Aboveground Oil Storage Tanks: Observations on EPA's Economic	 
Analyses of Amendments to the Spill Prevention, Control, and	 
Countermeasure Rule (27-JUL-07, GAO-07-763).			 
                                                                 
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.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-763 					        
    ACCNO:   A74650						        
  TITLE:     Aboveground Oil Storage Tanks: Observations on EPA's     
Economic Analyses of Amendments to the Spill Prevention, Control,
and Countermeasure Rule 					 
     DATE:   07/27/2007 
  SUBJECT:   Cost analysis					 
	     Cost effectiveness analysis			 
	     Economic analysis					 
	     Environmental law					 
	     Environmental monitoring				 
	     Environmental protection				 
	     Federal regulations				 
	     Financial analysis 				 
	     Noncompliance					 
	     Oil spills 					 
	     Pollution control					 
	     Public health					 
	     Regulatory agencies				 
	     Benefit-cost tracking				 
	     Program costs					 
	     Program goals or objectives			 
	     Program implementation				 
	     EPA Spill Prevention Control and			 
	     Countermeasures Plan				 
                                                                 

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GAO-07-763

   

     * [1]Results in Brief
     * [2]Background
     * [3]Limitations in EPA's Analysis of the 2002 SPCC Amendments Re

          * [4]EPA's Methodology for Analyzing the 2002 SPCC Amendments
          * [5]EPA Did Not Assess the Uncertainty Associated with Key Assum
          * [6]EPA's 2002 Analysis Had Other Limitations

     * [7]EPA's Economic Analysis of the 2006 SPCC Amendments Improved

          * [8]EPA's 2006 Analysis Included Elements Absent from Its Earlie
          * [9]EPA's 2006 Analysis Also Had Limitations

     * [10]Conclusions
     * [11]Recommendation for Executive Action
     * [12]Agency Comments and Our Evaluation

          * [13]Selection of Survey Respondents
          * [14]Questionnaire Design and Pretesting
          * [15]Survey Administration
          * [16]Content Analysis
          * [17]Data Analysis

     * [18]Survey Question 1
     * [19]Survey Question 2
     * [20]Stakeholders Had Mixed Views on the Impacts of the SPCC Amen
     * [21]Analysis Methodology

          * [22]Changes to Scope of the SPCC rule
          * [23]Planning or Notification
          * [24]Containment
          * [25]Testing
          * [26]Training
          * [27]Multiple Aspects

     * [28]GAO Contact
     * [29]Staff Acknowledgments
     * [30]GAO's Mission
     * [31]Obtaining Copies of GAO Reports and Testimony

          * [32]Order by Mail or Phone

     * [33]To Report Fraud, Waste, and Abuse in Federal Programs
     * [34]Congressional Relations
     * [35]Public Affairs

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

GAO-07-763

Contents

Letter 1

Results in Brief 4
Background 6
Limitations in EPA's Analysis of the 2002 SPCC Amendments Reduced Its
Usefulness for Informing Decision Makers and the Public About Economic
Trade-offs 12
EPA's Economic Analysis of the 2006 SPCC Amendments Improved on the
Earlier Study but Also Had Limitations 17
Conclusions 20
Recommendation for Executive Action 21
Agency Comments and Our Evaluation 21
Appendix I Objectives, Scope, and Methodology 24
Appendix II Summary of Survey Results 30
Survey Question 1 30
Survey Question 2 32
Appendix III Analysis of the Results of GAO's Survey on the Impacts of the
SPCC Amendments on Industry 41
Stakeholders Had Mixed Views on the Impacts of the SPCC Amendments 41
Analysis Methodology 42
Appendix IV Comments from the Environmental Protection Agency 50
Appendix V GAO Contact and Staff Acknowledgments 52

Tables

Table 1: Estimated Economic Impacts Associated with EPA's 2002 Amendments
to the SPCC Regulation 14
Table 2: Estimated Economic Impacts Associated with EPA's 2006 Amendments
to the SPCC Regulation 18
Table 3: Examples from Industry Comments Regarding the 2002 and 2006
Amendments to the SPCC Regulation 38

Figure

Figure 1: Summary of Industry Stakeholder Views on Impacts of 11 SPCC
Amendment Categories 42

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

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separately.

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.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.

1EPA 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. S110.3. 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.S
1321(b)(3).

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.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.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.

2GAO, Inland Oil Spills: Stronger Regulation and Enforcement Needed to
Avoid Future Incidents, [36]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.

340 C.F.R. pts. 280, 281.

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.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.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.

4Executive 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. S 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.

5Office 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).

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

           o analyze alternatives to the amendments, such as alternative lead
           times for industry to comply or alternative levels of stringency;

           o 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

           o 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,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.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.8
			  
6Oil 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).

7As 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.

8NRC 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.			  

           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 [37]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

           o 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
           o 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:

           o 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.9 
           o The SPCC rule applies to facilities that "use" oil, such as in
           the operational use of oil-filled equipment.10 
           o 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.

9In 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.

10Facilities 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.

           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

           o 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
           o 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

           o 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;
           o 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;11 and
           o 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.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.13 The
           2006 amendments also decreased some secondary containment
           requirements to reduce the burden for facilities. For example, the
           2006 amendments

           o exempted facilities from having to construct and meet
           requirements for specific sized secondary containment for mobile
           refuelers;14 and
           o 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.

11At 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.

12A "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.

13A "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.

           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.15 In
           response, EPA conducted an economic analysis to provide estimates
           of the potential costs and benefits of the amendments.16 In
           addition, the agency conducted economic analyses of the 2006
           amendments, both as proposed in 2005 and as made final in December
           2006.17 EPA's Office of Solid Waste and Emergency Response
           conducted these analyses.

14Mobile 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.

15Social 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.

16EPA, Economic Analysis for the Final Revisions to the Oil Pollution
Prevention Regulation (40 CFR Part 112) (May 2002).

           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:

           o 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.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.19 
			  
17EPA, 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).

18OMB 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.

19EPA 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.

           o 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.20 
           o 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.21 
           o 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.

20According 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.

21To 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.

           Table 1: Estimated Economic Impacts Associated with EPA's 2002
           Amendments to the SPCC Regulation

Dollars in millions                                               
Year amendments are in effect Costs (cost savings)a Benefits      
First year                                    $21.9 Not estimated 
Second year                                  (60.2) Not estimated 
Each subsequent year                         (45.0) Not estimated 

           Source: EPA.

           Note: EPA's analysis does not indicate which year the dollars
           represent.

           aThe estimates represent costs for all facilities (small, medium,
           and large) and all amendments for which EPA estimated costs.
			  
			  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.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.
			  
22For 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.

           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                                                                   
                                                                Benefits      
                                                   Cost savings expected      
                    Percentage of   Cost savings expected under under full    
                       facilities expected under    alternative compliance or 
Major components assumed to be    baseline of baseline of 50 50 percent    
of the 2006        affected by           full        percent compliance    
final rule                rule    compliancea    compliancea baselines     
Qualified                 100%            $38            $19 Not estimated 
facilities                                                                 
eligible for                                                               
streamlined                                                                
regulatory                                                                 
requirements                                                               
Qualified                   25             39             19 Not estimated 
oil-filled                                                                 
operational                                                                
equipmentb                                                                 
                               50             53             26 Not estimated 
                               75             67             33 Not estimated 
Motive power                10              1            < 1 Not estimated 
                               25              3              1 Not estimated 
                               50              5              3 Not estimated 
Mobile refuelers            25             17              9 Not estimated 
                               50             34             17 Not estimated 
                              75%            $51             26 Not estimated 

Source: EPA.

aEstimates 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.

bEstimates 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.

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).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.

23In 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.

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 [38]http://www.gao.gov .

If you or your staff has any questions about this report, please contact
me at (202) 512-3841 or [email protected]. 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,

John B. Stephenson
Director, Natural Resources and Environment

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.

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.)

                                                                            No   
                                                                          Answer 
                                                                          or No  
                                 Very   Somewhat        Somewhat   Very   Basis  
 Reference 2006 Rule           Positive Positive   No   Negative Negative   to   
 letter    amendments           Impact   Impact  Impact  Impact   Impact  Judge  
           S 112.1 General Applicability                                         
 a.        S 112.1(d)(2)(ii),     10       7       4       2        0       0    
           S 112.1(d)(7):                                                        
           excludes `motive                                                      
           power containers'                                                     
           (defined in S                                                         
           112.2) from the                                                       
           rule, but includes                                                    
           the transfer of                                                       
           fuel or other oil                                                     
           into a motive power                                                   
           container at an                                                       
           otherwise regulated                                                   
           facility.                                                             
           S 112.2 Definitions                                                   
 b.        S 112.2: adds          5        9       2       6        0       1    
           several                                                               
           definitions,                                                          
           including airport                                                     
           mobile refueler,                                                      
           farm, motive power                                                    
           container, and                                                        
           oil-filled                                                            
           operational                                                           
           equipment.                                                            
           S 112.3 Requirement to prepare and implement a Spill Prevention,
           Control, and Countermeasure Plans
 c.        S 112.3(a)(2), S       1        3       10      2        0       7    
           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.                                                         
 d.        S 112.3(g): defines    7        12      4       0        0       0    
           a qualified                                                           
           facility eligible                                                     
           to self-certify                                                       
           under the                                                             
           provisions set                                                        
           forth in S 112.6.                                                     
           S 112.6 Qualified Facility Plan Requirements                          
 e.        S 112.6: allows        10       7       5       1        0       0    
           qualified                                                             
           facilities (defined                                                   
           in S 112.3(g)) to                                                     
           self-certify and                                                      
           provides applicable                                                   
           requirements for                                                      
           self-certification.                                                   
           S 112.7 General requirements for Spill Prevention, Control, and
           Countermeasure Plans
 f.        S 112.7(k): allows     5        16      2       0        0       0    
           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.                                                         
           S 112.8 Spill Prevention, Control, and Countermeasure Plan
           requirements for onshore facilities (excluding production facilities)
                               
           S 112.12 Spill Prevention, Control, and Countermeasure Plan
           requirements        
 g.        S 112.8 (c)(2), S      10       10      3       0        0       0    
           112.8 (c)(11), S                                                      
           112.12 (c)(2), S                                                      
           112.12 (c)(11):                                                       
           provides an                                                           
           exception for                                                         
           mobile refuelers                                                      
           from constructing                                                     
           and meeting                                                           
           requirements for                                                      
           secondary                                                             
           containment.                                                          
           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
 h.        S 112.13 - S           0        1       13      0        0       9    
           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.                                                       

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.)

                                                                            No   
                                                                          Answer 
                                                                          or No  
                                 Very   Somewhat        Somewhat   Very   Basis  
Reference 2002 Rule         Positive Positive   No   Negative Negative   to   
letter    amendments         Impact   Impact  Impact  Impact   Impact  Judge  
             S 112.1 General                                                     
             Applicability                                                       
i.        S 112.1(b): adds     0        0       3       3        14      3    
             "users" of oil as                                                   
             a group subject                                                     
             to the rule and                                                     
             expands the                                                         
             jurisdiction of                                                     
             the rule as                                                         
             amended in the                                                      
             Clean Water Act.                                                    
j.        S 112.1(d)(2)(i):    3        10      8       1        0       1    
             does not count                                                      
             the capacity of                                                     
             completely buried                                                   
             tanks (defined in                                                   
             parts 280 or 281)                                                   
             or permanently                                                      
             closed tanks                                                        
             towards the                                                         
             threshold.                                                          
k.        S                    2        12      4       3        2       0    
             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.                                                           
l.        S 112.1(d)(4):       0        0       8       11       1       3    
             requires                                                            
             completely buried                                                   
             storage tanks,                                                      
             otherwise exempt,                                                   
             to be included on                                                   
             the facility                                                        
             diagram.                                                            
m.        S 112.1(d)(5),       5        12      2       0        2       2    
             (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.                                                       
n.        S 112.1(f): gives    0        0       11      6        3       3    
             the EPA Regional                                                    
             Administrators                                                      
             authority to                                                        
             require an SPCC                                                     
             plan for any                                                        
             facility within                                                     
             the jurisdiction                                                    
             in order to meet                                                    
             goals of the CWA.                                                   
             S 112.2                                                             
             Definitions                                                         
o.        S 112.2: adds new    1        3       3       4        11      1    
             definitions, such                                                   
             as for                                                              
             `facility', and                                                     
             expands the                                                         
             definition of                                                       
             `oil',                                                              
             `discharge',                                                        
             `navigable                                                          
             waters',                                                            
             `offshore                                                           
             facility', and                                                      
             `United States'.                                                    
             S 112.3 Requirement to prepare and implement Spill Prevention,
             Control, and Countermeasure Plan
p.        S 112.3(a),(b):      1        1       5       8        5       3    
             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.                                                         
q.        S 112.3(d):          0        7       6       6        4       0    
             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.                                                               
r.        S 112.3(e):          0        1       17      4        0       1    
             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.                                                              
s.        S 112.3(f):          1        13      7       1        0       1    
             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.                                                   
             S 112.4 Amendment of Spill Prevention, Control, and Countermeasure
             Plan by Regional Administrator
t.        S 112.4(a):          6        11      2       2        0       2    
             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.                                                                 
u.        S 112.4(b): does     5        11      5       1        0       1    
             not require                                                         
             facilities to                                                       
             meet any                                                            
             requirements of                                                     
             this section (S                                                     
             112.4) until the                                                    
             new compliance                                                      
             deadlines to                                                        
             prepare an SPCC                                                     
             Plan (specified                                                     
             in section S                                                        
             112.3).                                                             
v.        S 112.4(c):          0        0       22      1        0       0    
             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.                                                         
w.        S 112.4(d):          0        0       13      8        0       2    
             provides that the                                                   
             RA may require a                                                    
             Plan amendment                                                      
             after an on-site                                                    
             review of the                                                       
             Plan.                                                               
             S 112.5 Amendment of Spill Prevention, Control, and Countermeasure
             Plan by owners or operators
x.        S 112.5(a), (b):     0        2       11      8        1       1    
             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.                                                               
y.        S 112.5(b):          10       10      2       0        0       1    
             changes the                                                         
             period of review                                                    
             for SPCC Plans                                                      
             from 3 to 5                                                         
             years, and                                                          
             requires                                                            
             documentation of                                                    
             completion of the                                                   
             review and                                                          
             evaluation.                                                         
z.        S 112.5(c):          8        12      1       1        1       0    
             clarifies that a                                                    
             PE must certify                                                     
             only technical                                                      
             amendments, and                                                     
             not non-technical                                                   
             amendments (ex.                                                     
             names, phone                                                        
             numbers).                                                           
             S 112.7 General requirements for Spill Prevention, Control, and
             Countermeasure Plans
aa.       S 112.7: allows      3        13      3       1        0       2    
             differing formats                                                   
             for the Plan;                                                       
             other formats                                                       
             must be                                                             
             cross-referenced                                                    
             to the listed                                                       
             SPCC requirements                                                   
             and include all                                                     
             applicable SPCC                                                     
             requirements.                                                       
bb.       S 112.7(a)(2):       10       9       1       0        2       1    
             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.                                                           
cc.       S 112.7(a)(3):       0        1       11      10       1       0    
             requires a                                                          
             description and a                                                   
             diagram of the                                                      
             facility layout                                                     
             in the SPCC Plan.                                                   
dd.       S 112.7(a)(4):       0        1       9       10       0       3    
             requires                                                            
             facilities to                                                       
             provide                                                             
             additional                                                          
             information and                                                     
             procedures for                                                      
             reporting a                                                         
             discharge;                                                          
             facility response                                                   
             plan (FRP)                                                          
             facilities                                                          
             (defined in S                                                       
             112.20) are                                                         
             exempt.                                                             
ee.       S 112.7(a)(5):       0        2       18      1        0       2    
             requires                                                            
             facilities to                                                       
             organize the Plan                                                   
             in a readily                                                        
             usable format for                                                   
             an emergency;                                                       
             facility response                                                   
             plan (FRP)                                                          
             facilities                                                          
             (defined in S                                                       
             112.20) are                                                         
             exempt.                                                             
ff.       S 112.7(c):          0        0       12      5        6       0    
             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.                                                         
gg.       S 112.7(d): adds     0        1       2       9        10      1    
             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 S112.20)                                                    
             from having a                                                       
             contingency plan.                                                   
hh.       S 112.7(e):          0        13      8       1        0       1    
             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.                                                         
ii.       S 112.7(f):          0        11      7       3        2       0    
             mandates training                                                   
             for oil-handling                                                    
             employees only,                                                     
             and specifies                                                       
             training topics;                                                    
             also requires                                                       
             discharge                                                           
             prevention                                                          
             briefings at                                                        
             least once a                                                        
             year.                                                               
jj.       S 112.7(i):          1        0       6       5        4       7    
             specifies a                                                         
             brittle fracture                                                    
             requirement for                                                     
             field-constructed                                                   
             containers                                                          
             undergoing                                                          
             repairs,                                                            
             alteration,                                                         
             reconstruction or                                                   
             change in service                                                   
             that may affect                                                     
             the risk of                                                         
             discharge.                                                          
             S 112.8 Spill Prevention, Control, and Countermeasure Plan
             requirements for onshore facilities (excluding production
             facilities)       
kk.       S 112.8(c)(3), S     0        12      6       2        0       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.                                                            
ll.       S 112.8(c)(6):       0        3       2       8        9       1    
             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.                                                   
mm.       S 112.8(d)(1):       0        1       5       6        8       3    
             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).                                                   
nn.       S 112.8(d)(4):       0        2       4       11       4       2    
             requires                                                            
             integrity and                                                       
             leak testing of                                                     
             buried piping at                                                    
             the time of                                                         
             installation,                                                       
             construction,                                                       
             relocation or                                                       
             replacement.                                                        
             S 112.9 Spill Prevention, Control, and Countermeasure Plan
             requirements for onshore oil production facilities
oo.       S 112.9(c)(2):       0        0       10      10       2       1    
             clarifies that                                                      
             secondary                                                           
             containment                                                         
             include                                                             
             sufficient                                                          
             freeboard to                                                        
             contain                                                             
             precipitation.                                                      
             S 112.11 Spill Prevention, Control, and Countermeasure Plan
             requirements for offshore oil drilling, production, or workover
             facilities        
pp.       S 112.11(i):         0        0       10      0        2       11   
             requires offshore                                                   
             oil drilling,                                                       
             production or                                                       
             workover                                                            
             facilities to                                                       
             simulate                                                            
             discharges for                                                      
             testing and                                                         
             inspecting                                                          
             pollution control                                                   
             and                                                                 
             countermeasure                                                      
             systems.                                                            
             Subpart C--Requirements for Animal Fats and Oils and Greases, and
             Fish and Marine Mammal Oils; and for Vegetable Oils, including Oils
             from Seeds, Nuts, Fruits, and Kernels
qq.       S 112.12 - S         0        2       8       1        1       11   
             112.15: adds                                                        
             sections to apply                                                   
             to Animal Fats                                                      
             and Vegetable                                                       
             Oils based on the                                                   
             Edible Oil                                                          
             Regulatory Reform                                                   
             Act (EORRA)                                                         
             requirements.                                                       
             Requirements are                                                    
             identical to                                                        
             Subpart B for                                                       
             petroleum and                                                       
             non-petroleum                                                       
             oils.                                                               

Our stakeholder survey also allowed respondents the opportunity to
elaborate on their opinions of the SPCC amendments. Table 3 below presents
some illustrative examples of the open-ended comments that we received
from 22 of the 23 industry survey respondents. The examples include
respondents' opinions on the SPCC amendments that they consider to have
the most positive or negative impact on their industry sectors. These
comments provide the current opinions of the industry associations we
surveyed, but they do not necessarily represent the views of the regulated
community as a whole. In addition, these comments do not represent the
views of EPA or GAO.

Table 3: Examples from Industry Comments Regarding the 2002 and 2006
Amendments to the SPCC Regulation

Reference letter and                                                       
amendment addressed in                                                     
survey                 Comment                                             
N/A.                   "The preamble `clarifications' significantly        
                          broadened the scope and reduced the flexibility of  
Preamble               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."                                      
i.                     "This provision expands the scope of the 1973  rule 
                          to include more than the storage of oil  increasing 
S 112.1(b)             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."      
j.                     "The  existing  Underground   Storage  Tank   (UST) 
                          regulations  already  control  leaks  and   spills. 
S 112.1(d)(2)(i)       Exempting USTs  from  the SPCC  requirements  is  a 
                          significant  burden   reduction,  particularly   at 
                          gasoline service stations."                         
o.                     "EPA  significantly   increased   the   number   of 
                          facilities covered by  the rule in  changes of  the 
S 112.2                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."               
d.                     "The ability to self  certify in certain  instances 
                          will  allow  facilities  to  move  forward  without 
S 112.3(g)             requiring the  signature  of  a PE,  which  can  be 
                          costly, and time consuming."                        
y.                     "Changing the required  review period from  3 to  5 
                          years is an improvement since most E&P [Exploration 
S 112.5(b)             and    Production]    facilities    are    modified 
                          infrequently."                                      
bb.                    "Deviations for  secondary  containment  should  be 
                          allowed  where   secondary   containment   is   not 
S 112.7(a)(2)          feasible,  and  `feasible'   should  contain   some 
                          element of expense, especially for flowlines."      
gg.,ll.                "Integrity  testing  for  small  storage  tanks  is 
                          expensive - because it must  be performed by a  PE. 
S 112.7(d)             EPA should  reevaluate  any mandate  beyond  visual 
                          inspection."                                        
S 112.8(c)(6)                                                              
                          "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."                    
ll.                    "Integrity  testing   is  unnecessary   for   small 
                          elevated tanks  or  those with  release  prevention 
S 112.8(c)(6)          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."                               
jj.                    "Consistent with API [American Petroleum Institute] 
                          Standard 653,  brittle fracture  evaluations are  a 
S 112.7(i)             good  industry  practice  to  reduce  the  risk  of 
                          releases from tanks."                               
p., q., ff., gg., mm.  "[The amendments] will be extremely costly and time 
                          consuming.  Farm   tanks,  especially   those   for 
S 112.3(a),(b)         irrigation,  are   not  situated   in   centralized 
                          locations  that  are  ideal  for  one  SPCC   plan, 
S 112.3(d)             containment wall, etc. Instead they are spread  out 
                          in different  fields,  parcels, farms  (rented  and 
S 112.7(c)             owned)  which,  by   interpretation,  may   require 
                          separate SPCC  plans, containment,  security,  etc. 
S 112.7(d)             Seasonal (planting, harvest) requirements mean that 
                          farmers cannot dedicate extensive time to upgrading 
S 112.8(d)(1)          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."                       
i., o., ff., mm., gg.  "We are concerned about  the 2002 expansion of  the 
                          rules  to   motive  power   and  other   oil-filled 
S 112.1(b)             equipment that merely uses  oil. These issues  were 
                          also favorably addressed in the 2006 rule revision. 
S 112.2                Finally,  we  remain  concerned  about  the   EPA's 
                          definition of  "navigable  waters,"  which  broadly 
S 112.7(c)             extends the Agency's jurisdiction."                 
                                                                              
S 112.8(d)(1)                                                              
                                                                              
S 112.7(d)                                                                 
i., o., ff., mm., gg.  "[Our] chief concern with  the 2002 amendments  was 
                          the  regulation   of  airport   mobile   refuelers, 
S 112.1(b)             requiring them to have sized containment plans  for 
                          the trucks when not in service. The 2006 amendments 
S 112.2                have essentially eliminated  this requirement.  [We 
                          also were] very concerned about the 2002  expansion 
S 112.7(c)             of the rules to  motive power and other  oil-filled 
                          equipment that merely uses  oil. These issues  were 
S 112.8(d)(1)          also favorably addressed in the 2006 rule revision. 
                          Finally, [we  remain]  concerned  about  the  EPA's 
S 112.7(d)             expansive  and  vague   definition  of   `navigable 
                          waters,'  which   broadly  extends   the   agency's 
                          jurisdiction.  We   look  forward   to   additional 
                          rulemaking to address this concern."                
ll., mm., nn., oo.     "Produced water  storage  tanks  typically  contain 
                          small volumes  of  oil  that  do  not  represent  a 
S 112.8(c)(6)          significant source of  oil storage. Water  produced 
                          should be exempt from the SPCC regulations  because 
S 112.8(d)(1)          there is a very low risk of a significant discharge 
                          of oil  to  Waters  of the  U.S.  Additionally,  by 
S 112.8(d)(4)          expanding the scope  of the SPCC  program to  cover 
                          produced water,  it  has the  effect  of  capturing 
S 112.9(c)(2)          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."                 
N/A.                   "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.

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.1 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.2

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.

1There 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.

2According 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.

Figure 1: Summary of Industry Stakeholder Views on Impacts of 11 SPCC
Amendment Categories

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. 3

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:

           o 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.4

           2002 amendments that we categorized as decreasing the scope of the
           rule:

           o 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.
           o 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.
			  
3As 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.

4The 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.
			  
           o 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.
           o 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:

           o 112.1(d)(2)(ii), S 112.1(d)(7): excludes "motive power
           containers" (defined in S 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.
           o 112.3(a)(2), S 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:

           o 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.
           o 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.
           o 112.7(a)(3): requires a description and a diagram of the
           facility layout in the SPCC plan.
           o 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 S
           112.20) are exempt.
           o 112.7(a)(5): requires facilities to organize the SPCC plan in a
           readily usable format for an emergency; FRP facilities (defined in
           S 112.20) are exempt.

           2002 amendments that we categorize as decreasing planning or
           notification requirements:

           o 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.
           o 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.
           o 112.4(b): does not require new facilities to meet any
           requirements of this section (S 112.4) until the compliance dates
           for the initial preparation and implementation of an SPCC plan.
           o 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.
           o 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.
           o 112.5(c): states that a professional engineer (PE) must certify
           only technical amendments, and not non-technical amendments (e.g.
           names, phone numbers).
           o 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.
           o 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.
           o 112.8(c)(3), S 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:

           o 112.6: allows "qualified facilities" (defined in S 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:

           o 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.
           o 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.
           o 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:

           o 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:

           o 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.
           o 112.8 (c)(2), S 112.8 (c)(11), S 112.12 (c)(2), S 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:

           o 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 S112.20) from having a
           contingency plan when secondary containment is impracticable.
           o 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.
           o 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.
           o 112.8(d)(4): requires integrity and leak testing of buried
           piping at the time of installation, construction, relocation, or
           replacement.
           o 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:

           o 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:

           o 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:

           o 112.3(g): defines a qualified facility eligible to self-certify
           under the provisions set forth in S 112.6.

           2002 amendments that we could not determine if they should be
           categorized as increasing or decreasing or neither increased or
           decreased requirements:

           o 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.
           o 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.
           o 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.
           o 112.9(c)(2): states that secondary containment must include
           sufficient freeboard to contain precipitation.
           o 112.12 - S 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.5

           2006 amendments that we could not determine if they should be
           categorized as increasing or decreasing or neither increased or
           decreased requirements:

           o 112.2: adds several definitions, including airport mobile
           refueler, farm, motive power container, and oil-filled operational
           equipment.
           o 112.13 - S 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.
			  
5Sections 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.

           Appendix IV: Comments from the Environmental Protection Agency
			  
			  Appendix V: GAO Contact and Staff Acknowledgments
			  
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           DuBord; Timothy J. Guinane; Jennifer Huynh; Lisa Mirel; and Carol
           Herrnstadt Shulman made key contributions to this report.
			  			  
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(360690)

www.gao.gov/cgi-bin/getrpt?GAO-07-763.

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and methodology, click on the link above.

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Highlights of GAO-07-763, a report to the Honorable James M. Inhofe,
Ranking Member, Committee on Environment and Public Works, U.S. Senate

July 2007

ABOVEGROUND OIL STORAGE TANKS

Observations on EPA's Economic Analyses of Amendments to the Spill
Prevention, Control, and Countermeasure Rule

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.

[46]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.

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

           o did not analyze alternatives to the amendments, such as
           alternative lead times for industry to comply or alternative
           levels of stringency;
           o 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
           o 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.

References

Visible links
  36. http://www.gao.gov/cgi-bin/getrpt?GAO/RCED-89-65
  37. http://www.epa.gov/oilspill/conting.htm
  38. http://www.gao.gov/
  39. mailto:[email protected]
  40. http://www.gao.gov/
  41. http://www.gao.gov/
  42. http://www.gao.gov/fraudnet/fraudnet.htm
  43. mailto:[email protected]
  44. mailto:[email protected]
  45. mailto:[email protected]
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