One of the five experts did not provide input consistent with EPA's analytical methods, and as a result his quantitative estimates were not usable. Specifically, his baseline estimate of releases was not consistent with EPA's, and he was not able to provide information on how to extrapolate to EPA's universe.  In addition, his responses included apparent internal inconsistencies that could not be reconciled without collecting more information about baseline releases.  We therefore believe the opinions of the remaining four experts provide the best available data on the expected impact of the proposed rule.
      Avoided Costs as a Measure of Beneficial Impacts
      Avoided remediation costs provide the basis for a substantial portion of the beneficial impacts associated with the proposed rule.  Avoided remediation costs represent cost savings that accrue to owners, operators and public entities charged with remediating releases at regulated facilities.  While avoided remediation costs are not a direct measure of total willingness to pay for environmental improvements, and are therefore not equivalent to social benefits, they represent real economic cost savings due to reduced demand for baseline remediation.
Calculation of Annual Positive Impacts
The analysis presents the positive effects of the proposed rule as a constant, recurring, annual value for analytical convenience. The timing of the positive impacts of the rule is uncertain for several reasons:
   *       As shown in Exhibit 1-2 in Chapter 1, the proposed changes do not take effect simultaneously.
   *       Irrespective of when they take effect, the changes may require varying lengths of time to achieve full effect.
   *       EPA relies on its reported confirmed releases to calculate the reductions due to the proposed rule. Confirmed releases recorded in a particular evaluation year vary significantly in severity and length of time undetected, which introduces variability in the extent to which costs are avoided each year.
   *       The proposed rule includes activities such as: frequent inspections and equipment testing to prevent, identify and address releases; near-term shifts in technology; and long-term changes in technology. Each class of changes necessarily focuses on release avoidance and mitigation over different time horizons.

In the absence of detailed data characterizing releases by age and type, EPA assumes that implementation of the proposed regulations will have a uniform annual impact, with beneficial impacts realized on the last day of the year in which costs are incurred (i.e., a one-year delay). For equipment that is phased in over a period of time, we assume that positive impacts accrue at the same rate as installation and adjust those impacts so that they are constant over time.
4.3.1	Avoided Remediation Costs
      This section explains how EPA arrives at its estimates of avoided remediation costs. EPA first explains how it calculates avoided remediation costs based on the source of a release. This is followed by a discussion of the methods used to calculate the number of releases avoided and the number of releases for which severity is mitigated. Finally, the two elements are combined to estimate the total avoided remediation cost due to the proposed rule.
4.3.2	Calculating Avoided Remediation Costs
      This analysis values avoided releases according to their cost of remediation. EPA developed average remediation costs for the four general release size categories reported in the draft 23-state Autopsy Report.  The four categories generally conform with classification conventions used by state LUST offices, and the autopsy reports presented leak frequency data for different UST system components for each of the categories. The four categories include:
*       Local site extent with soil contamination;
*       Local site extent with water contamination;
*       Large site extent with soil contamination; and
*       Large site extent with water contamination.
       EPA obtained remediation costs aligned with each of these size categories from a survey of state LUST offices and calculated average expected remediation costs for each of the release categories outlined in the draft 23-state Autopsy Report (Exhibit 4-1). Remediation costs associated with groundwater remediation are generally higher than costs for soil remediation. Administrative, response, and oversight costs were provided by New Hampshire, and remediation costs reflect an average of the costs provided by New Hampshire and Utah.,

                                 Exhibit 4-1 a
                      REMEDIATION COSTS By Release Extent
                           Remediation Cost Category
                       Site Size And Contamination Type

                            Small extent, soil only
                            Large extent, soil only
                                    Small
                                   extent,
                           Groundwater Contamination
                                    Large
                       extent, Groundwater Contamination
Typical administrative cost (public notification, fines, fees, etc)[b]
                                                                            $0
                                                                            $0
                                                                          $500
                                                                        $3,700
Typical response cost (e.g., alerting and sending personnel, assessments and planning, immediate actions to stop the release)[b]
                                                                       $10,000
                                                                       $10,000
                                                                       $10,000
                                                                       $10,000
Typical remediation cost[c]
                                                                       $14,800
                                                                      $103,000
                                                                       $98,500
                                                                      $409,500
Typical oversight cost (e.g., monitoring)[b]
                                                                          $500
                                                                        $1,000
                                                                        $1,500
                                                                        $5,000
Total typical cost per LUST category
                                                                       $25,300
                                                                      $114,000
                                                                      $110,500
                                                                      $428,200
Notes:
[a]	Costs shown are one-time costs associated with a site remediation and have been rounded to the nearest hundred dollars.
[b] The costs presented for administrative, response, and oversight costs are based on New Hampshire data only.
[c]	The remediation costs shown represent the average costs from data provided by New Hampshire and Utah. Although New Mexico also reported costs, we excluded it for two reasons. First, groundwater cleanup cost estimates from New Mexico are much higher than those for other states ($2.5 million compared with $0.6 million or less for other states) but the state did not provide data on the number or type of sites that resulted in this high estimate of costs.  Second, New Mexico has a relatively small number of UST systems (3,958 UST systems as of September 30, 2009).  As a result, New Mexico's costs may be atypical and could skew results to overstate avoided costs.
Sources:
1.	New Hampshire Department of Environmental Services, Underground Storage Tank Program, November 18, 2008.
2.	Utah Department of Environmental Quality, Underground Storage Tank Program, November 18, 2008.

      EPA then used the average cost data from states to develop weighted average costs associated with remediation of releases from different portions of the UST system, based on release frequency data for each source.  Exhibit 4-2 presents, for each of the release sources identified in the draft 23-state Autopsy Report, the probability of a release by LUST category.  Using the cost data from Exhibit 4-1, EPA estimates a weighted average avoided cost per release size by multiplying the cost per site by the probability of each release type.  These are summed across the categories to obtain the weighted average cost by release source.[,]

                                  Exhibit 4-2

Probability And Weighted Average Of Avoided Costs Per Release Source And Extent
           Release Source (as identified in 23-state Autopsy Report)
                            Small extent, soil only
                            Large extent, soil only
                    Small extent, groundwater contamination
                    Large extent, groundwater contamination
                            Total/ Weighted Average
Piping
                                                                    Probability
                                                                         40.50%
                                                                         22.00%
                                                                          4.50%
                                                                         33.00%
                                                                        100.00%

                                                                          Cost
                                                                       $10,200
                                                                       $24,300
                                                                        $5,100
                                                                      $141,300
                                                                      $181,000
Dispenser
                                                                    Probability
                                                                         71.60%
                                                                          9.70%
                                                                          5.40%
                                                                         13.30%
                                                                        100.00%

                                                                           Cost
                                                                       $18,100
                                                                       $10,700
                                                                        $6,100
                                                                       $57,100
                                                                       $92,000
Tank
                                                                    Probability
                                                                         30.70%
                                                                         17.70%
                                                                         17.30%
                                                                         34.30%
                                                                        100.00%

                                                                          Cost
                                                                        $7,800
                                                                       $19,500
                                                                       $19,700
                                                                      $147,000
                                                                      $194,000
STP Area
                                                                    Probability
                                                                         50.00%
                                                                         31.00%
                                                                          0.00%
                                                                         19.00%
                                                                        100.00%

                                                                          Cost
                                                                       $12,600
                                                                       $34,300
                                                                            $0
                                                                       $81,400
                                                                      $128,200
Delivery Problems
                                                                    Probability
                                                                         59.20%
                                                                         16.80%
                                                                          1.80%
                                                                         22.20%
                                                                        100.00%

                                                                          Cost
                                                                       $14,900
                                                                       $18,500
                                                                        $2,100
                                                                       $95,200
                                                                      $130,700
Note: Costs shown have been rounded to the nearest hundredth dollar.
Sources:
1.	U.S. EPA, Evaluation of Releases from New and Upgraded Underground Storage Tanks (Draft). 2004. ("23-state Autopsy Report")
2.	New Hampshire Department of Environmental Services, Underground Storage Tank Program, November 18, 2008.
3.	Utah Department of Environmental Quality, Underground Storage Tank Program, November 18, 2008.

4.4	Establishing Avoided Releases
      To estimate the number of baseline releases that would be either avoided completely or reduced in severity as a result of the proposed rule, experts responded to a common set of questions about potential impacts of the regulatory changes under consideration and participated in follow-on discussions on specific areas of uncertainty.
      Each expert reviewed the proposed requirements and estimated how they would affect the following dimensions of releases:
   1.       Changes in total frequency (number) of annual confirmed releases;
   2.       Changes in the number of remaining releases that reach groundwater;
   3.       Changes in the average quantity released among remaining releases; and,
   4.       Changes in the average duration of release among remaining releases.
      Experts had the option of expressing reductions in release size in terms of duration or volume (quantity) of product, depending on how they typically collected and reviewed release data.  In addition, experts were given the option of expressing these changes either: 1) as a total national estimate that accounted for variation in existing regulation and technology among states and facilities, or 2) as a change applied to a specific subset of the tank universe (e.g., 10 percent change among tanks with a certain technology that are not currently regulated).
      Experts also estimated the sensitivity of results to changes in the frequency of regulatory requirements (e.g., the impact of inspections occurring at different intervals, consistent with different regulatory options) and noted synergies or dependencies between requirements, such as:
         * Dependency between equipment upgrades and walkthrough inspections: Experts consistently noted that simply replacing equipment with newer technologies (e.g., requiring that new systems have secondary containment) is insufficient for preventing all releases. Regular visual inspections are necessary to identify potential problems and ensure timely maintenance when a release has not yet occurred.
         * Synergy between equipment maintenance and walkthrough inspections:  Experts noted that the combination of operability testing and visual (walkthrough) inspections would result in more avoided releases by identifying equipment problems quickly and ensuring effective maintenance.
         * Dependency between operator training and walkthrough inspections:  Experts noted that training alone is not adequate to ensure effective site maintenance, and walkthrough inspection requirements are not effective without trained staff.  As a result, all experts assumed that impacts related to walkthrough inspections reflected trained staff and did not separately identify release reductions associated with training.
	Experts provided separate estimates of impacts for each regulatory requirement.  EPA then used these requirement-specific estimates to calculate total avoided costs for the proposed rule.  It is important to note, however, that when considering inter-relationships among regulatory requirements, experts differed in how they isolated and/or "allocated" impacts across specific requirements because the allocation of impacts across different regulatory requirements could potentially be interpreted in several ways (e.g., one expert might decide that inspections drove all impacts, while another might decide that testing was the primary factor).  EPA therefore avoids emphasis on the requirement-specific estimates provided by each expert, and considers their results in total.[,]
      In general, EPA applies the most conservative estimates presented by the experts and adjusts for the number of affected units where appropriate. In cases where reductions involved a range of values, EPA typically selected the low end of the range. Where experts' comments reflect qualitative assumptions that substantially affect their quantitative estimates, the analysis acknowledges those factors as caveats to estimated rates of release avoidance.
      To calculate the number of releases completely avoided as a result of potential regulatory changes, EPA combines the estimated reductions as identified by experts with a release distribution based on data from the draft 23-state Autopsy Report (see Appendix I for more detail).  To estimate changes in release severity, the analysis uses the distribution of releases from the same report to quantify the number of groundwater releases avoided due to reduced release volume. Exhibit 4-3 provides a summary of our findings with respect to avoided releases.  Experts' responses suggest that the Preferred Option of the proposed rule will avoid approximately 20 percent to 60 percent of 7,168 annual releases, or roughly 1,400 to 4,300 releases in evaluation year 2009. In addition,as summarized in Exhibit 4-4, of the remaining releases, approximately 330 to 1,100 releases would be reduced in severity (i.e., these releases would remain soil contamination only).  ).

                                  Exhibit 4-3
                               Avoided Releases
                                    Expert
                               Preferred Option
                                 Alternative 1
                                 Alternative 2
Expert 1
                                                                          1,400
                                                                          2,100
                                                                            610
Expert 2
                                                                          1,400
                                                                          1,500
                                                                            420
Expert 3
                                                                          1,800
                                                                          2,000
                                                                          1,400
Expert 4
                                                                          4,300
                                                                          4,600
                                                                          3,300
Range
                                                                1,400  -  4,300
                                                                1,500  -  4,600
                                                                  420  -  3,300
Note: See Appendices H and I for inputs and methods for calculating these values. Estimates were validated with experts to ensure they accurately capture their opinions.  Specifically, Expert 4 verified that he believed the rule would result in avoidance of over half of confirmed releases.

                                  Exhibit 4-4
                  Avoided Groundwater Contamination Incidents
                                    Expert
                               Preferred Option
                                 Alternative 1
                                 Alternative 2
Expert 1
                                                                          1,100
                                                                          1,200
                                                                            380
Expert 2
                                                                            470
                                                                            470
                                                                            210
Expert 3
                                                                            330
                                                                            320
                                                                            260
Expert 4
                                                                            560
                                                                            510
                                                                            530
Range
                                                                  330  -  1,100
                                                                  320  -  1,200
                                                                      210 - 530
Note: See Appendices H and I for inputs and methods for calculating these values. Estimates were validated with experts to ensure they accurately capture their opinions. Specifically, Expert 1 verified that he believed the rule would result in a significant number of avoided groundwater releases.

4.	4.1	Avoided Releases Using an Alternative Baseline
      EPA's primary analysis assumes that the universe of confirmed releases from UST systems remains constant over the time frame of the analysis. However, both the universe of UST systems and the release rate (defined as the number of confirmed releases divided by the number of UST systems in a given year) have declined over the last two decades. This is consistent with the regulatory context of the past 20 years, in which two key factors have been driving the number of releases.  First, the universe of UST systems has been declining as older, smaller tanks have been replaced by newer, larger systems.  Second, many of the confirmed releases reported in the 1990s and early 2000s were "legacy" releases associated with older systems that did not meet the technical standards under 40 CFR Part 280 (e.g., tanks that were installed prior to the promulgation of the UST regulation at 40 CFR Part 280).  Many of these legacy releases are discovered when tanks are removed during property transactions and other development projects.
As the number of legacy releases has declined, the declining trend in total releases has "flattened"  -  trend data suggest that release rates have been approximately one confirmed release per hundred tanks in recent years.  In addition, it is possible that confirmed releases may increase in future years, as UST systems continue to age, and as new fuel blends with potentially higher corrosivity are introduced into the industry.  Given this uncertainty, EPA assumes in the  primary analysis that release rates remain constant.
However, to address the uncertainty associated with the number of confirmed releases, EPA also assesses avoided costs under the proposed rule using an alternative baseline that projects a continued decline in the release rate consistent with the recent historical trend, and also captures the decline in the number of UST systems as estimated in Chapter 3, Section 3.3.1.  This represents a conservative avoided cost scenario because it does not account for the possibility that aging systems or changes in fuel could result in increases in the number of confirmed releases reported, or that the number of UST systems could increase (if, for example, an expanding economy or population growth demands more service locations).
      To estimate the rate of universe decline, EPA mapped historical data on the number of UST systems from 1991 through 2010 to an exponential one-phase decay function, which appears to most accurately represent the observed behavior of the UST system universe over time. EPA also mapped historical data on the release rate to a similar decay function.  These two functions were then used to project future UST universe sizes as well as future release rates. We used the results from these two projections to estimate future number of confirmed releases.
      The cumulative universe of releases over 20 years under this alternative baseline is approximately 60 percent of the number of cumulative releases over 20 years in the primary analysis. The alternative baseline contains proportionally fewer releases than UST systems because two separate declining trends, UST systems and release rate, are used to estimate the future decline in releases. This compounds the projected decline in releases.
      Exhibits 4-5 and 4-6 provide a summary of our findings with respect to avoided releases and avoided groundwater contamination events, respectively, assuming the alternative baseline releases occur. The alternative baseline results in a reduction of roughly 40 percent of both avoided releases and avoided groundwater contamination relative to the original baseline. Correspondingly, in the alternative baseline scenario, approximately 810 to 2,600 releases are avoided under the Preferred Option, compared to 900 to 2,800 under Alternative 1 and 250 to 2,000 under Alternative 2. Under the alternative baseline, there are approximately 200 to 650 avoided groundwater contamination incidents under the Preferred Option, 190 to 700 under Alternative 1, and 130 to 320 under Alternative 2.

Exhibit 4-5
                    Avoided Releases, Alternative Baseline
                                    Expert
                               Preferred Option
                                 Alternative 1
                                 Alternative 2
Expert 1
                                                                            810
                                                                          1,200
                                                                            370
Expert 2
                                                                            860
                                                                            900
                                                                            250
Expert 3
                                                                          1,100
                                                                          1,200
                                                                            810
Expert 4
                                                                          2,600
                                                                          2,800
                                                                          2,000
Range
                                                                  810  -  2,600
                                                                  900  -  2,800
                                                                  250  -  2,000
Note: See Appendices H and I for inputs and methods for calculating these values. Estimates were validated with experts to ensure they accurately capture their opinions.  Specifically, Expert 4 verified that he believed the rule would result in avoidance of over half of confirmed releases.

Exhibit 4-6
       Avoided Groundwater Contamination Incidents, Alternative Baseline
                                    Expert
                               Preferred Option
                                 Alternative 1
                                 Alternative 2
Expert 1
                                                                            650
                                                                            700
                                                                            230
Expert 2
                                                                            280
                                                                            280
                                                                            130
Expert 3
                                                                            200
                                                                            190
                                                                            150
Expert 4
                                                                            330
                                                                            310
                                                                            320
Range
                                                                    200  -  650
                                                                    190  -  700
                                                                      130 - 320
Note: See Appendices H and I for inputs and methods for calculating these values. Estimates were validated with experts to ensure they accurately capture their opinions. Specifically, Expert 1 verified that he believed the rule would result in a significant number of avoided groundwater releases.

4.5	Benefits from Avoided Releases and Reduced Release Severity
Two sources of avoided costs constitute the majority of quantifiable positive impacts from the proposed rule. First, some costs related to release remediation costs do not occur because a number of releases are altogether avoided. Second, some remaining releases are reduced in severity because of the proposed requirements (e.g., through earlier detection through via walkthrough inspections and improved operability of release detection equipment). To capture this dimension of avoided costs, the analysis relies on incremental avoided groundwater remediation costs -- the cost to remediate a groundwater release less the cost to remediate a soil release -- as groundwater releases are generally more costly to remediate than soil releases.
In addition to avoiding remediation costs, release prevention and mitigation results in a variety of other beneficial impacts, including:
*       Avoided vapor intrusion damages;
*       Avoided product loss;
*       Human health benefits;
*       Ecological benefits; and
*       Protection of groundwater quality.
This section monetizes, quantifies, or otherwise describes these impacts.
4.5.1	Avoided Release Remediation
      To determine the benefits of avoided releases, the analysis relies on the draft 23-state Autopsy Report's distribution of releases by source (i.e., the part of the UST system that produces the release), and applies the reduction associated with each regulation to the appropriate source to reduce the number of releases avoided by source.[,]  Each avoided release is valued according to the weighted average of remediation costs shown in Exhibit 4-2.
      Exhibit 4-7 presents the total avoided remediation costs under each regulatory option. We estimate that discounted benefits from avoided remediation costs range between approximately $170 million and $570 under the Preferred Option, while avoided costs amount to between $190 million and $610 million under Alternative 1 and between $54 million and $440 million under Alternative 2.
                                  Exhibit 4-7
                 Discounted Avoided Release Remediation Costs
                                    Expert
                         Preferred Option
($ millions)
                          Alternative 1
($ millions)
                          Alternative 2
($ millions)
Expert 1
                                                                           $170
                                                                           $250
                                                                            $75
Expert 2
                                                                           $180
                                                                           $190
                                                                            $54
Expert 3
                                                                           $230
                                                                           $250
                                                                           $170
Expert 4
                                                                           $570
                                                                           $610
                                                                           $440
Range
                                                                    $170 - $570
                                                                    $190 - $610
                                                                     $54 - $440
Note: Cost estimates were derived using a seven percent discount rate.

4.5.2	Reduction in Release Severity
      To assess the impact on remediation costs associated with reduced release severity, the analysis focuses on changes in the number of releases that would have involved groundwater in the baseline, but because of the proposed rule, involve only soil. While this metric does not capture all of the release mitigation effects of the proposed requirements, groundwater avoidance is likely to be among the most significant effects of the rule. The difference in remediation costs between soil and groundwater releases is substantial: remediation cost for an average groundwater release is approximately $270,000, while an average soil release costs approximately $70,000 to remediate.  Remediation costs across release extent and medium contaminated range from $25,250 to $428,200 based on typical site remediation costs from New Hampshire and Utah.
      To estimate the number of releases that are reduced in severity, we use experts' estimates of reductions in groundwater involvement and distribute them across release source, medium contaminated, and release extent. We distribute remaining releases according to the draft 23-state Autopsy Report results and calculate additional benefits from remediation due to reductions in groundwater contamination following the regulation. We calculate avoided costs from reduced release severity by subtracting the cost to remediate all remaining releases after the proposed rule is in effect from the cost to remediate all remaining releases in the baseline. In both cases, we remove from consideration the same number of fully-avoided releases and consider only the avoided costs from shifting releases from groundwater to soil.
      A key limitation of this approach may lead to a conservative estimate of the effects of the proposed rule. The analysis assumes that the distribution of releases across size (i.e., extent) does not change as a consequence of changes in groundwater contamination. In reality, changes in the likelihood of groundwater contamination are probably (at least in part) a consequence of reductions in release volume and duration. The same reductions in release volume that lower the incidence of groundwater contamination would likely also reduce the number of large extent releases of all types and decrease the average size of smaller releases. That is, new requirements should both reduce the number of groundwater contamination events and large extent events of all types. Our model captures only changes in the rates of groundwater contamination, and does not consider cost savings associated with smaller soil-only sites. We therefore likely understate avoided remediation costs.
      Exhibit 4-8 displays EPA's findings regarding discounted avoided costs due to the mitigation of groundwater incidents. The analysis calculates avoided remediation costs by taking the difference between estimated remediation costs before and after the proposed changes are implemented. This difference accounts for both the reduction in groundwater release incidents as well as the increase in soil contamination events. EPA estimates that benefits from averted groundwater releases range from approximately $61 million to $270 million across regulatory options. Avoided costs from reduced groundwater contamination are additive to avoided costs from avoided releases.

                                  Exhibit 4-8
               Discounted Avoided Groundwater Remediation Costs
                                    Expert
                         Preferred Option
($ millions)
                          Alternative 1
($ millions)
                          Alternative 2
($ millions)
Expert 1
                                                                           $260
                                                                           $270
                                                                            $93
Expert 2
                                                                           $110
                                                                           $110
                                                                            $52
Expert 3
                                                                            $78
                                                                            $75
                                                                            $61
Expert 4
                                                                           $130
                                                                           $120
                                                                           $130
Range
                                                                     $78 - $260
                                                                     $75 - $270
                                                                     $61 - $130
Note: Cost estimates were derived using a seven percent discount rate.

4.5.3	Total Avoided Remediation Costs from Avoided Releases and Reduced Release Severity
Exhibit 4-9 displays the sum of avoided remediation costs across both avoided releases and mitigated groundwater incidents for all four experts. Because experts with relatively lower estimates in one of these categories did not necessarily have similarly low estimates in the other, the range of total avoided costs is not the sum of the low and high ranges in Exhibits 4-7 and 4-8.
Exhibit 4-9
                  Total Discounted Avoided Remediation Costs
                                    Expert
                         Preferred Option
($ millions)
                          Alternative 1
($ millions)
                          Alternative 2
($ millions)
Expert 1
                                                                           $430
                                                                           $520
                                                                           $170
Expert 2
                                                                           $300
                                                                           $300
                                                                           $110
Expert 3
                                                                           $310
                                                                           $330
                                                                           $230
Expert 4
                                                                           $700
                                                                           $740
                                                                           $570
Range
                                                                    $300 - $700
                                                                    $300 - $740
                                                                    $110 - $570
Note: Cost estimates were derived using a seven percent discount rate.

4.5.4	Benefits from Avoided Releases and Reduced Release Severity under the Alternative Baseline Scenario
	Exhibits 4-10 and 4-11 present avoided remediation costs associated with the avoided releases and avoided groundwater incidents shown in Exhibits 4-5 and 4-6. In the alternative baseline scenario, avoided release remediation costs range from $100 million to $340 million under the Preferred Option, between $110 million and $370 million under Alternative 1, and between $32 million and $260 million under Alternative 2. Averted groundwater remediation costs, meanwhile, range from $47 million to $160 million under the Preferred Option, $45 million to $160 million under Alternative 1, and $32 million to $77 million under Alternative 2.  These alternative estimates represent conservative estimates of the potential value of avoided releases, because they do not consider possible factors that may lead to increases in the number of releases reported or the number of UST systems in the future.
Exhibit 4-10
      Discounted Avoided Release Remediation Costs, Alternative Baseline
                                    Expert
                         Preferred Option
($ millions)
                          Alternative 1
($ millions)
                          Alternative 2
($ millions)
Expert 1
                                                                           $100
                                                                           $150
                                                                            $45
Expert 2
                                                                           $110
                                                                           $110
                                                                            $32
Expert 3
                                                                           $140
                                                                           $150
                                                                           $100
Expert 4
                                                                           $340
                                                                           $370
                                                                           $260
Range
                                                                    $100 - $340
                                                                    $110 - $370
                                                                     $32 - $260
Note: Cost estimates were derived using a seven percent discount rate.

Exhibit 4-11
    Discounted Avoided Groundwater Remediation Costs, Alternative Baseline
                                    Expert
                         Preferred Option
($ millions)
                          Alternative 1
($ millions)
                          Alternative 2
($ millions)
Expert 1
                                                                           $160
                                                                           $160
                                                                            $56
Expert 2
                                                                            $68
                                                                            $68
                                                                            $32
Expert 3
                                                                            $47
                                                                            $45
                                                                            $37
Expert 4
                                                                            $79
                                                                            $73
                                                                            $77
Range
                                                                     $47 - $160
                                                                     $45 - $160
                                                                      $32 - $77
Note: Cost estimates were derived using a seven percent discount rate.

Exhibit 4-12 displays the sum of avoided remediation costs across both avoided releases and mitigated groundwater incidents under the alternative baseline scenario. Because experts with relatively lower estimates in one of these categories did not necessarily have similarly low estimates in the other, the range of avoided costs presented is not the sum of lower and higher bounds in Exhibits 4-10 and 4-11.  As the cumulative release universe in the alternative baseline scenario is roughly 60 percent of cumulative releases in the original baseline, total avoided costs in the alternative baseline are approximately 40 percent lower than they are in the primary analysis.

Exhibit 4-12
       Total Discounted Avoided Remediation Costs, Alternative Baseline
                                    Expert
                         Preferred Option
($ millions)
                          Alternative 1
($ millions)
                          Alternative 2
($ millions)
Expert 1
                                                                           $260
                                                                           $310
                                                                           $100
Expert 2
                                                                           $180
                                                                           $180
                                                                            $64
Expert 3
                                                                           $190
                                                                           $200
                                                                           $140
Expert 4
                                                                           $420
                                                                           $440
                                                                           $340
Range
                                                                    $180 - $420
                                                                    $180 - $440
                                                                     $64 - $340
Note: Cost estimates were derived using a seven percent discount rate.

4.5.5	Avoided Costs by Proposed Requirement
Exhibit 4-13 presents overall avoided costs by proposed requirement and regulatory option. The exhibit shows ranges of the avoided costs for each proposed requirement based on experts' responses to the effects of the individual requirements in the proposed rule. Beneficial impacts are concentrated similarly to costs: the majority of avoided costs are captured by walkthrough inspections, overfill prevention equipment tests, spill prevention equipment tests, interstitial integrity tests, and operability tests.  Estimates in Exhibit 4-13 assume that cost savings associated with each regulatory requirement occur one year after the implementation and reflect discounting.
Under the Preferred Option, total avoided costs are approximately $300 million to $700 million per year. Avoided costs increase to $300 million to $740 million under Alternative 1, largely due to more frequent overfill prevention equipment tests and interstitial integrity tests. Avoided costs under Alternative 2 are $110 million to $570 million per year, where less frequent walkthrough inspections and no requirement for interstitial integrity tests reduce beneficial impacts by approximately 19 percent to 65 percent compared to the Preferred Option.
We note that the model used by EPA to estimate avoided remediation costs is not designed to measure avoided costs from large-scale releases such as those typically associated with FCTs and AHFDSs.  We, therefore, do not offer an estimate of avoided costs for requirements that apply to these systems. However, we include a qualitative discussion of these acute events later in this chapter.

                                 Exhibit 4-13

Total Discounted Avoided Cost By Proposed Requirement[a, h]
                             Description [b], [c]
                         Preferred Option
($ millions)
                          Alternative 1
($ millions)
                          Alternative 2
($ millions)
Release Prevention

Walkthrough inspections
                                                                   $94.0 - $570
                                                                   $93.0 - $550
                                                                   $44.0 - $480
Periodic testing of:
 Overfill prevention equipment
 Spill prevention equipment
 Interstitial integrity
                                                                   $70.0 - $140
                                                                   $91.0 - $170
                                                                  $35.0 - $70.0
Testing after repairs to spill and overfill prevention equipment, and interstices
                                                                  $1.50 - $13.0
                                                                   $1.50- $12.0
                                                                  $1.50 - $13.0
Elimination of flow restrictors in vent lines for all new tanks and when overfill devices are replaced
                                                                 $0.170 - $12.0
                                                                 $0.150 - $12.0
                                                                             $0
Subtotal - Release Prevention[d]
                                                                    $260 - $660
                                                                    $270 - $670
                                                                   $92.0 - $550
Release Detection

Operability tests for release detection methods
                                                                  $25.0 - $43.0
                                                                  $25.0 - $43.0
                                                                  $8.60 - $17.0
Eliminate groundwater and vapor monitoring as release detection methods
                          Not estimated. See note e.
Add SIR/CITLD to regulations with performance criteria
                                                                 $0.140 - $1.80
                                                                 $0.140 - $1.80
                                                                 $0.140 - $1.90
Remove deferral for emergency generator tanks
                                                                 $0.530 - $6.20
                                                                 $0.530 - $6.20
                                                                 $0.530 - $6.30
Change release detection leak rate probabilities
                                                                             $0
                                                                     $0 - $21.0
                                                                             $0
Response to interstitial monitoring alarms
                                                                    $0 - $0.850
                                                                    $0 - $0.820
                                                                    $0 - $0.890
Subtotal - Release Detection[d]
                                                                  $32.0 - $49.0
                                                                  $32.0 - $70.0
                                                                  $10.0 - $24.0
Other

Remove deferral for airport hydrant fuel distribution systems
                          Not estimated. See note f.
Remove deferral for UST systems with field-constructed tanks
                          Not estimated. See note f.
Require notification of ownership change
                                                                             $0
                                                                             $0
                                                                             $0
Closure of lined tanks that cannot be repaired according to a code of practice
                                                                $0.001 - $0.240
                                                                $0.001 - $0.240
                                                                $0.001 - $0.250
Requirements for determining compatibility
                          Not estimated. See note g.
Subtotal  -  Other[d]
                                                                $0.001 - $0.240
                                                                $0.001 - $0.240
                                                                $0.001 - $0.250
EPAct-related Provisions

Operator training
                                                                 $0.015 - $1.20
                                                                 $0.015 - $1.10
                                                                 $0.018 - $1.30
Secondary containment
                                                                 $0.370 - $1.10
                                                                 $0.360 - $1.10
                                                                 $0.470 - $1.10
Subtotal - EPAct-related Provisions[d]
                                                                  $1.00 - $2.00
                                                                  $1.00 - $1.90
                                                                  $1.10 - $2.10
Total[d]
                                                                    $300 - $700
                                                                    $300 - $740
                                                                    $110 - $570
[a] For each proposed requirement, this exhibit presents a range of discounted avoided costs. This range represents the lowest avoided cost estimate for the proposed requirement among the four experts and the highest avoided cost estimate for the proposed requirement among the four experts.
[b] For some requirements, such as removing the deferral for emergency generator tanks, avoided costs under Alternative 2 are higher than under the Preferred Option or Alternative 1. This occurs because: 1) these requirements create groundwater contamination reductions; and 2) fewer releases are altogether avoided under Alternative 2. This combination of factors implies that groundwater reductions have a greater effect under Alternative 2, as they affect a larger number of releases. This effect is very small compared to the magnitude of changes in other requirements.
[c] Some proposed requirements, particularly those that target narrow subpopulations of the UST system universe, may generate higher avoided costs than this analysis suggests.  Three sources of uncertainty drive these smaller universe results:  First, EPA's model is calibrated to estimate avoided costs for broad-based national changes at average facilities; extrapolation of these results to small populations may not reflect specific subpopulations (e.g., UST systems in Indian country).  Second, several experts stated that their estimates of impacts for requirements affecting narrow subsets of UST populations are more uncertain than broader estimates.  Finally, experts emphasized that equipment replacement, inspection, training, and testing are all essential to ensure release reductions, and they used judgment to emphasize the different roles of these different activities.  Therefore, the assignment of specific impacts to each of the proposed requirements is potentially less accurate than the aggregate estimates of avoided impacts.
[d] Subtotals and totals presented in this table do not represent the sums of the ranges across the proposed requirements because experts with relatively lower estimates for one proposed requirement did not necessarily have similarly low estimates for other requirements.  Instead, the subtotals and totals shown represent the lowest and highest estimates among the four experts for each subtotal group and for the total across all proposed requirements.
[e] Experts were not asked to estimate avoided costs resulting from the elimination of groundwater and vapor monitoring. EPA decided to include this requirement after consulting with its experts.
[f] Reductions in frequency and release severity (as measured by changes in groundwater contamination) do not adequately capture the positive impacts of preventing releases from very large systems such as AHFDSs and UST systems with FCTs. Releases from these types of systems constitute a small portion of total releases, but may be large in volume and can result in significant groundwater impacts. Especially in the case of AHFDSs, even minor problems can create large releases due to the significant pressure under which contents are stored. The model used by EPA to estimate avoided remediation costs is not designed to measure avoided costs from very large releases such as those typically associated with AHFDSs and FCTs, and we therefore do not offer an estimate of avoided costs for requirements that apply to these systems.
[g] Experts were not asked to estimate avoided costs resulting from requirements for determining compatibility. EPA decided to include this requirement after consulting with its experts.

[h] Cost estimates were derived using a seven percent discount rate.

As noted in Exhibit 4-1, EPA excluded the highest state-level remediation cost values from its calculation of average cost of release remediation. While this step contributes toward a more conservative estimate of avoided costs, the possibility remains that the average remediation costs used in Exhibit 4-13 overestimate the positive impacts of the proposed rule if state data provided are not representative of national average remediation costs. In Exhibit 4-14, we therefore estimate the positive effects of the proposed rule using only the lowest remediation costs available.  As shown in Exhibit 4-14, EPA's estimate of the avoided costs of the proposed rule using the lowest state cost estimates is $190 million to $460 million per year under the Preferred Option. This estimate increases to a range of $190 million to $480 million per year under Alternative 1 and decreases to a range of $66 million to $370 million per year under Alternative 2.  While this is not a true "lower bound" estimate, these estimates reflect costs that lead to lower than average costs when compared to figures reported by ASTSWMO.

                                 Exhibit 4-14

Sensitivity Analysis: Total Discounted Avoided Cost By Proposed Requirement
                Based On New Hampshire Remediation Costs[a, h]
                             Description [b], [c]
                               Preferred Option

($ millions)
                          Alternative 1
($ millions)
                                 Alternative 2

($ millions)
Release Prevention

Walkthrough inspections
                                                                   $55.0 - $370
                                                                   $54.0 - $360
                                                                   $25.0 - $310
Periodic testing of:
 Overfill prevention equipment
 Spill prevention equipment
 Interstitial integrity
                                                                  $46.0 - $96.0
                                                                   $61.0 - $110
                                                                  $24.0 - $47.0
Testing after repairs to spill and overfill prevention equipment, and interstices
                                                                  $1.00 - $8.00
                                                                  $1.00 - $8.00
                                                                  $1.00 - $8.20
Elimination of flow restrictors in vent lines for all new tanks and when overfill devices are replaced
                                                                 $0.120 - $8.10
                                                                 $0.100 - $8.10
                                                                             $0
Subtotal - Release Prevention[d]
                                                                    $170 - $430
                                                                    $170 - $440
                                                                   $57.0 - $350
Release Detection

Operability tests for release detection methods
                                                                  $15.0 - $27.0
                                                                  $15.0 - $27.0
                                                                  $5.00 - $10.0
Eliminate groundwater and vapor monitoring as release detection methods
                          Not estimated. See note e.
Add SIR/CITLD to regulations with performance criteria
                                                                 $0.090 - $1.10
                                                                 $0.090 - $1.10
                                                                 $0.090 - $1.20
Remove deferral for emergency generator tanks
                                                                 $0.340 - $3.80
                                                                 $0.340 - $3.80
                                                                 $0.340 - $3.90
Change release detection leak rate probabilities
                                                                             $0
                                                                     $0 - $13.0
                                                                             $0
Response to interstitial monitoring alarms
                                                                    $0 - $0.520
                                                                    $0 - $0.500
                                                                    $0 - $0.540
Subtotal - Release Detection[d]
                                                                  $20.0 - $31.0
                                                                  $20.0 - $44.0
                                                                  $6.00 - $15.0
Other

Remove deferral for airport hydrant fuel distribution systems
                          Not estimated. See note f.
Remove deferral for UST systems with field-constructed tanks
                          Not estimated. See note f.
Require notification of ownership change
                                                                             $0
                                                                             $0
                                                                             $0
Closure of lined tanks that cannot be repaired according to a code of practice
                                                                $0.001 - $0.150
                                                                $0.001 - $0.150
                                                                $0.001 - $0.150
Requirements for determining compatibility
                          Not estimated. See note g.
Subtotal  -  Other[d]
                                                                $0.001 - $0.150
                                                                $0.001 - $0.150
                                                                $0.001 - $0.150
EPAct-related Provisions

Operator training
                                                                $0.009 - $0.750
                                                                $0.009 - $0.700
                                                                $0.011 - $0.810
Secondary containment
                                                                $0.240 - $0.760
                                                                $0.230 - $0.760
                                                                $0.300 - $0.770
Subtotal - EPAct-related Provisions[d]
                                                                 $0.670 - $1.30
                                                                 $0.640 - $1.20
                                                                 $0.760 - $1.40
Total[d]
                                                                    $190 - $460
                                                                    $190 - $480
                                                                   $66.0 - $370
[a] For each proposed requirement, this exhibit presents a range of discounted avoided costs. This range represents the lowest avoided cost estimate for the proposed requirement among the four experts and the highest avoided cost estimate for the proposed requirement among the four experts.
[b] For some requirements, such as removing the deferral for emergency generator tanks, avoided costs under Alternative 2 are higher than under the Preferred Option or Alternative 1. This occurs because: 1) these requirements create groundwater contamination reductions; and 2) fewer releases are altogether avoided under Alternative 2. This combination of factors implies that groundwater reductions have a greater effect under Alternative 2, as they affect a larger number of releases. This effect is very small compared to the magnitude of changes in other requirements.
[c] Some proposed requirements, particularly those that target narrow subpopulations of the UST system universe, may generate higher avoided costs than this analysis suggests.  Three sources of uncertainty drive these smaller universe results:  First, EPA's model is calibrated to estimate avoided costs for broad-based national changes at average facilities; extrapolation of these results to small populations may not reflect specific subpopulations (e.g., UST systems in Indian country).  Second, several experts stated that their estimates of impacts for requirements affecting narrow subsets of UST populations are more uncertain than broader estimates.  Finally, experts emphasized that equipment replacement, inspection, training, and testing are all essential to ensure release reductions, and they used judgment to emphasize the different roles of these different activities.  Therefore, the assignment of specific impacts to each of the proposed requirements is potentially less accurate than the aggregate estimates of avoided impacts.
[d] Subtotals and totals presented in this table do not represent the sums of the ranges across the proposed requirements because experts with relatively lower estimates for one proposed requirement did not necessarily have similarly low estimates for other requirements.  Instead, the subtotals and totals shown represent the lowest and highest estimates among the four experts for each subtotal group and for the total across all proposed requirements.
[e] Experts were not asked to estimate avoided costs resulting from the elimination of groundwater and vapor monitoring. EPA decided to include this requirement after consulting with its experts.

[f] Reductions in frequency and release severity (as measured by changes in groundwater contamination) do not adequately capture the positive impacts of preventing releases from very large systems such as AHFDSs and UST systems with FCTs. Releases from these types of systems constitute a small portion of total releases, but may be large in volume and can result in significant groundwater impacts. Especially in the case of AHFDSs, even minor problems can create large releases due to the significant pressure under which contents are stored. The model used by EPA to estimate avoided remediation costs is not designed to measure avoided costs from very large releases such as those typically associated with AHFDSs and FCTs, and we therefore do not offer an estimate of avoided costs for requirements that apply to these systems.
[g] Experts were not asked to estimate avoided costs resulting from requirements for determining compatibility. EPA decided to include this requirement after consulting with its experts.

[h] Cost estimates were derived using a seven percent discount rate.

For reference, we also estimate avoided costs using ASTSWMO's reported average cleanup cost of $127,216 for 2009. If we value the releases and groundwater incidents avoided under each option using this estimate, we obtain total avoided costs of approximately $250 million to $610 million under the Preferred Option, $250 million to $640 million under Alternative 1, and $87 million to $490 million under Alternative 2. Note that these values fall between our primary estimates and sensitivity analyses.

4.6	Avoided Vapor Intrusion Damages
      Vapor intrusion generally occurs when petroleum or highly-dissolved concentrations come into direct contact with building sumps and foundations, elevator shafts, and preferential pathways (e.g. improperly sealed utility lines). Intrusion can also occur when these substances come close to building foundations. The cost to remediate vapor intrusion is typically incremental to the cost to remediate a LUST site. Based on information provided by four states, EPA estimates that from one to 10 percent of all releases cause vapor intrusion issues. Each of these instances requires additional remedial actions valued between $27,000 and $52,000 beyond ordinary release remediation costs. As reported in Exhibit 4-15, given 1,680 to 5,370 avoided releases and mitigated groundwater incidents, we estimate between 17 and 540 avoided vapor intrusion incidents under the Preferred Option. This reduction would avoid between $0.4 million and $26 million per year in avoided remediation costs related to vapor intrusion. While the lower end of this range does not vary significantly among the options, EPA estimates savings of up to $28 million under Alternative 1 and $19 million under Alternative 2.
Exhibit 4-15
                         Avoided Vapor Intrusion Costs
                                   Scenario
                         Preferred Option
($ millions)
                          Alternative 1
($ millions)
                          Alternative 2
($ millions)
Total avoided releases and avoided groundwater incidents
                                                                  1,680 - 5,370
                                                                  1,820 - 5,780
                                                                    630 - 3,860
Low
   1% of releases involve vapor intrusion
   $27,000 per release to remediate
                                                                    $0.4 - $1.4
                                                                    $0.5 - $1.5
                                                                    $0.2 - $1.0
High
   10% of releases involve vapor intrusion
   $52,000 per release to remediate
                                                                   $8.2 - $26.0
                                                                   $8.9 - $28.0
                                                                   $3.1 - $19.0

	Under the alternative baseline, avoided vapor intrusion costs fall due to the smaller universe of releases. In the Preferred Option, avoided costs are $0.3 million to $16.0 million. Under Alternative 1, avoided costs range from $0.3 million to $17 million; under Alternative 2, they range between $0.1 million and $11.0 million. See Exhibit 4-20 for a full accounting of avoided costs in the alternative baseline.
4.7	Product Loss
      Releases into the environment cause operators to lose otherwise marketable fuel products. Exhibit 4-16 presents costs avoided due to product loss. The analysis calculates the product loss associated with avoided releases by multiplying the average volume associated with each release source by the number of releases of that type before and after the proposed rule is in effect. Based on the estimates of avoided releases presented by the experts, the draft 23-state Autopsy Report's distribution of releases, and average release volumes reported in the Florida study, EPA estimates that approximately 0.64 million gallons to 2.3 million gallons per year of diesel and gasoline releases are avoided as a consequence of the Preferred Option. At an average price of $3.27 per gallon, owners and operators avoid losing approximately $2.0 million to $7.2 million in product due to releases. These values increase to a range of 0.84 million gallons to 2.5 million gallons and $2.6 million to $7.6 million under Alternative 1 and decrease to a range of 0.13 million gallons to 1.7 million gallons and $0.4 million to $5.3 million under Alternative 2.  Limited data on release size do not support an analysis of avoided product loss associated with releases that are reduced in severity.

                                 Exhibit 4-16

Value of Avoided Product Loss
                                    Expert
                               Preferred Option
                                 Alternative 1
                                 Alternative 2

                               Thousand gallons
                                  $ millions
                               Thousand gallons
                                  $ millions
                               Thousand gallons
                                  $ millions
Expert 1
                                                                            640
                                                                           $2.0
                                                                            950
                                                                           $2.9
                                                                            200
                                                                           $0.6
Expert 2
                                                                            800
                                                                           $2.5
                                                                            840
                                                                           $2.6
                                                                            130
                                                                           $0.4
Expert 3
                                                                            810
                                                                           $2.5
                                                                            860
                                                                           $2.6
                                                                            570
                                                                           $1.7
Expert 4
                                                                          2,300
                                                                           $7.2
                                                                          2,500
                                                                           $7.6
                                                                          1,700
                                                                           $5.3
                                                                          Range
                                                                  640  -  2,300
                                                                    $2.0 - $7.2
                                                                    840 - 2,500
                                                                    $2.6 - $7.6
                                                                  130  -  1,700
                                                                    $0.4 - $5.3
Releases are valued using an average price of motor fuel for 2008. Prices per gallon for all grades of retail motor gasoline and No. 2 diesel fuel (all concentrations of sulfur) were $3.32 and $3.15, respectively, as reported by the Bureau of Transportation in Table 3-8: Sales Price of Transportation Fuel to End-Users in National Transportation Statistics 2010 (at http://www.bts.gov/publications/national_transportation_statistics/pdf/entire.pdf).  We weight these prices according to prime supplier sales volumes in 2009 published by the Energy Information Administration, which summed to 362,798.5 thousands of gallons per day for gasoline and 132,489.3 thousands of gallons per day for all grades of diesel fuel (at http://www.eia.gov/dnav/pet/pet_cons_prim_dcu_nus_a.htm).

Under the alternative baseline, avoided costs due to product loss are lower than in the original baseline as there are relatively fewer releases. In the Preferred Option, avoided costs due to product loss are $1.2 million to $4.3 million. Under Alternative 1, avoided costs range from $1.6 million to $4.6 million; under Alternative 2, they range between $0.2 million and $3.2 million. See Exhibit 4-20 for a full accounting of avoided costs in the alternative baseline scenario.
4.8	Human Health Benefits
      Exposure to petroleum through ingestion, dermal contact, and inhalation can cause a range of health effects, including cancer and non-cancer impacts associated with benzene, and non-cancer impacts (e.g., neurological impacts) associated with other petroleum constituents such as toluene.  Reductions in the number and severity of releases will reduce these exposures and associated morbidity and mortality impacts.  This benefits assessment examines the impacts of the regulations under consideration on population cancer risks associated with benzene exposures through groundwater.   Other health impacts, including benzene-related risks through inhalation of vapor and nonbenzene health effects, are not able to be reliably quantified with available data, but represent additional potential benefits of the rule.
4.8.1	Avoided Benzene Cancer Risk
      To address human health benefits associated with avoided exposure to benzene through groundwater, EPA performed a screening analysis using data on:
*       Expected number of cancer cases per underground storage tank release;
*       Estimated number of releases prevented through implementation of the regulatory revisions; and,
*       Estimated WTP to avoid a fatal cancer, expressed as the value of a statistical life (VSL).
      The EPA risk assessment provides population risk estimates on a per-release basis, expressed as the expected number of cancer cases per release. That analysis estimated population risk for releases of varying volumes and plume ages. To estimate the benefits of avoided cancer cases, EPA uses the estimated number of releases avoided and releases reduced in severity and applies the 2009 EPA estimated value of a statistical life (VSL) of $8.9 million as the value associated with avoiding one terminal cancer.[,]
      Exhibit 4-17 presents EPA's findings for four avoided release scenarios. The analysis shows that, even under unlikely assumptions of 100-year plumes and 5,000 gallon releases, total upper bound human health benefits due to avoided cancer cases are limited to approximately $850,000 per year under the Preferred Option. This value changes little when considering Alternatives 1 or 2.  EPA's central estimate of the benefits associated with avoided cancer incidence uses avoided costs from scenarios in which plume ages are one and five years and average release volume is 50 gallons, consistent with release data from available studies. These assumptions suggest human health benefits of approximately $1,400 to $4,500 per year associated with avoided benzene-related cancer risk.
      These modest findings reflect a number of assumptions that may provide an incomplete picture of the risks associated with leaks from underground storage tanks.  First, they reflect the frequency of confirmed releases, and (except in the 100-year spill time frame) the assumption that the existing UST cleanup program eliminates all exposure immediately upon release discovery.  In addition, the risk assessment did not consider larger-scale releases over 5,000 gallons in any scenario, though a number of these are reported annually.  Finally, exposure scenarios generally reflect behavioral assumptions that exposed individuals will limit their own exposure in certain cases (e.g., when petroleum contamination exceeds a "taste/odor threshold" and water is no longer palatable).  Any or all of these assumptions may not hold in all cases, and other risks and health benefits are not reflected at all in this screening level risk assessment (see below).  However, it is also not unreasonable to assume that health impacts under this proposed rule would be limited, given the baseline existence of technical and cleanup requirements designed to minimize human exposure.

                                 Exhibit 4-17

Discounted Benefits From Benzene Cancer Avoidance[d]
               Release time to discovery and volume [a,][b][, c]
                        Preferred Option
($ thousands)
                          Alternative 1
($ thousands)
                          Alternative 2
($ thousands)
Total releases
                                                                  1,680 - 5,370
                                                                  1,820 - 5,780
                                                                    630 - 3,860
1 year until discovery, 10 gals. release
   Prob(Cancer Case) = 0.000000012
                                                                 $0.15 - $0.49
                                                                 $0.17 - $0.53
                                                                 $0.06 - $0.35
1 year until discovery, 50 gals. released
Prob(Cancer Case) = 0.000000032
                                                                  $0.43 - $1.4
                                                                  $0.47 - $1.5
                                                                 $0.16 - $0.99
5 years until discovery, 50 gals. released
Prob(Cancer Case) = 0.00000017
                                                                   $2.4 - $7.6
                                                                   $2.6 - $8.2
                                                                  $0.89 - $5.5
100 year until discovery, 5,000 gals. release
   Prob(Cancer Case) = 0.000019
                                                                   $270 - $850
                                                                    $290 - $910
                                                                    $100 - $610
Primary estimate (average of 50 gal. release over 1 and 5 years)
                                                                   $1.4 - $4.5
                                                                   $1.5 - $4.8
                                                                  $0.53 - $3.2
[a]  The pathway assessed to evaluate avoided cancer risk is benzene exposure through contaminated groundwater.
[b] Calculations based on a value of statistical life of $8.9 million, as presented in U.S. EPA, "Summary of the updated Regulatory Impact Analysis (RIA) for the Reconsideration of the 2008 Ozone National Ambient Air Quality Standard (NAAQS)."
[c] Probability of cancer cases per release based on RTI International, "Risk Analysis to Support Potential Revisions to Underground Storage Tank (UST) Regulations," December 22, 2010.
[d] Estimates were derived using a seven percent discount rate.

Under the alternative baseline, the total upper bound human health benefits due to avoided cancer cases are limited to approximately $510,000 per year under the Preferred Option. The central estimate of the benefits associated with avoided cancer incidence suggests human health benefits of approximately $840 to $2,700 per year associated with avoided benzene-related cancer risk. See Exhibit 4-20 for a full accounting of avoided costs in the alternative baseline scenario.
4.8.2	Other Human Health Benefits
      The foregoing benefits from avoided benzene cancer avoidance represent only one portion of the health risk associated with releases from leaking UST systems.  The risk assessment examined only benzene risks through groundwater ingestion and shower inhalation and focused on average population risks. Such risks are limited in part because the analysis concluded that many sites do not have residents using groundwater near the area affected by a plume.  Nevertheless, the risk assessment concluded that some larger releases may have significant human health risks associated with them.

      Inhalation risks associated with direct exposure to vapor and other petroleum-related chemicals were not evaluated.  While EPA does not expect most instances of these risks to be large, significant risks remain for a subset of releases.  To the extent that the proposed rule would prevent or mitigate the most significant releases, this analysis may understate the avoided human health impacts associated with the rule.
      More broadly, the complex nature of petroleum mixtures and the limited toxicological data available both for petroleum mixtures and for individual component compounds of petroleum limits EPA's ability to comprehensively document the health effects associated with the most significant releases.  However, the toxicological testing that has been conducted on some common components of total petroleum hydrocarbons (TPH) suggests that exposures to TPH through inhalation or ingestion could result in the following effects:
    *       Neurological effects, such as central nervous system depression, have been associated with acute and chronic exposures to toluene and xylenes; n-hexane exposure has been associated with effects on peripheral neuropathy;
    *       Hematological effects associated with oral and inhalation exposure to benzene and with oral and inhalation exposure to naphthalene;
    *       Renal and hepatic effects associated with BTEX compounds and other aromatic hydrocarbon compounds;
    *       Developmental effects associated with intermediate exposures to ethylbenzene and xylenes; and
    *       Carcinogenic effects of oral exposures to certain polycyclic aromatic hydrocarbons (PAHs) including benzo(a)pyrene, benz(a)anthracene, and dibenz(a,h)anthracene.
Reduced exposure to TPH as a result of the proposed rule could therefore have nonquantified benefits related to reducing the risks of one or more of the above health effects.
4.9	Avoided Acute Exposure Events and Large-Scale Releases
      Most health effects associated with leaking underground storage tanks reflect long-term exposures, but some releases from UST systems relate to acute events such as fire or explosion.  These releases can involve acute exposures, large volumes of free product, extensive ecological damage, and injuries and death, depending on the circumstances of the event.  Because these events are difficult to predict and infrequent, it is not possible to quantify or monetize the impact associated with avoiding them, but the response, remediation, and medical costs associated with a single acute incident could be significant.  The proposed regulations are designed to ensure effective maintenance of UST systems, and one benefit will be to reduce the chances of an acute event that could result in a large-scale release and its associated damages (e.g., a well-maintained UST system is less likely to be in a condition where it may explode).
      Acute events are especially important in the case of UST systems such as airport hydrant fuel distribution systems and UST systems with field-constructed tanks, which can hold large volumes of fuel. Releases from these systems can be large in volume and can result in significant groundwater and other environmental and health impacts.  For instance, an estimated 300,000 to 500,000 gallons of fuel was released from a 2.1 million gallon underground field-constructed tank at a fuel depot in Portsmouth, VA that was in operation from the 1950s to mid-1980s.  Free product was found within 20 feet of a nearby creek in 1987.  To date, approximately 143,000 gallons of product have been recovered.
      Another example of the potential magnitude of the releases from these systems is Pease Air Force Base, where jet fuel was delivered to the runway apron via an underground fueling system.   Historical leakage from the system contaminated soil and groundwater, forming groundwater plumes at many sites along the system. A site release study identified 60 to 70 release points with varying degrees of severity along the refueling system line with free product found under the apron at closure.  While there are no historical records available indicating the amount of leaked fuel or leak origins, the presence of residual soil and groundwater contamination poses a significant threat to human health and the environment.
      While the analytical procedure used by EPA to estimate benefits was unable to capture the positive impacts of preventing releases from these types of systems, we note that preventing or mitigating these releases may generate substantial reductions in remediation costs.
4.10	Ecological Benefits

	A document prepared for EPA outlines the types of ecological damages that can result from land-based pollution releases:

      Measurable damage to ecological resources from land releases generally occurs when groundwater or overland flow of water carry contaminants to a nearby surface water body. Flood events and other acute incidents can cause releases of waste that have an immediate and significant effect on ecological resources (e.g., a surface impoundment dike fails and releases contaminants into a river, killing fish and other biota). More common are gradual increases in contaminant levels due to long-term releases to groundwater. These may have a broad array of impacts on both resources used by humans (such as fish populations) and on "non-use value" such as the value of preserving habitat and species diversity. In addition, biota can be affected by uptake of contaminants from soil, particularly in wetlands or areas where the water table is high.

Because of their locations, releases from underground storage tanks would likely be classified as land releases. Thus, any releases avoided due to the proposed rule may result in ecological benefits.   A complete assessment of ecological benefits, however, requires significant location-specific data, and it is often difficult to identify sufficient data to support valuation of both use and non-use values of preserving habitat and species diversity.

      The ecological benefits that accrue from the proposed rule are likely to occur as a consequence of averted groundwater contamination.  The resource economics literature contains numerous examples of studies that value these services, as demonstrated by the public's WTP for groundwater protection programs (e.g., see Poe et al. 2001).  However, these values are largely context-specific in terms of location, scale, and the specific threat to groundwater considered and do not provide broadly-applicable information on the value of groundwater.
      Some attempts have been made to develop standardized values for groundwater, often for purposes of Natural Resource Damage Assessment (NRDA).  For instance, the State of New Jersey currently employs a replacement cost approach to determine interim economic losses associated with injuries to groundwater. Even so, replacement cost methods do not constitute a proper WTP valuation.  The replacement cost of natural resources and their services capture WTP only when they meet three criteria:  1) replacement provides equivalent quality and quantity of services; 2) the public is actually willing to pay for the replacement; and 3) replacement is the most cost-effective means of restoring the lost services.  Even if these conditions are true, this approach may overestimate groundwater values in urban areas, as land is typically more expensive, and underestimate groundwater values in areas where land is less expensive.
      Because an assessment of the value of groundwater protected by the proposed rule is affected by spatial heterogeneity, it requires information about the public's WTP for protection in all states and territories.  These data are not available, and EPA is therefore unable to place a value on the groundwater protected. Instead, we provide an estimate below of the total quantity of groundwater that may be protected by the rule.  We note, though, that a portion of the value of restoring groundwater is captured as part of the cost to remediate each release discussed earlier in this chapter.  However, while the cost of restoring groundwater to a higher quality after contamination is captured as part of the cost to remediate each release, it cannot be assumed that remediation captures WTP.  In many cases, performing remediation to "safe" levels does not fully eliminate contamination, and therefore does not restore the resource to its original value.  Therefore, while a significant portion of the value of the quantity of groundwater protected may be captured by the avoided remediation costs, it may not reflect the full WTP of groundwater protection.
      Exhibit 4-18 summarizes a screening assessment of the volume of groundwater contamination potentially avoided because of reductions in releases and groundwater contamination incidents. The analysis relies on the EPA risk assessment, which describes typical volumes of groundwater affected by releases of different sizes over various discovery time frames. EPA's analysis estimates that 40 billion gallons to 130 billion gallons of groundwater per year are protected under conservative assumptions of 10 gallon release volumes that migrate for only one year before discovery. Under the upper bound conditions of 5,000 gallon release volumes and 100 year lifetimes, up to 5.7 trillion gallons of groundwater per year would be potentially protected by the regulatory changes. We also calculate the impact of 50 gallon releases over one- and five-year time frames.  These releases appear most consistent with empirical data in the draft 23-state Autopsy Report.  Assuming that 50 gallon releases and one- to five-year time frames represent the average parameters of avoided releases, we estimate that approximately 110 to 350 billion gallons of groundwater  would be protected annually from LUST-related releases due to the potential regulatory changes.

Exhibit 4-18

Volume Of Groundwater Protected
Release time to discovery and volume [*] (average groundwater volume contaminated)
Preferred Option
(billion gal. per year)
Alternative 1
(billion gal. per year)
Alternative 2
(billion gal. per year)
Total releases
                                                                  1,680 - 5,370
                                                                  1,820 - 5,780
                                                                    630 - 3,860
1 year until discovery, 10 gal. release
(24,068,183 gal. GW contaminated)
                                                                      40 - 130
                                                                      44 - 140
                                                                       15 - 93
1 year until discovery, 50 gal. release
(48,785,436 gal. GW contaminated)
                                                                     82 - 260
                                                                      89 - 280
                                                                       31 - 190
5 years until discovery, 50 gal. release
(80,192,581 gal. GW contaminated)
                                                                     130 - 430
                                                                      150 - 460
                                                                       51 - 310
100 year until discovery, 5,000 gal. release
(1,056,971,192 gal. GW contaminated)
                                                                 1,800 - 5,700
                                                                 1,900 - 6,100
                                                                 670  -  4,100
Primary estimate (average of 50 gal. release over 1 and 5 years)
                                                                     110 - 350
                                                                      120 - 370
                                                                      41 - 250
*Average groundwater volume contaminated per release based on RTI International, "Risk Analysis to Support Potential Revisions to Underground Storage Tank (UST) Regulations," December 22, 2010.

Under the alternative baseline, assuming that 50 gallon releases and one- to five-year time frames represent the average parameters of avoided releases, approximately 65 to 210 billion gallons of groundwater  would be protected annually in the Preferred Option. See Exhibit 4-20 for a full accounting of avoided costs in the alternative baseline.
4.11	Conclusion
	Exhibit 4-19 summarizes the monetized avoided costs and benefits due to the proposed rule. In total, EPA estimates approximately $300 million to $740 million in costs will be avoided as a consequence of the Preferred Option. In addition, the proposed rule will generate modest benefits due to avoided cancer risks. Although their value cannot be reliably monetized, roughly 110 billion to 350 billion gallons of groundwater per year will avoid contamination due to new requirements. Finally, the proposed rule will generate ecological benefits and reductions in nonbenzene morbidity and mortality risks that we could not quantify in our analysis.

Exhibit 4-
19

Summary Of Positive Impacts[d]
Type of Impact
                               Preferred Option
                                 Alternative 1
                                 Alternative 2

Monetized Benefits ($ millions, present value 2008$)

Avoided cancer risks[a]
                                                                $0.001 - $0.005
                                                               $0.002 - $0.005
                                                               $0.001 - $0.003

Monetized Avoided Costs ($ millions, present value 2008$)

Releases and groundwater incidents
                                                                   $300 - $700
                                                                   $300 - $740
                                                                   $110 - $570

Vapor intrusion
                                                                    $0.4 - $26
                                                                    $0.5 - $28
                                                                    $0.2 - $19

Product loss
                                                                    $2.0 - $7.2
                                                                    $2.6 - $7.6
                                                                    $0.4 - $5.3
Total[b]
                                                                    $300 - $740
                                                                    $310 - $770
                                                                    $110 - $590

Nonmonetized Impacts[c]

Groundwater protected (billion gallons)
                                                                      110 - 350
                                                                      120 - 370
                                                                       41 - 250
Acute events and large-scale releases (e.g., releases from AHFDSs and FCTs)
                                                                  Not estimated
                                                                  Not estimated
                                                                  Not estimated
Ecological benefits
                                                                  Not estimated
                                                                  Not estimated
                                                                  Not estimated
Nonbenzene human health risks
                                                                  Not estimated
                                                                  Not estimated
                                                                  Not estimated
[a]  The pathway assessed to evaluate avoided cancer risk is benzene exposure through contaminated groundwater.
[b]  Avoided cancer risks and avoided costs are separate and additive (i.e., these estimates do not overlap).  Avoided cancer risks are the benefits associated with reducing cancer cases prior to discovery of the release. Avoided remediation costs from releases and groundwater incidents are the costs related to site remediation. Avoided vapor intrusion costs include additional avoided costs associated with the remediation of vapor intrusion cases; the RIA does not address human health risk associated with vapor intrusion.  Avoided product loss costs are also separate and additive.
[c] Due to data and resource constraints, EPA was unable to monetize some of the positive impacts of the proposed rule.  Chapter 4 provides a qualitative discussion of these benefits.
[d]  Totals may not add up due to rounding. Cost estimates were derived using a seven percent discount rate.

4.11.1	Summary of Positive Impacts under the Alternative Baseline Scenario
	Exhibit 4-20 summarizes the monetized avoided costs and benefits due to the proposed rule under the alternative baseline. In total, EPA estimates approximately $180 million to $440 million in costs will be avoided as a consequence of the Preferred Option under the alternative baseline. The proposed rule will also generate modest benefits due to avoided cancer risks. Approximately 65 billion to 210 billion gallons of groundwater per year will avoid contamination due to the proposed requirements in the Preferred Option. Overall, positive impacts under the alternative baseline are roughly 60 percent of positive impacts when the original baseline is assumed.

Exhibit 4-20

Summary Of Positive Impacts Using Alternative Baseline[d]
Type of Impact
                               Preferred Option
                                 Alternative 1
                                 Alternative 2

Monetized Benefits ($ millions, present value 2008$)

Avoided cancer risks[a]
                                                               $0.001 - $0.003
                                                               $0.001 - $0.003
                                                              $0.0003 - $0.002

Monetized Avoided Costs ($ millions, present value 2008$)

Releases and groundwater incidents
                                                                   $180 - $420
                                                                   $180 - $440
                                                                    $64 - $340
Vapor intrusion, average
                                                                    $0.3 - $16
                                                                    $0.3 - $17
                                                                    $0.1 - $11
Product loss
                                                                    $1.2 - $4.3
                                                                    $1.6 - $4.6
                                                                    $0.2 - $3.2
Total[b]
                                                                    $180 - $440
                                                                    $180 - $460
                                                                     $64 - $360

Nonmonetized Impacts[c]

Groundwater protected (billion gallons)
                                                                       65 - 210
                                                                       71 - 220
                                                                       25 - 150
Acute events and large-scale releases (e.g., releases from AHFDSs and FCTs)
                                                                  Not estimated
                                                                  Not estimated
                                                                  Not estimated
Ecological benefits
                                                                  Not estimated
                                                                  Not estimated
                                                                  Not estimated
Nonbenzene human health risks
                                                                  Not estimated
                                                                  Not estimated
                                                                  Not estimated
[a]  The pathway assessed to evaluate avoided cancer risk is benzene exposure through contaminated groundwater.
[b]  Avoided cancer risks and avoided costs are separate and additive (i.e., these estimates do not overlap).  Avoided cancer risks are the benefits associated with reducing cancer cases prior to discovery of the release. Avoided remediation costs from releases and groundwater incidents are the costs related to site remediation. Avoided vapor intrusion costs include additional avoided costs associated with the remediation of vapor intrusion cases; the RIA does not address human health risk associated with vapor intrusion.  Avoided product loss costs are also separate and additive.
[c] Due to data and resource constraints, EPA was unable to monetize some of the positive impacts of the proposed rule.  Chapter 4 provides a qualitative discussion of these benefits.
[d]  Totals may not add up due to rounding. Cost estimates were derived using a seven percent discount rate.

   Chapter 5.		Distributional Impacts and Considerations

5.1		Introduction
      This chapter considers specific impacts that may be created by the distribution of the costs and benefits of the proposed rule.  EPA has undertaken several analyses to examine how the pattern of costs and benefits may affect specific populations and sectors of the economy.  Specifically, the chapter considers:

         * Economic impacts associated with the costs of the proposed rule:  These could include changes in facility operation and closure of facilities due to cost increases under the regulation.  In addition, the proposed rule may create negative and positive employment impacts, including both reductions in employment to reduce costs and increases in employment to ensure implementation of rule provisions.  Finally, the proposed rule may affect public spending related to cleanup of contaminated sites.

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

         * Impacts on small business and governments: EPA's regulatory flexibility analysis considers the potential for rule-related costs to have a significant impact on a substantial number of small entities (SISNOSE).

         * Impacts on minority and low-income populations:  EPA considers the potential for the proposed rule to have disproportionate impacts on minority or low-income populations.

         * Children's health impacts:  EPA considers the potential for the proposed rule to have a significant or disproportionate impact on the health of children.

Note that the analyses in this chapter employ data and results from EPA's primary analysis assuming a constant number of tanks and releases over 20 years.  This chapter does not consider impacts under the alternative baseline scenarios. In general, impacts under alternative baseline assumptions would be slightly smaller, reflecting the smaller universe of affected facilities over time.
5.2		Economic Impacts
In the context of regulatory analysis, an economic impact is an effect on the economic wellbeing, or welfare, of any stakeholder due to compliance with the proposed rule.  Direct economic impacts can be borne by producers (i.e., those who produce, distribute, or sell products associated with the proposed rule), by consumers (i.e., those who purchase products associated with the proposed rule), or both.
The economic impacts of the proposed rule result from increases in compliance costs due to new regulation.  In the short run, producers (i.e., owners or operators of facilities with UST systems) can respond to cost increases in one of two ways: by passing through some or all costs to customers (consumers) through increases in price, or by absorbing costs and reducing profitability.  If producers cannot pass on to consumers any of their increased compliance costs, the proposed rule will chiefly affect producers in the short run, and economic impacts may include reduced profits, changes in operation, and in extreme cases, facility closure. If producers are able to increase prices on products to recover some or all compliance costs, the proposed rule will affect consumers by raising prices.  The extent to which producers can pass through costs depends on the structure of the markets in which they operate.
As we discuss in subsequent sections, we do not believe that many firms will be able to pass increases in prices on to consumers through higher fuel prices. While local level motor fuel retail stations may face similar increases in costs of compliance, consumers' sensitivity to changes in gasoline prices provides a significant disincentive for station operators to increase fuel prices. Instead, compliance costs are likely to be passed on through cross-marketed goods whose demand is less sensitive to changes in prices, such as items for sale at gas station convenience stores.
EPA's assessment of the economic impacts associated with this rule is presented as follows:
         * Distribution of affected facilities. We first discuss the universe of affected facilities, with a focus on the retail motor fuels sector.  This section also describes supply and demand dynamics within the retail motor fuels market and the likely economic responses to increased compliance costs.
         * Screening level economic impact analysis of average costs on facilities.  EPA presents a screening assessment of the impacts of average estimated facility-level costs on the facilities affected by the rule.
         * Sensitivity analysis of economic impacts.  To address uncertainty related to the distribution of costs among UST facilities, we present a "worst case" sensitivity analysis that identifies the maximum number of facilities that could face significant economic impacts due to regulatory costs.  This section also briefly discusses implications for facility closures and changes in employment.
         * Impacts on public funding for cleanups.  The proposed rule is estimated to result in significant cost savings associated with avoided cleanup requirements as releases decline.  A significant portion of cleanup costs are currently borne by the public sector, using taxes and fees to fund state cleanup efforts.  EPA examines the potential reduction in public sector liabilities associated with the broader reduction in releases.
5.2.1	Distribution of UST Systems by Industry Sector
As shown in Exhibit 2-3 in Chapter 2, the majority of UST systems are located at motor fuel retailers (i.e., gas stations).  EPA estimates that, of the 611,449 UST systems active in 2009, 481,108 (roughly 80 percent) were located at approximately 162,000 motor fuel locations in the United States. The remaining 130,341 (roughly 20 percent) of facilities are spread across several industries, including the commercial sector (wholesale, retail, accommodation, and food services), manufacturing, transportation, communications and utilities, and hospitals.  Notably, the sectors other than retail motor fuels are difficult to characterize with regard to UST systems; depending on their uses, UST systems may occur in varying numbers at facilities of varying size and purpose across all sectors.  Only in the retail motor fuel sector do UST systems serve a similar, central function at virtually all facilities in the sector.
In addition to comprising 80 percent of all UST systems, establishments in the retail motor fuels sector also have the highest average number of UST systems per facility, with a facility average of 2.97 (roughly three systems per facility). In comparison, facilities in other sectors have, on average, between 1.47 and 2.30 systems. Because many requirements in the proposed rule occur at the UST system level, establishments in the retail motor fuels sector have the highest average compliance costs per facility. In total, this sector is likely to bear roughly 70 percent of total costs associated with the proposed rule.
Because the costs of the proposed rule will primarily affect the retail motor fuels sector, and because this sector is characterized by a large number of independently-owned facilities and companies, this economic impact analysis focuses on the retail motor fuels sector.
5.2.2	Market Dynamics in the Retail Motor Fuels Sector
This section provides an overview of the U.S. wholesale and retail motor fuels markets, including market concentration, fuel distribution practices, and the implications of market structure for pricing.
            Supply-side Characteristics: Ability of Producers to Pass Through Costs
The North American Industrial Classification System (NAICS) code for retail motor fuel sales (i.e., gasoline stations) is 447, and specifically applies to retailers of automotive fuel and automotive oils.  Establishments classified under NAICS code 447 include facilities with and without convenience stores, and all have specialized equipment for the storing and dispensing of automotive fuels.
According to the 2002 Economic Census, average revenues for establishments in NAICS sector 447 were approximately $2.1 million. On average, each establishment employed approximately eight employees.
      Market Concentration
Market concentration is an indicator of the ability of firms to raise prices in response to changes in the costs of doing business: in markets with fewer, larger companies (i.e., highly concentrated markets), large firms typically have greater ability to pass through price increases to consumers. One indicator of market concentration is the proportion of total sales made by individual firms within a particular market. In markets where concentration is high, few firms earn a relatively large proportion of the total revenues in a market and are sometimes able to pass price increases through to consumers because of limited competition from smaller firms.
The retail motor fuels sector is representative of the broader retail sector in market concentration.  Specifically, one-third of all sales made by NAICS sector 447 are made by establishments owned by the fifty largest firms in the sector, compared with 32 percent of sales to the largest 50 firms in the broader retail sector.  This level of market concentration does not suggest that retailers will easily pass through price increases.
            Geographical Concentration
Gasoline stations are generally distributed across the United States in proportion to population. The most populous states have more establishments and higher proportions of gasoline sales. While no data are available regarding the distribution of facilities by size, the retail gasoline market is relatively homogeneous nationwide, and it is likely that facilities of different sizes are distributed according to population as well.
Ownership Structure
The 2009 Gas Price Kit published by the National Association of Convenience Stores classifies motor fuel retailers into three broad categories, depending on the manner in which they obtain their wholesale product:
         * Refinery-Owned:  Fewer than two percent of facilities are retail operations directly owned by large oil producers. These stations receive wholesale product directly from the oil company's refinery, and their profit is part of the oil company's profit. At these facilities, the parent corporation manages all aspects of the customer experience and establishes a consistent brand identity.
         * Branded Independent Retailers:  Approximately 55 percent of facilities are branded independent retailers.  These facilities are owned by independent operators and contract with a refinery to sell a particular brand of gasoline. This owner leverages the supplier's marketing and ensures constant supply in exchange for a surcharge per gallon paid to the supplier. Branded retailers' contracts with refiners typically contain clauses that specify the margins retailers can charge above wholesale prices.
         * Unbranded Independent Retailers:  Approximately 45 percent of facilities are unbranded independent retailers. These retailers purchase gasoline on the open market, without committing to a particular supplier.
Wholesale gasoline is a commodity, but varies in price regionally based on a combination of refinery locations, specific fuel mixes (e.g., to meet air quality standards), and the type of distributors in a region. Types of wholesalers include:
      *       Refinery-owned wholesalers: Refiners (typically large oil companies) distribute directly to their own retail outlets in all regions, and in some areas may also distribute directly to independent branded and unbranded retailers (competing with other suppliers in the unbranded market).
      *       Area Franchisees: Otherwise known as "jobbers," these firms obtain the right from oil companies to franchise a brand of motor fuel in a particular area.  Jobbers are responsible for siting and building new facilities and marketing the brand, which further removes refiners from operating activities. The term is also used to describe wholesale distributors of motor fuels that offer multiple brands.
While some regions have significant competition among distributors, the market power of refiners and the contract structure of many retailers means that retailers in general have little control over the price of their fuel supply. As a consequence, any cost increases must be absorbed by retailers or passed through to customers.
      Demand-side Characteristics: Consumer Response to Price Increases
Consumer reactions to price changes are critical in determining whether a producer (i.e., retailer) can pass on costs. The degree to which consumers change the quantity they consume when the price of a good increases is known as the price elasticity of demand. Economists define demand as inelastic if the quantity demanded changes less than price (e.g., quantity demanded changes by one percent when prices rise (or fall) by 1.4 percent). Similarly, demand is said to be elastic if quantity demanded changes proportionally more for a relative change in price.
Motor fuel retailers rely on sales of gasoline for most revenues, though most also sell other automobile-related or convenience products. Research has documented that broad (national) market demand for gasoline is relatively price-inelastic in the short-run: consumers do not make immediate, significant changes in gasoline purchases if prices increase.    On its face, this dynamic would suggest that a retailer could pass through any cost increases to consumers. However, the structure of the market for gasoline prohibits significant price fluctuations at the facility level. While national demand is relatively consistent, consumers are highly sensitive to price differences within local markets.  Small increases in price at one location can produce relatively large changes in quantity demanded for a particular facility as consumers seek other local retailers with lower costs.
A recent National Association of Convenience Stores (NACS) survey provides insights into the price pressures faced by local retailers:
          *       73 percent of respondents stated that price was the most important factor in their gasoline-purchasing choices.
          *       32 percent stated that they would take the time to make a left turn on a busy street to save a penny per gallon of gasoline.
          *       20 percent said they would drive ten minutes out of their way (a 20-minute round trip plus cost of fuel) to save two cents per gallon. This amounts to savings of less than one dollar in terms of fuel for nearly all passenger vehicles on the road today.
Local competition for price-sensitive customers discourages retailers from increasing gasoline prices, except in cases such as wholesale price increases or tax increases where changes are uniform across facilities.  Because compliance costs may vary by facility depending on existing technology and practice, it is not likely that retailers will opt to pass through compliance costs by raising gasoline prices.  While retailers may be able to increase the prices of other products (e.g., motor oil or convenience store products), it is also likely that some retailers will be forced to absorb some or all of the costs associated with the regulation.
Retailers in relative isolation may be better positioned to pass on increases in cost to consumers. Research shows that store-level pricing is sensitive to the concentration of competition. In areas where motor fuel retailers are relatively sparse, facilities may be better able to pass cost increases on to consumers, for whom the opportunity cost of finding an alternative store is higher when they must travel farther.
However, because consumers are especially price sensitive about gasoline and it is not clear what other options owners or operators have to increase prices, we assume that owners or operators will likely bear the economic impacts of the rule.  We therefore examine producer impacts, including the possibility that some facilities may close due to cost increases.
5.2.3	Assessment of Market Exits and Employment Impacts
In a market setting where producers cannot reliably pass through costs, the most significant economic impacts are related to reduced facility profits.  In some cases, managers can cut supply or employment costs (this could result in smaller worker paychecks).  In cases where costs exceed facility profits, it is likely that in the long term a facility would exit the market.  A critical factor, therefore, is an estimate of average firm or facility profits.