*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review *** EO12866 _UST Revisions 2050 -AG46 _NPRM_ EA - RIA

_20110 9 1 4

**A ssessment**  **of the**  **P otential**  **C ost**  **, 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, In corporated 2067 Massachusetts Avenue Cambridge, MA 02140 617/354 - 0074

August 20 1 1*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review *** [This page intentionally left blank.]*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***



### 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 automated process that monitors product level and provides inventory

control BL S

– Un ited 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 Detector / 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 Associatio n 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 A gency PAHs

– Polycyclic Aromatic Hydrocarbons*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

Pd

– 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

– S tate 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 Hydrocarbons 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 Mandates Reform Act UST

– Underground Storage Tank VSL

– Value of a Statistical Life WA

– Work Assignment WTP

– Willingness to Pay*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

iii 

### 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 S ys tems 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**  **Social Costs** 3.1 Introduction ................................ ................................ ................................ ........................... 3 - 1 3.2 Compliance Cost Methodology ................................ ................................ ............................ 3 - 1 3.2.1 Categories of Compliance Costs Analyzed ................................ ................................ 3 - 3 3.2.2 Estimation of 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 Usin g 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 - 21*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

iv 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 Government Administrative Compliance Costs ................................ .............. 3 - 2 3 3.6.2 Costs to Regulated Universe to Review Regulations ................................ ............... 3 - 2 4 3.7 Summary

– Total Social Costs ................................ ................................ ............................ 3 - 2 4 3.7.1 Summary

– Total Social Costs 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 Avoided 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*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

v 4.8.1 Avoided Benzene Cancer Risk ................................ ................................ ................. 4 - 2 7 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 Positive 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 An aly 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 Protection 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*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

vi **Chapter 7. Comparison of**  **Costs, Benefits, and**  **Other Impacts** 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 Universe 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 between 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 Esti mating 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 Statement*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

ES - 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 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 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 stat e 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 systems . 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 trainin g or secondary containment grant guidelines). In order to establish federal UST requirements similar to the UST secondary

containment and operator training requirements of EPAct, EPA decided to revise the 1988 UST regulation . Without these changes, EPAc t 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 docum ents 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 onc e 1 See http://www.epa.gov./oust/fedlaws/Tribal%20Strategy_08076r.pdf*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

ES - 2 were , releases from piping and spills and overfills associated with deliveries have emerged as more common problems. 2 R eleases 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 mai ntained 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 egul**  **atory 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 the 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 train ing 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 Facilities in Florida,” draft, March 2005 .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

ES - 3  Provide for other changes to improve release prevention and detection and program implement ation 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 vapor 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 continuous 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 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 O ption . 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 Ad dress Environmental Justice in Minority Population s and Low -Income Population s  Executive Order 13045, Protection of Children F rom Environmental Health Risks and Safety Risks  Unfunded Mandates Reform Act of 1995  Executive Order 13175, Consultation and Co ordination W ith Indian Tribal Governments  Executive Order 13132, Federalism*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

ES - 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 change 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 los s; avoided vapor intrusion damages; and a subset of human health benefits.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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, i mpacts 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:

 Social costs

– EPA estimated $210 million in annual social costs 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 costs, 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 on e - 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. 3

 Avoided costs

– Avoided remediation costs form the majority of positive impacts from the proposed rule. EPA estimated the proposed rule will avoid 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 .  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

3 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 costs 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 proces s 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 operators to read the proposed regulation).*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

ES - 6 estimated the proposed rule could potentially protect 110 billion to 350 billion gallons of groundwater each ye ar. 4 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 5 ), and protection of ecological biota.  Social costs and avoided costs under the alternative baseline

– Under the alternative baseline scenario that assume s declines in the universes of b oth UST sy stems and releases over time, EPA estimated $20 0 million in annual social costs for the proposed rule. Annual social costs 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 under 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 impact 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 Pref erred Option. To the extent that these funds are maintained by

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

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

4 See c hapter 4. 10 for details on how this estimate was derived. 5 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 fueling system. Historical leakage from the system contaminated soil and gr oundwater, forming groundwater plumes at many sites along the system. A site release study identified 60 to 70 release points with varying degrees of severity along the refueling system line with free product found under the apron at closure. 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 200 8, the number of gas station facilities decreased an average of 1.4 percent per year (or 2,400 stations per year).*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

ES - 7 **A ssessment**  **o f**  **S ocial**  **C osts**  For this regulatory

impact analy sis , direct compliance costs and state oversight costs provide a reasonable proxy to assess the proposed rule’s social costs for the following reasons:  The regulatory requirements generall y focus on additional testing and inspection of existing equipment and do not reflect large - scale investments in equipment or significant changes to operations at the facility level. In addition, the facilities affected b y the propos ed rule are distributed with relative geographic uniformity for consumers and producers.

 Given the relativel y small 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. Th erefore, it is unlikely significant changes to production or consumer behavior will affect social costs.

 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 oppo rtunities 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: identifyingspecific 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 fai lure and repair of equipment. 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 social costs.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

ES - 8 Exhibit ES - 2 **Total Annual Social**  **Costs** d

**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 o perators to r ead r egulations $5.1 $5.1 $5.1 State government administrative costs b $0.2 $0.2 $0.2 **Total Annual S**  **ocial C**  **osts** c **$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 . **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 remediating 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 provided professional judgment regarding th e proposed rule’s effects on reduction in release frequency (number of releases per ye ar) and rel ease severity (as measured by groundwater incidents averted) . This body of knowledge allowed EPA to estimate total avoided 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 a ssume that exposure risk is eliminated at the time of discovery and cleanup, and are 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), 9 Office of Underground Storage Tanks, Evaluation of Releases from New and Upgraded Underground Storage Tank 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 receptors and by geology, and is not predictably related to the size or age of a plume. Product loss estimates rely on data from Florida and other sources for typical release sizes and are mapped to the estimates of avoided releases.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

ES - 9 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 . 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. 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 Social Costs**  **a nd**  **Positive Impacts** Exhibit ES - 4 summarizes the social costs 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

ES - 10 Exhibit ES - 4 **Comparison O**  **f Annual**  **Social Costs, C ost Savings**  **A nd Monetized**  **Benefits** g

**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 Social Costs** 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 Social Costs $210**  **$520 $130**  **Net Cost (Savings) To Society**  **[ Total**  **Social Costs less**  **Total Benefits and**  **Avoided Costs] ($**  **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 direct ly 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 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. 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. Cost estimates were derived usin g a seven percent discount rate .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

ES - 11 Exhibit ES - 5 summarizes the social costs and positive impacts of the proposed rule under an alternative baseline where universes of UST s ystems and releases are assumed to decrease at a declining rate over time. Social costs decline slightly under the alternative baseline relative to the primary

analy sis due to a small decrease in affected s ys tems. Avoided costs decline by approximately

40 percent, as the universe of releases contracts substantially under the alte rnative baseline. Exhibit ES - 5 **Comparison O**  **f Annual** 

**Social Costs, Cost Savings A**  **nd 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 Social Costs $200**  **$510 $120**  **Net Cost (Savings) to Society [Total Social Costs**  **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 dynamics 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 resu lt 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 defined 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 scenario. 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 ysis 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 would in many

cases reduce remediation demand for taxpayer - funded state funds. This is likely to improve behavioral incentives, as the parties most likely to cause releases will also be 11 For additional information regarding this issue, see Chapter 5.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

ES - 12 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**  **Distributional 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 and 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 m inority 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 contaminated groundwater due to the longer potential exposure from showering (inhalation of vapors) compared to children (ingestion of water while bathing) , particularl y those und er 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, 1997) . Moreover, because the proposed rule is expected t o 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

ES - 13  Regulatory p lanning and review

– Pursuant to the terms of Executive Order 12866 [ 58 F R 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 section 3(f)( 1 ) of th e order. Findings of the regulato ry

cost anal ys is in Chapter 3 indicate the rule, as proposed, is projected to result in aggregate annual social costs 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 governments 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 regulation shortly after the pa ssage 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 leader s 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 triballyowned 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 amended 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 aboveground*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

ES - 15 components will be subject to SPCC requirements. EPA is proposing to regulate the underground components associated with airport hydrant systems 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 wastewate r treatment tank s ys tems and UST 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 other 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 pro posed 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 h ealth 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 Trust Fund (LUST Trus t 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 o wners 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. By 1998 , owners and operators had to meet new UST sy stem requirements, upgrade their existi ng UST sy stems, or close them. Owners and operators who chose to upgrade had to ensure that every UST s ys tem had spill prevention equipment (e.g., spill buckets) , overfill prevention equipment , and was protected from corrosion. In addition, owners and op erators 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 Act (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 s tate 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 regulation (at 40 CFR Part 280 ), primaril y to ens ure parity in Indian c ountry . Key EPAct provisions (such as secondary containment and operator training) apply to all states receiving federal Subtitle I money , regardless of their state program approval status; but these key provisions do not apply

in Indian country

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

containment and operator training requirements of EPAct, EPA decided to revise the 1988 UST regulation . Without these changes, EPAct provisions will not apply in Indian country . 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 associated 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 these 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 3 A bout 50 percent of all releases 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 operation and maintenance of the r elease 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 beginn ing 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. Because 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 social costs. 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 as well as equipment manufacturers, small businesses, local governments, and environmental and community groups. Over a two - year period, we held conference calls, solicited comments and gave stakeholders multiple opportunities to share their ideas as well as kept them informe d 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 i s proposing the following set of revisions (hereafter referred to as the Preferred Option) :

4 We refer here to mechanisms other than those whose specific purpose is to fund remediation for new releases from UST systems. For example, if owners and operators in a particular state are compelled to participate in a fund operated by a public (or privat e) entity, and the contributions made directly 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 fund s 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 vapor 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 continuous in - tank leak detection (CITLD) as release detection methods o Update codes of practice listed in the regulation o Remove old upgrad e 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 E PA 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 co untry . 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 equipment , 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 co ntainment 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 ti me the rule comes into effect; depending on the requirement, they may have up to three years to satisfy the new requirements . 7 EPA’s anal ys is accounts for this delay in its estimate of costs by discounting the costs associated with each requirement as shown in **Exhibit 1 -**  **2** . EPA assumes that the monetized positive impacts associated with these requirements accrue at the end of the ye ar in which costs occur to incorporate an assumption that some beneficial impacts may lag requirements. 8

7 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. 8 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 impacts.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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

**Requirement Number of years until**  **effective Release Prevention**  Overfill prevention equipment test **9** 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) 10 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 regulations 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 11

9 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 million compared to a three - year delay; this does not affect the total cost estimate present ed in the RIA for the proposed rule.

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

ply with Subparts B, C, D, E, G, and H of 40 CFR Part 280. The proposed regulation require s 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.

11 While this represents a new requirement, based on conversations with the Georgia Environmental Protection Divisio n, 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 as sume 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 regulation s 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 co sts on these units and relevant state governments. In conducting these anal ys es, EPA also assessed the sensitivity of outcomes to key assumptions. Separatel y, the anal ys is 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 facility 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 impacts 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 Report 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. 12 D ata, methods, and results of this analy sis are presented in the following chapters:

12 Executive Order 12866, Regulatory Planning and Review, October 4, 1993; Office of 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 Social**  **Costs.** 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** **.** Th is 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 energ y impacts , effects on small businesses and governments , 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

planning 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 appendice s.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 produ cts; 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 s ys tems, 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 - u p 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 hazard ous 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 conve ntional 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 28 0.10 Subpart A

– Applicability.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 facilities and mainly serve operations at military bases. These tanks are currently

deferred from all regulation under 40 CFR Part 280, except for Subparts A and F, but are ty picall y subject to regulation under the Oil Pollution 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 equip ment 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 most 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 Conf** 

**iguration 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 , Inco rporated, 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 be st 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 .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 considered s eparatel 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, and the “s pill 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 f or storing and dispensing fuel in commercial settings, hospitals, manufacturing, transportation, communications and utilities, and agriculture . See Exhibit 2 - 3 for details.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 sy stems 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 pro vided b y 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 h ydrant 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 for 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 social costs and avoided 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 syst ems 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 Def ense 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

2 - 5 An anal ys is of state data by EPA concludes that the average retail motor fuel establishment has 2.97 tanks (UST sy stems). 12 Assuming approximately 2.97 UST s ys tems per facility and 161,768 facilities, 48 1 , 108 UST sy stems, or 79 percent of all active UST s ys tems, are associated with retail motor fuel establishments. In addition to traditional motor fuel retailers, b ig - box retai lers, 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 approximately 4, 5 00 fil ling 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 foo d 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 bu ses, 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 stems at the fa cilities 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 o f 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 number 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 Indus try 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 Order 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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., “Preliminary 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 for Local Government Entities to Demonstrate Financial Responsibility for Underground Storage Tanks,” December 1992, Exhibit 3 - 1. Estimates o f local government UST systems adjusted using the 1987 Census of Governments. Consistent with this analysis, the number of government UST systems is assumed to be two percent of all 2009 UST systems owned by state and federal governments and four percent o f 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 .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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) st ate 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 number 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 a ffect onl y those universes of facilities, and Energy Policy Act - related provisions affect only facilities and UST sy stems in Indian country . 17 See Appendix B for detailed descriptions of the values and sources used in each calculation. These estimates do n ot reflect baseline state regulations (e.g., whether a state already requires interstitial integrity testing) . As discussed 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 Ag ency . 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 five 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 n otification 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).*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 Directive 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 year 10 as a central estimate. In addition, we adjust unit costs to reflect the fact that the total cost of these requirements grows as the number of affected systems or facilities increases. **2. 5**  **Facilities and**  **Systems Affected**  **by Pr**  **oposed 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 change. 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 result 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 replacement 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 regulati ons. 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 baseli ne technology data is not 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, e stimates 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

2 - 11 percentage of s ys tems using ATGs are available only at the national level. As a result, the regulatory

scenarios in Chapters 3 (Social Costs) and Chapter 4 (Benefits and Cost Savings) reflect regulatory

changes required by

an “average” fac ility

in a state under the proposed rule, assuming that all s ys tems reflect the national profile of existing technologies. Analy ses of economic impacts and small businesses in Chapter 5 (Distributional Analy ses) assess the possible distribution of compliance impacts related to this uncertainty . 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 n otification 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 0*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

2 - 12 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 estimat e. In addition, we adjust unit costs to reflect the fact that the total cost of these requirements grows as the number of affected systems or facilities increases. c 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 1 

### Chapter 3. **Assessment o**  **f Social**  **Costs 3.1**  **Introduction** This chapter describes EPA’s anal ys is of the social costs 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 ass essing 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 th e administrative costs incurred b y the government, changes in producer and consumer 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 costs. In this context, compliance costs represent a reliable indicator of social costs for the following reasons:  The regulatory

requirements generall y focus on additional testing and insp ection 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 rule are distributed with relative geographic uniformity for cons umers and producers.  Given the small per- facility costs of the rule (less than $900 for the average 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 costs.  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 owne rs 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 costs over both the short - and long - run. This chapter presents EPA’s compliance cost methodology

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

anal ys is that evaluates the effec ts 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 state*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 2 regulation of underground storage tanks. EPA’s analy sis focuses on the specific incremental costs that occur as a consequence 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 level 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 f or 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 c ost model that identifies incremental equipment and labor requirements for an individual sy stem. Based on the baseline equipment, existing 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, inspection, testing, and recordkeeping. The model also includes other compliance costs , such as those associated with more frequent detection of equipment failure and repair of equipment . Some component costs are specific to individual UST sy stem configurations

– for example, 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 regulations 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 proposed 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 U ST 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 for 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 information, it

1 For this proposed rule, EPA does not specifically attempt to measure baseline regulatory costs. However, costs identified in the 1988 EPA regulation that set original technical standards under 40 CFR Part 280 provide an indication of baseline costs. The 1988 RIA calculated per - tank costs of $28,770, equivalent to $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 ).*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 3 is equally plausible that the se 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 number smaller than the entire universe. Furth er, 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 sy stem 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 the 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 by

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 time) . 4 Because the proposed rule does not fo cus 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 installing a new double - walled UST or under - di spenser 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 equip ment; 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 cos t per UST system ranges from less than $100 in one state to over $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 EPA 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. Th e 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 .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 4 **Existing equipment replacements:** An UST sy s tem 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 incre mental compliance 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 tes t would discover 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 propos ed regulations 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 acco unt for the age of existing equipment. Owners and operators typically plan for new capital expenditures over the lifetime of existing equipment, recording depreciation as operations consume its usefulness over time. If an owner or operator is close to repl acing certain equipment and is required to replace that equipment when the proposed 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 thi s factor, EPA assumes that owners and operators replace brand new equipment, a conservatism 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 Al ternative 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 ov er time. More frequent inspections may lead to more frequent repairs and replacements but may also reduce the severity and cost of issues.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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. T his anal ys is 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 compliance 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 for go 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 S ystems**  E stimates of 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 ye ar. 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 cate gories 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 rate s 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 Agenc y. 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 reflect the May 2008 Occupational Employment and Wage publication by the Bureau of Labor Statistics. See Appendix D for the particular Standard Occupational Classification codes us ed. EPA does not use the costs in its Information Collection Request 1360.08 because 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 reflects government overhead rates, we believe it is also representative of the low - overhead structure of the retail motor fuels sect or. The fringe benefits factor is from Bureau of Labor Services, Employer Costs for Employee Compensation, September 2009. See Table 10: All workers, service -providing industries.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 6 to be satisfied by

third - parties, such as testing, labor 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, an d 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 removing 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 costs 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 is calculates the cost of complyi ng 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 with release detection requirements at 40 CFR Part 280, Subpart D. **Exhibit 3**  **- 1**  presents the unit - level costs for the individual requirements in the proposed rule. 11

11 See Appendix D for a detailed discussion of these costs.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 systems $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 n otification 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*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 8 Exhibit 3 - 1 **Unit Costs For The Requirements In The Proposed Rule**  i **ONE -**  **TIME a**  **($) O&M** 

**($) REPAIR/REPLACEMENT**  **COST b**  **($)** 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 r epair and replacement of equipment reflect costs of repair or replace ment sooner than would have occurred in the baseline. For most requirements, these are costs th at 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 interstitial integrity testing, which occur every three years under the Preferred Option, represent the repairs and replacements over three years. In addition, TVM costs for 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 methods. It includes e lements 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 atte mpt

12 For details re garding these assumptions, see Appendix B . 13 See footnote 5 for an explanation of the use of a 20 - year time horizon.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 9 to adjust for these changes. This likely causes the analy sis to overestimate the costs of the proposed rule.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 10  **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 replacin g 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 declines 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 r equirements, 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 requi rements. 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 facilities with UST systems has been roughly 1.4 percent per year.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 11 EPA’s primary

a ssessment 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 c alculate 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 Steep declines in the universe of UST sy stems in past years reflect increases in tank size as well as industry

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

be reaching a practical limit in their ability to be transported and installed. 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 baselin e, 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, wh ich 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 U ST systems over time. The equation for such an exponenti al 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. ) 16 See Wayne Geyer, “Where Has Our Petroleum Storage Cap acity Gone?” Steel Tank Institute, https://www.steeltank.com/LinkClick.aspx?fileticket=h8g9YO5y%2BfI%3D&tabid=108&mid=502 . This source indicates simultaneo us 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 num ber of U ST systems may actually increase in the future to trend with population growth and economic expansion as more people living in more areas may necessitate more retail motor fuel outlets .

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

3 - 12 **3. 4**  **Res ults**  **o f**  **Assessment o**  **f Compliance 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 proportion of compliance cos ts 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 discu ssed 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**  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 or*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 13 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 ste ms are already in compliance with some requirements of the proposed rule.

19 In addition, Alternative 1 calls for tightness testing 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 14 Exhibit 3 - 3 **Annu al Compliance Costs D**  **ue T**  **o T**  **he Proposed Rule**  **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/A*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 15 Exhibit 3 - 3 **Annu al Compliance Costs D**  **ue T**  **o T**  **he Proposed Rule**  **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***** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 16 Exhibit 3 - 3 **Annu al Compliance Costs D**  **ue T**  **o T**  **he Proposed Rule**  **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 o f 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 emer gency 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 airp ort 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 the 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 associat ed with these systems offset each other, as the number of entries equals the number of exits; however, new systems entering the universe will still incur incremental capital costs associated with certain requirements (e.g., a new emergency generator 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 of 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 .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 17 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 18 **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**  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 among*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 19 facilities can sign ificantly 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 sy stems. 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 ins pections 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 wages, 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 fuel 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 maintenance 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 related 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. Inaddition to lower benefits and labor rates, 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 FCTs, 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 by gas station clerks or service attendants, not technical personnel.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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

3 - 21 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 BL S 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 perf orm 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 Man agement 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 Technic al 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 Compensation , September 2008 for Managerial (Table 9, Management, Professional, and Related); Technical and T echnical for operability testing (Table 10, Professional and T echnical S ervices ( S ervice Industries) ); and Clerical (Table 11, Office and Administrative 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 Stati on 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 service attendants, not technical personnel (e.g. 3rd -party contractors). e Baseline activities for operators of tanks that use groundwater or vapor monitoring include activi ties 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 labo r 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 number of entries equals the number of exits; however, new systems entering the universe will still incur incremental capital costs associated with certain requirements (e.g., a new emergency generator tank would need to install a release detection method). For modeling purposes, we account for these new units in the “Additions f or new units.” The costs shown reflect the capital costs associated with ne w units for all but the following requirements: elimination of 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 us ing a seven percent discount rate .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 22 **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 di fferent 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 testing 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 requirement s in place in the baseline, compliance costs could be higher than the estimates based on a uniform distribution presented in **Exhibit 3 -**  **2** and **Exhibit 3**  **- 3**  . Similarly , if affected facilities are concentrated in states that already have similar regulations in place in the baseline, then actual compliance costs could be substantially lower than estimates based on a uniform distribution. To investigate the imp act of the assumption 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., facilitie s 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 Technologie**  **s 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 .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 23 **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, pressur e, 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 percent of the total estimated compliance cos ts 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 e leven percent related to the distribution of technologies involved in overfill operability testing, integrity testing of interstitial areas, and spill prevention equipment tightness testing, and approximately four percent related to assumption s regarding i nterstitial

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 continuo us interstitial mo nitoring on their tanks will not be required to perform periodic interstitial integrity tests; (2) Piping: Owners and operators using vacuum monitoring, pressure monitoring, or liquid - filled interstitial space monitoring on their undergro und 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 l eak.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 24 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 o f 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 re lated 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 Sto rage Tank program administration requirements on state government agencies. 5 Specifically , state government agencies will incur costs associated 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 as sume 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 fo r 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 25 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, each 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 - year regulatory time horizon is appro ximately $ 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 te ms 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 Social Costs**  In total, EPA estimates that the Preferred Option for the proposed rule will produce incremental costs of approximately $2 1 0 million per ye ar 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, N orth Carolina, North Dakota, Nevada, and South Carolina. The Virgin Islands will also incur these costs.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 26 Exhibit 3 - 9 **Total Social Costs**  e

**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/O perators to Read Regulations $5.1 $5.1 $5.1 State Government Administrative Costs c $0.2 $0.2 $0.2 **Total Social Costs** d **$210 $520**  **$130** a Conventional UST systems include all systems that are not AHFDSs , FCTs , or EGTs . b Costs for EGT s 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 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 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 Cost estimates were derived using a seven percent discount rate . **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 UST sy stem. This as sumption 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 well 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 mo st 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 , because EPA’ s estimate is framed b y a number of conservative assumptions (outlined in section 3.3), it is unlikely that this analy sis understates the costs of the proposed rule significantly .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

3 - 27 **3.7 .1**  **Summary –**  **Total Social Costs 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 in 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 Social Costs Us**  **ing an Alternative Baseline**  e

**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/O perators to Read Regulations $5.1 $5.1 $5.1 State Government Administrative Costs c $0.2 $0.2 $0.2 **Total Social Costs** d **$200 $510**  **$120** a Conventional UST systems include all systems that are not AHFDSs , FCTs , or EGTs . b Costs for EGT s 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 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 state program approval, process notifications of ownership changes, and proce ss 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 .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 supplies). Ideally , social benefits reflect accurate measures of the total “willingness to pay” (WTP) of con sumers to obtain improvements in environmental quality . In other cases, avoided costs (e.g., medical care) can be used to inform proxy estimates of WTP when direct estimates of WTP are unavailable. In the context of this rule, EPA examines social benefit s and separatel y considers the avoided costs associated with reduced need for cleanup of releases because reliable WTP estimates for the value of an avoided 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 consu ltation) in detail. Next, it provides a description of monetized cost savings and other benefits, including avoided cleanup costs, avoided vapor damage cleanup estimates, avoided product loss, and the value of avoided c ancer risk associated with anticipat ed 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 Savings** 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 Estimates**  **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 changes in human behavior, and are not easily measured using equipment testing.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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. Therefore, EPA conducted a t argeted 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 signi ficant 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. Whil e 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 Research Council study of effecti veness 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 addres s 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 measurea ble 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 suggests that mandatory

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

1 Thomas 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 Emission 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 mode ling has been conducted.

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

– Environmental Results Project

– Vermont: Underground Storage Tank Facilities,” March 17, 2010; Rhode Island Department of Environmental Management, Underground Storage Tank Environmental Results Program, Final Report, Tables I - IV; U.S.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 inspections and reporting can reduce noncompliance. In general, the literature does not address UST inspection programs directly , and does not provide quantitative results that can be used to estimate the impacts of the 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 should 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 report ed release rates and isolate the marginal impacts of various components of the proposed rule. To collect detailed data at the facility level, however, would require visiting state UST programs individually

and collecting detailed site inspection data from state case files and archives. Not only would such an effort be prohibitive in terms of available resources, but our current knowledge of the state programs suggests that variable inspection practices and 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, o verfill 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 s ix - month Environmental Protection Agency, “Evaluation of Three Environmental Results Programs (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 Storage Tank Systems

– Peer Review Draft,” U.S. EPA, August 2004 , and U.S. Environmental Protection A gency, Office of Underground Storage Tanks, “Petroleum Releases at Underground Storage Tank Facilities in Florida,” draft, March 2005 .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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., state inspection) of s ys tem operations. In other words, we assume that owners/operators may

be less inclined t o report releases or properl y maintain their equipment if they are in a state where inspections occur infrequently or inconsistently . In conducting 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 observations and programmatic changes among states that prevent the isolation of regulation - related impacts . Specifical ly :  C onsistent, accurate release data are not available . It is likel y that measurement error exists in the recording of confirmed releases across states (the dependent variable) and that it is related in some sy stematic way to the regulatory structure o f 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 selec tion problems (i.e., states with high er release rates due to limited regulation may also be states that do not conduct frequent inspections and therefore have less reliable data). 7 Therefore, normal regression

6 Data can be accessed 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 of this , we use inspection frequency as an indicator o f reliable data.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

4 - 5 properties do not hold, and results may be bi ased 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 regulatory

indicators will proxy

for other relevant c haracteristics 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 over 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 unobserved characteristics of states that might affect release rates (such as soil pH or climate), independent of any effect of regulation. Available data superficially appear to be panel data, since they provide information on the number or rate of releases from different states i n multiple time periods, along with information on the presence or absence of UST regulations by

state. However, for many regulations it is unclear both when the regulation was first promulgated and when the effects of the regulation would be expected to be 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 regulations. The data limit ations 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 releases, independent of any unmeasured characteristics of states that could be affecting the number of releases in each state. In other words, in addition to data quality issues discussed above, the small number of states with specific UST release prevention regulations prevents identification of robust relationships between individual regulations and the number of releases per 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 regulations to reduce the rat e 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 sec ondary 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, 2005, and from 2002 to 2006 is less than the number of relea ses 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, California had between 56 and 63 percent fewer releases than wo uld 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, these*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

4 - 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

reduction s 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 pool of technical experts with national reputations for leadership in implementation of underground storage tank regulatory programs, or with extensive expertise in assessing spill causation at UST sites. From this pool, several experts were interviewed and 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 si milar 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 distributed 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 w ith 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 portion 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 costs 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 additiona l 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

4 - 7 for environmental improvements, and are therefore not equivalent to social benefits, they represent real economic cost savings due to reduced demand fo r baseline remediation. 12 **Calculation of Annual Positive 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 c onfirmed releases to calculate the reductions due 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 characterizin g 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 Avoided**  **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 releas es for which severity is mitigated. Finally , the two elements are combined to estimate the total avoided remediation cost due to the proposed rule.

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

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

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 generall y conform with classification conventions used b y state LUST offices , and the autopsy reports presented leak frequency data for different UST s ys tem components for each of the categories. The four categories include:  Local site extent with soil contamination;  Local site extent with water contamination; 15

 Large site extent with soil c ontamination; 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 categorie s 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 . Administrative, response, and oversight costs were provided by New Hampshire, an d 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 rec eived 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 Mexic o are m

uch higher than those for other states ($2.5 million compared with $0.6 million or less for other states) but the state did not provide data on the number or type of sites that resulted in this high estimate of costs. Second, New Mexico has a relatively small number of UST systems (3,958 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 average avoided co sts of remediation.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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

data for each source. **Exhibit 4 -**  **2** presents, for each of the rel ease 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 prob ability

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 releases, 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, October 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 details) . 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 .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 avoi ded 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 consideration 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 confirmed 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 unive rse 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 c onfirmed 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 revisions based on the sensitivity responses from the e xperts 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 average of cumulative estimates wa s generally consis tent with (i.e., within 10 percent of) the equivalent requirement - specific impacts.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 o f 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 to 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 rel eases , approximately

330 to 1,100 releases would be reduced in severity (i.e., these releases would remain soil contamination only). ) . 28

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, particularl y 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/operators would com ply fully with all new

regulation s 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 impacts 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.

28 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 sp lit 38 percent groundwater and 62 percent soil after the rule.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 . 29 This is consistent with the regulatory context of the past 20 years, in which two key factors have been driving the number o f releases. First, the universe of UST sy stems 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 t anks 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 , E PA 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 proje cts 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 d oes not account for the possibility

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

29 See Appendix J for charts and data sources that demonstrate these two trends .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

4 - 14 confirmed releases reported , 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 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. 30 EPA also mapped historical data on the release rate to a similar decay function. 31 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. 32 The cumulative universe of releases over 20 years under this alternative 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 and release rate, are used to estimate the future decline in releases. This compounds the projected decline in rel eases. **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 releas es 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.

30 See Section 3.3.1. 31 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. 32 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 addition, using the release rate projections to estimate future r eleases 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 s everity 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 avoid ed 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;*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

4 - 16  Ecological benefits; and  Protection of groundwater quality . This section monetizes, quantifie s, 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 p roduces the release), and applies the reduction associated with each regulation to the appropriate source to reduce the number of releases avoided b y source. 33 , 34 Each avoided release is valued according to the weighted average of remediation costs shown in **Exhibit 4 -**  **2** . 35 **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

33 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.

34 We use five system sources to identify 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 prev ention equipment tests are assumed to affect releases from delivery problems).

35 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 .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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. 36 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. 37 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. 38 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 red uced 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- avoided 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 re leases 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 sh ould 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 therefore likel y understate avoided remediation costs . 39 **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

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

37 Release extent is cl assified in the draft 23 - state Autopsy Report as either local or large. Releases that do not extend beyond the are a excavated during remediation are considered local, w hile releases that extend beyond property lines are considered large. Extent does not explicitly involve a measure of release volume.

38 See Appendix I for details on the calculation of avoided costs. 39 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

4 - 18 well as the increase in soil contamination events . 40 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 costs 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

40 This occurs because the analysis maintains the total number of releases constant: every groundwater release that is avoided still requires remediation as a soil release.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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

d o 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**  **, Alternative 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

4 - 20 Exhibit 4 - 1 2

**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 . 41 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 pe rcent 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 for

41 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 unc ertainty 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 replac ement, inspection, training, and testing are all essential to ensure release reductions, and they used judgment to em phasize 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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

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 p roposed 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 estimate avoided costs for broad -based national changes at average facilities; extrapolation of these results to small populations may not reflect specific subpopulations (e.g., UST systems in Indian country). Second, several experts stated that their estimates of impacts for requirements affecting narrow subsets of UST populations are more uncertain than broader estimates. Finally, experts emphasized that equipment replacement, 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 avoi ded 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 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 releas es, 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 esti mate avoided remediation costs is not designed to measure avoided 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 system s. 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 more 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. 42 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 Alternative 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. 43

42 These were provided by the State of New Hampshire’s UST program. 43 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 ob tain an overall average cost per release of approximately $96,000 (See memo in Appendix I for details) . 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 2009.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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**  **) Alternative 1** 

**($ mi**  **llions )**  **Alternative 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 deferral for airport hydrant fuel distribution systems Not estimated. See note f . Remove deferral 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***** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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**  **) Alternative 1** 

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

**($ mi**  **llions )**  a For each proposed requirement, this exhibit presents a range of discounted avoided costs. This range represents the lowest av oided 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 Alternativ e 2, as they affect a larger number of releases. This effect is very small compared 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 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 th at their estimates of impacts for requirements affecting narrow subsets of UST populations are more uncertain than broader estimates. Finally, 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 Subtotals 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 requirements. 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 from 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 avoided 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 res ulting 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 o ption 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. 44

44 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 o f avoided remediation costs.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

4 - 25 **4.6 Avoided Vapor Intrusion Damages**  Vapor intrusion generally 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. 45 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 ordin ary release remediation costs. 46 As reported in **Exhibit 4 -**  **1 5**  , given 1,680 to 5,370 avoided 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 vapor intrusion. While the lower end of this range does not vary significantl y among the options, EPA estimates savings of up to $ 28 mill ion 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 and $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

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

46 New Hampshire, Utah, South Carolina, Virginia, and New Mexico were contacted for LUST remediation costs, but only New Hampshire was able to provide a cost for cleanup actions related to vapor intrusion. Other state programs contributed data t o the frequency of incidents, but not to costs.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 milli on 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 due to releases. 47 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 Opti on**  **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 grades 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, avoided 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 avoided costs in the alternative baseline scenario .

47 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 grades of diesel fuel (at http://www.eia.gov/dnav/pet/pet_cons_prim_dcu_nus_a.htm)*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

4 - 27 **4.8 Human Health Benefits**  Exposure to petroleum through ingestion, dermal contact, and inhalation can cause a range of health effects, including can cer and non - cancer impacts associated with benzene, and non - cancer impacts (e.g., neurological impacts) associated with other petroleum constituents such as toluene. 48 Reductions in the number and severity of releases will reduce these exposures and associated morbidity and mortality impacts . This benefits assessment examines the impacts of the regulations under consideration on population cancer risks associated with benzene exposures through groundwater. Other health impacts, including benzene - re lated 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 a ssociated 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 re gulatory 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 rel ease. That anal ys is estimated population risk for releases of varying volumes and plume ages. 49 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 est imated value of a statistical life (VSL) of $8.9 million as the value associated with avoiding one terminal cancer. 50 , 51 **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 releases, total upper bound human health benefits due to avoided cancer cases are limited to approximately

48 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.

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

50 “Summary of the updated Regulatory Impact Analysis (RIA) for the Reconsideration of the 2 008 Ozone National Ambient Air Quality Standard (NAAQS),” U.S. EPA, http://www.epa.gov/ttn/ecas/regdata/RIAs/s1 - supplemental_analysis_full.pdf

51 This screening analysis also does not address the issue of latency, or discounting the VSL to reflect health ef fects that occur many years after exposure.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

4 - 28 $ 850 ,000 per ye ar under the Preferred Option. This value changes little when considering Alternatives 1 or 2. EP A’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. 52 These assumptions suggest human 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 exposure 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 this screening level risk assessment (see below). However, it is also not unreasonable to assume that health impacts un der this proposed rule would be limited, given the baseline existence of technical and cleanup requirements designed to minimize human exposure.

52 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 exp osure and to offset the risk analysis assumption that releases occur over a very short time frame.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

4 - 29 Exhibit 4 - 1 7 **Discounted Benefits F**  **rom Benzene Cancer Avoidance**  d **Release time to discovery an d 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, “Risk 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 approximately $ 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 on ly 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 inhalation and focused on average population risks. Such risks are limited in par t 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 larger 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. 53 While EPA does not expect most instances of these risks to be

53 Neither cancer nor non - cancer risks of these types were evaluated.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 toxicologic al 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 ha s 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 x yl 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 exposure s to certain polycyclic aromatic hydrocarbons (PAHs) including benzo(a)p yr ene, benz(a)anthracene, and dibenz(a,h)anthracene. 54 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 associated with leaking underground storage tanks reflect long - term exposures, but some releases from UST s ys tems relate to acute events such as fire or explosion. These releases can involve acute exposures, large volumes of free product, extensive ecological damage, and injuries and death, depending on the circumstances of the event. Because these events are difficult to predict and infrequent, it is not possible to quantify or monetize the impact associated with avoiding them, but the response, remediation, and medical costs associated with a single acute incident could be significant. The proposed regulations are designed to en sure 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 i t may explode).

54 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

4 - 31 Acute events are especially important in the case of UST sy stems such as airport hydrant fuel distribution sy stems 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 Port smouth, 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. 55 Another example of the potential magnitude of the rel eases 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. 56 Historical leakage from the s ys tem contaminated soil and gro undwater , forming groundwater plumes at many sites along the s ys tem. 58 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. 59 While there are no historical records available indicating the amount of leaked fuel or leak origins , the presence of residual soil and groundwater contamination poses a significant threat to human health and the environment. While the analy

tical procedure used by

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 mitigating these releases may generate substantial reductions in remediation costs. **4.10 Ecological Bene**  **fits** A document prepared for EPA outlines the ty pes of ecological damages that can result from land - based pollution releases: 60 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 55 Phone conversation and email from Lynne Smith, Ge ologist, VA DEQ and Russ Ellison, VA DEQ. 56 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/On eStopPub/Air/3301590780FY04 - 0453TypeSummary.pdf>.

58 New Hampshire Department of Environmental S ervices, 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 - 0113TypeSummary.pdf.

59 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.

60 “ 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 val ue” 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). 61 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 information on the value of groundwater. Some attempts have been made to develop standardized values for groundwater, often for purposes of Natural Resource Damage Assessment (NRDA). 62 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. 63 Even so, replacement cost methods do not constitute a proper WTP valuation. The replacement cost of natural resources and their s ervices 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. 64 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.

61 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.

62 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 th e 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 Asses sment. www.epa.gov/ superfund/ programs/nrd/nrda2.htm.

63 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 groundwater. Finally, the approach identifies and appraises candidate parcels. The cost of acquiring such a parcel for purposes of protecting a volume of groundwater equivalent to what was lost represents the measure of damages.

64 Freeman, A.M. III.. The Measurement of Environmental and Resource Values: Theory and Methods. Resources for the Future: Washington, DC. 2003. p. 460.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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. Instead, 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 re mediate each release discussed earlier in this chapter. However, while the cost of restoring groundwater to a higher quality after contamination is captured as part of the cost to remediate each release , it cannot be assumed that remediation captures WTP. Inmany 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 protecte d 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 screening assessment of the volume of groundwater contamination potentially avoided because of reductions in releases and groundwater contamination incidents. The anal ys is relies on the EPA risk assessment, which describes typical volumes of groundwater affected b y releases of different sizes over various discovery time frames. 65 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 only 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

chan ges. 66 We also calculate the impact of 50 gallon releases over one - and five - year time frames. These releases appear most consistent with empirical data in the draft 23 - state Autopsy Report. Assuming that 50 gallon releases and one to five - year time fram es 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. 67

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

66 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.

67 The release volume data used in the groundwater p rotection 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 implies an average of over 5 00 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 volume s 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 likel y 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 pr oduct loss, but which reduces the risk of overstating positive impacts from groundwater protection.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 (80,192,581 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 Total b $ 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 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 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 ye ar will avoid co ntamination 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 Total b $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 discussion of these benefits. d Totals may not add up due to rounding. Cost estimates were derived using a seven percent discount rate .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 sectors 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 fac ilities 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 considers 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 con sider 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 regulat ory anal ys is, an economic impact is an effect on the economic wellbeing, 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 products*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

5 - 2 asso ciated 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, pro ducers (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 their 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 clos ure. 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 sections, 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 cost s 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.  **Screening 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 by 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 fa ce 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. Factor s 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.pdf*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

5 - 3  **Impacts on public funding for cleanups.** The proposed rule is estimated to result in significant cos t 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 publi c 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 characteri ze 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 virtual ly 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 t ems 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 facilities 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 represents roughly 70 percent of social costs under the Preferred Option.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 concentration, fuel distribution practices, and the implications of market structure for pricing. **Supply -** **side Characteristics: Ability of Producers t o 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 all 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 approximately

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 busine ss: 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 individ ual 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 v alues 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. Acc essed 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 HHI is between 1,000 and 1,800 points as moderately concentrated, and those in which the HHI is in excess of 1,800 points as concentrated. Because the four largest firms in NAICS sector 447 generate only eight percent of*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

5 - 5 **Geographical Concentration** Gasoline stations are generall y distributed across the United States in proportion to population. The most populous states have more establishments and higher proportions of gasoline sales. 10 While no data are available regarding the distribution of facilities by size, the ret ail gasoline market is relatively homogeneous nationwide, and it is likely that facilities of different sizes are distributed according to population as well. **Ownership Structure** The 200 9 Gas Price Kit published by the National Association of Convenience S tores 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 will be well below 1,000 for this sector. We conclude that firms’ relatively small market share translates into weak pricing power. For additional information, see: htt p://www.justice.gov/ atr/public/testimony/hhi.htm

10 U.S. Census Bureau, Industry Statistics Sampler: 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 o f Gasoline Retailing Petroleum Distribution and Retailing Issues in the U.S."*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 retailers (competing with other suppliers in the unbranded market).  **Area Franchisees** : Otherwise known as “jobbers,” these firms obtain the right from oil companies to fran chise 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 th eir fuel suppl y. 13 As a consequence, any cost increases must be absorbed by

retailers or passed through to customers. **Demand -** **side Characteristics: Consumer Response to Price Increases** Consumer reactions to price changes are critical in determining whether a producer (i.e., retailer) can pass on costs. The degree to which consumers change the quantity they consume when the price of a good increases is known as the price elasticity of demand. Economists define demand as inelastic if the quantity d emanded chang es 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 - related or convenience products. Research has documented that broad (national) market demand for gasoline is relatively price - inelastic in the short - run: consumers do not make immediate, significant 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 consistent, 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 Restrictions in Gasoline Marketing,” 2004, Federal Trade Commission, accessed at http://www.ftc.gov/be/workpapers/w p271.pdf*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

5 - 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 cu stomers discourages retailers from increasing gasoline prices, except in cases such as wholesale 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 raising gasoline prices. While retailers may be able to increase the prices of other products (e.g., motor oil or convenience store products), it is also likely that some retailers will be forced to absorb some or all of the costs associated with the regulation. Retailers in relative isolation may be better positioned to pass on increases in cost to consumers. Research shows that store - level pricing is sensitive to the concentration of competition. In areas where motor fuel retailers are relativel y sparse, facilities may be better able to pass cost increases on to consumers, for whom the opportunity cost of finding an alternative store is higher when they must travel farther. 18 However, because consumers are especially price sensitive about gasoline and it is not clear what other options owners or operators have to increase prices, we assume that owners or operators will likely

bear the economic impacts of the rule. W e therefore examine producer impacts, including the possibility that some facilities may

close 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 gas oline 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 prohibitivel y 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 of*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

5 - 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 report ed 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” confi guration 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, eve n 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 i tems ( 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 adap ting to higher costs. If non - cash items and taxes 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 profits 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 2002 - 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 cost would be $1, 801 , and under Alternative 2 it wo uld be $61 3 . In Indian country, where facilities are required to meet more requirem ents than elsewhere; average cost per facility is $2, 364 under the Preferred Option, $3, 333 under Alternative 1, and $1, 999 under Alternative 2 .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 facilities 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” r

ule - 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 facilities, 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 indicate 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 reported by the 2007 Economic Census by the U.S. Census Bureau and the 2008 station count published by National Petroleum News. The Census reported 118,756 stations operating in any capacity, while NPN counted 161,768 stations. EPA contacted the Census Bureau, which offered three possible 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 e stablishments 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 petroleum 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 cos ts 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 $20 0 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 from Requirement A), which affect 150 fac ilities, 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 outcome with a high potential for market exi ts. 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 " wo rst 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 the replacement of closure of lined tank s 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 facilitie s identified, and are already therefore included in the number of facilities potentially affected under this worst - case assumption.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

5 - 11 **Exhibit 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 - 70 0 70 0 - 8 00 80 0 - 9 00 90 0 - 1 ,0 00 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, 70 0 1, 700 - 1 ,8 00 1, 800 - 1, 90 0 1, 900 - 2, 00 0 2, 000 - 2 ,1 00 2, 100 - 2 ,2 00 2, 200 - 2, 30 0 2, 300 - 2, 40 0 2, 400 - 2 ,5 00 2, 500 - 2, 60 0 2, 600 - 2, 70 0 2, 700 - 2 ,8 00 2, 800 - 2, 90 0 2, 900 - 3, 00 0 3, 000 - 3 ,1 00 3, 100 - 3 ,2 00 3, 200 - 3, 30 0 3, 300 - 3 ,4 00 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 facilities 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 .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 maximize the number of potential exits. EPA estimates that 6 , 100 facilities earning less than $25 0,000 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 facilities 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 s mallest 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 s cenario.
 **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 percent of worst - case, high - end cost outco me s. 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 facilitie s 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 reve nue 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 throughp ut 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 system. In addition, based on informatio n from a mid - size retail fuel marketer, EPA believes that a facility requires a minimum throughput of approximately 30,000 gallons per month to remain economically viable, which equates to upward of $50,000 in revenues per month given gasoline prices in ex cess of $2.00 since 2005. See http://www.eia.gov/dnav/pet/pet_pri_gnd_a_epmr_pte_dpgal_a .htm .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 legitimate 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 impac ts in a worst case scenario, it is unlikely that a significant number of actual market exits would result from the proposed regulation . A plausible 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 increase as firms seek to offset regulatory costs through sales of other products . Retailers will likely increase the pric es 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 dem and 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 al so the potential for the 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 P**  **ublic 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 5 6 state 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 co mp liance 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 this 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.htm*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

5 - 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 provid e 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 prevention costs and reduce public - sector remediation costs. To illustrate the potential magnitude of the public expenditures that could be affected b y the regulation (i.e., distributional effects), we examine states that have active state funds and categorize them into those that finance their funds via petroleum and tank fees (“Tier 1”), or via only a tank fee (“Tier 2”). 40 We assume that states that are required to comply with a larger number of the new requirements will experience a greater reduction of releases, all other things equal. To estimate the distribution of avoided releases, we calculate the average number of requirements with which

38 Association of State and Territorial S olid 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 - Tab le_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 State Fund incurs remediation costs, except that th e 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 cost, and in New Mexico, the owner or operator typic ally 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.htm*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

5 - 16 the sy stems in each state wil l need to comply . 41 We assign avoided releases based on both the number of s ys tems in a state and the average number of requirements on each sy stem , and we value releases based on the national profile of avoided releases and avoided groundwater incidents. 42 Using ASTSWMO data, w e subtract from our estimate of the potential cost borne by the public 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 woul d 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 identify the potential magnitude of impacts on state fund liabilities. A more detailed anal ys is of specific state program costs and the likely distribution of avoided releases would be necessary to precisel y measure potential savings. Overall, the values in **Exhibit 5 -**  **2** suggest that requiring owners and operators to focus on prevention reduces costs to state financial assurance funds by over $ 150 million under the Preferred Option and Alternative 1 and upward of $ 50 million for Alternative 2.

41 We use the number of times a system is affected rather than the actual number of systems affected because we lack the data to determine which units are affected by each requirement. For example, if two requirements each affect 1,000 and 500 units, 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 for 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 underes timate the potential for redistributive effects.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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**  **Im pact 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 costs 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 o n higher margin products and services. While overall e mploy ment impacts are unclear, it is possible that there may

be an increase in labor demand due to the additional requirements placed on owners and operators, and additional demand for third - party testing services. In addition, it appears that the proposed rule could have a positive impact on state governments that currently fund a portion of UST - related remediation costs through gasoline taxes and fees. A decrease in the number and severity of releas es represents cost saving s to states due to decreased demand on state financial assurance funds. Our initial screening assessment 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 may*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

5 - 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 to 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 t otal 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 regulato ry requirements 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 stati on 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 void le ft 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 prices i s not likely to be measurable.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 statio ns 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, suc h 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 represent 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 fuel 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 approxim ately

$1.7 billion. Given these circumstanc es , the proposed rule should not have a measurable impact on retail prices. **5.4 Regulatory Flexibility Analysis**  The Regulatory

Flexibility

Act (RFA) as amended by the Small Business Regulatory Enforcement Fairne ss Act of 1996 (SBREFA), 5 USC 601 et seq., generally requires EPA to prepare a regulatory

flexibility

anal ys is of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute. This analy sis mu st 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 Stati stics in Table 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 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).*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

5 - 20 substantial number of small entities, further analy s is must be performed to determine what can be done to lessen the impact. Small entities include small businesses, 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 detailed 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 a s defined b y the Small Business Administration’s (SBA) regulations at 13 CFR Part 121.201; (2) a small governmental jurisdiction that is a government of a city , county, town, school district or special district with a population of less than 50,000; and (3 ) a small organization that is any not - for - profit enterprise which is independently owned and operated and is not dominant in its field. For the purposes of this anal ys is, EPA considered costs in excess of one percent and three percent of revenues as indi cations that the proposed rule may have a significant impact on a given small entity , 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 affect ed 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 f

or 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 these firms report revenues between $0 and $250,000 (the smallest revenue range published by the 2002 Census), wi th 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 44 7110 (Gasoline 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 fact or was applied 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 d o not underestimate the number of small entities, we assume that all firms within a revenue bin that contains a specific SBA revenue threshold value are small. For example, if the SBA small business size threshold for a sector is $7 million, we assume that all firms in the revenue range of $5 to $10 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. However, 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 2002*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

5 - 21 To determine whether firms reporting revenues within a given revenue range would incur costs exceeding one percent or three percent of total revenue, EPA compares the average total compliance cost per firm wi th 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 signif icant 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 rul e. **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 44 7110 (gasoline stations with convenience stores) and 447190 (other gasoline stations), identifying the 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

dollar s. These costs exclude compliance costs associated with the removal of deferrals for AHFDSs and UST systems with FCTs. AHFDS and FCT systems are primarily owned by the Department of Defense and not by any small entities.

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. The se data should 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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, respe ctivel 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 - f irm 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 the U.S. Census Bureau reports several hundred facilities with annual revenues less that $100,000, market economics suggest th at 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 revenues, suggesting that some of these facilities may not be standalone entities. 54 Finall y, at least some of the smallest facili ties 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 assum ption is 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 repres ent 1.6 percent 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 direct 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, while 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

5 - 23 therefore, all other entities are considered to be small governmental jurisdictions according to the RFA/SBREFA defi nition. 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 2009 universe of 611,449 tanks. 55 These 24,458 tanks are distributed among all local governments, based upon the percent age of tank s owned in 1992 by local governments in each size category (the average number of tanks owned by a government varies with the size of the government from one tank for 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 governments , then inflated to 2008 dollars . Detailed information at the special district level is not available for later years , s o 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 governm ent with the average annual revenues to determine how many exceed either threshold. At a cost of $300 (2008 dollars) per UST sy stem, no small governments are affected under either the one percent or three percent revenue threshold (see **Exhibit 5 -**  **3** ). Correspondingl y, EPA does not find that the 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 Demons trate 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 p ercent of all 2009 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 fo r revenues.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 considered to be those that serve between 10,000 and 50,000 people, medium governments as those that serve between 2,500 and 10,000 people, and small governments as those that serve 2,500 or fewer people. According to RFA/SBREFA, small governmental jurisdictions have populations under 50,000. Therefore, all sizes of governments except for “very large” are considered to be small. **c** F rom 1992 Local Government Impac t Analysis data. **d** Calculated as number of tanks (adjusted 1992 distribution in each size category to r eflect 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** Cal culated as number of 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 Populations 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 addre ss, 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 screening anal ys is to examine whether there is a statistically significant disparity

between socioeconomic characteristics of populations located near UST facilities and those th at are not. 57 The results indicate that minority and low - income population s 57 Note that the affected populations identified in the screening analysis summarized here are simply defined by specific demographics surrounding UST locations. These affected populations are not necessarily equivalent to communities that oth ers have specifically identified as “environmental justice communities.”*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 adver se impacts on these populations. However, because all regulatory options considered 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 disprop ortionately 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 facilities 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 rep resents 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 data 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, busin ess 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 spatial distribution of facilities.

59 RTI International, “Risk Analysis to Support Revisions to Underground Storage Tank (UST) Regulations,” December 22, 20 10 .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

5 - 26 **Exhibit 5 -**  **4 UST Location Data**  **Used I n**  **A nalysis. (Se**  **e 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 populations 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 alone (the percentage of the population that specified their race as “white” and did not specify “Hispanic” ) . The anal ys is al so 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 facility level. Given that the area of interest is small (i.e., 1000 feet of a facility), the county - level provides an appropriate scale for comparison.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 affecte d and referen ce populations at each of the 59 , 945 sites, and examines whether the differences identified across all sites are statistically different from what would be expected in a random distribution. 61 The anal ys is considers the differences in demograph ics in two ways: unweighted (each site is given equal weight) and population weighted (results are weighted by affected persons, giving sites with larger populations more weight). A statistically significant positive difference indicates a greater percentage of target demographic in the affected population than in the larger reference 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 small, it is also highly statistically

significant (with a p - value below .001), which suggests that the difference between the v alues 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 .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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

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 res ults). 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”*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 potenti al that this 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 not anticipate the proposed rule to have any disproportionately high and adverse human health or environmental effects on these minority or low income communities, o r on any community . Since the proposed rule is not anticipated to create any new adverse human health or environmental impacts, EPA did not conduct a complete environmental justice anal ys is. **5.6 Children’s Health Protection Analysis**  Executive Order 1304 5, “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 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 o r 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 128 66. EPA’s screening - level risk assessment examines potential impacts to groundwater and subsequent chemical transport, exposure and risk. While the risk assessment did not specifically measure exposure to children, the general*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

5 - 31 exposure scenarios reflect f our exposure pathway s that have the most significant potential for human health impacts . These are:  ingestion of chemicals in groundwater that have migrated from the source area to residential drinking water wells  inhalation of volatile chemicals when sh owering with contaminated groundwater  dermal contact with chemicals while bathing or showering with contaminated groundwater  inhalation of vapors that may migrate upward from contaminated groundwater into overlying buildings Adults and children can potentially be exposed through all four exposure pathway s considered. For adults, inhalation of vapors while showering is the most significant adult exposure pathway ; for children, i ngestion is the most significant pathway , becaus e 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 fiv e 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 demographic analy sis described in section 5.5 finds a statistically significant result that children under the age of 18 and children under the age of five are slightly less likely to be found in the vicinity of UST facilities. This suggests that the impacts of the proposed rule will not have a disproportionate impact on children’s health. Moreover, because all regulatory

options proposed today

would increase regulatory s tringency

and reduce the number and size of releases, EPA does not expect the proposed rule 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.*** E.O. 12866 Review

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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 de fines “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 , competiti on, 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 i mpact 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 annual*** E.O. 12866 Review

–Draft - Do Not Cite, Quote or Release During Review ***

6 - 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 social costs 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 propo sed 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 by 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 rul e 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 f

uture 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 .*** E.O. 12866 Review

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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 State 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).*** E.O. 12866 Review

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6 - 4 In addition, under the proposed rule, each st ate 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 wi ll 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 syste ms in Indian country.*** E.O. 12866 Review

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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 triballyo wned 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 UST 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 a gain 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 protec tion 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 potenti al 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 Regulation s:**  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 m ay 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.*** E.O. 12866 Review

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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 systems and UST s ys tems 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 de tection 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 stri ngent 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 assumptions for these sy stems using information from the Department of Defense (the owner of the majority of all FCTs and AHFDSs). EGTs are assumed to incur all incremental costs beyond state regulatory

baseline costs; to the extent that these s ys tems are regulated under SPCC, this may

overstate costs.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 willin gness to pay for the benefits of a regulation against the opportunity costs of the rule. Anal ys es of this type typically do not consider distributional issues, although they can be adapted to do so. Adherence to a strict benefit - cost approach provides an i ncomplete assessment of the effects of this proposed rule for two reasons:  The majority

of positive effects from new requirements occur as avoided remediation costs, not social benefits such as improved water quality. Monetizable social benefits occur onl y in the form of avoided cancer cases 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.  A key

effect of the proposed r

ule is to reallocate costs from the public to responsible parties. This is likely to improve behavioral incentives, 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 approache s to assess the effectiveness of the proposed requirements. First, we compare the social costs of the proposed 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 b y 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 these benefits are taken into account, along with equity- enhancing effects such as reduction in demand for publicly- funded remediation, the benefit - cost co mparison becomes more complex. Consequently , the final regulatory

decision becomes a policy judgment that takes into account efficiency as well as equity concerns. In addition, the selection of a discount rate for estimating the present value of future co sts 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.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 social costs 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 typ es 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, monetized 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 benefits, 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 social benefit of $ 250 million to a net social cost of $ 210 million , while Alternative 2 could generate savings of $ 460 million to costs of $20 million .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

7 - 3 Exhibit 7 - 1 **Comparison O f Social Costs, Cost Savings**  **A nd Monetized**  **Benefits** f **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 Social Costs** 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 Social Costs $210**  **$520 $130**  **Net Cost (Savings) to Society [Total Social Costs**  **less Total**  **Benefits and Avoided Costs]**  **($ 5**  **3 0)**  **- ($**  **9 0**  **) ($250)**  **- $210**  **($ 460)**  **- $20**  **Nonm onetized**  **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 estimates of compliance costs within the other categories. Costs shown here reflect the administrative costs for state governments to read the regulation, apply for state program approval, process notifications of ownership ch anges, 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 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. 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 were derived using a seven percent discount rate .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 scenario , where the universes of releases and UST s ys tems decline over time in accordance with historical trends. In this alternati ve 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 co st 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 social 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 O f Social Costs, Cost Savings**  **A nd Monetized Benefits**  **, Considering an**  **Alternative Baseline** f **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 Social Costs** 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 Social Costs**  **$20 0**  **$5 1**  **0 $1**  **2 0**  **Net Cost (Savings) to Society [Total Social Costs**  **less Total**  **Benefits and Avoided Costs]**  **($ 240)**  **- $**  **2 0**  **$50 -**  **$ 33**  **0 ($**  **24 0)**  **- $**  **56 Nonm**  **onetized 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 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 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*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

7 - 5 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 du e to rounding. Cost estimates were derived using a seven percent discount rate . **7.2 Cost**  **- Effectiveness 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 anal ys is, we consider avoided releases to be both releases altogether av oided 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 Alternative 1. Exhibit 7 - 3 **Cost -**  **Effectiveness: Number Of Avoided Releases And Groundwater Incidents**  **Preferred Option Alternative 1**  **Alternative 2** Avoided releases and groundwater incidents 1,680 - 5,370 1,820 - 5,780 630 - 3,860 Social Cost ($ million) $210 $520 $130 **Cost per release avoided ($ million)**  **$0. 038**  **- $0.12**  **$0. 09**  **- $0.29**  **$0. 033**  **- $0.20**  Note: Cost estimates were derived using a seven percent discount rate. **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 of total social costs 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 and increases costs that have a delay before implementation . 1 , 2 The net result of a change from a discount rate of seven 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 essentiall y of fset each other .

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 dis count rates increase these costs, while lower discount rates cause them to decrease. See Appendix D for details .*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

7 - 6 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 increase s 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, as outlined in **Exhibit 1 -**  **2** . We conclude that, while a reduction in the discount rate leaves annual social costs 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 **Social Costs And Beneficial Impacts U**  **nder Alternat**  **iv e**  **Discount Rates**  **d 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 Social Costs** 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 Social Costs $210**  **$210 $210**  **Net Cost (**  **Savings )**  **to Society [Total Social Costs**  **less Total Avoided Costs]**  **($ 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 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 Totals may not add up due to rounding.

3 These requirements are the elimination of flow restrictors as overfill prevention for new tanks and when overfill devices are replaced, closure of lined tanks which cannot be repaired, and all Energy Policy Act requirements in Indian country, with the exception of operator training.*** E.O. 12866 Review - Draft - Do Not Cite, Quote or Release During Review ***

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 Academ y 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 Investigati ons: 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 Entiti es 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 Price Zones and Territorial Restrictions in Gasoline Mar keti 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

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