**A ssessment O**  **f T**  **he Potential Costs ,**  **Benefits ,**  **A nd Other Impacts**  **O f**  **T he Final Revisions**  **T o**  **EPA’s Underground Storage Tank**  **R egulations** 

Prepared for: Release Prevention Division, Office of Underground Storage Tanks

U.S. Environmental Prote ction Agency 1200 Pennsylvania Avenue NW Washington, DC 20460

Prepared b y: Industrial Economics, Incorporated 2067 Massachusetts Avenue Cambridge, MA 02140 617/354
- 0074

April 201 5[This page intentionally left blank.]iii



### Acronyms **A nd Terms**  AHFDS

– Airport hydrant f uel distribution s ys tem ASTSWMO

– Association of State and Territorial Solid Waste Management Officials ATG

– Automatic t ank g auge / g auging

– an automated process that monitors product level and provides inventory

control BL S

– United States Bureau of Labor Statistics BTEX

– b enzene, t oluene, e thylbenzene, and x yl enes CFR

– Code of Federal Regulations CITLD

– continuous in - t ank l eak d etection EGT

– emergency g enerator t ank EPA

– United States Environmental Protection Agency EPAct

– Energy

Policy Act of 2005 FCT

– f ield
- c onstructed t ank Fill pipe

– access by

which a tank is filled IRS

– United States Internal Revenue Service LLD

– l ine l eak d etector / d etection

– a device that alerts the tank operator to the presence of a leak in underground piping by restricting or shutting off the flow of product through the piping, or by triggering an audible or visible alarm LUST

– l eaking underground s torage t ank MIDAS

– m odeling of infectio us diseases a gents s tudy NACS

– National Association of Convenience Stores NAI CS

– North American Industry Classification Sy stem NRDA

– n atural r esource d amage a ssessment OMB

– United States Office of Management and Budget OUST

– Office of Underground Storage Tanks, United States Environmental Protection Agency PAHs

– p olycyclic aromatic hydrocarbonsiv

RFA

– Regulatory

Flexibility

Act SBA

– United States Small Business Administration SBREFA

– Small Business Regulatory Enforcement Fairness Act of 1996 SIR

– s tatistical inventory r econciliation

– a leak detection method where inventory , delivery , and dispensing data is statistically anal yz ed SI SNOSE

– s ignificant i mpact on a s ubstantial number of s mall entities SPA

– s tate p rogram a

pproval SPCC

– Spill Prevention, Control, and Countermeasure Spill bucket

– contained sump installed at the fill or vapor recovery c onnection points to contain drips and spills that can occur during delivery Sump

– subsurface area pit designed to provide access to equipment located below ground, and, when contained, to prevent liquids from releasing into the environment SWDA

– Solid Waste Disposal Act TPH

– t otal p etroleum hydrocarbons Turbine sump

– sump designed to provide access to the turbine area above the tank TVM

– time value of money UDC

– under
- dispenser c ontainment

– a device for collecting fluids spilled beneath a dispenser (pump) (e.g. dispenser pan) UMRA

– Unfunded Mandates Reform Act UST

– underground s torage t ank WTP

– w illingness to p ayv 

### Contents **EXECUTIVE SUMMARY ................................**  **................................ ................................**  **.... ES**  **- 1**  **CHAPTER 1. INTRODUCTION**  **................................ ................................**  **........................ 1**  **- 1**  1.1 Background
................................ ................................ ................................ ...................... 1
- 1 1.2 Need for Regulatory Action
................................ ................................ ............................. 1
- 2 1.3 Summary

of the Final UST regulation
................................ ................................ ............. 1
- 3 1.4 Alternative Regulatory Options
................................ ................................ ....................... 1
- 5 1.5 Scope of Anal ys is
................................ ................................ ................................ ............ 1
- 8 1.6 Report Organization
................................ ................................ ................................ ......... 1
- 8 **CHAPTER 2. UNIVERSE OF UST SYST**  **EMS AFFECTED BY THE FINAL UST**  **REGULATION ................................**  **................................ ................................**  **........................ 2**  **- 1**  2.1 Ty

pes of Entities Affected by the Final UST regulation
................................ ................. 2
- 1 2.2 Configuration of Average Conventional UST Sy stem ................................ .................... 2
- 2 2.3 UST Universe Size and Distribution A cross Sectors
................................ ....................... 2
- 3 2.4 Universe of Facilities and Sy stems Potentially Affected b y Final UST regulation
......... 2
- 7 2.5 Facilities and S ys tems Affected by Final UST regulation
................................ ............. 2
- 11 **CHAPTER 3. ASSESSMENT OF COMPLI** **ANCE COSTS ................................**  **............ 3**  **- 1**  3.1 Introduction
................................ ................................ ................................ ...................... 3
- 1 3.2 Compliance Cost Methodology
................................ ................................ ....................... 3
- 1 3.2.1 Categories of Compliance Costs Analyzed
................................ .......................... 3
- 3 3.2.2 Estimation of System - Level Compliance Costs for UST Systems ...................... 3
- 6 3.3 Calculation of Incremental Compliance Costs
................................ .............................. 3
- 11 3.3.1. Calculation of Incremental Compliance Costs Using an Alternative Baseline
... 3
- 13 3.4 Results of Assessment of Compliance Costs
................................ ................................ . 3
- 14 3.4.1 Assessment of Compliance Costs under the Alternative Baseline Scenario
..... 3
- 20 3.5 Sensitivity

Anal ys es ................................ ................................ ................................ ....... 3
- 20 3.5.1. Compliance Costs of the Final UST regulation Using Alternative Estimates of Labor Rates, Overhead Costs, and Fringe Ben efits
................................ ........... 3
- 20 3.5.2 Sensitivity

Anal ys is of Distribution of Technologies for Overfill Prevention Equipment Inspections, Spill Prevention Equipment Testing, and Containment Sump Testing
................................ ................................ ................................ ..... 3
- 24 3.5.3 Summary

of Sensitivity

Findings
................................ ................................ ....... 3
- 24vi

3.6 State Government Administrative Compliance Costs
................................ .................. 3
- 25 3.7 Summary

– Total Annual Compliance Costs
................................ ................................ . 3
- 26 **CHAPTER 4. ASSESSMENT OF COST S**  **AVINGS AND BENEFITS ..........................**  **4 -**  **1** 4.1 Introduction
................................ ................................ ................................ ...................... 4
- 1 4.2 Investigation of Empirical Methods for Measuring Cost Savings
................................ ... 4
- 1 4.2.1 Engineering Estimates and Literature
................................ ................................ .. 4
- 1 4.2.2 Statistical Analy sis of State Release Data
................................ ........................... 4
- 3 4.3 Final Methodology for Assessment of Positive Impacts: Expert Consultation
............... 4
- 6 4.3.1 Avoided Remediation Costs
................................ ................................ ................ 4
- 8 4.3.2 Calculating Avoided Remediation Costs
................................ ............................. 4
- 8 4.4 Establishing Avoided Releases
................................ ................................ ...................... 4
- 11 4.4.1 Avoided Releases Using an Alternative Baseline
................................ .............. 4
- 14 4.5 Benefits from Avoided Releases and Reduced Release Severity
................................ .. 4
- 16 4.5.1 Avoided Release Remediation
................................ ................................ ........... 4
- 16 4.5.2 Reduction in Release Severity
................................ ................................ ........... 4
- 17 4.5.3 Total Avoided Remediation Costs from Avo ided Releases and Reduced Release Severity
................................ ................................ ................................ . 4
- 19 4.5.4 Benefits from Avoided Releases and Reduced Release Severity under the Alternative Baseline Scenario
................................ ................................ ............ 4
- 20 4.5.5 Avoided Costs by Requirement
................................ ................................ ......... 4
- 22 4.6 Avoided Vapor Intrusion Damages
................................ ................................ ............... 4
- 25 4.7 Avoided Product Loss
................................ ................................ ................................ .... 4
- 26 4.8 Human Health Benefits
................................ ................................ ................................ .. 4
- 27 4.9 Avoided Acute Exposure Events and Large
- Scale Releases
................................ ......... 4
- 29 4.10 Ecological Bene fits
................................ ................................ ................................ ........ 4
- 30 4.11 Measuring Benefits through Housing Price Changes
................................ .................... 4
- 34 4.12 Conclusion
................................ ................................ ................................ ..................... 4
- 35 4.12.1 Summary

of Positive Impacts under the Alternative Baseline Scenario
........... 4
- 36 **CHAPTER 5. DISTRIBUTIONAL IMPAC**  **TS AND CONSIDERATION S**  **.................. 5**  **- 1**  5.1 Introduction
................................ ................................ ................................ ...................... 5
- 1 5.2 Economic Impacts
................................ ................................ ................................ ............ 5
- 1 5.2.1 Distribution of UST Systems by Industry Sector
................................ ................ 5
- 3 5.2.2 Market Dy

namics in the Retail Motor Fuels Sector
................................ ............ 5
- 3vii

5.2.3 Assessment of Market Exits and Employ m ent Impacts
................................ ...... 5
- 8 5.2.4 Assessment of Public Sector Cost Savings Related to Avoided Releases
......... 5
- 16 5.2.5 Economic Impact Summary
................................ ................................ ............... 5
- 19 5.3 Energy

Impact Anal ys is
................................ ................................ ................................ . 5
- 20 5.4 Regulatory

Flexibility

Analy sis
................................ ................................ ..................... 5
- 21 5.4.1 Small Business Screening Analy sis
................................ ................................ ... 5
- 22 5.4.2 Small Business Supplemental Anal ys is
................................ ............................. 5
- 23 5.4.3 Impacts to Small Governments
................................ ................................ .......... 5
- 24 5.5 Screening Analy sis to Inform Impacts on Minority and L ow - In come Populations
...... 5
- 26 5.5.1 Risk Assessment Population Analy sis
................................ ............................... 5
- 27 5.5.2 Demographic Anal ys is
................................ ................................ ....................... 5
- 29 5.5.3 Summary

and Limitations of the Anal ys is
................................ ......................... 5
- 33 5.6 Children’s Health Protection Analy sis
................................ ................................ ........... 5
- 34 **CHAPTER 6. OTHER STATUTORY AND**  **EXECUTIVE ORDER ANAL YSES**  **........ 6**  **- 1**  6.1 Regulatory

Planning and Review
................................ ................................ ..................... 6
- 1 6.2 Unfunded Mandates Analy sis
................................ ................................ .......................... 6
- 2 6.3 Federalism Anal ys is
................................ ................................ ................................ ......... 6
- 3 6.4 Tribal Governments Analy sis
................................ ................................ .......................... 6
- 4 6.5 Joint Impacts of Rules
................................ ................................ ................................ ...... 6
- 5 **CHAPTER 7. COMPARISON OF COSTS,**  **BENEFITS, AND OTHER IMPACTS**  **.... 7**  **- 1**  7.1 Cost Benefit Comparison
................................ ................................ ................................ . 7
- 2 7.1.1 Net Costs of the Regulation: Potential Underestimates of C ost Savings and Benefits
................................ ................................ ................................ ................ 7
- 4 7.1.2 Net Costs of the Regulation: Cost Savings to Public and Private Entities
.......... 7
- 4 7.1.3 Alternative Baseline: Potential Decreases in Future Cost Savings
...................... 7
- 6 7.2 Cost
- Effectiveness Analysis
................................ ................................ ............................ 7
- 7 7.3 Costs and Beneficial Effects Under Alternative Discount Rates
................................ ..... 7
- 7 **Sources Cited Appendices:**  Appendix A: Configuration and Cost Assumptions for Airport Hydrant Fuel Distribution

Sy stems (AHFDSs) and Field
- Constructed Tanks (FCTs)viii

Appendix B: Estimation of Affected UST Universe and Baseline State Regulations Appendix C: Analy sis o f Piping Replacement Thresholds Appendix D: Methodology for Calculating Compliance Costs Appendix E: Access Model Structure and Specifications Appendix F: Analy sis of Statistical Relationship between State Regulatory Programs and Confirmed Release Data Appendix G: Expert Consultation: Selection and Data Collection Methodology Appendix H: Expert Consultation: Responses and Interpretation Appendix I : Methodology for Calculating Avoided Cleanup Costs and Summary Tables Appendix J: Estimation of Future UST Sy stem and Release Universes for the Alternative

Baseline Scenario Appendix K: Methodology for Estimating Upper Bound Market Exit Scenario Appendix L : Screening Analy sis of Impacts on Small Entities Appendix M: Screening Analy sis of Environmental Justice Impacts Appendix N: Cost Savings to State Financial Assurance Funds Appendix O: UMRA Written StatementES
- 1 

### Executive Summary **Overview** In 1984, Congress responded to the increasing threat to groundwater from leaking underground storage tank (UST) sy stems by adding Subtitle Ito the Solid Waste Disposal Act (SWDA). SWDA required the U.S. Environmental Protection Agency (EPA) to protect the environment and human health from UST releases by developing a comprehensive regulatory program for UST sy stems storing petroleum or certain hazardous substances. In 1986, Congress amended Subtitle Iof SWDA and created the Leaking Underground Storage Tank Trust Fund (LUST Trust Fund) to oversee and pay for cleanups at sites where the owner or operator is unknown, unwilling to pay , or unable to pay
. EPA promulgated the UST regulation in 1988 (40 CFR Part 280). This regulation set minimum standards for new tanks and required owners and operators of existing tanks to upgrade, replace, or close them. The 1988 regulation set deadlines for owners and operators to meet the new requirements. In 1988, EPA also promulgated a regulation for state program approval (40 CFR Part 281). EPA has not significantly changed these regulations since 1988. In 2005, the Energy

Policy Act (EPAct) further amended Subtitle Iof SWDA. EPAct requires states that receive federal Subtitle Imoney from EPA to meet certain requirements. EPA developed grant guidelines for states regarding : operator training; inspections ; delivery prohibition ; secondary containment; financial responsibility for manufacturers and installers; public record ; and state compliance reports on government UST sy stems. After Congress passed EPAct, EPA decided to re vise the 1988 UST regulation (at 40 CFR Part 280), primaril y to ensure parity in Indian country. Key EPAct provisions (such as secondary containment and operator training) apply to all states receiving federal Subtitle I money , regardless of their state program approval status . However, these key provisions do not apply in Indian country

(or in states and U.S. territories that do not meet EPA’s operator training or secondary

containment grant guidelines). In order to establish federal UST requirements simil ar to the UST secondary containment and operator training requirements of EPAct, EPA needed to revise the 1988 UST regulation. Without these changes, EPAct provisions will not apply in Indian country . These revisions will also fulfill the objectives of the EPA
- Tribal UST Strategy (August 2006) in which both EPA and tribes recognized the importance of ensuring parity in implementing UST program requirements in states and territories, as well as in Indian country . 1 EPA decided now is also an appropriate tim e to change the 1988 UST regulation to reflect technology

improvements, address outdated requirements, and place a stronger emphasis on operations and maintenance . While EPA has issued many guidance documents and used various implementation approaches and techniques over the last 25 years, we have not made significant changes to the original 1988 UST regulation. Indeed, most states have passed requirements that go far beyond the 1988 UST regulation that provide greater environmental protection . These state regulations full y implement provisions of the EPAct and improve other

1 See http://www.epa.gov./oust/fedlaws/Tribal%20Strategy_08076r.pdf
.ES
- 2

important areas of the 1988 UST regulation that have become outdated . Furthermore, while information on sources and causes of releases show that releases from tanks are less common than they once were, releases from piping and spills and overfills associated with deliveries have emerged as more common problems. 2 Dispenser
- related failures have also emerged as a leading source of releases. The lack of proper operation and maintenance of UST systems is a main cause of release from these areas. The final UST regulation place s an emphasis on ensuring that equipment is properl y maintained and working . It highlight s the importance o f operating and maintaining UST equipment so releases are prevented and detected earl y in order to avoid or minimize potential soil and groundwater contamination. EPA worked diligently

to ensure our regulatory

development process was open and transparent . Over a two year period, we provided all stakeholders

– state and tribal regulators; federal facilities; petroleum industry members, including representatives of owners and operators; equipment manufacturers; small businesses; local governments; and environmental and community

groups – an opportunity

to share their ideas and concerns through a variety of meetings, conference calls, and email exchanges. EPA thoroughl y considered all input we received
. From this extensive stakeholder outreach, EPA compiled potential proposed changes to the UST regulation. EPA shared all ideas with stakeholders and gave them an opportunity to comment on each idea submitted. We then revised the list of potential changes and added items based on data, anal ys is , and consideratio n of costs and benefits. Ultimatel y, EPA identified the items in the proposed UST regulation as those which needed regulatory changes at the time; the proposed UST regulation was issued in November 2011 for a 90
- day public comment period. EPA then extended this public comment period for an additional 60 day s. EPA received submissions from over 190 commenters. Based on these comments, EPA has revised the 2011 proposed UST regulation and is now finalizing the UST regulation, as described below. **Regulatory Changes** EPA is revising the 1988 UST regulation to: establish federal requirements similar to certain key

provisions of the EPAct; ensure owners and operators perform proper operation and maintenance; address UST sy stems deferred in the 1988 U ST regulation ; update the regulation to encompass current technology and practices; and make technical and editorial corrections. Specificall y, EPA is requiring the following set of revisions (hereafter referred to as the Selected Option):

 Establish federal requirements for secondary containment and operator training similar to those established by EPAct for states that receive federal Subtitle I money
 Add operation and maintenance requirements
2 U.S. Environmental Protection Agency, Office of Underground Storage Tanks, “Evaluation of Releases from New and Up graded Underground Storage Tank Systems

– Peer Review Draft,” U.S. EPA, August 2004, and U.S. Environmental Protection Agency, Office of Underground Storage Tanks, “Petroleum Releases at Underground Storage Tank Facilities in Florida,” Peer Review Draft , M arch 2005.ES
- 3 o Walkthrough inspections o Overfill prevention equipment inspections o Spill prevention equipment tests o Containment sump tests o Operability

test s for release detection equipment

 Address UST s ys tems deferred in the 1988 UST regulation 3 o Remove release detection deferral for emergency generator tanks (EGTs) o Remove deferrals for airport hydrant fuel distribution systems (AHFDSs) and UST sy stems with field
- constructed tanks (FCTs)

 Provide for other changes to improve release prevention and detection and program implementation o Require testing after repairs to spill and overfill prevention equipment and secondary containment o Eliminate flow restrictors in vent lines as an overfill prevention option for all new tanks and when overfill prevention equipment is replaced o Require closure of lined tanks that cannot be repaired according to a code of practice o Address responses to interstitial monitoring alarms o Retain vapor monitoring and groundwater monitoring as methods of release detection for tanks and piping (for those installed before the effective date of today ’s final UST regulation) only if owners and operators demonstrate proper installation and performance through a site assessment o Require notification of ownership change o Establish requirements for demonstrating c ompatibility with fuels containing greater than E10 and greater than B20

 Make general updates to the UST regulation o Reference newer technologies, including explicitly adding statistical inventory reconciliation (SIR) and continuous in
- tank leak detectio n (CITLD) as release detection methods o Update codes of practice listed in the UST regulation o Remove old upgrade and implementation deadlines o Make editorial and technical corrections

 Revise the s tate p rogram a pproval regulation (40 CFR Part 281) to be consistent with the above revisions

3 In the final UST regulation, EPA is also addressing the 1988 UST regulatory deferrals of wastewater treatment tank systems that are not part of a waste water treatment facility regulated under sections 402 or 307(b) of the Clean Water Act, USTs containing radioactive material, and emergency generator UST systems at nuclear power generation facilities regulated by the Nuclear Regulatory Commission. However, because these regulatory changes will not result in any incremental costs to the regulated community, this RIA does not factor these systems into any part of the analysis.ES
- 4

In addition to the Selected Option, EPA considered two other regulatory alternatives, described as Alternative 1 and Alternative 2. Alternative 1 is overall more stringent tha n the Selected Option. Alternative 2 is overall less stringent than the Selected Option. **Exhibit ES -**  **1** summarizes the requirements under each alternative. Exhibit ES
- 1 **Options Considered For The Final UST regulation**  **Requirement Description Options**  **Selected Alternative 1**  **Alternative 2 Release Prevention**  Walkthrough inspections 30
- day 30
- day (as proposed in Nov 2011) * Quarterly Overfill prevention equipment inspections 3 year Annual Not required Spill prevention equipment tests 3 year Annual 3 year Containment sump testing 3 year Annual Not required Testing after repairs to spill and overfill prevention equipment, and secondary containment Required Required Required Eliminate flow restrictors in vent lines for all new tanks and when overfill prevention equipment is replaced Required Required No change from existing regulation **Release Detection** Operability test s for release detection equipment Annual (plus annual check of sumps) Annual (as proposed in Nov 2011) * Annual (plus annual check of sumps) Add SIR/CITLD to regulation with performance criteria Required Required Required Response to interstitial monitoring alarms Required Required Required Groundwater and vapor monitoring for release detection Continue to allow with site assessment 5
- ye ar phase out (as proposed in Nov 2011) * No change from existing regulation Remove release detection deferral for emergency generator tanks Required Required (as proposed in Nov 2011) * Required **Other** Require notification of ownership change Required Required Required Closure of lined tanks that cannot be repaired according to a code of practice Required Required Required Requirements for demonstrating compatibility with fuels > E10 and >B20 Required Required (as proposed in Nov 2011) * No change from existing regulation Remove deferrals for airport hydrant fuel distribution systems and UST sy stems with field
- constructed tanks Regulate under alternative release detection requirements Require AHS/FCT notify implementing agency and report releases (with no other requirements) Maintain deferral **EPAct -**  **related Provisions** Operator training Required Required Required Secondary containment Required Required Required * In the 2011 proposed UST regulation , these changes generally consisted of more or stricter requirements than what is in the final UST regulation. For example, the 30
- day walkthrough inspections in the 2011 proposed UST regulation included monthly check of sumps. Please see the 2011 proposed UST regulation for details. EPA designed this assessment in accordance with the Office of Management and Budget’s (OMB) requirements for regulatory review under Executive Order 12866 (as amended by Executive Order 13258), which applies to any significant regulatory

action. This document also fulfills these requirements:ES
- 5

 Regulato ry

Flexibility

Act, as amended b y Small Business Regulatory Enforcement Fairness Act of 1996  Executive Order 12898, Federal Actions to Address Environmental Justice in Minority Populations and Low
-Income Populations  Executive Order 13045, Protection of C hildren From Environmental Health Risks and Safety Risks  Unfunded Mandates Reform Act of 1995  Executive Order 13175, Consultation and Coordination W ith Indian Tribal Governments  Executive Order 13132, Federalism  Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use **Summary O**  **f Findings** Within the constraints of data availability , EPA in this analy sis identified all quantifiable and qualitative impacts for the UST regulation. EPA obtained sufficient data to identify , by state, the number of units likely to be affected b y each change in the final UST regulation. In our anal ys is, we use these data to assess the compliance costs imposed upon units and relevant state g overnments. In conducting these anal ys es, EPA also assessed the sensitivity of outcomes to key assumptions. Separatel y, the anal ys is monetizes a number of impacts of the final UST regulation including: avoided cost s generated b y avoided releases and reduc tion in severity of releases; avoided product loss; and avoided vapor intrusion damages. This anal ys is quantifies, but does not value, groundwater impacts. Finall y, due to data and resource limitations, EPA was unable to quantify or value in this anal ys is human health benefits or e cological impacts, but addresses these qualitatively
. In addition to identifying costs and positive impacts, EPA in this analysis also examined the economic and distributional impacts of the final UST regulation. The economic impact anal ys is includes the final UST regulation’s effect on facility closures, employ

ment, and energy output and cost. In the analy sis of the final UST regulation’s distributional impacts, we examined small business impacts, effe cts on minority and low
- income populations, impacts on children’s health, and potential impacts on state financial assurance funds. Finally , EPA’s anal ys is considered the final UST regulation’s impacts related to certain executive orders and statutes, including the Unfunded Mandates Reform Act, tribal governments, and federalism. The main conclusions of this analy sis are:

 **Compliance costs** 4

– EPA estimate s $160 million in annual compliance costs for the final UST regulation , including costs of $130 millio n for conventional UST sy stems and EGTs; $10 million for AHFDSs; $11 million for FCTs; $5.5 million

4 Com pliance costs include direct compliance costs and state oversight costs. For this regulatory impact analysis, direct compliance costs and state oversight costs provide a reasonable proxy to assess the final UST regulation ’s social costs. See Chapter 3.1 for further discussion.ES
- 6 for owners and operators to read the final UST regulation ; and less than $1.0 million in state government administrative costs . C ompliance c osts range from approximately

$70 million under Alternative 2 to $290 million under Alternative 1.

 **State and local government costs**

– Annual state and local government costs, including compliance costs to UST systems owned or operated by state and local governments, state program approval costs, state costs for processing ownership changes, and one
- time notification costs for previously deferred s ys tems, are approximately

$6.8 million. These costs range from approximately $3.6 million under Alternative 2 to $14 million und er Alternative 1. 5

 **Avoided costs**

– Avoided remediation costs associated with conventional UST sy stems form the majority of positive impacts from the final UST regulation. 6 EPA estimate s that the final UST regulation will avoid total costs of $310 million per year (range: $120 million per year to $530 million per year) under the Selected Option. This includes: $300 million (range: $110 million to $510 million) in avoided remediation costs from avoided releases and avoided groundwater contamination incidents ; $4.5 million (range: $1.7 million to $7.9 million) in avoided vapor intrusion remediation costs; and $3.1 million (range: $860,000 to $6.5 million) in avoided product loss . Total avoided costs are $450 million (range: $210 million to $670 million) under Alternative 1 and $230 million (range: $45 million to $420 million) under Alternative 2. 7

 **Benefits**

– Due to data and resource constraints, EPA was unable to quantify or monetize many

of the final UST regulation’s benefits, including human health and ec ological benefits. EPA estimates that the final UST regulation could potentially protect 50 billion to 240 billion gallons of groundwater each ye ar. 8 Categories of nonmonetizable or nonquantifiable benefits that are qualitatively discussed in this anal ysis include: avoidance of human health risks, mitigation of acute exposure

5 If all applicable state and local government costs were incurred in the first year, rather than annualized and discounted, state and local governments would incur approximately $3.8 million in co sts under the Selected Option. This includes $0.2 million for states to apply for state program approval and to read the regulations, $0.2 million for states to process one - time notifications of AHFDSs and FCTs and ownership changes that occur in the first year, and $3.6 million for state and local government owners and operators of UST systems to comply with requirements that come into effect in the first year (approximately 80 percent of which would be for state and local government owners and operators to read the final UST regulation).

6 For purposes of this analysis, “avoided remediation costs ” include avoided administrative, response, remediation, and oversight costs.

7 Note that due to modeling and data limitations, EPA was unable to estimate avoided remediation costs associated with avoided releases and avoided groundwater contamination from AHFDSs and FCTs. In addition, EPA’s estimates of avoided remediation costs do not include non
-use values that i ndividuals may place on the existence of uncontaminated water supply.

8 See chapter 4.10 for details on how this estimate was derived.ES
- 7 events and large
- scale releases (e.g., releases from AHFDSs and FCTs 9 ), protection of ecological biota, and avoided property devaluation.

 **Compliance costs and avoided costs under t he alternative baseline** 

– Under the alternative baseline scenario that assumes declines in the universes of both UST sy stems and r eleases over time, EPA estimates $160 million in annual compliance costs for the final UST regulation. Estimate d costs do not change substantially

under the alternative baseline scenario and range from $70 million under Alternative 2 to $290 million under A lternative 1. EPA also estimates total avoided costs of $210 million (range: $81 million to $360 million) under the Selected Option in the alternative baseline scenario. These avoided costs range from $160 million (range: $31 million to $290 million) under Alternative 2 to $310 million (range: $140 million to $460 million) under Alternative 1.

 **Average economic impacts**

– Motor f uel retailers, which account for roughly 80 percent of UST sy stems, are expected to bear approximately 70 percent of the total costs under the Selected Option. To establish how the final UST regulation may impact the market, EPA examined whether the final UST regulation imposes a cost greater than the average after
- tax profit margin of 1.8 percent for motor fuel retailers. 10 Using this benchmark, we estimate approximately 19 firms may

exit the market if they

cannot pass costs through to customers. This number represents less than 0.1 of one percent of the total universe of 148,000 facilities. In comparison, between 2005 and 2013, the number of gas station facilities decreased b y an average of 2,024 stations per year.
 **State financial assurance funds**

– D ecreases in release frequency and severity may decrease pay

ments required of state financial assurance funds b y $160 million or more per year under the Selected Option. 11 To the extent that these funds are maintained b y taxes other than those assessed on US T operators, decreases in these pay

ments effectivel y represent a reallocation of costs from public entities to the private entities responsible for releases.

9 For example, an estimated 300,00 0 to 500,000 gallons of fuel were released from a 2.1 million gallon underground FCT at a fuel depot in Portsmouth, VA. Free product was found within 20 feet of a nearby creek in 1987. The rel ease was attributed to tank or piping failures. Another example is Pease Air Force Base, where jet fuel wa s delivered to the runway apron via an underground fueling system. Historical leakage from the system contaminated soil and groundwater, forming groundwater plumes at many sites along the system. A site release study identified 60 to 70 release points with varying degrees of severity along the refueling system line with free product found under the apron at closure.

10 When costs exceed facility profits, it is likely that in the long
- term , the faci lity wo uld exit the market. After
- tax profit margin based on 2009 data reported to the IRS (see chapter 5.2.3).

11 See chapter 5
. 2.4 for details on how this estimate was derived
.ES
- 8

**Assessment O f Compliance Costs**  For this regulatory

impact analy sis, direct compliance costs and state oversight costs provide a reasonable proxy to assess the final UST regulation’s social costs for the following reasons:
 The regulatory

requirements generall y focus on additional testing and inspection of existing equipment and do not reflect large
- scale investments in equipment or significant changes to operations at the facility level. In addition, the facilities affected b y the final UST regulation are distributed with relative geographic uniformity

for consumers and producers.

 Given the small per
- facility costs (approximately

$71 5 per year for the average facility), closures or changes in market structure represent an unlikel y response to the final UST regulation. According to the 2007 Economic Census, average revenues in the retail motor fuel sales sector were approximately $3.8 million; the corresponding cost
- to - sales ratio for the average facility is less than one
- tenth of one percent. Therefore, it i s unlikely that significant changes to production or consumer behavior will affect social costs.

 The short
- and long
- run impacts of the final UST regulation are not likel y t o differ significantl y. Testing and inspection requirements may offer some opport unities for owners and operators to reduce costs by learning over time, but they are not likely to reduce costs enough to facilitate large
- scale equipment upgrades. EPA’s calculation of total incremental compliance costs for UST facilities reflects two key components: identifyingspecific measures necessary for compliance at individual facilities and calculating costs associated with each of these measures. To estimate these costs, EPA developed a compliance cost model that identifies incremental equipment and labor requirements for an individual sy stem. Based on the baseline equipment use profile, existing state regulations, and anticipated responses to the final UST regulation, the model then generates sy stem - specific estimates of compliance costs. Comp liance costs include labor and capital costs associated with new equipment and installation, inspection, testing, and recordkeeping. The model also includes other compliance costs, such as those associated with more frequent detection of equipment failure and repair of equipment. Some component costs are specific to individual UST sy stem configurations

– for example, AHFDSs or FCTs

– while others are consistent across all s ys tem ty pes. **Exhibit ES -**  **2** summarizes the findings of our anal ys is of compliance costs
.ES
- 9

Exhibit ES
- 2 **Total Annual Compliance Costs** a,b **Category Selected**  **Option ($ m** **illions) Alternative 1** 

**($ m illions)**  **Alternative 2**

**($ m illions)**  Conventional UST systems c $130 $280 $63 Emergency Generator Tanks (EGTs) $2.0 $2.3 $2.0 Airport Hydrant Fuels Distribution Systems (AHFDSs) $10 $0.017 $0.0 UST systems with Field
- Constructed Tanks (FCTs) $11 $0.066 $0.0 Cost to Owners/Operators to Read Regulation $5.5 $5.5 $5.5 State Government Administrative Costs d $0.12 $0.12 $0.12 **Total Annual Compliance Costs**  e **$160 $290**  **$70** a Cost estimates were derived using a seven percent discount rate. b Com pliance costs include direct compliance costs and state oversight costs. For this regulatory impact analysis, direct compliance costs and state oversight costs provide a reasonable proxy to assess the final UST regulation’s social costs. See Chapter 3. 1 for further discussion. c Conventional UST systems include all systems that are not AHFDSs, FCTs, or EGTs. d The costs for UST systems directly owned or operated by local, state, and federal government entities are included in the estimates of compliance costs within the other categories (see Exhibit ES
- 6). Costs shown here reflect the administrative costs for state governments to read the final UST regulation, apply for state program approval, process notifications of ownership changes, and process one
- time notifications of EGT, AHFDS, and FCT existence. e Totals may not add up due to rounding. **Assessment Of Cost Savings A nd Benefits**  Avoided remediation costs among conventional UST sy stems and EGTs provide the basis for a substantial portion of the b eneficial impacts associated with the final UST regulation. Avoided remediation costs of the final UST regulation represent cost savings that accrue to owners, operators, and public entities charged with remediating releases at regulated facilities. EPA ob tained remediation costs from a survey of state UST cleanup programs and estimates of the distribution of releases by UST s ys tem area from internal research. 12 EPA identified four UST technical experts who provided professional judgment regarding the final UST regulation’s effects on reduction in release frequency (number of releases per ye ar) and release severity (as measured b y groundwater incidents averted). This body of knowledge allowed EPA to estimate total avoided costs, as well as avoided costs per r equirement. EPA also estimated avoided costs associated with vapor intrusion and product loss, though these avoided costs are not allocated across requirements. 13 Finally , the anal ys is provides qualitative discussion of avoided acute events and exposure (in cluding large
- scale releases, such as those from AHFDSs and FCTs), avoided human health risks, ecological benefits, and avoided property devaluation. These findings are summarized in **Exhibit ES -**  **3** below.

12 U.S. Environmental Protection Agency Office of Underground Storage Tanks, “E valuation of Releases from New and Upgraded Underground Storage Tank Systems

– Peer Review Draft ,” U. S. EPA , August 2004.

13 These costs were not allocated because we did not ask the experts to estimate quantitatively how different regulatory requirements wo uld specifically affect vapor intrusion or product loss. Vapor intrusion frequency and cost data rely on general information we received from several states and are typically recorded as additional remedial activities at some groundwater sites. The likel ihood of vapor intrusion, however, is driven by proximity of receptors and by geology and is not predictably related to the size or age of a plume. Product loss estimates rely on data from Florida and other sources for typical release sizes and are mapped to the estimates of avoided releases.ES
- 10

Exhibit ES
- 3 **Summary Of Positive Impacts SELECTED**  **OPTION Type O**  **f Impact Expert 1**  **Expert 2 Expert 3**  **Expert 4 Average**  **Range Monetized Avoided Costs Ass**  **ociated With Conventional USTs A nd EGTs ($ millions, present value 2012$)**  **a** Releases and groundwater incidents b $330 $110 $260 $510 $300 $110
- $510 Vapor intrusion $4.3 $1.7 $4.1 $7.9 $4.5 $1.7
- $7.9 Product loss $2.3 $0.86 $2.9 $6.5 $3.1 $0.86
- $6.5 **Total** c **$330 $120**  **$270 $530**  **$310 $120**  **- $530**  **Non -**  **Monetized Impacts** d Groundwater protected (billion gallons) 130 50 120 240 130 50
- 240 Acute events and large
- scale releases (e.g., releases from AHFDSs and FCTs) e n/e n/e n/e n/e n/e n/e Ecological benefits e n/e n/e n/e n/e n/e n/e Human health risks e n/e n/e n/e n/e n/e n/e **ALTERNATIVE 1 Type O**  **f Impact Expert 1**  **Expert 2 Expert 3**  **Expert 4 Average**  **Range Monetized Avoided Costs Associated With Conventional USTs**  **A nd EGTs ($ millions, present value 2012$)**  **a** Releases and groundwater incidents b $490 $200 $410 $650 $440 $200
- $650 Vapor intrusion
- low assumptions $5.9 $2.5 $5.9 $9.1 $5.9 $2.5
- $9.1 Product loss $2.6 $0.78 $4.1 $7.6 $3.8 $0.78
- $7.6 **Total** c **$500 $210**  **$420 $670**  **$450 $210**  **- $670**  **Non -**  **Monetized Impacts** d Groundwater protected (billion gallons) 180 74 180 270 170 74
- 270 Acute events and large
- scale releases (e.g., releases from AHFDSs and FCTs) e n/e n/e n/e n/e n/e n/e Ecological benefits e n/e n/e n/e n/e n/e n/e Human health risks e n/e n/e n/e n/e n/e n/e **ALTERNATIVE 2 Type O**  **f Impact Expert 1**  **Expert 2 Expert 3**  **Expert 4 Average**  **Range Monetized Avoided Costs Associated With Conventional USTs**  **A nd EGTs ($ millions, present value 2012$)**  **a** Releases and groundwater incidents b $210 $44 $220 $410 $220 $44
- $410 Vapor intrusion
- low assumptions $2.6 $0.56 $3.2 $6.0 $3.1 $0.56
- $6.0 Product loss $1.5 $0.36 $2.5 $5.2 $2.4 $0.36
- $5.2 **Total** c **$220 $45**  **$220 $420**  **$230 $45**  **- $420**  **Non -**  **Monetized Impacts** d Groundwater protected (billion gallons) 78 17 96 180 92 17
- 180 Acute events and large
- scale releases (e.g., releases from AHFDSs and FCTs) e n/e n/e n/e n/e n/e n/e Ecological benefits e n/e n/e n/e n/e n/e n/e Human health risks e n/e n/e n/e n/e n/e n/e a Avoided remediation costs from releases and groundwater incidents are the costs related to site remediation. Avoided vapor intrusion costs include additional avoided costs associated with the remediation of vapor intrusion cases; the RIA does not address human health risk associated with vapor intrusion. Avoided product loss costs are also separate and additive.ES
- 11

Exhibit ES
- 3 **Summary Of Positive Impacts** b Expert 2 provided responses that generate benefits that are relatively low compared to estimated costs, unlike the other thre e experts. Conversations with this expert indicated that this discrepancy may be due to his assumptions about partial noncompliance. See Section 4.5.3 and Appendix H for additional discussion. c Totals may not add up due to rounding. Cost estimates were derived using a seven percent discount rate. d Due to data and resource constraints, EPA was unable to monetize some of the positive impacts of the final UST regulation. Chapter 4 provides a qualitative discussion of these benefits. e Benefit s not estimated are denoted by n/e. **Comparison O**  **f Compliance Costs A**  **nd Positive Impacts Exhibit ES**  **- 4**  summarizes the compliance costs and positive impacts of the final UST regulation. The majority of measurable positive effects occur as avoided remediation costs. As discussed in Chapter 4, avoided costs provide a reasonable measure of the positive effects of the final UST regulation. Exhibit ES
- 4 **Comparison Of Annual Compliance Costs And Cost Savings** f, d **Selected Option (2012$ m** **illions) Alternative 1** 

**(2012$ m illions)**  **Alternative 2**

**(2012$ m illions)**  **Annual Avoided Costs a**  Releases and groundwater incidents: average value (range of all values in italics) $300 ($110

- $510) $440

($200

- $650) $220

($44

- $410) Vapor intrusion: average value (range of all values in italics) $4.5 ($1.7

- $7.9) $5.9

($2.5

- $9.1) $3.1

($0.56

- $6.0) Product loss (range of all values in italics) $3.1 ($0.86

- $6.5) $3.8

($0.78

- $7.6) $2.4

($0.36

- $5.2) **Annual Compliance Costs**  Conventional UST systems b $130 $280 $63 Emergency generator tanks (EGTs) $2.0 $2.3 $2.0 Airport hydrant fuel distribution systems (AHFDSs) $10 < $0.1 N/A UST systems with field
- constructed tanks (FCTs) $11 < $0.1 N/A Cost to owners/operators to read UST regulation $5.5 $5.5 $5.5 State government administrative costs c $0.12 $0.12 $0.12 **Total Annual Avoided Costs** (range of all values in italics) **$310** ($120

- $530) **$450**

($210

- $670) **$230**

($45

- $420) **Total Annual Com** **pliance Costs d**  **$160 $290**  **$70 Net Cost (Savings) T**  **o Society d,g**  **[Total Compliance Costs L**  **ess Total Avoided Costs]**  (range of all values in italics) **($160)** $39

- ($370) **($160)**

$81

- ($380) **($160)**

$25

- ($350) **Non -**  **Monetized Benefits e**  Groundwater protected (billion gallons) 130 (50
- 240) 170

(74
- 270) 92

(17
- 180) Acute events and large
- scale releases (e.g., releases from AHFDSs and FCTs) Not estimated Not estimated Not estimated Ecological benefits Not estimated Not estimated Not estimated Human health risks Not estimated Not estimated Not estimated a Avoided costs are estimated for conventional UST systems and emergency generator tanks only. Avoided remediation costs from releases and groundwater incidents are the costs related to site remediation. Avoided vapor intrusion costs include additional avoided costs associated with the remediation of vapor intrusion cases; the RIA does not address human health risk associated with vapor intrusion. Avoided product loss costs are also separate and additive. b Conventional UST systems include all systems that are not AHFDSs, FCTs, or EGTs. c The costs for UST systems directly owned or operated by local, state, and federal government entities are included in the estimates of compliance cost s within the other categories. Costs shown here reflect the administrative costs for stateES
- 12

Exhibit ES
- 4 **Comparison Of Annual Compliance Costs And Cost Savings** f, d governments to read the final UST regulation, apply for state program approval, process notifications of ownership changes, and process one
- time notifications of exi stence for AHFDS and UST systems with FCTs. d Compliance costs include direct compliance costs and state oversight costs. For this regulatory impact analysis, direct compliance costs and state oversight costs provide a reasonable proxy to assess the final UST regulation’s social costs. See Chapter 3.1 for further discussion. e Due to data and resource constraints, EPA is unable to monetize some of the positive impacts of the final UST regulation. Chapter 4 of this document provides a qualitative discussio n of these benefits. f Totals may not add up due to rounding. Cost estimates were derived using a seven percent discount rate. g The results show that all but one of the four estimates of cost savings for conventional systems exceed total regulatory cost s (including FCT and AHFDS systems). As explained in Chapter 4 and Appendix H, one of the four experts provided estimates of avoided releases and averted groundwater incidents that do not result in net cost savings to society from the Selected Option
. However, this expert also assumed a high level of noncompliance with the final UST regulation that is not consistent with the assumption of 100 percent compliance in the cost estimates. As a result, this low
- end estimate of potential cost savings likely understates the cost savings that would be associated with a consistent, 100 percent compliance scenario. See Chapter 4 and Appendix H for detailed discussion of how these assumptions affect net benefits of the final UST regulation as calculated using responses from Expert 2. **Exhibit ES -**  **5** summarizes the compliance costs and positive impacts of the final UST regulation under an alternative baseline where universes of UST s ys tems and releases are assumed to decrease at a declining rate over time. Compliance costs do not change substantiall y under the alternative baseline, while estimates of avoided costs decrease by approximately 31 percent, as the universe of releases contracts substantially under the alternative baseline. In this scenario , annual net savings to society for the Selected Option average $60 million per year. Exhibit ES
- 5 **Comparison Of Annual Compliance Costs And Cost Savings Under Alternative Baseline** c, e **Selected Option (2012$ millions)**  **Alternative 1**

**(2012$ millions) Alternative 2** 

**(2012$ millions)** Total Annual Avoided Costs a,b (range of all values in italics) $220 ($81

- $360) $310

($140

- $460) $160

($31

- $290) Total Annual Compliance Costs c $160 $290 $70 **Net Cost (Savings) T**  **o Society** c,d **[Total Com pliance Costs**  **L ess**  **Total Avoided Costs]**  (range of all values in italics) **($60)** $74

- ($210) **($25)**

$140

- ($170) **($87)**

$39

- ($220)
a Avoided costs are estimated for conventional UST systems and emergency generator tanks only. b Due to data and resource constraints, EPA is unable to monetize some of the positive impacts of the final UST regulation. Chapter 4 of this document provides a qualitative discussion of these benefits. c Compliance costs include direct compliance costs an d state oversight costs. For this regulatory impact analysis, direct compliance costs and state oversight costs provide a reasonable proxy to assess the final UST regulation’s social costs. See Chapter 3.1 for further discussion. d The results show that all but one of the four estimates of cost savings for conventional systems exceeded total regulatory costs (including FCT and AHFDS systems). As explained in Chapter 4 and Appendix H, one of the four experts provided estimates of avoided releases and averte d groundwater incidents that do not result in net cost savings to society from the Selected Option. However, this expert also assumed a high level of noncompliance with the final UST regulation that is not consistent with the assumption of 100 percent comp liance in the cost estimates. As a result, this low
- end estimate of potential cost savings likely understates the cost savings that would be associated with a consistent, 100 percent compliance scenario. See Chapter 4 and Appendix H for detailed discussion of how these assumptions affect net benefits of the final UST regulation as calculated using responses from Expert 2. e Totals may not add up due to rounding. Cost estimates were derived using a seven percent discount rate.ES
- 13

**Economic Impacts** EPA’s assessment of the economic impacts associated with this final UST regulation focused on the retail motor fuels sector, which accounts for approximately 80 percent of UST owners or operators. In this analysis, EPA describes supply and demand dynamics within the retail motor fuels market and the likely economic responses to increased compliance costs. Our screening assessment finds that average estimated facility
- level costs of $715 may result in the market exit of approximat ely 19 firms , if these firms cannot pass any regulatory costs through to customers . This represents less than 0.1 of one percent of existing retail motor fuel facilities, and an even smaller fraction of all facilities affected by the final UST regulation. 14 Incomparison, approximately

2,024 facilities per year closed over the period between 2005 and 2013. To address uncertainty related to the distribution of costs among UST facilities, we also constructed a worst - case sensitivity anal ys is, which identified the maximum number of facilities that could face significant economic impacts due to regulatory costs. We defined the worst case as the scenario where the highest possible cost occurred for the smallest facilities. We fo und that up to 4,500 facilities may exit the market in this unlikely worst - case scenario , representing 3 percent of existing retail motor fuel facilities and a similar rate to annual historical market exits
. The limited magnitude of impacts even in the worst
- case scenario suggests that the final UST regulation will not affect existing consolidation trends in the retail motor fuels industry , retail motor fuel prices , or consumption. In addition, EPA’s anal ysis suggests that the final UST regulation could result in a reallocation of costs fro m the public to private parties responsible for releases. 15 Preventing releases under this UST regulation would increase compliance costs to facility owners, but the avoided releases would in many cases reduce remediation demand for taxpayer- funded state funds. This is likely

to improve behavioral incentives, as the parties most likely to cause releases will also be responsible for preventing them. As discussed in Chapter 5, this reallocation could result in savings to state financial assurance funds in exce ss of $160 million per year. **Other Regulatory A nd Distributional Issues**  As part of our anal ys is, we assessed the final UST regulation’s potential impacts related to:

 **Energy impacts**

– The final UST regulation will not have significant adverse

effects on energy

supply , distribution, or use, including impacts on price and foreign supplies. It is, therefore, not a significant energy actio n under Executive Order 13211, Actions Concerning Regulations T hat Affect Energy Supply, Distribution, or Use (May 18, 2001).

14 Census data on num

ber of f acilities per firm indicate that virtually all firms earning less than $250,000 per year in 2007 had only one facility. We therefore use “firm” and “facility” interchangeably in this context . See chapter 5.2.3 for details.

15 For additional information regarding this issue, see Chapter 5.ES
- 14

 **Regulatory flexibility**

– EPA’s anal ys is determined that approximately 634 small entities (less than 1 percent of the universe of affected small entities) may experience economic impacts that exceed 1 percent of revenues , but only 19 of these enti ties would exit the market as a result of incurring costs greater than or equal to total profits . For various reasons, and especially due to different s ys tem configurations for smaller facilities, the actual number of affected entities is likely to be even fewer than the number estimated by the anal ys is. In comparison, this number is smaller than the recent industry consolidation rate of approximately 2,024 facilities per ye ar in the retail motor fuels sector. The final UST regulation is unlikely

to have a significant economic impact on a substantial number of small businesses or small governments.

 **Small government impacts**

– The final UST regulation is not expected to have significant small government impacts. EPA’s assessment of costs to state and local go vernments indicated that no government
- owned UST facilities will experience costs that exceed 1 percent of revenues.

 **Impacts on minority and low -**  **income populations**

– Because the final UST regulation would increase regulatory stringency

and reduce the number and size of releases, the final UST regulation is not expected to have any disproportionately

high and adverse human health or environmental effects on minority or low
- income populations, or on any community
.
 **Children’s health protection**

– Because th e final UST regulation is expected to reduce exposure to contaminated groundwater b y reducing the number and size of releases, EPA does not expect the final UST regulation to have a disproportionate environmental health risk effect on children, as defined in Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks (62 FR 19885, April 23, 1997) . Moreover, while the risk assessment did not specifically measure exposure to children, it is unclear that children are disproportionately affected in the baseline. For example, adults could be the more sensitive receptor for cancer effects of contaminated groundwater due to the longer potential exposure from showering (inhalation of vapors) compared to children (ingestion of water while bathing), particularl y those under age 5 who are assumed to take more baths and fewer showers.

 **Regulatory planning and review**

– Pursuant to the terms of Executive Order 12866 ( 58 FR 51735 , October 4, 1993), EPA determined the final UST regulation is an economicall y significant regulatory action because it may have an annual effect on the economy

of $100 million or more, as defined under part 3(f)(1) of the Order. Findings of the regulatory cost anal ys is in Ch apter 3 indicate the final UST regulation is projected to result in aggregate annual compliance costs of approximately

$160 million under the Selected Option, $290 million under Alternative 1, and $70 million under Alternative 2.ES
- 15

 **Unfunded mandates analys is** 

– The final UST regulation is subject to the requirements of sections 202 and 205 of the Unfunded Mandates Reform Act (UMRA) , because it contains federal mandates that may result in the expenditure by state, local, and tribal governments or by the private sector of $100 million or more in any one ye ar. **Exhibit ES -**  **6** provides references for EPA’s analy ses responding to UMRA requirements under which this final UST regulation is subject. Exhibit ES
- 6 **Location Of Analyses Responding To UMRA Requirements Requirement**  **Location In This**  **Document** Identification of provision of f ederal law

under which rule is being promulgated Chapter 1 Assessment of costs and benefits to s tate, local, and tribal governments and the private sector Chapters 3 and 4 Assessment of the effect on health, safety, and the natural environment Chapter 4 Assessment of the extent to which such costs may be paid with f ederal financial assistance Chapter 3; no Federal assistance is anticipated Assessment of the extent to whic h there are available f ederal resources to carry out this mandate Chapter 3; no Federal resources are anticipated Estimates of future compliance costs Chapter 3 Estimates of disproportionate budgetary effects on any type of government or private sector segment Chapter 5 Estimates of the effect on the national economy Chapters 3 and 5

 **Federalism**

– Executive Order 13132, Federalism (64 FR 43255, August 10, 1999), defines policies that have federalism implications to include regulations with substantial direct effects on states, on the relationship between the federal government and states, or on the distribution of power and respons ibilities among the various levels of government. EPA ty picall y considers a policy to have federalism implications if it results in aggregate expenditures by state or local governments of $25 million or more in any one ye ar. As **Exhibit ES -**  **7** below indicates , EPA does not expect any of the regulatory

options to have significant federalism implications. Exhibit ES
- 7 **Summary Of Annual State And Local Government Costs** b

**Element Selected Option**  **($ m illions)**  **Alternative 1**

**($ m illions)**  **Alternative 2**

**($ m illions)**  Local Compliance Costs a $5.4 $11.0 $2.8 State Compliance Costs a $1.3 $2.9 $0.70 State Government Administrative Costs $0.12 $0.12 $0.12 **Total State A**  **nd Local Governments Costs c**  **$6.8 $14.0**  **$3.6** a State and local government compliance costs are included in the total compliance costs presented in Exhibit ES
- 2. b Cost estimates were derived using a seven percent discount rate. c Total may not sum due to rounding.ES
- 16

 **Tribal governments analysis**

– Executive Order 13175, Consultation and Coordination W

ith Indian Tribal Governments (65 FR 67249, November 9, 2000), requires EPA to develop an accountable process to ensure meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications. EPA consulted with tribal officials earl y in the process of developing this UST regulation to welcome meaningful and timel y input into its development. EPA began its consultation with tribes on possible changes to the UST regulation shortly

after the passage of the Energy Policy Act of 2005. In addi tion to our earl y consultation with tribes, EPA again reached out to the tribes as we started the official regulatory process and throughout the development of the UST regulation . EPA sent letters to leaders of over 500 tribes , as well as to tribal regulatory

staff , inviting their participation in develop ing the regulation
. EPA heard from both tribal officials who work as regulators as well as representatives of owners and operators of UST s ystems in Indian country . The tribal regulators raised concerns about ensuring parity of environmental protection between states and Indian country . The changes to the UST regulation are needed to ensure parity between UST systems in states and in Indian country . This final UST regulation will ensure installed equipment i s working properl y and protect s the environment from potential releases. As part of this anal ys is, EPA concluded that the final UST regulation will have tribal implications to the extent that tribally
- owned entities with UST systems on Indian country

would be affected. However, it will neither impose substantial direct compliance costs on tribal governments, nor preempt tribal law. Total costs to owners and operators of tribally
- owned UST sy stems are approximately $0.67 million.


###  **Joint impacts of regulat ions** 

– Facilities in the UST sy stem universe are affected by a number of existing regulations, including state regulations and Spill Prevention, Control, and Countermeasure (SPCC) regulations. At the time of the 1988 UST regulation, completely buried tanks greater than 42,000 gallons and located near navigable waters of the United States or adjoining shorelines were subject to both the UST regulation and SPCC regulation . Currently , a subset of UST sy stems in the universe is regulated b y SPCC; these include EGTs, AHFDSs, and FCTs. To the extent that the requirements imposed on these UST sy stems via the final UST regulation are more or less stringent than the SPCC regulation currently

governing them, the final UST regulation may cause an increase or a reductio n in overall inspection and monitoring requirements and costs for these UST s ys tems. To account for this, EPA generated baseline assumptions for these s ys tems using information from the Department of Defense, the owner of the majority of all AHFDSs and FCT s. EGTs are assumed to incur all incremental costs beyond state regulatory baseline costs; to the extent that these sy stems are regulated under SPCC, this may overstate costs. EPA does not believe that the final UST regulation creates a serious inconsisten cy or interferes with any other actions planned or undertaken by other agencies.1
- 1



### Chapter **1 .**  **Intr oduction**  This document presents an anal ys is by the U.S. Environmental Protection Agency (EPA) Office of Underground Storage Tanks (OUST) of the costs, benefits, and economic impacts of the final targeted changes to the underground storage tank (UST) regulation. The final UST regulation serves the purpose of strengthening the existing UST regulation by increasing the emphasis on proper operation and maintenance of UST systems and improved maintenance of release detection equipment. The changes anticipated under this final UST regulation also acknowledge improvements in technology over the last 25 ye ars, including the ability to perform release detection for many tank sy stems that were previously deferred. **1.1 Background**  In 1984, Congress responded to the increasing threat to groundwater from leaking UST sy stems by

adding Subtitle Ito the Solid Waste Disposal Act (SWDA). SWDA required EPA to protect the environment and human health from UST releases b y developing a comprehensive regulatory

program for UST sy stems sto ring petroleum or certain hazardous substances. In 1986, Congress amended Subtitle Iof SWDA and created the Leaking Underground Storage Tank Trust Fund (LUST Trust Fund) to oversee and pay for cleanups at sites where the owner or operator is unknown, unwi lling to pay , or unable to pay
. EPA promulgated the UST regulation in 1988 (40 CFR Part 280). This regulation set minimum standards for new tanks and required owners and operators of existing tanks to upgrade, replace, or close their existing tanks
. The 1988 regulation set deadlines for owners and operators to meet the new requirements. By 1998, owners and operators had to meet new UST sy stem requirements, upgrade their existing UST sy stems, or close them. Owners and operators who chose to upgrade had to ensure that every UST sy stem had spill prevention equipment (e.g., spill buckets), overfill prevention equipment, and was protected from corrosion. Inaddition, owners and operators were required to monitor their UST sy stems for releases using release dete ction (phased in during the 1990s depending on the year of installation of each UST sy stem). Finally , owners and operators were required to have financial responsibility (phased in through 1998) to ensure that they

are financiall y able to pay for any relea ses that occur. No significant changes have been made to these requirements since 1988. In 1988, EPA also promulgated a regulation for state program approval (40 CFR Part 281). Since states are the primary implementers of the UST program, EPA wanted to s et up a process where state programs could operate in lieu of the federal program if certain requirements were met. Th i s regulation describe s the minimum requirements states must meet to have their regulations operate in lieu of the federal regulation. In 2005, the Energy

Policy Act (EPAct) further amended Subtitle Iof SWDA. The EPAct requires states that receive federal Subtitle Imoney from EPA to meet certain requirements. EPA developed grant guidelines for states regarding : operator training ; inspec tions ; delivery prohibition ; secondary

containment ; financial responsibility for manufacturers and installers ; public record; and state compliance reports on government UST s ys tems.1
- 2

**1.2 Need**  **for Regulatory Action**  After Congress passed EPAct, EPA decided to revise the 1988 UST regulation (at 40 CFR Part 280), primaril y to ens ure parity in Indian c ountry . Key EPAct provisions (such as secondary containment and operator training) apply to all states receiving federal Subtitle I money , regardless of their state program approval status; but these key provisions do not apply

in Indian country

(or in states and U.S. territories that do not meet EPA’s operator training or secondary containment grant guidelines). In order to establish federal UST requirements similar to the UST secondary

containment and operator training requirements of EPAct, EPA decided to revise the 1988 UST regulation. Without these changes, EPAct provisions will not apply in Indian country
. These revisions will also fulfill the objectives of the EPA
- Tribal UST Strategy (August 2006) in which both EPA and tribes recognized the importance of ensuring parity in implementing UST program requirements in states and territories, as well as in Indian country
. 16 EPA decided that this is also an approp riate time to change the 1988 UST regulation to reflect technology

improvements, address outdated requirements, and place a stronger emphasis on operations and maintenance
. While EPA has issued many guidance documents and used various implementation approaches and techniques over the last 25 years, we have not made significant changes to the original 1988 UST regulation. Indeed, most states have passed requirements that go far beyond the 1988 UST regulation that provide greater environmental protection
. The se state regulations full y implement provisions of the EPAct and improve other important areas of the 1988 UST regulation that have become outdated. Furthermore, while information on sources and causes of releases show that releases from tanks are less co mmon than they once were , releases from piping and spills and overfills associated with deliveries have emerged as more common problems. 17 Inaddition, failures of equipment and operation s at the dispenser have emerged as one of the leading sources of releases. The lack of proper operation and maintenance of UST sy stems is a main cause of release from these areas. D ata also indicate that release detection equipment only detects about one quarter of all releases. 18 While some of those releases occur in ar eas not required to have release detection equipment , other releases that should be detected are not because of problems with the operation and maintenance of the release detection equipment.

16 See: U.S. Environmental Protection Agency, Office of Underground Storage Tanks. Strategy for an EPA/Tribal Partnership to Implement Section 1529 of the Ene rgy Policy Act of 2005. August 2006. Accessed at: http://www.epa.gov./oust/fedlaws/Tribal%20Strategy_08076r.pdf.

17 U.S. Environmental Protection Agency, Office of Underground Storage Tanks. “Evaluation of Releases from New and Upgraded Underground Storage Tank Systems (peer review draft).” August 2004; and U.S. Environmental Protection Agency, Office of Underground Storage Tanks. “Petroleum Releases at Underground Storage Tank Facilities in Florida.” March 2005.

18 About 50 percent of all releases go undete cted because they occur in areas where release detection is not required (and therefore is not designed to detect a release). Approximately half of the remaining 50% that should be detected still go undetected partly because of issues with operation and ma intenance of the release detection equipment. (U.S. Environmental Protection Agency, Office of Underground Storage Tanks. “Petroleum Releases at Underground Storage Tank Facilities in Florida.” March 2005. p. 26.)1
- 3

Since the beginning of the UST program, preventing petroleum re leases into the environment has been one of the program’s primary goals. EPA and our partners have made major progress in reducing the number of new releases, but over 5 ,000 releases are still discovered each ye ar. Because existing publicl y- funded mechanis ms and institutions frequently cover at least part of the costs of release remediation, many owners and operators of UST sy stems do not bear the full costs of their actions. Petroleum releases thus represent a negative externality

caused b y US T sy stem operators, as the individuals and firms that cause releases do not bear their full costs. This represents a failure of the market to full y internalize the cost to society of operating an UST sy stem: private costs do not equal social cost s. 19 A combination of revised technical standards and inspection and testing requirements represents the most appropriate method for reducing the number of future releases and mitigating the impact of existing negative externalities. In revising the 1988 regulation, EPA wante d to make sure the regulation development process was open and transparent and that all stakeholders had an opportunity to share their ideas as well as their concerns. From the beginning of this process, EPA recognized the concerns about costs on owners an d operators and was committed to limiting the requirements for retrofits. We reached out to all stakeholders, including state and tribal regulators, federal facilities, members of the petroleum industry including representatives of owners and operators as well as equipment manufacturers, small businesses, local governments, and environmental and community groups. Over a two
- year period, we held conference calls, solicited comments and provided multiple opportunities for stakeholders to share their ideas as well as for us to keep them informed of where we were in the process. From this extensive stakeholder outreach, EPA compiled potential propose d changes to the UST regulation
. EPA shared all ideas with stakeholders and gave them an opportunity to comment on each idea. We then revised the list of potential changes and added items based on data, anal ys is , and consideration of costs and benefits. Ultimately , EPA identified the items in the proposed UST regulation as those which needed regulatory changes at the time ; the proposed UST regulation was issued in November 2011 for a 90
- day public comment period. EPA then extended this public comment period for an additional 60 day s. EPA received submissions from over 19 0 commenters. Based on these comments, EPA rev ised the 2011 proposed UST regulation and is now finalizing the UST regulation , as described below
. **1.3 Summary**  **of the Final UST regulation**  EPA is revis ing the UST regulation to: establish federal requirements that are similar to certain key

provisions of the Energy Policy Act; ensure owners and operators perform proper operation and maintenance; address UST sy stems deferred in the 1988 UST regulation ; update the regulation to current technology and practices; and make technical and editorial corrections.

19 We refer here to mechanisms other than those whose specific purpose is to fund remediation for new releases from UST systems. For example, if owners and operators in a particular state are compelled to participate in a fund operated by a public (or private) entity, and the contributions made dir ectly by the owners and operators are equal to all the remediation costs, such a policy overcomes the market failure. However, when taxpayers are required to cover any portion of remediation costs through general funds or revenues obtained for other purpos es, the negative externality will not be rectified.1
- 4

Specificall y, EPA is requiring the following set of revisions (hereafter referred to as the Selected Option):

 Establish federal requirements for secondary containment and operator training similar to those established by EPAct for states that receive feder al Subtitle I money
 Add operation and maintenance requirements o Walkthrough inspections o Overfill prevention equipment inspections o Spill prevention equipment tests o Containment sump test s o Operability

test s for release detection equipment

 Address UST sy stems deferred in the 1988 UST regulation 20 o Remove release detection deferral for emergency generator tanks o Remove deferrals for airport hydrant fuel distribution systems (AHFDS s ) and UST sy stems with field
- constructed tanks (FCT s )

 Provide for other changes to improve release prevention and detection and program implementation o Require testing after repairs to spill and overfill prevention equipment, and secondary containment o Eliminate flow restrictors in vent lines as an overfill prevention option f or all new tanks and when overfill prevention equipment is replaced o Require closure of lined tanks that cannot be repaired according to a code of practice o Address responses to interstitial monitoring alarms o Retain vapor monitoring and groundwater monitoring as methods of release detection for tanks and piping (for those installed before the effective date of today ’s final UST regulation) only if owners and operators demonstrate proper installation and performance through a site assessment o Require n otific ation of ownership change o Establish requirements for demonstrating compatibility with fuels containing greater than E10 and greater than B20

 Make general updates to the UST regulation

20 In the final UST regulation, EPA is also addressing the 1988 regulatory deferrals of wastewater treatment tank systems that are not part of a wastewater treatment facility regulated under sections 402 o r 307(b) of the Clean Water Act, USTs containing radioactive material, and emergency generator UST systems at nuclear power generation facilities regulated by the Nuclear Regulatory Commission. However, because these regulatory changes will not result in any incremental costs to the regulated community, this RIA does not factor these systems into any part of the analysis.1
- 5 o Reference newer technologies, including explicitly adding statistical inventory reconciliation (SIR) and continuous in
- tank leak detection (CITLD) as release detection methods o Update codes of practice listed in the UST regulation o Remove old upgrade and implementation deadlines o Make editorial and technical corrections

 Revise the s tate p rogram a pproval regulation (40 CFR Part 281) to be consistent with the above revisions **1.4 Alternative Regulatory Options**  In addition to assessing the impacts of the Selected Option, this document assesses the costs, benefits, and econom ic impacts of two regulatory alternatives, as outlined in **Exhibit 1 -**  **1.** Please refer to the preamble for a discussion of the rationale behind the development of these two alternatives. While some of the regulatory requirements remain constant across all alternatives, EPA evaluated variations in the subset of proposed requirements that change across alternatives
. The differences between the three regulatory options considered in this regulatory impact anal ys is are described in **Exhibit 1 -**  **1**
. Note that each option (i.e., Selected, Alternative 1, and Alternative 2) considered by EPA contains a set of new requirements that does not vary across these options. EPA believes the requirements in this set represent, at a minimum, changes that need to be included in the final UST regulation . Specifically , these requirements are:

 Testing after repairs to spill and overfill prevention equipment, and interstitial spaces
 Adding SIR/CITLD to regulation with performance criteria

 Reporting and testing for interstitial alarms

 Removing the deferral for release detection for emergency generator tanks

 Notification of ownership change

 Closure of lined tanks that cannot be repaired according to a code of practice; and

 Requiring operator training and secondary containment21

21 As explained in the introduction, operator training and secondary containment are being finalized in order to ensure parity in program im plementation among states and in Indian country.1
- 6

Exhibit 1
- 1 **Options Considered For The Final UST regulation**  **Requirement Description Options**  **Selected Alternative 1**  **Alternative 2 Release Prevention**  Walkthrough inspections 30
- day 30
- day ( as proposed in Nov 2011 ) Quarterly Overfill prevention equipment inspections 3 year Annual Not required Spill prevention equipment tests 3 year Annual 3 year Containment sump testing 3 year Annual Not required Testing after repairs to spill and overfill prevention equipment, and secondary containment Required Required Required Eliminate flow restrictors in vent lines for all new tanks and when overfill prevention equipment is replaced Required Required No change from existing regulation **Release Detection** Operability test s for release detection equipment Annual (plus annual check of sumps) Annual ( as proposed in Nov 2011 ) Annual (plus annual check of sumps) Add SIR/CITLD to regulation with performance criteria Required Required Required Response to interstitial monitoring alarms Required Required Required Groundwater and vapor monitoring for release detection Continue to allow with site assessment 5
- ye ar phase out (as proposed in Nov 2011) No change from existing regulation Remove release detection deferral for emergency generator tanks Required Required ( as proposed in Nov 2011 ) Required **Other** Require notification of ownership change Required Required Required Closure of lined tanks that cannot be repaired according to a code of practice Required Required Required Requirements for demonstrating compatibility with fuels > E10 and >B20 Required Required ( as proposed in Nov 2011 ) No change from existing regulation Remove deferrals for airport hydrant fuel distribution systems and UST systems with field
- constructed tanks Regulate under alternative release detection requirements Require AHS/FCT notify implementing agency and report releases (with no other requirements) Maintain deferral **EPAct -**  **related Provisions** Operator training Required Required Required Secondary containment Required Required Required * In the 2011 proposed regulation , these changes generally consisted of more or stricter requirements than what is in the final UST regulation. For example, the 30
- day walkthrough inspections in the 2011 proposed UST regulation included monthly check of sumps. Please see the 2011 proposed UST regulation for details. Many of the requirements in the final UST regulation will not immediately impose new costs upon UST owners or operators. For example, new requirements for periodic testing of equipment do not require owners or operators to perform those tests at the time the regulation comes into effect; depending on the re quirement, owners or operators may have up to three ye ars to satisfy the new requirements
. 22 EPA’s anal ys is accounts for this delay in its estimate of costs by discounting the costs associated with each requirement as shown in **Exhibit 1 -**  **2** . EPA

22 Please refer to the preamble section for each requirement for a discussion of the implementation periods.1
- 7

assumes that the monetized positive impacts associated with these requirements accrue at the end of the year in which costs occur since some beneficial impacts may lag requirements. 23 Exhibit 1
- 2 **Years Until Final**  **Requirements Becom e Effective** 

**Requirement Number of**  **years until effective**  **Release Prevention** Walkthrough inspections 3 a Overfill prevention equipment inspections 3 Spill prevention equipment test s 3 Containment sump testing 7 3 **Release Detection** Operability test s for release detection methods 3 b Remove deferral for emergency generator tanks 3 c **Other** Remove deferral for airport hydrant fuel distribution systems (Subparts B, C, D and H ) 24 3 Remove deferral for UST systems with field
constructed tanks (Subparts B, C, D and H ) 9 3 **EPAct -**  **related Provision**  Operator training 3 Please refer to the preamble section for each requirement for a discussion on the rationale behind the delayed implementation periods.

a This requirement is effective immediately under Alternative 1. b This requirement is effective after one year under Alternative 1. In addition, under Alternative 1, groundwater and vapor monitoring are eliminated as release detection methods and must be phased out within five years. c This requirement is effective after one year under Alte rnative 1. Finally , EPA is including a set of revisions and clarifications that are not expected to have any economic impact, due to either the nature of the requirement or the interaction between the new UST regulation and existing regulation. The only cost associated with these clarifications and changes is the cost of reading the new regulation. These revisions include:

 Updating the regulation to reference newer technologies

 Updating the codes of practice listed in the regulation

23 EPA does not have data to suggest any particular length of lag for each requirement; for this analysis, we assume that benefits accrue at the end of the year in which costs occur. Chapters 3 and 4 provide detailed descriptions of the methods used to assess costs and beneficial impacts.

24 Removing deferrals for airport hydrant fuel distribution systems and field
- constructed tanks will require these systems to comply with Subpart B, C, D, E, G, H, and J of 40 CFR Part 280 (as described in Subpart K). The final UST regulation requires these systems to comply with Subparts B, C, D , H, and J after 3 years, while compliance with Subparts E and G would be required immediately.1
- 8

 Updating the regulatio n to remove old upgrade and implementation deadlines

 Updating the regulation for editorial and technical corrections

 Revising the State Program Approval regulation (40 CFR Part 281) to be consistent with the above revisions **1.5 Scope**  **of Analysis**  Within the constraints of data availability , this analy sis attempts to capture all quantifiable and qualitative impacts of the final UST regulation . EPA obtained sufficient data to identify , by

state, the number of units likely to be affected b y each chang e in the regulation . The anal ys is uses these data to assess the compliance costs on these units and relevant state governments. In conducting these anal ys es, EPA also assessed the sensitivity of outcomes to key assumptions. Separatel y, the anal ys is monetiz es a number of positive impacts of the regulation , including the avoided cost s generated b y avoided releases and reduction in severity of releases, avoided product loss, and avoided vapor intrusion damages. This anal ys is quantifies, but does not value, gro undwater impacts. Finall y, due to data and resource limitations, this analysis was unable to quantify

or value human health benefits or ecological impacts, but addresses these qualitatively
. In addition to identifying costs and the positive impacts of th e regulation , this analy sis also examines the economic and distributional impacts of the regulation . The economic impact anal ys is includes the final UST regulation ’s effect on facility closures, employ

ment, and energy output and cost. The analysis of the distributional impacts of the regulation examines the effect of a reduction in releases on state financial assurance funds, impacts on children ’ s health, small business impacts, and impacts on low
- income and minority populations. Finally , this anal ys is cons iders the final UST regulation ’s impacts related to certain executive orders and statutes, including the Unfunded Mandates Reform Act, tribal g overnments, and f ederalism. **1.6 Report Organization**  To support the development of the final UST regulation , EPA designed and conducted this analy sis of the regulation’s costs, benefits, and economic impacts consistent with the requirements of Executive Order 12866, and OMB Circular A
- 4. 25 Data, methods, and results of this analy sis are presented in the followin g chapters:

 **Chapter 2: Universe of UST Systems Affected by the Final UST regulation**  **.** This chapter identifies a profile of the entities that may be affected b y the final UST regulation
.  **Chapter 3: Assessment of Compliance C**  **ost s.**  This chapter summarizes the methods employed b y EPA to assess the cost impacts of the final UST regulation
.

25 Executive Order 12866. “Regulatory Planning and Review.” October 4, 1993; and U.S. Office of Management and Budget. Circular No. A
- 4. September 17, 2003.1
- 9

 **Chapter 4: Assessment of Benefits and Cost Savings.** This chapter presents estimates of the benefits and avoided costs of the final UST regulation
.  **Chapter 5: Distributional I mpacts and Considerations.**  This chapter summarizes the assessment of distributional impacts of the final UST regulation , including economic and energy

impacts, effects on small businesses and governments, impacts on low
- income and minority populations, and children's health effects.

 **Chapter 6: Other Statutory and Executive Order Analyses.** This chapter summarizes analy ses required by certain statutes or executive orders, including regulatory

planning and review, impacts created by unfunded mandates, federali sm implications, effects on tribal governments, and joint impact s of the final UST regulation in the context of existing regulation s.
 **Chapter 7: Comparison of Costs, Benefits, and Other Impacts.**  This chapter summarizes and compares the costs, cost savings, and benefits of the final UST regulation
.  **Appendices.** We present the details of methods and assumptions we employ in a number of appendices.2
- 1



### Chapter 2 **. Universe of UST Systems**  **Affected by the Final UST regulation**  This regulatory

impact analy sis addresses the effects of the final regulatory changes on four ty pes of UST s ys tems: conventional UST systems with prefabricated tanks that store and dispense petroleum products; emergency generator tank sy stems that store fuel fo r occasional use; UST sy stems with field
- constructed tanks that are typicall y designed to store large volumes of fuel; and airport hydrant fuel distribution systems that provide large volumes of fuel to aircraft using underground distribution systems. This chapter describes the universe of s ys tems, facilities, firms, and sectors that are likel y to be affected b y the final regulatory changes, and documents the extent to which state regulations already require compliance with the final UST regulation
. **2.1 Typ**  **es of Entities Affected by the Final UST regulation**  The four types of UST systems that are potentiall y affected b y the final UST regulation are characterized as follows:
 **Conventional UST systems (conventional USTs):** These s ys tems include the universe of facilities and tanks that are currently subject to existing regulations, along with ancillary

equipment (e.g., piping, dispensers, sumps, spill prevention equipment, and release detection equipment). The majority of these s ys tems store and dispense petroleum products and are typicall y found at gas stations. A limited number store other hazardous substances, but the regulatory impact anal ys is does not consider these UST sy stems separatel y. 26 These UST sy stems are subject to all requirements under 40 CFR Part 28 0.

 **Emergency generator tank systems (EGTs):** Emergency generator tank sy stems refer to the tanks and piping for s ys tems that provide longer
- term storage of fuel for occasional use as a back
- up fuel suppl y. These tanks are currently deferred from 40 CFR Part 280 Subpart D (release detection) but are subject to all other requirements under 40 CFR Part 280. The final UST regulation does not address emergency

tanks at nuclear power plants, which are regulated by the Nuclear Regulatory

Commission under 10 CFR Part 50, appendix A. 27

 **UST systems with field -**  **constructed tanks (FCTs):** Field
- constructed tanks are underground bulk storage tanks that are built on
- site because they are too large to be pre
- fabricated. All identified field
- constructed tanks currently in operation are owned b y federal facilities and mainly serve operations at military bases. These tanks are currently

deferred from all regulation under 40 CFR Part 280, except for Subparts A and F, but are ty picall y subject to regulation under the Oil Pollution
26 Because tanks storing hazardous substances are also currently subject to the 1988 UST regulation under 40 CFR Part 280, this analysis assumes that incremental costs and benefits associated with the final UST regulation will be comparable to the costs and benefits associated with other conventional UST systems. Although hazardous substance tanks are not included in the total number of active petroleum UST systems, EPA roughly estimates that less than one p ercent of all active regulated UST systems contain hazardous substances.

27 See 40 CFR 280.10 Subpart A

– Applicability.2
- 2 Act of 1990, 40 CFR Part 112 (EPA’s Spill Prevention, Control, and Co untermeasure regulation).

 **Airport Hydrant Fuel Distribution Systems (AHFDSs):** Airport hydrant fuel distribution systems are sy stems that include one or more tanks (either above
ground or underground), underground piping, and underground ancillary equipment used to fuel aircraft. These s ys tems do not ty picall y have a dispenser at the end of the piping run, but instead have a pressurized hydrant (fill stand). Large commercial and military

airports employ

these s ys tems, but most commercial sy stems have only

ab ove - ground storage tanks and are thus not affected by the final UST regulation
. 28 These s ys tems are currently deferred from all regulation under 40 CFR Part 280, except for Subparts A and F, but are ty pically subject to regulation under 40 CFR Part 112. **2.2 Configuration of Average Conventional UST System**  Conventional UST sy stems reflect a relativel y consistent configuration of standard equipment. While facility size and complexity

vary significantly , this analy sis assumes that a ty pical (average) convention al UST sy stem is configured as follows ( **Exhibit 2 -**  **1** ): 29

Exhibit 2
- 1 **Assu med Average Configuration For A Conventional UST System** 

**System Com** **ponent Configuration**  Pipes per tank 1 Feet per pipe 100 Fill pipes (per tank) 1 Spill prevention equipment (per fill pipe) 1 Under
- Dispenser Containment (UDC) (per tank) 2 Turbine sumps (per tank) 1 These assumptions best characterize motor fuel retailers, which represent approximately 80 percent of the 577,9 8 1 conventional UST sy stems in operation in 201 3
. 30 EGT sy stems and other conventional UST sy stems used to store fuel or hazardous substances are likel y to have

28 Industrial Economics, Inc. “Preliminary Assessment and Scoping of Data Related to Potential Revisions to the UST Regulations.” Work As signment 1
- 25, Tasks 2
- 4 November 20, 2008.

29 Assumptions based on data collected from pipe installation companies, state data, and EPA professional judgment. See: Industrial Economics, Inc. "Methodology for Secondary Containment for Piping." Work Assignme nt 1
- 19, Task 5, October 3, 2008; and E 2 , Incorporated. Memoranda and analyses submitted under Contract EP
- W
- 05
- 018, “U.S. Environmental Protection Agency. Underground Storage Tanks/Leaking Underground Storage Tanks Analytical and Technical Support.” Where gaps existed in the analyses, EPA used the best professional judgment of its UST system technical experts. All supporting materials not included in the appendices can be found in the docket for the final UST regulation
.

30 The remaining 20 percent of conve ntional UST systems consist of EGTs and tanks used for storing and dispensing fuel in commercial settings, hospitals, manufacturing, transportation, communications and utilities, and agriculture. See Exhibit 2
- 3 for details.2
- 3

sy stems with similar components but less complex dispenser s ys tems. The configurations of FCTs and AHFDSs are considered separately, and are descr ibed in detail in Appendix A. **Exhibit 2 -**  **2** provides an illustration of an UST system at a retail motor fuel establishment. Note that in this exhibit, the “dispenser sump” is a specific form of under
- dispenser containment, and the “spill bucket” is an exampl e of spill prevention equipment. **Exhibit 2 -**  **2 Configuration of Retail Motor Fuel UST System** 

**2.3 UST Universe Size and Distribution Across Sectors**  The December 201 3 Semi
- A nnual Report of UST Performance Measures reports a universe of 577 , 9 8 1 active petroleum tanks (UST systems) in the United States and its territories. 31 , 32 This total includes conventional UST systems and emergency generator tank 31 U.S. Environmental Protection Agency, Office of Underground Storage Tanks. Semi
- Annual Report of UST Performance Measures End of Fiscal Year 2013

– As Of September 2013 . Accessed at: http://www.epa.gov/oust/cat/ca
- 13
- 34.pdf. State and territory underground storage tank programs report to EPA periodically throughout the year w ith data on their UST performance. EPA compiles the data for all states, territories, and Indian country and makes the data publicly available at http://www. epa.gov/OUST/cat/camarchv.htm
.

32 Data indicate that the universe of UST systems has declined steadily over the past tw o decades. To consider the impacts of declining universe sizes on the results of this analysis, we construct and evaluate an alternative baseline for compliance costs and avoided costs in Chapters 3.4.1 and 4.4.1, respectively.2
- 4

sy stems. Estimates based on state data suggest that approximately 3.0 percent, or 17, 339 of the 577,981 active UST s ys tems, are emergency generator tanks. 33 In addition to EGT and c onventional UST sy stems, the final UST regulation addresses UST sy stems with FCTs and AHFDSs. While these two ty pes of s ys tems are deferred under current EPA regulation , a subset may be regulated by

individual states and included in the total estimate of t anks provided by those states. For the purpose of this anal ys is, however, these two universes are considered to be separate from the 577,981 tanks identified in the 201 3 EPA report. The total universe of UST sy stems with FCTs and AHFDSs includes approximat ely 334 UST sy stems with FCTs, and 74 AHFDSs (each hydrant sy stem is supported by an average of roughl y eight linked tanks) operated by the U.S. Department of Defense (DoD), 12 FCTs operated by the U.S. Department of Energy (DoE) and 10 AHFDSs operated at commercial airports. 34 Most UST systems in the United States are located at motor fuel retail establishments (i.e., gas stations), and virtually all retail motor fuel establishments use UST sy stems. Approximately 148 ,000 ( 147 , 902 ) retail fueling sites operated in the United States in 201 3
. 35 Of these, approximately

12 7 ,000 included convenience stores. 36 An anal ys is of state data by EPA concludes that the average retail motor fuel establishment has 3.07 tanks (UST sy stems). 37 Assuming approximately 3.0 7 UST sy s tems per facility and 147,902 facilities, 454,774 UST systems, or 79 percent of all active UST sy stems, are associated with retail motor fuel establishments. In addition to traditional motor fuel retailers, big
- box retailers, or hy permarkets, represent a growing segment of the retail motor fuel seller market. This category (NAICS code 452910) includes stores operated by Wal
- Mart, Costco, and other large compani es. Collectively , these

33 See: Industrial Economics, Inc. “Detailed Assessment of UST Universe by Tank Use and Industry Sector,” Work Assignment 1
- 25, Task 6, January 23, 2009. The number o f EGTs is assumed to be approximately 3.0 percent of all active UST systems based on the weighted average from four state databases.

34 Based on a meeting with Department of Defense in March 2013 and supplemental information provided to EPA in April 2013. I n addition, EPA identified 10 commercial airports with AHFDSs subject to the final UST regulation . DoE FCTs were identified from: U.S. Department of Energy. “U.S. Department of Energy Underground Storage Tank (UST) Compliance Strategy Report,” July 31, 200 6. This report identifies 12 DoE FCTs in South Carolina. See Appendix A for additional information.

35 National Association of Convenience Stores. Who Sells America’s Fuel? Accessed at: http://www.nacsonline.com/YourBusiness/FuelsReports/GasPrices_2014/Reta il
- Operations/Pages/Who
- Sells
Americas
- Fuel.aspx. According to NACS, there were 152,995 total retail motor fuel sites in the United States in 2013. Of these, 5,093 were “hypermarketers,” which are big
-box stores and other merchandisers that also sell motor fuels. 36 Ibid
.

37 A 2006 analysis of 13 state UST databases performed for EPA estimated that the average retail motor fuel establishment (i.e., facility) has 3.13 tanks. Adjustments to reconcile various estimates of the current universe of USTs with indus try estimates of the number of UST systems currently in place at retail motor fuel facilities further decreases the number of tanks per UST system operating in retail motor fuel settings to 3.07 tanks per retail motor fuel facility. See: Industrial Economi cs, Inc. “Small Entities Screening Analysis of UST Universe by Industry Sector.” Work Assignment 3
- 25, Task 4, February 4, 2010.2
- 5

firms operate approximately 5,1 00 filling stations; each station is likely to have at least three UST sy stems. 38 Other industry

sectors that report use of UST sy stems include agriculture (crop production and animal production), comm ercial (wholesale trade, retail trade, accommodation, and food services), communications and utilities (wired telecommunications carriers and electric power generation, transmission, and distribution), hospitals, manufacturing, transportation, local and st ate government operations, and federal facilities run by the U.S. Departments of Defense and Energy
. Collectivel y these sectors comprise approximately 120,000 UST sy stems, including those in the government sector ( **Exhibit 2 -**  **3** ). In many cases, firms in these sectors use UST sy stems for fueling fleets of vehicles such as school buses, delivery trucks, or rental cars. In other cases, UST sy stems store fuel for operations or emergency use, used oil, or hazardous substances. Facilities in sectors other than retail motor fuel have, on average, between 1.5 and 2.0 UST sy stems at the facilities that use UST sy stems. The actual number of UST sy stems at a specific facility , however, is likely to vary significantly

depending on facility

size and focus. 39 Results of an anal ys is of public UST records of 54 states and territories performed for EPA suggest that the average number of UST s ys tems per facility (across all sectors that use conventional UST sy stems or EGTs), is approximately 2.7 1
. 40

38 National Association of Convenience Stores. Who Sells America’s Fuel? Accessed at: http://www.nacsonline.com/YourBusiness/FuelsReports/GasPrices_2014/Retail
- Operations/Pages/Who
- Sells
Americas
- Fuel.aspx.

39 E 2 , Incorporated. Review of state databases, “Draft Industry and Facility Profiles,” Task Order No. 1010

– General Technical and Programmatic Support in Implementing the Energy Policy Act of 2005 . December 18, 2006. 40 Skeo Solutions. “Summary of Key Data from State Public Record Postings,” Work Order 1006 , T able 1, October 25, 2013.2
- 6

Exhibit 2
- 3 **Summary O f Universe Of UST System**  **s By Sector**

**Industry Sector NAICS**  **2009** a **201 3**  b **Number of Facilities**  **with UST System** **s Number** 

**of UST System** **s Number of** 

**Facilities with UST**  **System s**  **Number**

**of UST System** **s** Retail Motor Fuel Sales 447 161,768 481,108 147,902 454 , 774 Commercial (w

holesale trade, retail trade, accommodation, and food services) 42, 44
- 45, 72 (excluding 447) 21,652 49,793 2 7,356 47, 068 Institutional (hospitals only) 622 2,220 3,631 2 ,098 3,4 32 Manufacturing 31
- 33 8,822 14,536 8, 339 13, 740 Transportation (air, water, truck, transit, pipeline, and airport operations) 481, 483
- 486, 48811 8,153 14,422 7,7 07 13, 6 3 3 Communications and Utilities (wired telecommunications carriers; and electric power generation, transmission, and distribution) 5171, 2211 6,641 9,738 6, 278 9,2 05 Agriculture (crop and animal production) 111, 112 847 1,534 8 01 1,4 50 Local governments c Government jurisdiction n/e 24,458 n/e 23, 119 State governments c Government jurisdiction n/e 6,114 n/e 5, 780 Federal government c Government jurisdiction n/e 6,114 n/e 5, 780 **Total: Conventional UST systems and EGTs**  **210,103 d**  **611,449 200,480**  **d 577**  **, 981**  FCTs: Department of Defense Government jurisdiction 239 239 334 334 FCTs: Department of Energy Government jurisdiction
-- -- 12 12 AHFDSs: Department of Defense Government jurisdiction 162 1,296 e 7 1 592 e AHFDSs: Commercial Airports 4581
-- -- 10 64 **Total: FCTs and AHFDSs 401**  **1,535 430**  **1,002** a Analysis based on E 2 , Incorporated. Review of state databases, “Draft Industry and Facility Profiles,” Task Order No. 1010

– General Technical and Programmatic Support in Implementing the Energy Policy Act of 2005, Amendment 1, TDD #11
. December 18, 2006. Estimate of 168,987 retail motor fuel facilities with UST systems from “2005 U.S. motor fuel station count: 168,987,” National Petroleum News , May 19, 2005 (annual survey of states to collect data on number of stations), adjusted to reflect 2009 universe of 611,449 UST systems. All sector adjustments proportional except retail motor fuel sales, which reflects the 2008 estimate of 161,768 facilities with UST systems from National Petroleum News. "MarketFacts 2008 Overview." August 2008 , used as a proxy for the number of such facilities in 2009. (See also : Industrial Economics, Inc. “Preliminary Assessment and Scoping of Data Related to Potential Revisions to the UST Regulations.” Work Assignment 1
- 25, Tasks 2
- 4 November 20, 20 08. ) b Analysis based on 2009 co lumn (see note a above), adjusted to reflect 2013 universe of 577,981 UST systems. All sector adjustments proportional except retail motor fuel sales, which reflects the 2013 estimate of 147,902 facilities with UST syst em s from National Association of Convenience Stores
. Who Sells America’s Fuel? Accessed at: http://www.nacsonline.com/YourBusiness/FuelsReports/GasPrices_2014/Retail
- Operations/Pages/Who
- Sells
- Americas
Fuel.aspx
. The NACS Retail Fuels report noted 152,995 total facilities dispensing motor fue l commercially, of which 5,093 are hypermarketers and not included in the retail motor fuel sales category. (See also : Industrial Economics, Inc. “Preliminary Assessment and Scoping of Data Related to Potential Revisions to the UST Regulations.” Work Assignment 1
- 25, Tasks 2
- 4 November 20, 2008 .) c See : ICF. "Economic Impact Analysis of Additional Mechanisms for Local Government Entities to Demonstrate Financial Responsibility for Undergro und Storage Tanks." December 1992. Exhibit 3
- 1. Estimates of local government UST systems adjusted using the 1987 Census of Governments. Consistent with this analysis, the number of government UST systems is assumed to be two percent of all 201 3 UST systems owned by state and federal gover nments and four percent of all 201 3 UST sy stems owned by local governments. d The totals shown are the sum of the number of facilities of the rows above. These estimates are used only to establish distribution of facilities across sectors based on available data. e This number assumes that there are eight tanks per AHFDS. For more detail on assumptions for AHFDSs, see Appendix A
.2
- 7

**2.4 Universe of Facilities and Systems Potentially Affected by**  **Final UST regulation** EPA expects that all facilities or UST sy stems in the universe of conventional UST sy stems will be required to comply with one or more regulatory changes in the final UST regulation , but the number of facilities and s ys tems affected by each specific regulatory

change will vary depending on the extent of current (baseline) state regulations and the ty pe of equipment currently

in use. To estimate the number of sy stems that will be required to comply with each regulatory change, EPA reviewed publicly available data about state regulations, co mbined with data from a limited sample of states and equipment providers about the use of different technologies for release prevention and detection. 41 **Exhibit 2 -**  **4** identifies the total number of UST systems that could potentially be affected by each regulatory

change in the final UST regulation , based on the baseline technology currentl y in place in the universe of s ys tems. **Exhibit 2 -**  **4** identifies the number of UST s ys tems or facilities with relevant technologies, the ty pe of sy stem (i.e., conventional UST and EGT sy stems, facilities with conventional UST sy stems or EGTs, AHFDSs, or FCTs), the proportion of the relevant universe of UST sy stems with the technology , a s ummary of the assumptions that define the number of affected units , and the source of those assumptions . Note that changes for AHFDSs, EGTs, and FCTs affect only those universes of facilities, and EP Act
- related provisions affect only

facilities and UST sy s tems in Indian country
. 42 See Appendix B for detailed descriptions of the values and sources used in each calculation. The estimates in **Exhibit 2 -**  **4** do not reflect baseline state regulations (e.g., whether a state already requires spill prevention equipment testing). As discussed later in this chapter, some baseline state requirements satisfy requirements of the final UST regulation
.

41 E 2 , Incorporated. Memoranda and analy ses submitted under Contract EP
- W
- 05
- 018, “U.S. Environmental Protection Agency. Underground Storage Tanks/Leaking Underground Storage Tanks Analytical and Technical Support.” Where gaps existed in the analyses, EPA used the best professional judgment of its UST system technical experts. All supporting materials not included in the appendices can be found in the docket for the final UST regulation
.

42 EPA assumes that all states have adopted EPAct
- related provisions in the baseline, consistent with existing guidance.2
- 8 Exhibit 2
- 4 **Potential Number And Type Of Units Affected By Each Requirement**

**Regulatory Change Universe**  **Proportion of**  **Total Universe**  **Affected Annually**  **Number of**

**Potentially Affected**  **System s**  **(Annual)** a **Assumptions Source**  **Release Prevention** Walkthrough inspections Facilities with Conventional UST sy stems and EGTs 100.0% 213,277 facilities All facilities require periodic

walkthrough inspections. Not applicable

– all facilities require inspections. Overfill prevention equipment inspections Conventional UST sy stems and EGTs 100.0% 577,981 sy stems Percentage of UST systems with

overfill prevention equipment. E 2 , Incorporated, Task Order No. 3003, TDD #7: across 10 states, 99.8% of sy stems had overfill prevention equipment; EPA conservatively assumes all UST systems have overfill prevention equipment. Spill prevention equipment tests Conventional UST sy stems and E GTs 90.0% 520,183 sy stems One
- to - one spill prevention

equipment to tank ratio; 10 percent have self
- monitoring mechanism and do not need monitoring. EPA estimate based on information discussions with service contractors and inspectors. Containment sump testing Conventional UST sy stems and EGTs 18.3% 105,771 sy stems Pipes that use interstitial monitoring

and do not use continuous sensors, pressure, vacuum, or liquid
- filled leak detection monitoring mechanisms. E 2 , Incorporated, Task Order No. 3003, TDD #5, Table 13. Spill prevention equipment inspection after repair Conventional UST sy stems and EGTs 2.5% 14,450 systems Spill prevention equipment requires fix once every four years; repairs are used as the fix 10 percent of the time. E 2 , Incorporated, Task Order No. 3003, TDD #7: across 10 states, 99.8% of sy stems had overfill prevention equipment; EPA conservatively assumes all UST systems have overfill prevention equipment; repair/replace frequencies are EPA assumptions. Overfill prevention equipment test after repair Conventional UST sy stems and EGTs 2.0% 11,560 systems Overfill prevention equipment requires fix once every five years; repairs are used as the fix 10 percent of the time. EPA estimated that only a small (10%) percentage of overfill devi ces were repaired rather than replaced based on verbal conversations with service contractors. PEI provided the five
- year estimate based on information compiled from their members. This was also supported by answers from 3 vendors dated 11/8/12. Secondary containment test after repair Conventional UST sy stems and EGTs 3.3% 19,324 systems Tanks and pipes that use interstitial monitoring and do not use continuous sensors, pressure, vacuum, or liquid
filled leak detection monitoring mechanisms. Includes five percent of tanks and 90 percent of piping that use interstitial monitoring. Assumes 20 percent of pipes and five percent of tanks require repair every year. E 2 , Incorporated, Task Order No. 3003, TDD #5, Table 13; repair/replace frequencies are EPA assumptions.2
- 9 Exhibit 2
- 4 **Potential Number And Type Of Units Affected By Each Requirement**

**Regulatory Change Universe**  **Proportion of**  **Total Universe**  **Affected Annually**  **Number of**

**Potentially Affected**  **System s**  **(Annual)** a **Assumptions Source**  Eliminate flow restrictors in vent lines for all new tanks and when overfill prevention equipment is replaced Conventional UST sy stems and EGTs 13.5% 78,256 sy stems b 13 percent of new UST systems

would have installed flow restrictors in vent lines, and 13 percent of existing UST systems with replaced overfill prevention equipment would have installed flow restrictors in vent lines. Assumes five percent turnover of UST systems, a 19 percent test fail rate for flow restrictor, and that 90 percent of fixes require replacement of the flow restrictor. Information on number of new UST systems that would install flow restrictors provided by Robert Penkes, PEI, in August 2009; remainder from E 2 , Incorporated, Task Order No. 3003, TDD #21.

**Release Det ection**  Operability tests

– ATG Conventional UST sy stems and EGTs 33.7% 194,548 sy stems UST systems that use automatic tank

gauges. E 2 , Incorporated, Task Order No. 3003, TDD #5, Table 11. Operability tests

– interstitial monitoring Conventional UST sy stems and EGTs 18.8% 108,499 sy stems UST systems that use interstitial

monitoring (excluding five percent that conduct manual testing of the interstice). E 2 , Incorporated, Task Order No. 3003, TDD #5, Table 11. Operability tests

– line leak detection Conventional UST sy stems and EGTs 27.5% 159,221 sy stems Pressurized piping systems that use

electronic line leak detectors. E 2 , Incorporated, Task Order No. 3003, TDD #5, Table 11. Operability tests

– groundwater and vapor monitoring Conventional UST sy stems and EGTs 4.5% 25,968 systems UST systems that use vapor monitoring and/or groundwater monitoring as their sole release detection method(s). E 2 , Incorporated, Task Order No. 3003, TDD #5. Eliminate groundwater and vapor monitoring as release detection methods (Alternative 1 only) Conventional UST sy stems and EGTs 4.5% 25,968 systems UST systems that use vapor monitoring and/or groundwater monitoring as their sole release detection method(s). Universe affected phases in over five years. E 2 , Incorporated, Task Order No. 3003, TDD #5.
Add SIR/CITLD to regulation with performance criteria Conventional UST sy stems and EGTs 0.5% 2,809 systems 13 percent of UST systems use SIR; 15 percent of these use qualitative methods. Of these, 25 percent are assumed to incur costs to comply. E 2 , Incorporated, Task Order No. 3003, TDD #5, Table 11. Response to interstitial monitoring alarms Conventional UST sy stems and EGTs 2.4% 14,003 systems Weighted average annual percentage of UST systems and piping that experience an interstitial monitoring alarm. Assumes 20 percent of tanks and 18 percent of pipes use interstitial monitoring, and that three percent of tanks and 10 percent of pipes experience an alarm in a given year. E 2 , Incorporated, Task Order No. 3003 , TDD #5, Tables 11 and 13.

Remove release detection deferral for emergency generator tanks EGTs 3.0% 17,339 systems UST systems assumed to be emergency generator tanks. Based on review of over 15 state databases and discussions with several state UST program representatives. **Other** Remove deferral for airport hydrant fuel AHFDSs 100.0% 81 facilities All airport hydrant fuel distribution sy stems, including 71 DoD systems Meeting with U.S. Department of Defense2
- 10 Exhibit 2
- 4 **Potential Number And Type Of Units Affected By Each Requirement**

**Regulatory Change Universe**  **Proportion of**  **Total Universe**  **Affected Annually**  **Number of**

**Potentially Affected**  **System s**  **(Annual)** a **Assumptions Source**  distribution systems and 10 commercial airport systems. (DoD) in March 2013 and supplemental information provided to EPA in April 2013, plus information based on public comments and additional EPA research to identify commercial airport systems potentially affected. See Appendix A for addi tional information. Remove deferral for UST sy stems with field
constructed tanks FCTs 100.0% 346 systems All UST systems with field
constructed tanks, including 334 DoD sy stems and 12 DoE systems. Meeting with U.S. Department of Defense (DoD) in March 2013 and supplemental information provided to EPA in April 2013 and U.S. Department of Energy, “U.S. Department of Energy Underground Storage Tank (UST) Compliance Strategy Report,” August 2006, p. A
32 to A
- 34. See Appendix A for additional information. Require notification of ownership change Facilities with Conventional UST sy stems and EGTs 10.1% 21,505 facilities Annual number of facilities that

change ownership. E 2 , Incorporated, Task Order No. 3003, TDD #27. Closure of lined tanks that cannot be repaired according to a code of practice Conventional UST sy stems and EGTs <0.1% 80 systems Annual number of lined UST systems that cannot be repaired E 2 , Incorporated, Task Order No. 3003, TDD #17, Table 1 and E 2 , Incorporated, Task Order No. 3003, TDD #5. Requirements for demonstrating compatibility with fuels > E10 and > B20 Conventional UST sy stems and EGTs 0.04% 234 systems 0.4 percent of conventional UST sy stems and EGTs use fuels E >10 or B > 20, assume 10 percent can demonstrate compatibility Based on the count of UST sy stems from OUST’s mid
year and end
- year reports, plus the U.S. Department of Energy’s (DoE’s) Alternative Fuels Data Center listing the amount of stations selling E85 fuel. **EPAct -**  **related Provisions** Operator training UST Facilities in Indian country 100.0% 966 facilities All facilities in Indian country. Not applicable

– applies to all facilities in Indian country. Secondary containment
- new and replaced tanks UST systems in Indian country 36.2% 947 systems b Approximately 72.4 percent of sy stems in Indian country are single
walled. Analysis assumes midpoint of time horizon until all units are replaced (year 10, 50 percent of universe affected). E 2 , Incorporated, Tribal Data Analysis, July 2007.

Threshold for pipe UST systems in 30.2% 789 systems b Piping replaced every five years, E 2 , Incorporated, Tribal2
- 11 Exhibit 2
- 4 **Potential Number And Type Of Units Affected By Each Requirement**

**Regulatory Change Universe**  **Proportion of**  **Total Universe**  **Affected Annually**  **Number of**

**Potentially Affected**  **System s**  **(Annual)** a **Assumptions Source**  replacement rather than repair Indian country where 60.3% are single
- walled. Analysis assumes midpoint of time horizon until all units are replaced (year 10, 50 percent of universe affected). Data Analysis, July 2007.

Under
- dispenser containment for all new dispensers UST systems in Indian country 48.5% 1,270 systems b Approximately 97 percent of systems require under
- dispenser containment. Analysis assumes midpoint of time horizon until all units are replaced (year 10, 50 percent of universe affected). E 2 , Incorporated, Tribal Data Analysis, July 2007, Industrial Econo mics, “Preliminary Assessment and Scoping of Data Related to Potential Revisions to the UST Regulations; Tasks 2
- 4, Work Assignment 1
- 25,” November 20, 2008, Appendix A, and OUST End
- of
- Year reports. a Figures in this column are calculated assuming that the average number of UST systems per facility is approximately 2.71, per : Skeo Solutions. “Summary of Key Data from State Public Record Postings,” Work Order 1006 , Table 1, October 25, 2013. b The affect ed universes presented for these items reflect 50 percent of ultimately affected systems or facilities. Because these requirements take effect over time and future costs are discounted, we present the universe affected at year 10 as a central estimate. In addition, we adjust unit costs to reflect the fact that the total cost of these requirements grows as the number of affected systems or facilities increases.
**2.5 Facilities and Systems Affected by**  **Final UST regulation** Many states currently

have baseline regulations consistent with one or more requirements in the final UST regulation . As a result, onl y a portion of the universe of potentially affected facilities will be required to change practices to comply with each re gulatory

change. Whereas **Exhibit 2 -**  **4** displays the number of units that may potentially be subject to each requirement, **Exhibit 2 -**  **5** identifies, based on EPA’s review of baseline state regulations, the number of units that will be subject to these requirements as a result of the final UST regulation . For nearly all requirements, some portion of the potentially affected universe is already in compliance with the final regulatory

changes. For example, in cases where a state’s regulatory baseline already require s activities commensurate with the regulatory requirement under a given regulatory option of this f inal regulation, UST sy stems within that state are not considered to be “s ys tems affected” by the regulatory

option in question, because these sy stems would not incur any incremental requirements or associated costs under the final regulation
. Section B.2 of Appendix B, and the tabular summary

of state regulatory

requirements on pages B
- 10 through B
- 16, contain the complete set of information on state regulato ry baselines as they

pertain to the regulatory requirements of the final regulation, and provide an accounting of which states are considered by the cost estimation modeling in this RIA to have state regulatory baselines in full, partial, or non
compliance with each regulatory requirement of the final regulation. The tabular summary on pages B
- 10 through B
- 16 of Appendix B indicates the frequency or presence of the regulatory2
- 12

requirement according to each state’s regulatory baseline. As indicated above, by comparing these frequencies or requirements with those in each regulatory option of the final regulation (as shown in **Exhibit 1 -**  **1** ), it is possible to determine whether UST s ys tems in a given state are subject to a particular regulatory requirement under a given regulatory option, based on whether the regulatory

baseline of the state in question accords with the regulatory requirement under that regulatory

option. If the state regulatory baseline is as stringent, or more stringent, than what is required under the regulatory option ( **Exhibit 1 -**  **1** ), then UST sy stems in that state are not considered affected b y that particular regulatory requirement (and appear in **Exhibit 2 -**  **4** but not in the “sy stems affected” column of **Exhibit 2 -**  **5** ). Otherwise, the s ys tems are cons idered to be affected (and appear in both **Exhibit 2 -**  **4** and the “sy stems affected” column of **Exhibit 2 -**  **5** ). Alternative Option 2 will affect the smallest number of s ys tems. Among the specific regulatory changes, walkthrough inspections and spill prevention eq uipment tightness testing affect the largest number of UST sy stems in all scenarios. 43 In contrast, several regulatory changes (e.g., closure of irreparable lined tanks and pipe replacement requirements) are likel y to affect only

a small number of s ys tems. The distribution of incremental impacts of the regulation also depends on the distribution of baseline technologies across states with different baseline regulations. Facilities and systems in states with fewer current regulations may bear a greater propo rtion of costs and benefits than facilities and s ys tems in states with extensive baseline regulations. A key limitation of available baseline data is that baseline technology data is not available at the state level. For example, it is possible that facili ties and sy stems with specific release detection technologies (e.g., automatic tank gauges (ATGs)) may not be distributed evenly across all states. However, estimates of the percentage of s ys tems using ATGs are available only at the national level. As a re sult, the regulatory

scenarios in Chapters 3 (Compliance Costs) and Chapter 4 (Benefits and Cost Savings) reflect regulatory changes required b y an “average” facility in a state under the final UST regulation , assuming that all s ys tems reflect the national profile of existing technologies. Analy ses of economic impacts and small businesses in Chapter 5 (Distributional Analy ses) assess the possible distribution of compliance impacts related to this uncertainty
.

43 Walkthrough inspections are estimated at a facility level; the number of UST systems estimated as affected by these regulations is 555,003. Note that even those states that currently require walkthroughs do so on a mo nthly basis, rather than a 30
- day basis. This RIA considers facilities in those states to be affected by this regulatory requirement; however, it applies to these facilities only the incremental cost between conducting monthly inspections over a one
- year period and conducting 30
- day inspections over a one
- year period (i.e., a fraction of the cost of one inspection).2
- 13

Exhibit 2
- 5 **Estimated Systems Not Currently Regulated By States** 

**Description Universe of**  **Potentially Affected**  **System s**  **System s** 

**Affected by Selected**  **Option System** **s**

**Affected by Alternative**  **Option 1 System** **s**

**Affected by Option**  **Alternative Option 2**  **Release Prevention** Walkthrough inspections a 213, 277 (facilities) 204,798

(facilities) 204,798

(facilities) 128,986

(facilities) Overfill prevention equipment inspections a 577,981 354,769 395,802 N/A Spill prevention equipment tests a 520,183 388,641 418 , 547 388 , 641 Containment sump testing 105 ,7 71 80,324 95 , 366 N/A Spill prevention equipment inspection after repair 14, 450 14, 306 14, 306 14, 306 Overfill prevention equipment test after repair 11,56 0 11, 280 11, 280 11, 280 Secondary containment test after repair 19, 324 14, 426 14, 426 14, 426 Eliminate flow restrictors in vent lines for all new tanks and when overfill prevention equipment is replaced b 78 , 256 63 , 818 63 , 818 N/A **Release Detection** Operability test s – ATG c 194 , 548 190 , 854 19 0,854 190,584 Operability test s – interstitial monitoring c 108 , 499 106,43 8 10 6,438 106,43 8 Operability test s – line leak detection c 159 , 221 156 , 197 15 6,197 156 , 197 Operability test s – groundwater and vapor monitoring c 25,968 25,475 N/A 25,475 Eliminate groundwater and vapor monitoring as release detection methods c, d 25,968 N/A 25,968 N/A Add SIR/CITLD to regulation with performance criteria 2, 809 2, 756 2,7 56 2,7 56 Response to interstitial monitoring alarms 14, 003 10, 634 10, 634 10, 634 Remove release detection deferral for emergency generator tanks 17, 339 10,977 10,977 10,977 **Other** Remove deferral for airport hydrant fuel distribution sy stems 81 e 56 5 6 N/A Remove deferral for UST systems with field
- constructed tanks 346 198 198 N/A Require notification of ownership change 21,505 (facilities) 3, 220

(facilities) 3, 220

(facilities) 3,2 20

(facilities) Closure of lined tanks that cannot be repaired according to a code of practice 8 0 57 57 57 Requirements for demonstrating compatibility with fuels > E10 and > B20 23 4 23 4 577,981 f N/A **EPAct -**  **related Provisions** Operator training 966 (facilities) 966

(facilities) 966

(facilities) 966

(facilities) Secondary containment
- new and replaced tanks b 947 9 47 9 47 9 47 Threshold for pipe replacement rather than repair b, g 789 0 0 0 Under
- dispenser containment for all new dispensers b 1,2 70 1,2 70 1,2 70 1,2 70 a The universe of affected systems for these requirements varies because some states have current requirements that differ in frequency and ensure baseline compliance in some regulatory scenarios but not others. b The affected universes presented for these items reflect 50 percent of ultimately affected systems or facilities. Because the se requirements take effect over time and future costs are discounted, we present the universe affected at year 10 as a central estimate. In addition, we adjust unit costs to reflect the fact that the total cost of these requirements grows as the number of affected systems or facilities increases. c The number of affected systems differs from the universe of potentially affected systems for this requirement; however, as indicated in Appendix B, this RIA does not apply state baseline regulatory requirements to any system for this requirement. The number of affected systems is smaller than the number of potentially affected systems because some systems to which this requirement applies are EGTs, and the application of regulatory requirements to these systems is covered in the requirement for removing the release detection deferral for EGTs , and affects the numbers shown for this requirement as2
- 14

Exhibit 2
- 5 **Estimated Systems Not Currently Regulated By States** 

**Description Universe of**  **Potentially Affected**  **System s**  **System s** 

**Affected by Selected**  **Option System** **s**

**Affected by Alternative**  **Option 1 System** **s**

**Affected by Option**  **Alternative Option 2**  well. d Universe affected phases in over five years. e The universe of potentially affected units is 81 systems, or 632 tanks (at eight tanks per system for the 71 DoD
- owned sy stems, plus an additional 64 tanks at the 10 commercial airport systems). f As part of the requirements for demonstrating compatibility with fuels > E10 and > B20 proposed in November 2011, all UST sy stems must maintain equipment records. While 234 represents the number of UST systems subject to demonstrating compatibility with fuels > E10 and >B20 under the Selected Option , all (577,981) UST systems would are subject to the requirement to maintain e quipment records under Alternative Option 1
. g EPA’s screening analysis shows that a requirement to replace piping if more than 50 percent of it requires repairs would likely generate no net costs, as owners or operators would ordinarily pursue replacement under those circumstances. See Appendix C for details.3
- 1



### Chapter **3 .**  **Assessment of Compliance Costs 3.1**  **Introduction** This chapter describes EPA’s anal ys is of the social costs associated with the final UST regulation . OMB guidance suggests that an anal ysis that relies on measures of opportunity cost and willingness to pay

provides a holistic basis for assessing the total cost of any regulation. Specificall y, a social cost anal ys is should focus on measuring changes in consumer and producer surplus by

considering the market responses to compliance costs (e.g., changes in demand and supply). Along with the administrative costs incurred by the government, changes in producer and consumer surplus reflect the true cost to so ciety of adopting a set of regulatory measures. For this regulatory

impact analy sis, EPA uses a combination of direct compliance costs and state oversight costs to approximate social costs. In this context, compliance costs represent a reliable indicator of social costs for the following reasons:

 The regulatory

requirements generall y focus on additional testing and inspection of existing equipment, and do not reflect large
- scale investments in equipment or significant changes to operations at the facility level. In addition, the facilities affected b y the regulation are distributed with relative geographic uniformity for consumers and producers.

 Given the small per
- facility costs of the regulation ( approximately $7 1 5 for the average facility , as documented in this chapter), closures or changes in market structure represent an unlikely response to the regulation. Therefore, it is unlikely that significant changes to production or consumer behavior will affect social costs.
 The short
- and long
- run impacts of the regulation are not likel y to differ significantl y. Testing and inspection requirements under the regulation may offer some opportunities for owners and operators to reduce costs b y learning over time, but they

are not likely

to reduce costs enough to facilitate large
- scale equipment upgrades. For these reasons, compliance costs are likel y to be a reasonable approximation of social costs over both the short
- and long
- run. This chapter presents EPA’s compliance cost methodology

and results, and summarizes the calculation of government oversight costs. The chapter also provides a discussion of key uncertainties and several brief sensitivity analy ses. An anal ys is of the potential economic impacts of the final UST regulation is presented in Chapter 5, and a s ensitivity

anal ys is that evaluates the effects of alternative interest rates is presented in Chapter 7. **3.2 Compliance Cost Methodology**  In this chapter, EPA presents its methodology for estimating incremental compliance costs of the final UST regulation b eyond the current baseline costs of existing federal and state3
- 2

regulation of underground storage tanks. EPA’s analy sis focuses on the specific incremental costs that occur as a consequence of the regulation. 44 Throughout this chapter, the anal ys is distingui shes between three types of costs:

 Sy stem - level: Costs that occur at the individual UST tank level, including ancillary equipment.

 Facility- level: Costs that occur at the level of a facility that owns several USTs; ty picall y 2.7 1 times the sy stem - level cos t to reflect UST ownership by the average facility
.  Unit costs: System - level costs related to a particular requirement. For example, the requirement to provide notification of ownership change has a unit cost of approximately

$14. Calculation of total inc remental compliance costs for UST facilities reflects two key steps: identifying specific measures necessary for compliance at individual facilities, and calculating costs associated with each of these measures. To estimate these costs, EPA developed a compliance cost model that identifies incremental equipment and labor requirements for an individual system. Based on the baseline equipment, existing state regulations, and anticipated responses to the regulation, the model then generates sy stem - specific estimates of compliance costs. Compliance costs include the labor and capital costs associated with new equipment and installation, inspection, testing, and recordkeeping. The model also includes other compliance costs, such as those associated with more freq uent detection of equipment failure and repair of equipment. Some component costs are specific to individual UST system configurations

– for example, airport hydrant fuel distribution systems or UST sy stems with field
- constructed tanks

– while others are c onsistent across all s ys tem ty pes. We calculate the compliance costs of the final UST regulation by measuring three factors: the proportion of facilities or UST sy stems with specific technologies (i.e., the portion of sy stems that require specific ty pes o f upgrades or tests, described in Exhibit 2
- 4 and Section B.1 of Appendix B); the regulations already in place in each state (i.e., baseline regulations, described in Exhibit 2
- 5 and Section B.2 of Appendix B); and, the unit cost to comply with each element of the regulation (described in this Chapter, specifically Exhibit 3
- 1, as well as Appendix D). An important limitation of our anal ys is is that we do not have data on the distribution of UST technologies. Consider the following from **Exhibit 2 -**  **5** : under the Selected Option, we estimate that overfill prevention tests will be a new requirement for 354 ,76 9 sy stems, and spill prevention equipment tests will be a new requirement for 388,641 sy stems. These requirements could together affect as few as 388, 641 sy stems if all sy stems that are affected by overfill

44 For this final UST regulation , EPA does not specifically attempt to measure baseline regulatory costs. However, costs identified in the 1988 EPA regulation that set original technical standards under 40 CFR Part 280 provide an indication of baseline costs. The 1988 RIA calculated per
- tank costs of $28,770, equivalent to $55,836 in 2012 dollars. See: U.S. Environmental Protection Agency. "Regulatory Impact Analysis of Te chnical Standards for Underground Storage Tanks." August 24, 1988. Volume 1, page ES
- 7, Exhibit ES
- 1
.3
- 3

prevention testing are a subset of the s ys tems that are affected by spill prevention testing. In the absence of additional information, it is equally plausible that these two requirements affect the entire universe of USTs if they overlap as little as possible. EPA has not identified any information that could allow us to reliably narrow the universe of affected USTs to a number smaller than the entire universe. Further, EPA’s review of state data suggests that facilities in all states will be subject to some cos t under the final UST regulation
. 45 Consequently, when considering the average cost of the regulation on a facility or UST sy stem basis, we divide the total cost by the number of facilities or systems in the entire universe. 46 **3.2.1 Categories of Compliance**  **Costs Analyzed** This analy sis includes the following categories of compliance costs: operation and maintenance costs; capital costs; and implicit capital costs, or “time value of money costs” associated with earlier detection of equipment failure. Because the final UST regulation focuses on operational improvements, operation and maintenance costs constitute the majority of the compliance costs identified in this analysis. These costs are relativel y frequent, recurring costs that mainly

involve a service activity . Operation and maintenance activities include the labor and materials costs associated with maintenance of equipment, routine testing, and inspection (whether performed b y the owner, operator, or a contractor). This anal ys is assumes that UST

45 The discounted cost per UST system ranges from less than $100 in one state to over $310, with costs in 20 states and territories falling between $290 and $320, costs in another 17 states and territories falling between $230 and $270, and costs in another six states and territories between $210 and $230. The remaining 13 states and territories have per
- system costs between $75 and $200, with all but two st ates or territories having costs upwards of $130 per system. These costs are calculated by considering the regulatory baseline in each state, and the unit costs of each regulatory requirement not already required by the regulatory baseline in a given state . From the example above, states with low

per - UST system costs are those with regulatory baselines that substantially overlap with the requirements of the f

inal regulation , while those with the highest costs are those where most or all of the requirements of the final regulation are not already required by the state. Note that the figures presented here assume an average distribution of technologies across states, such that the only variant in UST system costs per state is the existing extent of each state's regulatory baseline.

46 We address uncertainty in the distribution of technology and costs with a set of sensitivity analyses in section 3.5 of this chapter, and we consider the economic impacts of different distributions of costs in Chapter 5. Our analysis indicates that appro ximately 81 percent of all facilities incur costs below the average per
- facility cost (calculated by dividing total costs by total facilities) and 18 percent of facilities incur per
- facility costs in excess of 110 percent of this calculation of average per
- facility cost. The remaining one percent of facilities incur costs within the range of 100
- 110 percent of average per
- facility costs. The cost estimates reported in the RIA and used in the analysis in this footnote do not incorporate high
- end technology c osts; they reflect the market costs for widely available technologies. The analysis in this footnote represents a worst - case cost scenario only as relates to impacts on small facilities, in order to consider potential business and employment impacts (see S ection 5.2.3). To do this, it examines the combined impact of two distinct, high
- cost assumptions: 1) that a given subset of UST systems are located in the state or states with the state regulatory baselines that overlap or accord least with the final regulation, and thus incur the highest compliance costs; and 2) that this same subset of UST systems has or uses the technologies for which regulatory costs are highest. The analysis concludes that even under this bounding scenario in which the smallest, oldes t facilities are universally located in states with low baseline regulatory requirements, employment and business impacts are limited. The Chapter 3 cost analysis assumes that the technology distribution of UST systems is similar across states, reflecting standard turnover in facilities and equipment.3
- 4

facility owners and operators pay in full for these costs when they occur (that is, they

do not obtain financing and pay

over time). 47 Some of the operation and maintenance activities included in the final UST regulation take the form of recurring requirements occurring less frequentl y than once per ye ar: for example, overfill prevention equipment inspections are required every three ye ars under the Selected Option. We calculate the total incremental annual cost of these recurring requirements by assuming that an equivalent portion of the universe incurs the cost associated with each such recurring requirement every year: for overfill prevention equipment inspections, we assume one third of the affected universe of UST s ys tems must undergo this inspection each ye ar, such that all UST sy stems have complied within each three
- ye ar inspection period. 48 Because the final UST regulation does not focus on broad equipment requirements, capital costs represent a small portion of the total compliance costs for this regulation. C apital costs address the purchase and installation of new equipment, such as installing a new double
walled UST or under
- dispenser containment. Total capital costs ty pically include installation, labor, and initial service required to ensure the new equipm ent is fully functioning. EPA assumes that UST owners and operators finance these compliance costs over the life of the equipment; all capital costs are calculated over a regulatory time horizon of 20 years. 49 The following examples characterize the three typ es of capital cost calculations that are relevant to this regulatory anal ys is: **Existing equipment replacements** : An UST s ys tem owner or operator must upgrade an existing sy stem with new equipment to comply with a requirement under the regulation (e.g., facilities with EGTs may be required to install release detection equipment when the deferral is removed). The incremental compliance cost is the total cost of the new equipment and installation (including removal of existing equipment). 50 Any additional (incremental) operation and maintenance costs are also included.

47 Certain one
- time costs that occur only once over the regulatory time horizon (e.g., one
- time spending on initial operator training for personnel at existing facilities) are also annualized over 20 years.

48 As noted in Exhibit 1
- 2, a number of recurring operations and maintenance requirements will not immediately impose costs on UST owners and operators as they may have up to three years (depending on the requirement) to comply with the initial testing or in spection requirement. Where applicable, we discount the annual cost associated with each such requirement by the length of this implementation delay at a seven percent discount rate (consistent with OMB’s guidance on discount rate), to account for the fact that owners and operators are not required to conduct the first test or inspection immediately. Chapter 7 also presents results for the Selected Option using a three percent discount rate.

49 Due to a lack of data on the distribution of ages of UST systems and planned retirements/replacements of existing systems, EPA assumes that owners and operators amortize all capital costs over a 20
- year expected regulatory horizon to be consistent with the 20
- year expected lifetime of an UST system. Note that this annualization timeframe specifically applies only to UST system (i.e., tank) components; f or other associated equipment with a lifetime other than 20 years, EPA assumes that a proportion of the universe is affected per year
. F or example, EPA assumes that piping is replaced every five years ; i.e., one - fifth of the universe must replace it every year. The central analysis uses a seven percent discount rate, consistent with: U.S. Office of Management and Budget. Circular No. A
- 94. Revised October 29, 1992. Other d iscount rates are considered in Chapter 7.

50 This approach may overstate costs, as it does not account for the age of existing equipment (depreciation). Owners and operators typically plan for new capital expenditures over the lifetime of existing equipment, recording depreciation as operations consume its usefulness over time. If an owner or operator is close to3
- 5

**New equipment requirements** : An operator is installing new or replacement equipment as an ordinary

business expense. Under baseline regulations, Equipment A is compliant. Howev er, new regulations require a higher level of compliance for new tank systems that can be satisfied at lowest cost by Equipment B . The incremental compliance cost to the operator of the equipment is the additional cost (if any) of purchasing , installing an d operating Equipment B instead of Equipment A . The costs of this requirement reflect the timing of the normal replacement cycle for all equipment in the universe. For example, owners and operators installing new UST s ys tems will be required to use technol ogies other than flow restrictors to ensure release prevention. **Time value of money (TVM) costs** : Under baseline regulations, the average UST sy stem requires inspection every three ye ars. EPA estimates that the baseline three
- ye ar inspection, on average, id entifies a hyp othetical repair or replacement cost of $100 associated with certain equipment. For example, under the final UST regulation , a new annual test could discover the same issue sooner and require repair or replacement two years earlier than it wo uld have been discovered in the baseline. In this example, while the repair expense is the same, the regulation generates a time value of money cost by requiring an owner or operator to incur the repair expenditure sooner. 51 **Costs to Regulated Universe to Review**  **Regulation** : This analy sis assumes that all facility operators in the universe will be required to read the final UST regulation in order to comply with it. For conventional USTs and EGTs, we estimate that reading and understanding the final UST regulation will require 4.75 hours of labor from a manager at each facility . This equates to a one - time cost of approximately $271 for each facility , or $58 million. This is equivalent to an annual cost of $5.5 million under each regulatory option. For FCTs an d AHFDSs, we assume these costs are subsumed in the management costs for these s ys tems (see Appendix A for details). EPA estimates that the final UST regulation will impose capital costs on the following components due to earlier detection of problems as a result of the new testing requirements:

 Overfill prevention equipment;

 Spill prevention equipment;

 Interstitial areas; and
replacing certain equipment and is required to replace that equipment when the final UST regulation becomes effective, he or she incurs a lower incremental cost than an owner or operator who only recently installed that equipment. By not attempting to adjust for this factor, EPA assumes that owners and operators replace brand new equipment, a conservatism that results in a higher cost. Using this ap proach, these annualized one
- time costs comprise approximately 10 percent of annual costs under the Selected Option, approximately six percent of annual costs under Alternative 1, and approximately nine percent of annual costs under Alternative 2.

51 There is significant uncertainty regarding whether total expenditures wo uld increase or decrease over time. More frequent inspections may lead to more frequent repairs and replacements but may also reduce the severity and cost of the problems discovered.3
- 6

 ATGs, interstitial monitors, vapor monitors, groundwater monitors, and line leak detectors. The final UST regulation requires testing, in addition to inspections, for several UST sy stem components. EPA assumes that testing adds value to baseline release prevention strategies in two way s: first, testing detects issues with an UST sy stem that may not be detectable in inspections. Second , in some cases, testing will occur more frequentl y than baseline inspections and therefore may identify issues that occur between inspections. This analy sis therefore considers two types of increased capital costs. First, EPA assumes that additional testing required under the final UST regulation will identify malfunctions that prior inspections would have overlooked, and will therefore mandate additional , incremental compliance costs related to equipment repair and replacement. Second, some baseline compl iance costs will occur earlier than they

would in the baseline, creating time value of money costs as owners and operators incur compliance costs earlier and forgo the use of such funds for other investments. The time value of money cost of incurring a repair sooner is estimated at seven percent, consistent with OMB’s guidance on discount rate. The use of a seven percent discount rate for these time value of money costs maintains consistency with the discount rates used for other cost and benefit calculations presented in this RIA, including amortization of capital costs and discounting costs associated with regulatory requirements with delayed implementations. For comparison, Chapter 7 presents results for the Selected Option using a three percent discount rate. See Appendix D for the detailed cost methodolo gy . The cost estimation methodology in this RIA focuses exclusively on the compliance costs incurred to compl y with the regulatory requirements of the f

inal regulation. This differs from the benefit es timation methodology (see Chapter 4), where benefits are monetized based on an estimated number of avoided releases, and the avoided remediation costs associated with those releases. **3.2.2 Estimation of System**  **- Level Compliance Costs for UST Systems**  Estimat es of sy stem - level compliance costs for each part of the final UST regulation are based on publicly

available data on equipment, installation, and testing costs, information collected from professionals in industries that provide relevant equipment and ser vices, and EPA’s professional judgment. 52 Costs are estimated to occur according to the regulation implementation schedule identified in **Exhibit 1 -**  **2** ; we use an annual discount rate of seven percent to adjust costs with compliance windows of more than one ye ar. Labor costs used in this analy sis reflect labor
- hour estimates from EPA Information Collection Request 1360.08 and EPA Information Collection Request 1360.12 for specific inspection and recordkeeping tasks. The cost of labor is based on Bureau of Labor Statistics (BLS) labor rates for skill categories appropriate to the retail sector and technical requirements of

52 E 2 , I ncorporated. Memoranda and analyses submitted under Contract EP
- W
- 05
- 018, “U.S. Environmental Protection Agency. Underground Storage Tanks/Leaking Underground Storage Tanks Analytical and Technical Support.” Where gaps existed in the analyses, EPA used the best professional judgment of its UST system technical experts. All supporting materials not included in the appendices can be found in Docket EPA
- HQ
- UST
2011
- 0301.3
- 7

the final UST regulation
. 53 Inparticular, EPA selected l abor rates that correspond to categories of labor employed in the retail motor fuels s ector (NAI CS 447). EPA does not expect regulated entities to employ

higher skilled workers to comply with this regulation. The anal ys is adjusts these rates using a 12 percent overhead factor and a fringe benefits factor of 28.8 percent, which is specific to service
- providing industries. 54 For requirements that are likel y to be satisfied by third
- parties, such as testing, labor costs are included in the market prices (costs) of those services. A broad explanation of the functionality of the compliance cost e stimation model is provided below:

 First, for each regulatory requirement of the rule , the model identifies the number of UST sy stems are affected. Sy stems are affected if they have the proper technical components affected b y the requirement (seen in **Exhibit 2 -**  **4** ) and are located within a state where compliance with this requirement is not already part of the regulatory baseline (seen in **Exhibit 2 -**  **5** ). To the extent that UST sy stems are located in states whose regulatory

baselines are in partial compliance with the rule, the cost model makes an appropriate adjustment such that the correct set of incremental costs are applied.

 Then, the cost model derives a set of unit costs for compliance with each regulatory requirement. These costs include labo r costs as well as O&M (equipment) costs, and are broken down b y one - time costs that are amortized versus annuall y- occurring costs. As described on page 3
- 2, some costs apply at the UST
- sy stem level, and others apply at the broader facility level (a facili ty may have more than one UST s ys tem). These costs can be seen in **Exhibit 3 -**  **1**
.
 To estimate costs, the model then applies unit costs for each regulatory requirement to each applicable s ys tem. In some cases, the unit costs in **Exhibit 3 -**  **1** for a given regulatory

requirement are simply

applied to the set of affected s ys tems or facilities for that requirement in **Exhibit 2 -**  **5** . However, in many cases, state regulatory

baselines interact with the regulation’s requirements in complex way s, such that this methodology must be adjusted. For example, UST facilities in states that require semiannual walkthrough inspections under their regulatory baselines incur lower costs than UST facilities in states that currently require no walkthrough inspections; the compliance cost model tracks these cases and applies the appropriate incremental cost as necessary
. 55
53 Labor rates reflect: U.S. Bureau of Labor Statistics. "Occupational Employment and Wage s." May 2011. See Appendix D for the particular Standard Occupational Classification codes used. EPA does not use the costs in its Information Collection Request 1360.08 because those labor rates reflect all industries and do not represent ty pical costs to the majority of UST owners and operators.

54 The overhead factor of 12 percent comes from: U.S. Office of Management and Budget. Circular No. A
76. p. D
- 7. Although this rate reflects government overhead rates, we believe it is also representative of the low
overhead structure of the retail motor fuels sector. The fringe benefits factor is from: U.S. Bureau of Labor Statistics. "Employer Costs for Employee Compensation." December 2012. See Table 10: All wo rkers, service
providing industries.

55 For addition al information on the derivation of the affected universe for each regulatory requirement, see Appendix B. Similarly, Appendix D contains derivations of the unit costs for each regulatory requirement, as well as3
- 8

While the regulation’s impacts are not significant enough ($1 billion per year) to require a quantitative assessment of uncertainty , the RIA considers the uncertainty as sociated with key variables. However, the regulatory requirements modeled in this RIA generall y do not lend themselves to a probabilistic assessment of uncertainty because most requirements consist of a task, such as an inspection or test, that has an established cost and must be performed according to a given schedule. Correspondingl y, the s ys tem is not subject to broad uncertainty related to options for compliance. Moreover, the regulation requires that each such task be performed with a given frequency
. Probabilistic uncertainty anal yses, which best appl y in cases where one of multiple outcomes may

occur with a different probability weight for each outcome, do not directly appl y to the req

uirements of this regulation
. To the extent that certain aspects o f the cost estimation methodology are uncertain, this RIA includes various sensitivity analy ses to address these:

 Input cost uncertainties are addressed b y the anal ysis of alternative labor rates ( **Exhibit 3**  **- 6**  );

 Universe uncertainties, especially regardin g the interaction between the uncertainty in which sy stems contain certain UST sy stem components and which s ys tems are located in states that do not currently require testing/inspection of those components, are addressed by the anal ys is of compliance cost scenarios ( **Exhibit 3 -**  **7** ); and

 Uncertainties regarding the potential of the rule to result in small business impacts are addressed via a “worst
- case scenario” sensitivity anal ys is where the smallest (i.e., least
revenue) firms are assumed to be located in the states with the least
- rigorous state regulatory

baselines (i.e., thus incurring the highest incremental costs) (Section 5.2.3). Because of the deterministic nature of the regulation in requiring each UST sy stem meeting a given criteri on to perform a certain task or undergo a certain inspection, probabilistic assessments of uncertainty are not directly applicable. In addition, specific requirements under the final UST regulation are addressed as follows:

 For regulatory

changes that take effect over time as equipment ages, the analy sis assumes a constant rate of equipment replacement, and calculates a constant annual pay

ment for the net present value of 20 years of replacement. Appendix D discusses the spec ific assumptions made in the analy sis.

 To identify

the total s ys tem - level compliance cost of removing deferrals from airport hydrant fuel distribution systems (AHFDSs) and field
- constructed tanks broader descriptions of how the compliance c ost model handles labor costs, time value of money costs, and other items of specific relevance to cost estimation for this regulation
.3
- 9 (FCTs), the anal ys is calculates both the direct costs of removing the deferral of these sy stems from the regulation under 40 CFR Part 280, and the additional costs of complying with other new regulatory options that apply

to all sy stems (and become relevant when deferrals are removed). For example, under the final UST regulation , owners and operators of these s ys tems must perform annual bulk line testing at prescribed rates or use an automatic tank gauge at prescribed leak rates. Appendix A discusses specif ic assumptions related to these tank populations.

 To estimate the total sy stem - level compliance cost of removing the deferral from emergency

generator tanks, the anal ys is calculates the cost of complying with specific changes that apply to the broader uni verse of conventional UST s ys tems and become relevant when the deferral is removed. Removal of the deferral under the final UST regulation means that EGTs must comply with release detection requirements at 40 CFR Part 280, Subpart D. **Exhibit 3 -**  **1** presents the unit
- level costs for the individual requirements in the final UST regulation
. 56

56 See Appendix D for a detailed discussion of these costs.3
- 10

Exhibit 3
- 1 **Unit Costs For The Requirements In The Final UST regulation**  **(Selected Option)** a **ONE -**  **TIME b**  **($) O&M**  **c**

**($) REPAIR/REPLACEMENT**  **COST d**  **($) Release Prevention**  Walkthrough inspections $0.00 $16.99 $0.14 Overfill prevention equipment inspections $0.00 $228.91 $67
. 07 Spill prevention equipment tests $0.00 $138.3 8 $37.53 Containment sump testing $0.00 $669
. 32 $86.97 Spill prevention equipment inspection after repair $0.00 $363.4 2 $0.00 Overfill prevention equipment test after repair $0.00 $400.7 1 $0.00 Secondary containment test after repair $0.00 $188. 23 $0.00 Eliminate flow restrictors in vent lines for all new tanks and when overfill prevention equipment is replaced $420.37 $0.00 $0.00 **Release Detection** Operability test s – ATG $0.00 $61.41 $9.40 Operability test s – interstitial monitoring $0.00 $10.8 3 $9.73 Operability test s – electronic LLDs $0.00 $61.41 < $0.0 1 Operability test s – vapor monitoring $0.00 $10.8 3 $1.20 Operability test s – groundwater monitoring $0.00 $10.83 $0.62 Site assessment

– vapor monitoring e $1,111.17 $0.00 $0.00 Site assessment

– groundwater monitoring e $935.56 $0.00 $0.00 Add SIR/CITLD to regulation with performance criteria $10.66 $0.00 $0.00 Response to interstitial monitoring alarms f $0.00 $0.00 $0.00 Remove release detection deferral for emergency generator tanks g $296.94 $193
. 41 **Other** Remove deferral for airport hydrant fuel distribution systems h $ 128,828.95 Remove deferral for UST systems with field
constructed tanks h $ 3 0,744. 57 Require notification of ownership change $0.00 $14.27 $0.00 Closure of lined tanks that cannot be repaired according to a code of practice $41,802.90 i $0.00 $0.00 Requirements for demonstrating compatibility with fuels > E10 and > B20 $1.93 j $0.00 j $0.00 Cost to owners/operators to read regulation $271.12 $0.00 $0.00 **EPAct -**  **related Provisions** Operator training $303.64 $139.36 $0.00 Secondary containment
- new and replaced tanks $8,413.90 $0.00 $0.00 Threshold for pipe replacement rather than repair k $0.00 $0.00 $0.00 Under
- dispenser containment for all new dispensers $1,914.27 $0.00 $0.00
a Cost estimates were derived using a seven percent discount rate. b One
- time costs presented here are not shown in annual terms. For the purposes of estimating total annual costs for the final UST regulation , these one
- time expenditures are annualized ov er 20 years at a seven percent interest rate. c Operation and maintenance costs presented here are not shown in annual terms, but rather on per
- incident terms. In other words, the cost for walkthrough inspections above is the unit cost per walkthrough inspection; the annual cost is the total3
- 11

Exhibit 3
- 1 **Unit Costs For The Requirements In The Final UST regulation**  **(Selected Option)** a cost conducting 30
- day walkthrough inspections over an annual period. d Time value of money costs due to earlier repair and replacement of equipment reflect costs of repair or replacement sooner than would have occurred in the baseline. For most requirements, these are costs that would occur and be identified by annual tests, i.e., they reflect one year's worth of accumulated issues that require equipment repairs or replacements. Three requirements represent exceptions. TVM costs for overfill prevention and containment sump testing, which occur every three years under the Selected Option, represent the repairs and replacements over three years. In addition, TVM costs for walkthrough inspections represent the repai rs and replacements identified on a monthly basis to match the requirement under the Selected Option. See Appendix D for additional details. e The one - time cost presented is the cost of conducting a site assessment or well verification, weighted by the rel atively likelihoods that a site assessment or well verification would be necessary to continue using vapor or groundwater monitoring as release detection. Note that a site assessment or well verification would be necessary for fewer than 25 percent of syst em s using vapor monitoring, and for fewer than 30 percent of systems using groundwater monitoring; the one - time costs presented here do not downward adjust the unit cost estimate to account for the possibility that a site assessment or well verification may not be necessary. f The cost associated with this requirement would be the incremental cost difference between a tightness test (required in the baseline) and an interstitial integrity test (required by the final UST regulation). However, because the cos t of an interstitial integrity test is less than the cost of a tightness test, we do not assign any cost to this requirement. See Appendix D for additional information. g Because different subsets of EGTs are subject to different requirements, we present average unit costs that divide the total cost to the affected universe by the total number of affected units. O&M costs include any TVM costs associated with operability tests . See Appendix D for additional details. h Because different subsets of AHFDSs are subject to different requirements, and because different requirements applicable to AHFDSs and FCTs include various types of one
- time and O&M costs, we present average unit costs that divide the total cost to the affected universe by the total number of affected units. These costs include any TVM costs associated with operability tests . See Appendix A for additional details. i We assume that this cost occurs in full for the systems that require closure of lined tanks in a given year, rather than annualiz ing it as described in note b above. See Appendix D for additional details. j This includes an annualized cost of $0.01 related to the cost of storing records for the life of the UST system. k We assume all facilities exceeding the 50 percent threshold fo r piping replacement would opt to replace piping in the baseline; costs are therefore zero. See Appendix C for detailed calculations. **3.3 Calculation of Incremental Compliance Costs**  This analy sis estimates the compliance cost of the final UST regulation by calculating the incremental cost of each regulatory change on the population of tank sy stems in every U.S. state and territory . This procedure relies on national estimates of the number of sy stems employing specific baseline technologies, as well as EPA ’s assessment of the baseline regulatory requirements in each state and territory
. 57 The anal ysis categorizes compliance costs into one
time or operation and maintenance costs and amortizes one
- time compliance costs over the 20
- ye ar regulatory

time horizon. 58 As a final step, it discounts annual compliance costs associated with several of the regulatory changes to delayed compliance horizons specified in the final UST regulation (e.g., overfill prevention equipment inspections must be performed within three years of the date the final UST regulation becomes effective). To calculate compliance costs, EPA employ s a number of assumptions, some of which likely overstate compliance costs:

57 For details regarding these assumptions, see Appendix B. 58 See footnote 49 for an explanation of the use of a 20
- year time horizon.3
- 12

 **Time value of money costs** . This anal ys is does not assume the rate at which p roblems occur in UST sy stems will decline as a result of the final UST regulation . The number and severity of problems will likely fall due to more frequent testing and inspections, but the rate of decline is uncertain and the anal ys is does not attempt to adjust for these changes. This likely causes the anal ys is to overestimate the costs of the final UST regulation
.  **Size of universe** . EPA’s anal ys is assumes that the number of UST s ys tems in the universe remains constant over time, with new s ys tems replacing closures. EPA’s end
- of
- ye ar reporting data reveal that the universe of conventional UST s ys tems has declined at a rate between one and three percent per year since 2000. 59 Assuming this pattern continues, future annual compliance costs due to the final UST regulation are likel y to be lower than estimated in this analysis. However, in absence of other data we assume new installations and upgrades will offset all closures, and annual compliance costs will remain constant. Impacts of assuming an alternative ba seline universe of UST s ys tems that declines over time are discussed in Sections 3.3.1 and 3.4.1.

 **Full compliance.** EPA assumes all owners and operators subject to each requirement will come into compliance. This ensures a high estimate of costs, as each s ys tem subject to the regulation implements the required measures and consequentl y incurs the related costs.

 **Timeliness of repairs.** EPA assumes all issues identified through testing of equipment will be properly addressed through immediate repair or replac ement of equipment. This may

overstate costs if owners or operators fail to address identified issues in a timely fashion.

 **Date on which costs are incurred.** EPA assumes all costs are incurred at the beginning of the ye ar in which each requirement of the final UST regulation becomes effective. This may overstate costs that occur at the end of the time frame. These combined assumptions help ensure that the total costs estimated in each scenario below are not likel y to be understated, even in cases where some uncertainty is associated with unit cost estimates for equipment or testing. Two key areas of uncertainty

that affect the distribution of costs are noted below.

 **Geographic distribution of technologies:** EPA lacks information on how UST sy stems with specific equipment (e.g., ATG) are distributed nationally . If most are located within states with existing applicable requirements, then costs could be lower (conversel y, if most are located in states with no existing applicable requirements, then costs could be higher). In the absence of this data, EPA

59 See: U.S. Environmental Protection Agency, Office of Underground Storage Tanks. Semi
- Annual Report of UST Performance Measures for fiscal years 1999 and 2013
.3
- 13 assumes a uniform distribution of technologies across all states. EPA assesses the extent to which this assumption creates cost uncertainty at the end of this chapter.

 **Distribution of costs across systems:** EPA does not have information on how costs are likel y to be distributed among the s ys tems that are subject to new requirements. For example, a correlation among sy stems that require overfill prevention equipment inspections , spill prevention equipment testing, and secondary containment testing after repair would concentrate costs on these sy stems in way s that EPA’s primary assessment of costs does not capture. While this does not affect total cost estimates, EPA assesses the distributional consequences of an outcome where costs are highly
- concentrated in Chapter 5. **3.3.1. Calculation of Incremental Compliance Costs Using an Alternative Baseline** EPA’s primary

analy sis assumes that the universe of UST sy stems stay s constant over time. That is, the analy sis assumes th at when an UST sy stem enters the universe, another exits, and vice versa. However, data show that the universe of UST s ys tems has been declining over the past two decades (albeit at a slowing rate). Therefore, EPA also assesses compliance costs associated with the final UST regulation based on an alternative baseline that projects a declining universe. To calculate the rate of universe decline, EPA mapped historical data on the universe of UST sy stems from 1991 through 201 3 to an exponential one
- phase decay function, which appears to most accurately represent the observed behavior of the UST sy stem universe over time. 60 Steep declines in the universe of UST sy stems in past years reflect increases in tank size as well as industry

consolidation. However, these declines may be reaching functional limits, both because the number of fuel outlets needed to serve the population is considerable, and because tank sizes may

be reaching a practical limit in their ability to be transported and installed. 61 , 62 The function used to project future UST universe sizes indicates that over a 20
- ye ar time period, the annual number of affected UST sy stems graduall y declines to 574,045 UST sy stems by year 20 under this alternative baseline. 63 The number of UST s ys tems aff ected under this alternative baseline is approximately 99 .8 percent of the size of the original baseline, which
60 To estimate future UST universe sizes, we used a single exponential decay function, which assumes that a quantity declines at a rate proportional to its value. This is an appropriate function given the singular and slowing rate of decline observed in the universe of UST syst ems over time. The equation for such an exponential singular decay function is Y = (Yo

– P) * e (
- k*X) + P, where P represents the “plateau,” or limit of the function and k represents the function’s half
- life. (See Appendix J for additional details.) 61 See: Geyer, Wayne. “Where Has Our Petroleum Storage Capacity Gone?” Steel Tank Institute. Accessed at: https://www.steeltank.com/LinkClick.aspx?fileticket=h8 g9YO5y%2BfI%3D&tabid=108&mid=502 . This source indicates simultaneous trends in increasing average tank sizes as well as decreasing UST system totals.

62 While this alternative baseline assumes a steady decline in the number of UST systems, it is possible that the number of UST systems may actually increase in the future to trend with population growth and economic expansion as more people living in more areas may necessitate more retail motor fuel outlets.

63 EPA assumes that owners and operators amortize al l capital costs over a 20
- year expected regulatory horizon to be consistent with the 20
- year expected lifetime of an UST system.3
- 14

assumes a constant universe size of 577,981 UST sy stems over this period. As a result, compliance costs associated with the final UST regulation are onl y marginally smaller under this alternative baseline. See Appendix J for additional details. **3.4 Results of Assessment of Compliance Costs**  **Exhibit 3 -**  **2** presents a summary of the estimated incremental compliance costs associated with the final UST re gulation by typ e of UST sy stem affected. In all options, it is clear that the category

of conventional UST sy stems will bear the largest proportion of compliance costs under the regulation. While compliance costs associated with removal of deferrals from E GTs are constant across regulatory scenarios, other costs vary substantially among the regulatory

options. The model parameters used to produce the results discussed in this chapter are presented in Appendix E and were selected to reflect the selected and alternative options described in Chapter 1 **.** Exhibit 3
- 2 **Annual Compliance Costs Of The Final UST regulation**  **For UST System s Affected**  a **Option Selected Option**  **($ m illions)**  **Alternative 1**

**($ m illions)**  **Alternative 2**

**($ m illions)**  Conventional UST systems b $130 $280 $63 Emergency Generator Tanks (EGTs) $2.0 $2.3 $2.0 Airport Hydrant Fuel Distribution Systems (AHFDSs) $1 0 $0.01 7 $0.0 UST systems with Field
- Constructed Tanks (FCTs) $11 $0.06 6 $0.0 Cost to Owners/Operators to Read Regulation (conventional UST systems and EGTs) $5.5 $5.5 $5.5 **Total $160**  **$290 $7**  **0** a Cost estimates were derived using a seven percent discount rate. b Conventional UST systems include all systems that are not AHFDSs, FCTs, or EGTs. **Exhibit 3 -**  **3** presents a disaggregation of compliance costs under each regulatory option
. The following areas contribute significantly to the differences in compliance costs among the alternatives.

 **Release prevention** : The greatest difference in compliance costs between the Selected Option and Alternative 1 is related to release prevention; specifically , due to the combination of walkthrough inspections, overfill prevention equipment inspections, spill prevention equipment tests, and containment sump tests, testing after repairs, and the elimination of flow restrictors. These requirements account for 66 percent and 8 8 percent of compliance costs, respectivel y. 64 This variation is largel y dependent on the testing or inspection frequency required under each alternative, as w ell as the fact that compliance costs for AHFDSs and FCTs are considerabl y lower in Alternative 1. Under Alternative 2, overfill prevention equipment inspections and containment sump tests are not required, and release

64 Total release prevention costs are approximately $99 million under the Selected Option and $247 million under Alternative 1. Respectively, these costs round to $100 million, or 63 percent of total Selected Option costs, and $250 million, or 86 percent of total Alternative 1 costs.3
- 15 prevention costs total $38 million, c ompared to roughl y $100 million under the Selected Option.

 **Removal of deferrals for AHFDSs and UST systems with FCTs** : Removal of deferrals for AHFDSs and FCTs is accompanied by tightness testing of equipment under the Selected Option. This tightness test d rives most of the compliance cost associated with these s ys tems. Under the Selected Option, total costs for these sy stems are $2 1 million, or approximately 1 3 percent of compliance costs. 65 Under Alternative 1, only notification of the implementing agency and reporting of releases are required for these s ys tems; correspondingl y, total costs for these sy stems under Alternative 1 are below $0.1 million. Alternative 2 maintains the deferrals and therefore has no incremental compliance cost. In total, these cate gories represent approximately 50 percent to 90 percent of the total compliance costs, depending on the option. EPA determines average compliance costs per s ys tem by dividing the total cost of the final UST regulation by

the total 577,981 sy stems in the regulated universe of conventional UST sy stems and EGTs. EPA’s analy sis shows that the compliance cost for this final UST regulation is approximately

$23 2 per sy stem, or approximately $71 5 per typical facility among motor fuel retailers, the sector with the highest average number of UST s ys tems per facility
. 66 **Exhibit 3 -**  **4** presents the same total costs as **Exhibit 3 -**  **3** but shows the number of s ys tems affected and the cost of the requirement per affected sy stem. 67 The costs in **Exhibit 3 -**  **4** reflect annualized one
- time costs, discounting, and adjustments for the adoption of certain requirements over time (e.g., elimination of flow restrictors for new and replaced tanks), and therefore differ from the unit costs presented in **Exhibit 3 -**  **1** . It is important to note that the unit costs in **Exhibit 3**  **- 4**  cannot be summed to obtain a cost per s ys tem, as nearl y all sy stems are already in compliance with some requirements of the final UST regulation
.

65 Specifically, costs associated with AHFDSs total $10.4 million under the Selected Option, while c osts associated with FCTs total $10.6 million. Together, these costs total to a rounded sum of roughly $21 million, or 13 percent of total Selected Option costs.

66 The $232 estimate excludes costs associated with removal of deferrals for AHFDSs and UST sys tems with FCTs, assumes 3.07 systems per retail motor fuel facility, and includes the annualized cost of $26 per facility for them to review the regulation. This approach does not address variability of baseline compliance across systems; to assess uncertainty associated with this approach, EPA presents a sensitivity analysis in Chapter 5.

67 For exhibits that show the disaggregation of com pliance costs under each regulatory option as we ll as systems affected, see Appendix D.3
- 16

Exhibit 3
- 3 **Total Annual Compliance Costs Due To The Final UST regulation**  **For UST System s Affected**  **All values in $ thousands** a **Description Selected Option**  **Alternative 1 Alternative 2** 

**Capital Cost (Annualized)**  **O&M Total Cost**  **Capital Cost**  **(Annualized) O&M**  **Total Cost Capital Cost**  **(Annualized) O&M**  **Total Cost Release Prevention**  Walkthrough inspections $0 $23,000 $23,000 $0 $53,000 $53,000 $0 $7,000 $7,000 Periodic testing/inspections of:

- Overfill

prevention equipment

- Spill prevention equipment

- Containment sumps $0 $64,000 $64,000 $0 $180,000 $180,000 $0 $19,000 $19,000
Testing after repairs to spill and overfill prevention equipment, and secondary containment $0 $12 ,000 $12 ,000 $0 $ 12 ,000 $ 12 ,000 $0 $12 ,000 $12 ,000 Elimination of flow restrictors in vent lines for all new tanks and when overfill prevention equipment is replaced $2, 5 00 $0 $2, 5 00 $2, 5 00 $0 $2, 5 00 N/A N/A N/A **Subtotal**

**– Release**  **Prevention** b **$2, 5**  **00 $**  **99 ,000**  **$100,000 $2,**  **5 00**  **$250,000 $250,000**  **$0 $38,000**  **$38,000 Release Detection**  Operability test s for release detection methods (incl. groundwater and vapor monitoring) $0 $21,000 $21,000 $0 $24,000 $24,000 $0 $21,000 $21,000 Groundwater and vapor monitoring for release detection c $ 500 $0 $500 See note b See note b $ 1,0 00 $0 $0 $0 Add SIR/CITLD to regulation with performance criteria $3 $0 $3 $3 $0 $3 $3 $0 $33
- 17

Exhibit 3
- 3 **Total Annual Compliance Costs Due To The Final UST regulation**  **For UST System s Affected**  **All values in $ thousands** a **Description Selected Option**  **Alternative 1 Alternative 2** 

**Capital Cost (Annualized)**  **O&M Total Cost**  **Capital Cost**  **(Annualized) O&M**  **Total Cost Capital Cost**  **(Annualized) O&M**  **Total Cost** Remove release detection deferral for emergency generator tanks d $250 $1, 700 $2,000 $290 $2,000 $2,300 $250 $1,700 $2,000 Response to interstitial monitoring alarms e $0 $0 $0 $0 $0 $0 $0 $0 $0 **Subtotal**

**– Release**  **Detection** b **$ 750**  **$23,000 $2**  **4 ,000**  **$290 $**  **26 ,000**  **$ 27**  **,000 $25**  **0 $23,000**  **$23,000 Other**  Remove deferral for airport hydrant fuel distribution sy stems f See note b See note b $ 10 ,000 See note b See note b $1 7 N/A Remove deferral for UST sy stems with field
constructed tanks f See note b See note b $11,000 See note b See note b $ 66 N/A Require notification of ownership change $0 $46 $46 $0 $46 $46 $0 $46 $46 Closure of lined tanks that cannot be repaired according to a code of practice g $0 $2,400 $2,400 $0 $2,400 $2,400 $0 $2,400 $2,400 Requirements for demonstrating compatibility with fuels > E10 and > B20 < $0.1 $0 < $0.1 < $0.1 $1,100 $1,100 N/A N/A N/A Cost to owners/operators to read regulation $5,500 $0 $5,500 $5,500 $0 $5,500 $5,500 $0 $5,500 **Subtotal**

**– Other**  b **$5,500 $2,400**  **$ 29**  **,000 $5,500**  **$3, 5**  **00 $9,100**  **$5,500 $2,400**  **$7,900 EPAct**  **- related Provisions**  Operator training $2 3 $110 $130 $2 3 $110 $130 $2 3 $110 $130 Secondary containment $98 0 $0 $ 98 0 $ 98 0 $0 $ 98 0 $ 98 0 $0 $98 0 **Subtotal**

**– EPAct**  **- related**  **Provisions** b **$1,000 $110**  **$1,100 $1,000**  **$110 $1,100**  **$1,000 $110**  **$1,100 Subtotal**  **b $**  **9,8 00**  **$ 12**  **0,000 $**  **16 0,000**  **$9,300 $280,000**  **$290,000 $6,700**  **$ 63**  **,000 $**  **70 ,000** 3
- 18

Exhibit 3
- 3 **Total Annual Compliance Costs Due To The Final UST regulation**  **For UST System s Affected**  **All values in $ thousands** a **Description Selected Option**  **Alternative 1 Alternative 2** 

**Capital Cost (Annualized)**  **O&M Total Cost**  **Capital Cost**  **(Annualized) O&M**  **Total Cost Capital Cost**  **(Annualized) O&M**  **Total Cost Additions for new units**  **(beyond those included above)**  **h** $5 $0 $5 $5 $0 $5 $5 $0 $5 **Total b**  **$ 9**  **, 8**  **00 $**  **12 0,000**  **$ 16**  **0,000 $9,300**  **$280,000 $290,000**  **$6,700 $**  **63 ,000**  **$ 70**  **,000** a Cost estimates were derived using a seven percent discount rate. b Totals may not add due to rounding. Costs associated with the removal of deferrals for FCTs and AHFDSs or groundwater and vap or monitoring for release detection under Alternative 1 are included in the total columns only. c Costs under the Selected Option include the cost of conducting a site assessment or well verification, weighted by the probab ility that one of these is necessary, as a one
- time cost. For Alternative 1, costs include a five
- year phase out of groundwater and vapor monitoring as release detection methods. Capital and O&M costs are aggregated in this line item for Alternative 1 because this requirement was modeled separately from the other requirements. See Appendix D for d etails. For Alternative 2, costs include only the cost of operability t ests for these types of release detection. d Costs related to removal of deferrals for the regulation of emergency generator tanks include the cost of removal of deferral s, installatio n and maintenance of ATG on approximately seven percent of systems, installation and maintenance of SIR on 60 percent of systems, and performing operability t ests on all EGT systems. See Appendix D for details. e The cost associated with this requirement would be the incremental cost difference between a tightness test (required in the baseline) and an interstitial integrity test (required by the final UST regulation). However, because the cost of an interstitial integrity test is less than the cost of a tightness test, we do not assign any cost to this requirement. See Appendix D for additional information. f Airport hydrant fuel distribution systems include a capital cost because tanks associated with airport hydrant fuel distribution systems without exis ting ATGs are assumed to install ATGs to comply with the requirement. Similarly, the DoE UST systems with field
- constructed tanks include a capital costs because these tanks are assumed to install ATGs to comply with the requirement. UST systems with fi eld
- constructed tanks without existing ATGs are assumed to conduct annual precision tightness tests to comply with the requirement. Capital and O&M costs are aggregated in these line items because various components of the compliance with release detecti on include both capital and O&M costs. See Appendix A for details. g Although the closure of lined tanks represents a capital cost, we consider it an operation and maintenance cost as a modeling convenience. See Appendix D for details. h As a simplifying a ssumption, EPA assumes that UST systems enter and exit the universe at a constant annual rate, such that the total number of UST systems in the universe does not change. We assume that operation and maintenance costs associated with these systems offset each other, as the number of entries equals the number of exits; however, new systems entering the universe will still incur incremental capital costs associated with certain requirements (e.g., a new emergency generator tan k would need to install a release detection method). For modeling purposes, we account for these new units in the “Additions for new units.” The costs shown reflect the capital costs associat ed with new units for all but the following requirements: elimination of flow restrictors for new t anks, requirement of secondary containment for new tanks, and requirement of under
- dispenser containment for new dispenser systems.3
- 19

Exhibit 3
- 4 **Discounted And Annualized Cost Per System Affected By Requirement** a **Description b**  **Selected Option Alternative 1**  **Alternative 2 Cost per**  **System c**  **Systems**

**Affected Cost per** 

**System c**  **Systems**

**Affected Cost per** 

**System c**  **Systems**

**Affected Release Prevention**  Walkthrough inspections $4 2 555,003 $9 6 555,003 $20 349,551 Periodic testing/inspections of: $334 190 , 623 d $8 60 210 ,2 66 d $48 388 , 641 d

- Overfill prevention equipment

- Spill prevention equipment

- Containment sumps Testing after repairs to spill and overfill prevention equipment, and secondary containment $311 40, 011 $311 40, 011 $311 40, 011 Eliminate flow restrictors in vent lines for all new tanks and when overfill prevention equipment is replaced $40 63 , 818 $40 63,818 N/A N/A **Release Detection** Operability test s for release detection methods d $126 165 , 492 $144 165,492 $126 165 , 492 Gr oundwater and vapor monitoring for release detection e $ 59 25,475 $ 40 25,968 $19 25,475 Add SIR/CITLD to regulation with performance criteria $1 2, 756 $1 2, 756 $1 2, 756 Remove release detection deferral for emergency generator tanks f $181 10,977 $20 7 10 , 977 $18 0 10,977 Response to interstitial monitoring alarms h $0 10, 634 $0 10, 634 $0 10, 634 **Other** Remove deferral from airport hydrant fuel distribution systems g $ 128,829 81 $ 214 81 N/A N/A Remove deferral from UST systems with field
- constructed tanks g $30,745 3 46 $ 192 346 N/A N/A Require notification of ownership change $5 8, 726 $5 8, 726 $5 8, 726 Closure of lined tanks that cannot be repaired according to a code of practice $41,803 57 $41,803 57 $41,803 57 Requirements for demonstrating compatibility with fuels > E10 and > B20 $0 23 4 $2 577,981 N/A N/A Cost to owners/operators to read regulation $9 577, 981 $9 577,981 $9 577, 981 **EPAct -**  **related Provisions** Operator training $51 2, 618 $51 2,618 $51 2,618 Secondary containment $443 2, 217 d $443 2, 217 d $443 2, 217 d a Cost estimates were derived using a seven percent discount rate. b Requirements that apply at the facility level are converted to a system basis using a conversion factor of 2.7 1 systems per facility. c Important: these unit costs cannot be summed to obt ain a total cost per system because nearly all systems are already in compliance with some requirements of the final UST regulation
. d Because the number of systems affected varies depending on the individual testing requirements, we estimate the number of systems affected by all three requirements by dividing their total cost by the sum of their unit costs. For example, if the three requirements had total unit costs of $100 and created new costs of $100,000, we would estimate that they affect 1,000 systems. e Costs under the Selected Option include the cost of operability tests for these types of release detection as the operation and maintenance cost, as well as the cost of conducting a site assessment or well verification, weighted by the probability that one of these is necessary, as a one
- time cost. For Alternative 1, costs include a five
- year phaseout of groundwater and vapor monitoring as release detection methods. For Alternative 2, costs include only the cost of operability test s for these types of release detection. f Costs related to removal of deferrals for the regulation of emergency generator tanks include the cost of removal of deferrals, installation and maintenance of ATG on approximately seven percent of systems, installation and maintenance of SIR on 60 percent of systems, and performing operability test s on all EGT systems. See Appendix D for details. Costs for emergency generator tanks are lower in Alternative 2 because operability test s are performed every 3 years versus every year under other options. g Because different subsets of AHFDSs are subject to different requirements, and because different requirements applica ble to AHFDSs and FCTs include various types of one
- time and O&M costs, we present average unit costs that divide the total cost to the affected universe by the total number of affected units. These costs include any TVM costs associated with operability t est s. See Appendix A for additional details. h The cost associated with this requirement would be the incremental cost difference between a tightness test (required in the baseline) and an interstitial integrity test (required by the final UST regulation). However, because the cost of an interstitial integrity test is less than the cost of a tightness test, we do not assign any cost to this requirement. See Appendix D for more information.3
- 20

**3.4.1 Assessment of Compliance Costs**  **under the Alternative Baseline Scenario Exhibit 3**  **- 5**  presents total annual compliance costs of the final UST regulation under the alternative baseline discussed in Section 3.3.1. Annual compliance costs are slightly less than those presented in **Exhibit 3 -**  **2** , reflecting the fact that the cumulative universe of affected sy stems in the alternative baseline is only marginally

smaller than the universe in the original baseline. However, as **Exhibit 3 -**  **5** shows, most cost reductions are within the rounding error of EP A’s estimates for annual compliance costs of the regulation. Exhibit 3
- 5 **Annual Compliance Costs Of The Final UST regulation**  **Using an Alternative Baseline For UST Systems Affected** a **Option Selected Option**  **($ m illions)**  **Alternative 1**

**($ m illions)**  **Alternative 2**

**($ m illions)**  Conventional UST systems b $130 $280 $62 Emergency Generator Tanks (EGTs) $2.0 $2.3 $2.0 Airport Hydrant Fuel Distribution Systems (AHFDSs) $1 0 $0.01 7 $0.0 UST systems with Field
- Constructed Tanks (FCTs) $11 $0.06 6 $0.0 Cost to owners/operators to read regulation $5.4 $5.4 $5.4 **Total** c **$160 $290**  **$70** a Cost estimates were derived using a seven percent discount rate. b Conventional UST systems include all systems that are not AHFDSs, FCTs, or EGTs. c Totals may not add exactly due to rounding. **3.5 Sensitivity Analyses**  Certain aspects of EPA’s compliance cost estimates are characterized by significant uncertainty and are sufficiently large that deviations from chosen assumptions may have a measurable impact on cost estimates. In this section, the anal ys is evaluates the sensitivity of certain results to variation in key parameters. These sensitivity anal ys es include evaluations of:

 Total compliance costs to the final UST regulation under an alternative estimate of labor costs. Specifically, the anal ys is evaluates the effect of using higher labor rates, overhead costs, and fringe benefits factors, and lower average labor costs.

 Highest and lowest compliance cost scenarios for the distribution of technologies for overfill prevention equipment inspections , spill prevention equipment tests , and containment sumps tests . If facilities using these technologies are disproportionately

located in states that do not already have similar regulations in place, costs could be higher than estimates presented in the earlier parts of this chapter. Similarl y, if affected facilities are located in states that already have similar regulations in place, costs could be substantially lower than estimated. **3.5.1. Compliance Cost s of the**  **Final UST regulation Using Alternative Estimates of Labor**  **Rates, Overhead Costs, and Fringe Benefits** For conventional UST facilities, EPA has selected labor, overhead, and fringe benefits rates that best reflect a “ty pical” UST facility . These lab or rates are representative of skilled3
- 21

labor costs at motor fuel retailers, which own and operate roughly 80 percent of the universe of UST sy stems. The use of these rates has a material impact on the estimated compliance cost of the final UST regulation b ecause they drive the operation and maintenance costs associated with requirements for walkthrough inspections and operability test s. To evaluate the impact of alternative labor rates on total compliance cost estimates, EPA considered two alternative scenarios. The first scenario is consistent with the OUST Information Collection Request 1360.12 and reflects labor rates reflective of economy
- wide average wages, benefits, and overhead. This represents a high
- end estimate because it also includes industries w ith highly

skilled labor requirements and benefits (e.g., law firms). 68 The second scenario uses specific labor categories and costs representative of retail motor fuel establishments, but assumes that lower
- level staff may complete walkthrough inspections
. **Exhibit 3 -**  **6** presents the results for the three labor category scenarios. While one
- time costs are not affected b y the change in labor rates, operation and maintenance costs in the high
cost scenario are roughly $40 million higher than EPA’s primary estim ate, totaling $200 million rather than $160 million (an increase of 25 percent). The majority of this increase is due to higher operation and maintenance costs related to walkthrough inspections and operability test s. In contrast, the low
- end labor
- rate co st estimate totals approximately $140 million, roughly

$20 million (or 13 percent) lower than EPA’s central estimate. In addition to lower benefits and labor rates, this low
- end estimate assumes that clerical
- level personnel will perform walkthrough inspec tions. For AHFDSs and sy stems with FCTs, EPA uses constant industry average labor rates across all scenarios
. 69

68 These labor categories were reported in U.S. Environmental Protection Agency. Information Collection Request Number 1360.12. February 2011. We used revised labor rates from those categories to reflect 2012 conditions. However, documentation in this analys is did not provide a reason for the use of economy
- wide average labor rates, and our assessment of the universe suggests that retail
-based rates are more appropriate.

69 This sensitivity analysis examines only the cost of obtaining labor with the skill sets needed to comply with the regulations. While it is possible that an owner/operator may opt to hire more highly
- skilled workers to provide a range of skills beyond what is required for compliance, the broad availability of lower -priced labor and profession al services in the market to achieve compliance render this unnecessary for compliance with the rule. Therefore, any acquisition of higher
- skilled labor would represent a business decision that incorporates consideration of other factors not related to dir ect compliance, and is therefore not a cost imposed by the rule. While it may be beneficial for businesses to obtain workers with additional skills to improve their operations, EPA considers only the potential uncertainty of the cost of labor required to p erform the required tasks under the rule. In other words, the alternate labor rates sensitivity analyses do not examine whether higher or lower labor rates include the acquisition or procurement or staff with different skill levels; rather, this sensitivity analysis assumes that staff skills are held constant at the level required for compliance with the rule, and that the uncertainty lies within the price at w hich these staff are available.3
- 22

Exhibit 3
- 6 **Compliance Cost Sensitivity Analysis: Alternative Labor Rates** a

**Description Final UST regulation**  **Lower Estimate ($ thousands)**  **b Primary Estimate**  **used for Analysis ($ thousands)**  **c Upper Estimate**  **($ thousands) d**  **Release Prevention** Walkthrough inspections e $11,000 $23,000 $45,000 Periodic testing/inspections of:

- Overfill prevention equipment

- Spill prevention equipment

- Containment sumps $63 ,000 $64,000 $64,000 Testing after repairs to spill and overfill prevention equipment, and secondary containment $12 ,000 $12 ,000 $12 ,000 Elimination of flow

restrictors in vent lines for all new tanks and when overfill prevention equipment is replaced $2,5 00 $2,5 00 $2,5 00 **Subtotal -**  **Release Prevention i**  **$ 89**  **,000 $100,000**  **$120,000 Release Detection**  Operability test s for release detection methods (incl. groundwater and vapor mo nitoring) $20,000 $21,000 $35,000 Groundwater and vapor monitoring for release detection f $ 500 $ 500 $ 500 Add SIR/CITLD to regulation with performance criteria $3 $3 $3 Remove release detection deferral for emergency generator tanks $1,900 $2,000 $2,700 Response to interstitial monitoring alarms g $0 $0 $0 **Subtotal -**  **Release Detection i**  **$22 ,000**  **$24 ,000**  **$ 38**  **,000 Other**  Remove deferral for airport hydrant fuel distribution systems h $10 ,000 $10 ,000 $10 ,000 Remove deferral for UST systems with field
- constructed tanks h $11,000 $11,000 $11,000 Require notification of ownership change $20 $46 $74 Closure of lined tanks that cannot be repaired according to a code of practice $2,400 $2,400 $2,400 Requirements for demonstrating compatibility with fuels > E10 and > B20 < $0.1 < $0.1 < $0.1 Cost to owners/operators to read regulation $2,400 $5,500 $8,900 **Subtotal**

**– Other**  **i $26**  **,000 $**  **29 ,000**  **$3 2**  **,000 EPAct**  **- related Provisions**  Operator training $ 120 $130 $190 Secondary containment $98 0 $9 8 0 $98 0 **Subtotal -**  **EPAct -**  **related Provisions i**  **$1,100 $1,100**  **$1,2 00**  **Subtotal i**  **$140,000 $160,000**  **$200,000 Additions for new units (beyond those**  **included above) j**  $5 $5 $5 **Total i**  **$140,000 $160,000**  **$200,000**3
- 23

Exhibit 3
- 6 **Compliance Cost Sensitivity Analysis: Alternative Labor Rates** a a Cost estimates were derived using a seven percent discount rate. b Lower Estimate relies on BLS Industry
- Specific Occupational Employment and Wages, NAICS 447000
- Gasoline Stations, May 2011 for: Managerial (41
- 1011 First
- Line Supervisors/Managers of Retail Sales Workers): Technical (53
- 1021 First
- Line Supervisors/Managers of Helpers, Laborers, and Material Movers, Hand); Clerical (53
- 6031 Service Station Attendants); and BLS National Occupational Employment and Wages, May 2011 for Technical for operabil ity test s (49
- 2094 Electrical and Electronics Repairers, Commercial and Industrial Equipment) and Legal (23
- 1011 Lawyers). Benefits rate is 25.1 percent of wages, as reported in BLS Employer Costs for Employee Compensation, December 2012. Table 10: Trade, transportation, and utilities
- retail trade. Overhead rate is 12 percent from : U.S. Office of Management and Budget. Circular No. A
- 76. p. D
- 7. Assumes that service station attendants perform walkthrough inspections. c Primary Estimate relies on BLS Indus try- Specific Occupational Employment and Wages, NAICS 447000
- Gasoline Stations, May 2011 for: Managerial (11
- 0000 Management Occupations (Major Group)); and Clerical (43
- 9061 Office Clerks, General); and BLS National Occupational Employment and Wages, May 2011 for Technical for operability test s (49
- 2094 Electrical and Electronics Repairers, Commercial and Industrial Equipment); Technical (53
- 1021 First
- Line Supervisors/Managers of Helpers, Laborers, and Material Movers, Hand); and Legal (23
- 1011 Lawyers) . Benefits rate is 28.8 percent (BLS Employer Costs for Employee Compensation, December 2012. Table 10: All workers, service
- providing industries). Overhead rate is 12 percent from: U.S. Office of Management and Budget. Circular No. A
- 76. p. D
- 7. d Upper E stimate relies on BLS Employer Costs For Employee Compensation, December 2012 for Managerial (Table 9, Management, Professional, and Related); Technical and Technical for operability test s (Table 10, Professional and Technical Services (Service Industries)); and Clerical (Table 11, Office and Administrative Support); and BLS National Occupational Employment and Wages, May 2011 for Legal (23
- 1011 Lawyers). Benefits rate is 28.8 percent (BLS Employer Costs for Employee Compensation, December 2012. Table 10: All workers, service
- providing industries). Overhead rate is 12 percent from: U.S. Office of Management and Budget. Circular No. A
- 76. p. D
- 7. e Walkthrough inspections under the Lower Esti mate rely on clerical labor rates estimated using BLS Standard Occupational Code 53
- 6031, Service Station Attendants; under other scenarios, we use technical labor rates estimated using BLS Standard Occupational Code 53
- 1021, First
- Line Supervisors/Manager s of Helpers, Laborers, and Material Movers, Hand. f Costs under the Selected Option consist of the cost of conducting a site assessment or well verification, weighted by the probability that one of these is necessary, as a one
- time cost. g The cost assoc iated with this requirement would be the incremental cost difference between a tightness test (required in the baseline) and an interstitial integrity test (required by the final UST regulation). However, because the cost of an interstitial integrity test is less than the cost of a tightness test, we do not assign any cost to this requirement. See Appendix D for additional information. h The labor rate used for these types of systems, where they are DoD
- owned, is the latest ICR labor rate (similar to the upper estimate rate), except for a component of the Operator Training requirement, which uses the United States Air Force labor rat e for pay grade E
- 6 over 3. For AHFDSs located at commercial airports, the labor rates used originate from BLS National Occupational Employment and Wages, May 2011 for NAICS 481100 (Scheduled Air Transportation) for Legal (23
- 1011), Managerial (11
- 000), Technical (53
- 0000), and Clerical (43
- 000), except for a component of the Operator Training Requirement, which uses the hourly rate for a Fuel Distribution System Worker from December 2012, according to USAjobs.gov. i Totals may not add exactly due to rounding. j As a simplifying assumption, EPA assumes that UST systems enter and exit the universe at a constant annual rate, such that the total number of UST systems in the universe does not change. We assume that operation and maintenance costs associated with these systems offset each other, as the number of entries equals the number of exits; however, new systems entering the univer se will still incur incremental capital costs associated with certain requirements (e.g., a new emergency generator tank would n eed to install a release detection method). For modeling purposes, we account for these new units in the “Additions for new unit s.” The costs shown reflect the capital costs associated with new units for all but the following requirements: elimination of fl ow restrictors for new tanks, requirement of secondary containment for new tanks, and requirement of under
- dispenser containment for new dispenser systems.3
- 24

**3.5.2 Sensitivity Analysis of Distribution of Technologies for Overfill**  **Prevention Equipment Inspections**  **, Spill Prevention Equipment Testing**  **, and Containment Sump Testing**  Because data on the distribution of UST technologies (including release detection and prevention technologies) is available only at a national level, EPA is not able to identify how facilities and s ys tems with certain technologies are distributed across di fferent states. As a result, the cost anal ys is assumes that technologies are distributed uniformly across all states and territories. For s ys tems that require overfill prevention equipment inspections , spill prevention equipment tests, and containment sump tests , actual compliance costs may differ substantiall y from EPA’s estimates if this assumption does not hold. For example, if facilities using these technologies are disproportionately located in states that do not already have similar inspection/testing requirements in place in the baseline, compliance costs could be higher than the estimates based on a uniform distribution presented in **Exhibit 3 -**  **2** and **Exhibit 3**  **- 3** 
. Similarly, if affected facilities are concentrated in states that already have similar regulations in place in the baseline, then actual compliance costs could be substantially lower than estimates based on a uniform distribution. To investigate the impact of the assumption of uniform distribution of technologies, EPA performed a bounding anal ys is of the two extreme cases of distribution. **Exhibit 3 -**  **7** reports the possible range of values for three scenarios : one where compliance cost is the lowest (i.e., facilities are located in states that already satisfy the final UST regulation), the actual model scenario based on uniform distribution of technologies , and the scenario in which compliance costs are highest. Variation between the minimum and maximum cost scenarios totals approximately

$30 million, or approximately 20 percent of the total compli ance costs estimated for the regulation. EPA’s primary estimate of these costs is near the mid
- point of the range of estimates. Exhibit 3
- 7 **Discounted Highest And Lowest Compliance Cost Scenarios For Technologies For Overfill Prevention**  **Equipment Inspectio ns**  **, Spill Prevention Equipment Tests**  **, And Containment Sump Tests**  a **Regulatory change Lower**  **($ m illions)**  **Prim ary**  **($ m illions)**  **Upper ($ m** **illions)** Overfill prevention equipment inspections b $29 $29 $29 Spill prevention equipment testing $17 $19 $25 Containment sump testing $0 $17 $22 **Total** c **$4 5**  **$64 $7**  **5** a Cost estimates were derived using a seven percent discount rate. b Because the entire universe of systems will be required to perform overfill prevention equipment inspections, EPA does not expect any uncertainty related to the locations of affected systems. c Totals may not sum due to rounding. **3.5.3 Summary of Sensitivity Findings**  EPA’s sensitivity

findings suggest that possible variation in labor rates is likely to produce the most significant impact on the estimated cost of the final UST regulation : plausible3
- 25

selections for labor rates may reduce selected option costs by approximately

$20 million (13 percent) or increase them by $40 million (25 percent). Separatel y, EPA has identified potential variation of approximately 20 percent related to the distribution of technologies involved in overfill prevention equipment inspections , co ntainment sump testing , and spill prevention equipment testing. We note that each of these sensitivity analy ses reflects variation compared with the primary

estimates of costs presented throughout this chapter. The estimates presented in the body of this chapter represent reasonable, conservative central tendencies for the costs of the final UST regulation
. **3.6 State Government Administrative Compliance Costs**  In addition to compliance costs related to the operation of UST sy stems, the final UST regulatio n will also impose new UST program administration requirements on state government agencies. 70 Specificall y, state government agencies will incur costs associated with new notification requirements, and costs associated with obtaining and reading the regulation . This section reviews state government costs associated with these activities. Costs associated with obtaining and reading the regulation assume that 10 people will each take six hours to read the regulation in each state (using the legal labor rate for states of $47 p er hour from OUST’s ICR 1360.08 inflated to 2012 dollars). In addition, based on the ICR, we assume that the reporting and recordkeeping burden for states to appl y for State Program Approval (SPA) is approximately 28.5 hours (using the c lerical labor rate for states of $26 per hour inflated to 2012 dollars). The total compliance cost in nominal terms is therefore approximately

$219,000; the annualized compliance cost assuming the 20
- ye ar regulatory time horizon is approximately $21,000. 71 State agencies that do not currentl y have a requirement for notification of changes in UST ownership or for at least an annual UST registration must also process a certain number of notices due to annual turnover in facility ownership. State government co mpliance costs for this activity assume a typical nominal recordkeeping cost of $32 per facility, based on OUST’s ICR 1360.08 inflated to 2012 dollars ; compliance costs assume the use of existing recordkeeping sy stems. Eight states and territories do not currently have recordkeeping requirements consistent with the final UST regulation
. 72 These eight states and territories will incur approximately $ 100 ,000 per ye ar, due to an annual turnover rate of approximately 10 percent in UST facility ownership. Lastl y, each state agency will incur costs to process the one
- time notifications of existence for AHFDSs and FCTs. State government compliance costs for this activity assume a

70 In some cases, UST systems are directly owned or operated by lo cal, state, and federal government entities. These costs are subsumed in the estimates of compliance costs presented earlier in this chapter.

71 Consistent with other parts of this regulatory impact analysis, we amortize one
- time or capital costs over the regulatory time horizon of 20 years. If these costs are phased in over a three
- year period, annual costs decrease to approximately $19,000.

72 Th ese states are Arizona, Georgia, Idaho, North Carolina, North Dakota, Nevada, and South Carolina. The Virgin Islands will also incur these costs.3
- 26

ty pical nominal recordkeeping cost of $32 per facility, based on OUST’s I CR 1360 .08 inflated to 2012 dollars ; compliance costs assume the use of existing recordkeeping sy stems. Based on the estimated universe of AHFDSs and FCTs, the total state processing cost in no minal terms is approximately

$14 ,000; the annualized processing cost a ssuming the 20
- ye ar regulatory time horizon is approximately $1,300. Total annualized state government administrative compliance costs sum to $120,000 per ye ar. Note that under alternative baseline assumptions, these costs would decline by a very small percentage ( less than one percent) as the universe of affected s ys tems declines. **3.7 Summary** 

**– Total Annual Compliance Costs**  In total, EPA estimates that the Selected Option for the final UST regulation will produce incremental costs of approximately $160 mi llion per year compared to the current regulatory baseline. **Exhibit 3 -**  **8** summarizes these costs per category . Regardless of the option, conventional UST sy stems will incur over 80 percent of these costs. Costs to AHFDSs and FCTs comprise approximately

14 percent and 0.03 percent of total costs under the Selected Option and Alternative 1, respectively. Exhibit 3
- 8 **Total Annual Compliance Costs** a,b **Category Selected**  **Option ($ m** **illions) Alternative 1** 

**($ m illions)**  **Alternative 2**

**($ m illions)**  Conventional UST systems c $130 $280 $6 3 Emergency Generator Tanks (EGTs) $2.0 $2.3 $2.0 Airport Hydrant Fuels Distribution Systems (AHFDSs) $1 0 $0.01 7 $0.0 UST systems with Field
- Constructed Tanks (FCTs) $11 $0.06 6 $0.0 Cost to Owners/Operators to Read Regulation $5.5 $5.5 $5.5 State Government Administrative Costs d $0.12 $0.12 $0.12 **Total Annual Compliance Costs** e **$160 $290**  **$7 0**  a Cost estimates were derived using a seven percent discount rate. b Com pliance costs include direct compliance costs and state oversight costs. For this regulatory impact analysis, direct compliance costs and state oversight costs provide a reasonable proxy to assess the final UST regulation ’s social costs. See Chapter 3. 1 for further discussion. c Conventional UST systems include all systems that are not AHFDSs, FCTs, or EGTs. d The costs for UST systems directly owned or operated by local, state, and federal government entities are included in the estimates of compliance costs within the other categories. Costs shown here reflect the administrative costs for state governments to read the regulation , apply for state program approval, process notifications of ownership changes, and process one - time notifications of EGT, AHFDS, and FCT existence. e Totals may not add up due to rounding. Under the alternative baseline universe assumption described in Section 3.3.1, EPA estimates that the Selected Option for the final UST regulation will produce incremental compliance costs of approximately $ 155 million per year compared to $ 156 million in annual costs in the primary

analy sis; the results of both the primary and alternative scenario round to $160 million in total annual social costs. Under Alternative 1, the alternative baseline universe assumption yields an estimate of approximately $ 286 million per year in incremental compliance costs, compared to $ 287 million in the primary analy sis; the results in both the primary and3
- 27

alternative scenarios round to $290 million in total annual social costs. Similarly , under Alternative 2, total annual social costs are approximately $70 million in both the alternative baseline scenario and the primary anal ys is. **Limitations of Compliance Cost Analysi s**  While EPA has taken steps to present a sound analy sis of compliance costs, it recognizes that certain assumptions and limitations are inherent to this assessment. **Tank configuration** : This analysis assumes that a particular configuration of equipment represents the average UST sy stem. This assumption affects the compliance costs of the final UST regulation because sy stems with different configurations (e.g., more sumps per tank) could have different costs. Mischaracterizing this configuration may under
- or overstate total costs as well as sy stem - level costs. **System -**  **level compliance costs** : As discussed in Section 3.3, sy stem - level compliance costs are based on public information, input from UST industry professionals, and EPA professional judgment, all of which are assumed to provide the most accurate available data at the time of this regulatory action . EPA recognizes that these data sometimes reflect onl y a small number of sources, and are therefore characterized by uncertainty. As a result of these uncertainties, the precise cost of the final UST regulation may differ from the estimate generated by EPA’s anal ys is. The above sensitivity anal yses, though not strictly additive, suggest that the outside range of cost uncertainty is l ess than 35 percent from EPA’s central estimates. 73 Moreover, because EPA’s estimate is framed b y a number of conservative assumptions (outlined in section 3.3), it is unlikely that this analy sis understates the costs of the final UST regulation significantly
.

73 The alternative labor rates sensitivity analysis in **Exhibit 3 -**  **6** indicates that compliance costs may decrease by up to $20 million or increase by up to $40 million, depending on the set of labor rates specified. This reflects a range spanning from a total decrease of up to 13 percent ($20 million / $160 million) to a total increase of up to 25 percent ($40 millio n / $160 million). In addition, the technology distribution sensitivity analysis in **Exhibit 3**  **- 7**  indicates that compliance costs may be overstated by up to $19 million, or understated by up to $11 million. This reflects a range spanning from a total decreas e of up to 12 percent ($19 million / $160 million) to a total increase of up to seven percent ($11 million / $160 million). Combining these ranges yields a total outside range of cost uncertainty of less than 35 percent around EPA’s central estimates: a po tential total decrease of 25 percent (13 percent + 12 percent) to a potential total increase of 32 percent (25 percent + seven percent).4
- 1



### Chapter **4 .**  **Assessment of Cost Savings and Benefits 4.1**  **Introduction** The beneficial impacts of a regulatory change are ty

pically measured in one of two way s: as “social benefits” or as avoided costs. Social benefits usually take the form of reduced environmental damage, reduced human health risk, and improvements in the value of environmental amenities. Benefits also include avoided costs associated with reduced need for cleanup and avoided costs of “averting behavio r” (e.g., obtaining replacement water supplies). Id eall y, social benefits reflect accurate measures of the total “willingness to pay” (WTP) of consumers to obtain improvements in environmental quality . In other cases, avoided costs (e.g., medical care) can be used to inform proxy estimates of WTP when direct estimates of WTP are unavailable. In the context of this regulation, EPA considers the avoided costs associated with reduced need for remediation ( cleanup ) of releases because avoided costs represent a real economic cost savings , and because reliable WTP estimates for the value of an avoided cleanup are not available . While avoided costs, or cost savings, could be subtracted from total costs and reported in Chapter 3, they do not typically accrue to the same parties that incur compliance costs. Therefore, for clarity of presentation , we examine them with other benefits and beneficial impacts in this chapter. This chapter describes the approaches used to evaluate avoided remediation costs and other benefi ts. It first outlines several different methods attempted for measuring benefits and cost savings in the context of the proposed regulation, and describes the final selected method (expert consultation) in detail. Next, it provides a description of monetiz ed cost savings, including avoided cleanup costs, avoided vapor damage cleanup estimates, and avoided product loss associated with anticipated reductions in releases and reductions in severity of releases. The chapter then presents a screening
- level anal ys is of the quantity of groundwater potentially protected b y the regulation. Finally, we provide a qualitative discussion of ecological, human health, and other social benefits. **4.2 Investigation of Empirical Methods for Measuring Cost Savings**  The cost savings of the final UST regulation result from the reduced incidence and size of releases that would occur due to the new requirements. EPA examined a number of way s to use quantitative, empirical data on release rates, inspection effectiveness, and program p erformance to directly estimate the changes in releases that could be expected under the final UST regulation . This section describes the different data sources and methods considered, and the limitations of each. **4.2.1 Engineering Estimates and Literature**  One approach to estimating the benefits of this regulation would be to develop an engineering model of the release rates associated with equipment and practices before and after the implementation of the regulation requirements. However, this approach w ould address onl y a small number of the final UST regulation components because most of the requirements are not focused on equipment modifications, but instead call for inspections, testing, and maintenance.4
- 2

These are requirements for changes in human beh avior, and are not easily measured using equipment testing. This suggests that EPA could best measure benefits empirically by examining studies of how release rates change in response to more frequent inspection and testing. Therefore, in the context of the proposed regulation, EPA conducted a targeted review of engineering literature and studies on the effectiveness of testing and inspection programs. While we were unable to identify any studies directly

applicable to the proposed UST regulation , we did identif y several studies that examined the effects of better inspection and testing rates more generall y. We summarize three key

studies below.
 **California study of impact of secondary containment on UST system releases (2002):**  74 This study

examined whether use of secondary containment throughout UST sy stems resulted in differences in release rates. The study ’s conclusions were hampered b y a limited sample size, and authors note that releases from other parts of the sy stems may

have affected results. The study did not find a significant relationship between secondary containment and release rates at sites, but did find that facility
- level factors (e.g., improper installations) made it more likel y than expected that all sy stems at a facility would either have or lack releases. While the study cannot be used to directly estimate the benefits associated with the proposed or final UST regulation , its conclusions suggest that regulations focusing on effective facility
- level inspections may be well
- targeted.

 **Nation al Research Council study of effectiveness of state vehicle emissions**  **inspection and maintenance programs (2001):** 75 This study reviewed four state programs and one city

program aimed at reducing motor vehicle emissions by requiring inspections and maintenance. While the study did not address UST sy stems, the structure of vehicl e inspection programs is similar to the US T regulation in that both require owners/operators to undertake routine inspections and perform maintenance as needed. The study found that the programs had a measureable impact on ambient air quality , but did not identify whether the differences were statistically significant. 76 The results do not provide a quantitative basis for estimating the impacts of the final UST regulation , but the study suggests that mandatory

inspection programs can reduce emissions.

74 Young, Thomas M. and Randy D. Golding. Underground Storage Tank Field
- Based Research Project Report. Submitted to the California State Water Resources Control Board under contract to the University of California, Davis. May 31, 2002.

75 Committee on Vehicle Emission Inspection and Maintenance Programs. Evaluating Vehicle Emissions Inspection and Maintenance Programs. Nati onal Academy Press, 2001.

76 The study also concluded that the programs had more modest impacts than those predicted by air quality mo deling, but this finding is of limited relevance to the current regulation, since no ambient conditions modeling has been c onducted.4
- 3

 **Environmental Results Program (ERP) data:** 77 Data from several environmental results programs (ERPs) show a statistically significant improvement in verified compliance as a result of a combination of self
certification, technical assistance, and inspections. While these programs do not isolate the imp act of specific regulatory changes, the results are consistent with other findings that programs that rely in part on self

- implemented inspections and reporting can reduce noncompliance. In general, the literature does not address UST inspection programs directly , and does not provide quantitative results that can be used to estimate the impacts of the final UST regulation
. However, the literature does provide data that generall y indicate that self
- implementing inspection programs (with external validation) do have an impact on equipment maintenance, and generally

lead to a reduction in environmental impacts. This suggests that some positive impact should be expected from the final UST regulation
. 78 **4.2.2 Statistical Analysis of State Release Data**  A different approach to a robust anal ys is of benefits would be to develop a database of state UST regulations and reported release rates before and after the effective dates of regulations similar to the final UST regulation . With good quality data, it is possible to combine these regulations and reported release rates, and isolate the marginal impacts of various components of the final UST regulation . To collect detailed data at the facility level, however, would require visiting state UST programs individually and collecting detailed site inspection data from state case files and archives. Not only would such an effort be prohibitive in terms of available resources, but our current knowledge of the state programs suggests that variable inspection practices and chan ges in record
- keeping practices over time may limit the ability

of the exercise to provide robust results. In the absence of site
- specific data, however, we collected and examined data on state regulatory

programs and reported releases from available aggregate sources at the time of the proposed regulation. Specificall y, we identified and evaluated data from th e following sources:

77 See: Vermont Department of Environmental Conservation. “Final Report

– Environmental Results Project

– Vermont: Underground Storage Tank Facilities.” March 17, 2010; Rhode Island Department of Environmental Management. Underground Storage Tank Environmental Results Program, Final Report, Tables I
IV; U.S. Environmental Protection Agency. “Evaluation of Three Environmental Results Programs (ERPs).” August 31, 2009; and U.S. Environmental Protection Agency. “ERP States Produce Results.” December 2 007.

78 EPA conducted an updated targeted literature review in October and November 2013 to determine whether additional studies examining the impacts of testing and inspection programs on environmental outcomes had been published. The conclusions of these additional studies are consistent with those described in this section. Additional studies reviewed include: Yin, H. “The environmental and economic impacts of environmental regulations: The case of underground storage tank regulations.” January 1, 2006; and Musgrave, M. “The Illinois Underground Storage Tank Fund: Tanks for Nothing,” Politics & Policy 41(5): 765
- 787. October 2013. The additional studies reviewed did not directly comment on specific outcomes, in terms of environmental impacts, from UST insp ection programs, but did discuss the effects of risk
- based insurance and financial assurance programs, which require a degree of regular inspection and maintenance, on avoiding leaks from USTs.4
- 4

 **Leak Autopsy Reports:** In 2004 and 2005, EPA released two draft “leak autopsy” studies (“the draft 23
- state Autops y Report” and a separate study examining the State of Florida). These studies examined the sources and extent of releases that occurred in sy stems that were compliant with the 1998 standards, and identifies the extent to which different baseline releases are associated with failures of equipment in different parts of the UST sy stem (e.g., piping, overfill protection equipment). 79

 **State Regulatory and Report Data** : State programs are required to rep ort aggregated information to EPA on the number of active UST s ys tems, the number of inspections, and the number of confirmed releases reported in each six
- month period. 80 In addition, EPA obtained information about state regulatory programs and the effective dates for state requirements that are similar to the requirements of the proposed regulation. Using the available data, EPA examined several different statistical approaches, focusing on regression anal ys is, to compile and examine a set of state
- level data that included the number of UST sy stems in each state in a given year, the number of releases from UST sy stems in each ye ar, the number of UST inspections conducted in each year, and the presence or absence of regulations designed to prevent releases. Before conducting regression analy sis on the data set of state USTs and releases, EPA first adjusted the data to account for a number of data quality concerns. Of particular concern was the relationship between states with low
- frequency inspections and s tates reporting small numbers of confirmed releases. To ensure that the reported UST releases accuratel y reflected most or all releases taking place, EPA developed an index that scored each state based on the frequency of inspections. States that reported inspection rates less frequent than every five years, and/or inconsistent inspection frequencies over time, were removed from the sample, based on the assumption that release data from those states may be less reliable due to less frequent third party veri fication (i.e., state inspection) of s ys tem operations. In other words, we assume that owners/operators may

be less inclined to report releases or properl y maintain their equipment if they are in a state where inspections occur infrequently or inconsistently
. In conducting the analy sis, however, EPA identified several fundamental problems with the available data , further limiting the value of a regression anal ys is approach. These include significant data availability and reliability

issues related to the li mited number of observations and programmatic changes among states that prevent the isolation of regulation
- related impacts. Specificall y:

79 U.S. Environmental Protection Agency, Office of Underground Storage Tanks. “Evaluation of Releases from New and Upgraded Underground Storage Tank Systems (peer review draft).” August 2004; and U.S. Environmental Protection Agency, Office of Underground Storage Tanks. “Petroleum Releases at Underground Storage Tank Facilities in Florida.” March 2005.

80 Data can be accessed at: http://www.epa.gov/oust/cat/camar chv.htm
.4
- 5

 **Consistent, accurate release data are not available** . It is likely that measurement error exists in the recording o f confirmed releases across states (the dependent variable) and that it is related in some sy stematic way to the regulatory structure of the state or other explanatory variables (as opposed to random reporting error) in the analy sis. In addition, state ins pections vary in timing and focus across states; this, in turn, affects the consistency of third
- party verified compliance and release information. While EPA attempted to account for this by selecting onl y states with a high frequency of inspections for in clusion in the anal ys is, the interaction between inspection frequency and degree and effectiveness of regulation creates sample selection problems (i.e., states with higher release rates due to limited regulation may also be states that do not conduct freq

uent inspections and therefore have less reliable data). 81 Therefore, normal regression properties do not hold, and results may be biased in ways that do not allow for a reliable interpretation. 82
 **Many regulations consistent with the proposed UST**  **regulation are currently**  **in place in only a small number of states** . EPA addressed limited variation in the presence of regulations by dropping several regulatory variables from the anal ys is, but the resulting lack of variation and the small number of observations make it likely

that regulatory

indicators will proxy

for other relevant characteristics of that state.  **Study design is limited by available data** . I deally , an anal ys is of the effectiveness of UST leak prevention regulations would employ observations from a large number of states over a time period that includes years before and after regulations were in place. Such “panel” data would allow for identification of impacts temporall y and spatially. Panel data would also allow for fixed
- effects estimation, which co ntrols for any unobserved characteristics of states that might affect release rates (such as soil pH or climate), independent of any effect of regulation. Available data superficially appear to be panel data, since they provide information on the number or rate of releases from different states in multiple time periods, along with information on the presence or absence of UST regulations by

state. However, for many regulations it is unclear both when the regulation was first promulgated and when the effects of the regulation would be expected to be fully

realized (e.g., through inspections). As discussed in more detail in Appendix F, quantitative anal ys is of annual UST releases by state did not reveal a consistent measure of the potential impact of release prevention regulations. The data limitations noted above prevented the use of the preferred method of fixed effects estimation using panel data. In the absence of fixed
- effects estimation, the anal ys is cannot

81 As noted above, the only reliable approach to identify the relationship between inspection frequency, compliance, and number of releases would require a large
- scale data collection effort. In absence of this, we use inspection frequency as an indicator of reliable data.

82 For example, several regressions found an apparent positive , statistic ally significant relationship between secondary containment requirements and the number of releases per year. However, empirical data from Florida indicate that secondary containment contributes to release reductions of as much as 50 percent.4
- 6

reliably draw conclusions about the impacts of regulations on releases, independent of any unmeasured characteristics of states that could be affecting the number of releases in each state. In other words, in addition to data quality issues discussed above, the small number of states with specific UST release prevention regulations prevents identification of robust relationships between individual regulations and the number of releases per ye ar. However, through cross
- sectional anal ys is, EPA was able to estimate that release rates in California and Florida

– two states with mature UST regulation regimes

– were about 55
- 65 percent less than one would expect based on release rates at other states during the time period examined. This difference could serve as an upper bound for the potential of leak prevention regulations to reduce the rate of UST releases. 83 **4.3 Final Methodology for Assessment of Positive Impacts: Expert Consultation**  In the absence of applicable engineering models and limited empirical state data, we resorted to a consultation with four experts with experience in regulation of USTs and implementation of state inspection programs to estimate the individual effects of each regulatory change. The remainder of this chapter describes in detail the final methodology used to identify reductions in releases associated with the final UST regulation , and the calculation of cost savings associated with those avoided releases. For the proposed regulation, to ensure that the assessment of regulatory effects relied on broad expertise in regulatory implementation, EPA developed a pool of technical experts with national reputations for leadership in implementation of underground storage tank regulatory programs, or with extensive expertise in assessing spill causation at UST sites. From this pool, sev eral experts were interviewed and five experts were identified. Each of these identified experts has over 20 ye ars of experience in the regulation, assessment, and/or remediation of underground storage tanks, including direction of state programs and imple mentation of regulations similar to some aspects of the proposed regulation. One of the five experts did not provide input consistent with EPA’s anal ytical methods, and as a result his quantitative estimates were not usable for the evaluation of the propos ed regulation. 84 As a result, for the final UST regulation , EPA consulted the remaining four experts to evaluate avoided costs.

83 Exhibit 6 in Appendix F shows the degree to which the actual number of releases in Florida and California in 2009, 2005, and from 2002 to 2006 is less than the number of releases that would be expected based on the release rates observed at other states. In 2005 and 2009, the years in which the dummy variable for California wa s statistically significant from zero, California had between 56 and 63 percent fewer releases than would be expected based on the regression analysis. In 2002
- 2006, w hen the period in which the dummy variable for Florida wa s statistically significant from zero, Florida had between 60 and 65 percent fewer releases than would be expected. EPA strongly cautions against generalizing these results beyond the states included in the analysis. However, these numbers do suggest an upper bound of potential avoided leaks associated with the operation of the mature, relatively stringent programs in both California and Florida.

84 This expert’s baseline estimate of releases was not consistent with EPA’s, and he was not able to provide information on how to extrapolate to EPA’s universe. In addition, his responses included apparent internal inconsistencies that could not be reconciled without collecting more information about baseline releases. The expert also provided clear opinions about the optimal regulatory structure and suggested that his answers were not reliable unless the regulatory language was amended to include specific technical requirements. This created additional uncertainty in the interpretation of his results.4
- 7

EPA provided an identical set of written questions separatel y to each expert and conducted individual follow
- up telephone interviews to clarify and verify

responses. Appendix G provides a detailed explanation of the process EPA followed in identifying experts, more detailed information about the qualifications of the experts, the questions distributed to experts, and an explanation of the factors EPA considered when including and excluding expert feedback. Appendix H provides the experts’ responses to EPA’s questions. **Avoided Costs as a Measure of Beneficial Impacts** Avoided remediation costs represent the key beneficial impact s associated with the regulations. Avoided remediation costs represent cost savings that accrue to owners, operators and public entities charged with remediating releases at regulated facilities. 85 While avoided remediation costs are not a direct measure of total willingness to pay for environmental improvements, and are therefore not equivalent to social benefits, they represent real cost savings due to reduced demand for baseline remediation. 86 **Calculation of Annual Positive Impacts** The anal ys is presents the positive effects of the final UST regulation as a constant, recurring, annual value for anal ytical convenience. The timing of the positive impacts of the regulation is uncertain for several reasons:

 As shown in **Exhibit 1 -**  **2** in Chapter 1, the regulatory changes do not take effect simultaneously
.  Irrespective of when they take effect, the changes may require varying lengths of time to achieve full effect.

 EPA relies on its reported confirmed releases to calculate the reductions due to the final UST regulation . Confirmed releases recorded in a particular evaluation ye ar vary significantl y in severity and length of time undetected, which introduces variability

in the extent to which costs are avoided each ye ar.
 The final UST re gulation includes activities such as: frequent inspections and equipment testing to prevent, identify and address releases; near
- term shifts in technology ; and long
- term changes in technology . Each class of changes necessarily

focuses on release avoidance and mitigation over different time horizons. In the absence of detailed data characterizing releases by age and typ e, EPA assumes that implementation of the final UST regulation will have a uniform annual impact, with beneficial impacts realized on the l ast day of the year in which costs are incurred (i.e., a one
- ye ar delay). For equipment that is phased in over a period of time, we assume that positive impacts accrue at

85 Chapter 5 provides a more detailed discussion on the potential positive effect of the final UST regulation on state financial assurance funds.

86 Economists commonly define social benefits as the sum of individuals’ willingness to pay to obtain a good or service or avoid an unwanted outcome. Avoided remediation costs may not equal willingness to pay.4
- 8

the same rate as installation and adjust those impacts so that they are constant over time, maintaining the one
- year delay
. 87 **4.3.1 Avoided Remediation Costs**  This section explains how EPA arrives at its estimates of avoided remediation costs. 88 EPA first explains how it calculates avoided remediation costs based on the source of a release. This is followed by

a discussion of the methods used to calculate the number of releases avoided and the number of releases for which severity is mitigated. Finally , the two elements are combined to estimate the total avoided remediation cost due to the f inal UST regulation
. **4.3.2 Calculating Avoided Remediation Costs**  This analy sis values avoided releases according to their cost of remediation. EPA developed average remediation costs for the four general release size categories reported in the draft 23
- state Autopsy

Report. The four categories generall y conform with classification conventions used b y state LUST offices, and the autopsy reports presented leak frequency data for different UST s ys tem components for each of the categories. The four categories include:

 Local site extent with soil contamination;

 Local site extent with water contamination; 89

 Large site extent with soil contamination; and

 Large site extent with water contamination. 90

87 Although remediation costs at a specific site may vary widely across years (if they extend past a year), available data do not support characterization of a typical cost stream that could be applied to each site. For example, some sites may require immediate and expensive response actions, while other sites may require multi
year remediation with a long initial planning phase. We do not have any national or state
- level data that could be used to characterize an “average” cost stream: a review of available state
-by
- state and national level data under Contract Number EP
- W
- 07
- 011, Work Assignment 3
- 42 indicated that site
-by
- site data do not contain payment stream information, and furthermore, due to a multitude of factors influencing time
- to - closure or remediation duration at a given site (e.g., groundwater contamination, MTBE contamination, eligibility for state funding, state priority ranking fo r site, etc.), an “average” cost stream cannot be effectively generalized. As a result, this analysis calculates an average annual cost based on total site remediation cost. Thus, benefits associated with avoided remediation are expressed in annual terms. See Appendix I for detailed explanation of the methodology used to develop remediation cost estimates.

88 We refer to avoided cleanup costs and avoided remediation costs interchangeably throughout this document.

89 Water contamination refers to both groundwater and surface water contamination, though groundwater contamination is more common than surface water contamination.

90 While no specific definition exists for a large site, the LUST Autopsy survey instruments used by the states generally define large sit es as those with contamination that extends beyond the extent of construction excavation. In addition, EPA classified sites with off
- site contamination as large sites.4
- 9

EPA obtained remediation costs aligned with each of these size categories from a survey of state LUST offices and calculated average expected remediation costs for each of the release categories outlined in the draft 23
- state Autopsy Report ( **Exhibit 4 -**  **1** ). 91 Remediation costs associated with groundwater remediation are generally higher than costs for soil remediation. Administrative, response, and oversight costs were provided by New Hampshire, and remediation costs reflect an average of the costs provided by New Hampshire and Utah. 92 , 93 Exhibit 4
- 1 **Remediation Costs By Release Extent**  a, b

**Remediation Cost Category Site Size And Contamination Type**  **Sm all**  **extent, soil only**  **Large**

**extent, soil only**  **Sm all** 

**extent, Groundwater**  **Contam ination**  **Large**

**extent, Groundwater**  **Contam ination**  Ty pical administrative cost (public notification, fines, fees, etc) c $0 $0 $500 $3,700 Ty pical response cost (e.g., alerting and sending personnel, assessments and planning, immediate actions to stop the release) c $10,000 $10,000 $10,000 $10,000 Ty pical remediation cost d $14,800 $103,000 $98,500 $409,500 Ty pical oversight cost (e.g., monitoring) c $500 $1,000 $1,500 $5,000 **Total typical cost per LUST category $25,300**  **$114,000 $110,500**  **$428,200** Notes: a Costs shown are one
- time costs associated with a site remediation and have been rounded to the nearest hundred dollars. b Costs are presented here in 2008 dollars. EPA inflates these costs to 2012 dollars for use in the analysis. c The costs presented for administrative, response, and oversight costs are based on New Hampshire data only. d The remediation costs shown represent the average costs from data provided by New Hampshire and Utah. Although New Mexico also reported costs, we excluded it for two rea sons. First, groundwater cleanup cost estimates from New Mexico are much higher than those for other states ($2.5 million compared with $0.6 million or less for other states) but the state did not provide data on the number or type of sites that resulted in this high estimate of costs. Second, New Mexico has a relatively small number of UST systems (3, 773 UST systems as of fiscal year 201 3 ). As a result, New Mexico’s costs may be atypical and could skew results to overstate avoided costs. Sources: 1. New Hampshire Department of Environmental Services, Underground Storage Tank Program, November 18, 2008. 2. Utah Department of Environmental Quality, Underground Storage Tank Program, November 18, 2008.

91 U.S. Environmental Protection Agency Office of Underground Storage Tanks, “Evaluation of Releases from New and Upgraded Underground Storage Tank Systems,” draft, August 2004.

92 To develop an avoided cleanup cost estimate, EPA collected data from Montana, New Ham pshire, New Mexico, South Carolina, Utah, and Virginia, all of which use state f inancial assurance funds to pay for LUST remediation. Each state UST program office received a questionnaire requesting data on typical cleanup costs broken out by the four general release types; New Hampshire, New Mexico, South Carolina, Utah and Virginia provided responses. New Hampshire provided the most comprehensive set of information, including cleanup costs by category (i.e., administrative, response, remediation, and oversight), while New Mexico and Utah could only provide estimates of remediation c osts. Virginia and South Carolina were unable to provide the detail required for this analysis, as neither state was able to break out costs by the extent of release (i.e., large or small).

93 New Mexico data are excluded from the calculation for two reason s. First, large
- extent groundwater cleanup cost estimates from New Mexico are much higher than those for other states ($2.5 million compared with $0.6 million or less for other states) but the state did not provide data on the number or type of sites that resulted in this high estimate of costs. Second, New Mexico has a relatively small number of UST systems (3,773 UST systems as of fiscal year 2013). As a result, we believe that New Mexico may be atypical and could skew results to overstate avoided costs. We therefore do not include its results among the average avoided costs of remediation.4
- 10

EPA then used the average cost data from states to develop weighted average costs associated with remediation of releases from different portions of the UST system, based on release frequency

data for each source. **Exhibit 4 -**  **2** presents, for each of the rele ase sources identified in the draft 23
- state Autopsy Report, the probability

of a release by

LUST category
. 94 Using the cost data from **Exhibit 4 -**  **1** , inflated to 2012 dollars, EPA estimates a weighted average avoided cost per release size by multiplying the c ost per site by the probability

of each release ty pe. These are summed across the categories to obtain the weighted average cost by release source. 95 , 96 The following section describes how this information is used to generate an estimate of incremental avoi ded costs.

94 U.S. Environmental Protection Agency, Office of Underground Storage Tanks. “Evaluation of Releases from New and Upgraded Underground Storage Tank Systems (peer review draft).” August 2004. Release probabilities were calculated using data for 580 spill events collected from 23 states during the development of EPA’s Autopsy report effort. Specifically, Figures 3, 16, 17, and 18 in the Autopsy Report provide data on the p ercent of releases by source, by extent, and by media affected for each extent (local or large). By multiplying the percent of total releases from a given source (e.g., piping), the percent of those releases affecting a given media type (e.g., soil), and the percent of releases affecting that medi um that are of a given extent (e.g., local soil), EPA is able to generate the probability distributions in Exhibit 4
- 2. Note that these sources include California and Florida releases, and may therefore be skewed s lightly if those more stringent and established programs have smaller releases. We are unable to adjust the data to correct for this, but its impact, if any, would likely be to reduce the average size and cost of baseline releases slightly, leading to an understatement of regulation
- related cost savings.

95 For more information on this approach and the draft 23
- state Autopsy report, see: Industrial Economics, Inc. "Methodology to Estimate Avoided Costs Associated with a Typical UST Leak." October 27, 2008.

96 If we calculate a weighted
- average cost per release where sources are weighted proportionally by their contribution to total releases, we obtain an overall average cost per release of approximately $152,000 in 2012 dollars (See Appendix I for details). This is generally consistent with ASTSWMO’s annual average cost estimate for site remediation of roughly $124,000 in 2012. ASTSWMO’s average site remediation value may understate typical remediation costs because co
- pays, deductibles, and other costs not pai d by state funds are excluded. Additionally, because the ASTSWMO estimates depend on expenditures in a given year, these estimates tend to vary substantially over time. See: Association of State and Territorial Solid Waste Management Officials. State Fund Survey Results 2012.4
- 11

Exhibit 4
- 2 **Probability And Weighted Average Of Avoided Costs Per Release Source And Extent Release Source (as identified in**  **23 -**  **state Autopsy Report) Sm**  **all extent, soil only**  **Sm all extent,** 

**groundwater contam** **ination Large extent,** 

**soil only Large extent,** 

**groundwater contam** **ination Total/** 

**Weighted Average**  Piping Probability 40.5% 22.0% 4.5% 33.0% 100.0% Cost $10,900 $25,900 $5,500 $150,700 $193,000 Dispenser Probability 71.6% 9.7% 5.4% 13.3% 100.0% Cost $19,300 $11,400 $6,600 $60,900 $98,100 Tank Probability 30.7% 17.7% 17.3% 34.3% 100.0% Cost $8,300 $20,800 $21,000 $156,700 $206,800 STP Area Probability 50.0% 31.0% 0.0% 19.0% 100.0% Cost $13,500 $36,500 $0 $86,800 $136,700 Delivery Problems Probability 59.2% 16.8% 1.8% 22.2% 100.0% Cost $15,900 $19,800 $2,200 $101,500 $139,400 Note: Costs shown have been rounded to the nearest hundred dollars. Costs have been inflated to 2012 dollars. Sources: 1. U.S. EPA, Evaluation of Releases from New and Upgraded Underground Storage Tanks (Draft). 2004. (“23
- state Autopsy Report”) 2. New Hampshire Department of Environmental Services, Underground Storage Tank Program, November 18, 2008. 3. Utah Department of Environment al Quality, Underground Storage Tank Program, November 18, 2008. **4.4 Establishing Avoided Releases**  To estimate the number of baseline releases that would be either avoided completely or reduced in severity as a result of the final UST regulation , experts responded to a common set of questions about potential impacts of the regulatory changes under consideration and participated in subsequent individual discussions of specific areas of uncertainty. Each expert reviewed the requirements under consideration for the final UST regulation and estimated how they

would affect the following dimensions of releases: 97 1. Changes in total frequency (number) of annual confirmed releases; 2. Changes in the number of remaining releases that reach groundwater; and/or 3. Changes in the average quantity released among remaining releases. Experts had the option of expressing reductions in release severity in terms of the percent reaching groundwater or volume (quantity) of product, depending on how they typically collected and review ed release data. In addition, experts were given the option of expressing these changes either: 1) as a total national estimate that accounted for variation in existing regulation and technology among states and facilities, or 2) as a change applied to a specific

97 EPA did not provide experts with information about the universe of facilities or costs associated with remediation; experts did, however, have access to information about the number of confirmed releases in 2008, 2011, and 2012 and their distribution across different parts of the UST system (e.g., tanks, pipes, and STP areas). EPA uses confirmed releases as the baseline estimate of total releases because high quality data on total releases are not available, and release confirmation triggers the remediation costs that would be avoided.4
- 12

subset of the tank universe (e.g., 10 percent change among tanks with a certain technology that are not currentl y regulated). Experts also estimated the sensitivity of results to changes in the frequency of regulatory requirements (e.g., the impact of inspections occurring at different intervals, consistent with different regulatory

options) and noted s ynergies or dependencies between requirements, such as:

 Dependency

between equipment upgrades and walkthrough inspections: Experts consistently

noted that simply

replacing equipment with newer technologies (e.g., requiring that new s ys tems have secondary containment) is insufficient for preventing all releases. Regular visual inspections are necessary to identify potential problems and ensure timely maintenance when a release has not yet occurred.

 Sy

nergy between equipment maintenance and walkthrough inspections: Experts noted that the combination of operability test s and visual (walkthrough) inspections would result in more avoided releases by identifying equipment problems quickly

and ensuring effective maintenance.

 Dependency

between operator training and walkthrough inspections: Experts noted that training alone is not adequate to ensure effective site maintenance, and walkthrough inspection requirements are not effective without trained staff. Experts provided separate estimates of impacts for each regulatory requirement. EPA then used these requirement
- s pecific estimates to calculate total avoided costs for the final UST regulation
. 98 It is important to note, however, that when considering relationships among regulatory

requirements, experts differed in how they isolated and/or “allocated” impacts across s pecific requirements because the allocation of impacts across different regulatory requirements could potentially

be interpreted in several ways (e.g., one expert might decide that inspections drove all impacts, while another might decide that testing was the primary factor). EPA therefore avoids emphasis on the requirement
- specific estimates provided by each expert, and considers their results in total. 99

98 Experts were also asked to provide an estimate of the “total cumulative impact” for the final UST regulation in aggregate. This general estimate was used only to verify that the experts’ logic was int ernally consistent, and to identify areas of overlap or synergy among the regulatory requirements. Because of adjustments required to align expert responses with the combination of regulatory requirements ultimately selected for the final UST regulation (e .g., using experts’ sensitivity responses for tanks on tribal lands rather than their responses for tanks overall), we are unable to assess the magnitude of overlap or synergy. However, the fact that the average of the experts’ cumulative estimates is high er than the average of their requirement
- specific totals indicates that they do not believe there is significant overlap among requirements. As a result, benefits are unlikely to be overstated due to overlap. 99 Note that EPA carefully examined and reviewe d each requirement
- specific estimate from each expert, and verified the results and assumptions with each expert, particularly in cases where results reflect a wide range. For detailed information on expert responses, see Appendix H.4
- 13

In general, EPA applies the estimates presented by the experts to the number of affected units. In ca ses where reductions involved a range of values, EPA selected the midpoint of the range of values identified by each expert. Where experts’ comments reflect qualitative assumptions that substantially affect their quantitative estimates, the anal ys is acknow ledges those factors as caveats to estimated rates of release avoidance. If these assumptions assume regulatory

language more stringent or significantly different than the final language, the anal ys is does not include any benefits for that requirement. 100 T o calculate the number of releases completel y avoided as a result of potential regulatory changes, EPA combines the estimated reductions as identified by experts with a release distribution based on data from the draft 23
- state Autopsy Report (see Appendix I for more detail). To estimate changes in release severity , the anal ys is uses the distribution of releases from the same report to quantify the number of groundwater releases avoided due to reduced release volume. **Exhibit 4 -**  **3** provides a summary of our findings with respect to avoided releases. Experts’ responses suggest that the Selected Option will avoid approximately nine percent to 50 percent of 6,128 annual releases, or roughl y 5 6 0 to 3,0 00 releases in the first evaluation ye ar. In addition, as summarized in **Exhibit 4 -**  **4** , of the remaining releases, approximately 21 0 to 90 0 releases would be reduced in severity (i.e., these releases would occur but instead of reaching groundwater they

would remain soil contamination only). 101 Exhibit 4
- 3 **Avoided Releases Expert**  **Selected Option Alternative 1**  **Alternative 2** Expert 1 1,100 1,600 590 Expert 2 560 690 170 Expert 3 1,600 2,400 1,200 Expert 4 3,000 3,700 2,200 **Average** (Range) **1, 6**  **00** (5 6 0
- 3,0 00) **2, 1**  **00**

(69 0
- 3, 700) **1,00 0** 

(1 7 0
- 2, 2 00) Note: See Appendices H and I for inputs and methods for calculating these values. Estimates were validated with experts to ensure they accurately capture their opinions.

100 For example, Experts 1, 2, and 3 attributed reductions to the groundwater and vapor monitoring site assessment requirements; however, these experts also noted that they assumed the requirements would lead users to switch to another leak detection method. Because EPA’s cost analysis does not assume that users will necessarily switch methods, we conservatively removed the experts’ assumed reductions for this requirement.

101 EPA assumes that these groundwater releases will instead become soil releases. Hypothetically, if releases are proportionally split as 50 percent groundwater and 50 percent soil before the regulation takes effect, and if the regulation reduces groundwater contamination by 20 percent, releases would be split 40 percent groundwater and 60 percent soil after the r egulation.4
- 14 Exhibit 4
- 4 **Avoided Groundwater Contam ination Incidents**  **Expert Selected Option**  **Alternative 1 Alternative 2**  Expert 1 900 1,100 620 Expert 2 210 460 88 Expert 3 320 310 280 Expert 4 6 0 0 480 570 **Average** (Range) **51 0**  ( 21 0
- 90 0) **60 0** 

( 31 0
- 1,100) **3 9**  **0**

( 88
- 570) Note: See Appendices H and I for inputs and methods for calculating these values. Estimates were validated with experts to ensure they accurately capture their opinions. **4.4.1 Avoided Releases Using an Alternative Baseline**  EPA’s primary

analy sis assumes that the universe of confirmed releases from UST sy stems remains constant over the time frame of the anal ys is. However, both the universe of UST sy stems and the release rate (defined as the number of confirmed releases divided by the number of UST s ys tems in a given year) have declined over the last two decades. 102 This is consist ent with the regulatory context of the past 20 years, in which two key factors have been driving the number of releases. First, the universe of UST systems has been declining as older, smaller tanks have been replaced b y newer, larger sy stems. Second, many of the confirmed releases reported in the 1990s and earl y 2000s were “legacy” releases associated with older sy stems that did not meet the technical standards under 40 CFR Part 280 (e.g., tanks that were installed prior to the promulgation of the UST regulation at 40 CFR Part 280). Many of these legacy releases are discovered when tanks are removed during property transactions and other development projects. As the number of legacy

releases has declined, the declining trend in total releases has “flattene d”

– trend data suggest that release rates have been approximately one confirmed release per hundred tanks in recent years. In addition, it is possible that confirmed releases may increase in future years, as UST systems continue to age, and as new fuel bl ends with potentially higher corrosivity

are introduced into the industry . Given this uncertainty , EPA assumes in the primary anal ys is that release rates remain constant. However, to address the uncertainty associated with the number of confirmed releases , EPA also assesses avoided costs under the final UST regulation using an alternative baseline that projects a continued decline in the release rate consistent with the recent historical trend, and also captures the decline in the number of UST s ys tems as estimated in Chapter 3, Section 3.3.1. 103 This represents a conservative avoided cost scenario because it does not account for the possibility

that aging s ys tems or changes in fuel could result in increases in the number of confirmed releases reported, or th at the number of UST sy stems could increase (if, for example, an expanding economy or population growth demands more service locations).

102 See Appendix J for charts and data sources that demonstrate these two trends. 103 This decline in UST systems also captures the effects of declining gasoline use in recent years.4
- 15

To estimate the rate of universe decline, EPA mapped historical data on the number of US T sy stems from 1991 through 2013 to an exponential one
- phase decay function, which appears to most accurately represent the observed behavior of the UST sy stem universe over time. 104 EPA also mapped historical data on the release rate to a similar decay function. 105 These two functions were then used to project future UST universe sizes as well as future release rates. We used the results from these two projections to estimate future number of confirmed releases. 106 The cumulative universe of releases over 20 years under this alternative b aseline is approximately 69 percent of the number of cumulative releases over 20 years in the primary anal ys is. The alternative baseline contains proportionally fewer releases than UST sy stems because two separate declining trends, UST s ys tems and release rate, are used to estimate the future decline in releases. This compounds the projected decline in releases. **Exhibits 4 -**  **5** and **4 -**  **6** provide a summary of our findings with respect to avoided releases and avoided groundwater contamination events, respectively , assuming the alternative baseline releases occur. The alternative baseline results in a reduction of roughl y 31 percent of both avoided releases and avoided groundwater contamination relative to the original baseline. Correspondingl y, in the alternative baseline scenario, approximately 3 9 0 to 2, 1 00 releases are avoided under the Selected Option, compared to 4 8 0 to 2, 6 00 under Alternative 1 and 1 2 0 to 1, 5 00 under Alternative 2. Under the alternative baseline, approximately 1 4 0 to 62 0 groundwater contamination incidents would be avoided under the Selected Option, 2 1 0 to 7 9 0 under Alternative 1, and 61 to 4 3 0 under Alternative 2. Exhibit 4
- 5 **Avoided Releases Under Alternative Baseline**

**Expert Selected Option**  **Alternative 1 Alternative 2**  Expert 1 760 1,100 41 0 Expert 2 390 4 8 0 1 2 0 Expert 3 1,100 1, 7 00 8 4 0 Expert 4 2,100 2, 6 00 1, 5 00 **Average** (Range) **1, 1**  **00** (3 9 0
- 2, 1 00) **1, 5**  **00**

(4 8 0
- 2, 600) **72 0** 

(1 2 0
- 1, 5 00) Note: See Appendices H and I for inputs and methods for calculating these values. Estimates were validated with experts to ensure they accurately capture their opinions.
104 See Section 3.3.1. 105 To estimate future release rates, we used a single exponential decay function, which assumes that a quantity declines at a rate proportional to its value. This is an appropriate function given the singular and slowing rate of decline observed in the release rate over time. The equation for such an exponential singular decay function is Y = (Yo

– P) * e (
- k*X) + P, where P represents the “plateau,” or limit of the function and k represents the function’s half
- life. See Appendix J for additional details. 106 We use release rates to project future number of releases (rather than use past trends in the number of confirmed releases) for two reasons: First, as the UST universe and release rate both appear to decline in a way approximating a single
- decay exponential function, these projections can be used to e stimate future number of releases without the added uncertainty of whether the release trend is truly a single
- decay exponential function. In addition, using the release rate projections to estimate future releases yields a more conservative (lower) total number of releases than if we were to use the past trend in the number of releases, which leads to more conservative (lower) avoided remediation cost estimates in the alternative baseline.4
- 16 Exhibit 4
- 6 **Avoided Groundwater Contam ination Incidents Under Alternative Baseline**  **Expert Selected Option**  **Alternative 1 Alternative 2**  Expert 1 62 0 7 9 0 4 3 0 Expert 2 140 3 2 0 61 Expert 3 2 2 0 2 1 0 1 9 0 Expert 4 4 2 0 3 3 0 3 9 0 **Average** (Range) **3 5**  **0** (140
- 62 0) **41 0** 

(2 1 0
- 79 0) **2 7**  **0**

( 61
- 4 3 0) Note: See Appendices H and I for inputs and methods for calculating these values. Estimates were validated with experts to ensure they accurately capture their opinions. **4.5 Benefits from Avoided Releases and Reduced Release Severity**  Two sources of avoided costs constitute the majority of quantifiable positive impacts from the final UST regulation . First, some costs related to release remediation do not occur because a number of releases are altogether avoided. Second, some remaining releases are reduced in severity because of the regulatory requirements (e.g., through earlier detection from walkthrough inspections and improved operability of release detection equipment). To capture this dimension of avoided costs, the anal ys is relies o n incremental avoided groundwater remediation costs

—the cost to remediate a groundwater release less the cost to remediate a soil release

—as groundwater releases are generall y more costl y to remediate than soil releases. In addition to avoiding remediatio n costs, release prevention and mitigation results in a variety of other beneficial impacts, including:

 Avoided vapor intrusion damages;

 Avoided product loss;

 Human health benefits;

 Avoided acute exposure events and large
- scale releases; and

 Ecological ben efits (including p rotection of groundwater quality). The following sections monetize, quantify , or otherwise describe these impacts. **4.5.1 Avoided Release Remediation**  To determine the benefits of avoided releases, the anal ys is relies on the draft 23
- state Autopsy Report’s distribution of releases b y source (i.e., the part of the UST sy stem that produces the release), and applies the reduction associated with each regulation to the4
- 17

a ppropriate source to reduce the number of releases avoided by source. 107 , 108 Each avoided release is valued according to the weighted average of remediation costs shown in **Exhibit 4 -**  **2**
. 109 **Exhibit 4 -**  **7** presents the total avoided remediation costs under each regulatory option. We estimate that discounted benefits from avoided remediation costs range between approximately

$6 8 million and $3 8 0 under the Selected Option, while avoided costs amount to between $ 82 million and $ 53 0 million under Alternative 1 and between $2 4 million and $2 9 0 million under Alternative 2. Consistent with OMB’s guidance on discount rates, this chapter presents results using a seven percent annual discount rate; for comparison, Cha pter 7 presents results for the Selected Option using a three percent discount rate.

Exhibit 4
- 7 **Discounted Avoided Release Rem ediation Costs**  **Expert Selected Option** 

**($ m illions)**  **Alternative 1**

**($ m illions)**  **Alternative 2**

**($ m illions)**  Expert 1 $140 $210 $80 Expert 2 $68 $82 $24 Expert 3 $190 $330 $160 Expert 4 $380 $530 $290 **Average** (Range) **$1 9**  **0** ($68
- $3 8 0) **$ 29**  **0**

($ 82
- $ 53 0) **$1 4**  **0**

($2 4
- $2 9 0) Note: Cost estimates reflect a seven percent discount rate. **4.5.2 Reduction in Release Severity**  EPA expects that the regulatory requirements will reduce the volume and duration of releases. As a result of the smaller quantity released and the shorter duration of the release, releases are assumed to be less likely to reach groundwater, thus reducing r elease severity. To assess the impact on remediation costs associated with reduced release severity , the anal ys is focuses on changes in the number of releases that would have involved groundwater in the baseline, but because of the final UST regulation , involve only soil. While this metric does not capture all of the release mitigation effects of the regulatory requirements, avoided groundwater contamination is likely

to be among the most significant effects of the regulation. The difference in remediation costs between soil and groundwater releases is substantial: remediation cost for an average groundwater release is approximately $290,000, while an average soil release costs

107 We exclude the ‘Other’ category of releases from the draft 23
- state Autopsy Report because it does not map to the reductions designated by the experts. Because ’Other’ accounts for only 1 percent of releases in the study, we distribute those releases proportionally across the remaining release sources.

108 We use five sys tem sources to identify release types: piping, dispenser, tank, sump turbine pump area, and delivery problems. We then assign each regulation’s effect to source types based on the regulation (e.g. spill bucket tightness tests are assumed to affect releases from delivery problems).

109 This approach assumes that avoided releases are well
- represented by the distribution of release severity that is identified in the draft 23
- state Autopsy Report.4
- 18

approximately

$74,000 to remediate. 110 Remediation costs across release extent and medium contaminated range from $27,000 to $460,000 based on ty pical site remediation costs from New Hampshire and Utah. 111 To estimate the number of releases that are reduced in severity , we use experts’ estimates of reductions in groundwater involvement and distribute them across release source, medium contaminated, and release extent. 112 We distribute remaining releases according to the draft 23
- state Autopsy

Report results and calculate additional benefits from remediation due to reductions in groundwater co ntamination following the regulation. We calculate avoided costs from reduced release severity

by subtracting the cost to remediate all remaining releases after the final UST regulation is in effect from the cost to remediate all remaining releases in the baseline. In both cases, we remove from consideration the same number of full y- avoided releases and consider only the avoided costs from shifting releases from groundwater to soil. A key limitation of this approach may lead to a conservative estimate of th e effects of the final UST regulation . The anal ys is assumes that the distribution of releases across size (i.e., extent) does not change as a consequence of changes in groundwater contamination. In reality , changes in the likelihood of groundwater contamin ation are probabl y (at least in part) a consequence of reductions in release volume and duration. The same reductions in release volume that lower the incidence of groundwater contamination would likely also reduce the number of large extent releases of al l types and decrease the average size of smaller releases. That is, new requirements should both reduce the number of groundwater contamination events and large extent events of all ty pes. Our model captures only changes in the number of times that groundw ater would be contaminated, and does not consider cost savings associated with smaller soil
- only sites or small groundwater contamination incidents. We therefore likely understate avoided remediation costs. 113 **Exhibit 4 -**  **8** displays EPA’s findings regarding di scounted avoided costs due to the mitigation of groundwater incidents. The analysis calculates avoided remediation costs by taking the difference between estimated remediation costs before and after the regulatory changes are implemented. This difference accounts for both the reduction in groundwater release incidents as well as the increase in soil contamination events. 114 EPA estimates that benefits from averted

110 These costs reflect a simple average of the costs to remediate a large extent and local extent release of each medium.

111 Release extent is classified in the draft 23
- state Autopsy Report as either local or large. Releases that do not extend beyond the area excavated during remediation are considered local, while relea ses that extend beyond property lines are considered large. Extent does not explicitly involve a measure of release volume.

112 See Appendix I for details on the calculation of avoided costs. 113 A change in the distribution of releases could also potentially cause the “average size” and cost of soil
only releases to increase (because larger groundwater releases are eliminated but become “large” local soil
- only releases). While this could result in higher average costs for local releases, (i.e., the cost savings for avoiding a groundwater release might be less than the difference between “average” groundwater and soil releases), the analysis also does not consider the cost savings associated with re ducing the size of groundwater releases that still reach groundwater or the cost savings associated with reducing the size of soil releases.

114 This occurs because the analysis maintains the total number of releases constant: every groundwater release that is avoided still requires remediation as a soil release.4
- 19

groundwater releases range from approximately $ 46 million to $1 9 0 million under the Selected Option, $ 80 million to $2 9 0 million under Alternative 1, and $ 20 million and $1 3 0 million under Alternative 2. Avoided costs from reduced groundwater contamination are additive to avoided costs from avoided releases.

Exhibit 4
- 8 **Discounted Avoided Groundwater Rem**  **ediation Costs Expert**  **Selected Option**

**($ m illions)**  **Alternative 1**

**($ m illions)**  **Alternative 2**

**($ m illions)**  Expert 1 $190 $290 $130 Expert 2 $46 $120 $20 Expert 3 $71 $80 $61 Expert 4 $130 $120 $120 **Average** (Range) **$1 1**  **0** ($4 6
- $1 9 0) **$1 5**  **0**

($ 80
- $2 9 0) **$ 84** 

($20
- $1 3 0) Note: Cost estimates reflect a seven percent discount rate. **4.5.3 Total Avoided Remediation Costs from Avoided Releases and Reduced Release**  **Severity Exhibit 4**  **- 9**  displays the sum of avoided remediation costs across both avoided releases and mitigated groundwater incidents for all four experts. Because experts with the lowest estimate in one of these categories did not necessarily have similarly

low estimates in the other, the range of total avoided costs is not equal to the sum of the ranges from **Exhibits 4 -**  **7** and **4 -**  **8**
.

Exhibit 4
- 9 **Total Discounted Avoided Rem ediation Costs**  a **Expert Selected Option** 

**($ m illions)**  **Alternative 1**

**($ m illions)**  **Alternative 2**

**($ m illions)**  Expert 1 $3 3 0 $4 9 0 $2 1 0 Expert 2 b $110 $ 20 0 $4 4 Expert 3 $2 6 0 $ 41 0 $2 2 0 Expert 4 $ 51 0 $6 5 0 $ 41 0 **Average** (Range) **$ 30**  **0** ($110

- $ 51 0) **$4 4**  **0**

($20 0
- $65 0) **$2 2**  **0**

($4 4
- $ 41 0) a Cost estimates were derived using a seven percent discount rate. b Expert 2 provided responses that generate benefits that are relatively low compared to the other experts. Conversations with this expert indicated that he assumed partial noncompliance of at least 25 percent (that is, a compliance rate of at most 75 percent). To evaluate th e potential magnitude of this inconsistency, we examined the impact of scaling Expert 2’s avoided remediation costs from 75 percent compliance to 100 percent compliance. This adjustment resulted in avoided remediation costs of greater than $1 5 0 million annually under the Selected Option, assuming a seven percent discount rate. See Appendix H for additional discussion. Although the values generated b y the experts’ responses cover a wide range, we note that the avoided cost estimates tend to spread evenly around the mean. Expert 4 consistently represents the high
- end estimate of avoided costs, and Expert 2 consistently represents the low
-4
- 20

end. While we are not able to explain why Expert 4’s estimates are consistently higher than those of the other experts, w e do note one source of uncertainty that applies to Expert 4’s estimates. The experience of most experts is related to implementing state regulatory programs, which directly consider the universe of confirmed releases evaluated in this anal ys is. However, the experience of Expert 4 considers sy stem engineering and changes in UST
- related equipment. As a result, Expert 4’s estimates consider all potential releases and then align these to EPA’s universe of confirmed releases. While this approach is methodologic all y sound, it requires one more assumption on the part of the expert to derive a total estimate. 115 In contrast , Expert 2’s responses generate benefits estimates that are low compared to the responses of other experts. Comments provided by the expert indicated, and subsequent conversations with him verified, that he assumed a significant level of noncompliance with the regulations in deriving his estimates. His estimates assume that at least 25 percent of facilities will not correctl y implement the req uirements (that is, a compliance rate of at most 75 percent). The expert noted that this assumed level of compliance did not include intentional noncompliance, but did attempt to account for a lack of awareness or human error b y owners/operators. This assumption is methodologically sound, but is not consistent with the full compliance assumed in our cost anal ys is. As a result, the values provided by Expert 2 may significantl y understate benefits relative to costs. To evaluate the potential magnitude of this inconsistency , we scale Expert 2’s avoided remediation costs from 75 percent compliance to 100 percent compliance as a sensitivity anal ys is. This adjustment results in total avoided remediation costs greater than $1 5 0 million annually under the Selected Option, assuming a seven percent discount rate. Appendix H provides additional discussion of the effect of assumed noncompliance on the experts’ responses and potential net benefits of the final UST regulation
. **4.5.4 Benefits from Avoided Releases and Reduc**  **ed Release Severity under the Alternative Baseline Scenario**  **Exhibits 4 -**  **10** and **4 -**  **11** present avoided remediation costs associated with the avoided releases and avoided groundwater incidents shown in **Exhibits 4 -**  **5** and **4 -**  **6** under the alternative baseline scenario . In the alternative baseline scenario, avoided release remediation costs range from $ 47 million to $ 26 0 million under the Selected Option, between $5 6 million and $3 7 0 million under Alternative 1, and between $1 7 million and $ 20 0 million under Alternative 2. Averted groundwater remediation costs, meanwhile, range from $3 2 million to $130 million under the Selected Option, $5 5 million to $ 20 0 million under Alternative 1, and $1 4 million to $ 92 million under Alternative 2. These alternative estimates repre sent conservative estimates of the potential value of avoided releases, because they do not consider possible factors that may lead to increases in the number of releases reported or the number of UST systems in the future.

115 The type of universe adjustment conducted by Expert 4 will not necessarily result in estimates that are overstated, and could instead result in estimates that are understated. The adjustment is no ted here simply as an additional source of uncertainty unique to this expert.4
- 21 Exhibit 4
- 10 **Discounted Avoided Release Rem**  **ediation Costs Under Alternative Baseline Expert**  **Selected Option**

**($ m illions)**  **Alternative 1**

**($ m illions)**  **Alternative 2**

**($ m illions)**  Expert 1 $94 $140 $56 Expert 2 $47 $56 $17 Expert 3 $130 $230 $110 Expert 4 $260 $370 $200 **Average** (Range) **$130** ($4 7
- $2 60) **$ 20**  **0**

($ 5 6
- $ 370) **$ 95** 

($1 7
- $20 0) Note: Cost estimates reflect a seven percent discount rate.
Exhibit 4
- 11 **Discounted Avoided Groundwater Rem ediation Costs Under Alternative Baseline**  **Expert Selected Option** 

**($ m illions)**  **Alternative 1** 

**($ m illions)**  **Alternative 2**

**($ m illions)**  Expert 1 $130 $200 $92 Expert 2 $32 $84 $14 Expert 3 $49 $55 $42 Expert 4 $89 $83 $85 **Average** (Range) **$7 5**  ($3 2
- $130) **$ 1**  **0 0** 

($5 5
- $20 0) **$5 8** 

($1 4
- $ 92 ) Note: Cost estimates reflect a seven percent discount rate. **Exhibit 4**  **- 12**  displays the sum of avoided remediation costs across both avoided releases and mitigated groundwater incidents under the alternative baseline scenario. Because experts with relatively

l ower estimates in one of these categories did not necessarily h ave simi larly

l ow estimates in the other, the range of avoided costs presented is not the sum of lower and higher bounds in **Exhibits 4**  **- 10**  and **4 -**  **11** . A s the cumulative release universe in the alternative baseline scenario is roughl y 69 percent of cumulative releases in the original baseline, total avoided costs in the alternative baseline are approximately 31 percent lower than they are in the primary anal ys is. Exhibit 4
- 12

**Total Discounted Avoided Rem ediation Costs Under Alternative Ba**  **seline Expert**  **Selected Option**

**($ m illions)**  **Alternative 1**

**($ m illions)**  **Alternative 2**

**($ m illions)**  Expert 1 $2 3 0 $3 4 0 $1 5 0 Expert 2 $7 9 $1 4 0 $ 31 Expert 3 $1 8 0 $2 9 0 $1 5 0 Expert 4 $3 5 0 $4 5 0 $2 8 0 **Average** (Range) **$2 1**  **0** ($ 79
- $3 5 0) **$ 30**  **0**

($1 4 0
- $4 5 0) **$1 5**  **0**

($ 31
- $2 8 0) Note: Cost estimates reflect a seven percent discount rate.4
- 22

**4.5.5 Avoided Costs by Requirement**  **Exhibit 4 -**  **13** presents overall avoided remediation costs by requirement for the Selected Option. The exhibit shows the avoided costs for each requirement based on experts’ responses to the effects of the individual requirements in the final UST regulation . Beneficial i mpacts are concentrated similarly

to costs: the majority

of avoided costs are captured by walkthrough inspections, overfill prevention equipment tests, spill bucket tightness tests, containment sump tests, and operability

test s. 116 Estimates in **Exhibit 4 -**  **13** assume that cost savings associated with each regulatory

requirement occur one year after implementation and reflect discounting. Similar exhibits presenting overall avoided remediation costs by requirement for Alternative 1 and Alternative 2 are included in Appendix I
. The model used b y EPA to estimate avoided remediation costs is not designed to measure avoided costs from large
- scale releases such as those ty pically associated with UST sy stems with FCTs and AHFDSs. Releases from these ty pes of sy stems co nstitute a small portion of total releases, but may

be large in volume and can result in significant groundwater impacts. Our anal ys is does not estimate the benefits associated with changes in operation of these s ys tems. However, we include a qualitative discussion of these acute events later in this chapter. Exhibit 4
- 13 **Total Discounted Avoided Costs By Requirement For Conventional UST System s**  **a,b ($ m** **illions) Selected Option**  **Description c**  **Expert 1 Expert 2**  **Expert 3 Expert 4**  **Average Release Prevention**  Walkthrough inspections $140 $44 $130 $270 $150 Overfill prevention equipment inspection $23 $1.1 $19 $25 $17 Spill prevention equipment testing $16 $7.3 $36 $21 $20 Containment sump testing $9.3 $18 $1.0 $9.7 $9.4 Testing after repairs to spill and overfill prevention equipment, and secondary containment $2.7 $11 $1.9 $7.9 $5.9 Eliminate flow restrictors in vent lines for all new tanks and when overfill prevention equipment is replaced $2.2 $7.5 $0.85 $1.5 $3.0 **Subtotal -**  **Release Prevention $190**  **$89 $190**  **$330 $200**  **Release Detection** Operability test s for release detection methods $130 $13 $61 $170 $92 Groundwater monitoring site assessmentd $0.00 $0.00 $0.00 $0.00 $0.00 Vapor monitoring site assessment d $0.00 $0.00 $0.00 $0.00 $0.00 Add SIR and CITLDS usage e $0.21 $0.00 $0.94 $0.56 $0.43

116 Some requirements, particularly those that target narrow subpopulations of the UST system universe, may generate higher avoided costs than this analysis suggests. Three source s of uncertainty drive these smaller universe results. First, EPA's model is calibrated to estimate avoided costs for broad
-based national changes at average facilities; extrapolation of these results to small populations may not reflect specific subpopulations (e.g., UST systems in Indian country). Second, several experts stated that their estimates of impacts for requirements affecting narrow

subsets of UST populations are more uncertain than broader estimates. Finally, experts emphasized that equipment r eplacement, inspection, training, and testing are all essential to ensure release reductions, and they used judgment to emphasize the different roles of these different activities. Therefore, the assignment of specific im pacts to each of the requirements i s potentially less accurate than the aggregate estimates of avoided impacts.4
- 23

Exhibit 4
- 13 **Total Discounted Avoided Costs By Requirement For Conventional UST System s**  **a,b ($ m** **illions) Selected Option**  Response to interstitial monitoring alarms $0.80 $10 $0.21 $0.78 $2.9 Remove release detection deferral for EGTs $0.68 $2.2 $7.6 $5.9 $4.1 **Subtotal -**  **Release Detection $130**  **$25 $70**  **$170 $99**  **Other** Notification of ownership changes f $0.00 $0.00 $0.00 $0.00 $0.00 Replacement of lined tanks that cannot be repaired according to a code of practice g $0.00 $0.00 $0.01 $0.00 $0.00 Requirements for demonstrating compatibility with fuels >E10 and >B20 h $0.00 $0.11 $0.00 $0.12 $0.06 **Subtotal**

**– Other**  **$0.00 $0.11**  **$0.01 $0.12**  **$0.06 EPAct**  **- related Provisions**  Operator Training $1.0 $0.04 $0.60 $1.5 $0.80 Secondary containment $1.0 $0.66 $7.6 $2.4 $2.9 **Subtotal -**  **EPAct -**  **related Provisions $2.1**  **$0.69 $8.2**  **$3.9 $3.7**  **TOTAL $330**  **$110 $260**  **$510 $300**  a Cost estimates were derived using a seven percent discount rate. b Reductions in frequency and release severity (as measured by changes in groundwater contamination) do not adequately capture the positive impacts of preventing releases from very large systems such as AHFDSs and UST systems with FCTs. Releases from these ty pes of sy stems constitute a small portion of total releases, but may be large in volume and can result in significant groundwater im pacts. Especially in the case of AHFDSs, even minor problems can create large releases due to the significant pressure und er which contents are stored. The model used by EPA to estimate avoided remediation costs is not designed to measure avoided costs from very large releases suc h as those typically associated with AHFDSs and FCTs, and we therefore do not offer an estimate o f avoided costs for requirements that apply to these sy stems. c Some requirements, particularly those that target narrow subpopulations of the UST system universe, may generate higher avoid ed costs than this analysis suggests. Three sources of uncertainty drive these smaller universe results: First, EPA's model is calibrated to estimate avoided costs for broad
-based national changes at average facilities; extrapolation of these results to small populations may not reflect specific subpopulations (e.g., UST sy stems in Indian country). Second, several experts stated that their estimates of impacts for requirements affecting narrow subsets of UST populations are more uncertain than broader estimates. Finally, experts emphasized that equip ment replacement, inspe ction, training, and testing are all essential to ensure release reductions, and they used judgment to emphasize the different roles of these different activities. Therefore, the assignment of specific impacts to each of the requirements is potentially les s accurate than the aggregate estimates of avoided impacts. d Experts 1, 2, and 3 attributed reductions to the groundwater and vapor monitoring site assessment requirements; however, thes e experts also noted that they assumed the requirements would lead u sers to switch to another leak detection method. Because EPA does not assume that users will necessarily switch methods, we conservatively removed the experts’ assumed reductions for this requirement. Expert 4 did not attribute reductions to these requirements. e Expert 2 assumed negligible effect of the requirement to add SIR and CITLDS usage on release frequency and severity. f All experts assumed no effect, or in the case of Expert 3, a negligible effect, of the requirement for notification of ownership changes on reductions in release frequency or severity. g Although all experts attributed some reduction in release frequency or severity to this requirement, the number of tanks that cannot be repaired according to a code of practice is assumed to be so s mall that estimated benefits are negligible. h Experts 1 and 3 attributed reductions to the compatibility requirement but noted that the majority of the benefit should be attributed to E10 users, which are not included in this requirement. As a result, we conservatively removed these experts’ assumed reductions for this requirement. As noted in **Exhibit 4 -**  **1** , EPA excluded the highest state
- level remediation cost values from its calculation of average cost of release remediation. While this step contributes toward a conservative (low) estimate of avoided costs, the possibility remains that the average remediation costs used in **Exhibit 4 -**  **13** overestimate the positive impacts of the final UST regulation if state data provided are not representative of national average remediation costs. In **Exhibit 4 -**  **14** , we therefore estimate the positive effects of the final UST regulation using only the lowest4
- 24

remediation costs available. 117 As shown in **Exhibit 4 -**  **14,** EPA’s estimate of the avoided remediation costs of the final UST regulation using the lowest state cost estimates is $ 73 million to $3 3 0 million per year under the Selected Option. While this is not a true “lower bound” estimate, these estimates reflect costs that lead to lower than average costs when compared to figur es reported b y ASTSWMO. 118 Similar exhibits presenting overall avoided remediation costs by requirement for Alternative 1 and Alternative 2 are included in Appendix I
. Exhibit 4
- 14 **Sensitivity Analysis: Total Discounted Avoided Costs By Requirement Based On**  **New Ham pshire Rem**  **ediation Costs a,b**  **($ m illions)**  **Selected Option Description**  **c Expert 1**  **Expert 2 Expert 3**  **Expert 4 Average**  **Release Prevention** Walkthrough inspections $86 $27 $81 $170 $92 Overfill prevention equipment inspection $15 $0.74 $13 $16 $11 Spill prevention equipment testing $11 $5.0 $24 $14 $14 Containment sump testing $6.1 $13 $0.68 $6.5 $6.5 Testing after repairs to spill and overfill prevention equipment, and secondary containment $1.7 $6.9 $1.2 $5.1 $3.7 Eliminate flow restrictors in vent lines for all new tanks and when overfill prevention equipment is replaced $1.3 $5.1 $0.57 $0.97 $2.0 **Subtotal -**  **Release Prevention $120**  **$58 $120**  **$220 $130**  **Release Detection** Operability test s for release detection methods $77 $7.3 $38 $100 $56 Groundwater monitoring site assessmentd $0.00 $0.00 $0.00 $0.00 $0.00 Vapor monitoring site assessment d $0.00 $0.00 $0.00 $0.00 $0.00 Add SIR and CITLDS usage e $0.13 $0.00 $0.58 $0.36 $0.27 Response to interstitial monitoring alarms $0.49 $6.2 $0.13 $0.50 $1.8 Remove release detection deferral for EGTs $0.42 $1.2 $4.7 $3.6 $2.5 **Subtotal -**  **Release Detection $78**  **$15 $43**  **$110 $61**  **Other** Notification of ownership changes f $0.00 $0.00 $0.00 $0.00 $0.00

117 These were provided by the State of New Hampshire’s UST program. 118 If we calculate a weighted
- average cost per release where sources are weighted proportionally by their contrib ution to total releases using the lowest remediation cost data available (i.e., from New Hampshire), we obtain an overall average cost per release of approximately $103,000 (See Appendix I for details) . Under the alternative baseline, total avoided costs b ased on New Hampshire remediation costs range from $51 million to $230 million in the Selected Option. This represents an extreme lower bound analysis of avoided remediation costs. Additionally, we consider whether the remediation costs used in this analys is are consistent with those reported by ASTSWMO. As noted above, ASTSWMO estimates the annual average remediation cost per site to be roughly $124,000 in 2012. If we value the releases and groundwater incidents avoided under each option using the ASTSWMO average site remediation cost, we obtain total avoided costs that are consistent with the primary estimates used in this analysis. Specifically, avoided remediation costs are approximately $96 million to $450 million under the Selected Option, $140 million to $520 million under Alternative 1, and $32 million to $340 million under Alternative 2. However, ASTSWMO’s average site remediation value may understate typical remediation costs because co
- pays, deductibles, and other costs not paid by state funds are excluded.4
- 25

Exhibit 4
- 14 **Sensitivity Analysis: Total Discounted Avoided Costs By Requirement Based On**  **New Ham pshire Rem**  **ediation Costs a,b**  **($ m illions)**  **Selected Option** Replacement of lined tanks that cannot be repaired according to a code of practice g $0.00 $0.00 $0.00 $0.00 $0.00 Requirements for demonstrating compatibility with fuels >E10 and >B20 h $0.00 $0.07 $0.00 $0.08 $0.04 **Subtotal**

**– Other**  **$0.00 $0.07**  **$0.00 $0.08**  **$0.04 EPAct**  **- related Provisions**  Operator Training $0.66 $0.02 $0.38 $1.0 $0.52 Secondary containment $0.67 $0.44 $4.8 $1.5 $1.9 **Subtotal -**  **EPAct -**  **related Provisions $1.3**  **$0.46 $5.2**  **$2.5 $2.4**  **TOTAL $200**  **$73 $170**  **$330 $190**  a Cost estimates were derived using a seven percent discount rate. b Reductions in frequency and release severity (as measured by changes in groundwater contamination) do not adequately capture the positive impacts of preventing releases from very large systems such as AHFDSs and UST systems with FCTs. Releases from these ty pes of systems constitute a small portion of total releases, but may be large in volume and can result in significant groundwater impacts. E specially in the case of AHFDSs, even minor problems can create large releases due to the significant pressure und er which contents are stored. The model used by EPA to estimate avoided remediation costs is not designed to measure avoided costs from very large releases such as those typ ically associated with AHFDSs and FCTs, and we therefore do not offer an estimate o f avoided costs for requirements that apply to these systems. c Some requirements, particularly those that target narrow subpopulations of the UST system universe, may generate higher avoid ed costs than this analysis suggests. Three sources of uncertainty drive these smaller universe results: First, EPA's model is calibrated to estimate avoided costs for broad
-based national changes at average facilities; extrapolation of these results to small populations may not reflect specific subpopulations (e.g., UST systems in Indian country). Second, several experts stated that their estimates of impacts for requirements affecting narrow subsets of UST populations are more uncertain than broader estimates. Finally, experts emphasized that equipment replacement, inspe ction, training, and testing are all essential to ensure release reductions, and they used judgment to emphasize the different roles of these different activities. Therefore, the assignment of specific impacts to each of the requirements is potentially les s accurate than the aggregate estimates of avoided impacts. d Experts 1, 2, and 3 attributed reductions to the groundwater and vapor monitoring site assessment requirements; however, thes e experts also noted that they assumed the requirements would lead us ers to switch to another leak detection method. Because EPA does not assume that users will necessarily switch methods, we conservatively removed the experts’ assumed reductions for this requirement. Expert 4 did not attribute reductions to these requirements. e Expert 2 assumed negligible effect of the requirement to add SIR and CITLDS usage on release frequency and severity. f All experts assumed no effect, or in the case of Expert 3, a negligible effect, of the requirement for notification of ownership c hanges on reductions in release frequency or severity. g Although all experts attributed some reduction in release frequency or severity to this requirement, the number of tanks that cannot be repaired according to a code of practice is assumed to be so small that estimated benefits are negligible. h Experts 1 and 3 attributed reductions to the compatibility requirement but noted that the majority of the benefit should be attributed to E10 users, which are not included in this requirement. As a result, we c onservatively removed these experts’ assumed reductions for this requirement. **4.6 Avoided Vapor Intrusion Damages**  Vapor intrusion generally occurs when petroleum or highl y- dissolved concentrations of free product come into direct contact with building sumps and foundations, elevator shafts, and preferential pathway s (e.g. improperly sealed utility

lines). Intrusion can also occur when these substances come close to building foundations. 119 The cost to remediate vapor intrusion is ty picall y incremental to the cost to remediate a LUST site. Based on information provided by four states, EPA estimates that, on average, 5.5 percent of all releases cause vapor intrusion

119 Davis, Robin V. “Petroleum Hydrocarbon Vapor Intrusion Investigations: Current General Practice.” Leaking Underground Storage Tanks, Utah Department of Environmental Quality, February 9, 2010. Accessed at: http://www.epa.gov/oust/pviwebinar_app roach.pdf.4
- 26

issues. Each of these instances requires additional remedial actions valued at approximately $42,000 beyond ordinary release remediation costs. 120 As reported in **Exhibit 4 -**  **15** , given 7 7 0 to 3, 6 00 avoided releases and mitigated groundwater incidents, we estimate between 42 and 20 0 avoided vapor intrusion incidents under the Selected Option. This reduc tion would avoid between $1. 7 million and $7. 9 million per year in avoided remediation costs related to vapor intrusion. Under Alternative 1, this range increases to $2. 5 million to $ 9.1 million, and under Alternative 2, this range decreases to $0. 6 millio n to $ 6.0 million per year. Exhibit 4
- 15 **Avoided Vapor Intrusion Costs ($ m illions)**  **Expert 1 Expert 2**  **Expert 3 Expert 4**  **Average** (Range) **Selected Option** Total avoided releases and avoided groundwater incidents 2,000 770 1,900 3,600 2,100 (770
- 3,600) Avoided vapor intrusion incidents 110 42 100 200 110 (42
- 200) Avoided vapor intrusion costs $4.3 $1.7 $4.1 $7.9 $4.5 ($1.7

- $7.9) **Alternative 1** Total avoided releases and avoided groundwater incidents 2,700 1,100 2,700 4,200 2, 7 00 (1,100
- 4,2 00) Avoided vapor intrusion incidents 150 63 150 230 1 5 0 ( 63
- 23 0) Avoided vapor intrusion costs $5.9 $2.5 $5.9 $9.1 $5. 9 ($2. 5
- $9.1 ) **Alternative 2** Total avoided releases and avoided groundwater incidents 1,200 260 1,500 2,800 1, 4 00 (260
- 2,800) Avoided vapor intrusion incidents 66 14 82 150 78 (14
- 150) Avoided vapor intrusion costs $2.6 $0.6 $3.2 $6.0 $3.1 ($0.6

- $6.0) Under the alternative baseline, avoided vapor intrusion costs fall due to the smaller universe of releases. Inthe Selected Option, avoided costs are $ 1.2 million to $ 5.5 million. Under Alternative 1, avoided costs range from $ 1.7 million to $ 6.3 million; under Altern ative 2, they range between $0.4 million and $ 4.1 million. **4.7 Avoided**  **Product Loss** Releases into the environment cause operators to lose otherwise marketable fuel products. **Exhibit 4 -**  **16** presents costs avoided due to product loss. The analysis calculates the product loss associated with avoided releases b y multiplying the average volume a ssociated with each release source b y the number of releases of that type before and after the final UST regulation is in effect. Based on the estimates of avoided releases presented b y the experts, the draft 23
- state Autopsy Report’s distribution of relea ses, and average release volumes reported in the Florida
120 New Hampshire, Utah, South Carolina, Virginia, and New Mexico were contacted for LUST remediation costs, but only New Hampshire was able to provide a cost for cleanup actions related to vapor intrusion. Other state programs contributed data to the frequency of incidents, but not to costs.4
- 27

study , EPA estimates that approximately 0.2 5 million gallons to 1. 9 million gallons per year of diesel and gasoline releases are avoided as a consequence of the Selected Option. At an average price o f $3.73 per gallon, owners and operators avoid losing approximately $0. 9 million to $6. 5 million in product due to releases. 121 These values range from 0.2 2 million gallons to 2. 2 million gallons, or $0. 8 million to $7. 6 million, under Alternative 1. Under A lternative 2, these values decrease to a range of 0. 10 million gallons to 1. 5 million gallons, or $0. 4 million to $ 5.2 million. Limited data on release size do not support an analy sis of avoided product loss associated with releases that are reduced in sev erity . This estimate of avoided product loss there understates total likely avoided product losses. Exhibit 4
- 16 **Value Of Avoided Product Loss Expert**  **Selected Option Alternative 1**  **Alternative 2**

**Thousand gallons**  **$ m illions**  **Thousand gallons**  **$ m illions**  **Thousand gallons**  **$ m illions**  Expert 1 650 $2.3 750 $2.6 440 $1.5 Expert 2 250 $0.9 220 $0.8 100 $0.4 Expert 3 830 $2.9 1 , 200 $4.1 710 $2.5 Expert 4 1,900 $6.5 2,200 $7.6 1,500 $5.2 **Average** (Range) **90 0** 

(2 5 0
- 1, 9 00) **$ 3.1** 

($0. 9
- $6. 5

) **1, 1**  **00** (2 2 0
- 2, 2 00) **$3. 8** 

($0. 8
- $7. 6

) **6 9**  **0** ( 100
- 1, 5 00) **$2. 4** 

($0. 4
- $ 5.2

) Releases are valued using an average price of motor fuel in 2012. Prices per gallon for all grades of retail motor gasoline and No. 2 diesel fuel (all concentrations of sulfur) were $3.63 and $3.97, respectively, as reported by : U.S. Bureau of Transportation Statistics. “Sales Price of Transportation Fuel to End
- Users.” National Transportation Statistics 2013. Table 3
- 11. Accessed at: http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/NTS_Entire_0.pdf
. We weight these prices according to prime supplier sales volumes in 2012 published by the Energy Information Administration, which summed to 347,234.5 thousan ds of gallons per day for gasoline and 143,270.6 thousands of gallons per day for all grades of diesel fuel (U.S. Energy Information Administration. Petroleum & Other Liquids. Prime Supplier Sales Volumes. Accessed at: http://www.eia.gov/dnav/pet/pet_cons_ prim_dcu_nus_a.htm. ). Under the alternative baseline, avoided costs due to product loss are lower than in the original baseline as there are relativel y fewer releases. Under the Selected Option, avoided costs due to product loss are $0.6 million to $4. 5 million. Under Alternative 1, avoided costs range from $0.5 million to $5.2 million; under Alternative 2, they range from $0. 3 million to $3. 6 million. **4.8 Human Health Benefits**  Exposure to petroleum through ingestion, dermal contact, and inhalation can cause a range of health effects, including cancer and non
- cancer impacts associated with benzene, and

121 Releases are valued using an average price of motor fuel in 2012. Prices per gallon for all grades of retail motor gasoline and No. 2 diesel fuel (all concentrations of sulfur) were $3.63 and $3.97, respectively, as reported by: U.S. Bureau of Transportati on Statistics. “Sales Price of Transportation Fuel to End
- Users.” National Transportation Statistics 2013. Table 3
- 11. Accessed at: http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/NTS_Entire_0.pdf. We weight these prices according to prime supplie r sales volumes in 2012 published by the Energy Information Administration, which summed to 347,234.5 thousands of gallons per day for gasoline and 143,270.6 thousands of gallons per day for all grades of diesel fuel (U.S. Energy Information Administration . Petroleum & Other Liquids. Prime Supplier Sales Volumes. Accessed at: http://www.eia.gov/dnav/pet/pet_cons_prim_dcu_nus_a.htm.).4
- 28

non - cancer impacts (e.g., neurological impacts) associated with other petroleum constituents such as toluene. 122 Inaddition, exposure to jet fuel, such as that stored in AHFDSs and FCTs at commercial and military

airports, can result in non
- cancer impacts to skin, nervous, and respiratory

s ys tems. 123 The ty

pes of health risks that may be avoided by

the final UST regulation are described in more detail below. The complex nature of petroleum mixtures and the limited toxicological data available both for petroleum mixtures and for individual component compounds of petroleum limits EPA’s ability to comprehensively

document the health effects associated with the most significant releases. However, the toxicological testing that has been conducted on some common components of total petroleum hydrocarbons (TPH) suggests that exposures to TPH through inhalation or ingestion o f gasoline or diesel could result in the following effects:

 Neurological effects, such as central nervous s ys tem depression, have been associated with acute and chronic exposures to toluene and xyl enes; n - hexane exposure has been associated with effects on peripheral neuropathy;
 Hematological effects associated with oral and inhalation exposure to benzene and with oral and inhalation exposure to naphthalene;

 Renal and hepatic effects associated with BTEX compounds and other aromatic hydrocarbon compounds;

 D evelopmental effects associated with intermediate exposures to ethylbenzene and x yl enes; and

 Carcinogenic effects of oral exposures to certain polycyclic aromatic hydrocarbons (PAHs) including benzo(a)p yr ene, benz(a)anthracene, and dibenz(a,h)anthracene. 124 Health risks may

also be associated with exposure to kerosene, which may be stored in USTs or used as a component in jet fuel. Although risks associated with kerosene have not been studied as widely

as those associated with petroleum, existing data sugge st that these risks primarily include non
- cancer impacts to the skin, nervous, and respiratory sy stems. 125 Inthe baseline, some of these risks may be reduced due to existing monitoring standards under the

122 For example, see: Paustenbach, D J, et. al. “Benzene toxicity and risk assessment, 1972
- 1992: im plications for future regulation.” Environ Health Perspect, December 1993, 101(Suppl 6):177

–200.

123 U.S. Department of Labor Occupational Safety and Health Administration. “Safety and Health Topics: Jet Fuel (JP8).” Accessed at: http://www.osha.gov/dts/chemicalsampling/data/CH_248748.html
.

124 U.S. Department of Health and Human Services. Public Health Service. Agency for Toxic Substances and Disease Registry. “Toxicological Profile for Polycyclic Aromatic Hydrocarbons.” August 1995.

125 See, for example: U.S. Department of Labor Occupational Safety and Health Administration. “Safety and Health Topics: Jet Fuel (JP8).” Accessed at: http ://www.osha.gov/dts/chemicalsampling/data/CH_248748.html ; and U.S. Department of Health and Human Services. Public Health Service. Agency for Toxic Substances and Disease Registry. “Toxic Substances Portal

– Jet Fuels JP
- 5 and JP
- 8.” Accessed at: http://www.atsdr.cdc.gov/phs/phs.asp?id=771&tid=150
.4
- 29

Occupational Safety and Health Administration (OSHA)
. 126 However, because the final UST regulation includes new requirements for AHFDSs and UST sy stems with FCTs located at commercial and military

airports, avoidance of health risks from kerosene could represent an additional benefit of the final UST regulati on . The magnitude of health benefits associated with avoiding exposure to petroleum and jet fuel components depends on multiple factors. These factors include the number of cancer cases and non
- cancer impacts per average UST release, which in turn depends on the number of groundwater users surrounding UST sites; the number of releases prevented through implementation of the final UST regulation ; and the willingness
- to - pay to avoid a fatal cancer (e.g., the value of a statistical life) or willingness
- to - pay to avoid non
- cancer impacts. In addition, assumptions about baseline behaviors, such as the assumption that individuals will limit their own exposure in certain cases (e.g., when petroleum contamination exceeds a “taste/odor threshold” and water is no longer palatable), affect the estimated magnitude of health benefits. Based on available information on average plume volumes and ages and the distribution of groundwater users, these benefits are expected to be small. 127 Nevertheless, some larger releases may have significant cancer and non
- cancer risks associated with them. Although these health effects are not able to be reliably quantified with available data, they represent additional potential benefits of the regulation. **4.9 Avoided Acute Exposure Events a**  **nd Large -**  **Scale Releases** Most health effects associated with leaking underground storage tanks reflect long
- term exposures, but some releases from UST s ys tems relate to acute events such as fire or explosion. These releases can involve acute exposures, large volumes of free product, extensive ecological damage, and injuries and death, depending on the circumstances of the event. Because these events are both infrequent and difficult to predict, it is not possible to quantify or monetize the impact associated with avoiding them, but the response, remediation, and medical costs associated with a single acute incident could be significant. The final UST regulation is designed to ensure effective maintenance of UST s ys tems, and one benefit will be to reduce the chances of an acute event that could result in a large
- scale release and its associated damages (e.g., a well
maintained UST sy stem is less likely to be in a condition where it may explode). Acute events are especially important in the case of UST sy stems such as AHFDSs and UST sy stems with FCTs, which can hold large volumes of fuel. Releases from these sy stems can result in extensive groundwater and other environmental and health impacts. For instance, an estimated 300,000 to 500,000 gallons of fuel was released from a 2.1 million gallon underground field
- constructed tank at a fuel depot in Portsmouth, VA that was in operation from the 1950s to

126 U.S. Department of Labor Occupational Safety and Health Administration. “Safety and Health Topics: Jet Fuel (JP8).” Accessed at: http://www.osha.gov/dts/chemicalsampling/data/CH_248748.html
.

127 U.S. Environmental Protection Agency, Office of Underground Storage Tanks. “Petroleum Releases at Underground Storage Tank Facil ities in Florida.” March 2005. See also: RTI International. “Risk Analysis to Support Potential Revisions to Underground Storage Tank (UST) Regulations.” December 22, 2010.4
- 30

mid
- 1980s. Free product was found within 20 feet of a nearb y creek in 1987. As of 2011, approximately

143,000 gallons of product had been recovered. 128 In addition, the final UST regulation may large
- scale releases associated with AHFDSs and FCTs. An example of the potential magnitude of the releases from these sy stems is the pattern of releases at Pease Air Force Base, where jet fuel was delivered to the runway apron via an underground fueling sy stem. 129 Historical leakage from the s ys tem contaminated soil and groundwater, forming groundwater plumes at many sites along the s ys tem. 130 A site release study identified 60 to 70 release points with varying degrees of severity along the refueling s ys tem line with free product found under the apron at closure. 131 While there are no historical records available indicating the amount of leaked fuel or leak origins, the presence of residual soil and groundwater contamination poses a significant threat to human health and the environment. While the analy

tical procedure used b y EPA to estimate monetized benefits was unable to capture the positive impacts of preventing releases from these types of s ys tems, we note that preventing or mitigating these releases may generate substantial reductions in remediation costs and public exposure
. **4.1 0**  **Ecological Benefits** A document prepared for EPA outlines the ty pes of ecological damages that can result from land
- based pollution releases: 132 Measurable damage to ecological resources from land releases generally occurs when groundwater or overland flow

of water carry contaminants to a nearby surface water body. Flood events and other acute incidents can cause releases of waste that have an immediate and significant effect on ecological resources (e.g., a surface impoundment dike fails and releases contaminants into a river, killing fish and other biota). More common are gradual increases in contaminant levels due to long
- t erm releases to groundwater. These may have a broad array of impacts on both resources used by humans (such as fish populations) and on “non
-use value” such as the value of preserving habitat and species diversity. In addition, biota can be affected by upt ake of contaminants from soil, particularly in wetlands or areas w here the water table is high. Because releases from USTs ty picall y reach soil before reaching groundwater, such releases would likely

be classified as land releases. Any releases avoided du e to the final UST regulation
128 Phone conversation and email from Lynne Smith, geologist, and Russ Ellison, Virginia Department of Environmental Quality.

129 New Hampshire Department of Environmental Services, Air Resources Division. 2007. Permit Application Review Summary, Former Pease AFB Remediation Project, FY04
- 0453. 10 March 2010. Accessed at: http://www2.des.state.nh.us/OneStopPub/Air/3301590780FY04
- 0453TypeSummary.pdf
. 130 New Hampshire Department of Environmental Services, Air Resources Division. 2009. Permit Application Review Summary, Former Pease AFB Remediation Project, 09
- 0113. 10 March 2010. Accessed at: http://www2.des.state.nh.us/OneStopPub/Air/330159094909
- 0113TypeSummary.pdf.

131 Hilton, Scott. Site Summaries Pease Air Force Base Newington/Portsmouth. 2008. New Hamp shire Department of Environmental Services. 10 March 2010. Accessed at: http://des.nh.gov/organization/divisions/waste/hwrb/fss/superfund/summaries/pease.htm.

132 Industrial Economics, Inc. “Approaches to Assessing the Benefits, Costs, and Impacts of the R CRA Subtitle C Program.” October 2000. Accessed at: http://www.epa.gov/oswer/docs/rcradocs/rcra.pdf. p. 3
- 174
- 31

may result in ecological benefits. A complete assessment of ecological benefits, however, requires significant location
- specific data, and it is often difficult to identify sufficient data to support valuation of both use and non - use values of preserving habitat and species diversity. The ecological benefits that accrue from the final UST regulation are likel y to occur as a consequence of averted groundwater contamination. The resource economics literature contains numerous e xamples of studies that value these services, as demonstrated by the public’s willing
to - pay (WTP ) for groundwater protection programs (e.g., see Poe et al. 2001). 133 However, these values are largel y context - specific in terms of location, scale, and the spe cific threat to groundwater considered and do not provide broadly
- applicable information on the value of groundwater. Some attempts have been made to develop standardized values for groundwater, often for purposes of Natural Resource Damage Assessment (NRDA). 134 For instance, the State of New Jersey currentl y emplo ys a replacement cost approach to determine interim economic losses associated with injuries to groundwater. 135 Even so, replacement cost methods do not constitute a proper WTP valuation. The replacement costs of natural resources and their services capture WTP only

when they

meet three criteria: 1) replacement provides equivalent quality and quantity of services; 2) the public is actually willing to pay

for the replacement; and 3) replacement is the most cost - effective means of restoring the lost services. 136 Even if these conditions are true, this approach may

overestimate groundwater values in urban areas, as land is ty pically more expensive, and underestimate groundwater values in areas where land is less expensive. Because an assessment of the value of groundwater protected b y the final UST regulation is affected b y spatial heterogeneity, it requires information about the public’s WTP for protection in all states and territories. These data are not available, and EPA is therefore unable to place a value on the groundwater protected. Instead, we provide an estimate below of the total quantity of groundwater that may

be protected b y the regulation. We note, though, that a portion of the value of restoring groundwater is captured as part of the cost to remediate each release discussed earlier in this chapter. However, while the cost of restoring groundwater to a higher quality after

133 Poe, Gregory L., K.J. Boyle, and J.C. Bergstrom. “A Preliminary Meta Analysis of Contingent Values for Ground Water Revisited.” In The Economic Value of Water Quality , edited by Bergstrom, J.C., K.J. Boyle and G.L. Poe, Cheltenham, United Kingdom: Edward Elgar Publishing Limited. 2001.

134 Natural Resource Damage Assessment (NRDA) is the process of estimating the monetary cost of restoring natural r esources injured by discharges of oil or releases of hazardous substances. Monetary costs, or damages, are estimated by identifying the services provided by the injured natural resources, determining the baseline level of the services provided by the resources, and quantifying the reduction in services that result from the natural resource injury. See: U.S. Environmental Protection Agency. Natural Resource Damage Assessment. Accessed at: www.epa.gov/ superfund/ programs/nrd/nrda2.htm.

135 New Jersey’s approac h follows three steps. First, the approach determines the total present value of potential yield from the contaminated area over the relevant period of impairment, typically based on a site
- specific or regional recharge rate for the area in question. Second, again considering regional recharge rates, it estimates the amount of land required to protect an equivalent present value total volume of groundwater. Finally, the approach identifies and appraises candidate parcels. The cost of acquiring such a parcel for purposes of protecting a volume of groundwater equivalent to what was lost represents the measure of damages.

136 Freeman, A.M. III. The Measurement of Environmental and Resource Values: Theory and Methods
. Resources for the Future: Washington, DC. 2003 . p. 460.4
- 32

contamination is captured as part of the cost to remediate each release, it cannot be assumed that remediation captures WTP. In many cases, performing remediation to “safe” levels does not fully eliminate contamination, and therefore does not restore the resource to its original value. Therefore, while a significant portion of the value of the quantity of groundwater protected may be captured b y the avoided remediation costs, it may not reflect the full WTP of groundwater protection. **Exhibit 4 -**  **1 7**  summarizes a screening assessment of the volume of groundwater contamination potentially avoided because of reductions in releases and groundwater contamination incidents. The anal ys is relies on the EPA risk assessment, which describes typical volumes of groundwater affected b y releases of different sizes over various discovery time frames. 137 EPA’s anal ys is estimates that, under the Selected Option, 1 9 billion gallons to 8 8 billion gallons of groundwater per ye ar are protected under conservative assumptions of 10
- gallon release volumes that migrate for onl y one year before discovery. Under the upper bound conditions of 5,000
- gallon release volumes and 100
- ye ar lifetimes, up to 3. 9 trillion gallons of groundwater per ye ar would be potentially protected by

the Selected Option. 138 We also calculate the impact of 50
- gallon releases over one
- and five
- year time frames. These releases appear most consistent with empirical data in the draft 23
- state Autopsy Report. Assuming that 50
- gallon releases and one
- to five
- ye ar time frames represent the average parameters of avoided releases, we estimate that approximately 50 to 2 4 0 billion gallons of groundwater would be protected annually from LUST
- related releases due to the regulatory changes. 139

137 RTI International. “Risk Analysis to Support Potential Revisions to Underground Storage Tank (UST) Regulations.” December 22, 2010.

138 The risk assessment on which this analysis is based did not estimate groundwater contamination volumes outside of a one
- mile radius about the point of release. The assessment notes that groundwater may be contaminated outside that radius, but it does not estimate this quantity. Generally, only releases greater than 1,000 gallons are affected by this phenomenon, i. e., groundwater contamination is likely underestimated for the 5,000 gallon, 100
- year release scenario.

139 The release volume data used in the groundwater protection assessment differs from the data used to calculate product loss and may lead to apparent inconsistencies. For instance, under the Selected Option, prevention of 900,000 gallons of product loss over 1,600 releases implies an average of over 500 gallons per release; however, in the groundwater protection analysis, EPA relies on estimates of groundwater contaminated based on releases of 50 gallons for the following two reasons: (1) the volumes of product loss based on Florida data are based on actual data, w hile the risk analysis relies on a simulation; and (2) the simulation assumes that product is released over a relatively short period of time (approximately one month), which likely overstates the effect of groundwater contamination for any given volume. Given these circumstances, EPA selected an average release volume to characterize groundwater contamination that is significantly lower than the volume implied by the analysis of product loss, but which reduces the risk of overstating positive impacts from groundwater protection.4
- 33

Exhibit 4
- 1 7 **Volume Of Gro undw**  **ater Protected (billion gallons per year) Expert 1**  **Expert 2 Expert 3**  **Expert 4 Average**  (Range) **Selected Option** Total avoided releases and avoided groundwater incidents 2,000 770 1,900 3,600 2,100 (770
- 3,600) 1 year until discovery, 10 gal. release ( 24,068,183 gal. GW contaminated) * 48 19 45 88 50 (19
- 88) 1 year until discovery, 50 gal. release ( 48,785,436 gal. GW contaminated) * 97 38 92 180 100 (38
- 180) 5 years until discovery, 50 gal. release (80,192,581 gal. GW contaminated) * 160 62 150 290 170 (62
- 290) 100 year until discovery, 5,000 gal. release ( 1,056,971,192 gal. GW contaminated) * 2,100 820 2,000 3,900 2,200 (820
- 3,900) **Primary estimate (average of 50 gal. release over 1 and 5 years) 130**  **50 120**  **240 130**  (50
- 240) **Alternative 1** Total avoided releases and avoided groundwater incidents 2,700 1,100 2,700 4,200 2,700 (1,100
- 4,2 00) 1 year until discovery, 10 gal. release ( 24,068,183 gal. GW contaminated) * 66 28 66 100 65 (2 8
- 100 ) 1 year until discovery, 50 gal. release ( 48,785,436 gal. GW contaminated) * 130 56 130 210 130 (56
- 21 0) 5 years until discovery, 50 gal. release (80,192,581 gal. GW contaminated) * 220 92 220 340 220 (92
- 340) 100 year until discovery, 5,000 gal. release ( 1,056,971,192 gal. GW contaminated) * 2,900 1,200 2,900 4,500 2,900 (1,200
- 4,500) **Primary estimate (average of 50 gal. release over 1 and 5 years) 180**  **74 180**  **270 170**  (74
- 270) **Alternative 2** Total avoided releases and avoided groundwater incidents 1,200 260 1,500 2,800 1, 4 00 (2 6 0
- 2, 8 00) 1 year until discovery, 10 gal. release ( 24,068,183 gal. GW contaminated) * 29 6 36 66 3 4 (6
- 6 6 ) 1 year until discovery, 50 gal. release ( 48,785,436 gal. GW contaminated) * 59 13 73 130 70 (1 3
- 1 3 0) 5 years until discovery, 50 gal. release (80,192,581 gal. GW contaminated) * 97 21 120 220 110 ( 21
- 2 2 0) 100 year until discovery, 5,000 gal. release ( 1,056,971,192 gal. GW contaminated) * 1,300 270 1,600 2,900 1, 5 00 (2 7 0
- 2, 9 00) **Primary estimate (average of 50 gal. release over 1 and 5 years) 78**  **17 96**  **180 92**  (1 7
- 1 8 0) * Release time to discovery and volume ( average groundwater volume contaminated ). Average groundwater volume contaminated per release based on : RTI International. “Risk Analysis to Support Potential Revisions to Underground Storage Tank (UST) Regulations.” December 22, 2010. Under the alternative baseline, assuming that 50 gallon releases and one - to five
- ye ar time frames represent the average parameters of avoided releases, approximately 3 4 to 1 6 0 billion gallons of groundwater would be protected annually under the Selected Option.4
- 34

**4.11 Measuring**  **Benefits t**  **hrough Housing Price Changes** A growing body of literature documents the effect that leaking USTs may have on local housing prices . Under certain assumptions, these price change s may serve as a prox y for household s ’ willingness
- to - pay (WTP ) to avoid UST releases
. The i mpact of avoiding or reducing releases on housing prices will, at least in part, overlap with some of the benefits discussed above, including avoided human health risks, ecological benefits, and groundwater quality protection (to the extent that the effects are borne b y the private households )
. However, other factors not previously discussed may

also contribute to property devaluation (e.g., aesthetics ) due to UST releases . By avoiding releases and groundwater contamination incidents, the final UST regulation may generate benefits that could at least partially be reflected b y avoided declines in property values. To estimate the effect of leaking USTs on housing prices, existing studies rely on hedonic property value models, and examine how house prices vary with proximity to a leaking UST, or how prices respond to a release should one occur. Under certain assumptions, the change in price can be interpreted as a measure of WTP to avoid potential contamination. Hedonic property value models isolate the effect of UST leaks on housing prices b y controlling for housing and neighborhood characteristics as well as the presence of the UST facility itself. Several previous studies have found that property values were approximately 10 percent to 17 percent lower, all else constant, at homes in the vicinity of leaking or “high
- risk” UST s ys tems. 140 S tated
preference studies on the effect of groundwater contamination from a leaking UST on housing values have found similar results
. 141 Two recent hedonic analy ses of UST sites in Maryland attempt to provide insight into the effects of leaking USTs at various stages of the cleanup process b y us ing panel data of home sales in three Maryland counties over 11 years. This dataset includes information on home sales prior to the discovery

of UST leaks, as well as during and after leak investigation and cleanup. One of these two studies incorporated ho me - specific data on the level of groundwater contamination and the extent to which information about the leak was received. 142 Although this study found little impact of leaking USTs on home values in general, the study did find 9 percent to 12 percent depre ciation at homes where the private groundwater well was tested for contamination after an UST leak. This depreciation occurred regardless of whether the well water was found to be contaminated. The second study , which relied on the same sales dataset

140 See, for example: Simons, Robert A., William Bowen, and Arthur Seme ntelli. “The Effect of Underground Storage Tanks on Residential Property Values in Cuyahoga County, Ohio.” Journal of Real Estate Research , 1997, 14(1), 29
- 42; Simons, Robert A., William Bowen and Arthur Sementelli. “The Price and Liquidity Effects of UST Leaks from Gas Stations on Adjacent Contaminated Property.” The Appraisal Journal , 1999, 67, 186
- 194; and Isakson, H. and M.D. Ecker. “The Effect of Leaking Underground Storage Tanks on the Values of Nearby Homes.” Technical Report. Department of Mathemati cs. University of Northern Iowa. 2010. Accessed at: http://faculty.cns.uni.edu/~ecker/research.html.

141 See: Guignet, Dennis. “The impacts of pollution and exposure pathways on home values: A stated preference analysis.” Ecological Economics , 2012, 82, 53
- 6; Simons, Robert A. and Kimberly Winson
- Geideman. 2005. “Determining Market Perceptions on Contamination of Residential Property Buyers Using Contingent Valuation Surveys,” Journal of Real Estate Research , 27(2), 193
- 220.

142 Guignet, Dennis. “What Do Property Values Really Tell Us? A Hedonic Study of Underground Storage Tanks.” Land Economics , 2013, 89(2), 211
- 226.4
- 35

but u sed information on publicity following the leak rather than the testing of private wells, also found little impact of leaking USTs on home values in general. However, this study found that highl y publicized releases decreased surrounding home values b y more than 10 percent. 143 Both studies found that property devaluation was most likely to occur when homeowners were aware of the actual or potential contamination. As a result, we expect that in the presence of adequate information, such as with highly publiciz ed UST releases , there is the potential for property devaluation from releases due to environmental, human health, and aesthetic changes
. Studies that examine those price changes could provide valuable insight into the WTP for avoiding such releases . Howev er, because of the small body

of available literature characterizing the potential magnitude of these effects , its limited geographic scope, and the large degree of spatial heterogeneity in the characteristics that would drive the benefits of avoided relea ses, a benefits transfer to estimate avoided property devaluation from UST releases nationwide would not be appropriate. Therefore, we are unable to quantify the potential benefit of the final UST regulation using hedonic property value studies
. **4.12 Concl**  **usion Exhibit 4**  **- 1**  **8** summarizes the monetized avoided costs and benefits due to the final UST regulation . In total, EPA estimates approximately $1 2 0 million to $ 53 0 million in costs will be avoided as a consequence of the Selected Option. Although their value cannot be reliabl y monetized, roughl y 50 billion to 2 4 0 billion gallons of groundwater per ye ar will avoid contamination due to new requirements. Finall y, the regulation will avoid costs associated with acute events, large
- scale releases (for example, releases from AHFDSs and FCTs), and property devaluation, and will generate reductions in human health risks and ecological benefits that we could not quantify

in our anal ys is. Exhibit 4
- 1 8 **Summary Of Positive Impacts SELECTED OPTION**  **Type O**  **f Impact Expert 1**  **Expert 2 Expert 3**  **Expert 4 Average**  **Range Monetized Avoided Costs Associated With Conventional USTs and EGTs ($ millions, present value 2012$)**  **a** Releases and groundwater incidents b $330 $110 $260 $510 $300 $110
- $510 Vapor intrusion $4.3 $1.7 $4.1 $7.9 $4.5 $1.7
- $7.9 Product loss $2.3 $0.86 $2.9 $6.5 $3.1 $0.86
- $6.5 **Total** c **$330 $120**  **$270 $530**  **$310 $120**  **- $530**  **Non -**  **Monetized Impacts** d Groundwater protected (billion gallons) 130 50 120 240 130 50
- 240 Acute events and large
- scale releases (e.g., releases from AHFDSs and FCTs) e n/e n/e n/e n/e n/e n/e Ecological benefits e n/e n/e n/e n/e n/e n/e Human health risks e n/e n/e n/e n/e n/e n/e

143 Zabel, Jeffrey E. and Dennis Guignet. “A hedonic analysis of the impact of LUST sites on house prices.” Resource and Energy Economics , 2012, 34, 549
- 564.4
- 36

Exhibit 4
- 1 8 **Summary Of Positive Impacts ALTERNATIVE 1**  **Type O f Impact**  **Expert 1 Expert 2**  **Expert 3 Expert 4**  **Average Range**  **Monetized Avoided Costs Associated With Conventional USTs and EGTs ($ millions, present value 2012$) a**  Releases and groundwater incidents b $490 $200 $410 $650 $440 $200
- $650 Vapor intrusion
- low assumptions $5.9 $2.5 $5.9 $9.1 $5.9 $2.5
- $9.1 Product loss $2.6 $0.78 $4.1 $7.6 $3.8 $0.78
- $7.6 **Total** c **$500 $210**  **$420 $670**  **$450 $210**  **- $670**  **Non -**  **Monetized Impacts** d Groundwater protected (billion gallons) 180 74 180 270 170 74
- 270 Acute events and large
- scale releases (e.g., releases from AHFDSs and FCTs) e n/e n/e n/e n/e n/e n/e Ecological benefits e n/e n/e n/e n/e n/e n/e Human health risks e n/e n/e n/e n/e n/e n/e **ALTERNATIVE 2 Type**  **O f Impact**  **Expert 1 Expert 2**  **Expert 3 Expert 4**  **Average Range**  **Monetized Avoided Costs Associated With Conventional USTs and EGTs ($ millions, present value 2012$) a**  Releases and groundwater incidents b $210 $44 $220 $410 $220 $44
- $410 Vapor intrusion
- low assumptions $2.6 $0.56 $3.2 $6.0 $3.1 $0.56
- $6 .0 Product loss $1.5 $0.36 $2.5 $5.2 $2.4 $0.36
- $5.2 **Total** c **$220 $45**  **$220 $420**  **$230 $45**  **- $420**  **Non -**  **Monetized Impacts** d Groundwater protected (billion gallons) 78 17 96 180 92 17
- 180 Acute events and large
- scale releases (e.g., releases from AHFDSs and FCTs) e n/e n/e n/e n/e n/e n/e Ecological benefits e n/e n/e n/e n/e n/e n/e Human health risks e n/e n/e n/e n/e n/e n/e a Avoided remediation costs from releases and groundwater incidents are the costs related to site remediation. Avoided vapor intrusion costs include additional avoided costs associated with the remediation of vapor intrusion cases; the RIA does not address human health risk associated with vapor intrusion. Avoided product loss costs are also separate and additive. b Expert 2 provided responses that generate benefits that are relatively low compared to estimated costs, unlike the other thre e experts. Conversations with this expert indicated that this discrepancy may be due to his assumptions about partial noncompliance. See Section 4.5.3 and Appendix H for additional discussion. c Totals may not add up due to rounding. Cost estimates were derived using a seven percent discount rate. d Due to data and resource constraints, EPA was unable to monetize some of the positive impacts of the final UST regulation . Chapter 4 provides a qualitative discussion of these benefits. e Benefits not estimated are denoted by n/e.
**4.12.1 Summary of Positive Impacts under the Alternative Baseline Scenario**  **Exhibit 4 -**  **19** summarizes the monetized avoided costs and benefits due to the final UST regulation under the alternative baseline. In total, EPA estimates approximately $81 million to $360 million in costs will be avoided as a consequence of the Selected Option under the alternative baseline. Approximately 34 billion to 160 billion gallons of groundwat er per ye ar will avoid contamination due to the proposed requirements in the Selected Option. Overall, positive impacts under the alternative baseline are roughl y 69 percent of positive impacts when the original baseline is assumed.4
- 37

Exhibit 4
- 19 **Summary Of Positive Impacts Under Alternative Baseline**  **SELECTED OPTION Type O**  **f Impact Expert 1**  **Expert 2 Expert 3**  **Expert 4 Average**  **Range Monetized Avoided Costs Associated With Conventional USTs and EGTs ($ millions, present value 2012$)**  **a** Releases and groundwater incidents b $230 $79 $180 $350 $210 $79
- $350 Vapor intrusion $3.0 $1.2 $2.8 $5.5 $3.1 $1.2
- $5.5 Product loss $1.6 $0.59 $2.0 $4.5 $2.2 $0.59
- $4.5 **Total** c **$230 $81**  **$190 $360**  **$220 $81**  **- $360**  **Non -**  **Monetized Impacts** d Groundwater protected (billion gallons) 89 34 84 160 92 34
- 160 Acute events and large
- scale releases (e.g., releases from AHFDSs and FCTs) e n/e n/e n/e n/e n/e n/e Ecological benefits e n/e n/e n/e n/e n/e n/e Human health risks e n/e n/e n/e n/e n/e n/e **ALTERNATIVE 1 Type O**  **f Impact Expert 1**  **Expert 2 Expert 3**  **Expert 4 Average**  **Range Monetized Avoided Costs Associated With Conventional USTs and EGTs ($ millions, present value 2012$)**  **a** Releases and groundwater incidents b $340 $140 $290 $450 $300 $140
- $450 Vapor intrusion $4.1 $1.7 $4.1 $6.3 $4.1 $1.7
- $6.3 Product loss $1.8 $0.54 $2.9 $5.2 $2.6 $0.54
- $5.2 **Total** c **$350 $140**  **$290 $460**  **$310 $140**  **- $460**  **Non -**  **Monetized Impacts** d Groundwater protected (billion gallons) 120 51 120 190 120 51
- 190 Acute events and large
- scale releases (e.g., releases from AHFDSs and FCTs) e n/e n/e n/e n/e n/e n/e Ecological benefits e n/e n/e n/e n/e n/e n/e Human health risks e n/e n/e n/e n/e n/e n/e **ALTERNATIVE 2 Type O**  **f Impact Expert 1**  **Expert 2**  **Expert 3 Expert 4**  **Average Range**  **Monetized Avoided Costs Associated With Conventional USTs and EGTs ($ millions, present value 2012$) a**  Releases and groundwater incidents b $150 $31 $150 $280 $150 $31
- $280 Vapor intrusion $1.8 $0.39 $2.2 $4.1 $2.1 $0.39
- $4.1 Product loss $1.1 $0.25 $1.7 $3.6 $1.7 $0.25
- $3.6 **Total** c **$150 $31**  **$150 $290**  **$160 $31**  **- $290**  **Non -**  **Monetized Impacts** d Groundwater protected (billion gallons) 54 11 67 120 64 11
- 120 Acute events and large
- scale releases (e.g., releases from AHFDSs and FCTs) e n/e n/e n/e n/e n/e n/e Ecological benefits e n/e n/e n/e n/e n/e n/e Human health risks e n/e n/e n/e n/e n/e n/e a Avoided remediation costs from releases and groundwater incidents are the costs related to site remediation. Avoided vapor intrusion costs include additional avoided costs associated with the remediation of vapor intrusion cases; the RIA does not address human health risk associated with vapor intrusion. Avoided product loss costs are also separate and additive. b Expert 2 provided responses that generate benefits that are relatively low compared to estimated costs, unlike the other thre e experts. Conversations with this expert indicated that this discrepancy may be due to his assumptions about partial noncompliance. See Section 4.5.3 and Appendix H for additional discussion. c Totals may not add up due to rounding. Cost estimates were derived using a seven percent discount rate. d Due to data and resource constraints, EPA was unable to monetize some of the positive impacts of the final UST regulation
. Chapter 4 provides a qualitative discussion of these benefits. e Benefit s not estimated are denoted by n/e.5
- 1



### Chapter **5 .**  **Distributional Impacts and Considerations 5.1**  **Introduction** This chapter considers specific impacts that may be created by

the distribution of the costs and benefits of the final UST regulation . EPA has undertaken several anal ys es to examine how the pattern of costs and benefits may affect specific populations and sectors of the economy. Specificall y, the chapter considers:

 **Economic impacts associated with the costs of the final UST regulation**  **:** These could include changes in facility operation and closure of facilities due to cost increases under the regulation. In addition, the final UST regulation may create negative and positive employ ment impacts, including both reductions in employ ment to re duce costs and increases in employ ment to ensure implementation of regulatory provisions. Finally , the regulation may affect public spending related to cleanup of contaminated sites.

 **Energy impacts associated with the final UST regulation**  **:** EPA considers the potential for this regulation to affect the supply , distribution, or use of energy , including changes in the price of fuel.

 **Impacts on small business and governments:** EPA’s regulatory flexibility anal ys is considers the potential for regulatory costs to have a significant impact on a substantial number of small entities (SI SNOSE).

 **Impacts on minority and low -**  **income populations:** EPA considers the potential for the final UST regulation to have disproportionate impacts on minority or low
income populations
.
 **Children’s health impacts:** EPA considers the potential for the final UST regulation to have a significant or disproportionate impact on the health of children. Note that the anal ys es in this chapter employ data and results from EPA’s primary anal ys is a ssuming a constant number of tanks and releases over 20 years. This chapter does not consider impacts under the alternative baseline scenarios. In general, impacts under alternative baseline assumptions would be slightl y smaller, reflecting the smaller universe of affected facilities over time. **5.2 Economic Impacts**  In the context of regulatory anal ys is, an economic impact is an effect on the economic wellbeing, or welfare, of any stakeholder due to compliance with the final UST regulation
. Direct economic impacts can be borne by producers (i.e., those who produce, distribute, or sell products associated with the regulation), b y consumers (i.e., those who purchase products associated with the regulation), or both.5
- 2

The economic impacts of the final UST regul ation result from increases in compliance costs due to new regulation. In the short run, producers (i.e., owners or operators of facilities with UST sy stems) can respond to cost increases in one of two way s: by passing through some or all costs to customer s (consumers) through increases in price, or b y absorbing costs and reducing profitability . If producers cannot pass on to consumers any of their increased compliance costs, the regulation will chiefly affect producers in the short run, and economic impact s may include reduced profits, changes in operation, and in extreme cases, facility closure. If producers are able to increase prices on products to recover some or all compliance costs, the regulation will affect consumers b y raising prices. The extent to which producers can pass through costs depends on the structure of the markets in which they operate. As we discuss in subsequent sections, we do not believe that many firms will be able to pass increases in prices on to consumers through higher fuel pri ces. While local
- level motor fuel retail stations may

face similar increases in costs of compliance, consumers’ sensitivity to changes in gasoline prices provides a significant disincentive for station operators to increase fuel prices. 144 Instead, complianc e costs are likel y to be passed on through cross
- marketed goods whose demand is less sensitive to changes in prices, such as items for sale at gas station convenience stores. EPA’s assessment of the economic impacts associated with this regulation is presented as follows:

 **Distribution of affected facilities.** We first discuss the universe of affected facilities, with a focus on the retail motor fuels sector. This section also describes supply and demand dy

namics within the retail motor fuels market and the l ikely economic responses to increased compliance costs.

 **Screening level economic impact analysis of average costs on facilities.** EPA presents a screening assessment of the impacts of average estimated facility
- level costs on the facilities affected b y the regulation.

 **Sensitivity analysis of economic impacts.** To address uncertainty related to the distribution of costs among UST facilities, we present a “worst
- case” sensitivity anal ys is that identifies the maximum number of facilities that could face signifi cant economic impacts due to regulatory costs. This section also briefly discusses implications for facility closures and changes in employment.

 **Impacts on public funding for cleanups.** The final UST regulation is estimated to result in significant cost savings associated with avoided cleanup requirements as releases decline. A significant portion of cleanup costs are currentl y borne by the public sector, using taxes and fees to fund state cleanup efforts. EPA e xamines
144 A high degree of consumer sensitivity to changes in gasoline prices does not imply that prices are equal across gasoline stations in the same area. Factors that affect retail motor fuel prices at the station
- le vel include traffic flows, population density, and intensity of local retail competition on the demand side, while supply can be affected by land cost, station setup, labor costs, and taxes. See: Fischer, Jeffrey. “The Economics of Price Zones and Territorial Restrictions in Gasoline Marketing.” Federal Trade Commission. 2004. Accessed at: http://www.ftc.gov/be/workpapers/w p271.pdf . p. 15

– 165
- 3 the potential reduction in public sector liabilities associated with the broader reduction in releases. **5.2.1 Distribution of UST Systems by Industry Sector**  As shown in **Exhibit 2 -**  **3** in Chapter 2, the majority of UST sy stems are located at motor fuel retailers (i.e., gas stations). EPA estimates that, of the 577 , 981 UST systems active in 201 3 , 454,774 (roughly

80 percent) were located at approximately 148 ,000 motor fuel locations in th e United States. 145 The remaining 123,207 UST s ys tems (roughl y 20 percent of the total) are spread across several industries, including the commercial sector (wholesale, retail, accommodation, and food services), manufacturing, transportation, communications and utilities, and hospitals. 146 Notably , the sectors other than retail motor fuels are difficult to characterize with regard to UST s ys tems; depending on their uses, UST sy stems may occur in varying numbers at facilities of varying size and purpose across all sectors. Onl y in the retail motor fuel sector do UST s ys tems serve a similar, central function at virtually all facilities in the sector. In addition to comprising approximately 80 percent of all UST sy stems, establishments in the retail motor fuels s ector also have the highest average number of UST sy stems per facility , with a facility

average of 3.0 7 (roughly three s ys tems per facility). In comparison, facilities in other sectors have, o n average, between 1.47 and 1.81 sy stems. 147 Because many requirem ents in the final UST regulation occur at the UST sy stem level, establishments in the retail motor fuels sector have the highest average compliance costs per facility . In total, this sector is likely to bear roughl y 70 percent of total costs associated with the final UST regulation
. 148 Because the costs of the final UST regulation will primarily affect the retail motor fuels sector, and because this sector is characterized by a large number of independently
- owned facilities and companies, this economic impact analy sis focuses on the retail motor fuels sector. **5.2.2 Market Dynamics in the Retail Motor Fuels Sector**  This section provides an overview of the U.S. wholesale and retail motor fuels markets, including market concentration, fuel distribution practices, and the implications of market structure for pricing.

145 EPA’s count of UST systems includes states and territories, while the estimate of retail motor fuel locations includes only facilities in the continental U.S., Hawaii, and Alaska. Because only 4,963 UST systems (approximately 0.9 percent) are located in other U.S territories, we use 148,000 facilities as the total population.

146 See Chapter 2.1 for more detail. 147 See **Exhibit 2 -**  **3** . For example, we calculate 1.81 systems per commercial facility by dividing 1,450 systems by 801 facilities (agriculture sector).

148 Total costs under the Selected Option are $160 milli on, with $130 million directly related to conventional USTs and EGTs (including the cost to read the regulations). Motor fuel retailers will bear approximately 80 percent of these $130 million in costs, which represent roughly 70 percent of total costs und er the Selected Option.5
- 4

**Supply -** **side Characteristics: Ability of Producers to Pass Through Costs** The North American Industrial Classification System (NAICS) code for retail motor fuel sales (i.e., gasoline stations) is 447, and specifically applies to retailers of automotive fuel and automotive oils. Establishments classified under NAI CS code 447 include facilities with and without convenience stores, and all have specialized equipment for the storing and dispensing of autom otive fuels. 149 According to the 2007 Economic Census, average revenues for establishments in NAI CS sector 447 were approximately $3.8 million. On average, each establishment employed approximately

eight employees. 150 **Market Concentration** Market concentration is an indicator of the ability of firms to raise prices in response to changes in the costs of doing business: in markets with fewer, larger companies (i.e., highl y concentrated markets), large firms typicall y have greater ability to p ass through price increases to consumers. One indicator of market concentration is the proportion of total sales made b y individual firms within a particular market. In markets where concentration is high, few firms earn a relativel y large proportion of th e total revenues in a market and are sometimes able to pass price increases through to consumers because of limited competition from smaller firms. The retail motor fuels sector is representative of the broader retail sector in market concentration. Speci fically , 41 percent of all sales made by NAICS sector 447 are made b y establishments owned by the fifty largest firms in the sector, compared with one
- third of sales to the largest 50 firms in the broader retail sector. 151 This level of market concentration does not suggest that retailers will easily pass through price increases. 152

149 2007 Economic Census, Retail Trade, Industry series. Gasoline Stations: 2007. Accessed at: http://www.factfinder2.census.gov
.

150 While EPA relies on 2007 Economic Census figures fo r values per facility, this analysis relies on more recent and focused National Petroleum News Survey values for a count of the number of facilities.

151 2007 Economic Census, Retail Trade, Industry series. Gasoline Stations: 2007. Accessed at: http://www.factfinder2.census.gov
.

152 A common measure of market concentration can be obtained through the Herfindahl
- Hirschman Index (“HHI”), which is calculated by squaring the market share of each firm competing in th e market and then summing the resulting numbers. For example, if only two firms operate in a market and each has 50 percent of sales, then the index would register 50 2 + 50 2 = 5,000. The U.S. Department of Justice’s merger guidelines categorize markets in which HHI is between 1,000 and 1,800 points as moderately concentrated, and those in which the HHI is in excess of 1,800 points as concentrated. Because the four largest firms in NAICS sector 447 generate only 10 percent of the sales in that market, the HH I will be well below 1,000 for this sector. We conclude that firms’ relatively small market share translates into weak pricing power. For additional information, see: U.S. Department of Justice. Herfindahl
- Hirschman Index. Accessed at: http://www.justice.g ov/ atr/public/testimony/hhi.htm.5
- 5

**Geographical Concentration** Gasoline stations are generall y distributed across the United States in proportion to population. The most populous states have more establishments and higher proportions of gasoline sales. 153 While no data are available regarding the distribution of facilities by size, the retail gasoline market is relatively homogeneous nationwide, and it is likely that facilities of different sizes are distributed according to population as well. **Ownership Structure** The 2013 NACS Retails Fuel Report published b y the National Association of Convenience Stores (NACS) classifies motor fuel retailers into three broad categories, depending on the manner in which they obtain th eir wholesale product: 154

 **Refinery -**  **Owned:** Less than one percent of facilities are retail operations directly owned b y large oil producers. These stations receive wholesale product directly from the oil company’s refinery, and their profit is part of the oil company’s profit. At these facilities, the parent corporation manages all aspects of the customer experience and establishes a consistent brand identity
.  **Branded Independent Retailers:** Approximately 50 percent of facilities are branded independent retailers. These facilities are owned b y independent operators and contract with a refinery to sell a particular brand of gasoline. This owner leverages the supplier’s marketing and ensures constant suppl y in exchange for a surcharge per gallon paid to the suppli er. Branded retailers’ contracts with refiners typically contain clauses that specify the margins retailers can charge above wholesale prices.

 **Unbranded Independent Retailers:** Approximately 50 percent of facilities are unbranded independent retailers. These retailers purchase gasoline on the open market, without committing to a particular supplier. Wholesale gasoline is a commodity, but varies in price regionally based on a combination of refinery

locations, specific fuel mixes (e.g., to meet air quality standards), and the type of distributors in a region. Types of wholesalers include: 155

 **Refinery -**  **owned wholesalers** : Refiners (typically large oil companies) distribute directly to their own retail outlets in all regions, and in some areas may also

153 U.S. Census Bureau. Industry Statistics Sampler: NAICS 447, Geographic Distribution
- Gasoline Stations: 1997. Accessed at: http://www.census.gov/epcd/ec97/industry/E447.HTM
.

154 National Association of Convenience Stores. “Who Sells America’s Fuel?” Accessed at: http://www.nacsonline.com/YourBusiness/FuelsReports/GasPrices_2014/Retail
- Operations/Pages/Who
- Sells
Americas
- Fuel.asp x

155 Kleit, Andrew

N. "The Economics of Gasoline: Retailing Petroleum Distribution and Retailing Issues in the U.S." December 2003.5
- 6 distribute directly

to independent branded and unbranded retailers (competing with other suppliers in the unbranded market).

 **Area Franchisees** : Otherwise known as “jobbers,” these firms obtain the right from oil companies to franchise a brand of motor fuel in a particular area. Jobbers are responsible for siting and building new facilities and marketing the brand, which further removes refiners from operating activities. The term is also used to describe wholesale distributors of motor fuels that offer multiple brands. While some regions have significant competition among distributors, the market power of refiners and the contract structure of many retailers means that retailers in general have little control over the price of their fuel suppl y. 156 As a consequence, any cost increases must be absorbed b y retailers or passed through to customers. **Demand -** **side Characteristics: Consumer Response to Price Increases** Consumer reactions to price changes are critical in determining whether a producer (i.e., retailer) can pass on costs. The degree to which consumers change the quantity they consume when the price of a good increases is known as the price elasticity of demand. Economists define demand as inelastic if the quantity demanded changes less than price (e.g., quantity demanded changes b y one percent when prices rise (or fall) by 1.4 percent). Similarly , demand is said to be elastic if quantity

demanded changes proportionally more for a relative change in price. Motor fuel retailers rel y on sales of gasoline for mo st revenues, though most also sell other automobile
- related or convenience products. Research has documented that broad (national) market demand for gasoline is relatively price
- inelastic in the short
- run: consumers do not make immediate, significant chang es in gasoline purchases if prices increase. 157 On its face, this dy namic would suggest that a retailer could pass through any cost increases to consumers. However, the structure of the market for gasoline prohibits significant price fluctuations at the faci lity level. While national demand is relativel y consistent, consumers are highl y sensitive to price differences within local markets. 158 Small increases in price at one location can produce relativel y large changes in quantity demanded for a particular facil ity as consumers seek other local retailers with lower costs.

156 Other suppliers, e.g. for convenience store items, may be easier with which to negotiate but may not be available to all mo tor fuel retailers.

157 Dahl, Carol and Thomas Sterner. “Analyzing Gasoline Demand Elasticities: A Survey.” Energy Economics, July 1991. p. 203

– 210.

158 As noted above, a high degree of consumer sensitivity to changes in gasoline prices does not imply that p rices are equal across gasoline stations in the same area. See: Fischer, Jeffrey. “The Economics of Price Zones and Territorial Restrictions in Gasoline Marketing.” Federal Trade Commission. 2004. Accessed at: http://www.ftc.gov/be/workpapers/w p271.pdf
.5
- 7

A recent National Association of Convenience Stores (NACS) survey provides insights into the price pressures faced b y local retailers: 159

 66 percent of respondents stated that price was the most important factor in their gasoline
- purchasing choices.

 6 7 percent stated that they would take the time to make a left turn on a busy street to save five cents per gallon of gasoline.

 3 9 percent said they would drive 10 minutes out of their way (a 20
- minut e round trip plus cost of fuel) to save five cents per gallon. This amounts to savings of less than one dollar in terms of fuel for nearl y all passenger vehicles on the road today
. Local competition for price
- sensitive customers discourages retailers from increasing gasoline prices, except in cases such as wholesale price increases or tax increases where changes are uniform across facilities. 160 Because compliance costs may vary by facility depending on existing technology

and practice, it is not likely that retailers will opt to pass through compliance costs by raising gasoline prices. While retailers may be able to increase the prices of other products (e.g., motor oil or convenience store products), it is also likely that some retailers will be forced to ab sorb some or all of the costs associated with the regulation. Retailers in relative isolation may be better positioned to pass on increases in cost to consumers. Research shows that store
- level pricing is sensitive to the concentration of competition. In areas where motor fuel retailers are relativel y sparse, facilities may be better able to pass cost increases on to consumers, for whom the opportunity cost of finding an alternative store is higher when they must travel farther. 161 However, because consumers are especially price sensitive about gasoline and it is not clear what other options owners or operators have to increase prices, we assume that owners or operators will likely

bear the economic impacts of the regulation. We therefore examine producer imp acts, including the possibility that some facilities may

close due to cost increases. 162

159 National Association of Convenience Stores. “Consumer Research: Price Still Dominates Gas Purchasing Decisions.” Accessed at: http://www.nacsonline.com/YourBusiness/FuelsReports/GasPrices_2014/Consumer - Research/Pages/Consumer
Research
- Price
- Still
- Dominates
- Gas
- Purchasing
- Decisions.aspx.

160 This may vary, depending on the region. For example, in Vancouver, gasoline prices are uniform and rigid (due to tacit collusion among wholesalers), while prices in Ottawa are dispersed and volatile (due to the price
disrupting behavior of “maverick” firms). See: Eckert, Andrew and Douglas S. West. "A Tale of Two Cities: Price Uniformity and Price Volatility in Gasoline Retailing." Annals of Regional Science , 2004, vol. 38, issue 1, p. 25
- 46.

161 See: Hoch et al . “Determinants of Store
- level Price Elasticity.” Journal of Marketing Research , Vol. 32 (1), 1995: p. 17

– 29.

162 A mo re detailed analysis of consumer impacts is prohibitively difficult for two reasons. First, the precise set of goods and services whose prices may increase is difficult to characterize. Second, gasoline aside, the main draw to products sold at retail motor fuel facilities is convenience, i.e., ease of access. Most non
- fuel products can be purchase d for lower prices at grocery stores, for example. Consumers can therefore shop at other types of facilities for the same goods, but typically opt to pay a premium for purchases at a convenient location. Note that, even5
- 8

**5.2.3 Assessment of Market Exits and Employment Impacts**  In a market setting where producers cannot reliably pass through costs, the most significant economic impacts are related to reduced facility profits. In some cases, managers can cut supply

or employ

ment costs (this could result in smaller worker paychecks). In cases where costs exceed facility

profits, it is likely

that in the long term a facility would exit the mar

ket. A critical factor, therefore, is an estimate of average firm or facility profits. It is difficult to estimate the profitability of retail motor fuel stations because many are small and privatel y held and are not required to report profits publicly. H owever, some evidence suggests that profit margins are below five percent, and data suggest that average after
- tax profit margins reported to the IRS for gas stations are roughl y 1.8 percent. 163 Holding all other things equal, an annual cost greater than 1.8 percent of gross sales (i.e., a cost greater than $1,800 for a firm earning $100,000 a year) would exceed average reported profits and would therefore cause a motor fuel retailer to operate at a loss. If the facility cannot adjust its prices or lower cost s, it will eventually

exit the market. 164 Consistent with the assessment of small business impacts in Section 5.4 of this chapter, EPA considers the impact of the final UST regulation on small facilities in order to identify the most likely

facilities to ex it the market. Assuming that all motor retail facilities, regardless of income, have an “average” configuration of approximately three tanks, EPA calculates the average to tal cost per facility to be $715 (2012 dollars), or $658 in 2007 dollars, under the S elected Option (reflecting a cost of approximately $232 per UST s ys tem in 2012 dollars, or $214 per s ys tem in 2007 dollars). 165 , 166

though consumers will be able to purchase equivalent goods at different locations, there is a reduction in consumer surplus associated with the loss of convenience in the purchase.

163 For corporations reporting net income, profit margins before non
- cash items (depreciation and amortization) and income tax (or credits) were approximately 1.8 percent (2.4 percent less amortization and depreciation, but not taxes paid). Earnings before depreciation and amortization account for the fact that firms can postpone capital expenditures to save cash, and would likely do so while adapting to higher costs. If non
- cash items and taxes are included, earnings drop to roughly one (1.3) percent. Our approach averages the two options (2.4 percent, before amortization and discounting, and 1.3 percent, after including non
- cash items and taxes) to yield a margin of 1.8 percent, reflecting an assumption that firms will do something to adapt to higher costs while they sort out how to adjust prices, and that firms typically minimize profits reported to the IRS. See: U. S. Internal Revenue Service. SOI TaxStats. Table 7: Corporation Returns with Net Income for 2009. Accessed at: http://www.irs.gov/taxstats/article/0,,id=170693,00.html . See also 2002
- 2012 RMA Statement Studies , Sector 447, for a range of profitability data from facilities of different sizes.

164 Throughout this chapter, EPA refers interchangeably to reductions in net profit and the proportion of revenues that the costs of the final UST regulation will create. In both cases, we refer to the impact of the cost of the final UST regulation on the profitability of a facility.

165 Specifically, we assume 3.07 UST systems per facility. 166 Under Alternative 1 the average retail motor fuel facility cost would be $1,509, and under Alternative 2 it would be $369 (2012 dollars). In Indian country, where facilities are required to meet more requirements than elsewhere; average cost per facility is $2,257 under the Selected Option, $3,326 under Alternative 1, and $1,801 under Alternative 2 (2012 dollars).5
- 9

Using data from the 2007 Economic Census and the regulatory flexibility

screening anal ys is methodology

described in Section 5.4 , EPA concludes that a facility
- level cost of $65 8 ($715 in 2012 dollars) would exceed 1.8 percent of total reported 2007 revenues (i.e., be equal to or greater than total profits) for 19 firms, representing less than one
- tenth of one percent of the univer se of 148,000 motor fuel retail facilities. 167 In comparison, approximately 2 , 024 facilities per year closed over the period between 2005 and 201 3
. 168 Insome cases, any exits related to regulatory

costs may

coincide with exits that would have occurred in the baseline. Furthermore, it is likely that many of the affected facilities will also have options to pass through at least a portion of costs, and many small facilities may

have fewer than three UST sy stems. Therefore, EPA concludes that the market impacts a ssociated with this regulation are likely to be diffuse and minimal, assuming a relativel y uniform distribution of costs nationwide. **Sensitivity Analysis: Considering Impacts of a “Worst -**  **Case Scenario”** EPA’s finding of minimal market impacts rests on an assessment of average facilities with average regulatory

compliance costs. If the costs of the final UST regulation are concentrated on certain facilities, it is possible that additional impacts (e.g., ma rket exits) could occur. EPA therefore employ s several sensitivity anal ys es to consider alternative, “worst
- case” distributions of regulatory costs across facilities. To examine the extent to which the distribution of regulatory costs can be “concentrated” on specific facilities, EPA constructs a “worst
- case distribution” in which regulatory costs are concentrated on a subset of facilities. 169 To obtain this distribution, we artificially assign costs to create the largest cost for the largest number of facilities, by assuming that the same facilities in the state make every

regulatory

change. 170 We further assume that the smallest facilities in the U.S. are the facilities that must make the regulatory changes. 171

167 An analogous statement of this outcome is that all facilities with revenues below approximately $36,300 per year would incur ne w costs equal to or in excess of profits of 1.8 percent of total revenue. Note that U.S. Census data indicate that all firms in the motor fuel sector that earn less than $36,300 are single
- location firms.

168 NPN reported a station count of 147,902 in 2013, compared with 164,094 in 2005. Note that 168,987 represents the total number of establishments offering gas filling services reported by NACS. We adjusted this number downward by the 4,893 “hypermarketer” facilities reported in existence by NACS in 2012 to reach the 164,094 retail motor fuel stations nationally. For the purposes of these calculations, we adjust both station counts dow nward for the number of “hypermarketers” providing retail motor fuel in 2013, w hich are not gas stations but rather supermarkets or wholesalers with filling stations. These figures imply a decrease of approximately 16,000 stations over eight years, or approximately 2,024 (1.2 percent) per year. See: National Petroleum Ne ws. "MarketFacts 2013"; and National Petroleum News. Market Pulse. "2005 U.S. Motor Fuel S tation Count: 168,987," both accessed at: http://www.npnweb.com/. Additionally, see “The U.S. Petroleum Industry: Statistics, Definitions” from the National Association of Convenience Stores (NACS), a ccessed at: http://www.nacsonline.com/YourBusiness/Fuels Reports/GasPrices_2014/Retail
- Operations/Pages/Who
- Sells
Americas
- Fuel.aspx.

169 Ideally, EPA would evaluate which facilities are likely to incur significant impacts by examining the specific changes each will be required to make to achieve compliance. These costs would be compared with the facility’s revenue and profit margin to establish whether it can incur the additional costs and remain in business. To EPA’s knowledge, no data of this resolution are available for the large population of facilities with UST systems.

170 For example, consider a state with 850 UST facilities that will be subject to three hypothetical technical requirements: Requirement A will affect 500 facilities and cost $50 per facility; Requirement B will affect 250 facilities and cost $100 per facility; and Requirement C will affect 100 facilities and cost $200 per facility. The5
- 10

**Exhibit 5 -**  **1** displays the universe of retail motor f uel UST facilities in the United States when costs are allocated to concentrate impacts. This creates an allocation of costs that varies broadly , from as little as $30 to over $4 ,5 00 per facility
. 172

average cost for all of these facilities is $ 82 (((50*500) + (250*100) + (100*200))/850). However, the highest cost possible in this state is $350 (costs of $50 from Requirement A, $100 from Requirement B, and $200 from Requirement C), and the largest number of facilities that could incur this cost is 100 (the smallest of the universes affected by Requirements A, B, or C). The next highest cost is $150 (costs of $100 from Requirement B and $50 from Requirement A), which affect 150 facilities, excluding those also affected by Requirement C. The last group wo uld be affected only by Requirement A , with 250 facilities at a cost of $50 per facility. Such an allocation of costs creates an unlikely outcome with a high potential for market exits. Appe ndix K provides the detailed summary of this threshold calculation.

171 EPA also examined a sensitivity analysis that would specifically consider the effects of "front
- loading" capital cost requirements, but this scenario would have no effect on the results of the "worst - case" sensitivity analysis. The “worst - case” scenario examined here already assumes simultaneous implementation of all requirements under the final UST regulation , including several which actually have delayed implementation schedule (e.g., s econdary containment tests). In addition, the analysis includes annualized costs for capital requirements for Indian country systems (e.g., secondary containment). The “worst - case” scenario does not address the replacement of closure of lined tanks that cannot be repaired according to a code of practice, and does not assume that full capital costs are incurred in a single year for affected tanks, but the facilities that would be affected by these changes are already among the highest cost facilities identif ied, and are already therefore included in the number of facilities potentially affected under this worst - case assumption.

172 One possible concern is whether facilities that are likely to face high costs are geographically concentrated in certain states or regions. To assess this, we examined the geographic distribution of the six percent of facilities that would incur the highest costs if costs were artificially concentrated (specifically, 9,310 facilities incurring costs greater than $1,500). Our analysis includes 4,681 firms incurring costs between $1,500 and $1,600. For simplicity and to preserve a conservative estimate, we assume that these firms all incur costs of $1,600.) The proportion of “highest
- cost facilities” does not vary substantially by state, because several regulatory requirements affect only a small percentage of the entire UST universe in any state. The concentration (percentage) of facilities that could be subject to costs over $1,600 is highest in American Samoa, where 6.3 percent of faci lities could be affected at that cost. In the remaining 55 states and territories, facilities that could, in a worst
- case scenario, incur costs over $1,600 represent less than 3.7 percent of total facilities within each state. Differential economic impacts across states are not likely to occur as a result of disproportionate state
- level impacts from this regulation, even in a scenario of maximum concentration of costs across the fewest firms.5
- 11 **Exhibit 5 -**  **1 Distribution Of Retail Motor Fuel UST Facil** **ity Costs**

**Using “Worst -**  **Case” Distribution**

To assess economic impacts using this unlikely worst - case scenario, EPA pairs the distributions of facility

size and costs to maximize the number of situations in which estimated costs would exceed 1.8 percent o f gross sales (the average reported retail motor fuel facility profit). Facilities with costs exceeding 1.8 percent of revenues would potentially face a significant economic impact under worst
- case assumptions. **Market Exits** Even under the artificially adverse scenario presented above, economic impacts to affected entities are limited. The least compliant facilities in the least regulated states would incur costs under $4, 6 00 in the worst case. 173 This represents less than 1.8 percent of revenues for facil ities earning more than $250,000 per ye ar, suggesting that even these facilities could

173 Facility costs of roughly $4,300 or less are representative of approximately 99 percent of worst
- case, high
- end cost outcomes. Facilities in Indian country are the only exception, as they will also be required to comply with additional regulations for operator training and secondary containment. Because this group of facilities represents only roughly one percent of facilities with costs at or above $4,300, we do not present them as the main highest
- cost scenario.

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000**F a** **c i** **l i** **t i** **e s** 

**Cost range ($)**5
- 12

absorb all worst
- case costs without becoming unprofitable. 174 To assess the worst
- case potential impact, EPA assumed that the facilities with the highest costs (those in the right
- hand tail of the distribution in **Exhibit 5 -**  **1** ) are also the facilities with the lowest revenues and allocated costs to those facilities to maximize the number of potential exits. EPA estimates that 4,5 00 facilities earning less than $250,000 per ye ar in the U.S. (in 2007 dollars) would be subject to costs exceeding 1.8 percent of revenues in the worst
- case scenario. 175 , 176 To the extent that those facilities could not increase prices to offset higher costs, it is likely that at least some of them would exit the market. I f all of these facilities exited the market, the closures would constitute roughl y three percent of existing facilities. 177 However, this scenario imposes several unlikel y assumptions, including:

 **All facilities with income less than $250,00 0 have average configurations of**  **three UST systems.** In fact, small facilities likely have fewer than three tanks and would therefore be subject costs that are much lower than the facility- level costs estimated here. Itis likely that the smallest facilitie s also operate only a single UST sy stem, which would reduce their compliance costs by approximately

67 percent. 178 Under such circumstances, most small operators would not be subject to a significant economic impact even in the worst
- case scenario.

 **No facili ty has any option to increase prices on any goods or services or to**  **identify any options for savings.** While gasoline prices are unlikel y to rise in response to this regulation, consumers may be willing to pay

marginal cost

174 For simplicity, we assume that all facilities earning less than $250,000 per year (in 2007 dollars) earn less than $243,000, in order to enable the use of Census data to estimate the number of facilities subject to costs exceeding 1.8 percent of revenues. This is a conservative estimate; in reality, there are likely some facilities earning between $243,000 and $250,000 per year that would not be subject to costs exceeding 1.8 percent of revenues.

175 The 2007 Economic Census identified 3,463 facilities that earned less than $250,000 in 2007. For the purposes of its SBA analysis, EPA revised this estimate upward by 38 percent to reconcile disparities between Census gas stations counts from 2007 and NACS gas station counts from 2013. Of the estimated 4,781 facilities earning less than $250,000 per year in 2007, we arrayed the highest cost facilities with the high est revenue facilities, to ensure an estimate of as many exits as possible, which yielded an estimate of approximately 4,500 facilities that could exit the market. See Appendix K for a detailed explanation of our methods.

176 Census data on number of facilities per firm indicate that virtually all firms earning less than $250,000 per year in 2007 had only one facility. We therefore use “firm” and “facility” interchangeably in this context.

177 In other words, of the 4,781 facilities earning less than $250,000 p er year in 2007, EPA estimates that up to 4,500 facilities may incur compliance costs that exceed 1.8 percent of revenues (i.e., costs greater than $4,600 per facility). To the extent that those facilities could not increase prices to offset higher costs, it is likely that at least some of them wo uld exit the market. See Appendix K for a detailed explanation of our methods.

178 According to the 2013 NACS Convenience Store Industry Fact Book, the average motor fuel retailing facility has monthly throughput of approximately 128,000 gallons. As discussed in Chapter 2, we believe that the average motor fuel retailer operates approximately 3 UST systems. This equates to roughly 42,700 gallons of mo nthly throughput per system. In addition, based on information from a mid
- size retail fuel marketer, EPA believes that a facility requires a minimum throughput of approximately 30,000 gallons per month to remain economically viable, which equates to upward of $50,000 in revenues per month given gasoline prices in excess of $2.00 since 2005. See: U.S. Energy Information Administration. Petroleum & Other Liquids. Retail prices for Regular Gasoline. Accessed at: http://www.eia.gov/dnav/pet/pet_pri_gnd_a_epmr_pte_dpgal_a.htm
.5
- 13 increases on other products and s ervices. Moreover, in remote rural areas, retailers may be able to directly

pass costs on to consumers.
 **A profit margin of 1.8 percent is standard.** The worst
- case scenario uses the average profits reported to the IRS to determine typical profitability. Ho wever, privately
- held companies have a clear incentive to minimize taxable profits when filing income taxes with the IRS. Because net income (profit) is taxable, corporations that are not publicly traded ty picall y take legitimate steps (e.g., yearend inve stments in equipment, employee bonuses) to reduce both net income and tax burdens. As a result, a 1.8 percent after
- tax profit estimate based on IRS data is likely to understate average profitability
. Finally , this analy sis does not adjust the 2007 Econom ic Census data on facility revenues for inflation, though costs are presented in 2012 dollars. Due to the variability of gasoline pricing, we adopt a conservative assumption that revenues have remained static in nominal terms since 2007. While our sensitiv ity

analy sis suggests that an extreme worst
- case scenario could impose significant economic impacts on as many as 4,500 facilities, it is unlikely that a significant number of actual market exits would result from the final UST regulation . It is more likel y that closures will occur in specific cases where facilities with high upgrade costs also face high levels of local competition. These closures would likel y be consistent with the current rate of industry consolidation of 1. 2 percent per ye ar. **Price Impacts**  The high sensitivity

of local demand to changes in retail motor fuel prices makes it unlikely that firms will react to the final UST regulation by raising gasoline prices. However, the cost of other goods and services could potentially increase as firms seek to offset regulatory costs through sales of other products. Retailers will likely increase the prices of goods that are relativel y price inelastic, such as tobacco products, auto service charges, or snack food s and other convenience items. **Employment Impacts** In addition to addressing the costs and benefits of the final UST regulation , EPA has anal yz ed the impacts of this regulation on employment. While a standalone anal ys is of employ ment impacts is not included in a standard cost
- benefit analy sis, such an anal ys is is of particular concern in the current economic climate of sustained high unemploy ment. Executive Order 13563, “Improving Regulation and Regulatory Review” (January

18, 2011), states, “Our regulatory

s ys tem must protect public health, welfare, safety, and our environment while promoting economic growth, innovation, comp etitiveness, and job creation.” For this reason, we are examining the effects of these requirements on employ ment in the regulated sectors. A discussion of costs asso ciated with this regulation (including labor costs) is included in Chapter 3, Section 3.2.2, with a sensitivity anal ys is regarding labor cost assumptions in Chapter 3, Section 3.5.1
.5
- 14

The employ

ment effects of environmental regulation are difficult to disentangle from other economic changes and business decisions that affect emplo ym ent over time and across regions and industries. In light of these difficulties, economic theory provides a constructive framework for approaching these assessments and for better understanding the inherent complexities in such assessments. Neoclassical microeconomic theory describes how profit
maximizing firms adjust their use of productive inputs in response to changes in their economic conditions. 179 Inthis framework, labor deman d impacts for regulated sectors can be decomposed into output and substitution effects. For the output effect, b y affecting the marginal cost of production, regulation affects the profit
- maximizing quantity of output. The substitution effect describes how, holding output constant, regulation affects the labor
- intensity of production. Because the output and substitution effects may be both positive, both negative or some combination, standard neoclassical theory alone does not point to a definitive net effec t of regulation on labor demand at regulated firms. In the labor economics literature , there is an extensive body of peer
- reviewed empirical work anal yz ing various aspects of labor demand, relying on the above theoretical framework. 180 This work focuses prim arily on the effects of employ

m ent policies ( e.g. labor taxes, minimum wage )
. 181 In contrast, the peer
- reviewed empirical literature specifically estimating employ

ment effects of environmental regulations is very limited. Several empirical studies, including Berman and Bui (2001) and Morgenstern et al (2002) , suggest that net employ ment impacts may

be zero or slightly

positive but small even in the regulated sector. 182 Other research suggests that more highl y regulated counties may generate fewer jobs than less regulated ones. 183 However, since these latter studies compare more regulated to less regulated counties, they overstate the net national impact of regulation to the extent that regulation causes plants to locate in one area of the country

rather than another. List et al. (2003) find some evidence that this ty pe of geographic relocation may

be occurring. 184 Overall, the peer
- reviewed literature does not contain eviden ce that environmental regulation has a large impact on net employ ment (either negative or positive) in the long run across the whole economy.

179 For a discussion, see: Layard, P.R.G., and A. A. Walters. 1978. Microeconomic Theory (McGraw
- Hill, Inc.), Chapter 9.

180 For a detailed treatment, see: Hamermesh. 1993. Labor Demand (Princeton, NJ: Princeton University Press), Ch apter 2.

181 For a concise overview, see: Ehrenberg, Ronald G., and Robert S. Smith. 2000. Modern Labor Economics: Theory and Public Policy (Addison Wesley Longman, Inc.), Chapters 3 and 4.

182 Berman, E. and L. T. M. Bui (2001). “Environmental Regulation and Labor Demand: Evidence from the South Coast Air Basin.” Journal of Public Economics 79 (2): 265
- 295; and Morgenstern, Richard D., William A
. Pizer, and Jhih
- Shyang Shih. “Jobs Versus the Environment: An Industry
- Level Perspective.” Journal of Environmental Economics and Management 43 (2002): 412
- 436.

183 Greenstone, M. 2002. “T he Impacts of Environmental Regulations on Industrial Activity: Evidence from the 1970 and 1977 Clean Air Act Amendme nts and the Census of Manufactures,” Journal of Political Economy 110(6): 1175
- 1219; and Walker, Reed. (2011).“Environmental Regulation and Labor Reallocation." American Economic Review: Papers and Proceedings 101(3): 442
- 447.

184 List, J. A., D. L. Millimet , P. G. Fredriksson, and W. W. McHone. 2003. “Effects of Environmental Regulations on Manufacturing Plant Births: Evidence from a Propensity Score Matching Estimator.” The Review of Economics and Statistics 85 (4): 944
- 952.5
- 15

Analy tic challenges make it very difficult to accurately

produce net employment estimates for the whole economy th at would appropriately capture the way in which costs, compliance spending, and environmental benefits propagate through the macro
- economy. Quantitative estimates are further complicated b y the fact that macroeconomic models often have very little sectoral detail and usually assume that the economy is at full employ ment. The EPA is currentl y in the process of seeking input from an independent expert panel on modeling economy- wide impacts, including emplo ym ent effects. 185 As described in detail in Chapter 2, Section 2.3, this regulation affects sectors using active UST s ys tems. Most UST sy stems in the United States are located at motor fuel retail establishments (i.e., gas stations), and virtually all motor fuel retail establishments use UST sy stems. EPA estim ates that this sector employ s approximately 1. 1 million workers. 186 The increased operating costs incurred b y facilities in this sector to comply with this regulation may

result in slightly

increased prices for their goods and services, as previousl y discussed. These potential price increases may result in reduced demand and thus reduced output of the facilities' goods and services. This c ould translate into lower demand for labor, a result commonly

referred to as the output, or demand , effect. 187 As discussed earlier, the price effect is expected to be small, and given the relativel y inelastic demand for gasoline, the demand effect is likely to be small as well. The final UST regulation may also contribute to a small number of market exits, which could cause a temporary negative employ

ment effect as these workers look for other positions. However, as noted above and discussed below, these exits are consistent with exits that are already occurring in the baseline. 188 Inaddition, given the competitive nature of the retail motor fuel sector and the similar regulatory costs faced b y each facility , many of these facilities may

be able to pass through at least a portion of these costs (see Price Impacts section above). 189 As a result, the potential employ ment effect of market exits from the final UST regulation is likely

small. While the final UST regulation is unlikely to have measurable employ ment impacts related to market exits, it is possible that some facilities will attempt to offset regulatory costs by reducing hours or staff. Even under worst
- case conditions, it is unclear whether facilities would reduce employ

ment. Because most personnel employed at retail motor fuel facilities earn hourl y wages rather than salaries, facilities have little to gain from eliminating positions and laying off

185 For more information, see: U.S. Environmental Protection Agency. Comment Request; Draft Supporting Materials for the Science Advisory Board Panel on the Role of Economy
- Wide Modeling in U.S. EPA Analysis of Air Regulations. February 5, 2014. Accessed at: https://www.federalregister.gov/ articles/2014/02/05/2014
- 02471/draft
- supporting
- materials
- for
- the
- science
- advisory
-board
-panel
- on - the
- role
- of
- economy - wide
- modeling. 186 The 2011 County Business Patterns report states that NAICS sector 447 employs 847,516 workers at 110,830 facilities. EPA extrapolated this value to the approximately 148,000 facilities counted by the 2012 NACS survey. 187 See, for example: Berman, E. and L. T. M. Bui (2001). “Environmental Regulation and Labor Demand: Evidence from the South Coast Air Basin.” Journal of Public Economics 79 (2): 265
- 295.

188 See footnote 169
. 189 Note that small marginal facilities are also likely to have fewer than three UST systems and thus face lower than average facility
- level compliance costs.5
- 16

employees: operations require a particular number of people
- hours, and the owner or operator will still need to allocate those tasks among the remaining workers. Some requirements of the final UST regulation may have a positive impact on employ ment. For example, walkthrough inspections require labor as a primary input; this may lead to small increases in employ ment at regulated facilities. 190 In addition, the increased demand for testing services and training under the final UST regulation may also increase demand for labor. Since the final UST regulation could potentially affect the demand for labor both positive ly and negatively, the overall direction of net employ ment impacts is unclear, but is most likely very small relative to the size of the industry. **Long -** **run Economic Impacts** The final UST regulation is unlikely to generate substantial additional impacts in the long run. In an unlikel y worst - case scenario it could accelerate ongoing consolidation trends in the retail motor fuel sector, but only if market exits result. NACS reports that 164,094 motor f uel stations operated in the United States in 2005. 191 By 201 3 , this number had fallen to 147,902, a decrease of 9 .9 percent compared with 2005, or approximately 1. 2 percent per year. 192 While broader market consolidation is related to ownership strategies amo ng oil companies and general economic patterns, facilities facing significant periodic costs (e.g. UST s ys tem replacement) may be among those most likely to close. Similarly , facilities that face higher operating costs as a result of the regulation may opt to close. In such cases, exits caused b y the regulation are likely to affect the most marginal firms and would likely coincide to some extent with exits that would have occurred in the absence of the regulation. These closures will occur in the context of the national decline in the number of facilities, such that the regulation is unlikely to cause a significant number of closures beyond those that will occur as part of the existing trend. **5.2.4 Assessment of Public Sector Cost Savings Related to Avoided**  **Releases** A major positive effect of the final UST regulation derives from its impact on state funds created for the purpose of providing a financial responsibility mechanism to UST owners and operators. 193 Among 56 state and territory governments, 3 5 state funds are active and continue to accept claims. 194 In many of these states, owners and operators are required to pay for a portion

190 For example, EPA estimates that monthly walkthrou gh inspections of a facility will take roughly half an hour to complete, on average. A compliant owner or operator in a state that does not currently have this requirement will need to allocate roughly six man
- hours of incremental effort per year to satisf y this portion of the final UST regulation
.

191 Note that 168,987 represents the total number of establishments offering gas filling services reported by NACS. We have adjusted this number downward by the 4,893 “hypermarketer” facilities reported in existenc e by NACS in 2012 to reach the 164,094 retail motor fuel stations nationally.

192 See footnote 16 9
. 193 State funds are created by state legislation and are submitted to EPA for approval before they can be used as financial responsibility mechanisms.

194 At the time of this assessment, Connecticut had not fully sunsetted its state fund. It was therefore included in this assessment; in other words, this assessment is based on 36 state funds. U.S. Environmental Protection Agency. "State UST Financial Assurance Fund s ." Accessed at: http://www.epa .gov/oust/states/fndstatus.htm.5
- 17

of remedial actions through deductibles that generally range from zero to $100,000. 195 Given an average state - fund cost of remedi ation per site of $1 24 , 48 8 in 201 2 , however, state funds are frequentl y required to finance some portion of remediation costs. 196 Inmost cases, states generate money

for their funds by

lev ying tank registration and petroleum fees, which are then used to provide pay

ments for remediation of releases beyond the deductibles paid by responsible parties. In states where funds rely on gas taxes and accept claims related to releases, these expenditures represent subsidies from the public to owners or operators responsible for releases. The extent to which this regulation reduces the occurrence of new releases produces two welcome effects:

 **Assignment of costs** . Fewer releases impl y lower expenditures from state funds. This represents a reduction in this public subsidy and a reassignment of costs from the public remediation costs to private entity prevention costs. This improves market signal ing and efficiency by requiring owners and operators to focus on release prevention.

 **Competitive effects** . High
- performing owners or operators are less likel y t o incur significant regulatory

costs than low
- performing owners or operators. As a result, the regulatory

costs and cost savings improve the alignment of incentives to focus on private
- sector prevention costs and reduce public
- sector remediation costs. To illustrate the potential magnitude of the public expenditures that could be affected b y the regulation (i.e., distributional effects), we examine states that have active state funds and categorize them into those that finance their funds via petroleum and tank fees (“Tier 1”), or via only a tank fee (“Tier 2”). 197 We assume that states that are required to comply with a larger number of the new requirements will experience a greater reduction of releases, all other things equal. To estimate the distribution of avoided releases, we calculate the average number of requirements with which the sy stems in each state will need to comply
. 198 We assign avoided releases based on both the

195 Association of State and Territorial Solid Waste Management Officials. State Fund Survey Results 2012. Table 1: Design Characteristics of State Financial Assurance Funds. Accessed at: http://www.astswmo.org/Files/Policies_and_Publications/Tanks/2012_State_Funds_Survey/2012
- Table1
- Part1.pdf
. 196 Association of State and Territorial Solid Waste Management Officials. State Fund Survey Results 2012. Summary of State Fund Survey Results. Accessed at: http://www.astswmo.org/Files/Policies_and_Publications/Tanks/2012_State_Funds_Survey/2012
- SummaryTable.pdf

. For example, representatives of the state of New Hampshire indicated that in most cases, the State Fund incurs remediation costs, except that the owner or operator typically bears the cost of immediately stopping the leak. In addition, New Hampshire indicated the owner or operator typically pays a $5,000 deductible towards the final remediation cost, and in New Mexico, the owner or operator typically pays a deductible between $0 and $10,000.

197 For s tates with active financial assurance funds, see: U.S. Environmental Protection Agency. "Status of State Fund Programs." Accessed on August 12, 2014. Accessed at: http://www.epa.gov/oust/states/fndstatus.htm.

198 We use the number of times a system is affected rather than the actual number of systems affected because we lack the data to determine which units are affected by each requirement. For example, if two requirements each affect 1,000 and 500 units, re spectively, they may ultimately affect between 1,000 and 1,500 units, depending upon whether any overlap exists among the two regulated universes.5
- 18

number of s ys tems in a state and the average number of requirements on each sy stem, and we value releases based on the national profile of avo ided releases and avoided groundwater incidents. 199 Using ASTSWMO data, we subtract from our estimate of the potential cost borne by the public the deductible that owners or operators would be expected to pay
. 200 See Appendix N for a discussion of the methodol ogy used. **Exhibit 5 -**  **2** presents the results of our screening
- level assessment. Among states with active state funds that fall into Tier 1 or Tier 2, we find that the potential reduction in public expenditures could reach $6 5 million to $2 9 0 million ($1 7 0 mi llion on average) under the Selected Option, with $ 50 million to $2 2 0 million ($1 3 0 million on average) in Tier 1 and $1 4 million to $6 4 million ($3 8 million on average) in Tier 2. 201 Reductions in public expenditures would equal approximately $1 2 0 million t o $3 7 0 million ($2 5 0 on average) under Alternative 1 and $2 6 million to $2 4 0 million ($1 3 0 on average) under Alternative 2. These savings would be slightly lower in a scenario where deductibles are in the upper end of their ranges. We note that, to realize the savings in public expenditures in the near term, state government action would be required to lower petroleum fees. Alternatively , to the extent that funds are not constrained in their use, a redistribution of funds (e.g., to existing sites awaiting c leanup) could also represent a significant public benefit through more rapid completion of existing sites. The values presented in this table reflect discounting to account for regulatory compliance schedules. This screening
- level analy sis is intended only to identify

the potential magnitude of impacts on state fund liabilities. A more detailed anal ys is of specific state program costs and the likely distribution of avoided releases would be necessary to precisel y measure potential savings. Overall, the values in **Exhibit 5 -**  **2** suggest that requiring owners and operators to focus on prevention reduces costs to state financial assurance funds, on average, b y over $1 6 0 million under the Selected Option, $2 3 0 million fo r Alternative 1, and $1 2 0 million for Alternative 2.

199 We calculate this as avoided costs due to avoided releases divided by number of releases avoided. The proc edure is similar for avoided groundwater remediation costs.

200 We rely on the ASTSWMO Fund Survey Results 2012 for the data that underlie our construction of tiers. These data are available at: http://www.astswmo.org/publications_tanks.htm.

201 Due to our ca lculation methods, two states with very high deductibles (Minnesota and Virginia) showed deductible amounts and avoided releases that exceed their estimated avoided release costs. We exclude them from our calculations, such that our estimates for likely underestimate the potential for redistributive effects.5
- 19 Exhibit 5
- 2 **Summary Of State Financial Assurance Fund Distributional Effects**

**Fund Revenue Mechanisms Selected**  **Option ($ m** **illions) Alternative 1** 

**($ m illions)**  **Alternative 2**

**($ m illions)**  **Low deductible scenario (High distributional effects)**  Tier 1 (petroleum & tank fee): average value (range of all values in italics) $1 3 0 ($ 50
- $2 2 0) $ 20 0

($ 91
- $2 9 0) $ 96

($ 19
- $1 8 0) Tier 2 (tank fee only): average value (range of all values in italics) $3 8 ($ 14
- $ 64

) $5 8 ($2 7
- $8 5

) $3 2 ($6. 5
- $5 9

) **Total** (range of all values in italics) **$1 7**  **0** ($65
- $2 9 0) **$2 5**  **0**

($1 2 0
- $3 7 0) **$1 3**  **0**

($2 6
- $2 4 0) **High deductible scenario (Low distributional effects)**  Tier 1 (petroleum & tank fee): average value (range of all values in italics) $1 2 0 ($4 6
- $20 0) $1 8 0

($ 86
- $2 6 0) $8 8

($1 8
- $1 6 0) Tier 2 (tank fee only): average value (range of all values in italics) $3 6 ($1 4
- $5 9

) $5 5 ($2 6
- $ 80

) $ 30 ($ 6.1
- $5 5

) **Total** (range of all values in italics) **$1 6**  **0** ($ 60
- $2 6 0) **$2 3**  **0**

($1 1 0
- $3 4 0) **$1 2**  **0**

($2 4
- $2 1 0) **5.2.5 Economic Impact Summary**  EPA’s sensitivity

anal ys es show that it is unlikely that the final UST regulation will have substantial negative economic impacts on the regulated community , in part because the costs of the regulation appear to be evenl y distributed across a large population of facilities, and remain modest at the facility

level. Even under a highly i mprobable worst
- case scenario in which the smallest facilities incur the highest possible costs and would have no options for passing through any cost increases, approximately three percent of the universe of retail motor fuel facilities would face costs s urpassing publicl y- reported (and therefore likel y understated) industry average profit margins. Any market exits under even this scenario would likel y coincide with the current market exit rate of approximately 2,024 facilities annually , and would likely affect out
- of

- date facilities that are on the brink of exiting. Therefore, the regulation will not likely create a significant additional contraction of the total market. A more likely

response by

affected firms will be to adapt by increasing prices on higher margin products and services. While overall employ ment impacts are unclear, it is possible that there may be an increase in labor demand due to the additional requirements placed on owners and operators, and addi tional demand for third
- party testing services. Finally , it appears that the final UST regulation could have a positive impact on state governments that currently fund a portion of UST
- related remediation costs through gasoline taxes and fees. A decrease in the number and severity of releases represents cost savings to states due to decreased demand on state financial assurance funds. Our initial screening assessment suggests that annual costs to states could be reduced by over $1 6 0 million. This represent s a reduction in a public subsidy and an improvement in market signaling.5
- 20

**5.3 Energy Impact Analysis**  Executive Order 13211, Actions Concerning Regulations T hat Affect Energy Supply, Distribution, Or Use (May 18, 2001), addresses the need for regulators to consider the potential energy impacts of the final UST regulation and resulting actions. Under Executive Order 13211, agencies are required to prepare a Statement of Energy Effects when a regulatory action may have significant adverse effects on energy supply , distribution, or use, including impacts on price and foreign supplies. Additionally, the requirements obligate agencies to consider reasonable alternatives to regulatory actions with adverse effects and the impacts that such alternatives might have on energy

supply , distribution, or use. The final UST regulation affects underground storage tanks used in the storage of motor fuel or emergency

generator fuel. However, it is unlikely that this regulation will have significant impacts on energy

supply , dis tribution, or use. To assess the energy impacts of the final UST regulation , EPA considers potential changes in energy supply and use associated with the total costs estimated in Chapter 3. The following summarizes EPA’s assessment of the energy impacts th at the final UST regulation will have in energy supply , distribution, and use. **Energy Supply and Distribution** The final UST regulation consists of additional regulatory requirements that apply

to the owners and operators of underground storage tanks. To the extent that the final UST regulation affects the motor fuel sector, it does so at the retail motor fuel sales level, rather than the level of refineries or distributors who supply the retail stations with motor fuel. Correspondingl y, we do not expect th e final UST regulation to have any impacts on energy supply or distribution. In terms of local motor fuel availability , we believe two outcomes are possible. I f a motor fuel station is located in an area where competition from other stations exists, fuel p rices will not likely be affected. Rather, owners and operators will seek to recover the costs of the final UST regulation by

increasing the prices of services or convenience items. If a station does not sell other products or services through which it can recover these costs, it may become subject to a significant economic impact. If this impact exceeds the profit margin of the facility, it may become unprofitable in the long term and exit the market. EPA’s analy ses suggests that the number of facilities l ikely to be affected is small, and supply will not be disrupted because sufficient supply

from other competitors exists to meet demand. We do not expect market exits to occur in low
- competition environments due to the market power of stations and the marginal nature of the increase in cost. If a motor fuel station is located in an area where competition is not intense (e.g., a rural setting), it may opt to directly pass on higher costs through increases in fuel or convenience goods prices. As we discuss bel ow, even if the entire cost of the regulation is priced through to consumers, the change in fuel prices is not likely

to be measurable. **Energy Use** The additional regulatory requirements contained in the final UST regulation may increase compliance costs f or owners and operators of retail motor fuel stations. If the owners and operators of retail motor fuel stations affected by the final UST regulation can successfully5
- 21

pass through their increased compliance costs, energy use may be affected through higher energy prices caused b y the final UST regulation . However, we do not expect a significant change in retail gasoline prices to result from this regulation for the following reasons:

 Economic anal ys es of retail fuel prices have revealed that demand for gasol ine is highl y sensitive to price (elastic) within localized geographic areas. As a result, individual retailers are unlikely to raise gasoline prices because local customers will select other stations. Because the regulations do not affect facilities unifo rmly , widespread price increases are unlikel y, and raising the price of gasoline can put individual retailers at a significant competitive disadvantage in local markets.

 Retail motor fuel stations often have associated stores and/or services, such as car w ashes, repair operations, and convenience outlets, on which they can more successfull y pass through increases in compliance costs. When considered in the context of total fuel consumption in the United States, the final UST regulation would represent a tiny fraction of motor fuel prices even if it was fully passed through to consumers. According to the Bureau of Transportation Statistics, the United States consumed 168,597,000,000 gallons of motor fuel (including gasoline and diesel) in 2011 at an average price of $3.73. 202 This implies that U.S. consumers spent $629 billion in 2012 on motor fuel. The overall cost of the final UST regulation is roughl y $160 million, less than one
- tenth of one percent of the amount spent by end
- users on motor fuel in 2012. In comparison, an increase of $0.01 in the average price of motor fuel in 2012 would have increased the total cost to consumers b y approximately $1.7 billion. Given these circumstances, the final UST regulation should not have a measurable impact on retail prices. **5.4 Regulatory Flexibility Analysis**  The Regulatory

Flexibility

Act (RFA) as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 USC 601 et seq., generally requires EPA to prepare a regulatory

flexibility

anal ys is of any regulation subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute. This anal ys is must be completed unless the agency certifies that the regulation will not have a significant economic impact on a substantial number of small entities. I f a regulation is found to have a significant impact on a substantial number of small entities, further anal ys is must be

202 2011 is the latest year data available from Bureau of Transportation Statistics for gallons of motor fuel consumed, as reported by: U.S. Department of Transportation, Research and Innovative Technology Administration, Bureau of Transportation Statistics. Accessed at: http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_04_0 9.html
. The 2012 prices per gallon for all grades of retail motor ga soline and No. 2 diesel fuel (all concentrations of sulfur) were $3.63 and $3.97, respectively, as reported by: U.S. Energy Information Administration. Short
- Term Energy Outlook
- Real and Nominal Energy Prices for 2012. Accessed at: http://www.eia.gov/for ecasts/steo/realprices/. We weight these prices according to prime supplier sales volumes in 2012 published by the Energy Information Administration, which summed to 347,234.5 thousands of gallons per day for gasoline and 143,270.6 thousands of gallons per day for all grades of diesel fuel (U.S. Energy Information Administration. Petroleum & Other Liquids. Prime Supplier Sales Volumes. Accessed at: http://www.eia.gov/dnav/pet/pet_cons_prim_dcu_nus_a.htm.).5
- 22

performed to determine what can be done to lessen the impact. Small entities include small businesses, small organizations, and small g overnmental jurisdictions. EPA developed a screening anal ys is and supplemental anal ys is consistent with the requirements under RFA; this section presents a summary of these findings, and Appendix Lprovides the detailed screening anal ys is. 203 For purposes of assessing the impacts of this regulation on small entities, a small entity is defined as: (1) a small business as defined b y the Small Business Administration’s (SBA) regulations at 13 CFR Part 121.201; (2) a small governmental jurisdiction that is a government of a city , county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not - for
- profit enterprise which is independently owned and operated and is not dominant in its field. For th e purposes of this anal ys is, EPA considered costs in excess of one percent and three percent of revenues as indications that the final UST regulation may

have a significant impact on a given small entity , and estimates of greater than 20 percent of total s mall firms or 1,000 total small firms affected as indications that a substantial number of small entities may be affected by

the final UST regulation
. **5.4.1 Small Business Screening Analysis**  We estimate that there are approximately 79,7 00 firms operating roughl y 148 ,000 facilities in the U.S. retail motor fuel sales sector. 204 , 205 This analy sis assumes that all retail motor fuels firms operate underground storage tanks (UST sy stems) at all of their facilities. Based on the distribution of firms across revenue categories published b y the 2007 Economic Census, and SBA’s revenue thresholds for NAICS 447110 and 447190, approximately 77,4 00

203 This section focuses on the retail motor fuel sec tor. As discussed in Appendix L, EPA’s screening assessment indicates that the proposed regulation wo uld not have a significant impact on a substantial number of small entities (SISNOSE) across all affected sectors. Because the cost per tank associated with the final UST regulation ($232, in 2012 dollars) is lower than that associated with the proposed regulation ($309, in 2008 dollars), this conclusion also applies to the final UST regulation. However, because 80 percent of all UST systems are in the retai l motor fuel sector, we refined the screening assessment to further examine the potential impacts of the final UST regulation on this sector.

204 There was a significant discrepancy between the number of establishments reported by the 2007 Economic Census by the U.S. Census Bureau and the 2008 station count published by National Petroleum News. The Census reported 118,756 stations operating in any capacity, while NPN counted 161,768 stations. EPA contacted the Census Bureau, which offered three possible reaso ns for this discrepancy. First, grocery stores with gas stations and wholesale truck stops with gas stations may be categorized under grocery stores or w holesale retail instead of gas stations. Second, the count reported by the Census excludes non
- employer establishments (10,131), which are family
- owned and only employ family members. Third, for those establishments that do not report back to the Census regularly, the Bureau is not likely to record changes in establishments that have happened at the locatio n (personal communication with the Office of Underground Storage Tanks, November 3, 2010). NPN likely provides a more accurate reflection of the number of stations because it is an industry publication specific to the petroleum sector. This rationale has b een carried forward to employ the 2013 station count published by NPN.

205 NAICS code 447 is comprised of 447110 (Gasoline stations with convenience stores) and 447190 (Other gasoline stations). To reconcile differing estimates of the number of retail motor fuel facilities (roughly 148,000 estimated by NACS in 2012 and roughly 119,000 estimated by the Census, excluding roughly 12,000 facilities reported as not operating for the full year), a 1.38 adjustment factor was applied to the Census data to inflate the num

ber of retail motor fuel facilities to 148,000, distributed proportionately across revenue ranges. 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 79,700 firms and 455,000 tanks in the retail motor fuel sector.5
- 23

(97 percent) of these firms meet SBA’s definition of a small entity
. 206 Approximately 4, 781 of these firms report revenues betwe en $0 and $250,000 (the smallest revenue range published b y the 2007 Economic Census), with average sales of approximately $144, 000. 207 To determine whether firms reporting revenues within a given revenue range would incur costs exceeding one percent or three percent of total revenue, EPA compares the average total compliance cost per firm with the average revenue reported b y firms in the revenue range. Based on a compliance cost per sy stem of $23 2 (in 2012 dollars), and assuming that firms in the smallest revenue range own one facility with three UST sy stems, we estimate that the 4, 781 small firms in the $0
- $250,000 revenue range would face average total compliance costs of $ 715 per firm (or $ 658 in 2007 dollars). 208 Any firm with annual revenues above $65, 8 00 (in 2007 dollars) (i.e., the revenue threshold at which compliance costs would exceed one percent of the firm’s revenue) is not expected to experience a significant impact. The average revenue for the 4, 781 firms in the $0
- $250,000 revenue bin is $144,000 , suggesting that on average, firms in this category will not experience significant impacts due to estimated compliance costs. However, because the lowest range reported b y the U.S. Census reflects a distribution of firms with revenues between $0 and $250,000, it is possible that some of the 4, 781 firms in this category may be significantly

affected. EPA also considers estimates of greater than 20 percent of total small firms or 1,000 total small firms affected as indications that a substantial number of small entities may

be affected b y the final UST regulation
. While the 4, 781 small firms in the lowest revenue range represent onl y six percent of all potentially affected small firms, EPA conducted a supplemental analy sis that focuses on this group of small firms in an attempt to refine the estimated number of small firms potentially affected by

the final UST regulation
. **5.4.2 Small Business Supplemental Analysis**  The purpose of this supplemental anal ys is is to refine the results of the small business screening anal ys is. The U.S. Census Bureau provided additional data on firms in the lowest revenue bins for NAI CS sectors 4 47110 (gasoline stations with convenience stores) and 447190 (other gasoline stations), identifying the percentage of firms with revenues in three ranges: (1)

206 For 447110, the SBA revenue threshold is $27 million; for 447190, the SBA revenue threshold is $9 million. To ensure that we do not underestimate the number of small entities, we assume that all firms within a revenue bin that contains a specific SBA revenue threshold value are small. For example, if the SBA small business size threshold for a sector is $7 million, we assume that all firms in the revenue range of $5 to $10 milli on are small.

207 For simplicity we identify size categories in this document as described by the 2007 Census (e.g., revenues up to $250,000 in 2007 dollars), and identify compliance costs in 2012 dollars. However, in the actual screening analysis, com

pliance costs have been adjusted from 2012 dollars to 2007 dollars using the GDP implicit deflator. The estimated compliance cost is $232 per system in 2012 dollars, or $214 per tank in 2007 dollars. These costs exclude compliance costs associated with the removal of deferrals for AHFDSs and UST systems with FCTs. AHFDS and FCT systems are primarily owned by the Department of Defense and not by any small entities.

208 Census data on number of facilities per firm indicate that virtually all firms earning le ss than $250,000 per year in 2007 had only one facility. We therefore use “firm” and “facility” interchangeably in this context.5
- 24

$0
- $50,000; (2) $50,000
- $150,000; and (3) $150,000
- $250,000. 209 Based on this information, we es timate the number of firms in the retail motor fuel sales sector (i.e., NAICS 447) for these three revenue groups at approximately 320 , 2,000, and 2 ,5 00, respectivel y and use these data to refine our estimate of the number of significantl y affected facilities. 210 , 211 Given compliance costs of $658 per firm ($715 in 2012 dollars), any firm making less than $65,8 00 and $ 22,0 00 would be considered significantly affected at the one percent and three percent revenue thresholds, respectivel y. Under these assumptions , EPA estimates that 634 firms would be affected at the one percent threshold, and no firms would be affected at the three percent threshold. 212 The number of firms that would be significantly affected at the one percent threshold under these assumptions do e s not exceed the one thousand
- firm substantial effect benchmark. Furthermore, this conclusion rests on the assumption that even these small firms operate the industry

average of three tank s ys tems. **5.4.3 Impacts to Small Governments**  The 1992 Local Government Economic Impact Analysis provides the best readil yavailable data on the number of governments owning UST s ys tems, total UST sy stems owned b y governments, average UST sy stems per government, and UST sy stems per owning government. The data include size and revenue for 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 s mall. The 1992 anal ys is defines a “very large” government as one that serves over 50,000 people; therefore, all other entities are considered to be small governmental jurisdictions according to the RFA/SBREFA definition. Using the data from the 1992 anal ys is, we estimate the number of

209 The information provided by the U.S. Census Bureau is considered an “unpublished data request.” As such, the Census Bureau included a letter noting that “these are not ‘official data’ from the Census Bureau, since they do not meet the Census Bureau’s quality standards. These data should be used with extreme caution, realizing the severe quality limitations that may exist.” Howev er, absent another source of information, we use this as the best data available. (This information was provided in January 2010 and relates to the 2002 Economic Census data. We use the 2002 distribution within this revenue range as a proxy for the 2007 Ec onomic Census data.)

210 The analysis interpolates between the lower and upper bounds of each range and assumes a uniform distribution of facilities within each range. The lowest revenue interval is bounded at $39,600, which EPA obtains from estimating the l inear trend between the zero and $250,000 in revenues. The implicit assumption is that no facilities earn less than that level of revenue

211 Although the U.S. Census Bureau reports several hundred facilities with annual revenues less than $100,000, market economics suggest that it would be difficult for a firm that relies solely on gasoline sales to be viable if earning less than $100,000 in annual revenues. Assuming $2 per gallon in sales, a facility earning $100,000 wo uld sell less than 4,200 gallons of g asoline per month, compared with the monthly industry average throughput of approximately 130,000 gallons. Based on information from a mid
- size retail fuel marketer, EPA believes that a facility requires a minimum throughput of approximately 30,000 gallons per month to remain economically viable. In addition, a facility would need $108,000 to generate enough gross profit to cover the direct cost of the wages of one full
- time employee at minimum wage ($15,080 at $7.25 per hour and 2,080 hours, before accounting for em ployment taxes). This does not consider other costs, such as electricity, property taxes, or franchise fees. 212 EPA estimates a total of approximately 104,000 small firms with USTs across all affected sectors; 634 is 0.6 percent of these. In NAICS 447, the 634 firms represent 0.8 percent.5
- 25

small governments that own UST sy stems based on the total universe of UST sy stems today . See Appendix Lfor additional detail. EPA assumes that local governments collectivel y own four percent of active tanks. This equates to 2 3, 119 tanks, based on the fiscal year 201 3 universe of 577 , 981 tanks. 213 These 23, 119 tanks are distributed among all local governments, based upon the percentage of tanks owned in 1992 by local governments in each size category (the average number of tanks owned by a government varies with the size of the government from one tank for smal l governments to 10 or more tanks for the largest governments). EPA then calculates, using the 1992 data on government ownership of UST sy stems, the average compliance cost per government entity . This is done by multiplying the cost per tank by the number of UST s ys tems per government b y size category . The average annual revenue for each size of general purpose government is calculated using 2007 Census of Governments Data and weighted
- average contributions that depend on ty pe of entity

(i.e., towns, munic ipalities, and counties). EPA extrapolates Census data on revenues for 4,128 townships to the 16,519 townships in the country . These weighted averages are combined to obtain annual revenues in 2007 dollars for general purpose governments, then inflated to 2012 dollars. Detailed information at the special district level is not available for later ye ars, so budget expenditures from the 1992 anal ys is were inflated into 2012 dollars. 214 To calculate how many s mall governments face significant compliance costs ex ceeding one or three percent of their revenues, we compared the average compliance cost per government with the average annual revenues to determine how many exceed either threshold. At a cost of $23 2 (2012 dollars) per UST sy stem, no small governments are affected under either the one percent or three percent revenue threshold (see **Exhibit 5 -**  **3** ). Correspondingl y, EPA does not find that the final UST regulation has any significant impact on a substantial number of small governments.

213 We adjusted the estimates of local government UST systems from the 1992 Local Government Economic Impact Analysis using the 2007 Census of Governments. See: ICF. "Economic Impact Analysis of Additional Mechanism s for Local Government Entities to Demonstrate Financial Responsibility for Underground Storage Tanks." December 1992. Exhibit 3
- 1. Consistent with this analysis, the number of government UST systems is assumed to be one percent of all 2013 UST systems for state and federal governments and four percent of all 2013 UST systems for local governments.

214 Ty pically, a RFA/SBREFA screening assessment uses revenues to assess economic impact measures for small governments. In the absence of detailed 2007 data, we u se 1992 budget expenditures as a proxy for revenues.5
- 26 **Exhibit 5 -**  **3 Complian**  **ce Costs To Systems Owned By Governm ents**  **Type of Gov’t**  **Size of**

**Gov’tb UST** 

**System s Per**  **Ow ning**  **Gov’tc Number of** 

**Gov’ts Ow**  **ning Tanksd**  **2007 Est.**

**Number of Gov’ts e**  **Average**

**Annual Revenue**  **($2007) f Average** 

**Cost Per Gov’t**  **($2007) g Gov’ts** 

**Exceeding 1%**  **of Revenue**  **Gov’ts**

**Exceeding 3%**  **of Revenue** 
**General Purpose**  **a** Very Large 10.2 505 1,463 $363,822,312 $2, 182 0 0

Large 2.5 1,4 29 4,044 $41,098,521 $ 535 0 0 Medium 1.4 1,3 65 7,832 $10,029,870 $ 300 0 0 Small 1.1 990 25,706 $2,045,340 $ 235 0 0 Subtotal 2.7 4, 289 39,044 **Special Purpose**  Very Large 3.7 3 17 970 $496,958,943 $ 792 0 0

Large 3.6 1, 798 5,546 $60,843,018 $ 770 0 0 Medium 1.4 2, 503 14,127 $2,918,747 $3 00 0 0 Small 1.0 24 4 29,789 $147,494 $21 4 0 0 Subtotal 2.4 4, 863 50,432 0 0 **Overall** Total 2.5 9, 152 89,476 0 0 **a** General Purpose governments include counties, municipalities and townships. Special Purpose governments include public school sy stems and special districts. **b** Very large governments are considered to serve more than 50,000 people. Large governments are considered to be those that serve between 10,000 and 50,000 people, medium governments as 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, all sizes of governments except for “very large” are considered to be small. **c** From 1992 Local Government Impac t Analysis data. **d** Calculated as number of tanks (adjusted 1992 distribution in each size category to reflect FY 201 3 tank numbers) divided by UST sy stems per owning government (c). **e** General purpose and Special Purpose total number of entities from 2007 Census of Governments, size distribution extrapolated from 1992 Local Government Impact Analysis data. **f** General purpose estimates from 2007 Census of Governments; Special Purpose estimates inflated from 1992 Local Government Impact Analysis data. **g** Calculated as number of systems per government (c) * estimated cost per tank ($21 5 in $2007 or $23 2 in $2012). **5.5 Screening Analysis to Inform Impacts on Minority and Low**  **- Income**  **Populations** Executive Order 12898 , Federal Actions to Address Environmental Justice in Minority Populations and Low
-Income Populations (59 FR 7629, Feb ruary 16, 1994) directs federal agencies, to the greatest extent practicable and permitted by law, to identify

and address, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low
- income populations in the United States. To inform us about the socio economic characteristics of communities potentially affected by the regulation, EPA conducted a screening analysis in 2010 to examine whether a statistically significant disparity

exists between socioeconomic characteristics of populations located near UST facilities and those that are not. 215 The results indicate that minority and low
- income populations are slightl y more likely to be located near UST facilities. An environmental justice anal ys is would then require an assessment of whether there would be disp roportionate and

215 Note that the affected populations identified in the screening analysis summarized here are simply defined by specific demographics surrounding UST locations. These affected populations are not necess arily equivalent to communities that others have specifically identified as “environmental justice communities.”5
- 27

adverse impacts on these populations. However, because all regulatory options considered in this regulation would increase regulatory stringency

and reduce the number and size of releases, EPA does not anticipate that the final UST regulation will have any disproportionately high and adverse human health or environmental e ffects on these minority or low
- income communities, or on any community . While resource constraints make it impractical to update this analysis with newer location data, i t is unlikely that marginal changes in sample facility locations would affect the results of the analy sis. **5.5.1 Risk Assessment Population Analysis**  To characterize the extent of human health risk reductions anticipated under the final UST regulation , EPA conducted a screening
- level anal ys is of the likely impact of the regulation on benzene
- related cancer incidence. 216 This anal ys is used location data for nearly 60,000 U.S. gas stations with UST s ystems using an ESRI Business Analyst database, and examined populations within a buffer distance of 1,000 feet of facilities with UST sy stems. The ESRIgas station location data are supplemented with 1,600 UST systems in Indian country , based on location information compiled from EPA regional Indian country databases . After elimination of duplicates, the data set contains 59,945 UST facilities (including 727 in Indian country) (see **Exhibit 5 -**  **4** ). The total data set represents over 25 percent of the roughl y 200,000 active facilities with UST sy stems. 217 To estimate populations near sample facilities, the anal ys is uses a “s ynthetic population” dataset developed b y the Modeling of Infection Diseases Agents Study (MIDAS) to provide population estimates at a finer spatial resolution than Census blocks, while maintaining the accuracy of aggregate demographic data at the 2000 Census block group level. For more detail on this method, see Appendix M. The modeled fate and transport of pollutants under a range of scenarios indicates that the contamination from UST releases do not ty pically exceed 1,000 feet. 218 The risk assessment considered population density within 1,000 feet of each UST, and incorporated estimates of the use of groundwater for drinking and bathing, along with ty pical exposure scenarios, to characterize the change in population risk likely to be associated with the reduction of 2,821 releases and groundwater incidents that were estimated in 2010 (i.e., the total estimated number of avoided releases and groundwater incidents resulting from the final US T regulation). The risk assessment concluded that the final UST regulation will result in a very small reduction in

216 RTI International. “Risk Analysis to Support Potential Revisions to Underground Storage Tank (UST) Regulations.” December 22, 2010.

217 ESRI. “2009 Methodology Statement: ESRI Data

—Business Locations and Business Summary.” ESRI, Redlands, CA. Accessed at: http://www.esri.com/library/whitepapers/pdfs/infousa
-business
- database.pdf. ESRI data are derived from an infoUSA database. The approach for c omp iling business data for this database is documented on the infoUSA website (http://www.infousa.com), and includes systematic compilation of public record, phone books, business directories, and includes frequent review for new, updated, and relocated bu sinesses. While this methodology does not capture all locations, it is not differentially focused on any specific region or information source, and therefore likely represents a reasonable spatial distribution of facilities.

218 RTI International. “Risk Anal ysis to Support Potential Revisions to Underground Storage Tank (UST) Regulations.” December 22, 2010.5
- 28

population risk related to cancer from benzene exposure, based on the estimated number and volume of avoided releases and groundwater incide nts. **Exhibit 5 -**  **4 UST Location Data Used In Analysis. (See Appendix M for details on data sources.)** 5
- 29

**5.5.2 Demographic Analysis**  The demographic anal ys is expands on the population data near the 59,945 gas stations in the risk assessment b y characterizing demographic features of populations at each site and comparing these populations to larger (county
- level) reference populations. 219 Specificall y, the anal ys is examines the following demographic variables: percent in poverty, percent minority, and, as a verification step, percent white alone (the percentage of the population that specified their race as “white” and did not specify “Hispanic”). The anal ys is also identifies percent under five years old, percent under 18 years old to support the an al ys is required under Executive Order 13045, “Protection of Children from Environmental Health Risks and Safety Risks” (see section 5.6 below). The anal ys is considers the significance of the “difference in means” and “difference in median” values for each census parameter and each community . That is, the anal ys is identifies the differences between mean and median concentrations of each demographic group for the affected and reference populations at each of the 59,945 sites, and examines whether the differen ces identified across all sites are statistically different from what would be expected in a random distribution. 220 The anal ys is considers the differences in demographics in two ways: unweighted (each site is given equal weight) and population weighted (res ults are weighted by affected persons, giving sites with larger populations more weight). A statistically significant positive difference indicates a greater percentage of target demographic in the affected population than in the larger reference populatio n. A statistically significant negative difference indicates a smaller percentage of the target demographic in the affected population. **Exhibit 5 -**  **5** provides the unweighted results of the anal ys is and generally finds that minority

and low
- income demographic s constitute a slightly larger proportion of the population surrounding UST facilities. For example, poor populations account for 13.3 percent of the population near an UST, compared with 12.2 percent of the reference (county) population. As **Exhibit 5 -**  **6** sh ows, although the difference is small, it is also highl y statistically significant (with a p
- value below .001), which suggests that the difference between the values is not a random occurrence. **Exhibits 5 -**  **7 and 5 -**  **8** summarize the results of the population
- w eighted anal ys is, and generall y find slightly larger (but still small) effects.

219 County
- level statistics provide a useful comparative measure for the populations at the local facility level. Given that the area of interest is small (i.e., 1000 feet of a facility), the county
- level provides an appropriate scale for comparison.

220 See Appendix M for the complete demographic screening analysis.5
- 30 **Exhibit 5 -**  **5 Summary Results For Census Parameters** 

**– Unweighted** 

**Census Param**  **eter Characteristics of** 

**Affected Population (1,000**  **ft Buffer around UST Facility)**  **Characteristics o f**  **Reference Population**  **(Counties where UST Facilities are**  **Located) Difference between Affected Population**  **and Reference Population**

**Me an**  **Median Me**  **an Median**  **Me an**  **Median 95% Confidence**  **Interval of Mean Difference**  **Lower Bound**  **Upper**

**Bound** Percent White Alone 70.3 81.3 70.8 74.8
- 0.44 1.29
- 0.61
- 0.27 Percent Under Age 5 6.7 6.5 6.7 6.7
- 0.05
- 0.12
- 0.068
- 0.032 Percent Under Age 18 24.7 24.9 25.6 25.5
- 0.84
- 0.54
- 0.99
- 0.68 Percent in Poverty 13.3 10.3 12.2 11.5 1.1
- 0.64 0.99 1.13 Percent Minority 24.0 14.6 23.8 20.9 0.21
- 1.48 0.06 0.36 Note: Difference summary statistics (mean and median) were calculated from the distribution of difference values (i.e., one result per facil ity, yielding a distribution of about 60,000 results). Mean values reflect the entire distribution, whereas the median values are based only on the 50 th percentile result. For this reason, the mean difference results could also be calculated simply by subtracting the reference community mean from the potentially affected community mean (e.g., for mean percent poverty 13.3

– 12.2 = 1.1). In contrast, the median difference values do not necessarily match values derived by subtracting the median values from th e underlying distributions (e.g., for median percent poverty 10.3

– 11.5 ≠

- .64). Although the primary results of the analysis are based on mean values, median results are provided for completeness and as an alternative indicator of the distributions’ central tendency.5
- 31 **Exhibit 5 -**  **6 Standard Error, T Test, And Risk Ratio Results** 

**– Unw**  **eighted**

**Census Param eter**  **Characteristics of Affected**  **Population (1,000 ft**  **Buffer around UST Facility)**  **Characteristics**

**of Reference Population**  **(Counties where UST**  **Facilities are**  **Located) Difference between Affected Population and**  **Reference Population SE of Mean**  **SE of Mean SE of**  **Me an**  **T Statistic**  **p**  

** value** **Ratio SE of** 

**Ratio** Percent White Alone 0.120 0.088 0.085
- 5.23 <0.001 0.99 0.001 Percent Under Age 5 0.010 0.004 0.009
- 5.18 <0.001 0.99 0.001 Percent Under Age 18 0.104 0.071 0.079
- 10.59 <0.001 0.97 0.001 Percent in Poverty 0.045 0.023 0.038 27.66 <0.001 1.09 0.003 Percent Minority 0.104 0.071 0.079 2.71 0.0067 1.01 0.003 Note: There are >56,033 degrees of freedom for this test (i.e. number of facilities). Note that the total number of facilities in the dataset (59,945) differs from the degrees of freedom, because a fraction of facilities have no people living within the 1000 foot buffer.5
- 32 **Exhibit 5 -**  **7 Summary**  **Results For Census Parameters**

**– Weighted By Population** 

**Census Param**  **eter Characteristics of** 

**Affected Population (1,000 ft Buffer**  **around UST Facility)**  **Characteristics of**

**Reference Population (Counties where UST**  **Facilities are Located) Difference between Aff**  **ected Population and Reference Population** 

**Me an**  **Median Me**  **an Median**  **Me an**  **Median 95% Confidence**  **Interval of Mean Difference**  **Lower Bound**  **Upper**

**Bound** Percent White Alone 53.88 59.63 58.79 57.70
- 4.61
- 2.55
- 5.0
- 4.2 Percent Under Age 5 6.91 6.78 6.80 6.85 0.11 0.04 0.073 0.14 Percent Under Age 18 24.74 24.91 25.36 25.53
- 0.62
- 1.57
- 0.73
- 0.50 Percent in Poverty 16.22 13.34 13.33 12.83 2.89 0.96 2.7 3.1 Percent Minority 36.61 29.54 33.16 31.92 3.45 0.58 3.1 3.8 Note: Difference summary statistics (mean and median) were calculated from the distribution of difference values (i.e., one result per faci lity, yielding a distribution of about 60,000 results). Mean values reflect the entire distribution, whereas the median values are based only on the 50 th percentile result. For this reason, the mean difference results could also be calculated simply by sub tracting the reference community mean from the potentially affected community mean (e.g., for mean percent poverty 16.2

– 13.3 = 2.9). In contrast, the median difference values do not necessarily match values derived by subtracting the median values from the underlying distributions (e.g., for median percent poverty 13.3

– 12.8 ≠
- 0.96). Although the primary results of the analysis are based on mean values, median results are provided for completeness and as an alternative indicator of the distributions’ central tendency.5
- 33 **Exhibit 5 -**  **8 Standard Error, T Test, And Risk Ratio Results** 

**– Weighted By Population** 

**Census Param eter**  **Characteristics of Affected**  **Population (1,000 ft**  **Buffer around UST Facility)**  **Characteristics**

**of Reference Population**  **(Counties where**  **UST Facilities are**  **Located) Difference between Affected Population and**  **Reference Population SE of Mean**  **SE of Mean SE of**  **Me an**  **T**

**Statistic p**  ****

**value Ratio**  **SE of**

**Ratio** Percent White Alone 0.288 0.193 0.205
- 22.48 <0.001 0.92 0.0035 Percent Under Age 5 0.020 0.008 0.017 6.24 <0.001 1.02 0.0026 Percent Under Age 18 0.065 0.033 0.058
- 10.62 <0.001 0.98 0.0023 Percent in Poverty 0.108 0.063 0.085 34.02 <0.001 1.22 0.0064 Percent Minority 0.255 0.165 0.191 18.05 <0.001 1.10 0.0058 Note: There are >56,033 degrees of freedom for this test (i.e. number of facilities). Note that the total number of facilities in the dataset (59,945) differs from the degrees of freedom, because a fraction of facilities have no people living within the 1000 foot buffer. Overall, the demographic anal ys is identifies a small but statistically significant difference between minority and low
- income populations near UST s ys tems and in the reference communities. Minority

and poverty- level demographics are present at greater perc entages in the vicinity of UST facilities. In contrast, a small negative relationship suggests that “white alone” populations are less likely to be near UST s ys tems, i.e., minority populations are marginally more likely

to reside near UST facilities. Moreo ver, while the unweighted analy sis does not find clear patterns related to children under 18 and children under five, the population
- weighted anal ys is finds that the distribution of all target demographics around UST facilities reflects small but significant differences from county- level populations. The population
- weighted results show greater differences, suggesting that facilities in higher population areas tend to have more pronounced disparities between local, potentially affected communities and reference (county
level) communities. These differences, while small, are statistically significant with p
- values less than 0.01 in all cases. This result implies that any risk reductions associated with the final UST regulation will occur in the context of a b aseline condition in which minority and low
- income populations are disproportionately located near USTs. **5.5.3 Summary and Limitations of the Analysis**  This section summarizes a screening assessment and does not present a complete environmental justice an aly sis. The assessment is limited by the fact that demographic data from the U.S. Census are at the block group level, and are not as precise as the spatial distribution of population. As a result, if the demographic distribution of populations within bloc k groups is uneven, the block group
- level data may not accurately

characterize populations living nearest to UST locations. The large sample of 59,945 sites, however, reduces the potential that this uncertainty could skew the results of the anal ys is (relative to a smaller sample of sites)
.5
- 34

Given the results of the screening anal ys is, because all regulatory options considered in this regulation would increase regulatory stringency

and reduce the number and size of releases, EPA does not anticipate the final UST regulation to have any disproportionately

high and adverse human health or environmental e ffects on these minority or low
- income communities, or on any community . Since the final UST regulation is not anticipated to create any new adverse human health or environmental impacts, EPA did not conduct a complete environmental justice anal ys is. **5.6 Children’s Health Protection Analysis**  Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks (62 FR 19885, April 23, 1997), applies to any regulation that: (1) is determined to be “economically

significant” as defined under E.O. 12866, and (2) concerns an environmental health or safety

risk that EPA has reason to beli eve may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or safety effects of the planned regulation on children, and explain why the planned regulation is preferabl e to other potentially effective and reasonably feasible alternatives considered b y the Agency. This action may

be subject to Executive Order 13045 because it is economically significant as defined in Executive Order 12866. EPA’s screening
- level risk asse ssment examines potential impacts to groundwater and subsequent chemical transport, exposure and risk. While the risk assessment did not specifically measure exposure to children, the general exposure scenarios reflect four exposure pathway s that have the most significant potential for human health impacts. These are:

 ingestion of chemicals in groundwater that have migrated from the source area to residential drinking water wells

 inhalation of volatile chemicals when showering with contaminated groundwater

 dermal contact with chemicals while bathing or showering with contaminated groundwater

 inhalation of vapors that may migrate upward from contaminated groundwater into overlying buildings Adults and children can potentially be exposed through all four expo sure pathway s considered. For adults, inhalation of vapors while showering is the most significant adult exposure pathway ; for children, ingestion is the most significant pathway , because children are assumed to take baths and are therefore not exposed through shower vapor inhalation. As a result of the longer exposure from showering, adults may be the more sensitive receptor for cancer effects compared to children, particularly

those under five who are assumed to take more baths and fewer showers. 221

221 U.S. Department of Health and Human Services. Public Health Service. Agency for Toxic Substances and Disease Registry. “Toxicological Profile for Polycyclic Aromatic Hydrocarbons.” August 1995.5
- 35

While the screening level risk assessment is limited in that it only examines benzene impacts, the final UST regulation would likel y reduce other contaminant exposures to children in a similar pattern, and would not create significant adverse impacts on children’ s health. The screening
- level demographic analy sis described in section 5.5 finds a statistically significant result that children under the age of 18 and children under the age of five are slightly less likely to be found in the vicinity of UST facilities . This suggests that the impacts of the final UST regulation will not have a disproportionate impact on children’s health. Moreover, because all regulatory

options would increase regulatory stringency

and reduce the number and size of releases, EPA does no t expect the final UST regulation to have any disproportionate adverse impact on children.6
- 1



### Chapter **6 .**  **Other Statutory and Executive Order Analyses**  As required b y applicable statutes and executive orders, this chapter summarizes our anal ys is of equity

considerations and other regulatory concerns associated with the final UST regulation . This chapter assesses potential impacts, with respect to the foll owing issues:

 **Regulatory planning and review** : requires examination and quantification of costs and benefits of regulating with and without the regulation.

 **Unfunded mandates:** examines the implications of the regulation with respect to unfunded mandates.

 **Federalism:** considers potential issues related to state sovereignty.
 **Tribal governments:** extends the discussion of federal unfunded mandates to include impacts on tribal governments and their communities.

 **Joint impacts of rules:** discusses how other regu lations, together with the final UST regulation , will likely affect the universe of regulated facilities. **6.1 Regulatory Planning and Review**  Under Executive Order 12866 (58 FR 51735, October 4, 1993), EPA, in conjunction with the Office of Management and Budget’s (OMB’s) Office of Information and Regulatory Affairs (OIRA), must determine whether a regulatory action is “significant” and therefore subject to OMB review and the full requirements of the Executive Order. The Order defines “significant regulatory action” as one that is likely to result in a regulation that may : (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way

the economy , a sector of the economy , productivity , competition, jobs, the environment, public health or safety, or State, local, or tribal governments or co mmunities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned b y another agency; (3) Materiall y alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President’s priorities, or the principles set forth in the Executive Order. Pursuant to the terms of Executive Order 12866, the Agency has determined that this regulation is an economically significant regulatory

action because it may

have an annual effect on the economy of $100 million or more, as defined under part 3(f)(1) of the Order. Findings of6
- 2

the regulatory

cost anal ysis (Chapter 3) indicate that the regulation will have aggregate annual compliance costs of approximately $160 million under the Selected Option, $290 million under Alternative 1, and $70 million under Alternative 2. Separatel y, this anal ys is concludes that the regulation is expected to have cost savings related to avoided costs of $1 2 0 million to $ 53 0 million under the Selected Option, $ 21 0 million to $6 7 0 million under Alternative 1, and $4 5 million to $ 42 0 million under Alternative 2. These cost savings effectivel y offs et the entire cost of the regulation, resulting in a net beneficial impact on the economy. However, for the purpose of addressing Executive Order 12866, these cost savings are considered to be separate impacts rather than direct reductions in the total cos t of the regulation. **6.2 Unfunded Mandates Analysis**  Signed into law on March 22, 1995, the Unfunded Mandates Reform Act (UMRA) calls on all federal agencies to provide a statement supporting the need to issue any regulation containing an unfunded federal mandate and describing prior consultation with representatives of affected state, local, and tribal governments. The final UST regulation is subject to the requirements of sections 202 and 205 of UMRA. In general, a regulation is subject to the requirements of these sections if it contains “Federal mandates” that may result in the expenditure by State, local, and tribal governments, in the aggregate, or b y the private sector, of $ 100 million or more in any one year. Because roughly 95 percent of conventional UST sy stems are privately owned, EPA estimates that the regulation will have approximately $ 1 3 0 million of costs to the private sector under the Selected Option, $ 270 million under Alternative 1, and $ 6 7 million under Alternative 2 in expenditures for the private sector and is thus subject to the following requirements of these sections. 222

 An identification of the provision of Federal law under which the regulation is being promulgated.

 A qualitative and quantitative assessment of the anticipated costs and benefits of the Federal mandate;
o Costs and benefits to State, local, and tribal governments and the private sector o Effect on health, s afety , and the natural environment o Analy sis of extent to which such costs may be paid with Federal financial assistance (or otherwise paid for b y the Federal government) o Analy sis of the extent to which there are available Federal resources to

222 As described in Exhibit 2
- 3, the number of UST systems owne d by state and federal governments is assumed to be two percent, and the number of UST systems owned by local governments is assumed to be four percent. Costs c alculated as total compliance costs for conventional UST systems, and EGTs (including costs to r ead regulations), documented in Exhibit 3
- 8, net of local and state government compliance costs identified in Exhibit 6
- 2 below . As commercial airports are not typically privately
- owned, we do not include them in private sector costs. However, commercial airports may be run by municipal or state
- level organizations that are separately funded and/or may reflect public/private partnerships. Note that the costs to commercial airports are small enough ($1.2 million per year) that including them in the private s ector does not change the total rounded private cost figures shown above.6
- 3 carry out thi s mandate

 Estimates of future compliance costs with the mandate.

 Estimates of disproportionate budgetary effects on any

typ e of government or segment of the private sector.

 Estimates of the effect on the national economy (if relevant and possible). **Exhibit 6 -**  **1** provides references for the anal ys es that EPA has performed that respond to these requirements. Exhibit 6
- 1 **Location Of Analyses Responding To UMRA Requirements Requirement**  **Location In This Document**  Identification of provision of f ederal law under which rule is being promulgated Chapter 1 Assessment of costs and benefits to s tate, local, and tribal governments and the private sector Chapters 3 and 4 Assessment of the effect on health, safety, and the natural environment Chapter 4 Assessm ent of the extent to which such costs may be paid with f ederal financial assistance Chapter 3; no Federal assistance is anticipated Assessment of the extent to which there are available f ederal resources to carry out this mandate Chapter 3; no Federal resources are anticipated Estimates of future compliance costs Chapter 3 Estimates of disproportionate budgetary effects on any type of government or private sector segment Chapter 5 Estimates of the effect on the national economy Chapters 3 and 5 **6.3 Federalism Analysis**  Executive Order 13132, Federalism (64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure “meaningful and timel y input b y state and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that have “substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government.” EPA typically considers a policy to have federalism implications if it results in the expenditure by

State and/or local governments in the aggregate of $25 million or m ore in any one year. Under Executive Order 13132, EPA may not issue a regulation that has federalism implications, that imposes substantial direct compliance costs, and that is not required b y statute, unless the Federal government provides the funds neces sary to pay the direct compliance costs incurred b y State and local governments, or EPA consults with State and local officials earl y in the process of developing the regulation.6
- 4

**Exhibit 6 -**  **2** summarizes annual government costs. Direct compliance costs for l ocal and State governments reflect average costs per UST system; the analy sis assumes that st ates collectively

own one percent of total UST sy stems (5, 780 ), and local governments own 23, 119 UST sy stems (four percent). In addition, under the final UST regulation , each state will incur labor costs for reading the new regulations, applying for State Program Approval (SPA), and processing one
- time notification of existence for AHFDSs, and FCTs. States that do not already require notification of UST ownership change will also incur costs to process and review all ownership change notifications. (See discussion in Chapter 3, Section 3.6.) In this scenario, total costs to all affected state and local governments (including direct compliance costs, notification co sts, and state program costs) are appro ximately $6.8 millio n under the Selected Option, $14 million under Alternative 1, and $3.6 million under Alternative 2 in 2012 dollars; this is not considered to be a substantial compliance cost under federalism requirements. 223 Exhibit 6
- 2 **Summary Of Annual State And Local Government Costs** b

**Element Selected Option**  **($ m illions)**  **Alternative 1**

**($ m illions)**  **Alternative 2**

**($ m illions)**  Local Compliance Costs a $5.4 $11 .0 $2.8 State Compliance Costs a $1.3 $2.9 $0.70 State Government Administrative Costs $0.12 $0.12 $0.12 **Total State and Local Governments Costs c**  **$ 6.8**  **$1 4**  **.0 $3.6**  a State and local government compliance costs are included in the total compliance costs presented in Exhibit 3
- 8
. b Cost estimates were derived using a seven percent discount rate. c Total may not sum due to rounding. **6.4 Tribal Governments Analysis**  Executive Order 13175, Consultation and Coordination W ith Indian Tribal Governments (65 FR 67249, November 9, 2000), requires EPA to develop an accountable process to ensure “meaningful and timel y i nput by tribal officials in the development of regulatory policies that have tribal implications.” EPA has concluded that this action will have tribal implications to the extent that tribally
- owned entities with UST systems on Indian country would be affected. However, it will neither impose substantial direct compliance costs on tribal governments, nor preempt Tribal law. The data sources fo r the Indian country anal ys is are the same as those used in the small business anal ys is. Based on a review of information available about the typ es of business entities

223 If all applicable state and local government costs were incurred in the first year, rather than annualized and discounted, state and local governments would incur approximately $3 .8 million in costs under the Selected Option. This includes $0.2 million for states to apply for state program approval and to read the regulations, $0.2 million for states to process one
- time notifications of AHFDSs and FCTs and ownership changes that oc cur in the first year, and $3.6 million for state and local government owners and operators of UST systems to comply with requirements that come into effect in the first year (approximately 80% of which would be for state and local government owners and op erators to read the final UST regulation).6
- 5

in Indian country , it is assumed that UST sy stems in Indian country represent a subset of the rest of the universe and are distributed similarly across the same sectors. 224 The total number of UST sy stems in Indian country is distributed proportionally among the NAICS sectors. The cost per UST sy stem is higher in Indian country , as the universe is smaller, and all UST sy stems are assumed to incur costs associated with all the requirements of the final UST regulation . At a 2012 cost of $734 per UST s ys tem, the total cost for UST sy stems in Indian country is approximately $1.9 million. EPA data indicates that 35 percent of all UST sy stems in Indian country

are tribally
- owned; correspondingly , the total cost to owners and operators of tribally
- owned UST s ys tems is approximately $0.67 million. EPA consulted with tribal officials early in the process of developing this regulation to engage them to have meaningful and timel y input into its development. EPA began its consultation with tribes on possible changes to the UST regulation shortly after the passage of the Energy

Policy Act of 2005 (EPAct). EPAct directed EPA to coordinate with tribes to develop and implement an UST program strategy in Indian country

to supplement the program’s existing approach. EPA and the tribes worked collaboratively to develop this tribal strategy
. EPAct also included key

provisions that apply

to states receiving federal funding but the Act did not specify

Indian country . Nonetheless, EPA’s goal is to implement the objectives of these provisions in Indian country as an important step in achieving more consistent program results in release prevention. Both EPA and tribes recognize the importance of having policies that can help to ensure parity in program implementation between states and in Indian country
. EPA committed to the tribes that we would full y i mplement the new provisions of the EPAct, and the final UST regulation will realize that commitment. In addition to our earl y consultation with the tribes, EPA again reached out to the tribes as we started the official regulatory process and throughout the development of the UST regulation. EPA sent letters to leaders of over 500 tribes , as well as to tribal regulatory staff , inviting their participation in developing the regulation. EPA heard from both tribal officials who work as regulators as well as representatives of owners and operators of UST systems in Indian country . The tribal regulators raised concerns about ensuring parity of environmental protection between states and Indian country
. The changes to the UST regulation under this regulation are needed to ensure parity between sites in states and in Indian country . The final UST regulation will ensure equipment is not just installed but is working properl y and protect s the environment from potential releases. **6. 5**  **Joint Impacts of Rules** Executive Order 12866 requires that the Agency review whether the regulation creates “a serious inconsistency” or otherwise interferes “with an action taken or planned by another agency .” We do not believe that the regulation creates a serious inconsistency or interferes with
224 For more detail, see: Industrial Economics, Inc. "Detailed Assessment of UST Universe by Tank Purpose and Design." Work Assignment 1
- 25, Task 6, March 24, 2009. Note that because tribal ow nership and operation is defined differently than other types of government ownership, no attempts are made to isolate or identify “government” UST systems in Indian country.6
- 6

any other actions planned or undertaken by other agencies. The following are the existing regulations that currently affect UST sy stems:

 **State UST Regulations:** A number of states have existing UST regulation s that are more demanding than existing regulations under 40 CFR Part 280. To the extent that these policies are at least as demanding as the regulations under consideration, the s ys tems in these states may already be in partial or full compliance with por

tions of the regulation. Chapter 2 identifies the number of UST sy stems in states with existing (baseline) regulations; cost estimates in Chapter 3 reflect the state regulatory programs that exist in the baseline.

 **SPCC Regulation:** Currently , a subset of UST s ystems in the universe is regulated b y the Spill Prevention, Control, and Countermeasure regulation (SPCC); these include emergency generator tanks, airport hydrant fuel distribution systems and UST sy stems with field
- constructed tanks. Specifically , the SPCC regulation in 40 CFR Part 112 apply to above
- ground containers and completely

buried tanks that are not otherwise covered by 4 0 CFR Part 280. SPCC regulation do es not specify particular leak detection protocols, but require that plans conform to industry standards, which can often be consistent with the requirements of the regulation. To the extent that the requirements imposed on these UST sy stems via the regulation are more or less stringent than the SPCC regulation currently

governing them, the regulation may cause an increase or a reduction in overall inspection and monitoring requirements (and costs) for these UST sy stems. To account for this, EPA has generated baseline assumptions for these sy stems using information from the Department of Defense (the owner of the majority

of all FCTs and AHFDSs). EGTs are assumed to incur all incremental costs beyond state regulatory baseline costs; to the extent that these sy stems are regulated under SPCC, this may overstate costs.7
- 1



### Chapter **7 .**  **Comparison of Costs, Benefits, and Other Impacts** This chapter compares the costs, cost savings, and benefits of the final UST regulation
. Cost
- benefit anal ys is is a useful tool for economic assessments. It is used to evaluate the economic efficiency

of environmental policies by measuring their costs and benefits, and hence their net impacts on society
. However, adherence to a strict cost
- benefit approach provide s an incomplete assessment of the effects of the final regulation for two reasons , described below. A traditional cost
- benefit comparison weighs society ’s willingness to pay for the benefits of a regulation against the opportunity costs of the regulation. In the case of leaking USTs , though, cleanup of releases is required under RCRA Subtitle I . Therefore , although avoided remediation costs are not a measure of willingness to pay , under the current statutory and regulatory baseline , a sufficient condition for the final UST regulation to improve economic efficiency would be if the expected avoided remediation costs exceed the costs. A s discussed in Chapter 4, avoided costs provide a reasonable measure of one set of positive effects of the final UST regulatio n . Even if avoided remediation costs do not exceed the cost of the regulation , economic efficiency

could be enhanced because this analy sis does not quantify additional social benefit s such as improved water quality . A traditional c ost - benefit comparison also do es not consider important distributional issues (e.g., what particular groups of people bear specific benefits or costs). A key effect of the final UST regulation is to reallocate costs from the public to responsible parties. As we discussed in Chap ter 5, avoided remediation costs could reduce demand on state financial assurance funds by over $1 6 0 million per year. This chapter uses two approaches to assess the effectiveness of the requirements. First, we compare the compliance costs of the final US T regulation with its total monetized avoided costs (section 7.1) . We then consider cost
- effectiveness measures which provide estimates of expenditures per unit reduction of releases achieved by the final UST regulation (section 7.2)
. EPA’s anal ys is shows that the final UST regulation will likely provide a net cost savings to society , but the cost
- benefit and cost
- effectiveness anal ys es presented here provide an incomplete estimate of benefits, because the final UST regulation is expected to provide other benefits that are not expressed in monetary terms. In addition, the avoided remediation costs associated with the regulation represent an equity- enhancing effect because the demand for publicly
- funded remediation is reduced; all else held constant, the inc reased compliance costs will fall on the specific operators who are not currently implementing the practices and technologies identified in the regulation. This may result in some facilities bearing additional costs, but should improve overall equity and e fficiency b y ensuring that operators who are adhering to best practices already (in the baseline) are not at a competitive disadvantage because other operators rel y on the availability of publicly
- funded remediation. OMB Circular A
- 4, numerous statutes, and Executive Orders require EPA to consider not only the costs and benefits of the regulation but also distributional impacts (e.g., impacts on minority and low
- income populations, children’s health, and energy distrib ution) . As such, the final regulatory

decision is a policy

judgment that must take into account a number of factors in addition to the benefits and costs
.7
- 2

In addition, the selection of a discount rate for estimating the present value of future costs and benefits is a complex issue. To reflect a range of possible future costs and benefits, we present two estimates of discounted costs and benefits ( section 7. 3 ) ; one based on a seven percent discount rate, and one based on a three percent discount rate. **7.1 C**  **ost Benefit Comparison** In this section, we compare the total costs of the regulation with its total monetized and non - monetized avoided costs and benefits. **Exhibit 7 -**  **1** summarizes total costs and monetized avoided costs of the final UST regulation . The cost s in the exhibit represent the compliance costs of the final UST regulation , including state government administrative costs. The exhibit also identifies the social benefits of the proposed requirements that are not captured in avoided costs. As discussed in Chapter 4, a number of benefits could not be monetized. These include groundwater protection, mitigation and avoidance of acute events, ecological benefits, and human health risks compared to the baseline in which the releases occur and are remediated
. Finally , EPA did not estimate benefits or avoided costs associated with changes in regulation at facilities with FCTs or AHFDSs. **Exhibit 7 -**  **1** demonstrates that the final UST regulation will likely avoid more costs than it creates, generating cost savings to society. EPA estimates that the Selected Option could generate $1 6 0 million per year in savings to society (reflecting the average of four estimates: $ 39 million in net costs, and $ 120 million, $1 8 0 million, and $3 7 0 million in savings ). Alternative s 1 and 2 could also have a net benefit of $1 6 0 million (reflecting the average of four estimates for each alternative: $81 million in net costs and $ 140 million, $ 22 0 million, and $ 38 0 million in savings for Alternative 1; or $2 5 million in net costs and $ 1 5 0 million, $1 5 0 million, and $3 5 0 million in savings for Alternative 2 ). These estimates only include cost savings for conventional UST sy stems and EGTs.7
- 3 Exhibit 7
- 1 **Comparison Of Annual Compliance Costs And Cost Savings** f, d **Selected Option (2012$**  **millions) Alternative 1**  **(2012$ millions) Alternative 2** 

**(2012$ millions) Annual Avoided Costs**  **a** Releases and groundwater incidents: average value (range of all values in italics) $ 30 0 ($110

- $51 0) $4 4 0

($20 0
- $65 0) $2 2 0

($4 4
- $ 41 0) Vapor intrusion: average value (range of all values in italics) $4. 5 ($1. 7
- $7. 9

) $5. 9

($2. 5
- $ 9.1

) $ 3.1

($0.5 6
- $ 6.0

) Product loss (range of all values in italics) $ 3.1 ($0. 86
- $6. 5

) $3. 8

($0.78
- $7. 6

) $2. 4

($0.3 6
- $5.2

) **Annual Compliance Costs** Conventional UST systems b $130 $280 $63 Emergency generator tanks (EGTs) $2.0 $2.3 $2.0 Airport hydrant fuels distribution systems (AHFDSs) $10 < $0.1 N/A UST systems with field
- constructed tanks (FCTs) $11 < $0.1 N/A Cost to owners/operators to read regulation $5.5 $5.5 $5.5 State government administrative costs c $0.1 2 $0.12 $0.12 **Total Annual Avoided Costs** (range of all values in italics) **$ 31**  **0** ($1 2 0
- $ 53 0) **$4 5**  **0**

($21 0
- $ 67 0) **$2 3**  **0**

($4 5
- $ 42 0) **Total Annual Compliance Costs d**  **$160 $290**  **$7 0**  **Net Cost (Savings) to Society**  **d,g [Total Com** **pliance Costs less**  **Total Avoided Costs]** (range of all values in italics) **($1 6**  **0)** $ 39
- ($3 7 0) **($1 6**  **0)**

$ 81
- ($3 8 0) **($1 6**  **0)**

$25
- ($3 5 0) **Non -**  **Monetized Benefits e**  Groundwater protected (billion gallons) 1 3 0 ( 50
- 2 4 0) 1 7 0

( 74
- 2 7 0) 92

(1 7
- 1 8 0) Ac ute events and large
- scale releases (e.g., releases from AHFDSs and FCTs) Not estimated Not estimated Not estimated Ecological benefits Not estimated Not estimated Not estimated Human health risks Not estimated Not estimated Not estimated a Avoided costs are estimated for conventional UST systems and emergency generator tanks (EGTs) only. Avoided remediation costs from releases and groundwater incidents are the costs related to site remediation. Avoided vapor intrusion costs include addition al avoided costs associated with the remediation of vapor intrusion cases; the RIA does not address human health risk associated with vapor intrusion. Avoided pro duct loss costs are also separate and additive. b Conventional UST systems include all systems that are not AHFDSs, FCTs, or EGTs. c The costs for UST systems directly owned or operated by local, state, and federal government entities are included in the est imates of compliance costs within the other categories. Costs shown here reflect the adminis trative costs for state governments to read the regulation, apply for state program approval, process notifications of ownership changes, and process one
- time notifications of existence for AHFDS and UST systems with FCTs. d Compliance costs include direc t compliance costs and state oversight costs. For this regulatory impact analysis, direct compliance costs and state oversight costs provide a reasonable proxy to assess the final UST regulation ’s social costs. See Chapter 3.1 for further discussion. e Du e to data and resource constraints, EPA is unable to monetize some of the positive impacts of the final UST regulation . Chapter 4 of this document provides a qualitative discussion of these benefits. f Totals may not add up due to rounding. Cost estimates were derived using a seven percent discount rate. g The results show that all but one of the four estimates of cost savings for conventional systems exceed total regulatory cost s (including FCT and AHFDS systems). As explained in Chapter 4 and Appendix H, one of the four experts provided estimates of avoided releases and averted groundwater incidents that do not result in net cost savings to society from the Selected Option. However, this expert also assumed a high level of noncompliance with the final UST regulation that is not consistent with the assumption of 100 percent compliance in the cost estimates. As a result, this low
- end estimate of potential cost savings represents likely understates the cost savings that would be associated with a consistent, 1 00 percent compliance scenario. See Chapter 4 and Appendix H for detailed discussion of how these assumptions affect net benefits of the final UST regulation as calculated using responses from Expert 2.7
- 4

**7.1.1 Net Costs of the Regulation: Potential**  **Underestimates of Cost Savings and Benefits** The results show that three of the four estimates of cost savings for conventional sy stems exceed total regulatory

costs for all sy stems, including both costs to conventional sy stems and costs to FCT and AHFDS systems (for which cost savings were not estimated). As explained in Chapter 4 and Appendix H, one of the four experts provided estimates of avoided releases and averted groundwater incidents that do not result in net cost savings to society from the Selecte d Option. However, this expert also assumed a high level of noncompliance with the final UST regulation that is not consistent with the assumption of 100 percent compliance in the cost estimates. As a result, this low
- end estimate of potential cost savings likel y understates the cost savings that would be associated with a consistent , 100 percent compliance scenario. In addition, this analy sis may understate avoided costs for the following reasons:

 This analy sis does not monetize benefits associated with groundwater protection, mitigation and avoidance of acute events, ecological benefits, human health risks, and avoided property devaluation relative to the baseline
.  This analy sis does not monetize avoided costs associated with FCT and AHFDS sy stems. Compli ance costs for these s ys tems are monetized.

 This analy sis does not quantify avoided remediation costs associated with reductions in release size (i.e., extent), other than the change in incidence of groundwater contamination. The same reductions in release volume that lower the incidence of groundwater contamination would likely also reduce the number of large extent releases of all ty pes and decrease the average size of smaller releases. **7.1.2 Net Costs of the Regulation: Cost Savings to Public and Privat**  **e Entities** While EPA opted to express all cost savings as “benefits to society” in this anal ys is, it is also common practice in RIAs to calculate the costs of a regulation by subtracting cost savings from cost increases to affected entities. 225 Under this regulation, the cost savings of avoided releases would in some cases reduce burden on state funds, but a portion of the remediation costs would also be borne directly by regulated entities. One option for presenting total costs of the regulatio n, therefore, would have been to present the net costs to regulated facilities after accounting for avoided remediation costs. However, b ecause it is impossible to predict which facilities would enjo y cost savings, EPA opted to present industry costs and industry
- related avoided costs separatel y in the main anal ys is. This section considers the net cost impact on facilities when accounting for avoided remediation costs. **Exhibit 7 -**  **2** provides a more detailed breakout of the estimated cost savings

225 The practice of subtracting cost savings from cost increases to estimate the net costs of a regulatio n is consistent with OMB Circular A
- 4. Circular A
- 4 explains: “You should also try to mo netize any cost savings as a result of an alternative and either add it to the benefits or subtract it from the costs of that alternative.” (U.S. Office of Management and Budget. Circular No. A
- 4. September 17, 2003.)7
- 5

for conventi onal s ys tems and EGTs. The exhibit compares cost savings directly to the private
sector compliance costs of the regulation for those sy stems. The exhibit shows that, in general, the net cost of the regulation to private
- sector entities falls well below $1 00 million in the Selected Option and Alternative 2 when avoided costs to the private sector are considered. Onl y under Alternative 1 do net costs to the private sector exceed $100 million under expert estimates. Exhibit 7
- 2 **Summary Of Net Costs To Private Sector for Conventional Systems and EGTs (2012$ m** **illions)** Selected Option Expert 1 Expert 2 Expert 3 Expert 4 Average **Private Sector Com pliance Cost**  **$130 Total Cost Savings**  a **$3 3**  **0 $1**  **2 0**  **$2 7**  **0 $**  **53 0**  **$ 31**  **0** Public Sector Cost Savings b $190 $65 $150 $290 $170 Private Sector Cost Savings $150 $52 $120 $240 $140 **Net Cost to Private Sector [Private Sector Com** **pliance Cost**

**– Private Sector**  **Cost savings] ($17)**  **$77 $6**  **($110) ($11)**  Alternative 1 Expert 1 Expert 2 Expert 3 Expert 4 Average **Private Sector Com** **pliance Cost $280**  **Total Cost Savings** a **$ 50**  **0 $**  **21 0**  **$ 42**  **0 $**  **67 0**  **$ 45**  **0** Public Sector Cost Savings b $290 $120 $240 $370 $250 Private Sector Cost Savings $210 $88 $190 $300 $200 **Net Cost to Private Sector [Private Sector Com** **pliance Cost**

**– Private Sector**  **Cost savings] $67**  **$190 $93**  **($15) $85**  Alternative 2 Expert 1 Expert 2 Expert 3 Expert 4 Average **Private Sector Com pliance Cost**  **$65 Total Cost Savings**  a **$2 2**  **0 $4**  **5 $2**  **2 0**  **$ 42**  **0 $**  **23 0**  Public Sector Cost Savings b $130 $26 $120 $240 $130 Private Sector Cost Savings $92 $19 $99 $190 $99 **Net Cost to Private Sector [Private Sector Com** **pliance Cost**

**– Private Sector**  **Cost savings] ($28)**  **$45 ($34)**  **($120) ($35)**  Notes: a As explained in Chapter 4 and Appendix H, one of the four experts provided estimates of avoided releases and averted groundwa ter incidents that do not result in net cost savings to society from the Selected Option. This expert also assumed a high level of noncompliance with the final UST regulation that is not consistent with cost modeling. See Chapter 4 and Appendix H for detailed discussion of how these assumptions affect net benefits of the final UST regulation as calculated using responses from Expert 2. b Values are estimated in Chapter 5.2.4. To provide a conservative estimate of net costs to the private sector, this table pres ents the lo w deductible scenario results. These values represent potential reductions in public expenditures in states with active state funds. We note that to realize the savings in public expenditures in the near term, state government action would be required to lower petroleum fee s. Alternatively, to the extent that funds are not constrained in their use, a redistribution of funds (e.g., to existing sites awaiting cleanup) could also represent a significant public benefit through more rapid completion of existing sites.7
- 6

**7.1.3 Alternative Baseline: Potential Decreases in Future Cost Savings**  In addition to the primary analysi s presented above, we also consider the comparison of costs and benefits of the final UST regulation in the alternative baseline scenario, where the universes of releases and UST sy stems decline over time in accordance with historical trends. In this alter native baseline, the universe of releases is smaller relative to the original baseline than the universe of UST sy stems; as described in Chapters 3 and 4, estimates of compliance costs do not change substantiall y under the alternative baseline, while estim ates of avoided costs decrease by approximately 31 percent. However, even in this scenario, the final UST regulation may avoid more costs than it creates, potentially generating cost savings to society . EPA estimates that the Selected Option in the alternative baseline could generate $ 60 million per year in savings to society (reflecting the average of four estimates: $ 74 million in net costs, $ 32 million, $ 75 million, and $ 21 0 million). Alternative 1 could generate $ 25 million per year in savings to society (reflecting the average of four estimates: $1 4 0 million in net costs, $ 7 million, $ 61 million, and $1 7 0 million), while Alternative 2 could generate savings of $ 8 7 million (reflecting the average of four estimates: $ 39 million in net costs, $ 81 million, $ 84 million, and $2 2 0 million). These results are presented in **Exhibit 7 -** **3**
. Exhibit 7
- 3 **Comparison Of Annual Compl iance Costs And Cost Savings Under Alternative Baseline**  c, e **Selected Option (2012$ millions)**  **Alternative 1 (2012$ millions)**  **Alternative 2**

**(2012$ millions)** Total Annual Avoided Costs a,b (range of all values in italics) $2 2 0 ($ 81
- $3 60) $ 31 0

($1 4 0
- $4 6 0) $1 6 0

($ 31
- $2 9 0) Total Annual Compliance Costs c $1 6 0 $2 9 0 $ 70 **Net Cost (Savings) to Society** c,d **[Total Com pliance Costs**  **less Total Avoided Costs]**  (range of all values in italics) **($ 60**  **)** $ 74
- ($21 0) **($25)**

$1 4 0

– ($1 70) **($ 87**  **)** $ 39
- ($2 2 0)
a Avoided costs are estimated for conventional UST systems and emergency generator tanks (EGTs) only. b Due to data and resource constraints, EPA is unable to monetize some of the positive impacts of the final UST regulation . Chapter 4 of this document provides a qualitative discussion of these benefits. c Compliance costs include direct compliance costs and state oversight costs. For this regulatory impact analysis, direct compl iance costs and state oversight costs provide a reasonable proxy to assess the f inal UST regulation ’s social costs. See Chapter 3.1 for further discussion. d The results show that all but one of the four estimates of cost savings for conventional systems exceeded total regulatory co sts (including FCT and AHFDS systems). As explained in Chapter 4 and Appendix H, one of the four experts provided estimates of avoided releases and averted groundwater incidents that do not result in net cost savings to society from the Selected Option. However, this expert also assumed a high level of nonc ompliance with the final UST regulation that is not consistent the assumption of 100 percent compliance in the cost estimates. As a result, this low
- end estimate of potential cost savings represents likely understates the cost savings that would be associated with a consistent, 100 percent compliance scenario. See Chapter 4 and Appendix H for detailed discussion of how these assumptions affect net benefits of the final UST regulation as calculated using responses from Expert 2. e Totals may not add up due t o rounding. Cost estimates were derived using a seven percent discount rate.7
- 7

**7.2 Cost** **- Effectiveness Analysis**  We measure cost
- effectiveness by considering the expected cost per release avoided. This cost - effectiveness measure is useful for comparing the resources required to eliminate a single release under each alternative. For the purpose of this analysis, we co nsider avoided releases to be both releases altogether avoided and groundwater incidents averted due to the final UST regulation . As presented in **Exhibit 7 -**  **4** , we find that the cost per release avoided is approximately

$4 3 ,000 to $2 0 0,000 under the Selected Option, compared with $ 68 ,000 to $2 5 0,000 under Alternative 1 and $2 5 ,000 to $ 27 0,000 under Alternative 2. In general, this compares favorably

with average release remediation costs presented in **Exhibit 4 -**  **2** in Chapter 4, which range between $98,000 and $2 10,000. 226 This regulatory

impact analy sis suggests that, in addition to improving the alignment of incentives, release prevention is likely to be less costly

than release remediation under the Selected Option and Alternative 2 and in some instances under A lternative 1. Exhibit 7
- 4 **Cost -**  **Effectiveness: Number Of Avoided Releases And Groundwater Incidents a**  **Selected Option Alternative 1**  **Alternative 2** Avoided releases and groundwater incidents 2,073 (7 72
- 3, 646 ) 2, 708

(1, 148
- 4,213 ) 1, 427

( 257
- 2, 753 ) Com pliance cost

b ($ million) $160 $290 $7 0 **Cost per release avoided ($ million) $0.08**  **($0.0 4**  **- $0.2**  **0 )**  **$0.11**

**($0.07 -**  **$0.2 5**  **) $0.05** 

**($0.03 -**  **$0. 27**  **)** a Cost estimates were derived using a seven percent discount rate. b Com pliance cost includes direct compliance costs and state oversight costs. For this regulatory impact analysis, direct compliance costs and state oversight costs provide a reasonable proxy to assess the final UST regulation ’s social costs. See Chapter 3. 1 for further discussion. **7.3 Costs and Beneficial Effects Under Alternative Discount Rates**  The selection of the rate at which to discount future costs and benefits is complex. To assess the sensitivity

of our results to our choice of discount rate, **Exhibit 7 -**  **5** presents a summary of total compliance costs and avoided remediation costs considering an alternate discount rate of three percent. Costs change little because a reduction in interest rates both reduces time value of money (TVM) costs and increases costs that have a delay before implementation. 227 , 228 The net result of a change from a discount rate of seven percent to a

226 The one exception to this conclusion is Expert 2. As explained in Chapter 4 and Appendix H, one of the four experts provided estimates of avoided releases and averted groundwater incidents that do not res ult in net cost savings to society from the Selected Option. This expert also assumed a high level of noncompliance with the final UST regulation that is not consistent with the cost modeling, and likely understates the cost savings associated with the 100 percent compliance that is assumed in the cost analysis. See Chapter 4 and Appendix H for detailed discussion of how these assumptions affect net benefits of the final UST regulation as calculated using responses from Expert 2.

227 When amortizing a value o ver time, if all other factors are held constant, a reduction in the rate of interest decreases the annual payment.7
- 8

discount rate of three percent is an overall increase in the cost of the regulation of less than $10 million per year, indicating that TVM and delayed
- implementation cost effects essentiall y offset each other. Discount rates are als o involved in our estimate of annual avoided costs. In particular, we use them to obtain constant annual avoided costs for those requirements in which the affected universe grows over time and to calculate the delay until positive impacts accrue. 229 Here, th e effect of lowering interest rate is more significant, as all requirements are discounted b y at least one period. As **Exhibit 7 -**  **5** shows, a change in the discount rate increases avoided costs from a range of $1 2 0 million
- $ 53 0 million using a seven percent discount rate to $ 1 3 0 million
- $ 6 1 0 million using a three percent discount rate . This increase is largel y due to the fact that we discount all avoided costs by at least one year, as outlined in **Exhibit 1 -**  **2**
. We conclude that, while a reduction in the disc ount rate to three percent leaves annual compliance costs essentially unchanged at $160 million, avoided costs increase b y $ 16 million to $ 84 million per year. As such, annual savings to society would increase from a range of $ 39 million in net costs to $3 7 0 million in net savings, to a range of $ 25 million in net costs to $ 45 0 million in net savings if EPA relies on a three percent discount rate.

228 The rate of discount enters into our calculation of time value of money costs. Higher discount rates increase these costs, while lower dis count rates cause them to decrease. See Appendix D for details.

229 Requirements for which the universe is assumed to grow over time are the elimination of flow restrictors as overfill prevention for new tanks and when overfill prevention equipment is replac ed, closure of lined tanks that cannot be repaired, and all Energy Policy Act requirements in Indian country, with the exception of operator training.7
- 9

Exhibit 7
- 5 **Compliance Costs And Beneficial Impacts Under Alternative Discount Rates d,e** 
**Avoided Cost Selected Option**  **7 percent discount rate ($ mi**  **llions) Selected Option**  **3 percent discount rate ($ mi**  **llions) Annual Avoided Costs**  **a** Releases and groundwater incidents $300 ($110
- $510) $350 ($130
- $590) Vapor intrusion $4.5 ($1.7
- $7.9) $4.7 ($1.7
- $8.2) Product loss $3.1 ($0.86
- $6.5) $3.3 ($0.89
- $6.8) **Annual Compliance Costs** Conventional UST systems b $130 $130 Emergency generator tanks (EGT) $2.0 $2.1 Airport hydrant fuels distribution systems (AHFDSs) $10 $12 UST systems with field
- constructed tanks (FCTs) $11 $12 Cost to owners/operators to read regulation $5.5 $3.9 State government administrative costs c $0.1 $0.1 **Total Annual Avoided Costs $310**  **($120 -**  **$530) $360**  **($130 -**  **$610) Total Annual Compliance Costs**  **d $160**  **$160 Net Cost (Savings) to Society**  **d, f**  **[Total Com pliance Costs**  **less Total Avoided Costs]**  **($160) $39**  **- ($370)**  **($200) $25**  **- ($450)**  a Avoided costs are estimated for conventional UST systems and emergency generator tanks (EGTs) only. b Conventional UST systems include all systems that are not AHFDSs, FCTs, or EGTs. c The costs for UST systems directly owned or operated by local, state, and federal government entities are included in the est imates of compliance costs within the other cat egories. Costs shown here reflect the administrative costs for state governments to read the regulation, apply for state program approval, process notifications of ownership changes, and process one
- time notifications of existence for AHFDS and UST systems with FCTs. d Compliance costs include direct compliance costs and state oversight costs. For this regulatory impact analysis, direct compl iance costs and state oversight costs provide a reasonable proxy to assess the final UST regulation ’s social costs. S ee Chapter 3.1 for further discussion. e Totals may not add up due to rounding. f As explained in Chapter 4 and Appendix H, one of the four experts provided estimates of avoided releases and averted groundwater incidents that do not result in net cost savings to society from the Selected Option. This expert also assumed a high level of noncompliance with the final UST regulation that is not consistent with cost modeling. See Chapter 4 and Appendix H for detailed discussion of how these assumptions affe ct n et benefits of the final UST regulation as calculated using responses from Expert 2.1

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