**A ssessment**  **of the**  **P otential**  **C ost**  **s , B**  **enefits ,**  **and O**  **ther I**  **mpacts of**  **the P**  **roposed R** **evisions to**  **EPA's U**  **nderground S**  **torage T**  **ank R** **egulations**

Prepared for: Policy and Standards Division, Office of Underground Storage Tanks, U.S. Environmental Protection Agency , 1200 Pennsylvania Ave NW,

Washington, DC 20460

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

August 20 1 1[This page intentionally left blank.]

### Acronyms And Terms

AHFDS

– Airport Hydrant Fuel Distribution Sy stem ASTSWMO

– Association of State and Territorial Solid Waste Management Officials ATG

– Automatic Tank Gauge / Gauging

– an a utomated process that monitors product level and provides inventory

control BL S

– United States Bureau of Labor Statistics BTEX

– Benzene, Toluene, Ethylbenzene, and Xylenes CFR

– Code of Federal Regulations CITLD

– Continuous In - Tank Leak Detection EGT

– Emergency

Generator Tank EPA

– United States Environmental Protection Agency EPAct

– Energy

Policy Act of 2005 FCT

– Field - Constructed Tank Fill pipe

– The access b y which the tank is filled IRS

– United States Internal Revenue Service LLD

– Li ne Leak Dete ctor / Detection

– 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

– Leaking Underground Storage Tank MIDAS - Modeling of Infection Diseases Agents Study NACS

– National Association of Convenience Stores NAI CS

– North American Industry Classification Sy stem NRDA

– Natural Resource Damage Assessment OMB

– United States Office of Management and Budget OUST

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

– Polycyclic Aromatic HydrocarbonsPd

– Probability of detection Pfa

– Probability

of false alarm RFA

– Regulatory

Flexibility

Act SBA

– United States Small Business Administration SBREFA

– Small Business Regulatory Enforcement Fairness Act of 1996 SDWA

– Safe Drinking Water Act SIR

– Statistical Inventory Reconciliation

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

– Significant Impact on a Substantial Number of Small Entities SPA

– State Program Approval SPCC

– Spill Prevention, Control, and Countermeasure Spill bucket

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

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

– Total Petroleum Hydrocarbon s Turbine sump

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

– Time value of money UDC

– Under- Dispenser Containment

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

– Unfunded Mand ates Reform Act UST

– Underground Storage Tank VSL

– Value of a Statistical Life WA

– Work Assignment WTP

– Willingness to Payiii 

### Table Of Contents **Executive Summary**  **C hapter**  **1 .**  **I ntroduction**  1.1 Background ................................ ................................ ................................ ........................... 1 - 1 1.2 Need for Regulatory

Action ................................ ................................ ................................ .. 1 - 2 1.3 Summary

of the Proposed Rule ................................ ................................ ............................ 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. U**  **niverse of**  **UST S ystems**  **A ffected**  **by the**  **P roposed Rule**  2.1 Ty pes of Entities Affected by the Proposed Rule ................................ ................................ . 2 - 1 2.2 Configuration of Average Conventional UST Sy stem ................................ ......................... 2 - 2 2.3 UST Universe Size and Distribution Across Sectors ................................ ............................ 2 - 4 2.4 Universe of Facilities and Sy stems Potentially Affected by

Proposed Rule ........................ 2 - 7 2.5 Facilities and S ys tems Affected b y Proposed Rule ................................ ............................ 2 - 10 **Chapter 3. Assessment of**  **Compliance Costs**  3.1 Introduction ................................ ................................ ................................ ........................... 3 - 1 3.2 Compliance Cost Methodology ................................ ................................ ............................ 3 - 1 3.2.1 Categories of Compliance Costs Analyze d ................................ ................................ 3 - 3 3.2.2 Estimation of Sy stem - Level Compliance Costs for UST Sy stems ............................ 3 - 5 3.3 Calculation of Incremental Compliance Costs ................................ ................................ ..... 3 - 8 3.3.1. Calculation of Incremental Compliance Costs Using an Alternative Baseline ....... 3 - 10 3.4 Results of Assessment of Compliance Costs ................................ ................................ ...... 3 - 1 1 3.4.1 Assessment of Compliance Costs under the Alternative Baseline Scenario.................................................................. .................... .. 3 - 17 3.5 Sensitivity

Anal ys is ................................ ................................ ................................ ............ 3 - 1 7 3.5.1 Compliance Costs of the Proposed Rule Using Alternative Estimates of Labor Rates Overhead Costs, and Fringe Benefits ................................ .............................. 3 - 1 8 3.5.2 Sensitivity

Analy sis of Distribution of Technologies Tested for Overfill Operability , Spill Prevention Equipment Tightness, and Interstitial Integrity ......... 3 - 21iv

3.5.3 Sensitivity

Analy sis of Compliance Costs for Interstitial Integrity Testing ............. 3 - 2 2 3.5.4 Summary

of Sensitivity

Findings ................................ ................................ .............. 3 - 2 2 3.6 Administrative Compliance Costs ................................ ................................ ...................... 3 - 2 3 3.6.1 State Governm ent Administrative Compliance Costs ................................ .............. 3 - 2 3 3.6.2 Costs to Regulated Universe to Review Regulations ................................ ............... 3 - 2 4 3.7 Summary

– Total Annual Compliance Costs ................................ ................................ ...... 3 - 2 4 3.7.1 Summary

– Total Annual Compliance Cost s under the Alternative Baseline Scenario................................................................ ........................ 3 - 26 **Chapter 4. Assessment of**  **Benefits and**  **Cost Savings** 4.1 Introduction ................................ ................................ ................................ ........................... 4 - 1 4.2 Investigation of Empirical Methods for Measuring Benefits and 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 - 7 4.3 .2 Calculating Avoided Remediation Costs ................................ ................................ .... 4 - 8 4.4 Establishing Avoided Releases ................................ ................................ ........................... 4 - 10 4.4.1 Avoided Releases Us ing an Alternative Baseline .................................. .......... 4 - 13 4.5 Benefits from Avoided Releases and Reduced Release Severity ................................ ....... 4 - 1 5 4.5.1 Avo ided Release Remediation ................................ ................................ .................. 4 - 1 6 4.5.2 Reduction in Release Severity ................................ ................................ .................. 4 - 1 6 4.5.3 Total Avoided Remediation Cos t s from Avoided Releases and Reduced Release Severity ......................................................... ............. 4 - 18 4.5. 4 Benefits from Avoided Release s and Reduc ed Release Severity under the Alternative Baseline Scenario...... .............................................. 4 - 18 4.5. 5 Avoided Costs by

Proposed Requirement ................................ ................................ 4 - 20 4.6 Avoided Vapor Intrusion Damages ................................ ................................ .................... 4 - 25 4.7 Product L oss ................................ ................................ ................................ ........................ 4 - 2 5 4.8 Human Health Benefits ................................ ................................ ................................ ....... 4 - 2 7 4.8.1 Avoided Benzene Cancer Risk ................................ ................................ ................. 4 - 2 7v

4.8.2 Other Human Health Benefits ................................ ................................ ................... 4 - 2 9 4.9 Avoided Acute Exposure Events and Large - Scale Releases ................................ ............ 4 - 30 4.10 Ecological Benefits ................................ ................................ ................................ ........... 4 - 31 4.11 Conclusions ................................ ................................ ................................ ....................... 4 - 34 4.11.1 Summary

of Pos itive Impacts under the Alternative Baseline Scenario..... .........4 - 35 **Chapter 5. Distributional Impacts and**  **Considerations** 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 - 4 5.2.3 Assessment of Market Exits and Employment Impacts ................................ ............. 5 - 8 5.2.4 Assessment of Public Sector Cost Savings Related to Avoided Releases ................ 5 - 14 5.2.5 Economic Impact Summary ................................ ................................ ...................... 5 - 1 7 5.3 Energy

Impact Analy sis ................................ ................................ ................................ ...... 5 - 17 5.4 Regulatory

Flexibility

Analy sis ................................ ................................ .......................... 5 - 1 9 5.4.1 Small Business Screening Anal ys is ................................ ................................ .......... 5 - 20 5.4.2 Small Business Supplemental Analy sis ................................ ................................ .... 5 - 2 1 5.4.3 Impacts to Small Governments ................................ ................................ ................. 5 - 2 2 5.5 Screening Analy sis to Inform Impacts on Minority and Low - In come Populations ........... 5 - 2 4 5.5.1 Risk Assessment Population Analy sis ................................ ................................ ...... 5 - 2 5 5.5.2 Demographic Analy sis ................................ ................................ .............................. 5 - 2 6 5.5.3 Summary

and Limitations of the Anal ysis ................................ ................................ 5 - 30 5.6 Children’s Health Pr otection Anal ys is ................................ ................................ ................ 5 - 30 **Chapter 6. Other Statutory and**  **Executive Order Analyses** 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 Government Analy sis ................................ ................................ ................................ . 6 - 4 6.5 Joint Impacts of Rules ................................ ................................ ................................ ........... 6 - 5 **Chapter 7. Comparison of**  **Costs, Benefits, and**  **Other Impacts**vi

7.1 Cost Benefit Comparison ................................ ................................ ................................ ...... 7 - 2 7.1.1 Cost - Benefit Comparison under the Alternative Baseline Scenario .....................7 - 4 7.2 Cost - Effectiveness Analysis ................................ ................................ ................................ . 7 - 5 7.3 Costs and Beneficial Effects Under Alternative Discount Rates ................................ .......... 7 - 5 **Appendices:** Appendix A: Configuration and Cost Assumptions for Airport Hydrant Fuel Distribution

Sy stems and Field - Constructed Tanks. Appendix B: Estimation of Affected UST Univers e and Baseline State Regulations. Appendix C: Analy sis of Piping Replacement Thresholds Appendix D: Methodology for Calculating Compliance Costs Appendix E: Access Model Structure and Specifications Appendix F: Analy sis of Statistical Relationship betw een State Regulatory Programs and Confirmed Release Data Appendix G: Expert Consultation: Selection and Data Collection Methodology Appendix H: Expert Consultation: Responses Appendix I : Methodology for Calculating Avoided Cleanup Costs Appendix J: Estimation of Future UST System 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 to Inform Impacts on Minority and L ow - In come Populations 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 t o groundwater from leaking underground storage tank (U ST ) 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 develop ing 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 T ank Tru st 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) . Th i s 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 change d these re gulations since 1988. In 2005 , the Energy

Policy Act (EPAct) further amended Subtitl e 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 syst ems . After Congress pass ed EPAct , EPA decided to revise the 1988 UST regulation (at 40 CFR Part 280) , primaril y to en sure 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 guidel ines). 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 c ountry . The se proposed revisions will also fulfill the objectives of the EPA - Tribal UST Strategy (August 2006) in which both EPA and tribes recognized it is important to ensure parity in implementing UST program requirements in states and territories, as well as in In dian country . 1 EPA decided now is also an appropriate time to change the 1988 UST regulation . While EPA has issued many guidance documents and used various implementation approaches and techniques over the last twenty years, we have not made significant changes to the original 1988 regulation. Indeed, most states have passed requirements that go far beyond the original federal regulation. These regulations fully implement provisions of the EPAct and improve important aspects of the existing (outdated) regulations. Furthermore, while i nformation on sources and causes of releases show that releases from tanks are less common than they once 1 See http://www.epa.gov./oust/fedlaws/Tribal%20Strategy_08076r.pdfES - 2

were , releases from piping and spills and overfills associated with deliveries have emerged as more c ommon problems. 2 Releases at the dispenser have also 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 . The proposed revisions focus on ensuring equipment is properl y maintained and working , and highlight the importance of operating and maintaining UST equipment so releases are prevented and detected early in order to avoid or minimize potential soil and groundwater contamination. EPA worked diligently

to ensure our proposed regulation 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 enviro nmental and community groups – an opportunity

to share their ideas and concerns through a variety of meetings, conference calls, and email exchanges . EPA thoroughly considered all input as we developed the proposed UST regulation chang es. **P roposed**  **R egula**  **tory C**  **hanges** EPA is proposing to revise the 1988 UST regulation in order to : establish federal requirements similar to certain key provisions of the EPAct; ensure owners and operators perform proper operation and maintenance; address deferrals; update th e regulation to current technology

and practices; and make technical and editorial corrections. Spec ificall y, EPA is proposing these revisions (hereafter the Preferred Option):

 Establish federal requirements for secondary containment and operator traini ng similar to those established by the EPAct for states that receive federal Subtitle I money
 Add operation and maintenance requirements o Walkthrough inspections o Spill prevention equipment tests o Overfill prevention equipment tests o Interstitial integrity tests o Operability

tests for release detection methods

 Address existing 40 CFR 280 deferrals o Require release detection for emergency generator UST sy stems o Remove deferrals and regulate airport hydrant fuel distribution systems (AHFDS s ) and UST s ys tems with field - constructed tanks (FCT s ) with alternate release detection requirements o Remove deferrals for wastewater treatment tanks

2 U.S. Environmental Protection Agency, Office of Underground Storage Tanks, “Evaluation of Releases from New and Upgraded 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 Facil ities in Florida,” draft, March 2005 .ES - 3

 Provide for other changes to improve release prevention and detection and program implementation o Require t esting after repairs to spill and overfill prevention equipment, and interstices o Eliminat e flow restrictors in vent lines as an overfill prevention option for all new tanks and when overfill devices are replaced o Require c los ure of lined tanks th at cannot be repaired according to a code of practice o Address responses to interstitial monitoring alarms o Notification requirement of ownership change o Eliminat e groundwater and vapor monitoring as release detection methods o Establish requirements for d etermining compatibility

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

 Revise state program approval (40 CFR Part 281) to be consistent with the above revisions In addition to the Preferred Option, EPA considered two other regulatory alternatives, described as Alternative 1 and Alternative 2. Alternative 1 is overall more stringent than the Preferred Option. Alternative 2 is overall less stringent than the Preferred Option . Exhibit ES - 1 summarizes the requirements under each alternative. EPA designed this assessment to satisfy 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:

 Regulatory

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 Population s and Low
-Income Populations  Executive Order 13045, Protection of Children F rom Environmental Health Risks and Safety Risks  Unfunded Mandates Reform Act of 1995  Executive Order 13175, Consultation an d Coordination W ith Indian Tribal Governments  Executive Order 13132, FederalismES - 4

 Executive Order 13211, Actions Concerning Regulations T hat Significantly Affect Energy Supply, Distribution, o r Use Exhibit ES - 1 **Options Considered For The Proposed Rule Requirement Description**  **Options Preferred**  **Alternative 1 Alternative 2**  **Release Prevention** Walkthrough inspections Monthly Monthly Quarterly Overfill prevention equipment tests 3 year 1 year 3 year Spill prevention equipment tests 1 year Require replacement every 3 years, no testing 1 year Interstitial integrity tests 3 year 1 year Not required Testing after repairs to spill and overfill prevention equipment, and interstices Required Required Required Elimination of flow restrictors in vent lines for all new tanks and when overfill devices are replaced Required Required Not required

**Release Detection** Operability tests for release detection methods 1 year 1 year 3 year Change leak rate probabilities from 95/5 to 99/1 (Pd/Pfa) Not required Required Not required Add SIR and CITLD to regulation with performance criteria Required Required Required Response to interstitial monitoring alarms Required Required Required Eliminate groundwater and vapor monitoring as release detection methods Eliminate in 5 year s Eliminate i mmediately Not required Remove deferral for emergency generator tanks Required Required 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 determining compatibility Required Required Required Remove deferrals for airport hydrant fuel distribution systems and UST systems with field - constructed tanks Regulate under alternative release detection requirements Regulate under release

detection requirements for conventional UST sy stems Maintain deferrals **EPA ct**  **- related P**  **rovisions** Operator training Required Required Required Secondary containment Required Required Required **S ummary**  **o f Findings**  Within the constraints of data availability , EPA in this analy sis identified all quantifiable and qualitative impacts for this proposed rule. EPA obtained sufficient data to identify , by state, the number of units likely to be affected b y each proposed ch ange in the proposed rule. In our anal ys is, we used these data to assess the compliance costs imposed upon 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 monetizes a number of impacts of the proposed rule including: avoided costs generated b y avoided releases; reduction in severity of releases; avoided product loss; avoided vapor intrusion damages; and a subset of human health benefits.ES - 5

This analy sis quantifies, but does not value, groundwater impacts. Finall y, due to data and resource limitations, EPA in this analy sis was unable to quantify or value a subset of human health benefits and ecological impacts, but addressed these qualitativel y. In addition to identifying costs and positive impacts, EPA in this analysis also examined the economic and distributional impacts of the proposed rule. The economic impact anal ys is includes the proposed rule’s effect on facility closures, employ

ment, and energy

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

 Compliance cost s 3

– EPA estimated $210 million in annual compliance cost s for the proposed rule. Costs range from approximately $130 million under Alternative 2 to $520 million under Alternative 1.
 State and local government costs

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

$9 million. These range from approximately $7 million under Alternative 2 to $19 million under Alternative 1. 4

 Avoided costs

– Avoided remediation costs form the majority of positive impacts from the proposed rule. EPA estimated the proposed rule will avoi d total costs of $ 3 0 0 million per year to $7 4 0 million per year under the Preferred Option. This includes: $ 3 0 0 million to $700 million in avoided remediation costs from avoided releases and avoided groundwater contamination incidents ; $ 0. 4 million to $ 26 million in avoided vapor intrusion remediation costs ; and approximately $ 2 million to $7 million in avoided product loss. Total avoided costs range from $3 1 0 million to $7 7 0 million under Alternative 1 and from $ 110 million to $5 9 0 million under Alternative 2.

3 Com pliance costs include direct com pliance costs and state oversight costs. For this regulatory impact analysis, direct compliance costs and state oversight costs provide a reasonable proxy to assess the proposed rule’s social costs. See Chapter 3 .1 for further discus sion . 4 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 $7 million in c osts under the Preferred Option . This includes $0.9 million for states to apply for state program approval and to read the regulations, $0.6 million for states to process one - time notifications of EGTs, AHFDSs, and FCTs, and ownership changes that occur in the first year, and $5.6 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 47% of which would be for state and local government owners and operato rs to read the proposed regulation).ES - 6

 Benefits

– Due to data and resource constraints, EPA only quantified human health benefits from avoided benzene - related cancer and was unable to quantify or monetize many

of the proposed rule’s benefits. The b enefits from avoided benzene - related cancer total less than $5,000 per year. In addition, EPA estimated the proposed rule could potentially protect 110 billion to 350 billion gallons of groundwater each ye ar. 5 Categories of nonmonetizable or nonquantifiable benefits that are qualitatively discussed in this analy sis include: avoidance of nonbenzene health risks, mitigation of acute exposure events and large - scale releases (e.g., releases from airport hydrant f uel distribution systems and UST sy stems with field - constructed tanks 6 ), and protection of ecological biota.
 Compliance cost s and avoided costs under the alternative baseline

– Under the alternative baseline scenario that assume s declines in the universes of both UST sy stems and releases over time, EPA estimated $20 0 million in annual compliance cost s for the proposed rule. Annual compliance cost s in the alternative baseline scenario range from $120 million under Alternative 2 to $510 million under Alternative 1. EPA also estimated total avoided costs of $180 million to $440 million under the Preferred Option in the alternative baseline scenario. These avoided costs range from $64 million to $360 million under Alternative 2 to $180 million to $460 million un der Alternative 1.
 Average economic impacts

– Motor fuel retailers, which account for roughly 80 percent of UST sy stems, are expected to bear approximately 70 percent of the total costs under the Preferred Option. To establish how the proposed rule may i mpact the market, EPA examined whether it imposes a cost greater than the average after- tax profit margin of 1.5 percent for motor fuel retailers. 7 Using this benchmark, we estimate approximately 560 firms may

exit the market if they cannot pass costs through to customers. This number represents less than one percent of the total universe of facilities. 8

 State financial assurance funds

– Decreases in release frequency and severity

may decrease pay

ments required of state financial assurance funds by $ 150 million per ye ar or more under the Preferred Option. To the extent that these funds are

5 See chapter 4.10 for details on how this estimate was derived. 6 For example, 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. Free product was found within 20 feet of a nearby creek in 1987. The release was attributed to tank and/or piping failures . Another example is Pease Air Force Base, where jet fuel was delivered to the runway apron via an underground f ueling 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 s ystem line with free product found under the apron at closure. 7 When costs exceed facility profits, it is likely that in the long - term , the facility wo uld exit the market. 8 In comparison, between 2005 and 2008, the number of gas station facilities decreased an average of 1.4 percent per year (or 2,400 stations per year).ES - 7 maintained by

taxes other than those assessed on UST operat ors, decreases in these pay ments effectively

represent a reallocation of costs from public entities to the private entities responsible for releases. **A ssessment**  **o f**  **Compliance C ost**  **s** For this regulatory

impact analy sis, direct compliance costs and stat e oversight costs provide a reasonable proxy to assess the proposed rule’s social cost s 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 proposed rule are distributed with relative geographic uniformity for consumers and producers.

 Given the relativel y sm all facility costs of less than $900 per ye ar for the average facility , closures or changes in market structure represent an unlikel y response to the proposed rule. According to the 2002 Economic Census, average revenues in the retail motor fuel sales sector were approximately $2.1 million; the corresponding cost - to - sales ratio for the average facility is less than one - tenth of one percent. Therefore, it is unlikely s ignificant changes to production or consumer behavior will affect social cost s.
 The short - and long - run impacts of the proposed rule are not likel y to differ significantl y. Testing and inspection requirements may offer some opportunities 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 t otal incremental compliance costs for UST facilities reflects two key components: identif

yi ng specific measures necessary for compliance at individual facilities and calculating cost s 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 proposed regulation, the model then generates sy stem - specific estimates of compliance costs. Compliance 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 equipm ent. Some component costs are specific to individual UST sy stem configurations

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

– while others are consistent across all sy stem ty pes. Exhibit ES - 2 summarizes the findings of our anal ys is of compliance cost s.ES - 8

Exhibit ES - 2 **Total Annual Compliance C**  **ost s**  d ,e

**Category Preferred**  **Option ($ m** **illions) Alternative 1** 

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

**($ m illions)**  Conventional UST systems a $180 $360 $120 Emergency generator tanks (EGT s ) $2.2 $2.2 $2.1 Airport hydrant fuel distribution systems (AHFDS s ) $18 $120 $0.0 UST systems with field - constructed tanks (FCT s ) $4.6 $33 $0.0 Cost to owners and operators to read regulations $5.1 $5.1 $5.1 State government administrative costs b $0.2 $0.2 $0.2 **Total Annual Compliance**  **C ost**  **s** c ,e **$210 $520**  **$130** a Conventional UST systems include all systems that are not AHFDSs, FCTs, or EGTs. b 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 regulations, apply for state program approval, process notifications of ownership changes, and process one - time notifications of EGT, AHFDS, and FCT existence. c Totals may not add up due to rounding. d Cost estimates were derived using a seven percent discount rate. e 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 pro xy to assess the proposed rule’s social costs. See Chapter 3.1 for further discussion. **A ssessment**  **of B**  **enefits a**  **nd Cost Savings**  Avoided remediation costs provide the basis for a substantial portion of the beneficial impacts associated with the proposed rule. Avoided remediation costs of the proposed rule represent cost savings that accrue to owners, operators , and public entities charged with remedi ating releases at regulated facilities. EPA obtained remediation costs from a survey of state leaking UST programs and estimates of the distribution of releases by UST sy stem area from internal research. 9 EPA identifi ed five UST technical experts who pro vided professional judgment regarding th e proposed rule’s effects on reduction in release frequency (number of releases per ye ar) and release severity (as measured by groundwater incidents averted) . This body of knowledge allowed EPA to estimate total avo ided costs, as well as avoided costs per requirement. EPA also estimated avoided costs associated with vapor intrusion and product loss, though these avoided costs are not allocated across requirements. 10 In addition to avoided costs, the analy sis monetized avoided benzene cancer risks from avoided contaminated groundwater and quantified volume of groundwater protected. These benefits assume that exposure risk is eliminated at the time of discovery and cle anup, and are

9 Office of Underground Storage Tanks, Evaluation of Releases from New and Upgraded Underground Storage T ank Systems

– Peer Review Draft , U.S. EPA, August 2004. 10 These costs were not allocated because we did not ask the experts to estimate quantitatively how different regulatory requirements would 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 likelihood of vapor intrusion, however, is driven by proximity of re ceptors 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 - 9

therefore additive to avoided cleanup costs . Finally , the anal ys is provided a qualitative discussion of avoided acute events and exposure (including large - scale releases, such as those from airport hydrant fuel distribution systems and UST sy stems with field - constructed tanks), ecological benefits, and avoided nonbenzene human health risks. These findings are summarized in Exhibit ES - 3 below . Exhibit ES - 3 **Summary O**  **f Annual**  **Positive Impacts** e

**Type O**  **f Impact Preferred Option**  **(2008$ millions) Alternative 1**  **(2008$ millions) Alternative 2**  **(2008$ millions) Monetized Benefits**  Avoided cancer risks a ,c $0.00 1 - $0.005 $0.002 - $0.00 5 $0.00 1 - $0.003 **Monetized Avoided Costs** Releases and groundwater incidents b $ 3 0 0 - $700 $ 300 - $740 $ 110 - $570 Vapor intrusion $0.4 - $26 $0. 5 - $2 8 $0. 2 - $ 1 9 Product loss $2 . 0 - $7. 2 $ 2.6 - $7 . 6 $0.4 - $5. 3 **Total** c **$ 3**  **0 0**  **- $7**  **4 0**  **$310 -**  **$77 0**  **$110 -**  **$59 0**  **Non m**  **onetized Impac t**  d Groundwater protected (billion gallons) 110 - 350 120 - 370 41

– 250 Ac ute events and large - scale releases (e.g., AHFDS and FCT releases) Not estimated Not estimated Not estimated Ecological benefits Not estimated Not estimated Not estimated Nonbenzene human health risks Not estimated Not estimated Not estimated a The pathway assessed to evaluate avoided cancer risk is benzene exposure through contaminated groundwater . b Monetized avoided costs are substantially lower in Alternative 2 relative to the Preferred Option due to differing requirements between these options , particularly walkthrough inspections . Alternative 2, overall, is less stringent than the Preferred Option, and therefore prevents fewer releases because systems do not require the same frequency of inspection and repair. For addition al information, see Chapter 4. c Avoided cancer risks and avoided costs are sep arate and additive (i.e ., these estimates do not overlap ). Avoided cancer risks are the benefits associated with reducing cancer cases prior to discovery of the release . Avoid ed 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. d Due to data and resource constraints, EPA was unable to monetize some of the positive impacts of the proposed rule. Chapter 4 provides a qualitative discussion of these benefits. e Totals may not add up due to rounding. Cost estimates were derived using a seven percent discount rate . **C om** **parison o**  **f Compliance C**  **ost s**  **a nd Positive Impacts**  Exhibit ES - 4 summarizes the compliance cost s and positive impacts of the proposed rule. The majority

of measurable positive effects occur as avoided remediation costs. Monetized social benefits occur only in the form of avoided cancer cases from groundwater contamination and constitute only

a very small part of overall effects. Nevertheless, as discussed in Chapter 4, avoided costs provide a reasonable measure of the positive effects of the proposed rule.ES - 10

Exhibit ES - 4 **Comparison Of Annual Compliance C**  **ost s, Cost Savings And Monetized Benefits**  g ,h

**Preferred Option (2008$ millions)**  **Alternative 1**

**(2008$ millions) Alternative 2** 

**(2008$ millions) Annual Monetized Benefits**  Avoided cancer risks a ,e $0.001 - $0.005 $0.002 - $0.00 5 $0.001 - $0.003 **Annual Avoided Costs e**  Releases and groundwater incidents $3 0 0 - $700 $300 - $740 $110 - $570 Vapor intrusion $0.4 - $26 $0.5 - $2 8 $0.2 - $19 Product loss $2.0 - $7.2 $2.6 - $7.6 $0.4 - $5.3 **Annual Compliance C** 

**ost s**  Conventional UST systems b $180 $360 $120 Emergency generator tanks (EGT s ) $2 $2 $2 Airport hydrant fuels distribution systems (AHFDS s ) c $18 $120 N/A UST systems with field - constructed tanks (FCT s ) c $5 $33 N/A Cost to owners and operators to read regulations $5 $5 $5 State government administrative costs d $0.2 $0.2 $0.2 **Total Annual Benefits and**  **Avoided Costs $3**  **0 0**  **- $7**  **4 0**  **$310 -**  **$770 $110**  **- $590**  **Total Annual Compliance**  **C ost**  **s h**  **$210 $520**  **$130 Net Cost (Savings) To Society**  **[ Total**  **Com pliance C**  **ost s**  **less Total**  **Benefits and Avoided Costs]**  **($5 3**  **0) -**  **($ 9**  **0) ($250)**  **- $210**  **($460) -**  **$20 Non**  **m onetized Benefits**  **f** Groundwater protected (billion gallons) 110 - 350 120 - 370 41 - 250 Ac ute events and large - scale releases (e.g., AHFDS and FCT releases) Not estimated Not estimated Not estimated Ecological benefits Not estimated Not estimated Not estimated Nonbenzene human health risks Not estimated Not estimated Not estimated a The pathway for avoided cancer risk is contaminated groundwater . b Conventional UST systems include all systems that are not AHFDSs , FCTs , or EGTs . c W e estimate there are 239 UST systems with FCTs and 162 AHFDSs that could be affected by the proposed regulation. For additional information regarding the assumptions and costs used in this analysis for these systems, see Appendix A. 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 gover nments 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 Avoided cancer risks and avoided costs are separate and additive (i.e., these estimates do not overlap ). Avoided cancer risks are the benefits associated with reducing cancer cases prior to discovery of the release . Avoided remediation costs from releases and groundwater incidents are the cost s 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. f Due to data and resource constraints, EPA was unable to monetize some of the positive impacts of the proposed rule. Chapter 4 provides a qualitative discussion of these benefits. g Totals may not add up due to rounding. C ost estimates were derived using a seven percent discount rate . h 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 proposed rule’s social costs . See Chapter 3.1 for further discussion.ES - 11

Exhibit ES - 5 summarizes the compliance cost s and positive impacts of the proposed rule under an alternative baseline where universes of UST sy stems and releases are assumed to decrease at a declining rate over time. Compliance cost s decline slightly under the alternative baseline relative to the p rimary anal ys is due to a small decrease in affected sy stems. Avoided costs decline b y approximately 40 percent, as the universe of releases contracts substantially under the alternative baseline. Exhibit ES - 5 **Comparison Of Annual**

**Compliance C ost**  **s, Cost Savings And Monetized Benefits**  **Us ing**  **A n**  **Alternative B**  **aseline Preferred Option**  **(2008$ millions) Alternative 1** 

**(2008$ millions) Alternative 2** 

**(2008$ millions) Total Annual**  **Benefits and**  **Avoided Costs $180**  **- $440**  **$180 -**  **$460 $64**  **- $360**  **Total Annual Compliance C**  **ost s**  **$200 $510**  **$120 Net Cost (Savings) to Society**  **[Total Com** **pliance C ost**  **s less**  **Total Benefits and**  **Avoided Costs] ($240)**  **- $20**  **$50 -**  **$330 ($240)**  **- $56**  Note: Cost estimates were derived using a seven percent discount rate. **E conomic Impacts**  EPA’s assessment of the economic impacts associated with this proposed rule focus ed on the retail motor fuels sector , which accounts for approximately 80 percent of UST owners or operators . In this analy sis, EPA described suppl y and demand dy namics within the retail motor fuels market and the likely economic responses to increased compliance costs. Our screening assessment found that average estimated facility- level costs of $890 may result in the market exit of approximately

560 facilities, if these facilities cannot pass any regulatory costs through to customers . This represents less than half of one percent of existing retail motor fuel facilities, and an even smaller fraction of all facilities affected by the proposed rule. To address uncertainty related to the distribution of costs among UST facilities, we also present ed a worst case sensitivity analy sis , which identified the maximum number of facilities that could face significant economic impacts due to regulatory costs. We defi ned the worst case as the scenario where the highest possible cost occurred for the smallest facilities. We found that up to 6,100 facilities (roughl y four percent of existing retail motor fuel facilities) may exit the market in this unlikely

worst - case sc enario. The limited magnitude of impacts even in the worst case scenario suggest that the proposed rule will not affect existing consolidation trends in the retail motor fuels industry , or retail motor fuel prices or consumption. In addition, EPA’s anal y sis suggests that the proposed rule could result in a reallocation of costs from the public to private parties responsible for releases . 11 The prevention of releases under this rule would increase compliance costs to facility owners, but the avoided releases
11 For additional inf

ormation regarding this issue, see Chapter 5.ES - 12

would in many

cases reduce remediation demand for taxpayer- funded state funds. This is likely to improve behavioral incentives, as the p arties 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 excess of $ 150 million per year. **O ther Regulatory**  **a nd Distribut** **ional Issues** As part of our anal ys is, we also assessed the proposed rule’s potential impacts related to:

 Energy

impacts

– The proposed rule will not have significant adverse effects on energy supply , distribution, or use, including impacts on price a nd foreign supplies. Itis, therefore, not a significant energy action under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use (May 18, 2001) .  Regulatory

flexibility

– EPA’s anal ys is determined that approximately 1,350 small entities (roughl y one percent of the universe of affected small entities) may experience economic impacts that exceed one percent of revenues. For various reasons, and especiall y due to different sy stem configurations for smaller facilities, the actual number of affected entities is likely to be even fewer than the number estimated b y the anal ys is. In comparison, this number is smaller than the recent industry consolidation rate of approximately

2,400 facilities per year in the retail motor fuels sector. The proposed rule is unlikely

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

 Small government impacts

– The proposed rule is not expected to have significant small government impacts. EPA’s assessment of costs to state and local governments indicated that no government - owned UST facilities will experience costs that exceed one percent of revenues.
 Impacts on minority

and low - income populations

– B ecause the proposed rule would increase regulatory

stringency

and reduce the number and size of releases, the proposed rule is not expected to have any disproportionatel y high and adverse human health or environmental effects on minority or low income populations, or on any community .  Children’s health protection

–While the risk assessment did not specifically measure exposure to children, adults are the more sensitive receptor for cancer effects of contam inated groundwater due to the longer potential exposure from showering (inhalation of vapors) compared to children (ingestion of water while bathing) , particularl y those under five who are assumed to take more baths and fewer showers. Therefore, EPA has no reason to believe that the proposed rule would have a disproportionate environmental health risk effect on children , as defined in Executive Order 13045, Protection of Children F rom Environmental Health Risks and Safety Risks (62 FR 19885, April 23, 199 7) . Moreover, because the proposed rule is expected to reduce exposure to contaminated groundwater b y reducing the number and size of releases, EPA does not expect the proposed rule to have any adverse impact on children.ES - 13

 Regulatory p lanning and review

– Pursuant to the terms of Executive Order 12866 [ 58 FR 51735 (October 4, 1993)] , EPA determined the proposed rule is an economically significant regulatory

action because it may

have an annual effect on the economy of $100 million or more , as defined in se ction 3(f)( 1 ) of th e order. Findings of the regulatory

cost anal ys is in Chapter 3 indicate the rule, as proposed, is projected to result in aggregate annual compliance cost s of approximately $2 1 0 million under the P referred O ption, $5 2 0 million under Alternative 1, and $1 3 0 million under Alternative 2.

 Unfunded mandates analysis

– The proposed rule is subject to the requirements of sections 202 and 205 of the Unfunded Mandates Reform Act (UMRA) because it contains f ederal mandates that may result in the expenditure by s tate, local, and tribal governments or b y 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 proposed rule is subject . Exhibit ES - 6 **Location Of Analyses Responding To UMRA Requirements Requirement**  **Location In This Document** Identification of federal law provision under which the proposed rule is being promulgated Chapter 1 Assessment of costs and benefits to state, local, and tribal governments and the private sector of the proposed rule Chapters 3 and 4 Assessment of the effect of the proposed rule on health, safety, and the natural environment Chapter 4 Assessment of the extent to which such costs of the proposed rule may be paid with federal financial assistance Chapter 3; no federal assistance is anticipated Assessment of the extent to which there are available federal resources to carry out this mandate Chapter 3; no federal resources are anticipated Estimates of future compliance costs of the proposed rule Chapter 3 Estimates of disproportionate budgetary effects of the proposed rule on any ty pe of government or private sector segment Chapter 5 Estimates of the effect of the proposed rule on the national economy Chapters 3 and 5

 Federalism

– Executive Order 13132, Federalism (64 FR 43255, August 10, 1999), defines p olicies that have federalism implications to include regulations with substantial direct effects on states, on the relationship between the national government and states, or on the distribution of power and responsibilities among th e various levels of government. EPA ty picall y considers a policy to have federalism implications if it results in aggregate expenditure s by

s tate and/or local gov ernments of $25 million or more in any one ye ar. As Exhibit ES - 7 below indicates, EPA does not expect any of the proposed options to have significant federalism implications.ES - 14 Exhibit ES - 7 **Summary O**  **f Annual Governmental Costs B**  **y Element** b

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

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

**($ m illions)**  Local compliance costs a $7.3 $15.0 $5.0 State compliance costs a $1.8 $3.7 $1.3 State government administrative costs $0.2 $0.2 $0.2 **Total C**  **osts T**  **o S**  **tate A**  **nd L**  **ocal G**  **overnments $9.3**  **$19.0 $6.5**  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 .  Tribal governments analy sis

– Executive Order 13175, Consultation and Coordination With Indian Governments (65 FR 67249, November 9, 2000), requires EPA to develop a process to ensure meaningful and timel y input b y tribal officials in the development of regulatory

policies that have tribal implications. EPA consulted with tribal officials early in the process of developing this proposed regulation to welcome meaningful and timely input into its development. EPA began its consultation with tribes on possible changes to the UST regul ation shortly after the passage of the Energy Policy Act of 2005. In addition to our earl y consultation with tribes, EPA also reached out again to tribes as we started the official rulemaking process and throughout the development of this proposed rule . EPA sent letters to leaders of over 500 tribes as well as to tribal regulatory staff to invite their participation in the development of the regulation. EPA heard from both tribal officials who work as regulators as well as representatives of owners and operators of UST sy stems in Indian country . The tribal regulators raised concerns about ensuring parity of environmental protection between states and Indian country . T oday ’s proposed changes to the UST regulation are needed to ensure parity between UST s ystems in states and in Indian country . This regulation will ensure installed equipment is working properl y to protect the environment from potential releases. As part of this anal ys is, EPA concluded the proposed rule will have tribal implications to the extent that tribally- owned entities with UST sy stems on Indian country would be affected. However, it will neither impose substantial direct compliance costs on tribal governments, nor preempt tribal law. T otal cost s to owners and operators of triball yowned UST sy stems are approximately $ 0.7 million.

 Joint i mpacts of r

ules

– 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) rules . At the time of the 1988 UST regulation, completely buried tanks greater than 42,000 gallons and located near navigable waters of the U.S. or adjoining shorelines were subject to both UST rules and SPCC rules. Since then, SPCC rules have been amende d and the rule exempts completely buried storage tanks, as well as connected underground piping, underground ancillary equipment, and containment sy stems, when subject to the technical requirements of 40 CFR part 280. In today's proposal, EPA proposes to continue to defer the aboveground components associated with airport hydrant sy stems and USTs with field - constructed tanks. These abovegroundES - 15

components will be subject to SPCC requirements. EPA is proposing to regulate the underground components associated with airport hydrant sy stems and USTs with field constructed tanks. Once the proposal becomes final, these underground components will no longer be subject to SPCC requirements. In addition , previously deferred wastewater treatment tank s ys tems and U ST sy stems that store fuel solel y for use b y emergency power generators will now be regulated under the UST regulation and will no longer be subject to SPCC. EPA does not believe the proposed rule creates a serious inconsistency or interferes with any oth er actions planned or undertaken b y other agencies.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

1 - 1 

### Chapter 1. **Introduction** 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 proposed targeted changes to the Underground Storage Tank (UST) regulations. The proposed rule serves the purpose of strengthening the existing underground storage tank regulations by

increasing the emphasis on proper operation and maintenance of UST s ys tems and improved maintenance of release detection equipment. The proposed changes also acknowledge improvements in technology over the last twenty ye ars , including the ability to perform release detection for many t ank systems that were previously deferred. **1.1 Background**  In 1984 , Congress responded to the increasing threat t o groundwater from leaking underground storage tank (U ST ) 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 by develop ing a comprehensive regulatory program for UST sy stems storing petroleum or c ertain hazardous substances. In 1986 , Congress amended Subtitle Iof SWDA and created the Leaking Underground Storage T ank 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) . Th is 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 fo r 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 s ys tem h ad spill prevention equipment (e.g., spill buckets) , overfill prevention equipment , and was protected from corrosion. In addition, owners and operators were required to monitor their UST sy stems for releases using release detection (phased in in the 1990s depending on the year of installation of each UST sy stem). Finall y, owners and operators we re required to have financial responsibility (phased in through 1998) to ensure that they

are financially

able to pay

for any releases 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 set 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 A ct (EPAct) further amended Subtitl e Iof SWDA. The EPAct requires states that receive federal Subtitle I money from EPA to meet certain requirements. EPA developed grant guidelines for states regarding operator training, inspections, delivery

prohibition , secondary

containment, financial responsibility for*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

1 - 2 manufacturers and installers, public record and state compliance reports on government UST sy stems . **1.2 Need**  **f**

**or Regulatory Action**  After Congress pass ed EPAct , EPA decided to revise the 1988 UST re gulation (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 secon dary

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 . The se proposed revisions will also fulfill the objectives of the EPA - Tribal UST Strategy (August 2006) in which both EPA and tribes recognized it is important to ensure parity in implementing UST program requirements in states and territories, as well as in In dian country . 1 EPA decided now is also an appropriate time to change the 1988 UST regulation . While EPA has issued many

guidance documents and used various implementation approaches and techniques over the last twenty years, we have not made significant changes to the original 1988 regulation. Indeed, most states have passed requirements that go far beyond the original federal regulation. Furthermore, while i nformation 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 as sociated with deliveries have emerged as more common problems. 2 Inaddition, releases 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 the se areas . D ata also indicate that release detection only detects about one quarter of all releases. 3 While some of those releases occur in areas not required to have release detection, other releases that should be detected are not because of problems with the operation and maintenance of the release detection equipment.

1 See http://www.epa.gov./oust/fedlaws/Tribal%20Strategy_08076r.pdf 2 U.S. Environmental Protection Agency, Office of Underground Storage Tanks, “Evaluation of Releases from New and Upgraded 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,” draft, March 2005 .

3 A bout 50 percent of all r eleases go undetected because they occur in areas where release detection is not required (and therefore is not designed to detect a release). Of the 50 percent that should be detected, 25 percent still go undetected partly because of issues with operatio n and maintenance of the release detection equipment. ( Office of Underground Storage Tanks, U.S. EPA, “Petroleum Releases at Underground Storage Tank Facilities in Florida,” U.S. EPA, draft, March 2005, p. 26.)*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

1 - 3 Since the beginning of the UST program, preventing petroleum releases into the environment has been one of the primary goals of the program. EPA and our partners have made major progress in reducing the number of new releases, but over 7 , 000 releases are still discovered each ye ar. Beca use existing publicl y- funded mechanisms and institutions frequently cover at least part of the costs of release remediation, owners and operators of UST sy stems do not bear the full costs of their actions. 4 Petroleum releases thus represent a negative externality caused b y UST s ys tem operators, as the individuals and firms that cause releases do not bear their full costs. This represents a failure of the market to fully internalize the cost to society of operating an UST s ys tem: private costs do not equal s ocial cost s. 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. EPA wanted to make sure the rule 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 and 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 a s 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 gave stakeholders multiple opportunities to share their ideas as well as kept them informed of where we were in the process. From this extensive stakeholder outreach, EPA compiled potential proposed changes to the UST regulations. EPA shared all of these ideas with the stakeholders and gave them an opportunity

to comment on each idea that was submitted to us. We then revised and added items to the list as necessary

based on data, analy sis and consideration of costs and benefits. Ultimately , EPA identified the item s in this proposed rule as the needed regulatory changes at this time. **1. 3**  **Summary o**  **f t**  **he Proposed Rule**  EPA is proposing to revise the UST regulations in order 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 deferrals; update the regulations to current technology

and practices; and make technical and editorial corrections. Spec ificall y, EPA is proposing the following set of revisions (hereafter referred to as the Preferred Opti on) :

4 We refer here to mechanisms other than tho se 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 direc tly by the owners and operators are equal to all the remediation costs, such a policy overcomes the market failure. However, if taxpayers are required to cover any portion of remediation costs through general funds or revenues obtained for other purposes, the negative externality will not be rectified.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

1 - 4  Establish federal requirements for secondary containment and operator training similar to those established by the EPAct for states that receive federal Subtitle I money
 Add operation and maintenance requirements o Walkthrough inspections o Spill prevention equipment tests o Overfill prevention equipment tests o Interstitial integrity tests o Operability

tests for release detection methods

 Address existing 40 CFR 280 deferrals o Require release detection for emergency generator UST sy stems o Remove deferrals and regulate airport hydrant fuel distribution systems (AHFDS s ) and UST s ys tems with field - constructed tanks (FCT s ) with alternate release detection requirements o Remove deferrals for wastewater treatment tanks

 Provide for other changes to improve release prevention and detection and program implementation o Require t esting after repairs to spill and overfill prevention equipment, and interstices o Eliminat e flow restrictors in vent lines as an overfill prevention option for all new tanks and when overfill devices are replaced o Require c los ure of lined tanks that cannot be repaired according to a code of practice o Address responses to interstitial monitoring alarms o Notification requirement of ownership change o Eliminat e groundwater and va por monitoring as release detection methods o Establish requirements for determining compatibility

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

 Revise state program approval (40 CFR Part 281) to be consistent with the above revisions*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

1 - 5 **1.4 Alternative**  **Regulatory Option s**  In addition to assessing the impacts of the Preferred Option, this document assesses the costs, benefits, and economic impacts of two regulatory alternatives, as outlined in **Exhibit 1 -**  **1 .**  Please refer to the preamble for a discussion on the rationale behind the development of these two alternatives. Under each of these alternatives, EPA evaluated variations of a subset of the proposed changes , while some of the proposed regulatory requirements remained in effect across all options . The differences between the three regulatory options considered in this regulatory impact anal ys is are described in **Exhibit 1 -**  **1** . Exhibit 1 - 1 **Options Considered F or**  **T he Proposed**  **Rule Requirement**  **Description Options**  **Preferred Alternative**  **1 Alternative**  **2 Release Prevention**  Walkthrough inspections Monthly Monthly Quarterly Overfill prevention equipment tests 3 year 1 year 3 year Spill prevention equipment tests 1 year Require replacement every 3 years, no testing 1 year Interstitial integrity tests 3 year 1 year Not required Testing after repairs to spill and overfill prevention equipment, and interstices Required Required Required Eliminat e flow restrictors in vent lines for all new tanks and when overfill devices are replaced Required Required Not required

**Release Detection** Operability tests for release detection methods 1 year 1 year 3 year Change leak rate probabilities from 95/5 to 99/1 (Pd/Pfa) Not required Required Not required Add SIR/CITLD to regulations with performance criteria Required Required Required Response to interstitial monitoring alarms Required Required Required Eliminate groundwater and vapor monitoring as release detection methods Eliminate in 5 year s Eliminate i mmediately Not required Remove deferral for emergency generator tanks Required Required 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 determining compatibility Required Required Required Remove deferrals for airport hydrant fuel distribution systems and UST systems with field - constructed tanks Regulate under alternative release detection requirements Regulate under release

detection requirements for conventional UST sy stems Maintain deferrals **EPA ct**  **- related Provisions**  Operator training Required Required Required Secondary containment Required Required Required*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

1 - 6 Note that e ach option considered by EPA contains a set of new requirements that does not vary across options. As explained in the introduction, operator training and secondary containment are being proposed in order to ensure parity in program implementation among states and in Indian country . Therefore, these requirements are necessary across all options. Based on input EPA received from stakeholders, EPA believes the other proposed requirements in this set represent the minimum necessary changes for its proposed rule . Specificall y, these requirements are :  Testing after repairs to spill and overfill prevention e quipment , and interstitial spaces  Adding SIR/CITLD to regulations with performance criteria
 Reporting and testing for interstitial alarms
 Removing the deferral for release detection for emergency generator tanks
 Notification of ownership chang e  Closure of lined tanks that cannot be repaired according to a code of practice
 Requirements for determining compatibility , and
 Requiring operator training and seco ndary containment Many of the requirements proposed in this rule 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 rul e comes into effect; depending on the requirement, they may have up to three years to satisfy the new requirements . 5 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 **Exhib it 1**  **- 2**  . EPA assumes that the monetized positive impacts associated with these requirements accrue at the end of the year in which costs occur to incorporate an assumption that some beneficial impacts may lag requirements. 6

5 Please refer to the preamble section for each proposed requirement for a discussion on the rationale behind the delayed or phase - in im plementation periods. 6 EPA does not have data to suggest any particular length of lag for each requirement ; for this analysis, we effectively 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 imp acts.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

1 - 7 Exhibit 1 - 2 **Years Until Propose d Requirem**  **ents Becom e Effective** 

**Requirement Number of years until**  **effective Release Prevention**  Overfill prevention equipment test **7** 3 Spill prevention equipment test 1 Interstitial integrity test 8 3 **Release Detection** Operability tests for release detection methods 1 Eliminate groundwater and vapor monitoring as release detection methods (for Preferred Option) 5 Remove deferral for emergency generator tanks 1 **Other** Remove deferral for airport hydrant fuel distribution systems (Subparts B, C, and D) 8 3 Remove deferral for UST systems with field constructed tanks (Subparts B, C, and D) 9 3 **EPAct -**  **related Provision** Operator training 3 Please refer to the preamble section for each proposed requirement for a discussion on the rationale behind the delayed or phase - in implementation periods. Finally , EPA is including a set of proposed revisions and clarifications that are not expected to have any economic impact , due either to the nature of the requirement or to the interaction of UST regulatio ns with existing regulations . The only cost associated with these clarifications and changes is the cost of reading the new regulations . These revisions include:
 Removing deferrals for wastewater treatment tanks 9

7 As part of this analysis, we assume that overfill prevention equipment tests and interstitial integrity tests will begin after a three - year delay. Phasing in these costs over a three - year period would increase total costs by approximately $5.1 mil lion compared to a three - year delay; this does not affect the total cost estimate presented in the RIA for the proposed rule.

8 Removing deferrals for airport hydrant fuel distribution systems and field - constructed tanks will require these systems to com

p ly with Subparts B, C, D, E, G, and H of 40 CFR Part 280. The proposed regulation requires these systems to com

ply with Subparts B, C, and D after 3 years, while com pliance with Subparts E, G, and H wo uld be required immediately.

9 While this represents a new requirement, based on conversations with the Georgia Environmental Protection Division, the National Association of Clean Water Agencies (NACWA), Highland Tank, and the Automobile Recyclers Association, EPA believes that all active wastewater treatment tanks, including tanks at most publicly owned treatment works and many private treatment facilities, are currently regulated by either section 402 or section 307(b) of the Clean Water Act and therefore excluded from 40 CFR 280. As a result, EPA believes that there are no wastewater treatment tank systems currently deferred. Therefore, we assume that the removal of the deferral will have no impact on the regulated universe.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

1 - 8  Updating the regulations to reference newer technologies
 Updating the codes of practice listed in the regulations
 Updating the regulations to remove old upgrade and implementation deadlines
 Updating the regulations for editorial and technical corrections , and
 Revising the State Program Approval (40 CFR Part 281) regulations to be consistent with the above revisions **1.5 Scope**  **o f**  **Analysis** Within the constraints of data availability , this analy sis attempts to capture all quantifiable and qualitative impacts for this proposed rule. EPA obtained sufficient data to identify , by

state, the number of units likely to be affected b y each proposed change in the rule. The anal ys is uses these data to assess the compliance costs on these units and relevant state governments. In conducting these anal y ses, EPA also assessed the sensitivity of outcomes to key assumptions. Separatel y, the anal ys is monetizes a number of impacts of the rule, including the avoided costs generated by avoided releases, reduction in severity of releases, avoided product loss, avoided vapor intrusion damages, and a subset of human health benefits. This analy sis quantifies, but does not value, groundwater impacts. Finally , this analy sis is unable to quantify or value a subset of human health benefits and ecological impacts, but addresses these qualitativel y. In addition to identifying costs and the positive impacts of the rule, this analy sis also examines the economic and distributional impacts of the rule. The economic impact anal ys is includes the proposed rule’s effect on faci lity closures, employ

ment, and energy

output and cost. The anal ys is of the distributional impacts of the rule examines the effect of a reduction in releases on state financial assurance funds, impacts on childrens’ health, small business impacts, and impac ts on low - income and minority populations. Finally , this analy sis considers impacts of the rule related to certain executive orders and statutes, including the Unfunded Mandates Reform Act, impacts on Tribal Governments, and Federalism impacts. **1.6 Rep**  **ort Organization** To support the development of the proposed rule, EPA designed and conducted this anal ys is of the rule’s costs, benefits, and economic impacts consistent with the requirements of Executive Order 12866, and OMB Circular A - 4. 10 D ata, methods, and results of this analy sis are presented in the following chapters:

10 Executive Order 12866, Regulatory Planning and Review, October 4, 1993; Office o f Management and Budget, Circular A - 4, September 17, 2003.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

1 - 9  **Chapter 2: Universe of UST Systems Affected by the Proposed Rule**  **.** This chapter identifies a profile of the entities that may be affected b y the proposed rule .  **Chapter 3: Assessment of**  **Compliance C ost**  **s.** This chapter summarize s the methods employed b y EPA to assess the cost impacts of the proposed rule.
 **Chapter 4: Assessment of Benefits and Cost Savings** **.** This chapter present s estimates of the benefits and avoided costs of the proposed rule .  **Chapter 5: Distributional Impacts and Considerations** **.** This chapter summarizes the assessment of distributional impacts of the proposed rule, including economic and energy impacts , effects on small businesses and go vernments , impact s 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

plann ing and review, impacts created by unfunded mandates, federalism implications, effects on tribal governments, and joint impact of the proposed rule in the context of existing rules.
 **Chapter 7: Comparison of Costs, Benefits, and Other Impacts.** This chapter summarizes and compares the costs, cost savings, and benefits of the proposed rule.

 **Appendices.** We present the details to methods and assumptions we employ in a number of appendices.2 - 1



### C **hapter 2. Universe**  **o f**  **UST Systems Affected b**  **y t**  **he Proposed Rule**  This regulatory

impact analy sis addresses the effects of the proposed regulatory changes on four ty pes of UST s ys tems: conventional UST sy stems with prefabricated tanks that store and dispense petroleum products; emergency generator tank sy stems that store fuel for 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 sy stems, facilities, firms, and sectors that are likel y to be affected b y the proposed regulatory changes, and documents the extent to which state regulations already require compliance with the proposed regulations. **2.1 Types**  **o f**  **Entities Affected by the**  **Proposed Rule** The four types of UST sy stem s that are potentiall y affected b y the proposed regulation are characterized as follows :  **Conventi on**  **al 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 s ys tems separatel y. 1 These UST sy stems are subject to all requirements under 40 CFR Part 280.
 **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. Th e proposed regulation does not address emergency

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

Commission under 10 CFR P art 50, appendix A . 2

1 Because tanks storing hazardous substances are also currently subject to the 1988 UST regulations under 40 CFR Part 280 this analysis assumes that incremental costs and benefits associated with the proposed rule 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 percent of all active regulated UST systems contain hazardous substances.

2 See 40 CFR 280.10 Subpart A

– Applicability.2 - 2

 **UST systems with f**  **ield -**  **constructed tank s (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 currentl y in operation are owned b y Federal fa cilities 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 Act of 1990, 40 CFR Part 1 12 (EPA’s Spill Prevention, Control, and Countermeasure regulations).
 **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 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 m ost commercial sy stems have only

above - ground storage tanks and are thus not affected by the proposed regulation. 3 These sy stems 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) conventional UST sy stem is configured as follows ( **Exhibit 2 -**  **1** ) : 4

Exhibit 2 - 1 **Assu med Average Configuration**  **F or**  **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

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

4 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 Assignment 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 proposed rule .2 - 3

These assumptions best characterize motor fuel retailers, which represent approximately 80 percent of the 611,449 conventional UST sy stems in operation in 2009 . 5 EGT sy stems and other conventional UST sy stems used to store fuel or hazardous substances are likel y to have sy stems with similar components and less complex dispenser sy stems. The configurations of FCTs and AHFDSs are cons idered separatel y, and are described in detail in Appendix A. **Exhibit 2 -**  **2** provides an illustration of an UST sy stem at a retail motor fuel establishment. Note that in this exhibit, the “dispenser sump” is a specific form of under- dispenser containment, an d the “spill bucket” is an example of spill prevention equipment. **Exhibit 2 -**  **2 Configuration of Retail Motor Fuel UST System** 

5 The remaining 20 percent of conventional UST sy stems 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 - 4

**2. 3**  **UST Universe**  **Size a**  **nd Distribution Across Sectors**  The September 30, 2009 Semi
- Annual Report of UST Performance Measures reports a universe of 611,449 active petroleum tanks (UST sy stems) in the United States and its territories. 6 , 7 This total includes conventional UST sy stems and e mergency generator tank sy stems. Estimates based on state data suggest that approximately 3.0 percent, or 18,343 of the 611,449 active UST s ys tems, are emergency generator tanks. 8 In addition to emergency generator and conventional UST sy stems, the proposed rule addresses UST s ys tems with field - constructed tanks and airport hydrant fuel distribution sy stems. While these two ty pes of s ys tems are deferred under current EPA regulations, a subset may be regulated by

individual states and included in the total estimate of tanks provided by those states. For the purpose of this anal ys is, however, these two universes are considered to be separate from the 611,449 tanks identified in the 2009 EPA report. The total universe of UST sy stems with field - constructed tanks and airport hydrant fuel distribution sy stems is small, including approximately

239 UST sy stems with field - constructed tanks, and 1 6 2 airport hydrant fuel distribution systems (each hydrant s ys tem is supported by an average of roughly

eight linked tanks). 9Most 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 162,000 (161,768) retail fueling sites operated in the United States in 2008. 10 Of these, approximately

115,000 included convenience stores. 11

6 U.S. Environmental Protection Agency, Office of Underground Storage Tanks, Semi
- Annual Report of UST Performance Measures End of Fiscal Year 2009

– As Of September 30, 2009 , http://www.epa.gov/OUST/cat/ca_09_34.pdf . State and territory underground storage tank programs report to EPA periodically throughout the year with data on their UST performance. EPA compiles the data fo r all states, territories, and Indian country and makes the data publicly available at http://www.epa.gov/OUST/cat/camarchv.htm.

7 FY2010 data indicate that the universe of t anks has contracted to 597,333 UST systems. T o consider the im pacts of declining universe sizes on the results of this analysis, we c onstruct and evaluate an alternative baseline for compliance costs and avo ided costs in Chapters 3.4.1 and 4.4.1, respectively.

8 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 of EGTs is assumed to be approximately 3.0 percent of all active UST systems based on the weighted average from four state databases.

9 See Industrial Economics, Inc., “Preliminary Assessment and Scoping of Data Related to Potential Revisions to the UST Regulations; Tasks 2 - 4, Work Assignment 1 - 25,” November 20, 2008. There are 201 airport hydrant fuel distribution systems owned by the Department of Defense and 40 airport hydrant fuel distribution systems located at commercial airports. Of these, 162 are not fueled by above - ground storage tanks (two commercial airport facilities have UST systems , along with 160 of the 201 Department of Defense systems).

10 Based on NPN MarketFacts 2008, cited in National Petroleum News , “MarketFacts 2008 Overvie w, ” July/August 2008.

11 National Association of Convenience Stores (NACS), “U.S. Petroleum Industry: Statistics, Definitions,” http://www.nacsonline.com/NACS/Resources/campaigns/GasPrices_2009/Pages/StatisticsDefinitions.aspx.2 - 5

An anal ys is of state data by EPA concludes that the average retail motor fuel establishment has 2.97 tanks (US T sy stems). 12 Assuming approximately 2.97 UST sy stems per facility and 161,768 facilities, 48 1 , 108 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, b ig - 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 companies. Collectively , these firms operate approximate ly 4, 5 00 filling stations ; each station is likely to have at least three UST sy stems . 13 Other industry sectors that report use of UST sy stems include agriculture (crop production and animal production), commercial (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 state government operations, and federal facilities run by the U.S. Departments of Defense and Energy . These sectors comprise approximately 130,000 UST s ys tems , including those in the government sector ( **Exhibit 2 -**  **3** ) . In many cases, firms in these sectors use UST systems 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 2.3 UST sy ste ms 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 . 14 Results of an anal ys is of public UST records of 45 states performed for EPA’s Office of Underground Storage Tanks suggest that the average number of UST sy stems per facility (across all sectors that use conventional UST sy stems or EGTs), is approximately 2.74. 15

12 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. Further adjustments to reconcile various estimates of UST use by industry total universe decrease the num ber of tanks per UST system operating in retail motor fuel settings to 2.97 tanks. See Industrial Economics, Inc., “Small Entities Screening Analysis of UST Universe by Industry Sector,” WA 3 - 25, Task 4, February 4, 2010.

13 National Association of Convenience Stores (NACS), “U.S. Petroleum Industry: Statistics, Definitions,” http://www.nacsonline.com/NACS/Resources/campaigns/GasPrices_2009/Pages/StatisticsDefinitions.aspx.

14 “Summary of Key Data from State Public Record Postings,” E 2 , Incorporated, Task O rder No. 1010

– Subtask A1 - 06C Technical Directive No. 36. All supporting materials not included in the appendices can be found in the docket for the proposed rule .

15 “Summary of Key Data from State Public Record Postings,” E 2 , Incorporated, Task Order No. 1010

– Subtask A1 - 06C Technical Directive No. 36, Table 1.2 - 6

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

**Industry Sector NAICS**  **2006** a **2009** 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 Conventional UST Systems and EGTs**  Retail Motor Fuel Sales 447 168,987 526,008 161,768 481,108 Commercial (wholesale trade, retail trade, accommodation, and food services) 42, 44 - 45, 72 (excluding 447) 22,730 52,271 21,652 49,793 Institutional (hospitals only) 622 2,330 3,812 2,220 3,631 Manufacturing 31 - 33 9,261 15,259 8,822 14,536 Transportation (air, water, truck, transit, pipeline, and airport operations) 481, 483 - 486, 48811 8,559 15,140 8,153 14,422 Communications and Utilities (wired telecommunications carriers; and electric power generation, transmission, and distribution) 5171, 2211 6,972 10,223 6,641 9,738 Agriculture (crop and animal production) 111, 112 889 1,610 847 1,534 Local governments c Government jurisdiction N/E N/E N/E 24,458 State governments c Government jurisdiction N/E N/E N/E 6,114 Federal government c Government jurisdiction N/E N/E N/E 6,114 **Total: Conventional UST systems and EGTs 219,728**  **d 624,323**  **210,103 d**  **611,449 UST systems with**  **Field Constructed Tanks and Airport Hydrant Fuel Distribution**  **Systems** FCTs: Department of Defense Government jurisdiction 239 239 AHFDSs: Department of Defense Government jurisdiction 162 1,296 e **Total: FCTs and AHFDSs 401**  **1,535** a Sources: December 18, 2006 review of state databases, “ Draft Industry and Facility Profiles ,” E 2 , Incorporated, Task Order No. 1010

– General Technical and Programmatic Support in Implementing the Energy Policy Act of 2005 , Amendment 1, TDD #11 . Estimate of 168,987 retail motor fuel facilities with UST systems from “2005 U.S. motor fuel station count: 168,987,” National Petro leum News , May 19, 2005 (annual survey of states to collect data on number of stations) . b Analysis based on 2006 column (see note a above) , 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 "MarketFacts 2008 Overview," National Petroleum News , August 2008 , used as a proxy for the number of such facilities in 2009. (See also Industrial Economics, Inc., “P reliminary Assessment and Scoping of Data Related to Potential Revisions to the UST Regulations; Tasks 2 - 4, Work Assignment 1 - 25,” November 20, 2008. ) c See United States Environmental Protection Agency, “Economic Impact Analysis of Additional Mechanisms f or Local Government Entities to Demonstrate Financial Responsibility for Underground 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 num ber of government UST systems is assumed to be two percent of all 2009 UST systems owned by state and federal governments and four percent of all 2009 UST systems 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**  **Fa cilities**  **and System**  **s Potentially Affected**  **by Proposed Rule**  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 proposed rule, but the number of facilities and sy stems affected by each specific regulatory

change will vary depending on the extent of current (baseline) state regulations and the type of equipment currentl y 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, combined with data from a limited sample of states and equipment providers about the use of different technologies for release prevention and detection. 16 **Exhibit 2 -**  **4** identifies the total number of UST sy stems that could potentially be affected by each regulatory

change in the proposed regulations, based on the baseline technology currentl y in place in the universe of s ys tems. **Exhibit 2 -**  **4** identifies the numb er of UST s ys tems or facilities with relevant technologies, the type of system (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 , and a summary of the assumptions that define the number of affected units. Note that proposed changes for AHFDSs, EGTs, and FCTs affect onl y those universes of facilities, and Energy Policy Act - related provisions affect only facilities and UST sy s tems in Indian country . 17 See Appendix B for detailed descriptions of the values and sources used in each calculation. These estimates do not reflect baseline state regulations (e.g., whether a state already requires interstitial integrity testing) . As dis cussed later in this chapter, some baseline state requirements satisfy requirements of the proposed rule.

16 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 proposed rule .

17 EPA assumes that all states have adopted Energy Policy Act - related provisions in the baseline, consistent with existing guidance.2 - 8

Exhibit 2 - 4 **Potential Number A**  **nd Type O**  **f Units Affected B**  **y Each Regulation**
**Regulatory Change Universe**  **Proportion of Total**  **Universe Affected**  **Annually Number of** 

**Potentially Affected**  **System s**  **(Annual)** a **Assumptions Release Prevention**  Walkthrough inspections Facilities with Conventional UST sy stems and EGTs 100.0% 223,157 facilities All facilities require periodic walkthrough

inspections . Overfill prevention equipment test s Conventional UST sy stems and EGTs 100.0% 611,449 systems Percentage of UST sy stems with overfill prevention

equipment. Spill prevention equipment test s Conventional UST sy stems and EGTs 90.0% 550,304 systems One - to - one spill prevention equipment to tank ratio,

10 percent have self

- monitoring mechanism and do not need monitoring . Interstitial integrity tests Conventional UST sy stems and EGTs 17.5% 106,747 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. Spill prevention equipment test after repair Conventional UST sy stems and EGTs 6.3% 38,216 systems Spill prevention equipment requires fix once every

four years ; repairs are used as the fix 25 percent of the time. Overfill prevention equipment test after repair Conventional UST sy stems and EGTs 5.0% 30,572 systems Overfill prevention equipment requires fix once

every five years ; repairs are used as the fix 25 percent of the time.

Interstitial integrity test after repair Conventional UST sy stems and EGTs 3.3% 20,443 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 25 percent of pipes and fi ve percent of tanks require repair every year. Eliminat e flow restrictors in vent lines for all new tanks and when overfill devices are replaced Conventional UST sy stems and EGTs 6.5% 39,744 systems b 13% of new UST systems would have installed flow

restrictors in vent lines . **Release Detection** Operability test s – ATG Conventional UST sy stems and EGTs 33.7% 205,814 systems UST systems that use automatic tank gauges . Operability test s – interstitial monitoring Conventional UST sy stems and EGTs 18.8% 114,781 systems UST systems that use interstitial monitoring

(excluding five percent that conduct manual testing of the interstice). Operability test s – line leak detection Conventional UST sy stems and EGTs 27.5% 168,440 systems Pressurized piping systems that use electronic line

leak detectors . Operability test s – mechanical LLDs Conventional UST sy stems and EGTs 54.9% 335,628 systems Proportion of pressurized piping that already

performs a LLD test, but which will require additional capital expenditures to comply with new regulations . Operability tests

– groundwater and vapor monitoring Conventional UST sy stems and EGTs 5.17% 31,612 systems UST systems that use vapor monitoring and/or

groundwater monitoring as their sole release detection method(s). Universe affected phases out in equal parts over initial five years of proposed rule.2 - 9

Exhibit 2 - 4 **Potential Number A**  **nd Type O**  **f Units Affected B**  **y Each Regulation**
**Regulatory Change Universe**  **Proportion of Total**  **Universe Affected**  **Annually Number of** 

**Potentially Affected**  **System s**  **(Annual)** a **Assumptions** Eliminate groundwater and vapor monitoring as release detection methods Conventional UST sy stems and EGTs 5.17% 31,612 Sy stems UST systems that use vapor monitoring and/or

groundwater monitoring as their sole release detection method(s). Universe affected phases in over five years. Add SIR/CITLD to regulations with performance criteria Conventional UST sy stems and EGTs 0.5% 2,972 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. Change release detection leak rate probabilities

– ATG Conventional UST sy stems and EGTs 33.7% 205,814 systems UST systems that use automatic tank gauges. Change release detection leak rate probabilities

– LLD Conventional UST sy stems and EGTs 27.5% 168,440 systems Pressurized piping systems that use electronic line

leak detectors. Change release detection leak rate probabilities

– SIR Conventional UST sy stems and EGTs 1.9% 11,887 systems UST systems that use qualitative SIR. Change release detection leak rate probabilities

– CITLD Conventional UST sy stems and EGTs 25.2% 154,360 systems 33.7 percent of systems use ATG; of these, 75

percent employ CITLD. Response to interstitial monitoring alarms Conventional UST sy stems and EGTs 2.4% 14,814 systems Weighted average annual percentage of UST

sy stems and piping that experience an interstitial monitoring alarm . Remove deferral for emergency generator tanks EGTs 3.0% 18,343 systems UST sy stems assumed to be emergency generator

tanks . **Other** Remove d eferral for airport hydrant fuel distribution systems AH FDS s 100.0% 162 facilities All airport hydrant fuel distribution systems . Remove d eferral f

or UST systems with field - constructed tanks FCTs 100.0% 239 systems All UST systems with field - constructed tanks. Require notification of ownership change Facilities with Conventional UST sy stems and EGTs 10.1% 22,502 facilities Annual number of f acilities that change ownership . Closure of lined tanks that cannot be repaired according to a code of practice Conventional UST sy stems and EGTs <0.1% 84 systems Annual number of lined UST systems that cannot be

repaired Requirements for determining compatibility Conventional UST sy stems and EGTs 100.0% 611,449 All conventional UST systems and EGTs **EPAct -**  **related Provisions** Operator training UST Facilities in Indian country 100.0% 958 facilities All facilities in Indian country. Universe affected

phases in over three years. Secondary containment - new and replaced tanks UST sy stems in Indian country 36.2% 950 systems b Approximately 72.4 percent of systems in Indian

country are single - walled. Analysis assumes midpoint of time horizon until all unit s are replaced (year 10 , 50 percent of universe affected).2 - 10

Exhibit 2 - 4 **Potential Number A**  **nd Type O**  **f Units Affected B**  **y Each Regulation**
**Regulatory Change Universe**  **Proportion of Total**  **Universe Affected**  **Annually Number of** 

**Potentially Affected**  **System s**  **(Annual)** a **Assumptions** Threshold for pipe replacement rather than repair UST sy stems in Indian country 6.0% 158 systems b Piping replaced every five years, where 60.3 % are

single - walled. Analysis assumes midpoint of time horizon until all unit s are replaced (year 10 , 50 percent of universe affected). Under - dispenser containment for all new dispensers UST sy stems in Indian country 48.5% 1,273 systems b Approximately 97 percent of systems require under dispenser containment. Analysis assumes midpoint of time horizon until all unit s are replaced (year 10 , 50 percent of universe affected). a Figures in this column are calculated assuming that the average number of UST systems per facility is approximately 2.74, per “Summary of Key Data from State Public Record Postings,” E 2 , Incorporated, Task Order No. 1010

– Subtask A1 - 06C Technical Directiv e No. 36, Table 1. 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 ye ar 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 Proposed Rule**  Many states currentl y have baseline regulations consistent with one or more requirements in the proposed regulations. As a result, only a portion of the universe of potentially affected facilities will be required to change practices to comply with each regulatory

c hange. Whereas **Exhibit 2 -**  **4** displays the number of units that may potentially be subject to each requirement, **Exhibit 2 -**  **5** identifies , b ased on EPA’s review of baseline state regulations , the number of units that will be subject to these requirements as a r esult of the proposed regulations. For nearl y all requirements , some portion of the potentially affected universe is already i n compliance with the proposed regulatory

changes. Alternative Option 2 will affect the smallest number of s ys tems. Among the specific changes proposed, walkthrough inspections and spill prevention equipment tightness testing affect the largest number of UST sy stems in all scenarios . 18 In contrast, several regulatory changes (e.g., closure of irreparable lined tanks and pipe repl acement requirements) are likel y to affect only

a small number of s ys tems. The distribution of incremental impacts of the rule also depends on the distribution of baseline technologies across states with different baseline regulations. Facilities and sy stems in states with fewer current regulations may bear a greater proportion 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 n ot available at the state level. For example, it is possible that facilities 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

18 Walkthrough inspections are estimated at a facility level; the number of UST systems estimated as affected by these regulations is 440,817.2 - 11

percent age of s ys tems using ATGs are available only at the national level. As a result, the regulatory

scenarios in Chapters 3 ( Compliance C ost s) and Chapter 4 (Benefits and Cost Savings) reflect regulatory changes required b y an “average” facility in a state un der the proposed rule, assuming that all sy stems 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 . Exhibit 2 - 5 **Estimated S ystems Not Currently Regulated B**  **y States**

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

**Affected by Preferred**  **Option System**  **s**

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

**Affected by Option**  **Alternative Option 2**  **Release Prevention** Walkthrough inspections 223,157 (facilities) 160,882

(facilities) 160,882

(facilities) 141,505

(facilities) Overfill prevention equipment tests a 611,449 378,672 421,137 378,672 Spill prevention equipment tests a 550,304 460,696 550,304 460,696 Interstitial integrity tests 106,747 76,157 93,538 N/A Spill prevention equipment test after repair 38,216 37,847 37,847 37,847 Overfill prevention equipment test after repair 30,572 29,844 29,844 29,844 Interstitial integrity test after repair 20,443 14,585 14,585 14,585 Eliminate flow restrictors in vent lines for all new tanks and when overfill devices are replaced b 39,744 32 , 46 0 32 , 46 0 N/A **Release Detection** Operability test s – ATG 205,814 201,874 201,874 201,874 Operability test s – interstitial monitoring 114,781 112,584 112,584 112,584 Operability test s – line leak detection 168,440 165,216 165,216 165,216 Operability test s – me chanical LLDs 335,628 335,628 335,628 335,628 Operability test s – groundwater and vapor monitoring 31,612 31,612 31,612 31,612 Eliminate groundwater and vapor monitoring as release detection methods c 31,612 31,612 31,612 31,612 Add SIR/CITLD to regulations with performance criteria 2,972 2, 882 2, 882 2, 882 Change release detection leak rate probabilities

– ATG 205,814 N/A 201,874 N/A Change release detection leak rate probabilities

– LLD 168,440 N/A 165,216 N/A Change release detection leak rate probabilities

– SIR 11,887 N/A 11,659 N/A Change release detection leak rate probabilities

– CITLD 154,360 N/A 151,406 N/A Response to interstitial monitoring alarms 14,814 10,569 10,569 10,569 Remove deferral for emergency generator tanks 18,343 11,704 11,704 N/A **Other** Remove deferral for airport hydrant fuel distribution sy stems 162 d 9 7 9 7 N/A Remove deferral for UST systems with field - constructed tanks 239 10 2 10 2 N/A Require notification of ownership change 22,502 (facilities) 3 , 2 65

(facilities) 3 , 2 65

(facilities) 3 , 2 65

(facilities) Closure of lined tanks that cannot be repaired according to a code of practice 84 59 59 59 Requirements for determining compatibility 611,449 611,449 611,449 611,449 **E PAct**  **- related Provisions**  Operator training 958 (facilities) 958

(facilities) 958

(facilities) 958

(facilities) Secondary containment - new and replaced tanks b 950 95 0 95 0 95 0 Threshold for pipe replacement rather than repair e 158 0 0 02 - 1 2

Exhibit 2 - 5 **Estimated S ystems Not Currently Regulated B**  **y States**

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

**Affected by Preferred**  **Option System**  **s**

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

**Affected by Option**  **Alternative Option 2**  Under - dispenser containment for all new dispensers b 1,273 1 , 27 3 1 , 27 3 1 , 27 3 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 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 th e total cost of these requirements grows as the number of affected systems or facilities increases. c Universe affected phases in over five years. d The universe of potentially affected units is 162 systems, or 1,296 tanks (at eight tanks per system). e 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 C ost**  **s 3.1**  **Introduction** This chapter describes EPA’s anal ys is of the social cost s associated with the proposed rule. OMB guidance suggests that an anal ys is that relies on measures of opportunity cost and willingness to pay

provides a holistic basis for assessing the total cost of any proposed rule. 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 b y the government, changes in producer and c onsumer surplus reflect the true cost to society of adopting a set of proposed measures. For this regulatory

impact analy sis, EPA uses a combination of direct compliance costs and state oversight costs to approximate social cost s. In this context, compli ance costs represent a reliable indicator of social cost s 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 signific ant changes to operations at the facility level. In addition, the facilities affected b y the rule are distributed with relative geographic uniformity for consumers and producers.
 Given the small per- facility costs of the rule (less than $900 for the avera ge facility , as documented in this chapter), closures or changes in market structure represent an unlikel y response to the rule. Therefore, it is unlikely that significant changes to production or consumer behavior will affect social cost s.  The short - and long - run impacts of the rule are not likely to differ significantly . Testing and inspection requirements under the rule may offer some opportunities 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. For these reasons, compliance costs are likel y to be a reasonable approximation for social cost s 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 proposed rule is presented in Chapter 5 , and a sensitivity

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 proposed rule beyond 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 c onsequence of the proposed rule. 1 Throughout this chapter, the anal ys is distinguishes 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 leve l of a facility that owns several USTs; ty picall y 2.74 times the sy stem - level cost to reflect UST ownership by the average facility .  Unit costs: System - level costs related to a particular proposed requirement. For example, the requirement to test spill prevention equipment after repairs has a unit cost of approximately

$130. Calculation of t otal incremental compliance costs for UST facilities reflects two key components: identification of specific measures necessary for compliance at individual facilities , and calculation of the cost s 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, exi sting state regulations, and anticipated responses to the proposed 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, ins pection, 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 configurati ons – for example, airport hydrant fuel distribution systems or UST sy stems with field - constructed tanks

– while others are consistent across all sy stem ty pes. We calculate the compliance costs of the proposed rule by measuring three factors: the regulati ons already in place in each state (i.e., baseline regulations); the proportion of facilities or UST sy stems with specific technologies (i.e., the portion of sy stems that require specific typ es of upgrades or tests); and the unit cost to comply with each p roposed element of the proposed regulation . Chapter 2 of this regulatory impact analy sis discusses the baseline state regulations and the proportion of facilities affected b y this rule (see **Exhibit 2 -**  **5** ) . 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** : we estimate that overfill prevention tests will be a new requirement for 378,672 s ys tems, and spill prevention equipment tests will be a new requirement f

or 460,696 sy stems. These requirements could together affect as few as 460,696 sy stems if all s ystems that are affected b y overfill prevention testing are a subset of the sy stems that are affected by spill prevention testing. In the absence of additional i nformation, it

1 For this proposed rule, EPA does not specifically attempt to m easure 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 $ 44,450 in 2009 dollars. See August 24, 1988 RIA entitled Regulatory Impact Analysis of Technical Standards for Underground Storage Tanks , Volume 1, page ES - 7, Exhibit ES - 1 ).3 - 3

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 UST s to a numb er smaller than the entire universe. Further, EPA’s review of state data suggests that facilities in all states will be subject to some cost under the proposed rule. 2 Consequently , when considering the total cost of the proposed rule on a facility or UST s ys tem basis, we divide the total cost by the number of facilities or s ys tems in the entire universe. 3 **3.2.1 Categories**  **of Compliance Cost**  **s Analyzed**  This analy sis includes the following categories of compliance costs: operations and maintenance costs; capital costs; and implicit capital costs, or “time value of money costs” associated with earlier detection of equipment failure. Because the proposed rule focuses on operational improvements, operations and maintenance costs constitute the majority of th e compliance costs identified in this analy sis. These costs are relativel y frequent, recurring costs that mainly

involve a service activity . Operations 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 assume s that UST facility owners and operators pay in full for these costs when they occur (that is, they

do not obtain financing and pay

over ti me) . 4 Because the proposed rule does not focus on broad equipment requirements, capital costs represent a small portion of the total compliance costs for this proposed rule. Capital costs address the purchase and installation of new equipment , such as ins talling a new double - walled UST or under- dispenser containment. Total capital costs ty picall y include installation labor and initial service required to ensure the new equipment is fully functioning. EPA assume s that UST owners and operators finance these compliance cost s over the life of the equipment; all capital costs are calculated over a regulatory time horizon of 20 years. 5 The following examples characterize the three typ es of capital cost calculations that are relevant to this regulatory anal ys is:

2 The discounted cost per UST system ranges from less than $100 in one state to ov er $700 , with costs in 54 states and territories falling between $200 and $450.

3 We address uncertainty in the distribution of t echnology and costs with a set of s ensitivity analyses in section 3.5 of this chapter, and we consider the economic impacts of different distributions of costs in Chapter 5.

4 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.

5 E PA assumes that owners and operators amortize all capital costs over a 20 - ye ar expected regulatory horizon to be consistent with the 20 - year expected lifetime of an UST system . For equipment with a lifetime shorter than 20 years, EPA assumes that a proportion of the universe is affected per year; for example, EPA assumes that piping is replaced every five years, such that one - fifth of the universe must replace it every year. The central analysis uses a seven percent discount rate, consistent with Office of Management and Budget Circular No. A - 94, Revised, October 29, 1992. Other discount rates are considered in Chapter 7 .3 - 4

**Existing equipment replacements:** An UST sy stem owner or operator must upgrade an existing sy stem with new equipment to comply with a requirement under the proposed rule (e.g., facilities with EGTs may be required to install release detection equipment if the deferral is removed). The incremental compliance cost is the total cost of the new equipment and installation (including removal of existing equipment). 6 Any additional (incremental) operation and maintenance costs are also included. **New equipment requirements:** An operator is installing new or replacement equipment as an ordinary

business expense. Under baseline regulations, E quipment A is compliant . However, new regulations require a higher level of compliance for new tank sy stem s that can be satisfied at lowest cost by Equipment B . The incremental comp liance cost to the owner of the equipment is the additional cost (if any) of purchasing and installing and 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 technologies 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 years. EPA estimates that the baseline three - year inspection, on average, identifies a hypothetical repair or replacement cost of $100 associated with certain equipment. Under the proposed rule, a new annual test would dis cover the repair sooner and require repair or replacement one - to - two years earlier. While the repair expense is the same, the proposed rule generates a time value of money cost b y requiring an expenditure sooner. 7 EPA estimates that the proposed regulati ons 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

6 This approach may overst ate costs, as it does not account for the age of existing equipment. Owners and operators typically plan for ne w capital expenditures over the lifetime of existing equipment, recording depreciation as operations consume its usefulness over time. If an owner or operator is close to replacing certain equipment and is required to replace that equipment when the propos ed rule 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 co nservatism that results in a higher cost. Using this approach, these annualized one - time costs comprise approximately one percent of annual costs under Preferred Option and Alternative 2. Under Alternative 1, the requirement of three - year spill prevention equipment replacement increases these costs to 38 percent of total costs.

7 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 issues.3 - 5

 ATGs, interstitial monitors, vapor monitors, groundwater monitors, and line leak detectors. The proposed rule 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. In addition, in some cases, testing will occur more frequentl y than baseline inspections and therefore may

identify issues that occur between inspections. This analysis therefore considers two ty pes of increased capital costs. First, EPA assumes that additional testing required under the proposed rule will identify malfunctions that prior inspections would have overlooked, and will therefore mandate additional compl iance costs related to repair and replacement of equipment . Second, some baseline compliance costs will occur earlier than they would in the baseline, creating time value of money costs as owners and operators forgo the use of funds for other investments. The time value of money cost of incurring a repair sooner is estimated at seven percent, consistent with OMB’s discount rate. See Appendix D for the detailed cost methodology . **3.2. 2**  **Estimatio n**  **o f**  **System -**  **Level Compliance Cost**  **s for**  **UST Systems** E stimates o f sy stem - level compliance cost s for each part of the proposed rule are based on publicly

available data on equipment, installation, and testing costs, information collected from professionals in industries that provide relevant equipment and services , and EPA ’s professional judgment. 8 Costs are estimated to occur according to the rule 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 year. Labor costs used in this analy sis reflect labor- hour estimates from EPA Information Collection Request 1360.08 for specific inspection and recordkeeping tasks. The cost of labor is based on Bureau of Labor Statistics (BL S) labor rates for skill categories appropriate to the retail sector and technical requirements of the proposed rule. 9 In particular, EPA selected l abor rates that correspond to categories of labor employed in the retail motor fuels sector (NAICS 447). The anal ys is adjust s these rates using a 12 percent overhead factor and a fringe benefits factor of 28.3 percent, which is specific to service - providing industries. 10 For requirements that are likel y

8 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 proposed rule .

9 Labor rates re flect the May 2008 Occupational Employment and Wage publication by the Bureau of Labor Statistics. See Appendix D for the particular Standard Occupational Classification codes used. EPA does not use the costs in its Information Collection Request 1360.08 b ecause those labor rates reflect all industries and do not represent typical costs to the majority of UST ow ners and operators. 10 The overhead factor of 12 percent comes from Office of Management and Budget Circular No. A - 76, p. D - 7. Although this rate re flects 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 Bureau of Labor Services, Employer Costs for Employee Compensation, September 2009. S ee Table 10: All workers, service -providing industries.3 - 6

to be satisfied by

third - parties, such as testing, labo r costs are included in the costs of those services. In addition, specific requirements under the proposed regulation are addressed as follows:
 For proposed regulatory changes that take effect over time as equipment ages, the anal ys is assumes a constant rate of equipment replacement, and calculates a constant annual pay

ment for the net present value of 20 years of replacements. Appendix D discusses the specific assumptions made in the analy sis.
 To identify

the total s ys tem - level compliance cost of removin g deferrals from airport hydrant fuel distribution systems (AHFDSs) and field - constructed tanks (FCTs) , the anal ys is calculates both the direct costs of removing the deferral of these sy stems from the regulations under 40 CFR Part 280, and the additional c osts of complying with other new regulatory options that apply

to all s ys tems (and become relevant when deferrals are removed). Under the proposed regulations, 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 specific 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 i s calculates the cost of complying with specific proposed changes that apply to the broader universe of conventional UST sy stems and become relevant when the deferral is removed. Removal of the deferral under the proposed rule means that EGTs must comply w ith release detection requirements at 40 CFR Part 280, Subpart D. **Exhibit 3**  **- 1**  presents the unit - level costs for the individual requirements in the proposed rule. 11

11 See Appendix D for a detailed discussion of these costs.3 - 7

Exhibit 3 - 1 **Unit Costs For The Requirements In The Proposed Rule** i **ONE -**  **TIME a**  **($) O&M** 

**($) REPAIR/REPLACEMENT** 

**COST b**  **($) Release Prevention**  Walkthrough inspections $0.00 $25.36 $0.13 Overfill prevention equipment test s $0.00 $214.69 $11.00 Spill prevention equipment test s $0.00 $125.68 $3.34 Int erstitial integrity tests $0.00 $310.25 $126.10 Spill prevention equipment test after repair $0.00 $125.68 $0.00 Overfill prevention equipment test after repair $0.00 $214.68 $0.00 Interstitial integrity test after repair $0.00 $157.78 $0.00 Eliminate flow restrictors in vent lines for all new tanks and when overfill devices are replaced $394.20 $0.00 $0.00 **Release Detection** Operability test s – ATG $0.00 $56.17 $1.12 Operability test s – interstitial monitoring $0.00 $9.93 $1.16 Operabili ty tests

– electronic LLDs $0.00 $56.17 $2.15 Operability tests

– me chanical LLDs $0.00 $0.00 $0.77 Eliminate groundwater and vapor monitoring as release detection methods $6 8.89 c Add SIR/CITLD to regulations with performance criteria $10.00 $0.00 $0.00 Change release detection leak rate probabilities

– ATG $2,431.37 - $8.00 f $0.00 Change release detection leak rate probabilities

– LLD $412.39 - $12.00 f $0.00 Change release detection leak rate probabilities

– SIR $15.00 - $2.40 f $0.00 Change release detection leak rate probabilities

– CITLD $80.00 - $1.60 f $0.00 Response to interstitial monitoring alarms $0.00 $78.19 $0.00 Remove deferral for emergency generator tanks h $298.56 $172.74 **Other** Remove d eferral for airport hydrant fuel distribution sy stems $11,281.20 $229,837.14 $0.00 Remove d eferral for UST systems with field constructed tanks $12.83 $ 55 , 474 . 81 $0.00 Require notification of ownership change $0.00 $12.83 $0.00 Closure of lined tanks that cannot be repaired according to a code of practice $35,499 d $0.00 $0.00 Requirements for determining compatibility $0.00 $1.89 g $0.00 **EPAct -**  **related Provisions** Operator training $265.89 $130.80 $0.00 Secondary containment - new and replaced tanks $7,890.18 $0.00 $0.00 Threshold for pipe r eplacement rather than repair e $0.00 $0.00 $0.00 Under - dispenser containment for all new dispensers $1,795.11 $0.00 $0.00 a One - time costs presented here are not shown in annual terms. For the purposes of estimating total annual costs for the proposed rule, these one - time expenditures are annualized over 20 years at a seven percent interest rate. b 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, th ese 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 inter stitial integrity testing, which occur every three years under the Preferred Option, represent the repairs and replacements over three years. In addition, TVM costs for3 - 8

Exhibit 3 - 1 **Unit Costs For The Requirements In The Proposed Rule** i **ONE -**  **TIME a**  **($) O&M** 

**($) REPAIR/REPLACEMENT** 

**COST b**  **($)** walkthrough inspection s represent the repairs and replacements identified on a monthly basis to match the requirement under the Preferred Option. See Appendix D for additional details. c Th e cost presented here is the average unit cost for the phasing out of groundwater and vapor monitoring and the phasing in of alternative compliance method s. It includes elements of annualized one - time costs and O&M costs. d We assume that this cost occurs in full for the systems that require closure of lined tanks in a given year. e We assume all facilities exceeding the 50 percent threshold for piping replacement would opt to replace piping in the baseline; costs are therefore zero. See Appendix C for detailed calculations. f Operations and maintenance costs associated with the adjustment of release detection leak rate probabilities is negative because operators avoid costly testing related to false alarms. g This includes an annualized cost of $0.01 related to the cost of storing record s for the life of the UST system . h Because different subsets of EGTs are subject to different requirements, we present average unit cost s that divide the total cost t o 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. i Cost es timates were derived using a seven percent discount rate . **3. 3**  **Calculation o**  **f Incremental Compliance Costs**  This analy sis estimates the compliance cost of the proposed rule 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 universe of sy stems employing specific baseline technologies, as well as E PA’s assessment of the baseline regulatory requirements in each state and territory . 12 The anal ysis categorizes compliance costs into one time or operations and maintenance costs and amortizes one - time compliance costs over the 20 - ye ar regulatory

time horiz on. 13 As a final step, it discounts annual compliance costs associated with several of the proposed changes to delayed compliance horizons specified in the proposed rule (e.g., overfill operability testing must be performed within three years of the date th e proposed rule becomes effective). To calculate compliance costs, EPA employ s a number of assumptions , some of which likely overstate compliance costs:
 **Time value of money costs** . This anal ys is does not assume that the rate at which problems occur in UST sy stems will decline as a result of the proposed rule. 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. Th is likely causes the analy sis to overestimate the costs of the proposed rule.

12 For details regarding these assumptions, see Appendix B . 13 See footnote 5 for an explanation of the use of a 20 - year time horizon.3 - 9

 **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 over two percent per ye ar since 1999. 14 Assuming this pattern continues, future annual compliance costs due to the proposed rule are likely to be lower than estimated in this analy sis. However, in absence of other data we assume that new installations and upgrades will offset all closures, and that annual compliance costs will remain constant. Impacts of assum ing an alternative baseline universe of UST sy stems that decline s over time are discussed in Sections 3.3.1 and 3.4.1.
 **Full compliance.** EPA assumes that 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 rule implements the required measures and consequentl y incurs the related costs.
 **Timeline ss of repairs.**  EPA assumes that all issues identified through testing of equipment will be properly addressed through immediate repair or replacement of equipment. This may

overstate costs if owners or operators fail to address identified issues in a timel y fashion.
 **Date on which costs are incurred.** EPA assumes that all costs are incurred at the beginning of the ye ar in which each requirement of the proposed rule becomes effective. This may

overstate costs that occur at the end of the time frame. These comb ined 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 af fect 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 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 operability

testing, spill prevention equipment tightness testing, and interstitial integrity testing after repair would concentrate costs on these systems in ways that

14 See U.S. Environmental Protection Agency, Office of Underground Storage Tanks, Semi - Annual Report of UST Performance Measures for Fiscal Year s 1999 and 2009 . In addition, industry data indicates that in recent years, the net decline in the population of facil ities with UST systems has been roughly 1.4 percent per year.3 - 10 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 highl y- 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 that 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 assess es compliance costs associated with the proposed rule 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 2010 to an exponential one - phase decay function, which appears to most accurately represent the observed behavior of the UST sy stem universe over time. 15 St eep declines in the universe of UST systems 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. 16 , 17 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 586,021 UST systems by year 20 under this alternative baseline. 18 The number of UST sy stems affected under this alternative baseline is approximately 97 percent of the size of the original baseline, which assumes a constant universe size of 611,449 UST sy stems over this period. As a result, compliance costs associated with the proposed rule are onl y marginall y smaller under this alternative baseline. See Appendix J for additional details.

15 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 systems 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 r epresents the function’s half - life. ( See Appendix J for additional details. ) 16 See Wayne Geyer, “Where Has Our Petroleum Storage Capacity Gone?” Steel Tank Institute, https://www.steeltank.com/LinkClick.aspx?fileticket=h8g9YO5y%2BfI%3D&tabid=108&mid=502 . This source indicates simultaneous trends in increasing average tank sizes as well as decreasing UST system totals.

17 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 ar eas may necessitate more retail motor fuel outlets .

18 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.3 - 11

**3. 4**  **Results o**  **f Assessment**  **o f**  **Comp liance Costs**  **Exhibit 3 -**  **2** presents a summary of the estimated incremental compliance costs associated with the proposed rule b y type of UST system affected. In all options, it is clear that the category

of conventional UST sy stems will bear the largest prop ortion of compliance costs under the proposed rule. While compliance costs associated with removal of deferrals from EGTs 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 preferred and alternative options described in Chapter 1 **.** Exhibit 3 - 2 **Total Annual Compliance Costs Of The Proposed Rule For UST System**  **s Affected** c **Option Preferred O**  **ption ($**  **mi llions**  **) Alternative 1** 

**($ mi**  **llions )**  **Alternative 2**

**($ mi**  **llions )**  Conventional UST systems a $180 $360 $120 Emergency Generator Tanks (EGT s ) b $2.2 $2.2 $2.1 Airport Hydrant Fuel Distribution Systems (AHFDS s ) $18 $120 $0.0 UST systems with Field - Constructed Tanks (FCT s ) $4.6 $33 $0.0 **Total $200**  **$520 $120**  a Conventional UST systems include all systems that are not AHFDSs, FCTs, or EGTs. b Costs for EGTs are lower in Alternative 2 because operability testing is performed every 3 years versus every year under other options. c Cost estimates were derived using a seven percent discount rate . **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 Alternative 1 and the Preferred Option is related to release prevention; specificall y, due to the combination of walkthrough inspections, overfill prevention equipment tests, spill prevention equipment tests, and interstitial integrity tests, and testing after repairs. These requirements account for 5 5 percent and 73 percent of total compliance costs, respectivel y . This variation is largel y dependent on the testing or inspection frequency required under each alternative.
 **Removal of deferrals for AHFDSs a nd UST systems with FCTs**  : Removal of deferrals for AHFDSs and FCTs is accompanied by tightness testing of equipment that varies in frequency

depending on the alternative. This tightness test drives most of the variation in compliance costs. Under the Prefe rred Option, total costs for these s ys tems are $2 3 million, or approximately 11 percent of total compliance costs; under Alternative 1, total costs are $1 53 million or3 - 12 approximately 29 percent of total compliance costs. 19 Alternative 2 maintains the deferrals and therefore has no incremental compliance cost.
 **Operability tests for release detection methods** : The Preferred Option and Alternative 1 each require annual testing of the operability of release detection sy stems, while Alternative 2 requires these tes ts every three years. Operability testing costs approximately $ 2 1 million under both the Preferred Option and Alternative 1, though they constitute 11 percent of total compliance costs for the Preferred Option and only four percent of total compliance cost s for Alternative 1. Three - ye ar testing under Alternative 2 (which includes operability tests for groundwater and vapor monitoring since they would remain as release detection methods) costs approximately $8 million, or about seven percent of total compliance costs for that option. In total, these categories represent approximately 90 percent of the total compliance costs for each option. In addition, the adjustment of release detection leak rate probabilities under Alternative 1 constitutes most of the remaining 10 percent of costs for that option . EPA determines average compliance costs per s ys tem by dividing the total cost of the proposed rule b y the total 611,449 sy stems in the regulated universe of conventional UST sy stems and EGTs. EPA’s anal ys is s hows that the compliance cost for this proposed rule is $300 per s ys tem, or approximately $89 0 per ty

pical facility

among motor fuel retailers, the sector with the highest average number of UST s ys tems per facility . 20 **Exhibit 3 -**  **4** presents the same total cos ts as **Exhibit 3 -**  **3** but shows the number of s ys tems affected and the cost of the requirement per affected sy stem. The costs in this exhibit 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 proposed rule.

19 In addition, Alternative 1 calls for tightness testing at a lower leak rate. See Appendix A for details . 20 The $300 estimate excludes costs associated with removal of deferrals for AHFDSs and UST systems with FCTs , assumes 2.97 systems per retail motor fuel facility, and includes the cost of $23 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 5.3 - 13 Exhibit 3 - 3 **Annu al Compliance Costs D**  **ue T**  **o T**  **he Proposed Rule**  **For UST System s Affected**  **All values in $ thousands** i **Description Preferred Option**  **Alternative 1 Alternative**  **2 C**  **apital Cost (** **Annualized )**  **O&M Total Cost**  **C apital Cost**  **( Annualized** **) O&M**  **Total Cost C**  **apital Cost (** **Annualized )**  **O&M Total Cost**  **Release Prevention** Walkthrough inspections $0.0 $46,000.0 $46,000.0 $0.0 $46,000.0 $46,000.0 $0.0 $14,000.0 $14,000.0 Periodic testing of:

- Overfill prevention equipment

- Spill prevention equipment a

- Interstitial integrity $0.0 $87,000.0 $87,000.0 $0.0 $230,000.0 $230,000.0 $0.0 $78,000.0 $78,000.0 Testing after repairs to spill and overfill prevention equipment, and interstices b $0.0 $13,000.0 $13,000.0 $0.0 $8,700.0 $8,700.0 $0.0 $13,000.0 $13,000.0 Elimination of flow restrictors in vent lines for all new tanks and when overfill devices are replaced $1,200.0 $0.0 $1,200.0 $1,200.0 $0.0 $1,200.0 N/A N/A N/A **Subtotal**
**– Release Prevention**  g **$1,200.0 $146,000.0**  **$147,200.0 $1,200.0**  **$284,700.0 $285,900.0**  **$0.0 $105,000.0**  **$105,000.0 Release Detection**  Operability tests for release detection methods $0.0 $21,000.0 $21,000.0 $0.0 $21,000.0 $21,000.0 $0.0 $7,9 00.0 $7,9 00.0 Eliminate groundwater and vapor monitoring as release detection methods $2,000.0 $2,3 00.0 N/A N/A N/A Add SIR/CITLD to regulations with performance criteria $2.7 $0.0 $2.7 $2.7 $0.0 $2.7 $2.7 $0.0 $2.7 Remove deferral for emergency generator tanks c $31 0.0 $1,900.0 $2,200.0 $31 0.0 $1,900.0 $2,200.0 $31 0.0 $1,800.0 $2,100.0 Change release detection leak rate probabilities d N/A N/A N/A $53,000.0 - $3,800.0 $50,000.0 N/A N/A N/A Response to interstitial monitoring alarms $0.0 $830.0 $830.0 $0.0 $830.0 $830.0 $0.0 $830.0 $830.0 **Subtotal**
**– Release Detection**  g **$31 2.7**  **$23,730.0 $26,032.7**  **$53,31 2.7**  **$19,930.0 $76,**  **3 32**  **.7 $31**  **2.7 $10,5**  **30.0 $10,8**  **32.7 Other**  Remove deferral for airport hydrant fuel distribution systems e $85.0 $18,000.0 $18,000.0 $85.0 $120,000.0 $120,000.0 N/A N/A N/A3 - 14 Exhibit 3 - 3 **Annu al Compliance Costs D**  **ue T**  **o T**  **he Proposed Rule**  **For UST System s Affected**  **All values in $ thousands** i **Description Preferred Option**  **Alternative 1 Alternative**  **2 C**  **apital Cost (** **Annualized )**  **O&M Total Cost**  **C apital Cost**  **( Annualized** **) O&M**  **Total Cost C**  **apital Cost (** **Annualized )**  **O&M Total Cost**  Remove deferral for UST systems with field - constructed tanks $0.0 $4,600.0 $4,600.0 $0.0 $3 3,000.0 $ 3 3,000.0 N/A N/A N/A Require notification of ownership change $0.0 $42.0 $42.0 $0.0 $42.0 $42.0 $0.0 $42.0 $42.0 Closure of lined tanks that cannot be repaired according to a code of practice f $0.0 $2,100.0 $2,100.0 $0.0 $2,100.0 $2,100.0 $0.0 $2,100.0 $2,100.0 Requirements for determining compatibility $11.0 $1,200.0 $1,200.0 $11.0 $1,200.0 $1,200.0 $11.0 $1,200.0 $1,200.0 **Subtotal**
**– Other**  g **$96.0 $25,942.0**  **$25,942.0 $96.0**  **$15 6,342.0**  **$15 6,342.0**  **$11.0 $3,342.0**  **$3,342.0 EP**  **Act -**  **related Provisions** Operator training $23.0 $120.0 $140.0 $23.0 $120.0 $140.0 $23.0 $120.0 $140.0 Secondary containment $9 20.0 $0.0 $ 9 20.0 $ 9 20.0 $0.0 $ 9 20.0 $ 9 20.0 $0.0 $9 20.0 **Subtotal**
**– EPAct**  **- related**  **Provisions** g **$ 9**  **43.0 $120.0**  **$1,0 60.0**  **$ 9**  **43.0 $120.0**  **$ 1,0**  **60.0 $9**  **43.0 $120.0**  **$1,0 60.0**  **Subtotal g**  **$2, 6**  **00.0 $200,000.0**  **$200,000.0 $56,000.0**  **$46 0,000.0**  **$51 0,000.0**  **$1, 3**  **00.0 $120,000.0**  **$120,000.0 Additions for new units (beyond**  **those included above) h**  $4.6 $0.0 $4.6 $750.0 $0.0 $750.0 $4.6 $0.0 $4.6 **Total g**  **$2, 6**  **00.0 $200,000.0**  **$200,000.0 $57,000.0**  **$46 0,000.0**  **$520 ,000.0**  **$1, 3**  **00.0 $120,000.0**  **$120,000.0**3 - 15 Exhibit 3 - 3 **Annu al Compliance Costs D**  **ue T**  **o T**  **he Proposed Rule**  **For UST System s Affected**  **All values in $ thousands** i **Description Preferred Option**  **Alternative 1 Alternative**  **2 C**  **apital Cost (** **Annualized )**  **O&M Total Cost**  **C apital Cost**  **( Annualized** **) O&M**  **Total Cost C**  **apital Cost (** **Annualized )**  **O&M Total Cost**  a Alternative 1 calls for spill prevention equipment replacement every three years. For analytical convenience, we annualize th e cost of replacement over three years and incorporate it as an O&M cost. b Costs fall under Alternative 1 compared with the Preferred Option because replacement of spill prevention equipment every 36 months will eliminate the need for repairs to such equipment. c 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 testing on all EGT syste ms. See Appendix D for details. O&M c osts for emerg ency generator tanks are lower in Alternative 2 because operability testing is performed every 3 years versus every year under other options . d Operations and maintenance costs associated with the adjustment of release detection leak rate probabilities is negative because operators avoid costly testing related to false alarms. These avoided costs are the only items included in the O&M for this requirement. e Airport hydrant fuel distribution systems include a capital cost because tanks associated with airpo rt hydrant fuel distribution systems without existing ATGs are assumed to install ATGs to comply with the requirement. UST systems with field - constructed tanks without existing ATGs are assumed to conduct annual precision tightness tests to comply with th e requirement . See Appendix A for details. f Although the closure of lined tanks represents a capital cost, we consider it an operations and maintenance cost as a modelin g convenience. See Appendix D for details. g Total may not add correctly due to rounding. h As a simplifying assumption, EPA assumes that UST systems enter and exit the universe at a constant annual rate, such that th e total number of UST systems in the universe does not change. We assume that operations and maintenance costs associated wi th these systems offset each other, as the number of entries equals the number of exits; however, new systems entering the un iverse will still incur incremental capital costs associated with certain requirements (e.g., a new emergency generator tank 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 associated with new units for all but the following requirements: elimination o f flow restrictors for new tanks, requirement of secondary containment for new tanks, and requirement of under - dispenser containment for new dispenser systems. i Cost estimates were derived using a seven percent discount rate .3 - 16

Exhibit 3 - 4 **Discounted A**  **nd Annualized Cost P**  **er System Affected B**  **y Requirement** g **Description a**  **Preferred Option Alternative**  **1 Alternative**  **2 Cost per**  **System f**  **Systems**

**Affected Cost per** 

**System f**  **Systems**

**Affected Cost per** 

**System f**  **Systems**

**Affected Release Prevention**  Walkthrough inspections $104 440,817 $104 440,817 $37 387,724 Periodic testing of: b $299 290,891 $681 335,750 $180 432,682

- Overfill prevention equipment

- Spill prevention equipment c

- Interstitial integrity Testing after repairs to spill and overfill prevention equipment, and interstices [d] $164 82,276 $106 82,276 $164 82,276 Eliminate flow restrictors in vent lines for all new tanks and when overfill devices are replaced $37 32,460 $37 32,460 $0 32,460 **Release Detection** Operability tests for release detection methods b $121 176,934 $121 176,934 $52 1 5 2 , 915 Eliminate groundwater and vapor monitoring as release detection methods $63 31,612 $74 31,612 $0 31,612 Add SIR/CITLD to regulations with performance criteria $1 2,882 $1 2,882 $1 2,882 Remove deferral for emergency generator tanks e $188 11,704 $188 11,704 $181 11,704 Change release detection leak rate probabilities b N/A N/A $251 197,532 N/A N/A Response to interstitial monitoring alarms $78 10,569 $78 10,569 $78 10,569 **Other** Remove deferral from airport hydrant fuel distribution systems $188, 545 97 $1,193, 506 97 N/A N/A Remove deferral from UST systems with field - constructed tanks $ 45 , 344 102 $ 32 7 ,8 61 102 N/A N/A Require notification of ownership change $5 8,946 $5 8,946 $5 8,946 Closure of lined tanks that cannot be repaired according to a code of practice $35,499 59 $35,499 59 $35,499 59 Requirements for determining compatibility $2 611,449 $2 611,449 $2 611,449 **EPAct -**  **related Provisions** Operator training $5 4 2,625 $ 5 4 2,625 $ 5 4 2,625 Secondary containment $415 2,224 $ 415 2,224 $ 415 2,224 a Requirements that apply at the facility level are converted to a system basis using a conversion factor of 2.74 systems per f acility. b Because the number of system s 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. c Alternative 1 calls for spill prevention equipment replacement every three years. For analytical convenience, we annualize th e cost of replacement over three years and incorporate it as an O&M cost. d Costs fall under Alternative 1 compared with the Preferred Option because replacement of spill prevention equipment every 36 months will eliminate the need for repairs to such equipment. e 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 testing on all EGT systems . See Appendix D for details. C osts for emergency generator tanks are lower in Alternative 2 because operability testing is performed every 3 years versus every year under other options. f Itis important to note that these unit costs cannot be summed to obtain a total cost per system because nearly all systems are already in compliance with some requirements of the proposed rule. g Cost estimates were derived using a seven percent discount rate.3 - 17

**3. 4.1**  **Assessment o**  **f Compliance Costs**  **u nder the Alternative Baselin**  **e Scenario**  **Exhibit 3 -**  **5** presents total annual compliance costs of the proposed rule under the alternative baseline discussed in Section 3.3.1 . Annual compliance costs are slightly less than those presented in **Ex hibit 3**  **- 2**  , re flecting 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. Exhibit 3 - 5 **Total Annual Compliance Costs Of The Proposed Rule Us**  **ing an Alternative Baseline**  **For UST Systems Affected** d **Option Preferred O**  **ption ($**  **mi llions**  **) Alternative 1** 

**($ mi**  **llions )**  **Alternative 2**

**($ mi**  **llions )**  Conventional UST systems a $17 0 $3 5 0 $1 1 0 Emergency Generator Tanks (EGT s ) b $2.2 $2.2 $2.1 Airport Hydrant Fuel Distribution Systems (AHFDS s ) $18 $120 $0.0 UST systems with Field - Constructed Tanks (FCT s ) $4.6 $33 $0.0 **Total** c **$200 $5**  **0 0**  **$120** a Conventional UST systems include all systems that are not AHFDSs, FCTs, or EGTs. b Costs for EGTs are lower in Alternative 2 because operability testing is performed every 3 years versus every year under other options. c Totals may not add exactly due to rounding. d Cost estimates were derived using a seven percent discount rate . **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 proposed rule under an alternative estimate of labor costs. Specificall y, the analysis evaluates the eff ect 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 tested for overfill prevention equipment operability, tightness o f spill prevention equipment, and interstitial integrity. 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 p arts 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.
 High - end and low - end estimates of possible compliance costs for interstitial integrity testing. EPA’s estimate of costs associated with interstitial integrity testing assumes a certain distribution of technologies, each of which carries a different testing cost. Variation in this distribution of technologies among3 - 18 facilities can significantly affect the estimates of compliance costs associated with interstitial integrity

testing. **3. 5**  **.1. Compliance Cost**  **s of**  **t he**  **Proposed Rule Using Alternative Estimates o**  **f Labor Rates,**  **Overhead Costs, a**  **nd Fringe Benefits**  For conventional UST facilities, EPA has selected labor, overhead, and fringe benefits rates that best reflect a “ty pical” UST facility . These labor rates are representative of skilled labor costs at motor fuel retailers, which own and operate roughly 80 percent of the universe of UST s ys tems. The use of these rates has a material impact on the estimated compliance cost of the proposed rule because they drive the operations and maintenance costs associated with requirements for walkthrough inspections and operability tests. To evaluate the impact of alternative labor rates on total compliance cost estimates, EPA considered two alternative scenarios. The first is consistent with the OUST Information Collection Request 1360.08 and reflects labor rates reflective of economy- wide average wa ges, benefits, and overhead. This represents a high - end estimate because it reflects industries with highl y skilled labor requirements and benefits (e.g., law firms). 1 The second uses specific labor categories and costs representative of retail motor fue l establishments, but assumes that lowerlevel staff may

complete walkthrough inspections. 2 **Exhibit 3 -**  **6** presents the results for the three labor category scenarios. While one - time costs are not affected by

the change in labor rates, operations and mainten ance costs in the high cost scenario are roughly $ 10 0 million higher than EPA’s primary estimate, totaling $3 0 0 million rather than $2 0 0 million (an increase of 50 percent). The majority of this increase is due to higher operations and maintenance costs re lated to walkthrough inspections and operability tests. In contrast, the low - end labor- rate cost estimate totals approximately $ 180 million, roughly

$ 2 0 million (or 1 0 percent) lower than EPA’s central estimate. In addition to lower benefits and labor rate s, this estimate assumes that clerical - level personnel will perform walkthrough inspections. This is consistent with remarks by UST experts, who indicated these tasks were most likel y to be completed b y non - technical workers. For AHFDSs and sy stems with F CTs, EPA uses constant industry average labor rates across all scenarios.

1 These labor categories were reported in OUST Information Collection Request 1360.08, dated October 24, 2007. We used revised labor rates from those categories to reflect 2009 conditions . However, documentation in this analysis 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.

2 Engineering experts consulted for this analysis suggest that walkthrough inspections are most likely to be performed b y gas station clerks or service attendants, not technical personnel.3 - 19

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

**Description Proposed Rule**  **Lower Estimate**  **($ thousan ds)**  **a Primary Estimate** 

**used for Analysis ($**  **thousands) b**  **Upper Estimate**

**($ thousands) c**  **Release Prevention** Walkthrough inspections d $23,000 $46,000 $120,000 Periodic testing of:

- Overfill prevention equipment

- Spill prevention equipment

- Interstitial integrity $87,000 $87,000 $87,000 Testing after repairs to spill and overfill prevention equipment, and interstices $13,000 $13,000 $14,000 Elimination of flow

restrictors in vent lines for all new tanks and when overfill devices are replaced $1,200 $1,200 $1,200 **Subtotal -**  **Release Prevention $124,200**  **$147,200 $222,200**  **Release Detection** Operability tests for release detection methods $20,000 $21,000 $42,000 Eliminate groundwater and vapor monitoring as release detection methods e $2,100 $2,000 $270 Add SIR/CITLD to regulations with performance criteria $3 $3 $3 Remove deferral for emergency generator tanks $2,100 $2,200 $3,200 Change release detection leak rate probabilities $0 $0 $0 Response to interstitial monitoring alarms $830 $830 $830 **Subtotal -**  **Release Detection $25,033**  **$26,033 $46,303**  **Other** Remove deferral for airport hydrant fuel distribution systems f $18,000 $18,000 $18,000 Remove deferral for UST systems with field - constructed tanks f $4,600 $4,600 $4,600 Require notification of ownership change $19 $42 $74 Closure of lined tanks that cannot be repaired according to a code of practice $2,100 $2,100 $2,100 Requirements for determining compatibility $910 $1,200 $2,500 **Subtotal**
**– Other**  **$25,629 $25,942**  **$27,274 EPAct**  **- related Provisions**  Operator training $130 $140 $230 Secondary containment $920 $920 $920 **Subtotal -**  **EP Act**  **- r**  **elated Provisions $1,050**  **$1,060 $1,150**  **Subtotal g**  **$180,000 $200,000**  **$300,000 Additions for new units (beyond those included above)**  **h** $5 $5 $5 **Total g**  **$180,000 $200,000**  **$300,000**3 - 20

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

**Description Proposed Rule**  **Lower Estimate**  **($ thousan ds)**  **a Primary Estimate** 

**used for Analysis ($**  **thousands) b**  **Upper Estimate**

**($ thousands) c** 
a Lower Estimate relies on BLS Industry- Specific Occupational Employment and Wages , NAICS 447000 - Gasoline Stations , May 200 8 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 200 8 for Technical for operability testing ( 49 - 2094 Electrical and Electronics Repairers, Commercial and Industrial Equipment) and Legal ( 23 - 1011 Lawyers ) . Benefits rate is 24.6 percent of wages, as reported in BLS Employer Costs for Employee Compensation, September 2008. Table 10: Trade, transportation, and utilities - retail trade . Overhead rate is 12 percent from OMB Circular A- 76, p. D - 7. Assumes that service station attendants perform walkthrough inspections, consistent with information from experts consulted for this analysis. b Primary Estimate relies on BLS Industry- Specific Occupational Employment and Wages , NAICS 447000 - Gasoline Stations , May 200 8 for : Managerial ( 11 - 0000 Management Occupations (Major Group) ) ; Technical ( 53 - 1021 First - Line Supervisors/Managers of Helpers, Laborers, and Material Movers, Hand) ; and Clerical ( 43 - 9061 Office Clerks, General ) ; and BLS National Occupational Employment and Wages , May 200 8 for Technical for operability testing ( 49 - 2094 Electrical and Electronics Repairers, Commercial and Industrial Equipment) and Legal ( 23 - 1011 Lawyers ) . Benefits rate is 28.3 percent (BLS Employer Costs for Employee Compensation, September 2009. Table 10: All workers, service - providing industries). Overhead rate is 12 percent from OMB Circular A - 76, p. D - 7. c Upper Estimate relies BLS Em ployer Costs For Employee Com pensation , September 2008 for Managerial (Table 9, Management, Professional, and Related); Technical and Technical for operability testing (Table 10, Professional and T echnical S ervices ( S ervice Industries) ); and Clerical (Table 11, Office and Administrati ve S upport); and BLS National Occupational Employment and Wages , May 200 8 for Legal ( 23 - 1011 Lawyers ) . Overhead rate used is 67 percent from OUST Information Collection Request 1360.08 from October 24, 2007. d Walkthrough inspections under the Lower Estimate 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/Managers of Helpers, Laborers, and Material Movers, Hand. UST experts consulted for this analysis suggest that walkthrough inspections are most likely to be performed by gas station clerks or ser vice attendants, not te chnical personnel (e.g. 3rd -party contractors). e Baseline activities for operators of tanks that use groundwater or vapor monitoring include activities such as recording of monthly measurements, which rely on technical labor . By eliminating groundwater and vapor monitoring as release detection methods under the proposed rule , these activities will no longer be required. As a result , increasing labor rates reduces the incremental costs of the proposed rule. f The labor rate used for these types of system is the latest ICR labor rate, except for a component of the Operator Training requirement, which uses the United States Air Force labor rate for pay grade E - 6 over 3. g Totals may not add exactly due to rounding. h 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 operations and maintenance costs associated with these systems offset each other, as the numb er 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). F or modeling purposes, we account for these new units in the “Additions for new units.” The costs shown reflect the capital costs associated with new units for all but the following requirements: elimination of flow restrictors for new tanks, requirement o f secondary containment for new tanks, and requirement of under dispenser containment for new dispenser systems. i Cost estimates were derived using a seven percent discount rate .3 - 21

**3. 5**  **.2 Sensitivity Analysis**  **of Distribution**  **o f**  **Technologies Tested f**  **or Overfill Operability,**  **Spill Prevention Equipment**  **Tightness, a**  **nd Interstitial Integrity**  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 different states. As a result, the cost anal ys is assumes that technologies are distributed uniforml y across all states and territories. For s ys tems that require testi ng for overfill operability, spill prevention equipment tightness, and interstitial integrity, actual compliance costs may differ substantially

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 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 , i f 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 ass umption of uniform distribution of technologies, EPA performed a bounding analy sis of the two extreme cases of distribution. **Exhibit 3 -**  **7** reports the possible range of values for scenarios where compliance cost is the lowest (i.e., facilities are located in states that already satisfy the proposed rule), the actual model scenario based on uniform distribution, and the scenario in which compliance costs are highest. Variation between the minimum and maximum cost scenarios totals approximately $ 21 million, or eleven percent of the total compliance costs estimated for the rule. 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 C ost Scenarios**  **F or Technologies Tested**  **F or Overfill** 

**Operability, Spill Prevention Equipment Tightness, A**  **nd Interstitial Integrity**b **Regulatory change Lower**  **($ m illions)**  **Prim ary**  **($ m illions)**  **Upper ($ m** **illions)** Overfill operability testing a $23 $23 $23 Spill prevention equipment testing $54 $55 $62 Interstitial integrity testing $0 $9 $13 **Total $77**  **$87 $98**  a Because the entire universe of systems will be required to test overfill operability, EPA does not expect any uncertainty rel ated to the locations of affected systems. b Cost estimates were derived using a seven percent discount rate .3 - 22

**3. 5**  **.3 Sensitivity Analysis**  **of Compliance Costs**  **for In**  **terstitial I**  **ntegrity T**  **esting** EPA’s estimates of compliance costs associated with interstitial integrity tests are weighted to exclude tanks and piping that are continuously monitored using vacuum, pressure, or liquid - filled methods. 3 Inaddition, tanks using continuous interstitial monitoring sensors are excluded. For the purpose of this anal ys is, EPA assumes that five percent of tanks and 9 0 percent of piping with interstices will require such testing. 4 Costs may vary to the extent that the actual number of facilities with these ty pes of equipment differs from these estimates. To establish a range of possible values, EPA investigated the scenarios outlined in **Exhibit 3 -**  **8** . For relatively large changes in EPA’s choices of parameters for universe affected, total costs for this proposed change vary between $5 million and $1 2 million. This uncertainty of $7 million represents four p ercent of the total estimated compliance costs of the rule.

Exhibit 3 - 8 **Se nsitivity Analysis O**  **f Interstitial Integrity Testing Universe Estimate**  **Universe Affected Discounted Cost**  **($ m illions)**  Lo wer Tanks 5% $5

Piping 50% Primary Tanks 5% $9

Piping 90% Upper Tanks 50% $12

Piping 95% Note: Cost estimates were derived using a seven percent discount rate . **3. 5**  **. 4**  **Summary o**  **f Sensitivity**  **F indings**  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 proposed rule: plausible selections for labor rates may reduce preferred option costs by approximately

$ 2 0 million ( 10 percent) or increase them by $ 10 0 million ( 50 percent). Separatel y, EPA has identified potential variation of approximately eleven percent related to the distribution of technologies involved in overfill operability testing, integrity testin g of interstitial areas, and spill prevention equipment tightness testing, and approximately four percent related to assumption s regarding interstitial

3 Secondary containment areas include tank and piping interstitial areas as well as containment sumps used as part of the piping secondary containment or interstitial monitoring. Under the proposed rule, EPA will allow the following exceptions to interstitial integrity tests: (1) Tanks: Owners and operators using continuous interstitial mo nitoring on their tanks will not be required to perform periodic interstitial integrity test s; (2) Piping: Owners and operators using vacuum monitoring, pressure monitoring, or liquid - filled interstitial space monitoring on their underground piping will not be required to perform periodic interstitial integrity tests; and (3) Containment Sumps

– Owners and operators using containment sumps which have two walls and continuously monitor the interstitial space between the walls for releases are not required to perform interstitial integrity tests.

4 An interstitial integrity test is performed in the space between tank walls, pipe walls, or in a secondary containment sump area and ensures the area being tested has integrity and will contain a leak.3 - 23

integrity testing. We note that each of these sensitivity anal ys es reflects variation compared with the primary

estimates of costs presented throughout this chapter. These analy ses only

illustrate the uncertainty surrounding certain elements of the proposed rule. The estimates presented in the body of this chapter represent reasonable, conservative central tendencies for the costs of the proposed rule. **3.6 Administrative Compliance Costs**  In addition to compliance costs related to the operation of UST sy stems, the proposed rule will also impose certain administrative costs on affected entities. We outline these costs below. **3. 6.1**  **State Government Administrative Compliance Costs**  The proposed rule imposes new Underground Storage Tank program administration requirements on state government agencies. 5 Specifically , state government agencies will incur costs as sociated with new notification requirements, and costs associated with obtaining and reading the regulations. This section reviews state government costs associated with these activities. Costs associated with obtaining and reading the regulations 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 per hour from OUST’s ICR 1360.08 ) . Inaddition, based on the ICR, we assume that the reporting and recordkeeping burden for states to apply for State Program Approval (SPA) is approximately

28.5 hours (using the clerical labor rate for states of $26 per hour). The total compliance cost in nominal terms is therefore approximately $205,000; the annualized compliance cost assuming the 20 - ye ar regulatory time horizon is approximately $19,000. 6 States that already require ownership change notifications will incur compliance costs associated with the se activities . 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 compliance costs for this activity assume a typical nominal recordkeeping cost of $30 per facility, based on OUST’s ICR 1360.08 ; compliance costs assume the use of existing recordkeeping s ys tems. Eight states and territories do not currently have recordkeeping requirements consistent with the proposed

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

6 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 $18,000.3 - 24

regulation. 7 These eight states and territories will incur approximately $100,000 per year, due to an annual turnover rate of approximately 10 percent in UST facility ownership. Lastl y, e ach state agency will incur costs to process the one - time notifications of existence for EGTs, AHFDSs, and FCTs. State government compliance costs for this activity assume a typical nominal recordkeeping cost of $30 per facility, based on OUST’s I CR 1360. 08 ; compliance costs assume the use of existing recordkeeping s ys tems. Based on the estimated universe of EGTs, AHFDSs, and FCTs, the total state processing cost in nominal terms is approximately

$ 560 ,000; the annualized processing cost assuming the 20 - y ear regulatory time horizon is approximately $ 53 ,000 . Total state government administrative compliance costs sum to $17 0,000 per year. Note that under alternative baseline assumptions, these costs would decline b y a very small percentage (roughly 2 percent) as the universe of affected s ys tems declines. These costs are reflected in **Exhibit 3 -**  **10** . **3. 6.2**  **Costs to**  **Regulated Universe to**  **Review Regulations** This analy sis assumes that all facility operators in the universe will be required to read the proposed rule in order to comply with it. For conventional USTs and EGTs, we estimate that reading and understanding the proposed rule will require 4.75 hours of labor from a manager at each facility . This equates to a one - time cost of approximately $244 for each facility , or $54 million. This is equivalent to an annual cost of $5.1 million under each proposed option. For FCTs and AHFDSs, we assume these costs are subsumed in the management costs for these sy stems (see Appendix A for details). **3.7 Summary** 
**– Total**  **Annual Compliance C**  **ost s**  In total, EPA estimates that the Preferred Option for the proposed rule will produce incremental costs of approximately $2 1 0 mil lion per year compared to the current regulatory baseline. **Exhibit 3 -**  **9** summarizes these costs per category . Regardless of the option , conventional UST sy stems will incur over 65 percent of these costs. Costs to AHFDSs and FCTs comprise approximately 11 percent and 29 percent of total costs under the Preferred Option and Alternative 1, respectivel y .

7 These states are Arizona, Georgia, Idaho, North Carolina, North Dakota, Nevada, and South Carolina. The Virgin Islands will also incur these costs.3 - 25

Exhibit 3 - 9 **Total Annual**  **Compliance C ost**  **s** e ,f

**Category Preferred**  **Option ($ m** **illions) Alternative 1** 

**($ mi** **llions) Alternative 2** 

**($ m illions)**  Conventional UST systems a $180 $360 $120 Emergency Generator Tanks (EGT s ) b $2.2 $2.2 $2.1 Airport Hydrant Fuels Distribution Systems (AHFDSs) $18 $120 $0.0 UST systems with Field - Constructed Tanks (FCTs) $4.6 $33 $0.0 Cost to Owners/Operators to Read Regulations $5.1 $5.1 $5.1 State Government Administrative Costs c $0.2 $0.2 $0.2 **Total Annual**  **Compliance C ost**  **s** d ,f **$210 $520**  **$130** a Conventional UST systems include all systems that are not AHFDSs, FCTs, or EGTs. b Costs for EGTs are lower in Alternative 2 because operability testing is performed every 3 years versus every year under other options. c The costs for UST systems directly owned or operated by local, state, and federal government entities are included i n the estimates of compliance costs within the other categories. Costs shown here reflect the administrative costs for state governments to read the regulations, apply for state program approval, process notifications of ownership changes, and proces s one - time notifications of EGT, AHFDS, and FCT existence. d Totals may not add up due to rounding. e Cost estimates were derived using a seven percent discount rate. f 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 proposed rule’s social costs. See Chapter 3.1 for further discussion. **Limitations of Compliance C**  **ost Analysis** While EPA has taken steps to present a sound analy sis of compliance cost s, it recognize s that certain assumptions and limitations are inherent to this assessment. **T ank configuration**  : This analysis assume s that a particular configuration of equipment represents the average US T sy stem. This assumption affects the compliance cost s of the proposed rule because s ystems with different configurations (e.g., more sumps per tank) could have different costs. Misch aracterizing this configuration may under- or overstate total costs as w ell as sy stem - level cost s. **System -**  **level compliance cost**  **s** : 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 assume d to provide the most accurate available data at the time of this proposal . EPA recognizes that these data sometimes reflect only a small number of sources, and are therefore characterized b y uncertainty. As a result of these uncertainties, the precise cost of the proposed rule may differ from the estimate generated b y EPA’s anal ys is. The above sensitivity anal ys es, though not strictl y additive, suggest that the outside range of cost uncertainty is approximately 5 0 percent from EPA’s central estimates. Moreover , becau se EPA’s estimate is framed by a number of conservative assumptions (outlined in section 3.3), it is unlikely that this analy sis understates the costs of the proposed rule significantly .3 - 26

**3.7 .1**  **Summary**
**– Total**  **Annual Compliance C**  **ost s**  **u nder the Alternative**  **Baseline Scenario**  Under the alternative baseline universe assumption described in Section 3.3.1 , EPA estimates that the Preferred Option for the proposed rule will produce incremental costs of approximately

$2 0 0 million per year compared to $210 million i n annual costs in the primary anal ys is . **Exhibit 3 -**  **10** summarizes these costs per category . Regardless of the option , conventional UST sy stems will incur over 65 percent of these costs. Costs to AHFDSs and FCTs comprise approximately 11 percent and 30 percent of total costs under the Preferred Option and Alternative 1, respectivel y . Exhibit 3 - 10 **Total Annual**  **Compliance C ost**  **s Us**  **ing an Alternative Baseline**  e ,f

**Category Preferred**  **Option ($ m** **illions) Alternative 1** 

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

**($ m illions)**  Conventional UST systems a $170 $350 $110 Emergency Generator Tanks (EGT s ) b $2.2 $2.2 $2.1 Airport Hydrant Fuels Distribution Systems (AHFDSs) $18 $120 $0.0 UST systems with Field - Constructed Tanks (FCTs) $4.6 $33 $0.0 Cost to Owners/Operators to Read Regulations $5.1 $5.1 $5.1 State Government Administrative Costs c $0.2 $0.2 $0.2 **Total Annual**  **Compliance C ost**  **s** d **$200 $510**  **$120** a Conventional UST systems include all systems that are not AHFDSs, FCTs, or EGTs. b Costs for EGTs are lower in Alternative 2 because operability testing is performed every 3 years versus every year under other options. c The costs for UST systems directly ow ned 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 regulations, apply for s tate program approval, process notifications of ownership changes, and process one - time notifications of EGT, AHFDS, and FCT existence. d Totals may not add up due to rounding. e Cost estimates were derived using a seven percent discount rate. f 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 proposed rule’s social costs. See Chapter 3.1 for further discussion.4 - 1



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

pically measured in two way s: as “social benefits” that 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 behavior” (e.g., obtaining replacement water supp lies). Ideally , 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 WT P when direct estimates of WTP are unavailable. In the context of this rule, EPA examines social benefits and separatel y considers the avoided costs associated with reduced need for cleanup of releases because reliable WTP estimates for the value of an av oided cleanup are not available, and because avoided costs represent a real economic cost savings. This chapter describes the approaches used to evaluate avoided remediation ( cleanup ) costs and other benefits. It first outlines several different methods attempted for measuring benefits and cost savings, and describes the final selected method (expert consultation) in detail. Next, it provides a description of monetized cost savings and other benefits, includin g avoided cleanup costs, avoided vapor damage cleanup estimates, avoided product loss, and the value of avoided c ancer risk associated with anticipated reductions in releases and reductions in severity of releases . The chapter then presents a screening - level analy sis of the quantity of groundwater potentially

protected by the regulations. Finally , we provide a qualitative discussion of ecological and other human health benefits. **4. 2**  **Investigation of**  **Empirical Methods for**  **Measuring Benefits and**  **Cost Saving s**  The benefits and cost savings of the proposed rule 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 performance to estimate directl y the changes in releases that could be expected under the proposed rule. This section describes the different data sources and methods considered, and the limitations of each. **4.2.1 Engineering E**  **stimates and**  **Literature** One approach to estimating the benefits of the proposed rule would be to develop an engineering model of the release rates associated with equipment and practices before and after the implementation of the rule requirements. However, this approach would address onl y a small number of the proposed rule components because most of the requirements are not focused on equipment modifications, but instead call for inspections, testing, and maintenance. These are requirements for change s in human behavior, and are not easily measured using equipment testing.4 - 2

This suggests that EPA could best measure benefits empirically by examining studies of how changing frequencies in inspection and testing would lead to different leak rates. Th erefore, EPA conducted a targeted literature review of engineering literature and studies of the effectiveness of testing and inspection programs. We were unable to identify any studies directl y applicable to the proposed UST regulations, but we did identify EPA and published literature on the effects of better inspection and testing rates more generall y. We summarize several key studies below.  **California study of impact of secondary containment on UST system releases (2002):**  **1** 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 s ys tems 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 likely 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 regulation, its conclusions suggest that regulations focusing on effective facility- level inspections may be well - targeted.
 **National Resea rch Council study of effectiveness of state vehicle emissions**  **inspection and maintenance programs (2001): 2**  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 proposed regulations in that both require owners/operators to undertake routine inspections and undertake 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. 3 While the results do not provide a quantitative basis for estimating the impacts of the proposed rule, the study s uggests that mandatory

inspection programs can reduce emissions.
 **Environmental Results Program (ERP) data: 4**  Data from several environmental results programs (ERPs) show a statistically significant

1 Th omas M. Young 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

2 Committee on Vehicle Emi ssion Inspection and Maintenance Programs, Evaluating Vehicle Emissions Inspection and Maintenance Programs, National Academy Press, 2001.

3 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 conducted.

4 See: Vermont Department of Environmental Conservation, “Final Report

– Environmental Results Project

– Vermont: Underground Stora ge Tank Facilities,” March 17, 2010; Rhode Island Department of Environmental Management, Underground Storage Tank Environmental Results Program, Final Report, Tables I - IV; U.S.4 - 3 improvement in verified compliance as a result of a combination of selfcertification, technical assistance, and inspections. While these programs do not isolate the impact of specific regulatory changes, the results are consistent with other findings that programs that rely in part on self

- implemented inspecti ons 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 proposed rule. 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 generall y lead to a reduction in environmental impacts. This suggests that some positive impact sho uld be expected from the proposed rule. **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 rules and reported release rates before and after the effective dates of rules similar to the proposed rule. With good quality data, one could combine these rules and reported release rates and isolate the marginal impacts of various components of the proposed rule. To collect detailed data at the facility level, howeve r, 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 changes 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. Specificall y, we identified and evaluated data from the following sources:  **Leak Autopsy Reports:** In2004 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). 5

 **State Regulatory and Report Data** : State programs are required to report 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 Environmental Protection Agency, “Evaluation of Three Environmental Results Pr ograms (ERPs),” August 31, 2009; and U.S. Environmental Protection Agency, “ERP States Produce Results,” December 2007.

5 U.S. Environmental Protection Agency, Office of Underground Storage Tanks, “Evaluation of Releases from New and Upgraded Underground S torage 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,” draft, March 2005 .4 - 4 period. 6 Inaddition, EPA obtained information about state regulatory programs and the effective dates for state requirements that are similar to the requirements of the proposed rule. 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. A key

data concern was the relationship between states with low - frequency inspections and states 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 verification (i.e., s tate 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 conductin g the anal ys is, however, EPA identified several fundamental problems with available data that limit the value of a regression analy sis approach . These include significant data availability and reliability issues related to the limited number of observatio ns and programmatic changes among states that prevent the isolation of regulation - related impacts . Specificall y:  C onsistent, accurate release data are not available . It is likel y that measurement error exists in the recording of confirmed releases acro ss 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 anal ys is . In addition, state inspections 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 only states with a high frequency of inspections for inclusion in the analy sis , the interaction between inspection frequency and degree and effectiveness of regulation creates sample selection problems (i.e., states with high er release rates due to limited regulation may also be states that do not conduct frequent inspections and th erefore have less reliable data). 7 Therefore, normal regression

6 Data can be ac cessed at http://www.epa.gov/oust/cat/camarchv.htm . 7 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 o f this , we use inspection frequency as an indicator of reliable data.4 - 5 properties do not hold, and results may be biased in way s that do not allow for a reliable interpretation. 8  M any

regulations consistent with the proposed rule are currentl y 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 regulat ory

indicators will proxy

for other relevant characteristics of that state.  Study

design is limited by

available data. Ideally , an anal ys is of the effectiveness of UST leak prevention regulations would employ observations from a large number of states ove r a time period th at includes years before and after regulations were in place. Such “panel” data would allow for identification of impacts temporally

and spatially . Panel data would also allow for fixed - effects estimation, which controls for any unobser ved 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 fro m 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 w ould be expected to be full y 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 regulati ons. 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 reliabl y draw conclusions about the impacts of regulations on re leases, 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 preventi on regulations prevents identification of robust relationships between individual regulations and the number of releases per year. 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 regulatio ns to reduce the rate of UST releases. 9

8 For example, seve ral regr essions found an apparent positive , statistically significant relationship between secondary containment requirements and the number of releases per year . However, em pirical data from Florida indicate that secondary containment contributes to release reductions of as much as 50 percent.

9 Exhibit 6 in Appendix F shows the degree to which the actual number of releases in Florida and California in 2009, 200 5, 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 was statistically significant from zero, Califo rnia had between 56 and 63 percent fewer releases than would be expected based on the regression analysis. In 2002 - 2006, when the period in which the dummy variable for Florida was 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, these4 - 6

**4. 3**  **Final Methodology**  **f or**  **Assessment o**  **f Positive Impacts**  **: Expert Consultation** To estimate the individual effects of each proposed regulatory change, and in light of the absence of applicable engineering models and limited empirical state data, we resorted to a consultation with five experts with experience in regulation of USTs and implementation of state inspection programs. The remainder of this chapter describes in detail the final methodology used to identify

red uctions in releases associated with the proposed rule, and the calculation of cost savings associated with those avoided releases. To ensure that the assessment of regulatory effects relied on broad expertise in regulatory implementation, EPA developed a p ool 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, several experts were interviewed an d five experts were identified. Each of the identified experts has over 20 years of experience in the regulation, assessment, and/or remediation of underground storage tanks, including direction of state programs and implementation of regulations similar to some aspects of the proposed regulation. EPA provided an identical set of written questions separately 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, and an explanation of the factors EPA considered when including and excluding expert feedback. Appendix H provides the questions distribute d to experts and their responses. O ne of the five experts did not provide input consistent with EPA’s analy tical methods, and as a result his quantitative estimates were not usable . Specifically , his 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. 10 We therefore believe the opinions of the remaining four experts provide the best available data on the expected impact of the proposed rule. **Avoided Costs as a Measure of Beneficial Impacts** Avoided remediation costs provide the basis for a substantial porti on of the beneficial impacts associated with the proposed rule . Avoided remediation costs represent cost savings that accrue to owners, operators and public entities charged with remediating releases at regulated facilities. 11 While avoided remediation co sts are not a direct measure of total willingness to pay 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.

10 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.

11 Chapter 5 provides a mo re detailed discussion on the potential positive effect of the proposed rule on state financial assurance funds.4 - 7

for environmental improvements, and are therefore not equivalent to social benefits, they represent real economic cost savings due to reduced demand for baseline remediation. 12 **Calculation of Annual P ositive Impacts**  The anal ys is presents the positive effects of the proposed rule as a constant, recurring, annual value for analy

tical convenience. The timing of the positive impacts of the rule is uncertain for several reasons:
 As shown in **Exhibit 1 -**  **2** in Chapter 1, the proposed 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 du e to the proposed rule. 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 proposed rule 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 necessaril y 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 proposed regulations will have a uniform annual impact , with beneficial impacts realized on the last 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 the same rate as installation and adjust those impacts so that they are constant over time. 13 **4. 3**  **.1 A** **voided Remediation**  **Costs** This section explains how EPA arrives at its estimates of avoided remediation costs. 14 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 proposed rule.

12 Economi sts 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 .

13 See Appendix I for detailed explanation of this methodology. 14 We refer to avoided cleanup costs and avoided remediation costs interchangeably throughout this document.4 - 8

**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 general ly 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; 15

 Large site extent with soil contamination; and
 Large site extent with water contamination. 16 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** ) . 17 Remediation costs associated with groundwater remediation are generally higher than costs for soil remediation . A dministrative, response, and oversight costs were provided by New Hampshire, and remediation costs reflect an average of the costs provided by New Hampshire and Utah. 18 , 19

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

16 While no specific definition exists for a large site, the LUST Autopsy survey instruments used by the states generally define large sites as those with contamination that extend s beyond the extent of construction excavation. In addition, EPA classified sites with off - site contamination as large sites. 17 U.S. Environmental Protection Agency Office of Underground Storage Tanks, “Evaluation of Releases from New and Upgraded Underground Storage Tank Systems,” draft, August 2004 .

18 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 financial assurance funds to pay for LUST remediation. E ach state UST program office rece ived a questionnaire requesting data on typical cleanup costs broken out by the four general release ty pes ; New Hampshire, New Mexico, South Carolina, Utah and Virginia provided responses . New Ham pshire 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 costs. Virginia and South Carolina were unable to provide the detail required for this analysis , as neither state wa s able to break out costs by the extent of release (i.e., large or small ).

19 New Mexico data are excluded from the calculation for two reasons. First, large - extent groundwater cleanup cost estimates from New Mexico are m

uch hi gher 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 (3,958 UST systems as of September 30, 2009). 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 averag e avoided costs of remediation.4 - 9

Exhibit 4 - 1 a **Remediation Costs B y**  **Release Extent** 

**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) b $0 $0 $500 $3,700 Ty pical response cost (e.g., alerting and sending personnel, assessments and planning, immediate actions to stop the release ) b $10,000 $10,000 $10,000 $10,000 Ty pical remediation cost c $14,800 $103,000 $98,500 $409,500 Ty pical oversight cost (e.g., monitoring) b $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 The costs presented for administrative, response, and oversight costs are based on New Hampshire data only. c 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 reasons. 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 typ e of sites that resulted in this high estimate of costs. Second, New Mexico has a relatively small number of UST systems (3,958 UST systems as of September 30, 2009). As a result, New Mexico’s costs may be atypical and could skew results to overstate avo ided 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. EPA then used the average c ost 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 release sources identified in the draft 23 - state Autopsy Report, the probability

of a release by

LUST category . 20 Using the cost data from **Exhibit 4**  **- 1**  , EPA estimates a weighted average avoided cost per release size by multiplying the cost per site by the probability

of each release typ e. These are summed across the categories to obtain the weighted average cost b y release source. 21 , 22

20 Office of Underground Storage Tanks, “Evaluation of Releases from New and Upgraded Underground Storage Tank Systems

– Peer Revie w Draft,” U.S. EPA, August 2004. Note that these sources include California and Florida relea ses, and may therefore be skewed slightly 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 releases slightly.

21 For more information on this approach and the draft 23 - state Autopsy report , see “Methodology to Estimate Avoided Costs Associated with a Typical UST Leak,” IEc Memorandum to EPA, prepared by Aaron Kamholtz, Neal Etre, and Cynthia Manson, Octo ber 27, 2008 .

22 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 $143,000 (See memo in Appendix I for detai ls) . For reference, ASTSWMO estimates the average cost per site to be roughly $127,000 in 2009. See Association of State and Territorial Solid Waste Management Officials, State Fund Survey Results 200 9 .4 - 10

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

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

**g roundwater**  **c ontam** **ination Large extent,** 

**g roundwater**  **c ontam** **ination Total/** 

**Weighted Average**  Piping Probability 40.50% 22.00% 4.50% 33.00% 100.00% Cost $10,200 $24,300 $5,100 $141,300 $181,000 Dispenser Probability 71.60% 9.70% 5.40% 13.30% 100.00% Cost $18,100 $10,700 $6,100 $57,100 $92,000 Tank Probability 30.70% 17.70% 17.30% 34.30% 100.00% Cost $7,800 $19,500 $19,700 $147,000 $194,000 STP Area Probability 50.00% 31.00% 0.00% 19.00% 100.00% Cost $12,600 $34,300 $0 $81,400 $128,200 Delivery Problems Probability 59.20% 16.80% 1.80% 22.20% 100.00% Cost $14,900 $18,500 $2,100 $95,200 $130,700 Note: Costs shown have been rounded to the nearest hundredth dollar. Sources: 1. U.S. EP A, 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 Environmental 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 proposed rule , experts responded to a common set of questions about potential impacts of the regulatory changes under consideratio n and participated in follow - on discussions on specific areas of uncertainty . Each expert reviewed the proposed requirements and estimated how they would affect the following dimensions of releases: 23 1. Changes in total frequency (number) of annual confirm ed releases; 2. Changes in the number of remaining releases that reach groundwater; 3. Changes in the average quantity released among remaining releases; and, 4. Changes in the average duration of release among remaining releases. Experts had the option of expressing reductions in release size in terms of duration or volume (quantity) of product, depending on how they typically collected and reviewed release data. In addition, experts were given the option of expressing these changes eith er: 1) as a total

23 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 and their distribution across different part s 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 - 11

national estimate that accounted for variation in existing regulation and technology among states and facilities, or 2) as a change applied to a specific 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

optio ns ) and noted s ynergies or dependenc i es 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 w alkthrough inspections: Experts noted that the combination of operability testing 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. As a result, all experts assumed that impacts related to walkthrough inspections reflected trained staff and did not separatel y identify release reductions associated with training. Experts provided separate estimates of impacts for each regulatory requirement. EPA then used these requirement - specific estimates to calculate total avoided costs for the proposed rule. 24 Itis important to note, however, that when considering inter- relationships among regulatory

requirements, experts differed in how they isolated and/or “allocated” impacts acros s specific 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 w as the primary factor). EPA

24 Experts were also asked to provide an estimate of the “total cumulative impact” for the proposed rule in aggregate as well. The analysis then compared the effects of simultaneously applying the requirement specific estimates with their total estimate of the overall effect of the proposed rule. This was performed to verify the experts’ logic and identify areas of overlap or synergy among the regulatory requirements. However, subsequent to receiving responses from experts, EPA made slight modifications to the list of regulatory requirements (e.g., experts were asked to consider impacts of an annual overfill prevention equipment test, but EPA is now proposing 3 - year tests). While EPA was able to adjust the requirement specific estimate of these slight revisi ons based on the sensitivity responses from the experts and follow - up questioning, the original “total cumulative impact” estimates provided by the experts are no longer representative of the current proposed rule as a whole. We note, though, that the ave rage of cumulative estimates wa s generally consistent with (i.e., within 10 percent of) the equivalent requirement - specific impacts.4 - 12

therefore avoids emphasis on the requirement - specific estimates provided by each expert, and considers their results in total. 25 , 26 In general, EPA applies the most conservative estimates presented by the experts and adjusts for the number of affected units where appropriate. In cases where reductions involved a range of values, EPA typ ically selected the low end of the range. Where experts’ comments reflect qualitative assumptions that substantially affect their quantitative esti mates, the anal ys is acknowledges those factors as caveats to estimated rates of release avoidance. To calculate the number of releases completel y avoided as a result of potential regulatory changes, EPA combines the estimated reductions as identified by e xperts with a release distribution based on data from the draft 23 - state Autopsy Report (see Appendix Ifor 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 Preferred Op tion of the proposed rule will avoid approximately 20 percent t o 60 percent of 7,168 annual releases, or roughly 1,400 to 4,300 releases in evaluation ye ar 2009. In addition, as summarized in **Exhibit 4 -**  **4** , of the remaining releases, approximately

330 to 1,100 releases would be reduced in severity (i.e., these releases w ould remain soil contamination only). ) . 27

Exhibit 4 - 3 **Avoided Releases Expert**  **Preferred Option**  **Alternative 1 Alternative 2**  Expert 1 1,400 2,100 610 Expert 2 1,400 1,500 420 Expert 3 1,800 2,000 1,400 Expert 4 4,300 4,600 3,300 **Range 1,400** 
**– 4,300**  **1,500**
**– 4,600**  **420**
**– 3,300**  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. Specifically, Expert 4 verified that he believed the rule would result in avoidance of over half of confirmed releases.

25 Note that EPA carefully examined and reviewed 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.

26 Consistent with the approach adopted for the cost analysis, EPA asked experts to estimate reductions in releases and release severity assuming that owners/ope rators would com ply fully with all new

regulations under the proposed rule. To the extent that non - compliance occurs, both costs and cost savings estimated in this RIA may be overstated. It is also possible that some expert opinions on specific rule i mp acts may not completely capture full compliance (and may therefore understate the impacts of the proposed rule), because the experience of most experts is related to implementing state regulatory programs and one issue encountered has been non - com pliance . However, experts asserted that their estimates approximate full compliance, and we do not therefore attempt to adjust for non compliance in either cost or cost - savings calculations.

27 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 rule takes effect, they will be split 38 percent groundwater and 62 percent soil after the rule.4 - 13 Exhibit 4 - 4 **Avoided Groundwater Contam ination Incidents**  **Expert Preferred Option**  **Alternative 1 Alternative 2**  Expert 1 1,100 1,200 380 Expert 2 470 470 210 Expert 3 330 320 260 Expert 4 560 510 530 **Range 330** 
**– 1,100**  **320**
**– 1,200**  **210 -**  **530** 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. Specifically, Expert 1 verified that he believed the rule would result in a significant number of avoided groundwater releases.
**4.4.1 Avoided Releases**  **Us ing 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 decade s . 28 This is consistent 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 “flattened”

– 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 ye ars, as UST sy stems continue to age, and as new fuel blends 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 proposed rule 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 sy stems as estimated in Chapter 3, Section 3.3.1. This represents a conservative avoided cost scenario because it does not account for the possibility

that aging sy stems or changes in fuel could result in increases in the number of

28 See Appendix J for charts and data so urces that demonstrate these two trends .4 - 14

confirmed releases repo rted , or that the number of UST systems could increase (if, for example, an expanding economy or population growth demands more service locations). To estimate the rate of universe decline, EPA mapped historical data on the number of UST sy stems from 199 1 through 2010 to an exponential one - phase decay function, which appears to most accurately represent the observed behavior of the UST sy stem universe over time. 29 EPA also mapped historical data on the release rate to a similar decay function. 30 Th e s e two function s w ere 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. 31 The cumulative universe of releases over 20 years under this alt ernative baseline is approximately

60 percent of the number of cumulative releases over 20 ye ars 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 an d release rate, are used to estimate the future decline in releases. This compounds the projected decline in releases. **Exhibit s**  **4 -**  **5** and **4 -**  **6** provide a summary of our findings with respect to avoided releases and avoided groundwater contamination events , respectivel y, assuming the alternative baseline releases occur . The alternative baseline results in a reduction of roughl y 40 percent of both avoided releases and avoided groundwater contamination relative to the original baseline. Correspondingl y, in the alternative baseline scenario, approximately 810 to 2,600 releases are avoided under the Preferred Option, compared to 900 to 2,800 under Alternative 1 and 250 to 2,000 under Alternative 2. Under the alternative baseline, there are approximately 200 to 650 avoided groundwater contamination incidents under the Preferred Option, 190 to 700 under Alternative 1, and 130 to 320 under Alternative 2.

29 See Section 3.3.1. 30 To estimate future release rates, weu sed 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. 31 We use release rates to project future num ber of releases (rather than use past trends in the num ber of confirmed releases) for two reasons: F irst, 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 estimate future num ber of releases without the added uncertainty of whether the release trend is truly a single - decay exponential function. I n ad dition, 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 mo re conservative ( lower) avoided remediation cost estimates in the alternative baseline.4 - 15 Exhibit 4 - 5 **Avoided Releases , Alternative Baseline**  **Expert Preferred**  **Option Alternative 1**  **Alternative 2** Expert 1 810 1,200 370 Expert 2 860 900 250 Expert 3 1,100 1,200 810 Expert 4 2,600 2,800 2,000 **Range 810** 
**– 2,600**  **900**
**– 2,800**  **250**
**– 2,000**  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. Specifically, Expert 4 verified that he believed the rule would result in avoidance of over half of confirmed releases.
Exhibit 4 - 6 **Avoided Groundwater Contam ination Incidents, Alternative Baseline**  **Expert Preferred Option**  **Alternative 1 Alternative 2**  Expert 1 650 700 230 Expert 2 280 280 130 Expert 3 200 190 150 Expert 4 330 310 320 **Range 200** 
**– 650**  **190**
**– 700**  **130 -**  **320** 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. Specifically, Expert 1 verified that he believed the rule would result in a significant number of avoided groundwater releases. **4.5 Benefits**  **f**

**rom Avoided Releases**  **a nd**  **Reduced Release Severity** Two sources of avoided costs constitute the majority of quantifiable positive impacts from the proposed rule. First, some costs related to release remediation costs do not occur because a number of releases are altogether avoided. Second, some remaining releases are reduced in severity because of the proposed requirements (e.g., through earlier detection through via walkthrough inspections and improved operability of release detection equipment) . To capture this dimension of avoided costs, the analy sis relies on 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 remediation costs, release prevention and mitigation results in a variety of other beneficial impacts, including:
 Avoided vapor intrusion damages;
 Avoided product loss;
 Human health benefits;4 - 16

 Ecological benefits; and
 Protection of groundwater quality . This section monetizes, quantifies, or otherwise describes 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 by source (i.e. , the part of the UST sy stem that produces the release), and applies the reduction associated with each regulation to the appropriate source to reduce the number of releases avoided b y source. 32 , 33 Each avoided release is v alued according to the weighted average of remediation costs shown in **Exhibit 4 -**  **2** . 34 **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

$ 170 million and $570 under the Preferred Option , while avoided costs amount to between $ 190 million and $610 million under Alternative 1 and between $ 54 million and $440 million under Alternative 2.

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

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

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

**($ m illions)**  Expert 1 $170 $250 $75 Expert 2 $ 180 $190 $54 Expert 3 $230 $250 $170 Expert 4 $570 $610 $440 **Range $170**  **- $570**  **$190 -**  **$610 $54**  **- $440**  Note: Cost estimates were derived using a seven percent discount rate . **4.5 .2**  **Reduction i**  **n Release 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 proposed rule, involve only soil. While this metric does not capture all of the release mitigation effects of the proposed requirements, groundwater avoidance

32 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.

33 We use five system sources to id entify release types: piping, dispenser, tank, sump turbine pump area, and delivery problem s . We then assign each regulation’s effect to source types based on the regulation (e.g. spill prevention equipment tests are assumed to affect releases from delivery problems).

34 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 - 17

is likely to be among the most significant effects of the rule. The difference in remediation costs between soil and groundwater releases is substantial: remediation cost fo r an average groundwater release is approximately $27 0 ,000, while an average soil release costs approximately

$ 70 ,000 to remediate. 35 Remediation costs across release extent and medium contaminated range from $25,250 to $428,200 based on ty pical site remediation costs from New Hampshire and Utah. 36 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. 37 We distribute remaining releases according to the draft 23 - state Autopsy Report results and calculate additional benefits from remediation due to reductions in groundwater contamination following the regulation. We calculate avoided cost s from reduced release severity

by subtracting the cost to remediate all remaining releases after the proposed rule 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 fully- avoide d releases and consider onl y the avoided costs from shifting releases from groundwater to soil. A key limitation of this approach may lead to a conservative estimate of the effects of the proposed rule. Th e anal ysis assumes that the distribution of release s across size (i.e., extent) does not change as a consequence of changes in groundwater contamination. In reality , changes in the likelihood of groundwater contamination are probably (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 all 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 rates of groundwater contamination, and does not consider cost savings associated with smaller soil - only sites. We there fore likel y understate avoided remediation costs . 38 **Exhibit 4 -**  **8** displays EPA’s findings regarding discounted avoided costs due to the mitigation of groundwater incidents. The anal ys is calculates avoided remediation costs by taking the difference between estimated remediation costs before and after the proposed changes are implemented. This difference accounts for both the reduction in groundwater release incidents as

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

36 Release extent is cl assified 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, w hile releases that exte nd beyond property lines are considered large. Extent does not explicitly involve a measure of release volume.

37 See Appendix I for details on the calculation of avoided costs. 38 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 reducing the size of groundwater releases that still reach groundwater or the cost savings associated with reducing the size of soil releases.4 - 18

well as the increase in soil contamination events . 39 EPA estimates that benefits from averted groundwater releases range from approximately $ 61 million to $ 270 million across regulatory options . Avoided costs from reduced groundwater contamination are additive to avoided costs from avoided releases.

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

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

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

**($ m illions)**  Expert 1 $260 $270 $93 Expert 2 $110 $110 $52 Expert 3 $78 $75 $61 Expert 4 $130 $120 $130 **Range $78**  **- $260**  **$75 -**  **$270 $61**  **- $130**  Note: Cost estimates were derived using a seven percent discount rate . **4.5 .**  **3 Total**  **Avoided Remediation**  **Cost s**  **from Avoided**  **Releases and**  **Reduced Release**  **Severity Exhibit**  **4 -**  **9** display s the sum of avoided remediation costs across both avoided releases and mitigated groundwater incidents for all four experts . Because experts with relativel y lower estimates in one of these categories did not necessarily h ave similarly

l ow estimates in the other, the range of total avoided cost s is not the sum of the low and high ranges in **Exhibits 4**  **- 7**  and **4 -**  **8** . Exhibit 4 - 9 **Total Discounted Avoided Rem ediation Costs** 

**Expert Preferred Option** 

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

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

**($ m illions)**  Expert 1 $430 $520 $170 Expert 2 $300 $300 $110 Expert 3 $310 $330 $230 Expert 4 $700 $740 $570 **Range $300**  **- $700**  **$300 -**  **$740 $110**  **- $570**  Note: Cost estimates were derived using a seven percent discount rate . **4.5 .**  **4 Benefits from**  **Avoided Release s**  **and Reduc ed**  **Release Severity under the**  **Alternative Baseline**  **Scenario Exhibits**  **4 -**  **10** and **4 -**  **1 1**  present avoided remediation costs associated with the avoided releases and avoided groundwater incidents shown in **Exhibits 4**  **- 5**  and **4 -**  **6** . In the alternative baseline scenario , avoided release remediation costs range from $100 million to $340 million

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

under the Preferred Option, between $110 million and $370 million under Alternative 1, and between $32 million and $260 million under Alternative 2. Averted groundwater remediation costs, meanwhile, range from $47 million to $160 million under the Preferred Option, $45 million to $160 million under Alternative 1, and $32 million to $77 million under Alternative 2. These alternative estimates represent conservative estimates of the potential value of avoided releases, because they

do not consider possible factors that may l ead to increases in the number of releases reported or the number of UST s ys tems in the future.

Exhibit 4 - 10 **Discounted Avoided Release Rem ediation Costs, Alternat**  **ive Baseline Expert**  **Preferred Option**

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

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

**($ m illions)**  Expert 1 $100 $150 $45 Expert 2 $110 $110 $32 Expert 3 $140 $150 $100 Expert 4 $340 $370 $260 **Range $100**  **- $340**  **$110 -**  **$370 $32**  **- $260**  Note: Cost estimates were derived using a seven percent discount rate . Exhibit 4 - 1 1 **Discounted Avoided Groundwater Rem ediation Costs, Alternative Baseline**  **Expert Preferred Option** 

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

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

**($ m illions)**  Expert 1 $160 $160 $56 Expert 2 $68 $68 $32 Expert 3 $47 $45 $37 Expert 4 $79 $73 $77 **Range $47**  **- $160**  **$45 -**  **$160 $32**  **- $77**  Note: Cost estimates were derived using 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** . As the cumulative release universe in the alternative baseline scenario is roughl y 60 percent of cumulative release s in the original baseline, total avoided costs in the alternative baseline are approximately 4 0 percent lower than they are in the primary anal ys is.4 - 20 Exhibit 4 - 12

**Total Discounted Avoided Rem ediation Costs, Alternative Baseline**  **Expert Preferred Option** 

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

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

**($ m illions)**  Expert 1 $2 60 $ 310 $ 100 Expert 2 $ 180 $ 180 $64 Expert 3 $ 190 $ 200 $ 140 Expert 4 $ 420 $ 440 $ 340 **Range $180**  **- $420**  **$ 180**  **- $**  **440 $**  **64 -**  **$ 340**  Note: Cost estimates were derived using a seven percent discount rate .

**4.5 .**  **5 Avoided Costs**  **b y**  **Proposed Requirement Exhibit 4**  **- 1**  **3** presents overall avoided costs by proposed requirement and regulatory option. The exhibit shows ranges of the avoided costs for each proposed requirement based on experts’ responses to the effects of the individual requirements in the proposed rule. Beneficial impacts are concentrated similarly to costs: the majority

of avoided costs are captured b y walkthrough inspections, overfill prevention equipment te sts , spill prevention equipment tests , interstitial integrity

tests, and operability tests . 40 Estimates in **Exhibit 4 -**  **1 3**  assume that cost savings associated with each regulatory requirement occur one ye ar after the implementation and reflect discounting. Under the Preferred Option, total avoided costs are approximately $ 3 0 0 million to $700 million per year. Avoided costs increase to $ 300 million to $740 million under Alternative 1 , largel y due to more frequent overfill prevention equipment tests and interstitial integrity test s . Avoided costs under Alternative 2 are $ 110 million to $570 million per year, where less frequent walkthrough inspections and no requirement for interstitial integrity tests reduce beneficial impacts by

approximately 19 percent to 65 percent compared to the Preferred Option. We note that the model used by EPA to estimate avoided remediation costs is not designed to measure avoided costs from large - scale releases such as those ty pically associated with FCTs and AHFDSs. We, therefore, do not offer an estimate of avoided costs f or

40 Some proposed requirements, particularly those that target narrow subpopulations of the UST system universe, may generate higher avoided costs than this analysis suggests. Three sources of unce rtainty 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 em phasized that equipment replace ment, 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 impacts to each of the proposed requirements is potentially less accurate than the aggregate estimates of avoided impacts.4 - 21

requirements that appl y t o these sy stems. However, we include a qualitative discussion of these acute events later in this chapter. Exhibit 4 - 1 3 **Total Discounted Avoided Cost B**  **y Proposed Requirement** a, h **Description b**  **, c**  **Preferred Option ($**  **mi llions**  **) A** **lternative 1** 

**($ mi**  **llions )**  **A lternative**  **2**

**($ mi**  **llions )**  **Release Prevention** Walkthrough inspections $94 .0 - $ 570 $93 .0 - $ 550 $44 .0 - $ 480 Periodic testing of:

- Overfill prevention equipment

- Spill prevention equipment

- Interstitial integrity $70 .0 - $ 140 $91 .0 - $ 170 $35 .0 - $ 70 .0 Testing after repairs to spill and overfill prevention equipment, and interstices $ 1.50 - $ 13.0 $ 1.50 - $ 12 . 0 $ 1.50 - $ 13 . 0 Elimination of flow restrictors in vent lines for all new tanks and when overfill devices are replaced $0.170 - $12.0 $0.150 - $12.0 $0 **Subtotal -**  **Release Prevention d**  **$ 260**  **- $660**  **$270 -**  **$670 $9**  **2 .0**  **- $550**  **Release Detection** Operability tests for release detection methods $25.0 - $43.0 $25.0 - $43.0 $8.60 - $17.0 Eliminate groundwater and vapor monitoring as release detection methods Not estimated. See note e . Add SIR/CITLD to regulations with performance criteria $0.140 - $1.80 $0.140 - $1.80 $0.140 - $1.90 Remove deferral for emergency generator tanks $0.530 - $6.20 $0.530 - $6.20 $0.530 - $6.30 Change release detection leak rate probabilities $0 $0 - $21.0 $0 Response to interstitial monitoring alarms $0 - $0.850 $0 - $0.820 $0 - $0.890 **Subtotal -**  **Release Detection d**  **$32.0 -**  **$49.0 $32.0**  **- $70.0**  **$10.0 -**  **$2 4**  **.0 Other**  Remove d eferral for airport hydrant fuel distribution systems Not estimated. See note f . Remove d eferral for UST systems with field - constructed tanks Not estimated. See note f . Require notification of ownership change $0 $0 $0 Closure of lined tanks that cannot be repaired according to a code of practice $0.001 - $0.240 $0.001 - $0.240 $0.001 - $0.250 Requirements for determining compatibility Not estimated. See note g . **Subtotal**
**– Other**  **d $0.001**  **- $0.240**  **$0.001 -**  **$0.240 $0.001**  **- $0.2**  **5 0**  **EPAct -**  **related Provisions** Operator training $0.01 5 - $1.20 $0.015 - $1.10 $0.018 - $1.30 Secondary containment $0.370 - $1.10 $0.360 - $1.10 $0.470 - $1.10 **Subtotal -**  **EPAct -**  **related Provisions d**  **$ 1.00**  **- $2.00**  **$1.00 -**  **$1.90 $1.10**  **- $2.10**  **Total d**  **$ 3**  **0 0**  **- $700**  **$300 -**  **$740 $110**  **- $570**  a For each proposed requirement, this exhibit presents a range of discounted avoided costs. This range represents the lowest avoided cost estimate for the proposed requirement among the four experts and the highest avoided cost estimate for the propo sed requirement among the four experts. b For some requirements, such as removing the deferral for emergency generator tanks, avoided costs under Alternative 2 are higher than under the Preferred Option or Alternative 1. This occurs because: 1) these requirements create groundwater contamination reductions; and 2) fewer releases are altogether avoided under Alternative 2. This combination of factors implies that groundwater reductions have a greater effect under Alternative 2, as they affect a larger n umber of releases. This effect is very small compared to the magnitude of changes in other requirements.4 - 22

Exhibit 4 - 1 3 **Total Discounted Avoided Cost B**  **y Proposed Requirement** a, h **Description b**  **, c**  **Preferred Option ($**  **mi llions**  **) A** **lternative 1** 

**($ mi**  **llions )**  **A lternative**  **2**

**($ mi**  **llions )**  c Some proposed requirements, particularly those that target narrow subpopulations of the UST system universe, may generate higher avoided costs than t

his 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 populatio ns 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. Final ly, experts emphasized that equipment replacement, 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 specif ic impacts to each of the proposed requirements is potentially less accurate than the aggregate estimates of avoided impacts. d Subtotals and totals presented in this table do not represent the sums of the ranges across the proposed requirements b ecause experts with relatively lower estimates fo r one proposed requirement did not necessarily have similarly low estimates for other requirements . Instead, the subtotals and totals shown represent the lowest and highest estimate s among the four experts for each subtotal group and for the total across all proposed requirements . e Experts were not asked to estimate avoided costs resulting from the elimination of groundwater and vapor monitoring. EPA deci ded to include this requirement after consulting with its exp erts. f R eductions 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 types of systems constitute a small portion of total releases, but may be large in volume and can result in significant groundwater impacts. Especially in the case of AHFDSs, even minor problems can create large releases due to the significant pressure under which contents are stored. The model used by EPA to estimate avoided remediation costs is not designed to measure avoided costs fro m very large releases such as those typically associated with AHFDSs and FCTs , and we therefore do not offer an estimate of avoided costs for requirements that apply to these systems. g Experts were not asked to estimate avoided costs resulting from requirements for determining compatibility. EPA decided to in clude this requirement after consulting with its experts. h Cost estimates were derived using a seven percent discount rate . 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 m ore conservative estimate of avoided costs, the possibility remains that the average remediation cost s used in **Exhibit 4 -**  **1 3**  overestimate the positive impacts of the proposed rule if state data provided are not representative of national average remediation costs . In **Exhibit 4 -**  **1 4**  , we therefore estimate the positive effects of the proposed rule using onl y the lowest remediation costs available. 41 As shown in **Exhibit 4 -**  **1 4**  **,** EPA’s estimate of the avoided costs of the proposed rule using the lowest state cost estimates is $ 190 million to $460 million per year under the P referred O ption. This estimate increases to a range of $ 190 million to $480 million per year under Al ternative 1 and decreases to a range of $ 66 million to $370 million per year under Alternativ e 2. While this is not a true “lower bound” estimate, these estimates reflect costs that lead to lower than average costs when compared to figures reported by ASTSWMO. 42

41 These were provided by the State of New Hampshire’s UST program. 42 If we calculate a weighted - average cost per release where sources are weighted proportionally by their contribution 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 $96,000 (See memo in Appendix I for details) . For reference, ASTSWMO estimates the aver age cost per site to be roughly $127,000 in 2009. See Association of State and Territorial Solid Waste Management Officials, State Fund Survey Results 2009.4 - 23

Exhibit 4 - 1 4 **Sensitivity Analysis: Total Discounted Avoided Cost B**  **y Proposed Require**  **ment Based On New Ham** **pshire Rem ediation Costs**  a, h **Description b**  **, c**  **Preferred Option ($**  **mi llions**  **) A** **lternative 1** 

**($ mi**  **llions )**  **A lternative**  **2**

**($ mi**  **llions )**  **Release Prevention** Walkthrough inspections $ 55 .0 - $ 37 0 $ 54 .0 - $ 36 0 $ 25 .0 - $ 31 0 Periodic testing of:

- Overfill prevention equipment

- Spill prevention equipment

- Interstitial integrity $ 46 .0 - $ 96. 0 $ 61 .0 - $1 1 0 $ 24 .0 - $ 47 .0 Testing after repairs to spill and overfill prevention equipment, and interstices $1.00 - $8 . 0 0 $1.00 - $8.00 $1.00 - $8.20 Elimination of flow restrictors in vent lines for all new tanks and when overfill devices are replaced $0.120 - $8 . 1 0 $0.100 - $8.10 $0 **Subtotal -**  **Release Prevention d**  **$170 -**  **$430 $**  **1 70**  **- $**  **440 $57.0**  **- $3**  **50 Release Detection**  Operability tests for release detection methods $15.0 - $27 .0 $15.0 - $27.0 $5.00 - $10.0 Eliminate groundwater and vapor monitoring as release detection methods Not estimated. See note e. Add SIR/CITLD to regulations with performance criteria $0.090 - $1.1 0 $0.090 - $1.10 $0.090 - $1.20 Remove deferral for emergency generator tanks $0.340 - $3.8 0 $0.340 - $3.80 $0.340 - $3.90 Change release detection leak rate probabilities $0 $0 - $13 .0 $0 Response to interstitial monitoring alarms $0 - $0.52 0 $0 - $0. 50 0 $0 - $0. 54 0 **Subtotal -**  **Release Detection d**  **$ 20**  **.0 -**  **$ 31**  **.0 $**  **20 .0**  **- $**  **44 .0**  **$ 6**  **. 0**  **0 -**  **$ 1**  **5.0 Other**  Remove d eferral for airport hydrant fuel distribution systems Not estimated. See note f. Remove d eferral for UST systems with field - constructed tanks Not estimated. See note f. Require notification of ownership change $0 $0 $0 Closure of lined tanks that cannot be repaired according to a code of practice $0.001 - $0. 15 0 $0.001 - $0. 15 0 $0.001 - $0. 15 0 Requirements for determining compatibility Not estimated. See note g. **Subtotal**
**– Other**  **d $0.001**  **- $0.**  **15 0**  **$0.001 -**  **$0. 15**  **0 $0.001**  **- $0.**  **15 0**  **EPAct -**  **related Provisions** Operator training $0.009 - $0.75 0 $0.009 - $0.700 $0.011 - $0.810 Secondary containment $0.240 - $0.76 0 $0.230 - $0.760 $0.300 - $0.770 **Subtotal -**  **EPAct -**  **related Provisions d**  **$ 0.670**  **- $1.3**  **0 $0.640**  **- $1.20**  **$0.760 -**  **$1.40 Total**  **d $**  **190 -**  **$ 460**  **$190 -**  **$ 4**  **8 0**  **$66.0 -**  **$3 70** 4 - 24

Exhibit 4 - 1 4 **Sensitivity Analysis: Total Discounted Avoided Cost B**  **y Proposed Require**  **ment Based On New Ham** **pshire Rem ediation Costs**  a, h **Description b**  **, c**  **Preferred Option ($**  **mi llions**  **) A** **lternative 1** 

**($ mi**  **llions )**  **A lternative**  **2**

**($ mi**  **llions )**  a For each proposed requirement, this exhibit presents a range of discounted avoided costs. This range represents the lowest avoided cost estimate for the proposed requirement among the four experts and the highest avoided cost estimate for the proposed requirement among the four experts. b For some requirements, such as removing the deferral for emergency generator tanks , avoided costs under Alternative 2 are higher than under the Preferred Option or Alternative 1. This occurs because: 1) these requirements create groundwater contamination reductions; and 2) fewer releases are altogether avoided under Alternative 2. This combination of factors implies that groundwater reductions have a greater effect under Alternative 2, as they affect a larger number of releases. This effect is very small c om pared to the magnitude of changes in other requirements. c Some proposed requirements, particularly those that target narrow subpopulations of the UST system universe, may generate higher avoided costs than this analysis suggests. Three sources of uncertainty drive these smaller universe results: First, EPA's model is calibrated to e stimate 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 th at their esti mates of impacts for requirements affecting narrow subsets of UST populations are more uncertain than broader estimates. Fin ally, experts emphasized that equipment replacement, 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 impacts to each of the proposed requirements is potentially less accurate than the aggregate estimates of avoided impacts. d S ubtotals and totals presented in this table do not represent the sums of the ranges across the proposed requirements because experts with relatively lower estimates fo r one proposed requirement did not necessarily have similarly low estimates for other req uirements. Instead, the subtotals and totals shown represent the lowest and highest estimates among the four experts for each subtotal group and for the total across all proposed requirements. e Experts were not asked to estimate avoided costs resulting f rom the elimination of groundwater and vapor monitoring. EPA decided to include this requirement after consulting with its experts. f R eductions 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 types of systems constitute a small portion of total releases, but may be large in volume and can result in significant groundwater impacts. Especially in the case of AHFDSs, even minor problems can create large releases due to the significant pressure unde r which contents are stored. The model used by EPA to estimate avoided remediation costs is not designed to measure avo ided costs from very large releases such as those typically associated with AHFDSs and FCTs , and we therefore do not offer an estimate of avoided costs for requirements that apply to these systems. g Experts were not asked to estimate avoided costs resulting from requirements for determining compatibility. EPA decided to include this requirement after consulting with its experts. h Cost estimates were derived using a seven percent discount rate . For reference, we also estimate avoided costs using ASTSWMO’s reported average cleanup cost of $127,216 for 2009. If we value the releases and groundwater incidents avoided under each option using this estimate, we obtain total avoided costs of approximately $ 250 million to $610 million under the Preferred Option, $ 250 million to $640 million under Alternative 1, and $ 87 million to $490 million under Alternative 2. Note that these values fall between our primary estimates and sensitivity

anal ys es. 43

43 Under the alternative baseline, total avoided costs based on New Ham pshire remediation costs range from $110 million to $280 million in the Preferred Option. This represents an extreme lower bound analysis of avoided remediation costs.4 - 25

**4.6 Avoided Vapor Intrusion Damages**  Vapor intrusion general ly occurs when petroleum or highl y- dissolved concentrations 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. 44 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 from one to 10 percent of all releases cause vapor intrusion issues. Each of these instances requires additional remedial actions valued between $ 27,000 and $52,000 beyond ordinary release remediation costs. 45 As reported in **Exhibit 4 -**  **1 5**  , given 1,680 to 5,370 avoid ed releases and mitigated groundwater incidents, we estimate between 17 and 540 avoided vapor intrusion incidents under the Preferred Option. This reduction would avoid between $0. 4 million and $ 26 million per year in avoided remediation costs related to v apor intrusion. While the lower end of this range does not vary significantl y among the options, EPA estimates savings of up to $ 28 million under Alternative 1 and $ 19 million under Alternative 2. Exhibit 4 - 1 5 **Avoided Vapor Intrusion Costs**

**Scenario Preferred Option**  **($ m illions)**  **Alternative 1**

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

**($ m illions)**  Total avoided releases and avoided groundwater incidents 1,680 - 5,370 1,820 - 5,780 63 0 - 3,8 6 0 Lo w 1% of releases involve vapor intrusion $27,000 per release to remediate $0. 4 - $1. 4 $0. 5 - $1. 5 $0. 2 - $1.0 High 10% of releases involve vapor intrusion $52,000 per release to remediate $8 . 2 - $ 26 .0 $ 8. 9 - $ 28 .0 $3.1 - $ 19 .0 Under the alternative baseline, avoided vapor intrusion costs fall due to the smaller universe of releases. In the Preferred Option, avoided costs are $0.3 million to $ 16 . 0 million. Under Alternative 1, avoided costs range from $0.3 million to $1 7 million; under Alternative 2, they range between $0.1 million an d $11. 0 million. See **Exhibit 4**  **- 20**  for a full accounting of avoided costs in the alternative baseline. **4.7 Product Loss**  Releases into the environment cause operators to lose otherwise marketable fuel products. **Exhibit 4 -**  **1 6**  presents costs avoided due to product loss. The anal ys is calculates the product loss

44 Davis, Robin V. February 9, 2010. “Petroleum Hydrocarbon Vapor Intrusion Investigations: Current General Practi ce,” Leaking Underground Storage Tanks, Utah Dept. of Environmental Quality, http://www.epa.gov/oust/pviwebinar_approach.pdf.

45 New Hampshire, Utah, South Carolina, Virginia, and New Mexico were contacted for LUST remediation costs, but only New Hampshire wa s 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 - 26

associated with avoided releases b y multiplying the average volume associated with each release source b y the number of releases of that type before and after the proposed rule is in effect. Based on the estimates of avoided releases presented by the experts, the draft 23 - state Autops y Report’s distribution of releases, and average release volumes reported in the Florida study, EPA estimates that approximately 0.64 million gallons to 2.3 million gallons per year of diesel and gasoline releases are avoided as a consequence of the Preferred Option. At an average price of $ 3 . 27 per gallon, owners and operators avoid losing approximately $ 2 . 0 million to $7.2 million in product d

ue to releases. 46 These values increase to a range of 0 . 84 million gallons to 2.5 million gallons and $ 2 . 6 million to $7.6 million under Alternative 1 and decrease to a range of 0. 13 million gallons to 1.7 million gallons and $ 0 . 4 million to $5.3 million under Alternative 2. Limited data on release size do not support an analy sis of avoided product loss associated with releases that are reduced in severity . Exhibit 4 - 1 6 **Value of Avoided Product Loss Expert**  **Preferred Option Alternative 1**  **Alternative 2**

**Thousand gallons**  **$ m illions**  **Thousand gallons**  **$ m illions**  **Thousand gallons**  **$ m illions**  Expert 1 640 $2.0 950 $2.9 200 $0.6 Expert 2 800 $2.5 840 $2.6 130 $0.4 Expert 3 810 $2.5 860 $2.6 570 $1.7 Expert 4 2,300 $7.2 2,500 $7.6 1,700 $5.3 **Range 640** 
**– 2,300**  **$2.0 -**  **$7.2 840**  **- 2,500**  **$2.6 -**  **$7.6 130** 
**– 1,700**  **$0.4 -**  **$5.3** Releases are valued using an average price of motor fuel for 2008. Prices per gallon for all grades of retail motor gasoline and No. 2 diesel fuel (all concentrations of sulfur) were $3.32 and $3.15, respectively, as reported by the Bureau of Transportation in Table 3 - 8: Sales Price of Transportation Fuel to End - Users in National Transportation Statistics 2010 (at http://www.bts.gov/publications/national_transportation_statistics/pdf/entire. pdf). We weight these prices according to prime supplier sales volumes in 2009 published by the Energy Information Administration, which summed to 362,798.5 thousands of gallons per day for gasoline and 132,489.3 thousands of gallons per day for all grade s of diesel fuel (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 relatively f ewer releases . In the Preferred Option, avoi ded costs due to product loss are $ 1 . 2 million to $4.3 million. Under Alternative 1, avoided costs range from $ 1 . 6 million to $4.6 million; under Alternative 2, they range between $0. 2 million and $ 3 . 2 million. See **Exhibit 4**  **- 20**  for a full accounting of avo ided costs in the alternative baseline scenario .

46 Releases are valued using an average price of motor fuel for 2008. Prices per gallon for all grades of retail motor gasoline and No. 2 diesel fuel (all concentrations of sulfur) were $3.32 and $3.15, respectively, as reported by the Bureau of Transportation in Table 3 - 8: Sales Price of Transportation Fuel to End - Users in National Transportation S tatistics 2010 (at http://www.bts.gov/publications/national_transportation_statistics/pdf/entire.pdf). We weight these prices according to prime supplier sales volumes in 2009 published by the Energy Information Administration, which summed to 362,798.5 thousands of gallons per day for gasoline and 132,489.3 thousands of gallons per day for all grades of diesel fuel (at http://www.eia.gov/dnav/pet/pet_cons_prim_dcu_nus_a.htm)4 - 27

**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 non - cancer impacts (e.g., neurological impacts) associated with other petroleum constituents such as toluene. 47 Reductions in the number and severity of releases will reduce these exposures and associated morbidity and mortality impacts . This benefits ass essment examines the impacts of the regulations under consideration on population cancer risks associated with benzene exposures through groundwater. Other health impacts, including benzene - related risks thro ugh inhalation of vapor and nonbenzene health effects, are not able to be reliably quantified with available data, but represent additional potential benefits of the rule. **4.8 .1**  **Avoided Benzene Cancer Risk** To address human health benefits associated with avoided exposure to benzene through groundwater , EPA performed a screening analy sis using data on:
 Expected number of cancer cases per underground storage tank release;
 Estimated number of releases prevented through implementation of the regulatory revisions; and,
 Estimated WTP to avoid a fatal cancer, expressed as the value of a statistical life (VSL) . The EPA risk assessment provides population risk estimates on a per - release basis, expressed as the expected number of cancer cases per release. That anal ys is estimated population risk for releases of varying volumes and plume ages. 48 To estimate the benefits of avoided cancer cases, EPA uses the estimated number of releases avoided and releases reduced in severity and applies the 2009 EPA estimated value of a statistical life (VSL) of $8.9 million as the value associated with avoiding one terminal cancer. 49 , 50 **Exhibit 4 -**  **1 7**  presents EPA’s findings for four avoided release scenarios. The anal ys is shows that, even under unli kely assumptions of 100 - ye ar plumes and 5,000 gallon rel eases, total upper bound human health benefits due to avoided cancer cases are limited to approximately

47 For example, see "Benzene toxicity and risk assessment, 1972 - 1992: implications for future regulation," D J Paustenbach, R D Bass, and P Price, Environ Health Perspect. 1993 December; 101(Suppl 6):177

–200.

48 “Risk Analysis to Support Potential Revisions to Underground Storage Tank (UST) Regulations,” prepared by RTI International, De cem ber 22, 2010 . 49 “Summary of the updated Regulatory Impact Analysis (RIA) for the Reconsideration of the 2008 Ozone National Ambient Air Quality Standard (NAAQS),” U.S. EPA, http://www.epa.gov/ttn/ecas/regdata/RIAs/s1 - supplemental_analysis_full.pdf

50 Thi s screening analysis also does not address the issue of latency, or discounting the VSL to reflect health effects that occur many years after exposure.4 - 28

$ 850 ,000 per ye ar under the Preferred Option. This value changes little when considering Alternatives 1 or 2. EPA’s central estimate of the benefits associated with avoided cancer incidence uses avoided costs from scenarios in which plume age s are one and five years and average release volume is 5 0 gallons, consistent with release data from available studies. 51 These assumptions suggest hum an health benefits of approximately $ 1,400 to $4, 5 00 per ye ar associated with avoided benzene - related cancer risk . These modest findings reflect a number of assumptions that may provide an incomplete picture of the risks associated with leaks from underground storage tanks. First, they reflect the frequency of confirmed releases, and (except in the 100 - ye ar spill time frame) the assumption that the existing UST cleanup program eliminates all exposure immediately upon release discovery . In addition, the risk assessment did not consider larger- scale releases over 5,000 gallons in any scenario, though a number of these are reported annuall y. Finally, exposure scenarios generally

reflect behavioral assumptions that exposed individuals will limit their own e xposure in certain cases (e.g., when petroleum contamination exceeds a “taste/odor threshold” and water is no longer palatable). Any or all of these assumptions may not hold in all cases, and other risks and health benefits are not reflected at all in thi s screening level risk assessment (see below). However, it is also not unreasonable to assume that health impacts under this proposed rule would be limited, given the baseline existence of technical and cleanup requirements designed to minimize human expo sure.

51 U.S. Environmental Protection Agency, Office of Underground Storage Tanks, “Petroleum Releases at Underground Storage Tank Facilities in Florida,” draft, March 2005 . Note that this estimate differs from the calculated avoided product loss based on average release volumes in the Florida autopsy data. We use a more conservative estimate of release volumes (consistent with median release volumes from Florida’s autopsy study) to reflect uncertainty regarding exposure and to offset the risk analysis assumption that releases occur over a very short time frame.4 - 29

Exhibit 4 - 1 7 **Discounted Benefits F**  **rom Benzene Cancer Avoidance** d **Release time to discovery and vol um**  **e a,**  **b , c**  **Preferred Option**  **($ thousands) Alternative 1** 

**($ thousands) Alternative 2** 

**($ thousands)** Total releases 1,680 - 5,370 1,820 - 5,780 63 0 - 3,8 60 1 year until discovery, 10 gals. release Prob(Cancer Case) = 0.00000001 2 $0. 15 - $0. 49 $0. 17 - $0. 53 $0. 0 6 - $0.35 1 year until discovery, 50 gals. released Prob(Cancer Case) = 0.00000003 2 $0. 43 - $ 1.4 $0. 47 - $1. 5 $0. 1 6 - $0.99 5 years until discovery, 50 gals. released Prob(Cancer Case) = 0.00000017 $ 2.4 - $ 7.6 $ 2.6 - $ 8.2 $ 0 . 89 - $5.5 100 year until discovery, 5,000 gals. release Prob(Cancer Case) = 0.000019 $ 270 - $ 850 $ 290 - $ 910 $ 100 - $610 **Prim ary estimate (average**  **of 50 gal. release over 1 and 5 years)**  $ 1.4 - $ 4.5 $ 1.5 - $ 4.8 $ 0 .5 3 - $3.2
a The pathway assessed to evaluate avoided cancer risk is benzene exposure through contaminated groundwater . b Calculations based on a value of statistical life of $8.9 million, as presented in U.S. EPA, “Summary of the updated Regulatory Impact Analysis (RIA) for the Reconsideration of the 2008 Ozone National Ambient Air Quality Standard (NAAQS).” c Probability of cancer cases per release based on RTI International, “Ris k Analysis to Support Potential Revisions to Underground Storage Tank (UST) Regulations,” December 22, 2010. d Estimates were derived using a seven percent discount rate . Under the alternative baseline, the total upper bound human health benefits due to avoided cancer cases are limited to approximately $ 510 ,000 per ye ar under the Preferred Option. The central estimate of the benefits associated with avoided cancer incidence suggest s human health benefits of a

pproximately

$ 840 to $ 2,700 per year associated with avoided benzene related cancer risk . See **Exhibit 4 -**  **20** for a full accounting of avoided costs in the alternative baseline scenario . **4.8 .2**  **Other Human Health Benefits** The foregoing benefits from avoided benzene cancer avoidance represent only one portion of the health risk associated with releases from leaking UST sy stems. The risk assessment examined only benzene risks through groundwater ingestion and shower inhalati on and focused on average population risks. Such risks are limited in part because the anal ys is concluded that many sites do not have residents using groundwater near the area affected b y a plume. Nevertheless, the risk assessment concluded that some larg er releases may have significant human health risks associated with them. Inhalation risks associated with direct exposure to vapor and other petroleum - related chemicals were not evaluated. 52 While EPA does not expect most instances of these risks to be

52 Neither cancer nor non - cancer risks of these types were evaluated.4 - 30

large, significant risks remain for a subset of releases. To the extent that the proposed rule would prevent or mitigate the most significant releases, this analy sis may understate the avoided human health impacts associated with the rule. More broadl y, 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 comprehensivel y 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 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;
 Developmental 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. 53 Reduced exposure to TPH as a result of the proposed rule could therefore have nonquantified bene fits related to reducing the risks of one or more of the above health effects. **4.9 Avoided Acute Exposure Events**  **and Large**  **- Scale Releases**  Most health effects as sociated 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 ecologic al damage, and injuries and death, depending on the circumstances of the event. Because these events are difficult to predict and infrequent, it is not possible to quantify or monetize the impact associated with avoiding them, but the response, remediatio n, and medical costs associated with a single acute incident could be significant. The proposed regulations are designed to ensure effective maintenance of UST sy stems, 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).

53 United States Department of Health and Human Services, Public Health Service, Agency for Toxic Substances and Disease Registry, “Toxic ological Profile for Polycyclic Aromatic Hydrocarbons,” August 1995.4 - 31

Acute events are especially important in the case of UST sy stems such as airport hydrant fuel distribution sy stem s and UST sy stems with field - constructed tanks , which can hold large volumes of fuel. Releases from these sy stems can be large in volume and can result in significant 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 mid - 1980s. Free product was found within 20 feet of a nearb y creek in 1987. To date, approximately 143,000 gallons of product have been recovered. 54 Another example of the potential magnitude of the releases from these s ys tems is Pease Air Force Base, where jet fuel was delivered to the runway apron via an underground fueling sy stem. 55 Historical leakage from the s ys tem contaminated soil and groundwater, forming groundwater plumes at many sites along the s ys tem. 56 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. 57 While there are no historical records available indicating the amount of leaked fuel or leak origins , the presence of residual soil and groundwater contamination pose s a significant threat to human health and the environment. While the analy

tical procedure used b y EPA to estimate benefits was unable to capture the positive impacts of preventing releases from these types of s ys tems , we note that preventing or mitigatin g these releases may generate substantial reductions in remediation costs. **4.10 Ecological Benefits**  A document prepared for EPA outlines the ty pes of ecological damages that can result from land - based pollution releases: 58 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
54 Phone conversation and email from Lynne Smith, Geologist, VA DEQ and Russ Ellison, VA DEQ. 55 New Hampshire Department of Environmental Services, Air Resources Division. 2007. Permit Application Review Summary, Former Pease AFB Remediation Project, FY04 - 0453. 10 March 2010 < http://www2.des.state.nh.us/OneStopPub/Air/3301590780FY04 - 0453TypeSummary .pdf>.

56 New Hampshire Department of Environmental Services, Air Resources Division. 2009. Permit Application Review Summary, Former Pease AFB Remediation Project, 09 - 0113. 10 March 2010, see: http://www2.des.state.nh.us/OneStopPub/Air/330159094909 - 0113Typ eSummary.pdf.

57 Hilton, Scott. Site Summaries Pease Air Force Base Newington/Portsmouth. 2008. NH Department of Environmental Services. 10 March 2010 see: http://des.nh.gov/organization/divisions/waste/hwrb/fss/superfund/summaries/pease.htm.

58 “ Approaches to Assessing the Benefits, Costs, and Impacts of the RCRA Subtitle C Program, ” prepared by Industrial Economics, Inc. for U.S. EPA Office of Solid Waste, October 2000, p. 3 - 17, accessed at http://www.epa.gov/oswer/docs/rcradocs/rcra.pdf.4 - 32 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 - term 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 uptake of contaminants from soil, particularly in wetlands or areas w here the water table is high. Because of their locations, releases from underground storage tanks would likely be classified as land releases. Thus, any releases avoided due to the proposed rule 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 proposed rule are likel y to occur as a consequence of averted groundwater contamination. The resource economics literature contains numerous examples of studies that value these services, as demonstrated by the public’s WTP for groundwater protection programs (e.g., see Poe et al. 2001). 59 However, these values are largel y context - specific in terms of location, scale, and the specific threat to groundwater considered and do not provide broadl y- applicable informatio n 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). 60 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. 61 Even so, replacement cost methods do not constitute a proper WTP valuation. The replacement cost 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 actuall y willing to pay for the replacement; and 3) replacement is the most cost - effective means of restoring the lost services. 62 Even if these conditions are true, this approach may overestimate groundwater values in urban areas, as land is ty picall y more expensive, and underestimate groundwater values in areas where land is less expensive.

59 Poe, Gregory L., K.J. Boyle, and J.C. Bergstrom. “A Preliminary Meta Analysis of Contingent Values for Ground Water Revisited.” Chapter 8 in The Economic Value of Water Quality. Bergstrom, J.C., K.J. Boyle and G.L. Poe (eds.), Cheltenham, United Kingdom: Edward Elgar Publishing Limited. 2001.

60 Natural Resource Damage Assessment (NRDA) is the process of estimating the monetary cost of restoring natural resources 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. U.S. EPA . Natural Resource Damage Assessment. www.epa.gov/ superfund/ programs/nrd/nrda2.htm.

61 New Jersey’s approach 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 groundw ater. 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.

62 Freeman, A.M. III.. The Meas urement of Environmental and Resource Values: Theory and Methods. Resources for the Future: Washington, DC. 2003. p. 460.4 - 33

Because an assessment of the value of groundwater protected b y the proposed rule 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. Inst ead, we provide an estimate below of the total quantity of groundwater that may

be protected by

the rule. 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 contamination i s 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 8**  summarizes a screenin g 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. 63 EPA’s anal ys is estimates that 40 bi llion gallons to 130 billion gallons of groundwater per year are protected under conservative assumptions of 10 gallon release volumes that migrate for on ly one year before discovery . Under the upper bound conditions of 5,000 gallon release volumes and 100 year lifetimes, up to 5.7 trillion gallons of groundwater per year would be potentially

protected by

the regulatory

changes. 64 We also calculate the impac t 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 - year time frames represent the average parameters of avoided releases, we estimate that approximately 110 to 350 billion gallons of groundwater would be protected annuall y from LUST - related releases due to the potential regulatory changes. 65

63 “Risk Analysis to Support Potential Revisions to Underground Storage Tank (UST) Regulations,” prepared by RTI International, Decembe r 22, 2010.

64 The risk assessment on which this analysis is based did not estimate groundwater contami nation 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.

65 The release volume data us ed in the groundwater protection assessment differ s from the data used to calculate product loss and may lead to apparent inconsistencies. For instance, under the Preferred Option, prevention of 1.2 million gallons of product loss over 2,200 releases impli es 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, while 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 - 34

Exhibit 4 - 1 8 **Volume O f Groundwater Protected**  **Release time to discovery and volum**  **e** ***** **(average groundwater volume contam** **inated) Preferred Option**  **(billion gal. per year) Alternative 1**  **(billion gal. per year) Alternative 2**  **(billion gal. per year)** Total releases 1,680 - 5,370 1,820 - 5,780 630 - 3,860 1 year until discovery, 10 gal. release ( 24,068,183 gal. GW contaminated) 40 - 130 44 - 140 15 - 93 1 year until discovery, 50 gal. release ( 48,785,436 gal. GW contaminated) 82 - 260 89 - 280 31 - 190 5 years until discovery, 50 gal. release (80,192,58 1 gal. GW contaminated) 130 - 430 150 - 460 51 - 310 100 year until discovery, 5,000 gal. release ( 1,056,971,192 gal. GW contaminated) 1,800 - 5,700 1,900 - 6,100 670

– 4,100 **Prim ary estimate (average of 50 gal.**  **release over 1 and 5 years) 110**  **- 350**  **120 -**  **370 41**  **- 250**  *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 65 to 210 billion gallons of groundwater would be protected annual ly in the Preferred Option. See **Exhibit 4**  **- 20**  for a full accounting of avoided costs in the alternative baseline. **4.11 Conclusion**  **Exhibit 4 -**  **1 9**  summarizes the monetized avoided costs and benefits due to the proposed rule. In total, EPA estimates approximately $ 300 million to $ 740 million in costs will be avoided as a consequence of the Preferred Option. In addition, the proposed rule will generate modest benefits due to avoided cancer risks. Although their value cannot be reliably monetized, roughl y 110 billion to 350 billion gallons of groundwater per ye ar will avoid contamination due to new requirements. Finall y, the proposed rule will generate ecological benefits and reductions in nonbenzene morbidity

and mortality

risks that we could not quantify in our anal ys is.4 - 35

Exhibit 4 - 1 9 **Summary O f Positive Impacts**  d **Type of Impact Preferred Option**  **Alternative 1 Alternative 2**  **Monetized Benefits ($ millions, present value 2008$)** Avoided cancer risks a $0.001 - $0.005 $0.002 - $0.00 5 $0.001 - $0.003 **Monetized Avoided Costs ($ millions, present value 2008$)**  Releases and groundwater incidents $ 3 0 0 - $700 $ 300 - $740 $ 110 - $570 Vapor intrusion $ 0.4 - $26 $ 0.5 - $ 28 $ 0.2 - $19 Product loss $2.0 - $7.2 $2. 6 - $7. 6 $0 .4 - $ 5 . 3 Totalb $ 3 0 0 - $7 4 0 $ 31 0 - $770 $ 110 - $590 **Nonm onetized Impacts**  c Groundwater protected (billion gallons) 110 - 350 120 - 370 41 - 250 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 Nonbenzene human health risks Not estimated Not estimated Not estimated a The pathway assessed to evaluate avoided cancer risk is benzene exposure through contaminated groundwater . b Avoided cancer risks and avoided costs are separate and additive (i.e., these estimates do not overlap ). Avoided cancer risks are the benefits associated with reducing cancer cases prior to discovery of the release . Avoided remediation costs from releases and groundwater incidents are the costs related to site remediation . Avoided vapor intrusion costs in clude 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. c Due to data and resource cons traints, EPA was unable to monetize some of the positive impacts of the proposed rule. Chapter 4 provides a qualitative discussion of these benefits. d Totals may not add up due to rounding. Cost estimates were derived using a seven percent discount rate . **4.11.1 Summary of Positive Impacts under the Alternative Baseline**  **Scenario Exhibit 4**  **- 20**  summarizes the monetized avoided costs and benefits due to the proposed rule under the alternative baseline. In total, EPA estimates approximately $ 180 million to $440 million in costs will be avoided as a consequence of the Preferred Option under the alternative baseline . The proposed rule will also generate modest benefits due to avoided cancer risks. Approximately 65 billion to 210 billion gallons of groundwater per year will avoid contamination due to the proposed requirements in the Preferred Option . Overall, positive impacts under the alternative baseline are roughl y 60 percent of positive impacts when the original baseline is assumed.4 - 36

Exhibit 4 - 20 **Summary O f**  **Positive Impacts Using**  **Alternative Baseline** d **Type of Impact Preferred Option**  **Alternative 1 Alternative 2**  **Monetized Benefits ($ millions, present value 2008$)** Avoided cancer risks a $0.001 - $0.00 3 $0.001 - $0.003 $0.0003 - $0.002 **Monetized Avoided Costs ($ millions, present value 2008$)**  Releases and groundwater incidents $180 - $420 $180 - $440 $64 - $340 Vapor intrusion, average $0.3 - $1 6 $0.3 - $1 7 $0.1 - $11 Product loss $1.2 - $4 . 3 $1 . 6 - $4 . 6 $ 0 .2 - $ 3 . 2 Totalb $180 - $440 $180 - $460 $64 - $360 **Nonm onetized Impacts**  c Groundwater protected (billion gallons) 65 - 210 71 - 220 25 - 150 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 Nonbenzene human health risks Not estimated Not estimated Not estimated a The pathway assessed to evaluate avoided cancer risk is benzene exposure through contaminated groundwater . b Avoided cancer risks and avoided costs are separate and additive (i.e., these estimates do not overlap ). Avoided cancer risks are the benefits associated with reducing cancer cases prior to discovery of the release . 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. c Due to data and resource constraints, EPA was unable to monetize some of the positive impacts of the proposed rule. Chapter 4 provides a qualitative di scussion of these benefits. d Totals may not add up due to rounding. Cost estimates were derived using a seven percent discount rate .5 - 1



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

the distribution of the costs and benefits of the proposed rule . EPA has undertaken several anal yses to examine how the pattern of costs and benefits may affect specific populations and sector s of the economy. Specificall y, the chapter considers:

 Economic impacts associated with the costs of the proposed rule: These could include changes in facility operation and closure of facilities due to cost increases under the regulation. In addition, the proposed rule may create negative and positive employ

ment impacts, including both reductions in employ ment to reduce costs and increases in employ ment to ensure implementation of rule provisions. Finally , the proposed rule may affect public spending related to cleanup of contaminated sites.

 Energy

impacts associated with the proposed rule: EPA considers the potential for this proposed rule 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

analy sis considers the potential for rule - related costs to have a significant impact on a substantial number of small entities (SI SNOSE) .  Impacts on minority and low - income populations : EPA consider s the potential for the proposed rule to have disproportionate impact s on minority or low - income populations.

 Children’s health impacts: EPA considers the potential for the proposed rule 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 assuming 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 wel lbeing, or welfare, of any stakeholder due to compliance with the proposed rule. Direct economic impacts can be borne b y producers (i.e. , those who produce, distribute, or sell products5 - 2

associated with the proposed rule), b y consumers (i.e. , those who purchase products associated with the proposed rule), or both. The economic impacts of the proposed rule 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 customers (consumers) through increases in price, or b y absorbing costs and reducing profitability . If producers cannot pass on to consumers any of th eir increased compliance costs, the proposed rule will chiefly affect producers in the short run, and economic impacts 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 proposed rule 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 sec tions, we do not believe that many firms will be able to pass increases in prices on to consumers through higher fuel prices. 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. 1 Instead, compliance 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 rule 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 likely economic responses to increased compliance costs.
 **Scre ening level economic impact analysis of a** **verage costs on facilities.** EPA presents a screening assessment of the impacts of average estimated facility- level costs on the facilities affected b y the rule.
 **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 significant economic impacts due to regulatory costs. This section also briefly discusses implications for facility closures and changes in employment.

1 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. Fact ors that affect retail motor fuel prices at the station - level 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 p. 15

– 16, Fischer, Jeffrey. “The Economics of Price Zones and Territorial Restrictions in Gasoline Marketing,” 2004, Federal Trade Commission, accessed at http://www.ftc.gov/be/workpapers/w p271.pdf5 - 3

 **Impacts on public funding for cleanups.** The proposed rule 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 examines the potential reduction in public sector liabilities associated with the broader reduction in releases. **5.2 .1**  **Distribution o**  **f UST Systems**  **b y**  **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 611,449 UST sy stems active in 2009, 481,108 (roughly

80 percent) were located at approximately 162,000 motor fuel locations in the United States. 2 The remaining 130, 341 (roughl y 20 percent) of facilities are spread across several industries, including the commercial sector (wholesale, retail, accommodation, and food services), manufacturing, transportation, communications and utilities, and hospitals. 3 Notably , the sectors other than retail motor fuels are difficult to characterize with regard to UST sy stems; depending on their uses, US T sy stem s may occur in varying numbers at facilities of varying size and purpose across all sectors. Only in the retail motor fuel sector do UST sy stems serve a similar, central function at virtually all facilities in the sector. In addition to comprising 80 percent of all UST systems, establishments in the retail motor fuels sector also have the highest average number of UST s ys tems per facility , with a facility average of 2.97 (roughl y three s ys tems per facility). In comparison, facilities in other sectors have, on average, between 1.47 and 2.30 sy stems. 4 Because many requirements in the proposed rule 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 proposed rule. 5 Because the costs of the proposed rule will primarily affect the retail motor fuels sector, and because this sector is characterized b y a large number of independently - owned faci lities and companies, this economic impact anal ys is focuses on the retail motor fuels sector.

2 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 7,619 UST systems (approximately 1.1 percent) are located in other U.S territories, we use 162,000 facilities as the total population.

3 See Chapter 2.1 for more detail. 4 See **Exhibit 2 -**  **3** . For example, we calculate 2.30 systems per commercial facility by dividing 52,271 systems by 22,730 facilities.

5 Total costs under the Preferred Option are $ 210 million , with $180 million directly related to conventional USTs and EGTs . Motor fuel retailers will bear approximately 80 percent of these $180 million in costs, which represent roughly 70 percent of total costs under th e Preferred Option.5 - 4

**5.2.2 Market Dynamics**  **i n**  **t he**  **Retail Motor Fuels Sector** This section provides an overview of the U.S. wholesale and retail motor fuels markets, including market c oncentration, fuel distribution practices, and the implications of market structure for pricing.

**Supply -** **side Characteristics: Ability of Producers to Pass Through Costs** The N orth American Industrial Classification System (NAI CS ) 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 al l have specialized equipment for the storing and dispensing of automotive fuels. 6 According to the 2002 Economic Census, average revenues for establishments in NAI CS sector 447 were approximately $ 2.1 million . O n average , each establishment employed approx imately

eight employees. 7 **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 pass 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 the 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. Specifically , o ne - third of all sales made by NAICS sector 447 are made by establishments owned by the fifty largest firms in the sector , compared with 32 percent of sales to the largest 50 firms in the broader retail s ector. 8 This level of market concentration does not suggest that retailers will easily pass through price increases. 9

6 2002 Economic Census, Retail Trade, Industry series. Gasoline Stations: 2002. Issued November 14, 2004. Accessed online at: http://www.census.gov/epcd/www/concentration.html

7 While EPA relies on 2002 Economic Census figures for values per facility, this analysis relies on more recent and focused National Petroleum News Survey values for a count of the number of facilities.

8 2002 Economic Census, Retail Trade , Industry series. Gasoline Stations: 2002. Issued November 14, 2004. Ac cessed online at: http://www.census.gov/prod/ec02/ec0244i14.pdf

9 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 the 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 HH I 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 eight percent of5 - 5 **Geographical Concentration** Gasoline stations are generall y distributed across the United States in proportion to population. The mo st populous states have more establishments and higher proportions of gasoline sales. 10 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 faci lities of different sizes are distributed according to population as well. **Ownership Structure** The 200 9 Gas Price Kit published by the National Association of Convenience Stores classifies motor fuel retailers into three broad categories, depending on the manner in which they obtain their wholesale product: 11

 **Refinery -**  **Owned:** Fewer than two percent of facilities are retail operations directly owned by

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 cor poration manages all aspects of the customer experience and establishes a consistent brand identity.  **Branded Independent Retailers:** Approximately 5 5 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 supplier. Branded retailers’ contracts with refiners typi cally

contain clauses that specify the margins retailers can charge above wholesale prices.
 **Unbranded Independent Retailers:** Approximately 4 5 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 . Ty pes of wholesaler s include: 12 the sales in that market, the HHI wil l 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: http://www.justice.gov/ atr/public/testimony/hhi.htm

10 U.S. Census Bureau, Industry Statistics Sam pler: NAICS 447, Geographic Distribution

— Gasoline Stations: 1997. Accessed online at: http://www.census.gov/epcd/ec97/industry/E447.HTM

11 National Association of Convenience Stores, 2009 NACS Gas Price Kit, http://www.nacsonline.com/NACS/Resources/campaigns/GasPrices_2009/Pages/HowRetailersGetSellGas.aspx

12 Kleit, Andrew

N., 2003. "The Economics of Gasoline Retailing Petroleum Distribution and Retailing Issues in the U.S."5 - 6

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

to independent branded and unbranded retai lers (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. 13 As a consequence, any cost increases must be absorbed by

retailers or pa ssed 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 d emanded 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 most revenues, though m ost also sell other automobile - relate d 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 changes in gasoline purchases if prices increase. 14 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 facility level. While national demand is relativel y consist ent, consumers are highl y sensitive to price differences within local markets. 15 Small increases in price at one location can produce relativel y large changes in quantity demanded for a particular facility as consumers seek other local retailers with lower costs.

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

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

– 210.

15 A s noted above, 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. See: Fischer, Jeffrey. “The Economics of Price Zones and Territorial Re strictions in Gasoline Marketing,” 2004, Federal Trade Commission, accessed at http://www.ftc.gov/be/workpapers/w p271.pdf5 - 7

A recent National Association of Convenience Stores (NACS) survey provides insights into the price pressures faced b y local retailers: 16

 73 percent of respondents stated that price was the most important factor in their gasoline - purchasing choices .  32 percent stated that they would take the time to make a left turn on a busy street to save a penny per gallon of gasoline.
 20 percent said they would drive ten minutes out of their way (a 20 - minute round trip plus cost of fuel) to save two 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 whole sale price increases or tax increases where changes are uniform across facilities . 17 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 r aising 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 absorb some or all of the costs associated with the regul ation. 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. 18 However, because consumers are especially price sensitive about gasoline and it i s 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 rule. We therefore examine producer impacts, including the possibility that some facilities may

clo se due to cost increases. 19

16 National Association of Convenience Stores, “Consumer Fuels Report,” February 2008, as cited in “T estimony of Bill Douglass, Douglass Distributing Company, on behalf of The National Association of Convenience Stores before the House Judiciary Committee, Anti - Trust Task Force Hearing to Examine the Consumer Effects of Rising Gas Prices,” May 7, 2008.

17 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 Otta wa 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, “2003, The Annals of Regional Science 38:25

–46.

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

– 29.

19 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 . M ost non - fuel products can be purchased for lower prices at grocery stores, for example. Consumers can therefore shop at other types of5 - 8

**5.2. 3**  **Assessment o**  **f Market Exits**  **a nd**  **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 paycheck s). In cases where costs exceed facility

profits, it is likely

that in the long term a facility would exit the market. 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 . However, 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. 5 percent. 20 Holding all other things equal, an annual cost greater than 1. 5 percent of gross sales (i.e., a cost greater than $1, 5 00 for a firm earning $ 100,000 a year) w ould exceed average reported profits and would therefore cause a motor fuel retailer to operate at a loss . I f the facility cannot adjust its prices or lower costs, it will eventually

exit the market. 21 Consistent with the assessment of small business impacts in Section 5.4 of this chapter, EPA considers the impact of the proposed rule on small facilities in order to identify the most likely facilities to exit the market. Assuming that all motor retail facilities, regardless of income , have an “average” configuration of approximately three tanks, EPA calculates the averag e total cost per facility

to be $892 under the Preferred Option (reflecting a cost of approximately $300 per UST s ys tem). 22 , 23 Using data from the 2002 Economic Census and the regulatory flexibility

screening anal ys is methodology , EPA concludes that a facility- level cost of $892 would exceed 1. 5 percent facilities for the same goods, but typically opt to pay a premium for purchases at a convenient location. Note that, even 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.

20 For corporations reporting net income, profit margins before non - cash items ( depreciation and amortization) and income tax (or credits) were approximately 1.8 percent . E arnings before depreciation and amortization account for the fact that firms can postpone capital expenditures to save cash , and would likely d o so while adapting to higher costs. If non - cash items and t axes are included, earnings drop to roughly one percent. Our approach average s of the two options, reflecting an assumption that firms will do something to adapt to higher costs while they sort out how to adjust prices , and that firms ty pically minimize p rofits reported to the IRS. See SOI TaxStats, Table 7: Corporation Returns with Net Income for 2007, accessed at http://www.irs.gov/taxstats/article/0,,id=170693,00.html . See also 20 02 - 2010 RMA Statement Studies , Sector 447, for a range of profi tability data from facilities of different sizes.

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

22 Specifically, we assume 2.97 UST systems per facility. 23 Under Alternative 1 the average retail motor fuel facility cos t would be $1, 801 , and under Alternative 2 it wo uld be $61 3 . In Indian country, where facilities are required to meet more requirements than elsewhere; average cost per facility is $2, 364 under the Preferred Option, $3, 333 under Alternative 1, and $1, 999 under Alternative 2.5 - 9

of total reported revenues (i.e., be equal to or greater than total profits) for 561 firms, representing less than one percent of the universe of motor fuel retail facilities . 24 Incomparison, approximately

2,400 facilities per year closed over the period between 2005 and 2008. 25 , 26 In some 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 faciliti es may have fewer than three UST s ys tems. Therefore, EPA concludes that the market impacts associated with this proposed rule are likel y t o be diffuse and minimal, assuming a relativel y uniform distribution of costs nationwide. **Sensitivity Analysis** EPA’ s finding of minimal market impacts rests on an assessment of “average” facilities with “average” rule - related costs. If the costs of the proposed rule are concentrated on certain facilities, it is possible that additional impacts (e.g., market exits ) could occur. EPA therefore employ s several sensitivity analy ses to consider alternative, “worst case” distributions of regulatory

costs across facilities. To examine the extent to which the distribution of regulatory costs can be “concentrate d” on specific f

acilities, EPA constructs a “worst case distribution” in which regulatory costs are concentrated on a subset of facilities. 27 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

24 An analogous statement of this outcome is that all facilities with revenues below approximately $ 59 , 5 00 per year would incur ne w costs equal to or in excess of profits of 1. 5 percent of total revenue. Note that U.S. Census data indi cate that all firms in the motor fuel sector that earn less than $59,500 are single - location firms.

25 NPN reported a station count of 161,768 in 2008, compared with 168,987 in 2005. These figures imply a decrease of approximately 2,400 stations, or 1.4 percent, per year. See National Petroleum News , “MarketFacts 2008,” and NPN MarketPulse, “ 2005 U.S. motor fuel station count: 168,987,” both accessed at http://www.npnweb.com/.

26 There is a significant discrepancy between the number of establishments reporte d 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 reasons for this discrepancy. First, grocery stores with gas stations and wholesale truck stops with gas stations may be categorized under grocery stores or wholesale retail instead of gas stations. Second, the count reported by the Census excludes non - em ployer establishments ( 10,131 ) , w hich 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 location (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 petro leum sector. 27 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.5 - 10

the state make every

regulatory

change. 28 We further assume that the smallest facilities in the U.S. are the facilities that bear the highest cost. 29 **Exhibit 5 -**  **1** displays the universe of retail motor fuel 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 just over $3,400 per facility .

28 For e xample, consider a state with 1,000 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. The average cost for all of these facilities is $70 (((50*500) + (250*100) + (100*200))/1000). 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 fr om Requirement A), which affect 150 facilities, excluding those also affected by Requirement C. The last group wo uld be affected only by Requirement C, with 250 facilities at a cost of $50 per facility. Such an allocation of costs creates an unlikely outco me with a high potential for market exits. Appendix K provides the detailed summary of this threshold calculation.

29 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 ca se" sensitivity analysis. The “ wo rst case ” scenario examined here already assumes simultaneous implementation of all requirements under the proposed rule, including several that actually have delayed implementation schedule (e.g. , interstitial integrity tests ). In addition, the analysis includes annualized costs for capital requirements for Indian c ountry systems (e.g., secondary containment). The “ worst cas e” scenario does not address th e 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 identified, and are already therefore included in the number of facilities potentially affected under this worst - case assumption.5 - 11 **Ex hibit 5**  **- 1**  **Distrib ution Of Retail Motor Fuel UST F**  **acility C**  **osts**

**U sing “**  **W orst**  **C ase”**  **D istribution** 

0 5, 000 10, 000 15, 000 20, 000 25, 000 30, 000 35, 000 40, 000

0- 100 10 0 - 2 00 20 0 - 30 0 30 0 - 40 0 40 0 - 5 00 50 0 - 60 0 60 0 - 7 00 70 0 - 80 0 80 0 - 9 00 90 0 - 1, 00 0 1, 000 - 1, 10 0 1, 100 - 1 ,2 00 1, 200 - 1, 30 0 1, 300 - 1, 40 0 1, 400 - 1 ,5 00 1, 500 - 1, 60 0 1, 600 - 1 ,7 00 1, 700 - 1, 80 0 1, 800 - 1 ,9 00 1, 900 - 2, 00 0 2, 000 - 2, 10 0 2, 100 - 2 ,2 00 2, 200 - 2, 30 0 2, 300 - 2 ,4 00 2, 400 - 2, 50 0 2, 500 - 2 ,6 00 2, 600 - 2, 70 0 2, 700 - 2, 80 0 2, 800 - 2 ,9 00 2, 900 - 3, 00 0 3, 000 - 3 ,1 00 3, 100 - 3, 20 0 3, 200 - 3 ,3 00 3, 300 - 3, 40 0 3, 400 - 3 ,5 00

**Co st**  **r an**  **ge (** **$) N** **u m** **b e** **r o** **f F** **a c** **i l** **i t** **i e** **s**

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 distribution of the five percent of facilities incurring the highest costs if costs were concentrated (specifically , 8,135 facilities incurring costs greater than $1,800). The proportion of highest - cost facilities does not vary

substantially by

state. The highest concentration of high - cost facilities would be 6.4 percent (in Guam); 53 of the remaining 56 states and territories (accounting for 91 percent of retail motor fuel facilities ) have roughly 5.0 percent to 6.5 percent of their facilitie s with this cost (OR, CA, and MS have fewer than four percent high - cost facilities). Differential economic impacts across states are not likel y to occur as a result of disproportionate state - level impacts from this rule , even in a scenario of maximum concentration of costs across the fewest firms . To assess economic impacts in this worst case scenario, EPA pairs the distribution s of facility size and costs to identify situations in which estimated costs would exceed 1.5 percent of gross sales (the average reported retail motor fuel facility profit). Facilities with costs exceeding 1.5 percent of revenue s may face a significant economic impact under worst case assumptions .5 - 12

**Market Exits** Even under the adverse scenario presented above, economic impacts to affected entities are relativel y small. The least compliant facilities in the least regulated states would incur costs of $3, 415 in the worst case. 30 This represents less than 1. 5 percent of revenues for facilities earning more than $ 228 ,000 per year. To assess the worst - case potential impact, EPA assumed that the facilities with the highest costs (those i n 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 max imize the number of potential exits. EPA estimates that 6 , 100 facilities earning less than $250,000 per ye ar in the U.S. ( in 2002 dollars) would be subject to costs exceeding 1. 5 percent of revenues in the worst case scenario . 31 To the extent that those f acilities could not increase prices to offset higher costs, it is likely that at least some of them would exit the market. If all of these facilities exited the market, the closures would constitute roughl y four percent of existing facilities. Note that this scenario relies on a highl y unlikely confluence of assumptions, including:
 **All facilities with income less than $250,000 have average configurations of three UST systems.**  In fact, it is likely that small facilities have fewer than three tanks and would therefore not be subject to the facility- level costs estimated here It is likel y that the smallest facilities also operate only a single UST s ys tem, which would reduce their compliance costs b y approximately 67 percent. 32 Under such circumstances, most small operators would not be subject to a significant economic impact even in the worst - case scenario.
 **No facility has any option to increase prices on goods or services or to identify options for savings.**  While gasoline prices are unlikel y to rise in response to this proposed rule, consumers may be willing to pay

marginal cost increases on other products and services. Moreover, in remote rural areas, retailers may

be able to directly

pass costs on to consumers.
30 Facility costs of roughly $3,400 or less are representative of approximately 99 perc ent 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 $3,400, we do not present them as the main highest - cost scenario.

31 The U.S. Census identified 5,142 facilities that earned less than $250,000 in 2002. For the purposes of its SBA analysis, EPA revised this estimate upward by 46 percent to reconcile disparities between Census gas stations counts from 2002 and NACS gas station counts from 2008. Of the estimated 7,52 0 facilities earning less than $250,000 per year in 2002, we arrayed the highest cost facilities with the highest revenue facilities, to ensure an estimate of as many exits as possible. See Appendix K for a detailed explanation of our methods.

32 According to the 2009 NACS Convenience Store Industry Fact Book, the average motor fuel retailing facility has monthly throughput of approximately 118,500 gallons. As discussed in Chapter 2, we believe that the average motor fuel retailer operates approximately 3 UST systems. This equates to roughly 39,500 gallons of mo nthly throughput per syst em. 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 p er month given gasoline prices in excess of $2.00 since 2005. See http://www.eia.gov/dnav/pet/pet_pri_gnd_a_epmr_pte_dpgal_a .htm .5 - 13

 **A profit margin of 1. 5**  **percent is standard.** C ompanies 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 typically take legiti mate steps (e.g., year- end investments in equipment, employee bonuses) to reduce both net income and tax burdens. As a result, a 1. 5 percent after - tax profit estimate based on IRS data is likely to understate average profitability . Finally , this analy sis does not adjust the Census data on facility revenues for inflation, though costs are presented in 2008 dollars. Due to the variability of gasoline pricing, we adopt a conservative assumption that revenues have remained static in nominal terms since 2002. While our sensitivity

analy sis suggests that just over 6,100 facilities may be at risk of significant economic impacts in a worst case scenario, it is unlikely that a significant number of actual market exits would result from the proposed regulation . A p lausible exception to this finding exists in cases where a facility with high upgrade costs faces high levels of local competition. Even in these cases, closures would likely be consistent with the recent rate of industry consolidation of 1.4 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 proposed rule by raising gasoline prices, H owever, the cost of other goods and services could potentially incre ase 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 and other convenience items.

**Employment Impacts** The increased operating costs incurred b y facilities to comply with this proposed rule may result in very

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

referred to as the demand effect. As discussed earlier, the price effect is expected to be small though, and given the relativel y inelastic demand for gasoline, the demand effect is likely to be small as well. There is also the potential for th e proposed rule to result in a small number of facilities exiting the market, which could result in a temporary negative employ

ment effect as these workers look for other positions. However, as noted earlier and in the next section below , these exits may coincide with exits that would already occur in the baseline. 33 In addition, g iven 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

33 See footnote 25.5 - 14

of these costs (see Price Impacts section above). 34 As a result, the potential employ ment effect of market exits from the proposed rule is likel y small. Furthermore, some of the requirements of the proposed rule may have a positive impact on employ

ment. For example, walkthrough inspections require labor as a primary input which may lead to small increases in employ ment at regulated facilities. 35 Inaddition, the increased demand for testing services and training under the proposed rule may also lead to increased demand for labor. Since the proposed rule could potentially affect the demand for labor both positive ly and negative ly , the overall direction of net employ ment impact s is unclear, but is most likely very s mall relative to the size of the industry. **Long -** **run Economic Impacts** The proposed rule is unlikely to generate substantial additional impacts in the long run, but in a worst - case scenario it could accelerate ongoing consolidation trends in the retail mo tor fuel sector if market exits result. NPN reports that 168,987 motor fuel stations operated in the United States in 2005. By 2008, this number had fallen to 161,768, a decrease of 4.3 percent compared with 2005, or approximately 1.4 percent per year. 36 While broader market consolidation is related to ownership strategies among oil companies and general economic patterns, facilities facing significant periodic costs (e.g. UST s ys tem replacement) may be most likely to close. Similarly , facilities with higher operating costs as a result of the rule may opt to close. In such cases, exits caused b y the rule 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 proposed r

ule . These closures will occur in the context of the national decline in the number of facilities, such that the rule is unlikely to cause a significant number of closures beyond those that will occur as part of the existing trend. **5.2. 4**  **Assessment o**  **f Pub**  **lic Sector Cost Savings Related to**  **Avoided Releases** A significant positive effect of the proposed rule derives from its impact on state funds created for the purpose of providing a financial responsibility mechanism to UST owners and operators . Among 56 st ate and territory governments, 43 have an existing fund created for the purpose of reme diating releases; of these, 36 are active and continue to accept claims. 37 In many of these states, owners and operators are required to pay for a portion of remedial actions through

34 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.

35 For example, EPA estimates that mo nthly walkthrough inspections of a facility will take nearly an hour to com plete, on average. A com pliant owner or operator in a state that does not currently have thi s requirement will need to allocate 12 man - hours of incremental effort per year to satisfy this portion of the proposed rule.

36 See footnote 25. 37 U.S. EPA, “Status of State Fund Programs,” accessed September 9, 2010 at http://www.epa.gov/ oust/states/fndstatus.htm5 - 15

deductibles that generally range from zero to $100,000. 38 Given an average cost of remediation of $127,216 in 2009, however, state funds are frequently required to finance some portion of remediation costs. 39 These state funds are created b y state legislatio n and must be submitted to EPA for approval before they can be used as financial responsibility mechanisms. In most cases, states generate money

for their funds b y lev yi ng tank registration and petroleum fees, which are then used to provide payments for remediation of releases beyond the deductibles paid by responsible parties. In states where funds rel y 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 the proposed regulations reduce the occurrence of new releases produce s two welcome effects:
 **Assignment of costs** . Fewer releases implies 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 signaling and efficienc y b y 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 preventi on 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”). 40 We assume that states that are required to comply with a larger number of the new requirements will experience a greater reduction of relea ses, all other things equal. To estimate the distribution of avoided releases, we calculate the average number of requirements with which

38 Association of State and Territorial Solid Waste Management Officials, State Fund Survey Results 2009 , Table 1: Design Characteristics of State Financial Assurance Funds, accessed at http://astswmo.org/ files/publications/tanks/2009StateFundSurvey/2009 - Table_1 - Design - Characteristics - of - St - Financial - Assurance Funds.pdf.

39 Association of State and Territorial Solid Waste Management Officials, State Fund Survey Results 2009 , Summary of State Fund Survey Results, accessed at: http://astswmo.org/files/publications/tanks/ 2009StateFundSurvey/2009 - Summary.pdf. For example, representatives of the state of New Hampshire indicated that in most cases, the S tate Fund incurs remediation costs, except that the owner or operator typically bears the cost of immediately stopping the leak. In addition, New Ham pshire indicated the owner or operator typically pays a $5,000 deductible towards the final remediation co st, and in New Mexico, the owner or operator typically pays a deductible between $0 and $10,000.

40 States with active financial assurance funds can be found at http://www.epa.gov/ OUST/states/fndstatus.htm5 - 16

the sy stems in each state will need to comply . 41 We assign avoided releases based on both the number of s ys tems in a s tate and the average number of requirements on each sy stem , and we value releases based on the national profile of avoided releases and avoided groundwater incidents. 42 Using ASTSWMO data, w e subtract from our estimate of the potential cost borne by the pub lic the deductible that owners or operators would be expected to pay . 43 See Appendix N for a discussion of the methodology used. **Exhibit 5 -**  **2** presents the results of our screening - level assessment. Among the 36 states with active state funds that fall into Tier 1 or Tier 2, we find that the potential reduction in public expenditures could reach $ 191 million to $431 under the Preferred Option, with $ 150 million to $338 million in Tier 1 and $ 41 million to $94 million in Tier 2. 44 Reductions in public expenditures would equal approximately $ 198 million to $457 million under Alternative 1 and $ 80 million to $340 million 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, state government action would be required to lower petroleum fees. Alternativel y, the extent that funds are not constrained in their use, a redistribution of funds (e.g., to backlog sites awai ting cleanup) could also represent a significant public benefit. The values presented in this table do not reflect discounting to account for regulatory compliance schedules . Note that this screening - level anal ys is is intended only to identif y 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 **Exhi bit 5**  **- 2**  suggest that requiring owners and operators to focus on prevention reduces costs to state financial assurance funds by over $ 150 million under the Preferred Option and Alternative 1 and upward of $50 million for Alternative 2.

41 We use the n

umber 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, respectively, they may ultimately affect between 1,000 and 1,500 units, depending upon whether any overlap exists among the two regulated universes.

42 We calculate this as avoided costs due to avoided releases divided by number of releases avoided. The procedure is similar f

or avoided groundwater remediation costs. 43 We rely on the ASTSWMO Fund Survey Results 2008 for the data that underlie our construction of tiers. These data are available at http://www.astswmo.org/publications_tanks.htm.

44 Due to our calculation 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 po tential for redistributive effects.5 - 17 Exhibit 5 - 2 **Summary O f State Financial Assurance Fund Distributional Effects** 

**Fund Revenue Mechanisms Preferred**  **Option ($ m** **illions) Alternative** 

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

**2 ($ m** **illions) Low deductible scenario (High**  **distributional effects)**  Tier 1 (petroleum & tank fee) $ 150 - $338 $154 - $355 $53 - $275 Tier 2 (tank fee only) $ 41 - $94 $44 - $102 $27 - $65 **Total $191**  **- $432**  **$198 -**  **$457 $80**  **- $340**  **High deductible scenario (Low distributional**  **effects)** Tier 1 (petroleum & tank fee) $138 - $303 $142 - $318 $49 - $120 Tier 2 (tank fee only) $39 - $87 $42 - $95 $14 - $71 **Total $177**  **- $390**  **$184 -**  **$413 $63**  **- $191**  **5.2. 5**  **Economic Impact Summary** This set of anal ys e s shows that it is unlikely that the proposed rule will have substantial negative economic impacts on the regulated community , in part because the costs of the rule appear to be evenl y distributed across a large population of facilities, and remain modest at the facility level . Even under a highl y improbable worst case scenario in which the highest cos ts are incurred b y the smallest facilities, roughl y four percent of the universe of retail motor fuel facilities would potentially incur costs greater than publicly reported industry

average profit margins. Market exits of roughl y 2, 4 00 facilities annually represent the current market trend. It is likely, therefore, that most or all market exits under this proposed rule would coincide with exits o f specific out - of

- date facilities that are on the brink of exiting, and would not create a significant additional contraction of the total market. A more likely

response by

many 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 inc rease in labor demand due to the additional requirements placed on owners and operators, and additional demand for third - party testing services. In addition, it appears that the proposed rule could have a positive impact on state governments that currentl y fund a portion of UST - related remediation costs through gasoline taxes and fees. A decrease in the number and severity of releases represents cost saving s to states due to decreased demand on state financial assurance funds. Our initial screening assess ment suggests that annual costs to states could be reduced b y over $ 150 million. This represents a reduction in a public subsidy and an improvement in market signaling. **5.3 Energy Impact Analysis**  Executive Order 13211, “Actions Concerning Regulations that Affect Energy Suppl y, Distribution, or Use” (May 18, 2001), addresses the need for regulators to consider the potential energy impacts of the proposed rule and resulting actions. Under Executive Order 13211, agencies are required to prepare a Statement of Energy Effects when a regulatory action may5 - 18

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 t o regulatory actions with adverse effects and the impacts that such alternatives might have on energy

supply , distribution, or use. The proposed rule affects underground storage tanks used in the storage of motor fuel or emergency

generator f

uel. However, it is not likely that this proposed rule will have significant impacts on energy

supply , distribution, or use. To assess the energy impacts of the proposed rule , 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 that the proposed rule will have in energy suppl y, distribution, and use. **Energy Supply and Distribution** The proposed rule consists of additional regulatory requirement s that appl y to the owners and operators of underground storage tanks. To the extent that the proposed rule affects the motor fuel sector, it does so at the retail motor fuel sales level, rather than the leve l of refineries or distributors who supply the retail stations with motor fuel. Correspondingl y, we do not expect the proposed rule 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, we do not believe fuel prices will be affected. Rather, owners and operators will seek to recover the costs of the proposed rule b y increasing the prices of convenience items. If a station does not also operate a convenience store through which it can recover these costs, it may become subject to a significant economic impact and exit the market. In such a case, however, supply will not be disrupted, as other competitors fill the vo id left by the former market participant. 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 below, even if the entire cost of the rule is priced through to consumers, the change in fuel pri ces is not likely to be measurable.5 - 19

**Energy Use** The additional regulatory requirements contained in the proposed rule may increase compliance costs for owners and operators of retail motor fuel stations. I f the owners and operators of retail motor fuel s tations affected b y the proposed rule can successfully pass through their increased compliance costs, energy use may be affected through higher energy prices caused b y the proposed rule . However, we do not expect a significant change in retail gasoline prices to result from this proposed rule for the follow reasons:
 Economic anal ys es of retail fuel prices have revealed that demand for gasoline is highl y sensitive to price (elastic) within localized geographic areas.
 As a result, if one motor fuel retailer in an area passes through increases in compliance costs b y increasing gasoline prices, while another does not, the one with higher prices is at a significant competitive disadvantage.
 Retail motor fuel stations often have associated stores and/or services , such as car washes, 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 proposed rule would repre sent only

a very small 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 1 70,765,000,000 gallons of motor fuel (including gasoline and diesel) in 2008 at an average price of $3.27. 45 This implies that U.S. consumer s spent $558 billion in 2008 on motor fuel. The overall cost of the proposed rule is roughly $210 million, less than one - tenth of one percent of the amount spent by end - users on motor fue l in 2008. In comparison, an increase of $0.01 in the average price of motor fuel in 2008 would have increased the total cost to consumers by approximately

$1.7 billion. Given these circumstanc es , the proposed rule should not have a measurable impact on re tail 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

analy sis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute. This analy sis must be completed unless the agency certifies that the rule 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

45 The 2008 prices per gallon for all grades of retail motor gasoline and No. 2 diesel fuel (all concentrations of sulfur) were $3.32 and $3.15, respectively, as reported by the Bureau of Transportation Statistics in Tabl e 3 - 8: Sales Price of Transportation Fuel to End - Users in National Transportation Statistics 2010 (at http://www.bts.gov/publications/national_transp ortation_statistics/pdf/entire.pdf). We weight these prices according to prime supplier sales volumes in 2 009 published by the Energy Information Administration, which summed to 362,798.5 thousands of gallons per day for gasoline and 132,489.3 thousands of gallons per day for all grades of diesel fuel (at http://www.eia.gov/dnav/pet/pet_cons_prim_dcu_nus_a.htm).5 - 20

substantial number of small entities, further analy sis must be performed to determine what can be done to lessen the impact. Small entities include small bus inesses, small organizations, and small governmental 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 L provides the det ailed screening anal ys is. 46 For purposes of assessing the impacts of this rule 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 independentl y owned and operated and is not dominant in its field. For the purposes of this anal ys is, EPA considered costs in excess of one percent and three percent of revenues as indications that the proposed rule may have a significant impact on a given small enti ty , and 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 by

the proposed rule. **5.4.1 Small Business Screening Analysis**  We estimate that there are approximately 83 , 9 00 firms operating 162,000 facilities in the U.S. retail motor fuel sales sector. 47 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 by the 2002 Census, and SBA’s revenue thresholds for NAI CS 447110 and 447190, approximately 82,500 (98 percent) of these firms meet SB A’s definition of a small entity . 48 Approximately 7,520 of th ese firms report revenues between $0 and $250,000 (the smallest revenue range published by the 2002 Census), with average sales of approximately $149,000. 49
46 This section focuses on the retail motor fuel sector. As discussed in Appendix L , EPA’s screening assessment indicates that the proposed rule will not have a significant impact on a substantial number of small entities (SISNOSE) across all affected sectors. However, because 80 percent of all UST systems are in the retail mo tor fuel sector, we refined the screening assessment to further examine the potential impacts of the proposed rule on this sector.

47 NAICS code 447 is comprised of 447110 (Gasolin e stations with convenience stores) and 447190 (Other gasoline stations). To reconcile differing estimates of the number of retail fuel facilities (roughly 162,000 estimated by NPN, and 110,600 estimated by the Census), a 1.46 adjustment factor was applie d to the Census data to inflate the number of retail motor fuel facilities to 162,000, 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 83,900 firms and 481,000 tanks in the retail motor fuel sector.

48 For 447110, the SBA revenue thres hold is $27 million; for 447190, the SBA revenue threshold is $9 million. To ensure that we do not underes timate 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 i n the revenue range of $5 to $10 million are small.

49 Note that for simplicity we identify size categories in this document as described by the 2002 Census (e.g., revenues up to $250,000 in 2002 dollars), and identify compliance costs in 2008 dollars. H owever, in the actual screening analysis, compliance costs have been adjusted from 2008 dollars to 2002 dollars using the GDP im plicit deflator. The estimated compliance cost is $ 300 per system in 2008 dollars, or $ 255 per tank in 20025 - 21

To determine whether firms reporting revenues within a given revenue range would incur costs exce eding 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 $300 (in 2008 dollars), and assuming that firms in the smallest revenue range own one facility with three UST sy stems, we estimate that the 7,520 small firms in the $0 - $250,000 revenue range would face total compliance costs of $892 per firm (or $757 in 2002 dollars). 50 Any firm with annual revenues above approximately $75,700 (in 2002 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 7,520 firms in the $0 - $250,000 revenue bin is $149,000, 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 still possible that some of the 7,520 firms in this category

may be significantly

affected. As mentioned above, EPA also considered 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 proposed rule. While the 7,520 small firms in the lowest revenue range represent only nine percent of all potentially affected small firms, EPA conducted a supplemental analysis that focuses on this group of small firms in an attempt to refine the estimated number of small firms potentially affected by

the proposed rule. **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 Census Bureau provided additional data on firms in the lowest revenue bins for NAICS sectors 447110 (gasoline stations with convenience stores) and 447190 (other gasoline stations), identifyingthe percentage of firms with revenues in three ranges: (1) $0 - $50,000; (2) $50,000 - $150,000; and (3) $150,000 - $250,000. 51 Based on this information, we estimate the number of firms in the retail motor fuel sales sector (i.e., NAICS 447) for these three

dollars. These cost s 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.

50 Census data on number of facilities per firm indicate that virtually all firms earning less than $250,000 per year in 2002 had only one facility. We therefore use “firm” and “facility” interchangeably in this conte xt.

51 The information provided by the U.S. Census Bureau is considered an “unpublished data request.” As such, while the Census Bureau provided the data we requested, they also 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 shoul d be used with extreme caution, realizing the severe quality limitations that may exist.” However, given that we do not have another source of information, we us e this as the best data available.5 - 22

revenue groups at approximately 550, 3,120, and 3,860, respectivel y and use these data to refine our estimate of the number of significantl y affected facilities . 52 Given compliance costs of $892 per firm ($757 in 2002 dollars), any firm making less than $ 75,700 and $30,000 would be considered significantly affected at the one percent and three percent revenue thresholds, respectivel y. EPA estimates that 1,348 firms are affected at the one percent threshold, and no firms are affected at the three percent threshold. The number of firms that will be significantl y affected at the one percent threshold exceeds the one thousand - firm substantial effect benchmark b y 348 firms. However, it is likely that this proposed rule will have no SI SNOSE for three reasons . First, 1,348 firms represent roughl y one percent of potentially affected small firms, which is significantly lower than the 20 percent threshold (the other parameter considered in this analy sis to determine a “substantial number” ). 53 Second, although th e U.S. Census Bureau reports several hundred facilities with annual revenues less that $100,000, market economics suggest that it would be difficult for a firm that relies solel y on gasoline sales to be viable if earning less than $100,000 in annual revenu es, suggesting that some of these facilities may not be standalone entities. 54 Finall y, at least some of the smallest facilities are likel y to have fewer than the three tanks used as a basis for facility- level costs. EPA thus finds that the proposed rule does not appear likel y to have a significant economic impact on a substantial number of small businesses. **5.4.3 Impacts**  **to Sm**  **all Government s**  The 1992 Local Government Economic Impact Analysis provides the best readil yavailable data on the number of governments owning UST sy stems , 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 small. The 1992 anal ys is defines a “very large” government as one that serves over 50,000 people; 52 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 $35,750, which EPA obtains from estimating the linear trend between the zero and $250,000 in revenues. The implicit assumption i s that no facilities earn less than that level of revenue

53 EPA estimates a total of roughly 116,000 small firms with USTs across all affected sectors; 1,348 is roughly 1.2 percent of these. In NAICS 447, the 1,348 affected facilities represent 1.6 perce nt of facilities.

54 Assuming $2 per gallon in sales, a facility earning $100,000 would sell less than 4,200 gallons of gasoline 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 wo uld need $108,000 to generate enough gross profit to cover the dir ect cost of the wages of one full - time employee at minimum wage ($15,080 at $7.25 per hour and 2080 hours, before accounting for employment taxes). This does not consider other costs, such as electricity, property taxes, or franchise fees. As a result, wh ile the supplemental analysis indicates that 1 ,348 firms will face costs that exceed the one percent revenue threshold, it is not clear whether all of these facilities represent average motor fuel retailers with full scale operations, three UST systems, and no other income.5 - 23

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 small governments that own UST sy stems based on the total universe of UST sy stems today . See Appendix L for additional detail. EPA assume s that local governments collectivel y own four percent of active tanks. This equates to 24,458 tanks, based on the fiscal year 200 9 universe of 611,449 tanks. 55 These 24,458 tanks are distributed among all local governments, based upon the percent age of tanks owned in 1992 by local governments in each size category (the average number of tanks owned by a government varies with the siz e of the government from one tank for small 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 sy stems per government by size category . The avera ge annual revenue for each siz e of general purpose government is calculated using 2002 Census Data and weighted average contributions that depend on ty pe of entity

(i.e., towns, municipalities, and counties) . EPA extrapolates Census data on revenues for 4,128 townships to the 16,504 townships in the country . These weighted averages are combined to obtain annual revenues in 200 2 do llars for general purpose gov ernments , then inflated to 2008 dollars . Detailed information at the special district level is not available for later years , so budget expenditures from the 1992 anal ys is were inflated into 2008 dollars. 56 To calculate how many s mall governments fa ce significant compliance costs exceeding 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 $300 (2008 dollars) per UST sy st em, 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 proposed rule has any significant impact on a substantial number of small governments.

55 Estimates of local government UST systems adjusted from 1992 ICF Analysis using The 1987 Census of Governments. See “Economic Impact Analysis of Additional Mechanisms 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 2009 UST systems for state and federal governments and four percent of all 20 09 UST systems for local governments.

56 Ty pically, a RFA/SBREFA screening assessment uses revenues to assess economic impact measures for small governments. In the absence of detailed 2002 data, we use 1992 budget expenditures as a proxy for revenues.5 - 24

Exhibit 5 - 3 **Compliance Costs To Systems Owned By Governments Type of**  **Gov’t Size of** 

**Gov’t** b **UST**

**System s Per**  **Ow ning**  **Gov’t c**  **Number of**

**Gov’ts Ow**  **ning Tanks**  **d 2002 Est.** 

**Number of Gov’ts**  **e Average** 

**Annual Revenue**  **($2008) f**  **Average**

**Cost Per Gov’t ($)**  **g Gov’ts** 

**Exceeding 1%**  **of Revenue**  **Gov’ts**

**Exceeding 3%**  **of Revenue**  **General Purpose**  **a** Very Large 10.2 534 1,461 $316,129,836 $2,597 0 0

Large 2.5 1,512 4,040 $35,687,794 $637 0 0 Medium 1.4 1,444 7,822 $8,712,804 $356 0 0 Small 1.1 1,048 25,644 $1,779,216 $280 0 0 Subtotal 2.7 4,538 38,967 **Special Purpose**  Very Large 3.7 336 934 $431,319,166 $942 0 0

Large 3.6 1,902 5,340 $52,806,696 $917 0 0 Medium 1.4 2,648 13,602 $2,533,231 $356 0 0 Small 1.0 258 28,682 $128,013 $255 0 0 Subtotal 2.4 5,144 48,558 0 0 **Overall** Total 2.5 9,682 87,525 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 c onsidered 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 jurisdic tions have populations under 50,000. Therefore, all sizes of governments except for “very large” are considered to be small. **c** F rom 1992 Local Government Impact Analysis data. **d** Calculated as number of tanks (adjusted 1992 distribution in each size category to reflect FY 2009 tank numbers) divided by UST sy stems per owning government (c). **e** General purpose and Special Purpose total number of entities from 2002 Census of Governments, size distribution extrapolated from 1992 Local Government Impact Analysis data. **f** General purpose estimates from 2002 Census of Governments; Special Purpose estimates inflated from 1992 Local Government Impact Analysis data. **g** Calculated as number o f systems per government (c) * estimated cost per tank ($255 in 2002$; $300 in 2008$). **5.5 Screening**  **Analysis t**  **o Inform**  **Im pacts**  **on Minority**  **and Low**  **- Income Populations**  Executive Order 12898 (Federal Actions to Address Environmental Justice in Minority Po pulations and L ow - Income Populations) (59 FR 7629, Feb. 16, 1994) directs federal agencies, to the greatest extent practicable and permitted b y 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 socioeconomic characteristics of communities potentially affected by the rule, EPA conducted a screenin g anal ys is to examine whether there is a statistically significant disparity

between socioeconomic characteristics of populations located near UST facilities and those that are not. 57 The results indicate that minority and low - income population s 57 N ote 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 necessarily equivalent to communities that others have specifi cally identified as “environmental justice communities.”5 - 25

are slightly

more likely

to be located near UST facilities . An environmental justice anal ys is would then require an assessment of whether there would be disproportionate and adverse impacts on these populations. However, because all regulatory options co nsidered in this proposed rule would increase regulatory stringency

and reduce the number and size of releases, EPA does not anticipate that the proposed rule will have any disproportionately high and adverse human health or environmental effects on these minority or low income communities , or on any community . **5.5.1 Risk Assessment Population Analysis**  To characterize the extent of human health risk reductions anticipated under the proposed regulation, EPA conducted a screening - level analy sis of the likel y impact of the rule on benzene related cancer incidence. This analy sis used location data for nearl y 60,000 U.S. gas stations with UST sy stems using an ESRIBusiness Anal yst database , and examined population s within a buffer distance of 1,000 feet of facil ities with UST sy stems. The ESRI gas station location data are supplemented with 1,600 UST sy stems 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 2 5 percent of the roughl y 2 20 ,000 active facilities with UST sy stems. 58 T o estimate populations near s ample 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 ag gregate demographic data at the 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. 59 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 ri sk likely to be associated with the reduction of 2,821 releases and groundwater incidents (i.e., the total estimated number of avoided releases and groundwater incidents resulting from the proposed regulations). The risk assessment concluded that the prop osed regulations will result in a very small reduction in population risk related to cancer from benzene exposure, based on the estimated number and volume of avoided releases and groundwater incidents.

58 2009 Methodology Statement: ESRI Data

—Business Locations and Business Summary. ESRI, Redlands, CA. available at http://www.esri.com/library/whitepapers/pdfs/infousa -business - d atabase.pdf . ESRI d ata are derived from an infoUSA database. The approach for compiling 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 businesses. 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 spatia l distribution of facilities.

59 RTI International, “Risk Analysis to Support Revisions to Underground Storage Tank (UST) Regulations,” December 22, 20 10 .5 - 26 **Exhibit 5 -**  **4 UST Location Data**  **Used I n**  **A nalysis. (See Appendix**  **M for details on data sources.)** 

**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 populati ons at each site and comparing these populations to larger (county- level) reference populations. 60 Specificall y, the anal ys is examines the following demographic variables: percent in poverty, percent minority , and, as a verification step, percent white alo ne (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 anal ys is required under Executive Order 13045, “Protection of Children from Environmental Health Risks and Safety Risks” (see section

60 County - level statistics provide a useful comparative measure for the populations at the local facili ty 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.5 - 27

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 referen ce populations at each of the 59 , 945 sites, and examines whether the differences identified across all sites are statis tically different from what would be expected in a random distribution. 61 The anal ys is considers the differences in demographics in two ways: unweighted (each site is given equal weight) and population weighted (results are weighted by affected persons, gi ving 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 population. 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 generall y finds that minority and low - income demographics 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** shows, although the difference is smal l, it is also highly 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 - weighted analy sis, and generally find slightly

larger (but still small) effects.

61 See Appendix M for the complete demographic screening analysis .5 - 28 **Exhibit 5 -**  **5 Summary Results F**  **or Census Parameters**
**– Unweighted** 

**Census Param**  **eter 1000 ft Buffer** 

**around Facility County where** 

**Facility is Located Difference** 

**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) wer e calculated from the distribution of difference values (i.e., one result per facility, yielding a distribution of about 60,000 results). Mean values reflect the entire distribution, where as the median values are based only on the 50 th percentile result. F or 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 valu es do not necessarily match values derived by subtracting the median values from the 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 p rovided for completeness and as an alternative indicator of the distributions’ central tendency. **Exhibit 5 -**  **6 Standard Error, T Test, A**  **nd Risk Ratio Results**
**– Unw**  **eighted 1000 ft Buffer**  **around Facility**  **County where**

**Facility is Located**  **Difference SE of**  **Me an**  **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 facilitie s 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 - 29 **Exhibit 5 -**  **7 Summary Results F**  **or Census Parameters**
**– Weighted**  **B y Population** 

**Census Param**  **eter 1000 ft Buffer** 

**around Facility**  **County where Facility is Located**  **Difference**

**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 facility, 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 po tentially 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. **Exhibit 5 -**  **8 Standard Error, T**  **Test, A nd Risk Ratio Results** 
**– Weighted**  **B y Population** 

**1000 ft Buffer around**  **Facility County where** 

**Facility is Located**  **Difference 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 facilitie s 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 population s near UST s ys tems and in the reference communities. M inority and poverty- level demographics are present at greater percentages in the vicinity of UST facilities . In contrast, a small negative relationship suggests that “white alone”5 - 30

populations are less likely to be near UST s ys tems, i.e., minority populations are marginally more likely

to reside near UST facilities . Moreover, 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 de mographics 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 (countylevel) 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 proposed rule will occur in the context of a baseline condition in which minority and low - income populations are disproportionately located near USTs. **5.5.3 Summary**  **a nd**  **Limitations o**  **f t**  **he Analysis**  This section summarizes a screening assessment and does not present a complete environmental justice analy 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 block groups is uneven, the block group - level data may not accurately

characterize populations living near est to UST locations. The large sample of 59,945 sites, however, reduces the potential that th is uncertainty could skew the results of the anal ys is. Given the results of the screening anal ys is, because all regulatory options considered in this proposed rule would increase regulatory stringency

and reduce the number and size of releases, EPA does no t anticipate the proposed rule to have any disproportionately high and adverse human health or environmental effects on these minority or low income communities, or on any community . Since the proposed rule is not anticipated to create any new adverse hum an 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, Ap ril 23, 1997) , applies to any rule 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 believe 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 rule on children, and explain why the planned regulation is preferable 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 assessment examines potential impacts to groundwater and subs equent chemical transport, exposure and risk. While the risk assessment did not specifically measure exposure to children, the general5 - 31

exposure scenarios reflect f our exposure pathway s that have the most significant potential for human health impacts . The se 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 showerin g 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 exposure 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 via shower vapor inhalation . As a result of the longer exposure from showering, adults are the more sensitive receptor for cancer effects compared to children, particularl y those under five who are assumed to take more baths and fewer showers. 62 While the screening level risk assessment is limited in that it only examines benzene impacts, the proposed rule would likely reduce other contaminant exposures to children in a similar pattern, and would not create significant adverse impacts on children’s health. The screening - level d emographic 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 impact s of the proposed rule will not have a disproportionate impact on children’s health. Moreover, because all regulatory

options proposed today

would increase regulatory stringency

and reduce the number and size of releases, EPA does not expect the proposed r ule to have any disproportionate adverse impact on children.

62 United States Department of Health and Human Services, Public Health Service, Agency for Toxic Substances and Disease Registry. “Toxicological Profile for Polycyclic Aromatic Hydrocarbons.” August 1995.6 - 1



### Chapter 6. **Other Statutory a**  **nd 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 proposed rule. This chapter assesses potential impacts, with respect to the following i ssues:
 **Regulatory planning and review** : requires examination and quantification of costs and benefits of regulating with and without the proposed rule .  **Unfunded mandates:** examines the implications of the proposed rule 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 Native American tribal governments and their communities .  **Joint impacts of rules:** discusses how other rules, together with the proposed rule, will likely

affect the universe of facilities regulated by the proposed rule. **6.1 Regulatory Planning**  **a nd**  **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 defin es “significant regulatory

action” as one that is likely to result in a rule 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 communities; (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 proposed rule is an economically significant regulatory

action because it may

have an annual6 - 2

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 (Chapter 3) indicate that the rule, as proposed, is projected to result in aggregate annual compliance cost s of approximately $210 million under the P referred Option, $52 0 million under Alternative 1, and $130 million under Alternative 2. Separatel y, this anal ys is concludes that the p roposed rule is expected to have cost savings related to avoided costs of $ 300 million to $7 4 0 million under the P referred Option, $ 310 million to $770 million under Alternative 1, and $ 110 million to $590 million under Alternative 2, but for the purposes of addressing Executive Order 12866, these cost savings are considered to be separate impacts rather than direct reductions in the total cost of the rule. **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 proposed rule is subject to the requirements of sections 202 and 205 of UMRA. In general, a rule is subject to the requirements of these sections if it contains “Federal mandates” that may result in the expenditure b y State, local, and tribal governments, in the aggregate, or by the private sector, of $ 100 million or more in any one year. The proposed rule results in approximately $ 180 million of costs to the private sector under the Preferred Option, $ 35 0 million under Alternative 1, and $ 120 million under Alternative 2 in expenditures for the private sector and is thus subject to the following requirements of these sections. 1

 An identification of the provision of Federal law under which the proposed rule 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, safety, 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 carry out this mandate

 Estimates of future compliance costs with the mandate .

1 Calculated as total compliance costs for conventional UST systems and EGTs (including costs to read regulations), documented in Exhibit 3 - 9 , net of local and state government compliance costs identified in Exhibit 6 - 2 below .6 - 3

 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** Identification of provision of Federal law under which proposed rule is being promulgated Chapter 1 of this document Assessment of costs and benefits to State, local, and tribal governments and the private sector Chapters 3 and 4 of this document Assessment of the effect on health, safety, and the natural environment Chapte r 4 of this document Assessment of the extent to which such costs may be paid with Federal financial assistance Chapter 3 of this document; no Federal assistance is anticipated Assessment of the extent to which there are available Federal resources to carry out this mandate Chapter 3 of this document; no Federal resources are anticipated Estimates of future compliance costs Chapter 3 of this document Estimates of disproportionate budgetary effects on any type of government or private sector segment Chapter 5 of this document Estimates of the effect on the national economy Chapters 3 and 5 of this document **6 .**  **3 Federalism Analysis**  Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure “meaningful and timel y i nput by state and local officials in the development of regulatory policies that have federalism i mplications.” “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 more 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 necessary 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. **Exhibit 6 -**  **2** summarizes annual government costs. Direct compliance costs for local and St ate governments reflect average costs per UST system; the anal ys is assumes that st ates collectivel y own one percent of total UST s ys tems (6,114), and local governments own 24,458 UST sy stems (four percent).6 - 4

In addition, under the proposed rule, each stat e will incur labor costs for reading the new regulations , appl yi ng for State Program Approval (SPA), and processing one - time notification of existence for EGTs, AHFDSs, and FCTs. S tates that do not already require notification of UST ownership change will also incur costs to process and review all ownership change notifications of UST sy stem ownership change. In this scenario, total costs to all affected state and local governments (including direct compliance costs, notification costs, and state program costs) are approximately $9. 3 million under the Preferred Option, $19 million under Alternative 1, and $6. 5 million under Alternative 2 in 2008 dollars; this is not considered to be a substantial compliance cost under federalism requirements. Exhibit 6 - 2 **Summary O f Annual**  **State And Local Government Costs**  b

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

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

**($ m illions)**  Local Compliance Costs a $7.3 $15.0 $5.0 State Compliance Costs a $1.8 $3.7 $1.3 State Government Administrative Costs $0.2 $0.2 $0.2 **Total State and Local Governments Costs**  **$9.3 $19.0**  **$6.5** a State and local government compliance costs are included in the total compliance costs presented in Exhibit 3 - 9 . b Cost estimates were derived using a seven percent discount rate . **6 .**  **4 Tribal Governments Analysis**  Executive Order 13175, entitled “Consultation and Coordination with 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 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 for the Indian country analy sis are the same as those used in the small business anal ys is. Based on a review of information available about the types of busi ness entities in In dian 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. 2 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 proposed rule . At a 2008 cost of $795 per UST s ys tem, the total cost for UST sy stems in Indi an country is 2 For more detail, see Industrial Economics, Inc., "Detailed Assessment of UST Universe by Tank Purpose and Design," WA 1 - 25, Task 6, March 24, 2009. Note that because tribal ownership and operation is defined differently than other types of government ownership, no attempts are made to isolate or identify “government” UST s ystems in Indian country.6 - 5

approximately

$2.1 million. EPA data indicates that 35 percent of all UST sy stems in Indian country are triball y- owned; correspondingl y, the total cost to owners and operators of triballyowned UST sy stems is $0. 7 million. EPA consulted with tribal officials early in the process of developing this regulation to permit them to have meaningful and timel y input into its development. EPA began its consultation with tribes on possible changes to the U ST regulations 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 collaborativel y 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 proposed regulations will realize that commitment. In addition to our earl y consultation with the tribes, EPA also reached out again to the tribes as we started the official regulatory process and throughout the development of these proposed regulations. EPA sent letters to leaders of over 500 tribes as well as to tribal regulatory staff to invite their participation in the development of the regulations. EPA heard from both tribal officials who work as regulators as well as representatives of owners and operators of UST sy stems in Indian country . The tribal regulators raised concerns about ensuring parity of environmental protection between states and Indian country . The proposed changes to the UST regulations are needed to ensure parity between sites in states and in Indian country . These regulations are also needed to ensure equipment is not just installed but is working properl y to protect the environment from potential releases. **6 .5**  **Joint Impacts o**  **f Rules**  Executive Order 12866 requires that the Agency review whether the proposed rule creates “ a serious inconsistency” or otherwise interfere s “with an action taken or planned by another agency .” We do not believe that the proposed rule creates a serious inconsistency or interferes with any other actions planned or undertaken b y other agencies. The following are the existing regulations that currentl y affect UST systems:

 **State UST Regulations:**  A number of states have existing UST regulations 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 portions of the proposed rule. 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.6 - 6  **SPCC Regulations:** Currentl y, a subset of UST systems in the universe is regulated b y Spill Prevention, Control, and Countermeasure rules (SPCC); these include emergency

generator tanks, airport hydrant fuel distribution sys tems and UST sy stems with field - constructed tanks. Specifically , SPCC rules in 40 CFR Part 112 apply

to above - ground containers and completely buried tanks that are not otherwise covered b y the regulations of 40 CFR Part 280. SPCC rules do not specify particular leak detection protocols, but require that plans conform to industry standards, which can often be consistent with the requirements of the proposed rule. To the extent that the requirements imposed on these UST sy stems via the proposed rule are more or less stringent than the SPCC rules currently governing them, the proposed rule 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 a ssumptions 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 s ys tems are regulated under SPCC, this may

overstate costs.7 - 1



### Chapter 7. **Comparison o**  **f Costs, Benefits,**  **a nd**  **Other Impacts** This chapter provides several analy ses that compare the costs and beneficial impacts of the proposed rule . Cost - benefit anal ys is is a central feature of virtuall y all economic assessments and evaluates the economic efficiency of environmental policies by measuring their costs and benefits, and hence their net impacts on society. From an economic viewpoint, the proposed rule would enhance economic efficiency if beneficial impacts exceed costs. A traditional cost - benefit comparison weighs society ’s willingness to pay for the benefits of a regulation against the opportunity costs of the rule. Anal ys es of this ty pe ty pically do not consider distributional issues, although they can be adapted to do so. Adherence to a strict benefit - cost approach provides an incomplete assessment of the effects of this proposed rule for two reasons:
 The majority

of positive effec ts from new requirements occur as avoided remediation costs, not social benefits such as improved water quality. Monetizable social benefits occur only in the form of avoided cancer cases and constitute only

a very small part of overall effects. Neverthel ess, as discussed in Chapter 4, avoided costs provide a reasonable measure of the positive effects of the proposed rule.
 A key

effect of the proposed rule is to reallocate costs from the public to responsible parties. This is likely to improve behavioral i ncentives, as the parties most likely

to cause releases will also be responsible for preventing them. As we discussed in Chapter 5, savings to state financial assurance funds could exceed $ 150 million per year. While this chapter presents a comparison of costs and benefits, the principal comparison is between avoided remediation costs and the cost of the proposed rule. This chapter uses two approaches to assess the effectiveness of the proposed requirements. First, we compare the compliance cost s of the p roposed rule with its total monetized avoided costs and benefits. We then consider cost - effectiveness measures which provide estimates of expenditures per unit reduction of releases and estimates of the cost per unit of benefit achieved by the proposed rule . C ost - benefit and cost - effectiveness anal ys es, however, should not be the only tools used in the establishment of any final regulatory

action. The proposed rule is expected to provide other benefits that are not expressed in monetary terms. When the se benefits are taken into account, along with equity- enhancing effects such as reduction in demand for publicly- funded remediation, the benefit - cost comparison becomes more complex. Consequently , the final regulatory

decision becomes a policy judgment th at takes into account efficiency as well as equity concerns. 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 ; one based on a seven percent discount rate , and one based on a three percent discount rate.7 - 2

**7.1 Cost Benefit Comparison**  In this section, we compare the total costs of the rule with its total monetized and non monetized benefits and avoided costs . The total costs and monetized avoided costs of the proposed rule are summarized in **Exhibit 7 -**  **1** . The costs in the exhibit represent the compliance cost s of the proposed rule, including state government administrative costs. The exhibit also shows the social benefits of the proposed requirements that are not captured in avoided costs . M onetized social benefits are calculated onl y for avoided cancer risks related to benzene due to the difficulty in measuring other ty

pes of benefits. Avoided cancer risks are estimated to be minimal, as they address only the uncontrolled human health risks that occur before discovery

and remediation of a release under existing programs . EPA estimates less than $ 5 ,000 in measurable, m onetized social benefits per year , regardless of the option. However, as **Exhibit 7 -**  **1** notes and discussed in Chapter 4 , a number of benefits could not be monetized, including groundwater protection, mitigation and avoidance of acute events, ecological benef its, and non - benzene human health risks. **Exhibit 7 -**  **1** demonstrates that the proposed rule may avoid more costs than it creates, potentially

generating cost savings to society. EPA estimates that the Preferred Option could generate $ 90 million to $ 530 million per year in savings to society. Alternative 1 could have a net benefit of $ 250 million to a net cost of $210 million , while Alternative 2 could generate savings of $ 460 million to costs of $20 million .7 - 3

Exhibit 7 - 1 **Comparison O f**  **Annual Compliance**  **C ost**  **s , Cost Savings**  **A nd Monetized Benefits**  f ,g **Preferred Option (2008$ millions)**  **Alternative 1**

**(2008$ millions) Alternative 2** 

**(2008$ millions) Annual Monetized Benefits**  Avoided cancer risks a ,d $0.00 1 - $0.00 5 $0.002 - $0.00 5 $0.001 - $0.003 **Annual Avoided Costs d**  Releases and groundwater incidents $3 0 0 - $700 $300 - $740 $110 - $570 Vapor intrusion $0. 4 - $2 6 $0.5 - $2 8 $0.2 - $19 Product loss $2.0 - $7.2 $2.6 - $7.6 $0.4 - $5.3 **Annual Compliance C** 

**ost s**  Conventional UST systems b $180 $360 $120 Emergency generator tanks (EGT s ) $2 $2 $2 Airport hydrant fuels distribution systems (AHFDS s ) $18 $120 N/A UST systems with field - constructed tanks (FCT s ) $5 $33 N/A Cost to owners/operators to read regulations $5 $5 $5 State government administrative costs c $0.2 $0.2 $0.2 **Total Annual Benefits and**  **Avoided Costs $3**  **0 0**  **- $7**  **4 0**  **$310 -**  **$770 $110**  **- $590**  **Total Annual Compliance C**  **ost s**  **g $210**  **$520 $130**  **Net Cost (Savings) to Society g**  **[Total Com** **pliance C ost**  **s less**  **Total Benefits and**  **Avoided Costs] ($5**  **3 0)**  **- ($**  **9 0)**  **($250) -**  **$210 ($460)**  **- $20**  **Nonmonetized Benefit**

**s e**  Groundwater protected (billion gallons) 110 - 350 120 - 370 41 - 250 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 Non -benzene human health risks Not estimated Not estimated Not estimated a The pathway assessed to evaluate avoided cancer risk is benzene exposure through contaminated groundwater. 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 co mpliance 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 . d Avoided cancer risks and avoided costs are separate and additive (i.e., these estimates do not overlap). Avoided cancer risk s are the benefits associated with reducing cancer cases prior to discovery of the release. Avoided remediation costs from release s and groundwater incidents are the costs related to site remediation. Avoided vapor intrusion costs include additional avoided costs associate d 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. e Due to data and resource constraints, EPA is unable to monetize some of the positive impacts of the proposed rule. Chapter 4 of this document provides a qualitative discussion of these benefits. f Totals may not add up due to rounding. Cost estimates wer e derived using a seven percent discount rate. g Compliance costs include direct compliance costs and state oversight costs. For this regulatory impact analysis, direct comp liance costs and state oversight costs provide a reasonable proxy to assess the proposed rule’s social costs. See Chapter 3.1 for further discussion.7 - 4

**7. 1.1**  **Cost -**  **Benefit Comparison under the Alternative Baseline Scenario**  **Exhibit 7 -**  **2** depicts the comparison of costs and benefits of the proposed rule in the alternative baseline scen ario , where the universes of releases and UST s ys tems decline over time in accordance with historical trends. In this alternative baseline, the universe of releases is smaller relative to the original baseline than the universe of UST s ys tems; however, **Exhibit 7 -**  **2** demonstrates that even in this case, the proposed rule may avoid more costs than it creates, potentially

generating cost savings to society. EPA estimates that the Preferred Option in the alternative baseline could generate between $ 240 million per year in savings to $ 20 million per ye ar in costs to society. Alternative 1 could have a net cost of $ 50 million to $33 0 million , while Alternative 2 could generate savings of $ 240 million to costs of $ 56 million . Exhibit 7 - 2 **Comparison Of Annual**  **Com pliance C**  **ost s, Cost Savings And Monetized Benefits**  **Using an**  **Alternative Baseline** f ,g **Preferred Option (2008$ millions)**  **Alternative 1**

**(2008$ millions) Alternative 2** 

**(2008$ millions) Annual Monetized Benefits**  Avoided cancer risks a ,d $0.001 - $0.00 3 $0.001 - $0.003 $0.0003 - $0.002 **Annual Avoided Costs d**  Releases and groundwater incidents $180 - $420 $180 - $440 $64 - $340 Vapor intrusion $0.3 - $1 6 $0.3 - $1 7 $0.1 - $11 Product loss $ 1 . 2 - $ 4 . 3 $ 1 .6 - $ 4 .6 $0. 2 - $ 3 . 2 **Annual Compliance C** 

**ost s**  Conventional UST systems b $1 7 0 $3 5 0 $1 1 0 Emergency generator tanks (EGT) $2 .2 $2 .2 $2 .1 Airport hydrant fuels distribution systems (AHFDS s ) $18 $120 N/A UST systems with field - constructed tanks (FCT s ) $4.6 $33 N/A Cost to owners/operators to read regulations $5 .1 $5 .1 $5 .1 State government administrative costs c $0.2 $0.2 $0.2 **Total Annual Benefits and**  **Avoided Costs $**  **1 80**  **- $44**  **0 $180**  **- $46**  **0 $**  **64 -**  **$ 36**  **0 Total Annual**  **Compliance C ost**  **s g**  **$20 0**  **$5 1**  **0 $1**  **2 0**  **Net Cost (Savings) to Society**  **g [Total**  **Com pliance C**  **ost s**  **less Total**  **Benefits and Avoided Costs]**  **($ 240)**  **- $**  **2 0**  **$50 -**  **$ 33**  **0 ($**  **24 0)**  **- $**  **56 Nonmonetized Benefits**  **e** Groundwater protected (billion gallons) 65 - 210 71 - 220 25 - 1 50 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 Non -benzene human health risks Not estimated Not estimated Not estimated a The pathway assessed to evaluate avoided cancer risk is benzene exposure through contaminated groundwater . 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 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 o wnership changes, and process one - time notifications of EGT, AHFDS, and FCT existence. d Avoided cancer risks and avoided costs are separate and additive (i.e., these estimates do not overlap ). Avoided cancer risks are the benefits associated with reducin g cancer cases prior to discovery of the release . Avoided remediation costs from releases and groundwater7 - 5

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. e Due to data and resource constraints, EPA is unable to monetize some of the positive impacts o f the proposed rule. 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 Compliance costs include direct compliance cos ts and state oversight costs. For this regulatory impact analysis, direct compliance costs and state oversight costs provide a reasonable proxy to assess the proposed rule’s social costs. See Chapter 3.1 for further discussion. **7.2 Cost** **- Effectiven**  **ess Analysis** W e 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 a nal ys is, we consider avoided releases to be both releases altogether avoided and groundwater incidents averted due to the proposed rule. As presented in **Exhibit 7 -**  **3** , we find that the cost per release avoided is approximately

$ 3 8 ,000 to $ 120 ,000 under the Preferred Option, compared with $ 9 0,000 to $2 9 0,000 under Alternative 1 and $ 33 ,000 to $200,000 under Alternative 2. This compares favorabl y with average release remediation costs presented in **Exhibit 4 -**  **2** in Chapter 4 , which range between $92,000 and $194, 000. This regulatory impact anal ys is suggests that, in addition to improving the alignment of incentives, release prevention is likely to be less costly

than release remediation under the Preferred Option and Alternative 2 and in some instances under Alter native 1. Exhibit 7 - 3 **Cost -**  **Effectiveness: Number Of Avoided Releases And Groundwater Incidents a**  **Preferred Option Alternative 1**  **Alternative 2** Avoided releases and groundwater incidents 1,680 - 5,370 1,820 - 5,780 630 - 3,860 Com pliance cost

b ($ million) $210 $520 $130 **Cost per release avoided ($ million) $0.038**  **- $0.12**  **$0. 09**  **- $0.29**  **$0.033 -**  **$0.20** a Cost estimates were derived using a seven percent discount rate. b Com pliance cost include s 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 proposed rule’s social costs. See Chapter 3.1 for further discussion. **7.3 Costs**  **a nd**  **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 -**  **4** presents a summary o f total compliance cost s and avoided remediation costs considering alternate discount rates of three percent and zero percent (i.e., no discounting). Costs change little because a reduction in interest rates both reduces time value of money (TVM) costs an d increases costs that have a delay

before implementation . 1 , 2 The net result of a change from a discount rate of seven 1 When amortizing a value over time, if all other factors are held constant, a reduction in the rate of interest de creases the annual payment.

2 The rate of discount enters into our calculation of time value of money costs . Higher discount rates increase these costs, while lower discount rates cause them to decrease. See Appendix D for details .7 - 6

percent to a discount rate of zero percent is an overall increase in the cost of the rule of less than $10 million per year , indicating that TVM and delayed - implementation cost effects essentially offset each other . Discount rates are also involved in our estimate of annual avoided costs. In particular, we use them only

to obtain constant annual avoided costs for those requirements in which the affected universe grows over time and calculate the delay until positive impacts accrue . 3 Here, the effect of lowering interest rate is more significant, as all requirements are discounted b y at least one period. As **Exhibit 7 -**  **4** shows, a change in the rate of discount from seven percent to zero percent increases avoided costs from a range of $3 0 0 million - $7 4 0 million to $340 million

- $8 1 0 million . This increase is largely due to the fact that we discount all avoided costs by at least one year, a s outlined in **Exhibit 1 -**  **2** . We conclude that, while a reduction in the discount rate leaves annual compliance cost s essentially

unchanged at $210 million , avoided costs increase from by $ 4 0 million to $ 7 0 million per year. As such, annual savings to society would increase from a range of $ 90 million - $5 3 0 million to $ 130 million - $ 600 million if EPA relie s on a zero rate of discount. Exhibit 7 - 4 **Compliance C ost**  **s And Beneficial Impacts Under Alternat iv**  **e Discount**  **Rates d**  **,e Avoided Cost**  **Preferred Option 7**  **percent discount rate ($ m** **illions) Preferred Option** 

**3 percent discount rate ($ m** **illions) Preferred Option** 

**Undiscounted ($ m** **illions) Annual Monetized Benefits**  Avoided cancer risks a $0.001 - $0.005 $0.001 - $0.005 $0.002 - $0.00 5 **Annual Positive Impacts (Avoided Costs)**  Releases and groundwater incidents $3 0 0 - $700 $320 - $740 $340 - $770 Vapor intrusion $0.4 - $26 $0.4 - $27 $0.5 - $2 8 Product loss $2.0 - $7.2 $2.0 - $7.4 $2.1 - $7.7 **Annual Compliance C** 

**ost s**  Conventional UST systems b $180 $180 $180 Emergency generator tanks (EGT) $2.2 $2.2 $2.2 Airport hydrant fuels distribution systems (AHFDS s ) $18 $21 $22 UST systems with field - constructed tanks (FCT s ) $4.6 $5.2 $5.6 Cost to owners/operators to read regulations $5.1 $3.7 $2.7 State government administrative costs c $0.2 $0.2 $0.2 **Total Annual Avoided Costs $3**  **0 0**  **- $7**  **4 0**  **$330 -**  **$770 $340**  **- $8**  **1 0**  **Total Annual Compliance C**  **ost s**  **e $210**  **$210 $210**  **Net Cost (Savings) to Society e**  **[Total Com** **pliance C ost**  **s less**  **Total Avoided Costs] ($5**  **3 0)**  **- ($**  **9 0)**  **($560) -**  **($120) ($130)**  **- ($**  **600 )**  a The pathway assessed to evaluate avoided cancer risk is benzene exposure through contaminated groundwater . 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 administrative costs for sta te governments to read the regulation, 3 These requirements are the elimination of flow restrictors as overfill prevention for new tanks and when overfill devices are rep laced, closure of lined tanks which cannot be repaired, and all Energy Policy Act requirements in Indian country, with the exception of operator training.7 - 7

apply for state program approval, process notifications of ownership changes, and process one - time notifications of EGT, AHFDS, and FCT existence. d Totals may not add up due to rounding. e 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 proposed rule’s social costs . See Chapter 3.1 for further discussion.1



### Sources Cited "2005 U.S. Mo tor Fuel Station Count: 168,987. " National Petroleum News Market Pulse. 40 CFR 280.10 Subpart A

– Applicability . Association of State and Territorial S olid Waste Management Officials. State Fund Survey Results 2008. Association of State and Territorial S olid Waste Management Officials. State Fund Survey Results 2009. Committee on Vehicle Emission Insp ection and Maintenance Programs. Evaluating Vehicle Emissions Inspection and Maintenance Programs
. National Academy Press, 2001. Dahl, Carol and Thomas Sterner. “Anal yz ing Gasolin e Demand Elasticities: A Survey . ” Energy Economics , July

1991. Davis, Robin V . “Petroleum Hydrocarbon Vapor Intrusion Investigations: Current General Practice . ” Leaking Underground Storage Tanks, Utah Department of Environmental Quality , February

9, 2010. E 2 , Incorporated, memoranda and anal ys es submitted under Contract EP - W - 05 - 018 , “U.S. Environmental Protection Agency . Underground Storage Tanks/Leaking Underground Storage Tanks Analy

tical and Technical Support .” Eckert, Andrew and Douglas S. West. "A Tale of Two Cities: Price Uniformity and Price V olatility in Gasoline Retailing. " Annals of Regional Science , 2004, vol. 38, issue 1, p. 25 - 46. ESRI . “2009 Methodology Statement: ESRIData

—Business Locations and Business Summary .” http://www.esri.com/library /whitepapers/pdfs/infousa - business - database.pdf IC F . "Economic Impact Analy sis of Additional Mechanisms for Local Government Entities to Demonstrate Financial Responsibility for Underground Storage Tanks." December 1992. Executive Order 12866, “ Regulatory Planning and Review, ” October 4, 1993. Fischer, Jeffrey . “The Economics of Pric e Zones and Territorial Restrictions in Gasoline Marketi ng. ” Federal Trade Commission . 2004 . Accessible online at http://www.ftc.gov/be/workpapers/wp271.pdf . Freeman, A.M. III, . The Measurement of Environmental and Resource Values: Theory and Methods . Resources for the Future: Washington, DC. 2003. Geyer, Way

ne. “Where Has Our Petroleum Storage Capacity Gone? ” Steel Tank Institute. Accessible online at2

https://www.steeltank.com/LinkClick.aspx?fileticket=h8g9YO5 y%2 Bf I%3D&tabid=108 &mid=502 . Hoch et al . “Determinants of Store - level Price Elasticity .” Journal of Marketing Research , Vo l. 32 (1) , 1995 : p. 17

– 29. Industrial Economics, Inc. “Approaches to Assessing the Benefits, Costs, and Impacts of the RCRA Subtitle C Program.” October 2000. Accessible online at http://www.epa.gov/oswer/docs/rcradocs/rcra.pdf. Industrial Economics, In c. "Detailed Assessment of UST Univ erse b y Tank Purpose and Design." Work Assignment 1 - 25, Task 6, March 24, 2009. Industrial Economics, Inc. "Methodology for S econdary

Containment for Piping. " Work Assignment 1 - 19, Task 5, October 3, 2008. Industrial Econ omics, Inc. "Methodology to Estimate Avoided Costs Ass ociated with a Ty pical UST L eak. " October 27, 2008. Industrial Economics, Inc. “Preliminary Assessment and Scoping of Data Related to Potential Revisions to the UST Regulations.” Work Assignment 1 - 25, T asks 2 - 4 November 20, 2008. Industrial Economics, Inc. “Small Entities Screening Anal ys is of UST Universe by Industry Sector.” Work Assignment 3 - 25, Task 4, February 4, 2010. Kleit, Andrew N., "The Economics of Gasoline : Retailing Petroleum Distribution and Retailing Issues in the U.S." December 2003. "MarketFacts 2008 Overview." National Petroleum News. August 2008. National As sociation of Convenience Stores. 2009 Fact Book. National As sociation of Convenience Stores. “C onsumer Fuels Report,” February 2008, as cited in “Testimony

of Bill Douglass, Douglass Distributing Company , on behalf of The National Association of Convenience Stores before the House Judiciary Committee, Anti - Trust Task Force Hearing to Examine the Con sum er Effects of Rising Gas Prices. ” May 7, 2008. National As sociation of Convenience Stores. “How do retail ers get

– and sell

– gasoline?” 2008 NACS Gas Price Kit. National Association of Convenience Stores. “U.S. Petroleum Industry : Statistics, Definitions.” http://www.nacsonline.com/NACS/Resources/campaigns/GasPrices_2009/Pages/Statistic sDefinitions.aspx . National Association of Convenience Stores . “Who sells gasol ine in the United States ? ” 2008 NACS Gas Price Kit .3

New Hampshire Depar

tment of Environmental Services. "Underground Storage Tank Program. " November 18, 2008. Paustenbach, D J, et. al. , “ Benzene toxicity and risk assessment, 1972 - 1992: impl ications for future regulation.” Environ Health Perspect , December 1993 , 101(Suppl 6):177

–200. Poe, Gregory

L ., K.J. Boyle, and J.C. Bergstrom. “A Preliminary Meta Analy sis of Contingent Value s 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. Reid, Keith. "MarketFacts 2008. " National Petroleum News. Rhode I sland Departm ent of Environmental Management. Underground Storage Tank Environmental Results Program, Final Report, Tables I - IV . Risk Management Association. Statement Studies , Sector 447. RTIInternational. “Risk Analy sis to Support Revisions to Underground Storage Tank (UST) Regulations.” December 22, 2010 . Testimony

of Bill Douglass , CEO, Douglass Distributing Company , on behalf of the National Association of Convenience Stores, before the House Judiciary Committee, Anti - Trust Task Force Hearing to Examine the Consum er Effects of Rising Gas Prices. May 7, 2008 U.S. Bureau of Labor Statistics. "Employer Costs for Employee Compensation. " March 2010. U.S. Bureau of Labor Statistics. "Employer Costs for Employee Compensation. " September 2009. U.S. Bureau of Labor Statistics. "Oc cupational Employ ment and Wages. " May

2009 . U.S. Bureau of Transportation Statistics. “Sales Price of Transportation Fuel to End - Users in National Transportation Statistics 2010.” Table 3 - 8. http://www.bts.gov/publications/national_transportation_statistics/pdf/entire/pdf U.S. Census Bureau. 2002 Census of Governments. U.S. Census Bureau. 2002 Economic Census, Retail Trade . Industry Series. Gasoline Stations: 2002, issued November 14, 2004. U.S. Census Bureau. 2008 County Business Patterns. U.S. Census Bureau. Industry Statistics Sampler: NAI CS 447 , Geographic Distribution - Gasoline Stations: 1997. United States Department of Health and Human Services, Public Health Service, Agency for Toxic Substances and Disease Registry . “Toxicological Profile for Pol yc yclic Aromatic Hydrocarbons.” August 1995.4

U.S. En ergy

Information Administration. Petroleum Summary , Supply and Disposition. U.S. En ergy

Information Administration. Short - Term Energy Outlook - Real Energy

Prices. U .S. Environmental Protection Agency . “ERP States Produce Results . ” December 2007 U.S. Environmental Protection Agency . “Evaluation of Three Enviro nmental Results Programs (ERPs). ” August 31, 2009 . U.S. Environmental Protection Agency , Offi ce of Underground Storage Tanks. “Evaluation of Releases from New and Upgraded Underground Storage Tank S ys tems (peer review draft). ” August 2004. U.S. Environmental Protection Agency , Offi ce of Underground Storage Tanks. “Petroleum Releases at Underground Storage Tank Facilities in Florida .” March 2005. U.S. Environmental Protection Agency , Offi ce of Underground Storage Tanks. Semi
- Annual Report of UST Performance Measures End of Fiscal Year 2009

– As Of September 30, 2009 . U.S. Environmental Protection Agency . "Regulatory Impact Analy sis of Technical Standard s for Underground Storage Tanks. " August 24 , 1988. U.S. Environmental Protection Agency . "Status of State Fund Programs. " accessed on September 9, 2010 . http:///www.epa.gov/oust/states/fndstatus.htm U.S. Environmental Protection Agency . “Summary of the updated Regulatory Impact Analy sis (RIA) for the Reconsideration of the 2008 Ozone National Ambient Air Quality Standard (NAAQS)." U.S. Environmental Protection Agency . "Underground Storage Tanks: Technical and Financial Requirements, and St ate Program Approval Procedures. " Supporting Statement for EPA In formation Co llection Request Number 1360.08. October 24, 2007. U.S. Internal Revenue Service. SOI TaxStats. Table 7: Corporation Returns with Net Income for 2007 . Accessible online at http://www.irs.gov/taxstats/article/0,,id=170693,00.html . U.S. Office of Management and Budget. Circular No. A - 4. September 17, 2003. U.S. Office of Management and Budget. Circular No. A - 76. U.S. Office of Management and Budget. Circular No. A - 94 . Revised October 29, 1992. Utah Department of Environmental Quality . "Underground Storage Tank Program . " November 18, 2008. Vermont Department of Environmental Conservation. “Final Report

– Environmental Results Project

– Vermont: Unde rground Storage Tank Fac ilities. ” March 17, 2010 .5

Young, Thomas M. and Randy D. Golding. Underground St orage Tank Field - Based Research Project Report. S ubmitted to the California State Water Resources Control Board under contract to the University of California, Davis. May 31, 20 02 .