Aboveground Oil Storage Tanks
Observations on EPA's Economic Analyses of Amendments to the Spill Prevention, Control, and Countermeasure Rule
Gao ID: GAO-07-763 July 27, 2007
Oil in aboveground tanks can leak into soil and nearby water, threatening human health and wildlife. To prevent certain oil spills, the Environmental Protection Agency (EPA) issued the Spill Prevention, Control, and Countermeasure (SPCC) rule in 1973. EPA estimated that, in 2005, about 571,000 facilities were regulated under this rule. When finalizing amendments to the rule in 2002 and 2006 to both strengthen the rule and reduce industry burden, EPA analyzed the amendments' potential impacts and concluded that the amendments were economically justified. As requested, GAO assessed the reasonableness of EPA's economic analyses of the 2002 and 2006 SPCC amendments, using Office of Management and Budget (OMB) guidelines for federal agencies in determining regulatory impacts, among other criteria, and discussed EPA's analyses with EPA officials.
EPA's economic analysis of the 2002 SPCC amendments had several limitations that reduced its usefulness for assessing the amendments' benefits and costs. In particular, EPA did not include in its analysis a number of the elements recommended by OMB guidelines for assessing regulatory impacts. For example, EPA did not assess the uncertainty of key assumptions and data. In the analysis, EPA assumed that certain facilities were already complying with at least some of the rule's provisions and, as a result, they would not incur any additional compliance costs because of the amendments. However, the extent of facility compliance with the rule was highly uncertain. EPA did not analyze the effects of alternative rates of industry compliance on the estimated costs and benefits of the revised rule and, therefore, potentially misstated these amounts. Furthermore, EPA's 2002 analysis was limited in that it (1) did not analyze alternatives to the amendments, such as alternative lead times for industry to comply or alternative levels of stringency; (2) did not present the compliance costs that EPA expects facilities to incur or save in the second and subsequent years under the amendments in comparable present value terms (through discounting); and (3) provided only limited general information on the amendments' potential benefits in reducing the risk of an oil spill and its potential effects on human health and the environment. EPA's economic analysis of the 2006 amendments addressed several of the limitations of its 2002 analysis, but it also had some limitations that made it less useful than it could have been for assessing the amendments' costs and benefits. For example, EPA's 2006 analysis assessed the potential effect of industry noncompliance on the estimated costs (or cost savings) and estimated the present value of costs (or cost savings) associated with different alternatives for burden reduction. Nevertheless, as with the 2002 analysis, EPA did not estimate the potential benefits of the 2006 amendments, such as the extent to which they would affect the risk of an oil spill and public health and welfare and the environment. In addition, EPA did not have available nationally representative samples for its analysis; therefore, its estimates of the number of facilities that would be affected by the 2006 amendments may not be accurate. In particular, for one category of facilities, EPA based its estimates of the number of facilities on data available from eight states. Because facilities in these states may not have been representative of facilities nationwide, EPA's use of these data in its analysis could have introduced bias into its estimates of the number of facilities and costs for this amendment. EPA acknowledged that its analysis of the 2006 amendments was not a full accounting of all social benefits and costs but stated that the results were based on the best available information given time and resource constraints.
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GAO-07-763, Aboveground Oil Storage Tanks: Observations on EPA's Economic Analyses of Amendments to the Spill Prevention, Control, and Countermeasure Rule
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Report to the Honorable James M. Inhofe, Ranking Member, Committee on
Environment and Public Works, U.S. Senate:
United States Government Accountability Office:
GAO:
July 2007:
Aboveground Oil Storage Tanks:
Observations on EPA's Economic Analyses of Amendments to the Spill
Prevention, Control, and Countermeasure Rule:
Aboveground Oil Storage Tanks:
GAO-07-763:
GAO Highlights:
Highlights of GAO-07-763, a report to the Honorable James M. Inhofe,
Ranking Member, Committee on Environment and Public Works, U.S. Senate
Why GAO Did This Study:
Oil in aboveground tanks can leak into soil and nearby water,
threatening human health and wildlife. To prevent certain oil spills,
the Environmental Protection Agency (EPA) issued the Spill Prevention,
Control, and Countermeasure (SPCC) rule in 1973. EPA estimated that, in
2005, about 571,000 facilities were regulated under this rule. When
finalizing amendments to the rule in 2002 and 2006 to both strengthen
the rule and reduce industry burden, EPA analyzed the amendments‘
potential impacts and concluded that the amendments were economically
justified.
As requested, GAO assessed the reasonableness of EPA‘s economic
analyses of the 2002 and 2006 SPCC amendments, using Office of
Management and Budget (OMB) guidelines for federal agencies in
determining regulatory impacts, among other criteria, and discussed
EPA‘s analyses with EPA officials.
What GAO Found:
EPA‘s economic analysis of the 2002 SPCC amendments had several
limitations that reduced its usefulness for assessing the amendments‘
benefits and costs. In particular, EPA did not include in its analysis
a number of the elements recommended by OMB guidelines for assessing
regulatory impacts. For example, EPA did not assess the uncertainty of
key assumptions and data. In the analysis, EPA assumed that certain
facilities were already complying with at least some of the rule‘s
provisions and, as a result, they would not incur any additional
compliance costs because of the amendments. However, the extent of
facility compliance with the rule was highly uncertain. EPA did not
analyze the effects of alternative rates of industry compliance on the
estimated costs and benefits of the revised rule and, therefore,
potentially misstated these amounts. Furthermore, EPA‘s 2002 analysis
was limited in that it
• did not analyze alternatives to the amendments, such as alternative
lead times for industry to comply or alternative levels of stringency;
• did not present the compliance costs that EPA expects facilities to
incur or save in the second and subsequent years under the amendments
in comparable present value terms (through discounting); and • provided
only limited general information on the amendments‘ potential benefits
in reducing the risk of an oil spill and its potential effects on human
health and the environment.
EPA‘s economic analysis of the 2006 amendments addressed several of the
limitations of its 2002 analysis, but it also had some limitations that
made it less useful than it could have been for assessing the
amendments‘ costs and benefits. For example, EPA‘s 2006 analysis
assessed the potential effect of industry noncompliance on the
estimated costs (or cost savings) and estimated the present value of
costs (or cost savings) associated with different alternatives for
burden reduction. Nevertheless, as with the 2002 analysis, EPA did not
estimate the potential benefits of the 2006 amendments, such as the
extent to which they would affect the risk of an oil spill and public
health and welfare and the environment. In addition, EPA did not have
available nationally representative samples for its analysis;
therefore, its estimates of the number of facilities that would be
affected by the 2006 amendments may not be accurate. In particular, for
one category of facilities, EPA based its estimates of the number of
facilities on data available from eight states. Because facilities in
these states may not have been representative of facilities nationwide,
EPA‘s use of these data in its analysis could have introduced bias into
its estimates of the number of facilities and costs for this amendment.
EPA acknowledged that its analysis of the 2006 amendments was not a
full accounting of all social benefits and costs but stated that the
results were based on the best available information given time and
resource constraints.
What GAO Recommends:
GAO recommends that EPA improve its analysis of future changes to the
SPCC rule by more closely following OMB guidance. In commenting on a
draft of this report, EPA generally agreed with this recommendation and
stated that, consistent with it, the agency will continue gathering
data to improve its understanding of the regulated universe and oil
spill risks and to address uncertainty and quantify benefits.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-763].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact John B. Stephenson at
(202) 512-3841 or stephensonj@gao.gov
Contents:
Letter:
Results in Brief:
Background:
Limitations in EPA's Analysis of the 2002 SPCC Amendments Reduced Its
Usefulness for Informing Decision Makers and the Public About Economic
Trade-offs:
EPA's Economic Analysis of the 2006 SPCC Amendments Improved on the
Earlier Study but Also Had Limitations:
Conclusions:
Recommendation for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Summary of Survey Results:
Survey Question 1:
Survey Question 2:
Appendix III: Analysis of the Results of GAO's Survey on the Impacts of
the SPCC Amendments on Industry:
Stakeholders Had Mixed Views on the Impacts of the SPCC Amendments:
Analysis Methodology:
Appendix IV: Comments from the Environmental Protection Agency:
Appendix V: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Estimated Economic Impacts Associated with EPA's 2002
Amendments to the SPCC Regulation:
Table 2: Estimated Economic Impacts Associated with EPA's 2006
Amendments to the SPCC Regulation:
Table 3: Examples from Industry Comments Regarding the 2002 and 2006
Amendments to the SPCC Regulation:
Figure:
Figure 1: Summary of Industry Stakeholder Views on Impacts of 11 SPCC
Amendment Categories:
Abbreviations:
EPA: Environmental Protection Agency:
FRP: Federal Response Plan:
NRC: National Response Center:
OMB: Office of Management and Budget:
PE: Professional Engineer:
SPCC: Spill Prevention, Control, and Countermeasure:
United States Government Accountability Office:
Washington, DC 20548:
July 27, 2007:
The Honorable James M. Inhofe:
Ranking Member:
Committee on Environment and Public Works:
United States Senate:
Dear Senator Inhofe:
Billions of gallons of oil, from petroleum products to cooking oils,
are produced, distributed, and used each year in the United States.
These oils--often stored in aboveground storage tanks at various types
of facilities--have sometimes leaked into soil and nearby water, posing
threats to public health and to wildlife and their habitats. To prevent
certain oil spills, the Environmental Protection Agency (EPA), under
the authority of the Clean Water Act, issued the Spill Prevention,
Control, and Countermeasure (SPCC) rule in 1973. EPA estimated that, in
2005, about 571,000 facilities in industry sectors such as oil
production, petroleum bulk storage, farming, electric utilities, and
manufacturing were regulated under this rule. Facilities are subject to
the rule, as amended, if they are nontransportation related and have a
total capacity of greater than (1) 1,320 gallons in aboveground oil
storage tanks or (2) 42,000 gallons in completely buried oil storage
tanks, and if they could reasonably be expected, due to their location,
to discharge harmful quantities of oil into or upon the navigable
waters of the United States or adjoining shorelines.[Footnote 1]
The SPCC rule requires each owner or operator of a regulated facility
to prepare or amend and implement a plan that describes how the
facility is designed, operated, and maintained to prevent the discharge
of oil into navigable waters or adjoining shorelines. The plan must
also include measures to control, contain, clean up, and alleviate the
effects of an oil spill so as to prevent such spills from reaching any
navigable waters or adjoining shorelines. According to industry sectors
covered by the rule, facilities may incur significant costs to develop,
revise, and implement an SPCC plan, for such actions as modifying the
facility and having an engineer review and certify these modifications.
The extent of the costs depends on, among other things, the size and
type of facility and whether the facility is a new or existing one.
In July 2002, as part of an overall government effort to reduce
regulatory burden--and to respond to recommendations made by GAO and an
EPA spills task force--EPA made over 100 amendments to the rule,
including 30 that it considered major. Although the intent of some of
the amendments was to strengthen the rule to better prevent oil spills
as GAO and the task force had recommended, EPA also expected that some
of these amendments would, among other things, reduce inefficiencies,
eliminate duplication of effort, reduce the number of facilities
regulated by the rule, and lower facilities' compliance costs.[Footnote
2] For example, under the 2002 amendments to the rule, EPA no longer
regulates certain completely buried tanks that are subject to
underground storage tank regulations.[Footnote 3] This change
eliminated from the rule some completely buried containers and
facilities that were previously covered by both sets of regulations
and, therefore, duplicated compliance costs. In addition, the agency
made changes that, in EPA's view, clarified the rule's language to
better define which facilities are subject to the rule. However, many
industry sectors consider several of these amendments to be changes to
the requirements of the rule rather than clarifications and, in some
cases, maintain that they had not previously considered themselves
subject to the rule prior to these changes.
In 2006, partly in response to industry concerns about the cost of
complying with the 2002 amendments, EPA made several major changes to
the rule to further reduce burden and provide owners and operators of
certain facilities a more cost-effective approach to prevent oil
spills, which, according to EPA, could potentially impact about 62
percent of the regulated universe. For example, the 2006 amendments
allowed qualified facilities, such as those with an oil storage
capacity of 10,000 gallons or less and that meet a reportable discharge
history criterion, to self-certify their SPCC plans rather than hire a
professional engineer for certification. EPA has extended until July 1,
2009, the date by which facility owners and operators must prepare or
amend and implement SPCC plans in accordance with the 2002 and 2006
amendments, provided that the owners and operators of facilities in
existence on or before August 16, 2002, maintain their existing plans.
When finalizing the 2002 and 2006 amendments to the SPCC rule, EPA
conducted economic analyses of the potential impacts that these
amendments were expected to have on the regulated community. Federal
agencies are generally required by statute and executive order to
assess the costs and benefits of significant regulatory actions,
including those that would have an annual effect on the economy of $100
million or more.[Footnote 4] Furthermore, the Office of Management and
Budget (OMB) developed guidelines under Executive Order 12866 to
encourage good regulatory impact analysis and to standardize the way
that benefits and costs of federal regulations are measured and
reported.[Footnote 5] The OMB guidelines generally direct agencies, in
analyzing the impacts of rules, to, among other things, (1) identify
and quantitatively analyze key uncertainties in their analysis, (2)
measure the potential social benefits and costs--including the effects
on public health and welfare and the environment--of regulatory
alternatives incremental to a "baseline," (or the conditions that would
exist in the absence of the proposed regulation), (3) identify the
regulatory alternative that would maximize net social benefits (total
benefits minus total costs), and (4) present benefits and costs that
would occur in different time periods in comparable, present value
terms. OMB guidelines further state that good regulatory analysis
includes identifying the regulatory alternative with the largest net
benefits (that is, that maximizes economic efficiency), and such
information is useful for decision makers and the public, even when
economic efficiency is not the only or the overriding public policy
objective. EPA concluded, on the basis of its economic analyses, that
the 2002 and 2006 amendments were economically justified.
In this context, you asked us to review the reasonableness of the
economic analyses EPA performed in support of the 2002 and 2006 SPCC
amendments. To respond to this objective, we evaluated EPA's economic
analyses using, among other criteria, OMB guidelines for federal
agencies in assessing regulatory impacts. In addition, we discussed
EPA's analyses with senior officials in EPA's Office of Emergency
Management, which was responsible for conducting the analyses. We
performed our work from June 2006 to July 2007 in accordance with
generally accepted government auditing standards. A more detailed
discussion of our objectives, scope, and methodology is presented in
appendix I.
Results in Brief:
EPA's economic analysis of the 2002 SPCC amendments had limitations
that reduced its usefulness for assessing the amendments' costs and
benefits. In particular, EPA's analysis did not assess the uncertainty
associated with key assumptions and data, as directed by OMB
guidelines. For example, in conducting its analysis, EPA assumed that
certain facilities were already complying with at least some of the
2002 amendments and, as a result, these facilities would not incur any
additional compliance costs. In addition, EPA assumed that any
compliance costs incurred by facilities that were not complying with at
least some of the amendments should be attributed in its analysis to
the baseline and not to the 2002 amendments. However, the extent to
which facilities were in compliance--or would be in compliance in the
future in the absence of the amendments--was highly uncertain. EPA
stated that it was possible that some facilities misinterpreted the
existing regulation and were not in full compliance with it but that
there was no practical way to measure industry compliance.
Nevertheless, OMB guidelines indicate that, when compliance with
existing regulations is uncertain and different assumptions about
compliance could significantly affect the estimated benefits and costs,
agencies can assess, through uncertainty analysis, the effect of
multiple baselines using different assumptions about the extent of
compliance. Without such an analysis, EPA excluded from its assessment
of the total costs and benefits associated with the 2002 amendments the
potential impacts of the extent of facilities' compliance, thus
potentially misstating these amounts. Furthermore, EPA's 2002 analysis
was limited because it did not:
* analyze alternatives to the amendments, such as alternative lead
times for industry to comply or alternative levels of stringency;
* present in comparable present value terms (through discounting) the
compliance costs that EPA expected facilities to incur or save over
time as a result of the amendments; and:
* estimate the benefits associated with the amendments but rather
provided only limited general qualitative information on the risk of an
oil spill and the damages to public health and welfare and the
environment that it might cause.
EPA's economic analysis of the 2006 amendments addressed several of the
limitations of its 2002 analysis, but it also had some limitations that
made it less useful than it could have been for assessing the economic
trade-offs associated with the amendments. For example, in contrast
with its analysis of the 2002 amendments, EPA's 2006 analysis used an
alternative baseline to assess the potential effects of industry
noncompliance on the estimated costs (or cost savings), considered some
regulatory alternatives, and estimated the present value of costs (or
cost savings) associated with different regulatory alternatives for
burden reduction that the agency considered in its analysis.
Nevertheless, as with the 2002 analysis, EPA did not estimate the
potential benefits of the 2006 amendments, such as the extent to which
they would affect the risk of an oil spill and public health and
welfare and the environment. In addition, EPA did not have available
nationally representative samples for its analysis; therefore, its
estimates of the number of facilities that would be affected by the
2006 amendments may not be accurate. In particular, EPA based its
estimates of the number of facilities that would be affected by one
amendment that would reduce the burden for certain "qualified
facilities" on data available from eight states. Because facilities in
these states may not have been representative of facilities nationwide,
EPA's use of these data in its analysis could have introduced bias into
its estimates of the number of facilities and costs for this amendment.
EPA acknowledged that its 2006 analysis was not a full accounting of
all social benefits and costs, but stated that the results were useful
and informative and were based on the best available information given
time and resource constraints. However, without more substantive
information on the extent to which the 2006 amendments might affect the
risk of an oil spill and public health and welfare and the environment,
it is difficult to confirm that the amendments were economically
justified, as EPA concluded. EPA officials stated that the agency will
continue to work to refine and improve its analytical methods to
address uncertainties in the number of facilities affected, compliance
rates, and benefits analysis, and to improve its economic analyses for
future rule changes. In light of the limitations of EPA's analysis of
the 2002 and 2006 SPCC amendments, we are recommending that EPA improve
its economic analyses of future changes to the SPCC rule by ensuring
that they include all of the key elements contained in OMB's
guidelines.
In commenting on a draft of this report, EPA generally agreed with our
recommendation. According to EPA, consistent with our recommendation,
the agency is taking steps to improve its SPCC analyses and plans to
continue gathering additional data to improve its understanding of the
regulated universe and oil spill risks and to address uncertainty and
quantify benefits.
Background:
The Clean Water Act prohibits the discharge of oil into or upon
navigable waters or adjoining shorelines and requires the President to
establish regulations to prevent oil spills. The President subsequently
delegated this responsibility to EPA. To fulfill this requirement, in
1973, EPA issued its Oil Pollution Prevention Regulation,[Footnote 6]
which outlined actions regulated facilities must take to prevent,
prepare for, and respond to oil spills before they reach navigable
waters or adjoining shorelines. Under this rule, as amended through
2006, EPA seeks to prevent oil spills from storage tanks at facilities
that (1) have an aggregate aboveground storage tank capacity of more
than 1,320 gallons or a total completely buried storage capacity
greater than 42,000 gallons and (2) could reasonably be expected, due
to their location, to discharge oil in quantities that may be harmful
into or upon the navigable waters of the United States or onto
adjoining shorelines.[Footnote 7] EPA estimated that about 571,000
facilities were regulated under the SPCC rule as of 2005. Oil
production facilities (an estimated 166,000 facilities or 29 percent of
the total) and farms (an estimated 152,000 facilities or 27 percent of
the total) account for the largest portion of these estimated
facilities. The SPCC rule does not require facilities that are covered
under the rule to report to EPA that they are covered. Therefore, the
agency does not have an inventory of facilities that it regulates under
the program. However, facilities are required to report discharges of
oil in quantities that may be harmful to navigable waters or adjoining
shorelines to the National Response Center (NRC), but EPA does not
consider these and other data reliable enough for EPA to determine the
number of facilities subject to the SPCC rule that have had oil
spills.[Footnote 8]
The SPCC rule is a cornerstone of EPA's strategy to prevent oil spills
from reaching the nation's waters. The regulation requires each owner
or operator of a regulated onshore or offshore facility to prepare or
amend and implement an SPCC plan that describes the facility's design,
operation, and maintenance procedures established to prevent spills
from occurring, as well as countermeasures to control, contain, clean
up, and mitigate the effects of an oil spill that could reach navigable
waters or adjoining shorelines. Unlike oil spill contingency plans that
typically address spill cleanup measures after a spill to navigable
waters or adjoining shorelines has occurred, SPCC plans ensure that
facilities put in place containment and other measures--such as regular
visual inspection and integrity testing of bulk storage containers--to
prevent oil spills that could reach navigable waters or adjoining
shorelines. EPA's 10 regional offices administer an inspection program
to ensure compliance with the regulations.
EPA proposed revisions to the SPCC rule in October 1991 and February
1993. In addition to clarifying previous regulatory language, these
proposed revisions outlined additional requirements for regulated
facilities. In December 1997, EPA proposed additional amendments to the
SPCC requirements, focusing on measures to reduce the information
collection burden on affected facilities. Many, but not all, of the
amendments to the rule proposed by EPA in 1991, 1993, and 1997, were
made final in July 2002.
EPA made over 100 amendments to the rule in 2002, including more than
30 that EPA considers to be major. Several of these amendments changed
the scope of the rule's applicability. For example, the 2002
amendments:
* exempted from the rule containers with a capacity of less than 55
gallons, completely buried storage tanks subject to all of the
technical requirements of underground storage tank regulations,
permanently closed oil tanks as defined in the regulation, and any
facility or part thereof used exclusively for wastewater treatment;
and:
* eliminated the provision triggering the requirement for an SPCC plan
when any single container has a capacity of greater than 660 gallons
but maintained the 1,320-gallon total capacity threshold.
The 2002 amendments also added to or changed the language of some
definitions in the 1973 rule in order, according to EPA, to clarify
which facilities are subject to the rule and facilities'
responsibilities under the rule. For example, according to EPA, the
2002 amendments clarified the following:
* A "facility" may be as small as a piece of equipment--for example, a
tank--or as large as a military base; "oil" includes not only petroleum
oil, but such other products as animal fats, vegetable oils, and oil
mixed with wastes, other than "dredged spoil"; and what "navigable
waters" means for purposes of the rule.[Footnote 9]
* The SPCC rule applies to facilities that "use" oil, such as in the
operational use of oil-filled equipment.[Footnote 10]
* EPA had always considered statements in the existing (1973) SPCC
regulations that a facility "should" implement a specific rule
provision as meaning that a facility was required to comply with that
provision or, if circumstances warranted, undertake alternative methods
to achieve environmental protection. As a result, EPA changed "should"
to "must" to reflect this understanding and address any confusion that
compliance with such provisions was optional.
According to EPA, the agency made several of these definitional changes
to clarify the types of facilities that are included under the rule and
facilities' requirements. However, many industry sectors consider
several of these amendments to be changes to the requirements of the
rule rather than clarifications and, in some cases, maintain that they
had not previously considered themselves subject to the rule prior to
these changes. (A summary of industries' views on the impacts that
these and other amendments to the SPCC rule have had or are likely to
have on the regulated community, and our analysis of these views, are
included in apps. II and III, respectively.)
Several of the rule's amendments also changed requirements for
preparing, implementing, reviewing, and amending SPCC plans. For
example, the 2002 amendments to the rule:
* decreased from once every 3 years to once every 5 years, the
frequency with which a facility's SPCC plan must be reviewed; required
that the plan include a diagram of the facility, and that completely
buried storage tanks located on the facility--otherwise exempt from
SPCC rules--be included on the facility diagram; and:
* gave EPA regional administrators the authority to require that any
facility within their jurisdiction amend the SPCC plan after on-site
review of the plan and extend the period of time for facilities already
in operation to amend or complete their plans.
Other amendments to the rule in 2002 changed facility requirements
regarding the use and testing of containers, piping, and other
equipment to prevent or mitigate the effects of oil spills from
containers. For example, the 2002 amendments:
* amended the integrity testing requirements for aboveground containers
and required brittle fracture evaluation of field-constructed
aboveground containers that may have a risk of discharge;
* added specificity to the description of secondary containment
requirements, such as detailing that the containment system, including
walls and floors, must be capable of containing oil and constructed so
that any discharge from the primary containment system is prevented
from escaping before cleanup occurs;[Footnote 11] and:
* required a facility to conduct periodic integrity testing of
containers and piping, in addition to the other requirements--i.e.,
contingency planning and a written commitment of resources--when the
owner/operator determines and clearly explains that the installation of
specific secondary containment structures or equipment is not
practicable.
In December 2006, EPA again made several changes to the SPCC rule,
including several major amendments to provide additional burden relief
to the regulated industries on specific rule provisions. For example,
the scope of the rule's applicability was changed, potentially reducing
the number of facilities under the rule, by excluding motive power
containers from the rule's requirements.[Footnote 12] In addition, the
2006 amendments also changed requirements for preparing SPCC plans by
providing an option for "qualified facilities" to prepare a self-
certified SPCC plan instead of one that is reviewed and certified by a
professional engineer.[Footnote 13] The 2006 amendments also decreased
some secondary containment requirements to reduce the burden for
facilities. For example, the 2006 amendments:
* exempted facilities from having to construct and meet requirements
for specific sized secondary containment for mobile refuelers;[Footnote
14] and:
* allowed facilities to use alternatives to general secondary
containment requirements for qualified oil-filled operational
equipment, such as preparing an oil spill contingency plan and a
written commitment of resources to control and remove discharged oil,
and requiring an inspection or monitoring program.
Although changes to the rule were finalized in 2002 and 2006, EPA
extended the date of compliance in 2003, 2004, 2006, and 2007.
Currently, owners and operators of facilities in existence on or before
August 16, 2002, must continue to maintain their SPCC plans, and then
must amend them to ensure compliance with current requirements, and
implement the amended plan no later than July 1, 2009. Facilities
beginning operations after August 16, 2002, must prepare and implement
a plan by July 1, 2009. EPA made this latest extension to, among other
things, allow owners and operators of facilities the time to fully
understand the 2002 and 2006 amendments and the further revisions to
the rule EPA plans to make in 2008 and to make changes to their
facilities and SPCC plans.
EPA determined that the 2002 and 2006 amendments constituted
significant regulatory actions under Executive Order 12866. For
significant regulatory actions, Executive Order 12866 requires agencies
to assess the benefits and costs of, and reasonably feasible
alternatives to, the planned regulatory action.[Footnote 15] In
response, EPA conducted an economic analysis to provide estimates of
the potential costs and benefits of the amendments.[Footnote 16] In
addition, the agency conducted economic analyses of the 2006
amendments, both as proposed in 2005 and as made final in December
2006.[Footnote 17] EPA's Office of Solid Waste and Emergency Response
conducted these analyses.
Limitations in EPA's Analysis of the 2002 SPCC Amendments Reduced Its
Usefulness for Informing Decision Makers and the Public About Economic
Trade-offs:
EPA's economic analysis of the 2002 SPCC amendments had a number of
limitations that reduced its usefulness for assessing the economic
trade-offs associated with the amendments. Specifically, EPA's 2002
analysis was limited because it did not (1) assess the uncertainty
associated with key data and assumptions, such as the degree to which
facilities were already in compliance with the amendments, (2) analyze
the effect of regulatory alternatives to the amendments, (3) provide
the compliance costs that EPA expected facilities to incur or save as a
result of the amendments in comparable present value terms, and (4)
estimate the effect of the amendments on the risk of an oil spill and
on public health and welfare and the environment. These limitations
raise questions about the reasonableness of the estimates and limit
their usefulness for informing decision makers, stakeholders, and the
public about the potential effects of the 2002 amendments.
EPA's Methodology for Analyzing the 2002 SPCC Amendments:
EPA estimated the compliance costs or cost savings to the regulated
community of complying with the 2002 SPCC amendments using the
following methodology:
* First, EPA established a baseline for the analysis, which it defines
as a projection of regulated facility behavior in the absence of new
regulatory provisions.[Footnote 18] For the purposes of its analysis,
EPA assumed that the baseline represented full compliance by regulated
facilities with the existing (1973) regulation, as well as industry
behavior, practices, or standards that exceed the existing regulation.
After establishing the baseline, EPA classified each regulatory
revision or amendment into one of five categories: baseline, cost
increase, negligible increase, cost savings, or negligible
savings.[Footnote 19]
* Second, EPA estimated the total number of potentially affected
facilities covered by the regulation to account for differences in the
total potential costs for different sizes of facilities. Because
estimating the economic effects of the amendments first required
information on the size of the regulated community, EPA used a 1995
survey that it had conducted to determine the estimated number and size
of production and storage facilities in most regulated industry
sectors.[Footnote 20]
* Third, EPA estimated the costs of compliance for each regulated
facility (that is, hours multiplied by the wage rate) for certain
amendments, varying costs for each facility by its size. EPA developed
costs for each facility for amendments considered to have cost
increases or cost savings that were not negligible.[Footnote 21]
* Finally, EPA estimated the annual total compliance costs (or cost
savings) associated with the amendments by multiplying the estimated
costs per facility by the estimated number of affected facilities,
taking into account whether the facility was small, medium, or large.
EPA then aggregated the first-year and subsequent-year costs or savings
incurred by all facilities.
On the basis of this methodology, EPA estimated the costs that
facilities will incur by implementing the 2002 amendments. As shown in
table 1, EPA estimated that facilities will incur costs the first year
and then save costs in the following years.
Table 1: Estimated Economic Impacts Associated with EPA's 2002
Amendments to the SPCC Regulation:
Dollars in millions.
Year amendments are in effect: First year;
Costs (cost savings)[A]: $21.9;
Benefits: Not estimated.
Year amendments are in effect:
Second year; Costs (cost savings)[A]: (60.2);
Benefits: Not estimated.
Year amendments are in effect: Each subsequent year;
Costs (cost savings)[A]: (45.0);
Benefits: Not estimated.
Source: EPA.
Note: EPA's analysis does not indicate which year the dollars
represent.
[A] The estimates represent costs for all facilities (small, medium,
and large) and all amendments for which EPA estimated costs.
[End of table]
EPA Did Not Assess the Uncertainty Associated with Key Assumptions and
Data:
EPA's estimates of the economic impacts of the 2002 SPCC amendments are
based on assumptions and data that are subject to uncertainty. In
conducting its analysis of the amendments, however, EPA did not
evaluate these uncertainties, as OMB guidelines advise. For example,
EPA did not consider the uncertainties relating to its assumptions
about facilities' compliance with the existing 1973 SPCC rule and the
potential impacts of revisions that were intended to clarify what types
of facilities are subject to the rule. According to EPA, many of the
2002 SPCC amendments are either clarifications or editorial in nature,
or they do not represent a substantive change in the existing
regulatory requirements. In assessing the economic impacts associated
with these amendments, EPA maintained that the clarifications were
making explicit provisions or requirements that were already implicit
in the existing SPCC rule, rather than introducing new ones. Therefore,
in its analysis, EPA assumed that all regulated facilities were in full
compliance with these existing provisions and would not incur any
additional compliance costs as a result of the amendments. In addition,
to the extent that regulated facilities were not in compliance with the
provisions being clarified, EPA assumed that any cost they would incur
to comply should be attributed in its analysis to the baseline and not
to the 2002 amendments. However, the extent to which facilities were in
compliance--or would be in compliance in the future in the absence of
the amendments--is highly uncertain. As a result, EPA's cost estimates
do not fully reflect the potential impacts of the amendments.
If, contrary to EPA's assumption, facilities were not previously in
compliance with the clarified provisions, but are brought into
compliance by the 2002 amendments, the estimated costs (or cost
savings) that should be attributed to the 2002 amendments would be
higher (or lower), all else remaining the same. For example, in
commenting to EPA and OMB on the proposed 2002 amendments, a
representative of the electric utility industry stated that, until EPA
clarified in the 2002 amendments that "users" of oil are subject to the
rule, the electric utility industry did not believe that the SPCC rules
applied to electrical equipment. Because of EPA's clarification,
however, facilities in this industry found that they were subject to
the rule and EPA would consider them to have been out of compliance. As
a result, the representative stated, the clarification would cause that
industry to incur substantial costs to modify its facilities to meet
the requirements of the amendments, such as installing secondary
containment.
EPA's economic analysis stated that it was possible that some
facilities misinterpreted the existing regulation and were not in full
compliance with it, but there was no practical way to measure industry
compliance. OMB guidelines indicate, however, that agencies can use
uncertainty analysis to assess the effect of multiple baselines with
different assumptions about the degree of compliance, particularly when
industry compliance with existing regulations is uncertain and when
different assumptions about compliance could substantially affect the
estimated benefits and costs. Without such an analysis, EPA excluded
the potential impact of current industry practice from its assessment
of the total costs and benefits associated with the 2002 amendments,
thus potentially misstating these amounts.
In addition, EPA did not account for the uncertainty associated with
its estimates of the number of facilities affected by the amendments.
Because these estimates were subject to sampling error, EPA may not
have accurately presented the number of facilities subject to the
amendments. For example, for its estimates, EPA used a 1995 survey,
which was based on a statistical sample of facilities in the 48
contiguous states. On the basis of this survey and subsequent
adjustments agency officials made using their professional judgment,
EPA estimated that 51,398 facilities would no longer be subject to the
requirements of the SPCC rule as a result of the 2002 amendments.
However, like estimates from all statistical samples, EPA's estimates
are subject to sampling error, which is the imprecision that results
from surveying a sample of facilities rather than surveying every
facility in the country. In its 2002 analysis, EPA acknowledged the
sampling error, stating that its estimates of the number of facilities
were accurate within plus or minus 10 percent. However, EPA did not
account for this sampling error when estimating the costs associated
with the amendments.[Footnote 22] OMB guidelines direct that the
agencies ensure that their estimates reflect the full probability
distribution of potential results. Consequently, to account for the
imprecision in the estimated facilities and costs, it would have been
appropriate for EPA to analyze the uncertainty associated with these
estimates.
EPA's 2002 Analysis Had Other Limitations:
OMB guidelines direct agencies to consider the most important
alternative approaches to some or all of a rule's provisions and
provide their reasons for selecting the preferred regulatory action
over such alternatives. However, EPA's 2002 analysis did not assess
alternatives to the amendments, such as alternative levels of
stringency or alternative lead times to comply. To provide decision
makers and the public with information on how the costs and benefits
might vary depending on the regulatory approach, it would have been
appropriate for EPA to assess the effect of alternatives in its
analysis of the 2002 amendments. Without information on the benefits
and costs of alternative regulatory actions, it is difficult to confirm
that EPA's preferred regulatory approach maximizes net benefits.
Moreover, OMB guidelines state that agencies should discount costs and
benefits that accrue in different time periods to present values. As
depicted in table 1, EPA did not present the total cost estimate (costs
incurred minus cost savings) of the amendments in comparable, net
present value terms. Instead, EPA estimated the costs that would be
incurred in the first year that the rule is in effect and the cost
savings that facilities would achieve in the second and subsequent
years. EPA officials stated that the present value of estimated costs
is not significantly different from the cost estimates in the simple
analysis it conducted absent the discounting. Nonetheless, since EPA
estimated costs incurred and cost savings in the first year and each
subsequent year over the life of the amendments, it would have been
appropriate for EPA to present the total net costs in comparable
present value terms. To compute present value, the agencies are
directed to discount the estimated benefits and costs using interest
rates recommended by OMB.
Finally, OMB guidelines direct agencies to quantify and monetize the
benefits (including the benefits of risk reductions) associated with
the regulatory action, whenever possible. Moreover, when benefits are
difficult to monetize, the OMB guidelines state that acceptable
quantitative estimates of benefits and costs are preferable to
qualitative descriptions. In cases where quantification is difficult,
the guidelines direct the agencies to present any relevant quantitative
information and describe the unquantifiable effects. In its analysis of
the 2002 amendments, however, EPA did not monetize or quantify the
potential benefits expected to result from any of the amendments. In
addition, EPA's qualitative discussion of the potential beneficial
aspects of the 2002 amendments was very limited. For example, the
agency discussed the general risk of an oil spill and the general
damage that might be caused to public health and welfare and the
environment. EPA stated that it assumed that the amendments would have
minimal effects on the risks of a spill, lessen the burden to the
regulated community, and maintain the existing level of protection to
public health and welfare and the environment. Nonetheless, some of the
2002 amendments are more stringent than the existing SPCC rule,
possibly reducing the risk of an oil spill, while other amendments are
less stringent (that is, burden reducing), possibly increasing the risk
of an oil spill. Without more substantive information on the potential
effect of the amendments on the risk of an oil spill and the resulting
effect on public health and welfare and the environment, it is
difficult to confirm that the benefits of the amendments exceed their
costs, as EPA concluded.
EPA's Economic Analysis of the 2006 SPCC Amendments Improved on the
Earlier Study but Also Had Limitations:
EPA's economic analysis of the 2006 amendments to the SPCC rule
addressed several of the limitations in the agency's 2002 analysis.
However, the 2006 analysis also had some limitations that made it less
useful than it could have been for assessing the economic trade-offs
associated with the amendments.
EPA's 2006 Analysis Included Elements Absent from Its Earlier Study:
As shown in table 2, EPA estimated the compliance cost savings that
would be generated by the 2006 amendments under (1) a baseline assuming
full compliance with the existing SPCC rule including the 2002
amendments, (2) an alternative baseline assuming only 50 percent
compliance with the existing SPCC rule including the 2002 amendments,
and (3) different assumptions about the number of facilities that would
be affected by the 2006 amendments.
Table 2: Estimated Economic Impacts Associated with EPA's 2006
Amendments to the SPCC Regulation:
2005 dollars in millions.
Major components of the 2006 final rule: Qualified facilities eligible
for streamlined regulatory requirements;
Percentage of facilities assumed to be affected by rule: 100%;
Cost savings expected under baseline of full compliance[A]: $38;
Cost savings expected under alternative baseline of 50 percent
compliance[A]: $19;
Benefits expected under full compliance or 50 percent compliance
baselines: Not estimated.
Major components of the 2006 final rule: Qualified oil-filled
operational equipment[B];
Percentage of facilities assumed to be affected by rule: 25;
Cost savings expected under baseline of full compliance[A]: 39;
Cost savings expected under alternative baseline of 50 percent
compliance[A]: 19;
Benefits expected under full compliance or 50 percent compliance
baselines: Not estimated.
Major components of the 2006 final rule: Qualified oil-filled
operational equipment[B];
Percentage of facilities assumed to be affected by rule: 50;
Cost savings expected under baseline of full compliance[A]: 53;
Cost savings expected under alternative baseline of 50 percent
compliance[A]: 26;
Benefits expected under full compliance or 50 percent compliance
baselines: Not estimated.
Major components of the 2006 final rule: Qualified oil-filled
operational equipment[B];
Percentage of facilities assumed to be affected by rule: 75;
Cost savings expected under baseline of full compliance[A]: 67;
Cost savings expected under alternative baseline of 50 percent
compliance[A]: 33;
Benefits expected under full compliance or 50 percent compliance
baselines: Not estimated.
Major components of the 2006 final rule: Motive power;
Percentage of facilities assumed to be affected by rule: 10;
Cost savings expected under baseline of full compliance[A]: 1;
Cost savings expected under alternative baseline of 50 percent
compliance[A]: < 1;
Benefits expected under full compliance or 50 percent compliance
baselines: Not estimated.
Major components of the 2006 final rule: Motive power;
Percentage of facilities assumed to be affected by rule: 25;
Cost savings expected under baseline of full compliance[A]: 3;
Cost savings expected under alternative baseline of 50 percent
compliance[A]: 1;
Benefits expected under full compliance or 50 percent compliance
baselines: Not estimated.
Major components of the 2006 final rule: Motive power;
Percentage of facilities assumed to be affected by rule: 50;
Cost savings expected under baseline of full compliance[A]: 5;
Cost savings expected under alternative baseline of 50 percent
compliance[A]: 3;
Benefits expected under full compliance or 50 percent compliance
baselines: : Not estimated.
Major components of the 2006 final rule: Mobile refuelers;
Percentage of facilities assumed to be affected by rule: 25;
Cost savings expected under baseline of full compliance[A]: 17;
Cost savings expected under alternative baseline of 50 percent
compliance[A]: 9;
Benefits expected under full compliance or 50 percent compliance
baselines: Not estimated.
Major components of the 2006 final rule: Mobile refuelers;
Percentage of facilities assumed to be affected by rule: 50;
Cost savings expected under baseline of full compliance[A]: 34;
Cost savings expected under alternative baseline of 50 percent
compliance[A]: : 17; Benefits expected under full compliance or 50
percent compliance baselines: : Not estimated.
Major components of the 2006 final rule: Mobile refuelers;
Percentage of facilities assumed to be affected by rule: 75%;
Cost savings expected under baseline of full compliance[A]: $51;
Cost savings expected under alternative baseline of 50 percent
compliance[A]: 26;
Benefits expected under full compliance or 50 percent compliance
baselines: Not estimated.
Source: EPA.
[A] Estimates are annualized cost savings using 7 percent discount
rate; EPA also estimated savings using a 3 percent discount rate, per
OMB's Circular A-4 guidelines.
[B] Estimates apply to new facilities only. EPA assumed that existing
facilities would already have secondary containment in place or an
impracticality determination and, therefore, would not benefit from
this burden reduction.
[End of table]
Under the alternative baseline, compliance cost savings would be
roughly half as much as under the full compliance baseline because
owners and operators of facilities that are not currently in compliance
will not save costs as a result of the changes for burden reduction. In
addition, because EPA did not have data on the precise number of
facilities that would be affected by the amendments, EPA assessed the
uncertainty associated with its estimates using arbitrarily developed
scenarios for three of the major components of the rule. Based on this
approach, EPA assumed that various percentages of the facilities would
be affected by the regulatory changes in the rule. For example, for
facilities with qualified oil-filled operational equipment, EPA
analyzed the cost savings under different assumptions about the number
of facilities that would be affected by the rule, ranging from 25
percent to 75 percent of the total number.
Moreover, unlike its 2002 analysis, EPA's 2006 analysis also analyzed
and discussed some regulatory alternatives. For example, for the
version of these amendments that were proposed in 2005, EPA proposed an
exemption on the oil-filled operational equipment requirement for
facilities that had no reportable discharges from their equipment
within the prior 10 years of the date of their SPCC plan certification.
Partly in response to comments on the proposed rule, EPA narrowed the
restriction in the 2006 final rule to owners and operators that have
not had a discharge exceeding 1,000 gallons or two discharges exceeding
42 gallons within a 12-month period in the 3 years prior to SPCC plan
certification. Oil spills that are the result of natural disasters are
not subject to these limitations. In its economic analysis of the 2006
final rule, EPA discussed the differences between the cost estimates
for the restriction proposed in 2005 and the estimates for the
restriction adopted in 2006. EPA estimated that the final rule cost
savings would be greater under certain conditions (that is, if 75
percent of facilities are affected by the amendment), than estimated in
the proposed version.
EPA's 2006 Analysis Also Had Limitations:
Despite the improvements over its 2002 analysis, EPA's analysis of the
2006 amendments also had some limitations that made it less useful than
it could have been for assessing the economic trade-offs associated
with the amendments. For example, EPA did not quantify or monetize the
potential impacts of the 2006 amendments on the risk of an oil spill
and on public health and welfare and the environment. Instead, EPA
provided only a very limited qualitative discussion of the general risk
of an oil spill and the general potential damages that it might cause.
EPA reported that the reduced compliance costs will translate to net
social benefits, but that these benefits might be partially offset by
the potential increase in the risk of an oil spill (because of the less
stringent requirements of the 2006 amendments compared with the
existing requirements).[Footnote 23] EPA also stated that quantifying
net benefits (benefits minus costs) associated with the 2006 amendments
was not possible due to unknown future impacts of the rule, but it
concluded that cost savings resulting from the amendments will not be
offset by any significant losses in environmental protection.
Nonetheless, it is difficult to affirm EPA's conclusion without more
substantive information on the potential effect of the amendments on
the risk of an oil spill and the resulting effect on public health and
welfare and the environment.
In addition, because EPA's estimates of the number of facilities that
would be affected by the 2006 amendments were not based on nationally
representative samples, the results may not be accurate. In particular,
for the one amendment that would reduce the burden for certain SPCC-
regulated facilities, EPA based its estimates of the number of
facilities that would be affected by this amendment on data drawn from
eight states: Florida, Kansas, Maryland, Minnesota, New York, Oklahoma,
Virginia, and Wisconsin. Because facilities in these states may not
have been representative of facilities nationwide, EPA's use of these
data in its analysis could have introduced bias into its estimates of
the number of facilities and costs for this amendment. Furthermore, EPA
excluded from its analysis more than half of the facilities in these
eight states because the industrial category for these facilities could
not be determined and could not be matched to an additional database.
By not including such a high proportion of facilities on a nonrandom
basis, additional error was likely introduced into EPA's estimates of
the number of SPCC-regulated facilities. It is, therefore, unclear
whether the facilities that EPA included in the analysis are even
representative of the universe of facilities within these eight states.
EPA acknowledged these limitations in its analysis and stated that the
analysis provided the best possible results given time and resource
constraints. However, the actual number of U.S. facilities, and hence
the resulting cost impacts, could be greater or less than EPA
estimated.
Overall, EPA reported that its analysis did not fully comply with OMB
guidelines for conducting economic analyses of significant regulatory
actions. It is difficult to confirm, however, that the regulatory
changes are economically justified, as EPA concluded, without an
estimate of both the costs and benefits associated with the amendments.
Conclusions:
Because both the 2002 and 2006 amendments to the SPCC rule are
significant regulatory actions, it is important for EPA to have a
credible economic basis for selecting these as the agency's preferred
regulatory actions. However, although EPA's 2006 analysis improved upon
its 2002 analysis, both analyses had limitations that may make it
difficult for decision makers, stakeholders, and the public to verify
that the agency has fully analyzed the economic impacts of its
regulatory actions. Specifically, because EPA did not analyze key
uncertainties in its analysis of the 2002 amendments, including the
degree to which facilities were in compliance with some of the
revisions, the reliability of the estimated costs and cost savings is
questionable. In addition, EPA did not assess regulatory alternatives
in its analysis for the 2002 amendments, making it difficult to confirm
that EPA's preferred regulatory approach is economically superior to
other possible approaches. Moreover, because EPA did not estimate the
impact of the amendments on the potential risk of an oil spill and on
public health and welfare and the environment for either the 2002 or
the 2006 amendments, EPA's economic analyses may not provide decision
makers, stakeholders, and the public with a sufficient basis for
concluding that the benefits of the amendments outweigh their costs, as
EPA did. Although we recognize that evaluating regulatory impacts is a
complex task, unless EPA conducts more thorough economic analyses
consistent with OMB guidelines, decision makers, stakeholders, and the
public may lack assurance that the agency has fully evaluated the
economic trade-offs of its regulatory actions.
Recommendation for Executive Action:
To improve the usefulness of the agency's economic analysis for
informing decision makers and the public, we recommend that the
Administrator, EPA, take action to ensure that the agency's economic
analysis of future changes to the SPCC rule includes all of the key
elements for such analyses contained in OMB's guidelines for complying
with Executive Order 12866.
Agency Comments and Our Evaluation:
GAO provided EPA with a draft of this report for its review and
comment. The agency stated that it generally agreed with the
recommendation in the report to improve the agency's economic analyses
for future changes to the SPCC rule, consistent with OMB guidelines,
and has undertaken several initiatives to improve its analyses. EPA
noted that, consistent with our recommendation, the agency has (1)
activated a core SPCC Economic Subgroup of economic and technical
experts; (2) acquired additional expert contractor support; and (3)
hired an experienced senior economist to guide these efforts, and plans
to continue gathering additional data to improve its understanding of
the regulated universe and oil spill risks, and to address uncertainty
and quantify benefits.
In addition, EPA commented that the agency believes that the economic
analyses that it conducted for the 2002 and 2006 amendments to the SPCC
rule are already consistent with, and meet the spirit and intent of,
OMB guidelines, given the limited data, time, and resources available.
However, because both the 2002 and 2006 amendments to the SPCC rule
were significant regulatory actions potentially affecting thousands of
facilities across a wide range of industries, it is important for EPA
to have a credible economic basis for selecting its preferred
regulatory actions. In particular, we found that EPA's analyses were
generally not consistent with OMB guidelines in some key areas,
including accounting for the extent to which facilities were in
compliance with the existing 1973 rule and in assessing the impact of
the amendments on the risk of an oil spill and public health and the
environment. Decision makers, stakeholders, and the public may lack
assurance that the agency has fully evaluated the economic trade-offs
of its regulatory actions without more thorough economic analyses
consistent with OMB guidelines.
Finally, EPA commented that it does not agree with GAO's
characterization that the agency's sensitivity analysis of the 2006
amendments used "arbitrarily developed scenarios" for three of the
major components affected by the rule. However, in its economic
analysis of the 2006 amendments, EPA stated that it "arbitrarily
developed three scenarios" to estimate the number of facilities that
might be affected by these components. Furthermore, we did not comment
on EPA's use of these scenarios because, according to the agency, data
on the number of facilities that might be affected by the rule were not
available.
EPA also provided technical comments on the draft report, which we have
incorporated as appropriate. The full text of EPA's comments is
included as appendix IV.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 20 days
from the report date. At that time, we will send copies to the
Administrator of EPA and other interested parties. We will also make
copies available to others upon request. In addition, the report will
be available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
If you or your staff has any questions about this report, please
contact me at (202) 512-3841 or stephensonj@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. Key contributors to this report are
listed in appendix V.
Sincerely yours,
Signed by:
John B. Stephenson:
Director, Natural Resources
and Environment:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
We reviewed the reasonableness of the economic analyses that the
Environmental Protection Agency (EPA) used in support of the 2002 and
2006 Spill Prevention, Control, and Countermeasure (SPCC) amendments.
To determine the reasonableness of EPA's economic analyses, we assessed
EPA's May 2002 Economic Analysis for the Final Revisions to the Oil
Pollution Prevention Regulation (40 CFR Part 112), November 2005
Regulatory Analysis for the Proposed Revisions to the Oil Pollution
Prevention Regulation (40 CFR Part 112), and November 2006 Regulatory
Impact Analysis for the Final Revisions to the Oil Pollution Prevention
Regulations (40 CFR Part 112). As criteria for evaluating the
reasonableness of the economic analyses, we used guidelines for federal
agencies in assessing regulatory impacts that the Office of Management
and Budget (OMB) developed under Executive Order 12866, including its
Economic Analysis of Federal Regulations Under Executive Order 12966;
Guidelines to Standardize Measures of Costs and Benefits and the Format
of Accounting Statements; and Circular A-4. We also reviewed the
Unfunded Mandates Reform Act of 1995. In addition, we discussed EPA's
analyses with senior officials in EPA's Office of Emergency Management,
Regulation, and Policy Development Division, which was responsible for
conducting the analyses. We also spoke with officials representing
major industry associations about their views on EPA's economic
analyses and discussed any analysis they may have prepared regarding
the SPCC amendments. Furthermore, we reviewed other documents related
to the rule changes.
We also obtained stakeholders' views on any impacts that they believe
the SPCC amendments will have on either the regulated community or on
the risk of oil spills by administering a survey to key industry
associations and environmental groups, respectively, regarding 43 key
SPCC amendments. A summary of responses to survey questions appears in
appendix II, and our analysis of the results of the survey appears in
appendix III.
Selection of Survey Respondents:
To administer our survey, we selected a nonprobablity sample of 30 SPCC
stakeholders, including 28 industry associations and two environmental
groups. These organizations were either (1) members of EPA's SPCC
stakeholder group, which was involved with the agency in discussions
and periodic meetings before the rule amendments were made final, or
(2) national organizations that submitted comments to EPA regarding
proposed SPCC rule changes more than once in 1991, 1993, 1997, or 2002.
The vast majority of comments were received from associations and
businesses representing the major industry sectors--such as oil and
natural gas products, petroleum refining, transportation,
manufacturing, electric utilities, and food and agriculture--most
likely to be regulated under SPCC. Only a few environmental
associations submitted comments. Results from this nonprobability
sample cannot be used to make inferences about all industry or
environmental associations because not all associations representing
those affected by the SPCC rule had a chance of being selected as part
of the sample.
Questionnaire Design and Pretesting:
Our questionnaire asked stakeholders what impact they believe will
result from each of 43 major amendments to the SPCC rule. We selected
these amendments by reviewing the major changes EPA made to the SPCC
rule in 2002 and 2006. Our questionnaire provided summaries of each of
these amendments, which, in most instances, were derived from EPA's
descriptions in the Federal Register. In some cases, we developed our
summaries by reviewing the descriptions of the amendments in the rules,
and reviewing comments on the amendments submitted to EPA by both
industry and environmental groups. Of the 43 amendments selected, we
included 29 amendments finalized in 2002 that EPA listed as major
amendments in the Federal Register. In addition, we included six
amendments from 2006 that EPA described in the Federal Register and
several agency fact sheets as major amendments to the rule. The
remaining eight amendments we included in our survey--six from 2002 and
two from 2006--were frequently mentioned in industry comments that we
reviewed. We asked respondents to assess the impact of each of these
amendments on a five-point scale which ranged from "very negative
impact" to "very positive impact." We asked industry associations to
assess the impact on their industry and environmental groups to assess
the impact on the risk of oil spills. We also asked respondents to list
the five amendments that would have the greatest positive impact and
the five amendments that would have the greatest negative impact.
However, we did not receive a sufficient number of responses to these
questions and so did not include them in our analysis.
The practical difficulties of conducting any survey may introduce
errors, commonly referred to as nonsampling errors. For example,
respondents may have difficulty in interpreting a particular question
or may lack information necessary to provide valid and reliable
responses. In order to minimize these errors, we conducted pretests of
the draft questionnaire with two industry associations by telephone.
During these pretests, we checked whether (1) questions were clear and
unambiguous, (2) terminology was used correctly, (3) the questionnaire
did not place undue burden on respondents, (4) the information could
feasibly be obtained, and (5) the survey was comprehensive and
unbiased. In addition, the survey was peer reviewed by a GAO senior
survey methodologist. We made changes to the content and the format of
the questionnaire after each of the pretests based on the feedback we
received.
Survey Administration:
We administered our survey in January 2007. We first phoned each
stakeholder group to identify the most appropriate individual to
receive the questionnaire. We then e-mailed the questionnaire to each
stakeholder as a Microsoft Word form that respondents could complete by
marking checkboxes. In addition, we attached copies of the SPCC rule,
as amended in 2002 and 2006, and EPA's 2002 economic analysis to
provide stakeholders a more thorough description of the amendments than
we provided in the survey. On January 17, 2007, we sent a reminder
letter to all stakeholders who had not responded by that date, along
with additional copies of the questionnaire, the SPCC rule, and EPA's
economic analysis. Two days later, we telephoned all stakeholders who
had not returned the questionnaire and asked them to participate in our
survey. We received usable responses from 23 of the 28 industry
associations and one of the two environmental groups by January 29,
2007. Following is a list of the associations from which we received
completed questionnaires:
Agricultural Retailers Association:
Air Transport Association of America, Inc.:
Aircraft Owners & Pilots Association:
Airports Council International-North America:
Alliance of Automobile Manufacturers:
American Association of Airport Executives:
American Bakers Association:
American Feed Industry Association:
American Gas Association:
American Petroleum Institute:
American Trucking Associations, Inc.:
Domestic Petroleum Council Independent:
Petroleum Association of America:
Independent Liquid Terminals Association:
Independent Lubricant Manufacturers Association:
National Air Transportation Association:
National Automobile Dealers Association:
Natural Resources Defense Council:
National Stone, Sand, and Gravel Association:
Petroleum Marketers Association of America:
Synthetic Organic Chemical Manufacturers Association:
The Associated General Contractors of America:
USA Rice Federation:
Utility Solid Waste Activities Group:
Content Analysis:
In order to succinctly summarize responses to our survey, we performed
a content analysis in which we grouped each of the 43 SPCC amendments
into major categories. We first reviewed the summary of each of the
amendments that we included in our questionnaire and inductively
identified common groups. We then developed criteria to define which
amendments would be included in each group. To ensure that this process
was reliable, each amendment was independently categorized by three GAO
analysts, and categorization decisions among the three analysts were
compared. All initial disagreements regarding categorization decisions
were discussed and reconciled by refining the criteria used to
categorize the amendments. In a few cases, we were unable to determine
the category into which to place an amendment based solely on the
description of that amendment used in our survey. In these cases, we
reviewed the complete description of the amendment in the Federal
Register to determine the appropriate category. To see the exact
wording of the final rule, please refer to the Federal Register.
We categorized each of the 43 amendments along two dimensions. The
first dimension relates to the actions that regulated facilities are
required to take. The categories within this dimension that we
identified during our content analysis include the following: (1)
requirements to develop an SPCC plan or to notify officials of oil
spills; (2) changes to the scope of those facilities to which the rule
applies; (3) requirements for containers and piping used by SPCC
facilities; (4) requirements to test or inspect containers, piping, and
other equipment; (5) requirements regarding training of SPCC facility
employees; and (6) amendments that fit into more than one of the above
categories or did not fit into one of the above categories.
The second dimension relates to whether the amendment increases or
decreases requirements on facilities. We made this determination based
on whether the amendment uses terms such as "adds new requirements" and
"mandates," which would be considered an increase in requirements, or
terms such as "allows" or "exempts," which would be considered a
decrease in requirements. In some instances, we determined that an
amendment does not imply either an increase or a decrease in
requirements, or that an amendment included provisions that would both
increase and decrease requirements. In these instances we categorized
the amendment as having a "mixed" direction. In some instances we could
not determine if the amendments increased or decreased requirements
and, therefore, did not categorize the amendment along the second
dimension.
By categorizing each amendment in terms of both of these dimensions--
the facility actions to which the amendment applies and whether the
amendment increases or decreases requirements on facilities--we
identified 11 total categories of amendments. For example, we developed
a category for amendments that increased requirements on planning and
notification and another category for amendments that decreased
requirements on the scope. Some combinations of categories in these two
dimensions contained no amendments. For example, we did not identify
any amendments that decreased requirements on inspections and testing.
For a detailed description of our coding rules and specific amendments
that we placed in each of these categories, please see appendix III.
Data Analysis:
We calculated a score to summarize the industry stakeholders' views of
the impact they believe each type of SPCC amendment will have on their
industries. We collapsed the five-point response options in our survey
into "very positive impact" and "somewhat positive impact" categories
from the survey into one and removed the "no answer/no basis to judge"
responses. We then calculated the average of the responses from all of
the industry associations to questions regarding all of the amendments
within a particular category and developed a score, ranging from -1.0
(entirely negative impact), to 0.0 (no impact), to 1.0 (entirely
positive impact), for each of the categories of amendments. An entirely
positive impact would indicate that every industry stakeholder reported
that every amendment of a given type would have a positive impact on
their industry. Similarly, an entirely negative impact would indicate
that every industry stakeholder reported that every amendment of a
given type would have a negative impact on their industry. No impact
would indicate that either (1) every industry stakeholder reported that
every amendment of a given type would have no impact on their industry,
or (2) an equal number of responses reported a positive impact as
reported a negative impact for all amendments of a given type. Using
these three anchor points, we considered scores between -1.0 and -0.5
to be mostly negative, scores between -0.5 and 0.0 to be somewhat
negative, scores between 0.0 and 0.5 to be somewhat positive, and
scores between 0.5 and 1.0 to be mostly positive. Computer analysis
programs were independently verified by a senior statistician. We also
verified the accuracy of the underlying survey data keypunched by
comparing them with their corresponding questionnaires and found that
there were no errors. Our analysis is limited to the perceived impact
of the amendments on industry. We did not receive sufficient responses
from environmental groups to do a thorough analysis of the perceived
impact of the amendments to the SPCC rule on protecting human health
and the environment.
We performed our work from June 2006 to July 2007 in accordance with
generally accepted government auditing standards.
[End of section]
Appendix II: Summary of Survey Results:
The following tables present a summary of our survey of 23 stakeholders
to obtain their views on the impacts that the amendments to the SPCC
rule have had or are likely to have on the regulated community. These
stakeholders included the major associations representing industry that
had submitted comments to EPA on the proposed rule changes and that EPA
had also identified as key stakeholders. We also followed up with
officials from several industry associations to clarify some of their
survey responses.
Survey Question 1:
What impact does your association believe each of the following 2006
amendments to the SPCC rule will have on your industry? (We asked
survey recipients to check one box per amendment.)
Reference letter: a;
2006 Rule amendments: § 112.1 General Applicability: § 112.1(d)(2)(ii),
§ 112.1(d)(7): excludes 'motive power containers' (defined in § 112.2)
from the rule, but includes the transfer of fuel or other oil into a
motive power container at an otherwise regulated facility;
Very Positive Impact: 10;
Somewhat Positive Impact: 7;
No Impact: 4;
Somewhat Negative Impact: 2;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 0.
Reference letter: b;
2006 Rule amendments: § 112.2 Definitions: § 112.2: adds several
definitions, including airport mobile refueler, farm, motive power
container, and an oil-filled operational equipment;
Very Positive Impact: 5;
Somewhat Positive Impact: 9;
No Impact: 2;
Somewhat Negative Impact: 6;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 1.
Reference letter: c; 2006 Rule amendments: § 112.3(a)(2), §
112.3(b)(2): delays the compliance dates for farms until the effective
date of a rule establishing SPCC requirements specifically for farms or
dates that farms must comply with the provisions of this part;
Very Positive Impact: 1;
Somewhat Positive Impact: 3;
No Impact: 10;
Somewhat Negative Impact: 2;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 7.
Reference letter: d;
2006 Rule amendments: § 112.3(g): defines a qualified facility eligible
to self-certify under the provisions set forth in § 112.6;
Very Positive Impact: 7;
Somewhat Positive Impact: 12;
No Impact: 4;
Somewhat Negative Impact: 0;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 0.
Reference letter: e;
2006 Rule amendments: § 112.6 Qualified Facility Plan Requirements: §
112.6: allows qualified facilities (defined in § 112.3(g)) to self-
certify and provides applicable requirements for self-certification;
Very Positive Impact: 10;
Somewhat Positive Impact: 7;
No Impact: 5;
Somewhat Negative Impact: 1;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 0.
Reference letter: f;
2006 Rule amendments: § 112.7 General requirements for Spill
Prevention, Control, and Countermeasure Plans: § 112.7(k): allows
owners/ operators of qualified oil-filled operational equipment
(defined in (k)(1)) to meet alternate requirements (defined in (k)(2))
in lieu of the general secondary containment requirements;
Very Positive Impact: 5;
Somewhat Positive Impact: 16;
No Impact: 2;
Somewhat Negative Impact: 0;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 0.
Reference letter: g;
2006 Rule amendments: § 112.8 Spill Prevention, Control, and
Countermeasure Plan requirements for onshore facilities (excluding
production facilities) § 112.12 Spill Prevention, Control, and
Countermeasure Plan Requirements: § 112.8 (c)(2), § 112.8 (c)(11), §
112.12 (c)(2), § 112.12 (c)(11): provides an exception for mobile
refuelers from constructing and meeting requirements for secondary
containment;
Very Positive Impact: 10;
Somewhat Positive Impact: 10;
No Impact: 3;
Somewhat Negative Impact: 0;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 0.
Reference letter: h;
2006 Rule amendments: Subpart C - Requirements for Animal Fats and Oils
and Greases, and Fish and Marine Mammal Oils; and for Vegetable Oils,
including Oils from Seeds, Nuts Fruits, and Kernels: § 112.13 - §
112.15: removal of these sections because they do not apply to
facilities that process, store, use, or transport animal fats and/or
vegetable oils;
Very Positive Impact: 0;
Somewhat Positive Impact: 1;
No Impact: 13;
Somewhat Negative Impact: 0;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 9.
[End of table]
Survey Question 2:
What impact does your association believe each of the following 2002
amendments to the SPCC rule will have on your industry? (We asked
survey recipients to check one box per amendment.)
Reference letter: i;
2002 Rule amendments: § 112.1 General Applicability: § 112.1(b): adds
"users" of oil as a group subject to the rule and expands the
jurisdiction of the rule as amended in the Clean Water Act;
Very Positive Impact: 0;
Somewhat Positive Impact: 0;
No Impact: 3;
Somewhat Negative Impact: 3;
Very Negative Impact: 14;
No Answer or No Basis to Judge: 3.
Reference letter: j;
2002 Rule amendments: § 112.1 General Applicability: § 112.1(d)(2)(i):
does not count the capacity of completely buried tanks (defined in
parts 280 or 281) or permanently closed tanks towards the threshold;
Very Positive Impact: 3;
Somewhat Positive Impact: 10;
No Impact: 8;
Somewhat Negative Impact: 1;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 1.
Reference letter: k;
2002 Rule amendments: § 112.1 General Applicability: § 112.1(d)(2)(ii):
eliminates the aboveground storage capacity threshold of greater than
660 gallons for a single container but maintains the greater than 1320
threshold and establishes a "de minimis" container capacity size of 55
gallons or greater to calculate capacity;
Very Positive Impact: 2;
Somewhat Positive Impact: 12;
No Impact: 4;
Somewhat Negative Impact: 3;
Very Negative Impact: 2;
No Answer or No Basis to Judge: 0.
Reference letter: l;
2002 Rule amendments: § 112.1 General Applicability: § 112.1(d)(4):
requires completely buried storage tanks, otherwise exempt, to be
included on the facility diagram;
Very Positive Impact: 0;
Somewhat Positive Impact: 0;
No Impact: 8;
Somewhat Negative Impact: 11;
Very Negative Impact: 1;
No Answer or No Basis to Judge: 3.
Reference letter: m;
2002 Rule amendments: § 112.1 General Applicability: § 112.1(d)(5),
(6): exempts containers that are 55 gallons or less; exempts facilities
(or parts thereof) used exclusively for wastewater treatment unless it
is used to meet part 112 requirements;
Very Positive Impact: 5;
Somewhat Positive Impact: 12;
No Impact: 2;
Somewhat Negative Impact: 0;
Very Negative Impact: 2;
No Answer or No Basis to Judge: 2.
Reference letter: n;
2002 Rule amendments: § 112.1 General Applicability: § 112.1(f): gives
the EPA Regional Administrators authority to require an SPCC plan for
any facility within the jurisdiction in order to meet goals of the CWA;
Very Positive Impact: 0;
Somewhat Positive Impact: 0;
No Impact: 11;
Somewhat Negative Impact: 6;
Very Negative Impact: 3;
No Answer or No Basis to Judge: 3.
Reference letter: o;
2002 Rule amendments: § 112.2 Definitions: § 112.2: adds new
definitions, such as for 'facility', and expands the definition of
'oil', 'discharge', 'navigable waters', 'offshore facility', and
'United States';
Very Positive Impact: 1;
Somewhat Positive Impact: 3;
No Impact: 3;
Somewhat Negative Impact: 4;
Very Negative Impact: 11;
No Answer or No Basis to Judge: 1.
Reference letter: p;
2002 Rule amendments: Reference letter p.: § 112.3 Requirement to
prepare and implement Spill Prevention, Control, and Countermeasure
Plan: § 112.3(a),(b): requires facilities in operation to prepare or
revise an SPCC Plan within six months and implement the plan within
another six months; new facilities must prepare and implement an SPCC
Plan before beginning operations;
Very Positive Impact: 1;
Somewhat Positive Impact: 1;
No Impact: 5;
Somewhat Negative Impact: 8;
Very Negative Impact: 5;
No Answer or No Basis to Judge: 3.
Reference letter: q;
2002 Rule amendments: § 112.3 Requirement to prepare and implement
Spill Prevention, Control, and Countermeasure Plan: § 112.3(d):
requires the professional engineer (PE) attestation to include that the
PE considered applicable industry standards and certified that the Plan
is in accordance with SPCC requirements; also allows an agent to
examine a facility in place of the PE, but the PE must review the
agent's work, and certify the SPCC Plan;
Very Positive Impact: 0;
Somewhat Positive Impact: 7;
No Impact: 6;
Somewhat Negative Impact: 6;
Very Negative Impact: 4;
No Answer or No Basis to Judge: 0.
Reference letter: r;
2002 Rule amendments: § 112.3 Requirement to prepare and implement
Spill Prevention, Control, and Countermeasure Plan: § 112.3(e):
requires a copy of the SPCC Plan to be maintained at a facility
attended for at least 4 hours a day instead of the current requirement
of 8 hours;
Very Positive Impact: 0;
Somewhat Positive Impact: 1;
No Impact: 17;
Somewhat Negative Impact: 4;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 1.
Reference letter: s;
2002 Rule amendments: § 112.3 Requirement to prepare and implement
Spill Prevention, Control, and Countermeasure Plan: § 112.3(f):
provides for an extension of time to be granted by the Regional
Administrators (RA) for amendments of the SPCC Plan, as well as the
entire SPCC Plan;
Very Positive Impact: 1;
Somewhat Positive Impact: 13;
No Impact: 7;
Somewhat Negative Impact: 1;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 1.
Reference letter: t;
2002 Rule amendments: § 112.4 Amendment of Spill Prevention, Control,
and Countermeasure Plan by Regional Administrator: § 112.4(a): raises
the threshold for reporting two discharges to greater than 42 U.S.
gallons (1 barrel) per discharge, but reduces the amount of information
to be submitted to the RA;
Very Positive Impact: 6;
Somewhat Positive Impact: 11;
No Impact: 2; Somewhat Negative Impact: 2;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 2.
Reference letter: u;
2002 Rule amendments: § 112.4 Amendment of Spill Prevention, Control,
and Countermeasure Plan by Regional Administrator: § 112.4(b): does not
require facilities to meet any requirements of this section (§ 112.4)
until the new compliance deadlines to prepare an SPCC Plan (specified
in section § 112.3);
Very Positive Impact: 5;
Somewhat Positive Impact: 11;
No Impact: 5;
Somewhat Negative Impact: 1;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 1.
Reference letter: v;
2002 Rule amendments: § 112.4 Amendment of Spill Prevention, Control,
and Countermeasure Plan by Regional Administrator: § 112.4(c): changes
the requirement from notification to the State agency in charge of
water pollution control activities to notification to the State agency
in charge of oil pollution control activities;
Very Positive Impact: 0;
Somewhat Positive Impact: 0;
No Impact: 22;
Somewhat Negative Impact: 1;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 0.
Reference letter: w;
2002 Rule amendments: § 112.4 Amendment of Spill Prevention, Control,
and Countermeasure Plan by Regional Administrator: § 112.4(d): provides
that the RA may require a Plan amendment after an on-site review of the
Plan;
Very Positive Impact: 0;
Somewhat Positive Impact: 0;
No Impact: 13;
Somewhat Negative Impact: 8;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 2.
Reference letter: x;
2002 Rule amendments: § 112.5 Amendment of Spill Prevention, Control,
and Countermeasure Plan by owners or operators: § 112.5(a), (b):
requires any amendment made under this section be prepared within six
months and implemented in no more than six months from when the
amendment was made;
Very Positive Impact: 0;
Somewhat Positive Impact: 2;
No Impact: 11;
Somewhat Negative Impact: 8;
Very Negative Impact: 1;
No Answer or No Basis to Judge: 1.
Reference letter: y;
2002 Rule amendments: § 112.5 Amendment of Spill Prevention, Control,
and Countermeasure Plan by owners or operators: § 112.5(b): changes the
period of review for SPCC Plans from 3 to 5 years, and requires
documentation of completion of the review and evaluation;
Very Positive Impact: 10;
Somewhat Positive Impact: 10;
No Impact: 2;
Somewhat Negative Impact: 0;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 1.
Reference letter: z;
2002 Rule amendments: § 112.5 Amendment of Spill Prevention, Control,
and Countermeasure Plan by owners or operators: § 112.5(c): clarifies
that a PE must certify only technical amendments, and not non-technical
amendments (ex. names, phone numbers);
Very Positive Impact: 8;
Somewhat Positive Impact: 12;
No Impact: 1;
Somewhat Negative Impact: 1;
Very Negative Impact: 1;
No Answer or No Basis to Judge: 0.
Reference letter: aa;
2002 Rule amendments: § 112.7 General requirements for Spill
Prevention, Control, and Countermeasure Plans: § 112.7: allows
differing formats for the Plan; other formats must be cross-referenced
to the listed SPCC requirements and include all applicable SPCC
requirements;
Very Positive Impact: 3;
Somewhat Positive Impact: 13;
No Impact: 3;
Somewhat Negative Impact: 1;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 2.
Reference letter: bb;
2002 Rule amendments: § 112.7 General requirements for Spill
Prevention, Control, and Countermeasure Plans: § 112.7(a)(2): allows
deviations from most of the rule's major requirements (except secondary
containment), provided that the reasons for nonconformance are
explained, and equivalent environmental protection is provided;
Very Positive Impact: 10;
Somewhat Positive Impact: 9;
No Impact: 1;
Somewhat Negative Impact: 0;
Very Negative Impact: 2;
No Answer or No Basis to Judge: 1.
Reference letter: cc;
2002 Rule amendments: § 112.7 General requirements for Spill
Prevention, Control, and Countermeasure Plans: § 112.7(a)(3): requires
a description and a diagram of the facility layout in the SPCC Plan;
Very Positive Impact: 0;
Somewhat Positive Impact: 1;
No Impact: 11;
Somewhat Negative Impact: 10;
Very Negative Impact: 1;
No Answer or No Basis to Judge: 0.
Reference letter: dd;
2002 Rule amendments: § 112.7 General requirements for Spill
Prevention, Control, and Countermeasure Plans: § 112.7(a)(4): requires
facilities to provide additional information and procedures for
reporting a discharge; facility response plan (FRP) facilities (defined
in § 112.20) are exempt;
Very Positive Impact: 0;
Somewhat Positive Impact: 1;
No Impact: 9;
Somewhat Negative Impact: 10;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 3.
Reference letter: ee;
2002 Rule amendments: § 112.7 General requirements for Spill
Prevention, Control, and Countermeasure Plans: § 112.7(a)(5): requires
facilities to organize the Plan in a readily usable format for an
emergency; facility response plan (FRP) facilities (defined in §
112.20) are exempt;
Very Positive Impact: 0;
Somewhat Positive Impact: 2;
No Impact: 18;
Somewhat Negative Impact: 1;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 2.
Reference letter: ff;
2002 Rule amendments: § 112.7 General requirements for Spill
Prevention, Control, and Countermeasure Plans: § 112.7(c): requires a
containment system to be capable of containing oil and constructed to
prevent any discharge from escaping from the facility and reaching
navigable waters and adjoining shorelines;
Very Positive Impact: 0;
Somewhat Positive Impact: 0;
No Impact: 12;
Somewhat Negative Impact: 5;
Very Negative Impact: 6;
No Answer or No Basis to Judge: 0.
Reference letter: gg;
2002 Rule amendments: § 112.7 General requirements for Spill
Prevention, Control, and Countermeasure Plans: § 112.7(d): adds new
requirements for periodic integrity testing of containers, and periodic
integrity and leak testing of valves and piping; exempts FRP facilities
(as defined by section §112.20) from having a contingency plan;
Very Positive Impact: 0;
Somewhat Positive Impact: 1;
No Impact: 2;
Somewhat Negative Impact: 9;
Very Negative Impact: 10;
No Answer or No Basis to Judge: 1.
Reference letter: hh;
2002 Rule amendments: § 112.7 General requirements for Spill
Prevention, Control, and Countermeasure Plans: § 112.7(e): allows use
of usual and customary business records to serve as a record of tests
or inspections and records to be kept separate from the Plan;
acknowledges the certifying engineer as having a role developing
inspection procedures;
Very Positive Impact: 0;
Somewhat Positive Impact: 13;
No Impact: 8;
Somewhat Negative Impact: 1;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 1.
Reference letter: ii;
2002 Rule amendments: § 112.7 General requirements for Spill
Prevention, Control, and Countermeasure Plans: § 112.7(f): mandates
training for oil-handling employees only, and specifies training
topics; also requires discharge prevention briefings at least once a
year;
Very Positive Impact: 0;
Somewhat Positive Impact: 11;
No Impact: 7;
Somewhat Negative Impact: 3;
Very Negative Impact: 2;
No Answer or No Basis to Judge: 0.
Reference letter: jj;
2002 Rule amendments: § 112.7 General requirements for Spill
Prevention, Control, and Countermeasure Plans: § 112.7(i): specifies a
brittle fracture requirement for field-constructed containers
undergoing repairs, alteration, reconstruction or change in service
that may affect the risk of discharge;
Very Positive Impact: 1;
Somewhat Positive Impact: 0;
No Impact: 6;
Somewhat Negative Impact: 5;
Very Negative Impact: 4;
No Answer or No Basis to Judge: 7.
Reference letter: kk;
2002 Rule amendments: § 112.8 Spill Prevention, Control, and
Countermeasure Plan requirements for onshore facilities (excluding
production facilities): § 112.8(c)(3), § 112.9(b)(1): allows National
Pollutant Discharge Elimination Systems (NPDES) records to be used for
SPCC purposes in lieu of events records specifically prepared for this
purpose;
Very Positive Impact: 0;
Somewhat Positive Impact: 12;
No Impact: 6;
Somewhat Negative Impact: 2;
Very Negative Impact: 0;
No Answer or No Basis to Judge: 3.
Reference letter: ll;
2002 Rule amendments: § 112.8 Spill Prevention, Control, and
Countermeasure Plan requirements for onshore facilities (excluding
production facilities) § 112.8(c)(6): requires integrity testing on
aboveground containers on a regular schedule, and when material repairs
are done; testing can be recorded using usual and customary business
records;
Very Positive Impact: 0;
Somewhat Positive Impact: 3;
No Impact: 2;
Somewhat Negative Impact: 8;
Very Negative Impact: 9;
No Answer or No Basis to Judge: 1.
Reference letter: mm;
2002 Rule amendments: § 112.8 Spill Prevention, Control, and
Countermeasure Plan requirements for onshore facilities (excluding
production facilities) § 112.8(d)(1): requires buried piping installed
or replaced to have protective wrapping and coating and cathodic
protection or otherwise satisfy the corrosion protection provisions for
underground piping (40 CFR part 280 or 281);
Very Positive Impact: 0;
Somewhat Positive Impact: 1;
No Impact: 5;
Somewhat Negative Impact: 6;
Very Negative Impact: 8;
No Answer or No Basis to Judge: 3.
Reference letter: nn;
2002 Rule amendments: § 112.8 Spill Prevention, Control, and
Countermeasure Plan requirements for onshore facilities (excluding
production facilities) § 112.8(d)(4): requires integrity and leak
testing of buried piping at the time of installation, construction,
relocation or replacement;
Very Positive Impact: 0;
Somewhat Positive Impact: 2;
No Impact: 4;
Somewhat Negative Impact: 11;
Very Negative Impact: 4;
No Answer or No Basis to Judge: 2.
Reference letter: oo;
2002 Rule amendments: § 112.9 Spill Prevention, Control, and
Countermeasure Plan requirements for onshore oil production facilities§
112.9(c)(2): clarifies that secondary containment include sufficient
freeboard to contain precipitation;
Very Positive Impact: 0;
Somewhat Positive Impact: 0;
No Impact: 10;
Somewhat Negative Impact: 10;
Very Negative Impact: 2;
No Answer or No Basis to Judge: 1.
Reference letter: pp;
2002 Rule amendments: § 112.11 Spill Prevention, Control, and
Countermeasure Plan requirements for offshore oil drilling, production,
or workover facilities § 112.11(i): requires offshore oil drilling,
production or workover facilities to simulate discharges for testing
and inspecting pollution control and countermeasure systems;
Very Positive Impact: 0;
Somewhat Positive Impact: 0;
No Impact: 10;
Somewhat Negative Impact: 0;
Very Negative Impact: 2;
No Answer or No Basis to Judge: 11.
Reference letter: qq;
2002 Rule amendments: Subpart C--Requirements for Animal Fats and Oils
and Greases, and Fish and Marine Mammal Oils; and for Vegetable Oils,
including Oils from Seeds, Nuts, Fruits, and Kernels: § 112.12 - §
112.15: adds sections to apply to Animal Fats and Vegetable Oils based
on the Edible Oil Regulatory Reform Act (EORRA) requirements.
Requirements are identical to Subpart B for petroleum and non-petroleum
oils;
Very Positive Impact: 0;
Somewhat Positive Impact: 2;
No Impact: 8;
Somewhat Negative Impact: 1;
Very Negative Impact: 1;
No Answer or No Basis to Judge: 11.
Source: Responses to GAO 's survey on EPA's SPCC rule.
[End of table]
Our stakeholder survey also allowed respondents the opportunity to
elaborate on their opinions of the SPCC amendments. Table 3 below
presents some illustrative examples of the open-ended comments that we
received from 22 of the 23 industry survey respondents. The examples
include respondents' opinions on the SPCC amendments that they consider
to have the most positive or negative impact on their industry sectors.
These comments provide the current opinions of the industry
associations we surveyed, but they do not necessarily represent the
views of the regulated community as a whole. In addition, these
comments do not represent the views of EPA or GAO.
Table 3: Examples from Industry Comments Regarding the 2002 and 2006
Amendments to the SPCC Regulation:
Reference letter and amendment addressed in survey: N/A: Preamble;
Comment: "The preamble 'clarifications' significantly broadened the
scope and reduced the flexibility of the 1973 rule. Industry and
certifying PEs [Professional Engineers] always interpreted, and EPA
enforced, the rule containment requirements applying only to bulk
storage tanks. The 2002 clarifications expanded these requirements to
include 'containers,' piping, transfer operations, and equipment
containing oil. As a result, integrity testing requirements were also
applied to this equipment. Additionally, the 'should to shall to must'
clarification in the 2002 amendments resulted in the requirements being
more prescriptive.".
Reference letter and amendment addressed in survey: i: § 112.1(b);
Comment: "This provision expands the scope of the 1973 rule to include
more than the storage of oil increasing the number of facilities and
equipment regulated with no real benefit cited for the change."; "By
adding fuel-containing equipment, the universe of sites that require
secondary containment and SPCC plans increased significantly although
engine crankcases rarely have significant oil leaks.".
Reference letter and amendment addressed in survey: j: §
112.1(d)(2)(i);
Comment: "The existing Underground Storage Tank (UST) regulations
already control leaks and spills. Exempting USTs from the SPCC
requirements is a significant burden reduction, particularly at
gasoline service stations.".
Reference letter and amendment addressed in survey: o: § 112.2;
Comment: "EPA significantly increased the number of facilities covered
by the rule in changes of the definition text and preamble discussion.
The 'navigable waters' definition was expanded to EPA's broad
interpretation without considering the recent court decisions. By
defining 'storage capacity' as the 'shell capacity' of the container,
the non-oil portions of a container are included in the applicability
and containment capacity requirements. The definition of oil now
includes virtually any substance that leaves a sheen."; "The
definitions have made the rule more confusing. For example, the
addition of a definition of oil and gas production facility complicates
the applicability determination for multiple facilities in a single
field."; "The definition of oil is also an issue [for us]. The
definition in the rule is vague and causes uncertainty as to whether or
not a material is considered oil under SPCC. As a result, materials
(e.g. solvents, coolants) that would not be considered intuitively to
be oil are pulled into the regulation. In addition, as mentioned above,
there is no de minimis amount of oil under which a mixture stops being
considered oil. One drop of oil in a thousand gallons of water would
cause the entire mixture to be considered oil.".
Reference letter and amendment addressed in survey: d: § 112.3(g);
Comment: "The ability to self certify in certain instances will allow
facilities to move forward without requiring the signature of a PE,
which can be costly, and time consuming.".
Reference letter and amendment addressed in survey: y: § 112.5(b);
Comment: "Changing the required review period from 3 to 5 years is an
improvement since most E&P [Exploration and Production] facilities are
modified infrequently.".
Reference letter and amendment addressed in survey: bb: § 112.7(a)(2);
Comment: "Deviations for secondary containment should be allowed where
secondary containment is not feasible, and 'feasible' should contain
some element of expense, especially for flowlines.".
Reference letter and amendment addressed in survey: gg.,ll: § 112.7(d):
§ 112.8(c)(6);
Comment: "Integrity testing for small storage tanks is expensive -
because it must be performed by a PE. EPA should reevaluate any mandate
beyond visual inspection."; "Integrity testing should be left to the
assessment of the operator and PE certifying the plan. Under the 1973
rule operators have used the flexibility of the rule to implement
appropriate inspections and leak detections methods. The current system
adequately protects waters of the U.S. from spills associated with E&P
facilities.".
Reference letter and amendment addressed in survey: ll: § 112.8(c)(6);
Comment: "Integrity testing is unnecessary for small elevated tanks or
those with release prevention barriers, as visual inspection will
readily detect leaks. Visual inspection in lieu of integrity testing
was agreed upon by EPA in litigation settlement and should be
incorporated into the rule. Integrity testing is also not necessary for
small containers and drums, or for mobile containers which are already
regulated by DOT regulations."; "—the requirement to integrity test all
containers/tanks is overly burdensome. Even applying the STI [Steel
Tank Institute] industry standard (which was rewritten last year after
the final rules were published) requires a great deal of recordkeeping
and inspections for smaller tanks and containers. EPA has indicated in
the past that tanks greater than 40,000 gallons present the greatest
risk. [We believe] that the rules should require integrity testing only
for tanks greater than 40,000 gallons.".
Reference letter and amendment addressed in survey: jj: § 112.7(i);
Comment: "Consistent with API [American Petroleum Institute] Standard
653, brittle fracture evaluations are a good industry practice to
reduce the risk of releases from tanks.".
Reference letter and amendment addressed in survey: p., q., ff., gg.,
mm: § 112.3(a),(b): § 112.3(d): § 112.7(c): § 112.7(d): § 112.8(d)(1);
Comment: "[The amendments] will be extremely costly and time consuming.
Farm tanks, especially those for irrigation, are not situated in
centralized locations that are ideal for one SPCC plan, containment
wall, etc. Instead they are spread out in different fields, parcels,
farms (rented and owned) which, by interpretation, may require separate
SPCC plans, containment, security, etc. Seasonal (planting, harvest)
requirements mean that farmers cannot dedicate extensive time to
upgrading multiple locations for rule compliance. There is also an
expected shortage of Professional Engineers for the amount of tanks
that may be regulated. Many tanks must also be mobile to some extent as
wells dry up and new ones are dug. Short answer - the SPCC rule was
made for heavy industry, not farming, and does not translate, as
written, in a common sense manner to agriculture.".
Reference letter and amendment addressed in survey: i., o., ff., mm.,
gg: § 112.1(b): § 112.2: § 112.7(c): § 112.8(d)(1): § 112.7(d);
Comment: "We are concerned about the 2002 expansion of the rules to
motive power and other oil-filled equipment that merely uses oil. These
issues were also favorably addressed in the 2006 rule revision.
Finally, we remain concerned about the EPA's definition of "navigable
waters," which broadly extends the Agency's jurisdiction.".
Reference letter and amendment addressed in survey: i., o., ff., mm.,
gg: § 112.1(b): § 112.2: § 112.7(c): § 112.8(d)(1): § 112.7(d);
Comment: "[Our] chief concern with the 2002 amendments was the
regulation of airport mobile refuelers, requiring them to have sized
containment plans for the trucks when not in service. The 2006
amendments have essentially eliminated this requirement. [We also were]
very concerned about the 2002 expansion of the rules to motive power
and other oil-filled equipment that merely uses oil. These issues were
also favorably addressed in the 2006 rule revision. Finally, [we
remain] concerned about the EPA's expansive and vague definition of
'navigable waters,' which broadly extends the agency's jurisdiction. We
look forward to additional rulemaking to address this concern.".
Reference letter and amendment addressed in survey: ll., mm., nn., oo:
§ 112.8(c)(6): § 112.8(d)(1): § 112.8(d)(4): § 112.9(c)(2);
Comment: "Produced water storage tanks typically contain small volumes
of oil that do not represent a significant source of oil storage. Water
produced should be exempt from the SPCC regulations because there is a
very low risk of a significant discharge of oil to Waters of the U.S.
Additionally, by expanding the scope of the SPCC program to cover
produced water, it has the effect of capturing hundreds of thousands of
natural gas operations producing natural gas liquids that have
previously fallen below the threshold for planning."; "The containment
of produced fluids around oil and gas fired process vessels, such as
heater treaters, can present a serious safety hazard and it is
impractical for pressurized vessels. In addition, the rule treats
process/operating equipment inconsistently for the different industrial
sectors. At non-exploration and production sites, it is excluded from
the definition of bulk storage containers, whereas at E&P facilities,
this type of equipment is considered bulk storage containers and
subject to secondary containment requirements. The purpose of oil and
gas process equipment such as heater treaters is to process oil/water
mixtures. These vessels are flow-through process vessels rather than
containment vessels."; "Requirements for containment around flow lines
and gathering lines are excessive and impractical and will cause
significant and unnecessary disturbance of the surrounding lands.
Installing secondary containment (including double-walled piping) or
retrofitting all existing flow lines and gathering lines is cost
prohibitive. A more reasonable approach would be to allow operators to
implement flexible and responsible, risk-based flow line inspection and
maintenance programs to prevent spills. Flow lines are not and should
not be considered oil storage containers.".
Reference letter and amendment addressed in survey: N/A;
Comment: "A recurring problem with the SPCC program has been
inconsistent interpretation between EPA's headquarters and its regions.
Consequently, EPA needs to establish its requirements as regulations
that can be consistently interpreted and applied equally throughout the
country. Guidance documents fail to provide certainty; rather, they
create the opportunity for different interpretations of the same
requirements in different EPA offices. But, Guidance documents preclude
formal challenges and therefore create the opportunity for arbitrary
and unsubstantiated decisions by EPA inspectors. The SPCC programs
needs reliability that can only be achieved in regulations.".
Source: Responses to GAO 's survey on EPA's SPCC rule.
[End of table]
[End of section]
Appendix III: Analysis of the Results of GAO's Survey on the Impacts of
the SPCC Amendments on Industry:
Stakeholders Had Mixed Views on the Impacts of the SPCC Amendments:
Our analysis of the results of our survey of 23 key industry
stakeholders regarding 43 major SPCC amendments indicates that they
generally view increases in SPCC requirements as having a negative
impact on their industries and decreases as having a positive
impact.[Footnote 24] However, their views on the extent of the
anticipated impacts varied widely depending on the type of requirement.
Overall, industry stakeholders responded that the 2006 amendments would
have a positive impact on their industries and that the 2002 amendments
would have a combination of both positive and negative impacts. We
identified five categories of amendments that increase SPCC
requirements. Of these five categories, we found that industry
stakeholders view two as having a mostly negative impact on their
industry, two as having a somewhat negative impact, and one as having a
somewhat positive impact. In addition, we identified four categories of
amendments that decrease SPCC requirements. Of these four types, we
found that industry stakeholders view three as having a mostly positive
impact on their industry and one as having a somewhat positive impact.
Finally, we identified one category of amendments that both increase
and decrease requirements and another category of amendments for which
we could not determine whether the amendments either increase or
decrease the requirements. We found that industry stakeholders view
both of these categories as having a somewhat negative impact.[Footnote
25]
We found that industry stakeholders anticipate a mostly negative impact
from amendments that (1) increased requirements on testing, such as
integrity testing of storage tanks; and (2) increased requirements on
containment, such as secondary containment requirements.
By contrast, these stakeholders anticipate a mostly positive impact
from amendments that decrease requirements on containment, facility oil
spill prevention plans or notification procedures, and what we
categorize as multiple SPCC requirements. Finally, industry
stakeholders indicated that six amendment categories will have a
somewhat negative or somewhat positive impact on their industries
compared with the other amendments. Figure 1 summarizes these views.
Figure 1: Summary of Industry Stakeholder Views on Impacts of 11 SPCC
Amendment Categories:
[See PDF for image]
Source: GAO survey of industry stakeholders and analysis of SPCC
amendments.
[End of figure]
We received responses to our survey from only one environmental
stakeholder and, therefore, we were unable to comprehensively analyze
the views of environmental groups.
Analysis Methodology:
The following is a detailed description of the coding rules used and
the 11 categories into which we placed the 2002 and 2006 SPCC
amendments. We summarize the major rule amendments finalized in 2002
and 2006; to see the exact wording of the finalized rule, please refer
to the regulation as published in the Federal Register. We determined
whether the amendment increases or decreases requirements on facilities
based on whether the amendment uses terms such as "adds new
requirements" and "mandates," which would be considered an increase in
requirements, or terms such as "allows" or "exempts," which would be
considered a decrease in requirements. In some instances, we determined
that an amendment does not imply either an increase or a decrease in
requirements, or that an amendment included provisions that would both
increase and decrease requirements. In addition, there were several
instances where we could not determine if the amendment increased or
decreased requirements. For example, several of these types of
amendments made definitional changes to words used in the rule, but it
was unclear from reviewing the text of the amendment whether these
changes were a clarification to the rule or increased or decreased
requirements. [Footnote 26]
Changes to Scope of the SPCC rule:
In general, amendments in this category are changes to the criteria for
eligibility or changes to thresholds for oil storage. These amendments
affect either the number of facilities subject to the SPCC rule or the
number of oil tanks at a given facility subject to the SPCC rule. In
particular, the written description of the amendment in our survey
should include words such as increases, adds, eliminate, or exempts. We
identified one of the 43 amendments as expanding the scope of the SPCC
rule, and six as decreasing the scope of the SPCC rule.
2002 amendment that we categorized as expanding the scope of the rule:
* 112.1(f): gives the EPA Regional Administrators authority to require
an SPCC plan for any facility within the region, otherwise exempt from
the rule, in order to carry out the purposes of the Clean Water
Act.[Footnote 27]
2002 amendments that we categorized as decreasing the scope of the
rule:
* 112.1(d)(2)(i): excludes the capacity of completely buried tanks
subject to all of the technical requirements of the underground storage
tank regulations from calculation of the threshold, and states that
permanently closed tanks also do not count in the calculation.
* 112.1(d)(2)(ii): eliminates the aboveground storage capacity
threshold of greater than 660 gallons for a single container, but
maintains the greater than 1,320 threshold and establishes a "de
minimis" container capacity size of 55 gallons or greater to calculate
capacity.
* 112.1(d)(4): exempts completely buried storage tanks that are subject
to all of the technical requirements of the underground storage tank
regulations from the rule requirements, but requires those tanks to be
included on the facility diagram.
* 112.1(d)(5), (6): exempts containers that are less than 55 gallons;
and facilities (or parts thereof) used exclusively for wastewater
treatment unless it is used to meet part 112 requirements.
2006 amendments that we categorized as decreasing the scope of the
rule:
* 112.1(d)(2)(ii), § 112.1(d)(7): excludes "motive power containers"
(defined in § 112.2) from the rule, but does not exclude the transfer
of fuel or other oil into a motive power container at an otherwise
regulated facility.
* 112.3(a)(2), § 112.3(b)(2): delays the compliance dates for farms
until the effective date of a rule establishing SPCC requirements
specifically for farms or dates that farms must comply with the
provisions of this part.
Planning or Notification:
In general, this category refers to requirements to prepare, implement,
amend, or certify SPCC plans or other records or documents required of
regulated facilities. The description of the amendment includes
references to plans, records, diagrams, or any other documents that
facilities are required to have under the SPCC rule. We identified 17
amendments from 2002 and 1 amendment from 2006 that fit this category.
Of the 17 amendments from 2002, we categorized 5 amendments as
increasing requirements on facility oil spill prevention plans or oil
spill notification procedures, 9 as decreasing requirements, and 3 as
either both increasing and decreasing requirements or neither
increasing or decreasing requirements. The one amendment from 2006
decreased requirements.
2002 amendments that we categorize as increasing planning or
notification requirements:
* 112.3(e): requires a copy of the SPCC plan to be maintained at a
facility attended for at least 4 hours a day instead of the current
requirement of 8 hours.
* 112.4(d): provides that the EPA Regional Administrator may require an
amendment to the SPCC plan after an on-site review of the plan.
* 112.7(a)(3): requires a description and a diagram of the facility
layout in the SPCC plan.
* 112.7(a)(4): requires facilities to provide additional information
and procedures in the SPCC plan for reporting a discharge; facility
response plan (FRP) facilities (defined in § 112.20) are exempt.
* 112.7(a)(5): requires facilities to organize the SPCC plan in a
readily usable format for an emergency; FRP facilities (defined in §
112.20) are exempt.
2002 amendments that we categorize as decreasing planning or
notification requirements:
* 112.3(f): allows the EPA Regional Administrator to grant an extension
of time for amendments of the SPCC plan, as well as the entire SPCC
plan.
* 112.4(a): raises the threshold for reporting under the program to two
discharges of greater than 42 U.S. gallons (1 barrel) per discharge in
any 12-month period, and reduces the amount of information to be
submitted to the EPA Regional Administrator.
* 112.4(b): does not require new facilities to meet any requirements of
this section (§ 112.4) until the compliance dates for the initial
preparation and implementation of an SPCC plan.
* 112.5(a): requires any amendment made under this section be prepared
within six months and implemented in no more than six months from when
the amendment was prepared.
* 112.5(b): changes the period of review for SPCC plans from 3 to 5
years, and requires documentation of completion of the review and
evaluation.
* 112.5(c): states that a professional engineer (PE) must certify only
technical amendments, and not non-technical amendments (e.g. names,
phone numbers).
* 112.7: allows differing formats for the SPCC plan; other formats must
be cross-referenced to the listed SPCC requirements and include all
applicable SPCC requirements.
* 112.7(e): allows use of usual and customary business records to serve
as a record of tests or inspections and records to be kept separate
from the SPCC plan; acknowledges the certifying engineer as having a
role developing inspection procedures.
* 112.8(c)(3), § 112.9(b)(1): allows National Pollutant Discharge
Elimination Systems (NPDES) records to be used for SPCC purposes in
lieu of events records specifically prepared for this purpose.
2006 amendments that we categorize as decreasing planning or
notification requirements:
* 112.6: allows "qualified facilities" (defined in § 112.3(g) to self-
certify SPCC plans and provides applicable requirements for self-
certification.
2002 amendments that we categorize as both increasing and decreasing
the planning or notification requirements, or that neither increasing
nor decreasing the requirements:
* 112.3(a),(b): requires facilities in operation to prepare or revise
an SPCC plan within 6 months and implement the plan within one year;
new facilities must prepare and implement an SPCC plan before beginning
operations.
* 112.3(d): requires the PEs to attest that they considered applicable
industry standards and that the SPCC plan is in accordance with SPCC
requirements; also allows an agent to examine a facility in place of
the PE, but the PE must review the agent's work, and certify the SPCC
plan.
* 112.4(c): changes the requirement from notification to the state
agency in charge of water pollution control activities to notification
to the state agency in charge of oil pollution control activities.
Containment:
In general, this category refers to requirements for containers or
piping used by SPCC facilities. In particular, the amendment in our
survey should use one or more of the following terms: container,
containment, secondary containment, piping, or tanks to be included in
this category. We identified one amendment from 2002 that increased
requirements for containers or piping used by SPCC facilities and two
amendments from 2006 that decreased the requirements.
2002 amendment that we categorized as increasing containment
requirements:
* 112.8(d)(1): requires all buried piping installed or replaced on or
after August 16, 2002, to have protective wrapping and coating and
cathodic protection or otherwise satisfy the corrosion protection
provisions for underground piping (40 C.F.R. pts. 280 or 281).
2006 amendments that we categorized as decreasing containment
requirements:
* 112.7(k): allows owners/operators of qualified oil-filled operational
equipment (defined in 112.7 (k)(1)) to meet alternate requirements
(defined in 112.7(k)(2)) in lieu of the general secondary containment
requirements.
* 112.8 (c)(2), § 112.8 (c)(11), § 112.12 (c)(2), § 112.12 (c)(11):
provides an exception for mobile refuelers from constructing and
meeting certain secondary containment requirements.
Testing:
In general, this category refers to requirements to evaluate, inspect,
and test containers, piping, or equipment to prevent oil spills. In
particular, the written description of the amendment in our survey
should include one or more of the following terms: test, integrity
test, or inspect. We identified five amendments from 2002 that fit this
category. All five of these amendments were categorized as increasing
SPCC requirements.
2002 amendments that we categorized as increasing testing requirements:
* 112.7(d): adds new requirements for periodic integrity testing of
containers, and periodic integrity and leak testing of valves and
piping when secondary containment is impracticable; exempts FRP
facilities (as defined by section §112.20) from having a contingency
plan when secondary containment is impracticable.
* 112.7(i): specifies a brittle fracture evaluation requirement for
field-constructed containers undergoing repairs, alteration,
reconstruction, or change in service that may affect the risk of
discharge.
* 112.8(c)(6): requires integrity testing on aboveground containers on
a regular schedule (as opposed to periodically), and when material
repairs are done; testing can be recorded using usual and customary
business records.
* 112.8(d)(4): requires integrity and leak testing of buried piping at
the time of installation, construction, relocation, or replacement.
* 112.11(i): requires offshore oil drilling, production, or workover
facilities to simulate discharges for testing and inspecting pollution
control and countermeasure systems.
Training:
This category refers to training of employees that facilities are
required to undertake. Amendments placed into this category must
include the key word "training." We identified one amendment--from
2002--that fits this category. We categorized it as increasing
requirements.
2002 amendment that we categorized as increasing requirements:
* 112.7(f): mandates training for oil-handling employees only, and
specifies additional training topics; also requires discharge
prevention briefings at least once a year.
Multiple Aspects:
Amendments in this category either (1) do not fit into one of the above
categories or (2) fit into more than one of the above categories. Two
amendments--one each from 2002 and one from 2006--were categorized as
decreasing requirements. In addition, seven amendments in this category
did not fit into the above categories because we could not determine if
the amendments increased or decreased requirements.
2002 amendment that we categorized as decreasing requirements:
* 112.7(a)(2): allows deviations from most of the rule's substantive
requirements (except secondary containment), provided that the reasons
for nonconformance are explained, and equivalent environmental
protection is provided.
2006 amendment that we categorized as decreasing requirements:
* 112.3(g): defines a qualified facility eligible to self-certify under
the provisions set forth in § 112.6.
2002 amendments that we could not determine if they should be
categorized as increasing or decreasing or neither increased or
decreased requirements:
* 112.1(b): adds "using" to the lists of activities at facilities
subject to the rule and expands the scope of the rule to conform to the
expanded jurisdiction in the Clean Water Act.
* 112.2: adds new definitions, such as for "facility," and discharge;
revises the text of the definitions of "oil" and "navigable waters";
and includes statutory definitions for "offshore facility," and "United
States" in the rule.
* 112.7(c): states that a containment system must be capable of
containing oil and constructed to prevent any discharge from escaping
from the facility before cleanup occurs.
* 112.9(c)(2): states that secondary containment must include
sufficient freeboard to contain precipitation.
* 112.12 - § 112.15: adds sections to differentiate requirements for
Animal Fats and Vegetables Oils based on the Edible Oil Regulatory
Reform Act (EORRA) requirements. Requirements are identical to Subpart
B for petroleum and non-petroleum oils.[Footnote 28]
2006 amendments that we could not determine if they should be
categorized as increasing or decreasing or neither increased or
decreased requirements:
* 112.2: adds several definitions, including airport mobile refueler,
farm, motive power container, and oil-filled operational equipment.
* 112.13 - § 112.15: removal of these sections because they are not
appropriate for facilities that process, store, use, or transport
animal fats and/or vegetable oils.
[End of section]
Appendix IV: Comments from the Environmental Protection Agency:
United States Environmental Protection Agency:
Washington D.C. 20460:
July 13, 2007:
Mr. John B. Stephenson, Director:
Natural Resources & Environment:
Government Accountability Office:
441 G Street, NW, Room 2135:
Washington D.C. 20548:
Dear Mr. Stephenson:
Thank you for the opportunity to comment on the draft report
"Aboveground Oil Storage Tanks: Observations on EPA's Economic Analysis
of the Amendments to the Spill Prevention, Control and Countermeasure
Rule (GAO-07-763)." We appreciate the collegial working relationship
and open dialog, while working with GAO on this report.
Overall, we generally agree with the Recommendation in the report to
improve our economic analyses for future changes to the Spill
Prevention, Control, and Countermeasures (SPCC) rule, consistent with
Office of Management and Budget (OMB) guidelines and in consideration
of available data. EPA recognized this need last year and implemented
three major initiatives: (1) activated a core SPCC Economic Subgroup of
economic and technical experts; (2) acquired additional expert
contractor support; and (3) hired an experienced senior economist to
guide these efforts.
However, we also believe that the economic analyses that were conducted
for the 2002 and 2006 amendments to the SPCC rule are already
consistent with, and meet the spirit and intent of, OMB guidelines,
given the limited data, time, and resources available. We are
continuously working to gather additional data to improve our
understanding of the regulated universe, oil spill risks, and to
address uncertainty and quantify benefits. Although the Regulatory
Impact Analysis (RIA) that supports the 2006 final rule amendments
promulgated in December 2006 is constrained by limited data and
uncertainty, we believe that the assumptions used in the analyses have
a reasonable basis and that there was sufficient information to allow
us to make policy and regulatory decisions underpinning these
amendments that generate significant cost savings and burden reduction.
We also maintain that these modifications serve to tailor and ease
compliance for several industry sectors leading to protection of the
environment from oil spills. As you noted in your report, the 2006 R1A
addresses many of the issues identified in the RIA for the final 2002
amendments. Therefore, we request that you consider revising this
portion of the report to note RIA consistency with 0MB guidelines in
light of limited data.
EPA also requests that the report be modified to address several
technical corrections (see enclosure). In one section, in particular
(page 20), the report characterizes the 2002 economic analysis, and to
some extent, the 2006 economic analysis, with terminology that we
believe does not accurately reflect the analysis. With respect to the
choice of assumed rates of compliance for sensitivity analysis, the
term "arbitrary" is used. Rather than arbitrary, EPA assumed 100%
compliance under the baseline and the rule amendments for a proper
"with and without" comparison of the economic impact. We then chose
25%, 50% and 75% rates of compliance for the sensitivity analysis to
show the full range of impacts, depending upon any future, new
information that would suggest otherwise. Therefore, we do not agree
with GAO's characterization that the analysis used "arbitrarily
developed scenarios."
Again, we appreciate the opportunity to work with your team on this
review and your consideration of technical corrections. If you have
other comments or questions about these corrections, please contact
Deborah Dietrich, Director of the Office of Emergency Management at 202-
564-8600.
Sincerely:
Signed by:
Susan Parker Bodine:
Assistant Administrator:
Enclosure:
[End of section]
Appendix V: GAO Contact and Staff Acknowledgments:
GAO Contact:
John B. Stephenson, (202) 512-3841, stephensonj@gao.gov:
Staff Acknowledgments:
In addition to the individual named above, Vincent P. Price, Assistant
Director; Kevin Bray; Mark Braza; Greg Carroll; Jennifer DuBord;
Timothy J. Guinane; Jennifer Huynh; Lisa Mirel; and Carol Herrnstadt
Shulman made key contributions to this report.
AO, Inland Oil Spills: Stronger Regulation and Enforcement Needed to
Avoid Future Incidents, GAO/RCED-89-65 (Washington, D.C.: Feb. 22,
1989); The Oil Spill Prevention, Control, and Countermeasures Program
Task Force, Interim Final Report, May 13, 1988.
FOOTNOTES
[1] EPA defines harmful quantity as any quantity of discharged oil that
violates applicable water quality standards, causes a film or sheen
upon, or discoloration of, the surface of the water or adjoining
shorelines, or causes a sludge or emulsion to be deposited beneath the
surface of the water or upon adjoining shorelines. 40 C.F.R. §110.3.
Section 311 of the Clean Water Act prohibits the discharge of harmful
quantities of oil or hazardous substances (1) into or upon the
navigable waters of the United States, adjoining shorelines, or into or
upon the waters of the contiguous zone, or (2) in connection with
activities under the Outer Continental Shelf Lands Act or the Deepwater
Port Act of 1974, or which may affect natural resources belonging to,
appertaining to, or under the exclusive management authority of the
United States, including resources under the Magnuson-Stevens Fishery
Conservation and Management Act 33 U.S.C.§ 1321(b)(3).
[2] GA0 C.F.R. pts. 280, 281.
[3] 40 C.F.R. pts. 280, 281.
[4] Executive Order 12866 directs agencies to conduct economic analyses
of significant regulatory actions and to select the policy that
maximizes net benefits to society unless a statute requires otherwise.
Further, the Unfunded Mandates Reform Act of 1995, Pub. L. No. 104-4,
109 Stat. 48 (1995) (codified at 2 U.S.C. § 1531 et seq.), requires
agencies to choose the least costly, most cost-effective, or least
burdensome option, unless inconsistent with law or the agency head
explains why this option was not adopted.
[5] Office of Management and Budget (OMB): Economic Analysis of Federal
Regulations Under Executive Order 12866 (Jan. 11, 1996) (generally
referred to as "best practices"); OMB, Guidelines to Standardize
Measures of Costs and Benefits and the Format of Accounting Statements
(May 22, 2000); and Circular A-4 (Sept. 17, 2003) (replacing earlier
guidelines, effective for significant final rules on January 1, 2005).
[6] Oil Pollution Prevention: Non-Transportation-Related Onshore and
Offshore Facilities, 38 Fed. Reg. 34164 (December 11, 1973) (codified
as amended at 40 C.F.R. pt. 112).
[7] As amended in 2002, total storage capacity excludes containers with
capacity of less than 55 gallons, capacity of containers that are
permanently closed, and facilities or parts of facilities used
exclusively for wastewater treatment. In addition, it excludes
completely buried tanks, associated underground piping, underground
ancillary equipment, and containment systems that are subject to all of
the technical requirements of the underground storage tank regulations.
[8] NRC is the federal government's national communications center and
the national point of contact for spill reporting. NRC also distributes
reported spill information to agencies--including EPA and the U.S.
Coast Guard--tasked with responding to spills. It is staffed 24 hours a
day by Coast Guard officers and marine science technicians.
[9] In 1975, EPA first published a clarification of the rule's
definition of oil, "affirm[ing] that non-petroleum oils, such as fats
and oils from animals and vegetable sources," were subject to the rule.
40 Fed. Reg. 28,849 (July 9, 1975). Wastes can include oil mixed with
water--known as produced water in the oil and gas production sector.
[10] Facilities that use oil operationally include electrical
substations that contain electrical transformers and certain hydraulic
systems. Oil-filled operational equipment includes an oil storage
container in which the oil is present solely to support the function of
the apparatus or device.
[11] At an SPCC-regulated facility, areas with the potential for a
discharge are subject to either general or specific secondary
containment requirements. Under SPCC, several methods can be used to
contain oil from spilling into or upon navigable waters or adjoining
shorelines, such as dikes and berms. As described in agency guidance,
general secondary containment requirements are intended to address the
most likely oil discharge in loading or unloading areas or areas (not
associated with a rack) with containers and equipment, such as oil-
filled operational and manufacturing equipment, or piping. Specific
secondary containment requirements are intended to address a worst case
container failure, such as for bulk storage containers, certain mobile
portable containers, or loading/unloading racks. These specific
provisions prescribe the size of secondary containment methods used.
[12] A "motive power" container is any onboard bulk storage container
used primarily to power the movement of a motor vehicle or ancillary
onboard oil-filled operational equipment. Examples of motive power
containers include trucks, automobiles, aircraft, self-propelled
cranes, and locomotives.
[13] A "qualified facility" is a facility with a limited oil storage
capacity that is eligible for streamlined regulatory requirements. To
be eligible, the facility must have 10,000 gallons or less in aggregate
aboveground oil storage capacity and must not have (1) a single
discharge of oil into or upon navigable waters or adjoining shorelines
each exceeding 1,000 U.S. gallons or (2) two discharges of oil to
navigable waters or adjoining shorelines exceeding 42 U.S. gallons
within any 12-month period for the 3 years prior to the SPCC plan
certification or since becoming subject to the rule if the facility has
been in operation for less than 3 years. Oil spills that occur as a
result of a natural disaster are not subject to these criteria.
[13] Mobile refuelers are bulk storage containers onboard a vehicle or
towed that are designed or used solely to store and transport fuel for
transfer into or from an aircraft, motor vehicle, locomotive, vessel,
ground service equipment, or other oil storage container.
[15] Social costs and benefits represent the opportunity costs of the
resources used or the benefits forgone as a result of the regulatory
action. Opportunity costs include private-sector compliance costs,
government administrative costs, and losses in consumer or producer
surpluses. EPA estimated only the compliance costs (or cost savings)
associated with the rule changes.
[16] EPA, Economic Analysis for the Final Revisions to the Oil
Pollution Prevention Regulation (40 CFR Part 112) (May 2002).
[17] PA, Regulatory Analysis for the Proposed Revisions to the Oil
Pollution Prevention Regulations (40 CFR Part 112), (November 2005);
Regulatory Impact Analysis for the Final Revisions to the Oil Pollution
Prevention Regulations (40 CFR Part 112), (November 2006).
[18] OMB guidelines recommend that the benefits and costs of regulatory
alternatives be measured incrementally to a baseline, or the way the
world would look in the absence of the proposed regulatory
alternatives. Thus, the baseline provides a point of comparison for
estimating the effects of different regulatory alternatives.
[19] EPA assumed that revisions classified as baseline would produce no
substantive change in the existing regulation or were already adhered
to by facilities as good engineering practices or prevailing industry
standards or practices.
[20] According to EPA's 1995 EPA survey, the survey was designed so
that data on sampled facilities could be extrapolated to the nation as
a whole for all facilities regulated by EPA's SPCC rule.
[21] To collect data for the estimation of costs, selected EPA and
state officials and contractor staff with experience in the existing
SPCC program and other spill prevention programs were contacted. EPA
considered the cost estimates to be representative of the possible
costs to be incurred by facilities, rather than precise estimates of
the actual costs that will occur.
[22] For certain industrial categories, EPA did not obtain complete
data. In these cases, it supplemented the 1995 survey data with data
from a 1991 study of four states. However, we could not determine
whether this caused additional error or bias.
[23] In its analysis of the 2006 amendments, EPA used compliance cost
savings to approximate social benefits and considered the impact on
public health and welfare and the environment as representing the
potential social costs of the amendments. To be consistent with the
agency's analysis of the 2002 amendments, we present EPA's 2006
estimates of the potential effect on private-sector compliance as costs
(or negative costs) and on public health and the environment as
benefits (or negative benefits). As with its 2002 analysis, EPA did not
fully assess the social costs or social benefits associated with the
amendments.
[24] There was one exception to this general pattern: industry
associations generally reported that increasing requirements on
employee training will have a somewhat positive impact on their
industry.
[25] According to EPA, Office of Emergency Management officials, the
agency considers five of the amendments to be clarifications to the
scope or definitions of the SPCC rule. The survey referred to these
five amendments as additions or expansions. To assess the potential for
bias among these questions we removed the questions related to these
five amendments from our analysis and recomputed scores for each of the
categories. After removing these five questions from the multiple
aspects category, the score results were similar to those presented
above and in figure 1.
[26] As previously stated in the report, according to EPA, the agency
made several definitional changes to clarify the types of facilities
that are included under the rule and facilities' requirements. However,
many industry sectors consider these amendments to be increases to the
requirements of the rule rather than clarifications.
[27] The summaries of amendments presented in this appendix were
modified from the text of amendment summaries in the questionnaire. For
the full text of amendments, see the Federal Register.
[28] Sections 112.13-112.15 have been deleted per the December 2006
amendments. Section 112.12 was established to provide a platform for
any further differentiation, if necessary. 71 FR 77285, 77293.
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