Based on the count of UST systems from OUST's mid-year and end-year reports, plus the U.S. Department of Energy's (DoE's) Alternative Fuels Data Center listing the amount of stations selling E85 fuel.
EPAct-related Provisions
Operator training
UST Facilities in Indian country
                                    100.0%
                                966 facilities
All facilities in Indian country.
Not applicable  -  applies to all facilities in Indian country.
Secondary containment - new and replaced tanks
UST systems in Indian country
                                     36.2%
                                947 systems[b]
Approximately 72.4 percent of systems in Indian country are single-walled. Analysis assumes midpoint of time horizon until all units are replaced (year 10, 50 percent of universe affected).
E[2], Incorporated, Tribal Data Analysis, July 2007.
Threshold for pipe replacement rather than repair
UST systems in Indian country
                                     30.2%
                                789 systems[b]
Piping replaced every five years, where 60.3% are single-walled. Analysis assumes midpoint of time horizon until all units are replaced (year 10, 50 percent of universe affected).
E[2], Incorporated, Tribal Data Analysis, July 2007.
Under-dispenser containment for all new dispensers
UST systems in Indian country
                                     48.5%
                               1,270 systems[b]
Approximately 97 percent of systems require under-dispenser containment. Analysis assumes midpoint of time horizon until all units are replaced (year 10, 50 percent of universe affected).
E[2], Incorporated, Tribal Data Analysis, July 2007, Industrial Economics, "Preliminary Assessment and Scoping of Data Related to Potential Revisions to the UST Regulations; Tasks 2-4, Work Assignment 1-25," November 20, 2008, Appendix A, and OUST End-of-Year reports.
[a]	Figures in this column are calculated assuming that the average number of UST systems per facility is approximately 2.71, per: Skeo Solutions. "Summary of Key Data from State Public Record Postings," Work Order 1006, Table 1, October 25, 2013.
[b] The affected universes presented for these items reflect 50 percent of ultimately affected systems or facilities. Because these requirements take effect over time and future costs are discounted, we present the universe affected at year 10 as a central estimate. In addition, we adjust unit costs to reflect the fact that the total cost of these requirements grows as the number of affected systems or facilities increases.

2.5	Facilities and Systems Affected by Final UST regulation
      Many states currently have baseline regulations consistent with one or more requirements in the final UST regulation. As a result, only a portion of the universe of potentially affected facilities will be required to change practices to comply with each regulatory change. Whereas Exhibit 2-4 displays the number of units that may potentially be subject to each requirement, Exhibit 2-5 identifies, based on EPA's review of baseline state regulations, the number of units that will be subject to these requirements as a result of the final UST regulation. For nearly all requirements, some portion of the potentially affected universe is already in compliance with the final regulatory changes. For example, in cases where a state's regulatory baseline already requires activities commensurate with the regulatory requirement under a given regulatory option of this final regulation, UST systems within that state are not considered to be "systems affected" by the regulatory option in question, because these systems would not incur any incremental requirements or associated costs under the final regulation. Section B.2 of Appendix B, and the tabular summary of state regulatory requirements on pages B-10 through B-16, contain the complete set of information on state regulatory baselines as they pertain to the regulatory requirements of the final regulation, and provide an accounting of which states are considered by the cost estimation modeling in this RIA to have state regulatory baselines in full, partial, or non-compliance with each regulatory requirement of the final regulation. The tabular summary on pages B-10 through B-16 of Appendix B indicates the frequency or presence of the regulatory requirement according to each state's regulatory baseline. As indicated above, by comparing these frequencies or requirements with those in each regulatory option of the final regulation (as shown in Exhibit 1-1), it is possible to determine whether UST systems in a given state are subject to a particular regulatory requirement under a given regulatory option, based on whether the regulatory baseline of the state in question accords with the regulatory requirement under that regulatory option. If the state regulatory baseline is as stringent, or more stringent, than what is required under the regulatory option (Exhibit 1-1), then UST systems in that state are not considered affected by that particular regulatory requirement (and appear in Exhibit 2-4 but not in the "systems affected" column of Exhibit 2-5). Otherwise, the systems are considered to be affected (and appear in both Exhibit 2-4 and the "systems affected" column of Exhibit 2-5).
      Alternative Option 2 will affect the smallest number of systems. Among the specific regulatory changes, walkthrough inspections and spill prevention equipment tightness testing affect the largest number of UST systems in all scenarios. In contrast, several regulatory changes (e.g., closure of irreparable lined tanks and pipe replacement requirements) are likely to affect only a small number of systems.
      The distribution of incremental impacts of the regulation also depends on the distribution of baseline technologies across states with different baseline regulations. Facilities and systems in states with fewer current regulations may bear a greater proportion of costs and benefits than facilities and systems in states with extensive baseline regulations. A key limitation of available baseline data is that baseline technology data is not available at the state level. For example, it is possible that facilities and systems with specific release detection technologies (e.g., automatic tank gauges (ATGs)) may not be distributed evenly across all states. However, estimates of the percentage of systems using ATGs are available only at the national level. As a result, the regulatory scenarios in Chapters 3 (Compliance Costs) and Chapter 4 (Benefits and Cost Savings) reflect regulatory changes required by an "average" facility in a state under the final UST regulation, assuming that all systems reflect the national profile of existing technologies. Analyses of economic impacts and small businesses in Chapter 5 (Distributional Analyses) assess the possible distribution of compliance impacts related to this uncertainty.

Exhibit 2-5

              Estimated Systems Not Currently Regulated By States
                                  Description
                   Universe of Potentially Affected Systems
                      Systems Affected by Selected Option
                   Systems Affected by Alternative Option 1
                Systems Affected by Option Alternative Option 2
Release Prevention
Walkthrough inspections [a]
                                                                        213,277
                                                                   (facilities)
                                                           204,798 (facilities)
                                                           204,798 (facilities)
                                                           128,986 (facilities)
Overfill prevention equipment inspections a
                                                                        577,981
                                                                        354,769
                                                                        395,802
                                                                            N/A
Spill prevention equipment tests a
                                                                        520,183
                                                                        388,641
                                                                        418,547
                                                                        388,641
Containment sump testing
                                                                        105,771
                                                                         80,324
                                                                         95,366
                                                                            N/A
Spill prevention equipment inspection after repair
                                                                         14,450
                                                                         14,306
                                                                         14,306
                                                                         14,306
Overfill prevention equipment test after repair
                                                                         11,560
                                                                         11,280
                                                                         11,280
                                                                         11,280
Secondary containment test after repair
                                                                         19,324
                                                                         14,426
                                                                         14,426
                                                                         14,426
Eliminate flow restrictors in vent lines for all new tanks and when overfill prevention equipment is replaced [b]
                                                                         78,256
                                                                         63,818
                                                                         63,818
                                                                            N/A
Release Detection
Operability tests  -  ATG [c]
                                                                        194,548
                                                                        190,854
                                                                        190,854
                                                                        190,584
Operability tests  -  interstitial monitoring [c]
                                                                        108,499
                                                                        106,438
                                                                        106,438
                                                                        106,438
Operability tests  -  line leak detection [c]
                                                                        159,221
                                                                        156,197
                                                                        156,197
                                                                        156,197
Operability tests  -  groundwater and vapor monitoring [c]
                                                                         25,968
                                                                         25,475
                                                                            N/A
                                                                         25,475
Eliminate groundwater and vapor monitoring as release detection methods [c, d]
                                                                         25,968
                                                                            N/A
                                                                         25,968
                                                                            N/A
Add SIR/CITLD to regulation with performance criteria
                                                                          2,809
                                                                         2, 756
                                                                          2,756
                                                                          2,756
Response to interstitial monitoring alarms
                                                                         14,003
                                                                         10,634
                                                                         10,634
                                                                         10,634
Remove release detection deferral for emergency generator tanks
                                                                         17,339
                                                                         10,977
                                                                         10,977
                                                                         10,977
Other
Remove deferral for airport hydrant fuel distribution systems
                                                                         81 [e]
                                                                             56
                                                                             56
                                                                            N/A
Remove deferral for UST systems with field-constructed tanks
                                                                            346
                                                                            198
                                                                            198
                                                                            N/A
Require notification of ownership change
                                                                         21,505
                                                                   (facilities)
                                                                          3,220
                                                                   (facilities)
                                                                          3,220
                                                                   (facilities)
                                                                          3,220
                                                                   (facilities)
Closure of lined tanks that cannot be repaired according to a code of practice
                                                                             80
                                                                             57
                                                                             57
                                                                             57
Requirements for demonstrating compatibility with fuels > E10 and > B20
                                                                            234
                                                                            234
                                                                     577,981[f]
                                                                            N/A
EPAct-related Provisions
Operator training
                                                                            966
                                                                   (facilities)
                                                                            966
                                                                   (facilities)
                                                                            966
                                                                   (facilities)
                                                                            966
                                                                   (facilities)
Secondary containment - new and replaced tanks [b]
                                                                            947
                                                                            947
                                                                            947
                                                                            947
Threshold for pipe replacement rather than repair b, [g]
                                                                            789
                                                                              0
                                                                              0
                                                                              0
Under-dispenser containment for all new dispensers b
                                                                          1,270
                                                                          1,270
                                                                          1,270
                                                                          1,270
[a]	The universe of affected systems for these requirements varies because some states have current requirements that differ in frequency and ensure baseline compliance in some regulatory scenarios but not others.
[b] The affected universes presented for these items reflect 50 percent of ultimately affected systems or facilities. Because these requirements take effect over time and future costs are discounted, we present the universe affected at year 10 as a central estimate. In addition, we adjust unit costs to reflect the fact that the total cost of these requirements grows as the number of affected systems or facilities increases.
[c]	The number of affected systems differs from the universe of potentially affected systems for this requirement; however, as indicated in Appendix B, this RIA does not apply state baseline regulatory requirements to any system for this requirement. The number of affected systems is smaller than the number of potentially affected systems because some systems to which this requirement applies are EGTs, and the application of regulatory requirements to these systems is covered in the requirement for removing the release detection deferral for EGTs, and affects the numbers shown for this requirement as well.
[d]	Universe affected phases in over five years.
[e]	The universe of potentially affected units is 81 systems, or 632 tanks (at eight tanks per system for the 71 DoD-owned systems, plus an additional 64 tanks at the 10 commercial airport systems).
[f] 	As part of the requirements for demonstrating compatibility with fuels > E10 and > B20 proposed in November 2011, all UST systems must maintain equipment records. While 234 represents the number of UST systems subject to demonstrating compatibility with fuels > E10 and >B20 under the Selected Option, all (577,981) UST systems would are subject to the requirement to maintain equipment records under Alternative Option 1.
[g]	EPA's screening analysis shows that a requirement to replace piping if more than 50 percent of it requires repairs would likely generate no net costs, as owners or operators would ordinarily pursue replacement under those circumstances. See Appendix C for details.

 Chapter 3.	Assessment of Compliance Costs

3.1	Introduction
This chapter describes EPA's analysis of the social costs associated with the final UST regulation. OMB guidance suggests that an analysis that relies on measures of opportunity cost and willingness to pay provides a holistic basis for assessing the total cost of any regulation. Specifically, a social cost analysis should focus on measuring changes in consumer and producer surplus by considering the market responses to compliance costs (e.g., changes in demand and supply). Along with the administrative costs incurred by the government, changes in producer and consumer surplus reflect the true cost to society of adopting a set of regulatory measures.
For this regulatory impact analysis, EPA uses a combination of direct compliance costs and state oversight costs to approximate social costs. In this context, compliance costs represent a reliable indicator of social costs for the following reasons:
   *       The regulatory requirements generally focus on additional testing and inspection of existing equipment, and do not reflect large-scale investments in equipment or significant changes to operations at the facility level. In addition, the facilities affected by the regulation are distributed with relative geographic uniformity for consumers and producers.
   *       Given the small per-facility costs of the regulation (approximately $715 for the average facility, as documented in this chapter), closures or changes in market structure represent an unlikely response to the regulation. Therefore, it is unlikely that significant changes to production or consumer behavior will affect social costs.
   *       The short- and long-run impacts of the regulation are not likely to differ significantly. Testing and inspection requirements under the regulation may offer some opportunities for owners and operators to reduce costs by learning over time, but they are not likely to reduce costs enough to facilitate large-scale equipment upgrades.
	For these reasons, compliance costs are likely to be a reasonable approximation of social costs over both the short- and long-run. This chapter presents EPA's compliance cost methodology and results, and summarizes the calculation of government oversight costs. The chapter also provides a discussion of key uncertainties and several brief sensitivity analyses. An analysis of the potential economic impacts of the final UST regulation is presented in Chapter 5, and a sensitivity analysis that evaluates the effects of alternative interest rates is presented in
Chapter 7.
3.2	Compliance Cost Methodology
      In this chapter, EPA presents its methodology for estimating incremental compliance costs of the final UST regulation beyond the current baseline costs of existing federal and state regulation of underground storage tanks. EPA's analysis focuses on the specific incremental costs that occur as a consequence of the regulation. Throughout this chapter, the analysis distinguishes between three types of costs:
    *       System-level: Costs that occur at the individual UST tank level, including ancillary equipment.
    *       Facility-level: Costs that occur at the level of a facility that owns several USTs; typically 2.71 times the system-level cost to reflect UST ownership by the average facility.
    *       Unit costs: System-level costs related to a particular requirement. For example, the requirement to provide notification of ownership change has a unit cost of approximately $14.
      Calculation of total incremental compliance costs for UST facilities reflects two key steps: identifying specific measures necessary for compliance at individual facilities, and calculating costs associated with each of these measures. To estimate these costs, EPA developed a compliance cost model that identifies incremental equipment and labor requirements for an individual system. Based on the baseline equipment, existing state regulations, and anticipated responses to the regulation, the model then generates system-specific estimates of compliance costs. Compliance costs include the labor and capital costs associated with new equipment and installation, inspection, testing, and recordkeeping. The model also includes other compliance costs, such as those associated with more frequent detection of equipment failure and repair of equipment. Some component costs are specific to individual UST system configurations  -  for example, airport hydrant fuel distribution systems or UST systems with field-constructed tanks  -  while others are consistent across all system types.
      We calculate the compliance costs of the final UST regulation by measuring three factors: the proportion of facilities or UST systems with specific technologies (i.e., the portion of systems that require specific types of upgrades or tests, described in Exhibit 2-4 and Section B.1 of Appendix B); the regulations already in place in each state (i.e., baseline regulations, described in Exhibit 2-5 and Section B.2 of Appendix B); and, the unit cost to comply with each element of the regulation (described in this Chapter, specifically Exhibit 3-1, as well as Appendix D).

An important limitation of our analysis is that we do not have data on the distribution of UST technologies. Consider the following from Exhibit 2-5: under the Selected Option, we estimate that overfill prevention tests will be a new requirement for 354,769 systems, and spill prevention equipment tests will be a new requirement for 388,641 systems. These requirements could together affect as few as 388,641 systems if all systems that are affected by overfill prevention testing are a subset of the systems that are affected by spill prevention testing. In the absence of additional information, it is equally plausible that these two requirements affect the entire universe of USTs if they overlap as little as possible.
EPA has not identified any information that could allow us to reliably narrow the universe of affected USTs to a number smaller than the entire universe. Further, EPA's review of state data suggests that facilities in all states will be subject to some cost under the final UST regulation. Consequently, when considering the average cost of the regulation on a facility or UST system basis, we divide the total cost by the number of facilities or systems in the entire universe.
3.2.1	Categories of Compliance Costs Analyzed
This analysis includes the following categories of compliance costs: operation and maintenance costs; capital costs; and implicit capital costs, or "time value of money costs" associated with earlier detection of equipment failure. Because the final UST regulation focuses on operational improvements, operation and maintenance costs constitute the majority of the compliance costs identified in this analysis. These costs are relatively frequent, recurring costs that mainly involve a service activity. Operation and maintenance activities include the labor and materials costs associated with maintenance of equipment, routine testing, and inspection (whether performed by the owner, operator, or a contractor). This analysis assumes that UST facility owners and operators pay in full for these costs when they occur (that is, they do not obtain financing and pay over time). Some of the operation and maintenance activities included in the final UST regulation take the form of recurring requirements occurring less frequently than once per year: for example, overfill prevention equipment inspections are required every three years under the Selected Option. We calculate the total incremental annual cost of these recurring requirements by assuming that an equivalent portion of the universe incurs the cost associated with each such recurring requirement every year: for overfill prevention equipment inspections, we assume one third of the affected universe of UST systems must undergo this inspection each year, such that all UST systems have complied within each three-year inspection period.
Because the final UST regulation does not focus on broad equipment requirements, capital costs represent a small portion of the total compliance costs for this regulation. Capital costs address the purchase and installation of new equipment, such as installing a new double-walled UST or under-dispenser containment. Total capital costs typically include installation, labor, and initial service required to ensure the new equipment is fully functioning. EPA assumes that UST owners and operators finance these compliance costs over the life of the equipment; all capital costs are calculated over a regulatory time horizon of 20 years. The following examples characterize the three types of capital cost calculations that are relevant to this regulatory analysis:
Existing equipment replacements: An UST system owner or operator must upgrade an existing system with new equipment to comply with a requirement under the regulation (e.g., facilities with EGTs may be required to install release detection equipment when the deferral is removed). The incremental compliance cost is the total cost of the new equipment and installation (including removal of existing equipment). Any additional (incremental) operation and maintenance costs are also included.
New equipment requirements: An operator is installing new or replacement equipment as an ordinary business expense. Under baseline regulations, Equipment A is compliant. However, new regulations require a higher level of compliance for new tank systems that can be satisfied at lowest cost by Equipment B. The incremental compliance cost to the operator of the equipment is the additional cost (if any) of purchasing, installing and operating Equipment B instead of Equipment A. The costs of this requirement reflect the timing of the normal replacement cycle for all equipment in the universe. For example, owners and operators installing new UST systems will be required to use technologies other than flow restrictors to ensure release prevention.
Time value of money (TVM) costs: Under baseline regulations, the average UST system requires inspection every three years. EPA estimates that the baseline three-year inspection, on average, identifies a hypothetical repair or replacement cost of $100 associated with certain equipment. For example, under the final UST regulation, a new annual test could discover the same issue sooner and require repair or replacement two years earlier than it would have been discovered in the baseline. In this example, while the repair expense is the same, the regulation generates a time value of money cost by requiring an owner or operator to incur the repair expenditure sooner.
      Costs to Regulated Universe to Review Regulation: This analysis assumes that all facility operators in the universe will be required to read the final UST regulation in order to comply with it. For conventional USTs and EGTs, we estimate that reading and understanding the final UST regulation will require 4.75 hours of labor from a manager at each facility. This equates to a one-time cost of approximately $271 for each facility, or $58 million. This is equivalent to an annual cost of $5.5 million under each regulatory option. For FCTs and AHFDSs, we assume these costs are subsumed in the management costs for these systems (see Appendix A for details).
EPA estimates that the final UST regulation will impose capital costs on the following components due to earlier detection of problems as a result of the new testing requirements:
   *       Overfill prevention equipment;
   *       Spill prevention equipment;
   *       Interstitial areas; and
   *       ATGs, interstitial monitors, vapor monitors, groundwater monitors, and line leak detectors.
The final UST regulation requires testing, in addition to inspections, for several UST system components. EPA assumes that testing adds value to baseline release prevention strategies in two ways: first, testing detects issues with an UST system that may not be detectable in inspections. Second, in some cases, testing will occur more frequently than baseline inspections and therefore may identify issues that occur between inspections. This analysis therefore considers two types of increased capital costs. First, EPA assumes that additional testing required under the final UST regulation will identify malfunctions that prior inspections would have overlooked, and will therefore mandate additional, incremental compliance costs related to equipment repair and replacement. Second, some baseline compliance costs will occur earlier than they would in the baseline, creating time value of money costs as owners and operators incur compliance costs earlier and forgo the use of such funds for other investments. The time value of money cost of incurring a repair sooner is estimated at seven percent, consistent with OMB's guidance on discount rate. The use of a seven percent discount rate for these time value of money costs maintains consistency with the discount rates used for other cost and benefit calculations presented in this RIA, including amortization of capital costs and discounting costs associated with regulatory requirements with delayed implementations. For comparison, Chapter 7 presents results for the Selected Option using a three percent discount rate. See Appendix D for the detailed cost methodology.
The cost estimation methodology in this RIA focuses exclusively on the compliance costs incurred to comply with the regulatory requirements of the final regulation. This differs from the benefit estimation methodology (see Chapter 4), where benefits are monetized based on an estimated number of avoided releases, and the avoided remediation costs associated with those releases.
3.2.2	Estimation of System-Level Compliance Costs for UST Systems
Estimates of system-level compliance costs for each part of the final UST regulation are based on publicly available data on equipment, installation, and testing costs, information collected from professionals in industries that provide relevant equipment and services, and EPA's professional judgment. Costs are estimated to occur according to the regulation implementation schedule identified in Exhibit 1-2; we use an annual discount rate of seven percent to adjust costs with compliance windows of more than one year.
Labor costs used in this analysis reflect labor-hour estimates from EPA Information Collection Request 1360.08 and EPA Information Collection Request 1360.12 for specific inspection and recordkeeping tasks. The cost of labor is based on Bureau of Labor Statistics (BLS) labor rates for skill categories appropriate to the retail sector and technical requirements of the final UST regulation. In particular, EPA selected labor rates that correspond to categories of labor employed in the retail motor fuels sector (NAICS 447). EPA does not expect regulated entities to employ higher skilled workers to comply with this regulation.
The analysis adjusts these rates using a 12 percent overhead factor and a fringe benefits factor of 28.8 percent, which is specific to service-providing industries. For requirements that are likely to be satisfied by third-parties, such as testing, labor costs are included in the market prices (costs) of those services.
    A broad explanation of the functionality of the compliance cost estimation model is provided below:

    * First, for each regulatory requirement of the rule, the model identifies the number of UST systems are affected. Systems are affected if they have the proper technical components affected by the requirement (seen in Exhibit 2-4) and are located within a state where compliance with this requirement is not already part of the regulatory baseline (seen in Exhibit 2-5). To the extent that UST systems are located in states whose regulatory baselines are in partial compliance with the rule, the cost model makes an appropriate adjustment such that the correct set of incremental costs are applied.

    * Then, the cost model derives a set of unit costs for compliance with each regulatory requirement. These costs include labor costs as well as O&M (equipment) costs, and are broken down by one-time costs that are amortized versus annually-occurring costs. As described on page 3-2, some costs apply at the UST-system level, and others apply at the broader facility level (a facility may have more than one UST system). These costs can be seen in Exhibit 3-1.

    * To estimate costs, the model then applies unit costs for each regulatory requirement to each applicable system. In some cases, the unit costs in Exhibit 3-1 for a given regulatory requirement are simply applied to the set of affected systems or facilities for that requirement in Exhibit 2-5. However, in many cases, state regulatory baselines interact with the regulation's requirements in complex ways, such that this methodology must be adjusted. For example, UST facilities in states that require semiannual walkthrough inspections under their regulatory baselines incur lower costs than UST facilities in states that currently require no walkthrough inspections; the compliance cost model tracks these cases and applies the appropriate incremental cost as necessary.

    While the regulation's impacts are not significant enough ($1 billion per year) to require a quantitative assessment of uncertainty, the RIA considers the uncertainty associated with key variables. However, the regulatory requirements modeled in this RIA generally do not lend themselves to a probabilistic assessment of uncertainty because most requirements consist of a task, such as an inspection or test, that has an established cost and must be performed according to a given schedule. Correspondingly, the system is not subject to broad uncertainty related to options for compliance. Moreover, the regulation requires that each such task be performed with a given frequency. Probabilistic uncertainty analyses, which best apply in cases where one of multiple outcomes may occur with a different probability weight for each outcome, do not directly apply to the requirements of this regulation.

    To the extent that certain aspects of the cost estimation methodology are uncertain, this RIA includes various sensitivity analyses to address these:

    * Input cost uncertainties are addressed by the analysis of alternative labor rates (Exhibit 3-6);

    * Universe uncertainties, especially regarding the interaction between the uncertainty in which systems contain certain UST system components and which systems are located in states that do not currently require testing/inspection of those components, are addressed by the analysis of compliance cost scenarios (Exhibit 3-7); and

    * Uncertainties regarding the potential of the rule to result in small business impacts are addressed via a "worst-case scenario" sensitivity analysis where the smallest (i.e., least-revenue) firms are assumed to be located in the states with the least-rigorous state regulatory baselines (i.e., thus incurring the highest incremental costs) (Section 5.2.3).

Because of the deterministic nature of the regulation in requiring each UST system meeting a given criterion to perform a certain task or undergo a certain inspection, probabilistic assessments of uncertainty are not directly applicable.
In addition, specific requirements under the final UST regulation are addressed as follows:
   *       For regulatory changes that take effect over time as equipment ages, the analysis assumes a constant rate of equipment replacement, and calculates a constant annual payment for the net present value of 20 years of replacement. Appendix D discusses the specific assumptions made in the analysis.
   *       To identify the total system-level compliance cost of removing deferrals from airport hydrant fuel distribution systems (AHFDSs) and field-constructed tanks (FCTs), the analysis calculates both the direct costs of removing the deferral of these systems from the regulation under 40 CFR Part 280, and the additional costs of complying with other new regulatory options that apply to all systems (and become relevant when deferrals are removed). For example, under the final UST regulation, owners and operators of these systems must perform annual bulk line testing at prescribed rates or use an automatic tank gauge at prescribed leak rates. Appendix A discusses specific assumptions related to these tank populations.
   *       To estimate the total system-level compliance cost of removing the deferral from emergency generator tanks, the analysis calculates the cost of complying with specific changes that apply to the broader universe of conventional UST systems and become relevant when the deferral is removed. Removal of the deferral under the final UST regulation means that EGTs must comply with release detection requirements at 40 CFR Part 280, Subpart D.
Exhibit 3-1 presents the unit-level costs for the individual requirements in the final UST regulation.
Exhibit 3-1

Unit Costs For The Requirements In The Final UST regulation (Selected Option)[a]

                               ONE-TIME [b]
($)
                                O&M [c]
($)
                        REPAIR/REPLACEMENT
COST [d]
($)
Release Prevention
Walkthrough inspections
                                                                          $0.00
                                                                         $16.99
                                                                          $0.14
Overfill prevention equipment inspections
                                                                          $0.00
                                                                        $228.91
                                                                         $67.07
Spill prevention equipment tests
                                                                          $0.00
                                                                        $138.38
                                                                         $37.53
Containment sump testing
                                                                          $0.00
                                                                        $669.32
                                                                         $86.97
Spill prevention equipment inspection after repair
                                                                          $0.00
                                                                        $363.42
                                                                          $0.00
Overfill prevention equipment test after repair
                                                                          $0.00
                                                                        $400.71
                                                                          $0.00
Secondary containment test after repair
                                                                          $0.00
                                                                        $188.23
                                                                          $0.00
Eliminate flow restrictors in vent lines for all new tanks and when overfill prevention equipment is replaced
                                                                        $420.37
                                                                          $0.00
                                                                          $0.00
Release Detection
Operability tests  -  ATG
                                                                          $0.00
                                                                         $61.41
                                                                          $9.40
Operability tests  -  interstitial monitoring
                                                                          $0.00
                                                                         $10.83
                                                                          $9.73
Operability tests  -  electronic LLDs
                                                                          $0.00
                                                                         $61.41
                                                                     < $0.01
Operability tests  -  vapor monitoring
                                                                          $0.00
                                                                         $10.83
                                                                          $1.20
Operability tests  -  groundwater monitoring
                                                                          $0.00
                                                                         $10.83
                                                                          $0.62
Site assessment  -  vapor monitoring e
                                                                      $1,111.17
                                                                          $0.00
                                                                          $0.00
Site assessment  -  groundwater monitoring e
                                                                        $935.56
                                                                          $0.00
                                                                          $0.00
Add SIR/CITLD to regulation with performance criteria
                                                                         $10.66
                                                                          $0.00
                                                                          $0.00
Response to interstitial monitoring alarms[f]
                                                                          $0.00
                                                                          $0.00
                                                                          $0.00
Remove release detection deferral for emergency generator tanks [g]
                                                                        $296.94
                                    $193.41
Other
Remove deferral for airport hydrant fuel distribution systems [h]
                                  $128,828.95
Remove deferral for UST systems with field-constructed tanks [h]
                                  $30,744.57
Require notification of ownership change
                                                                          $0.00
                                                                         $14.27
                                                                          $0.00
Closure of lined tanks that cannot be repaired according to a code of practice
                                                                  $41,802.90[i]
                                                                          $0.00
                                                                          $0.00
Requirements for demonstrating compatibility with fuels > E10 and > B20
                                                                      $1.93 [j]
                                                                      $0.00 [j]
                                                                          $0.00
Cost to owners/operators to read regulation
                                                                        $271.12
                                                                          $0.00
                                                                          $0.00
EPAct-related Provisions
Operator training
                                                                        $303.64
                                                                        $139.36
                                                                          $0.00
Secondary containment - new and replaced tanks
                                                                      $8,413.90
                                                                          $0.00
                                                                          $0.00
Threshold for pipe replacement rather than repair [k]
                                                                          $0.00
                                                                          $0.00
                                                                          $0.00
Under-dispenser containment for all new dispensers
                                                                      $1,914.27
                                                                          $0.00
                                                                          $0.00
[a] Cost estimates were derived using a seven percent discount rate.
b One-time costs presented here are not shown in annual terms. For the purposes of estimating total annual costs for the final UST regulation, these one-time expenditures are annualized over 20 years at a seven percent interest rate.
c Operation and maintenance costs presented here are not shown in annual terms, but rather on per-incident terms. In other words, the cost for walkthrough inspections above is the unit cost per walkthrough inspection; the annual cost is the total cost conducting 30-day walkthrough inspections over an annual period.
[d]	Time value of money costs due to earlier repair and replacement of equipment reflect costs of repair or replacement sooner than would have occurred in the baseline. For most requirements, these are costs that would occur and be identified by annual tests, i.e., they reflect one year's worth of accumulated issues that require equipment repairs or replacements. Three requirements represent exceptions. TVM costs for overfill prevention and containment sump testing, which occur every three years under the Selected Option, represent the repairs and replacements over three years. In addition, TVM costs for walkthrough inspections represent the repairs and replacements identified on a monthly basis to match the requirement under the Selected Option. See Appendix D for additional details.
[e]	The one-time cost presented is the cost of conducting a site assessment or well verification, weighted by the relatively likelihoods that a site assessment or well verification would be necessary to continue using vapor or groundwater monitoring as release detection. Note that a site assessment or well verification would be necessary for fewer than 25 percent of systems using vapor monitoring, and for fewer than 30 percent of systems using groundwater monitoring; the one-time costs presented here do not downward adjust the unit cost estimate to account for the possibility that a site assessment or well verification may not be necessary.
[f] The cost associated with this requirement would be the incremental cost difference between a tightness test (required in the baseline) and an interstitial integrity test (required by the final UST regulation). However, because the cost of an interstitial integrity test is less than the cost of a tightness test, we do not assign any cost to this requirement. See Appendix D for additional information.
[g] 	Because different subsets of EGTs are subject to different requirements, we present average unit costs that divide the total cost to the affected universe by the total number of affected units. O&M costs include any TVM costs associated with operability tests. See Appendix D for additional details.
[h] Because different subsets of AHFDSs are subject to different requirements, and because different requirements applicable to AHFDSs and FCTs include various types of one-time and O&M costs, we present average unit costs that divide the total cost to the affected universe by the total number of affected units. These costs include any TVM costs associated with operability tests. See Appendix A for additional details.
[i]	We assume that this cost occurs in full for the systems that require closure of lined tanks in a given year, rather than annualizing it as described in note b above. See Appendix D for additional details.
[j] 	This includes an annualized cost of $0.01 related to the cost of storing records for the life of the UST system.
[k]	We assume all facilities exceeding the 50 percent threshold for piping replacement would opt to replace piping in the baseline; costs are therefore zero. See Appendix C for detailed calculations.

3.3	Calculation of Incremental Compliance Costs
This analysis estimates the compliance cost of the final UST regulation by calculating the incremental cost of each regulatory change on the population of tank systems in every U.S. state and territory. This procedure relies on national estimates of the number of systems employing specific baseline technologies, as well as EPA's assessment of the baseline regulatory requirements in each state and territory. The analysis categorizes compliance costs into one-time or operation and maintenance costs and amortizes one-time compliance costs over the 20-year regulatory time horizon. As a final step, it discounts annual compliance costs associated with several of the regulatory changes to delayed compliance horizons specified in the final UST regulation (e.g., overfill prevention equipment inspections must be performed within three years of the date the final UST regulation becomes effective).
To calculate compliance costs, EPA employs a number of assumptions, some of which likely overstate compliance costs:
   *       Time value of money costs. This analysis does not assume the rate at which problems occur in UST systems will decline as a result of the final UST regulation. The number and severity of problems will likely fall due to more frequent testing and inspections, but the rate of decline is uncertain and the analysis does not attempt to adjust for these changes. This likely causes the analysis to overestimate the costs of the final UST regulation.
   *       Size of universe. EPA's analysis assumes that the number of UST systems in the universe remains constant over time, with new systems replacing closures. EPA's end-of-year reporting data reveal that the universe of conventional UST systems has declined at a rate between one and three percent per year since 2000. Assuming this pattern continues, future annual compliance costs due to the final UST regulation are likely to be lower than estimated in this analysis. However, in absence of other data we assume new installations and upgrades will offset all closures, and annual compliance costs will remain constant. Impacts of assuming an alternative baseline universe of UST systems that declines over time are discussed in Sections 3.3.1 and 3.4.1.
   *       Full compliance. EPA assumes all owners and operators subject to each requirement will come into compliance. This ensures a high estimate of costs, as each system subject to the regulation implements the required measures and consequently incurs the related costs.
   *       Timeliness of repairs. EPA assumes all issues identified through testing of equipment will be properly addressed through immediate repair or replacement of equipment. This may overstate costs if owners or operators fail to address identified issues in a timely fashion.
   *       Date on which costs are incurred. EPA assumes all costs are incurred at the beginning of the year in which each requirement of the final UST regulation becomes effective. This may overstate costs that occur at the end of the time frame.
These combined assumptions help ensure that the total costs estimated in each scenario below are not likely to be understated, even in cases where some uncertainty is associated with unit cost estimates for equipment or testing. Two key areas of uncertainty that affect the distribution of costs are noted below.
   *       Geographic distribution of technologies: EPA lacks information on how UST systems with specific equipment (e.g., ATG) are distributed nationally. If most are located within states with existing applicable requirements, then costs could be lower (conversely, if most are located in states with no existing applicable requirements, then costs could be higher). In the absence of this data, EPA assumes a uniform distribution of technologies across all states. EPA assesses the extent to which this assumption creates cost uncertainty at the end of this chapter.
   *       Distribution of costs across systems: EPA does not have information on how costs are likely to be distributed among the systems that are subject to new requirements. For example, a correlation among systems that require overfill prevention equipment inspections, spill prevention equipment testing, and secondary containment testing after repair would concentrate costs on these systems in ways that EPA's primary assessment of costs does not capture. While this does not affect total cost estimates, EPA assesses the distributional consequences of an outcome where costs are highly-concentrated in Chapter 5.
3.3.1. Calculation of Incremental Compliance Costs Using an Alternative Baseline
	EPA's primary analysis assumes that the universe of UST systems stays constant over time. That is, the analysis assumes that when an UST system enters the universe, another exits, and vice versa. However, data show that the universe of UST systems has been declining over the past two decades (albeit at a slowing rate). Therefore, EPA also assesses compliance costs associated with the final UST regulation based on an alternative baseline that projects a declining universe.
	To calculate the rate of universe decline, EPA mapped historical data on the universe of UST systems from 1991 through 2013 to an exponential one-phase decay function, which appears to most accurately represent the observed behavior of the UST system universe over time. Steep declines in the universe of UST systems in past years reflect increases in tank size as well as industry consolidation. However, these declines may be reaching functional limits, both because the number of fuel outlets needed to serve the population is considerable, and because tank sizes may be reaching a practical limit in their ability to be transported and installed.[,]
	The function used to project future UST universe sizes indicates that over a 20-year time period, the annual number of affected UST systems gradually declines to 574,045 UST systems by year 20 under this alternative baseline. The number of UST systems affected under this alternative baseline is approximately 99.8 percent of the size of the original baseline, which assumes a constant universe size of 577,981 UST systems over this period. As a result, compliance costs associated with the final UST regulation are only marginally smaller under this alternative baseline. See Appendix J for additional details.
3.4	Results of Assessment of Compliance Costs
Exhibit 3-2 presents a summary of the estimated incremental compliance costs associated with the final UST regulation by type of UST system affected. In all options, it is clear that the category of conventional UST systems will bear the largest proportion of compliance costs under the regulation. While compliance costs associated with removal of deferrals from EGTs are constant across regulatory scenarios, other costs vary substantially among the regulatory options. The model parameters used to produce the results discussed in this chapter are presented in Appendix E and were selected to reflect the selected and alternative options described in Chapter 1.
Exhibit 3-2

Annual Compliance Costs Of The Final UST regulation For UST Systems Affected [a]
                                    Option
                                Selected Option
                                 ($ millions)
                                 Alternative 1
                                 ($ millions)
                                Alternative 2
                                 ($ millions)
Conventional UST systems [b]
                                     $130
                                     $280
                                      $63
Emergency Generator Tanks (EGTs)
                                     $2.0
                                     $2.3
                                     $2.0
Airport Hydrant Fuel Distribution Systems (AHFDSs)
                                      $10
                                    $0.017
                                     $0.0
UST systems with Field-Constructed Tanks (FCTs)
                                      $11
                                    $0.066
                                     $0.0
Cost to Owners/Operators to Read Regulation
(conventional UST systems and EGTs)
                                     $5.5
                                     $5.5
                                     $5.5
Total
                                     $160
                                     $290
                                      $70
[a] Cost estimates were derived using a seven percent discount rate.
[b] Conventional UST systems include all systems that are not AHFDSs, FCTs, or EGTs.

Exhibit 3-3 presents a disaggregation of compliance costs under each regulatory option. The following areas contribute significantly to the differences in compliance costs among the alternatives.
   *       Release prevention: The greatest difference in compliance costs between the Selected Option and Alternative 1 is related to release prevention; specifically, due to the combination of walkthrough inspections, overfill prevention equipment inspections, spill prevention equipment tests, and containment sump tests, testing after repairs, and the elimination of flow restrictors. These requirements account for 66 percent and 88 percent of compliance costs, respectively. This variation is largely dependent on the testing or inspection frequency required under each alternative, as well as the fact that compliance costs for AHFDSs and FCTs are considerably lower in Alternative 1. Under Alternative 2, overfill prevention equipment inspections and containment sump tests are not required, and release prevention costs total $38 million, compared to roughly $100 million under the Selected Option.
   *       Removal of deferrals for AHFDSs and UST systems with FCTs: Removal of deferrals for AHFDSs and FCTs is accompanied by tightness testing of equipment under the Selected Option. This tightness test drives most of the compliance cost associated with these systems. Under the Selected Option, total costs for these systems are $21 million, or approximately 13 percent of compliance costs. Under Alternative 1, only notification of the implementing agency and reporting of releases are required for these systems; correspondingly, total costs for these systems under Alternative 1 are below $0.1 million. Alternative 2 maintains the deferrals and therefore has no incremental compliance cost.
In total, these categories represent approximately 50 percent to 90 percent of the total compliance costs, depending on the option.
EPA determines average compliance costs per system by dividing the total cost of the final UST regulation by the total 577,981 systems in the regulated universe of conventional UST systems and EGTs. EPA's analysis shows that the compliance cost for this final UST regulation is approximately $232 per system, or approximately $715 per typical facility among motor fuel retailers, the sector with the highest average number of UST systems per facility.
      Exhibit 3-4 presents the same total costs as Exhibit 3-3 but shows the number of systems affected and the cost of the requirement per affected system. The costs in Exhibit 3-4 reflect annualized one-time costs, discounting, and adjustments for the adoption of certain requirements over time (e.g., elimination of flow restrictors for new and replaced tanks), and therefore differ from the unit costs presented in Exhibit 3-1. It is important to note that the unit costs in Exhibit 3-4 cannot be summed to obtain a cost per system, as nearly all systems are already in compliance with some requirements of the final UST regulation.

Exhibit 3-3

Total Annual Compliance Costs Due To The Final UST regulation For UST Systems Affected
All values in $ thousands [a]
                                  Description
                                Selected Option
                                 Alternative 1
                                 Alternative 2

                           Capital Cost
(Annualized)
                                    O&M
                                  Total Cost
                           Capital Cost
(Annualized)
                                    O&M
                                  Total Cost
                           Capital Cost
(Annualized)
                                    O&M
                                  Total Cost
Release Prevention

Walkthrough inspections
                                                                             $0
                                                                        $23,000
                                                                        $23,000
                                                                             $0
                                                                        $53,000
                                                                        $53,000
                                                                             $0
                                                                         $7,000
                                                                         $7,000
Periodic testing/inspections of:
 Overfill prevention equipment
 Spill prevention equipment
 Containment sumps
                                                                             $0
                                                                        $64,000
                                                                        $64,000
                                                                             $0
                                                                       $180,000
                                                                       $180,000
                                                                             $0
                                                                        $19,000
                                                                        $19,000
Testing after repairs to spill and overfill prevention equipment, and secondary containment
                                                                             $0
                                                                        $12,000
                                                                        $12,000
                                                                             $0
                                                                        $12,000
                                                                        $12,000
                                                                             $0
                                                                        $12,000
                                                                        $12,000
Elimination of flow restrictors in vent lines for all new tanks and when overfill prevention equipment is replaced
                                                                         $2,500
                                                                             $0
                                                                         $2,500
                                                                         $2,500
                                                                             $0
                                                                         $2,500
                                      N/A
                                      N/A
                                      N/A
Subtotal  -  Release Prevention [b]
                                                                         $2,500
                                                                        $99,000
                                                                       $100,000
                                                                         $2,500
                                                                       $250,000
                                                                       $250,000
                                                                             $0
                                                                        $38,000
                                                                        $38,000
Release Detection

Operability tests for release detection methods (incl. groundwater and vapor monitoring)
                                                                             $0
                                                                        $21,000
                                                                        $21,000
                                                                             $0
                                                                        $24,000
                                                                        $24,000
                                                                             $0
                                                                        $21,000
                                                                        $21,000
Groundwater and vapor monitoring for release detection [c]
                                                                           $500
                                                                             $0
                                                                           $500
                                                                     See note b
                                                                     See note b
                                                                         $1,000
                                                                             $0
                                                                             $0
                                                                             $0
Add SIR/CITLD to regulation with performance criteria
                                                                             $3
                                                                             $0
                                                                             $3
                                                                             $3
                                                                             $0
                                                                             $3
                                                                             $3
                                                                             $0
                                                                             $3
Remove release detection deferral for emergency generator tanks [d]
                                                                           $250
                                                                         $1,700
                                                                         $2,000
                                                                           $290
                                                                         $2,000
                                                                         $2,300
                                                                           $250
                                                                         $1,700
                                                                         $2,000
Response to interstitial monitoring alarms [e]
                                                                             $0
                                                                             $0
                                                                             $0
                                                                             $0
                                                                             $0
                                                                             $0
                                                                             $0
                                                                             $0
                                                                             $0
Subtotal  -  Release Detection [b]
                                                                           $750
                                                                        $23,000
                                                                        $24,000
                                                                           $290
                                                                        $26,000
                                                                        $27,000
                                                                           $250
                                                                        $23,000
                                                                        $23,000
Other

Remove deferral for airport hydrant fuel distribution systems [f]
                                                                     See note b
                                                                     See note b
                                                                        $10,000
                                                                     See note b
                                                                     See note b
                                                                            $17
                                      N/A
Remove deferral for UST systems with field-constructed tanks [f]
                                                                     See note b
                                                                     See note b
                                                                        $11,000
                                                                     See note b
                                                                     See note b
                                                                            $66
                                      N/A
Require notification of ownership change
                                                                             $0
                                                                            $46
                                                                            $46
                                                                             $0
                                                                            $46
                                                                            $46
                                                                             $0
                                                                            $46
                                                                            $46
Closure of lined tanks that cannot be repaired according to a code of practice [g]
                                                                             $0
                                                                         $2,400
                                                                         $2,400
                                                                             $0
                                                                         $2,400
                                                                         $2,400
                                                                             $0
                                                                         $2,400
                                                                         $2,400
Requirements for demonstrating compatibility with fuels > E10 and > B20
                                                                      < $0.1
                                                                             $0
                                                                      < $0.1
                                                                      < $0.1
                                                                         $1,100
                                                                         $1,100
                                      N/A
                                      N/A
                                      N/A
Cost to owners/operators to read regulation
                                                                         $5,500
                                                                             $0
                                                                         $5,500
                                                                         $5,500
                                                                             $0
                                                                         $5,500
                                                                         $5,500
                                                                             $0
                                                                         $5,500
Subtotal  -  Other [b]
                                                                         $5,500
                                                                         $2,400
                                                                        $29,000
                                                                         $5,500
                                                                         $3,500
                                                                         $9,100
                                                                         $5,500
                                                                         $2,400
                                                                         $7,900
EPAct-related Provisions

Operator training
                                                                            $23
                                                                           $110
                                                                           $130
                                                                            $23
                                                                           $110
                                                                           $130
                                                                            $23
                                                                           $110
                                                                           $130
Secondary containment
                                                                           $980
                                                                             $0
                                                                           $980
                                                                           $980
                                                                             $0
                                                                           $980
                                                                           $980
                                                                             $0
                                                                           $980
Subtotal  -  EPAct-related Provisions [b]
                                                                         $1,000
                                                                           $110
                                                                         $1,100
                                                                         $1,000
                                                                           $110
                                                                         $1,100
                                                                         $1,000
                                                                           $110
                                                                         $1,100
Subtotal [b]
                                                                         $9,800
                                                                       $120,000
                                                                       $160,000
                                                                         $9,300
                                                                       $280,000
                                                                       $290,000
                                                                         $6,700
                                                                        $63,000
                                                                        $70,000
Additions for new units (beyond those included above) [h]
                                                                             $5
                                                                             $0
                                                                             $5
                                                                             $5
                                                                             $0
                                                                             $5
                                                                             $5
                                                                             $0
                                                                             $5
Total [b]
                                                                         $9,800
                                                                       $120,000
                                                                       $160,000
                                                                         $9,300
                                                                       $280,000
                                                                       $290,000
                                                                         $6,700
                                                                        $63,000
                                                                        $70,000
[a] Cost estimates were derived using a seven percent discount rate.
b Totals may not add due to rounding. Costs associated with the removal of deferrals for FCTs and AHFDSs or groundwater and vapor monitoring for release detection under Alternative 1 are included in the total columns only.
[c] Costs under the Selected Option include the cost of conducting a site assessment or well verification, weighted by the probability that one of these is necessary, as a one-time cost. For Alternative 1, costs include a five-year phase out of groundwater and vapor monitoring as release detection methods. Capital and O&M costs are aggregated in this line item for Alternative 1 because this requirement was modeled separately from the other requirements. See Appendix D for details. For Alternative 2, costs include only the cost of operability tests for these types of release detection.
[d] Costs related to removal of deferrals for the regulation of emergency generator tanks include the cost of removal of deferrals, installation and maintenance of ATG on approximately seven percent of systems, installation and maintenance of SIR on 60 percent of systems, and performing operability tests on all EGT systems. See Appendix D for details.
[e] The cost associated with this requirement would be the incremental cost difference between a tightness test (required in the baseline) and an interstitial integrity test (required by the final UST regulation). However, because the cost of an interstitial integrity test is less than the cost of a tightness test, we do not assign any cost to this requirement. See Appendix D for additional information.
[f] Airport hydrant fuel distribution systems include a capital cost because tanks associated with airport hydrant fuel distribution systems without existing ATGs are assumed to install ATGs to comply with the requirement. Similarly, the DoE UST systems with field-constructed tanks include a capital costs because these tanks are assumed to install ATGs to comply with the requirement. UST systems with field-constructed tanks without existing ATGs are assumed to conduct annual precision tightness tests to comply with the requirement. Capital and O&M costs are aggregated in these line items because various components of the compliance with release detection include both capital and O&M costs. See Appendix A for details.
[g] Although the closure of lined tanks represents a capital cost, we consider it an operation and maintenance cost as a modeling convenience. See Appendix D for details.
h As a simplifying assumption, EPA assumes that UST systems enter and exit the universe at a constant annual rate, such that the total number of UST systems in the universe does not change. We assume that operation and maintenance costs associated with these systems offset each other, as the number of entries equals the number of exits; however, new systems entering the universe will still incur incremental capital costs associated with certain requirements (e.g., a new emergency generator tank would need to install a release detection method). For modeling purposes, we account for these new units in the "Additions for new units." The costs shown reflect the capital costs associated with new units for all but the following requirements: elimination of flow restrictors for new tanks, requirement of secondary containment for new tanks, and requirement of under-dispenser containment for new dispenser systems.

Exhibit 3-4
     Discounted And Annualized Cost Per System Affected By Requirement [a]
                                Description [b]
                                Selected Option
                                 Alternative 1
                                 Alternative 2

                              Cost per System [c]
                               Systems Affected
                              Cost per System [c]
                               Systems Affected
                              Cost per System [c]
                               Systems Affected
Release Prevention

Walkthrough inspections
                                                                            $42
                                                                        555,003
                                                                            $96
                                                                        555,003
                                                                            $20
                                                                        349,551
Periodic testing/inspections of:
                                                                           $334
                                                                     190,623[d]
                                                                           $860
                                                                     210,266[d]
                                                                            $48
                                                                     388,641[d]
-     Overfill prevention equipment

-     Spill prevention equipment

-     Containment sumps

Testing after repairs to spill and overfill prevention equipment, and secondary containment
                                                                           $311
                                                                         40,011
                                                                           $311
                                                                         40,011
                                                                           $311
                                                                         40,011
Eliminate flow restrictors in vent lines for all new tanks and when overfill prevention equipment is replaced
                                                                            $40
                                                                         63,818
                                                                            $40
                                                                         63,818
                                                                            N/A
                                                                            N/A
Release Detection

Operability tests for release detection methods [d]
                                                                           $126
                                                                        165,492
                                                                           $144
                                                                        165,492
                                                                           $126
                                                                        165,492
Groundwater and vapor monitoring for release detection [e]
                                                                            $59
                                                                         25,475
                                                                            $40
                                                                         25,968
                                                                            $19
                                                                         25,475
Add SIR/CITLD to regulation with performance criteria
                                                                             $1
                                                                          2,756
                                                                             $1
                                                                          2,756
                                                                             $1
                                                                          2,756
Remove release detection deferral for emergency generator tanks [f]
                                                                           $181
                                                                         10,977
                                                                           $207
                                                                         10,977
                                                                           $180
                                                                         10,977
Response to interstitial monitoring alarms h
                                                                             $0
                                                                         10,634
                                                                             $0
                                                                         10,634
                                                                             $0
                                                                         10,634
Other

Remove deferral from airport hydrant fuel distribution systems [g]
                                                                       $128,829
                                                                             81
                                                                           $214
                                                                             81
                                                                            N/A
                                                                            N/A
Remove deferral from UST systems with field-constructed tanks [g]
                                                                        $30,745
                                                                            346
                                                                           $192
                                                                            346
                                                                            N/A
                                                                            N/A
Require notification of ownership change
                                                                             $5
                                                                          8,726
                                                                             $5
                                                                          8,726
                                                                             $5
                                                                          8,726
Closure of lined tanks that cannot be repaired according to a code of practice
                                                                        $41,803
                                                                             57
                                                                        $41,803
                                                                             57
                                                                        $41,803
                                                                             57
Requirements for demonstrating compatibility with fuels > E10 and > B20
                                                                             $0
                                                                            234
                                                                             $2
                                                                        577,981
                                                                            N/A
                                                                            N/A
Cost to owners/operators to read regulation
                                                                             $9
                                                                        577,981
                                                                             $9
                                                                        577,981
                                                                             $9
                                                                        577,981
EPAct-related Provisions

Operator training
                                                                            $51
                                                                          2,618
                                                                            $51
                                                                          2,618
                                                                            $51
                                                                          2,618
Secondary containment
                                                                           $443
                                                                       2,217[d]
                                                                           $443
                                                                       2,217[d]
                                                                           $443
                                                                       2,217[d]
[a] Cost estimates were derived using a seven percent discount rate.
[b] Requirements that apply at the facility level are converted to a system basis using a conversion factor of 2.71 systems per facility.
[c] Important: these unit costs cannot be summed to obtain a total cost per system because nearly all systems are already in compliance with some requirements of the final UST regulation.eecauequipment, and interstices
[d] Because the number of systems affected varies depending on the individual testing requirements, we estimate the number of systems affected by all three requirements by dividing their total cost by the sum of their unit costs. For example, if the three requirements had total unit costs of $100 and created new costs of $100,000, we would estimate that they affect 1,000 systems.
e Costs under the Selected Option include the cost of operability tests for these types of release detection as the operation and maintenance cost, as well as the cost of conducting a site assessment or well verification, weighted by the probability that one of these is necessary, as a one-time cost. For Alternative 1, costs include a five-year phaseout of groundwater and vapor monitoring as release detection methods. For Alternative 2, costs include only the cost of operability tests for these types of release detection.
[f] Costs related to removal of deferrals for the regulation of emergency generator tanks include the cost of removal of deferrals, installation and maintenance of ATG on approximately seven percent of systems, installation and maintenance of SIR on 60 percent of systems, and performing operability tests on all EGT systems. See Appendix D for details. Costs for emergency generator tanks are lower in Alternative 2 because operability tests are performed every 3 years versus every year under other options.
[g] Because different subsets of AHFDSs are subject to different requirements, and because different requirements applicable to AHFDSs and FCTs include various types of one-time and O&M costs, we present average unit costs that divide the total cost to the affected universe by the total number of affected units. These costs include any TVM costs associated with operability tests. See Appendix A for additional details.
[h] The cost associated with this requirement would be the incremental cost difference between a tightness test (required in the baseline) and an interstitial integrity test (required by the final UST regulation). However, because the cost of an interstitial integrity test is less than the cost of a tightness test, we do not assign any cost to this requirement. See Appendix D for more information.

3.4.1	Assessment of Compliance Costs under the Alternative Baseline Scenario
Exhibit 3-5 presents total annual compliance costs of the final UST regulation under the alternative baseline discussed in Section 3.3.1. Annual compliance costs are slightly less than those presented in Exhibit 3-2, reflecting the fact that the cumulative universe of affected systems in the alternative baseline is only marginally smaller than the universe in the original baseline. However, as Exhibit 3-5 shows, most cost reductions are within the rounding error of EPA's estimates for annual compliance costs of the regulation.
Exhibit 3-5

             Annual Compliance Costs Of The Final UST regulation
           Using an Alternative Baseline For UST Systems Affected a
                                    Option
                                Selected Option
                                 ($ millions)
                                 Alternative 1
                                 ($ millions)
                                Alternative 2
                                 ($ millions)
Conventional UST systems [b]
                                     $130
                                     $280
                                      $62
Emergency Generator Tanks (EGTs)
                                     $2.0
                                     $2.3
                                     $2.0
Airport Hydrant Fuel Distribution Systems (AHFDSs)
                                      $10
                                    $0.017
                                     $0.0
UST systems with Field-Constructed Tanks (FCTs)
                                      $11
                                    $0.066
                                     $0.0
Cost to owners/operators to read regulation
                                     $5.4
                                     $5.4
                                     $5.4
Total [c]
                                     $160
                                     $290
                                      $70
[a] Cost estimates were derived using a seven percent discount rate.
[b] Conventional UST systems include all systems that are not AHFDSs, FCTs, or EGTs.
[c] Totals may not add exactly due to rounding.
3.5	Sensitivity Analyses
      Certain aspects of EPA's compliance cost estimates are characterized by significant uncertainty and are sufficiently large that deviations from chosen assumptions may have a measurable impact on cost estimates. In this section, the analysis evaluates the sensitivity of certain results to variation in key parameters. These sensitivity analyses include evaluations of:
   *       Total compliance costs to the final UST regulation under an alternative estimate of labor costs. Specifically, the analysis evaluates the effect of using higher labor rates, overhead costs, and fringe benefits factors, and lower average labor costs.
   *       Highest and lowest compliance cost scenarios for the distribution of technologies for overfill prevention equipment inspections, spill prevention equipment tests, and containment sumps tests. If facilities using these technologies are disproportionately located in states that do not already have similar regulations in place, costs could be higher than estimates presented in the earlier parts of this chapter. Similarly, if affected facilities are located in states that already have similar regulations in place, costs could be substantially lower than estimated.
3.5.1. Compliance Costs of the Final UST regulation Using Alternative Estimates of Labor Rates, Overhead Costs, and Fringe Benefits
      For conventional UST facilities, EPA has selected labor, overhead, and fringe benefits rates that best reflect a "typical" UST facility. These labor rates are representative of skilled labor costs at motor fuel retailers, which own and operate roughly 80 percent of the universe of UST systems. The use of these rates has a material impact on the estimated compliance cost of the final UST regulation because they drive the operation and maintenance costs associated with requirements for walkthrough inspections and operability tests.
      To evaluate the impact of alternative labor rates on total compliance cost estimates, EPA considered two alternative scenarios. The first scenario is consistent with the OUST Information Collection Request 1360.12 and reflects labor rates reflective of economy-wide average wages, benefits, and overhead. This represents a high-end estimate because it also includes industries with highly skilled labor requirements and benefits (e.g., law firms).
      The second scenario uses specific labor categories and costs representative of retail motor fuel establishments, but assumes that lower-level staff may complete walkthrough inspections.
      Exhibit 3-6 presents the results for the three labor category scenarios. While one-time costs are not affected by the change in labor rates, operation and maintenance costs in the high-cost scenario are roughly $40 million higher than EPA's primary estimate, totaling $200 million rather than $160 million (an increase of 25 percent). The majority of this increase is due to higher operation and maintenance costs related to walkthrough inspections and operability tests. In contrast, the low-end labor-rate cost estimate totals approximately $140 million, roughly $20 million (or 13 percent) lower than EPA's central estimate. In addition to lower benefits and labor rates, this low-end estimate assumes that clerical-level personnel will perform walkthrough inspections. For AHFDSs and systems with FCTs, EPA uses constant industry average labor rates across all scenarios.

Exhibit 3-6

Compliance Cost Sensitivity Analysis: Alternative Labor Rates [a]
                                  Description
                             Final UST regulation

                       Lower Estimate
($ thousands) [b]
             Primary Estimate used for Analysis
($ thousands) [c]
                       Upper Estimate
($ thousands) [d]
Release Prevention

Walkthrough inspections [e]
                                                                        $11,000
                                                                        $23,000
                                                                        $45,000
Periodic testing/inspections of:
 Overfill prevention equipment
 Spill prevention equipment
 Containment sumps
                                                                        $63,000
                                                                        $64,000
                                                                        $64,000
Testing after repairs to spill and overfill prevention equipment, and secondary containment
                                                                        $12,000
                                                                        $12,000
                                                                        $12,000
Elimination of flow restrictors in vent lines for all new tanks and when overfill prevention equipment is replaced
                                                                         $2,500
                                                                         $2,500
                                                                         $2,500
Subtotal - Release Prevention [i]
                                                                        $89,000
                                                                       $100,000
                                                                       $120,000
Release Detection

Operability tests for release detection methods (incl. groundwater and vapor monitoring)
                                                                        $20,000
                                                                        $21,000
                                                                        $35,000
Groundwater and vapor monitoring for release detection [f]
                                                                           $500
                                                                           $500
                                                                           $500
Add SIR/CITLD to regulation with performance criteria
                                                                             $3
                                                                             $3
                                                                             $3
Remove release detection deferral for emergency generator tanks
                                                                         $1,900
                                                                         $2,000
                                                                         $2,700
Response to interstitial monitoring alarms [g]
                                                                             $0
                                                                             $0
                                                                             $0
Subtotal - Release Detection [i]
                                                                        $22,000
                                                                        $24,000
                                                                        $38,000
Other

Remove deferral for airport hydrant fuel distribution systems h
                                                                        $10,000
                                                                        $10,000
                                                                        $10,000
Remove deferral for UST systems with field-constructed tanks h
                                                                        $11,000
                                                                        $11,000
                                                                        $11,000
Require notification of ownership change
                                                                            $20
                                                                            $46
                                                                            $74
Closure of lined tanks that cannot be repaired according to a code of practice
                                                                         $2,400
                                                                         $2,400
                                                                         $2,400
Requirements for demonstrating compatibility with fuels > E10 and > B20
                                                                      < $0.1
                                                                      < $0.1
                                                                      < $0.1
Cost to owners/operators to read regulation
                                                                         $2,400
                                                                         $5,500
                                                                         $8,900
Subtotal  -  Other [i]
                                                                        $26,000
                                                                        $29,000
                                                                        $32,000
EPAct-related Provisions

Operator training
                                                                           $120
                                                                           $130
                                                                           $190
Secondary containment
                                                                           $980
                                                                           $980
                                                                           $980
Subtotal - EPAct-related Provisions [i]
                                                                         $1,100
                                                                         $1,100
                                                                         $1,200
Subtotal [i]
                                                                       $140,000
                                                                       $160,000
                                                                       $200,000
Additions for new units (beyond those included above) [j]
                                                                             $5
                                                                             $5
                                                                             $5
Total [i]
                                                                       $140,000
                                                                       $160,000
                                                                       $200,000
a Cost estimates were derived using a seven percent discount rate.
[b] Lower Estimate relies on BLS Industry-Specific Occupational Employment and Wages, NAICS 447000 - Gasoline Stations, May 2011 for: Managerial (41-1011 First-Line Supervisors/Managers of Retail Sales Workers): Technical (53-1021 First-Line Supervisors/Managers of Helpers, Laborers, and Material Movers, Hand); Clerical (53-6031 Service Station Attendants); and BLS National Occupational Employment and Wages, May 2011 for Technical for operability tests (49-2094 Electrical and Electronics Repairers, Commercial and Industrial Equipment) and Legal (23-1011 Lawyers). Benefits rate is 25.1 percent of wages, as reported in BLS Employer Costs for Employee Compensation, December 2012. Table 10: Trade, transportation, and utilities - retail trade. Overhead rate is 12 percent from: U.S. Office of Management and Budget. Circular No. A-76. p. D-7. Assumes that service station attendants perform walkthrough inspections.
[c] Primary Estimate relies on BLS Industry-Specific Occupational Employment and Wages, NAICS 447000 - Gasoline Stations, May 2011 for: Managerial (11-0000 Management Occupations (Major Group)); and Clerical (43-9061 Office Clerks, General); and BLS National Occupational Employment and Wages, May 2011 for Technical for operability tests (49-2094 Electrical and Electronics Repairers, Commercial and Industrial Equipment); Technical (53-1021 First-Line Supervisors/Managers of Helpers, Laborers, and Material Movers, Hand); and Legal (23-1011 Lawyers). Benefits rate is 28.8 percent (BLS Employer Costs for Employee Compensation, December 2012. Table 10: All workers, service-providing industries). Overhead rate is 12 percent from: U.S. Office of Management and Budget. Circular No. A-76. p. D-7.
[d] Upper Estimate relies on BLS Employer Costs For Employee Compensation, December 2012 for Managerial (Table 9, Management, Professional, and Related); Technical and Technical for operability tests (Table 10, Professional and Technical Services (Service Industries)); and Clerical (Table 11, Office and Administrative Support); and BLS National Occupational Employment and Wages, May 2011 for Legal (23-1011 Lawyers). Benefits rate is 28.8 percent (BLS Employer Costs for Employee Compensation, December 2012. Table 10: All workers, service-providing industries). Overhead rate is 12 percent from: U.S. Office of Management and Budget. Circular No. A-76. p. D-7.
[e] Walkthrough inspections under the Lower Estimate rely on clerical labor rates estimated using BLS Standard Occupational Code 53-6031, Service Station Attendants; under other scenarios, we use technical labor rates estimated using BLS Standard Occupational Code 53-1021, First-Line Supervisors/Managers of Helpers, Laborers, and Material Movers, Hand.
f Costs under the Selected Option consist of the cost of conducting a site assessment or well verification, weighted by the probability that one of these is necessary, as a one-time cost.
g The cost associated with this requirement would be the incremental cost difference between a tightness test (required in the baseline) and an interstitial integrity test (required by the final UST regulation). However, because the cost of an interstitial integrity test is less than the cost of a tightness test, we do not assign any cost to this requirement. See Appendix D for additional information.
h The labor rate used for these types of systems, where they are DoD-owned, is the latest ICR labor rate (similar to the upper estimate rate), except for a component of the Operator Training requirement, which uses the United States Air Force labor rate for pay grade E-6 over 3. For AHFDSs located at commercial airports, the labor rates used originate from BLS National Occupational Employment and Wages, May 2011 for NAICS 481100 (Scheduled Air Transportation) for Legal (23-1011), Managerial (11-000), Technical (53-0000), and Clerical (43-000), except for a component of the Operator Training Requirement, which uses the hourly rate for a Fuel Distribution System Worker from December 2012, according to USAjobs.gov.
[i] Totals may not add exactly due to rounding.
[j] As a simplifying assumption, EPA assumes that UST systems enter and exit the universe at a constant annual rate, such that the total number of UST systems in the universe does not change. We assume that operation and maintenance costs associated with these systems offset each other, as the number of entries equals the number of exits; however, new systems entering the universe will still incur incremental capital costs associated with certain requirements (e.g., a new emergency generator tank would need to install a release detection method). For modeling purposes, we account for these new units in the "Additions for new units." The costs shown reflect the capital costs associated with new units for all but the following requirements: elimination of flow restrictors for new tanks, requirement of secondary containment for new tanks, and requirement of under-dispenser containment for new dispenser systems.

3.5.2	Sensitivity Analysis of Distribution of Technologies for Overfill Prevention Equipment Inspections, Spill Prevention Equipment Testing, and Containment Sump Testing
      Because data on the distribution of UST technologies (including release detection and prevention technologies) is available only at a national level, EPA is not able to identify how facilities and systems with certain technologies are distributed across different states. As a result, the cost analysis assumes that technologies are distributed uniformly across all states and territories. For systems that require overfill prevention equipment inspections, spill prevention equipment tests, and containment sump tests, actual compliance costs may differ substantially from EPA's estimates if this assumption does not hold. For example, if facilities using these technologies are disproportionately located in states that do not already have similar inspection/testing requirements in place in the baseline, compliance costs could be higher than the estimates based on a uniform distribution presented in Exhibit 3-2 and Exhibit 3-3. Similarly, if affected facilities are concentrated in states that already have similar regulations in place in the baseline, then actual compliance costs could be substantially lower than estimates based on a uniform distribution.
      To investigate the impact of the assumption of uniform distribution of technologies, EPA performed a bounding analysis of the two extreme cases of distribution. Exhibit 3-7 reports the possible range of values for three scenarios: one where compliance cost is the lowest (i.e., facilities are located in states that already satisfy the final UST regulation), the actual model scenario based on uniform distribution of technologies, and the scenario in which compliance costs are highest. Variation between the minimum and maximum cost scenarios totals approximately $30 million, or approximately 20 percent of the total compliance costs estimated for the regulation. EPA's primary estimate of these costs is near the mid-point of the range of estimates.
Exhibit 3-7
Discounted Highest And Lowest Compliance Cost Scenarios For Technologies For Overfill Prevention Equipment Inspections, Spill Prevention Equipment Tests, And Containment Sump Tests[a]
                               Regulatory change
                              Lower
($ millions)
                             Primary
($ millions)
                              Upper
($ millions)
Overfill prevention equipment inspections [b]
                                                                            $29
                                                                            $29
                                                                            $29
Spill prevention equipment testing
                                                                            $17
                                                                            $19
                                                                            $25
Containment sump testing
                                                                             $0
                                                                            $17
                                                                            $22
Total [c]
                                                                            $45
                                                                            $64
                                                                            $75
a Cost estimates were derived using a seven percent discount rate.
[b] Because the entire universe of systems will be required to perform overfill prevention equipment inspections, EPA does not expect any uncertainty related to the locations of affected systems.
[c] Totals may not sum due to rounding.

3.5.3	Summary of Sensitivity Findings
      EPA's sensitivity findings suggest that possible variation in labor rates is likely to produce the most significant impact on the estimated cost of the final UST regulation: plausible selections for labor rates may reduce selected option costs by approximately $20 million (13 percent) or increase them by $40 million (25 percent). Separately, EPA has identified potential variation of approximately 20 percent related to the distribution of technologies involved in overfill prevention equipment inspections, containment sump testing, and spill prevention equipment testing. We note that each of these sensitivity analyses reflects variation compared with the primary estimates of costs presented throughout this chapter.
      The estimates presented in the body of this chapter represent reasonable, conservative central tendencies for the costs of the final UST regulation.
3.6	 State Government Administrative Compliance Costs
In addition to compliance costs related to the operation of UST systems, the final UST regulation will also impose new UST program administration requirements on state government agencies. Specifically, state government agencies will incur costs associated with new notification requirements, and costs associated with obtaining and reading the regulation. This section reviews state government costs associated with these activities.
      Costs associated with obtaining and reading the regulation assume that 10 people will each take six hours to read the regulation in each state (using the legal labor rate for states of $47 per hour from OUST's ICR 1360.08 inflated to 2012 dollars). In addition, based on the ICR, we assume that the reporting and recordkeeping burden for states to apply for State Program Approval (SPA) is approximately 28.5 hours (using the clerical labor rate for states of $26 per hour inflated to 2012 dollars). The total compliance cost in nominal terms is therefore approximately $219,000; the annualized compliance cost assuming the 20-year regulatory time horizon is approximately $21,000.
      State agencies that do not currently have a requirement for notification of changes in UST ownership or for at least an annual UST registration must also process a certain number of notices due to annual turnover in facility ownership. State government compliance costs for this activity assume a typical nominal recordkeeping cost of $32 per facility, based on OUST's ICR 1360.08 inflated to 2012 dollars; compliance costs assume the use of existing recordkeeping systems. Eight states and territories do not currently have recordkeeping requirements consistent with the final UST regulation. These eight states and territories will incur approximately $100,000 per year, due to an annual turnover rate of approximately 10 percent in UST facility ownership.
      Lastly, each state agency will incur costs to process the one-time notifications of existence for AHFDSs and FCTs. State government compliance costs for this activity assume a typical nominal recordkeeping cost of $32 per facility, based on OUST's ICR 1360.08 inflated to 2012 dollars; compliance costs assume the use of existing recordkeeping systems. Based on the estimated universe of AHFDSs and FCTs, the total state processing cost in nominal terms is approximately $14,000; the annualized processing cost assuming the 20-year regulatory time horizon is approximately $1,300.
      Total annualized state government administrative compliance costs sum to $120,000 per year. Note that under alternative baseline assumptions, these costs would decline by a very small percentage (less than one percent) as the universe of affected systems declines.
3.7	Summary  -  Total Annual Compliance Costs
      In total, EPA estimates that the Selected Option for the final UST regulation will produce incremental costs of approximately $160 million per year compared to the current regulatory baseline. Exhibit 3-8 summarizes these costs per category. Regardless of the option, conventional UST systems will incur over 80 percent of these costs. Costs to AHFDSs and FCTs comprise approximately 14 percent and 0.03 percent of total costs under the Selected Option and Alternative 1, respectively.

Exhibit 3-8

                      Total Annual Compliance Costs [a,b]
                                   Category
                         Selected Option
($ millions)
                          Alternative 1
($ millions)
                          Alternative 2
($ millions)
Conventional UST systems [c]
                                                                           $130
                                                                           $280
                                                                            $63
Emergency Generator Tanks (EGTs)
                                                                           $2.0
                                                                           $2.3
                                                                           $2.0
Airport Hydrant Fuels Distribution Systems (AHFDSs)
                                                                            $10