1 

### MEMORANDUM | 4 Fe bruary 20 1 0

TO 

### Cho

- Yi Kwan, EPA FROM 

### Monisha Khurana and Cynthia Manson, Industrial Economics, Inc. SUBJECT 

### Small Entities Screening Analysis of UST Universe by Industry Sector

(WA 3

- 25, Task 4 ) In promulgating regulations, the O ffice of Underground Storage Tanks (OUST) must consider the effects of those regulations on small entities, as required by the Regulatory Flexibility Act, amended by the Small Business Regulatory Fairness Act (RFA/SBREFA). Under RFA/SBREFA, the regulating agency must certify whether a regulation has a “significant impact on a substantial number of small entities” (SISNOSE). Within reason, the definitions of “significant” and “substantial” are a matter of Agency discretion. To inform the development of regul atory revisions, however , Industrial Economics, Incorporated ( IEc ) has developed a spreadsheet that calculates the impacts of proposed rules on small entities (including businesses and governments). The calculator also evaluates Federalism impacts and total impacts on Tribal governments. The calculator uses data from the Small Business Administration (SBA) and U.S. Census to identify governments and businesses by sector and size . We use data from E 2 

### , Incorporated (E 2

### ) and from a 1992 EPA study of small go vernments with USTs to estimate the number of small entities in each sector likely to have USTs. 1 , 2 

### Based on a user- entered per

-tank cost of compliance, the spreadsheet estimates the number of small entities that incur costs exceeding one and three percent of gross annual revenues. The spreadsheet also evaluates total costs to tanks on Tribal lands , and provides specific results for state and local government costs, including both impacts on small entities and a total estimate of costs addressed under Ex ecutive Order 13132 , addressing potential federalism impacts

. This memo describes an analysis using the spreadsheet, summarizes the data sources and outputs of the spreadsheet, and summarizes the methodology and results

. 3 

### IEc’s small entity impact screening approach is intended to identify an initial estimate of the number of small entities that may experience significant impacts associated with the regulations currently under consideration. To ensure that the analysis does not overlook potential impacts, we incorporate several conservative (i.e., high

- cost or low

-revenue)

1 See TO 1010, TDD# 11, Appendix B, Draft Industry and Facility Profiles, 12.18.06, and Amendment 1, December 18, 2006 2 "Economic Impact Analysis of Additional Mechanisms for Local Government Entities to Demonstrate Financial Responsibility for Underground Storage Tanks," December 1992 3 The spreadsheet contains an initial “Notes” sheet with d etailed information about assumptions, i nputs, and calculations. The model also includes a summary table of key outputs (Output Summary) and more detailed analysis summaries ( “Inputs and Outputs” and “Calculations by Major Sector” page s; the model also contains specific sheets to support analys is of government and Tribal impacts . INTRODUCTION AND BACKGROUND

OV ER VIEW AND RESUL TS2 

### assumptions that are documented in our methodology. This memorandum describes a spreadsheet tool that can be used to assess a range of different regulatory scenarios. The key features of the spreadsheet are as follows:

 The spreadsheet calculates the number of small entities (firms and governments) with estimated costs associated with the regulation that exceed either one percent or three percent to total revenues. The per

-tank compliance cost currently programmed in the model is based on estimates from the January 26 , 20 10 version of IEc’s cost model. The parameters used to run the cost model are included in the spreadsheet and in Appendix 1 of this memo. The cost model output number i s currently adjusted to 2002 dollars , to be consistent with revenue data in this model from SBA and U.S. Census is from 2002. Based on the January 26 , 20 10 version of the cost model, this value is $309 in 2008 dollars, or $262 in 2002 dollars. 4



###  The spre adsheet also evaluates cost results for tanks on Tribal lands , based on model calculations specific to Tribal tanks

.  The spreadsheet calculates the number of small entities with USTs that will experienc e compliance costs equal to or greater than one percent and three percent of annual revenue. The spreadsheet also calculates the percentage of small entities with USTs represented by the entities meeting the thresholds.

 Using these figures, the Agency can make an initial determination of whether a regulation significantly affects a substantial number of small businesses or governments. The remainder of this memorandum describes in more detail the specific methods, data, and assumptions used in calculating costs associated with small businesses, small government entities, and tanks on Tribal lands. For the analysis of impacts on small business entities, we adopt a hybrid approach for estimating the distribution of USTs among facilities and firms. For the NAICS 447 (Retail Motor Fuels) sector , we distribute tanks proportionately by facility across all facilities in the sector . For all other sectors, we distribute tanks proportionally by revenue among a subset of facilities in the sector

. We describe this approach in more detail below, outlining data sources and methodology. We also present the results of two sensitivity analyses (one that distributes tanks in all sectors proportionately by facility and one that distributes all tanks proportionately by revenue) in Appendix 2

. 5
DATA SOURCES 

### IEc used E 2 

### data developed in 2006 to estimate the number of tanks and facilities in each of several key sectors that use USTs. 6 

### With the exception of hospitals (NAICS 622),

4 Because the key output of the model is number of small entities affected, the results are not affected by year dollars used, as long as data are internally consistent However, we note that we expect to update the m odel to incorporate 2007 Census of Manufacturers data when this data set and the accompanying SBA data set become available. 5 The user can manually toggle the scenario by using the drop
- down menu on the “Calculations by Major Sector” worksheet, cell B2, w hich provides three options: original (hybrid), facility, and revenue. 6 See TO 1010, TDD# 11, Appendix B, Draft Industry and Facility Profiles, 12.18.06, and Amendment 1, December 18, 2006 SMALL BUSINESS ANAL YSIS3 

### retail motor fuel establishments (NAICS 447) and communications and utilities (NAICS 5171 and 2211) , E 2 

### data on use of USTs specified only high leve l (e.g., 2

- digit) NAICS sectors, such as “commercial” and “manufacturing” sectors. SBA provides data on the number of firms, establishment s and receipts by size of firm, categorized by 2

- digit NAICS sectors

. 7 

### SBA data allocate firms in each sector into the following annual revenue ranges, or “bins : ”

 $0 to $99,999,

 $100,000 to $499,999,

 $500,000 to $999,999,

 $1,000,000 to $4,999,999,

 $5,000,000 to $9,999,999,

 $10,000,000 to $49,999,999,

 $50,000,000 to $9 9,999,999 and

 $100,000,000 and above. For 3

- digit sector information (e.g., H ospitals and Retail Motor Fuel sales ) , IEc used U.S. C ensus data to determine the number of firms, number of establishments , and average revenue s by firm , because SBA does not provide data for the relevant 3

- digit NAICS codes. The U.S. Census publishes slightly different revenue bins for reporting data. The lowest

income revenue bin includes all firms that report annual revenues under $250,000 . All intermediate revenue bins are t he same between U.S. Census and SBA . SBA’s highest

income revenue bin is over $100 million, but U.S. Census breaks the largest categories down into $100 to $250 million, and then over $250 million. SBA provides employment and revenue thresholds to define small entities in each sector of the economy. We summarize the size standards for the industries identified by E 2 

### in Exhibit 1. 8

7 Small Business Administration, “ Employer Firms, Establishments , Employment, Annual Payroll, and Receipts by Receipts Size of Firm and Major Industry, 2002 ,” as viewed at http://www.sba.gov/advo/research/data.html#us 8 The complete list of size thresholds can be found on the SBA website at http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf .4 EXHIBIT 1 . SMALL BUSINESS SIZE STANDARDS FOR INDUST RIES WITH UST S
INDUSTRY OR SECTOR NAICS THRESHOLD Gasoline stations wit h convenience stores 447110 $27 million (M) Traditional service stations 447190 $9M Wholesale trade 42 100 employees Retail trade, accommodation and food services 44 - 45, 72 (excluding 447) Varies: $7M to $29M or 50

employees Wired telecommunications ca rriers 5171 1,500 employees Hospitals 622 $34.5M Manufacturing 31
- 33 Varies: 500 to 1,500 employees Transportation and Warehousing 48 Varies: $7M to $34.5M or 500 to 1,500 employees Source: U.S. Small Business Association, “Table of Small Business Size Standards Matched to North American Industry Classification System Codes,” August 22, 2008, as viewed at http://www.sba.gov/idc/groups/public/documents/sba _homepage/serv_sstd_tablepdf.pdf

METHODOLOGY : SMALL BUSINESSES (FIRMS) Identification of Number of Small Firms and Av erage R evenues 

### The first step in our analysis identifies the number of small firms, average revenues, and establishments in each sector. E 2 

### data from 2006 estimates the number of tanks in the following sectors: Commercial (NAICS 42, 44

-45, 72, excluding 447), Institutional (Hospitals only, NAICS 622), Manufacturing (NAICS 31

- 33), Transportation and Warehousing (NAICS 48 1, 483

-486, and 48 811 ), and Communi cation and Utilities (NAICS 51 71 and 2211 ). To fit E 2 

### ’s sector information to SBA data, we group communications and utilities into the Information sector (NAICS 51). We also use the entire Transportation and Warehousing sector (NAICS 48), while E 2 

### breaks down the sector into NAICS codes 481, 483

-486, and 48811 for their analysis. We use EPA’s Semi

-Annual Report of UST Performance Measures, End of Fiscal Year 2009 Report to estimate the total number of tanks , and E 2 

### ’s distribution of tanks across sectors to identify the percentage and total number of tanks in each sector
. 9 

### IEc uses SBA employment and revenue thresholds as outlined in Exhibit 1 to define small entities in each sector of the economy

. To ensure that we are not underestimating the number of small entities, we assume that all businesses within a revenue bin that contain s a specific SBA revenue threshold value are small. In other words, if the SBA small business size threshold for a sector is $7 million , the model assumes that al l firms in the revenue range of $5 to $10 million are small

. When SBA provides an employment threshold, we use total employment numbers for each revenue bin to calculate the average number of employees per firm, and assume that all businesses within a revenue bin that

9 Semi
- Annual Report of UST Performa nce Measures, End of Fiscal Year 2009

— As Of September 30, 2009. Accessed December 17, 2009 at < http://www.epa.gov/oust/cat/ca_09_34.pdf >5 

### contain the threshold value are small, similar to the sectors whose thresholds are defined by revenue. The number of small firms in each sector is displayed in Exhibit 2

. To estimate the number of retail motor fuel facilities, we consulted Na tional Petroleum News’ annual survey and U.S. Census of Manufacturers data. To reconcile differing estimates of the number of retail fuel facilities (roughly 162,000 estimated by NPN, and 1 10,600 estimated by the Census), and to account for roughly 37,000 tanks estimated to be owned by governments that were not included in the E 2 

### data but are reflected in the total population of 611,449 tanks (FY 2009), we developed a 1.46 adjustment factor to C ensus data to inflate the number of retail motor fuel faciliti es to 162,000, distributed proportionately across revenue ranges. 10 , 11 

### To ensure that the total number tanks and total number of facilities are consistent, we also revise E 2 

### 's estimate of tanks per facility from 3.13 to 2.97. This approach preserves the distribution of firms by size according to Census data. As a result of this approach, we estimate that there are a total of approximately 83,900 firms and 481,000 tanks in the retail motor fuel sector.

EXHIBIT 2 . NUMBER AND PERCENTAG E OF SMALL FIRMS BY NAI CS CODE

INDUSTRY OR SECTOR NAICS NUMBER OF SMALL FIRMS TOTAL

NUMBER OF FIRMS PERCENTAGE

OF FIRMS THAT ARE SMALL SMALL FIRMS

WITH USTs Retail Motor Fuel Sales 447 82,462 83,869 98% 82,462 Commercial (wholesale trade, retail trade, accommodation, and food services) 42, 44
- 45, 72 (excluding 447) 1,434,363 1,451,645 99% 14,128 Institutional (hospitals only) 622 2,278 3,800 60% 2,105 Manufacturing 31
- 33 293,325 297,873 98% 6,725 Transportation (air, water, truck, transit, pipeline, and airport operations) 4 8 157,904 159,373 99% 5,848 Information 51 76,582 77,605 99% 3,880 Sources: Small Business Administration, “ Employer Firms, Establishments, Employment, Annual Payroll, and Receipts by Receipts Size of Firm and Major Industry, 2002 ,” as viewed at http://www.sba.gov/advo/research/data.html#us U.S. Census “Table 4: Receipts/Revenue Size of Firms for the United States: 2002, as viewed at: http://www.census.gov/prod/ec02/ec0262sssz.pdf .

10 NPN Market Facts 2008. See: < http://www.npnweb.com/ME2/dirmod.asp?sid=A79131211D8846B1A33169AF72F78511&type= gen&mod =Core+Pages&gid=CD6098BB12AF47B7AF6FFC9DF4DAE988 > 11 According to the Census, the term “establishment” is defined as “a single physical location where business transactions take place and for which payroll and employment records are kept.” We therefore ass ume that an establishment is equivalent to one facility. The terms facility and establishment are used interchangeably in this memorandum.6 Ta nk Distribution Across R evenue Bins (Except R etail Motor Fuel, NAICS 447) 

### The second step in our analysis is to distribute tanks among firms within each revenue bin for each sector

. With the excep tion of the retail motor fuels sector, where we assume that all facilities have tanks, available data do not identify specific distributions of tanks across facilities in key sectors or sub

- sectors. In the absence of empirical data about the use of tanks at specific facilities, we assign tanks to facilities within broad sectors assuming that tanks are distributed proportionately by revenue across all facilities in the sector
. That is, w e assume that larger companies with more facilities are likely to have more tanks (e.g., car rental companies with multiple locations)

. To ensure that the number of small firms potentially affected is not undercounted, the model currently assumes that all tanks in these sectors are located at small firms , and distributes tanks proportionately by revenue among small f irm size categories. For example, in a hypothetical sector in which ten firms report total revenues of $10 million, and 20 more firms report revenues totaling $5 million, the model assumes that two

-thirds of the tanks in that sector are distributed among the ten firms with revenues totaling $10 million and the remaining one

-third of tanks are distributed among firms with revenues totaling $5 million. 12 

### The average number of tanks per facility is estimated using E 2 

### data, and is held constant for each sector; the number of tanks per firm therefore increases with the average number of facilities per firm as firm size increases. Exhibit 3 provides an example calculation to illustrate this approach

. To calculate the c ost of compliance for each firm with USTs, we multiply the average number of tanks per firm by the average cost per tank, as defined by user

- inputs to the model (in this case, cost model inputs). 13 

### We compare this number with the average receipts per firm in each revenue bin, and determine how many firms would face compliance costs greater than one and three percent of their total revenue.

12 This approach reflects some uncertainty; to the extent that tanks are not distributed proportionately across firms within a sector by revenue, it is possible that this approach could underestimate or over estimate impacts on small entities. However, we do not have enough information about the actual distribution of tanks within sub
- sectors of these industries to devel op a more refined distribution process. 13 Cost per tank is calculated by running the cost model with the default parameters, and dividing the total cost across the total universe of tanks to obtain a per tank cost. This calculator can be run with a user - s pecified number by changing the input in cell C2 on the “Inputs and Outputs” worksheet.7 EXHIBIT 3 . TA NK DISTRIBUTION IN TRANSPOR TAT ION & W AR EHOUSING (NAICS 48)

[A] SMALL FIRMS [B]

REVENUE RANGE [C] FIRMS [ D]

FACILITIES [E]

RECEIPTS ($000) [F]

PERCENT OF TOTAL SECTOR RECEIPTS [G]

FACILITIES PER FIRM [H]

NUMBER OF USTS [I]

TANKS PER FIRM [J]

NUMBER OF FIRMS WITH USTS
Yes $0 to $99,999 41,605 41,623 2,081,438 0.42% 1.00 190 1.77 107 Yes $100,000 to $499 ,999 65,261 65,383 15,545,929 3.11% 1.00 1,420 1.77 801 Yes $500,000 to $999,999 20,143 20,380 14,176,545 2.84% 1.01 1,295 1.79 724 Yes $1,000,000 to $4,999,999 24,091 26,174 50,211,290 10.06% 1.09 4,587 1.92 2,387 Yes $5,000,000 to $9,999,999 3,696 5,2 90 24,352,963 4.88% 1.43 2,225 2.53 879 Yes $10,000,000 to $49,999,999 3,108 8,707 51,486,660 10.31% 2.80 4,704 4.96 949 No $50,000,000 to $99,999,999 440 2,813 18,101,927 3.63% 6.39 No $100,000,000 to + 1,029 24,773 323,265,371 64.75% 24.07 TOTA LS 159,373 195,143 $499,222,123 100% 14,422 5,848 Note s and Sources : [A]: Based on threshold from SBA. [B], [C], [D], [E],: Based on 2002 Census Data. Note that the terms “establishments” and “facilities” are assumed to be equ ivalent and are used i nterchangeably within this analysis. [F]: Calculated as each row in [E ] / ∑[E] . [G]: Calculated as [D]/[C] . [H]: Calculated as [F]* total number of USTs per sector (e.g., 14,422 in NAICS 48) . [I]: Calculated as [G] * E 2’s estimate of tanks per facility for each sector. [J]: Calculated as [H]/[I] .

Ta nk Distribution for Motor Fuel R etailers (NAICS 447)



### For Retail Motor Fue l Sales (NAICS 447), we a ssume that all establishments (facilities) have USTs . Moreover, we assume that the number of USTs is constant across all facilities in the sector, and therefore varies directly with the number of facilities per firm

. 14 

### This approach differs from the revenue

-based distribution used in other sectors in that we assume that even very small facilities have the same numb er of tanks (2.97) as larger facilities

. 15 

### In reality, it is probable that some small facilities have fewer tanks and some larger facilities have more tanks, but our simplified distribution ensures that every facility has at least one tank and that costs to small facilities are not underestimated.

14 According to the Census, the term “establishment” is defined as “a single physical location where business transactions take place and for which payroll and employm ent records are kept.” We therefore assume that an establishment is equivalent to one facility. The terms facility and establishment are used interchangeably in this memorandum. 1 5 Appendix 2 provides an alternative method of distributing tanks in NAICS 447 proportional to revenue as opposed to the number of facilities per firm.8 RESUL TS 

### At a 2002 cost of $ 262 ( $ 309 in 200 8 dollars) per tank, the analysis concludes that no small entities in any sector will incur compliance costs that exceed either one or three percent of annual revenues ( Exhibit 4)

. LIMITAT IONS AND UNCE RTAINTIES 

### By assuming that tanks are owned by small firms, (with the exception of retail motor fuel establishments (NAICS 447)), we may be overstating the number of small firms owning tanks. Available data do not provide information on how the number or existence of tanks relates to the size of the business in a given industry. In certain industries such as fuel retailers, it is likely that all facilities have one or more USTs. In other industries such as hospitals, most fac ilities do not have any tanks, and it may be that larger hospitals are more likely to have tanks than smaller hospitals (rather than small hospitals, as assumed). In addition, while Census and SBA revenue data are presented in ranges (or bins), the SBA si ze threshold, as well as the one or three percent of revenue thresholds, typically fall in the middle of ranges. Because we assume that all firms in a bin earn “average” revenues, the relationship between this average and the revenue impact thresholds determines whether all the facilities in that bin are “affected” by the regulation. This approach is likely to under

- or over- estimate the number of businesses affected. Finally, we assume that when the small business threshold occurs in the middle of a revenue bin, all firms in that category are small; this might over

- estimate the number of businesses affected.9 EXHIBIT 4 . SUMMAR Y RESUL TS OF CURRENT S MALL ENTITY SCREENIN G ANAL YSIS

INDUSTRY OR SECTOR SECTOR

(NAICS) SMALL

ENTITIES (FIRMS) WITH USTS SMALL

ENTITI ES WITH USTS COSTS EXCEED 1% OF REVENUES PERCENT OF

SMALL ENTITIES WITH USTS WITH COSTS EXCEEDING 1% OF REVENUES ENTITIES

WITH USTS COSTS EXCEED 3% OF REVENUES PERCENT OF

SMALL ENTITIES WITH USTS WITH COSTS EXCEEDING 3 % OF REVENUES Retail Motor Fuel Sa les 447 82,462 0 0.0% 0 0.0% Commercial (wholesale trade, retail trade, accommodation, and food services) 42, 44
- 45, 72 (excluding 447) 14,128 0 0.0% 0 0.0%
Institutional (hospitals only) 622 2,105 0 0.0% 0 0.0% Manufacturing 31
- 33 6,725 0 0.0% 0 0.0% Transportation (air, water, truck, transit, pipeline, and airport operations) 48 5,848 0 0.0% 0 0.0%
Information 51 3,880 0 0.0% 0 0.0% TOTALS 115,148 0 0.0% 0 0.0%



### To map SBA revenue data to E 2 

### tank estimates, w e group communications and utilities into the Information sector (NAICS 51)

. We also use the entire Transportation and Warehousing sector (NAICS 48), while E 2 

### breaks down the sector into NAICS codes 481, 483

-486, and 48811 for their analysis. Using larger sectors could potentially be skewing th e revenues and size of the firms in the smaller NAICS sub

- divisions. A large number of governmental organizations use USTs. These governments include school districts, public utilities, local and county governments, and others. RFA/SBREFA requires agenc ies to consider the impacts on small governmental jurisdictions as well as small businesses; small governmental jurisdictions are defined as governments of cities, counties, towns, townships, villages, school districts, or special districts with a populati on of less than 50,000 people. 16 

### In 2002, there were 87,525 local governments , including special districts, in the United States. 17 

### To assess impacts to small governmental

16 For the purposes of the RFA, s tates and tribal entities are not considered small.
< http://www.epa.gov/sbrefa/government.htm > 17 2002 Census of Governments SMALL GOVERNMENT AND FEDERALISM ASSESSMENT10 

### jurisdiction s, we evaluate compliance costs for all small governmental juris dictions with tanks to determine what percentage would have expenses exceeding one or three percent of total revenues. We evaluate total costs to all non

- federal governments (including both direct compliance costs and program implementation costs) to determine whether the regulations under consideration would be likely to trigger requirements under E.O. 13132 (Federalism)

. Total annual state and local expenditures associated with the regulation of $25 million or more, and/or compliance costs that are equal to or exc eed one percent of their annual revenues, would trigger EPA’s federalism requirements . This would require EPA to investigate approaches for ensuring that states have adequate discretion in implementing the relevant regulation s . DATA SOURCES 

### The data sources we use for our small governments analysis include the following:

 Economic Impact Analysis of Additional Mechanisms for Local Government Entities to Demonstrate Financial Responsibility for Underground Storage Tanks, December 1992 ( 1992 Local Governm ent Economic Impact Analysis), and

 2002 U.S. Census of Governments Data

. METHODOLOGY AND RESUL TS : SMALL G OVERNMENT A NAL YSIS 

### The 1992 Local Government Economic Impact Analysis data provide information on the size and revenue of both general purpose (i.e. counties, municipalities, and townships) and special district governments (i.e. school districts and other special districts) , dividing these governments into four size categories: very large, large, medium and small. The analysis also provides data on the number of governments owning USTs, the number of total USTs owned by governments, average USTs per government, USTs per owning government and the annual average budget expenditures, all broken out by size categories. The 1992 analysis defines a “very large” government as one that serves over 50,000 people; therefore, we consider all other entities to be small governmental jurisdictions, according to the RFA/SBREFA definition

. We assume that local governments collectively own four percent of active tanks. This equates to 24,458 tanks, based on the FY 2009 universe of 611,449 tanks. We distribute the 2 4,458 tanks among all local governments, based upon the percent of tanks owned in 1992 by local governments in each size category. We then determine how many small governments own tanks, using the 1992 data for USTs per owning government. We determine the average compliance cost per government, calculated by the per tank cost multiplied by the number of USTs per owning government in each size category. The average annual revenues for each size of general purpose governments are calculated using 2002 Census Data. We add the total number of very large, large, medium and small governments across town/townships, municipalities and counties, and weight their total revenues accordingly to reflect the total number of each type of government (town, municipality, county) in each size category. In the United States, there are 16,50411 

### townships but revenue data are available only for 4,128 townships , so we extrapolate to get revenue data for all townships. We then combine these weighted averages to get a figure for annual revenues in 2002 dollars for general purpose governments. Detailed information at the special district level is not available for 2002, so we inflate the budget expenditures from the 1992 document into 2002 dollars. 18 

### To calculate how many small governments face significant compliance costs exceeding one or three percent of their revenue s , we compare the average compliance cost per government with the average annual revenues to determine how many exceed either threshold. At a cost of $309 ($2008) per tank, no small governments are affected under either the one percent or three percent revenue threshold (see Exhibit 5)

. METHODOLOGY AND RESUL TS : FEDERALISM A S SESSMENT 

### In addition to determining the impact on small governments, we calculate state and local costs to determine whether the proposed regulations would trigger an impact under Executive Order 13132 , which address es potential federalism impacts

. We assume that states collectively own one percent of total tanks (6 ,114 ). This number is then multiplied by the per tank cost, as defined by the cost model/user

- inputs to the model. Under the proposed regulations, each state will incur labor costs for reading the regulations and applying for State Program Approval (SPA). In addition, under the proposed regulations , facilities will be required to notify state s of each tank ownership change. Processing and reviewing these notifications represent costs to the states , and are included in total state costs. The model calculates local government costs by summing the number of tanks in local governments for both general purpose and special districts in all four size categories: very large, large, medium and small. We th en apply the p er tank cost to the number of tanks across all local governments
. Local and state costs are added together to determine if there will be a federalism impact. In this scenario, we determine that total costs to both state and local government s (including direct compliance costs, notification co sts, and state program costs) are approximately $10 million in 2008 dollars ; this is not considered to be a substantial compliance cost under federalism requirements.
LIMITAT IONS AND UNCE RTAINTY 

### The data used for this analysis ( 1992 Local Government Economic Impact Analysis data) use 1987 U.S. Census data. We are unable to find more recent data relating to the number of governments owning USTs, the average USTs per government, and USTs per owning governments. These numbers are likely outdated, and the current pattern of government ownership of USTs may be significantly different. Note, however, that because even very small governments earn over $1.5 million, it is not likely that any updates to the distribution of tanks would affect the results of the analysis

.

18 Typically, in a RFA/S BREFA screening assessment, revenues are used as the metric to assess economic impact measures for small governments. Without detailed 2002 data available, we use the budget expenditures in the 1992 document as a proxy for revenues.12

EXHIBIT 5 . SMALL GOVERNMENT ANA LY SIS

[A] TYPE OF GOVERNMENT [B]

SIZE OF GOVERNMENT C [C]

USTS PER OWNING GOV’T [D]

NUMBER OF GOV’TS OWNING TANKS [E]

2002 EST. NUMBER OF GOV’TS [F]

AVERAGE ANNUA L REVENUE (2002 $) [G]

AVERAGE COST PER GOV’T ($) [H]

NUMBER OF GOV’TS EXCEEDING 1% OF REVENUE [I]

NUMBER OF GOV’TS EXCEEDING 3% OF REVENUE

General Purpose Very Large 10.2 534 1,461 $316,129,836 $ 2 , 676 0 0

Large 2.5 1,512 4,040 $35,687,794 $656 0 0 Medium 1.4 1,444 7,822 $8,712,804 $367 0 0 Small 1.1 1,048 25,644 $1,77 9,216 $289 0 0 Subtotal 2.7 4,538 38,967

Special Purpose Very Large 3.7 336 934 $431,319,166 $971 0 0

Large 3.6 1,902 5,340 $52,806,696 $945 0 0 Medium 1.4 2,648 13,602 $2,533,231 $367 0 0 Small 1 .0 258 28,682 $128,013 $262 0 0 Subtotal 2.4 5,144 48,558 Overall Total 2.5 9,682 87,525 Note s : [A] : G eneral Purpose governments include counties, municipalities and townships. Special Purpose governments include public school systems and special districts. [B] : Very large governments are considered to serve more than 50,000 people. We consider large governments as those that serve between 10,000 and 50,000 people, medium governments a s those that serve between 2,500 and 10,000 people, and small governments as those that serve 2,500 or fewer people. According to RFA/SBREFA, small governmental jurisdictions have populations under 50,000. Therefore, we consider all sizes of governments ex cept for “very large” as small. [C] : From 1992 Local Government Impact Analysis data [D] : Calcuated as number of tanks (adjusted 1992 distribution in each size category to reflect FY 2009 tank numbers) / [C] [E] : General purpose numbers from 2002 Census of Governments; Special Purpose total number of entities from 2002 Census of Governments, size distribution extrapolated from 1992 Local Government Impact Analysis data. [F] : General purpose estimates from 2002 Census of Governments; Special Purpose esti mates inflated from 1992 Local Government Impact Analysis data . [G]: Calculated as [C] * mod el estimated cost per tank ($262 in 2002$).13 DATA SOURCES AND MET HODOLOGY 

### The data sources for the tribal lands analysis are the same as those used in the small business analysis. Based on a review of information available about the types of business entities on Tribal Lands, we assume that tanks on Tribal lands represent a subset of the rest of the universe and are distributed similarly across the same sector s. 19 

### We distribute the total number of tribal tanks proportionally among the NAICS sectors. Using the E 2 

### data for tanks per facility and facilities per firm, we determine the total firms in each sector in tribal lands. RESUL TS 

### We run the cost model with th e same parameters as the rest of the universe. The per cost tank is higher in tribal country, as the universe is smaller , and there are no regulations currently in place, so all tanks incur all costs

. At a 2008 cost of $524 ($ 445 in 2002 dollars) per tank, the total cost for all tanks on tribal lands is about $1

. 4 million.
LIMITAT IONS AND UNCE RTAINTY 

### In order to determine the impacts on tribal entities, we assume the tank distribution across sectors in tribal country mirrors that of the rest of the United States. While we can estimate the total number of firms in tribal lands with tanks, we do not have data about the total number of firms

.

19 For more detail, s ee Detailed Assessment of UST Universe by Tank Purpose and Design (WA 1
- 25, Task 6), 24 March 2009. Note that because Tribal ownership and operation is defined differently than other types of government ownership, we do not attempt to isolate or identify “g overnment” tanks on Tribal lands. TRIBAL LANDS COST14 

### APPENDIX 1
EXHIBIT A - 1 . PA RAMETERS USED T O R UN COST MODEL

RESULTS_USER_INPUTS REGULATION ID OPTION

ID CHOICE

ID O PTION_NAME SELECTIONS SELECTION TYPE 1 1 1 Walkthrough inspections by owner or operator 1 months between inspections 2 1 1 Overfill functionality testing 12 months between tests 3 1 1 Spill bucket tightness testing 12 months between tests 4 1 1 Integri ty testing for interstitial areas 12 months between tests 5 1 1 Spill bucket tightness test after repair 1 1 for yes; 0 for no 5 2 1 Overfill functionality test after repair 1 1 for yes; 0 for no 5 3 1 Interstitial integrity test after repair 1 1 for ye s; 0 for no 6 1 1 Eliminate flow restrictors for all new tanks 1 1 for yes; 0 for no 6 2 1 Replacement of existing ball floats 0 1 for yes; 0 for no 7 1 1 Functionality test
- ATG 12 months between tests 7 2 1 Functionality test
- Sticking 12 months be tween tests 7 3 1 Functionality test
- interstitial monitoring 12 months between tests 7 4 1 Functionality test
- vapor monitoring 12 months between tests 7 5 1 Functionality test
- groundwater monitoring 12 months between tests 7 6 1 Functionality tes t - line leak detection 12 months between tests 9 1 1 Add SIR/CITLDS to regulations with restrictions 1 1 for yes; 0 for no
11 1 1 Deferrals removed for emergency generator tanks 1 1 for yes; 0 for no 11 2 1 Deferrals removed for airport hydrants 0 1 fo r yes; 0 for no 11 3 1 Deferrals removed for field
- constructed USTs 0 1 for yes; 0 for no 11 4 1 Deferrals removed for wastewater treatment tanks 0 1 for yes; 0 for no15 RESULTS_USER_INPUTS REGULATION ID OPTION

ID CHOICE

ID O PTION_NAME SELECTIONS SELECTION TYPE 12 1 2 Notification of ownership changes 1 1 for yes; 0 for no 13 1 1 Replacement of irrepairable lined tanks 1 1 for yes; 0 for no 14 1 1 Response to interstitial monitoring alarms on tanks and pipes 1 1 for yes; 0 for no
16 1 1 Operator training 1 1 for yes; 0 for no 17 1 1 Secondary containment
- new & replaced tanks 1 1 for yes; 0 for no 17 2 1 Threshold for pipe replacement rather than repair 0.5 piping replacement threshold 17 3 1 Under
- dispenser containers for all new dispensers 1 1 if applies to all under
dispenser containers; 0 otherwise 17 3 2 Under
- dispenser containers for all new motor fuel dispensers only 0 1 if only applies to motor fuel under
- dispenser containers; 0 otherwise16 

### APPENDIX 2 SENSITIVITY A NAL YSES Our primary analysis assesses impacts to small businesses in non

-NAICS 447 sectors by distributing all USTs in each sector across small businesses , proportional to revenue. For NAICS 447, however, we assume all facilities own USTs, and therefore distribute tanks by the number of facilities per firm. In this Appendix, we present two alternative scenarios: distribu

tion of tanks in all sectors by firm revenue, and distribution of tanks in all sectors by number of facilities. DISTRIBUTION BY REVE NUE 

### This sensitivity analysis presents the results of distributing tanks by revenue across all sectors, including NAICS 44 7. Using this methodology, this analysis concludes that no firms in any sector face compliance costs exceeding one or three percent of annual revenues.

INDUSTRY OR SECTOR NAICS SMALL FIRMS WITH USTS ENTITIES WITH

USTS - COSTS EXCEED 1% OF REVENUES PERCEN T OF

SMALL ENTITIES WITH USTS WITH COSTS EXCEEDING 1% OF REVENUES ENTITIES

WITH USTS COSTS EXCEED 3% OF REVENUES PERCENT OF

SMALL ENTITIES WITH USTS WITH COSTS EXCEEDING 3 % OF REVENUES Retail Motor Fuel Sales 447 82,462 0 0.0% 0 0.0% Commercial (wholesa le trade, retail trade, accommodation, and food services) 42, 44
- 45, 72 (excluding 447) 14,128 0 0.0% 0 0.0%
Institutional (hospitals only) 622 2,105 0 0.0% 0 0.0% Manufacturing 31
- 33 6,725 0 0.0% 0 0.0% Transportation (air, water, truck, transit, pipel ine, and airport operations) 48 5,848 0 0.0% 0 0.0%
Information 51 3,880 0 0.0% 0 0.0% TOTALS 115,148 0 0.0% 0 0.0%17 DISTRIBUTION BY F ACI LITY 

### This sensitivity analysis presents the results of distributing tanks by number of facilities across all sector s. Using this methodology, this analysis concludes that no firms in any sector face compliance costs exceeding one or three percent of annual revenues.

INDUSTRY OR SECTOR NAICS SMALL FIRMS WITH USTS ENTITIES

WITH USTS COSTS EXCEED 1% OF REVENUES PERCEN T OF

SMALL ENTITIES WITH USTS WITH COSTS EXCEEDING 1% OF REVENUES S ENTITIES

WITH USTS COSTS EXCEED 3% OF REVENUES PERCENT OF

SMALL ENTITIES WITH USTS WITH COSTS EXCEEDING 3 % OF REVENUES Retail Motor Fuel Sales 447 82,462 0 0.0% 0 0.0% Commercial (who lesale trade, retail trade, accommodation, and food services) 42, 44
- 45, 72 (excluding 447) 14,128 0 0.0% 0 0.0% Institutional (hospitals only) 622 2,105 0 0.0% 0 0.0% Manufacturing 31
- 33 6,725 0 0.0% 0 0.0% Transportation (air, water, truck, transit, p ipeline, and airport operations) 48 5,848 0 0.0% 0 0.0% Information 51 3,880 0 0.0% 0 0.0% TOTALS 115,148 0 0.0% 0 0.0%