Aboveground Oil Storage Tanks: Observations on EPA's Economic Analyses of Amendments to the Spill Prevention, Control, and Countermeasure Rule
Published: 2007-07-27T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Oil in aboveground tanks can leak into soil and nearby water, threatening human health and wildlife. To prevent certain oil spills, the Environmental Protection Agency (EPA) issued the Spill Prevention, Control, and Countermeasure (SPCC) rule in 1973. EPA estimated that, in 2005, about 571,000 facilities were regulated under this rule. When finalizing amendments to the rule in 2002 and 2006 to both strengthen the rule and reduce industry burden, EPA analyzed the amendments' potential impacts and concluded that the amendments were economically justified. As requested, GAO assessed the reasonableness of EPA's economic analyses of the 2002 and 2006 SPCC amendments, using Office of Management and Budget (OMB) guidelines for federal agencies in determining regulatory impacts, among other criteria, and discussed EPA's analyses with EPA officials.
section_title: What GAO Found
paragraphs: EPA's economic analysis of the 2002 SPCC amendments had several limitations that reduced its usefulness for assessing the amendments' benefits and costs. In particular, EPA did not include in its analysis a number of the elements recommended by OMB guidelines for assessing regulatory impacts. For example, EPA did not assess the uncertainty of key assumptions and data. In the analysis, EPA assumed that certain facilities were already complying with at least some of the rule's provisions and, as a result, they would not incur any additional compliance costs because of the amendments. However, the extent of facility compliance with the rule was highly uncertain. EPA did not analyze the effects of alternative rates of industry compliance on the estimated costs and benefits of the revised rule and, therefore, potentially misstated these amounts. Furthermore, EPA's 2002 analysis was limited in that it (1) did not analyze alternatives to the amendments, such as alternative lead times for industry to comply or alternative levels of stringency; (2) did not present the compliance costs that EPA expects facilities to incur or save in the second and subsequent years under the amendments in comparable present value terms (through discounting); and (3) provided only limited general information on the amendments' potential benefits in reducing the risk of an oil spill and its potential effects on human health and the environment. EPA's economic analysis of the 2006 amendments addressed several of the limitations of its 2002 analysis, but it also had some limitations that made it less useful than it could have been for assessing the amendments' costs and benefits. For example, EPA's 2006 analysis assessed the potential effect of industry noncompliance on the estimated costs (or cost savings) and estimated the present value of costs (or cost savings) associated with different alternatives for burden reduction. Nevertheless, as with the 2002 analysis, EPA did not estimate the potential benefits of the 2006 amendments, such as the extent to which they would affect the risk of an oil spill and public health and welfare and the environment. In addition, EPA did not have available nationally representative samples for its analysis; therefore, its estimates of the number of facilities that would be affected by the 2006 amendments may not be accurate. In particular, for one category of facilities, EPA based its estimates of the number of facilities on data available from eight states. Because facilities in these states may not have been representative of facilities nationwide, EPA's use of these data in its analysis could have introduced bias into its estimates of the number of facilities and costs for this amendment. EPA acknowledged that its analysis of the 2006 amendments was not a full accounting of all social benefits and costs but stated that the results were based on the best available information given time and resource constraints.

section_title: Letter
paragraphs: Billions of gallons of oil, from petroleum products to cooking oils, are  produced, distributed, and used each year in the United States. These  oils—often stored in aboveground storage tanks at various types of  facilities—have sometimes leaked into soil and nearby water, posing  threats to public health and to wildlife and their habitats. To prevent  certain oil spills, the Environmental Protection Agency (EPA), under the  authority of the Clean Water Act, issued the Spill Prevention, Control, and  Countermeasure (SPCC) rule in 1973. EPA estimated that, in 2005, about  571,000 facilities in industry sectors such as oil production, petroleum  bulk storage, farming, electric utilities, and manufacturing were regulated  under this rule. Facilities are subject to the rule, as amended, if they are  nontransportation related and have a total capacity of greater than (1)  1,320 gallons in aboveground oil storage tanks or (2) 42,000 gallons in  completely buried oil storage tanks, and if they could reasonably be  expected, due to their location, to discharge harmful quantities of oil into  or upon the navigable waters of the United States or adjoining shorelines.
The SPCC rule requires each owner or operator of a regulated facility to  prepare or amend and implement a plan that describes how the facility is  designed, operated, and maintained to prevent the discharge of oil into  navigable waters or adjoining shorelines. The plan must also include  measures to control, contain, clean up, and alleviate the effects of an oil  spill so as to prevent such spills from reaching any navigable waters or  adjoining shorelines. According to industry sectors covered by the rule,  facilities may incur significant costs to develop, revise, and implement an  SPCC plan, for such actions as modifying the facility and having an  engineer review and certify these modifications. The extent of the costs  depends on, among other things, the size and type of facility and whether  the facility is a new or existing one.
In July 2002, as part of an overall government effort to reduce regulatory  burden—and to respond to recommendations made by GAO and an EPA  spills task force—EPA made over 100 amendments to the rule, including  30 that it considered major. Although the intent of some of the  amendments was to strengthen the rule to better prevent oil spills as GAO  and the task force had recommended, EPA also expected that some of  these amendments would, among other things, reduce inefficiencies,  eliminate duplication of effort, reduce the number of facilities regulated by  the rule, and lower facilities’ compliance costs. For example, under the  2002 amendments to the rule, EPA no longer regulates certain completely  buried tanks that are subject to underground storage tank regulations.  This change eliminated from the rule some completely buried containers  and facilities that were previously covered by both sets of regulations and,  therefore, duplicated compliance costs. In addition, the agency made  changes that, in EPA’s view, clarified the rule’s language to better define  which facilities are subject to the rule. However, many industry sectors  consider several of these amendments to be changes to the requirements  of the rule rather than clarifications and, in some cases, maintain that they  had not previously considered themselves subject to the rule prior to these  changes.
In 2006, partly in response to industry concerns about the cost of  complying with the 2002 amendments, EPA made several major changes to  the rule to further reduce burden and provide owners and operators of  certain facilities a more cost-effective approach to prevent oil spills,  which, according to EPA, could potentially impact about 62 percent of the  regulated universe. For example, the 2006 amendments allowed qualified  facilities, such as those with an oil storage capacity of 10,000 gallons or  less and that meet a reportable discharge history criterion, to self-certify  their SPCC plans rather than hire a professional engineer for certification.  EPA has extended until July 1, 2009, the date by which facility owners and  operators must prepare or amend and implement SPCC plans in  accordance with the 2002 and 2006 amendments, provided that the owners  and operators of facilities in existence on or before August 16, 2002,  maintain their existing plans.
When finalizing the 2002 and 2006 amendments to the SPCC rule, EPA  conducted economic analyses of the potential impacts that these  amendments were expected to have on the regulated community. Federal  agencies are generally required by statute and executive order to assess  the costs and benefits of significant regulatory actions, including those  that would have an annual effect on the economy of $100 million or more.  Furthermore, the Office of Management and Budget (OMB) developed  guidelines under Executive Order 12866 to encourage good regulatory  impact analysis and to standardize the way that benefits and costs of  federal regulations are measured and reported. The OMB guidelines  generally direct agencies, in analyzing the impacts of rules, to, among  other things, (1) identify and quantitatively analyze key uncertainties in  their analysis, (2) measure the potential social benefits and costs— including the effects on public health and welfare and the environment— of regulatory alternatives incremental to a “baseline,” (or the conditions  that would exist in the absence of the proposed regulation), (3) identify  the regulatory alternative that would maximize net social benefits (total  benefits minus total costs), and (4) present benefits and costs that would  occur in different time periods in comparable, present value terms. OMB  guidelines further state that good regulatory analysis includes identifying  the regulatory alternative with the largest net benefits (that is, that  maximizes economic efficiency), and such information is useful for  decision makers and the public, even when economic efficiency is not the  only or the overriding public policy objective. EPA concluded, on the basis  of its economic analyses, that the 2002 and 2006 amendments were  economically justified.
In this context, you asked us to review the reasonableness of the  economic analyses EPA performed in support of the 2002 and 2006 SPCC  amendments. To respond to this objective, we evaluated EPA’s economic  analyses using, among other criteria, OMB guidelines for federal agencies  in assessing regulatory impacts. In addition, we discussed EPA’s analyses  with senior officials in EPA’s Office of Emergency Management, which  was responsible for conducting the analyses. We performed our work from  June 2006 to July 2007 in accordance with generally accepted government  auditing standards. A more detailed discussion of our objectives, scope,  and methodology is presented in appendix I.
subsections: section_title: Background
paragraphs: The Clean Water Act prohibits the discharge of oil into or upon navigable  waters or adjoining shorelines and requires the President to establish  regulations to prevent oil spills. The President subsequently delegated this  responsibility to EPA. To fulfill this requirement, in 1973, EPA issued its  Oil Pollution Prevention Regulation, which outlined actions regulated  facilities must take to prevent, prepare for, and respond to oil spills before  they reach navigable waters or adjoining shorelines. Under this rule, as  amended through 2006, EPA seeks to prevent oil spills from storage tanks  at facilities that (1) have an aggregate aboveground storage tank capacity  of more than 1,320 gallons or a total completely buried storage capacity  greater than 42,000 gallons and (2) could reasonably be expected, due to  their location, to discharge oil in quantities that may be harmful into or  upon the navigable waters of the United States or onto adjoining  shorelines. EPA estimated that about 571,000 facilities were regulated  under the SPCC rule as of 2005. Oil production facilities (an estimated  166,000 facilities or 29 percent of the total) and farms (an estimated  152,000 facilities or 27 percent of the total) account for the largest portion  of these estimated facilities. The SPCC rule does not require facilities that  are covered under the rule to report to EPA that they are covered.
Therefore, the agency does not have an inventory of facilities that it  regulates under the program. However, facilities are required to report  discharges of oil in quantities that may be harmful to navigable waters or  adjoining shorelines to the National Response Center (NRC), but EPA  does not consider these and other data reliable enough for EPA to  determine the number of facilities subject to the SPCC rule that have had  oil spills.
The SPCC rule is a cornerstone of EPA’s strategy to prevent oil spills from  reaching the nation’s waters. The regulation requires each owner or  operator of a regulated onshore or offshore facility to prepare or amend  and implement an SPCC plan that describes the facility’s design,  operation, and maintenance procedures established to prevent spills from  occurring, as well as countermeasures to control, contain, clean up, and  mitigate the effects of an oil spill that could reach navigable waters or  adjoining shorelines. Unlike oil spill contingency plans that typically  address spill cleanup measures after a spill to navigable waters or  adjoining shorelines has occurred, SPCC plans ensure that facilities put in  place containment and other measures—such as regular visual inspection  and integrity testing of bulk storage containers—to prevent oil spills that  could reach navigable waters or adjoining shorelines. EPA’s 10 regional  offices administer an inspection program to ensure compliance with the  regulations.
EPA proposed revisions to the SPCC rule in October 1991 and February  1993. In addition to clarifying previous regulatory language, these  proposed revisions outlined additional requirements for regulated  facilities. In December 1997, EPA proposed additional amendments to the  SPCC requirements, focusing on measures to reduce the information  collection burden on affected facilities. Many, but not all, of the  amendments to the rule proposed by EPA in 1991, 1993, and 1997, were  made final in July 2002.
EPA made over 100 amendments to the rule in 2002, including more than  30 that EPA considers to be major. Several of these amendments changed  the scope of the rule’s applicability. For example, the 2002 amendments    exempted from the rule containers with a capacity of less than 55 gallons,  completely buried storage tanks subject to all of the technical  requirements of underground storage tank regulations, permanently  closed oil tanks as defined in the regulation, and any facility or part  thereof used exclusively for wastewater treatment; and   eliminated the provision triggering the requirement for an SPCC plan when  any single container has a capacity of greater than 660 gallons but  maintained the 1,320-gallon total capacity threshold.
The 2002 amendments also added to or changed the language of some  definitions in the 1973 rule in order, according to EPA, to clarify which  facilities are subject to the rule and facilities’ responsibilities under the  rule. For example, according to EPA, the 2002 amendments clarified the  following:    A “facility” may be as small as a piece of equipment—for example, a  tank—or as large as a military base; “oil” includes not only petroleum oil,  but such other products as animal fats, vegetable oils, and oil mixed with  wastes, other than “dredged spoil”; and what “navigable waters” means for  purposes of the rule.
The SPCC rule applies to facilities that “use” oil, such as in the operational  use of oil-filled equipment.
EPA had always considered statements in the existing (1973) SPCC  regulations that a facility “should” implement a specific rule provision as  meaning that a facility was required to comply with that provision or, if  circumstances warranted, undertake alternative methods to achieve  environmental protection. As a result, EPA changed “should” to “must” to  reflect this understanding and address any confusion that compliance with  such provisions was optional.
According to EPA, the agency made several of these definitional changes  to clarify the types of facilities that are included under the rule and  facilities’ requirements. However, many industry sectors consider several  of these amendments to be changes to the requirements of the rule rather  than clarifications and, in some cases, maintain that they had not  previously considered themselves subject to the rule prior to these  changes. (A summary of industries’ views on the impacts that these and  other amendments to the SPCC rule have had or are likely to have on the  regulated community, and our analysis of these views, are included in  apps. II and III, respectively.)
Several of the rule’s amendments also changed requirements for preparing,  implementing, reviewing, and amending SPCC plans. For example, the  2002 amendments to the rule    decreased from once every 3 years to once every 5 years, the frequency  with which a facility’s SPCC plan must be reviewed; required that the plan  include a diagram of the facility, and that completely buried storage tanks  located on the facility—otherwise exempt from SPCC rules—be included  on the facility diagram; and   gave EPA regional administrators the authority to require that any facility  within their jurisdiction amend the SPCC plan after on-site review of the  plan and extend the period of time for facilities already in operation to  amend or complete their plans.
Other amendments to the rule in 2002 changed facility requirements  regarding the use and testing of containers, piping, and other equipment to  prevent or mitigate the effects of oil spills from containers. For example,  the 2002 amendments    amended the integrity testing requirements for aboveground containers  and required brittle fracture evaluation of field-constructed aboveground  containers that may have a risk of discharge;    added specificity to the description of secondary containment  requirements, such as detailing that the containment system, including  walls and floors, must be capable of containing oil and constructed so that   any discharge from the primary containment system is prevented from  escaping before cleanup occurs; and required a facility to conduct periodic integrity testing of containers and  piping, in addition to the other requirements—i.e., contingency planning  and a written commitment of resources—when the owner/operator  determines and clearly explains that the installation of specific secondary  containment structures or equipment is not practicable.
In December 2006, EPA again made several changes to the SPCC rule,  including several major amendments to provide additional burden relief to  the regulated industries on specific rule provisions. For example, the  scope of the rule’s applicability was changed, potentially reducing the  number of facilities under the rule, by excluding motive power containers  from the rule’s requirements. In addition, the 2006 amendments also  changed requirements for preparing SPCC plans by providing an option for  “qualified facilities” to prepare a self-certified SPCC plan instead of one  that is reviewed and certified by a professional engineer. The 2006  amendments also decreased some secondary containment requirements to  reduce the burden for facilities. For example, the 2006 amendments    exempted facilities from having to construct and meet requirements for  specific sized secondary containment for mobile refuelers; and   allowed facilities to use alternatives to general secondary containment  requirements for qualified oil-filled operational equipment, such as  preparing an oil spill contingency plan and a written commitment of  resources to control and remove discharged oil, and requiring an  inspection or monitoring program.
Although changes to the rule were finalized in 2002 and 2006, EPA  extended the date of compliance in 2003, 2004, 2006, and 2007. Currently,  owners and operators of facilities in existence on or before August 16,  2002, must continue to maintain their SPCC plans, and then must amend  them to ensure compliance with current requirements, and implement the  amended plan no later than July 1, 2009. Facilities beginning operations  after August 16, 2002, must prepare and implement a plan by July 1, 2009.  EPA made this latest extension to, among other things, allow owners and  operators of facilities the time to fully understand the 2002 and 2006  amendments and the further revisions to the rule EPA plans to make in  2008 and to make changes to their facilities and SPCC plans.
EPA determined that the 2002 and 2006 amendments constituted  significant regulatory actions under Executive Order 12866. For significant  regulatory actions, Executive Order 12866 requires agencies to assess the  benefits and costs of, and reasonably feasible alternatives to, the planned  regulatory action. In response, EPA conducted an economic analysis to  provide estimates of the potential costs and benefits of the amendments.  In addition, the agency conducted economic analyses of the 2006  amendments, both as proposed in 2005 and as made final in December  2006. EPA’s Office of Solid Waste and Emergency Response conducted  these analyses.
section_title: Limitations in EPA’s Analysis of the 2002 SPCC Amendments Reduced Its Usefulness for Informing Decision Makers and the Public About Economic Trade-offs
paragraphs: EPA’s economic analysis of the 2002 SPCC amendments had a number of  limitations that reduced its usefulness for assessing the economic trade- offs associated with the amendments. Specifically, EPA’s 2002 analysis  was limited because it did not (1) assess the uncertainty associated with  key data and assumptions, such as the degree to which facilities were  already in compliance with the amendments, (2) analyze the effect of  regulatory alternatives to the amendments, (3) provide the compliance  costs that EPA expected facilities to incur or save as a result of the  amendments in comparable present value terms, and (4) estimate the  effect of the amendments on the risk of an oil spill and on public health  and welfare and the environment. These limitations raise questions about  the reasonableness of the estimates and limit their usefulness for  informing decision makers, stakeholders, and the public about the  potential effects of the 2002 amendments.
subsections: section_title: EPA’s Methodology for Analyzing the 2002 SPCC Amendments
paragraphs: EPA estimated the compliance costs or cost savings to the regulated  community of complying with the 2002 SPCC amendments using the  following methodology:    First, EPA established a baseline for the analysis, which it defines as a  projection of regulated facility behavior in the absence of new regulatory  provisions. For the purposes of its analysis, EPA assumed that the  baseline represented full compliance by regulated facilities with the  existing (1973) regulation, as well as industry behavior, practices, or  standards that exceed the existing regulation. After establishing the  baseline, EPA classified each regulatory revision or amendment into one   of five categories: baseline, cost increase, negligible increase, cost savings,  or negligible savings.
Second, EPA estimated the total number of potentially affected facilities  covered by the regulation to account for differences in the total potential  costs for different sizes of facilities. Because estimating the economic  effects of the amendments first required information on the size of the  regulated community, EPA used a 1995 survey that it had conducted to  determine the estimated number and size of production and storage  facilities in most regulated industry sectors.
Third, EPA estimated the costs of compliance for each regulated facility  (that is, hours multiplied by the wage rate) for certain amendments,  varying costs for each facility by its size. EPA developed costs for each  facility for amendments considered to have cost increases or cost savings  that were not negligible.
Finally, EPA estimated the annual total compliance costs (or cost savings)  associated with the amendments by multiplying the estimated costs per  facility by the estimated number of affected facilities, taking into account  whether the facility was small, medium, or large. EPA then aggregated the  first-year and subsequent-year costs or savings incurred by all facilities.
On the basis of this methodology, EPA estimated the costs that facilities  will incur by implementing the 2002 amendments. As shown in table 1,  EPA estimated that facilities will incur costs the first year and then save  costs in the following years.
section_title: EPA Did Not Assess the Uncertainty Associated with Key Assumptions and Data
paragraphs: EPA’s estimates of the economic impacts of the 2002 SPCC amendments  are based on assumptions and data that are subject to uncertainty. In  conducting its analysis of the amendments, however, EPA did not evaluate  these uncertainties, as OMB guidelines advise. For example, EPA did not  consider the uncertainties relating to its assumptions about facilities’  compliance with the existing 1973 SPCC rule and the potential impacts of  revisions that were intended to clarify what types of facilities are subject  to the rule. According to EPA, many of the 2002 SPCC amendments are  either clarifications or editorial in nature, or they do not represent a  substantive change in the existing regulatory requirements. In assessing  the economic impacts associated with these amendments, EPA maintained  that the clarifications were making explicit provisions or requirements  that were already implicit in the existing SPCC rule, rather than  introducing new ones. Therefore, in its analysis, EPA assumed that all  regulated facilities were in full compliance with these existing provisions  and would not incur any additional compliance costs as a result of the  amendments. In addition, to the extent that regulated facilities were not in  compliance with the provisions being clarified, EPA assumed that any cost  they would incur to comply should be attributed in its analysis to the  baseline and not to the 2002 amendments. However, the extent to which  facilities were in compliance—or would be in compliance in the future in  the absence of the amendments—is highly uncertain. As a result, EPA’s  cost estimates do not fully reflect the potential impacts of the  amendments.
If, contrary to EPA’s assumption, facilities were not previously in  compliance with the clarified provisions, but are brought into compliance  by the 2002 amendments, the estimated costs (or cost savings) that should  be attributed to the 2002 amendments would be higher (or lower), all else  remaining the same. For example, in commenting to EPA and OMB on the  proposed 2002 amendments, a representative of the electric utility industry  stated that, until EPA clarified in the 2002 amendments that “users” of oil  are subject to the rule, the electric utility industry did not believe that the  SPCC rules applied to electrical equipment. Because of EPA’s clarification,  however, facilities in this industry found that they were subject to the rule  and EPA would consider them to have been out of compliance. As a result,  the representative stated, the clarification would cause that industry to  incur substantial costs to modify its facilities to meet the requirements of  the amendments, such as installing secondary containment.
EPA’s economic analysis stated that it was possible that some facilities  misinterpreted the existing regulation and were not in full compliance  with it, but there was no practical way to measure industry compliance.  OMB guidelines indicate, however, that agencies can use uncertainty  analysis to assess the effect of multiple baselines with different  assumptions about the degree of compliance, particularly when industry  compliance with existing regulations is uncertain and when different  assumptions about compliance could substantially affect the estimated  benefits and costs. Without such an analysis, EPA excluded the potential  impact of current industry practice from its assessment of the total costs  and benefits associated with the 2002 amendments, thus potentially  misstating these amounts.
In addition, EPA did not account for the uncertainty associated with its  estimates of the number of facilities affected by the amendments. Because  these estimates were subject to sampling error, EPA may not have  accurately presented the number of facilities subject to the amendments.  For example, for its estimates, EPA used a 1995 survey, which was based  on a statistical sample of facilities in the 48 contiguous states. On the basis  of this survey and subsequent adjustments agency officials made using  their professional judgment, EPA estimated that 51,398 facilities would no  longer be subject to the requirements of the SPCC rule as a result of the  2002 amendments. However, like estimates from all statistical samples,  EPA’s estimates are subject to sampling error, which is the imprecision  that results from surveying a sample of facilities rather than surveying  every facility in the country. In its 2002 analysis, EPA acknowledged the  sampling error, stating that its estimates of the number of facilities were  accurate within plus or minus 10 percent. However, EPA did not account  for this sampling error when estimating the costs associated with the  amendments. OMB guidelines direct that the agencies ensure that their  estimates reflect the full probability distribution of potential results.  Consequently, to account for the imprecision in the estimated facilities  and costs, it would have been appropriate for EPA to analyze the  uncertainty associated with these estimates.
section_title: EPA’s 2002 Analysis Had Other Limitations
paragraphs: OMB guidelines direct agencies to consider the most important alternative  approaches to some or all of a rule’s provisions and provide their reasons  for selecting the preferred regulatory action over such alternatives.  However, EPA’s 2002 analysis did not assess alternatives to the  amendments, such as alternative levels of stringency or alternative lead  times to comply. To provide decision makers and the public with  information on how the costs and benefits might vary depending on the  regulatory approach, it would have been appropriate for EPA to assess the  effect of alternatives in its analysis of the 2002 amendments. Without  information on the benefits and costs of alternative regulatory actions, it is  difficult to confirm that EPA’s preferred regulatory approach maximizes  net benefits.
Moreover, OMB guidelines state that agencies should discount costs and  benefits that accrue in different time periods to present values. As  depicted in table 1, EPA did not present the total cost estimate (costs  incurred minus cost savings) of the amendments in comparable, net  present value terms. Instead, EPA estimated the costs that would be  incurred in the first year that the rule is in effect and the cost savings that  facilities would achieve in the second and subsequent years. EPA officials  stated that the present value of estimated costs is not significantly  different from the cost estimates in the simple analysis it conducted  absent the discounting. Nonetheless, since EPA estimated costs incurred  and cost savings in the first year and each subsequent year over the life of  the amendments, it would have been appropriate for EPA to present the  total net costs in comparable present value terms. To compute present  value, the agencies are directed to discount the estimated benefits and  costs using interest rates recommended by OMB.
Finally, OMB guidelines direct agencies to quantify and monetize the  benefits (including the benefits of risk reductions) associated with the  regulatory action, whenever possible. Moreover, when benefits are  difficult to monetize, the OMB guidelines state that acceptable quantitative  estimates of benefits and costs are preferable to qualitative descriptions.  In cases where quantification is difficult, the guidelines direct the agencies  to present any relevant quantitative information and describe the  unquantifiable effects. In its analysis of the 2002 amendments, however,  EPA did not monetize or quantify the potential benefits expected to result  from any of the amendments. In addition, EPA’s qualitative discussion of  the potential beneficial aspects of the 2002 amendments was very limited.  For example, the agency discussed the general risk of an oil spill and the  general damage that might be caused to public health and welfare and the  environment. EPA stated that it assumed that the amendments would have  minimal effects on the risks of a spill, lessen the burden to the regulated  community, and maintain the existing level of protection to public health  and welfare and the environment. Nonetheless, some of the 2002  amendments are more stringent than the existing SPCC rule, possibly  reducing the risk of an oil spill, while other amendments are less stringent  (that is, burden reducing), possibly increasing the risk of an oil spill.  Without more substantive information on the potential effect of the  amendments on the risk of an oil spill and the resulting effect on public  health and welfare and the environment, it is difficult to confirm that the  benefits of the amendments exceed their costs, as EPA concluded.
section_title: EPA’s Economic Analysis of the 2006 SPCC Amendments Improved on the Earlier Study but Also Had Limitations
paragraphs: EPA’s economic analysis of the 2006 amendments to the SPCC rule  addressed several of the limitations in the agency’s 2002 analysis.  However, the 2006 analysis also had some limitations that made it less  useful than it could have been for assessing the economic trade-offs  associated with the amendments.
subsections: section_title: EPA’s 2006 Analysis Included Elements Absent from Its Earlier Study
paragraphs: As shown in table 2, EPA estimated the compliance cost savings that  would be generated by the 2006 amendments under (1) a baseline  assuming full compliance with the existing SPCC rule including the 2002  amendments, (2) an alternative baseline assuming only 50 percent  compliance with the existing SPCC rule including the 2002 amendments,  and (3) different assumptions about the number of facilities that would be  affected by the 2006 amendments.
Under the alternative baseline, compliance cost savings would be roughly  half as much as under the full compliance baseline because owners and  operators of facilities that are not currently in compliance will not save  costs as a result of the changes for burden reduction. In addition, because  EPA did not have data on the precise number of facilities that would be  affected by the amendments, EPA assessed the uncertainty associated  with its estimates using arbitrarily developed scenarios for three of the  major components of the rule. Based on this approach, EPA assumed that  various percentages of the facilities would be affected by the regulatory  changes in the rule. For example, for facilities with qualified oil-filled  operational equipment, EPA analyzed the cost savings under different  assumptions about the number of facilities that would be affected by the  rule, ranging from 25 percent to 75 percent of the total number.
Moreover, unlike its 2002 analysis, EPA’s 2006 analysis also analyzed and  discussed some regulatory alternatives. For example, for the version of  these amendments that were proposed in 2005, EPA proposed an  exemption on the oil-filled operational equipment requirement for  facilities that had no reportable discharges from their equipment within  the prior 10 years of the date of their SPCC plan certification. Partly in  response to comments on the proposed rule, EPA narrowed the restriction  in the 2006 final rule to owners and operators that have not had a  discharge exceeding 1,000 gallons or two discharges exceeding 42 gallons  within a 12-month period in the 3 years prior to SPCC plan certification.  Oil spills that are the result of natural disasters are not subject to these  limitations. In its economic analysis of the 2006 final rule, EPA discussed  the differences between the cost estimates for the restriction proposed in  2005 and the estimates for the restriction adopted in 2006. EPA estimated  that the final rule cost savings would be greater under certain conditions  (that is, if 75 percent of facilities are affected by the amendment), than  estimated in the proposed version.
section_title: EPA’s 2006 Analysis Also Had Limitations
paragraphs: Despite the improvements over its 2002 analysis, EPA’s analysis of the  2006 amendments also had some limitations that made it less useful than it  could have been for assessing the economic trade-offs associated with the  amendments. For example, EPA did not quantify or monetize the potential  impacts of the 2006 amendments on the risk of an oil spill and on public  health and welfare and the environment. Instead, EPA provided only a  very limited qualitative discussion of the general risk of an oil spill and the  general potential damages that it might cause. EPA reported that the  reduced compliance costs will translate to net social benefits, but that  these benefits might be partially offset by the potential increase in the risk  of an oil spill (because of the less stringent requirements of the 2006  amendments compared with the existing requirements). EPA also stated  that quantifying net benefits (benefits minus costs) associated with the  2006 amendments was not possible due to unknown future impacts of the  rule, but it concluded that cost savings resulting from the amendments will  not be offset by any significant losses in environmental protection.  Nonetheless, it is difficult to affirm EPA’s conclusion without more  substantive information on the potential effect of the amendments on the  risk of an oil spill and the resulting effect on public health and welfare and  the environment.
In addition, because EPA’s estimates of the number of facilities that would  be affected by the 2006 amendments were not based on nationally  representative samples, the results may not be accurate. In particular, for  the one amendment that would reduce the burden for certain SPCC- regulated facilities, EPA based its estimates of the number of facilities that  would be affected by this amendment on data drawn from eight states:  Florida, Kansas, Maryland, Minnesota, New York, Oklahoma, Virginia, and  Wisconsin. Because facilities in these states may not have been  representative of facilities nationwide, EPA’s use of these data in its  analysis could have introduced bias into its estimates of the number of  facilities and costs for this amendment. Furthermore, EPA excluded from  its analysis more than half of the facilities in these eight states because the  industrial category for these facilities could not be determined and could  not be matched to an additional database. By not including such a high  proportion of facilities on a nonrandom basis, additional error was likely  introduced into EPA’s estimates of the number of SPCC-regulated  facilities. It is, therefore, unclear whether the facilities that EPA included  in the analysis are even representative of the universe of facilities within  these eight states. EPA acknowledged these limitations in its analysis and  stated that the analysis provided the best possible results given time and  resource constraints. However, the actual number of U.S. facilities, and  hence the resulting cost impacts, could be greater or less than EPA  estimated.
Overall, EPA reported that its analysis did not fully comply with OMB  guidelines for conducting economic analyses of significant regulatory  actions. It is difficult to confirm, however, that the regulatory changes are  economically justified, as EPA concluded, without an estimate of both the  costs and benefits associated with the amendments.
section_title: Conclusions
paragraphs: Because both the 2002 and 2006 amendments to the SPCC rule are  significant regulatory actions, it is important for EPA to have a credible  economic basis for selecting these as the agency’s preferred regulatory  actions. However, although EPA’s 2006 analysis improved upon its 2002  analysis, both analyses had limitations that may make it difficult for  decision makers, stakeholders, and the public to verify that the agency has  fully analyzed the economic impacts of its regulatory actions. Specifically,  because EPA did not analyze key uncertainties in its analysis of the 2002  amendments, including the degree to which facilities were in compliance  with some of the revisions, the reliability of the estimated costs and cost  savings is questionable. In addition, EPA did not assess regulatory  alternatives in its analysis for the 2002 amendments, making it difficult to  confirm that EPA’s preferred regulatory approach is economically  superior to other possible approaches. Moreover, because EPA did not  estimate the impact of the amendments on the potential risk of an oil spill  and on public health and welfare and the environment for either the 2002  or the 2006 amendments, EPA’s economic analyses may not provide  decision makers, stakeholders, and the public with a sufficient basis for  concluding that the benefits of the amendments outweigh their costs, as  EPA did. Although we recognize that evaluating regulatory impacts is a  complex task, unless EPA conducts more thorough economic analyses  consistent with OMB guidelines, decision makers, stakeholders, and the  public may lack assurance that the agency has fully evaluated the  economic trade-offs of its regulatory actions.
section_title: Recommendation for Executive Action
paragraphs: To improve the usefulness of the agency’s economic analysis for informing  decision makers and the public, we recommend that the Administrator,  EPA, take action to ensure that the agency’s economic analysis of future  changes to the SPCC rule includes all of the key elements for such  analyses contained in OMB’s guidelines for complying with Executive  Order 12866.
section_title: Agency Comments and Our Evaluation
paragraphs: GAO provided EPA with a draft of this report for its review and comment.  The agency stated that it generally agreed with the recommendation in the  report to improve the agency’s economic analyses for future changes to  the SPCC rule, consistent with OMB guidelines, and has undertaken  several initiatives to improve its analyses. EPA noted that, consistent with  our recommendation, the agency has (1) activated a core SPCC Economic  Subgroup of economic and technical experts; (2) acquired additional  expert contractor support; and (3) hired an experienced senior economist  to guide these efforts, and plans to continue gathering additional data to  improve its understanding of the regulated universe and oil spill risks, and  to address uncertainty and quantify benefits.
In addition, EPA commented that the agency believes that the economic  analyses that it conducted for the 2002 and 2006 amendments to the SPCC  rule are already consistent with, and meet the spirit and intent of, OMB  guidelines, given the limited data, time, and resources available. However,  because both the 2002 and 2006 amendments to the SPCC rule were  significant regulatory actions potentially affecting thousands of facilities  across a wide range of industries, it is important for EPA to have a  credible economic basis for selecting its preferred regulatory actions. In  particular, we found that EPA’s analyses were generally not consistent  with OMB guidelines in some key areas, including accounting for the  extent to which facilities were in compliance with the existing 1973 rule  and in assessing the impact of the amendments on the risk of an oil spill  and public health and the environment. Decision makers, stakeholders,  and the public may lack assurance that the agency has fully evaluated the  economic trade-offs of its regulatory actions without more thorough  economic analyses consistent with OMB guidelines.
Finally, EPA commented that it does not agree with GAO’s  characterization that the agency’s sensitivity analysis of the 2006  amendments used “arbitrarily developed scenarios” for three of the major  components affected by the rule. However, in its economic analysis of the  2006 amendments, EPA stated that it “arbitrarily developed three  scenarios” to estimate the number of facilities that might be affected by  these components. Furthermore, we did not comment on EPA’s use of  these scenarios because, according to the agency, data on the number of  facilities that might be affected by the rule were not available.
EPA also provided technical comments on the draft report, which we have  incorporated as appropriate. The full text of EPA’s comments is included  as appendix IV.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 20 days from the  report date. At that time, we will send copies to the Administrator of EPA  and other interested parties. We will also make copies available to others  upon request. In addition, the report will be available at no charge on the  GAO Web site at http://www.gao.gov.
If you or your staff has any questions about this report, please contact me  at (202) 512-3841 or stephensonj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. Key contributors to this report are listed in appendix V.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: We reviewed the reasonableness of the economic analyses that the  Environmental Protection Agency (EPA) used in support of the 2002 and  2006 Spill Prevention, Control, and Countermeasure (SPCC) amendments.  To determine the reasonableness of EPA’s economic analyses, we  assessed EPA’s May 2002 Economic Analysis for the Final Revisions to  the Oil Pollution Prevention Regulation (40 CFR Part 112), November  2005 Regulatory Analysis for the Proposed Revisions to the Oil Pollution  Prevention Regulation (40 CFR Part 112), and November 2006  Regulatory Impact Analysis for the Final Revisions to the Oil Pollution  Prevention Regulations (40 CFR Part 112). As criteria for evaluating the  reasonableness of the economic analyses, we used guidelines for federal  agencies in assessing regulatory impacts that the Office of Management  and Budget (OMB) developed under Executive Order 12866, including its  Economic Analysis of Federal Regulations Under Executive Order 12966;  Guidelines to Standardize Measures of Costs and Benefits and the Format  of Accounting Statements; and Circular A-4. We also reviewed the  Unfunded Mandates Reform Act of 1995. In addition, we discussed EPA’s  analyses with senior officials in EPA’s Office of Emergency Management,  Regulation, and Policy Development Division, which was responsible for  conducting the analyses. We also spoke with officials representing major  industry associations about their views on EPA’s economic analyses and  discussed any analysis they may have prepared regarding the SPCC  amendments. Furthermore, we reviewed other documents related to the  rule changes.
We also obtained stakeholders’ views on any impacts that they believe the  SPCC amendments will have on either the regulated community or on the  risk of oil spills by administering a survey to key industry associations and  environmental groups, respectively, regarding 43 key SPCC amendments.  A summary of responses to survey questions appears in appendix II, and  our analysis of the results of the survey appears in appendix III.
subsections: section_title: Selection of Survey Respondents
paragraphs: To administer our survey, we selected a nonprobablity sample of 30 SPCC  stakeholders, including 28 industry associations and two environmental  groups. These organizations were either (1) members of EPA’s SPCC  stakeholder group, which was involved with the agency in discussions and  periodic meetings before the rule amendments were made final, or (2)  national organizations that submitted comments to EPA regarding  proposed SPCC rule changes more than once in 1991, 1993, 1997, or 2002.  The vast majority of comments were received from associations and  businesses representing the major industry sectors—such as oil and  natural gas products, petroleum refining, transportation, manufacturing,  electric utilities, and food and agriculture—most likely to be regulated  under SPCC. Only a few environmental associations submitted comments.  Results from this nonprobability sample cannot be used to make  inferences about all industry or environmental associations because not all  associations representing those affected by the SPCC rule had a chance of  being selected as part of the sample.
section_title: Questionnaire Design and Pretesting
paragraphs: Our questionnaire asked stakeholders what impact they believe will result  from each of 43 major amendments to the SPCC rule. We selected these  amendments by reviewing the major changes EPA made to the SPCC rule  in 2002 and 2006. Our questionnaire provided summaries of each of these  amendments, which, in most instances, were derived from EPA’s  descriptions in the Federal Register. In some cases, we developed our  summaries by reviewing the descriptions of the amendments in the rules,  and reviewing comments on the amendments submitted to EPA by both  industry and environmental groups. Of the 43 amendments selected, we  included 29 amendments finalized in 2002 that EPA listed as major  amendments in the Federal Register. In addition, we included six  amendments from 2006 that EPA described in the Federal Register and  several agency fact sheets as major amendments to the rule. The  remaining eight amendments we included in our survey—six from 2002  and two from 2006—were frequently mentioned in industry comments that  we reviewed. We asked respondents to assess the impact of each of these  amendments on a five-point scale which ranged from “very negative  impact” to “very positive impact.” We asked industry associations to  assess the impact on their industry and environmental groups to assess the  impact on the risk of oil spills. We also asked respondents to list the five  amendments that would have the greatest positive impact and the five  amendments that would have the greatest negative impact. However, we  did not receive a sufficient number of responses to these questions and so  did not include them in our analysis.
The practical difficulties of conducting any survey may introduce errors,  commonly referred to as nonsampling errors. For example, respondents  may have difficulty in interpreting a particular question or may lack  information necessary to provide valid and reliable responses. In order to  minimize these errors, we conducted pretests of the draft questionnaire  with two industry associations by telephone. During these pretests, we  checked whether (1) questions were clear and unambiguous, (2)  terminology was used correctly, (3) the questionnaire did not place undue  burden on respondents, (4) the information could feasibly be obtained,  and (5) the survey was comprehensive and unbiased. In addition, the  survey was peer reviewed by a GAO senior survey methodologist. We  made changes to the content and the format of the questionnaire after  each of the pretests based on the feedback we received.
section_title: Survey Administration
section_title: Content Analysis
paragraphs: In order to succinctly summarize responses to our survey, we performed a  content analysis in which we grouped each of the 43 SPCC amendments  into major categories. We first reviewed the summary of each of the  amendments that we included in our questionnaire and inductively  identified common groups. We then developed criteria to define which  amendments would be included in each group. To ensure that this process  was reliable, each amendment was independently categorized by three  GAO analysts, and categorization decisions among the three analysts were  compared. All initial disagreements regarding categorization decisions  were discussed and reconciled by refining the criteria used to categorize  the amendments. In a few cases, we were unable to determine the  category into which to place an amendment based solely on the  description of that amendment used in our survey. In these cases, we  reviewed the complete description of the amendment in the Federal  Register to determine the appropriate category. To see the exact wording  of the final rule, please refer to the Federal Register.
We categorized each of the 43 amendments along two dimensions. The  first dimension relates to the actions that regulated facilities are required  to take. The categories within this dimension that we identified during our  content analysis include the following: (1) requirements to develop an  SPCC plan or to notify officials of oil spills; (2) changes to the scope of  those facilities to which the rule applies; (3) requirements for containers  and piping used by SPCC facilities; (4) requirements to test or inspect  containers, piping, and other equipment; (5) requirements regarding  training of SPCC facility employees; and (6) amendments that fit into more  than one of the above categories or did not fit into one of the above  categories.
The second dimension relates to whether the amendment increases or  decreases requirements on facilities. We made this determination based on  whether the amendment uses terms such as “adds new requirements” and  “mandates,” which would be considered an increase in requirements, or  terms such as “allows” or “exempts,” which would be considered a  decrease in requirements. In some instances, we determined that an  amendment does not imply either an increase or a decrease in  requirements, or that an amendment included provisions that would both  increase and decrease requirements. In these instances we categorized the  amendment as having a “mixed” direction. In some instances we could not  determine if the amendments increased or decreased requirements and,  therefore, did not categorize the amendment along the second dimension.
By categorizing each amendment in terms of both of these dimensions— the facility actions to which the amendment applies and whether the  amendment increases or decreases requirements on facilities—we  identified 11 total categories of amendments. For example, we developed a  category for amendments that increased requirements on planning and  notification and another category for amendments that decreased  requirements on the scope. Some combinations of categories in these two  dimensions contained no amendments. For example, we did not identify  any amendments that decreased requirements on inspections and testing.  For a detailed description of our coding rules and specific amendments  that we placed in each of these categories, please see appendix III.
section_title: Data Analysis
paragraphs: We calculated a score to summarize the industry stakeholders’ views of  the impact they believe each type of SPCC amendment will have on their  industries. We collapsed the five-point response options in our survey into  “very positive impact” and “somewhat positive impact” categories from the  survey into one and removed the “no answer/no basis to judge” responses.  We then calculated the average of the responses from all of the industry  associations to questions regarding all of the amendments within a  particular category and developed a score, ranging from -1.0 (entirely  negative impact), to 0.0 (no impact), to 1.0 (entirely positive impact), for  each of the categories of amendments. An entirely positive impact would  indicate that every industry stakeholder reported that every amendment of  a given type would have a positive impact on their industry. Similarly, an  entirely negative impact would indicate that every industry stakeholder  reported that every amendment of a given type would have a negative  impact on their industry. No impact would indicate that either (1) every  industry stakeholder reported that every amendment of a given type would  have no impact on their industry, or (2) an equal number of responses  reported a positive impact as reported a negative impact for all  amendments of a given type. Using these three anchor points, we  considered scores between -1.0 and -0.5 to be mostly negative, scores  between -0.5 and 0.0 to be somewhat negative, scores between 0.0 and 0.5  to be somewhat positive, and scores between 0.5 and 1.0 to be mostly  positive. Computer analysis programs were independently verified by a  senior statistician. We also verified the accuracy of the underlying survey  data keypunched by comparing them with their corresponding  questionnaires and found that there were no errors. Our analysis is limited  to the perceived impact of the amendments on industry. We did not  receive sufficient responses from environmental groups to do a thorough  analysis of the perceived impact of the amendments to the SPCC rule on  protecting human health and the environment.
We performed our work from June 2006 to July 2007 in accordance with  generally accepted government auditing standards.
section_title: Appendix II: Summary of Survey Results
paragraphs: The following tables present a summary of our survey of 23 stakeholders  to obtain their views on the impacts that the amendments to the SPCC rule  have had or are likely to have on the regulated community. These  stakeholders included the major associations representing industry that  had submitted comments to EPA on the proposed rule changes and that  EPA had also identified as key stakeholders. We also followed up with  officials from several industry associations to clarify some of their survey  responses.
subsections: section_title: Survey Question 1
paragraphs: What impact does your association believe each of the following 2006  amendments to the SPCC rule will have on your industry? (We asked  survey recipients to check one box per amendment.) § 112.3 Requirement to prepare and implement a Spill Prevention, Control, and Countermeasure Plans  § 112.3(a)(2), § 112.3(b)(2):  delays the compliance  dates for farms until the  effective date of a rule  establishing SPCC  requirements specifically for  farms or dates that farms  must comply with the  provisions of this part.
7  § 112.6 Qualified Facility Plan Requirements  § 112.7 General requirements for Spill Prevention, Control, and Countermeasure Plans  § 112.8 Spill Prevention, Control, and Countermeasure Plan requirements for onshore facilities (excluding  production facilities)  § 112.12 Spill Prevention, Control, and Countermeasure Plan requirements  § 112.8 (c)(2), § 112.8  (c)(11), § 112.12 (c)(2), §  112.12 (c)(11): provides an  exception for mobile  refuelers from constructing  and meeting requirements  for secondary containment.
section_title: Survey Question 2
paragraphs: What impact does your association believe each of the following 2002  amendments to the SPCC rule will have on your industry? (We asked  survey recipients to check one box per amendment.) § 112.1(b): adds “users” of oil  as a group subject to the rule  and expands the jurisdiction of  the rule as amended in the  Clean Water Act.  § 112.1(d)(2)(i): does not  count the capacity of  completely buried tanks  (defined in parts 280 or 281)  or permanently closed tanks  towards the threshold.   § 112.1(d)(2)(ii): eliminates the  aboveground storage capacity  threshold of greater than 660  gallons for a single container  but maintains the greater than  1320 threshold and  establishes a “de minimis”  container capacity size of 55  gallons or greater to calculate  capacity.  § 112.1(d)(4): requires  completely buried storage  tanks, otherwise exempt, to be  included on the facility  diagram.   § 112.1(d)(5), (6): exempts  containers that are 55 gallons  or less; exempts facilities (or  parts thereof) used exclusively  for wastewater treatment  unless it is used to meet part  112 requirements.  § 112.1(f): gives the EPA  Regional Administrators  authority to require an SPCC  plan for any facility within the  jurisdiction in order to meet  goals of the CWA.
3  § 112.2: adds new definitions,  such as for ‘facility’, and  expands the definition of ‘oil’,  ‘discharge’, ‘navigable waters’,  ‘offshore facility’, and ‘United  States’.  § 112.3 Requirement to prepare and implement Spill Prevention, Control, and Countermeasure Plan  § 112.3(a),(b): requires  facilities in operation to  prepare or revise an SPCC  Plan within six months and  implement the plan within  another six months; new  facilities must prepare and  implement an SPCC Plan  before beginning operations.  § 112.3(d): requires the  professional engineer (PE)  attestation to include that the  PE considered applicable  industry standards and  certified that the Plan is in  accordance with SPCC  requirements; also allows an  agent to examine a facility in  place of the PE, but the PE  must review the agent’s work,  and certify the SPCC Plan.  § 112.3(e): requires a copy of  the SPCC Plan to be  maintained at a facility  attended for at least 4 hours a  day instead of the current  requirement of 8 hours.
1  § 112.4 Amendment of Spill Prevention, Control, and Countermeasure Plan by Regional Administrator  § 112.4(a): raises the  threshold for reporting two  discharges to greater than 42  U.S. gallons (1 barrel) per  discharge, but reduces the  amount of information to be  submitted to the RA.  § 112.4(b): does not require  facilities to meet any  requirements of this section (§  112.4) until the new  compliance deadlines to  prepare an SPCC Plan  (specified in section § 112.3).   § 112.4(c): changes the  requirement from notification  to the State agency in charge  of water pollution control  activities to notification to the  State agency in charge of oil  pollution control activities.   § 112.4(d): provides that the  RA may require a Plan  amendment after an on-site  review of the Plan.  § 112.5 Amendment of Spill Prevention, Control, and Countermeasure Plan by owners or operators  § 112.5(a), (b): requires any  amendment made under this  section be prepared within six  months and implemented in no  more than six months from  when the amendment was  made.  § 112.5(b): changes the period  of review for SPCC Plans from  3 to 5 years, and requires  documentation of completion  of the review and evaluation.  § 112.5(c): clarifies that a PE  must certify only technical  amendments, and not non- technical amendments (ex.  names, phone numbers).
0  § 112.7 General requirements for Spill Prevention, Control, and Countermeasure Plans  § 112.7: allows differing  formats for the Plan; other  formats must be cross- referenced to the listed SPCC  requirements and include all  applicable SPCC  requirements.  § 112.7(a)(3): requires a  description and a diagram of  the facility layout in the SPCC  Plan.  § 112.7(a)(4): requires  facilities to provide additional  information and procedures for  reporting a discharge; facility  response plan (FRP) facilities  (defined in § 112.20) are  exempt.  § 112.7(a)(5): requires  facilities to organize the Plan  in a readily usable format for  an emergency; facility  response plan (FRP) facilities  (defined in § 112.20) are  exempt.  § 112.7(c): requires a  containment system to be  capable of containing oil and  constructed to prevent any  discharge from escaping from  the facility and reaching  navigable waters and  adjoining shorelines.
0  § 112.7(d): adds new  requirements for periodic  integrity testing of containers,  and periodic integrity and leak  testing of valves and piping;  exempts FRP facilities (as  defined by section §112.20)  from having a contingency  plan.  § 112.7(e): allows use of usual  and customary business  records to serve as a record of  tests or inspections and  records to be kept separate  from the Plan; acknowledges  the certifying engineer as  having a role developing  inspection procedures.  § 112.7(f): mandates training  for oil-handling employees  only, and specifies training  topics; also requires discharge  prevention briefings at least  once a year.  § 112.7(i): specifies a brittle  fracture requirement for field- constructed containers  undergoing repairs, alteration,  reconstruction or change in  service that may affect the risk  of discharge.  § 112.8 Spill Prevention, Control, and Countermeasure Plan requirements for onshore facilities (excluding  production facilities)  § 112.8(c)(3), § 112.9(b)(1):  allows National Pollutant  Discharge Elimination  Systems (NPDES) records to  be used for SPCC purposes in  lieu of events records  specifically prepared for this  purpose.  § 112.8(c)(6): requires integrity  testing on aboveground  containers on a regular  schedule, and when material  repairs are done; testing can  be recorded using usual and  customary business records.
1  § 112.8(d)(1): requires buried  piping installed or replaced to  have protective wrapping and  coating and cathodic  protection or otherwise satisfy  the corrosion protection  provisions for underground  piping (40 CFR part 280 or  281).  § 112.9 Spill Prevention, Control, and Countermeasure Plan requirements for onshore oil production facilities  § 112.9(c)(2): clarifies that  secondary containment  include sufficient freeboard to  contain precipitation.  § 112.11 Spill Prevention, Control, and Countermeasure Plan requirements for offshore oil drilling, production, or  workover facilities  § 112.11(i): requires offshore  oil drilling, production or  workover facilities to simulate  discharges for testing and  inspecting pollution control  and countermeasure systems.
Subpart C—Requirements for Animal Fats and Oils and Greases, and Fish and Marine Mammal Oils; and for  Vegetable Oils, including Oils from Seeds, Nuts, Fruits, and Kernels  § 112.12 - § 112.15: adds  sections to apply to Animal  Fats and Vegetable Oils based  on the Edible Oil Regulatory  Reform Act (EORRA)  requirements. Requirements  are identical to Subpart B for  petroleum and non-petroleum  oils.
Our stakeholder survey also allowed respondents the opportunity to  elaborate on their opinions of the SPCC amendments. Table 3 below  presents some illustrative examples of the open-ended comments that we  received from 22 of the 23 industry survey respondents. The examples  include respondents’ opinions on the SPCC amendments that they  consider to have the most positive or negative impact on their industry  sectors. These comments provide the current opinions of the industry  associations we surveyed, but they do not necessarily represent the views  of the regulated community as a whole. In addition, these comments do  not represent the views of EPA or GAO.
section_title: Appendix III: Analysis of the Results of GAO’s Survey on the Impacts of the SPCC Amendments on Industry
subsections: section_title: Stakeholders Had Mixed Views on the Impacts of the SPCC Amendments
paragraphs: Our analysis of the results of our survey of 23 key industry stakeholders  regarding 43 major SPCC amendments indicates that they generally view  increases in SPCC requirements as having a negative impact on their  industries and decreases as having a positive impact. However, their  views on the extent of the anticipated impacts varied widely depending on  the type of requirement. Overall, industry stakeholders responded that the  2006 amendments would have a positive impact on their industries and  that the 2002 amendments would have a combination of both positive and  negative impacts. We identified five categories of amendments that  increase SPCC requirements. Of these five categories, we found that  industry stakeholders view two as having a mostly negative impact on  their industry, two as having a somewhat negative impact, and one as  having a somewhat positive impact. In addition, we identified four  categories of amendments that decrease SPCC requirements. Of these four  types, we found that industry stakeholders view three as having a mostly  positive impact on their industry and one as having a somewhat positive  impact. Finally, we identified one category of amendments that both  increase and decrease requirements and another category of amendments  for which we could not determine whether the amendments either  increase or decrease the requirements. We found that industry  stakeholders view both of these categories as having a somewhat negative  impact.
We found that industry stakeholders anticipate a mostly negative impact  from amendments that (1) increased requirements on testing, such as  integrity testing of storage tanks; and (2) increased requirements on  containment, such as secondary containment requirements.
By contrast, these stakeholders anticipate a mostly positive impact from  amendments that decrease requirements on containment, facility oil spill  prevention plans or notification procedures, and what we categorize as  multiple SPCC requirements. Finally, industry stakeholders indicated that  six amendment categories will have a somewhat negative or somewhat  positive impact on their industries compared with the other amendments.  Figure 1 summarizes these views.
We received responses to our survey from only one environmental  stakeholder and, therefore, we were unable to comprehensively analyze  the views of environmental groups.
section_title: Analysis Methodology
paragraphs: The following is a detailed description of the coding rules used and the 11  categories into which we placed the 2002 and 2006 SPCC amendments. We  summarize the major rule amendments finalized in 2002 and 2006; to see  the exact wording of the finalized rule, please refer to the regulation as  published in the Federal Register. We determined whether the amendment  increases or decreases requirements on facilities based on whether the  amendment uses terms such as “adds new requirements” and “mandates,”  which would be considered an increase in requirements, or terms such as  “allows” or “exempts,” which would be considered a decrease in  requirements. In some instances, we determined that an amendment does  not imply either an increase or a decrease in requirements, or that an  amendment included provisions that would both increase and decrease  requirements. In addition, there were several instances where we could  not determine if the amendment increased or decreased requirements. For  example, several of these types of amendments made definitional changes  to words used in the rule, but it was unclear from reviewing the text of the  amendment whether these changes were a clarification to the rule or  increased or decreased requirements.
subsections: section_title: Changes to Scope of the SPCC rule
paragraphs: In general, amendments in this category are changes to the criteria for  eligibility or changes to thresholds for oil storage. These amendments  affect either the number of facilities subject to the SPCC rule or the  number of oil tanks at a given facility subject to the SPCC rule. In  particular, the written description of the amendment in our survey should  include words such as increases, adds, eliminate, or exempts. We  identified one of the 43 amendments as expanding the scope of the SPCC  rule, and six as decreasing the scope of the SPCC rule.  2002 amendment that we categorized as expanding the scope of the rule:    112.1(f): gives the EPA Regional Administrators authority to require an  SPCC plan for any facility within the region, otherwise exempt from the  rule, in order to carry out the purposes of the Clean Water Act. 2002 amendments that we categorized as decreasing the scope of the  rule:    112.1(d)(2)(i): excludes the capacity of completely buried tanks subject to  all of the technical requirements of the underground storage tank  regulations from calculation of the threshold, and states that permanently  closed tanks also do not count in the calculation.   112.1(d)(2)(ii): eliminates the aboveground storage capacity threshold of  greater than 660 gallons for a single container, but maintains the greater  than 1,320 threshold and establishes a “de minimis” container capacity size  of 55 gallons or greater to calculate capacity.    112.1(d)(4): exempts completely buried storage tanks that are subject to  all of the technical requirements of the underground storage tank  regulations from the rule requirements, but requires those tanks to be  included on the facility diagram.   112.1(d)(5), (6): exempts containers that are less than 55 gallons; and  facilities (or parts thereof) used exclusively for wastewater treatment  unless it is used to meet part 112 requirements.  2006 amendments that we categorized as decreasing the scope of the rule:    112.1(d)(2)(ii), § 112.1(d)(7): excludes “motive power containers” (defined  in § 112.2) from the rule, but does not exclude the transfer of fuel or other  oil into a motive power container at an otherwise regulated facility.   112.3(a)(2), § 112.3(b)(2): delays the compliance dates for farms until the  effective date of a rule establishing SPCC requirements specifically for  farms or dates that farms must comply with the provisions of this part.
section_title: Planning or Notification
paragraphs: In general, this category refers to requirements to prepare, implement,  amend, or certify SPCC plans or other records or documents required of  regulated facilities. The description of the amendment includes references  to plans, records, diagrams, or any other documents that facilities are  required to have under the SPCC rule. We identified 17 amendments from  2002 and 1 amendment from 2006 that fit this category. Of the 17  amendments from 2002, we categorized 5 amendments as increasing  requirements on facility oil spill prevention plans or oil spill notification  procedures, 9 as decreasing requirements, and 3 as either both increasing  and decreasing requirements or neither increasing or decreasing  requirements. The one amendment from 2006 decreased requirements.  2002 amendments that we categorize as increasing planning or  notification requirements:    112.3(e): requires a copy of the SPCC plan to be maintained at a facility  attended for at least 4 hours a day instead of the current requirement of 8  hours.   112.4(d): provides that the EPA Regional Administrator may require an  amendment to the SPCC plan after an on-site review of the plan.    112.7(a)(3): requires a description and a diagram of the facility layout in  the SPCC plan.   112.7(a)(4): requires facilities to provide additional information and  procedures in the SPCC plan for reporting a discharge; facility response  plan (FRP) facilities (defined in § 112.20) are exempt.   112.7(a)(5): requires facilities to organize the SPCC plan in a readily usable  format for an emergency; FRP facilities (defined in § 112.20) are exempt. 2002 amendments that we categorize as decreasing planning or  notification requirements:    112.3(f): allows the EPA Regional Administrator to grant an extension of  time for amendments of the SPCC plan, as well as the entire SPCC plan.   112.4(a): raises the threshold for reporting under the program to two  discharges of greater than 42 U.S. gallons (1 barrel) per discharge in any  12-month period, and reduces the amount of information to be submitted  to the EPA Regional Administrator.   112.4(b): does not require new facilities to meet any requirements of this  section (§ 112.4) until the compliance dates for the initial preparation and  implementation of an SPCC plan.   112.5(a): requires any amendment made under this section be prepared  within six months and implemented in no more than six months from  when the amendment was prepared.   112.5(b): changes the period of review for SPCC plans from 3 to 5 years,  and requires documentation of completion of the review and evaluation.   112.5(c): states that a professional engineer (PE) must certify only  technical amendments, and not non-technical amendments (e.g. names,  phone numbers).   112.7: allows differing formats for the SPCC plan; other formats must be  cross-referenced to the listed SPCC requirements and include all  applicable SPCC requirements.   112.7(e): allows use of usual and customary business records to serve as a  record of tests or inspections and records to be kept separate from the  SPCC plan; acknowledges the certifying engineer as having a role  developing inspection procedures.   112.8(c)(3), § 112.9(b)(1): allows National Pollutant Discharge Elimination  Systems (NPDES) records to be used for SPCC purposes in lieu of events  records specifically prepared for this purpose. 2006 amendments that we categorize as decreasing planning or  notification requirements:    112.6: allows “qualified facilities” (defined in § 112.3(g) to self-certify SPCC  plans and provides applicable requirements for self- certification.  2002 amendments that we categorize as both increasing and decreasing  the planning or notification requirements, or that neither increasing  nor decreasing the requirements:    112.3(a),(b): requires facilities in operation to prepare or revise an SPCC  plan within 6 months and implement the plan within one year; new  facilities must prepare and implement an SPCC plan before beginning  operations.   112.3(d): requires the PEs to attest that they considered applicable  industry standards and that the SPCC plan is in accordance with SPCC  requirements; also allows an agent to examine a facility in place of the PE,  but the PE must review the agent’s work, and certify the SPCC plan.   112.4(c): changes the requirement from notification to the state agency in  charge of water pollution control activities to notification to the state  agency in charge of oil pollution control activities.
section_title: Containment
paragraphs: In general, this category refers to requirements for containers or piping  used by SPCC facilities. In particular, the amendment in our survey should  use one or more of the following terms: container, containment, secondary  containment, piping, or tanks to be included in this category. We identified  one amendment from 2002 that increased requirements for containers or  piping used by SPCC facilities and two amendments from 2006 that  decreased the requirements.  2002 amendment that we categorized as increasing containment  requirements:    112.8(d)(1): requires all buried piping installed or replaced on or after  August 16, 2002, to have protective wrapping and coating and cathodic  protection or otherwise satisfy the corrosion protection provisions for  underground piping (40 C.F.R. pts. 280 or 281).  2006 amendments that we categorized as decreasing containment  requirements:    112.7(k): allows owners/operators of qualified oil-filled operational  equipment (defined in 112.7 (k)(1)) to meet alternate requirements  (defined in 112.7(k)(2)) in lieu of the general secondary containment  requirements.   112.8 (c)(2), § 112.8 (c)(11), § 112.12 (c)(2), § 112.12 (c)(11): provides an  exception for mobile refuelers from constructing and meeting certain  secondary containment requirements.
section_title: Testing
paragraphs: In general, this category refers to requirements to evaluate, inspect, and  test containers, piping, or equipment to prevent oil spills. In particular, the  written description of the amendment in our survey should include one or  more of the following terms: test, integrity test, or inspect. We identified  five amendments from 2002 that fit this category. All five of these  amendments were categorized as increasing SPCC requirements.  2002 amendments that we categorized as increasing testing  requirements:    112.7(d): adds new requirements for periodic integrity testing of  containers, and periodic integrity and leak testing of valves and piping  when secondary containment is impracticable; exempts FRP facilities (as  defined by section §112.20) from having a contingency plan when  secondary containment is impracticable.   112.7(i): specifies a brittle fracture evaluation requirement for field- constructed containers undergoing repairs, alteration, reconstruction, or  change in service that may affect the risk of discharge.   112.8(c)(6): requires integrity testing on aboveground containers on a  regular schedule (as opposed to periodically), and when material repairs  are done; testing can be recorded using usual and customary business  records.    112.8(d)(4): requires integrity and leak testing of buried piping at the time  of installation, construction, relocation, or replacement.    112.11(i): requires offshore oil drilling, production, or workover facilities  to simulate discharges for testing and inspecting pollution control and  countermeasure systems.
section_title: Training
paragraphs: This category refers to training of employees that facilities are required to  undertake. Amendments placed into this category must include the key  word “training.” We identified one amendment—from 2002—that fits this  category. We categorized it as increasing requirements.  2002 amendment that we categorized as increasing requirements:    112.7(f): mandates training for oil-handling employees only, and specifies  additional training topics; also requires discharge prevention briefings at  least once a year.
section_title: Multiple Aspects
paragraphs: Amendments in this category either (1) do not fit into one of the above  categories or (2) fit into more than one of the above categories. Two  amendments—one each from 2002 and one from 2006—were categorized  as decreasing requirements. In addition, seven amendments in this  category did not fit into the above categories because we could not  determine if the amendments increased or decreased requirements.  2002 amendment that we categorized as decreasing requirements:    112.7(a)(2): allows deviations from most of the rule’s substantive  requirements (except secondary containment), provided that the reasons  for nonconformance are explained, and equivalent environmental  protection is provided. 2006 amendment that we categorized as decreasing requirements:    112.3(g): defines a qualified facility eligible to self-certify under the  provisions set forth in § 112.6.  2002 amendments that we could not determine if they should be  categorized as increasing or decreasing or neither increased or  decreased requirements:    112.1(b): adds “using” to the lists of activities at facilities subject to the  rule and expands the scope of the rule to conform to the expanded  jurisdiction in the Clean Water Act.   112.2: adds new definitions, such as for “facility,” and discharge; revises  the text of the definitions of “oil” and “navigable waters”; and includes  statutory definitions for “offshore facility,” and “United States” in the rule.   112.7(c): states that a containment system must be capable of containing  oil and constructed to prevent any discharge from escaping from the  facility before cleanup occurs.   112.9(c)(2): states that secondary containment must include sufficient  freeboard to contain precipitation.    112.12 - § 112.15: adds sections to differentiate requirements for Animal  Fats and Vegetables Oils based on the Edible Oil Regulatory Reform Act  (EORRA) requirements. Requirements are identical to Subpart B for  petroleum and non-petroleum oils. 2006 amendments that we could not determine if they should be  categorized as increasing or decreasing or neither increased or  decreased requirements:    112.2: adds several definitions, including airport mobile refueler, farm,  motive power container, and oil-filled operational equipment.   112.13 - § 112.15: removal of these sections because they are not  appropriate for facilities that process, store, use, or transport animal fats  and/or vegetable oils.
section_title: Appendix IV: Comments from the Environmental Protection Agency
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Vincent P. Price, Assistant  Director; Kevin Bray; Mark Braza; Greg Carroll; Jennifer DuBord; Timothy  J. Guinane; Jennifer Huynh; Lisa Mirel; and Carol Herrnstadt Shulman  made key contributions to this report.