United States
Environmental Protection
Agency
Office of Air Quality
Planning and Standards
Research Triangle Park, NC 27711
EPA-450/2-91-011
June 1992
& EPA
REGULATORY IMPACT ANALYSIS
AND
REGULATORY FLEXIBILITY ACT
SCREENING
FOR
OPERATING PERMITS
REGULATIONS
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EPA-450/2-91-011
REGULATORY IMPACT ANALYSIS
AND
REGULATORY FLEXIBILITY ACT
SCREENING
FOR
OPERATING PERMITS REGULATIONS
By
Rosalina M. Rodriguez
Ambient Standards Branch
Air Quality Management Division
U.S. Envirc'" " ' '" -lotion Agency
Region 5, U. "•:"'•)
77 West Jac.; -.. . Jovard, 12th Floor
Chicago, IL 60604-3590
Office Of Air Quality Planning And Standards
Office Of Air And Radiation
U. S. Environmental Protection Agency
Research Triangle Park, NC 27711
June 1992
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This report has been reviewed by the Office Of Air Quality Planning And Standards, U. S.
Environmental Protection Agency, and has been approved for publication. Any mention of trade
names or commercial products is not intended to constitute endorsement or recommendation for
use.
ACKNOWLEDGEMENTS
The author wishes to acknowledge the assistance and supervision in preparation of this
document of Allen Basala, Chief of the Economic Analysis Section. Technical support was
provided by staff of the Economic Analysis Section and the Operating Permits Section, and by
the Radian Corporation. Questions and comments on the document should be directed to the
author:
Rosalina M. Rodriguez
Telephone (919) 541-5298/FTS 629-5298
Economic Analysis Section
Ambient Standards Branch
Air Quality Management Division (MD 12)
Office Of Air Quality Planning And Standards
EPA-450/2-91-011
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TABLE OF CONTENTS
I. INTRODUCTION AND SUMMARY 1
II. THE NEED FOR AND CONSEQUENCES OF REGULATORY ACTION ... 4
III. ALTERNATIVES EXAMINED 7
IV. ANALYSIS OF FEES, NUMBER OF SOURCES AND PAPERWORK
COSTS 10
V. ECONOMIC IMPACTS, REGULATORY FLEXIBILITY ANALYSIS,
AND PAPERWORK REDUCTION ACT ANALYSIS 22
VI. BENEFITS OF TITLE V 32
VII. NET BENEFITS 34
APPENDIX A 35
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I. INTRODUCTION AND SUMMARY
A. MAJOR FINDINGS
Implementation of Title V requirements with this rulemaking
will provide many benefits that will strengthen the framework for
air quality management. The estimated annualized cost of such a
program is nontrivial, amounting to over $526 million in direct
paperwork cost and fees. However, the use of statutory options
such as general permits and deferred applicability will avert the
potential for adverse impacts in many instances and mitigate this
potential in other cases. Many States already have operating
permit systems with fee provisions in place. Consequently, for
affected sources in those States, the suggested cost and relative
impacts may be overstated. A brief overview of the analysis is
provided below.
B. RULE CLASSIFICATION AND ANALYTICAL METHODOLOGY
The estimated cost of this rule is anticipated to be in
excess of $100 million annually. According to Executive Order
12291, rules with such costs are classified as major and require
a regulatory impact analysis.
The objective of Executive Order 12291 is to assess the
cost-effectiveness and economic efficiency aspects of major rules
to help encourage promulgation of rules with stronger economic
attributes while not departing from the Congressional mandate
under which the rules were developed.
By assuming no regulatory discretion for these rules and no
existing operating permit programs in place, the analysis
identified the potential consequences of not considering cost-
effectiveness and economic efficiency. The potential
consequences were adverse, especially for smaller entities. The
discretionary regulatory measures averting and/or mitigating
these adverse impacts adopted in this rulemaking were identified.
C. NEED FOR REGULATION
Chapter II describes the legal and economic arguments for
the operating permits rule developed under Title V of the Clean
Air Act (Act). This chapter also identifies the scope of this
rule and distinguishes it from other requirements mandating the
use of pollution control equipment.
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D. ALTERNATIVES EXAMINED
Chapter III describes the regulatory options available in
this rulemaking. These options include specific source permits,
general permits, and deferred applicability.
E. ANALYSIS OF COSTS
Chapter IV includes the estimated explicit cost to the
permitted sources, State and local permitting agencies, and the
U.S. Environmental Protection Agency (EPA). The costs to the
sources include the administrative burden in securing and
modifying operating permits and permit fees designed to cover the
costs that State and local agencies incur in administering the
operating permit program. The costs to the State and local
agencies are financed by the fee program and includes review of
applications as well as issuance of permits. The costs to the
EPA includes oversight on program implementation, permit
issuance, and data management. The cost estimate excludes
opportunity costs associated with any production delays
attributed to permitting. The EPA has no data to quantify such
costs.
Cost estimates are developed for the first 3 years1 as well
as the first 5-year period subsequent to rule promulgation.
These estimates are summarized as follows:
First 3 Years First 5 Years
Sources $0 $512 Million
State and Local $26 Million $160 Million
U.S. EPA $3 Million $14 Million
The estimates are equivalent annual costs. The assumed real
interest rate for investment cost is 10 percent. Recognize that
the above 5-year cost estimates are not additive. The State and
local cost is financed by fee revenues collected from the
sources. The total for the 5-year annual cost estimate is $526
million.
F. REGULATORY FLEXIBILITY ANALYSIS
The Regulatory Flexibility Act requires Federal agencies to
review the effects of their regulations on small entities. The
analysis was conducted according to the analytical methodology
xThe Information Collection Request (ICR) required under the
Paperwork Reduction Act is approved for a maximum of 3 years
immediately following promulgation of the rule.
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described in Section B and is discussed further in Chapter V.
The major finding is that the prudent use of general permits and
deferred applicability will avert and/or mitigate potential
adverse impacts on small entities.
6. BENEFITS OF THE RULE
The many benefits of the operating permits rule are
described in qualitative terms in Chapter VI. Examples include
more efficient enforcement, fewer legal actions, and
administrative savings from consolidating source requirements
into one Federally-enforceable document.
H. NET BENEFITS
Chapter VII discusses the limitations of this analysis.
Because the benefits are discussed in qualitative terms while the
costs are described in quantitative terms, a definitive statement
on the economic efficiency aspects of this rule is not possible.
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II. THE NEED FOR AND CONSEQUENCES OF REGULATORY ACTION
A. LEGISLATIVE REQUIREMENTS AFFECTING THE IMPLEMENTATION
OF THE TITLE V FEDERAL OPERATING PERMITS PROGRAM
Title V of the Act as amended November 15, 1990, establishes
requirements for a new operating permits program. States are
required to develop and submit to the EPA, programs for issuing
operating permits to major stationary sources, sources covered by
New Source Performance Standards (NSPS), sources covered by
National Emission standards for Hazardous Air Pollutants
(NESHAPs), certain sources of hazardous air pollutants listed in
section 112, and affected sources under the acid precipitation
program.
Title V requires the EPA to promulgate, within 12 months of
enactment, regulations that require and specify the minimum
elements of State operating permit programs. Within 3 years of
enactment, States are required to submit permit programs to the
EPA for approval. The EPA has*1 year to act on the proposed
programs. If a State fails to submit a fully approvable program
by that date, the EPA must establish a program for that State
within 2 years. Subject sources must submit a permit application
within 1 year after the program is approved.
B. THE NATURE OF THE OPERATING PERMITS PROGRAM
The operating permits program is intended to serve as a
framework for implementation of the various requirements of the
Act. Under Title V, all of the applicable requirements for a
subject source will be consolidated into a single, Federally-
enforceable document. Title V, itself, does not impose any
additional emissions limitations or control requirements.
Title V is modeled after a similar program under the Clean
Water Act's National Pollutant Discharge Elimination System
(NPDES). Adding such a program updates the Act, rendering it
more consistent with other Federal environmental statutes that
require sources of pollution to obtain operating permits.
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C. THE NEED FOR REGULATORY ACTION
Title V of the Clean Air Act Amendments of 1990 calls for
the EPA to promulgate operating permits regulations 12 months
from enactment. The Operating Permits Program was designed to
improve air quality management in several ways. First, Title V
consolidates all applicable air program requirements for a source
into one publicly-available permit, making enforcement (by State
or local agencies, the affected public, and/or the EPA) more
effective and less burdensome. Second, the permit program
provides industry a clear indication of emissions limits they
must meet, while affording sources operational flexibility to
make certain periodic changes. Third, permits better facilitate
State implementation of the criteria pollutant control programs
as well as programs for control of acid precipitation and air
toxics, including the expeditious adoption of new source-specific
requirements. Finally, Title V allows States to charge permit
fees to be paid by subject sources sufficient to recover the
reasonable direct and indirect costs of developing and
implementing the State's permit program.
The Title V program is intended to clarify the applicable
requirements of the Act for subject sources, consolidate those
requirements into a single Federally-enforceable document, and
enhance compliance and enforcement activities by Federal, State,
and local levels of government. Currently, in many cases,
sources' pollution control obligations (ranging from emission
controls and monitoring requirements to recordkeeping and
reporting requirements) may be scattered throughout numerous
provisions of the State Implementation Plan (SIP) or Federal
regulations. In addition, regulations are often written to cover
broad source categories, and may not make clear how a general
regulation applies to a specific source. In many cases, sources
are not clearly required by applicable provisions to submit
periodic compliance reports to the EPA or the States. As a
result, it may be time-consuming to identify the extent of a
source's compliance or noncompliance.
Actual emission limits are mandated by other sections of the
Act. Title V benefits society by providing a standardized and
centralized system of permitting that provides coordination
between various portions of the Act. The Title V permit program
requires that all of a source's obligations under the Act be
contained in a single permit. A permit system will provide the
opportunity to reduce redundant paperwork and recordkeeping
requirements, potentially avoid unnecessarily burdensome
abatement requirements, and promote an integrated approach to
meeting all of a source's air pollution obligations.
The Title V permits will also improve enforcement of the
various air quality management regulations. Sources will clearly
know what pollution control requirements apply to them, as well
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as the criteria for determining whether or not they are in
compliance with these requirements. They will be required to
submit periodic reports of compliance. Detection of sources
failing to meet their obligations will be more certain and less
costly to the government unit charged with enforcing the
regulations.
The Title V permits program described here will also be used
to implement Phase II of the acid rain program set forth in Title
IV of the Act. In Phase II, the States are required to
administer a Federally-approved permit program, and will thus be
in accordance with the process established in Title V, as
supplemented by acid rain specific content regulations to be
published separately. The allowance trading provisions of Title
IV, utilizing the permitting provisions of Title V, will lower
the cost of the acid rain improvements by allowing sources to
find the lowest total cost through redistributing reduction
requirements and encouraging technological innovation in sulfur-
removing technology.
In summary, the Title V permit program mandated by the Act
will provide an effective permitting process for all affected
major sources subject to Title V, and will provide a basis for
compliance determination and enforcement activities on the part
of the State pollution authorities charged with implementing and
enforcing the Act.
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III. ALTERNATIVES EXAMINED
A. INTRODUCTION
The "alternatives" section of a Regulatory Impact Analysis
(RIA), as outlined in Executive Order 12291, is intended to
examine at a minimum the following alternatives:
a) No regulation
b) Regulations beyond the scope of present legislation
c) Market-oriented alternatives
d) Alternative control strategies
This specific methodology was not followed because of the
prescriptive nature of the statute. The regulations must specify
the minimum elements of State operating permit programs, required
conditions for permit applications and permit issuance,
provisions to ensure compliance and enforcement, and provisions
for permit review and notification.
A primary objective of this program is the issuance of
permits to applicable air pollution sources. The Title V
legislation provides three distinct options for permit issuance.
Thus, instead of providing a discussion of regulatory
alternatives, Chapter III briefly describes the following options
for permit issuance:
(1) Specific Source Permit
(2) Permanent Exemptions/Deferred Applicability
(3) General Permit.
B. SPECIFIC SOURCE PERMIT
Most major sources and certain nonmajor sources will be
required under Title V to obtain a specific (or individual)
source permit. The activities involved in the permit issuance
process include: submittal of a permit application by a source,
drafting of the permit by the permitting authority, review by the
EPA and notification of contiguous and affected States, issuance
of the permit, and permit management (including reopenings and
modifications).
The Act sets forth explicit requirements regarding the
application process. Section 502(b)(l) and (6) require that
State programs have standard application forms, criteria for
determining completeness of applications, and procedures for
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timely processing. Section 503(b) requires that compliance plans
be submitted along with all applications.
Since many permitting authorities already use standard
permit application forms, the EPA will not require a standard
form for the Title V operating permits program in order to
minimize disruption of existing programs. The acid rain program
requires that sources submit a standard form for that program,
however. State and local agencies will have considerable
discretion to develop and use application forms that best meet
their particular needs. The EPA will require that a minimum set
of data elements be included in each application and submitted to
the EPA. Standard data elements will include: general company
information, plant description, emissions data, and air pollution
control requirements. It should be noted that the smaller (in
terms of emission points) and less complex (in terms of air
pollution control equipment) sources will have a simpler specific
permit than the large sources, and consequently, a less costly
permit.
Applications must be accompanied by a compliance plan that
describes how the source will comply with all the applicable
requirements. Submission of these compliance plans is required
for permit renewal and permit modifications. In addition, the
permit application must contain, where applicable, a schedule for
submission of compliance certifications.
C. PERMANENT EXEMPTIONS/DEFERRED APPLICABILITY
The EPA has authority under the Act to exempt nonmajor
source categories, in whole or in part, from the requirements of
Title V if the EPA finds that compliance with these requirements
would be "impracticable, infeasible, or unnecessarily
burdensome." The Agency's regulations for Title V initially
provide for the exemption of two source categories (residential
woodstoves and asbestos demolition/remodeling) and for the
deferred applicability of all nonmajor sources for a period of 5
years from the date of State/local program approval. At the end
of 5 years, all deferred sources will become subject to Title V,
unless the EPA determines that a permitting exemption or extended
period of deferral is appropriate.
D. GENERAL PERMIT
A general permit is a single, standardized permit which
applies to many similar sources. A permitting authority with an
approved program may determine whether to issue general permits
for certain source categories. Key criteria in making this
determination will include source size and similarity of sources
within the same category. Categories comprised of numerous,
8
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small, and nearly-identical sources are ideal candidates for
general permits. General permits may also be issued for
categories of numerous, identical emissions units within larger
sources. A permit for a large manufacturing operation with
numerous permitted emissions units could incorporate the terms of
a general permit (e.g., for a degreaser) along with the terms
drafted specifically for that source.
Sources covered by a general permit are still required to
comply with all Title V requirements, including those for
submitting a complete application and paying the appropriate
fees. Depending upon the complexity of the source category being
issued the general permit, permitting authorities may accept
applications which are somewhat more simplified than specific
permits. In this way, general permits provide an opportunity to
reduce the administrative burden for sources required to obtain a
permit. In addition, general permits will ease the burden
associated with review of applications and final permits on both
permitting authorities and the EPA.
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IV. ANALYSIS OF FEES, NUMBER OF SOURCES AND PAPERWORK COSTS
A. INTRODUCTION
This chapter addresses the costs of the Title V Operating
Permits Rule in terms of fees generated, number of sources, and
administrative burden associated with implementing the program.
Coverage includes: (1) the criteria air pollutants and their
precursors—volatile organic compounds (VOC), ozone (O3),
particulate matter (PM-10), nitrogen oxides (NOX) , sulfur dioxide
(SO2) , lead (Pb) , and carbon monoxide (CO) to the extent it comes
from major stationary sources; and (2) air toxic emissions
regulated under Title III. The chapter also presents the
methodology for determining administrative burden to the EPA,
permitting agencies, and sources. The results are discussed in
the last section.
It is important to emphasize the conservative approach used
to estimate the costs associated with the implementation of Title
V. Regulatory impact and regulatory flexibility analyses are
intended to evaluate the additional burden imposed by a new rule.
A majority (about 80 percent) of State and local air pollution
control agencies already have some kind of operating permit
program in place. Of those States with programs in place, 88
percent of the States issue permits to sources emitting at least
25 tons-per-year (tpy), and 79 percent of the States issue
permits to all sources including those emitting less than 25 tpy.
However, instead of calculating the incremental costs associated
with implementing this regulation for each State and local agency
(which would require extensive and long-term data collection and
analysis), the regulatory analyses contained here describe the
estimated total burden on sources, State and local agencies, and
the EPA. As a result, the estimates in this report are
conservative with the costs generally overstated.
B. FEE ASSESSMENT
For the purposes of the Act debate during the summer of
1990, the EPA prepared an estimate of total fees for the five
criteria pollutants—VOC, PM-10, NOX, Pb, and SO2—amounting to
$309.6 million per year for some 8,176 sources emitting greater
than 100 tpy, or greater than 1 tpy of lead emissions. The
basis for this estimate is the 1985 data from the EPA's National
Emission Data System (NEDS). Fees are not required for CO
emissions, because these are primarily emitted by mobile sources.
Fees have not been estimated for air toxics in this report.
10
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The 1985 NEDS inventory represents the most recent, quality-
assured, and nationwide emissions data available for large
sources. For this reason, 1985 data was used for the permit fee
assessments in this study. However, the 1985 inventory primarily
reflects only sources emitting greater than 100 tpy. The 1985
inventory data for major sources were used in the initial permit
fee revenue projection. The 1985 inventory focused on major
sources greater than 100 tpy. But, as noted in Section C, the
operating permit rule also covers sources which are less than 100
tpy. The initial total fee projection of $309.6 million will not
underestimate revenue requirements as long as the State and local
agency requirements are less. Section D indicates that this is
the case.
C. NUMBER OF SOURCES
Table IV-1 includes a distribution of the number of sources
estimated under Title V coverage. It is estimated that 34,324
major sources would be required to obtain a permit under Title
V. The following is a breakdown of these sources, a brief
summary and a description of the data base used to arrive at the
number estimates. Sources are described as major or nonmajor
with respect to tons of emissions per year; they are described as
large or small with respect to plant size, number of emission
points, complexity of air pollution control equipment, and
parameters other than tons of emissions per year.
o Major/large sources = 9,160
Defined as greater than 100 tpy; estimate based on 1990
Aerometric Information Retrieval System (AIRS) Air
Facility Subsystem (AFS).
o Major/small sources = 21,414
Defined as nontoxic emitting less than 100 tpy;
estimates based on 1990 AIRS' AFS with a correction for
the South Coast Air Quality Management District
(California) classification as an extreme nonattainment
area.
o Major toxic sources = 3,750
Defined as air toxics sources emitting more than 10 tpy
(or 25 tpy combined); estimate based on Toxic Release
Information System (TRIS). These sources are
considered to be small in terms of emission points and
complexity of air pollution control equipment, but
major in terms of tpy of emissions. The large toxics
sources are assumed to be included in the above 9,160
estimate. *'
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A total of 350,000 nonmajor air toxic sources has been
identified to be regulated under section 112(c)(l) of the Act.
Regulations to control these sources are expected to be
promulgated and implemented within the next 3 to 8 years. The
operating permit rule allows the States to defer permit
requirements for all of these nonmajor sources until the second
5-year cycle of implementation. The second 5-year cycle could
begin as early as mid-1998. The permitting costs attributable to
these nonmajor air toxic sources are presented in the form of a
sensitivity analysis in Appendix A because the rule allows the
States to defer permit requirements for these sources. It is
expected that States will elect to require permits in the first
cycle for at most 10 - 25 percent of these sources (35,000 -
88,000 sources) using the general permit type of permitting.
Results of this analysis show that adoption of general
permits for 88,000 sources (25 percent of the total) will result
in an increase in the cost of the Title V implementation of less
than 5 percent for both permitting agencies and permitted
entities. This scenario is pessimistic for the first 5-year
implementation period, since the EPA expects the States to grant
deferrals to those sources. Adoption of general permits for 100
percent of the 350,000 nonmajor air toxics sources, an unlikely
event, will result in a moderate increase of 16 percent in the
cost of administering the operating permits program and of 15
percent in the cost of the sources.
It should be noted that approximately 98 percent of these
nonmajor toxic sources are suitable candidates for coverage under
the general permit provision because they are homogeneous in
terms of operation, process, emissions and air pollution control
equipment.
12
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D. ADMINISTRATIVE BURDEN
Administrative burden costs are incurred by: (1) owners
and/or operators of stationary sources, who apply for operating
permits, (2) State authorities who review permit applications and
issue permits, and (3) the EPA, which provides oversight on
program implementation, permit issuance, data management, and
enforcement. The total administrative burden to sources is
estimated at $352 million annually for the first 5-year
implementation period. State/local agencies are estimated to
incur administrative costs of $26 million annually during the 3
years preceding implementation and of $160 million annually
during the first 5-year implementation cycle. The administrative
cost to the EPA is estimated at $3 million annually during the 3
years preceding implementation and at $14 million annually during
the first 5-year implementation period. See Tables IV-2 and IV-
3. It should be noted that costs to the permitting authorities
are offset by the fee mechanism provided by Title V.
The administrative costs in this analysis account only for
the direct costs associated with permit issuance. Indirect costs
related to air quality management such as program development,
enhanced monitoring, emissions inventories, and enforcement are
not included in the cost analysis.
E. METHODOLOGY
This section discusses the methodology used to estimate a
source's burden associated with permit fees and administrative
cost. This section discusses the approaches used to develop cost
algorithms on a model plant basis for: 1) this chapter's
nationwide estimate for administrative burden, and 2) analysis of
economic impacts on small businesses in Chapter V.
Fee Assessments
As stated above, the estimate of nationwide permit fees was
taken from a previous EPA study. For the purpose of conducting
the Regulatory Flexibility Screening Analysis in Chapter V, the
approach used to assess permit fees combined emissions data from
the AIRS for each pollutant by industry classification with data
from the Department of Commerce Bureau of Census Reports. The
industry classification corresponded to the four digit Standard
Industrial Classification (SIC) code. Emission estimates were
extrapolated from AIRS for each 4-digit SIC industry and matched
with reported data on establishments to derive an average
emission per establishment. (For more information, refer to
Chapter V). Total fees were estimated by multiplying $25 per ton
by the average emission per establishment.
14
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For purposes of this analysis, a fee of $25 per ton of
emissions per year is assumed. Permitting authorities may charge
lower fees as long as they can demonstrate that, in the
aggregate, they will collect sufficient fees to cover the costs
of developing and implementing their program. In this way, State
or local agencies may attempt to reduce the economic impact of
the fee program on affected sources.
Administrative Burden
(a) Industry Sector.
Specific Permits. For the purpose of estimating
administrative costs, a combination of the model for NSPS and
NESHAPS regulations with actual permitting experience2 was
applied as the methodological tool for the specific source
operating permit. The time period used for the RIA was 5 years.
For the owner and/or operator of a stationary source,
administrative costs consist of a one-time charge for processing
a permit application and an estimated cost for annually recurring
recordkeeping activities. The initial administrative burden
includes the task of interpreting the regulations and generating
data and information needed for the first permit application.
For a detailed breakdown of initial and recurring tasks, see
Reference 2. The one-time charge is annualized over the 5-year
period of the permit. These costs are assumed to be constant per
source (e.g., for large sources, a 100 tpy source incurs the same
burden as a 1000 tpy source).
The basis for estimating resource costs for the industry
sector was $45 per hour. The rationale for this is the
assumption that 70 percent of the resources expended by industry
would be in-house resources assumed at a rate of $41 per hour and
30 percent contracted with consultants at a rate of $55 per
hour.2
The algorithm for evaluating the cost of a specific permit
to sources is as follows:
Total Cost($/yr) = {$25/ton times plant emissions, tons
emitted/yr} + {$ll,373/yr for a small
source or $22,594/yr for a large source}.
16
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The assumptions for constructing the administrative costs
($22,594/yr) for a large source are the following:
o permit processing cost (1st year) = $45/hr x 1,221
hr/yr, or $54,945/permit
o annualized value of permit processing based on
capital recovery factor {10 percent, 5 yr} =
$14,494/yr
o administrative cost (recurring for 5 yrs) = $45/hr x
180 hr/yr = $8,100/yr
The assumptions for constructing the administrative costs
($ll,373/yr) for a small source are:
o permit processing cost (1st year) = $45/hr x 670
hr/yr, or $30,150/permit
o annualized value of permit processing based on
capital recovery factor {10 percent, 5 yr} =
$7,953/yr
o administrative cost (recurring for 5 yrs) = $45/hr x
76 hr/yr = $3,420/yr
General Permits. The specific source operating permit may
present a significant resource cost on the truly small source.
The concept of a general operating permit is being considered,
therefore, to mitigate the administrative burden for small
sources.
For the general, permit, the assumptions for arriving at the
administrative costs for a small source ($154/yr) are the
following:
o review of permit application and compliance plan (1st
year) = $45/hr x 13 hr/yr, or $585/source
o annualized value of permit application review capital
recovery factor {10 percent, 5 yr} = $154/yr
The total administrative burden to industry sources is
presented in Table IV-1. It was assumed that half of all small
sources listed in Table IV-l would incur costs associated with
issuance of a general permit. This assumption was validated by a
group of permitting experts from the government and private
sectors.
The total administrative burden to industry sources
presented in Table IV-l may be higher based on the scenarios
discussed in Appendix A. Under the realistic/optimistic
assumptions that 25 percent of the area sources considered in
Appendix A will be permitted with low cost ($154) general
permits, the increase in cost to the sources will be $13 million,
or 4 percent of the total cost presented in Table IV-l. Assuming
figures from midrange in the sensitivity analysis of Appendix A,
17
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such as permitting 25 percent of the sources at a cost of $4,000
per permit and another 25 percent of the sources at a cost of
$154 per permit, the increase in cost to the sources will be $362
million, which is 103 percent of the total cost presented in
Table IV-1.
(b) Government Sector
Estimates in this RIA represent the costs for the first 5-
year cycle of Title V implementation. However, burden estimates
for permitting agencies and the EPA for the 3-year period
preceding implementation have been determined also. The total
annual administrative cost for years 1-3 is estimated to be about
$30 million: $3 million for the EPA and $27 million for the
permitting agencies. See reference #2 for the detailed breakdown
of these costs. A comparable analysis of years 1-3 was not done
for the sources because pre-implementation costs were included in
the 5-year analysis.
The approach for estimating State/local agency and the EPA
burden is similar to that used for industry sources. Subtotals
are derived by multiplying the unit costs by the estimate of
sources for a source category (e.g., large sources).2 An
alternative approach would be to use the State/local agency as
the unit of analysis. There are some 120 State/local agencies.2
The basis for estimating resource costs—$34 per hour—for the
government sector is the Federal 1991 General Schedule for a
Grade 11, Step 3 program analyst and applying a 110 percent
overhead. Refer to Table IV-2 for a summary of the burden hour
estimates.
For State/local agency burden, the assumptions for constructing
the administrative costs for a large source ($9,523/yr) are the
following:
o review of permit application and other tasks (1st
year) = $34/hr x 315 hr/yr, or $10,710/source
o annualized value of permit application review based
on capital recovery factor {10 percent, 5 yr} =
$2,825/yr
o progress review/certification cost and other tasks
(recurring for 5 yrs) = $34/hr x 197 hr/yr =
$6,698/yr
For the EPA, the assumptions for constructing the administrative
costs for a large source ($903/yr) are the following:
o review of permit application and compliance plan (1st
year) = $34/hr x 40 hr/yr, or $1,320/source
o annualized value of permit application review capital
recovery factor {10 percent, 5 yr} = $359/yr
o review permit revisions (recurring for 5 yrs) =
18
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$34/hr X 16 hrs/yr = $544/yr
For State/local agency burden, the assumptions for constructing
the administrative costs for a small source-specific permit
($5,706/yr) are:
o review of permit application and compliance plan (1st
year) = $34/hr x 151 hr/yr, or $5,134/source
o annualized value of permit application review based
on capital recovery factor {10 percent, 5 yr} =
$l,354/yr
o progress review/certification cost (recurring for 5
yrs) = $34/hr x 128 hr/yr = $4,352/yr
For the EPA, the assumptions for constructing the administrative
costs for a small source specific permit ($451/yr) are the
following:
o review of permit application and compliance plan (1st
year) = $34/hr x 20 hr/yr, or $680/source
o annualized value of permit application review capital
recovery factor {10 percent, 5 yr} = $179/yr
o review permit revisions (recurring for 5 years) =
$34/hr x 8 hr/yr = $272/yr
The resources needed are relatively small for the
administrative burden costs associated with the general permit.
Only 8 hours of initial burden per source is estimated to be
required for the State/local agency at a cost of $72 per permit
per year. For the EPA, a 0.5 hour initial burden per source is
estimated at a cost of approximately $5/yr for each permit.
F. DISCUSSION OF RESULTS
Table IV-3 presents a summary of the total annual
administrative cost of the operating permit rules. The total
cost to society is estimated at $526 million annually. The
annualized burden and fees incurred by industry sources
nationwide are estimated to be $512 million. This figure
represents $352 million for administrative burden and $160
million in permit fees. The permit fees figure also represents
the cost to the permitting agencies. Fees are charged to the
sources to recover the administrative burden incurred by the
permitting authorities. Cost to the EPA is estimated at $14
million annually. In estimating industry costs, it was assumed
that half of the major small sources—nontoxic and toxic—would
obtain specific permits. If all of these sources (21,414
nontoxic and 3,750 toxic) would obtain general permits, then the
estimates would decrease to a total annual cost of $308.5
million. The total annual cost to sources would be $300 million.
This figure represents $211 million for administrative burden and
$89 million in fees. The fee amount also represents the
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administrative burden to the permitting agencies. Cost to the
EPA would decrease to about $8.5 million annually.
As discussed in Appendix A, the total administrative burden
to industry sources presented in Table IV-1 may be higher based
on the various possible scenarios of permitting nonmajor air
toxic sources. If specific permits are required for more than 50
percent of these sources at a cost per permit of $4000 (much
higher than the expected $500) , then the burden increase to the
sources could be more than $700 million or a 200 percent
increase. Assuming figures from midrange in the sensitivity
analysis of Appendix A, such as permitting 25 percent of the
sources at a cost of $4,000 per permit and another 25 percent of
the sources at a cost of $154 per permit, the increase in cost to
the sources will be $362 million, or 103 percent of the total
cost presented in Table IV-1. Under the realistic/optimistic
assumptions that 25 percent of the area sources considered in
Appendix A will be permitted with low cost ($154) general
permits, the increase in cost to the sources will be $13 million,
or 4 percent of the total cost presented in Table IV-1.
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REFERENCES
1. Memorandum from William G. Laxton to John Calcagni, "New
Analysis of Projected Air Emissions Permit Fees," Office of
Air Quality Planning and Standards, U. S. Environmental
Protection Agency, June 12, 1989.
2. Information Collection Request prepared for the Office of
Management and Budget (SF-83) by the U. S. Environmental
Protection Agency, January 10, 1991.
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V. ECONOMIC IMPACTS, REGULATORY FLEXIBILITY ANALYSIS,
AND PAPERWORK REDUCTION ACT ANALYSIS
A. INTRODUCTION
The Regulatory Flexibility Act requires Federal agencies to
review the effects of their regulations on small entities and to
involve these entities more actively in developing and reviewing
regulations. The term "small entities" includes small
businesses, small governmental jurisdictions, and small
organizations. Through the EPA's proposal, public review,
comment period, and promulgation process, provision is made for
involvement of all affected parties. However, much involvement
has been elicited already from local, State, environmental, and
business groups.
The criteria for "smallness" applies to the entire firm, not
to each of the facilities, plants, or establishments owned by the
firm. The Small Business Administration (SBA) defines "small
businesses" by SIC code in terms of annual sales or employment.
Agencies are required to screen for potential adverse effects and
to prepare a Regulatory Flexibility Analysis (RFA) if certain
criteria are triggered. The following criteria are used as
guidance regarding the need for a RFA. A "significant economic
impact" is said to occur whenever all of the following are met:
1. A substantial number of small entities is impacted
significantly. An impact of over 20 percent is generally
considered significant, although this is not a fixed rule.
2. An annual compliance cost results in an increase of 5
percent or more of the total production cost or sales.
3. The potential for significant impact is
disproportionate, i.e., the effect on small entities is
approximately 10 percent more than the effect on large entities.
If none of these conditions result from the new regulation,
then no RFA is required. If the economic impact of the new
regulations results in any of these conditions, then impact
mitigation strategies must be developed to the extent the
objectives of the Act are not compromised.
Chapter V presents the methodology and results of a RFA
screening analysis of the Title V operating permits program. The
purpose of the screening analysis was to survey "high risk"
industries within the small business community and identify the
potential for adverse impact.
22
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As a result of the screening analysis and comments from
the Title V regulatory development work group, steps were also
taken to propose regulations with features that mitigate adverse
impacts on small businesses while still meeting the objectives of
Title V.
B. METHODOLOGY
Industries were identified as potentially "high risk" and
selected for the screening analysis based on whether an industry
was comprised of predominantly small entities and whether the
industry had expressed much concern over regulatory burden in the
past. A list of industries that met these criteria was derived
based on SIC codes for two criteria pollutants (PM-10 and VOC)
and for air toxics regulated under the Act. Sources of other
criteria pollutants such as NOx and SO2 were not included because
of the nature of these emitters; namely, the emitters are mostly
large sources and/or fuel combustion sources which could likely
qualify for a general permit. Tables V-l to Tables present the
universe of "high risk" industries used for this analysis for PM-
10, VOC, and air toxics, respectively.
For purposes of this screening analysis, the total cost of
the permit program on air pollution sources was estimated based
on the sum of permit fees (based on emissions) and administrative
burden costs. The procedure for estimating these costs is
explained in Chapter IV.
In this screening analysis, the impact of Title V on small
businesses is measured in terms of cost as a percent of sales.
The procedure for this analysis is as follows:
(1) Obtain economic data (number of establishments, payroll,
sales, and value added) for companies with less than 20
employees for the SIC's in the "high risk" categories.
(2) Determine the cost of compliance with the Title V operating
permits regulations as previously explained in Chapter IV.
(3) Determine ratios of compliance costs per sales.
Estimates of sales for each small entity segment of the high
risk industries were obtained from the 1982 Enterprise Statistics
and the 1987 Census of Manufacturers. Where necessary, the
following other sources were used:
o 1987 Census of Service Industries (Subject Series)
o 1987 Census of Construction Industries (Industry
Series)
o 1987 Census of Transportation (Geographic Area Series)
o 1987 Census of Mineral Industries.
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C. RESULTS
The results of this analysis are summarized in Tables V-l to
V-4 and in Figure V-l. As can be seen from Table V-4, about 38
percent (8 of 21) of the industries analyzed for PM-10 had
estimated permitting costs higher than 3 percent of sales. The
highest permitting cost/sales ratio was around 7 percent. For
VOC, about 18 percent (3 of 17) of the industries analyzed had
permitting costs higher than 3 percent of sales. The highest
permitting cost/sales ratio was also in the 7 percent range.
None of the industries studied for air toxics had permitting
costs higher than 3 percent of sales.
Although these figures suggest the potential for adverse
impact on a number of small entities, it should be noted that the
methodology was deliberately designed to yield conservative
estimates.
D. MEASURES TO AVERT IMPACTS ON SMALL FIRMS
The EPA may exempt one or several source categories, in
whole or in part, from the requirements under Title V if it is
determined that compliance with these requirements would be
"impracticable, infeasible, or unnecessarily burdensome." Thus,
the impacts of permitting on small firms will be averted
completely for any source category which receives a Title V
exemption. The Agency may under no circumstances exempt a major
air pollution source. The EPA's draft regulations grant full
exemptions for residential woodstoves and asbestos
demolition/remodeling and deferred applicability for 5 years from
the date of program approval for all nonmajor sources.
E. MEASURES TO MITIGATE IMPACTS ON SMALL FIRMS
The impact of permitting costs on small firms can be
mitigated in four primary ways. The first measure is the
implementation of small business stationary source technical and
environmental compliance assistance programs as called for in
s.ection 507 of the Act (at the Federal and State levels) . These
programs may significantly alleviate the economic burden on small
sources by establishing: 1) programs to assist small businesses
with determining what Act requirements apply to their sources and
when they apply, and 2) guidance on alternative control
technology and pollution prevention for small businesses.
The second mitigation measure is deferred applicability or
exemption of one or several source categories from the
requirements of Title V. Small sources will benefit from the
proposed initial 5-year deferral because they: 1) will not be
24
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required to pay permit fees during this period, and 2) will not
be required to obtain a permit during the first years after
program approval, when the States and the EPA will be gaining
experience in implementing their new Title V programs. It would
be especially burdensome to require small sources, generally
without the legal and technical resources at the level of major
sources, to obtain permits at this time.
The third mechanism by which the impact of permitting
activities on small sources can be mitigated is through the
issuance of general permits. Permitting authorities are to issue
general permits, where appropriate, to source categories
comprised of numerous similar sources. It is anticipated that
most general permits will be issued to categories made up
primarily of small sources.
Permitting authorities will have the option to require less
detailed applications from sources applying for a general permit,
as long as they contain the minimum elements required under Title
V. The reduced administrative burden associated with a general
permit is expected to be a key benefit of general permits to
small sources. In addition, general permits will typically
require less administrative review by permitting authorities.
This may prove to be an additional benefit to small sources
because they should receive their approved permits in a more
expeditious fashion.
Finally, the economic impact resulting from Title V on small
businesses can be reduced through the discretion of the
permitting authorities. Permitting authorities have the option
to charge variable emissions fee rates based upon source
categories or pollutants as long as they can demonstrate that, in
the aggregate, they will recover sufficient fees to cover the
direct and indirect costs of developing and implementing their
permit program. In this way, State or local agencies may charge
lower per-ton fees to certain source categories made up primarily
of small sources to match their ability to pay and reduce the
economic burden imposed on them.
F. PAPERWORK REDUCTION ACT
Under the Paperwork Reduction Act, Federal agencies must
obtain Office of Management and Budget (OMB) clearance for
collection of information from ten more non-Federal respondents.
Each source subject to the requirements for obtaining a Title V
operating permit will have to submit a permit application and
will make periodic compliance reports. Part 70 regulations
provide for the State/local permitting authorities to collect
this information. Indeed, these requirements parallel what many
sources are already reporting to State and local permitting
authorities and what States report to the EPA. The effect of
these regulations will be to subject more sources to such
25
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requirements, primarily those required to obtain a permit due to
classification as a major source. The Act specifies that major
sources cannot be exempted from the requirement to obtain a
permit.
6. CONCLUSIONS
There is a potential for Title V to adversely impact a
substantial number of small entities. However, the number of
small entities adversely affected by permitting costs suggested
by this screening analysis may be due to the conservative nature
of the analysis. Conservative assumptions were made consistently
throughout this analysis and are explained below.
The first conservative assumption involves limiting the
analysis only to "high risk" industries. Such an analysis is
likely to yield "worst case" scenarios. A more comprehensive
analysis of all potential industries comprised of small sources
would likely reveal a lower percentage of industries with
cost/sales ratios greater than 3 percent.
Second, the determination of permit fee costs used a
conservative methodology as well. In order to determine the fee
cost, total emissions reported for a SIC were divided by the
total number of establishments (not firms) within that SIC for
the size distribution being analyzed. Assuming that there are
some large emitters in the population, the approach basically
assigns more tons of emissions to an establishment than it
actually emits. Since the permitting fee was calculated based on
tons of emissions, the cost tends to be overestimated.
A third source of conservatism comes from the assumption
that the permits concept is new to most sources and that the
permit application process therefore will be extremely time
consuming. Three-quarters of the States presently have their own
laws requiring operating permits for most minor and major sources
of air pollution. Over half of the existing State permit
programs address both new and existing sources and require
renewal of permits periodically. Approximately 20 programs
closely match the basic intent of Title V and have the basic
requirements for issuing permits, collecting fees, etc. Since
title V permit regulations are being structured to minimize the
disruption of those existing programs, the administrative cost
assumptions used for this analysis may also be overestimated.
Fourth, the national scope of this analysis may also
introduce a factor that skews the results in a conservative
direction. The small sources likely to be affected by permitting
regulations are those located in nonattainment areas. Assuming
that most small sources are also defined as "small entities," the
impact of permitting costs would be localized in nonattainment
26
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areas and would not be an across-the-nation phenomena as this
analysis assumes.
Finally, this analysis presents costs for obtaining initial
permits and does not discuss costs for permit renewals. Permit
renewals will invariably cost less for sources. The intent of
the regulation is to limit information collection at the time of
permit renewal to any major changes that may have occurred since
the time of previous permit issuance.
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TABLE V-l
High Risk Industries for PM-10 and
Screening Analysis Results
SIC
2911
2840
2449
3211
2951
2611
3273
3295
2869
2861
2873
3241
2621
1422
2421
3312
2732
2813
2892
1796
Type of Industry
Petroleum Refineries
Soap & Cleaners
Wood Containers
Grey Iron Foundries
Asphalt Paving
Pulp Mills
Ready Mix Concrete
Structural Clay Products
Industrial Organic and
Inorganic Chemicals
Wood and Gum Chemicals
Agricultural Chemicals
Hydraulic Cement
Paper Mills
Crushed & Broken Stone
Saw Mills
Blast Furnaces/Steel Mills
Bookprinting
Industrial Gases
Explosives
General Contractors
Cost/Sales m
0.10
1.10
3.58
3.49
0.60
0.16
7.28
2.67
0.79
0.74
1.06
7.29
3.42
6.33
2.76
4.54
2.35
0.64
0.85
3.69
(Industrial Bldgs.)
3313 Electrometallurgical 1.88
Products
28
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TABLE V-2
High Risk Industries for VOC
and Screening Analysis Results
SIC Tvrie of Industry Cost/Salesf%)
2899
2711
2842
2911
4226
3011
3479
2461
1799
2621
2511
5541
2435,
2436
3479
1321
2821,
2861
2431,
2499,
2851
Solvent Metal Cleaning
Newspaper/Graphic Arts
Perc & Petroleum Dry Cleaning
Fixed Tanks
Bulk Terminals
Rubber and Tire Mfg.
Auto and Truck Surface Coating
Paper Surface Coating
Architectural Coating
Paper Products
Wood Furniture
Gas Service Stations
Flat Wood Paneling
Can Surface Coating
Natural Gas Liquids
SOCMI Fugitives
Wood Finishing
1.02
7.44
0.51
0.54
0.00
3.30
2.62
0.57
2.08
2.79
5.86
1.23
1.46
1.53
0.63
2.98
2.13
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TABLE V-3
High Risk Industries For Air Toxics
and Screening Analysis Results
SIC Tvpe of Industry Cost/Sales
2851
2869
2861
2873
2842
3011
2011
2013
2046
2231
2732
2813
3339
2875
2891
3111
3291
3861
Paint and Allied Products
Organic & Inorganic Products
Wood and Gum Chemicals
Agricultural Chemicals
Perc and Petroleum Dry Cleaners
Rubber and Tire Mfg.
Meat Packing
Sausage and Other Meats
Wet Corn Milling
Weaving Mills
Book Printing
Industrial Gases
Primary Nonferrous Materials
Fertilizers
Adhesives and Sealants
Leather Tanning and Finishing
Abrasive Products
Photo Equip, and Supplies
0.54
0.61
0.61
0.44
0.45
1.01
0.39
0.47
0.35
1.41
1.18
0.46
0.44
0.41
0.61
1.34
1.30
0.65
30
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TABLE V-4
FINDINGS
COST OF PERMITTING AS PERCENT OF SALES
Percent of Industry Percent of Industry
with Estimated with Estimated
Permitting Cost Permitting Cost
> 1 Percent of Sales >. 3 Percent of Sales
PM-10 67% 38%
VOC 70 18
Toxics 28 —
••^••^^^^••^^^•»^^^^^^^^^^<_^^«««^^«»w^^^^«»«
TOTAL 55% 20%
TABLE V-5
COST OF PERMITTING
AS PERCENT OF VALUE ADDED
Percent of Industry Percent of Industry
with Estimated with Estimated Percent of Industry
Permitting Cost Permitting Cost for Which More
< 1 Percent of < 3 Percent of Assessment is Needed
Value Added Value Added
PM-10 14 50 50
VOC 14 50 50
Toxics 61 100 -
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VI. BENEFITS OP TITLE V
A. INTRODUCTION
This chapter addresses the potential benefits associated
with implementation of the Title V operating permits program.
Generally, Title V was legislated in order to improve air quality
management. To be more specific, the program is designed to:
o improve the effectiveness of the current permitting
system and facilitate the adoption of lower cost
control strategies based on economic incentive
approaches;
o consolidate source requirements into one Federally-
enforceable document, thereby providing greater
certainty to sources regarding their applicable
requirements under the Act and facilitating better
Federal/State/local enforcement efforts;
o facilitate implementation of other titles of the Act;
o improve the quality of emissions data and other source-
related data; and
o update the Act for consistency with other environmental
quality legislation that utilizes permit systems.
A formal quantitative benefits analysis for this rule should
theoretically include the valuation of more efficient enforcement
activities, fewer legal actions due to greater certainty for
sources regarding their applicable requirements, administrative
savings due to better emissions data and opportunities to
consolidate reporting, and reduced emissions resulting from the
permit fee requirement. Environmental benefits will be limited
to reduced emissions resulting from permit fees and possibly from
better compliance. As one can see, assigning monetary values for
such benefits would be arbitrary at this point. For these
reasons, the benefits analysis included in this study is mostly
qualitative in nature.
The EPA estimates that this rule will impose additional
costs of $526 million per year. Comparison of these costs to the
overall health and environmental benefits of the Act is
inappropriate. Instead, these costs should be compared to the
incremental benefits of the permits program. The incremental
benefits associated with the operations permits rule include the
following: more efficient enforcement, fewer legal actions and
administrative savings. Environmental benefits will be limited
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to reduced emissions resulting from permit fees and possibly from
better compliance.
B. EXPECTED BENEFITS
A primary benefit of the Title V permit program is that it
will consolidate all of the applicable requirements that apply to
a particular source into a single, Federally-enforceable
document. In the past, many sources and air pollution control
agencies have lacked sufficient information to properly comply
with or enforce applicable regulations. Currently, a source's
obligations under the Act, ranging from emissions control and
monitoring to recordkeeping and reporting, are identified in
numerous provisions of the SIP Federal regulations. Lawsuits or
protracted administrative appeals have occasionally resulted from
conflicting interpretations of a source's applicable
requirements.
Title V is designed to clarify this vital information. The
permit program will enable the source, the State, the EPA, and
the public to better understand the requirements to which the
source is subject, and whether the source is meeting those
requirements. The permit program will provide certainty to
industry regarding their statutory obligations, resulting in
increased source accountability. Because permits are to be
Federally-enforceable, enforcement of the Act requirements should
improve significantly, providing environmental benefits in terms
of cleaner air and reduced human health problems and adverse
welfare effects from air quality improvements. In addition, the
EPA's ability to implement the Act and enhance air quality
planning and control will be greatly strengthened, in part, by
providing the basis for better emission inventories.
Another benefit of the permit program is that it provides a
uniform vehicle for State and local agencies to administer other
titles of the Act, such as the substantially revised Federal air
toxics program and the new acid deposition program. Title V may
be used to facilitate implementation of the early voluntary
reduction program for air toxics as required in Title III. In
addition, States will use Title V permits to implement Phase II
of the acid deposition program. Operating permits will play a
significant role in ensuring compliance with the requirements of
this program.
The collection of permit fees is not considered a benefit of
this rule. The permit fee provisions of Title V require that
sources share the costs of developing and implementing the
Operating Permits Program. However, to the extent that fees are
based on emissions levels, the fees may provide an incentive for
sources to reduce emissions. This emission-based fee system will
help achieve the environmental quality goals of the Act.
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VII. NET BENEFITS
The economic efficiency criterion states that society is
better off relative to no regulation when the additional benefit
of the regulatory action exceeds the additional cost. A
necessary condition in applying the criterion is that the cost
represents the least amount of resources necessary to achieve the
regulatory objective.
This condition of cost-effectiveness is approximated in the
operating permits rulemaking. With the features of operational
flexibility, the use of general permits as opposed to specific
permits, and deferred applicability, the expected cost of this
regulation is lowered significantly.
With respect to benefits, the categories are several. They
include clarification and consolidation of a source's applicable
requirements into a single document, improved use of local,
State, and Federal enforcement resources, increased source
accountability, better emissions and source-related data,
improved implementation of other Titles of the Act, and, to a
lesser extent, emission reduction incentives. However, the
overall improvement the operating permits rule gives to the air
quality management program at the local, State, and Federal
levels is not amenable to quantification. Consequently, the
estimated benefit of the rule in monetary terms has not been
developed.
With quantification of the costs and a qualitative
assessment of the benefits, we cannot determine whether the
benefits exceed the costs.
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APPENDIX A
IMPACT OF PERMITTING AREA SOURCES (AKA TOXIC SOURCES EMITTING
<10 TPY) ON THE COST OF THE OPERATING PERMITS RULE
• OBJECTIVE
To assess the potential impact on the cost of the proposed
operating permit rule ($160 million to permitting agencies and
$352 million to the sources) of permitting approximately 350,000
small air toxics sources identified under section 112(c) of the
Act.
• QUALIFICATIONS
The extent of Maximum Achievable Control Technology
(MACT) coverage for these air toxics sources is
presumably unknown and, consequently, the number
receiving exemptions under MACT is unknown.
The distribution of sources permitted under a general
permit versus a specific permit is unknown and
dependent on the State program.
The number of sources receiving deferrals under the
Permit Rule is unknown and dependent on the State
program.
• METHODOLOGY
Approximately 350,000 nonmajor air toxic sources were
identified as possible candidates for requiring Title V
permits. The estimate comes from a draft initial list
of categories of sources under section 112(c)(l). The
list was revised to screen out sources that would not
fall under the requirements of Title V. Following are
the source categories, the number of sources in each
category, and a synopsis of the criteria used for the
screening. It should be noted that these do not
represent the universe of nonmajor sources. However,
there is overlap between these nonmajor air toxic
sources and nonmajor sources of VOC and PM-10
emissions. A significant number of nonmajor PM-10
sources (residential woodstoves and asbestos
demolition/remodeling) are exempted from Title V
permitting.
35
-------
1. Commercial Sterilizers: 190 - 47 facilities
considered major = 143 total
2. Hospital Sterilizers = 7,000 (up to 512 may be
major sources)
3. Industrial Cooling Towers = 75 sources. From the
3,000 on the list, there are 2,800 (petroleum
refineries, chemical manufacturers, primary metal
producers) with 800 cooling towers in total, and
only 10 percent use chromium. Therefore, there
should be about 300 sources with 800 towers. It is
estimated that 75 percent of these towers are part
of major sources and that the other 25 percent (or
75 sources) should be considered area sources.
4. Chromium Electroplaters = 5,000. This category
includes hard chromium electroplating, chromic
acid anodizing, and decorative chromium
electroplating. The list estimates 5,000 sources,
some of which would be considered major with
lesser quantity cutoffs (LQC's). At this time, the
number of major cannot be clearly identified
because the LQC list has not been finalized.
5. Stage I Gasoline Marketing = 191,066. The list
estimates 286,573 area sources. Only 191,066 can
be considered area sources requiring operating
permits: 12,046 bulk terminals; 4,020 pipeline
facilities; and 175,000 service stations.
6. Commercial Dry Cleaning (PCE) = 24,700. Numbers
are not included in source category list. Dry
cleaning regulation package estimates 24,700
commercial dry cleaners.
7. Halogenated Solvent Cleaners = 115,000. The list
estimated 100,000 small cold cleaners, most of
which are located in area sources such as service
garages and auto body shops; 30,000 open top vapor
cleaners, with 15,000 located at major sources;
and 3,000 in-line cleaners which are also
considered major.
8. Asbestos = 3,447. There are 430 processing
sources; renovation and demolition are exempted
from Title V; no construction sources; 3,017 waste
disposal landfills that accept asbestos waste; and
no destruction/conversion sources identified yet.
A sensitivity analysis is performed to analyze
scenarios according to:
36
-------
1. Distribution of permitting "mix" in terms of
specific permits vs. general permits. The
following percent ratios of specific permit to
general permit are presented in the attached
tables: 100/0, 50/50, and 0/100.
2. The percent of sources permitted : 100, 50, and
25.
3. The cost of a specific permit. The annual c~st of
permitting to the permitting agency presentp.1 in
the ICR is: $72 for the general permit; $9, 23 for
the specific permit of a large source; and $5,707
for the specific permit of a small source. The
annual cost of permitting to the sources presented
in the ICR is: $154 for a general permit; $22,594
for the specific permit of a large source; and
$11,373 for the specific permit of a small source.
The analysis was done using the general permit and
small source values and varying the cost of a
specific permit to $3000 and $500 for the
permitting agency; and to $8000, $4000, and $500
for the sources. The $500 cost figure is
estimated to be the most realistic because of the
nature of these sources: nonmajor sources
reporting usually on just one emission unit and
requiring less complex air pollution control
equipment. The cost of the general permit was not
changed.
Total annual costs include initial costs amortized over
a 5-year period with an interest rate of 10 percent,
plus recurring costs.
Findings are reported as a percent increase over the
total cost to the sources or to the permitting
agencies, not over the total cost of the program.
FINDINGS
Adoption of 100 percent general permits for all of
these area sources will result in a moderate increase
in the cost of administering the operating permits
program (16 percent) and in the total cost to the
sources (15 percent).
Use of exemptions and deferred applicability features,
where consistent with other Act objectives, will reduce
this moderate increase to less than 5 percent for both
permitting agencies and permitted entities.
37
-------
Adoption of 100 percent specific permits (at a
realistic permit cost of $500 per permit) for these
area sources will result in an increase in the cost of
administering the operating permits program of about
100 percent and in the cost to the sources of about 50
percent.
Approximately 98 percent of these sources are
considered good candidates for coverage under the
general permit provision because they are homogeneous
in terms of operation, processes, emissions, and air
pollution control equipment.
If the cost of the specific permit is $5,707 (from
ICR), then the increase in cost to the permitting
agency due to permitting area sources with a mix of
general and specific permits could range from 4 percent
to 1,250 percent ($6 million to $1.9 billion). SEE
TABLE 1.
If the cost of the specific permit is $3,000
(approximately half of the ICR figure), then the
increase in cost to the permitting agency due to
permitting area sources with a mix of general and
specific permits could range from 4 percent to 655
percent ($6 million to $1.45 billion). Notice that the
lower bound does not change because it is determined by
assuming a general permit for 100 percent of the
sources and the cost of the general permit was not
varied. SEE TABLE 2.
If the cost of the specific permit is $500, which is a
more realistic estimate for nonmajor sources because
they have less emission points and use less complex air
pollution control equipment, then the increase in cost
to the permitting agency due to permitting area sources
with a mix of general and specific permits could range
from 4 percent to 109 percent ($6 million to $175
million). Again, the lower bound does not change
because the cost of the general permit was not varied.
SEE TABLE 3.
If the cost of the specific permit is $11,373 (from
ICR), then the increase in cost to the sources due to
permitting area sources with a mix of general and
specific permits could range from 4 percent to 1,129
percent ($13 million to $4 billion). SEE TABLE 4.
If the cost of the specific permit is $8000
(approximately two-thirds of what is used in the ICR),
the increase in cost to the sources with a mix of
general and specific permits would range from 4 percent
38
-------
to 794 percent ($13 million to $2.8 billion). Notice
that the lower bound does not change because it is
determined by assuming a general permit for 100 percent
of the sources and the cost of the general permit was
not varied. SEE TABLE 5.
If the cost of the specific permit is $4,000
(approximately one-third of what is used in the ICR) ,
the increase in cost to the sources with a mix of
general and specific permits would range from 4 percent
to 397 percent ($13 million to $1.4 billion). Notice
that the lower bound does not change because it is
determined by assuming a general permit for 100 percent
of the sources and the cost of the general permit was
not varied. SEE TABLE 6.
If the cost of the specific permit is $500, a more
realistic estimate considering that most of these
nonmajor sources have only one emission unit and less
complex control equipment, then the increase in cost to
the sources with a mix of general and specific permits
would range from 4 percent to 58 percent ($13 million
to $175 million). Again, the lower bound does not
change because it is determined by assuming a general
permit for 100 percent of the sources, and the cost of
the general permit was not varied. SEE TABLE 7.
39
-------
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