Document ID: EPA-HQ-SFUND-2004-0001-0461
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2005-09-21T04:00Z

Addendum
to
EIA
for
the
AAI
Regulation
A­
1
ADDENDUM
TO
ECONOMIC
IMPACT
ANALYSIS
ALL
APPROPRIATE
INQUIRIES
FINAL
RULE
Background
EPA
published
the
proposed
All
Appropriate
Inquiries
(
AAI)
in
the
Federal
Register
on
August
26,
2004
(
69
FR
52542).
Prior
to
publishing
the
proposed
rule,
EPA
undertook
an
analysis
of
the
potential
economic
impacts
of
the
requirements
included
in
the
proposed
rule.
EPA
published
the
results
of
the
economic
impact
analysis
in
a
document
titled
"
Economic
Impact
Analysis
for
the
Proposed
All
Appropriate
Inquiries
Regulation."
This
document
was
included
in
the
public
docket
for
the
proposed
rule.
In
the
preamble
to
the
proposed
rule,
EPA
solicited
comment
on
the
Economic
Impact
Analysis
(
EIA).

Following
publication
of
the
proposed
rule,
EPA
provided
for
a
three­
month
public
comment
period,
during
which
the
Agency
accepted
comments
from
the
public
on
the
proposed
requirements
for
conducting
AAIs
and
on
the
EIA
for
the
proposed
AAI
regulation.
During
the
public
comment
period,
EPA
held
three
public
meetings
on
the
proposed
rule,
in
St.
Louis
on
September
22,
Washington
D.
C.
on
October
20,
and
San
Francisco
on
November
18.

During
the
comment
period,
which
ended
on
November
30,
2004,
EPA
received
4301
unique
comments
from
interested
stakeholders,
including
the
comments
submitted
during
the
three
public
meetings.
Commenters
who
are
currently
performing
environmental
site
assessments
(
ESAs)
submitted
over
70
percent
of
the
comment
letters.
Close
to
40
percent
of
those
commenters
were
members
of
professional
organizations
which
have
educational
and
certification
requirements
for
their
members.
Of
the
public
comments
received,
26
explicitly
commented
on
the
EIA.

Based
on
the
comments
received,
EPA
has
made
relatively
minor
changes
to
the
regulatory
language
and
is
now
finalizing
the
proposed
requirements.
The
analysis
presented
in
this
addendum
reflects
the
regulatory
language
in
the
final
rule.

Purpose
of
the
Addendum
to
EIA
EPA
received
a
number
of
comments
on
the
EIA
that
was
conducted
to
assess
the
potential
costs
and
impacts
of
the
proposed
AAI
rule.
Before
finalizing
the
AAI
rule,
EPA
is
required
to
consider
and
respond
to
issues
raised
by
the
public
and
may
revise
the
proposed
regulatory
language
and
the
EIA,
based
upon
input
provided
in
public
comments,
as
the
Agency
deems
appropriate.
This
addendum
summarizes
the
public
comments
that
EPA
received
on
the
EIA
completed
for
the
proposed
rule
and
provides
responses
to
the
major
issues
raised
by
the
commenters,
and
includes
revised
average
incremental
cost
estimates.

1
The
Agency
received
439
comment
letters
of
which
nine
letters
were
duplicates.
Addendum
to
EIA
for
the
AAI
Regulation
A­
2
The
addendum
is
organized
as
follows.
We
first
provide
a
brief
summary
of
the
changes
that
EPA
is
making
to
the
proposed
regulatory
language
in
finalizing
the
regulations
and
we
discuss
whether
any
revisions
to
the
EIA
are
required,
based
upon
public
comment
and
the
modifications
made.
We
then
summarize
the
public
comments
by
major
issue
and
provide
responses
to
each,
with
the
revised
incremental
cost
estimates
presented
in
the
subsequent
section.
Finally,
we
present
a
sensitivity
analysis
conducted
in
response
to
certain
public
comments.

Overview
of
the
Revisions
to
the
Regulatory
Language
In
response
to
the
public
comments,
EPA
modified
the
proposed
definition
of
environmental
professional
(
EP)
to
allow
individuals
who
have
significant
relevant
experience
in
conducting
environmental
site
assessments,
but
do
not
have
a
Baccalaureate
degree,
to
qualify
as
EPs.
Under
the
final
AAI
rule,
persons
with
10
years
of
full­
time
relevant
experience
will
qualify
as
EPs,
even
if
such
individuals
do
not
have
college
degrees.

With
respect
to
the
shelf­
life
of
ESA
reports,
EPA
clarified
the
proposed
language.
Under
the
final
AAI
rule,
information
contained
in
previously
conducted
Phase
I
ESAs,
even
if
the
information
was
collected
more
than
a
year
prior
to
the
purchase
date
of
the
subject
property,
can
be
used
in
the
development
of
a
new
AAI
investigation.
However,
all
aspects
of
an
all
appropriate
inquiries
investigation
completed
more
than
one
year
prior
to
the
purchase
date
of
the
subject
property
must
be
updated
to
reflect
current
conditions
and
current
property­
specific
information.

With
respect
to
the
requirements
to
search
for
institutional
controls
(
ICs),
EPA
revised
the
required
search
distance
included
in
the
proposed
rule.
Under
the
final
AAI
rule,
the
search
for
ICs
is
confined
to
the
subject
property.

Public
Comments
EPA
received
a
number
of
comments
addressing
the
potential
costs
and
impacts
of
the
proposed
AAI
rule.
Many
commenters
generally
agreed
with
the
EPA's
conclusion
that
the
average
incremental
cost
increase
associated
with
the
proposed
requirements
would
be
minimal.
Some
commenters,
however,
asserted
that
the
EIA
underestimated
the
incremental
costs
associated
with
the
proposed
rule.
Unfortunately,
only
a
few
commenters
provided
an
explanation
as
to
which
particular
activities
would
be
associated
with
a
higher
level
of
effort
than
estimated
in
the
EIA;
most
of
the
commenters
did
not
provide
specific
reasons
for
claimed
cost
increases
over
the
ASTM
E1527­
2000.

This
section
summarizes
the
public
comments
received
and
provides
responses
to
issues
raised
by
the
commenters,
including,
where
applicable,
our
rationale
for
revising
the
EIA.
Each
subsection
corresponds
to
a
major
issue
and
opens
with
a
brief
overview
of
the
proposed
AAI
rule
dealing
with
that
particular
issue.
Where
EPA
revised
the
proposed
Addendum
to
EIA
for
the
AAI
Regulation
A­
3
language
in
response
to
the
public
comments,
we
summarize
the
requirements
under
the
final
AAI
rule.

Definition
of
EP
(
§
312.10)

The
proposed
AAI
rule
recognized
professional
engineers,
professional
geologists,
and
persons
with
state
certifications
as
environmental
professionals.
The
proposed
rule
also
provided
educational
and
relevant
experience
qualifications
for
individuals
to
meet
the
proposed
EP
definition.
In
addition,
under
the
proposed
rule,
current
practitioners
with
a
Baccalaureate
degree
and
10
years
of
full­
time
relevant
experience
would
be
"
grandfathered,"
while
individuals
not
meeting
the
EP
definition
would
be
allowed
to
contribute
to
the
conduct
of
AAIs
under
the
supervision
or
responsible
charge
of
an
EP.

Some
commenters
stated
that
the
EIA
underestimated
the
incremental
cost
of
the
AAI
Phase
I
ESA
relative
to
the
ASTM
E1527­
2000
(
i.
e.,
the
base
case).
They
reasoned
that
there
would
be
an
incremental
cost
increase
under
the
AAI
due
to
the
more
stringent
license,
educational,
and
relevant
experience
requirements
for
EPs.

The
EIA
did
not
account
for
any
incremental
cost
due
to
the
proposed
definition
of
EP
for
the
following
reasons.
First,
the
proposed
rule
requires
that
an
EP
supervise
the
Phase
I
ESA
(
including
visual
inspection
of
the
subject
property),
and
not
necessarily
perform
the
entire
site
assessment.
2
Second,
even
if
some
firms
exited
the
market
(
firms
without
staff
meeting
the
proposed
EP
definition),
we
would
not
expect
the
price
of
Phase
I
ESAs
to
increase
since
the
ESA
industry
is
highly
competitive.

In
the
final
AAI
rule,
EPA
modified
the
definition
of
EP
to
provide
for
persons
who
have
10
years
of
full­
time
relevant
experience,
but
do
not
have
a
Baccalaureate
degree,
to
qualify
as
EPs.
Therefore,
the
percent
of
professionals
who
will
not
meet
the
revised
definition
of
EP
is
likely
to
be
very
low.
In
addition,
it
is
highly
likely
that
most
of
the
professionals
not
meeting
the
qualifications
for
an
EP
would
be
working
under
the
supervision
of
an
EP,
in
accordance
with
the
AAI
standard,
until
they
accumulate
the
required
10
years
of
full­
time
experience.

We
did
not
revise
the
EIA
based
upon
input
from
these
commenters.

All
Appropriate
Inquiries
(
§
312.20)

Data
Gaps
The
proposed
AAI
rule
set
forth
requirements
for
evaluation,
identification,
and
documentation
of
data
gaps.
The
proposed
rule
suggests
sampling
and
analysis
as
one
method
to
fill
data
gaps,
but
does
not
require
it.
In
finalizing
the
rule,
EPA
did
not
make
any
changes
to
the
proposed
language.

2
During
the
negotiated
rulemaking
process,
the
FACA
committee
did
consider
the
option
of
requiring
all
activities
to
be
performed
by
an
EP
but
did
not
adopt
it.
The
EIA
estimated
the
incremental
costs
under
that
option
(
AAI
Option
1).
Addendum
to
EIA
for
the
AAI
Regulation
A­
4
Several
commenters
stated
that
the
EIA
underestimated
the
incremental
cost
associated
with
documenting
data
gaps,
with
ENSR
International
estimating
the
required
level
of
effort
of
one
to
two
hours.
3
The
EIA
did
not
explicitly
account
for
this
performance
factor.
Data
gaps
would
need
to
be
documented
only
in
the
cases
in
which
the
EP
cannot
perform
one
or
more
of
the
required
tasks.
The
EIA
implicitly
assumed
that
if
the
documentation
of
data
gaps
is
necessary,
the
time
saved
by
omitting
the
required
tasks
would
offset
the
time
needed
for
the
documentation.

We
did
not
revise
the
EIA
based
upon
input
from
these
commenters.

Shelf
Life
of
the
AAI
Phase
I
ESA
Report
Under
the
proposed
AAI
rule,
parties
conducting
AAIs
would
be
allowed
to
use
previous
inquiries
completed
for
the
same
property
provided
that
(
1)
the
previous
inquiries
were
completed
with
information
that
was
collected
or
updated
no
longer
than
a
year
prior
to
the
current
acquisition
date
for
the
property;
and
(
2)
certain
types
of
information
collected
more
than
180
days
prior
to
the
current
date
of
acquisition
are
updated
for
the
current
AAI.

A
few
commenters
suggested
that
this
new
requirement
would
result
in
the
redoing
of
a
substantial
number
of
reports.
One
commenter
suggested
that
five
to
10
percent
of
the
reports
prepared
annually
would
be
affected,
without
providing
the
source
or
the
basis
for
the
estimate.
4
The
shelf­
life
requirement
may
result
in
the
redoing
of
a
small
fraction
of
Phase
I
ESAs.
Because
the
rule
allows
for
the
use
of
previously
collected
information,
the
cost
of
redoing
a
Phase
I
ESA
on
the
subject
property
should
be
lower,
on
average,
than
the
cost
of
the
initial
Phase
I
ESA
performed
on
the
same
subject
property.
The
shelf­
life
requirement,
therefore,
would
not
increase
the
average
cost
of
Phase
I
ESAs.

In
the
final
AAI
rule,
EPA
clarified
that
previously
completed
AAI
reports
prepared
for
the
same
property
can
be
used
as
sources
of
information
even
when
they
are
more
than
a
year
old
as
long
as
the
information
in
them
is
updated
to
reflect
current
conditions
and
current
property­
specific
information.
This
provision
makes
the
AAI
rule
consistent
with
the
current
industry
practice,
and
therefore
should
impose
no
incremental
cost.
No
changes
were
made
to
the
EIA
based
upon
comments
received
on
this
provision
of
the
proposed
rule.

3
Public
Comment
0314.
4
Public
Comment
0256.
Addendum
to
EIA
for
the
AAI
Regulation
A­
5
Interviews
with
Past
Owners
or
occupants
(
§
312.23)

The
proposed
rule
requires
interviews
with
the
current
owner
and
occupant(
s)
of
the
subject
property.
The
rule
does
not
explicitly
require
interviews
with
past
owners
and
occupants,
but
provides
that
the
EP
include
interviews
of
past
owners,
operators,
or
occupants
as
necessary
to
meet
the
proposed
objectives
and
in
accordance
with
the
proposed
performance
factors.
In
finalizing
the
rule,
EPA
did
not
make
any
changes
to
the
proposed
language.

The
EIA
assumed
that
if
an
interview
of
a
past
owner
was
necessary,
that
interview
would
allow
a
reduction
in
time
needed
to
interview
the
current
owner,
thereby
offsetting
any
time
needed
to
interview
the
past
owner.
The
EIA
estimated
a
level
of
effort
of
two
to
six
hours
to
conduct
interviews
both
under
the
base
case
and
the
AAI
rule.

A
few
commenters
suggested
that
the
EIA
underestimated
the
level
of
effort
for
locating
and
interviewing
past
owners
or
occupants,
with
ENSR
International
estimating
a
level
of
effort
of
one
to
three
hours
for
this
task.

In
response
to
the
public
comments,
EPA
revised
the
cost
estimates
developed
for
the
analysis
of
the
proposed
rule.
EPA
agreed
with
the
commenters
who
asserted
that
locating
past
owners
or
occupants
may
be
more
time
consuming
than
locating
the
current
owners
or
occupants
and
revised
the
cost
estimate
to
reflect
the
additional
incremental
burden.
Based
on
ICF
Consulting's
professional
experience,
locating
past
owners
or
occupants
could
require
as
little
as
one
simple
5­
minute
phone
call
(
e.
g.,
if
the
current
owner
has
the
contact
information
for
the
past
owner)
or
it
could
require
multiple
phone
calls
that
could
take
in
excess
of
one
hour.
For
the
purpose
of
this
analysis,
we
estimated
the
incremental
burden
to
be,
on
average,
one­
half
hour
per
interview
regardless
of
the
property
type
or
size.
EPA
also
recognizes
that
in
some
cases
the
EP
will
need
to
complete
the
full
interview
with
the
current
owner
before
determining
that
it
is
necessary
to
interview
a
past
owner.
In
other
words,
the
EP
will
need
to
do
the
full/
complete
interview
with
the
current
owner,
and
then
perform
a
more
focused
interview
of
a
past
owner
to
fill
the
data
gaps.
EPA
estimated
that
the
incremental
burden
for
interviewing
past
owners
or
occupants
will
be
one­
half
hour
for
undeveloped
and
residential
properties,
one
hour
for
commercial
and
industrial
properties
(
of
all
sizes
except
large
industrial),
and
1.5
hours
for
large
industrial
properties.
Therefore,
the
total
level
of
effort
for
locating
and
interviewing
past
property
owners
or
occupants
will
range
from
one
hour
to
two
hours
depending
on
the
property
type
and
size.

The
additional
incremental
hour
burden,
however,
will
not
be
incurred
at
every
site
assessment.
We
expect
that
interview
with
past
owners
or
occupants
will
be
conducted
for
properties
with
a
higher
than
average
owner/
occupant
turnover
rate.
5
Since
data
on
the
turnover
rate
by
property
are
not
readily
available,
this
number
needs
to
be
approximated.

5
As
stated
in
section
5.2,
we
estimated
that
properties
are
sold,
on
average,
every
10
years.
Addendum
to
EIA
for
the
AAI
Regulation
A­
6
We
started
with
the
estimate
that
newly
purchased
properties
are
resold
after
an
average
of
10
years.
We
then
assumed,
for
simplicity,
that
the
chance
of
reselling
a
property
that
has
not
yet
been
resold
remains
constant
over
time.
These
two
assumptions
imply
that,
of
a
group
of
properties
that
are
purchased
at
the
same
time,
10
percent
are
resold
in
one
year,
another
9
percent
(
that
is,
10
percent
of
the
90
percent
that
were
not
sold
in
the
first
year)
are
sold
in
the
second
year,
and
so
on.
Further,
we
assumed
that
the
EP
will
interview
only
the
current
property
owner
if
s/
he
were
in
the
possession
of
the
subject
property
for
more
than
two
years.
It
is
reasonable
to
assume
that
after
two
years
of
owning
a
property,
the
current
property
owner
should
have
a
reasonably
good
knowledge
of
its
condition.

Based
on
this
analysis,
we
estimated
that
19
percent
of
Phase
I
ESAs
conducted
in
a
given
year
are
conducted
on
properties
which
were
sold
at
least
once
in
the
previous
two
years.
Using
the
assumption
that
15
percent
of
all
properties
are
abandoned
properties
(
see
Section
5.6.5.2
of
EIA)
which
would
not
be
affected
by
the
requirement
to
interview
past
owners
or
occupants,
we
revised
the
above
estimate
to
account
only
for
nonabandoned
properties
that
were
sold
over
the
past
two
years.
Therefore,
for
the
purpose
of
this
analysis,
we
estimated
that
16
percent
of
properties
will
require
one
interview
with
past
owners
or
occupants.
6
The
revised
cost
estimates
are
presented
in
the
next
section.

Searches
for
Recorded
Environmental
Cleanup
Liens
(
§
312.25)

The
proposed
rule
requires
that
prospective
purchasers,
or
environment
professionals
on
the
purchasers'
behalf,
search
for
environmental
cleanup
liens
that
are
recorded
under
federal,
tribal,
state,
or
local
law.
In
finalizing
the
rule,
EPA
did
not
make
any
changes
to
the
proposed
language.

Many
comments
suggested
that
the
title
search
for
environmental
liens
would
be
an
incremental
cost.
Under
the
current
ASTM
standard,
it
is
the
user's
responsibility
to
check
for
environmental
liens
that
are
currently
recorded
against
the
subject
property,
and
to
report
these
to
the
EP
conducting
the
Phase
I
ESA.
The
AAI
rule's
requirements
are
no
different;
therefore,
there
will
be
no
incremental
cost
(
labor
or
expenses)
incurred
under
the
AAI
rule.
Thus,
even
if
the
cost
of
a
title
search
is
explicitly
accounted
for
under
the
base
case
and
under
the
AAI
standard,
the
average
incremental
cost
per
transaction
would
stay
unchanged.

No
changes
were
made
to
the
EIA
based
on
input
from
these
commenters.

Reviews
of
Federal,
State,
Tribal,
and
Local
Government
Records
(
§
312.26)

The
proposed
rule
requires
that
federal,
state,
tribal
and
local
government
records
be
searched
for
information
necessary
to
achieve
the
objectives
and
performance
factors,
including
information
regarding
the
environmental
conditions
at
the
subject
property
and
6
One
could
choose
other
functional
forms,
for
example,
a
uniform
distribution
over
20
years
which
would
then
lead
to
a
lower
number
of
affected
properties.
Our
estimate
should
therefore
be
regarded
as
conservative.
Addendum
to
EIA
for
the
AAI
Regulation
A­
7
conditions
of
nearby
or
adjoining
properties.
In
finalizing
the
rule,
EPA
modified
the
search
requirements
for
institutional
controls,
based
upon
input
provided
by
public
commenters.
The
final
rule
requires
that
government
records
and
available
lists
for
ICs
be
searched
only
for
information
on
such
controls
at
the
subject
property.
EPA
made
no
modifications
to
the
EIA
based
upon
public
comments,
or
the
revisions
made
to
the
rule
with
regard
to
the
requirements
to
search
government
records
for
information
on
institutional
controls.

Tribal
Records
One
commenter
suggested
that
the
EIA
underestimated
the
incremental
labor
hours
for
searching
tribal
records.
In
the
preamble
to
the
final
rule,
EPA
clarifies
that
tribal
records
need
only
be
searched
for
and
reviewed
in
those
instances
where
the
subject
property
is
located
on
or
near
tribal­
owned
lands.
When
such
records
are
not
available,
necessary
information
should
be
sought
from
other
sources.
The
EIA
assumed
that
this
requirement
would
be
fulfilled
to
the
extent
that
tribal
records
are
easily
available,
through,
for
example,
the
EDR
database.
7
If
such
records
are
not
available,
it
is
likely
that
the
EP
will
attempt
to
obtain
the
relevant
information
during
the
interview
process,
and
therefore
there
would
be
no
incremental
cost.

No
changes
were
made
to
the
EIA
based
upon
this
comment.

Search
and
Documentation
of
Institutional
Controls
The
proposed
AAI
rule
requires
the
EP
to
search
for
ICs
within
a
one­
half
mile
radius
of
the
subject
property.
A
number
of
commenters
claimed
that
the
EIA
underestimated
the
incremental
labor
hours
required
to
search
for
ICs
under
the
proposed
AAI
rule.

In
the
EIA
for
the
proposed
rulemaking,
EPA
assumed
that
the
user
would
perform
the
search
for
ICs
under
the
AAI
requirements,
as
they
have
been
required
to
do
under
the
ASTM,
at
no
additional
labor
hour
burden
and/
or
direct
costs.
This
assumption
was
based
on
the
information
from
EDR
stating
that
it
would
start
including
data
on
ICs
in
future
EDR
Reports
at
no
additional
cost.
Unlike
the
current
ASTM
standard,
the
AAI
rule
explicitly
requires
that
the
EP
document
the
search
results
in
the
Phase
I
ESA
report.
EPA
assumed,
in
the
analysis
for
the
proposed
rule,
which
the
documentation
requirement
would
result
in
an
additional
one­
half
hour
to
one
hour
of
labor,
depending
on
the
property
type.

Based
on
the
information
provided
in
the
public
comments,
we
determined
that
the
estimated
incremental
labor
hours
required
to
search
for
ICs
under
the
proposed
AAI
rule
were
underestimated.
The
proposed
AAI
rule
would
have
extended
the
search
for
ICs
to
one­
half
mile
radius
of
the
subject
property
while
the
search
requirement
under
the
ASTM
standard
is
limited
to
the
subject
property.
Had
the
EIA
for
the
proposed
rule
properly
accounted
for
the
extended
scope
of
the
IC­
search
requirement
under
the
7
EDR
informed
ICF
that
it
currently
searches
tribal
records
in
27
states.
Addendum
to
EIA
for
the
AAI
Regulation
A­
8
proposed
AAI
rule,
the
estimated
average
incremental
cost
per
Phase
I
ESA
would
have
been
higher
than
$
47.

EPA,
however,
has
revised
the
IC­
search
requirement
under
the
final
AAI
rule,
based
upon
input
from
commenters,
by
limiting
the
search
for
ICs
to
the
subject
property.
This
revision
is
in
line
with
the
commenters'
recommendations
and
the
ASTM
IC­
search
requirement.
Therefore,
the
EIA
does
not
need
to
be
revised
to
reflect
this
change.

The
Relationship
of
the
Purchase
Price
to
the
Value
of
the
Property,
if
the
Property
was
not
Contaminated
(
§
312.29)

The
proposed
AAI
rule
required
that
the
purchaser
of
the
property
consider
whether
or
not
the
property's
purchase
price
reflects
the
fair
market
value
of
the
property,
assuming
the
property
is
not
contaminated.
In
finalizing
the
rule,
EPA
did
not
make
any
changes
to
the
proposed
language.

A
number
of
commenters
suggested
that
the
EIA
underestimated
the
incremental
cost
associated
with
the
purchase
price
requirement
since
it
did
not
account
for
the
cost
of
conducting
a
formal
real
estate
appraisal
of
the
subject
property.

While
the
EIA
did
incorporate
an
incremental
labor
hour
burden
under
the
AAI
rule
to
document
the
results
in
the
report,
the
AAI
rule
does
not
specifically
require
that
a
real
estate
appraisal
be
conducted.
Therefore,
in
the
EIA
we
assumed
that
a
more
extensive
search
would
not
be
required
under
the
AAI
requirements
than
what
is
currently
required
under
the
ASTM
E1527­
2000.

Other
Issues
­
Liability
Insurance
Several
commenters
indicated
that
the
EIA
underestimated
the
incremental
cost
associated
with
liability
insurance,
stating
that
the
insurance
industry
likely
would
increase
insurance
premiums
to
account
for
the
added
risk
associated
with
the
"
openended
nature"
of
the
AAI
rule.
As
explained
in
the
preamble
to
the
final
rule,
EPA
believes
that
those
commenters
who
argued
that
the
performance­
based
approach
to
proposed
rule
is
"
open­
ended,"
most
likely
misunderstood
the
extent
of
the
statutory
requirements
for
obtaining
CERCLA
liability
protection.
The
mere
conduct
of
AAI
prior
to
purchasing
a
property
does
not
ensure
the
liability
protections.
The
statute
establishes
many
other
criteria
for
obtaining
protection
from
CERCLA
liability.

It
is
not
clear
that
the
insurance
industry
would
react
to
the
AAI
rule
as
commenters
indicated.
It
is
also
possible,
for
example,
that
insurance
companies
will
cut
premiums
for
all
policies
that
might
be
affected
by
CERCLA
as
a
result
of
additional
liability
protection
the
statute
offers
to
prospective
purchasers
who
follow
the
AAI
standard.

No
changes
were
made
to
the
EIA
based
on
input
from
these
commenters.
Addendum
to
EIA
for
the
AAI
Regulation
A­
9
Revised
Estimates
of
Costs
This
section
presents
the
revised
average
incremental
cost
per
AAI
Phase
I
ESA
and
the
incremental
total
annual
cost
under
the
final
AAI
rule
compared
to
the
base
case.

The
EIA
estimated
that
there
would
be
no
incremental
burden
associated
with
locating
and
interviewing
current
and
past
owners
and
operators
for
non­
abandoned
properties
under
the
AAI
rule;
the
level
of
effort
for
this
task
would
be
the
same
as
under
the
ASTM
E1527­
2000.
In
response
to
the
public
comments,
we
revised
the
labor
burden
under
the
final
AAI
rule
to
account
for
the
additional
level
of
effort
required
to
locate
and
interview
past
owners
and
occupants.
EPA
estimated
that
the
incremental
burden
for
locating
and
interviewing
past
owners
or
occupants
would
be
one
hour
for
undeveloped
and
residential
properties
and
1.5
hours
for
commercial
and
industrial
properties
(
except
for
large
industrial
properties
for
which
we
estimated
a
level
of
effort
of
two
hours).
As
explained
in
the
previous
section,
we
estimate
that
16
percent
of
properties
will
be
affected.

Except
for
the
increase
in
the
level
of
effort
for
the
interview
task
for
non­
abandoned
properties,
all
other
parameters
used
in
modeling
are
the
same
as
presented
in
the
EIA
conducted
for
the
proposed
rule.
To
derive
the
incremental
average
cost
per
transaction
and
the
total
annual
cost
of
the
final
AAI
rule,
we
employed
the
methodology
explained
in
detail
in
Chapters
7
and
8
of
the
EIA.

Average
Phase
I
ESA
Cost
As
explained
in
Chapter
8
of
the
EIA,
we
estimated
the
distribution
of
abandoned
and
non­
abandoned
properties
as
a
range
due
to
uncertainties
surrounding
the
number
of
abandoned
properties
subject
to
the
AAI
requirements.
As
a
result,
the
estimated
weighted
average
cost
of
a
Phase
I
ESA
under
the
AAI
rule
also
is
presented
as
a
range.
To
derive
an
upper
bound
estimate
of
the
weighted
average
cost
of
a
Phase
I
ESA,
we
assumed
that
15
percent
of
all
commercial
properties
subject
to
the
AAI
requirements
are
abandoned.
For
a
lower
bound
estimate,
we
assumed
that
28
percent
of
all
commercial
properties
subject
to
the
AAI
requirements
are
abandoned.

As
shown
in
the
tables
below,
based
on
our
analysis,
the
cost
of
a
Phase
I
ESA
under
the
final
AAI
regulation
will
increase,
on
average,
between
$
52
and
$
58.
The
estimated
weighted
average
cost
for
a
Phase
I
ESA
thus
will
range
between
$
2,185
and
$
2,190.8
8
We
assumed
that
the
EPs
will
need
to
complete
the
full
interview
with
the
current
owner
before
conducting
an
interview
with
the
past
owners
or
occupants.
To
the
extent
that
this
may
not
always
be
the
case,
the
average
incremental
cost
is
overestimated.
Addendum
to
EIA
for
the
AAI
Regulation
A­
10
Exhibit
A­
1:
Final
AAI
Regulation
­
Estimated
Unit
Cost
(
Upper
Bound)

Size
Type
Assumed
Distribution
Average
Incremental
Hours
Average
Incremental
Labor
Cost
Average
Incremental
Direct
Cost
Average
Total
Incremental
Cost
Small
Undeveloped/
Agricultural
12.8%
0.73
$
37.6
$
0
$
37.6
Residential
9.2%
0.73
$
37.6
$
0
$
37.6
Commercial
37.6%
1.32
$
67.3
$
0
$
67.3
Industrial
11.4%
1.32
$
67.3
$
0
$
67.3
Medium
Undeveloped/
Agricultural
5%
0.73
$
37.6
$
0
$
37.6
Residential
3.6%
0.73
$
37.6
$
0
$
37.6
Commercial
14.8%
1.32
$
67.3
$
0
$
67.3
Industrial
4.5%
1.32
$
67.3
$
0
$
67.3
Large
Undeveloped/
Agricultural
0.2%
0.73
$
37.6
$
0
$
37.6
Residential
0.1%
0.73
$
37.6
$
0
$
37.6
Commercial
0.5%
1.32
$
67.3
$
0
$
67.3
Industrial
0.2%
1.32
$
67.6
$
0
$
67.6
Average
Incremental
Cost
$
58
Average
ASTM
E1527­
2000
Phase
I
ESA
Cost
$
2,132
Average
AAI
Phase
I
ESA
Cost
$
2,190
Notes:
We
assumed
that
15
percent
of
all
commercial
properties
subject
to
the
AAI
requirements
are
abandoned.
Totals
do
not
add
due
to
rounding.

Exhibit
A­
2:
Final
AAI
Regulation
­
Estimated
Unit
Cost
(
Lower
Bound)

Size
Type
Assumed
Distribution
Average
Incremental
Hours
Average
Incremental
Labor
Cost
Average
Incremental
Direct
Cost
Average
Total
Incremental
Cost
Small
Undeveloped/
Agricultural
12.8%
0.67
$
34.3
$
0
$
34.3
Residential
9.2%
0.67
$
34.3
$
0
$
34.3
Commercial
37.6%
1.19
$
60.7
$
0
$
60.7
Industrial
11.4%
1.19
$
60.7
$
0
$
60.7
Medium
Undeveloped/
Agricultural
5%
0.67
$
34.3
$
0
$
34.3
Residential
3.6%
0.67
$
34.3
$
0
$
34.3
Commercial
14.8%
1.19
$
60.7
$
0
$
60.7
Industrial
4.5%
1.19
$
60.7
$
0
$
60.7
Large
Undeveloped/
Agricultural
0.2%
0.67
$
34.3
$
0
$
34.3
Residential
0.1%
0.67
$
34.3
$
0
$
34.3
Commercial
0.5%
1.19
$
60.7
$
0
$
60.7
Addendum
to
EIA
for
the
AAI
Regulation
A­
11
Size
Type
Assumed
Distribution
Average
Incremental
Hours
Average
Incremental
Labor
Cost
Average
Incremental
Direct
Cost
Average
Total
Incremental
Cost
Industrial
0.2%
1.13
$
57.6
$
0
$
57.6
Average
Incremental
Cost
$
52
Average
ASTM
E1527­
2000
Phase
I
ESA
Cost
$
2,132
Average
AAI
Phase
I
ESA
Cost
$
2,185
Notes:
We
assumed
that
28
percent
of
all
commercial
properties
subject
to
the
AAI
requirements
are
abandoned.
Totals
do
not
add
due
to
rounding.

Under
the
final
AAI
regulation,
the
average
estimated
incremental
costs
for
the
users
transitioning
from
transaction
screens
to
Phase
I
ESAs
will
range
between
$
1,459
and
$
1,465
($
2,185
­
$
726
=
$
1,459,
and
$
2,190
­
$
726
 
$
1,465;
where
$
726
is
the
estimated
average
cost
of
a
transaction
screen).
Although
this
is
a
relatively
high
incremental
cost,
only
a
small
percent
of
the
users
will
be
affected
annually.

As
explained
in
the
EIA
conducted
for
the
proposed
rule,
we
estimate
that
about
97
percent
of
property
transactions
will
bear
only
the
incremental
cost
of
the
rule
relative
to
the
ASTM
E1527­
2000
standard.
Therefore,
under
the
final
AAI
regulation,
the
weighted
average
incremental
cost
per
ESA
per
property
transaction
is
estimated
to
be
between
$
94
and
$
100
(
97%
*
$
52
+
3%
*
$
1,459
=
$
94,
and
97%
*
$
58
+
3%
*
$
1,465
=
$
100).

Total
Cost
and
Incremental
Annual
Cost
In
this
section,
we
first
present
the
estimated
total
10­
year
cost
and
the
total
annual
cost
of
the
AAI
rule.
We
then
present
the
incremental
total
annual
cost
of
the
AAI
rule
relative
to
the
total
annual
cost
under
the
base
case,
where
the
incremental
total
annual
cost
is
the
annual
cost
of
the
AAI
regulation.

Based
on
our
analysis,
the
present
value
of
the
total
10­
year
cost
of
the
AAI
rule
would
range
between
$
5.92
billion
and
$
5.93
billion,
assuming
a
three
percent
annual
growth
rate
in
Phase
I
ESAs
and
a
three
percent
discount
rate.
The
total
annual
cost,
amortized
over
10
years
at
a
three
percent
discount
rate,
would
range
between
$
694
million
and
$
695
million.
Using
a
discount
rate
of
seven
percent,
we
estimate
the
total
10­
year
cost
will
range
between
$
5.01
billion
and
$
5.03
billion
and
the
total
annual
cost
will
range
from
$
714
million
to
$
716
million.
Addendum
to
EIA
for
the
AAI
Regulation
A­
12
Exhibit
A­
3:
AAI
Regulation
­
Estimated
Total
Cost
(
Upper
Bound)

Annual
Volume
Total
Annual
Cost
(
in
millions)
Year
Phase
I
ESAs
Transaction
Screens
Phase
I
ESAs
Transaction
Screens
Sum
of
Phase
I
ESAs
and
Transaction
Screens
Total
Cost
Discounted
at
3%
Total
Cost
Discounted
at
7%

2004
263,680
24,320
$
577.6
$
17.6
$
595.2
$
595.2
$
595.2
2005
271,590
24,320
$
594.9
$
17.6
$
612.5
$
594.7
$
572.5
2006
279,738
24,320
$
612.7
$
17.6
$
630.4
$
594.2
$
550.6
2007
288,130
24,320
$
631.1
$
17.6
$
648.8
$
593.7
$
529.6
2008
296,774
24,320
$
650.1
$
17.6
$
667.7
$
593.2
$
509.4
2009
305,677
24,320
$
669.6
$
17.6
$
687.2
$
592.8
$
490.0
2010
314,848
24,320
$
689.7
$
17.6
$
707.3
$
592.3
$
471.3
2011
324,293
24,320
$
710.3
$
17.6
$
728.0
$
591.9
$
453.4
2012
334,022
24,320
$
731.6
$
17.6
$
749.3
$
591.5
$
436.1
2013
344,043
24,320
$
753.6
$
17.6
$
771.2
$
591.1
$
419.5
Present
Value
of
Total
10­
year
Cost
$
5,930.7
$
5,027.5
Annual
Cost
$
695.3
$
715.8
Notes:
We
assumed
that
15
percent
of
all
commercial
properties
subject
to
the
AAI
requirements
are
abandoned.
Totals
do
not
add
due
to
rounding.

Exhibit
A­
4:
AAI
Regulation
­
Estimated
Total
Cost
(
Lower
Bound)

Annual
Volume
Total
Annual
Cost
(
in
millions)
Year
Phase
I
ESAs
Transaction
Screens
Phase
I
ESAs
Transaction
Screens
Sum
of
Phase
I
ESAs
and
Transaction
Screens
Total
Cost
Discounted
at
3%
Total
Cost
Discounted
at
7%

2004
263,680
24,320
$
576.1
$
17.6
$
593.7
$
593.7
$
593.7
2005
271,590
24,320
$
593.4
$
17.6
$
611.0
$
593.2
$
571.0
2006
279,738
24,320
$
611.2
$
17.6
$
628.8
$
592.7
$
549.2
2007
288,130
24,320
$
629.5
$
17.6
$
647.2
$
592.2
$
528.3
2008
296,774
24,320
$
648.4
$
17.6
$
666.0
$
591.8
$
508.1
2009
305,677
24,320
$
667.8
$
17.6
$
685.5
$
591.3
$
488.7
2010
314,848
24,320
$
687.9
$
17.6
$
705.5
$
590.9
$
470.1
2011
324,293
24,320
$
708.5
$
17.6
$
726.2
$
590.4
$
452.2
2012
334,022
24,320
$
729.8
$
17.6
$
747.4
$
590.0
$
435.0
2013
344,043
24,320
$
751.7
$
17.6
$
769.3
$
589.6
$
418.5
Present
Value
of
Total
10­
year
Cost
$
5,915.9
$
5,014.9
Annual
Cost
$
693.5
$
714.0
Notes:
We
assumed
that
28
percent
of
all
commercial
properties
subject
to
the
AAI
requirements
are
abandoned.
Totals
do
not
add
due
to
rounding.
Addendum
to
EIA
for
the
AAI
Regulation
A­
13
Summary
of
Annual
Cost
Estimates
Exhibits
A­
5
and
A­
6
summarize
the
total
annual
cost
estimates
for
the
base
case
and
the
final
AAI
regulation,
calculated
using
a
discount
rate
of
three
and
seven
percent,
respectively.
The
Exhibits
also
present
the
estimated
incremental
total
annual
cost
of
the
final
AAI
rule
relative
to
the
base
case.

Exhibit
A­
5:
Summary
of
Annual
Cost
Estimates
(
in
millions),
Discounted
at
Three
Percent
Base
Case
Final
AAI
Rule
Total
Annual
Cost
$
663.8
$
693.5
­
$
695.3
Incremental
Total
Annual
Cost
Relative
to
the
Base
Case
$
0
$
29.7
­
$
31.4
Exhibit
A­
6:
Summary
of
Annual
Cost
Estimates
(
in
millions),
Discounted
at
Seven
Percent
Base
Case
Final
AAI
Rule
Total
Annual
Cost
$
683.5
$
714.0
­
$
715.8
Incremental
Total
Annual
Cost
Relative
to
the
Base
Case
$
0
$
30.5
­
$
32.3
Sensitivity
Analysis
Overview
of
the
EDR
Survey
Among
the
commenters
who
asserted
that
the
EIA
underestimated
the
incremental
cost
of
the
proposed
rule,
several
cited
the
result
of
a
"
survey"
conducted
by
Environmental
Data
Resource
(
EDR)
and
published
in
the
July
2004
issue
of
the
ESA
Newsletter.
The
EDR
results
were
based
on
an
informal
client
questionnaire
in
which
over
500
EPs
responded
to
a
request
to
quantify
the
effects
of
the
proposed
AAI
rule
on
the
price
of
Phase
I
ESA
at
their
respective
firms.
Close
to
60
percent
of
the
respondents
indicated
that
a
higher
level
of
effort
required
for
an
environmental
inquiry
under
the
AAI
rule
would
cause
them
to
increase
the
price
of
Phase
I
ESA
at
their
firm
by
more
than
10
percent.
Assuming
the
average
price
of
Phase
I
ESA
of
$
2,000,
a
10
percent
increase
would
amount
to
a
$
200
price
increase.
Figure
1
presents
the
results
of
the
survey.
9
9
EDR
conducted
a
more
formal
survey
in
the
Fall
of
2004
in
which
it
asked
the
same
question.
The
results
of
the
two
surveys
are
fairly
similar,
with
the
second
survey
showing
a
higher
percentage
of
respondents
who
expect
the
price
of
Phase
I
ESA
at
their
firm
to
increase
by
less
than
five
percent
(
28
percent
versus
15
percent
in
the
first
survey).
Addendum
to
EIA
for
the
AAI
Regulation
A­
14
Source:
EDR,
ESA
Newsletter,
July
2004.

In
its
surveys,
EDR
did
not
ask
the
respondents
to
identify
specific
tasks
associated
with
a
higher
level
of
effort
(
and
therefore
higher
price),
an
approach
that
would
have
been
more
in
line
with
the
EIA
methodology.
The
EDR
results,
thus,
do
not
give
a
basis
for
revising
the
incremental
cost
estimates
for
individual
tasks.
Specifically,
it
cannot
be
determined,
based
on
the
information
provided
in
the
surveys,
whether
the
EIA
did
not
account
for
all
of
the
incremental
(
i.
e.,
new)
tasks
or
whether
the
EIA
underestimated
the
level
of
effort
and/
or
direct
costs
for
the
incremental
tasks.

The
following
issues
regarding
the
EDR
results
are
worth
nothing
before
proceeding
to
a
sensitivity
analysis.
First,
the
EIA
estimated
the
incremental
cost
under
the
proposed
AAI
rule
relative
to
the
ASTM
standard,
with
an
implicit
assumption
that
the
ESA
industry
is
fully
compliant
with
the
ASTM
standard.
The
EDR
survey
respondents
were
asked
to
assess
an
increase
in
the
price
of
Phase
I
ESA
relative
to
their
current
practices
which
might
be
more
or
less
stringent
than
the
ASTM
standard.
Second,
the
EIA
estimated
a
weighted
average
incremental
cost,
where
the
distributions
of
properties
by
type
and
size
were
used
as
weights.
Respondents
to
EDR's
questionnaire
were
probably
assessing
an
impact
on
the
price
of
Phase
I
ESA
for
a
"
typical"
property
for
which
they
performed
ESAs.
What
constitutes
a
"
typical"
property
may
vary
significantly
across
firms.
Third,
the
EIA
weighted
the
increased
effort
under
the
AAI
by
the
probability
that
the
incremental
hours
may
be
needed.
For
example,
we
assumed
that
only
15
percent
of
properties
would
need
to
satisfy
the
requirement
for
documenting
the
relationship
of
the
purchase
price
to
the
value
of
the
property.
EDR's
respondents
might
well
have
assumed
that
all
of
the
AAI
requirements
will
need
to
be
satisfied
in
each
and
every
Phase
I
ESA.
In
addition,
there
is
a
possibility
of
selectivity
bias
in
the
EDR
results.
Specifically,
it
is
possible
that
the
EPs
who
believe
the
AAI
rule
would
raise
the
level
of
effort
for
conducting
Phase
I
ESAs
significantly
relative
to
the
ASTM
standard
responded
with
greater
frequency
than
those
who
believe
the
effect
would
be
minimal.

To
address
the
public
comments
received,
we
performed
the
following
sensitivity
analysis.
Addendum
to
EIA
for
the
AAI
Regulation
A­
15
Sensitivity
Analysis
 
Average
Increment
Cost
We
estimated
that
the
cost
of
a
Phase
I
ESA
under
the
final
AAI
rule
would
increase,
on
average,
by
approximately
three
percent
compared
to
the
cost
of
a
Phase
I
ESA
under
the
current
ASTM
standard
(
or
by
approximately
200
percent
for
properties
switching
from
a
transaction
screen
to
an
AAI
Phase
I
ESA).
This
translates
to
an
incremental
cost
of
$
58
per
Phase
I
ESA
(
or
$
1,465
per
ESA
for
properties
switching
from
transaction
screens).

The
ESA
practitioners
surveyed
by
the
EDR
indicated
that
the
increase
in
the
price
of
a
Phase
I
ESA
under
the
proposed
AAI
rule
would
be
anywhere
between
0
to
over
20
percent.
To
estimate
the
average
increase
in
the
Phase
I
ESA
price,
we
first
estimated
the
average
price
of
a
Phase
I
ESA
using
the
data
on
the
distribution
of
properties
by
the
average
Phase
I
ESA
price
presented
in
the
EDR's
2005
Environmental
Site
Assessment
Industry
Benchmark
Report.
We
then
multiplied
the
estimated
average
price
by
the
expected
percentage
increase
in
the
price
as
presented
in
the
EDR
survey.
Weighing
the
results
by
the
distribution
of
the
EDR
survey
respondents,
we
estimated
that
the
average
incremental
increase
in
the
price
of
a
Phase
I
ESA
under
the
proposed
AAI
rule
would
be
about
$
240
(
or
about
12
percent).
We
assumed
that
this
would
be
an
average
incremental
increase
for
properties
switching
from
the
ASTM
E1527­
2000.10
We
then
used
this
estimate
to
conduct
a
sensitivity
analysis.
The
results
are
presented
in
Table
A­
7.

Exhibit
A­
7:
Annual
Cost
Estimates
(
in
millions)
 
Average
Incremental
Cost
Average
Incremental
Cost
per
Phase
I
ESA
Relative
to
the
Base
Case
Cost
Estimates
Base
Case
Final
AAI
Total
Annual
Cost1
$
683.5
$
715.8
ICF
estimate:
$
58
Incremental
Total
Annual
Cost
Relative
to
the
Base
Case1
$
0
$
32.3
Total
Annual
Cost
$
683.5
$
773.7
EDR
Survey:
$
240
Incremental
Total
Annual
Cost
Relative
to
the
Base
Case
$
0
$
90.2
1)
The
cost
estimates
are
presented
in
Exhibit
A­
6.
Notes:
1.
We
assumed
that
Phase
I
ESAs
grow
at
an
annual
rate
of
three
percent.
2.
We
assumed
that
15
percent
of
all
commercial
properties
subject
to
the
AAI
requirements
are
abandoned.
3.
Costs
are
discounted
at
seven
percent.

The
sensitivity
analysis
results
show
that
an
average
incremental
cost
of
$
240
per
Phase
I
ESA
would
lead
to
an
incremental
total
annual
cost
of
$
90.2
million.
Thus,
even
if
the
final
AAI
rule
increases
the
cost
per
Phase
I
ESA
by
an
amount
close
to
the
EDR
respondents'
estimate,
the
annual
cost
of
the
regulation
is
below
$
100
million.

10
Properties
switching
from
a
transaction
screen
would
see
an
average
increase
of
about
$
1,650
($
2,132
+
$
240
­
$
726
=
$
1,646).
Addendum
to
EIA
for
the
AAI
Regulation
A­
16
Small
Entity
Analysis
This
section
presents
the
revised
estimate
of
the
potential
economic
impact
of
the
AAI
rule
on
small
entities.

In
Chapter
10
of
the
EIA,
we
estimated
that,
for
the
majority
of
small
entities,
the
average
incremental
cost
of
the
proposed
AAI
rule
relative
to
the
base
case
(
i.
e.,
the
ASTM
E1527­
2000)
would
be
between
$
41
and
$
47.
For
properties
switching
from
a
transaction
screen
to
a
Phase
I
ESA
under
the
proposed
rule
(
about
three
percent
of
transactions
annually)
the
cost
would
increase,
on
average,
between
$
1,448
and
$
1,454.

Based
upon
input
from
commenters,
we
revised
the
cost
estimates
to
account
for
the
additional
incremental
hour
burden
for
locating
and
interviewing
past
owners
or
occupants
at
non­
abandoned
properties.
The
additional
burden
for
the
interview
task
for
non­
abandoned
properties
was
not
accounted
for
in
the
analysis
of
costs
conducted
for
the
proposed
rule.
All
other
parameters
used
in
modeling
the
impacts
on
small
entities
are
the
same
as
presented
in
the
EIA
for
the
proposed
rule.

Based
on
our
analysis,
for
the
majority
of
small
businesses,
the
cost
of
conducting
a
Phase
I
ESA
would
increase,
on
average,
between
$
52
and
$
58
under
the
final
AAI
rule.
For
the
small
percentage
of
cases
for
which
a
transaction
screen
would
have
been
preferred
to
the
ASTM
E1527­
2000
in
the
base
case,
but
which
now
would
require
an
assessment
in
compliance
with
the
AAI
regulation,
the
cost
of
conducting
an
ESA
would
increase,
on
average,
between
$
1,459
and
$
1,465.
Annualizing
the
incremental
cost
per
ESA
over
10
years
­
the
average
life
of
a
firm
­
at
a
seven
percent
discount
rate,
we
estimated
that,
for
the
majority
of
small
entities,
the
average
annual
cost
increase
per
establishment
per
property
transaction
would
be
approximately
$
8.
For
the
small
percentage
of
entities
transitioning
from
transaction
screens
to
Phase
I
ESAs,
the
average
annual
cost
increase
per
establishment
per
property
transaction
would
be
$
209.
We
conclude
that,
although
substantial
numbers
of
small
entities
would
likely
be
affected
by
the
AAI
regulation,
the
cost
impact
on
them
would
not
be
significant.