og96026.txt

Office of the General Counsel
B-272247
July 5, 1996
The Honorable John H. Chafee Chairman The Honorable Max Baucus
Ranking Minority Member Committee on Environment and Public Works
United States Senate
The Honorable Thomas J. Bliley, Jr. Chairman The Honorable John
D. Dingell Ranking Minority Member Committee on Commerce House of
Representatives
Subject: Accidental Release Prevention Requirements: Risk
Management Programs Under Clean Air Act Section 112(r)(7)
Pursuant to section 801(a)(2)(A) of title 5, United States Code,
this is our report on a major rule promulgated by the Environmental
Protection Agency (EPA), entitled "Accidental Release Prevention
Requirements: Risk Management Programs Under Clean Air Act Section
112(r)(7)" (FRL #5516-5, RIN: 2050-AD26). We received the rule on
June 7, 1996. It was published in the Federal Register as a final
rule on June 20, 1996. 61 Fed. Reg. 31668.
This rule implements section 112(r) of the Clean Air Act
Amendments of 1990, which mandates that EPA promulgate regulations
and develop guidance to prevent accidental releases to the air from
stationary sources and mitigate the consequences of such releases
by focusing prevention measures on chemicals that pose the greatest
risk to the public and the environment.
Enclosed is our assessment of EPA's compliance with the
procedural steps required by sections 801(a)(1)(B)(i) through (iv)
of title 5 with respect to the rule. Our review indicates that EPA
complied with the applicable requirements.
GAO/OGC-96-26
If you have any questions about this report, please contact
Kathleen E. Wannisky, Associate General Counsel for Operations, at
[phone]. The official responsible for GAO evaluation work
relating to EPA is Peter F. Guerrero, Director for Environmental
Protection Issues. Mr. Guerrero can be reached at (202)
512-6111.
Robert P. Murphy General Counsel
cc: Craig Matthiessen Senior Chemical Engineer Environmental
Protection Agency
Page 2 GAO/OGC-96-26
ENCLOSURE
ANALYSIS UNDER 5 U.S.C. § 801(a)(1)(B)(i)-(iv) OF A MAJOR RULE
ISSUED BY THE ENVIRONMENTAL PROTECTION AGENCY (EPA) ENTITLED
"ACCIDENTAL RELEASE PREVENTION REQUIREMENTS: RISK MANAGEMENT
PROGRAMS UNDER CLEAN AIR ACT SECTION 112(r)(7)" (RIN:
2050-AD26)
(i) Cost-benefit analysis
Because EPA determined that the rule was an "economically
significant regulatory action" under terms of Executive Order
12866, it prepared an economic impact analysis in support of the
rule on risk management program regulations. It submitted that
analysis to the General Accounting Office on June 7, 1996, along
with a copy of its final rule. The economic impact analysis
describes the regulatory options EPA considered for revising its
earlier proposed risk management requirements and estimates the
costs and benefits attributable to these options.
The chart below, extracted from the analysis, shows that, with
the exception of the first year, EPA believes that the cost of the
benefits associated with the implementation of the rule's
requirements greatly exceed the costs of implementation of the
rule.
ANNUALIZED NET COSTS AND BENEFITS OF THE FINAL RULE

In addition to the estimated benefits of reduced damages from
releases of toxic substances, EPA's analysis also highlights what
the agency believes to be additional qualitative benefits including
those resulting from efficiency gains, increased technology
transfer, indirect cost savings, increased goodwill, and increased
public awareness.
GAO/OGC-96-26
(ii) Agency actions relevant to the Regulatory Flexibility Act,
5 U.S.C. §§ 603-605, 607 and 609
Section 603: Initial regulatory flexibility analyses
The Regulatory Flexibility Act requires federal agencies to
evaluate the effects of a proposed rule on small entities. EPA
prepared an initial regulatory flexibility analysis in compliance
with section 603 of the Act; it published a summary of that
analysis in the preamble to the proposed rule in the Federal
Register on October 20, 1993. 58 Fed. Reg. 54212. The analysis
concluded that the economic burden for initial compliance would be
minimal for about 90 percent of the small businesses affected. For
the remaining 10 percent, however, the analysis stated that the
program would impose a significant adverse effect in the first
year.
Based on the information presented during public hearings and in
comments received on the proposed rule, EPA published a
supplemental notice of proposed rulemaking in the Federal Register
on March 13, 1995. 60 Fed. Reg. 13526. The agency included in the
preamble to the revised proposed rule a summary of its updated
regulatory flexibility analysis. The analysis concluded that the
rule as proposed in 1993 would have had severe adverse effects on
small businesses. The revised analysis evaluates three alternatives
to the initially proposed rule and assesses the burdens and impacts
of each. According to the EPA's discussion, the streamlined
requirements of the revised proposed rule drastically reduce the
burden on both small businesses and small communities.
Section 604: Final regulatory flexibility analysis
EPA published a summary of its final regulatory flexibility
analyses as required by section 604 of the Act in the Federal
Register on June 20, 1996. 61 Fed. Reg. 31715. EPA estimated that
the total number of small entities affected by the rule was 12,500
or 19 percent of the affected universe. No detailed analysis of the
impact on small entities was performed because of the relatively
low cost of implementation estimated by EPA (for most manufacturers
substantially less than 1 percent of sales the first year and
considerably less in subsequent years; for non-manufacturers less
than $1,000 for initial compliance).
According to EPA's analysis, a number of decisions adopted in
the final rule (specifically, the adoption of tiers ("programs"),
the reduced requirements for the risk management plan and the
development of guidance for offsite consequence analysis) have
significantly reduced the burden on small entities. EPA considered
comments on both the initial and the proposed rule in making these
decisions.
All analyses prepared in accordance with this Act were submitted
to the Chief Counsel, Small Business Administration.
Page 2 GAO/OGC-96-26
Section 607: Preparation of analysis
EPA's analyses use both quantifiable and general descriptions of
the effects of the rule and alternatives on small entities.
Section 609: Participation by small entities
EPA included small entities (from both government and business)
in focus groups, public hearings, seminars, and meetings to develop
this rule.
(iii) Agency actions relevant to sections 202-205 of the
Unfunded Mandates Reform Act of 1995, 2 U.S.C. §§ 1532-1535
EPA has determined that this rule contains a federal mandate
that may result in expenditures of $100 million or more for state,
local, and tribal governments, or the private sector in only its
first year. In compliance with section 202 of the Unfunded Mandates
Reform Act, EPA prepared a written statement, including a cost
benefit analysis, assessing the impact of the rule, which it
published with both the proposed and the final rule. As discussed
previously, EPA considered the future compliance costs in assessing
the impact of the rule.
Consistent with the intergovernmental provisions of sections 203
and 204 of the Act, and Executive Order 12875 "Enhancing the
Intergovernmental Partnership," EPA involved state, local, and
business representatives in focus groups, public hearings,
seminars, and meetings to develop the rule.
Section 205 of the Act requires agencies to identify and
consider a reasonable number of regulatory alternatives and to
adopt the least costly, most cost-effective or least burdensome
alternative that achieves the objectives of the rule. The preamble
to the final rule indicates that EPA evaluated three different
methodologies for implementation. It ultimately chose what it
believed to be the least costly and least burdensome
alternative.
(iv) Other relevant information or requirements under Acts and
Executive orders
Administrative Procedure Act, 5 U.S.C. §§ 551 et seq.
This rule was promulgated through the general notice of proposed
rulemaking procedures of the Act, 5 U.S.C. § 553. EPA afforded
interested persons several opportunities to comment. Following
publication of the proposed rule (58 Fed. Reg. 54190), EPA held
four public hearings and received approximately 770 written
comments. Because of these comments, EPA issued a supplemental
notice of proposed rulemaking on March 13, 1995 (60 FR 13526) for
comment on:
Page 3 GAO/OGC-96-26
approaches for setting different requirements for sources that
pose different levels of hazard (tiering); worst-case releases and
other hazard assessment issues; accident information reporting;
public participation; inherently safer approaches; and
implementation and integration of section 112(r) with state
programs, particularly state air permitting programs. EPA held a
public hearing on March 31, 1995, in Washington, DC, and received
more than 283 written comments. In total, commenters represented 92
chemical manufacturers, 81 other chemical users, 111 petroleum
industry companies, 174 industry trade associations, 40 other trade
associations, 58 agricultural supply retailers, 102 propane
retailers, 132 explosives users, 29 water treatment facilities, 26
utilities, 66 state agencies, 63 local governments, 8 other federal
agencies, 52 academics and consultants, 61 environmental groups, 6
labor unions, and 31 private citizens. This rule reflects EPA's
consideration of all comments; major issues raised by commenters
and EPA's response are briefly discussed in the preamble. A summary
of all comments submitted and EPA's response to them is available
at the agency.
Paperwork Reduction Act, 44 U.S.C. §§ 3501-3520
The rule imposes information collection requirements in the
registration process, in the preparation and submission of the risk
management plans, and in the maintenance of on-site documentation.
EPA describes in the preamble to the rule the reasons for the
collection of information, the type of information and an estimate
of the burden imposed on the source. Both initial and supplemental
proposed rule publications invited comments on the information
collection requirements imposed by the rule. 58 Fed. Reg. 53212. 60
Fed. Reg. 13543.
Section 3506(c) of the Act requires each agency to establish an
independent process to review each proposed collection of
information before submitting the proposal to OMB for review. EPA's
Office of Program Planning and Evaluation conducted such a review.
EPA subsequently sent the information collection requirements to
the Office of Management and Budget for approval under the Act. 44
U.S.C. §§ 3507(a)(2) and (3). EPA's discussion of its compliance
with the Paperwork Reduction Act was omitted from the final rule,
including the agency's response to comments by OIRA required to be
discussed in the final rule by 44 U.S.C. § 3507(d)(2).
Consequently, there is no evidence in EPA's filing of OIRA's
comments on, approval or disapproval of, the agency's information
collection requirements. EPA did, however, reduce the potential
burden of required information collection in drafting the final
rule. See discussion below.
EPA appears to meet the OMB requirement (5 C.F.R. §
1320.8(a)(5)) that agencies evaluate the use of automated,
electronic or other technological collection forms by allowing
sources to register and file risk management plans electronically,
thus avoiding what could have been a huge paperwork burden.
Page 4 GAO/OGC-96-26
Executive Order No. 12866
Based on its economic impact, the rule was determined to be an
"economically significant regulatory action" within the meaning of
Executive Order 12866. EPA submitted both the proposed rule and the
final rule to the Office of Information and Regulatory Affairs
(OIRA) for review. According to EPA, OIRA raised some concerns
about the scope of information collection requirements initially
proposed by EPA. EPA addressed OIRA's concerns by lessening the
information collection requirements for risk management plans in
its final rule. In the Federal Register notice, EPA described
lessening risk management plan information requirements as
follows:
". . . EPA has limited the requirements for information to that
which can be reported as data elements. In contrast, the rule as
proposed would have required sources to document for each process
all major hazards, the consequences of each of these hazards, the
risk reduction steps taken to address each hazard, and the
consequences of each risk reduction step. The result would have
been, for large, complex sources, documents of a l,000 pages or
more."
Statutory authorization for the rule
This rule is promulgated under sections 112(a), 301(a)(1), title
V of the Clean Air Act as amended (42 U.S.C. § § 7412(r),
7601(a)(i), 7661-7661f). The intent of section 112(r) is to prevent
accidental releases to the air and mitigate the consequences of
such releases by focusing prevention measures on chemicals that
pose the greatest risk to the public and the environment. Section
112(r)(3) mandates that EPA promulgate a list of regulated
substances, with threshold quantities; this list defines the
stationary sources that will be subject to accident prevention
regulations mandated by section 112(r)(7). EPA promulgated its list
of substances on January 31, 1994 (59 Fed. Reg. 4478).
EPA did not identify any other statute or executive order
imposing procedural requirements relevant to this rule.
Supplementary information
The rule is not covered in the judicial review provisions
recently added to the Regulatory Flexibility Act by the Small
Business Regulatory Enforcement Act of 1996 (Pub. L. 104-121, Title
II, March 29, 1996) because it was published as a final rule before
the effective date of those provisions. It is, however, reviewable
under
Page 5 GAO/OGC-96-26
the Clean Air Act. See 42 U.S.C. § 7607(b)(1). Under that
provision, judicial review of the requirements contained in this
rule is available only by petition for review in the U.S. District
of Appeals for the District of Columbia Circuit within 60 days of
publication of this final rule.
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