Regulatory Impact Analysis
for the 2008 and 2009 Final Amendments to the Oil Pollution Prevention Regulations (40 CFR PART 112)

                                   Volume I

                                 Prepared for:
                     U. S. Environmental Protection Agency
                 Office of Solid Waste and Emergency Response
                        Office of Emergency Management

                       Prepared with the assistance of:
                              Abt Associates Inc.
                      under EPA Contract No. 68-W-03-020
                               October 22, 2009

                                     DRAFT

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                               Table of Contents

1	Executive Summary	3
1.1	Baseline for the Analysis	10
1.2	Universe of Affected Facilities	11
1.3	Baseline Compliance Cost and Cost Savings	12
1.4	Impacts on Human Health, Welfare and the Environment	19
1.5	Small Entity Impact and Executive Orders	20
1.6	Sensitivity Analyses	22
1.7	Key Assumptions and Limitations	25
2	Introduction	31
2.1	Statutory Authority	33
2.2	Regulatory Background	33
2.3	Statement of Need for Regulatory Action	34
2.4	Final Amendments to the Rule	34
2.5	Objectives of the Regulatory Impact Analysis	38
2.6	Organization of this Report	39
3	Methodology	45
3.1	Regulatory Baseline for the Analysis	45
3.2	Cost Savings from the Final Rule Amendments	47
4	Estimation of the SPCC-Regulated Universe of Facilities	53
4.1	Data Sources and Industry Sectors	53
4.2	Facility Categories	55
4.3	Comparison with EPA's 1991 Facilities Study	56
4.4	SPCC Universe Estimation Using State Databases	58
4.5	SPCC Universe Estimation Using Industry-Specific Data Sources	63
4.6	Estimates of the Total SPCC Universe	67
4.7	Advantages and Limitations of the Updated SPCC Universe Estimate	71
4.8	Projecting SPCC Universe Estimates Using Derived Industry Growth Rates	72
5	Facility Compliance Costs	77
5.1	SPCC Plan and Records	78
5.2	Capital and Operation and Maintenance (O&M) Activities Costs	93
5.3	Final Alternative Compliance Option for Tier I Qualified Facilities	106
5.4	State Overlap	107
5.5	Annualizing Estimated Changes in Compliance Costs	108
6	Compliance Costs and Savings by Rule Component	113
6.1	Hot-Mix Asphalt	113
6.2	Pesticide Application Equipment and Related Mix Containers	124
6.3	Applicability of Mobile Refueler Requirements to Farm Nurse Tanks	129
6.4	Residential Heating Oil Containers	132
6.5	Definition of "Facility"	139
6.6	Facility Diagram	139
6.7	Loading/Unloading Racks	143
6.8	General Secondary Containment	144
6.9	General Secondary Containment for Non-Transportation-Related Tank Trucks	144
6.10	Security	145
6.11	Integrity Testing	149
6.12	Integrity Testing Requirements for Animal Fats and Vegetable Oils	152
6.13	Oil Production Facilities	158
6.14	Man-Made Structures	185
6.15	Wind Turbines	185
6.16	Tier I Qualified Facilities	185
6.17	Underground Emergency Diesel Generator Tanks at Nuclear Power Stations	195
6.18	Overall Compliance Cost Savings	201
7	Impacts on Human Health, Welfare and the Environment	207
7.1	Oil Discharge Threat	207
7.2	Distributional Analysis	214
8	Small Entity Impacts, Executive Orders, and Other Required Analyses	217
8.1	Regulatory Flexibility Act and Small Business Regulatory Enforcement Fairness Act	217
8.2	Executive Order 13132 - Federalism	218
8.3	Executive Order 13175 - Consultation and Coordination with Indian Tribal Governments	219
8.4	Executive Order 13045 - Protection of Children from Environmental Health & Safety Risks	219
8.5	Executive Order 13211 - Actions that Significantly Affect Energy Supply, Distribution, or Use	219
8.6	National Technology Transfer and Advancement Act	220
8.7	Paperwork Reduction Act	220
8.8	Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations	221
8.9	Congressional Review Act	222
9	Key Limitations and Assumptions	225
9.1	General Limitations	225
9.2	Hot-Mix Asphalt	227
9.3	Pesticide Application Equipment and Related Mix Containers	227
9.4	Residential Heating Oil	228
9.5	Tier I Qualified Facilities	228
9.6	Security	228
9.7	Animal Fats and Vegetable Oils (AFVO)	229
9.8	Oil Production Facilities	229
9.9	Integrity Testing	230
9.10	Key Assumptions	230
Bibliography	235

                               List of Exhibits

Exhibit 1-1 Summary of Key SPCC Rule Final Amendments	5
Exhibit 1-2 Estimated Number of Existing SPCC-Regulated Facilities by Size Category (2010)	12
Exhibit 1-3 Total Cost Savings for Farms from the Final Rule Amendments (2007$, Millions)	16
Exhibit 1-4 Total Cost Savings for Oil Production Facilities from the Final Rule Amendments (2007$, Millions)	17
Exhibit 1-5  Total Cost Savings for the Final Amendments (2007$, Millions)	18
Exhibit 1-6  Annualized Cost Savings for the Final Rule Provisions for Partial Compliance Scenarios	24
Exhibit 2-1  Crosswalk with the Preamble	41
Exhibit 3-1  Main Steps for Estimating the Economic Effects of the Final Rule Changes	49
Exhibit 4-1  Industry Sectors and Databases Used to Estimate SPCC-Regulated Facilities	54
Exhibit 4-2  Estimated Number of SPCC-Regulated Facilities by Size Category	56
Exhibit 4-3  Comparison with EPA's 1991 Facilities Study	57
Exhibit 4-4  Summary of State Databases Used in the Analysis	59
Exhibit 4-5  Percentage of Matched Facilities after Automated and Manual Matching	62
Exhibit 4-6  SPCC Universe Estimates Using State Databases	63
Exhibit 4-7  Summary of Federal and Proprietary Data Sources and Methodologies Used in the Analysis	65
Exhibit 4-8  SPCC Universe Estimate Using Federal Databases	67
Exhibit 4-9  Estimated Universe of SPCC-Regulated Facilities	68
Exhibit 4-10  Estimated Universe of SPCC-Regulated Facilities	70
Exhibit 4-11  Estimated Growth Rates for Total and New Facilities by Industry Sector	73
Exhibit 5-1  SPCC Plan Preparation and Maintenance (In-House Labor, New Production Facility)	85
Exhibit 5-2  SPCC Plan Preparation and Maintenance (In-House Labor, New Storage Facility)	86
Exhibit 5-3  SPCC Plan Preparation and Maintenance (Professional Labor, New Production Facility)	87
Exhibit 5-4  SPCC Plan Preparation and Maintenance (Professional Labor, New Storage Facility)	88
Exhibit 5-5  SPCC Plan Preparation and Maintenance (In-House Labor, Existing Production Facility)	89
Exhibit 5-6  SPCC Plan Preparation and Maintenance (In-House Labor, Existing Storage Facility)	90
Exhibit 5-7  SPCC Plan Preparation and Maintenance (Professional Labor, Existing Production Facility)	91
Exhibit 5-8  SPCC Plan Preparation and Maintenance (Professional Labor, Existing Storage Facility)	92
Exhibit 5-9  Capital Costs of Sized Secondary Containment (New Facilities)[1]	94
Exhibit 5-10  Capital Costs for Secondary Containment for Bulk Storage Containers (New Facilities)[1]	95
Exhibit 5-11  Facility-Level Integrity Testing Costs (New & Existing Storage Facilities)[1]	97
Exhibit 5-12  Monthly Inspection and Testing Costs (New & Existing Facilities)[1]	99
Exhibit 5-13  Liquid Level Sensing Device Testing Costs (New & Existing Storage Facilities)	99
Exhibit 5-14  2002 Baseline Capital Costs of Anti-Corrosive Measures (New Storage Facilities)[1]	101
Exhibit 5-15  Capital Costs of Drainage Measures (New Facilities[1])	101
Exhibit 5-16  Security Costs (New Storage Facilities)	102
Exhibit 5-17  Annual Training Costs (New & Existing Facilities)[1]	102
Exhibit 5-18  Other Costs (New Storage Facilities)	103
Exhibit 5-19  Costs for All Compliance Measures (New Facilities)	104
Exhibit 5-20  Costs for All Measures (Existing Facilities)	105
Exhibit 5-21  Estimated Costs for Preparing a Template Plan to Tier I Qualified Facilities Introduced by the Final Amendment	107
Exhibit 5-22  Estimated Percentage Reduction in Total Burden due to State Overlap	108
Exhibit 6-1  Industry Categories with Hot-Mix Asphalt Storage	113
Exhibit 6-2  Distribution of Asphalt Facilities by Capacity Category  (10-year Average)	114
Exhibit 6-3  Projected Number of New and Existing Asphalt Facilities	115
Exhibit 6-4  Percentage of HMA Facilities Expected to Move Across Size Categories	116
Exhibit 6-5  Projected Number of New and Existing Facilities Affected by the Final Option of Exempting HMA Containers	117
Exhibit 6-6 Annual Cost Impact of Exempting Hot-Mix Asphalt (2007$)[1]	118
Exhibit 6-7 Assumptions Used for Estimating Hot-Mix Asphalt Facility Compliance Cost	119
Exhibit 6-8 Projected Baseline Annual Compliance Cost for Facilities with Hot-Mix Asphalt Containers (2007$ Millions)	120
Exhibit 6-9 Projected Annual Compliance Cost Savings from Exempting Hot-Mix Asphalt Containers (2007$ Millions)[1]	123
Exhibit 6-10  Projected Total Number of New and Existing Farms Affected by the Pesticide Application Equipment Exemption	126
Exhibit 6-11  Annual Farm-level Baseline Cost of Compliance and Cost Impact of Exempting Pesticide Application Equipment (2007$)[1]	127
Exhibit 6-12  Projected Annual Compliance Cost Savings from Exempting Pesticide Application Equipment (2007$ Millions)[1]	128
Exhibit 6-13  Estimated Aggregate Annual Cost Savings for Farms from Multiple Rule Components (2007$ Millions)	130
Exhibit 6-14  Projected Total Number of New and Existing Farms Affected by the Residential Oil Exemption	134
Exhibit 6-15  Annual Baseline Compliance Cost and Cost Savings to Farms from the Final Amendment to Exempt Residential Oil (2007$)[1]	136
Exhibit 6-16  Projected Annual Compliance Cost Savings from the Final Amendment to Exempt Residential Heating Oil (2007$ Millions)[1]	138
Exhibit 6-17  Projected Number of New Facilities Affected by the Facility Diagram Amendment	140
Exhibit 6-18  Annual Cost Savings from Final Amendments to Facility Diagram Requirements (2007$)[1]	141
Exhibit 6-19  Projected Annual Compliance Cost Savings from Final Amendments to Facility Diagram Requirements (2007$ Millions)[1]	142
Exhibit 6-20  Projected Total Number of New Affected Storage Facilities	146
Exhibit 6-21  Cost of Demonstrating Environmental Equivalence (2007$)[1]	146
Exhibit 6-22  Projected Annual Compliance Cost Savings from Final Amendments to Security Requirements (2007$ Millions)[1]	148
Exhibit 6-23  Projected Number of New Storage Facilities Affected by the Integrity Testing Amendment	149
Exhibit 6-24  Total Projected Compliance Cost Savings from Integrity Testing Amendment (2007$ Millions)[1,2]	151
Exhibit 6-25  Projected Total Number of New and Existing AFVO Facilities Affected by the Final Amendment	153
Exhibit 6-26  Estimated Baseline Facility-Level Integrity Testing by Facility Size Category (2007$)	153
Exhibit 6-27  Total Projected Baseline Compliance Cost for Integrity Testing Requirement at AFVO Facilities (2007$ Millions)	154
Exhibit 6-28  Estimated Facility-Level Integrity Testing by Facility Size Category (2007$)	156
Exhibit 6-29  Total Projected Compliance Cost Savings for AFVO Facilities from Final Amendments (2007$ Millions)[1]	157
Exhibit 6-30  Projected Total Number of New Oil Production Facilities Affected by the  Final Amendment to SPCC Plan Preparation and Implementation[1]	160
Exhibit 6-31 Annual Cost of Compliance with 2002 SPCC Rule Requirements (2007$)	160
Exhibit 6-32  Assumptions on Production Facility Characteristics	161
Exhibit 6-33 Annual Cost of Plan Amendment  for Production Facilities (2007$)	162
Exhibit 6-34 Projected Annual Baseline Compliance Costs of 2002 SPCC Requirements for Oil Production Facilities (2007$ Millions)	163
Exhibit 6-35  Annual Cost of Plan Amendment for Oil Production Facilities (2007$)	164
Exhibit 6-36 Projected Annual Compliance Cost Savings from Final Amendment to SPCC Plan Preparation and Implementation (2007$ Millions)[1]	166
Exhibit 6-37  Projected Number of New Oil Production Facilities[1]	171
Exhibit 6-38  Annual Baseline Compliance Cost of Secondary Containment at Flow-through Process Vessels Requirements  (2007$ Millions)	173
Exhibit 6-39  Projected Annual Compliance Cost Savings from Final Amendment to Flow-through Process Vessels Requirements (2007$ Millions)[1]	176
Exhibit 6-40  Projected Annual Total Compliance Cost Savings for the EPA Approach for Marginal Oil Production Facilities (2007$ Millions)	179
Exhibit 6-41 Oil Storage Containers at a Typical Oil Production Facility in Size Category II	180
Exhibit 6-42 Estimated Unit Cost/Cost Savings for New Facilities	181
Exhibit 6-43  Estimated Aggregate Annual Cost Savings for Oil Production Facilities from Multiple Rule Components (2007$ Millions)	184
Exhibit 6-44  Projected Number of New Facilities Affected by the Final Amendment for Tier I Qualified Facilities	187
Exhibit 6-45  Annual Baseline Facility-Level Compliance Costs for Tier I Qualified Facility	188
Exhibit 6-46  Total Projected Baseline Compliance Cost for New Tier I Qualified Facilities with No Containers Greater than 5,000 Gallons (2007$ Millions)	190
Exhibit 6-47  Annual Compliance Costs and Potential Compliance Cost Savings per Tier I Qualified Facility (2007$)	191
Exhibit 6-48  Estimated Additional Costs to New Tier I Qualified Facilities Introduced by the Final Amendment	192
Exhibit 6-49  Total Projected Compliance Cost Savings for New Tier I Qualified Facilities with No Individual Aboveground Oil Storage Containers Greater than 5,000 Gallons (2007$ Millions)[1]	194
Exhibit 6-50 Projected Number of New Generating Units at Nuclear Power Plants, Assuming Full Compliance in the Baseline	198
Exhibit 6-51 Projected Annual Compliance Cost Savings from the Final Amendment for Nuclear Power Plants (2007$)[1]	200
Exhibit 6-52  Summary of Estimated Cost Savings Associated with the Final Amendments (2007$ Millions)	202

                          Acronyms and Abbreviations

AFVO	Animal Fats and Vegetable Oils
API	American Petroleum Institute
AST	Aboveground storage tank
ATSDR	Agency for Toxic Substances and Disease Registry
Bbl	Barrel
BLS	Bureau of Labor Statistics
BTEX	Benzene, toluene, ethylbenzene, and xylenes
CBECS	Commercial Buildings Energy Consumption Survey
CERCLA	Comprehensive Environmental Response, Compensation, and Liability Act
CFR	Code of Federal Regulations
CWA	Clean Water Act
D&B	Dun & Bradstreet
DEC	Department of Environmental Conservation (New York State)
DEQ	Department of Environmental Quality (Virginia)
DOE	U.S. Department of Energy
DOI	U.S. Department of the Interior
DOT	U.S. Department of Transportation
EDG	Emergency diesel generator
EIA	Energy Information Administration
EO	Executive Order
ERS	Economic Research Service (USDA)
FDA	U.S. Food and Drug Administration
FDEP	Florida Department of Environmental Protection
FERC	Federal Energy Regulatory Commission
FIFRA	Federal Insecticide, Fungicide, and Rodenticide Act
FR	Federal Register
FRP	Facility Response Plan
FRS	Facility Registry System
GAO	Government Accountability Office
GIS	Geographic information system
HMA	Hot-mix asphalt
IARC	International Agency for Research on Cancer
ICIS	Integrated Compliance Information System
ICR	Information Collection Request
IDEA	Integrated Data for Enforcement Analysis
IOGCC	Interstate Oil and Gas Compact Commission
IPPA	Independent Petroleum Association of America
IRIS	Integrated Risk Information System
KDH&E	Kansas Department of Health and the Environment
LP	Liquefied petroleum
MDE	Maryland Department of the Environment
MnPCA	Minnesota Pollution Control Agency
MOU	Memorandum of Understanding
NAICS	North American Industry Classification System
NPV	Net present value
NRC	National Response Center; Nuclear Regulatory Commission
NTTAA	National Technology Transfer and Advancement Act
O&M	Operation and maintenance
OCC	Oklahoma Corporation Commission
OMB	Office of Management and Budget
OPA	Oil Pollution Act
OPEI	Office of Policy, Economics, and Innovation
OPP	Oil Pollution Prevention; Office of Pesticide Programs
OSLTF	Oil Spill Liability Trust Fund
PAH	Polycyclic aromatic hydrocarbon
PE	Professional Engineer(ing)
PHMSA	Pipelines and Hazardous Materials Safety Administration
POLREP	Pollution report
PRA	Paperwork Reduction Act
RFA	Regulatory Flexibility Act
RIA	Regulatory impact analysis
RMA	Risk Management Association
SBA	U.S. Small Business Administration
SBREFA	Small Business Regulatory Enforcement Fairness Act
SIC	Standard Industrial Classification
STI	Steel Tank Institute
SPCC	Spill Prevention, Control, and Countermeasure
USDA	U.S. Department of Agriculture
UST	Underground storage tank
USWAG	Utility Solid Waste Activities Group
Chapter 1

Executive Summary
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Executive Summary
The Oil Pollution Prevention regulation at 40 CFR part 112 requires and establishes procedures for the preparation and implementation of Spill Prevention, Control, and Countermeasure (SPCC) Plans. SPCC Plans help minimize the potential for oil discharges by non-transportation-related onshore and offshore facilities into or upon the navigable waters of the United States or adjoining shorelines or from affecting certain natural resources.
The U.S. Environmental Protection Agency (EPA or the Agency) published amendments to the SPCC rule portion of the Oil Pollution Prevention regulation on December 5, 2008, and they were to become effective on February 3, 2009. These amendments to the SPCC rule provide increased clarity, tailor requirements to particular industry sectors, and streamline certain requirements for facility owners and operators subject to the rule. While EPA is ensuring environmental protection, the final rule is expected to significantly reduce the burden imposed on the regulated community by the SPCC requirements.
However, the effective date of the December 2008 rulemaking was delayed for 60 days from February 3, 2009 to April 4, 2009, in accordance with the January 20, 2009, White House memorandum entitled, "Regulatory Review," and the memorandum from the Office of Management and Budget entitled "Implementation of Memorandum Concerning Regulatory Review" (M-09-08, January 21, 2009 OMB memorandum). The Agency took this action to ensure that the rule properly reflects consideration of all relevant facts. EPA requested public comment on the delay of the effective date and its duration, and on the regulatory amendments contained in the final rule (74 FR 5900, February 3, 2009). On April 1, 2009, the Agency further delayed the effective date of the December 2008 rulemaking until January 14, 2010 (74 FR 14736). The Agency took this action to allow sufficient time to address the comments received on the February 3, 2009 notice.
In this 2009 action, EPA is finalizing certain provisions with no revisions, making technical corrections to several provisions, and removing three provisions from the December 5, 2008 rule. This RIA provides estimates of the combined impact of the 2008 and 2009 final amendments (hereafter referred to as the "final amendments"). For provisions finalized with no revisions, the economic impacts remain the same as reported in the RIA that supported the 2008 rule amendments. Technical corrections provide additional clarity and are intended to help facility owners and operators understand and comply with the rule requirements. Therefore, for provisions with technical corrections, the economic impacts are reported as "No monetized cost impact." For provisions that are being removed, the associated costs or savings are also removed.
After consideration of all relevant facts and public comments on the regulatory amendments published in the December 2008 final rule, EPA is removing three provisions published in December 2008: (1) the exclusion of farms and production facilities from loading and unloading rack requirements, (2) alternative criteria for marginal wells, and (3) exemption of certain produced water containers. This action will result in reduced risk of oil spills and elimination of the cost savings that would have been achieved with those provisions.
EPA is also making a correction to the cost savings estimate that appears in the RIA for the 2008 final rule. The total cost savings estimated for the 2008 rule was $176 million annualized.  Of the total, $51 million of the annualized cost savings were estimated to result from excluding oil production facilities and farms from the loading/unloading rack requirements. Although it is possible that some farms or oil production facilities may have loading/unloading equipment, further assessment indicates that the majority, if not all, of these facilities are unlikely to have equipment that meets the final, more specific, definition of a loading/unloading rack as specified in the 2008 rule (see Chapter 6, Section 6.7). Because these facilities are not expected to have loading/unloading racks according to the 2008 rule's definition, these facilities would not be eligible for the cost savings from the exclusion outlined in the 2008 rule. Therefore, for the 2008 rule the $51 million annualized cost savings for loading/unloading racks is eliminated and the 2008 rule cost savings are corrected from $176 million annualized down to $125 million annualized.
Compared to the compliance cost of the 2002 SPCC rule amendments, the cost savings from the final amendments are estimated at about $95 million annualized. Given that the corrected cost savings from the 2008 amendments are estimated at about $125 million annualized, the final amendments represent a reduction of cost savings of about $30 million annualized.
Exhibit 1-1 presents the key final amendments, by the type of amendment and impact on cost savings. This table sets the framework for the regulatory impact analysis by identifying specific final amendments that result in cost savings as opposed to those that are not expected to affect facilities' compliance costs.

Exhibit 1-1
Summary of Key SPCC Rule Final Amendments
Action
Clarifications or Streamlining Requirements
No Monetized Cost Savings
Exemptions from the Rule
Cost Savings
Streamlining Requirements
Cost Savings
 Final Amendments-No Regulatory Modifications
Clarified the applicability of mobile refueler requirements to farm nurse tanks
Amended the definition of "facility" to clarify that contiguous or non-contiguous parcels can be considered separate facilities
Reaffirmed that the "facility" definition governs applicability of the SPCC rule
Amended the definition of "production facility"
Defined the term "loading/unloading racks" and clarified the applicability of the requirements
Amended the general secondary containment requirements to clarify the scope of secondary containment
Exempted non-transportation-related tank trucks from sized secondary containment requirements
Provided specific requirements for a flowline/intra-facility gathering line maintenance program and an alternative compliance option of contingency planning for flowlines and intra-facility gathering lines in lieu of the general secondary containment requirements
Defined the term "produced water containers", and provided an alternative compliance option for produced water containers at oil production facilities requiring general secondary containment, a process or procedure certified by a PE designed to remove free-phase oil on the surface of the produced water container and compliance with additional oil spill prevention measures in lieu of sized secondary containment requirements.
Clarified the definition of "permanently closed" as it applies to oil production facilities
Clarified that it may be appropriate for a facility owner or operator to consider man-made structures to determine how to comply with the SPCC rule
Clarified that wind turbines can use alternative compliance option provided for oil-filled operational equipment
Clarified the applicability of SPCC rule on natural gas production facilities
Hot-mix asphalt and hot-mix asphalt containers
Pesticide application equipment and related mix containers
Residential heating oil containers
Amended the facility diagram requirements to clarify how containers are identified on the diagram
Amended facility security requirements to allow flexibility to tailor security measures to facilities' specific characteristics and locations
Amended integrity testing requirements to provide flexibility to rely on industry standards
Provided flexibility on integrity testing to owner/operator of facility that handles certain AFVO
Allowed a new oil production facility a period of six months to prepare and implement an SPCC Plan
Provided an alternative compliance option for flow-through process vessels at oil production facilities
 Final Amendments with Technical Corrections
Amended compliance date for new oil production facilities to November 10, 2010, to align with the current compliance date
Underground oil storage tanks at NRC facilities that meet NRC design and quality criteria
Designated a subset of qualified facilities ("Tier I") with a set of streamlined requirements and the option to complete a self-certified SPCC Plan template
 Removed Amendments
None
Exemption for certain produced water containers (no monetized cost savings);
Exclusion for onshore production facilities and farms from loading/unloading rack requirements
Alternative criteria for marginal oil production facilities to be eligible to self-certify an SPCC Plan as qualified facilities

Key Final Amendments to the SPCC Rule
The key regulatory actions finalized without any changes, amendments finalized with technical corrections, and removed provisions are presented below. However, not all regulatory actions are expected to have a measurable economic impact on regulated facilities. Some provisions provide a clarification without changing the regulatory requirements. Therefore, for those amendments, EPA did not estimate cost savings.
Final Amendments- No Regulatory Modifications
On December 5, 2008, the EPA amended the SPCC rule to address a number of issues raised by the regulated community. The following provisions are finalized without modification for which no new economic analysis was conducted beyond that presented in the 2008 RIA:
         1. Hot-Mix Asphalt. EPA exempted hot-mix asphalt and hot-mix asphalt (HMA) containers from SPCC requirements. This material is unlikely to flow as a result of the entrained aggregate, there would be very few circumstances in which a discharge of HMA would have the potential to reach navigable waters or adjoining shorelines. EPA modified §112.1(d)(2) so that the capacity of storage containers containing only hot-mix asphalt is not counted toward a facility's aggregate oil storage capacity.
         2. Pesticide Application Equipment and Related Mix Containers. EPA exempted pesticide application equipment and related mix containers from SPCC requirements regardless of ownership or where used. EPA also modified §112.1(d)(2) so that the capacities of these containers are not counted toward a facility's aggregate oil storage capacity.
         3. Applicability of Mobile Refueler Requirements to Farm Nurse Tanks. EPA clarified that nurse tanks used on farms are considered mobile refuelers, according to the definition found in §112.2.
         4. Residential Heating Oil Containers. EPA exempted residential heating oil containers that are used to store oil for the sole purpose of heating a single-family residence (including a residence at a farm) by adding a new paragraph under the general applicability section, §112.1(d). EPA also modified §112.1(d)(2) so that the capacity of single-family residential heating oil containers is not counted toward a facility's oil storage capacity.
         5. Definition of "Facility." EPA modified the definition of "facility" to clarify that contiguous or non-contiguous properties, parcels, leases, and pipelines may be considered separate facilities when calculating aggregate storage capacity to determine applicability of the SPCC rule. This final amendment clarifies that facilities are allowed to choose how they aggregate or separate containers stored on contiguous or non-contiguous parcels within their operations. EPA also clarified that the definition of "facility" alone governs applicability of the SPCC rule.
         6. Facility Diagram. EPA amended §112.7(a)(3) to clarify that the facility diagram must include all fixed (i.e., not mobile or portable) containers. EPA also required that certain containers and piping, which are exempted from SPCC requirements in this final amendment, be identified on the facility diagram and marked as "exempt." Under this final amendment, the facility owner or operator must mark the area on the diagram where the mobile containers are stored, and can choose to indicate in the facility's SPCC Plan the average number of mobile or portable containers maintained at the facility and the anticipated contents and capacities of those containers, rather than on the diagram itself. The revision to the rule language simplifies the development of a facility diagram by allowing for a general indication of the location and contents of numerous mobile or portable oil storage containers (e.g., drums and totes) on the diagram, rather than a specific representation of each container.
         7. Loading/Unloading Racks. EPA established a definition for the term "loading/unloading rack" and specified that this definition controls applicability of the provision at §112.7(h), Facility tank car and tank truck loading/unloading rack. This final amendment provides additional clarity to the regulated community about the applicability of this provision to regulated facilities. In the December 5, 2008, amendments, EPA had specifically excluded all onshore production facilities and farms from the requirements at §112.7(h). However, the final amendments remove this exclusion.
         8. General Secondary Containment. EPA added clarity by amending the general secondary containment requirement at §112.7(c) in three ways: (1) by adding text regarding the method, design, and capacity of secondary containment; (2) by specifically allowing both active and passive measures of secondary containment; and (3) by including additional examples of prevention systems.
         9. General Secondary Containment for Non-Transportation-Related Tank Trucks. EPA extended the regulatory relief provided to mobile refuelers in 2006 to non-transportation-related tank trucks at facilities subject to the SPCC rule, because they operate similarly to mobile refuelers.
         10. Security. EPA amended the facility security requirements at §112.7(g) to allow owners and operators of all facilities to tailor security measures to their facilities' specific characteristics and locations. Under this final amendment, the facility owners/operators are required to describe how they secure and control access to the oil handling, processing, and storage areas; secure master flow and drain valves; prevent unauthorized access to starter controls on oil pumps; secure out-of-service and loading/unloading connections of oil pipelines; and address the appropriateness of security lighting to both prevent acts of vandalism and assist in the discovery of oil discharges.
         11. Integrity Testing. EPA amended the integrity testing requirements at §§112.8(c)(6) and 112.12(c)(6) to allow an owner or operator to consult and rely on industry standards to determine the appropriate qualifications for personnel performing tests and inspections, as well as the type and frequency of integrity testing required for a particular container size and configuration. This final amendment provides flexibility in complying with bulk storage container integrity testing requirements by extending the streamlined bulk storage container inspection requirement for qualified facilities provided in the December 2006 final rule (71 FR 77266, December 26, 2006) to all facilities subject to the integrity testing provision.
         12. Integrity Testing Requirements for Animal Fats and Vegetable Oils (AFVO). EPA amended the requirements found at §112.12(c)(6) to provide the Professional Engineer (PE) or owner/operator certifying an SPCC Plan with the flexibility to determine how integrity testing requirements should be met for eligible containers, based on compliance with certain FDA regulations and other criteria relating to container construction and configuration.
         13. Oil Production Facilities. EPA clarified or streamlined requirements specific to this sector in the following ways:
Amended the definition of "production facility" to be consistent with the amended definition of "facility."
Allowed a new oil production facility a period of six months to prepare and implement an SPCC Plan.
Provided an alternative compliance option for flow-through process vessels at oil production facilities.
Exempted certain intra-facility gathering lines subject to requirements of the U.S. Department of Transportation's (DOT's) pipeline regulations in 49 CFR parts 192 or 195.
Provided specific requirements for a flowline/intra-facility gathering line maintenance program and an alternative compliance option for flowlines and intra-facility gathering lines at oil production facilities.
Clarified the definition of "permanently closed" as it applies to oil production facilities and containers present at an oil production facility.
Defined the term "produced water containers", and provided an alternative compliance option for these containers at oil production facilities requiring general secondary containment, a process or procedure certified by a PE designed to remove free-phase oil on the surface of the produced water container and compliance with additional oil spill prevention measures.
         14. Man-Made Structures. EPA clarified that certain man-made structures such as building walls, basement structures, and drainage systems may be considered when determining how to comply with SPCC requirements. If an oil container at a regulated facility is located inside a building, the PE or facility owner/operator certifying the SPCC Plan may take into consideration the ability of the building walls and/or drainage systems to serve as secondary containment for the container.
         15. Wind Turbines. EPA clarified the applicability of the SPCC rule to wind turbines used to produce electricity; specifically, these wind turbines meet the definition of oil-filled operational equipment promulgated in the December 2006 SPCC rule amendments (71 FR 77266, December 26, 2006) to the extent that the wind turbines meet the oil storage capacity threshold in the rule. Therefore, owners and operators of wind turbines can take advantage of the alternative compliance option provided to oil-filled operational equipment.
Final Amendments with Technical Corrections
The following provisions are finalized with technical corrections for which no new economic analysis was conducted as there were no cost implications of the corrections:
         1. Tier I Qualified Facilities. EPA streamlined SPCC requirements for Tier I qualified facilities -- a subset of Tier II qualified facilities (i.e., facilities less than 10,000 gallons aggregate aboveground storage capacity) having no oil storage containers with a capacity greater than 5,000 gallons. Under this final amendment, owners or operators of Tier I qualified facilities have the alternative to complete an SPCC Plan template (promulgated as Appendix G to 40 CFR part 112) in lieu of a full SPCC Plan and self-certify that the facility complies with a set of streamlined SPCC rule requirements. In the 2009 final action, this amendment is being finalized with technical corrections (e.g., clarifications and corrections of typographical and formatting errors.
         2. Underground Emergency Diesel Generator Tanks at Nuclear Power Stations. EPA exempted underground oil storage tanks including below-grade vaulted tanks, deferred under 40 CFR part 280, that supply emergency diesel generators at nuclear power generation facilities and that are subject to design criteria under the Nuclear Regulatory Commission (NRC) regulations.
         3. Oil Production Facilities-Compliance Date for New Facilities. Amended the compliance date for new oil production facilities to November 10, 2010.
Removed Provisions
 Additionally, after consideration of all relevant facts and public comments, EPA is removing the following December 5, 2008 provisions from the SPCC regulation. These revisions have a cost impact that is discussed in Chapter 6:
         1. Loading/Unloading Rack Exclusions. EPA is removing the exclusion of oil production facilities and farms from the loading/unloading rack requirements at §112.7(h).
         2. Produced Water Containers. EPA is removing the exemption for certain produced water containers that do not contain oil in quantities that may be harmful as certified by a PE..
         3. Alternative Qualified Facility Criteria for Oil Production Facilities. Removed the alternative criteria for a marginal oil production facility to be eligible to self-certify an SPCC Plan as a qualified facility.
Baseline for the Analysis
This regulatory impact analysis compares the compliance costs for facilities affected by the final amendments to the costs associated with the 2002 SPCC rule revisions. The results of this analysis are that regulated facilities will have lower costs, i.e., cost savings, for these final revisions compared to the 2002 baseline. The Agency followed the best economic practices in EPA's "Guidelines for Preparing Economic Analyses" (EPA 2000) and assumed that regulated facilities are in full compliance with the 2002 SPCC rule amendments.
In response to comments from the Government Accountability Office (GAO), the Office of Management and Budget (OMB), and from the EPA Office of Policy, Economics, and Innovation (EPA/OPEI), the Agency conducted a sensitivity analysis to examine the impact of several alternative compliance assumptions. The first alternative assumption is that there is partial compliance in both the baseline and after the final rule amendments. The second assumption is that there is partial compliance in the baseline and full compliance after the final rule amendments. The sensitivity analysis appears in Volume II and is conducted for farms and oil production facilities as the Agency has some additional information on the current compliance rates for these sectors.
Regulated facilities may implement oil spill prevention measures for many reasons. Since certain SPCC requirements may be similar in nature to those imposed by state regulations or industry standards, compliance activities and their associated costs cannot be fully attributed to the SPCC rule. The regulatory impact analysis takes into consideration state oil spill prevention requirements. For details of the state overlap analysis, refer to Section 5.4 of this report.
EPA has limited data on compliance with industry standards, so the regulatory impact analysis was conducted without accounting for possible overlap of SPCC requirements with industry standards. EPA generally allows the application of industry standards where the standards are both specific and objective, and their application may reduce the threat of discharges to and impact on the environment. EPA believes that industry standards represent good engineering practice and generally are environmentally protective. As technology advances, specific standards change, and therefore by referencing industry standards, EPA anticipates that the underlying requirements of the rule itself will change as new technology comes into use without the need for further amendments. If owners and operators of facilities follow industry standards that are equivalent or more stringent than the current SPCC rule requirements, these facilities would not incur any additional cost (or savings) from the SPCC rule (or final amendments). If the industry standards are equivalent or less stringent than the requirements in the amended SPCC rule, then the estimates for the cost savings would be accurate. For provisions that do not have industry standards, the baseline compliance cost estimate and the cost savings would not present an overestimate.
EPA obtained the data for the facility unit cost of compliance (hereinafter called `compliance cost' or `facility compliance cost') with the 2002 SPCC requirements from a professional engineering firm with experience in preparing, reviewing, and certifying SPCC Plans. The PE firm also has experience with construction and operation and maintenance of structures for oil spill prevention measures. In addition to data and information from the PE firm, EPA interviewed five regulated facilities to: (1) obtain additional information on activities that facility owners and operators undertake to comply with SPCC requirements and their associated costs, and (2) validate the estimates obtained from the PE firm (see Appendix H in Volume II for more details). EPA also compared the unit costs used in its analyses to similar estimates produced by the U.S. Department of Energy (DOE), the American Petroleum Institute (API), and the Steel Tank Institute (STI) (see Appendix H in Volume II for more details). Most of the figures provided by DOE, API, and STI fall within the broad ranges of cost estimates that EPA developed.
Universe of Affected Facilities
For the purpose of this regulatory impact analysis, EPA used the universe estimates for the number of regulated facilities as a starting point. The universe estimates were originally developed for the RIA for the 2006 SPCC final rule amendments, which were updated using industry-specific growth rates for this analysis. EPA estimated the universe of SPCC-regulated facilities in each of 30 industry sectors and four oil storage capacity categories. For 18 of these 30 industry sectors, EPA used state databases that report data on oil storage, handling, and use. For the remaining 12 sectors, which represent the highest proportion of affected facilities (e.g., farms and oil and gas production), federal and proprietary data were used to estimate the number of facilities.
For the purpose of this regulatory impact analysis, EPA classified facilities into oil storage capacity categories to (1) improve understanding of the universe of regulated facilities, (2) account for differences in the facility unit compliance costs for facilities of different sizes and characteristics; and (3) determine the number of facilities affected by each of the final amendments to the SPCC rule, based on the facility's storage capacity. The four oil storage capacity categories are:
Category I: total oil storage capacity greater than 1,320 gallons but less than or equal to 10,000 gallons;
Category II: total oil storage capacity greater than 10,000 gallons but less than or equal to 42,000 gallons;
Category III: total oil storage capacity greater than 42,000 gallons but less than or equal to 1,000,000 gallons; and
Category IV: total oil storage capacity greater than 1,000,000 gallons. Exhibit 1-2 summarizes the estimated number of regulated facilities for each size category in the analysis. While these projected estimates are for 2010 (the first year of the analysis period), Chapter 6 reports the number of affected facilities for the entire analysis period, 2010 through 2019.
Exhibit 1-2
Estimated Number of Existing SPCC-Regulated Facilities by Size Category (2010)
Size Category
Aggregate Capacity
Estimated Number of Facilities[1]
I
                            1,320 to 10,000 gallons
                                                                       318,000
II
                           10,001 to 42,000 gallons
                                                                       205,000
III
                          42,001 to 1 million gallons
                                                                       115,000
IV
                        Greater than 1 million gallons
                                                                         3,000
Total
                                                                       640,000
[1] 	Individual values may not sum to the total due to rounding.

The facilities in the universe were divided into two categories: oil production facilities and storage facilities. The analysis estimates that approximately 215,000 oil production facilities and 425,000 storage facilities will be subject to SPCC requirements in 2010. (In 2005 the regulatory impact analysis estimated that the regulated universe had 571,000 facilities, of which 166,000 facilities were production and 405,000 storage facilities.) As a result, the Agency developed separate estimates for the facility level unit compliance cost for oil production and storage facilities in Categories I through IV (Chapter 5).
Baseline Compliance Cost and Cost Savings
EPA estimated the annualized baseline cost of compliance with the 2002 SPCC rule amendments and the compliance cost impact resulting from the final amendments using 3 percent and 7 percent discount rates. EPA used the 3 percent and 7 percent discount rates to adjust the estimates for differences in timing, according to OMB Circular A-4. The analysis estimates the cost savings for each rule provision and each regulatory alternative expected to have a measurable cost impact.
For those final amendments whose cost savings could result only from the reduced burden of understanding the rule, EPA did not have sufficient information to quantify cost savings. Those amendments are included in the regulatory impact analysis and assessed as "No monetized cost impact" in Exhibit 1-5. Technical clarifications of existing rule provisions that do not result in changes in the regulatory requirements are not expected to alter facility owner/operator behavior. Thus, such clarifications are not expected to result in cost changes and not included in the cost impact analysis. Below is a list of the final amendments included in the economic impact analysis.
      1. Hot-Mix Asphalt. EPA estimated the expected cost savings of exempting HMA and HMA containers.
      2. Pesticide Application Equipment and Related Mix Containers. EPA estimated the cost impact of exempting pesticide application equipment and related mix containers.
      3. Applicability of Mobile Refueler Requirements to Farm Nurse Tanks. EPA recognizes that there could be cost savings that result from the reduced burden of understanding the rule, but did not have sufficient information to quantify these savings.
      4. Residential Heating Oil Containers. EPA estimated the cost impact of exempting residential heating oil containers.
      5. Definition of "Facility." EPA assessed that there could be cost savings that result from the reduced burden of understanding the rule, but did not have sufficient information to quantify these savings.
      6. Facility Diagram. EPA estimated the cost savings from clarification of the facility diagram requirements.
      7. Loading/Unloading Racks. EPA estimated the cost impact of a definition of the term "loading/unloading rack."
      8. General Secondary Containment. EPA assessed that there could be cost savings that result from the reduced burden of understanding the rule, but did not have sufficient information to quantify these savings.
      9. Non-Transportation-Related Tank Trucks. EPA assessed potential cost savings from exempting these trucks from sized secondary containment requirements but did not have sufficient information to quantify the savings associated with the exemption.
      10. Security. EPA estimated the cost savings from allowing owners and operators of all facilities to tailor security measures to their facility's specific characteristics.
      11. Integrity Testing. EPA estimated the cost savings from allowing facilities to use specific tank inspection standards on portable containers.
      12. Integrity Testing Requirements for Animal Fats and Vegetable Oils. EPA estimated the cost savings for providing more flexibility on integrity testing for qualified containers.
      13. Oil Production Facilities. EPA estimated the cost savings from the final amendments on several issues -- allowing a six-month delay in preparation and implementation of the SPCC Plan; providing an alternative compliance option for flowlines and intra-facility gathering lines for contingency planning in lieu of the general secondary containment requirements, and establishing more specific requirements for a flowline/intra-facility gathering maintenance program; providing an alternative to the sized secondary containment requirements for flow-through process vessels at oil production facilities; and providing alternative compliance measures for produced water containers..
      14. Man-Made Structures. EPA assessed that there could be cost savings that result from the reduced burden of understanding the rule, but did not have sufficient information to quantify these savings.
      15. Wind Turbines. EPA assessed that there could be cost savings that result from the reduced burden of understanding the rule, but did not have sufficient information to quantify these savings.
      16. Tier I Qualified Facilities. EPA estimated cost savings for streamlined requirements for qualified facilities that have no oil storage containers with a capacity greater than 5,000 gallons. EPA also calculated costs savings for the alternative option of defining qualified facilities as those with total oil storage capacity no greater than 5,000 gallons.
      17. Underground Emergency Diesel Generator Tanks at Nuclear Power Stations. EPA estimated the cost savings from exempting underground oil storage tanks (including completely buried tanks and tanks that are below-grade and vaulted) located at nuclear power plants licensed by the NRC that are subject to the NRC design criteria.
The regulatory impact analysis calculated the cost savings by estimating the number of facilities affected by each provision of the final rule; identifying the specific behavioral changes that may occur at the affected facilities (e.g., choosing to prepare a self-certified template-based Plan rather than a full SPCC Plan); estimating the unit costs of the affected compliance measures under the baseline and policy scenarios; and applying the change in costs to the projected number of affected facilities. Total resulting cost savings were annualized over a 10-year period (2010 through 2019) . The main steps in the analysis are summarized below:
      18. Estimate the universe of facilities affected by the final rule. EPA first developed a baseline universe of SPCC-regulated facilities by industry sector and range of oil storage capacities. For each major component of the final amendments, EPA then estimated the number of facilities that might be affected by the changes. EPA then projected the anticipated annual change in the number of affected facilities over the 10-year analysis period, using industry-specific growth rates.
      19. Estimate the baseline compliance cost. EPA developed the baseline compliance cost for each rule provision.
      20. Estimate changes in facility level compliance cost from the final rule amendments. EPA estimated the change in facility costs resulting from the final amendments by identifying the provisions that will affect facility compliance costs and examining specific compliance measures associated with those provisions.
      21. Estimate total reduction in compliance costs (i.e., cost savings) to all potentially affected facilities. EPA estimated the cost savings for owners and operators of each type of affected facility, and multiplied these estimates by the total number of facilities that are expected to take advantage of each alternative or final provision. Finally, the regulatory impact analysis estimates the net change in compliance costs and annualized it over a 10-year period using 3 percent and 7 percent discount rates. The analysis does not estimate cost savings for non-substantive changes to the requirements such as those that only provide additional clarity on the intent of existing SPCC rule requirements.
The cost savings expected from each of these final amendments were calculated from the baseline cost of compliance with the 2002 SPCC rule amendment. Farms and the oil production sector will benefit from multiple components of the final rule. Both sectors will benefit from the new requirements for Tier I qualified facilities. In addition to the exemption of pesticide application equipment, farms will benefit from the final amendments to the security, integrity testing, and facility diagram requirements, as well as the exemption for single-family residential heating oil containers. The oil production sector will benefit from final amendments specific to this industry, such as the six-month delay in preparation and implementation of SPCC Plans and the alternative to the sized secondary containment requirement for flow-through separation and treating equipment.
Total Annual Cost Savings
As summarized in Exhibit 1-3, at the 7 percent discount rates, the combined impact of the final amendments to the SPCC rule are expected to yield annualized cost savings to farm owners and operators of The total annual cost savings to farm owners and operators are estimated at approximately $13 million ($2007) at the 7 percent discount rate.
approximately $4 million from the exemption of pesticide application equipment, $2 million from the exemption of residential heating oil containers, less than $1 million from the clarification to the facility diagram requirements, $1 million from the final amendments to the security requirements, $1 million from the final amendments to integrity-testing requirements, and $4 million from the streamlined requirements for Tier I qualified facilities. The total annual cost savings to farm owners and operators are estimated at approximately $13 million at the 7 percent discount rate (see Exhibit 1-3). Exhibit 1-3
Total Cost Savings for Farms from the Final Rule Amendments (2007$, Millions)
Rule Provision
Annualized Cost Savings
(Discounted at 7%) [2]
Pesticide Application Equipment
 Exempted pesticide application equipment and related mix containers
                                                                            $4
Residential Heating Oil Containers
 Exempted residential heating oil containers
                                                                            $2
Facility Definition
 Clarified the definition of "facility"
                           No monetized cost impact
Facility Diagram
 Revised facility diagram requirement
                                 Less than $1
Security Requirements[1]
 Revised security requirements
                                                                             $1
Integrity Testing
 Provided greater flexibility in the use of industry standards for integrity testing requirements
                                                                             $1
Tier I Qualified Facilities
 Provided streamlined requirements for Tier I qualified facilities
                                                                            $4
Total
                                                                            $13
1 	Midpoint estimate (75% of farms affected). Cost savings might be higher or lower using different assumptions.
2	Individual values may not sum to the total due to rounding. Cost savings were estimated for both 3% and 7% discount rates (see Chapter 6); for simplicity in presentation only 7% discounted values are presented here.

The total annual cost savings to owners and operators of oil production facilities are estimated at $35 million ($2007) at the 7 percent discount rate.
As summarized in Exhibit 1-4, at the 7 percent discount rate, the final amendments to the SPCC rule are expected to yield annualized cost savings to oil production facility owners and operators of approximately $2 million from the clarification to the facility diagram requirements, $24 million from the six-month delay in SPCC Plan preparation and implementation, $7 million from the alternative compliance measure in lieu of sized secondary containment of flow-through process vessels, and $2 million from the streamlined requirements for Tier I qualified facilities. The total annual cost savings to owners and operators of oil production facilities from all of the final amendments that affect this sector are estimated at $35 million at the 7 percent discount rate (see Exhibit 1-4).Exhibit 1-4
Total Cost Savings for Oil Production Facilities from the Final Rule Amendments (2007$, Millions)
Regulatory Provision
Annualized Cost Savings
(Discounted at 7%) [1]
Facility Definition
 Clarify the definition of "facility"
                           No monetized cost impact
Facility Diagram
 Revise facility diagram requirement
                                                                             $2
General Secondary Containment
 Revised the general secondary containment provision
                           No monetized cost impact
General Secondary Containment for Non-Transportation-Related Tank Trucks
 Extended regulatory relief for mobile refuelers to non-transportation-related tank trucks
                           No monetized cost impact
Plan Preparation and Implementation
 Provided six-month delay for Plan preparation and implementation at new oil production facilities
                                                                            $24
Flowlines and Intra-facility Gathering Lines
 Provided an alternative compliance option of contingency planning for flowlines and intra-facility gathering lines at oil production facilities in lieu of secondary containment requirements
                           No monetized cost impact
Flow-Through Process Vessels
 Provided alternative compliance measures for flow-through process vessels in lieu of sized secondary containment
                                                                            $7
Alternative Compliance Measures for Produced Water Containers
 Provided alternative compliance measures for produced water containers in lieu of sized secondary containment
                           No monetized cost impact
Tier I Qualified Facilities
 Provided streamlined requirements for Tier I qualified facilities
                                                                            $2
Total
                                                                            $35
1 	Cost savings were estimated for both 3% and 7% discount rates (see Chapter 6); for simplicity in presentation only 7% discounted values are presented here.

Aside from farms and oil production facilities, other facilities will have $47 million of annualized cost savings.
Exhibit 1-5 summarizes the cost savings expected from each of the final amendments. At the 7 percent discount rate, they range from an annualized savings of less than $1 million (exempting buried oil storage tanks at nuclear power plants) to $24 million (streamlined requirements for Tier I qualified facilities). The total cost savings across all the final amendments to the SPCC rule are expected to be about $95 million annualized at the 7 percent discount rate. The estimates do not account for interactions among the various components of the final amendments.

Exhibit 1-5
Total Cost Savings for the Final Amendments (2007$, Millions)
Regulatory Provision[1]
Annualized Cost Savings
(Discounted at 7%) [2]
Hot-Mix Asphalt
 Exempted HMA containers
                                                                            $8
Pesticide Application Equipment
 Exempted pesticide application equipment and related mix containers
                                                                            $4

Applicability of Mobile Refueler Requirements to Farm Nurse Tanks
 Clarified that nurse tanks used on farms are considered mobile refuelers
                           No monetized cost impact
Residential Heating Oil Containers
 Exempted residential heating oil containers
                                                                            $2
Facility Definition
 Clarified the definition of "facility"
                           No monetized cost impact
Facility Diagram
 Revised facility diagram requirement
                                                                             $3
Loading/Unloading Racks
 Defined "loading/unloading rack"
                           No monetized cost impact
General Secondary Containment
 Provided final revisions to the general secondary containment provision
                           No monetized cost impact
General Secondary Containment for Non-Transportation-Related Tank Trucks
 Extended relief for mobile refuelers to non-transportation-related tank trucks
                           No monetized cost impact
Security
 Revised security requirements[3]
                                                                             $9
Integrity Testing
 Provided greater flexibility in the use of industry standards for integrity testing
                                                                            $11
Animal Fats and Vegetable Oil
 Amended integrity testing requirements for AFVO containers that meet certain criteria[4]
                                                                            $2
Oil Production Facilities
 Provided six-month delay for Plan preparation and implementation
                                                                            $24
 Alternative compliance option for flowlines and intra-facility gathering lines in lieu of secondary containment
                           No monetized cost impact
 Alternative compliance option for flow-through process vessels
                                                                            $7
   Alternative compliance measures for produced water containers
                           No monetized cost impact
Man-Made Structures
 Allowed to consider man-made structures in determining SPCC rule applicability
                           No monetized cost impact
Wind Turbines
 Clarified applicability of the rule to wind turbines used to produce electricity
                           No monetized cost impact
Tier I Qualified Facilities
 Provided streamlined requirements for Tier I qualified facilities
                                     $24
Nuclear Power Stations
 Exempted underground oil storage tanks at nuclear power generation facilities
                                 Less than $1
Total
                                                                           $95
1 	Cost impacts are presented by rule component; impacts across industries are not separated out.
2	Individual values may not sum to the total due to rounding. Cost savings were estimated for both 3% and 7% discount rates (see Chapter 6); for simplicity in presentation only 7% discounted values are presented here.
[3] 	Midpoint estimate (75% of farms affected). Cost savings might be higher or lower using different assumptions.
4 	Midpoint estimate (65% of facilities affected). Cost savings might be higher or lower using different assumptions.
5 	Total cost savings are expected to range from about $92 million to $100 million on an annualized basis.

Impacts on Human Health, Welfare and the Environment
The principal combined impact of the final amendments is lower compliance costs for owners and operators of certain types of facilities due to modifications in the spill prevention measures they are required to implement. EPA believes that the final rule amendments provide the opportunity for regulated facilities to reduce the cost of SPCC compliance while maintaining protection of the environment. Throughout the process of developing these amendments, EPA has relied on its own technical staff, including Regional inspectors, and outside consultants to identify changes that will reduce the compliance costs and burden of the regulations while maintaining protection of public health and the environment.
Moreover, EPA believes that certain provisions finalized in the 2008 rule amendments may have an adverse impact to human health, welfare and the environment and is therefore removing the following provisions:
Loading/Unloading Rack Exclusions. In the December 2008 amendments, EPA specifically excluded onshore oil production facilities and farms from the loading/unloading rack requirements at §112.7(h). The reason for the exclusion was that the Agency and commenters believe that loading and unloading racks are not typically associated with these types of facilities. If production facilities or farms do have loading and unloading racks, exclusion from the regulations could increase the threat of oil discharges and spills.  EPA agrees with comments received on this amendment that stated that certain facilities (i.e., farms and oil production facilities) should not be treated differently than other facilities, even if loading/unloading racks are not typically associated with these types of facilities. Therefore, EPA is removing the provision published in December 2008 that would have excluded onshore oil production facilities and farms from the loading/unloading rack requirements at §112.7(h).
Alternative Qualified Facility Criteria for Oil Production Facilities. EPA is removing the alternative criteria for a marginal oil production facility to be eligible to self-certify an SPCC Plan as a qualified facility. EPA believes that the alternative qualified facility eligibility criteria for onshore oil production facilities would not effectively protect the environment from discharges of oil in quantities that may be harmful. The Agency also believes a PE should be involved in the development and implementation of an SPCC Plan, unless the oil production facility is eligible to self-certify its Plans based on the qualified facilities criteria finalized in December 2006, at most oil production facilities because they typically have complex equipment and store large quantities of oil. These facilities are of further concern because they typically have operations in which oil flows continuously in unattended, remote locations and therefore pose an environmental threat. The alternative qualified facility eligibility criteria was based on the flow rate of oil at the facility, and undermines the existing capacity based criteria. Allowing unrestricted total oil storage capacity increases the likelihood that relatively high-volume facilities, including some facilities above the threshold for which a Facility Response Plan is required, will self-certify their Plan. Furthermore, the alternative qualified facility criteria include oil production facilities that may be complex, such as those with injection wells, that may pose a greater threat of oil discharge.
Produced Water Containers. EPA is removing the exemption for certain produced water containers that do not contain oil in quantities that may be harmful as certified by a PE. EPA believes that produced water containers present a threat of discharge that can cause harm to the environment and human health. The separation equipment found at onshore oil production facilities are not perfectly efficient at separating oil from the produced fluids and become progressively less efficient with age. Furthermore, in the event of a discharge, the aqueous phase of the produced water mixture may serve to carry the oil farther overland and into waters than cases where crude oil alone is discharged. The spill data shows that produced water containers are indeed a common source of oil discharges from onshore oil production facilities. Finally, produced water containers may be equally or even more likely to fail than other containers in the tank battery because the higher salt content of produced water fluids and the resulting corrosion of the metallic components of the produced water storage system. Produced water containers remain subject to the SPCC rule and must comply with either the sized secondary containment requirements; or general secondary containment, a process or procedure certified by a PE designed to remove free-phase oil on the surface of the produced water container, and additional spill prevention measures.
Small Entity Impact and Executive Orders
EPA considered whether the final amendments to the SPCC rule impact the financial condition of small entities, as required by the Regulatory Flexibility Act (RFA) and Small Business Regulatory Enforcement Fairness Act (SBREFA). In addition, the analyses required under Executive Order (EO) 13132 - Federalism; EO 13175 - Consultation and Coordination With Indian Tribal Governments; EO 13045 - Protection of Children From Environmental Health & Safety Risks; EO 13211 - Actions That Significantly Affect Energy Supply, Distribution, or Use; the National Technology Transfer and Advancement Act (NTTAA); and the Paperwork Reduction Act (PRA) were conducted.
Small Entity Impact. RFA, as amended by SBREFA, requires federal agencies to determine whether their regulatory actions will have a significant adverse economic impact on a substantial number of small entities. Thus, the Agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, or otherwise has a positive economic effect on all of the small entities subject to the rule.
The final amendments to the SPCC rule will reduce the compliance costs and burden on small businesses, and is not expected to increase the cost for any small entity. These provisions provide small businesses with several regulatory alternatives, such as those offered to oil production facilities, facilities that store or handle animal fats and vegetable oils, Tier I qualified facilities, and others. Because the SPCC rule categorizes affected entities based on oil storage capacity, while the U.S. Small Business Administration (SBA) defines small businesses based on the business' total number of employees or total annual revenue, EPA does not know how many SPCC-regulated facilities are also SBA-defined small businesses. Nevertheless, given their resource constraints, owners and operators of small businesses are likely to take advantage of, and benefit from, the regulatory burden relief offered by the final amendments.
Executive Order 13045  -  Protection of Children from Environmental Health & Safety Risks. EPA expects that the final rule amendments will not have a disproportionate adverse effect on children nor adversely affect a large number of children (EO 13045). EPA interprets Executive Order 13045 as applying only to those regulatory actions that are based on health or safety risks, such that the analysis required under section 5-501 of the Order has the potential to influence the regulation. This final rule amendment is not subject to Executive Order 13045 because it does not establish an environmental standard intended to mitigate health or safety risks.
Executive Order 13211  -  Actions That Significantly Affect Energy Supply, Distribution, or Use. In response to EO 13211, EPA concludes that since the final amendments to the SPCC rule reduce the burden on owners and operators of regulated facilities; EPA does not expect an adverse impact of the rule on energy supply, distribution, or use.
Executive Orders 13132 and 13175 and National Technology Transfer and Advancement Act. EPA concludes that the final rule amendment does not have federalism implications; therefore, EO 13132 does not apply to this action. In addition, it does not significantly or uniquely affect communities of Indian tribal governments; thus, EO 13175 does not apply to this action. EPA also concludes that the NTTAA does not apply because the rulemaking does not set or incorporate by reference any one specific technical standard.
The final amendments will reduce the reporting and recordkeeping burden by about 1.3 million hours and capital, operating and maintenance (O&M) costs by about $7.5 million.
Paperwork Reduction Act. Agencies must provide information to OMB on the parties affected, the annual reporting burden, and the annualized cost of responding to the information collection. Owners and operators of regulated facilities must prepare SPCC Plans in accordance with good engineering practices and have them approved by a person with the authority to commit the resources necessary to implement the SPCC Plan. EPA estimates that approximately 640,000 facilities will incur paperwork-related burden in the first year of the Information Collection Request (ICR) and estimates the total reporting and recordkeeping burden for these facilities at approximately 8 million hours in each year of this ICR. The Agency estimates that as a result of the final amendments to clarify and streamline certain SPCC requirements, the reporting and recordkeeping burden will decrease by 1.3 million hours on an annualized basis. The final rule amendments will reduce capital and operating and maintenance costs by approximately $7.5 million on an annualized basis.Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations. EPA has determined that this final rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it does not affect the level of protection provided to human health or the environment. The overall effect of the action is to decrease the regulatory burden on facility owners or operators subject to its provisions.
Sensitivity Analyses
This regulatory impact analysis estimates the cost savings resulting from the final rule amendments compared to 2002 baseline, which assumes full compliance with the SPCC rule requirements under 40 CFR part 112, as amended in 2002 (67 FR 47042). The cost savings may in fact be greater or lower (for details, see Chapter 9).
EPA is aware of industry concerns regarding non-compliance (both now and after the amendments are effective) among owners and operators of facilities of certain sizes or industry sectors. Although no statistically valid data exist to assess the extent or magnitude of such non-compliance, inspections by EPA regions have found non-compliance in the SPCC regulated community. In response to comments from the Office of Management and Budget (OMB), the Government Accountability Office (GAO), and the EPA Office of Policy, Economics and Innovation (EPA / OPEI), EPA conducted sensitivity analysis to examine the impact of various non-compliance assumptions. The sensitivity analysis considered two scenarios. In the first sensitivity analysis scenario, EPA considered partial compliance both in the baseline and after the final rule amendments (i.e., the partial compliance rate did not change between the baseline and the post-rule period in this scenario). The results for this scenario are presented below. In the second scenario, EPA considered partial compliance in the baseline and full compliance after the final rule amendments, and included an estimate of the cost of compliance incurred by facilities that will come into compliance during the analysis period. The results for the second scenario are presented in Appendix B of Volume II..
Estimated Change in Cost Savings for the Alternative Baseline
This alternative analysis presents cost saving estimates for owners and operators of facilities resulting from the final rule assuming partial compliance (25 percent, 50 percent, or 75 percent compliance) with both the 2002 and 2009 final rule amendments. In other words, these scenarios assume that 75, 50, or 25 percent of the facilities, respectively, are not in compliance with the existing rule, will not do anything different under the amendments, and will not incur any cost savings.
Under the partial compliance scenarios, anticipated cost savings will be less than the total cost savings presented in the primary regulatory impact analysis in direct proportion to the assumed compliance rates. There is less cost savings under those scenarios because the fraction of SPCC-regulated facilities whose owners and operators are assumed to be in non-compliance will not be affected by the rule changes, and will not be able to lower their costs. The estimated cost savings under the three partial compliance scenarios on an annualized basis are presented in Exhibit 1-6.

Exhibit 1-6
Annualized Cost Savings for the Final Rule Provisions for Partial Compliance Scenarios
(2007$, Millions)

Final Rule Component[1]

Partial Compliance in the Baseline and after the Final Rule (25%, 50%, 75%)

25% Compliance
50% Compliance
75% Compliance

Not Discounted
3% Discounted
7% Discounted
Not Discounted
3% Discounted
7% Discounted
Not Discounted
3% Discounted
7% Discounted
Exempt Hot-Mix Asphalt Containers
                                                                         $2.10
                                                                         $2.09
                                                                         $2.09
                                                                         $4.19
                                                                         $4.19
                                                                         $4.18
                                                                         $6.29
                                                                         $6.28
                                                                         $6.27
Exempt Pesticide Application Equipment
                                                                        $0.890
                                                                        $0.891
                                                                        $0.892
                                                                         $1.78
                                                                         $1.78
                                                                         $1.78
                                                                         $2.67
                                                                         $2.67
                                                                         $2.68
Exempt Residential Heating Oil Containers
                                                                        $0.577
                                                                         $0.578
                                                                         $0.579
                                                                          $1.15
                                                                          $1.16
                                                                          $1.16
                                                                          $1.73
                                                                          $1.73
                                                                          $1.74
Facility Diagram
                                                                        $0.843
                                                                        $0.838
                                                                        $0.830
                                                                         $1.69
                                                                         $1.68
                                                                         $1.66
                                                                         $2.53
                                                                         $2.51
                                                                         $2.49
Tier I Qualified Facilities
                                                                         $6.07
                                                                         $6.03
                                                                         $5.98
                                                                         $12.1
                                                                         $12.1
                                                                         $12.0
                                                                         $18.2
                                                                         $18.1
                                                                         $17.9
Security Requirements[2]
                                                                         $2.35
                                                                         $2.33
                                                                         $2.31
                                                                         $4.69
                                                                         $4.66
                                                                         $4.62
                                                                         $7.04
                                                                         $6.99
                                                                         $6.93
Integrity Testing
                                                                         $2.81
                                                                         $2.79
                                                                         $2.76
                                                                         $5.61
                                                                         $5.57
                                                                         $5.53
                                                                         $8.42
                                                                         $8.36
                                                                         $8.29
Animal Fats and Vegetable Oils[3]
                                                                        $0.483
                                                                        $0.482
                                                                        $0.482
                                                                        $0.966
                                                                        $0.965
                                                                        $0.963
                                                                         $1.45
                                                                         $1.45
                                                                         $1.45
Oil Production: Six-Month Delay for Plan Preparation and Implementation
                                                                         $6.06
                                                                         $6.02
                                                                         $5.96
                                                                         $12.1
                                                                         $12.0
                                                                         $11.9
                                                                         $18.2
                                                                         $18.1
                                                                         $17.9
Oil Production: Alternative Measures for Flow-through Process Vessels in lieu of Sized Secondary Containment
                                                                         $1.84
                                                                         $1.83
                                                                         $1.81
                                                                         $3.68
                                                                         $3.66
                                                                         $3.62
                                                                         $5.52
                                                                         $5.48
                                                                         $5.43
Exempt Underground USTs at Nuclear Power Generation Facility
                                                                     $0.000507
                                                                     $0.000484
                                                                     $0.000452
                                                                      $0.00101
                                                                     $0.000968
                                                                     $0.000904
                                                                      $0.00152
                                                                      $0.00145
                                                                      $0.00136
Total
                                                                         $24.0
                                                                         $23.9
                                                                         $23.7
                                                                         $48.0
                                                                         $47.8
                                                                         $47.4
                                                                         $72.0
                                                                         $71.6
                                                                         $71.1
[1] 	Impacts are presented by rule component; impacts across industries are not separated out.
[2] 	Midpoint estimate (75% of farms affected). Cost savings might be higher or lower using different assumptions.
[3] 	Midpoint estimate (65% of facilities affected). Cost savings might be higher or lower using different assumptions.

Key Assumptions and Limitations
According to Executive Order 12866, agencies are required to assess all costs and benefits of regulatory activities, including quantitative and qualitative measures. The Executive Order also requires assessment of benefits and costs including, but not limited to, those related to the environment, public health and safety, distributive impacts, and issues of equity.
This regulatory impact analysis estimates the cost savings that accrue to owners and operators of facilities from reductions in compliance costs resulting from the final amendments to the rule. In addition, the Agency considered whether the streamlined requirements in the final rule might affect human health, welfare, and the environment. EPA qualitatively assessed the change in threat of discharge and believes that the final rule amendments will maintain environmental protection.
Many of the assumptions, as well as the estimates of unit cost savings and the number of affected facilities, presented in this RIA are based upon available data. EPA made the best use of the available data to make informed decisions regarding the assumptions used in the analysis. To address uncertainties involved in estimating the total cost savings from the final amendments, the Agency used a sensitivity analysis approach to estimate the range of cost savings by examining up to three scenarios for several components of the final rule (e.g., final amendments to the security requirements, and flexibility for AFVO facilities).
The baseline estimate for the number of SPCC-regulated facilities does not take into account a possible change in behavior of facility owners and operators with respect to redefining their facility boundaries when the facility is located on multiple, non-contiguous parcels. EPA recognizes that the baseline estimate for the number of SPCC-regulated facilities and the baseline compliance cost are likely to represent an overestimate. The Agency potentially overestimates the regulated universe because facility owners and operators might have redefined their boundaries and divided the parcels in order to reduce regulatory burden. This behavioral change will reduce the number of regulated facilities, leaving a certain number of facilities outside of the SPCC universe. Facilities in the following industries are expected to be most affected by this rule flexibility: farms, large oil production facilities, military bases, airports, and large universities.
General Assumptions and Limitations
Assumptions
EPA made four major assumptions in the analysis. First, the Agency assumes that cost minimization behavior applies to all owners and operators of facilities that qualify for reduced regulatory requirements, whereby all those eligible will take advantage of burden relief. Second, EPA assumes that all existing owners and operators of facilities are in full compliance with the July 2002 amendments to the SPCC rule (67 FR 47042). It is important to note that insofar as certain owners/operators of facilities are not in compliance with the 2002 rule because of the compliance date extension (November 10, 2010), this assumption may imply that cost savings are an under-estimate. Third, EPA assumes that owners and operators of existing SPCC-regulated facilities will forgo compliance activities offered as alternatives to activities that required one-time initial investments because they would have already incurred the one-time cost. For example, EPA assumes that an owner or operator of an existing facility who will qualify for reduced security requirements under the final rule will have already provided the security measures as per the 2002 rule amendments or demonstrated environmental equivalence for tailored security measures. Thus, owners and operators of existing facilities will not take advantage of the provided alternative, while owners and operators of new facilities will. Fourth, EPA assumes that compliance is nationally consistent despite variability in state regulations and the distribution of affected facilities. In addition, EPA made several assumptions when estimating the cost savings for the different options. These are described in greater detail in Chapter 8.
Limitations
 One of the main constraints on the regulatory impact analysis is limited data on the number of facilities regulated under the SPCC program. The rule does not include a notification requirement and, with certain exceptions, regulated entities do not need to submit any information to EPA. The absence of notification data means that, without conducting a statistically valid survey, EPA is limited to data already collected by state or federal agencies or by proprietary sources. Such data are collected for diverse purposes and are not ideal for identifying SPCC-regulated facilities, as the data do not normally provide information on smaller storage tanks or non-petroleum oils. Because the collected data may miss certain portions of the regulated universe or lack detail about certain facility characteristics, the evaluation of regulatory options using those data involves some uncertainty. Some additional uncertainty may also be introduced by the knowledge of how owners and operators will use the flexibility to define the facility boundaries for contiguous and non-contiguous parcels.
Compliance costs incurred by owners and operators of facilities in the baseline depend not only on the volume of oil stored and handled, but also on the types of oil at a site, the number of containers (and their capacity), and the locations of the tanks across the site. Given the wide range of industries and facility sizes affected by the SPCC rule -- as well as geographical and climatic conditions that affect a facility's configuration and operation patterns -- a realistic baseline against which regulatory changes are measured is difficult to establish. Therefore, uncertainty is involved in estimating the changes in compliance costs that could occur under the final regulatory actions.
Another limitation concerns many of the cost estimates used in the analysis, which are based on the expert opinion of a PE firm and on interviews with a limited number of regulated facilities. The data provided by the PE firm represent informed professional judgment based on the firm's service to the 48 contiguous states, but are not statistically representative of the entire country. The PE firm indicated the variability of costs across the country with higher costs in certain geographic areas such as the North East and California. Therefore, extrapolation to a larger universe is appropriate but does not necessarily represent the actual compliance costs incurred by facilities of different types and sizes. The PE firm personnel were hesitant to provide "typical" costs when the costs of compliance depend significantly on site-specific factors. The PE firm provided the cost estimates for various types of equipment and industry type. Ideally, a regulatory analysis would explicitly account for such variability in costs. However, in this analysis EPA was unable to differentiate compliance costs due to the lack of information on the site characteristics of facilities affected by the final SPCC rule.
In addition, due to the lack of data on the extent to which facilities adopt industry standards, in this analysis the Agency estimated the baseline compliance costs and cost savings associated with the SPCC requirements without accounting for possible overlap with industry standards.
EPA did not have quantitative data on the number of regulated facilities that use in-house professionals to design and implement SPCC compliance measures versus the facilities that primarily hire an outside contractor for those tasks. Site visits suggested that in any size category there are facilities that use in-house labor as well as facilities relying on outside engineering firms. Therefore, when estimating per-facility costs of compliance, EPA used the assumption that within each size category 50 percent of facilities will use in-house labor and 50 percent of facilities will hire a PE firm.
Furthermore, the cost of compliance was calculated for each of the amendments separately, assuming that there were no changes in other aspects of the rule. Therefore, the analysis does not take into account the ways in which different amendments interact with each other and how these possible interactions might reduce or increase the total cost. The estimates do not account for interactions among the various components of the amendments.
Finally, the Agency did not calculate a final cost of compliance with the SPCC rule that adds the cost savings from the 2006 final amendments with the cost savings from the 2008 and 2009 final amendments.

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Chapter 2

Introduction

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Introduction
The Environmental Protection Agency (EPA or the Agency) amended the Spill Prevention, Control, and Countermeasure (SPCC) requirements of the Oil Pollution Prevention regulation at 40 CFR part 112 on December 5, 2008. In this action, the Agency is finalizing certain amendments, providing technical correction to others, and removing three amendments. These amendments are intended to provide clarity, tailor requirements to particular industry sectors, and streamline certain requirements. The regulatory changes reduce the compliance costs and burden to the regulated community.

Based on public comments provided to EPA and after consideration of all relevant facts, EPA is removing the following amendments from the 2008 rule: exclusion for farms and oil production facilities from loading/unloading rack requirements because it is inappropriate to provide exclusions for specific industry sectors; exemption for certain produced water containers at an oil production facility; and alternative Qualified Facilities eligibility criteria for an oil production facility. For the remaining provisions in the December 2008 rule, EPA is either taking no action or providing technical corrections.

The final amendments provide relief to owners and operators of affected facilities from certain regulatory provisions, and could change the manner in which they comply with other, still applicable provisions. Under the terms of Executive Order 12866 (58 FR 51735, October 4, 1993), EPA must determine whether a regulatory action is "significant" and subject to Office of Management and Budget (OMB) review. The order defines "significant regulatory action" as one that is likely to result in a rule that may do one or more of the following:
      22. Have an annual effect on the economy of $100 million or more, or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities.
      23. Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency.
      24. Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof.
      25. Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.
When an action is determined to be a "significant regulatory action," agencies are required to assess all costs and benefits of regulatory provisions, including quantitative and qualitative measures. Under the terms of Executive Order 12866, this notice is a "significant regulatory action" because it may have an annual effect on the economy of about $100 million. This action has been submitted to OMB for review, and the Agency prepared this regulatory impact analysis (RIA) in support of this 2009 final regulatory action for the SPCC rule.
This RIA provides an estimate of reduced compliance costs for certain types of facilities and equipment as a result of the amendments to the rule. EPA believes that the rule amendments protect the environment while, at the same time, providing alternatives and additional regulatory flexibility to clarify, streamline, and tailor requirements. This regulatory impact analysis focuses on estimating the incremental change in compliance costs as a result of the final rule amendments. Therefore, this report is in compliance with the Executive Order 12866 in all respects.
The assumptions underlying this analysis are appropriate and consistent with best practices in conducting regulatory impact analysis. The data supporting the analysis are the best available, although, as in all economic analyses, there are uncertainties, limited precision, and statistical variability. While EPA did not have statistically significant samples of data for various components of the analysis, the Agency has made the best use of the available data to make informed decisions regarding the assumptions and estimates used in the analysis.
EPA has received a number of comments on the rule revisions finalized in 2008 from regulated parties, professional associations, environmental interest groups, and others. Aside from public comments, the U.S. Government Accountability Office (GAO) published a report on the SPCC rule, specifically commenting on the uncertainty aspect of the analysis. While the Agency recognizes the comments received, it believes that the fundamental assumptions used in the RIA are reasonable and does not find the comments compelling enough to modify those assumptions. However, EPA conducted a set of sensitivity analyses that provide alternative estimates for the number of SPCC-regulated facilities that are in full compliance with the rule. To address the cost variability issue, EPA developed ranges for compliance costs. The regulatory impact analysis considers the variability associated with various methods of compliance and individual facility storage capacities.
For the final rulemaking, EPA employed new approaches to enhance the existing analyses, while maintaining the original analytical concepts. In addition to changes made in response to comments and recommendations from GAO, OMB, and other federal agencies, EPA made improvements to the analysis compared to the RIA for the proposed 2007 rule. Throughout the rulemaking process, EPA actively used the knowledge and expertise of the SPCC Economic Subgroup that consists of economic and technical experts.
The remainder of this chapter provides background information on the Oil Pollution Prevention regulation, identifies the statutory authority for the regulation, and summarizes the final regulatory actions, technical corrections, and removed provisions.
Statutory Authority
Section 311(j)(1)(C) of the Clean Water Act (CWA or the Act), 33 U.S.C. 1321(j)(1)(C), requires the President to issue regulations establishing procedures, methods, equipment, and other requirements to prevent discharges of oil to navigable waters or adjoining shorelines from vessels and facilities. The President delegated the authority to regulate non-transportation-related onshore facilities to EPA in Executive Order 11548 (35 FR 11677, July 22, 1970), which was superseded by Executive Order 12777 (56 FR 54757, October 22, 1991). An MOU between DOT and EPA (36 FR 24080, November 24, 1971) established the definitions of transportation-related and non-transportation-related facilities. An MOU between EPA, the U.S. Department of the Interior (DOI), and DOT (59 FR 34102, July 1, 1994) re-delegated the responsibility to regulate certain offshore facilities from DOI to EPA.
Regulatory Background
The Oil Pollution Prevention regulation, 40 CFR part 112, outlines requirements for prevention of, preparedness for, and response to oil discharges. The amendments in this action affect existing requirements related to prevention that are collectively known as the Spill Prevention, Control, and Countermeasure (SPCC) rule.
The SPCC rule was originally promulgated on December 11, 1973, at 38 FR 34164, under the authority of §311(j)(1)(C) of the CWA. The SPCC regulation establishes procedures, methods, equipment, and other requirements to prevent the discharge of oil from non-transportation-related onshore and offshore facilities with aboveground oil storage capacity greater than 1,320 gallons, or with completely buried underground oil storage capacity greater than 42,000 gallons. Regulated facilities are also limited to those that, because of their location, could reasonably be expected to discharge oil into the navigable waters of the United States or adjoining shorelines.
Amendments to the rule finalized in July 2002 contained revisions to the original 1973 regulations such as exempting certain completely buried tanks and wastewater treatment facilities. The changes to the rule also eliminated the provision that required an owner or operator of a facility having an aboveground tank greater than 660 gallons to prepare an SPCC Plan.
Amendments to the rule finalized in 2006 addressed additional issues raised by the 2002 final rule, including those pertaining to facilities with smaller oil storage capacities, qualified oil-filled operational equipment, motive power containers, and mobile refuelers. EPA also removed sections of the rule that are not appropriate for facilities with animal fats and vegetable oils, and extended the compliance dates for farms. Since then, on several occasions, EPA delayed the effective date and extended the compliance dates to provide additional time for the regulated community to understand, amend or prepare, and implement SPCC Plans.
Statement of Need for Regulatory Action
EPA has identified opportunities to improve the efficiency of the SPCC regulatory program. To that end, the Agency proposed a series of revisions to the rule in 2007 (72 FR 58378), and received comments on these revisions from regulated parties, professional associations, environmental interest groups, and others. EPA reviewed these comments and evaluated new data about the operations of various industries regulated under the rule, and determined that amending the rule will provide an effective approach to meeting statutory requirements.
Final Amendments to the Rule
On December 5, 2008, EPA amended the SPCC requirements of the Oil Pollution Prevention regulation at 40 CFR part 112. In the current 2009 action, relative to the 2008 rule, the Agency is taking no action on most amendments (i.e., finalizing provisions), making technical corrections to some amendments, and removing three amendments. Based on comments received and consideration of all relevant facts, EPA is removing provisions to: exclude farms and oil production facilities from loading/unloading rack requirements; exempt certain produced water containers at oil production facilities; and provide alternative Qualified Facilities eligibility criteria for oil production facilities. Following is a summary of the December 5, 2008 final amendments that are, after public comments and consideration of all facts, finalized in this action, including several amendments to which EPA has made technical corrections.
Finalized Amendments
The following provisions will become effective without modification on January 14, 2010:
   1. Hot-Mix Asphalt. EPA exempted hot-mix asphalt and hot-mix asphalt (HMA) containers from SPCC requirements. Since this material is unlikely to flow as a result of the entrained aggregate, there would be very few circumstances in which a discharge of HMA would have the potential to reach navigable waters or adjoining shorelines. EPA modified §112.1(d)(2) so that the capacity of storage containers containing only hot-mix asphalt is not counted toward the facility's aggregate oil storage capacity.
   2. Pesticide Application Equipment and Related Mix Containers. EPA exempted pesticide application equipment and related mix containers from SPCC requirements regardless of ownership or where used. EPA also modified §112.1(d)(2) so that the capacities of these containers are not counted toward a facility's aggregate oil storage capacity.
   3. Applicability of Mobile Refueler Requirements to Farm Nurse Tanks. EPA clarified that nurse tanks used on farms are considered mobile refuelers, according to the definition found in §112.2.
   4. Residential Heating Oil Containers. EPA exempted residential heating oil containers that are used to store oil for the sole purpose of heating a single-family residence (including a residence at a farm) by adding a new paragraph under the general applicability section, §112.1(d). EPA also modified §112.1(d)(2) so that the capacity of single-family residential heating oil containers is not counted toward a facility's oil storage capacity.
   5. Definition of "Facility." EPA modified the definition of "facility" to clarify that contiguous or non-contiguous properties, parcels, leases, and pipelines may be considered separate facilities when calculating aggregate storage capacity to determine applicability of the SPCC rule. This amendment clarifies that facilities are allowed to choose how they aggregate or separate containers stored on contiguous or non-contiguous parcels within their operations. EPA also clarified that the definition of "facility" alone governs applicability of the SPCC rule.
   6. Facility Diagram. EPA amended §112.7(a)(3) to clarify that the facility diagram must include all fixed (i.e., not mobile or portable) containers. EPA also required that certain containers and piping, exempted from SPCC requirements in this final amendment, be identified on the facility diagram and marked as "exempt." Under this amendment, the facility owner or operator must mark the area on the diagram where the mobile containers are stored, and can choose to indicate in the facility's SPCC Plan the average number of mobile or portable containers maintained at the facility and the anticipated contents and capacities of those containers, rather than on the diagram itself. The revision to the rule language simplifies the development of a facility diagram by allowing for a general indication of the location and contents of numerous mobile or portable oil storage containers (e.g., drums and totes) on the diagram, rather than a specific representation of each container.
   7. Loading/Unloading Racks. EPA established a definition for the term "loading/unloading rack" and specified that this definition controls applicability of the provision at §112.7(h), Facility tank car and tank truck loading/unloading rack. This amendment provides additional clarity to the regulated community about the applicability of this provision to regulated facilities. EPA also is finalizing editorial revisions to the provision at §112.7(h) for clarity.
   8. General Secondary Containment. EPA added clarity by amending the general secondary containment requirement at §112.7(c) in three ways: (1) by adding text regarding the method, design, and capacity of secondary containment; (2) by specifically allowing both active and passive measures of secondary containment; and (3) by including additional examples of prevention systems.
   9. General Secondary Containment for Non-Transportation-Related Tank Trucks. EPA extended the regulatory relief provided to mobile refuelers in 2006 to non-transportation-related tank trucks at facilities subject to the SPCC rule, because they operate similarly to mobile refuelers.
   10. Security. EPA amended the facility security requirements at §112.7(g) to allow owners and operators of all facilities to tailor security measures to their facilities' specific characteristics and location. Under this final amendment, the facility owners/operators are required to describe how they secure and control access to the oil handling, processing, and storage areas; secure master flow and drain valves; prevent unauthorized access to starter controls on oil pumps; secure out-of-service and loading/unloading connections of oil pipelines; and address the appropriateness of security lighting to both prevent acts of vandalism and assist in the discovery of oil discharges.
   11. Integrity Testing. EPA amended the integrity testing requirements at §§112.8(c)(6) and 112.12(c)(6) to allow an owner or operator to consult and rely on industry standards to determine the appropriate qualifications for personnel performing tests and inspections, as well as the type and frequency of integrity testing required for a particular container size and configuration. This amendment provides flexibility in complying with bulk storage container integrity testing requirements by extending the streamlined bulk storage container inspection requirement for qualified facilities provided in the December 2006 final rule (71 FR 77266, December 26, 2006) to all facilities subject to the integrity testing provision.
   12. Integrity Testing Requirements for Animal Fats and Vegetable Oils (AFVO). EPA amended the requirements found at §112.12(c)(6) to provide the PE or owner/operator certifying an SPCC Plan with the flexibility to determine how integrity testing requirements should be met for eligible containers, based on compliance with certain FDA regulations and other criteria relating to container construction and configuration.
   13. Oil Production Facilities. EPA streamlined requirements specific to this sector in the following ways:
Amended the definition of "production facility" to be consistent with the amended definition of "facility."
Allowed a new oil production facility a period of six months to prepare and implement an SPCC Plan.
Provided an alternative compliance option for flow-through process vessels at oil production facilities that requires general secondary containment and additional oil spill prevention measures in lieu of the sized secondary containment requirements that apply for this equipment.
Exempted certain intra-facility gathering lines subject to requirements of the U.S. Department of Transportation's (DOT's) pipeline regulations in 49 CFR parts 192 or 195.
Provided specific requirements for a flowline/intra-facility gathering line maintenance program and an alternative compliance option for flowlines and intra-facility gathering lines at oil production facilities for contingency planning in lieu of the general secondary containment requirements.
Defined the term "produced water containers", and provided an alternative compliance option for these containers at oil production facilities requiring general secondary containment, a process or procedure certified by a PE designed to remove free-phase oil on the surface of the produced water container and compliance with additional oil spill prevention measures in lieu of sized secondary containment requirements.
Clarified the definition of "permanently closed" as it applies to oil production facilities and containers present at an oil production facility.
   14. Man-Made Structures. EPA clarified that certain man-made structures such as building walls, basement structures, and drainage systems may be considered when determining how to comply with SPCC requirements. If an oil container at a regulated facility is located inside a building, the PE or facility owner/operator certifying the SPCC Plan may take into consideration the ability of the building walls and/or drainage systems to serve as secondary containment for the container.
   15. Wind Turbines. EPA clarified the applicability of the SPCC rule to wind turbines used to produce electricity; specifically, these wind turbines meet the definition of oil-filled operational equipment promulgated in the December 2006 SPCC rule amendments (71 FR 77266, December 26, 2006) to the extent that the wind turbines meet the oil storage capacity threshold in the rule. Therefore, owners and operators of wind turbines can take advantage of the alternative compliance option provided to oil-filled operational equipment.
Finalized Amendments with Technical Corrections
The following provisions will become effective with technical corrections on January 14, 2010:
   1. Tier I Qualified Facilities. EPA streamlined SPCC requirements for Tier I qualified facilities -- a subset of Tier II qualified facilities (i.e., facilities less than 10,000 gallons aggregate aboveground storage capacity) having no oil storage containers with a capacity greater than 5,000 gallons. Tier II qualified facilities were addressed in the 2006 amendment to the SPCC rule (71 FR 77266, December 26, 2006). Under this amendment, owners or operators of Tier I qualified facilities have the alternative to complete an SPCC Plan template (promulgated as Appendix G to 40 CFR part 112) in lieu of a full SPCC Plan. An owner or operator of a Tier I qualified facility may, as an alternative, complete the SPCC Plan template and may self-certify that the facility complies with a set of streamlined SPCC rule requirements. In the 2009 final action, this amendment is being finalized with technical corrections (e.g., clarifications and corrections of typographical and formatting errors.
   2. Underground Emergency Diesel Generator Tanks at Nuclear Power Stations. EPA exempted underground oil storage tanks including below-grade vaulted tanks, deferred under 40 CFR part 280, that supply emergency diesel generators at nuclear power generation facilities and that are subject to design criteria under the Nuclear Regulatory Commission (NRC) regulations.
   3. Oil Production Facilities-Compliance Date for New Facilities. Amended the compliance date for new oil production facilities to November 10, 2010.
Removed Provisions
 Additionally, after consideration of all relevant facts and public comments, EPA is removing the following December 5, 2008 provisions from the SPCC regulation:
         1.       Loading/Unloading Rack Exclusions. EPA is removing the exclusion of oil production facilities and farms from the loading/unloading rack requirements at §112.7(h).
         2.       Produced Water Containers. EPA is removing the exemption for certain produced water containers that do not contain oil in quantities that may be harmful as certified by a PE.
         3.       Alternative Qualified Facility Criteria for Oil Production Facilities. Removed the alternative criteria for a marginal oil production facility to be eligible to self-certify an SPCC Plan as a qualified facility.
Objectives of the Regulatory Impact Analysis
The purpose of this report is to present the regulatory impact analysis for the SPCC final amendments. The report also meets the requirements for regulatory impact analysis of Executive Order 12866 - Regulatory Planning and Review; the Regulatory Flexibility Act (RFA) and Small Business Regulatory Enforcement Fairness Act (SBREFA); Executive Order 13132 - Federalism; Executive Order 13175 - Consultation and Coordination with Indian Tribal Governments; Executive Order 13045 - Protection of Children from Environmental Health & Safety Risks; Executive Order 13211 - Actions That Significantly Affect Energy Supply, Distribution, or Use; the National Technology Transfer and Advancement Act; and the Paperwork Reduction Act (PRA).
Organization of this Report
The remainder of this report is organized as follows:
Chapter 3 describes the methodology for the analysis.
Chapter 4 describes the estimation method of the SPCC-regulated universe.
Chapter 5 discusses the compliance costs associated with the rule requirements (i.e., unit costs).
Chapter 6 analyzes the impacts of the final rule on compliance costs and resulting savings by rule component.
Chapter 7 describes the projected impact of the final rule on human health, welfare, and the environment.
Chapter 8 presents a summary of small business impacts and responds to Executive Orders.
Chapter 9 provides key limitations and assumptions of the analysis.
Volume II contains the following appendices to this report:
Appendix A presents the results of the questionnaires that were sent to regulated facilities.
Appendix B provides the sensitivity analysis for the annual cost savings that examines the impact of alternative compliance assumptions.
Appendix C presents the data sources used to estimate the universe of facilities regulated by the SPCC rule.
Appendix D presents details on the methodology used to determine the industry categories for regulated facilities using state databases and Dun & Bradstreet (D&B) data.
Appendix E describes how the universe of SPCC-regulated facilities was estimated using industry-specific data.
Appendix F analyzes the proximity of facilities to navigable waters or adjoining shorelines using geographic information systems (GIS).
Appendix G describes the use of industry growth rates to project the universe of SPCC-regulated facilities.
Appendix H briefly compares the unit costs from various sources with EPA estimates.
Appendix I provides the details of the unit cost inventory.
Appendix J presents the detailed formulae used in calculating cost savings in Chapter 6.
Appendix K provides the hypothetical SPCC facility profiles.
Exhibit 2-1 shows the correspondence between the preamble of the final rule and this RIA for each provision in the final rule.
Exhibit 2-1
Crosswalk with the Preamble
Final Amendment
Preamble Section
RIA Section
Hot-Mix Asphalt
V.A.1
6.1
Pesticide Application Equipment and Related Mix Containers
V.A.2
6.2
Applicability of Mobile Refueler Requirements to Farm Nurse Tanks
V.A.3
6.3
Residential Heating Oil Containers
V.A.4
6.4
Definition of Facility
V.A.5
6.5
Facility Diagram
V.A.6
6.6
Loading/Unloading Racks
V.A.7
6.7
General Secondary Containment
V.A.8
6.8
General Secondary Containment for Non-Transportation-Related Tank Trucks
V.A.9
6.9
Security
V.A.10
6.10
Integrity Testing
V.A.11
6.11
Integrity Testing Requirements for Animal Fats and Vegetable Oils
V.A.12
6.12
Oil Production Facilities
V.A.13
6.13
  Definition of Production Facility
V.A.13.a
6.13.3
  Modifications to §112.9 for Drilling and Workover Facilities
V.A.13.b
6.13.4
  SPCC Plan Preparation and Implementation for New Oil Production Facilities
V.B.3
6.13.5
  Exemption for Certain Intra-facility Gathering Lines
V.A.13.c
6.13.6
  Flowlines and Intra-facility Gathering Lines
V.A.13.d
6.13.6
  Compliance Alternative in Lieu of Secondary Containment for Flowlines and Intra-facility Gathering Lines
V.A.13.d.i
6.13.6
  Contingency Plan for Flowlines and Intra-facility Gathering Lines
V.A.13.d.ii
6.13.6
  Requirements for a Flowline and Intra-Facility Gathering Line Maintenance Program
V.A.13.d.iii
6.13.6
  Exemption from Sized Secondary Containment for Flow-Through Process Vessels
V.A.13.e.i
6.13.7
  Alternative compliance requirements in Lieu of Sized Secondary Containment for Flow-Through Process Vessels
V.A.13.e.ii
6.13.7
  Reportable Discharge from Flow-Through Process Vessels
V.A.13.e.iii
NA
  Alternative Qualified Facility Eligibility Criteria for an Oil Production Facility
V.C.2
6.13.8
  Alternative Compliance Measures for Produced Water Containers
V.A.13.f
6.13.9
  Exemption for Produced Water Containers
V.C.3
6.13.9
  Clarification of the Definition of Permanently Closed Containers
V.A.13.g
6.13.10
  Oil and Natural Gas Pipeline Facilities
V.D
6.13.11
Man-Made Structures
V.A.14
6.14
Wind Turbines
V.A.15
6.15
Tier I Qualified Facilities
V.B.1
6.16
Underground Emergency Diesel Generator Tanks at Nuclear Power Generation Facilities
V.B.2
6.17

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Chapter 3

Methodology

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Methodology
Executive Order 12866 requires agencies to assess all costs and benefits of regulatory activities, including quantitative and qualitative measures. This chapter presents the methodology used to estimate the economic impacts of the final amendments to the SPCC regulations and the total cost of compliance with the rule requirements. This action addresses the amendments finalized in 2008 (but did not take effect), after consideration of further public comments and all relevant facts. Section 3.1 describes the regulatory and economic baseline for the analysis; Section 3.2 outlines the basic framework for estimating cost savings from the final amendments to the SPCC rule. Subsequent chapters of the report provide greater detail on specific steps and calculations involved in the estimation of cost savings, including relevant equations that could be used to replicate the analysis.
Regulatory Baseline for the Analysis
The impacts of rule amendments in this action are estimated by comparing costs in the baseline with those associated with the finalized amendments. For the regulatory impact analysis of the combined impact of the 2008 and 2009 final amendments to the SPCC rule, EPA used as its baseline the SPCC rule requirements under 40 CFR part 112, as amended in 2002 (71 FR 77266-77293). The 2002 amendments are used as the baseline because these amendments were the first revisions to the regulations since the original regulations were published in 1973. The 2002 amendments were the culmination of a process that included three proposals to the 1973 regulations. Moreover, the 2002 amendments were substantive revisions to the original oil spill regulations. As recommended by EPA's "Guidelines for Preparing Economic Analyses," September 2000, the Agency assumed that facilities are in full compliance with the SPCC rule prior to the 2002 amendments. The regulatory impact analysis also contains a sensitivity analysis with partial compliance scenarios.
However, there is widespread concern among industry and others regarding potential non-compliance among owners and operators of facilities of certain sizes and industry sectors. For the RIA supporting the 2002 amendments, EPA was unable to locate statistically valid data to assess the extent or magnitude of such non-compliance. EPA considered compliance issues in the 2002 economic analysis of the SPCC rule:
      "It is possible that [owners and operators of] some facilities have misinterpreted the existing regulation and are not currently in full compliance with existing requirements, but there is no practical way to measure the level of non-compliance. Moreover, the costs of coming into compliance with the clarified requirements are not properly attributed to this final [2002] regulation."
This regulatory impact analysis considers the reductions in compliance costs resulting from the final amendments to the SPCC rule. EPA recognizes, however, that actual changes in expenditures depend on the degree of compliance with SPCC requirements by owners and operators of the facilities affected by this rule. Owners and operators of existing facilities that are out of compliance with the existing rule will not benefit from the reduced requirements offered by the final rule.
To better understand the impacts of potential non-compliance on the estimated cost savings, and in response to comments from OMB and GAO, EPA conducted two sensitivity analyses that examine the economic impact of the rule under different compliance scenarios. In the first analysis, EPA assumed three partial compliance scenarios (25 percent, 50 percent, and 75 percent compliance) in the baseline and after the final amendments (see Appendix B in Volume II). In the second sensitivity analysis, EPA assumed three partial compliance scenarios in the baseline and full compliance after the final amendments. EPA estimated the net impact on owners and operators of facilities in the oil production sector and farm sector that comply with the rule. Compliance in the agricultural community may be low or close to zero compliance, as reported by the U.S. Department of Agriculture. EPA assumed partial compliance rates of 0 percent, 25, percent, and 75 percent for the farm sector. The compliance rate of the oil production sector may be higher; the U.S. Department of Energy (DOE) estimates that about 67 percent of oil production facilities comply with the secondary containment requirement. For the oil production sector, EPA assumed partial compliance rates of 25 percent, 50 percent, 67 percent, and 75 percent for this sector.
Industry compliance activities and their associated costs cannot be fully attributed to the SPCC rule. Data on the extent that facilities adopt industry standards is uncertain, and, in this analysis, the compliance costs and cost savings are not adjusted for possible overlap with industry standards. As a result, the analysis may overestimate the compliance costs. The Agency plans to consider industry standards in future economic analyses. The regulatory impact analysis takes into account requirements in state regulations that are similar to the SPCC requirements. For details of the state overlap analysis, refer to Section 5.4 of this report and additional information in the docket. In sum, when reporting the compliance cost and cost savings, EPA accounted for potential overlap with state regulations but not with industry standards.