number of 

employees assumed for each type of source. Unit cost estimates for refresher training ranged from $60 

for retailers to $100,000 for large refineries. Table 12 in Appendix B provides the detailed estimates of 

the unit time and costs. 

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

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

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

training. A schedule for inspections and tests is required. On-going costs were based on estimates of the 

number of hours of maintenance per year for each process. Initial costs were estimated to range from 

$250 for retailers to $86,600 for large refineries; on-going costs were estimated to range from $234 for 

retailers to $64,500 for large refineries. Table 13 in Appendix B provides the detailed estimates of the 

unit time and costs. Appendix C explains the basis of the estimates.

The purpose of the maintenance requirement is create a preventive maintenance system to 

eliminate equipment breakdowns that can lead to accidental releases as well as costly downtime even if a 

release does not occur. For the most part the inspections and tests can take place while equipment is in 

service or will occur during routine maintenance. For many of the processes covered by this rule, 

maintenance occurs during scheduled shutdowns/turnarounds. By identifying problem equipment, the 

source can repair or replace it, before it fails, on a schedule that allows the source to minimize any 
4-10

disruption of the production process. If a source waits until a part fails, the process may be down while 

the source waits for the delivery of new equipment. One advantage of this approach is that parts can be 

ordered while the process is running and replaced as soon as they are received. Therefore, costs for 

downtime are not included in the maintenance costs. EPA expects that the program will provide 

productivity gains and has accounted for those in the cost savings (see section 5.1.5). 

Compliance Audit. At least once every three years, each owner or operator of a Program 2 or 3 

process was assumed to conduct an audit of the source. The source operator is required to keep records of 

each audit conducted. Compliance audits were estimated to cost between $90 for retailers and $20,000 

for large chemical manufacturers. Table 14 in Appendix B provides the detailed estimates of the unit 

time and costs. Appendix C explains the basis of the estimates.

Documentation. For Program 3 processes, documentation was assumed to cost 10 percent of the 

cost of management, training, and maintenance; 10 percent is a standard generally applied to account for 

documentation. For manufacturers, documentation costs ranged from $640 for source-specific elements 

and $980 for substance-specific elements for a small company to $4,700 and $34,000 for a high 

complexity manufacturer with more than 2,500 employees. For non-manufacturers, documentation costs 

ranged from $150 to $2,700. Program 2 processes were assumed to incur no documentation costs because 

documentation requirements are not included in Program 2 elements. Documentation costs do not include 

the costs to develop PHA/hazard review or compliance audit reports, process safety information, 

operating procedures, or the RMP. Although all of these are documents, the cost of developing them is 

incorporated in the unit costs for the individual elements. Including them in documentation would be to 

double count them.

Capital Improvements. Sources are required to respond to each PHA recommendation; many 

of these are likely to require capital improvements. Industry sources estimated that the cost of such 

improvements range from one to 10 times the cost of a HAZOP and up to 30 times the cost of simpler 

PHA methods. Based on comments from states with existing RMP programs, the types of improvements 

are expected to be relatively low cost mitigation, containment, or detection systems, or improved 

instrumentation, such as backup gauges. These capital improvements are not related to documentation of 

the risk management program. Because of the uncertainty involved in the implementation of 

recommendations, the analysis assumed that manufacturers, utilities, federal sources, and public sources 

would spend, on average, the cost of their PHAs on capital improvements. Retailers, propane users, and 

wholesalers, were assumed to incur no capital improvement costs.

4.3.3. Submission of the RMP

EPA has not determined the manner and method of RMP submission. Because not all sources 

have computers, EPA will provide at least two methods of submission. For sources that do not have 

computers or access to them, submission may be by fax. Sources would be required to submit the RMP 

data on a form that can be read by an Optical Character Recognition (OCR) reader. Such a system would 

impose no costs on sources beyond those already incurred to complete the form. Sources with computers 

are likely to be encouraged to submit the data electronically through the internet or other server. The 

costs to these sources would include the cost of any software needed if EPA does not provide it on-line 

and a $10 to $30 monthly Internet Connection charge. By the date of submission, most sources will 

already have access to the Internet; therefore, the connection charge may not be properly applied to this 

rule. 
4-11

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

GOVERNMENT 

4.4.1. RMP Costs to EPA

The analysis assumed that RMPs will be filed to a central point designated by EPA. Assistance 

to sources completing the RMP were assumed to be part of the technical assistance provided, which is 

discussed below. 

As discussed above, EPA has not determined the method(s) of submission for the RMP. For 

electronic submissions, a recent feasibility study conducted for EPA indicated that EPA's costs would 

include the following:14

Establishment of a home page$20,000

Internet server hardware and software< $10,000

Connection to the Internet$10,000 to $20,000

Staff to post receipts (1 FTE)$30,000

For OCR submissions, EPA's costs would include the following:

1 to 3 high-speed scanners$10,000-$50,000 each

Computer to process scanned forms$10,000

Conversion software$25,000

Printing forms$.50/form

Postage$1.00/form

Staff to receive, load, interpret forms$30,000/FTE

4.4.2. Program Oversight and Assistance Costs to EPA

EPA was also assumed to oversee the state implementation programs and provide training to 

states and sources. Based on discussions with EPA, program oversight was assumed to require 1 

technical FTE and 1/10 of a clerical FTE per region to review state programs, answer state questions, and 

maintain files on state programs and memoranda between regional staff and states, local agencies, and 

sources. EPA was assumed to have 3 FTEs at headquarters for the program. The annual cost was 

estimated to be $748,000 for regional technical support ($36 x 10 x 2080), $225,000 for headquarters 

support, plus $28,500 for clerical support ($13.70 x 2080) for a total of $1 million. These costs are above 

any costs for implementing all or part of the program. The cost of any EPA enforcement was not 

included in this element although enforcement actions may be taken even if states implement the program 

for all sources.

 

 14 CAA Section 112(r) Technology Assessment Report, Final. November 27, 1995.
4-12

EPA was also assumed to provide training courses for state and regional inspectors. Each 

training course was assumed to last 10 days, based on a reduced version of OSHA's PSM compliance 

inspector course. Costs were estimated as follows:

10 days of training (100 hours x $36 = $3,600); assumes 8 hours of training, plus 2 hours of time 

answering questions and preparing.

Course development at 4 hours/per course hour (80 hours x 4 x $36 = $11,520).

Clerical support for developing and compiling training material (24 hours x $13.7 = $329).

On-site support during training (80 hours x $13.7 = $1,096).

Materials provided to trainees (500 pages x 40 trainees x $.10/page = $2,000).

Registering attendees, answering questions (2 hours per attendee at $13.7 x 40 x 2 = $1,096).

Administrative costs including scheduling presenters, producing signs, name tags, etc., and obtaining 

equipment (150 hours x $13.7 + 50 x 25 = $3,305).

Rental of site ($500/day x 10 = $5,000).

Cost estimates are based on actual costs of developing, presenting, and organizing similar EPA 

training programs. The total cost per session was estimated to be $27,900, with five sessions presented to 

states for $140,000. States were assumed to send an average of four people each.

EPA was also assumed to provide workshops for sources. The workshops were assumed to last 4 

1/2 days (based on Chemical Safety Audit training programs), with 60 attendees per program. Costs were 

estimated on the same basis as inspector training, as follows:

Presenters (45 hours at $36 hours = $1,620).

Development of course (36 hours x 4 x $36 = $5,180).

Clerical support (24 hours x $13.7 = $330).

On-site support (45 hours x $13.7 = $620).

Materials (400 pages x 60 x $.1/page = $2,400).

Registration (2 hours per registrant x $13.7 x 60 = $1,640).

Advertising (developing brochures, compiling mailing list, mailing, etc.) (50 hours x $13.7 + 50 hours 

x $25 = $1,940).

Administrative (scheduling and materials), $3,305 as above.

Site ($500 per day for 5 days = $2,500).
4-13

Total course cost is $19,500. EPA was assumed to provide one course per region for a total of 

$192,000.

4.4.3. Unit Time and Cost Estimates for Implementing Agencies 

The CAA requires that the RMPs submitted to government authorities must be audited to 

determine their adequacy. The implementing agency with the responsibility for review of RMPs and 

enforcement may be either EPA or a state agency, once a state has an approved program. Costs for 

implementation activities were based on the time needed to provide technical assistance and workshops, 

conduct the initial review of the RMP, train inspectors, conduct audits or inspections, and manage the 

program. Based on discussions with EPA, the following assumptions were made:

Technical assistance was assumed to take .5 hours per non-manufacturer sources and 1 hour per 

manufacturer. Although some sources will require substantially more assistance, others 

may seek no assistance. State and local agencies (4,000 total) were also assumed to 

require technical assistance, at one hour per agency.

Initial RMP review to determine the general adequacy of the document will vary with the size of the 

document, which will be determined, in large part, by the number of substances affected. 

Unit time was assumed to range from 1 hour for most non-manufacturers to 12 hours for 

large chemical manufacturing sources. The implementing agency was assumed to 

conduct the completeness review for the air permitting agency to eliminate duplicative 

reviews.

States were assumed to train an average of four inspectors by sending them to an 10-day EPA course. 

Costs were assumed to cover the trainees time, travel, and expenses; total costs per state 

were estimated to be $16,800. If states do not seek delegation of the program, this cost 

will shift to EPA.

Based on the time required by the New Jersey RMP program to conduct inspections and on EPA 

experience, the average time required for inspections was assumed to vary from 8 hours 

for most non-manufacturers to 80 hours for a very large chemical source or a large 

refinery. This estimate includes the time required to prepare for the inspection, conduct 

the inspection, and complete the formal report and any citations. Implementing agencies 

will determine, based on their own needs and priorities, the rate at which they inspect 

sources. This analysis assumed that all chemical manufacturers and refineries will be 

inspected once every five years, and non-chemical manufacturers, cold storage sources, 

federal sources, utilities, public sources, and wholesalers will be inspected once every 10 

years. Other non-manufacturers will be inspected once every 20 years. 

Each state was assumed to provide one workshop for sources at a cost of $19,200, as detailed in the 

previous section.

Each state and region implementing the program was assumed to require three senior staff (manager 

and inspectors), an attorney (0.2 FTE), and a tenth FTE for clerical support, to implement 

the program, develop budgets, oversee compliance and enforcement actions, report to 
4-14

senior managers and legislative bodies, and track documentation. The total cost was 

estimated $303,000 per implementing agency.

An alternate methodology for estimating the cost of implementing the rule is to use the current 

costs to states implementing similar RMP rules. New Jersey's RMP program has an annual budget of 

$2.5 million for 136 sources. Delaware collects $135,000 in fees and spends an additional $40,000 in 

state funds to support the program covering 95 sources. Because implementation of the Delaware 

program is closer to what may occur at the state level, given the difficulty of gaining approval for fees at 

the state level, the analysis used the Delaware program to estimate a per source cost of $1,842 for 

implementation.

4.4.4. Costs for Local Agencies and Others 

Section 112(r) of the CAA requires that the RMP be submitted to the state in which the source is 

located, and the local emergency planning bodies and response agencies. The RMP is to be made 

available to the public. Because EPA is planning to have the RMPs submitted electronically (or in a way 

that will make translation to an electronic format simple) to EPA, local agencies will have access to the 

RMPs through on-line databases, as will the public. Local agencies are not expected to incur any 

additional costs to maintain RMPs or make them available, because EPA will assume those costs. 
5--1 

CHAPTER 5. ESTIMATED TOTAL COSTS OF COMPLIANCE 

This chapter provides the estimated total costs of compliance with EPA's regulatory options. 

Total costs were estimated by combining the universe of sources, substances, and incremental sources and 

substances developed in Chapter 3 with the unit costs developed in Chapter 4, taking into account rates of 

prior source compliance with the risk management program elements under other regulations and 

programs. This chapter presents both the initial compliance (first three years) and subsequent-year costs 

for each of the options. Section 5.1 provides the methodology for calculating the estimated total 

compliance costs to industry, the average cost per source, and the cost-savings expected for the proposed 

rule. Section 5.2 presents the initial compliance costs for the three options. Section 5.3 presents the total 

costs, the present value of costs over the first 30 years, and the annualized costs for each of the options. 

The estimated total costs to government are presented in section 5.4. 

5.1. METHODOLOGY 

As discussed in Chapter 3, this analysis assumed that different types of sources would be affected 

differently by the regulations. All sources with listed substances in processes above the applicable 

thresholds were assumed to incur the costs of rule familiarization, registration, the offsite consequence 

analysis, and the RMP. Certain firms are already obligated to comply with some of the risk management 

activities under OSHA's PSM standard. Because it is not appropriate to attribute to EPA's rule the costs 

of complying with other regulations or industry standards, this analysis made a further adjustment for the 

expected likelihood that a firm would already be in compliance with some risk management requirements. 

All cost estimates provided throughout this chapter represent the costs attributable to EPA's regulatory 

options only. 

5.1.1. Compliance Cost Estimates 

To estimate the total compliance costs to industry of the regulatory options, the universe of 

affected sources was multiplied by the unit cost of each risk management program element and the 

expected level of current compliance. For rule familiarization and the RMP, the universe of sources was 

multiplied by the unit costs of these per-source activities. For the hazard assessment, the unit cost was 

multiplied by the total number of substances. To estimate the total first-year costs to industry for 

developing and complying with the remaining risk management activities, the unit cost incurred for each 

incremental source and regulated substance was multiplied by the estimated number of incremental 

sources or regulated substances, adjusted for current compliance. These costs were added to derive the 

total compliance costs of the program options. 

Prior Compliance. Many of the elements of the prevention program are already in use by many 

sources. Because the rule would not require sources to redo these, total costs and average source costs 

were adjusted to account for this prior compliance. For example, the rule allows the owner/operator to 

certify that current employees are competent to perform their jobs and, therefore, do not need to receive 

new training. The analysis assumes that all sources will certify such competence. Training costs, 

therefore, were limited to new employees, estimated at 26 percent a year, based on the OSHA PSM RIA. 
5-2

The estimated degree of prior compliance (Exhibits 5-1 and 5-2) represent the percent of affected 

manufacturers and non-manufacturers that were assumed to already be in compliance with the risk 

management requirements. All affected sources were assumed to have no prior compliance with certain 

EPA-specific risk management program elements, including rule familiarization, registration, the hazard 

assessment, the RMP, and documentation. Other elements are similar in content to state risk management 

regulations, various programs developed by private organizations, and common industry practices. 

Therefore, the adjustment factors for prior compliance were applied to the adjusted universe to more 

accurately reflect the additional burden on sources attributable to EPA's risk management program 

options. The basis for compliance estimates is presented in Appendix C. 

Chemical Industry/Refineries. High complexity chemical companies and refineries are members 

of trade associations (i.e., Chemical Manufacturers Association (CMA) and the American Petroleum 

Institute (API)), which require their members, as a condition of membership, to comply with industry 

codes (CMA's Responsible Care and API's RP-750) that parallel the prevention program. Consequently, 

the analysis assumed that the only costs associated with the prevention program for these sources were for 

documentation of compliance, capital improvements, and additional efforts to improve training, 

maintenance, and management oversight. 

CMA member company names were obtained from CMA; the number of individual plant sites for 

these companies was determined using the SRI Directory of Chemical Producers. Approximately 1,500 

plants belong to CMA members; approximately 1,400 of these were assumed to be subject to the rule (the 

remaining plants produce industrial gases not covered by the rule). Because of the concentration of CMA 

membership in the production of chemicals, all chemical sources with more than 100 FTEs in SIC codes 

281, 282, 286, 2873, and 2879 (a total of 623) were assumed to be members of CMA; their estimated 

degree of compliance was assumed to be 100 percent (i.e., their costs were multiplied by zero) for PHA, 

PSI, SOPs, compliance audits, management of change, pre-startup reviews, and incident investigations. 

Based on the CMA membership list, approximately 50 percent of large moderately complex sources and 

25 percent of sources in the listed SIC codes with 20 to 99 FTEs were assumed to be CMA members; 

compliance ratios for these sources reflect the reduction for CMA membership. 

Refineries of all sizes were assumed to be API members and, therefore, had 100 percent current 

compliance for PHA, PSI, SOPs, safety audits, management of change, pre-startup reviews, and accident 

investigations. The number of refineries was determined from DOE information. 

By statute, sources have three years from the date of promulgation of the rule to come into 

compliance with the risk management requirements. Therefore, most initial compliance costs were 

assumed to be incurred equally over the three years after the expected date of promulgation in 1996. Rule 

familiarization was assumed to occur in the first year, the RMP in the third year. 
5-3

EXHIBIT 5-1

ESTIMATED DEGREE OF CURRENT COMPLIANCE WITH PROPOSED RULE 

MANUFACTURERS

Element Non-chemical -

All

< 20 FTEs 

Chemical

20-99 FTEs 

(SIC codes 

283-5, 287-9) 

20-99 FTEs 

(SIC codes 

281-2, 286)

100+ FTEs 

(SIC codes 

283-5, 287-9)

100+ FTEs 

(SIC codes 

281-2, 286, 

291)

Pre-Startup Review 0%-25% 0% 25% 40% 75% 100%

Management of Change 0% 0% 10% 60% 75% 100%

Accident Investigation 40% 40% 40% 40% 75% 100%

Management 0% 0% 0% 40% 75% 100%

Training 74% 74% 74% 80% 87% 100%

Refresher Training 25% 25% 25% 55% 75% 100%

PHA 0% 0% 0% 25% 75% 100%

PSI 0% 20% 20% 55% 75% 100%

Maintenance 40% 40% 40% 55% 75% 100%

Safety Audit 5% 5% 5% 30% 75% 100%

EXHIBIT 5-2 

ESTIMATED DEGREE OF CURRENT COMPLIANCE WITH PROPOSED RULE 

NON-MANUFACTURERS

Element Retailers

Propane 

Users

Large Utilities Small Utilities Large Public 

Sources1

Gas Proc.

Small Public 

Sources

Federal

Accident Inv. 0% 40% 0% 40% 0% 0%

Training 74% 74% 74% 74% 74% 74%

Refresher 0% 25% 25% 0% 0% 0%

PSI 0% 20% 0% 20% 20% 0%

SOPs 0% 40% 40% 40% 0% 40%

Maintenance 20% 40% 40% 40% 40% 40%

1

 Large public sources, for this chart, are those that treat 25 mgd or more.
5-4

5.1.2. Average Initial Compliance Cost Per Source

The average initial compliance cost per source for the proposed rule was estimated by multiplying 

the unit cost of each regulatory requirement by the estimated number of substances where appropriate. 

The average cost of each program element was then summed to estimate the

average cost for manufacturers and non-manufacturers, depending on whether they were assumed to incur 

the full cost of compliance or only partial costs, and modified by the compliance factors for the expected 

likelihood that a source would not already be in full compliance with the risk management program 

elements. The adjustment factors for prior compliance were applied to the costs rather than to the 

universe of sources to estimate the average cost that a single source would incur. For example, if an 

estimated 40 percent of all affected medium chemical manufacturers already provide maintenance, then 

the average affected manufacturer was assumed to be 40 percent in compliance with the requirement. 

Therefore, the estimated costs of compliance were multiplied by 0.60 to estimate the average cost 

incurred by each medium chemical manufacturer for maintenance. 

Under the OSHA PSM standard, neither OSHA nor the states are notified that a source is subject 

to the standard; information is available to the government only on request. The CAA mandates that 

sources to submit information about their accident history, potential release impacts, and prevention 

activities to the government, which will make it available to the public. Because of the additional 

analyses, which will help sources identify potential offsite impacts of accidental releases and the 

governmental and public scrutiny, EPA expects that sources covered by OSHA PSM will take steps to 

upgrade their initial compliance with the PSM rule to further reduce the likelihood of serious accidental 

releases. Based on professional judgment, the analysis assumed that sources would concentrate additional 

effort on those steps where further effort would be most likely to improve prevention; specifically the 

analysis assumed that sources would concentrate on improving training, maintenance, capital 

improvements, and management oversight. Other activities, such as PHAs and PSI, were assumed to 

have been done adequately for OSHA; additional efforts to upgrade these would be unlikely to yield 

benefits. In contrast, improved training and maintenance, capital improvements, as well as management 

oversight to ensure that the program is being properly implemented, have the potential to reduce the 

likelihood of accidental releases, the majority of which are generally attributed to worker error or 

equipment failure. 

For the purposes of the analysis, sources and processes covered by the OSHA PSM standard or 

industry programs were assumed to have already spent 80 percent of the time estimated in this analysis 

for training, maintenance, and capital improvements for sources newly subject to the Program 3 

prevention program. To ensure that all programs for all processes operate at the same level, PSM sources 

were, therefore, assumed to spend an additional 20 percent for these three elements. For management 

oversight, OSHA sources were assumed to have spent 60 percent of the time estimated for compliance in 

this analysis and to commit resources to bring their level of management oversight to that estimated for 

EPA processes. These costs for OSHA-covered sources and processes were not adjusted for current 

compliance because it was assumed that these efforts were in addition to any current activities.

Exhibit 5-3 provides average cost per source, by industry group, for sources as follows:

Program 2 costs (applies only to Option 1); no processes covered by OSHA are in this category;
5-5

Program 3 costs —

_Sources covered only by EPA under Options 1 and 2 (no OSHA PSM processes) (low OCA and RMP 

costs); 

_Sources covered only by EPA under Option 3 (no OSHA PSM processes) (high OCA and RMP costs); 

_Sources covered by EPA and OSHA with processes not covered by OSHA under Options 1 and 2 (low 

OCA and RMP costs); 

_Sources covered by EPA and OSHA with processes not covered by OSHA under Option 3 (high OCA 

and RMP costs); 

_Sources covered by EPA and OSHA with all processes covered by OSHA under Options 1 and 2 (low 

OCA and RMP costs); 

_Sources covered by EPA and OSHA with all processes covered by OSHA under Option 3 (high OCA 

and RMP costs); 

5.1.3. Subsequent-Year Cost Estimates 

This analysis also estimated the subsequent-year costs (years 4 through 30) to industry for 

complying with the risk management requirements for each of the options. Recurring costs for 

implementing certain risk management program elements were estimated to be lower after the initial 

compliance years because elements would only need to be updated to reflect changes. Exhibit 5-4 

presents the estimated percent reduction in burden for each risk management program element. 

The maintenance requirement must be implemented annually. This analysis assumed that this 

element would require the same amount of effort every year, but as described in Chapter 4.3.2, only the 

inspection/testing costs recur. 

The recurrence of risk management program requirements for management of change, pre-startup 

reviews, and accident investigations are more difficult to predict because they will be triggered by sourcespecific changes and releases. Based on professional judgment, this analysis assumed that changes 

requiring pre-startup reviews would occur every second year, that one release requiring an investigation 

would occur every five years, and the management of change procedures would be implemented annually 

for manufacturers. Many changes will require new or revised PHAs; the costs of these PHAs were not 

included in the cost of management of change. 

To compensate for the uncertainty of this estimate, management of changes was assumed to occur 

annually rather than every second year with pre-startup review. Capital improvements were assumed to 

start in the second year and be financed over 15 years, based on standard EPA assumptions for the useful 

life of equipment. 
5-6

EXHIBIT 5-3

AVERAGE INITIAL COMPLIANCE COST PER SOURCE

CHEMICAL MANUFACTURERS OTHER MANUFACTURERS

<19 FTEs

20-99 FTEs 100+ FTEs

SIC 2911 <19 FTEs 20-99 

FTEs

100+ 

FTEs

SIC codes 

283-5, 287-9

SIC codes 

281, 2, 6

SIC codes 

283-5, 287-9

SIC codes 281-2, 286

PROGRAM 2

Options 1/2 N/A N/A N/A $20,000 N/A N/A N/A N/A $17,000

PROGRAM 3

EPA Only Options 1/2 N/A N/A N/A N/A N/A N/A N/A N/A $41,000

EPA Only Option 3 N/A N/A N/A N/A N/A N/A N/A N/A $53,000

EPA/OSHA Added EPA Substances 

Options 1/2

N/A N/A $94,000 $71,000 $123,000-$785,000 N/A N/A N/A $27,000

EPA/OSHA Added EPA Substances 

Option 3

N/A N/A $169,000 $116,000 $259,000-$1.7m N/A N/A N/A $39,000

EPA/OSHA, No Added Substances 

Options 1/2

$11,000 $22,000 $88,000 $39,000 $101,000-$708,000 $189,000-

$616,000

$7,000 $9,000 $8,000

EPA/OSHA, No Added Substances

Option 3

$35,000 $54,000 $160,000 $79,000 $202,000-$1.4m $418,000-

$972,000

$29,000 $30,000 $20,000

N/A means that no sources are in the category.
5-7

5-7

EXHIBIT 5-3 (continued)

Public Utilities Cold 

Storage

Wholesalers Retailers Federal Gas 

Processors

Gas 

Utilities

PROGRAM 1 $260

PROGRAM 2 $7,000-

$11,000

9,000-

$12,000

N/A $2,200 $1,400 $7,600 N/A N/A

PROGRAM 3 

EPA Only Option 2 $11,000-

$23,000

$25,000-

$32,000

N/A $2,400 $1,600 N/A N/A N/A

EPA Only Option 3 $13,000-

$34,000

$34,000-

$55,000

N/A $5,100 $3,500 N/A N/A N/A

EPA/OSHA Added EPA Substances 

Option 2

N/A $4,500-

$13,000

N/A $2,000 N/A $7,300 N/A N/A

EPA/OSHA Added EPA Substances 

Option 3

N/A $14,000-

$36,000

N/A $4,700 N/A $21,000 N/A N/A

EPA/OSHA, No Added Substances 

Option 2

$2,000-

$3,900

$3,300-

$7,600

$2,400 $1,000 N/A N/A $800 $1,700

EPA/OSHA, No Added Substances

Option 3

$3,000-

$15,000

$13,000-

$31,000

$3,600 $3,700 N/A N/A $6,400 $11,000

N/A means that no sources are in the category.
5-8

EXHIBIT 5-4

ANNUAL PERCENT REDUCTION IN FIRST-YEAR COSTS ASSUMED TO REFLECT THE

BURDEN FOR UPDATING RISK MANAGEMENT PROGRAM ELEMENTS IN

SUBSEQUENT YEARS

RISK MANAGEMENT

PROGRAM ELEMENT

PERCENT 

REDUCTION

IN BURDEN HOURS

FREQUENCY OF 

UPDATE

Hazard Assessment 50% Every 5 years

PHA 50% Every 5 years

PSI 90% Every year

SOPs 90% Every year

Training 90% Every year

Refresher Training 0% Every 3 years

Maintenance 0% Every year (inspection, 

testing, costs only)

Pre-startup Review 0% Every 2 years

Management of Change 0% Every year

Compliance Audit 0% Every 3 years

Accident Investigation 0% 1 Every 5 years

RMP 0% Every 5 years
5-9

Subsequent-year costs were estimated by multiplying the unit cost of each risk management 

program element, the adjusted universe of affected sources, and the estimated percent reduction in initial 

unit-time estimates, as appropriate. Total subsequent-year costs for implementing the risk management 

program do not include rule familiarization because these costs are incurred primarily in the first year.

5.1.4. Cost Estimates of EPA's Regulatory Options

The total costs to industry of EPA's regulatory options were estimated for the first three years 

following publication of the rule and the 27 subsequent years, based on an OMB recommendation to 

provide costs over 30 years. It is necessary to present these future costs in current dollars to compare 

them to the benefits accrued under the various options. The following formula was used to calculate the 

costs in current dollars:

 vi where: vi...vn =Series of cash flows in range

Σ

n

i=1 ---------- d =Discount rate

 (1+d)i n =Number of cash flows

i =Current iteration (1 through n)15

There is a substantial body of literature concerning both the theory of discounting and the 

appropriate discount rate to use in analyzing a stream of costs. Based on OMB's current recommended 

practice, this analysis used a seven percent discount rate.

5.1.5. Cost Savings

In addition to reducing the number and severity of accidental releases, the risk management 

program can be expected to improve the efficiency of source operations through a better trained work 

force and fewer breakdowns. These improvements in operations can be expressed in terms of increased 

productivity. Integrated risk management programs are expected to increase productivity in two primary 

ways: 

Workers understand and are trained in running processes at greater efficiency, thereby lessening the 

amount of wasted materials and the amount of product lost because it does not meet 

specifications; and 

Equipment will operate with fewer breakdowns through proper preventive maintenance. 

 

 15 v1 v2v3v4

--- + --- +--- +---+ etc.

(1+d)1(1+d)2(1+d)3(1+d)4
5-10

Equipments breakdowns can lead to accidental releases; benefits related to elimination of these 

shutdowns are counted in the benefits analysis. The unplanned shutdowns considered in the productivity 

analysis are those that do not lead to accidental releases, but occur because some piece of equipment 

breaks down or malfunctions and needs to be replaced or repaired. The article quoted in the next 

paragraph describes the impact of such non-accident shutdowns on productivity and operability. Poorly 

maintained equipment also leads to lost product through fugitive emissions. According to IIAR, one 

ammonia refrigeration system in midwest lost 200,000 pounds of ammonia through fugitive emissions 

over the course of a year, the smell of the ammonia masked by odors from neighboring stock yards. The 

cost of that loss was $50,000 (to replace the ammonia); proper maintenance and equipment may lessen 

such losses. 

In a January 1995 article in Hydrocarbon Processing, I.S. Sutton wrote that "there is an 

increasing interest to organize these [PSM] programs to improve overall reliability and operability." He 

went on to state that "Improving plant reliability, particularly by reducing the number of unscheduled 

shutdowns, will improve safety, environmental performance, and operability." He detailed the reasons for 

improving operability: 

"If unplanned shutdowns can be avoided, then plant operability is improved by these reasons: 

Increased production. If a plant can sell all the product that it can make, then any incremental 

production can be very profitable because all fixed costs associated with production, such 

as depreciation, rent, and salaries, are covered. Conversely, incremental production 

losses severely reduce profitability. 

Productivity. Shutdowns reduce productivity for many reasons: 

_Energy is wasted during plant restart; 

_Raw materials are lost due to flaring and downgrading to fuel; 

_Overtime must be allocated for hourly paid workers; 

_Transient effects such as reversible loss in catalyst selectivities occur; 

Maintenance and equipment costs. Shutdowns increase other plant costs: 

_Direct replacement cost of broken and damaged equipment; 

_Labor costs of carrying out repairs; 

_Need for larger inventories of spare parts. 

More benefits. A final benefit to improved reliability that is difficult to measure, but is widely 

recognized, is employee morale. " 

OSHA, in developing the PSM standard, collected some information and estimates of 

productivity gains. A number of commenters cited improvements of operating efficiency as a benefit of 

the program (testimony of CMA (Tr. 11/30/90 at 1050-1057), BP (Tr. 3/1/91 at 3052), Texaco (Tr. 3/1/91 

at 3086-3088), Oryx Energy (Tr. 3/7/91 at 3722), and Exxon (Ex. 99 at 4). In addition, some commenters 

submitted estimates of potential improvements. Ray Brandes, then of ICI Americas, estimated the 

productivity gains at "5 to 8 percent ... in productivity from better understanding of job tasks by workers 

... and another 5 to 10 percent increase in material yield productivity for an overall gain of over 10 
5-11

percent" (Ex. 11-87). A manager of a small plant predicted cost savings of 4 to 7 percent of the operating 

budget (William Toth, Ex. 131, Attachment III). A safety consultant, Ray E. Witter, in a December 11, 

1989, letter to OSHA estimated productivity gains at 0.5 to 3 percent.

More recent articles on PSM indicate the predicted benefits are real. An article in Occupational 

Hazards in March 1994 reported that ITT's implementation of PSM led teams to identify opportunities for 

savings of "nearly $1.5 million in annual operating costs at six sites." An article in Chemical Week in 

November 16, 1994, reported on improved maintenance programs. One plant manager stated that he 

expected savings "in excess of 20 percent of our maintenance budget, and the focus on equipment 

reliability has yielded an increase in our effective capacity." 

Other recent articles and conference papers also cite improved productivity as a benefit of the 

PSM program without providing specific estimates of gains. ("Training Personnel on Operating 

Procedures," Bob Metz, Conference Proceedings, 1996 Process Plant Safety Symposium, vol. 2, p391; 

"Small Business: Make the Most of PSM, Chemical Engineering Progress, February 1994, p 60; 

"Process Safety: Dow Chemical USA Finds the Standard's Positive Side, Occupational Health and Safety, 

Oct. 1992, p 36-37; "Build a Proper PSM Program from the Ground Up, Chemical Engineering Progress, 

Jan. 1, 1995, p 47; "Commitment to PSM by Management Improves Business as well as Safety, 

Occupational Health and Safety Letter, Sept. 5, 1995; "PSM Protect Works, American City and County, 

June 1995, p 34.)

This analysis adopted the approach applied by OSHA in its RIA for the final PSM standard. 

OSHA stated that chemical industry sources reported gains of between five and ten percent annually. 

Across all industry sectors, OSHA estimated that productivity improves at a rate of 0.5 percent a year for 

the first five years of implementation and 1 percent a year in subsequent years. OSHA calculated 

productivity gains by multiplying the annual compensation of a production worker ($27 x 2080 hours) by 

the number of workers and the percentage productivity gain. 

This analysis adjusted the percentages. Based on professional judgment, for chemical 

manufacturers the analysis selected a conservative assumption of a two percent productivity gain, with no 

increase in the percentage over time. For other manufacturers, the analysis adopted OSHA's 0.5 percent, 

with no increase in the percentage over time. The difference was based on the likelihood that chemical 

manufacturers have greater opportunities for improving productivity because of the diverse and complex 

ways in which they manufacture and process chemicals. Other manufacturers primarily use and store 

substances, which limits the possibility of improved productivity. Non-manufacturers were assumed to 

have gains of 0.1 percent because the simple way they use the substances should limit the gains; retailers, 

wholesalers, propane users, gas utilities, and gas processors were assumed to experience no gains because 

it is not clear that their operations, which primarily involve loading and unloading of regulated 

substances, would experience productivity gains. 

The analysis assumed that the gain would apply to all incremental substances (processes) in the 

manufacturing sector and to those substances at electric utilities, public systems, cold storage systems and 

federal sources. Because the analysis assumed that owners/operators of OSHA PSM processes would 

spend an additional 20 percent for training and maintenance, the activities most likely to produce 

productivity gains, the analysis assumed that productivity gains would be only 20 percent of those for 

non-OSHA processes (i.e., 0.4 percent productivity gain for chemical manufacturers, 0.1 percent for nonchemical manufacturers, and 0.02 percent for non-manufacturers). The salaries used were specific to the 

sector and were based on total compensation, with no overhead load. The total cost savings were 
5-12

estimated to be $108 million per year for all options because the savings are derived primarily from 

activities carried out by all Program 2 and 3 sources, training and maintenance. Although OSHA, in its 

analysis, applied cost savings immediately, this analysis did not apply them to the initial two compliance 

years because some sources may not start activities immediately. The analysis assumed that cost savings 

began in the third compliance year at one-half the total and reached the full value in the first year after 

initial compliance was achieved and continued on an annual basis. To be conservative, initial compliance 

costs presented below do not reflect these savings, but annualized costs do include them (i.e., the cost 

savings were subtracted from the compliance costs). 

Exhibit 5-5 summarizes the assumptions used to estimate productivity gains, specifically the 

number of workers used in the estimation, and the percentage gains for processes covered by OSHA and 

those covered only by EPA. As the exhibit indicates, the analysis used the two percent productivity gain 

for only 310 processes.

5.2. ESTIMATED INITIAL COMPLIANCE COST TO INDUSTRY FOR 

REGULATORY OPTIONS

The regulatory options analyzed apply the tiers and rule elements to various sources affected. 

The estimates presented are for the cost of complying with all required elements under the option in 1995 

dollars. It should be noted that when costs were annualized over 30 years (see Section 5.3), initial 

compliance costs were assumed to be spent over the three years between the date of the final rule and the 

compliance date.

5.2.1. Option 1

Under Option 1, processes that can demonstrate no public impacts from a worst-case release 

would only have to comply with Program 1. All OSHA PSM processes and all processes in SIC codes 

2611, 2812, 2819, 2821, 2865, 2869, 2869, 2873, 2879, and 2911 would be required to comply with 

Program 3. All other processes would be required to comply with the streamlined Program 2. The only 

difference between Program 2 and Program 3 is the prevention program; in Program 2 the prevention 

program is streamlined, with fewer requirements and reduced documentation; the Program 3 prevention 

program is the OSHA PSM standard. The total initial compliance cost was estimated to be $494 million.
5-13

EXHIBIT 5-5

ASSUMPTIONS USED TO ESTIMATE PRODUCTIVITY GAINS

Industry Sectors

# 

Employees

% of Gain NonOSHA Processes# NonOSHA 

Processes

% of Gain 

OSHA 

Processes

# OSHA 

Processes

Small Non-Chemical 

Manufacturers

6 .5% 0 .1% 450

Small Chemical Manufacturers 6 2% 0 .4% 2,200

Medium/Large Non-Chemical 

Manufacturers

30 .5% 1,600 .1% 9,350

Medium Chemical Manufacturers

Small Refineries

30 2% 50 .4% 5,540

Large Chemical Manufacturers < 

500 FTEs

Medium Refineries

50 2% 167 .4% 3,640

Large Chemical Manufacturers < 

2500 FTEs

Large Refineries

75 2% 85 .4% 1,545

Large Chemical Manufacturers 

2500+ FTEs

100 2% 8 .4% 143

Non-Manufacturers

(Elec. Util., Drinking Water, 

POTWs, Federal)

6 .1% 9,440 .02% 11,220

Non-Manufacturers

(Retailers, Propane Users,

Wholesalers, Gas Utilities, Gas 

Processers, Cold Storage)

0% 34,600 0% 9,760

5.2.2. Option 2

Option 2 would impose Program 3 (OSHA PSM) on all processes. The total cost was estimated 

to be $642 million. The difference in costs between Options 1 and 2 reflects the higher costs to the large 

non-chemical manufacturers and non-manufacturers who are not covered by OSHA and who would have 

to implement the more costly PSM program under Option 2, but the streamlined Program 2 under Option 

1. The costs to OSHA PSM and high complexity chemical manufacturers sources would be the same 

under both Options.
5-14

5.2.3. Option 3 

Option 3 would impose Program 3 on all processes, with the OCA and RMP requirements of the 

proposed rule, rather than the final rule. The cost difference between Options 2 and 3 is entirely the result 

of the higher costs of the proposed OCA and RMP requirements. Under Option 3, OCA would cost 

industry $307 million more than the OCA requirements of the final rule. The RMP would cost $267 

million more under Option 3. Because these costs recur every five years, they would represent a 

continuing burden on industry. The total initial compliance cost was estimated to be $1.22 billion. 

The estimated total compliance costs to industry are presented on an element-by-element basis in 

Exhibit 5-6; total compliance costs by industry sector are presented in Exhibit 5-7. 

In Exhibit 5-6, no costs appear for pre-startup reviews or management of change under Option 1 

because all sources subject to these requirements are also subject to OSHA PSM. Because these 

procedures are developed on a site, rather than a process-specific, basis, sources do not need to develop or 

revise these to comply with EPA's rule. The only difference between Options 2 and 3 are the higher costs 

for the RMP and OCA under Option 3. 

In Exhibit 5-7, the costs per industry sector reflect both the differences in unit costs for different 

types of sources and the number of sources. Although unit costs are far higher for large, high complexity 

sources, there are relatively few of these sources; the number of sources declines as the size of the source 

increases. 

5.3TOTAL NET COSTS TO INDUSTRY 

5.3.1 Subsequent Year Net Costs

This analysis presents subsequent-year (i.e., years after a source is required to be in compliance) 

as net costs (i.e., total costs minus cost savings) for a period of 27 years, based on an OMB 

recommendation that costs be presented for the first 30 years. Net costs will vary from year to year 

because certain risk management program elements are not required to be updated yearly. Compliance 

audits and hazard assessments, for example, must be updated every three years and five years, 

respectively, as shown in Exhibit 5-4. Consequently, this analysis assumed that sources would incur the 

full cost of updating these elements in the third and fifth subsequent year, respectively. Further, sources 

would again incur the costs of updating the safety audits in the sixth and ninth years, and the hazard 

assessments in the tenth year. Other risk management program elements, such as training and SOPs, must 

be updated yearly; sources were assumed to incur these costs on an annual basis. 
5-15

EXHIBIT 5-6

INDUSTRY INITIAL COMPLIANCE COSTS BY ELEMENT

ELEMENT OPTION 1 OPTION 2 OPTION 3

Registration $25,000 $25,000 $25,000

Rule Familiarization $50 million $54 million $54 million

Offsite Consequence Analysis $44 million $44 million $351 million

Management $37 million $50 million $50 million

Prevention Program

 Process Safety Information $4 million $11 million $11 million

 Process Hazard Analysis $12 million $38 million $38 million

 Operating Procedures $7 million $15 million $15 million

 Training $23 million $23 million $23 million

Refresher Training $53 million $53 million $53 million

 Maintenance (Mechanical Integrity) $114 million $114 million $114 million

 Pre-Startup Review $2 million $2 million

 Management of Change $27 million $27 million

 Compliance Audits $19 million $19 million $19 million

 Accident Investigation $1.6 million $1.6 million $1.6 million

 Documentation $13 million $31 million $38 million

 Capital Improvements $100 million $144 million $145 million

Risk Management Plan $16 million $16 million $282 million

TOTAL $494 million $642 million $1.22 billion
5-16

EXHIBIT 5-7

INITIAL COMPLIANCE COST BY INDUSTRY SECTOR

# of Sources OPTION 1 OPTION 2 OPTION 3

NON CHEMICAL 

MANUFACTURERS

< 19 FTEs 120 $785,000 $795,000 $3 million

20-99 FTEs 300 $2 million $2 million $8 million

100+ FTEs 6,500 $62 million $94 million $169 million

CHEMICAL MANUFACTURERS

< 19 FTEs 840 $8 million $8 million $29 million

20-99 FTEs (SIC codes 283-5, 287-9) 900 $18 million $18 million $47 million

20-99 FTEs (SIC codes 281-2, 286) 800 $60 million $62 million $119 million

100+ FTEs (SIC codes 283-5, 287-9) 840 $24 million $26 million $60 million

SIC codes 281, 282, 286

FTE < 250 340 $26 million $31 million $65 million

FTE 250-499 150 $20 million $24 million $54 million

FTE 500-999 80 $19 million $22 million $49 million

FTE 1000-2499 40 $18 million $21 million $41 million

FTE 2500+ 13 $6 million $7 million $15 million

Sic code 2911

< 30 bbl/d 61 $10 million $10 million $23 million

30-60 bbl/d 39 $8 million $8 million $19 million

> 60 bbl/d 85 $32 million $32 million $62 million

NON MANUFACTURERS

Federal 1,600 $10 million $25 million $48 million

Cold storage 5,800 $14 million $14 million $22 million

Retailers 18,500 $22 million $30 million $66 million

Elec. Utilities 25 MW+ 1,100 $12 million $20 million $47 million

Elec. Utilities 10-25 MW 570 $2 million $4 million $10 million

POTWs-100mgd 45 $520,000 $1 million $2 million

POTWs-25mgd 180 $2 million $4 million $6 million
5-17

EXHIBIT 5-7

INITIAL COMPLIANCE COST BY INDUSTRY SECTOR

# of Sources OPTION 1 OPTION 2 OPTION 3

POTWs-10mgd 320 $3 million $3 million $5 million

POTWs-1mgd 2,600 $20 million $27 million $32 million

DW 100mgd 440 $5 million $10 million $15 million

DW 25mgd 1,530 $18 million $35 million $49 million

DW 10mgd 1,190 $9 million $13 million $20 million

DW 2mgd 980 $5 million $7 million $8 million

Wholesalers 1,500 $3 million $3 million $8 million

Gas Processors 725 $319,000 $1 million $6 million

Propane Users 16,100 $54 million $74 million $95 million

Gas Utilities 1,800 $2 million $3 million $21 million

TOTAL 66,088 $494 million $642 million $1.22 billion

FTE — Full-Time Employee

bbl/d — barrels per day

MW — Megawatt

POTW — Publicly Owned Treatment Works

DW - Drinking Water

mgd — million gallons per da

The present value of net costs of the rule for the first 30 years from the date of promulgation for 

the options is estimated to be:

Option 1:$1.2 billion

Option 2:$1.8 billion

Option 3:$3.1 billion

5.3.2Annualized Net Costs

The annualized net costs (compliance minus cost savings) of the regulatory options also were 

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

promulgation of the final rule to be able to meet the statutory compliance deadline three years later. As 

compared to the subsequent-year net cost estimates, which are presented in real dollars and vary from 

year to year depending on which risk management program elements would be updated, the annualized 

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

may be expected to incur on an annual basis in the time period examined. Using the seven percent 
5-18

discount rate (as discussed in section 5.1.4), this analysis estimated the annualized net costs for each of 

the first three years (implementation period) and subsequent years. The annualized net costs are 

presented in Exhibit 5-7 for the first three years (initial compliance), the first 13 years (compliance plus 

two full RMP cycles), and the first 30 years. 

As the exhibit indicates, the annualized net costs decline as the period considered is extended. 

The reasons for the decline include the following: 

Rule familiarization occurs only in the first year; 

PHA and OCA costs are reduced after the initial compliance because only updates are required; other 

elements occur annually after initial compliance but at a reduced rate. 

Capital improvements, which are costed over 15 years, do not occur in the later years. 

The primary continuing costs are for training, maintenance, management, and documentation 

(which varies by year depending on the activities being performed). 

EXHIBIT 5-8 

ANNUALIZED NET COSTS OF OPTIONS

Years 1-3 Years 1-13 Years 1-30

Option 1 $118 million $101 million $97 million

Option 2 $165 million $146 million $142 million

Option 3 $366 million $265 million $246 million

5.3. ESTIMATED TOTAL COSTS TO GOVERNMENT 

5.3.1. Total Costs to EPA for RMPs 

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

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

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

sources will submit their data electronically through the Internet or other server. As discussed in Chapter 

7, approximately 6,160 sources were assumed to have fewer than 20 employees. The cost to print and 

mail forms to these sources was estimated to be $9,240. Only one scanner and one-half an FTE would be 

needed to handle the forms submitted. Total costs for submission were estimated to be as follows: 

OCR Submissions 

Forms and mailing$9,240 
5-19

Scanner (1)$50,000 

Computer$10,000 

Conversion software$25,000 

Staff (1/2 FTE)$15,000 

Electronic Submissions 

Home page$20,000 

Internet server$10,000 

Internet connection$20,000 

Staff (1 FTE, G-5)$24,000 

Total$183,000 

To be conservative, the analysis used the high end cost presented in Chapter 4 where a range was 

possible. Given the trends in technology prices, it is possible that costs may be considerably lower by 

1999 for some of these requirements. In addition, technology developments may result in different, more 

cost-effective approaches. 

5.3.2. Program Oversight and Assistance Costs to EPA 

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

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

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

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

5.3.3. Total Costs for Implementation and Enforcement 

The CAA section 112(r) program will require that the RMPs prepared by sources be submitted 

and audited by the government. These audits as well as inspections of sources for compliance with the 

risk management program requirements may lead to recommendations that the sources take additional 

actions or to enforcement actions. As explained in Chapter 4, implementation costs have the following 

components: technical assistance, workshops, staff for program management and implementation, initial 

review of RMPs, and audits. These costs will vary over time. The analysis assumed that workshops 

would continue for five years, technical assistance will continue, but the level of effort will decrease over 

time as sources and government agencies become familiar with the rule. Initial review of the RMP will 

occur over two years, starting in year four, and will recur every five years thereafter with the 

resubmissions. Audits were assumed to begin in year four and continue every year thereafter. Program 

management and regional oversight would begin in years two and three respectively and continue 

thereafter. The analysis assumed that Program 1 sources imposed no implementation costs on the 

implementing agency. 

Two issues significantly affect the cost estimates for implementation: first, different costs will 

apply depending on whether EPA or states serve as the implementing agency; second, the level of effort 

the implementing agency (IA) spends on auditing and inspecting could substantially alter the total cost of 
5-20

implementation. States are not required to serve as the implementing agency; to do so, they must seek 

delegation from EPA under CAA section 112(l). The analysis considered two possibilities for the first of 

these issues: EPA would serve as the IA for all states or states would serve as IAs for all states. If EPA 

were to be the IA for all states, the annualized cost of the program implementation over 30 years would be 

$5.5 million. If states serve as IAs for all states the annualized implementation costs would be $18 

million. The reason for the difference is that the analysis assumed that the number of staff per region 

would be no greater than the number of staff per state; based on current budgetary constraints, the level of 

staffing assumed per EPA region is probably higher than would be available in the short term. The 

staffing level may, however, be higher than needed at the state level, provided that the level of effort 

assumed for audits and inspections is appropriate. 

The number of audits and inspections performed is a major component of on-going costs. The 

analysis assumed that medium and large Program 3 manufacturing sources would be audited every five 

years; other manufacturing sources and most non-manufacturers would be audited once every 10 years, 

and retailers, propane users, and gas utilities would be audited once every 20 years. Different levels of 

effort would produce varying costs. For example, the implementation cost per source if EPA serves as 

the IA would be $83; if the states serves as the IA the cost per source would be $275. In contrast, in 

Delaware, where the state inspects each source every three years, the program cost per source is $1,800. 
6-1

CHAPTER 6.

ESTIMATION OF BENEFITS OF RMP RULE 

The primary benefits expected from this rule are reductions in the damages to human health, 

property, and the environment from accidents involving fires, explosions, and toxic releases at sources 

covered by the rule. This chapter attempts to quantify these primary benefits and discusses other less 

certain benefits that may occur as a result of the rule. Following this introduction, Section 6.2 presents a 

baseline estimate of the annual damages resulting from toxic releases. Section 6.3 presents estimated 

annual damages resulting from flammable substances. Section 6.4 summarizes the total estimated annual 

baseline damages. Section 6.5 shows the estimated annual percentage reduction in damages that may be 

expected as a result of the rule. Section 6.6 derives an estimate of annual damage reductions by 

multiplying the baseline damages by the estimated percentage reduction. Section 6.7 presents sensitivity 

analyses considering the impact of two alternative assumptions on the benefits estimate. Section 6.8 

discusses some of the other potential benefits estimated by EPA. Section 6.9 discusses other benefits, 

which were not quantified, that EPA expects may occur as a result of the rule. Section 6.10 summarizes 

the assumptions used in the analysis and the overall benefits expected from the rule. 

6.1. OVERVIEW OF DAMAGES 

The benefits expected from this rule arise primarily from the avoidance of chemical accidents and 

the associated damages to human health, property, and the environment. The damages that have resulted 

historically from the types of accidents that will be covered under this rule fall into several categories. In 

some cases, it is difficult to determine the direct effect this rule will have on mitigating certain categories 

of these damages due to the uncertainty between the cause of the accident and the impact that this rule 

will have in preventing or mitigating future accidents of this nature. This section discusses the categories 

of damages estimated, the uncertainties associated with these estimates, the types and magnitudes of 

accidents considered in the analysis, and the overlap of coverage between the OSHA and EPA rules. 

6.1.1. Types of Damages 

The types of damages or costs considered in this analysis include threats to human health; 

responses to these threats; threats to the environment; and economic damages. The human health threats 

considered include deaths and injuries; the responses to these threats include hospitalizations, evacuations 

and sheltering-in-place. The environmental damages examined include threats to wildlife, soil, and water. 

Finally, the economic damages include lost production, property damages, and litigation. 

6.1.2 Certainty of Damage and Benefit Estimates

Because of severe data limitations and the complexity of the rules, the sources, and the processes 

affected by the rules, uncertainties are associated with the estimates of damages and benefits presented in 

this chapter. As noted above, however, clear distinctions can be made among some of the categories of 

damage and benefit estimates. In keeping with the variability in the degree of uncertainty in the analysis, 

the results of the analysis are presented in three groups: environmental, human health, and economic. The 
6-2

greatest stress is placed on the damage estimates for which the best information is available, with less 

certain estimates labeled as such. 

6.1.2. Nature of the Accident: Toxic or Flammable Releases 

The types of accidents covered in this analysis include both releases of toxic substances and fires 

or explosions caused by flammable substances. The two types are treated separately in this chapter 

largely because of differences in the data used to estimate their occurrence. In addition, the categories of 

damages affected and the severity of these damages vary between the two different types of incidents. 

For example, accidents involving toxic substances are expected to cause more severe environmental 

damages than would a typical fire or explosion, as their effects are more difficult to contain within source 

boundaries. In contrast, fires and explosions are generally more costly to industry in terms of physical 

damage and associated lost production opportunities. Releases of toxic substances, which played a key 

role in motivating the development of the regulations, are discussed first. 

6.1.3. Magnitudes of Incidents 

Most of the analysis in this chapter is aimed, necessarily, at incidents that are both serious enough 

to be reported and tracked, and frequent enough to leave a relatively reliable statistical record. EPA 

recognizes, however, that many minor releases occur every year; in addition, in any given year there is at 

least some chance of a catastrophic accident, well beyond the scale of those documented for this country. 

This analysis attempts to take these "tails" of the size distribution into account. 

6.1.4. 6.1.5 Rule Coverage: Overlap Between EPA and OSHA 

As described in the cost analysis in this report, EPA's rule will increase the number of sources 

with process safety management programs and the number of sources conducting offsite consequence 

analyses. The effective coverage of these sources by these two components of the rule, however, differs 

significantly. The offsite consequence component will affect all sources using listed substances above a 

threshold. Because OSHA already has a program very similar to the process safety management 

component of EPA's rule, however, EPA's process safety rule will mainly affect only those sources using 

listed substances not on OSHA's list and sources exempted by OSHA. In the following sections, both the 

damages from accidents involving the "full list" (all listed substances, including those also covered by 

OSHA) and the "non-OSHA" list (listed substances not covered by OSHA) are discussed, because both 

are important to the analysis. A clear distinction is made between the two, however, because of the 

differences in estimating damage reductions between chemical substances solely on EPA's list and those 

on both EPA's and OSHA's list. 
6-3

6.2. ESTIMATED DAMAGES FROM TOXIC RELEASES 

This section presents EPA's estimates of the annual number of toxic release incidents involving 

substances on EPA's list, and of the average monetized damages resulting from any such release. 

Damages are then estimated for both the full and "non-OSHA" lists and for general, small magnitude, and 

large magnitude toxic events. Because the number of serious releases derived by this analysis is fairly 

small, evidence is presented to show that the results are probably in the right order of magnitude. 

6.2.1. Use of the ARIP Database 

Most of the analysis of the damages from toxic releases is based on data from the Accidental 

Release Information Program (ARIP) database. ARIP, which is maintained by EPA, has 4,857 records of 

chemical accident release events that occurred from October 1986 through September 1993. The ARIP 

database is a subset of the Emergency Response Notification System (ERNS) database, which is 

used to store information on releases of oil and hazardous substances. As of 1993, when this analysis was 

conducted, the ERNS database received in excess of 32,000 reports annually, of which approximately 

6,000 were related to releases of CERCLA hazardous substances. 

ARIP is designed to have information on all releases reported to the National Response Center 

(NRC) that meet one or more of four criteria: (1) the quantity released was above a certain multiple of the 

Reportable Quantity (RQ); (2) the release resulted in a death or injury; (3) the release was one in a trend 

of frequent releases from the same source; or (4) the release involved an extremely hazardous substance 

(EHS) as listed by EPA under section 302 of SARA/EPCRA. 

The ARIP database was screened for all records involving EPA Section 112(r) substances (List 

substances). Out of a total of 4,857 records, 2,931 records involved releases of 57 of the 77 toxic List 

substances. As the time period covered by the database was six years and ten months, the estimated 

annual rate of releases was found by dividing the total number of releases by 6.8. This rate was found to 

be 431 releases per year. 

The database was further screened for records involving releases of List substances that are not 

regulated under OSHA's PSM standards, because EPA can only claim full benefits for the rule's expected 

effect on the reduction of accidents involving these substances. With the exception of releases involving 

ammonia, chlorine, hydrochloric acid, and hydrofluoric acid, all other List substances that are also 

regulated under OSHA were excluded from this data set. This screening left 1,828 records out of the 

original total of 4,857 records. 

It is assumed that a subset of releases involving chlorine, hydrochloric acid, and hydrofluoric acid 

are not covered by OSHA regulations, and therefore that RMP requirements on sources handling such 

chemicals may create additional benefits. More extensive analysis was required to separate out data on 

releases of these chemicals that would not be covered by OSHA: 

; OSHA only regulates hydrochloric and hydrofluoric acid in the anhydrous state, and it is 

assumed that sources in the chemical production industry (SIC code 28) and petroleum industry 

(SIC code 29) handle these two chemicals in the gaseous state. It is furthermore assumed that 
6-4

sources in all other SIC categories handle these two chemicals in solutions, which are not covered 

by OSHA. The database was modified to include only releases of hydrogen chloride and 

hydrogen fluoride at sources in SIC codes other than 28 and 29. This left 1,756 records. 

; OSHA does not regulate municipal water treatment sources in states without a delegated 

OSHA program. Therefore, additional benefits may result from RMP requirements on such 

sources, which are significant users of chlorine. It is assumed that municipal water treatment 

sources are listed under several possible SIC classifications: (1) 4941 , drinking water; (2) 4952 ,

sewerage systems; (3) 4953 , refuse systems; (4) 4959 , sanitary services; (5) 9511 , air, water, 

and solid waste management. All releases of chlorine occurring at sources not included in one of 

these five SIC classification codes were deleted from the database. The remaining records 

involving chlorine were reviewed based on the name and location of the source involved, to 

determine which releases unambiguously occurred at treatment plants. In addition, all records of 

releases of chlorine at treatment sources in states that have delegated OSHA programs were 

deleted. After the screening of the chlorine release records, 1,141 records remained. 

; Although ammonia is regulated under OSHA's list, OSHA does not apply the rule to 

agricultural retailers/wholesalers (SIC 5191). All accidents involving ammonia, which did not 

occur at an agricultural retailer/wholesaler were dropped from the database. This left a total of 

312 records. 

Final adjustments were made to the database to account for under-reporting to ARIP. Using the 

Emergency Response Notification System (ERNS) database, EPA identified approximately 9,500 releases 

between October 1986 and September 1993 that meet the criteria for inclusion in ARIP. While ARIP 

questionnaires were mailed by EPA to sources or regional offices for each of these 9,500 releases, only 

4,857 were returned and entered into the database. Therefore, it is assumed that the data in ARIP underrepresented the actual number of chemical accidents by a factor of two. 

Adjusting the ARIP data for non-response is not believed to introduce significant bias into the 

estimate of baseline toxic release damages due to the nature of the non-response. It is the responsibility 

of EPA Regions to administer the collection of ARIP data for their area. Unfortunately, some Regions 

were not able to devote as many resources to the program as other Regions and, therefore, did not collect 

data for their Regions. Adjusting the ARIP data for missing observations does not introduce significant 

bias into the results, as missing observations are more highly correlated with regional differences in 

administering the overall program than with small magnitude events that Regional and facility personnel 

discounted in filing reports. 

6.2.2. Comparison of ARIP to AHE 

Because there are several possible sources of undercounting of serious releases in the 

methodology presented above, and because the total numbers and magnitudes of the releases seen in the 

ARIP database are moderately low, it is important to test these results against other sources of data to 

determine whether they provide a reasonable basis for the baseline damage estimates. To check the 

reasonableness of the damages found using the ARIP database, the analysis compared the annual reports 

of injuries, evacuations, evacuees, and deaths in ARIP from the full List to comparable numbers from the 
6-5

Acute Hazardous Events (AHE) database.16 In compiling AHE, EPA made a serious attempt to capture 

all significant hazardous substance accidents in the U.S. over a period of years, using a wide variety of 

data sources. EPA believes that AHE's coverage of severe accidents is relatively complete, particularly 

for the most severe accidents.17

The comparison of ARIP (adjusted as described above) and AHE showed the two databases to be 

comparable in terms of injury events, total injuries, and evacuations due to toxic substance releases at 

fixed sources. These results provided some confidence that the adjusted ARIP database includes most of 

the serious toxic release incidents: there is apparently little chance that ARIP includes only a small subset 

of damages. The reader is referred to Appendix B of this analysis for further information. 

On the other hand, the adjusted ARIP results showed a significantly smaller ratio of fatalities to 

injuries, and evacuees to evacuations, than did AHE. To allow for possible under-reporting of fatalities in 

ARIP, the ratio of deaths attributable to toxic releases was assumed to be the same as observed in AHE: 

one death per 60 injuries. Similarly, the reported number of persons evacuated in ARIP was adjusted 

upwards by a factor of four. 

Because some incidents could be missed by both AHE and ERNS, the total damage estimates are 

probably understated to some degree. Because the chances that a release will be reported by the 

responsible party, emergency personnel, or the news media rise for more serious incidents, EPA believes 

that undercounting has relatively little effect on the total damage estimate. 

6.2.3. Number of Incidents 

Exhibit 6-1 presents the baseline estimates of the total number of toxic substance releases. 

Release estimates are provided for both total List substances and those List substances not covered under 

OSHA. The last column of the exhibit refers to the annual baseline estimate of releases after adjusting for 

under-reporting to ARIP. Exhibit 6-2 presents annual baseline estimates of the number of toxic release 

effects that this analysis uses to estimate baseline damages. The exhibit summarizes, for both the full list 

and the subset, non-OSHA list, the estimated number of individuals who are affected annually from a 

toxic release, by incident category, as well as the estimated annual number of environmental and 

economic effects occurring as a result of an accidental toxic release, by incident category. 

6.2.4. Valuation of Incidents 

To calculate a monetary value for the annual damages presented above, EPA multiplied the 

annual number of each category of damages by a unit cost estimate for each category. These unit costs, 

rounded to two significant digits, are presented in Exhibit 6-3. The basis for these unit cost estimates is 

described in detail in Appendix C. Multiplying the estimated annual number of damage cases by the 

16 The comparison was made using the full list compared to AHE's toxic incidents, rather than the non-OSHA list 

compared to a subset of AHE, to provide a larger set of data for making the comparison. EPA relied on ARIP data 

because it provided more detail on individual incidents than AHE.

17 Based on conversations with Fred Talcott, Office of Policy, Planning, and Education, EPA.
6-6

estimated damage per unit produces an estimate of the total damage from toxic releases, shown in Exhibit 

6-4. For example, to calculate the estimated annual baseline economic damages related to List toxic 

releases, the estimated annual number of litigation actions and disruptions of source operations resulting 

from a toxic release (summarized in Exhibit 6-2) are multiplied by the respective damage resulting from 

each type of incident (summarized in Exhibit 6-3).18

18 (172 litigation actions * $80,000 per incident) + (862 disruptions of source operations * $8,900 per incident) = 

$21.4 million, which is less than the estimated $21.5 million in annual damages due to rounding.
6-7

EXHIBIT 6-1

BASELINE ESTIMATES OF ACCIDENTAL TOXIC RELEASES

(rounded to the nearest whole number)

List Substances Number of Unique List 

Substances

Number of Releases in 6.8 

Years

Annual Number of 

Releases

Annual Releases 

Adjusted for UnderReporting Full List 57 2,931 431 862

Non-OSHA 26 312 46 92

Source: ARIP

(adjusted).

EXHIBIT 6-2

ANNUAL BASELINE ESTIMATES OF ACCIDENTAL TOXIC RELEASE INCIDENTS

(rounded to the nearest whole number)

Human Health Incidents Environmental Incidents Economic Incidents

List Substances Evacuees Sheltering in 

Place

Injuries Fatalities Soil Vegetation Groundwater Litigation Disruption of 

Source

Full List 45,403 1,624 1,186 20 29 16 1 172 Operations 862

Non-OSHA 5,405 30 44 1 14 1 0 18 92

Source: ARIP (adjusted).
6-8

SUMMARY DAMAGE VALUATION FROM HAZARDOUS CHEMICAL RELEASES

(1995 dollars, rounded)

Type of Damage and Value per Incident Source of Estimate for Value per Incident

Human 

Health

Evacuation

$290/person

Cynthia B. Flynn and James A. Chalmers, "The Social and 

Economic Effects of the Accident at Three Mile Island: 

Findings to Date" (January 1980).

Sheltering in place 

$30/person

Cynthia B. Flynn and James A. Chalmers, "The Social and 

Economic Effects of the Accident at Three Mile Island: 

Findings to Date" (January 1980).

Injury1 

$19,000

Ted Miller, Charles Calhoun, and W. Brian Arthur, 

"Utility-Adjusted Impairment Years: A Low-Cost 

Approach to Morbidity Valuation," in Estimating and 

Valuing Morbidity in a Policy Context" (June 1989).

Fatality 

$5,400,000

EPA estimate.

Environment

al

Soil contamination 

$220,000

Federal Remediation Technologies Roundtable, "Synopses 

of Federal Demonstrations of Innovative Site Remediation 

Technologies" (May 1991); ARIP questionnaires.

Vegetation damage 

$54,000

Gaynor W. Dawson and Basil W. Mercer, Hazardous 

Waste Management (1986); ARIP questionnaires.

Groundwater contamination 

$1,600,000

ICF Incorporated estimate.

Economic Litigation

$80,000/action

EPA estimate (action is estimated to occur in 20 percent of 

incidents).

Disruption of source 

operations $8,900

U.S. Department of Commerce, "Survey of Current 

Business" (April 1991); ARIP questionnaires.

1 To avoid overstating damages, this analysis assumes that the damage value per injury includes the 

costs associated

with hospitalization.

EXHIBIT 6-4

ESTIMATED BASELINE ANNUAL DAMAGE OF ACCIDENTAL TOXIC RELEASES

($ million)

List Substances Human Health Environmental Economic Total1

Full List $142.8 $9.4 $21.5 $173.7 

Non-OSHA $6.3 $3.5 $5.8 $15.6 

1 Total may not add exactly due to 

rounding.
6-9

6.2.5. Additional Damages from Smaller Magnitude Events 

EPA expects that events that do not cause serious damage to human health or the environment 

probably make a fairly small contribution to aggregate damages, in spite of their large numbers. In 

addition, EPA's rule was aimed at the problem of large-scale releases with serious offsite consequences 

rather than minor within-plant events. For these reasons, relatively little effort has been devoted to 

estimating the average damage caused by minor releases. EPA assumed for the purposes of this chapter 

that all ERNS reports related to releases of CERCLA hazardous substances that are not serious enough to 

warrant an ARIP questionnaire resulted from a minor release. It was also assumed that the ratio of 

releases involving List substances to total releases and the ratio of non-OSHA substance releases to full 

list releases, as reported in ERNS, are the same for small, low-consequence events as for the incidents in 

the ARIP database. Thus, it is assumed that approximately 2,776 small incidents involving List 

substances occur annually, and 291 small incidents involve non-OSHA substances.19

For a per-incident damage estimate, EPA made the simple assumption that the costs per incident 

are equal to one-half of the estimated $8,900 value of lost production used for the more serious incidents, 

or $4,450 per incident.20 Multiplying the estimated number of incidents per year by the assumed value 

per incident yields annual damage estimates from small incidents of $12.4 million and $1.3 million per 

year for the full list and the non-OSHA list respectively. Note that some of these damages will be 

prevented by OSHA's rule. 

6.2.6. Additional Damages from Larger Magnitude Events 

The Bhopal disaster, which could be said to have engendered this rule, was a singular event: no 

other fixed-source release of a toxic substance anywhere in the world, let alone the U.S., has killed or 

injured nearly as many. 

While the scale of this disaster increases the urgency of preventive steps, the extreme rarity of 

accidents of this magnitude greatly complicates any attempt to estimate the expected chance that it will be 

repeated. The one available data point is insufficient to predict with any confidence whether or when a 

similar incident could happen, where it might occur, or the substance it might involve. One might argue 

that, because Bhopal is in India, there is no evidence that a catastrophe could happen in the United States. 

19 If there are 6,000 ERNS reports annually involving CERCLA substances, and there are about 1,400 incidents 

each year serious enough to warrant an ARIP questionnaire (calculated as the 9,500 questionnaires sent over 6.8 

years), there are no more than 4,600 releases involving CERCLA substances that do not require an ARIP 

questionnaire. As 2,931/4,857 or about 60 percent of the records in the ARIP database involve List substances, it is 

assumed that 2,776 small releases involve List substances each year. Since non-OSHA List substances cause 

312/2,931 or about 10.5 percent of all List substance releases reported in ARIP, it is assumed that there are about 

10.5 percent times 2,776 or 291 small releases per year involving non-OSHA List substances. 

20 Based on professional opinion, this estimate is the midpoint of a uniform distribution of the costs of lost 

production with a lower bound of $0 and an upper bound of $8,900. Other damages are not estimated due to the low 

magnitude of the events.
6-10

On the other hand, it has been pointed out that the source in Bhopal was owned by a American firm and 

was similar to plants in the United States; it could be argued that the next disaster at an American-owned 

source could well be in the U.S. That no similar catastrophes have taken place in the U.S. does not by 

itself mean that the annual probability of one occurring is much smaller than in the rest of the world. 

Even if the annual probability for a catastrophe occurring in the U.S. were above zero (e.g., a two percent 

chance per year) it would not be at all surprising to find that no disasters had occurred since the beginning 

of the modern industrial era (i.e., in the past fifty years). 

Faced with the fact that catastrophes can occur, but with very little information on their expected 

frequency in the U.S., EPA explored two methods for constructing probability scenarios for catastrophic 

chemical releases. The first approach assumed that the chance of an accident approximately as severe as 

the one in Bhopal (with about 4,000 fatalities) is proportional to activity in the petroleum refining and 

chemical industries. The second approach grouped disasters in terms of numbers of fatalities, and derived 

a relationship between number of fatalities and the fraction of all disasters of that magnitude that took 

place in the United States. These two approaches are described in more detail below. 

Output Proportionality Approach

This approach uses the fact that there has been one Bhopal-scale disaster recorded in the world 

since the second world war - the beginning of the modern industrial era - and that each year's output of 

chemicals and refined petroleum in U.S. is equal to about one percent of the world's cumulative output 

over the same time period.21 The approach assumes that the probability of a disaster is proportional to 

output of chemicals and refined petroleum, and that the world's experience of one disaster per 50 years of 

cumulative output is a first approximation of the underlying relationship between output and risk. These 

assumptions imply that there is a one percent chance that a disaster that kills on the order of 4,000 persons 

will occur in the U.S. in any given year.22 The expected loss of life is therefore on the order of 

4,000/100 or 40 deaths per year. 

It is important to recognize that if a disaster of this scale occurs in the U.S., it will not necessarily 

be caused by a substance that is covered exclusively by EPA's rule. It may instead be caused by a 

substance that is covered by OSHA's rule. If so, the damages associated with it, and the potential for 

averting them, should not be associated with EPA's rule. (In fact, the substance involved in the Bhopal 

incident, methyl isocyanate, would be covered by OSHA rather than by EPA.) As a rough means of 

adjusting for the distribution of potential disasters between substances on the full list and substances on 

the non-OSHA list, EPA is assuming that the chance that a given disaster will involve a substance on the 

non-OSHA list is equal to the ratio of the number of ARIP reports involving the non-OSHA list to the 

number of ARIP reports involving all list substances. This ratio is approximately one to ten; EPA will 

therefore assume that only a tenth of the expected 40 fatalities - or an expected total of four per year - can 

be related to non-OSHA list substances. Assuming a value per statistical life saved of $5.4 million, these 

damages can be valued at about $216 million and $21.6 million for the full List and the non-OSHA list 

substances, respectively. 

21 OPPE analysis based on data from Chemical Manufacturers Association and U.S. Industrial Outlook.

22 There is a two percent chance of a disaster on the scale of Bhopal occurring somewhere in the world in any 

given year. The annual output of chemicals and refined petroleum in the U.S. equals 50 percent of that of the world. 

Therefore, there is a one percent chance of a Bhopal-scale disaster occurring in the U.S. in any given year. 
6-11

Projected-Fraction-in-U.S. Approach

For this approach, EPA notes that there is strong evidence that the fraction of the world's disasters 

that fall on the U.S. falls steadily for disasters of greater magnitude. The U.S. has had about half of all 

reported accidents with five fatalities, for example. The U.S. share of accidents with 10 fatalities, 

however, drops to about 40 percent; its share of accidents with 20 fatalities falls to about 20 percent; and 

its share of accidents with more than 50 fatalities falls below 10 percent.23 The statistical trend toward a 

smaller relative risk for the U.S. at larger magnitudes is very strong, with almost no chance that it could 

have appeared randomly. Given the scatter in the data, shown in Exhibit 6-5, there is some chance that 

the true relationship (between the scale of the disaster and the chance that a given disaster will occur in 

the U.S.) will lie above most or all of the data points (See the upper 95 percent confidence band on the 

exhibit). It is unlikely, however, that more than 15 percent of disasters with 100 or more fatalities will 

take place in the U.S.24 The reason behind this relationship could involve differential reporting 

efficiencies in the U.S. and the rest of the world for the smaller accidents, while the efficiencies probably 

approach 100 percent everywhere for the worst accidents. Higher safety standards, lower population 

densities, and a more effective system of medical care in the United States could also reduce the chances 

of fatalities from very serious accidents here compared to the rest of the world. 

If it is assumed that there is one disaster with about 4,000 fatalities in the world in 50 years, and if 

the U.S. is likely to have no more than a 15 percent probability of suffering any given disaster of this 

magnitude, then it can be estimated that the annual probability for the U.S. is about 0.15/50, or 1/300. 

Given the magnitude of the disaster, the expected number of fatalities (for all hazardous substances at 

fixed sources) would be 4,000 / 300, or just over 13 per year. Following the reasoning presented above 

for distinguishing between full list and non-OSHA list substances, EPA estimates (under this approach) 

that about 1.3 fatalities can be expected per year from Bhopal-scale accidents involving non-OSHA list 

substances. Assuming a value per statistical life saved of $5.4 million, these damages can be valued at 

about $70 million and $7.0 million per year for the full List and the non-OSHA List substances, 

respectively. 

For the purposes of this analysis, the output proportionality approach was chosen to represent the 

expected additional damages from larger magnitude events. This approach was chosen based on the 

simplicity of its design and assumptions. 

23 Based on data from the Fatal Hazardous Materials Accidents database developed by Resources for the Future 

(RFF), using fixed source accidents only. This database is further described in section 6.3.

24 If the relationship were projected out to the scale of the actual Bhopal accident, the statistical relationship would 

predict that no more than one or two percent of the World's catastrophes are likely to take place in the U.S. It may 

not be safe to project out this far beyond the data points used for the statistical analysis, however.
6-12

EXHIBIT 6-5 

RELATIONSHIP BETWEEN THE SCALE OF A DISASTER AND THE CHANCE

THAT A DISASTER WILL OCCUR IN THE U.S. 

6.3. ESTIMATED DAMAGES FROM FLAMMABLE SUBSTANCES 

This section discusses the processes used to construct a database of flammable related accidents 

involving all EPA List substances and the subset of substances that are not subject to OSHA regulation. 

Baseline damages attributable to these accidents are then estimated. 

6.3.1. Database Construction 

The list of chemicals regulated under CAA 112(r) includes 63 flammable chemicals, 

approximately 45 percent of the total number of List substances. All of these chemicals are also covered 

under OSHA's 1992 PSM standard that deals with the risks involved in the storage, handling, and 

processing of highly hazardous materials. This standard emphasizes the application of management 

controls, rather than specific engineering guidelines, when addressing the risks associated with handling 

or working near hazardous chemicals. OSHA's rule, however, does exclude certain industries using 

propane. 

The database of flammable accidents used for estimating the benefits of this rule was drawn from 

a number of different sources: (1) the Acute Hazardous Events (AHE) database; (2) the Fatal Hazardous 

Materials Accidents database; (3) the Major Hazard Incident Data Service (MHIDAS) database; and (4) 

the Nexus on-line access to newspaper and periodical articles. (The ARIP database does not include data 

on flammable related incidents.) Each of these sources is described in greater detail below: 

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

0 1 2 3 4
6-13

; The AHE database was developed by EPA to provide a perspective on the magnitude of chemical 

accidents in the United States. The database emphasizes incidents resulting in deaths, injuries, or 

evacuations. The database also emphasizes events involving the release of hazardous chemicals 

into the air. It contains information, drawn from various newspapers and government records, on 

roughly 11,000 separate events that occurred between 1982 and 1987. 

; The Fatal Hazardous Materials Accidents database was developed by Resources for the Future 

(RFF). It was developed to document the record of industrial hazardous materials accidents in the 

U.S. and elsewhere since World War II. It contains information, drawn from more than thirty 

different sources, on accidents occurring during the period 1945 through 1991. The database 

includes domestic accidents that involved at least one death or foreign accidents that involved at 

least five deaths. 

; MHIDAS is a world-wide database maintained by the Safety and Reliability Business (SRB) of 

AEA Technology and the UK Health and Safety Executive. It currently contains more than 6,500 

records of incidents involving hazardous substances that have had offsite impacts. 

; Nexus research was conducted for newspaper articles involving propane accidents that were not 

captured in the above mentioned databases. Generally, this search was used to identify smaller 

and less severe incidents that the other databases may have omitted. 

Propane is the only flammable List substance that is not fully covered under OSHA's PSM 

standard. OSHA's standard specifically excludes propane fuel users, retailers, and remote sources (gas 

processors) from compliance. EPA's regulation, however, will not exclude these sources if they exceed a 

10,000 pound threshold. These sources, which are excluded from OSHA's regulation, are the only ones 

for which EPA is able to claim full benefits for any reduction or mitigation of accidental flammable 

incidents. 

All records from the above databases involving propane accidents were analyzed to construct a 

database of accidents at sources that would not have been covered under OSHA's regulation. To do this, 

the following criteria were applied: 

; OSHA also regulates all sources using propane in their processes with the exception of propane 

retailers and those sources using propane as a fuel. Consequently, all propane-related accidents 

involving sources that do not use propane as a feedstock, such as refineries, were excluded. 

; All records of accidents that occurred at sources such as restaurants, shops, and homes were 

omitted from the database due to the likelihood that these sources do not store over 10,000 

pounds of the fuel on site. 

6.3.2. Number of Incidents 

A total of 416 flammable casualty events were identified involving List chemical substances. Out 

of this total, 44 records were identified as propane accidents having occurred at sources that would not 

have been regulated under OSHA's recent standard. Exhibit 6-6 presents the baseline estimates of the 

total number of flammable accidents. Exhibit 6-7 presents findings on the annual number of baseline 
6-14

incidents for flammable accidents. 

6.3.3. Valuation of Incidents 

To estimate annual losses for all categories except property damage and lost production, EPA 

multiplied the annual number of each category of damages by the unit cost estimate for each category as 

determined in Section 6.2. The unit costs for flammable-related incidents are presented in Exhibit 6-8. 

The databases analyzed for flammable-related incidents were not as detailed as the ARIP database in 

providing damages associated with incidents. Given the lack of available data concerning the damages 

associated with sheltering in place and environmental incidents, it was assumed that no damages were 

associated with either of these categories. Intuitively, the omission of damages associated with sheltering 

in place would only slightly underestimate actual damages due to its low monetary value per incident. 

Furthermore, the omission of environmental damages probably also does not greatly underestimate total 

damages because these damages are not typically associated with flammable-related incidents, but are 

more often associated with the release of toxic substances, which have the ability to remain in the 

environment after their release. 

EXHIBIT 6-6

BASELINE ESTIMATES OF ACCIDENTAL FLAMMABLE ACCIDENTS

(rounded to the nearest whole number)

List Substances Number of Unique 

List Substances

Total Number of 

Releases

Annual Number of 

Releases

Full List 43 416 9

Non-OSHA 1 44 1

Source: ARIP 

(adjusted).

EXHIBIT 6-7

ANNUAL BASELINE ESTIMATES OF FLAMMABLE INCIDENTS

(rounded to the nearest whole number)

Human Health Economic

List Substances Evacuees Injuries Fatalities Litigation Property 

Damage

Lost 

Production

Full List 1,853 30 6 2 9 9

Non-OSHA 297 6 1 1 1 1
6-15

EXHIBIT 6-8

SUMMARY DAMAGE VALUATION FROM HAZARDOUS CHEMICAL RELEASES

(1995 dollars, rounded)

Type of Damage and Value per Incident Source of Estimate for Value per Incident

Human 

Health

Evacuation

$290/person

Cynthia B. Flynn and James A. Chalmers, "The Social 

and Economic Effects of the Accident at Three Mile 

Island: Findings to Date" (January 1980).

Injury1

$19,000

Ted Miller, Charles Calhoun, and W. Brian Arthur, 

"Utility-Adjusted Impairment Years: A Low-Cost 

Approach to Morbidity Valuation," in Estimating and 

Valuing Morbidity in a Policy Context" (June 1989).

Fatality 

$5,400,000

EPA estimate.

Economic Litigation

$80,000/action

EPA estimate (action is estimated to occur in 20 percent 

of incidents).

Property Damage

$37.5 million

ICF analysis (median value of minimum reported 

damages).

Lost Production

$75 million

Marsh & McLennan, adjusted ratio (twice the property 

damage estimate).

1 To avoid overstating damages, this analysis assumes that the damage value per injury includes the 

costs associated 

with hospitalization.

For purposes of this analysis, lost production damages are estimated using a 2-to-1 loss ratio 

between business interruption and property damage. The insurance industry cites a 4-to-1 loss ratio 

between business interruption and property damage.25 However, for the purposes of this analysis, it is 

recognized that while businesses suffering a shutdown due to an accident lose sales revenue, they also 

save some of their operating costs, such as material inputs, energy, and miscellaneous other expenditures. 

Therefore, the 4-to-1 loss ratio was further adjusted based on a general review of select chemical 

company financial statements that showed the cost of sales, less labor costs, was about one-half of net 

sales. Consequently, the M & M ratio was adjusted by one-half, to avoid overstating actual societal 

losses associated with property damage losses. Estimates for property damages are based on estimates 

found in the original data records, which have been updated to 1995 dollars.26 Exhibit 6-9 presents the 

estimated annual baseline cost for the associated damages. Annual baseline estimates are provided for 

human health and economic effects, including property damages. These estimates were calculated in the 

same manner as for toxic release incidents. For example, to estimate the annual baseline damages 

associated with human health effects, the annual number of evacuees, injuries, and fatalities was 

25 Marsh and McLennan, “Large Property Damage Losses in the Hydrocarbon-Chemical Industries: A Thirty Year 

Review,” 15th edition, David Mahoney, editor.

26 Missing estimates for the listed chemicals that are also OSHA flammable substances were assigned the median 

property damage value of $37.5 million, for the non-OSHA list flammable substance data base they were assigned 

the median property damage value for those reported incidents of $1.8 million. The median property damage was 

used for OSHA and non-OSHA substances because in both cases, the median value was less than the average. This 

was done in an effort to avoid over-estimating the true benefits of the program.
6-16

multiplied by their respective value per incident. 

EXHIBIT 6-9

ANNUAL BASELINE DAMAGE OF FLAMMABLE ACCIDENTS

($ million)

List Substances Human Health Economic Total1

Full List $36.1 $1,020.6 $1,056.7

Non-OSHA $6.6 $38.0 $44.6

1 Total may not add exactly due to rounding.

The Agency recognizes that the estimated baseline damages resulting from flammable-related 

accidents are particularly high in relation to the damages from toxic-related accidents. Intuitively, one 

would expect flammable-related damages to be higher due to the associated destruction of capital that is 

normally not associated with a toxic accident. The Agency assumed that the associated property damage 

for flammable accidents was on average $37.5 million per facility in 1995 dollars. This number was 

based on the reported lower-bound median property damage value in the flammable accidents database 

developed by EPA to identify flammable-related accidents that have occurred at facility types that will be 

regulated under this rulemaking. A 1991 report conducted by M&M Protection Consultants (M&M) 

supports this estimate. The report analyzed the trend of large property damage losses that occurred in the 

hydrocarbon-chemical industries for the past 30 years. The report found that over time, the magnitude of 

the property losses had increased significantly. On average, petrochemical plants suffered $47.0 million 

per accident, refineries $44.6 million, and gas processing plants $55.5 million, in 1991 dollars. 

Furthermore, the report found that the total property damage dollar loss to industry has increased from 

$0.34 billion for the 1962 through 1966 period to almost $3.0 billion for the 1987 through 1991 period (in 

1991 dollars). The most recent series of M&M data suggests that annual property damages are about 

$600 million in 1991 dollars, compared to EPA’s more conservative estimate of about $300 million in 

1995 dollars. 

The report hypothesizes that the increasing magnitude of property damage losses is most likely 

the result of attempts by the manufacturing industries to achieve greater economies of scale and efficiency 

by expanding the operating size of their facilities. For example, the report states that in 1970, a 

petrochemical plant with an ethylene production capacity of 500 million pounds per year was considered 

large; in 1991 large plants produced three times that amount. In addition, the report found that facilities 

are designed differently to economize on operation costs. For example, some plants have reduced the 

spacing throughout their process units to lower the cost of piping, wiring, and energy losses. Process 

equipment such as heat exchangers and air coolers are more often arranged vertically rather than spread 

horizontally. The net result of these changes is a greater concentration of assets in a small area of the 

plant and consequently a larger total dollar exposure for a single loss accident. The report also notes that 

increased regulatory safety, and environmental concerns have in many cases increased the cost of permits, 

debris removal, and cleanup associated with large property damage losses. 
6-17

6.4. TOTAL ESTIMATED BASELINE DAMAGES 

To facilitate comparison of the estimates of benefits and costs, baseline damages are presented 

according to the three program levels discussed previously in the analysis. Sources in SIC codes 2611, 

2812, 2819, 2821, 2865, 2869, 2873, 2879, and 2911 and processes already covered by the OSHA PSM 

standard are assumed to comply with Program 3.27 Consequently, baseline damages originating 

from these sources are assumed to be impacted by Program 3 requirements. All other accidents are 

assumed to originate from sources subject to Program 2 requirements. No baseline damages are 

assumed to originate from sources impacted under Program 1, as the requirements of the Program do not 

impose any additional prevention requirements on industry beyond what is currently practiced. 

Exhibit 6-10 shows the total annual expected damages resulting from both the full list of EPA 

regulated chemicals and the EPA list of chemicals that are also not regulated under OSHA, by program 

level. Because only the database for toxic-related incidents included a sources SIC code, baseline 

damages for other categories were scaled between program levels using the ratio of toxic related damages 

for Program 2 and Program 3. For purposes of constructing the baseline, all regulated sources using listed 

chemicals are assumed to undergo full compliance with the regulatory requirements associated with each 

program. The exhibit shows that no quantitative damages are subject to Program 1 requirements, as the 

requirements of the Program do not impose any additional prevention requirements on industry beyond 

what is currently practiced. Consequently, no quantified benefits can be claimed for Program 1 sources. 

However, imposing the requirements of this rule on Program 1 sources may provide qualitative benefits 

as described in Section 6.9. 

EXHIBIT 6-10

TOTAL ANNUAL DAMAGES SUBJECT TO PROGRAM LEVEL

($ million)

Regulated Chemical Substances Program 1 Program 2 Program 3 Total1 

General Toxic Events Full List - $13.4 $160.4 $173.8 

Non-OSHA - $13.4 $2.3 $15.7 

Small Magnitude Toxic 

Events

Full List - $1.1 $11.3 $12.4 

Non-OSHA - $1.1 $0.2 $1.3 

Large Magnitude Toxic 

Events

Full List - $18.4 $197.5 $215.9 

Non-OSHA - $18.4 $3.1 $21.5 

Flammables Full List - $38.1 $1,018.6 $1,056.7 

Non-OSHA - $38.1 $6.5 $44.6 

Total1 Full List - $71.0 $1,387.8 $1,458.8 

Non-OSHA - $71.0 $12.1 $83.1 

1 Total may not add exactly due to rounding.

27 SIC code definitions are as follows: 2611- pulp mills; 2812- alkalies and chlorine; 2819- industrial inorganic 

chemicals; 2821- plastics materials and resins; 2865- cyclic crudes and intermediates; 2869- industrial organic 

chemicals; 2873- nitrogenous fertilizers; 2879- agricultural chemicals; and 2911- petroleum refining.
6-18

6.5. PROJECTED REDUCTIONS IN DAMAGES 

To estimate the percentage reduction in the damages from releases that can be attributed to the 

presence of a risk management program, this analysis relies on the findings of a small industrial survey, 

which collected data on the costs and benefits of OSHA's PSM standard. The survey findings are used as 

an estimate of the effectiveness of EPA's program because many of the requirements for the RMP are 

similar to OSHA's PSM. 

6.5.1. Expected Reduction in Damages for PSM Activities 

This section develops a reasonable estimate for EPA's program effectiveness for non-OSHA List 

substances based on the results of a 1992-1993 industry survey, conducted by JBF Associates, on the 

costs and benefits of process safety management.28 The study surveyed 84 sources, representing a total 

of 25 companies, that have implemented process safety management techniques (PSM) at the work place 

to control process-related hazards. 

As part of the survey, companies were asked to estimate their reduction in losses attributable to 

the OSHA PSM program for three separate categories: source operations, environmental damages, and 

employee/public harm. Companies were asked to estimate their losses both before and after PSM 

implementation. Exhibit 6-11 presents the average estimate per respondent. The average percent 

reduction in losses across all categories of losses -- source operations, environmental damages, and 

employee/public harm -- is computed to be approximately 50 percent. This estimate corresponds to the 

estimated effectiveness assumed by OSHA in its final rule for the first five years of the OSHA PSM 

program. Based on these results, EPA has assumed that the PSM portion of the RMP program will result 

in a 50 percent reduction in damages for non-OSHA List substances. 

EXHIBIT 6-11

PROCESS SAFETY MANAGEMENT BENEFIT ESTIMATES

Source Operations Environmental Damages Employee/Public Harm

Before PSM After PSM Before PSM After PSM Before PSM After PSM

Average (million) $0.95 $0.41 $0.3 $0.16 $.25 $0.13

Percent 

Reduction

57% 47% 48%

28 "The Cost and Benefits of Process Safety Management, Industry Survey Results," William G. Bridges, JBF 

Associates, Inc., Knoxville, TN, 1993.
6-19

6.5.2. Expected Reduction in Damages for Non-PSM Activities 

EPA also expects that the RMP rule will reduce the number and severity of releases of List 

substances beyond PSM activities. The addition of the EPA rule is expected to increase both the level 

and quality of compliance with the OSHA standard because of the greater stringency of the RMP 

requirements compared to the OSHA rule and the review of a source's program by the government and 

the public. Under OSHA, the government is not notified that a source is covered and no review occurs 

unless a source is inspected. 

The additional reduction in damages achieved with the RMP rule is estimated based on the 

increase in spending on PSM activities under the RMP rule for List substances also covered by OSHA 

and the level of benefits (i.e., damage reductions) already achieved by the OSHA PSM program. As 

discussed in Chapter 5, spending on PSM activities associated with List substances covered by OSHA is 

expected to increase by approximately 25 percent under the RMP program. EPA expects that these 

additional costs will be incurred primarily for improved training of personnel, better maintenance and 

oversight practices, and other activities that are expected to reduce damages beyond what has been 

achieved by the OSHA program. 

Although OSHA had estimated that five years after the implementation of the PSM program, 

accidents at complying sources would decrease by 80 percent, EPA believes that this may have been an 

overly optimistic assumption. For the purposes of this analysis, EPA assumes that PSM activities achieve 

only a 50 percent reduction in accident losses, as estimated by OSHA for the first five years of its PSM 

program. Thus, EPA believes that the non-PSM activities of the RMP rule will reduce the number and 

severity of incidents comprising the remaining 50 percent of damages not addressed by PSM. 

To estimate the additional reduction in damages resulting from a 25 percent increase in spending 

on non-PSM activities, EPA first assumed that there are declining returns in terms of the resulting 

percentage reduction in damages for each additional dollar spent on accident prevention activities. In 

other words, each additional dollar spent on these activities is assumed to achieve a smaller percentage 

reduction in accidental losses. According to economic theory, a source would perform the more costeffective activities before less cost-effective activities in order to maximize the returns on expended 

dollars. Consistent with this theory, EPA made the simple assumption that for sources already regulated 

under the OSHA PSM program, doubling their current level of spending on accident prevention activities 

would reduce remaining damages by 50 percent. Consequently, if twice as much money was spent on 

non-PSM and other activities than is currently spent to achieve a 50 percent reduction in damages, the 

program would reduce remaining damages by an additional 25 percent, for a total damage reduction of 75 

percent. Exhibit 6-12 illustrates this concept. 

6-21

Based on this assumed relationship between spending on non-PSM activities and the resulting 

percentage reduction in damages, an estimated 25 percent increase in accident prevention spending by 

facilities covered under this rule is estimated to further reduce remaining baseline damages by ten percent, 

for a total estimated reduction in baseline damages (i.e., before implementation of a PSM program) for 

regulated sources of 60 percent.29 This estimation procedure may underestimate the additional benefits 

achieved by the EPA program if the spending under the EPA program is actually more cost-effective than 

PSM spending under the OSHA program. For the purposes of this analysis, however, it is assumed that 

the implementation of RMP activities will reduce estimated baseline damages for non-OSHA List 

substances by 60 percent and for OSHA List substances by an additional ten percent, as they are already 

required under OSHA to practice PSM activities. 

6.6. ESTIMATED REDUCTION IN DAMAGES 

Multiplying the damages from incidents involving toxic and flammable substances by estimates 

of the percentage reduction that could be provided by the rule yields an estimate of the rule's damage 

reduction benefits. This calculation was performed in two parts. First, a best estimate of damage 

reductions for non-OSHA List substances was calculated assuming total damages are reduced by 60 

percent. Second, a best estimate of the expected damage reduction for the remaining List substances was 

calculated assuming total baseline damages are reduced by an additional 10 percent. For the 

purpose of this analysis, EPA did not differentiate between the effectiveness of different programs 

because that information is currently unavailable, and an attempt to do so would be based on subjective 

opinion without the support of any empirical evidence. 

Exhibit 6-13 presents the effects of reducing baseline damages for both toxic and flammable 

related substances for non-OSHA and other List substances. The less certain damage reductions (i.e., 

small and large magnitude toxic events) are shown along with the categories of damage reductions for 

which there is more data. Because the differences in regulatory options are all quite similar, the Agency 

believes that the estimated benefits attributed to this rulemaking are not greatly biased when compared to 

the costs of each regulatory option.30 Because the program is generally phased-in over a three years 

time-period, the Agency correspondingly phased-in the stream of expected benefits. Beginning in the 

third year, all sources are assumed to be in full compliance. The exhibit shows estimated benefits for the 

first year to be $61.9 million, which increases to an estimated annual reduction in damages of $187.4 

29 The reduction in damages is approximated assuming a curve-linear relationship between the level of spending 

and the reduction in damages when moving from the current spending level (1x) to twice the current spending level 

(2x). Thus, if a spending level of 1x results in a 50 percent reduction in baseline damages, and a spending level of 

2x is assumed to result in a 75 percent reduction (one-half of the remaining damages from 1x spending), then a 

spending level of 1.25x would be expected to result in a 60 percent reduction in baseline damages [1 - (1/(2 * 1.25) 

], or a ten percent additional reduction in total damages.

30 Benefits were not associated with specific rule elements because the data sources used for the analysis (ARIP, 

AHE, RFF, MHIDAS, M&M) do not provide enough detail concerning the facility programs and processes in place 

at the time of the accident. Consequently, it is difficult to determine the degree to which specific rule-related 

requirements would have decreased the likelihood of the accident having occurred. Although a great deal of time 

and effort was expended by the Agency to identify accidents that occurred at facilities that will be affected by this 

rulemaking, EPA recognized the difficulty in determining the benefits of the rulemaking by rule elements due to the 

data limitations. Consequently, the Agency devoted greater effort on developing a rule that would minimize the 

economic impact to industry while still complying with the requirements of the statute. 
6-22

million beginning in the third year. Total estimated annualized benefits are about $174 million. 

EXHIBIT 6-13

ANNUAL EXPECTED BENEFITS

($ million)

Regulated Chemical Substances Year 1 Year 2 Year 3 Years 1-30 

(annualized)1 

General Toxic Events Full List $8.3 $16.6 $25.2 $23.3 

Non-OSHA $3.1 $6.2 $9.4 $8.7 

Small Magnitude Toxic 

Events

Full List $0.6 $1.2 $1.9 $1.7 

Non-OSHA $0.3 $0.5 $0.8 $0.7 

Large Magnitude Toxic 

Events

Full List $10.7 $21.4 $32.4 $30.0 

Non-OSHA $4.3 $8.5 $12.9 $12.0 

Flammables Full List $42.2 $84.4 $127.9 $118.4 

Non-OSHA $8.8 $17.6 $26.7 $24.7 

Total2 Full List $61.9 $123.7 $187.4 $173.5 

Non-OSHA $16.5 $32.9 $49.9 $46.2 

1 Annualized using a 7 percent discount 

rate.

2 Total may not add exactly due to 

rounding.

The benefits reflected in Exhibit 6-13 for the full list consider only the additional effect the rule 

will have on processes already regulated under the OSHA PSM program. Benefits from the rule are not 

explicitly reduced for any potential benefits from voluntary programs, such as CMA and API PSM 

programs. This adjustment was not made because the extent of participation and the compliance with 

such programs is unknown and because the data did not allow this type of estimation.31

6.7. SENSITIVITY ANALYSES 

This section examines the change in the estimated benefits under alternative assumptions 

31 In addition, some overlap in the time frame between the voluntary programs and the EPA databases indicate that 

some damages may have been avoided by these programs, thereby implicitly reducing the estimated baseline 

damages. While costs were discounted in the analysis for toxic substance processes not covered by the OSHA PSM 

but that are covered by CMA and API programs, the magnitude of these costs is so small (applying to only 370 of 

the more than 90,000 processes) that the final estimates are not considered to be overstated.
6-23

regarding the effectiveness of the OSHA program and the additional reduction in damages achieved by 

implementing the EPA RMP program for these facilities. The base analysis assumes that the OSHA 

program achieves only a 50 percent reduction in damages and that the additional spending associated 

with adding the EPA program has the same effectiveness, in terms of reducing total damages, as an 

increase in spending under the OSHA program. These sensitivity analyses consider the impact of two 

alternatives on the benefits estimate for OSHA-covered processes: 

(1) The OSHA program achieves 80 percent effectiveness; and 

(2) The additional spending associated with adding the EPA program is twice as cost-effective as 

additional spending under the OSHA PSM program. 

6.7.1. OSHA Program is More Effective 

If, as OSHA assumes, their PSM program will reduce damages by 80 percent after the first five 

years, the addition of the EPA RMP program can only reduce the number and severity of incidents 

comprising the remaining 20 percent of damages not addressed by OSHA. Because a rigorous analysis of 

OSHA’s benefit methodology was not undertaken, EPA has conservatively estimated that the 

implementation of its rule will still result in a 50 percent reduction in remaining incidents, even if 

OSHA’s PSM standards may result in an eventual 80 percent reduction in OSHA-regulated facility 

incidents. For this alternative analysis, EPA assumes that a doubling of the current spending level would 

reduce the remaining damages by 50 percent, for a 10 percent additional reduction in total damages. 

Exhibit 6-14 illustrates this concept. 

6-25

Using this assumed relationship, the 25 percent increase in spending associated with the EPA 

RMP rule is estimated to reduce total damages for OSHA processes by an additional four percent (for a 

combined reduction in damages of 84 percent under both the OSHA and EPA programs).32 Under this 

alternative, the total benefits associated with the EPA RMP rule are about $97 million or about $76 

million less than the best estimate. Exhibit 6-15 shows the breakdown of benefits by category. 

EXHIBIT 6-15

TOTAL ANNUAL EXPECTED BENEFITS- SENSITIVITY ANALYSIS 1

($ million)

Regulated Chemical Substances Year 1 Year 2 Year 3 Years 1-30 

(annualized)1

General Toxic Events Full List $5.2 $10.4 $15.7 $14.6

OSHA $2.1 $4.2 $6.3 $5.8

Small Magnitude Toxic 

Events

Full List $0.4 $0.8 $1.2 $1.1

OSHA $0.1 $0.3 $0.4 $0.4

Large Magnitude Toxic 

Events

Full List $6.8 $13.7 $20.7 $19.2

OSHA $2.6 $5.1 $7.8 $7.2

Flammables Full List $22.2 $44.4 $67.2 $62.2

OSHA $13.4 $26.7 $40.5 $37.5

Total2 Full List $34.6 $69.3 $104.9 $97.1

OSHA $18.2 $36.3 $55.0 $50.9

1 Annualized using a 7 percent discount 

rate.

2 Total may not add exactly due to rounding.

6.7.2. Additional Spending under EPA Rule is More Cost-Effective 

In the original analysis, the non-PSM spending associated with adding the EPA rule for 

substances covered by the OSHA PSM program is assumed to further reduce damages by 10 percent. 

It could be argued that the additional spending that occurs as a result of implementing the EPA RMP 

program for OSHA-covered processes would be more cost-effective (i.e., achieve a greater additional 

percentage reduction in damages) because sources have a choice regarding what process activities they 

spend the additional money on (as opposed to OSHA) and, therefore, are expected to expend the 

additional resources on more cost-effective activities, such as increased and improved training, 

32 Using the same functional form as originally used, y = 1 - 1/(2x), y = 0.8 when x = 2.5. Doubling x to 5.0 results 

in a y of 0.9. Increasing x = 2.5 by a factor of 1.25 results in a y of 0.84, or a four percent increase.
6-26

maintenance, and oversight.33

Assuming that non-PSM spending is twice as effective as originally estimated, for OSHA 

processes only, an additional 25 percent increase in EPA program-related spending would result in an 

additional 30 percent reduction in total baseline damages (assuming the OSHA program reduces damages 

by 50 percent without the EPA program).34 Exhibit 6-16 illustrates the effect of assuming that spending 

under the EPA program is more cost-effective. 

33 Technically, this would imply that non-OSHA covered processes would also achieve the same additional 

benefits as OSHA covered processes for non-PSM spending. This simple analysis, however, only looked at the 

effect on OSHA-covered processes to maintain a conservative estimate of benefits. 

34 Again. assuming the original functional form, y = 1 - 1/(2x), if x is twice as effective as originally estimated, 

then y = 1 - 1/[(2*(2*1.25)] = 0.8, or a 30 percent increase.

6-28

Thus, assuming the additional spending associated with the EPA RMP rule is twice as effective at 

reducing damages than could be expected from additional spending under OSHA, the total annualized 

benefits associated with the EPA RMP rule are estimated at about $428.2 million, or about $255 million 

greater than the best estimate. Exhibit 6-17 shows the breakdown of benefits by category. 

6.8. POTENTIAL ADDITIONAL BENEFITS 

In addition to the primary benefits discussed in the preceding sections of this chapter, additional 

potential benefits can also be included in the analysis. For the purposes of this analysis, however, EPA 

chose not to include these estimates with the overall estimated quantified benefits because a rigorous 

approach was not used to estimate the magnitude of these benefits compared to that of the other estimated 

benefits. This section specifically considers the possible damage reductions 

attributable to offsite consequence analyses and to a reduction in routine emissions, which the proposed 

rule may affect. 

EXHIBIT 6-17

TOTAL ANNUAL EXPECTED BENEFITS- SENSITIVITY ANALYSIS 2

($ million)

Regulated Chemical Substances Year 1 Year 2 Year 3 Years 1-30 

(annualized)1

General Toxic Events Full List $18.8 $37.5 $56.8 $52.6

OSHA $15.6 $31.3 $47.4 $43.9

Small Magnitude Toxic 

Events

Full List $1.4 $2.7 $4.1 $3.8

OSHA $1.1 $2.2 $3.3 $3.1

Large Magnitude Toxic 

Events

Full List $23.5 $47.0 $71.3 $66.0

OSHA $19.2 $38.5 $58.3 $54.0

Flammables Full List $109.0 $218.0 $330.4 $305.8

OSHA $100.2 $200.4 $303.6 $281.0

Total2 Full List $152.7 $305.3 $462.6 $428.2

OSHA $136.2 $272.4 $412.7 $382.0

1 Annualized using a 7 percent discount rate.

2 Total may not add exactly due to rounding.
6-29

6.8.1. Possible Damage Reductions Due to the Offsite Consequence Analyses 

EPA's rule requires all facilities using List substances in quantities above the threshold to perform 

an offsite consequence analysis, and to make the results available to the potentially affected communities. 

Because the OSHA rule does not have a comparable provision, any benefits of EPA's provision could be 

applied to damages from all substances on the List, not only from the non-OSHA list. In addition, these 

benefits can be applied in theory to the potential damages from low probability/high consequence 

incidents as well as to the more common types of accidents. 

The availability of the information generated by the offsite consequences analyses may provide 

benefits by leading to reductions in the number and severity of releases at the facilities that perform the 

offsite consequence analyses because facilities would become more aware of potentially dangerous 

practices as a result of conducting an offsite consequence analysis and would therefore act to minimize 

the possibility of the occurrence of such a situation. This section explains why these reductions may take 

place, and then shows why most of these potential reductions are not counted as benefits of the RMP rule. 

The dissemination of information on potential releases could ultimately have an impact on the 

chance that a release would occur. Based on the Agency's experience with another piece of 

environmental legislation, the Emergency Planning and Community Right-to-Know Act of 1986 

(EPCRA), facilities are required to account for routine releases of toxic substances into the environment. 

The Toxic Release Inventory (TRI), which is mandated under section 313 of EPCRA, allows citizens to 

become aware of the number, quantity, and hazards of toxic chemicals stored in their communities, which 

has encouraged them to actively seek to work with local facilities to develop strategies capable of 

reducing environmental and health risks. 

TRI requires that certain facilities submit information on their toxic emissions, which is made 

available to the public. The availability of TRI information has led to more frequent meetings between 

citizen groups and industry. This increased contact has led to plant tours, citizen inspections, the 

establishment of community advisory boards to monitor industrial activities, and the creation of "Good 

Neighbor Agreements" with specific facilities.35 In California's Silicon Valley, for example, citizens 

used TRI data to pressure the state's largest emitter of ozone-depleting CFC’s, IBM, into eliminating 

CFC’s altogether. In Akron, Ohio, TRI information was used to pressure BF Goodrich into publicly 

announcing a 70 percent reduction goal in its emissions of air toxics.36 The Clean Water Action/Clean 

Water Fund used TRI data on the Houston Ship Channel in a report arguing that the channel be included 

in the Texas Water Commission's list of Toxic Impaired Waters.37

The effects of the public availability of TRI information have been quantified in a study 

investigating whether pollution data released by EPA in the June 1989 TRI were “news” to journalists and 

investors. The study found that the greater the amount of air emissions, land releases, underground 

injections, waste shipped offsite, or chemical submissions reported by a firm, the more likely it was to 

receive media coverage. Firms reporting TRI information lost on average $4.1 million in stock value on 

35 Lynn, Frances M., Jack D. Kartez and Cheryl Connelly. The Toxics Release Inventory: Environmental 

Democracy in Action, Office of Pollution Prevention and Toxics (OPPT), January 1992, p.3.

36 Orum, Paul, Richard Schrader and Jeffrey Tryens. Making the Difference: Using the Right-to-Know in the 

Fight Against Toxics, The National Center for Policy Alternatives, Washington, D.C., pp. 1 and 16.

37 Ibid., p.3.
6-30

the day the data were released. The greater the number of different chemical submissions reported by a 

firm, the larger the drop in stock value for the company.38

However, the magnitudes of the reductions resulting from the offsite consequence provisions may 

not be as dramatic as those attributed to the TRI system. The releases spotlighted by the TRI were 

routine, legal releases that firms may have seen little reason to 

minimize before TRI resulted in adverse publicity. Many facilities might, therefore, have had numerous, 

inexpensive opportunities for reducing releases (such as improved valve maintenance schedules) that had 

been neglected in the past because of the lack of sufficient economic or regulatory incentives. However, 

the situation is different with accidental releases of hazardous substances. Firms have always faced 

disruptions in their operations and liability for damages in the event of accidental releases of hazardous 

substances, and there are now regulations requiring that firms take special actions to project and prevent 

these accidents. Thus, even if firms are motivated by publicity resulting from the offsite consequence 

analysis to further reduce the risks of a release, there are unlikely to be many additional, low-cost actions 

open to those firms. 

It is possible that some firms will be motivated by the publicity surrounding their offsite 

consequences analysis to take some additional actions to reduce risks even if these actions, such as 

improvements in capital equipment or training, are expensive. For two reasons, however, the damage 

reductions that would result from these actions are not counted as benefits of this rule. First, these 

additional actions are voluntary; they are not required by the rule, and so cannot be directly attributed to 

it. Second, because the costs of these actions are not included in the analysis of the costs of the rule, it 

would be inconsistent to include the associated damage reductions in the analysis of the benefits. 

It is still possible that knowing the offsite consequences of potential releases, and knowing that 

the surrounding community has access to this information, will induce facilities to implement their risk 

reduction measures more conscientiously. As a result, existing risk reduction programs could be more 

effective, without necessarily costing more. EPA would argue that the resulting reduction in damages 

should be credited to the rule's offsite consequence provisions. 

Unfortunately, this potential effect (of reducing risks without taking costly actions) is very 

difficult to quantify. Because of the efforts already expected to be devoted to minimizing releases, and 

because additional efforts that require expenditures of resources are excluded, EPA assumed that the 

effect of the offsite consequence provisions will be quite small. Accordingly, EPA conservatively 

assumed that the offsite consequence provisions will result in a one percent reduction in baseline 

damages, for an annualized benefit of $13.5 million. The benefits calculated as a result of this assumption 

should not be considered certain. 

6.8.2. Possible Reductions in Damages Due to Routine Emissions 

38 Hamilton, James T. “Pollution as News: Media and Stock Market Reactions to the Toxics Release Inventory 

Data,” Journal of Environmental Economics and Management, 1995, p.112. 
6-31

EPA also suspects that this rule may also influence the number and quantity of routine emissions 

for affected sources. This subsection presents upper-bound estimates of EPA's program's effectiveness in 

reducing the number and quantity of toxic air emissions in general, and hydrocarbon emissions in 

particular. These estimates are based on the State of New Jersey's experience with a rule similar to that of 

EPA. The State of New Jersey's Toxic Catastrophe Prevention Act (TCPA) was signed into law on 

January 8, 1986. TCPA was adopted by the State after a period of special concern for public safety 

created by several releases of hazardous substances, some in New Jersey, during the fall of 1984 and early 

1985. The Bhopal accident played a significant role in convincing public officials of a need for such a 

law. TCPA mandates that owners or operators of facilities that handle extraordinarily hazardous 

substances (EHSs) in the state to institute and implement risk management programs to prevent their 

release. On June 20, 1988, the New Jersey Department of Environmental Protection and Energy adopted 

rules in support of TCPA. 

To estimate the potential effectiveness of EPA's program in reducing routine emissions of toxic 

substances, the trend of toxic air emissions in New Jersey has been analyzed in comparison to the trend in 

the rest of the U.S. Data were collected from the TRI database for the period 1987 through 1993. 

Exhibit 6-18 presents information concerning the number of toxic air emissions reported by New 

Jersey and the rest of the U.S. Emissions for California, Delaware, and New Jersey were omitted from 

the figures for the rest of the U.S., as these three states implemented risk management regulations during 

the 1987 through 1993 period of study. Although the California and Delaware programs have been 

EXHIBIT 6-18 

NUMBER OF TOXIC AIR EMISSIONS REPORTED BY NEW JERSEY AND THE U.S.

Year NJ U.S.1

NJ as a percentage of 

the U.S.1

1987 2,431 49,021 4.96%

1988 2,529 55,601 4.55%

1989 2,612 58,835 4.44%

1990 2,588 60,700 4.26%

1991 2,284 58,390 3.91%

1992 2,148 56,811 3.78%

1993 2,034 54,965 3.70%

1 Excludes emissions from the states of California, Delaware, and New Jersey

implemented in different ways on a different schedule, inclusion of release data from these states could 

bias the results. 

While the number of toxic releases decreased both in New Jersey and in the rest of the U.S., New 

Jersey showed a much greater decline. Between 1988, the year of the New Jersey program's 
6-32

implementation, and 1993, New Jersey's emissions fell almost 20 percent, while U.S. emissions dropped 

only one percent. In fact, if the U.S. had followed the same trend in toxic air emissions as did New Jersey 

over that six year period, the annual number of U.S. emissions would have fallen from 55,601 reported 

releases to 44,718 reported releases, indicating that a total of 10,247 releases, or 2,049 releases per year, 

could have been avoided. This analysis considers 2,049 releases to be an upper-bound estimate of the 

annual number of toxic air emissions that may be avoided nationally as a result EPA's program. 

While the drop in the number of toxic releases reported by New Jersey is significant, an even 

greater decline can be seen in the actual quantities of toxics emitted. Information concerning the 

quantities of toxic air emissions reported by New Jersey and the rest of the U.S. is presented in Exhibit 6-

19. The exhibit shows that between 1988 and 1993, the quantity of U.S. toxic emissions fell

approximately 39 percent, while the quantity of New Jersey's emissions dropped more than 61 percent. If 

the U.S. had followed the trend seen in New Jersey, the national quantity of emitted toxics would have 

significantly decreased, from 1.3 million tons to 500 thousand tons. Therefore, an additional 300 

thousand tons, or 60 thousand tons a year, may potentially be avoided by the implementation of EPA's 

program. This figure is considered to be an upper-bound estimate. 

EXHIBIT 6-19 

QUANTITIES OF TOXIC AIR EMISSIONS REPORTED BY NEW JERSEY AND THE U.S.

(thousand tons) 

Year NJ U.S.1

NJ as a percentage of 

the U.S.1

1987 22.5 1,300 1.68%

1988 20.0 1,300 1.52%

1989 16.0 1,200 1.30%

1990 12.9 1,100 1.17%

1991 11.4 1,000 1.17%

1992 10.3 900 1.17%

1993 7.7 800 0.97%

1 Excludes emissions from the states of California, Delaware, and New Jersey 

To quantify the benefits associated with the upper-bound estimate of the quantity of potentially 

reduced routine toxics, this analysis assumes that for each ton of TRI substances released, approximately 

two tons of hydrocarbons are released.39 Consequently, an estimated 100 thousand tons of hydrocarbon 

emissions could be avoided. Additionally, each ton of hydrocarbons released has been estimated to 

39 Based on information provided by Tom Walton, EPA, Office of Air Quality, Planning, and Standards.
6-33

generate up to $500 in social damages annually in non-attainment areas. Given that 29 percent of the 

U.S. population lives in non-attainment areas, a total estimated social cost of $16.7 million may therefore 

be avoided as a result of the implementation of EPA's program.40

The above analysis presents upper-bound estimates for the effectiveness of EPA's program. 

Actual benefits from its implementation may range from zero to $16.7 million. In addition, many factors 

were not considered in the analysis, including, but not limited to, any changes in the actual amounts of 

toxics manufactured, processed, or used in the U.S. over the period studied, any other factors that could 

have caused a decline in releases over the period not due to the implementation of a RMP, and any nonlinearity in the trend of the data. 

The results of this analysis of potential additional benefits are shown in Exhibit 6-20. The exhibit 

presents an estimate of the damage reductions that could result from the implementation of the proposed 

rule. Expected annual potential additional benefits could total $37.4 million, once the program is fully 

implemented. 

EXHIBIT 6-20 

TOTAL ANNUAL POTENTIAL BENEFITS

($ million) 

Category Year 1 Year 2 Year 3

Years 1-30

(annualized)1

Offsite Consequence 

Analysis $4.8 $9.6 $14.6 $13.5

Routine Emissions $5.5 $11.0 $16.7 $15.5

Total2$13.3 $26.6 $40.4 $37.4

1 Annualized using a 7 percent discount rate. 

2 Total may not add exactly due to rounding. 

40 $500 is considered to be a conservative estimate for the social damages generated by one ton of hydrocarbons in 

non-attainment areas. See "Meeting the 15 Percent Rate of Progress Requirement under the Clean Air Act: A Menu 

of Options," STAPPA and ALAPCO, September 1993, p.20. Other figures as high as $3,050 per ton have been 

proposed. See the EPA Energy Policy Branch working paper "A Cost-Effective Accelerated Scrappage Program for 

Urban Automobiles," William Schroeer, January 1991 draft, p.5. Due to this wide variation in data, this analysis has 

adopted the conservative estimate.
6-34

6.9. QUALITATIVE BENEFITS 

The preceding sections presented estimates of the damages from releases, and the extent to which 

the proposed rule might reduce these damages. Additional benefits, which are not so easily quantified, 

could also be attributed to implementing the RMP rule. These benefits include those resulting from 

efficiency gains, as well as from increased technology transfer, indirect cost savings, 

and increased goodwill. The benefits expected to accrue to society through efficiency gains, are realized 

in two ways: 

(1) By requiring industry to examine the external benefits associated with their provision of accident 

risk reduction, so that they provide a more socially optimal level of accident prevention measures; 

and 

(2) By making information available to the public as a result of the offsite consequence provisions 

and the risk management plan, thereby enabling communities and individuals to make better 

decisions regarding the efficient amount of effort to expend to avert damages. 

The efficiency gains to society in moving toward the socially optimal level of prevention and averting 

behavior increases social welfare, which represents potential benefits associated with the implementation 

of the RMP rule. Unfortunately, it is difficult to quantify such efficiency gains and estimate the impact on 

social welfare. Consequently, this section only discusses the reasons why such inefficiencies may exist 

and how implementing the RMP program may correct for these inefficiencies; it does not attempt to 

quantify these benefits. 

6.9.1. Moving Toward the Optimal Level of Prevention 

The motivation behind establishing environmental regulations that require industry to reduce 

pollution and take additional steps to prevent accidents is that the marginal costs of undertaking such 

actions for any individual source will be less than the marginal benefits realized by society. Because 

individual sources frequently do not factor in the social benefits associated with their prevention actions, 

they will engage in less than the socially efficient amount of prevention. For example, industry may be 

able to quantify the benefits they realize through increased accident prevention measures, but they may 

neglect to realize that, in some cases, the surrounding population may want even greater accident 

prevention measures to be provided, which would ensure them greater peace of mind. As long as the 

surrounding population would be willing to pay more for this increased protection than it costs a source to 

provide, then society would benefit from increased provision of accident prevention, even if a source does 

not perceive the increased provision to be cost-effective. By requiring such a source to undertake 

additional prevention activities through regulation, social welfare is increased, as the gain in social 

benefits is greater than the costs of providing increased risk reduction. 

Exhibit 6-21 illustrates how an industrial source will engage in an inefficiently low amount of 

prevention (Po) when faced with their own marginal cost (MC) and marginal benefits (MB) of prevention 

actions. Prevention of Po is sub-optimal because the marginal social benefits of additional prevention are 

greater than the marginal cost of providing additional prevention. The socially optimal level of 
6-35

MCIndividual Source 

Po P*

Prevention By Source (P)

MBIndividual Source

X

Y

Z

$

prevention (P*) is determined by the point at which the social marginal benefit of increasing prevention by 

one unit is equal to the marginal cost of providing that prevention. Regulations that require the source to 

move from sub-optimal Po to socially optimal P*

increase net social benefits by an amount equal to the 

area XYZ in the exhibit, as the increase in costs (area PoXZP*) is less than the increase in benefits (area 

P

oYZP*

).

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

Damages 

As part of EPA's RMP rule, industries are required to conduct offsite consequence analyses of 

worst-case and more likely release scenarios to the surrounding community. Sources are required to 

make this information available to the public. Members of society rely on information to make sound and 

efficient economic decisions. In most cases, information has the characteristics of a publicly provided 

good. In other words, no one individual can be easily excluded from using information once 

it is provided. Because any publicly provided good tends to be under-produced due to the "free-rider" 

problem, it is difficult to observe the public's true willingness to pay for the good and hence make 

decisions concerning the optimal amount of the good to provide.41

EXHIBIT 6-21 

MARGINAL COSTS AND BENEFITS OF PREVENTION BY A SOURCE

41 Publicly provided goods, by definition, are available for use to all members of society without exclusion. 

Because no member of society can be excluded from enjoying the benefits of a public good, individuals have an 

incentive to understate their true preference of supply for public goods in an attempt to pay a disproportionately 

smaller share of the costs of providing the good relative to the benefits they enjoy (i.e., the free-rider problem). If all 

members of society behave in this manner, then the socially optimal amount of publicly provided goods will be 

under produced.
6-36

For an economy to be operating efficiently, economic theory asserts that market participants need 

access to complete information concerning market characteristics to optimize their transactions. Market 

clearing prices and social behavior may become distorted when individuals have to make decisions based 

on imperfect information. In such a scenario, some individuals would value an increase in market 

information that would allow them to make more efficient economic choices. 

With respect to the risk of damages inflicted by an industrial accident, individuals and 

communities will make decisions regarding their level of effort to avoid damages based on their perceived 

level of risk of incurring such damages and the cost of taking steps to reduce their risk. Damage averting 

behavior by individuals and communities could include such actions as adjusting zoning and housing 

location decisions, devoting limited resources to establish special procedures and training for fire fighting 

and other emergency response personnel to respond to an accident, and maintaining additional emergency 

and medical equipment in case of an accident. Lack of information on the true level of risk and 

prevention efforts being taken by nearby sources may lead individuals and communities to expend an 

inefficient amount of resources on damage averting behavior. For example, if individuals in a community 

overestimate the level of risk posed by a nearby source, for example, they may spend too much to live 

farther away, incurring additional housing and/or travel costs, because they believe they need to live that 

far away from a source to reduce their risk of damage. In addition, homes located closer to a source that 

are thought to be "high" risk may be priced too low if the true risk is lower than perceived by the housing 

market. 

Exhibit 6-22 illustrates the potential efficiency gains from making additional information 

available to the public that enables them to better estimate the true risk presented by a source and the 

marginal benefits that can be gained from additional efforts to avoid damages. Graph A presents the case 

in which community members are overestimating the level of risk presented by a source. In this case, 

community members will expend an inefficiently high amount of resources to avert damages, Ao, which 

is greater than the optimal level of effort, A*. Ao is inefficient because the true social marginal benefit of 

the extra effort to avert damages, given the actual level of risk, is less than the marginal cost of the 

additional effort at this point. Graph B presents the opposite case in which community members are 

underestimating the level of risk and not compensating for the lack of sufficient prevention effort by the 

source, resulting in an inefficiently low level of effort being expended on averting behavior, Ao, which is 

lower than A*.

The area XYZ in Graph A and area ABC in Graph B represent the potential efficiency gains that 

can be achieved by increasing the information available and moving to an efficient level of effort to avert 

damages. These efficiency gains represent expected increases in social welfare, and thus, potential 

benefits attributable to the RMP rule. 

As an example, consider a real estate market surrounding a regulated source. In a competitive 

market, individuals with a high aversion to risk would tend to locate further away from a risk source than 

individuals with lower levels of risk aversion. These individuals would be willing to pay a 

premium to reduce their risk exposure. Absence of information, however, may cause distortions in the 

marketplace as individuals are not able to correctly estimate the amount of risk the location of a house 

poses. Individuals with high levels of risk aversion may end up choosing housing with high risks. 

Several studies have attempted to test whether there is an implicit value of risk embedded in 

household prices. Although no study has looked specifically at residential property values surrounding 
6-37

sources using extremely hazardous substances, several studies have looked at residential property values 

surrounding similar risk-imposing sites. These studies report mixed findings concerning the degree to 

which residential property values are influenced by the distance from a site. 

Greenberg and Hughes (1993) found through a survey of New Jersey tax assessors that nearly 20 

percent of the assessors reported that proximity to a hazardous waste site lowered the appreciation of 

property values within 1/4 mile of the site. However, they also found that many other sites were not 

significantly impacted by proximity to a hazardous waste site because housing valuation was more 

heavily influenced by factors such as taxes, planning policies, and the economic recession. 

Smith and Desvousges (1986) conducted a study in which they attempted to estimate a demand 

model to describe a household's demand for distance from a landfill with hazardous wastes. Their 

findings indicate that the average household would realize a consumer surplus of $330 to $495 annually 

for each mile between its residence and a landfill containing hazardous wastes. A later study by the 

authors (1987) attempted to measure the values for reductions in the risks of exposure and premature 

death from hazardous wastes. The authors found in this study that the average values for reductions in 
6-38

$

A*

MCAverting Damages

MBPerceived Risk

MB True Risk

Ao

Effort To Avert Damages (A)

X

Z

MCAverting Damages

A

B

$

C

Ao A*

Effort to Avert Damages (A)

MBPerceived Risk

Y

MBTrue Risk

EXHIBIT 6-22 

MARGINAL COSTS AND BENEFITS OF EFFORTS BY INDIVIDUALS 

AND COMMUNITIES TO AVERT DAMAGES

GRAPH A

GRAPH B
6-39

the risk of premature death due to hazardous waste exposures were approximately constant over large 

differences in the level of the baseline risk. This finding, however, implies that the estimated marginal 

valuation of risk decreases as the level of risk increases. 

Other authors have looked at the effect of distance a nuclear power plant exerts on surrounding 

residential property value. Gamble and Downing (1982) could not find any evidence to support their 

hypothesis that nuclear power plants had an adverse effect on residential property values. In a later study, 

the authors examined the property values surrounding the Three Mile Island nuclear power plant before 

and after the accident. Again, they could not find any evidence to support their hypothesis that the power 

plant influenced residential property values. 

A recent study conducted for EPA's Office of Solid Waste looked at hazardous waste sources and 

residential property values.42 The authors examined the public perception of treatment, storage, and 

disposal sources that are regulated under RCRA. Preliminary results showed statistically significant 

relationships between housing prices and distance to sources. The authors state that changes in housing 

prices over time appear to be consistent with the hypothesis that key contamination events can affect 

housing prices. EPA believes that the results from this study support the assumption that property values 

surrounding sources covered under the RMP rule would behave in a similar manner. As a result, there are 

expected to be benefits associated with increasing the amount of information available to the public on the 

potential risk posed by a source, as previously described. 

EPA research shows that approximately 85 million people live within a five-mile radius of a 

regulated source. This is equivalent to approximately 35 million households, or a third of the nation's 

total household population. This population is expected to benefit directly from the information provided 

by industries' offsite consequence analysis, which is required to be conducted and made available to the 

public under this rule. Due to difficulties associated with computing the value society places on the 

information provided under this rule, EPA has not pursued quantifying these benefits. However, this 

omission does not imply that these benefits are not real and recognized by society. 

6.9.3. Other Benefits 

In addition to the potential efficiency gains from increasing prevention efforts by sources and by 

providing the public with additional information, EPA believes that this rule has several other categories 

of benefits that are not currently quantified. Based on the similar rule in the State of New Jersey, it is 

believed that this rule will contribute to the improved transfer and adoption of new and improved 

technologies between industries. The New Jersey rule has served as an impetus for industries to adopt 

innovative new technologies into their production processes. The result, presumably, is more efficient 

production processes for the sources with decreased risks in associated accidents. The State has also 

shared information on state of the art technologies and has required their use in certain higher risk 

sources. 

In a similar fashion, the State of California has noted that industries covered under a similar rule 

42 "Hazardous Waste Sources and Residential Property Values, Preliminary Results in Support of Benefits 

Estimation for the Corrective Action Rule," ABT Associates, July 15, 1992.
6-40

have identified in their review of their production processes wasted hazardous and non-hazardous 

materials that comprised a costly input into the production process. This has resulted in cost savings on 

extremely hazardous substance chemicals that are used in the industrial processes, other raw materials, 

and hazardous waste collection and disposal. 

EPA has also elected not to quantify the effect the rule will have on the increased good will that 

surrounding communities would extend toward industry. In essence, the rule will serve as an 

encouragement for industries and surrounding communities to begin an open dialogue concerning 

community safety. EPA believes that communities will realize both the emotional well being and 

satisfaction of living in a safer community and the financial security of living in a community with stable 

or increasing property values. In addition, industry will benefit when attempting to expand or alter their 

sources or obtain permits because of the improved community trust and acceptance of their existing 

sources. This should benefit industry financially as they may expect to incur lower costs in seeking 

approval for planned sources. 

Thus, the RMP rule is expected to result in a net increase in social welfare resulting from the 

reduction in total damages to society from accidents, the movement toward a more efficient level of 

prevention by sources and effort by individuals and communities to avert damages, as well as the 

additional potential benefits from technological developments and indirect cost savings that are realized 

and improvements in good will and perceived quality of life for individuals living in affected 

communities. 

6.10. SUMMARY OF EXPECTED BENEFITS 

The primary benefits expected from the rule are reductions in the damages from accidents 

involving toxic releases and flammable substances. Three categories of damages were estimated: threats 

to human health and responses to these threats, threats to the environment, and economic damages. The 

human health threats considered include deaths and injuries; the responses to these threats include 

hospitalizations, evacuations, and sheltering in place. The environmental damages examined include 

threats to wildlife, soil, and water. Finally, the economic damages include lost production, property 

damages, and litigation. 

These damages were estimated for each of four categories of accidents: general toxic events, 

small magnitude toxic events, large magnitude toxic events, and incidents involving flammables. To 

facilitate the comparison of benefits with costs, damages were estimated according to the program levels 

described in the cost section of the analysis. Damages were estimated for both EPA List substances and 

the subset of those substances not currently subject to OSHA regulation. These estimates are presented 

again in Exhibit 6-23. Total annual baseline damages are estimated at about $1.5 billion. 

An estimate of overall damage reduction was derived by multiplying these baseline damages by 

the percentage reduction in damages that might be expected as a result of the rule. The results of this 

analysis are summarized in Exhibit 6-24. 

Two sensitivity analyses were performed to consider the impact of two alternative assumptions 

on the benefits estimate. Other potential benefits were also estimated. Due to the uncertainty of these 

estimates, however, these benefits were not included in the final estimation of the dollar value of benefits, 

although the Agency recognizes the existence of these, as well as additional, qualitative benefits. 
6-41

EXHIBIT 6-23

TOTAL ANNUAL DAMAGES SUBJECT TO PROGRAM LEVEL

($ million)

Regulated Chemical Substances Program 1 Program 2 Program 3 Total1 

General Toxic Events Full List - $13.4 $160.4 $173.8 

Non-OSHA - $13.4 $2.3 $15.7 

Small Magnitude Toxic 

Events

Full List - $1.1 $11.3 $12.4 

Non-OSHA - $1.1 $0.2 $1.3 

Large Magnitude Toxic 

Events

Full List - $18.4 $197.5 $215.9 

Non-OSHA - $18.4 $3.1 $21.5 

Flammables Full List - $38.1 $1,018.6 $1,056.7 

Non-OSHA - $38.1 $6.5 $44.6 

Total1 Full List - $71.0 $1,387.8 $1,458.8 

Non-OSHA - $71.0 $12.1 $83.1 

1 Total may not add exactly due to rounding.

EXHIBIT 6-24

ANNUAL EXPECTED BENEFITS

($ million)

Regulated Chemical Substances Year 1 Year 2 Year 3 Years 1-30 

(annualized)1 

General Toxic Events Full List $8.3 $16.6 $25.2 $23.3 

Non-OSHA $3.1 $6.2 $9.4 $8.7 

Small Magnitude Toxic 

Events

Full List $0.6 $1.2 $1.9 $1.7 

Non-OSHA $0.3 $0.5 $0.8 $0.7 

Large Magnitude Toxic 

Events

Full List $10.7 $21.4 $32.4 $30.0 

Non-OSHA $4.3 $8.5 $12.9 $12.0 

Flammables Full List $42.2 $84.4 $127.9 $118.4 

Non-OSHA $8.8 $17.6 $26.7 $24.7 

Total2 Full List $61.9 $123.7 $187.4 $173.5 

Non-OSHA $16.5 $32.9 $49.9 $46.2 

1 Annualized using a 7 percent discount

rate.

2 Total may not add exactly due to 

rounding.
7-1

CHAPTER 7.

SMALL ENTITY AND UNFUNDED MANDATE ANALYSIS

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

proposed regulations will have a significant economic impact on a substantial number of small 

entities. In addition, the Unfunded Mandates Regulatory Reform Act of 1995 requires analysis 

of rules that impose significant burdens on state, local, and tribal governments. This chapter 

presents an analysis of the estimated economic impacts on small entities of EPA's regulation for 

implementing Risk Management Programs for Chemical Accidental Release Prevention under 40 

CFR Part 68. 

Section 7.1 describes the estimated number and characteristics of the small entities that

would be regulated by the rule. 

Section 7.2 presents the estimated economic impacts of EPA's requirements for Risk

Management Programs on those entities. 

Section 7.3 presents conclusions of this analysis.

7.1. NUMBER AND CHARACTERISTICS OF REGULATED SMALL BUSINESSES 

7.1.1. Definition of "Small" Business 

The Regulatory Flexibility Act specifies that either the U.S. Small Business 

Administration's (SBA's) definition of "small" business (generally any business that is 

independently owned or operated and not dominant in its field) or another appropriate 

regulation-specific definition of "small" business may be used. For this analysis of the Risk 

Management Programs regulation, which covers a multitude of SIC codes, EPA developed its 

own definition: small businesses are those with fewer than 100 employees. This definition was 

adopted primarily for two reasons: 

SBA's definition of small for some of the affected SIC codes (e.g., wholesalers) is based

on a cutoff of 100 employees, although for most of the SIC codes the cutoff is 

based on 500 or more employees. 

Compliance costs are generally incurred at the source level, as opposed to the business

or enterprise level; however, many sources that had fewer than 100 employees 
7-2

had no larger corporate structure to support them or to help carry the burden of 

compliance costs (i.e., they were whole businesses or enterprises in themselves). 

In other words, manufacturers with fewer than 100 employees as a general rule 

only operated one affected source. There are, however, some exceptions to this; 

for example, sources in SIC code 2813, industrial gases, frequently have very few 

employees at a single site, but are owned by larger companies. 

Notwithstanding the adopted definition of small business, this analysis presents impacts 

of the proposed regulation for two categories of small businesses: (1) those with fewer than 20 

employees, and (2) those with 20 to 99 employees. This approach was employed to more clearly 

determine how the costs of complying with the proposed regulation would impact small 

businesses, particularly those with the most limited financial resources. 

Based on EPA guidance, small governmental entities are defined as those with 

populations of less than 50,000. 

7.1.2. Estimated Number of Small Entities 

As indicated in Chapter 3, the number of small manufacturers was estimated to be 960 

sources with fewer than 20 FTEs; 2,000 regulated source have between 20 and 99 FTEs. The 

number of small non-manufacturers is more difficult to determine. Virtually all retailer and 

wholesalers have fewer than 100 FTEs. Estimates from the ammonia and propane retailers 

association, however, indicate that as many as 80 percent of the retailers are owned by larger 

companies; the analysis assumed that 3,700 retailers (20 percent of the total) were small 

businesses. No information was available to estimate the percentage of wholesalers that might 

be owned by large corporation. The analysis assumed that all 1,500 wholesalers were small. 

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

Public drinking water and waste water systems affected by the rule generally serve a 

minimum of 10,000 people. Approximately 980 water systems are estimated to serve between 

10,000 and 25,000 people. Approximately 500 water systems are estimated to serve between 

25,000 and 50,000 people. Consequently, 1,480 drinking water systems would be considered 

small governmental entities. It should be noted that this number represents the number of 

treatment systems, not the number of drinking water sites, which is how the number of these 

sources is generally presented in this analysis. Most of these systems, however, have only one 

treatment site. The number of small POTWs was estimated to include all systems treating less 

than 10 mgd and 59 percent of those treating between 10 and 25 mgd (based on the ratio of 

drinking water systems in this category that serve populations below 50,000). Approximately 

2,600 POTWs were estimated to serve between 10,000 and 25,000 people and 180 to serve 

between 25,000 and 50,000, for a total of 2,800 POTWs. The smallest utility affected by the rule 

produces at least 10 megawatts of power; none of these utilities would be considered small. A 

total of approximately 4,300 small governmental entities would be affected by this rule. 
7-3

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

percent of the affected universe.

7.1.3. Estimated Compliance Costs Per Affected Entity

The compliance costs developed in Chapter 5 were used to determine whether the 

proposed regulation would have a significant economic impact on a substantial number of small 

businesses. As indicated in that chapter, the magnitude of the costs that regulated entities are 

expected to incur depends on a number of factors, including the type of sources operated (i.e., 

manufacturing or non-manufacturing), the complexity of the processes and operations at those 

sources, the type of chemical substances used or present at those sources. This last item was 

integral in determining whether regulated entities may already be in compliance with certain 

requirements of EPA's Risk Management Programs regulation because they are affected by 

OSHA's PSM standard and, thus, are already required to incur costs to comply with those or 

similar regulations. Exhibits 7-1 and 7-2, respectively, summarize the initial annual costs per 

source for manufacturers and for non-manufacturers under the final rule (Option 1).

7.1.4. Data Sources

The financial data used in this analysis were obtained from SBA's FINSTAT database, 

which contains mean and median statistics on enterprises (or businesses) for the years 1976-

1983.43 The data in the FINSTAT database were originally collected by Dun & Bradstreet as 

part of its credit reporting services. The data were voluntarily supplied to Dun & Bradstreet by 

firms seeking credit; consequently, they may not be representative of all small businesses. 

The biggest limitation of the data is their age: 1982 was the most recent full-year for 

which data were supplied. To facilitate analyses using estimated 1995 compliance costs, the 

financial data obtained from FINSTAT were inflated to 1995 dollars using the Bureau of Labor 

Statistics' Employment Cost Index. Estimating the current financial performance of businesses 

from historical performance data in this manner assumes that profit margins and revenue growth 

rates have remained constant. In other words, this approach assumes that the financial condition 

of businesses has remained constant in real terms and will remain constant in the future, an 

assumption that may not represent reality. Particularly for some sectors, 1982 data do not reflect 

other regulatory costs imposed since that time that could be expected to affect financial 

performance. However, despite these drawbacks, the FINSTAT data represent the largest 

publicly available financial database on small privately held firms.

 

 43 U.S. Small Business Administration, FINSTAT Analysis V, 1985.
7-4

Data in the database are classified by two-digit SIC code and organized into the following 

employment size ranges: 1 to 9 employees, 10 to 19 employees, 20 to 49 employees, 50 to 99 

employees, and 100 or more employees. Mean values in the FINSTAT data are generally higher 

than median values, indicating that larger firms within a given SIC code-employment size 

category have a disproportionate effect on the mean financial values. This finding supported the 

approach to use median values for this analysis. Because this analysis divided small businesses 

into categories that overlapped those used by FINSTAT, a weighted-average approach was used 

to aggregate certain financial data provided by FINSTAT for firms with 1 to 9 and 10 to 19 

employees and for firms with 20 to 49 employees and 50 to 99 employees.44

 

 44 To aggregate the financial data in employment size categories 1 to 9 and 10 to 19, for example, the number of 

data points or businesses reporting financial data (designated "N") in each employment size category were used to 

develop weights. Specifically, if N1 and N2 are the number of data points in size categories 1 to 9 and 10 to 19, 

respectively, then the estimated median sales for employment size 1 to 19 was calculated as follows: 

Sales = (( Sales1 x N1 ) + ( Sales2 x N2 ))/( N1 + N2 ).
7-5

EXHIBIT 7-1

ESTIMATED ANNUALIZED INITIAL COMPLIANCE COST PER SOURCE FOR MANUFACTURERS

FTE < 20 FTE 20-99

Non-Chemical Chemical Non-Chemical Chemical

(SIC 283, 284, 285, 287, 

289)

Chemical

(SIC 281, 282, 286)

Program 2 N/A N/A N/A N/A N/A

Program 3

OSHA Only $2,300 $3,600 $3,000 $7,300 $29,000

Program 3

Additional EPA 

Processes

N/A N/A N/A N/A $31,000
7-6

EXHIBIT 7-2

ESTIMATED ANNUALIZED INITIAL COMPLIANCE COST PER SOURCE FOR NON MANUFACTURERS

Retailers Wholesalers Public 10 mgd Public 1-2 mgd*

Program 2 $500 $700 $2,500 $2,400

Program 3

OSHA

N/A $370 $800 $800

Program 3

Additional EPA 

Processes

N/A $800 N/A N/A

*

 Based on POTW unit costs, which are slightly higher than drinking water system costs.

N/A means no sources are in this category.

Program 1 is not included because its costs are negligible.

SIC code 281 (industrial inorganics); 281 (plastics and resins); 286 (industrial organics); 283 (pharmaceuticals); 284 (toiletries); 285 (paint); 287 (agricultural chemicals); 289 (other chemicals.
7-7

Exhibits 7-3 through 7-5 present financial profiles of median manufacturers (with fewer 

than 20 employees and with 20 to 99 employees) and of median non-manufacturers (with fewer 

than 20 employees) for which data were available. 

The financial profiles of small manufacturers presented in Exhibits 7-3 and 7-5 show 

significant variation between manufacturers with fewer than 20 employees and those with 20 to 

99 employees, both within and between SIC codes. For example, most median manufacturers 

with fewer than 20 employees have sales between the range of $430,000 and $900,000, whereas 

most median manufacturers with 20 to 99 employees have sales between the range of $2.4 

million and $5.6 million. Similarly, net income, total assets, and total debt are each on average 

at least three times larger for the median manufacturer with 20 to 99 employees than for the 

median manufacturer with fewer than 20 employees. Interestingly, however, median 

manufacturers with fewer than 20 employees generally have lower debt levels in relation to the 

size of their sales, net income, and assets, and higher net income levels in relation to the size of 

their sales than do median manufacturers with 20 to 99 employees. Also, net income of 

manufacturers with fewer than 20 employees falls within a relatively narrow range ($19,000 to 

$34,000), whereas that for manufacturers with 20 to 99 employees is much more variable, 

ranging from $50,000 to $210,000. In both groups of small manufacturers, manufacturers in the 

chemical and allied products industry have nearly the highest values for each of the financial 

variables.

Sales, net income, assets, and debt for small non-manufacturers (all of which were 

assumed to have fewer than 20 employees) in almost all cases are larger, although not much

larger, than those for manufacturers with fewer than 20 employees (see Exhibit 7-5). The 

relative size of these variables, however, more closely mirrors that found in the profiles for 

manufacturers with 20 to 99 employees than it does for manufacturers with fewer than 20 

employees.

7.1.5. Data on Small Governmental Entities

The economic resources available to the entities operating drinking water and wastewater 

treatment systems is based on two EPA studies. In 1986, EPA surveyed community drinking 

water systems to determine, among other things, revenues.45 A 1993 study on the impacts of 

the Safe Drinking Water Act amendments on costs to local systems used the 1986 to consider the 

ability of households to absorb the costs of the amendments.46 Average revenues of drinking 

water systems serving 10,000 to 25,000 people are $2.7 million (1995 dollars). The 1993 study 

 

 45 US EPA, Final Descriptive Summary 1986 Survey of Community Water Systems, RTI/7805/02-02F, 

October 23, 1987.

 46 ICF, Inc., Affordability of the 1986 SDWA Amendments to Community Water Systems, September 30, 

1993.
7-8

indicated that the average annual cost to household served by these systems is $300.35 (1995 

dollars). Costs to larger systems and their customers are lower. Data are not available on 

POTWs, but it is reasonable to assume that the revenues of these systems would be at least as 

high because their costs for treatment may be higher than the cost of treating drinking water. 

EXHIBIT 7-3

FINANCIAL PROFILES OF MEDIAN MANUFACTURERS WITH FEWER THAN 20 EMPLOYEES

(1995 dollars) 

Business/Source Category SIC

Code

Sales Net Income Assets Debt

Chemical and Allied Products 28 $909,000 $35,000 $416,000 $134,000

EXHIBIT 7-4

FINANCIAL PROFILES OF MEDIAN MANUFACTURERS WITH 20 TO 99 EMPLOYEES

(1995 dollars) 

Business/Source Category SIC

Code

Sales Net Income Assets Debt

Chemical and Allied Products 28 $5,783,000 $133,000 $2,531,000 $1,163,000

Petroleum and Coal Products 29 $9,468,000 $218,000 $3,936,000 $1,826,000

EXHIBIT 7-5 

FINANCIAL PROFILES OF MEDIAN NON-MANUFACTURERS 

WITH FEWER THAN 20 EMPLOYEES

(1995 dollars) 

Business/Source Category SIC

Code

Sales Net Income Assets Debt

Retailers 50/51 $1,525,000 $34,000 $489,000 $216,000

Wholesalers 50/51 $1,525,000 $34,000 $489,000 $216,000
7-9

7.2. ESTIMATED ECONOMIC IMPACTS ON SMALL ENTITIES 

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

relatively low cost of the final rule for small businesses. Initial costs are considerably less than 

one percent of sales for all small manufacturers. Subsequent year costs will be even lower. 

Costs for non-manufacturers are very low (less than $1,000 per year for initial compliance). 

These sums do not impose a significant adverse burden on these sources. Only chemical 

manufacturers with complex processes and 20 to 99 FTEs have initial costs that exceed $6,000 

per year. The costs for these sources, $21,000 to $24,000 per year for the first three years, 

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

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

with the OSHA rule, to improve the quality of the risk management programs. If they do not 

take additional actions, their costs would be substantially lower. 

7.3. ESTIMATED ECONOMIC IMPACT ON SMALL GOVERNMENTS

A significant number of small governmental entities will be affected by the rule. A 

detailed analysis of the impacts on these entities was not performed, however, because like the 

small businesses discussed above, these entities will incur relatively low costs to comply with 

this rule. The cost of compliance with the risk management program rule would add 

approximately $2,500 to the drinking water systems costs. If these costs were recovered 

completely through higher rates, revenues would need to increase less than 0.1 percent. The 

1993 study indicated that the average annual cost to household for systems serving 10,000 and 

25,000 people is $300.35 (1995 dollars). If the compliance costs were passed on to consumers, 

their annual bills would rise $0.30. Relative costs to larger systems and their customers are 

lower. It is reasonable to assume that the impact on POTWs would be no greater than it is on 

water systems because the costs of the program are approximately the same. It should be noted 

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

ensure that the burden on these sources is minimized. 

7.4. THE UNFUNDED MANDATE ANALYSIS

The Unfunded Mandate Reform Act of 1995 (UMRA) requires the Agency to consider 

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

governmental entities, primarily water, wastewater, and electric utility authorities or special 

districts. The analysis indicates that the annualized cost of the final rule over 30 years for all of 

these sources is $13 million. The total impact of the rule on all regulated sources, however, does 

exceed the $100 million level in the first year of initial compliance. The costs thereafter are 

below this UMRA trigger. 
7-10

CAA section 112(r)(7) mandates the promulgation of this rule. In developing the rule, 

EPA conducted the cost/benefit analysis contained in this document to evaluate the impacts of 

the rule on regulated sources. EPA has adopted a number of changes to the rule that have 

reduced the cost of the rule by more than 50 percent and is continuing to work with industry 

sectors to develop models that will lessen the burden of compliance. Because the analysis 

indicates that the benefits of the rule exceed the costs, EPA did not separately estimate the 

impact on the national economy. 

The CAA provides no funding for compliance with this rule. The analysis, however, 

indicates that the rule imposes no disproportionate effect on any regions or on state, local, or 

tribal governments. The majority of the costs of the rule will fall on chemical manufacturers and 

refineries. The concentration of costs in these sectors is the result of the larger number of 

chemicals and processes at these sources, the higher degree of complexity to be addressed in 

hazard analyses, training, maintenance, operating procedures, and safety information, and the 

greater number of employees (which affects training costs). 

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

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

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

EPA is working with air permitting authorities to minimize the burden on these agencies; any 

costs that may accrue to permitting authorities, however, can be covered by the permit fees, 

which the CAA Title V requires to be set at a level to cover all direct and indirect costs of the 

program. Permitting authority costs, therefore, do not constitute an unfunded mandate. 

Implementing agency costs, as discussed in Chapter 5, may be substantial. No state, 

however, is required to seek delegation of the program. States will be granted authority to serve 

as implementing agencies only if they demonstrate that the state has the resources to implement 

and enforce the rule, as specified in CAA section 112(l). Because seeking delegation is 

voluntary, it does not constitute an unfunded mandate. 

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

RMP, EPA is planning to have the RMPs submitted only to EPA in a form that will allow the 

Agency to make the RMPs available electronically to all interested parties. This action will 

relieve states and local governments of the burden of establishing and maintaining files of RMPs 

and of providing the documents to the public. 
7-11

7.5. CONCLUSION

The Regulatory Flexibility Act of 1980 requires federal agencies to assess whether 

proposed regulations will have a significant economic impact on a substantial number of small 

entities. Although the rule will affect a substantial number of small entities, based on this 

analysis, EPA's final risk management program requirements does not impose a significant 

adverse burden on these small entities. 

A number of the decisions EPA adopted in the final rule, specifically the adoption of 

tiers, the reduced requirements for the RMP, and the development of guidance for offsite 

consequence analyses to eliminate the need for air dispersion modeling, have significantly 

reduced the burden on small entities. For small businesses, estimated costs have been reduced 

by more than 50 percent. The impact on small governments is less because EPA has always 

been committed to developing model guidance for public systems to reduce their burdens. 

Without such guidance, small governments probably would have had to hire consultants to 

conduct dispersion modeling, leading to significantly higher costs.

The Unfunded Mandates Regulatory Reform Act of 1995 requires analysis of rules that 

impose significant burdens on state, local, and tribal governments; significant burden is defined 

as an aggregate annual cost of $100 million or more. EPA has determined that the risk 

management program rule contains a federal mandate that may result in expenditures of $100 

million or more, but only in the initial compliance year; after sources are in compliance, annual 

costs will fall below $100 million.
Refs-1

CHAPTER 8.

CONCLUSIONS

This chapter discusses the uncertainties associated with the analysis presented in this 

document and the findings of the analysis.

8.1. UNCERTAINTIES

All analyses have to address uncertainties related to the data used and assumptions made 

about future behavior. Recently, reviews of past EIAs and subsequent experience with 

implementing rules have shown that predictions of both EPA and industry have tended to 

overstate the costs of rule implementation. This analysis has attempted to identify those areas of 

uncertainty associated with it to define the limits of the estimated impacts and the direction of 

possible errors.

In general, the estimates of the regulated universe are based on limited data. The TRI 

data used, while the best data available, nonetheless do not cover all substances regulated under 

section 112(r). The TRI data do, however, include the commodity chemicals that are used 

outside of the chemical manufacturing sector; in addition, the analysis used other information 

sources to address gaps in the TRI data. TRI, and all other reporting requirements, also specify 

maximum on site; this rule applies to maximum in a process. In considering the impact of these 

data limitations, it appears that the universe of affected sources is likely to have been 

overestimated. To the extent that the estimate is overestimated, it is probably for two reasons. 

First, fewer sources may have a threshold quantity in a process than the data, based on the 

presence of a threshold quantity at a site, indicate. The extent of this overestimate is unknown. 

Second, some sources will switch chemicals or reduce inventories to eliminate the need to 

comply with the rule; in states with state RMP programs, these actions have reduced the number 

of affected sources substantially. Overall, therefore, it is likely that the estimates used for the 

universe in this analysis represent an upper bound.

The major source of uncertainty on the cost estimates is the degree to which sources are 

already in compliance with the rule because of existing programs, either regulatory or voluntary. 

Many of the requirements of the rule reflect good operating practices at any source. For 

example, workers should be trained to operate equipment properly. This consideration is 

particularly relevant to Program 2 sources because their requirements can generally be met by 

using good practices and meeting codes and standards that already apply to them. The analysis 

used conservative estimates of current compliance, which may lead to an overestimation of the 

costs. 
8-2

A second concern on the cost estimates is the extent to which sources may hire 

consultants to develop their risk management programs. The final rule was specifically 

developed to limit the need for outside help, in part because of the high costs associated with 

hiring such consultants. The model risk management programs being developed should 

eliminate the need for outside assistance. Nonetheless, some sources may elect to seek such help 

because they lack the time or staff resources. To the extent that this occurs, actual costs of the 

program will be higher.

Given the likelihood that the universe is overestimated and that Program 2 sources (the 

majority of sources) may already be complying with many of the rule elements, the costs of 

compliance may be overstated to some degree.

On costs to implementing agencies, the analysis indicates considerable uncertainty about 

the estimates because it is currently unclear how many states will elect to implement the program 

and, therefore, for how many states EPA will serve as the implementing agency. Also unknown 

is the level of effort that EPA and the states will be able to fund. Although the analysis makes 

reasonable estimates on these issues and presents a range of possible costs, the estimates of these 

costs are likely to contain a greater degree of uncertainty than the estimates of costs to industry.

A number of uncertainties exist in the benefits analysis. The analysis is based on existing 

accident data reported to the federal government. These data are generally believed to be 

incomplete although the most severe releases are likely to have been captured. Increases in the 

number of accidents reported in recent years indicate that there has been considerable 

underreporting in the period covered by the data used in this analysis. The data used to estimate 

releases of flammables are even more likely to be incomplete as they are complied from various 

sources, some of which included only the most severe releases. The baseline data on which the 

rest of the benefits analysis rests, therefore, probably understate the number of releases involving 

regulated substances. A second problem is that damages were estimated using the average of 

past damages. For flammables, in particular, the assumption that average past damages represent 

average future damages is probably conservative. According to Marsh & McLennan's analysis, 

the damages from major accidents has risen dramatically in recent years as plant sites became 

larger and more likely to be constructed vertically. 

As discussed in Chapter 6, the benefits associated with the rule are highly dependent on 

the assumptions about the rule's effectiveness. If the OSHA PSM rule is more effective that 

estimated, the benefits of this rule would be lower than estimated. If this rule increases the 

effectiveness of the prevention activities to a greater extent than estimated, the benefits could be 

higher.

8.2. IMPACT OF RULE CHANGES ON FINAL COSTS

EPA selected options to highlight changes in regulatory requirements between the 

proposed rule, supplemental notice, and the final rule. The supplemental notice included two 
8-3

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

approach moves the majority of sources into Program 1 and 2, with a reduced set of 

requirements. Second, the offsite consequence analysis was changed to allow sources to use a

guidance document that EPA has developed to estimate the distance to an endpoint; this 

guidance eliminates the need to conduct air dispersion modeling, which would have required 

consultants for most sources outside of the larger chemical companies. The final rule added a 

third change that reduced costs, the shift of the RMP from a large, text document to a set of data 

elements that can be submitted electronically. 

Option 1 reflects the supplemental notice assignment of sources to tiers and the final rule 

requirements. The supplemental notice did not specify the prevention program elements, beyond 

listing training, maintenance, safety precautions, and monitoring as the core of good prevention 

practices. In response to comments that the Agency needed to specify what constituted an 

adequate level of compliance with these elements, EPA has provided seven specific requirements 

that constitute good prevention practices. These elements clarify what EPA intended in its 

supplemental notice language and assist sources in understanding the level of documentation 

they will be required to maintain. In general, EPA has sharply reduced the documentation 

requirements for Program 2 sources. 

One difference between the supplemental notice and the final rule is not reflected in this 

analysis. Under the supplemental notice, processes in the specified SIC codes at sources with 20 

to 99 employees would have had eight years to come into compliance with the Program 3 

prevention program. Based on comments that opposed the phase-in and on the very limited 

number (50) of processes that would be affected, EPA did not include the phase-in in the final 

rule. The cost impact of this minor change was so small that the analysis did not consider it. 

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

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

cost of the rule because tiering represents the only difference between the options.

Initial Compliance Cost

Option 1$494 million

Option 2$642 million

Options 2 and 3 reflect the proposed rule approach to the prevention program (i.e., OSHA 

PSM would be applied to all sources). The differences between the options are the changed 

requirements for the offsite consequence analysis and the RMP. Comparison of the two options 

allows examination of the cost reduction made possible by each of these changes. The reduction 

in initial compliance costs from the changes are as follow:
8-4

Proposed RuleFinal Rule

Offsite consequence analysis$351 million$44 million

RMP$283 million$16 million

In short, the rule changes have reduced the cost of initial compliance by more than $700 

million dollars. On an annualized basis, EPA's changes have reduced the net costs from $221 

million to $72 million, a 67 percent reduction.

8.3. IMPACT OF THE RULE ON INDUSTRY SECTORS

The rule imposes most of its costs on manufacturers, especially chemical manufacturers 

and petroleum refineries. The 4,190 chemical manufacturers and refineries constitute 6 percent 

of the universe of regulated sources, but will incur 52 percent of the costs, with most of the costs 

being borne by sources with more than 100 employees. Manufacturers (including chemical 

companies) comprise 17 percent of the universe and bear 66 percent of the costs. The 

concentration of costs in these sectors is the result of the larger number of chemicals and 

processes at these sources, the higher degree of complexity to be addressed in hazard analyses, 

training, maintenance, operating procedures, and safety information, and the greater number of 

employees (which affects training costs).

8.4. COMPARISON OF COSTS AND BENEFITS

The analysis considered the annualized net costs (compliance costs minus cost savings) 

and benefits to sources, which are presented in Exhibit 8-1. As the Exhibit indicates, the annual 

benefits will exceed annual costs after the first year of implementation. Cumulative benefits 

exceed cumulative costs by the third year on compliance; the cumulative difference in benefits 

over costs increases over time.

EXHIBIT 8-1

ANNUALIZED NET COSTS AND BENEFITS OF THE FINAL RULE

INITIAL COMPLIANCE YEARS SUBSEQUENT 

YEARS

(4-30)

1 2 3

NET COSTS $144 million $92 million $73 million $75 million

BENEFITS $62 million $124 million $187 million $174 million
8-5

8.5. IMPACT OF IMPLEMENTATION ON GOVERNMENTS

As discussed above, the costs to implementing agencies and EPA are highly uncertain 

because (1) it is not known how many states will elect to implement and enforce the program and 

(2) because the level of effort that either EPA or the state will be able to fund is unclear. The 

analysis presents a range of implementation costs, from annualized costs of $5.5 million to $18 

million. If states have the resources to implement the program at the level that states with 

existing RMP programs have, costs will be considerably higher.

8.6. IMPACT ON SMALL ENTITIES

Approximately 12,500 small entities (19 percent of the universe) will be affected by this 

rule. Of these, 8,200 are small businesses and 4,300 are small governments. The impact of the 

rule on these sources is not significant because the cost of the rule is relatively low per source, 

representing less than 1 percent of sales for businesses and 0.05 percent of general revenues for 

local governments. EPA is working with industry and developing model risk management 

programs for many small businesses to ensure that the burden of compliance is minimized.

8.7. UNFUNDED MANDATES

The Unfunded Mandates Regulatory Reform Act of 1995 requires analysis of rules that 

impose significant burdens, defined as an aggregate annual cost of $100 million or more. EPA 

has determined that the risk management program rule contains a federal mandate that may result 

in expenditures of $100 million or more in the initial year of compliance.
Refs-1

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"Small Business: Make the Most of PSM, Chemical Engineering Progress, February 

1994, p 60. 

SRI, Directory of U.S. Chemical Producers 1994, Menlo Park, CA, 1994. 

Sutton, I.S., "Integrated Management Systems Improve Plant Reliability," Hydrocarbon 

Processing, January 1995, v 74, n 1, p63-64.
Refs-3

TRI database, 1991, U.S. EPA.

U.S. Bureau of Census, Census of Manufacturers, 1987, 1992.

U.S. Bureau of Census, County Business Patterns, 1992. 

U.S. Bureau of Census, Statistical Abstract of the United States 1995.

U.S. Bureau of Labor Statistics, Employer Costs for Employee Compensation, March 

1995.

U.S. Department of Agriculture/National Agricultural Statistics Service, "Capacity of 

Refrigerated Warehouses," February 15, 1990.

U.S. Department of Commerce, Survey of Current Business, April 1991.

U.S. Energy Information Administration, Petroleum Supply Annual 1993.

U.S. EPA, Final Descriptive Summary 1986 Survey of Community Water Systems, 

RTI/7805/02-02F, October 23, 1987.

U.S. EPA, Review of Emergency Systems, Report to Congress under EPCRA section 

305(b), 1988.

U.S. EPA, National Pretreatment Program, Report to Congress, July 1991 (21 W 4004).

U.S. EPA, Summary and Response to Comments on the Risk Management Program Rule 

under CAA section 112(r), 1996.

U.S. OSHA, Final Regulatory Impact and Regulatory Flexibility Analysis of the Final 

Standard for Process Safety Management of Highly Hazardous Chemical (§ 1910.119, Subpart 

H), January 1992.

U.S. Small Business Administration, FINSTAT Analysis V, 1985.

Organizations/Individuals

American Gas Association.

American Petroleum Institute. Ken Leonard.

American Water Works Association. Vern Achtermann, Alan Roberson.

Battelle. Wyne Simmons.

Bonar Engineers. Hank Bonar.

Chevron. Robert Sandilos, Gerald Walker.
Refs-4 

Chlorine Institute. Art Dungan. 

R.A. Cole and Associates, Inc. Ronald Cole. 

A. Epstein and Sons. Ron Vallant. 

EQE. David W. Jones. 

Fairfax County (VA) POTW. 

International Association of Refrigerated Warehouses. Mike Shaw. 

International Institute of Ammonia Refrigeration. Kent Anderson. 

JBF Associates. Steve Arendt, William Bridges. 

National Association of Chemical Distributors. Chris Cathcart. 

National Propane Gas Assocation. Bill Butterbaugh. 

William V. Richards, Inc. William Richards. 

SAIC. Geoffry Kaiser, Ray Brandes. 

St. Auwn & Ruff. Burt Nisely. 

State of California. Fred Lercari, Office of Emergency Services. 

State of Delaware. Robert Barrish, Richard Antoff, Department of Natural Resources 

State of Louisiana. Bob Hayes, Office of State Police. 

State of Maryland. Marcia Ways, Department of the Environment. 

State of New Jersey. Reginald Baldini, Allen Edwards, Department of Environmental 

Protection. 

State of Oregon. Dennis Walthall, State Fire Marshall's Office. 

State of Virginia. Tim Petrie, SARA Title 3 Data. 

State of Texas Railroad Commission. 

Sutton, Leach, Lindstrom. Carey Faber. 

Technica. 

U.S. EPA Office of Ground Water and Drinking Water. 

U.S. OSHA. Robert Blicksilver. 
App. A-1 

APPENDIX A. 

 SUBSTANCES LISTED UNDER CAA SECTION 112(r) 

Toxic Substances Listed Under CAA Section 112(r) 

CAS No. Chemical Name

OSHA

PSM

TRI

List

 107-02-8 Acrolein * **

 107-13-1 Acrylonitrile **

 814-68-6 Acrylyl chloride *

 107-18-6 Allyl alcohol **

 107-11-9 Allylamine *

7664-41-7 Ammonia (anhydrous) * **

7664-41-7 Ammonia (conc 20% or greater) * **

7784-34-1 Arsenous trichloride

7784-42-1 Arsine *

10294-34-5 Boron trichloride *

7637-07-2 Boron trifluoride *

 353-42-4 Boron trifluoride compound with methyl ether (1:1)

7726-95-6 Bromine *

 75-15-0 Carbon disulfide **

7782-50-5 Chlorine * **

10049-04-4 Chlorine dioxide * **

 67-66-3 Chloroform **

 542-88-1 Chloromethyl ether * **

 107-30-2 Chloromethyl methyl ether * **

4170-30-3 Crotonaldehyde

 123-73-9 Crotonaldehyde, (E)-
App.A-2

CAS No. Chemical Name

OSHA

PSM

TRI

List

 506-77-4 Cyanogen chloride *

 108-91-8 Cyclohexylamine

19287-45-7 Diborane *

 75-78-5 Dimethyldichlorosilane *

 57-14-7 1,1-Dimethylhydrazine * **

 106-89-8 Epichlorohydrin **

 107-15-3 Ethylenediamine

 151-56-4 Ethyleneimine * **

 75-21-8 Ethylene oxide * **

7782-41-4 Fluorine *

 50-00-0 Formaldehyde (solution) * **

 110-00-9 Furan *

 302-01-2 Hydrazine **

7647-01-0 Hydrochloric acid (conc 30% or greater) **

 74-90-8 Hydrocyanic acid * **

7647-01-0 Hydrogen chloride (anhydrous) * **

7664-39-3 Hydrogen fluoride/Hydrofluoric acid (conc 50% or 

greater)

* **

7783-07-5 Hydrogen selenide *

7783-06-4 Hydrogen sulfide *

13463-40-6 Iron, pentacarbonyl- *

 78-82-0 Isobutyronitrile

 108-23-6 Isopropyl chloroformate

 126-98-7 Methacrylonitrile *

 74-87-3 Methyl chloride * **

 79-22-1 Methyl chloroformate *

 60-34-4 Methyl hydrazine * **
App.A-3

CAS No. Chemical Name

OSHA

PSM

TRI

List

 624-83-9 Methyl isocyanate * **

 74-93-1 Methyl mercaptan *

 556-64-9 Methyl thiocyanate

 75-79-6 Methyltrichlorosilane *

13463-39-3 Nickel carbonyl *

7697-37-2 Nitric acid (conc 80% or greater) * **

10102-43-9 Nitric oxide *

8014-95-7 Oleum (fuming sulfuric acid) *

 79-21-0 Peracetic acid * **

 594-42-3 Perchloromethylmercaptan *

 75-44-5 Phosgene * **

7803-51-2 Phosphine *

10025-87-3 Phosphorus oxychloride *

7719-12-2 Phosphorus trichloride *

 110-89-4 Piperidine

 107-12-0 Propionitrile

 109-61-5 Propyl chloroformate

 75-55-8 Propyleneimine **

 75-56-9 Propylene oxide **

7446-09-5 Sulfur dioxide (anhydrous) *

7783-60-0 Sulfur tetrafluoride *

7446-11-9 Sulfur trioxide *

 75-74-1 Tetramethyllead *

 509-14-8 Tetranitromethane

7550-45-0 Titanium tetrachloride **

 584-84-9 Toluene 2,4-diisocyanate **
App.A-4

CAS No. Chemical Name

OSHA

PSM

TRI

List

 91-08-7 Toluene 2,6-diisocyanate **

26471-62-5 Toluene diisocyanate (unspecified isomer) **

 75-77-4 Trimethylchlorosilane

 108-05-4 Vinyl acetate monomer **
App.A-5 

Flammable Substances Listed Under CAA Section 112(r)

CAS No. Chemical Name

TRI

List

 75-07-0 Acetaldehyde *

 74-86-2 Acetylene

 598-73-2 Bromotrifluorethylene

 106-99-0 1,3-Butadiene *

 106-97-8 Butane

 106-98-9 1-Butene

 107-01-7 2-Butene

25167-67-3 Butene

 590-18-1 2-Butene-cis

 624-64-6 2-Butene-trans

 463-58-1 Carbon oxysulfide *

7791-21-1 Chlorine monoxide

 557-98-2 2-Chloropropylene

 590-21-6 1-Chloropropylene

 460-19-5 Cyanogen

 75-19-4 Cyclopropane

4109-96-0 Dichlorosilane

 75-37-6 Difluoroethane

 124-40-3 Dimethylamine

 463-82-1 2,2-Dimethylpropane

 74-84-0 Ethane

 107-00-6 Ethyl acetylene

 75-04-7 Ethylamine

 75-00-3 Ethyl chloride *

 74-85-1 Ethylene *
App.A-6

CAS No. Chemical Name

TRI

List

 60-29-7 Ethyl ether

 75-08-1 Ethyl mercaptan

 109-95-5 Ethyl nitrite

1333-74-0 Hydrogen

 75-28-5 Isobutane

 78-78-4 Isopentane

 78-79-5 Isoprene

 75-31-0 Isopropylamine

 75-29-6 Isopropyl chloride

 74-82-8 Methane

 74-89-5 Methylamine

 563-45-1 3-Methyl-1-butene

 563-46-2 2-Methyl-1-butene

 115-10-6 Methyl ether

 107-31-3 Methyl formate

 115-11-7 2-Methylpropene

 504-60-9 1,3-Pentadiene

 109-66-0 Pentane

 109-67-1 1-Pentene

 646-04-8 2-Pentene, (E)-

 627-20-3 2-Pentene, (Z)-

 463-49-0 Propadiene

 74-98-6 Propane

 115-07-1 Propylene *

 74-99-7 Propyne

7803-62-5 Silane
App.A-7 

CAS No. Chemical Name

TRI

List

 116-14-3 Tetrafluoroethylene

 75-76-3 Tetramethylsilane

10025-78-2 Trichlorosilane

 79-38-9 Trifluorochloroethylene

 75-50-3 Trimethylamine

 689-97-4 Vinyl acetylene

 75-01-4 Vinyl chloride *

 109-92-2 Vinyl ethyl ether

 75-02-5 Vinyl fluoride

 75-35-4 Vinylidene chloride *

 75-38-7 Vinylidene fluoride

 107-25-5 Vinyl methyl ether
App.B-1 

APPENDIX B.

WAGE RATES AND UNIT COST TABLES 
App. B-2

Table 1 

WAGE RATES AND SOURCES 

Wages ($) Source Benefit 

Load 

Source Loaded 

w/Overhead ($)

Loaded w/o Overhead ($)

Chem Engineers

'Low (indirect 

supervision)

28.22 AIChE 0.295 BLS 42.76 36.54 

'Medium (supervise 

team)

31.9 AIChE 0.295 BLS 48.33 41.31 

' High (manage dept) 40.14 AIChE 0.295 BLS 60.82 51.98 

' Co. Management 50.48 AIChE 0.295 BLS 76.48 65.37 

White Collar -Other

SIC 49 20.49 BLS 0.314 BLS Tbl16 31.50 26.92 

Other Manufacturers

Technical 18.16 BLS 0.318 BLS 28.00 23.93 

Professional 24.74 BLS 0.293 BLS 37.43 31.99 

Management 26.63 BLS 0.288 BLS 40.13 34.30 

Production Worker 

Wages

SIC 28 15.72 BLS 0.354 BLS 24.90 21.28 

SIC 29 19.55 BLS 0.354 BLS 30.97 26.47 

SIC 26 14.27 BLS 0.354 BLS 22.61 19.32 

Other Mfr 14.7 BLS 0.354 BLS Tbl10 23.29 19.90 

Public Utility 17.88 BLS 0.338 BLS Tbl16 27.99 23.92 

Retail

White collar/sales 10.47 BLS 0.232 BLS Tbl10 15.09 12.90 

Blue Collar 7.3 BLS 0.217 BLS Tbl10 10.39 8.88 

Wholesale 13.54 BLS 0.272 BLS Tbl10 20.15 17.22 

Clerical 10.47 BLS 0.285 BLS 15.74 

State/Local Gvt

Management 22.08 BLS 0.31 BLS Tbl4 33.84 28.92 

Techical 23.91 BLS 0.267 BLS Tbl4 35.44 30.29 

Clerical 10.59 BLS 0.338 BLS 16.58 14.17 

Blue Collar 12.99 BLS 0.354 BLS Tbl4 20.58 17.59 

Federal

GS 13 23.5 OPM 0.304 BLS 35.85 30.64 

GS 11 16.49 OPM 0.304 Average 25.16 21.50 

GS 5 8.99 OPM 0.304 State 13.72 11.72 
App. B-3

BLS , Employer Costs for Employee Compensation, March 1995 

AIChE 1994 Salary Survey Report, Chemical Engineering Process, June 1994 

Loaded means wages plus benefits; overhead load is 17 percent. 

UNIT COST TABLES 

Table 2 

RULE FAMILIARIZATION

Mgt

(hrs)

Tech

(hrs)

Total

($)

Chem Mfr EPA 48 88 7,152 

Other Mfr EPA 48 88 5,176 

Other Mfr Program 

2

24 44 2,588 

ChemMfr OSHA 4 12 820 

Other MFR Osha 4 12 604 

Utility EPA 12 22 1,088 

Utility OSHA 4 8 384 

Public EPA 12 22 1,184 

Public OSHA 4 8 418 

Retail Model 4 8 156 

Retail EPA 12 22 442 

Propane User 

Model

4 8 456 

Propane User EPA 12 22 1,294 

Wholesale EPA 12 22 585 

Wholesale OSHA 4 8 206 

Federal OSHA 4 8 344 

Gas Processors 4 0 160 

Table 3

ACCIDENT INVESTIGATION AND PRE-STARTUP REVIEW PROCEDURES 

Hours Total

Chemical mfrs 16 $ 976 

Large non-chemical mfrs 16 $ 640 

Small medium non-chemical mfrs 10 $ 400 

Utility 10 $ 320 

Retail 1 $ 13 

Wholesale 2 $ 34 

Federal 2 $ 72 

Public Model 1 $ 34 

User 1 $ 40 

Table 4 
App. B-4

ACCIDENT INVESTIGATION 

no employ Mgt

(hrs)

Tech

(hrs)

Prod

(hrs)

Review

(hrs)

TOTAL

Small non-chem mfr 10 8 4 4 0.50 $ 678 

Small chem mfr 10 10 6 6 0.50 $ 1,173 

Medium non-chem mfr 50 8 4 4 0.50 $ 1,144 

Medium chem mfr 50 10 12 6 0.50 $ 1,961 

Medium high 

complexity

50 24 32 16 0.50 $ 4,025 

Large non-chem mfr 150 8 8 8 0.50 $ 2,550 

Large chem mfr 150 16 16 16 0.50 $ 4,019 

SIC 28 high complexity

FTE <250 150 100 80 80 1 $ 15,690 

FTE <500 300 100 80 80 1 $ 19,440 

FTE <1000 600 100 80 80 1 $ 26,940 

FTE <2500 1,200 100 80 80 1 $ 41,940 

FTE 2500+ 1,600 100 80 80 1 $ 51,940 

Sic2911

Small 50 100 80 80 1 $ 13,970 

Medium 150 100 80 80 1 $ 17,070 

Large 300 100 80 80 1 $ 21,720 

Federal Facitities 10 8 4 4 0.50 $ 511 

Cold storage 3 8 4 4 0.50 $ 596 

Retailers 10 6 0 2 0.50 $ 141 

Utilities large 10 8 4 4 0.50 $ 668 

Utilities small 10 8 4 4 0.50 $ 668 

POTWs-100mgd 10 8 4 4 0.50 $ 597 

POTWs-25mgd 10 8 4 4 0.50 $ 597 

POTWs-10mgd 10 6 2 2 0.50 $ 418 

POTWs-1 mgd 10 6 2 2 0.50 $ 418 

DW 100mgd 10 8 4 4 0.50 $ 597 

DW 25 mgd 10 8 4 4 0.50 $ 597 

DW 10 mgd 10 6 2 2 0.50 $ 418 

DW 2mgd 10 6 2 2 0.50 $ 418 

Wholesalers 10 6 0 2 0.50 $ 166 

Gas Processors 10 6 2 2 0.50 $ 477 

Propane Users 10 6 0 2 0.50 $ 403 
App. B-5

Table 5 

MANAGEMENT OF CHANGE — INITIAL AND ONGOING 

INITIAL COSTS

DEVELOPMENT

(hrs)

REVIEW

(hrs)

Total ($)

Consultant Mgt Tech Prod Mgt Tech Prod

Small non-chem mfr 16 8 8 4 4 10 3,157 

Small chem mfr 16 8 8 4 4 10 3,558 

Medium non-chem mfr 16 8 8 8 4 4 30 3,809 

Medium chem mfr 16 8 8 8 4 4 30 4,258 

Medium high complexity 32 32 16 8 8 30 5,510 

Large non-chem mfr 24 16 16 16 8 8 50 6,386 

large chem mfr 32 32 16 8 8 50 6,010 

SIC 28 high complexity

FTE <250 32 32 16 8 16 50 6,394 

FTE <500 48 48 24 8 16 50 8,338 

FTE <1000 80 80 40 16 32 75 14,107 

FTE <2500 120 120 60 16 32 75 18,967 

FTE +2500 160 160 80 32 64 100 26,964 

Small Refinery 32 32 16 8 8 50 6,406 

Medium Refinery 48 48 24 8 16 50 8,782 

Large Refinery 120 120 60 16 32 75 19,777 

Federal Facilities 16 8 8 4 4 10 2,869 

Retailers 1 10 103 

Utilites large 24 16 16 16 8 8 50 6,615 

Utilities small 16 8 8 4 4 10 3,083 

POTWs/DW 16 8 8 4 4 10 3,036 

Wholesalers 1 10 107 

Gas Processors 0 8 8 4 4 10 1,157 

Propane Users 0 1 0 0 0 10 273 

MANAGEMENT OF CHANGE - ONGOING

Tech Basis Haz Rev Update Doc Review Changes Train Total

Tech Prod Tech Prod

Small non-chem mfr 1 4 8 2 10 2 10 1,110 

Small chem mfr 1 4 8 2 10 2 10 1,381 

Medium non-chem mfr 1 4 8 4 30 4 30 2,190 

Medium chem mfr 1 6 8 4 30 4 30 2,695 

Medium high complexity 1 16 12 8 30 8 30 3,881 

Large non-chem mfr 1 4 8 8 50 8 50 3,418 

large chem mfr 2 16 12 8 50 8 50 4,942 

SIC 28 high complexity

FTE <250 2 16 12 8 50 8 50 4,942 

FTE <500 2 24 16 12 50 12 50 6,006 

FTE <1000 2 32 16 16 75 16 75 8,128 

FTE <2500 3 48 20 24 75 24 75 10,125 

FTE +2500 4 64 20 30 100 30 100 12,988 

Small Refinery 2 16 12 12 30 12 30 4,686 
App. B-6

Medium Refinery 3 24 16 16 50 16 50 7,051 

Large Refinery 4 48 20 24 200 24 200 18,836 

Federal Fac 1 4 8 2 10 2 10 754 

Retailers 0.5 0.5 0.5 5 0.5 5 116 

Utilities 1 4 8 2 10 2 10 1,174 

POTWs/DW 1 2 2 2 10 2 10 726 

Wholesalers 0.5 0.5 0.5 5 0.5 5 124 

Gas Processors 1 4 8 2 10 2 10 1,110 

Propane Users 0.5 0.5 0.5 5 0.5 5 309 

Table 6 

MANAGEMENT 

Mgt

(hrs)

Total

Retail 13 $ 169 

Propane Users 13 $ 520 

Wholesale 13 $ 224 

Small/Medium Non Chemical Mfr 52 $ 2,080 

Small Chemical Mfr 52 $ 3,172 

Medium Chemical Mfr 78 $ 4,758 

Lrarge Non Chemical Mfr 78 $ 3,120 

Small Utility 52 $ 1,664 

Large Utility 52 $ 1,664 

Small Public 52 $ 1,758 

Large Public 52 $ 1,758 

Chemical Mfr FTE <1000 104 $ 6,344 

Chemical Mfr FTE>1000 156 $ 9,516 

Refineries 156 $ 9,516 
App. B-7

TABLE 7 

RMP COSTS

# Hours Rate Total Corp Review Rate Total

Program 1 0.25 61 15 76 34 

Program 2 # Hours Rate Total Corp Review Rate Total

1 sub Ex Sum 2.00 Retail

Registration 0.25 13 72 13 75 

Accident History 2.00 

OCA 0.50 Public

Prevention 0.50 34 187 34 196 

ER 0.25 

Total 5.50 Mfr

40 220 40 230 

2 sub Ex Sum 2.50 Public

Registration 0.25 34 247 34 255

Accident History 3.00 Mfr

OCA 0.75 40 290 40 300 

Prevention 0.50 Chem Mfr

ER 0.25 61 442 76 461 

Total 7.25 Wholesale 125 17 129 

3 sub Ex Sum 3.00 Utility

Registration 0.25 32 282 32 296 

Accident History 4.00 Mfr

OCA 1.00 40 360 40 370 

Prevention 0.50 Chem Mfr

ER 0.25 61 549 76 568 

Total 9.00 

4 sub Ex Sum 3.50 Utility

Registration 0.25 32 344 32 352

Accident History 5.00 Mfr

OCA 1.25 40 430 40 440 

Prevention 0.50 Chem Mfr

ER 0.25 61 656 76 675 

Total 10.75 
App. B-8

RMP COSTS (continued) 

Program 3 # Hours Rate Total Corp Review Rate Total

‘1 sub Reg 0.25 Retail Corp .25

ER 0.25 13 75 13 78 

Prevention 0.25 Public

Prevention Process 0.50 34 196 34 204 

OCA-Worst case 0.25 Mfr

OCA - Alternative 0.25 40 230 40 240 

Ex Sum 2.00 

Accident history 2.00 ChemCorp .5 Leg al 1 hr

5.75 61 351 76 489 

2 sub Reg/ER/Prevention 0.75 Public

Prevention-Proc 1.00 32 315 34 323

OCA 1.00 Wholesale

ExSum 2.50 17 159 17 163 

Accident history 4.00 

Total 9.25 Chem 564 76 702 

4 sub Reg/ER/Prevention 0.75 

Prevention-Proc 2.00 

OCA 2.00 

ExSum 3.00 

Accident history 8.00 

Total 15.75 961 76 1,099 

6 sub Reg/ER/Prevention 0.75 

Prevention-Proc 3.00 

OCA 3.00 

ExSum 4.00 

Accident history 12.00 corp 1 legal 2

Total 22.75 1,388 76 1,664 

10 sub/12 proc Reg/ER/Prevention 0.75 

Prevention-Proc 6.00 

OCA 5.00 

ExSum 8.00 

Accident history 20.00 

Total 39.75 2,425 76 2,701 

10 sub/30 proc Reg/ER/Prevention 0.75 

Prevention-Proc 15.00 

OCA 5.00 

ExSum 12.00 

Accident history 20.00 1hr corp 4hr legal

Total 52.75 3,218 76 3,694 

4 sub/25 proc Reg/ER/Prevention 0.75 

Prevention-Proc 12.50 
App. B-9

OCA 2.00 

ExSum 3.00 

Accident history 8.00 

Total 26.25 1,601 76 2,077 

Table 8 

OFFSITE CONSEQUENCE ANALYSIS 

# Staff Worst

(hrs)

Alternative

(hrs)

Mappin

g

(hrs)

Population/Env.

(hrs)

Total

($)

MANUFACTURERS

small non-chemical 2 2 2 0.50 4 $ 487 

small chemical 2 2 2 0.50 4 $ 704 

medium non-chemical 2 2 2 0.50 4 $ 487 

medium chemical 2 3 3 0.50 4 $ 948 

medium high complexity 2 3 3 0.50 4 $ 948 

l arge non-chemical 2 2 2 0.50 4 $ 487 

large chemical 2 3 3 0.50 4 $ 948 

high complexiity SIC 28

FTE <250 2 4 4 0.50 4 $ 1,192 

FTE <500 2 4 4 0.50 4 $ 1,192 

FTE <1000 2 5 4 0.50 4 $ 1,314 

FTE <2500 2 6 4 0.50 4 $ 1,436 

FTE 2500+ 3 6 4 0.50 4 $ 2,046 

Sic2911

Small 2 4 4 0.50 4 $ 1,192 

Medium 2 4 4 0.50 4 $ 1,192 

Large 3 4 4 0.50 4 $ 1,680 

NON-MANUFACTURERS

Federal Facilities 2 2 2 0.50 4 $ 401 

Cold storage 2 2 2 0.50 4 $ 487 

Retailers 2 2 2 0.50 4 $ 163 

Utilities large 2 2 2 0.50 4 $ 400 

Utilities small 2 2 2 0.50 4 $ 400 

POTWs 2 2 2 0.50 4 $ 430 

Drinking water 2 2 2 0.50 4 $ 430 

Wholesalers 2 2 2 0.50 4 $ 215 

Gas Utility 2 2 2 0.50 4 $ 400 

Propane Users 2 2 2 0.50 4 $ 487 

Gas Processors 2 2 0 0.50 1 $ 112 
App. B-10

Table 9 

PROCESS SAFETY INFORMATION 

Block Flow

(hrs)

Parameters

(hrs)

Chemistry

(hrs)

P&IDs # P&IDs 

(hrs)

Other Doc

(hrs)

Total

($)

Program 2

($)

MANUFACTURERS

small non chemical 1 1 0 1 16 8 962 

small chemical 2 2 1 4 16 8 3,696 

medium non chemical 1 1 0 1 16 8 962 

medium chemical 2 2 1 4 24 8 5,232 

384 

medium high complexity 3 3 1 6 24 12 7,824 

large non chemical 1 1 0 1 16 12 1,110 

444 

large chemical 3 3 1 6 24 16 8,016 

768 

SIC 28 High Complexity

FTE <250 3 3 1 6 24 16 8,016 

FTE <500 3 3 1 10 24 16 12,624 

FTE <1000 4 4 1 30 24 24 36,144 

FTE <2500 4 4 1 60 24 24 70,704 

FTE +2500 4 4 1 80 24 24 93,744 

Small Refinery 3 3 1 30 24 16 35,664 

Medium Refinery 3 3 1 50 24 24 59,088 

Large Refinery 3 3 1 80 24 24 93,648 

NON MANUFACTURERS

Federal Facilities 1 1 0 1 16 8 650 

200 

Retailers 1 1 0 1 0 2 52 

26 

Utilities large 1 1 0 1 8 8 576 

256 

Utilities small 1 1 0 1 8 8 576 

POTWs/DW >25 mgd 1 1 0 1 8 8 637 

283 

POTWs/DW <25 mgd 1 1 0 1 8 4 496 

142 

Wholesalers 0 0.5 0 0 0 4 77 

69 

Gas Processors 1 1 0 1 16 8 962 

296 

Propane Users 1 1 0 1 0 2 148 74 
App. B-11

Table 10 

PROCESS HAZARD ANALYSIS/HAZARD REVIEW 

Technique Hours Total ($)

Mgt Tech Prod Consultant Report Training

Retailers Model 1 1 4 1 87 

Propane Users Model 1 1 4 1 263 

POTW/DW <25 mgd Model 2 2 4 2 312 

POTW/DW > 25 mgd Checklist 4 4 4 4 2 420 

Small non-chem mfr What If 8 8 8 24 2,256 

Medium non-chem mfr What If 8 8 8 8 24 2,442 

Large non-chem mfr Checklist 4 4 4 4 494 

Large non-chem mfr What If 16 16 16 16 40 4,378 

POTW/DW >25 mgd What If 16 16 16 16 40 4,248 

Utilities What If 24 24 24 60 6,192 

Utilities Checklist 4 4 4 4 2 1,012 

Wholesalers Checklist 4 4 4 4 242 

Gas Processors What If 16 16 16 40 3,200 

Federal What If 16 16 16 16 40 4,059 

Small chemical mfr HAZOP 160 40 80 19,640 

Medium chemical mfr HAZOP 240 60 120 29,460 

Medium chemical mfr What If 16 16 16 8 2,632 

Medium high complexity HAZOP 320 80 160 39,280 

Large chemical mfr What If 16 16 16 8 2,632 

Large chemical mfr HAZOP 320 160 29,280 

SIC 28 High Complexity

FTE < 250 HAZOP 400 200 36,600 

FTE < 500 HAZOP 560 200 46,360 

FTE < 1000 HAZOP 720 200 56,120 

FTE <2500 HAZOP 800 250 64,050 

FTE >2500 HAZOP 960 250 73,810 

Small refinery HAZOP 400 200 36,600 

Medium refinery HAZOP 800 250 64,050 

Large Refinery HAZOP 960 250 73,810 
App. B-12

Table 11 

OPERATING PROCEDURES 

Development 

(hrs)

Review

(hrs)

Total ($) Program 2 

Total ($)

Mgt Tech Prod Mgt Tech Prod

Small non-chem mfr 4 4 4 10 622 

Small chem mfr 8 8 1 4 10 1,026 

Medium non-chem mfr 4 4 4 30 1,088 

Medium chemical mfr 8 8 1 4 30 1,526 

Medium high complexity 16 16 1 4 30 2,171 

Large non chemical 8 8 4 50 1,795 630 

Large chemical 8 48 48 4 20 50 5,714 5,196 

SIC 28 High Complexity

FTE <250 32 64 64 4 20 50 7,614 

FTE <500 40 80 80 8 40 50 11,206 

FTE <1000 60 120 120 8 80 75 17,403 

FTE <2500 80 160 160 8 120 75 23,463 

FTE +2500 100 200 200 8 160 100 30,148 

Small Refinery 40 80 80 8 40 50 16,378 

Medium Refinery 60 120 120 8 80 75 18,573 

Large Refinery 100 200 200 8 160 100 30,728 

Federal Facilities 4 8 4 2 4 20 845 571 

Retailers 4 5 97 52 

Utilities large 8 8 4 10 951 636 

Utilities small 4 4 4 10 697 382 

POTWs/DW >25 mgd 4 4 4 10 572 366 

POTWs/DW <25 mgd 4 4 4 10 572 

366 

Wholesalers 4 10 159 

69 

Gas Processors 8 8 1 4 10 1,087 

Propane Users 4 5 277 160 
App. B-13

*** DRAFT 2/17/15 ***

Table 12 

TRAINING/REFRESHER TRAINING 

TRAINING REFRESHER

no employ hr/emply crs dvlp +teach mgt rvw total hr/employee Total

Small non-chem mfr 10 4 20 $ 1,672 2 $ 540 

Small chem mfr 10 8 40 $ 3,920 4 $ 1,192 

Medium non-chem mfr 30 4 20 $ 3,536 2 $ 1,472 

Medium chem mfr 30 8 40 $ 7,920 4 $ 3,192 

Medium high complexity 30 24 120 $ 23,760 8 $ 6,384 

Large non-chem mfr 50 8 40 $ 10,800 3 $ 3,606 

Large chem mfr 50 24 120 $ 35,760 8 $ 10,384 

SIC 28 high comp exity 0 $ - $ -

FTE <250 50 32 160 4 $ 47,924 12 $ 15,576 

FTE <500 50 32 160 4 $ 47,924 12 $ 15,576 

FTE <1000 75 32 160 4 $ 67,924 12 $ 23,076 

FTE <2500 75 40 200 4 $ 84,844 16 $ 30,768 

FTE 2500+ 100 40 200 4 $ 109,844 16 $ 40,768 

Sic2911 0 $ - $ -

Small 30 40 200 4 $ 47,044 16 $ 15,648 

Medium 50 40 200 4 $ 71,844 16 $ 25,568 

Large 200 40 200 4 $ 257,844 16 $ 99,968 

Federal Facilities 10 4 20 $ 1,048 1 $ 162 

Cold storage 2 4 20 $ 926 1 $ 98 

Retailers 5 2 5 $ 155 1 $ 58 

Utilities large 10 8 40 $ 3,800 3 $ 1,041 

Utilities small 10 8 20 $ 3,160 1 $ 347 

POTWs-100mgd 10 8 40 $ 3,064 3 $ 724 

POTWs-25mgd 10 8 40 $ 3,064 3 $ 724 

POTWs-10mgd 5 4 20 $ 1,120 3 $ 415 

POTWs-1 mgd 5 4 20 $ 1,120 1 $ 138 

DW 100mgd 10 8 40 $ 3,064 3 $ 724 

DW 25 mgd 10 8 40 $ 3,064 3 $ 724 

DW 10 mgd 5 4 20 $ 1,120 3 $ 415 

DW 2mgd 5 4 20 $ 1,120 1 $ 138 

Wholesalers 10 2 10 $ 352 1 $ 107 

Gas Processors 10 8 40 $ 3,344 3 $ 810 

Propane Users 10 2 5 $ 651 1 $ 270 

Gas Utilities 10 $ - $ -
App. B-14

Table 13 

MAINTENANCE — INITIAL & ONGOING

DEVELOPMENT TRAINING MAINTENANCE TOTAL ONGOING

Mgt 

(hrs)

Tech 

(hrs)

Prod

(hrs)

Hr/Empy Hrs/Yr

Small non-chem mfr 1 4 2 4 52 $ 2,970 $ 1,212 

Small chem mfr 1 6 3 8 104 $ 6,560 $ 2,600 

Medium non-chem mfr 1 4 2 4 52 $ 2,970 $ 1,212 

Medium chem mfr 2 6 3 8 104 $ 6,621 $ 2,600 

Medium high complexity 3 12 6 16 416 $ 18,381 $ 10,400 

large non-chemical mfr 1 4 2 4 52 $ 2,970 $ 1,212 

Large chemical mfr 4 16 8 16 416 $ 18,684 $ 10,400 

SIC 28 high complexity

FTE <250 6 24 16 16 1,040 $ 34,990 $ 26,000 

FTE <500 8 32 24 24 1,300 $ 45,732 $ 32,500 

FTE <1000 12 40 32 24 1,560 $ 53,060 $ 39,000 

FTE <2500 16 48 40 32 2,080 $ 70,424 $ 52,000 

FTE 2500+ 24 64 48 32 2,080 $ 71,880 $ 52,000 

Sic2911

Small 24 64 48 32 2,080 $ 86,568 $ 64,480 

Medium 24 64 48 32 2,080 $ 86,568 $ 64,480 

Large 24 64 48 32 2,080 $ 86,568 $ 64,480 

Federal Facilities 1 4 2 1 52 $ 1,113 $ 712 

Cold srorage 1 52 $ 1,593 $ 1,212 

Utilities large 1 4 2 1 104 $ 4,000 $ 3,328 

Utilities small 1 4 2 1 104 $ 4,000 $ 3,328 

POTWs-100mgd 1 4 2 1 104 $ 4,423 $ 3,682 

POTWs-25mgd 1 4 2 1 104 $ 4,423 $ 3,682 

POTWs-10mgd 1 4 2 1 52 $ 2,583 $ 1,841 

POTWs-1 mgd 1 4 2 1 52 $ 2,583 $ 1,841 

DW 100mgd 1 4 2 1 104 $ 4,423 $ 3,682 

DW 25 mgd 1 4 2 1 104 $ 4,423 $ 3,682 

DW 10 mgd 1 4 2 1 52 $ 2,583 $ 1,841 

DW 2mgd 1 4 2 1 52 $ 2,583 $ 1,841 

Retailers 1 26 $ 247 $ 234 

Users 1 26 $ 646 $ 606 

Gas Processors 1 4 2 1 52 $ 2,704 $ 1,924 
App. B-15

Table 14 

COMPLIANCE AUDITS 

Corp/Co

ns

(hrs)

Mgt

(hrs)

Report

(hrs)

Response

(hrs)

Total

Small non-chem mfr 8 8 8 4 $ 1,800 

Small chem mfr 8 8 8 8 $ 2,464 

Medium non-chem mfr 8 8 8 4 $ 1,800 

Medium chem mfr 8 8 8 8 $ 2,464 

Medium high complexity 16 16 16 8 $ 3,440 

Large non-chem mfr 8 8 8 4 $ 1,800 

Large chem mfr 24 48 24 16 $ 7,204 

SIC 28 High complexity

FTE <250 24 48 24 16 $ 7,204 

FTE <500 64 64 40 24 $ 12,704 

FTE <1000 80 80 40 24 $ 14,904 

FTE <2500 80 120 40 24 $ 17,344 

FTE +2500 120 120 40 24 $ 20,404 

Small Refinery 24 48 24 16 $ 7,204 

Medium Refinery 64 64 40 24 $ 12,704 

Large Refinery 80 120 40 24 $ 17,344 

Federal Faciilities 8 8 8 4 $ 1,720 

Retailers 4 2 1 $ 91 

Utilities large 8 8 8 4 $ 1,640 

Utilities small 8 4 2 $ 448 

POTWs/DW >25 mgd 8 8 4 4 $ 1,541 

POTWs/DW <25 mgd 8 4 1 $ 439 

Wholesalers 2 2 1 $ 86 

Gas Processors 8 4 1 $ 520 

Propane Users 0 4 2 1 $ 280 
App. C-1

APPENDIX C.

BASIS OF UNIT COST AND COMPLIANCE ESTIMATES 
App. C-2

BASIS OF UNIT COST ESTIMATES

ELEMENT BASIS AND COMMENTS

Rule Familiarization TRI estimates as a baseline. TRI ICRs estimate that sources spend 34 hours on rule 

familiarization. Because of the complexity of this rule, in comparison with TRI, 

sources that must comply with Program 3 and that are not covered by OSHA PSM 

were assumed to spend 4 times as long on this rule as on TRI because of the greater 

complexity of this rule. Program 2 manufacturing sources were assumed to spend half 

the time that Program 3 sources spend (or twice TRI). Manufacturers covered by 

OSHA were assumed to spend 16 hours based on professional judgment of the time 

needed to read and understand the OCA and RMP requirements; they are already 

familiar with PSM. All manufacturers are either covered by OSHA or are in Program 

2. The full costs, therefore, are never applied.

Nonmanufacturers in Program 2 without models were assumed to spend 34 hours (the 

same as TRI). Nonmanufacturing sources with models were assumed to spend 12 

hours, based on professional judgment. Depending on the models and their 

complexity, this estimate may be high or low.

Accident Investigation 

and Pre-Startup Review 

Procedures

Professional judgment; reviewed by Delaware.

These costs reflect only the time to develop the procedures. No comments were 

received on these costs.

Accident Investigations Professional judgment; reviewed by Delaware.

One utility stated that an investigation would cost $3,500 to $7,400. The Texas 

Chemical Council estimated an investigation would require 4 to 12 people full time for 

several days, plus a week to write and review the report, or between 170 and 420 

hours. The EIA estimated 260 hours of professional time for larger chemical 

companies. The EIA also includes the cost of reviewing the results with employees, 

as required by the rule.

The EIA reduced the level of effort of other sources to reflect the less complex 

processes. 

Management of 

Change

Professional judgment and comments; reviewed by Delaware.

A commenter and a consultant indicated that it could cost $30,000 to develop 

procedures for a large source. Estimates were developed to approach this cost for high 

complexity sources and backed down for smaller, simpler sources. These are the costs 

for developing procedures only.

Estimates for actual implementation of the procedures based on professional 

judgment.

Management Professional judgment; reviewed by Delaware.

This element is not related to the management system requirement. It covers the time 

needed to oversee the implementation of the program, to ensure that procedures are 

being followed and that documents are being maintained. Commenters estimated that 

the costs would be $1,280 for a medium refinery to $15,000 for a utility (Southern Co. 

Services) or chemical companies. The utility estimated it would require one person, 

quarter time. The EIA estimates are between these numbers. This activity is not 

technically required by the rule, but is a necessary adjunct.

RMP Based on professional judgment of engineering consultants who reviewed the mock 

RMP and estimated the time needed to complete the form.

Offsite Consequence 

Analysis

Professional judgment; reviewed by Delaware state RMP staff.

These estimates assume that sources will use EPA's guidance or models. Therefore, 

no costs are included for dispersion modeling. The estimates for sources with multiple 
App. C-3

ELEMENT BASIS AND COMMENTS

substances are somewhat high because each unit cost includes hours for identifying 

populations and environmental receptors; in reality, sources would probably do this 

once for environmental receptors.

The time for defining and analyzing scenarios is assumed to be greater for complex 

sources where more screening analyses will be needed.

PSI Professional judgment; reviewed by Delaware.

Commenters provided estimates of $12,500 for a medium utility and $250,000/unit for 

a refinery (it is not clear what a unit is).

Bridges reported costs/P&ID as ranging from $250 to $3,000. (Bridges, William. 

"The costs and benefits process safety management. JBF Associates) The EIA costs 

for similar sources range from $590 to $2,450/P&ID.

PHAs Based on time estimates from a study of PHA techniques. Rich, Gerald A., "Air 

Toxics: Prevention and Mitigation," Table 5 — Estimated lower bound costs for 

various hazard identification and evaluation procedures for one process unit, Pollution 

Engineering, June 1989, pp. 66-89.

The analysis applied the high end costs to the largest, most complex sources and 

backed the numbers down from there for smaller sources based on professional 

judgment. Rich estimated HAZOPs would require 320 to 960 hours. The EIA applied 

these numbers to large chemical companies and refineries and reduced the low-end 

number for smaller chemical companies. Rich estimated What Ifs would require 72 to 

120 hours. The EIA used 56 hours because the processes are not in the chemical 

industry and, therefore, should require less time. Also these What Ifs are not PHAs 

under Program 3, but Hazard Reviews under Program 2.

The EIA PHA costs range from $19,600 to $73,000. Bridges' data provides a range of 

costs from $5,000 to $300,000 per PHA, with most between $16,000 and $75,000.

The Hazard Review costs (models, checklists) were based on professional judgment 

and reviewed by Delaware.

SOPs Professional judgment; reviewed by Delaware.

Commenters estimates ranged from $3,900 to $7,700, but were for non-manufacturing 

sources.

NJ provided estimates for medium chemical source of $9,600 and a large (<250 FTE) 

chemical company of $12,000. EIA estimates were $2,200 and $7,600 respectively.

Program 2 estimates were based on Program 3 estimates, but reduced based a lesser 

level of review. Generally Program 2 SOPs have less material.

Training Professional judgment; reviewed by Delaware.

Course development was assumed to take four hours per every hour of training, based 

on a standard training rule of thumb (also used by OSHA in its PSM RIA).

Course length was based on knowledge of industry training practices drawn from 

reports under EPCRA 305(b) surveys. The largest sources reported providing weeklong training. This figure was reduced for smaller and less complex sources.

Utility and large public sources estimates are consistent with information provided by 

a large utility (Southern Co. Services), which reported providing 8 hours of training 

for their systems.

NJ estimate for a medium chemical source is considerably lower, $6,000 versus 

$7,900 or $24,000 depending on which SIC code the source was in.

Maintenance Professional judgment; reviewed by Delaware.

On-going costs were based on the number of hours a year maintenance will be 

performed. Estimates are consistent with data submitted by the Texas Chemical 

Council, which indicated that sources spent between 1,300 and 1,900 hours per year 

per process on certified valve service alone. The EIA estimated that the larger 
App. C-4

ELEMENT BASIS AND COMMENTS

chemical companies and refineries would spend 2,080 hours/process to reflect the 

variety of maintenance needed for each process.

NJ supported EPA's estimates.

Compliance Audits Professional judgment; reviewed by Delaware.

The only comments on these costs were for gas fields (no longer covered), estimates 

range from $200 to $2,500, and a utility ($2,600).
App. C-5

BASIS OF COMPLIANCE ESTIMATES

ELEMENT BASIS/COMMENTS

Pre-Startup Review For smaller firms and non-manufacturers, based on professional judgment that firms 

will not have written procedures.

Based on OSHA PSM RIA for 25 percent for large companies and chemical 

companies outside of CMA members; the 65 percent for SIC codes 281, 282, 286, 20-

99 FTEs represents a recognition that some of these companies are CMA members.

All other chemical companies are assumed to be CMA members or refineries and, 

therefore, in compliance with industry standards that include this element.

Management of 

Change

For smaller firms and non-manufacturers, based on professional judgment that firms 

will not have written procedures. OSHA used 0 percent for some sectors.

For non CMA chemical companies with 20 to 99 FTEs, 10 percent is the rounded 

value assigned by OSHA (OSHA used 12 and 15 percent for these firms). Note that 

none of these sources actually have to do this because they are OSHA PSM or are 

Program 2.

The 65 percent for SIC codes 281, 282, 286, 20-99 FTEs represents a recognition that 

some of these companies are CMA members.

All other chemical companies are assumed to be CMA members or refineries and,

therefore, in compliance with industry standards that include this element.

Accident Investigation For manufacturers (other than CMA firms), based on a study of paper industry 

conducted by JBF Associates, which found that 36 percent of smaller companies and 

60 percent of larger ones had such procedures. CMA members and refineries are 

assumed to be in compliance with industry standards.

Utilities and larger public sources are assumed to have the same characteristics as 

small manufacturers. For other non-manufacturers, based on professional judgment 

that they will not have formal procedures.

Management For smaller firms and non-manufacturers, based on professional judgment that firms 

will not such systems and that only 40 percent of large manufacturers will. 

The 65 percent for SIC codes 281, 282, 286, 20-99 FTEs represents a recognition that 

some of these companies are CMA members.

All other chemical companies are assumed to be CMA members or refineries and, 

therefore, in compliance with industry standards that include this element.

Training The rule allows sources to certify that current employees are competent. The EIA 

assumes that all sources will so certify. The 10 percent rate reflects the need to train 

newly hired workers, with an assumed 10 percent turnover.

Refresher Training For non-CMA/refinery manufacturers and utilities, based on JBF study of paper 

industry. Smaller CMA companies are assumed to have the same rate as large nonCMA chemical companies. Large CMA firms and refineries were assumed to be in 

compliance with industry standards.

For other non-manufacturers, based on professional judgment that they will not have 

formal refresher training as required.

PHA Based on professional judgment that smaller firms will not have conducted formal 

PHAs. (Note that all of these are covered by PSM so the compliance factors are not 

relevant.) The 60 percent for smaller chemical and large non-CMA chemical 

companies based on OSHA RIA. Large CMA firms and refineries were assumed to be 

in compliance with industry standards.

PSI Based on professional judgment that non-chemical firms will not have up-to-date PSI 

and that only 20 percent to 40 percent of chemical firms and utilities will. Large CMA 

firms and refineries were assumed to be in compliance with industry standards. 
App. C-6

ELEMENT BASIS/COMMENTS

SOPs Because the PSM rule includes elements not in standard SOPs, no Program 3 sources 

were assumed to be in compliance.

Based on professional judgment that 40 percent of utilities, larger public sources, and 

federal sources would have procedures that meet the Program 2 requirements. 

(Consistent with OSHA estimate for utilities.)

Maintenance Based on JBF study for non-CMA manufacturers, utilities, large public sources, 

federal sources. Large CMA firms and refineries were assumed to be in compliance 

with industry standards. 

Safety Audit Based on JBF study for non-CMA manufacturers. Large CMA firms and refineries 

were assumed to be in compliance with industry standards. 

JBF study was used where possible because it considered actual compliance rates and because its findings tended to 

be lowered than OSHA estimates. In general, the analysis assigned the most conservative number. 

Note that many of these factors are never applied because no sources are subject to the requirements. For example, 

no manufacturers are subject to pre-startup, accident investigation, management of change because all sources 

subject to Program 3 are already OSHA PSM sources. No non-chemical manufacturers or small and medium, 

moderately complex chemical companies have to comply with PSI, PHA, SOPs, training, refresher training, 

maintenance, or audits because they have no non-PSM processes.