3EPA
             Un«t«0 Suit*
             Environmental Protection
             Agency
            Solid Waste and
            Emergency
DfRECTIVE NUMBER: 9610.12

TITLE: U.S. EPA Penalty Guidance for Violations of
      UST Regulations
             APPROVAL DATE:

             EFFECTIVE DATE:
            NOV 14 (990

            WM4 B90
              ORIGINATING OFFICE: Office of Underground Storage
                             Tanks (OUST)
              Q FINAL

              D DRAFT

               STATUS:
              REFERENCE (other documents):

               OSWER Directive 9610.11 "UST/LLFST Enforcenent
                 Procedures Guidance Manual"
 OS WER      OS WER      OS WER
fE   DIRECTIVE   DIRECTIVE   D

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_O_COA WMhngton. DC 20460 U
otm QSWER Directive Initiation Reauest '
2. Orlahutor Information
Name of Contact Penan MalCode Office T««,
Josh Baylson OS-420 OUST 47
3. Title
U.S. EPA Penalty Guidance for Violations of UST Regulations
rective Number
9610.12

ahoneCode
5-9725

4 Summary of Directive (include brief statement ol purpose)
Provides guidance to U.S. EPA Regional Offices on calculating civil penalties against
owners/operators of underground storage tanks who are in violation of the UST
technical standards and financial responsibility regulations.
5. Keywords
underground storage tanks, enforcement, penalties
6a. Does This Directive Supersede Previous Dtrective(s)7 1 1 1 1
[XXJ No | 	 | Yes What directive (number, tide)
b. Does II Supplement Previous Directives)? f— ~| r~~|
| 	 [No IXXjYes What directive (number. We) 9610.11,
UST/LUST Enforcement Procedures Guidance Manual
7. Draft Level
1 1 A-SionedbyAA/DAA x 8 - Signed by Office Director I 1 C - For Review & Commen
V
t O-lnDttlttopmem


8. Document to be distributed to States by Headquarters? 1 lv«« [xjNo

This Request Meets OSWER Directives System Format Standards.
9. Signature of Lead Office Directives Coordinator . _ s\
Beverlv Thomas. OUST Directives Coordinator
10. Name and Trie of Approving Official ^y * + ^ Xj — — *A ~~*
Ronald Brand, Director, OUST
Date . /
"• 
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    &EPA
             United Suies
             Environmental Protection
             Agency
            Off tee o<
            Solid Waste and
            Emergency Response
DfRECTIVE NUMBER: 9610.12

TITLE: U.S. EPA Penalty Guidance for Violations of
      UST Regulations
              APPROVAL DATE:

              EFFECTIVE DATE:
             NOV 14 1990

             NOV 14 890
              ORIGINATING OFFICE: Office of Underground Storage
                             Tanks (OUST)
              S FINAL

              Q DRAFT

               STATUS:
              REFERENCE (other documents):

                OSHER Directive 9610.11 "UST/LUST Enforcement
                 Procedures Guidance Manual"
 OSWER      OSWER      OSWER
'E   DIRECTIVE    DIRECTIVE

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             UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
MEMORANDUM
SUBJECT:  Final  "U.S.  EPA  Penalty  Guidance for Violations of UST
          Regulations"

FROM:     Don R. Clay. Assistant
          Office of Solid Waste and

                               stant
 urgency  Response

Administrator
          James M. Strock
          Office of Enfdrcem<

TO:       Waste Management Division Directors,
          Regions I-III, V-IX
          Water Division Directors,
          Regions IV & X
          Regional Counsels, Regions I - X

     Attached  is  the  final  version of  the  "U.S.  EPA  Penalty
Guidance  for  Violations  of  UST  Regulations"  (OSWER  Directive
9610.12).  The purpose of this document is to provide guidance to
the  Regions  on  calculating civil  penalties against owners  and
operators of underground storage tanks (USTs) who are  in violation
of  the  UST  technical  standards  and  financial  responsibility
regulations.

     This  version  is  based  on  the April  .11,  1990 draft  and
incorporates Regional comments.  Highlights  of those  comments and
revisions to the document include:

o    expanding the upward range of adjustments to the matrix values
     to  facilitate reaching the statutory maximum penalty,

o    replacing  the  environmental  sensitivity  factor  with  the
     environmental  sensitivity  and the  days  of  non-compliance
     multipliers,

o    reserving a chapter for a discussion of penalties for Federal
     field citations, and

               -oxamples of  the  application  of  this  guidance in

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     While  the Agency has  emphasized the need to stress voluntary
compliance  with  the UST regulations because of the large size of
the  regulated community, we  also have recognized the need to send
a strong enforcement  message to those owners and operators who do
not  comply with the  regulations.   This document  is  designed to
provide the Regions flexibility in assessing penalties  in response
to the unique  characteristics of  each case, while establishing a
national framework to ensure that penalties are  assessed in a fair
and  consistent manner,  and  that  such  penalties  serve  to deter
potential violators and assist in achieving compliance.  Thus, this
document provides the flexibility to assess penalties for as little
as several hundred dollars and as much as several hundred thousand
dollars, based on the  specifics of the case.

     This document supplements the "UST/LUST Enforcement Procedures
Guidance Manual" (OSWER Directive 9610.11), which provides guidance
to the Regions on taking enforcement actions, discusses situations
in which  Regional enforcement responses  are warranted, and  the
factors to be considered in determining the  appropriate enforcement
response (including the assessment of civil penalties).

     The penalty guidance was  developed by a workgroup consisting
of UST program managers, staff and attorneys from Regions IV, V and,
VII  and  OUST  staff,  and  was reviewed  by  the Office of  Waste
Programs Enforcement and the  Office of Enforcement  for consistency
with Agency policy.  We want  to thank everyone for  their excellent
work in  this cooperative effort.   If you  have any questions or
would like additional  information, please have  your staff contact
Josh Baylson of OUST on FTS  475-9725.
Attachment
cc:  Ron Brand, OUST
     Joe Retzer, OUST
     UST Regional Program Managers
     UST Regional Attorneys
     Susan Bromm, OWPE
     Kathie Stein, OE
     John Rasnic, OAQPS

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                                OSWER Directive 9610.12
U.S. EPA PENALTY GUIDANCE
    FOR VIOLATIONS OF
     UST REGULATIONS
         November 1990
 Office of Underground Storage Tanks
 U.S. Environmental. Protection Agency

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OSWER Directive 9610.12
                                           NOTICE
       The procedures set forth in this document are intended solely for the guidance of the U.S. EPA.
They are not intended, and cannot be relied on, to create rights, substantive or procedural, enforceable
by any party in litigation with the United States government.  The U.S. EPA reserves its right to act at
vanance with this guidance and to change it at any time without public notice.

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                                                               OSWER Directive 9610.12
                                 TABLE OF CONTENTS
CHAPTER 1. INTRODUCTION TO UST PENALTY GUIDANCE	  1

    1.1    U.S. EPA Penalty Authority	  1
    1.2    Overview of the UST Enforcement Process	  2
    1.3    UST Penalty Assessment Framework	  4


CHAPTER 2. DETERMINING THE ECONOMIC BENEFIT COMPONENT	  8

    2.1    Definition of Economic Benefit Component	  B
    2.2    Avoided Costs	  9
    2.3    Delayed Costs	 12


CHAPTER 3. DETERMINING THE GRAVITY-BASED COMPONENT	14

    3.1    Determining the Matrix Value	14
          3.1.1  Extent of Deviation from Requirements	15
          3.1.2 Potential for Harm  	15

    3.2    Violator-Specific Adjustments	17
          3.2.1  Degree of Cooperation/Noncooperation  	18
          3.2.2 Degree of Willingness or Negligence  	18
          3.2.3 History of Noncompliance	19
          3.2.4 Other Unique Factors	19

    3.3    Environmental Sensitivity  Multiplier	20

    3.4    Days of Noncompliance Multiplier	21


CHAPTER 4. SETTLEMENT ADJUSTMENTS	23


CHAPTER 5. USE OF FIELD CITATIONS	26
                                         iii

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OSWER Directive 9610.12
                                   TABLE OF CONTENTS
                                        (Continued)
APPENDICES

Appendix A:    Matrix Values for Selected Violations
              of Federal Underground Storage Tank Regulations	A-1

Appendix 8:    UST Penalty Computation Worksheet	8-1

Appendix C:    UST Penalty Computation Examples	C-1
                                     LIST OF EXHIBITS                                Page


Exhibit 1:     Overview of UST Enforcement Options	3

Exhibit 2:     Process for Assessing UST Civil Penalties  	5

Exhibit 3:     Applicable Tax.'Rates for Determining Avoided Costs  	11

Exhibit i:     Matrix Value For Determining
             the Gravity-Based Component of a Penalty	16
                                             IV

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                                                                     OSWER Directive 9610.12
          CHAPTER 1,  INTRODUCTION TO UST PENALTY GUIDANCE


      This document provides guidance to U.S. Environmental Protection Agency (EPA) Regional
Offices on calculating civil penalties against owner/operators of underground storage tanks (USTs) who
are in violation of the UST technical standards and financial responsibility regulations. The
methodology described in this guidance seeks to ensure that UST civil penalties, which can be as high
as $10,000 for each tank for each day of violation, are assessed in a fair and consistent manner, and
that such penalties serve to deter potential violators and assist in achieving compliance.

      This penalty document is part of a series of enforcement documents which includes: (1) the
Agency's UST/LUST Enforcement Procedures Guidance Manual (OSWER Directive 9610.11, July 1990),
which provides guidance to U.S. EPA Regional personnel on taking enforcement actions against
violations of the UST technical requirements; and (2) the draft •Interim Enforcement Response Strategy
lor Violations of UST Financial Responsibility  Requirements,' which provides guidance on taking
enforcement actions against violations of the financial responsibility requirements. Although these
enforcement documents are intended primarily for U.S. EPA Regional enforcement staff, State and local
UST implementing agencies may find it useful to adapt some of the concepts and methodologies for
their own UST enforcement programs.

      This chapter briefly describes the U.S. EPA's authorities for taking enforcement action and
assessing civil penalties. It also provides an overview of the enforcement actions that may be taken in
response to UST violations, and indicates how the assessment of penalties fits into the enforcement
framework.

1.1   U.S. EPA PENALTY AUTHORITY

      The U.S. EPA's authority for assessing civil penalties for violations of UST requirements is
provided by Subtitle I of the Resource Conservation and Recovery Act (RCRA).  Under the Hazardous
and Solid Waste Amendments of 1984, Congress added Subtitle I to RCRA in response to the growing
environmental and health problems created by releases from USTs.  The statutory framework for the
national UST program is set forth in Sections 9002 through 9004 of Subtitle I.

      Under Section 9006 of Subtitle I, EPA  is authorized to take enforcement actions and assess
penalties against violators of requirements promulgated under Subtitle I, including technical standards
and financial responsibility requirements.1  In particular, Section 9006(a) provides the  authority to issue
administrative orders requiring compliance within a reasonable specified time period.  All such orders
will be processed within the Agency according to the Consolidated Rules of Practice (CROP).2
Pursuant to Section 9006(d), a Section 9006 compliance order may assess a civil penalty,  provided that
the penalty does not exceed $10,000 for each tank for each day of violation of the technical standards
    1 These are contained in two separate rules:  the UST Technical Standards Rule, 40 CFR Part 280,
Subparts A through G (promulgated September 23, 1988) and the UST Financial Responsibility Rule,
40 CFR Part 260, Subpart H (promulgated October 26, 1988).
'  .• 2 40 CFR Part 22, The Consolidata^uj** !ft^£radiccJCbv»5;Viing tlv; -  ^•'"fative Assessment of
Civil Penalties and the Revocation or ^^tuSys^ftPe,- «"•;*• 
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OSWER Directive 9610.12
and financial responsibility rules.3  This document presents guidance for determining the appropriate
civil penalty amount for an administrative complaint and order, and discusses use of penalties in field
citations.

      In addition to administrative enforcement actions, EPA may initiate judicial enforcement actions
under Section 9006 to compel compliance with Subtitle I's statutory and regulatory requirements. EPA's
judicial enforcement actions are processed through Federal courts and are reserved for violations of
administrative orders.  Under such actions, EPA is authorized to seek judicial penalties of up to $25,000
for each day of continued noncompliance with an administrative order issued under Section 9006 or a
corrective action order issued under Section 9003. In these cases, Agency personnel should seek the
maximum penalty.4

1.2   OVERVIEW OF THE LIST ENFORCEMENT PROCESS

      The UST/LUST Enforcement Procedures Guidance Manual (OSWER Directive 9610.11, July 1990)
describes the range of enforcement actions that may be  taken in response to an UST violation. These
enforcement options vary from initial responses, such as warning letters or notices of violation (NOVs),
which encourage  compliance, to more stringent actions,  such as administrative orders and judicial
injunctions, which compel compliance and, if appropriate, penalize violators.  Exhibit 1 presents the
various enforcement actions that may be taken once a violation of an UST requirement is identified. In
general, enforcement personnel will take the least costly  enforcement action  that appears necessary to
achieve compliance and create a strong deterrent, and will escalate the severity of the enforcement
response if the initial action fails.

      As shown in Exhibit 1 .there are two approaches to taking enforcement actions.  Under the
traditional' approach, enforcement personnel may initially respond to a discovered violation by issuing
a waning letter or NOV to inform the owner/operator of the violation, explain what actions need to be
taken, and indicate possible consequences if the owner/operator fails to achieve compliance.  If
necessary, enforcement personnel may then meet with the owner/operator to negotiate an  agreed-upon
course of action for the owner/operator to follow to achieve compliance. However, for recalcitrant
violators, or where violations pose a threat to human health and the environment, enforcement
personnel will typically issue administrative complaints or take judicial action. To provide a deterrent
effect, an administrative complaint may include an initial penalty target figure. Upon receipt of the
complaint, a violator may pay the penalty specified, request an informal settlement conference, and/or
request an administrative hearing. Regardless of  the violator's response, the outcome generally will be
a final penalty that the violator must pay or else face judicial prosecution. Exhibit 1 shows  where the
target and final penalties appear in the enforcement process.

      As an alternative to the traditional approach, enforcement personnel may initiate an enforcement
response using field citations (see Chapter 5). Field citations, similar to traffic tickets, are modified
compliance orders issued by inspectors on-site at a facility when violations are discovered.  However,
the use of field citations is generally limited to  first-time violators when compliance is expected and
when the violation does not pose an immediate threat to human health and the environment. A typical
    3 This 510,000 limit also applies to violations of the Interim Prohibition provisions and any
requirement of an approved State program.  For violations of the May 1985 (statutory) notification
requirements, the penalty may not exceed $10,000 for each tank.
    4 This guidance is in no way intended to limit the penalty amounts sought in
In settling judicial cases, however, the Agency may use the narrative penalty asses&iiiwtf -.nitfefja set
forth in this guidance to determine or justify the penalty amount that the Agency agrees to &;-c&pt in
settlement.

                                              -2-

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                                                            OSWER Directive 9610.12
                                 Exhibit I
       Overview of Enforcement Response Options
              Traditional
              Approach
                 Discovery of
                   Violation
                          FleM Citation
                            Approach
      Response
     (e.g. warning
     letter, NOV)
                                           1
                                      Dttarmination of
                                        approprlatt
                                        enforcement
       initial
     Negotiation
      . show cause
      meeting)
    Administrative
     Complaint
 Economic
  Benefit
Component
Gravity*
                                     portent
   Initial Penalty
   Target Figure
     Settlement
    Negotiations
                          Settlement
                         Adjustments
  Consent Agreement
   and Final Order
     (or hearing)
        Final
       Penalty
                                            new
                                           CHatfon
                                         wHh penalty
                                    Judicial
                                  Enforcement
NOTE: This exhibit presents an overview ofenfc.^:\:.'.,' <-,:- .TS onty. fA? doss -wf flwrdbff 8 certain order
of action. Actual enforcement actions may begi:.; :\ /;;; -:,.'!,'. t?>e pflc-r-i*

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OSWER Directive 9610.12
field citation will not only require that the violator take actions to achieve compliance, but win also
assess a pre-estaMshed, non-negotiable penalty.  This penalty is usually fairly low (e.g., $100) to
encourage prompt payment and response.  In paying the citation penalty, the violator gives up the right
to appeal and consents to the requirements specified; thus, the citation Is analogous to the final penalty
that results from settlement negotiations.  This alternative path to arriving at a penalty is also shown in
Exhibit 1.  If the owner/operator fails to respond to the field citation, enforcement personnel may resort
to enforcement actions under the traditional approach or may initiate judicial actions.

      Under the UST program's franchise approach, States will undertake most of the enforcement
actions.  However, in certain cases (e.g., where an owner/operator is particularly recalcitrant or the State
lacks sufficient enforcement authority), Federal assistance may be needed.  In such cases, the Regional
office may omit initial, informal responses and proceed directly with administrative or judicial actions.
However, U.S. EPA enforcement also may be needed at the beginning of an enforcement case in
certain circumstances  (e.g.. in States without active enforcement programs or on Indian Lands).  In
such cases, Regional enforcement personnel may begin with either the traditional responses or may
determine that it is appropriate to use field citations.

1.3   UST PENALTY ASSESSMENT FRAMEWORK

      This document provides guidance on calculating penalties to be used in the administrative
enforcement actions described above. Consistent with the  U.S. EPA's Policy on Civil Penalties,
penalties assessed under this methodology are intended to achieve the following goafs:5

      •     Encourage timely resolution of environmental problems;

            Support fair and equitable treatment of the regulated community; and

      •     Deter potential violators from future violations.

Exhibit 2 provides an overview of the major components used to set penalties at levels that will achieve
these goals.  Specifically, to deter the violator from repeating the violation and to deter other potential
violators from failing to comply, the penalty must place the violator in a worse position economically
than rf he or she had complied on time.  Such deterrence is achieved by:

      (1)    Removing any significant economic benefit that the violator may have gained from
            noncompliance (the 'economic benefit component*); and

      (2)    Charging an additional amount, based on the  specific violation and circumstances of the
            case, to penalize the violator for not obeying the law (the 'gravity-based component").

The procedures for determining the economic benefit component and gravity-based component are
discussed in Chapters 2 and 3, respectively.  Furthermore,  to support fair and equitable treatment of the
regulated community, the penalty must allow for adjustments to take into account legitimate differences
between similar cases. Thus,  under this methodology, the  gravity-based component incorporates
adjustments that reflect the specific circumstances of the violation, the violator's background and
actions, and the environmental threat posed by the situation.
    5 The 'EPA Policy on Civil Penalties' (EPA General Enforcement Policy #GM-21, February 1S!
and the 'Framework for Statute-Specific Approaches to Penalty Assessment* (EPA General
Enforcement Policy #GM-22. February  1984) establish a consistent Agency-wide approach to the
assessment of civil penalties.

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                                              OSWER Directive 9610.12
                      Exhibit 2

Process for Assessing UST Civil Penalties
         Traditional
         Approach
Economic Benefit
Component
• AwUadOMti
• 0*tey*dca*t»


Initial
_^b>
                     Gravity-Based
                      Component
                    ItettaVtlw
                   • Bwliannnnal
                   • Daysof NonoofflpilanM
                    MuMplltr
     Target Figure
 VtoMor accepts
raquMt» tearing
                        1
                   ,  Settlement
                    Adjustments
                   • AMKytopqr
                   • O»»rtotor»
                                 Field CHation
                                  Approach
                                FtoM Citation
                                             norvragotiaWc
                                      Rnal
                                     Penalty
                                     i   :
                          -5-

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            OSWER Directive 9610.12
                  The sum of the economic benefit component and the gravity-based component yields the initial
            penalty target figure that is assessed in the administrative complaint6  For each case that involves
            more than one violation, the Regional case team will need to decide on the number of counts
            addressed in the complaint Each count should be accompanied by an appropriate penalty calculation,
            and the sum of these penalties will be the initial penalty target figure assessed in the complaint. Once
            a complaint is issued, the Agency may enter into settlement negotiations with the owner/operator to
            encourage timely resolution of the violation. Such negotiations provide the owner/operator with the
            opportunity to present evidence to support downward adjustments in the penalty. The process of
            adjusting the penalty during settlement negotiations is addressed in Chapter 4. The outcome of such
            negotiations win be the final penalty.

                  For specific types of cases, enforcement personnel may issue field citations, which assess
            penalties while encouraging a swift return to compliance without a drawn-out appeals process.  The use
            of field citations to assess penalties is addressed in Chapter 5.
                6 However, it should be remembered that the sum of the gravity-based component plus the
TWO a men   econornic benefit component cannot be greater than trte statutory maximum of $10,000 for each tank
             ftf    h d  ^ vioJation ^ tne technical standards and financial responsibility regulations.
                       J

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                                             OSWER Directive 9610.12
                      Chapter 2
         Determining the Economic Benefit
                      Component
             Traditional
              Approach
  fl*W Citation
   Approach
Economic Benefit
  Component
  Delayed eoia
       Initial Penalty
       Target Figure
                          i
                       Settlement
                      "*'0*i
                                      Hna
                                     Penalty
;•£
  §
  f*~^
'
                            -7-

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OSWER Directive 9610.12
    CHAPTER 2.  DETERMINING THE ECONOMIC BENEFIT COMPONENT


      As explained in the preceding chapter, to ensure that the penalty deters potential violators, the
initial penalty target figure assessed in the complaint must include two fundamental components:

      •    Economic Benefit Component, which removes any significant profit from
           noncompliance; and

      •    Gravity-Based Component, which imposes an assessment to penalize current
           and/or past noncompliance.

This chapter discusses the process for determining the economic benefit component  The gravity-
based component is discussed in Chapter 3.

2.1   DEFINITION OP ECONOMIC BENEFIT COMPONENT

      The economic benefit component represents the economic advantage that a violator has gained
by delaying capital and/or non-depreciable costs and by avoiding operational and maintenance costs v
associated with compliance.7  The total economic benefit component is based on the benefit from two
sources:  (1) avoided costs; and (2) delayed costs.  All penalties  assessed must include the fuH
economic benefit unless the benefit is determined to be 'incidental,' i.e., less than $100.
              Economic Benefit Component = Avoided Costs  + Delayed Costa


  Avoided costs are the periodic, operation and  maintenance expenditures that should have been
  incurred, but were not.

  Delayed costs are the expenditures that have been deferred by the violation, but will be incurred
  to achieve compliance.
      The Agency-wide penalty policy prescribes the use of two methods for calculating a violator's
economic benefit from noncompliance:9  (1) the rule-of-thumb approach; and (2) the software program
   7 This policy does not outline a methodology for the recovery, as a measure of economic benefit,
of profits proximately attributable to illegal or non-compliant activities.  Because the Federal UST
regulations do not include a permitting process, the Agency is not presently aware of situations where
such profits would be realized, or where we would expect to seek recovery of such profits as a
measure of economic benefit in the Federal UST program.  Should EPA determine that the recovery of
such profits is appropriate in a particular case, the Agency wil calculate such profits in a manner
consistent with the RCRA Civil Penalty Policy (October 1990).

   8 Revised guidelines for calculating the economic benefit from noncompliance are incorporated
      '' Viorandum from Courtney Price (Assistant Administrator for Enforcement and Compliance
        I \ Entitled, 'Guidance for Calculating the Economic Benefit of Noncompliance for a Civil
       ., icssmenf (November 5,1984).

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                                                                      OSWER Directive 9610.12
called BEN.*  The rute-of-thumb approach (described in the sections that follow) should be used for
making an initial estimate of the economic benefit of noncompliance. If the initial estimate is less than
$10,000, the rute-oMhumb calculation may be used as a basis for the economic benefit assessed in the
penalty. If, however, the estimate indicates that the economic benefit is greater than $10,000, the BEN
model should be used. The BEN model should also be used if the violator rejects the ru!e-of-thumb
calculation.

     The BEN model, which is accessible by computer from anywhere in the country, uses a financial
analysis technique known as •discounting* to determine the net present value of economic gains from
noncompliance. BEN determines the economic benefit far an individual violator based on 12 specific
factors, or inputs, including the violator's initial capital investment, nondepreciable expenditures, and
operation  and maintenance costs. For some inputs, such as income tax rate, annual inflation rate, and
discount rate, BEN will provide standard values if the user does not have actual figures. This use of
standard values allows for national consistency in determining economic benefit.  Because the majority
of UST violations will be associated with an economic benefit of less than $10,000, the ru!e-of-thumb
approach  will be used in most cases.

      The procedures for calculating the economic benefit of noncompliance using the rule-of-thumb
approach  are described below. Because of the fundamental differences between avoided and delayed
costs, the  process for determining the economic benefit component will depend on the type of cost
involved.  The sections that follow describe methods for calculating each type of cost.

2.2   AVOIDED COSTS

      Avoided costs are the operation and maintenance expenditures that are averted by the violator's
failure to comply.  These are considered to be avoided  because they will never be incurred even if the
violator comes into compliance. For example, a violator who has failed to maintain product inventory
records in the past never will have to make up for the costs saved, even if he is directed to start
maintaining inventory records now. Other examples of avoided costs include:  (1) failure to conduct a
required periodic test;  (2) failure to obtain financial assurance by the phase-in date; and (3) failure to
conduct periodic maintenance of equipment. The violator's benefit from avoided costs is generally
expressed as the avoided expenditures plus the interest potentially earned on the money not spent
                               DETERMINING AVOIDED COSTS

     Avoided =    Avoided   +   Avoided    x  Interest  x   Number   x    (1 - Marginal)
     Costs         Expenditures   Expenditures	of Days           Tax Rate
                                                365 Days

  Avoided Expenditures are estimated using local, comparable costs.
  /merest is the equity discount rate provided in the BEN model (currently 18.1 percent).
  Number of Days is from the. date of noncompliance to the date of compliance.
  365 Days is the number of days in a year.
  Marginal Tax Rate is based on corporate tax rates or financial responsibility compliance class.
   9 For information, contact the BEN/ABEL Coordinator in the Office of Enforcement at the ip.S. EPA
Headquarters by phoning (202) 475-6777 or FTS 475-6777.

                                             -9-

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OSWER Directive 9610.12
      To determine the value of the Interest, compounded annually, the equity discount rate should be
used. This represents the risk-free rate (T-WII) plus the cost of financing for pollution control equipment.
This rate can be obtained by calling the EPA Office of Enforcement or by accessing the BEN computer
model.10 As of the beginning of FY91, the equity discount rate was 18.1 percent. When used in the
formula, this number should be expressed as a decimal and not a percentage (e.g., 0.181, instead of
18.1%).

      The marginal tax rate (MTR) used in calculating the avoided costs will vary depending on the size
of the business. Exhibit 3 provides a list of appropriate tax rates based on the facility or company's
taxable income. As with the interest rate,  this number should be expressed as a decimal, not a
percentage (e.g., 0.15 instead of 15%).  To determine the taxable income, enforcement staff should
contact EPA's National Enforcement Investigations Center (NEIC) to determine whether the business in
violation is listed in the Dun and Bradstreet Business Information Report data base.11 The data base
provides information on the annual incomes of a large number of companies across the country,
including the smaller,  'Mom and Pop' businesses. Although most of the incomes listed in the data base
are those reported to  Dun and Bradstreet, the data base also includes some estimated incomes for
companies that have not reported.

      If information on annual income cannot be obtained from NEIC, enforcement staff may use the
company's financial responsibility compliance class as a basis for determining the appropriate marginal
tax  rate, as follows:                                                                          '
     MARGINAL TAX RATES BASED ON FINANCIAL RESPONSIBILITY COMPLIANCE CLASS

                        Compliance Class*                 Tax Rale
                        FR Classes 1 & 2                   0.34 (34%)
                        FR Class 3                        0.25 (25%)
                        FR Class 4                        0.15 (15%)

  a Compliance class is determined as follows: Class 1  • large petroleum marketing firms with
  1,000 or more USTs or any firm with net worth over $20 million; Class 2 - large and medium-sized
  petroleum marketing firms with 100 to 999 USTs; Class 3 - smaller petroleum marketing firms with
  13 to 99 USTs; and Class 4 - very small marketing firms with 1 to 12 USTs or less than 100 USTs
  at one site, all other firms with net worth of less than $20 million, and municipalities.
In the absence of specific information on the violator's FR compliance class, enforcement staff should
assume that the violator is in FR Class 4 (which will result in the highest penalty).
   10 To obtain the equity discount rate from the Office of Enforcement, or to access BEN, cafl the
BEN/ABEL coordinator at (202) 475-6777 or FTS 475-6777.

   11 For inforwrasw- from the Dun and Bradstreet data base call NEIC at (303) 236-3219 or FTS
8-776-321F  !-•<" r •' '"Tvtion on tne violator's name and location (city and State). NEIC staff can
search the uav-j fr \.   > •/ information on the company's annual income.

                                             -10-

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                                                                  OSWER Directive 9610.12
                                     Exhibit 3
  Applicable  Tax Rates for Determining Avoided  Costs
          MARGINAL TAX RATE BASED ON FEDERAL CORPORATE TAX RATES
                           (from 1989 U.S. Master Tax Guide):

        Taxable income over               Not over                 Tax rate
          SO                              $50,000                      15%
          $50,000                         $75,000                      25%
          $75,000                         $100,000                     34%
          $100,000                        $335,000                     39%"
          $335,000                        	                         34%

          *An additional 5% tax is applied to income between $100,000 and $335,000
          to phase out the benefits of the graduated rates in that income range.

The marginal tax rate is applied to each increment of income specified above (e.g., for an income of
$75,000, 15% is applied to the first $50,000 and 25% to the next $25,000).  The weighted average
tax rates below have been calculated for each $10,000 increment in income to reflect the actual tax
burden at each income level  These values will facilitate the determination of penalty amounts by
eliminating the need to calculate the tax burden on each increment of marginal taxable income. To
find the weighted tax rate, round the estimated taxable income to the nearest $10,000 and use the
tax rate indicated in the table.

                WEIGHTED AVERAGE TAX RATES BY INCOME LEVEL"

       Taxable Income          Tax               Taxable Income           Tax
       not greater than          Rate              not greater than           Rate


          $50,000               0.15                 $200,000              0.31
          $60,000               0.17                 $210,000              031
          $70,000               0.18                 $220,000              0.31
          $80,000               0.19                 $230,000              0.32
          $90,000               0.21                 $240,000              0.32
          $100,000              0.22                 $250,000              0.32
          $110,000              0.24                 $260,000              0.33
          $120,000              0.25                 $270,000              0.33
          $130,000              0.26                 $280,000              0.33
          $140,000              0.27                 $290,000              0.33
          $150,000              0.28                 $300,000              0.33
          $160,000              0.29                 $310,000              0.34
          $170.000              0.29                 $320,000              0.34
          $180,000              0.30                 $330,000              0.34
          $190,000              0.30               > $340,000              0.34

          "This table includes the additional 5% tax applied to incomes between
          $100.000 and S335.000.


                                        -11-

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OSWER Directive 9610.12
2.3   DELAYED COSTS

      Delayed costs are the capital expenditures and one-time non-depreciable costs that have been
deferred because the violator failed to comply with the requirements.  Examples of delayed costs
include: (1) failure to install required equipment, such as cathodic protection; and (2) failure to clean up
a spill. These expenditures are considered only to be delayed, and not avoided altogether, because
the violator will eventually have to incur these costs to come into compliance. The benefit from delayed
costs is generally expressed as only the return on investment that could have been earned on the
money not spent.
                               DETERMINING DELAYED COSTS

              Delayed Costs =  Delayed Expenditures x  Interest x Number of Days
                                                    365 Days

   Delayed Expenditures are estimated using local, comparable costs.
   Merest is the equity discount rate used in the BEN model (currently 18.1 percent).
   Number of Days is from the date of noncompliance to the date of compliance.
   365 Days is the number of days in a year.
      For delayed costs there is no computation of the tax rate. Although there may be a modest tax
consequence for the violator because of delayed costs, this effect was deemed to be insignificant.
Furthermore, such a tax consequence only would be incurred if the violation were to span more than
one of tne violator's tax years.
                                             -12-

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                                       OSWER Directive 9610.12
                Chapter 3
    Determining the Gravity-Based
               Component
       Approach
                  Component
               • Environnnnttl
                S*mMtv1ty MuMptar
               • Dm of Nonoomplianes
                MuMpter
Initial Penalty
         Vtofktof iw0odi!tM/
                    l
                 Stttttmorrt
                     -13-

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OSWER Directive 9610.12
       CHAPTER 3.  DETERMINING THE GRAVITY-BASED COMPONENT


      The second component of a penalty, and the one that serves to deter potential violators, is the
gravity-based component.  The purpose of the gravity-based component is to ensure that violators are
economically disadvantaged relative to owner/operators of those facilities in compliance, and to penalize
current and/or past noncompliance. The gravity-based component consists of four elements:

           Matrix Value (Section 3.1 );

      •    Violator-Specific Adjustments to the Matrix Value (Section 3.2);

           Environmental Sensitivity Multiplier (Section 3.3); and

      •    Days of Noncompliance Multiplier (Section 3.4).

The gravity-based component is then added to the economic benefit component to arrive at the initial
penalty target figure assessed in the complaint
                     DETERMINING THE GRAVITY-BASED COMPONENT

                                                        Environmental     Days of
   Gravity-Based  =  Matrix Value  x  Violator-Specific  x    Sensitivity      x  Noncompliance
   Component                      Adjustments          Multiplier         Multiplier


   Matrix Value is based on potential for harm and deviation from the requirement.

   Wo/ator-SpecMc Adjustments to the matrix value are based on violator's cooperation, willfulness,
   history of noncompliance, and other factors.

   Environmental SensHMty Multiplier (KM) is a value based on the environmental sensitivity
   associated with the location of the facility.

   Days of Noncompf/ance Multiplier (DNM) is a value based on the number of days of
   noncompliance.
If the complaint results in settlement negotiations, certain factors used to adjust the matrix value may be
re-assessed during negotiations to determine whether a downward adjustment in the gravity-based
component is appropriate.  In general, it is the violator's responsibility to provide evidence in support of
reducing the penalty assessment during the settlement stage (see Chapter 4).

3.1   DETERMINING THE MATRIX VALUE

      The first step in determining the gravity-based component is determining the initial matrix value.
           s^-Jj? ^ased on the following two criteria:
                —
               jX of deviation from ^quirrgr.fijj- An assessment of the extent to which
            therviolation deviates frav thVu^caatutory or regulatory requirements.
                                            -14-

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                                                                         OSWER Directive 9610.12
       a     Actual or potential harm - An assessment of the likelihood that the violation
             couU (or did) result in harm to human health or the environment and/or has
             (or had) an adverse effect on the regulatory program.

       A matrix has been developed in which these two criteria form the axes (Exhibit 4). Three gravity
 levels apply to each of these criteria - major, moderate,  and minor - and form the grid of the matrix.
 Thus, the matrix has nine cells, each of which contains a penalty amount.  The specific cell to be used
 in determining the matrix value is identified by selecting a gravity level for both factors. As a guide to
 determining the appropriate gravity level, Appendix A provides a list of selected violations of the Federal
 UST requirements and the associated deviation from the requirements and potential for harm.

       Based on the type of violation (see Appendix A), penalties will be assessed on a per-tank basis if
 the specific requirement or violation is clearly associated with one tank (e.g., tank upgrading).  If the
 requirement addresses the entire facility (e.g., recordkeeping practices), the penalty will be assessed on
 a pec-facility basis. For requirements that address piping, the unit of assessment will depend on
 whether the piping is  associated with one tank or with more than one tank.  Appendix A indicates the
 suggested unit of assessment for specific violations.

 3.1.1  Extent of Deviation from Requirements

       The first factor  in determining the matrix value is the extent of deviation from the requirements.
 The categories for extent of deviation from the requirements are the following:

       •     Major -  The violator deviates from the requirements of the regulation or
            statute to such an extent that there is substantial noncompliance.  An
            example is installing a bare steel tank without cathodic protection.

            Moderate - The violator significantly deviates from the requirement of the
            regulation or statute, but to some extent has implemented the requirement as
            intended. An example is installing improperly constructed cathodic
            protection.

            Minor - The violator deviates slightly from the regulatory or statutory
            requirements,  but most of the requirements are met.  An example is failing to
            keep  every maintenance record on properly constructed cathodic protection.

 3.1.2  Potential for Harm

       The second criterion for determining the matrix value of a violation is the extent to which the
 owner/operator's actions resulted in, or were likely to result in, a situation that could cause harm to
 human health or the environment.  When determining this (actor, ft is the potential in each situation that
 is important, not solely whether the harm has actually occurred. Violators should not be rewarded with
 lower penalties simply because no harm has occurred. The potential extent of this harm, if it were to
 occur, is addressed by the environmental sensitivity multiplier, discussed in Section 3.3 of this chapter.

       The potential-for-harm factor will also be applied to violations of administrative requirements (e.g.,
recordkeeping and notification requirements) that are integral to the regulatory program.   For violations
of these requirements, enforcement personnel should consider the 'importance' of the requirement
violated.  For example, failure to submit tank  notification data may be considered to have significant
potential for harm because the Agency has few other sources of information on the location of USTs.
                                              -15-

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 OSWER Directive 9610.12
                              Exhibit 4

              Matrix Values for Determining the
            Gravity-Based Component of a Penalty
                  Extent of Deviation from Requirement
   £
NOTE: These amounts constitute the matrix value only. They are oat the Initial penalty
      target figure. The Initial penalty target figure Is calculated as follows:
Initial Penalty
            Economic  /«47B/r   Violator-     Environmental  Days of      \
            Beneflt   +(vi/il? x Specific  x  Sensitivity   x Noncompllance)
                     I Y*LU*    £           Multiplier      Multiplier     /
                                 -16-

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                                                                       OSWER Directive 9610.12
      For purpose of this guidance, the categories lor potential for harm are the following:

            ftjajor - The violation causes or may cause a situation resulting in a
            substantial or continuing risk to human health and the environment and/or
            may have a substantial adverse effect on the regulatory program.  Examples
            are: (1) improperly installing a fiberglass reinforced plastic tank (because a
            catastrophic release may result); or (2) failing to provide adequate release
            detection by the specified phase-in date (because without release detection a
            release may go unnoticed for a tengthy period of time with detrimental
            consequences).

      •     Moderate - The violation causes or may cause a situation resulting in a
            significant risk to human health and the environment and/or may nave a
            significant adverse effect on the regulatory program. An example would be
            Installing a tank that fails to meet tank corrosion protection standards
            (because it could resuft in a release, although the use of release detection is
            expected to minimize the potential for continuing harm from the release).

            Minor - The violation causes or may cause a situation resulting in a relatively
            low risk to human health and the environment and/or may have a minor
            adverse effect on the regulatory program.  An example would be failing to
            provide certification of UST installation (assuming that the installation was
            done correctly).

3.2   VIOLATOR-SPECIFIC ADJUSTMENTS

      In general, adjustments to the matrix  value may be made at both the pre-negotiation and
settlement stages of penalty assessment to  address the unique facts of each case and to resolve the
case quickly. Prior to settlement negotiations, enforcement personnel have the discretion to use any
relevant information to adjust the matrix value upwards or downwards. These adjustments are solely at
the discretion of EPA enforcement personnel.

      Specifically, to ensure that penalties are assessed in a fair and consistent manner, and take into
account case-specific differences, enforcement personnel have the option of adjusting the matrix value
based on any information known about the violator's:  (1) degree of cooperation or noncooperation; (2)
degree of willfulness or negligence; (3) history of noncompliance; and (4) other unique factors.
                 VIOLATOR-SPECIFIC ADJUSTMENTS TO THE MATRIX VALUE

         Adjustment Factor                         Range of Percentage Adjustment

      Degree of Cooperation/Noncooperation      Between 50% increase and 25% decrease
      Degree of Willfulness or Negligence         Between 50% increase and 25% decrease
      History of Noncompliance                  Up to 50% increase onty
      Other Unique Factors                      Between 50% increase and 25% decrease
      The sections that follow discuss these four adjustment factors. In addition, the matrix value
should be adjusted to reflect the environmental sensitivity and the days of noncompliance, which are
discussed in Sections 3.3 and 3.4. respectively.  Subsequent adjustments made during the settlement
stanc, inclur^-  adjustments tor inability to pay, are discussed in Chapter 4.
                                             -17-

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 OSWER Directive 9610.12
       To ensure that the penally maintains a deterrent effect, enforcement staff should consider
 adjustments toward increased penalties In all cases (i.e., make upwards adjustments to the matrix
 value). It is up to the violator to present information during settlement that mitigates use of such
 upward adjustments. However, to ensure that penalties are calculated fairly and consistently, any
 upwards adjustment may be made only if the circumstances of the case warrant such adjustments.
 Furthermore, for any adjustments made to the matrix value, justification must be provided on the penalty
 assessment worksheet (see Appendix B).

 3.2.1  Degree of Cooperatlon/Noncooperatlon

       The first factor that may be considered in adjusting the matrix value is the violator's cooperation
 or good faith efforts in response to enforcement actions.  In adjusting for the violator's degree of
 cooperation or noncooperation, enforcement staff may consider making upward adjustments by as
 much as SO percent and downward adjustments by as much as 25 percent of the matrix value.

       In order to have the matrix value reduced, the owner/operator must demonstrate cooperative
 behavior by going beyond what is minimally required to comply with requirements that are closely
 related to the initial harm addressed. For example, an owner/operator may indicate a willingness to
 establish an environmental auditing program to check compliance at other UST facilities, if appropriate,
 or may demonstrate efforts to accelerate compliance with other UST regulations for which the phase-in
 deadline has not yet passed.12 Because compliance with the regulation is expected from the
 regulated community, no downward adjustment may be made if the good faith efforts to comply
 primarily consist of coming into compliance. That is, there should be no 'reward* for doing now what
 should have been done in the first place. On the other hand, lack of cooperation with enforcement
 officials can result in an increase of up to 50 percent of the matrix value.

 3.2.2  Oegree of Willfulness or Negligence

       The second adjustment that may be made to the matrix value is for willfulness or negligence,
 which takes into account the owner/operator's culpability and intentions in committing the violation.  In
 assessing the degree of willfulness or negligence, the following factors may be considered:

       •     How much control the violator had ever events constituting the violation (e.g.,
            whether the violation could have been prevented or was beyond the
            owner/operator's control, as in the case of a natural disaster);

       •     The foreseeability of the events constituting the violation;

       •     Whether the violator made any good faith efforts to comply and/or took
            reasonable precautions against the events constituting the violation; and

       •     Whether the violator knew or should have known of the hazards associated
            with the conduct; and

       •     Whether the violator knew of the legal requirement that was violated (resulting
            in an upward adjustment only).13
    12 For information on establishing environmental auditing programs, see 'EPA Policy on the
, Inclusion of Environmental Audrtinp "m-fr-inns in Enforcement Settlements,* U.S. EPA, Office of
 Enforcement and Compliance k'. .. ^..    '  -^mber 1986.
                                 **»»>.*   <.-..                     _j

    13 Lack of knowledge of the Icyc,,  .   i.ients may not be „.* d s^. ..•£& to reduce the matrix
 value. Rather, informed violation of the law should serve to increase tha matrix value.

                                               -18-

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                                                                        OSWER Directive 9610.12
      In certain circumstances, the amount of control that the violator has over how quickly the violation
is remedied also can be relevant.  Specifically, if correction of a violation is delayed by factors that the
violator clearly can show were not reasonably foreseeable and out of his or her control, the penalty
assigned for the duration of noncompliance may be reduced (see Section 3.4), although the original
penalty for noncompliance should not be.  In assessing the degree of willfulness, enforcement staff may
consider making upward adjustments by as much as 50 percent and downward adjustments by as
much as 25 percent of the matrix value.

3.2.3 History of Noncompliance

      The third factor to be considered in adjusting the matrix value is the violator's history of
noncompliance.  Previous violations of any environmental regulation are usually considered clear
evidence that the violator was not deterred by previous interaction with enforcement staff and
enforcement actions.  Unless the current violation was  caused by factors entirely out of the control of
the violator, pnor violations should be taken as an indication that the matrix value should be adjusted
upwards.  When assessing the history of noncompliance, some of the factors that may be considered
are:

      •     Number of previous violations;

      •     Seriousness of the previous violations;

      •     Time period over which  previous violations occurred;

      •     Similarity of the previous violations;

      •     Enforcement tools utilized (e.g., whether the owner/operator's previous
            behavior required use of more stringent enforcement actions); and

      •     violator's response to the previous violation(s} with respect to correction of
            the problem.

For purposes of this document, a 'prior violation* includes any act or omission for which an accountable
enforcement action has occurred (e.g., an inspection that found a violation, a notice of violation, an
administrative or judicial complaint, or a consent order). A prior violation of trie same or a related
requirement would constitute a similar violation.

      In cases of large corporations that have many divisions and/or subsidiaries, if the same
corporation is involved in the current  violation the adjustments for history of noncompliance will apply.
In addition, enforcement staff should  be wary of a company that changes operators or shifts
responsibility for compliance to different persons or organizational units as a way of avoiding increased
penalties. A consistent pattern of noncompliance  by several divisions or subsidiaries of a corporation
may be found, even though the facilities are at different locations.  Again, in these situations,
enforcement staff may make only upward adjustments  to the matrix value by as much as 50 percent

3.2.4 Other Unique Factors

      This guidance allows an adjustment for unanticipated factors that may arise on a case-by-case
basis.  As with the previous factors, enforcement staff may want to make upward adjustments  to the
matrix value by as much as 50 percent and downward adjustments by as much as 25 percent for such
reasons.
                                              -19-

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OSWER Directive 9610.12
3.3   ENVIRONMENTAL SENSITIVITY MULTIPLIER (ESM)

      In addition to the violator-specific adjustments discussed above, enforcement personnel may
make a further adjustment to the matrix value based on potential site-specific impacts that could be
caused by the violation. The environmental sensitivity multiplier takes into account the adverse
environmental effects that the violation may have had, given the sensitivity of the local area to damage
posed by a potential or actual release. This factor differs from the potential-for-harm factor (discussed
in Section 3.1.2) which takes into account the probability that a release or other harmful action would
occur because of the violation.  The environmental sensitivity  multiplier addressed here looks at the
actual or potential impact that such a release, once it did occur, would have on the local environment
and public health.

      To calculate the environmental sensitivity multiplier, enforcement personnel must first determine
the sensitivity of the environment. For purposes of this document, the environmental sensitivity will be
either low, moderate, or high. Factors to consider in determining the appropriate sensitivity level
include:

            Amount of petroleum or hazardous substance potentially or actually released
            (e.g.. size of the tanks and number of tanks at the facility that were involved
            in the violation, as they relate to the potential volume of materials released);

      •     Toxicrty of petroleum or hazardous substance released;

      •     Potential hazards presented by the release or potential release, such as
            explosions or other human hearth hazards;

      *     Geologic features of the site that may affect the  extent of the release and may make
            remediation difficult;

      •     Actual or potential human or environmental receptors, including:

                  Likelihood that release  may contaminate a nearby river or stream;

                  Number of drinking water wells potentially affected;

                  Proximity to environmentally sensitive areas, such as wetlands; and

                  Proximity to sensitive populations, such as children (e.g., in schools).

            Ecological or aesthetic value to environmentally  sensitive areas.

Thus, a 'low* sensitivity value may be given in a case where one tank containing petroleum is located in
clay soil in a semi-residential area where all drinking water is  supplied by municipal systems, and where
little wildlife is expected to be affected.  A moderate sensitivity value may be given if:  several tanks
were in violation; the geology of the site would allow for some movement of a plume of released
substance; and  several drinking water wells could have been affected.  A high sensitivity value may be
given if:  a number of tanks (or very large tanks) were involved; there were several potential receptors of
the released substance through drinking water wells or contact with contaminated surface water;  and
the contamination would be difficult to remediate.  Each level of sensitivity is given a corresponding
multiplier value,  as provided below.
                                               -20-

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                                                                  OSWER Directive 9610.12
               DETERMINING THE ENVIRONMENTAL SENSITIVITY MULTIPLIER

               SentHMty Multiplier (ESM) is based on the potential or actual environmental
  impact at the sfte, and is given a corresponding value as follows:

                         Environmental
                         Sensitivity                     ESM
                         Low                           1.0
                         Moderate                      1.5
                         High                          2.0
3.4   DAYS OF NONCOMPUANCE MULTIPLIER

      The final adjustment that may be made to the matrix value takes into account the number of days
of noncompliance.  To determine the amount of the adjustment, locate the days of noncompiiance
multiplier (or DNM)  in the table below that corresponds to the duration of the violation:
                DETERMINING THE DAYS OF NONCOMPLIANCE MULTIPLIER

  Days of Noncomp/iance Multiplier (DNM) is based on the number of days of noncompliance:

                           Days of
                           Noncompliance               DNM
                           0-90                       1.0
                           91 -180                     1.5
                           181-270                    2.0
                           271  - 365                    2.5
                           Each additional 6 months
                            or fraction thereof            add 0.5
The DNM is then multiplied by the adjusted matrix value and environmental sensitivity multiplier to
obtain the gravity-based component of the penalty, as follows:
                     DETERMINING THE GRAVITY-BASED COMPONENT

                                                       Environmental     Days of
   Gravity-Based  =  Matrix Value  x  Violator-Specific  x     Sensitivity     x   Noncompliance
   Component                      Adjustments          Multiplier         Multiplier
The economic benefit component is added to the gravity-based component to form the initial penalty
target figure to be assessed in the complaint As discussed previously, this figure cannot exceed
310,000 for each tank for each day of violation:
                                           -21-

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OSWER Directive 9610.12
                        Chapter 4

                 Settlement Adjustments
            Initial Penalty
            target figure
                            1


S«tU«RMnt
Adjusmwrn*
• AMfeytopty
• Otmrfacton


                                       : *
                                      ,  -t

                                       - t
                                        *
                            -22-

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                                                                      OSWER Directive 9610.12
                    CHAPTER 4.  SETTLEMENT ADJUSTMENTS


       After the initial penalty target figure has been presented to the potential violator in a complaint,
 additional adjustments may be made as pan of a settlement compromise. All such adjustments are
 entirely within the discretion of Agency personnel.  The burden is always on the owner/operator to
 provide evidence supporting any reduction of the penalty.

       In response to a complaint, the owner/operator may request an informal conference and/or a
 hearing to settle the penalty and violation.  The Federal Consolidated Rules of Practice (CROP)
 procedures for administrative actions at 40 CFR Part 22 provide for a settlement conference and a right
 to a public hearing, giving the owner/operator the opportunity to present data to support a penalty
 adjustment. At a minimum, enforcement personnel may consider adjustments based on the four
 violator-specific adjustment factors discussed in Chapter 3, including:

       •     Degree of cooperation/noncooperatton;
            Degree of willfulness or negligence;
            History of noncompliance; and
       •     Other unique factors.

 The settlement adjustment  is usually not  made to the economic benefit component unless new and
 better information about the economic benefits is made available. The Agency should maintain a
 record that includes a statement of the reasons for adjusting the penalty.

      In addition to the adjustment factors fisted above, and because of the nature of the UST
 regulated community, one factor that commonly will be discussed during negotiations is the
 owner/operator's inability to pay. An adjustment may need to be made for inability to pay to ensure fair
 and equitable treatment of the regulated  community, ft is important, however, that this reduction not
 allow the regulated community to regard  violations of environmental requirements as a way to save
 money. Furthermore, a penalty should not be reduced when a violator refuses to correct a violation.
 has a history of noncompliance, or in cases with egregious violations, e.g., failure to abate a release
 that is contaminating drinking-water supplies.

      The Agency should assume that the owner/operator is able to pay unless the owner/operator
 demonstrates otherwise.  The inability to  pay adjustment should be based on the amount of the initial
 penalty target figure and the financial condition of the business, but it is the owner/operator's
 responsibility to provide evidence of inability to pay. The owner/operator may provide evidence, such
 as tax returns, to document his or her claims. In cases when the owner/operator fails to demonstrate
 inability to pay, the Agency should determine whether the owner/operator is unwilling to pay, in which
 case no adjustments to the initial penalty target figure should be made.  In cases where the
owner/operator can successfully demonstrate:  (1) that the company is unable to pay; or (2) that
 payment of all or a portion of the penalty will preclude the violator from achieving compliance,  the
following options may be considered:

      •    An installment payment plan with interest;

      •    A delayed payment schedule with interest;

           An in-kind mitigation activity performed by the owner/operator;

      •    An environmental auditing program implemented by the owner/operator; or

           Reduction of up to'^0  percem .n^;j.~  •"-  ..   -«..^onent.


                                            -23-

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OSWER Directive 9610.12
A reduction of the gravity-based component should be considered only after determining that the other
four options are not feasible.14

      In order to evaluate a violator's claim regarding inability to pay, two sources of information are
available to determine the likelihood that a company can afford to pay a certain civil penalty:

      National Enforcement Investigation Canter (NEIC). The NEIC of EPA's Office of Enforcement
has developed the Superfund Financial Assessment System that can determine a company's ability to
pay. For publicly owned companies, specific financial data is available from NEIC. If investigating a
private company, enforcement staff can report financial data to NEIC and it will be keyed into NEIC's
computerized economic computer model for analysis.15

      ABEL  EPA's Office of Enforcement developed the 'ABEL* model as part of an ongoing effort to
evaluate the financial health of firms involved in enforcement proceedings.  The ABEL model has been
used by EPA, Regions, and States to evaluate a firm's claim regarding inability to pay based on 21
inputs gathered from the company's Federal income tax returns from the previous 3 years.
Enforcement staff may access ABEL by computer dial-up on a personal computer with a modem and an
ABEL user ID number.16  In addition, OUST has developed a PC-based model called ABELPRO which
is a simplified version of ABEL that is run on a PC using a LOTUS spreadsheet or Macintosh Excel.17
   14 The Agency is currently developing cross-media guidance on environmental mitigation projects
which, when final, will supersede the •Alternative Payments1 section of the Agency's February 16, 1984
penalty policy (#GM-22). Until the revised Agency guidance is finalized, the Agency's 1984 penalty
policy should be consulted for additional guidance.

   15 For further information, contact the NEIC at (303) 236-5100 or FTS 8-776-5100.

   16 To obtain the ABEL User's Manual and user ID numbers for computer hookup, contact the
BEN/ABEL Coordinator at the U.S. EPA Headquarters, by phoning (202) 475-677? c^FTS 475-6777.

   17 For information, contact the appropriate Regional Desk Officer at U.Si, EPA Headquarters' Office
of Underground Storage Tanks.

                                             -24-

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                                             OSWER Directive 9610.12
                    Chapter 5

            Use of Field Citations
         Approscfi
                  •n-y^afcjA. 3fcA^-i. j-Li. >. ^i-*j. t
                  s « KRWDEVnKBH

                  '*"  «mttv«ykMtipter
     iltlal Penalty
VMttraoocpti    Mquwtt hwlng
                 rr

                                       >*-
                                    Tltiai
                                    Penalty
                                                RtWCftrton
                                              FIild
                         -25-

-------
OSWER Directive 9610.12
                     CHAPTER 5.  USE OF FIELD CITATIONS

                                      < Reserved >


     The Office of Underground Storage Tanks (OUST) has been exploring the use of field citations as
an alternative means of assessing civil penalties and obtaining compliance with UST requirements.
Once the manner in which field citations will be used in the Federal UST program has been determined,
this policy will be revised to reflect how field citations fit into the UST penalty policy.
                                           •26-

-------
                                     OSWER Directive 9610.12
                 APPENDIX A:

    MATRIX VALUES FOR SELECTED VIOLATIONS OF
FEDERAL UNDERGROUND STORAGE TANK REGULATIONS

-------
                                                                                                  OSWER Directive 9610.12
                                                   APPENDIX A:
MATRIX VALUES FOR SELECTED VIOLATIONS OF FEDERAL UNDERGROUND STORAGE TANK REGULATIONS*
Regulatory
Citation
Violation
Unit
Aaaeea-
Iil0ni~
SUBPART B - UST SYSTEMS: DESIGN, CONSTRUCTION, INSTALLATION, AND

528020(a)(1)
§260.20(a}(2)
§280.20(a)f2)(l)
$28020(a)(2)
m
0)
0)
(p>
(p»
m
«PI
(pj
(p>
Deviation from
Requirement
NOTIFICATION

Major
Major
Major
Moderate
Moderate
Major
Major
Major
Major
Major
Moderate
Moderate
Major
Potential
for Harm


Major
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Major
Moderate
Moderate
Moderate
Moderate
Moderate
Matrix Value


$1500
$750
$750
$500
$500
$750
$750
$1500
$750
$750
$500
$500
$750
-' Unit "->«" j-nent refers to whether the penalty should be applied per tank (T) or per facility (F). Where the violation applies to piping (P), the assessment will depend on whether
the pip'"' '• -ssociated with one tank or more than one tank.
           E: THIS UST OF SELECTED VIOLATIONS IS MOT INTENDED TO BE E
rrve AND, THEREFORE, MAY NOT INCLUDE ALL POSSIBLE VIOLATIONH

-------
                                                                                                                      OSWER Directive 961
Regulatory
Citation
Violation
Unit
Assess-
ment-'
SUBPART B - UST SYSTEMS: DESIGN, CONSTRUCTION, INSTALLATION, AND
§280.20(c>(1)
§28020(c)(1)(i)
§280.20(c)(1)
f2B0.2Hl
(T/F)
(T/F)
Deviation from
Requirement
NOTIFICATION
Major
Major
Major
Major
Varies?
Varies?
Moderate
Minor
Major
Major
Major
Major
Major
Moderate
Potential
tor Harm
(Continued)
Major
Major
Moderate
Moderate
Varies?
Varies?
Minor
Minor
Major
Major
Moderate
Moderate
Major
Minor
Matrix Value

$1500
$1500
$750
$750
see matrix
see matrix
$100
$50
$1600
$1900
$750
$750
$1500
$100
                    tank upgrade requirement
y Deviation from requirement and potential tor harm will vary depending upon specHIc code or standard violated.
        • NOTE: THIS UST OF SELECTED VIOLATIONS IS HOT INTENDED TO BE EXHAUSTIVE AND, THEREFORE, MAY NOT INCLUDE ALL POSSIBLE VIOLATIONS.

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                                                        A-3
                      OSWEH Directive 8610.12

Regulatory
CKaUon
Violation
Unit
Assess-
ment-
SUBPART B - UST SYSTEMS: DESIGN, CONSTRUCTION, INSTALLATION, AND
§280.21 
-------
                                                                                                   OSWER Obeett
                                                                                                                   12
Reguktonr
Citation
Violation
Unit
Assess-
ment
Deviation from
Requirement
Potential
for Harm
Matrix Value
SUBPART C - GENERAL OPERATING REQUIREMENTS

J280.30(a)
5280300)
§280.30(b)

5280.31 (a)
5280.31 (b)(1)
5260.31 (b){1)
5280.31(b)(1)
280.30 8a« and overfill control
Failure to take necessary precautions to prevent overfill/spillage during the
transfer of product
Failure to report a spUUoverflll
Failure to Investigate and clean up a epill/overfill
280.31 Operation and maintenance of corrosion protection
Failure to operate and maintain corrosion protection system continuously
Failure to ensure that cathodlc protection system la tested within 6 months of
Installation
Failure to ensure thai cathodic protection system to tested every 3 years
thereafter
Failure to meet one 3-year teal for cathodlc protection system
5280.31 (b)(2) Failure to Inspect cathodtc protection system in accordance with accepted
5280.31 (c)
(280.31 (d)
5280.31 (d)

5260.32
Failure to Inspect Impressed currant systems every 60 days
Failure to maintain any records of cathodlc protection Inspections
Failure to maintain every record of cathodlc protection Inspections
280.32 CompatfbUHy
Failure to ensure that UST system is made of or lined with materials
eomnatlbla with substance Stored

(F,
(F)
(F)

(Frt)
rm
(Tff)

-------
                                                       A-5
                                                                                                         OSWER Directive 9610.12

".T;' -'-'siry Violation
Unit Deviation from
Assess- Requirement
nMnt~
Potential
for Harm
Matrix Value
8UBPART C - GENERAL OPERATING REQUIREMENTS (Continued)
-jaft 44 B^MB^I*^ AlbMamoJ
20V.99 nejpSjrBj SJIOvWO
5280 33(a) Failure to repair UST system In accordance with accepted codes and
standards
§280 33(b) Failure to repair fiberglass-reinforced UST In accordance with accepted codes
and standards
§280.33(c) Failure to replace metal piping that has released product
§28" *' '-.' Failure to repair fiberglass-reinforced piping in accordance with
manufacturers specifications
* ?~ " ' Failure to ensure that repaired tank systems are tightness tested within 30
, > . days of completion of repair
system
§280.33(0 Failure to maintain records of each repair to an UST system
28034 Reporting and racordkoeping

(T) Varies?
(T) Varies?
(P) Major
(P) Major
(T) Major
(T) Major
(T) Major


Varies?
Varies?
Major
Major
Moderate
Moderate
Major


see matrix
see matrix
$1500
$1500
$750
$750
$1500

(For violations of reporting and racordkeeplng, see appropriate regulatory section (eg., reporting of releases will be under Subpart D).
SUBPART D - RELEASE DETECTION
280.40 Owteralre<|UlreiT»trUforaUUSTayat«ms
§280.40(a)(1) Failure to provide release detection method capable ol detecting a release
from tank or piping that routinely contains product
§280.40(a)(2) Failure to Install, calibrate, operate, or maintain release detection method In

(T/F) Major
JT/F) Major

Major
Major

$1500
$1500
        accordance with manufacturer's Instructions
TE: THIS UST OF SELECTED VIOLATIONS IS MOT INTENDED TO BE
STIVE AND, THEREFORE, MAY NOT INCLUDE ALL POSSIBLE VIOLATION

-------
                                                                                                       OSWER Directive nnu.12

Regulatory
CltatUm
Violation
Unit
Assess-
ment
Deviation from
Requirement
Potential
for Harm
Matrix Value
SUBPART D - RELEASE DETECTION (Continued)
§?<»JlO(a)(3}
§2PQ.40(b)
,:«. .:;••'.
i2S0.40(c)
§280.40(d)

5280.41 (a)
§280.41 (a)(1)
5280.41 (a) (2)
5280.41 (b)
S280.42(e)
S280.42(b)
§280.42(b)(1)
S280.42(b)(2)
Failure to provide a release detection method that meets the performance
requirement* In {280.43 or §280.44
Failure to notify Implementing agency when release detection indicates
release ,
Failure to provide any release detection method by phase-in date
Failure to close any LIST system that cannot meet release detection
requirements.
280.41 Requlremento for petroleum UST system*
Failure to monitor tanks at least every 30 days, if appropriate
Failure to conduct tank tightness testing every 5 years. If appropriate
Failure to conduct annual tank tightness testing, If appropriate
Failure to use any underground piping monitoring method


system
Failure to provide adequate release detection for a new hazardous substance
UST system
Failure to provide adequate secondary containment of tank for a hazardous
substance UST
Failure to provide adequate double-walled tank/adequate lining for a

(F)
(F)
(T)
o)
Major
Major
Major
Major

Major
Major
Major
Major
Major
Major
Major
Major
Major
Major
Major
Major

Major
Major
Major
Major
Major
Major
Major
Major
$1800
$1500
$1500
$1500

$1500
$1500
$1500
$1500
$1500
$1500
$1500
$1500
           hazardous substance UST
' NOTE: THIS LIST OF SELECTED VIOLATIONS IS NOT INTENDED TO BE EXHAUSTIVE AND, THEREFORE, MAY NOT INCLUDE ALL POSSIBLE VIOLATIONS.

-------
                                                     A-7
                                         OSWER Directive 961012

Regulatory
Citation
-•
f 23C 42(b)(3)
!•»<«,(•)

128044
§280.44(0)
S280.44(b)
(280 A4fc)

..i /i. -i
$280.45
*28045(a)
§28045(6)
$280.45(0)
4280.45(0)
§280.45(C)

Violation
SUBPART D » RELEASE DETECTION (Continued)
Failure to provide adequate external linen lor a hazardous substance UST
Failure to provide adequate secondary containment of piping for a hazardous
substance UST
280.44 Methods) off refeaee djetecfJon for pfpfnQ
Failure to provide adequate line leak detector system for underground piping
Failure to provide adequate line tightness testing system for underground
piping system
In&d0
(F)
(F)
(F)

Deviation from
Requirement

Major
Major

Major
Major
Major
Major


Moderate
Moderate
Major
Moderate
Major
Major

Potential
for Harm

Major
Major

Major
Major
Major
Malar

Uitlnr
Major
Minor
Minor
Major
Minor
Major
Major

Matrix Value
|
$1500
$1500

$1500
$1500
$1500
K1SOO


$100
$100
$1500
$100
$1500
$1500
        detection
>TE: THIS UST OF SELECTED VIOLATIONS IS NOT INTENDED TO BE
STIVE AND, THEREFORE, MAY NOT INCLUDE AU. POSSIBLE VIOLAHON9I

-------
                                                                                                                       OSWER Direct
                    Violation
Citation
                                                                 Unit

                                                                 merrti'
Deviation from  Potential
Requirement    for Harm
                                                                                                                              Matrix Value
           SUBPART O - RELEASE DETECTION (Continued)
§280.45(e)
Failure to document evaiy calibration, maintenance, and repair ol release        If)
detection
                                                                                                  Modeiate
                                                                                                                Moderate
                            9800
           SUBPART E - RELEASE REPORTING, INVESTIGATION, AND CONFIRMATION
                    280.50 Reporting ol suspected release

                    Failure to report a suspected release within 24 hours to trie Implementing
                    agency
                                                                              Major
              Major
$1900
§280.52(a)-(b)
280.52  Release Investigation and confirmation step*

Failure to Investigate and confirm a release (H appropriate) using accepted
procedures
                                                                                                  Major
 (280.61
Failure to take initial response actions within specified lime period after a         (F)
release is confirmed
                                                                                                  Major
              Major
91500
S260.53(a)
1280.53(11)
(280.53(0)
280.53 Reporting and cleanup of aptO* and overfllle
Failure to report a spill/oveiflll (H appropriate) to Implementing agency within |F)
24 hours (or other specified time period)
gallons
Failure to contain and Immediately clean up a hazardous substance (F)
spilVoverUU
Major Major 91500
Major Major 91500
Major Major 81500
SUBPART F - RELEASE RESPONSE AND CORRECTIVE ACTION
              Major
91500
        • NOTE: THIS UST OF SELECTED VIOLATIONS IS NOT INTENDED TO BE EXHAUSTIVE AND, THEREFORE, MAY NOT INCLUDE ALL POSSIBLE VIOLATIONS.

-------
                                                                     A-9
                                                                                                    OSWER Directive 9610.12
Regulatory -
Citation
Violation
Unit
Assess-
nwntl'
Deviation from
Requirement
Potential
tor Harm
Matrix Value
SUBPART F •• RELEASE RESPONSE AND CORRECTIVE ACTION (Continued)
$280.62
*?Y.?3
§2°C.64
Failure to submit report on Initial abatement measures within 20 days (or
other specified time) ol release oonllrmation
Failure to submit report on Initial site characterization wrthin 45 days (or other
specified time) ol release confirmation
Failure to submit report on free report removal within 45 days (or other

(F)
(F)
(F)
Major
Major
Major
Major
Major
Major
S1500
$1500
$1500
SUBPART G - OITT-OF-SERVICE UST SYSTEMS AND CLOSURE

5280.70(8)
5280.70(6)
S28D.70(b)
&!*).-*'*
$280.71(8)
$280.71 (b)
$280.71 (b)
280.70 Temporary doeure
Failure to continue operation and maintenance of cathodlc protection system
In a temporarily closed tank system
temporarily closed tank system
Failure to comply with temporary closure requirements for a tank system for 3
or more months
Failure to permanently close or upgrade a temporarily closed tank system
after 12 months

Failure to notify Implementing agency ol a closure or change-in-service
Failure to remove all liquids and sludges lor tank closure
Failure to remove closed tank from the ground or fill tank wtth an inert solid

(FA)
(FA)
(FA)
(FA)
(FA)
(FA)
(FA)

Major
Major
Major
Major
Major
Major
Major

Moderate
Major
Moderate
Major
Major
Major
Moderate

$750
$1500
$750
$1500
$1500
$1500
$750
$280.71 (c)
lor tank closure

Failure to empty'and clean tank system and conduct a site assessment prior
to a chang»-ln-aervlce
(FA)
Major
Major
$1500
           JTE THIS UST OF SELECTED VIOLATIONS IS NOT INTENDED TO Bl
                                                       JSTIVE AND, THEREFORE, MAY NOT INCLUDE ALL POSSIBLE VK>LATrO~.

-------
                                                           -10
                                                                                                            OSWER DirecOIVmo.12
Ttcvjyletory
Violation Unit
Assess-
ment™
Deviation from
Requirement
Potential
for Harm
Matrix Value
SUBPART G - OUT-OF-SERVICE UST SYSTEMS AND CLOSURE (Continued)

5280.72(8)
$280.72(0}

§28074
S3TC74
1
•
S280.93(a)
280.73 Aeaeaslng the elie at closure or change-In-service
Failure to measure (If required) for the presence of a release before a (T/F)
permanent closure
H contaminated soil, contaminated ground water, or free product Is (T/F)
discovered, failure to begin corrective action
280.74 Ctoeure recorde
Failure to maintain closure records for at least 3 years (F)
Failure to maintain change-In-service records tor at least 3 years (F)
SUBPART H - FINANCIAL RESPONSIBILITY
Failure to comply with financial responsibility requirements by the required (F)
phase-In time
i260.93(a)(1)-(2) Failure to meet the requirement tor pet-occurrence coverage of Insurance. (F)
i260.93(b)(1)
5280.93(1)
{28044
{280.05
•(2) Failure to meet the requirement for annual aggregate coverage of Insurance (F)
Failure to review end adjust financial assurance after acquiring new or (F)
additional USTs
Use of en unapproved mechanism or combination of mechanisms to (F)
demonstrate financial responsibility
Use of falsified financial documents to pass financial tost of self-Insurance (F)
§280.106(a)(1) Failure to report evidence of financial responsibility to me Implementing (F)

Major
Major

Major
Major

Major
Major
Major
Major
Major
Major
Moderate

Mafor
Major

Major
Major

Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Minor

$1500
$1500

$1500
$1500

$750
$750
$750
$750
$760
$750
$100
            agency within 30 days of detecting a known or suspected release
• NOTE:  THIS LIST OF SELECTED VIOLATIONS IS NOT INTENDED TO BE EXHAUSTIVE AND, THEREFORE. MAY NOT INCLUDE ALL POSSIBLE VIOLATIONS.

-------
                                                                        A-11
                                                                                                          OSWER Directive 961012
Regulatory
Citation
                      Violation
                                                                                           Unit
                                                                                  Deviation from  Potential
                                                                                  Requirement    for Harm
MatrU Value
           SUBPART H - FINANCIAL RESPONSIBILITY (Continued)
$260.106(4(2)          Pollute to leport evidence of financial responsibility to the implementing
                      agency whan new tanka are installed
                                                                     (F)
                                                                                  Moderate       Minor
$100
S260.106(b)
Failure to report evidence of financial responsibility to the implementing          (F)
agency H the provider becomes Incapable of providing financial assurance
and the owner or operator Is unable to obtain alternate coverage within 30
days.

Failure to maintain copies of the financial assurance mechanism(s) used to       (F)
comply with financial responsibility rule and certification that the mechanism
Is in compliance with the requirements of the rule at the UST site or place of
businesa
                                                                                                           lerate       Minor
                                                                                                        Moderate       Minor
$100
$100
            S>TE: THIS UST OF SELECTED VIOLATIONS IS NOT INTENDED TO BE BMRbSTIVE AND. THEREFORE, MAY NOT INCLUDE ALL POSSIBLE VIOLATIONS.

-------
                                 OSWER Directive 9610.12
            APPENDIX B:



UST PENALTY COMPUTATION WORKSHEET

-------
OSWEH Directive 9610.12
                                     (This page is blank)

-------
                                                                  OSWER Directive 9610.12
I                        UST PEMALTY COMPUTATION WORKSHEET	I


Assessments for each violation should be determined on separate worksheets and totaled. (If more space
is needed, attach separate sheet.)
                                  PART 1 - BACKGROUND
Company name.
Regulation violated.
Previous violations
Date of requirement	    Date of inspection.
Date of compliance	    Explanation (if appropriate):

1.   Days of noncompliance	

2.   Number of tanlcs	
                         PART 2 - ECONOMIC BENEFIT COMPONENT
Avoided Expenditures	     Basis:.

Delayed Expenditures	
Weighted Tax Rate	     Source:

Interest Rate	     Source:
AVOIDED  =
COSTS
Avoided   +   Avoided  x   Interest  x  Number |   x  (1 • Weighted Tax Rate)
Expenditures   Expenditures	of Dave
                        366 Days
3.   Calculated Avoided Cosi:	

                                        Page 1 of 3

-------
 OSWER Directive 9610.12
L
UST PENALTY COMPUTATION WORKSHEET
DELAYED COSTS  = Delayed Expenditures x Interact x Number of Dave
                                       365Deye
4.   Calculated Delayed Cost:.
5.  Economic Benefit Component:	(cany figure to Line 16).
    (Line 3 + Line 4)
                PART 3 - MATRIX VALUE FOR THE GRAVITY-BASED COMPONENT
Potential for Harm:	     Extent of Deviation.
6.  Matrix Value (MV):	     (from document page 16 or Appendix A)

7.  Per-Uink MV:	     (if violation is per facility, the amount on Line 7 will
    (Line 2 x Line 6)                        be the same as the amount on Line 6)
                PART 4 - VIOLATOR-SPECIFIC ADJUSTMENTS TO MATRIX VALUE
                         Percentage x  Matrix  =  Dollar
                         Change      Value      Adjustment
                         (+ or-)                 f+ or •)     Justification for Adjustment:
8.  Degree of cooperation/
    noncooperation

9.  Degree of willfulness
    or negligence:

10. History of
    noncompliance:

11. Unique factors:
 12.  Adjusted Matrix Value
     (Line 7 + Lines 8-11)
                                         Page 2 of 3

-------
                                                               OSWER Directive 9610.12
I          	UST PENALTY COMPUTATIOK WORKSHEET	I
                         PAflT 5 ' ORAVnY^ASED COMPONENT
Level of
Environmental Sensitivity	   Justification:
13.  ESM (from document Page 21).
14.  DNM (from document Page 21).
                                                     Environmental     Day* of
GRAVITY-BASED COMPONENT  =  Adjuated Matrix Value x  Sensitivity     x  Noncompllance
                                                     Multiplier         Multiplier
15.  Gravity-Based Component: _
    (Line 12 x Line 13 x Line uf
                        PART «- INITIAL PENALTY TARGET FIGURE
16.  Economic Benefit Component
    (from Line 5)
17.  Gravity-Based Component..
    {from Line 15)
18.  Initial Penalty Target Figure
    (Line 16 + Una 17)
SIGNATURE	DATE.

                                      Page 3 of 3

-------
OSWER Directive 9610.12
                                    (This page is blank)

-------
                                OSWER Directive 9610.12
           APPENDIX C:



UST PENALTY COMPUTATION EXAMPLES

-------
   OSWER Directive 9610.12
                                          EXAMPLE 1
                                          BACKGROUND

 Inspection Date: April 12,1990

 Facility Name and Description: Ed's Gas and Go is a small gas station in a semi-rural part of the county.
 The facility has 4 tanks, apparently installed prior to 1965.  Judging from the condition of the facility and
 adjacent store, Ed's income appears to be less than $50,000 per year.

 Violations: During the inspection, the inspector observed that Ed failed to provide a method of release
 detection by the December 22,1989 deadline, in violation of 40 CFR section 280.40(c).

 Owner/Operator Response: Ed claimed no knowledge of the requirements for release detection.  After
 being informed of methods for meeting the requirement, he indicated that he would use annual tank
 tightness testing and monthly inventory control, in accordance with 40 CFR section 280.41 (a)(2).  Ed
 began to conduct adequate monthly inventory control and arranged to have his tanks tested within  10
 days.

 Previous Actions at Facility: Previously, Ed had been given a warning letter for failure to comply with the
 notification requirements,  but had complied upon receipt of the  letter. No other previous violations were
 identified.

 Current Status at Site: The inspector observed that given the age of the tanks, and Ed's previous inability
 to detect iny releases, there was a good chance for a release to occur and go unnoticed for a significant
 length of time.  However, Ed's subsequent tightness tests indicated that the tanks were tight. The geology
 in the area is fractured shale.  There are no drinking water wells or sensitive wildlife receptors within a 5-
 mile radius of the site.
                                  PENALTY CALCULATION DATA

Violation: 40 CFR section 280.40(c)

Days of violation:  120 days from date of noncompliance (December 22,1989) to date of compliance
(April 22,1990. which was 10 days after the inspection).

Avoided expenditures: $2.50 per day = $300 for 120 days (estimated cost tor labor needed to conduct
dairy inventory control, based on 1/2 hour labor at $5.00 per hour)

Delayed expenditures: $520 x 4 tanks = $2,080, where the average cost for a tank tightness test is $520.
This is considered a delayed expenditure because it was necessary to achieve compliance in this time
frame.

Interest rate:  18.1% (the equity discount rate used in the BEN model for 1990).

Tax rate: 15% (the weighted average tax rate for a facility with less than $50,000 annual IncomeV

[NOTE: The numbers used to determine avoided and delayed expenditures were chosen fc:
only. They do not necessarily represent true costs in any State or Region in the country.]

                                               C-2

-------
                                                              OSWER Directive 9610.12
I _ UST PENALTY COMPuTATK>M WORKSHEET . _    I


Assessments for each violation should be determined on separate worksheets and totaled. (If more space
is needed, attach separate sheet)


                                PART 1 • BACKGROUND
Company name   £a*  &A& <*nel  <$o
Regulation violated   HO Cf£ setttm  A$0 jo(t}  -
                             bu
                                   December   2.i
Previous violations   A/J -A/ -foxt 4ifff\   i/to fa+fev\
                                                                        *4
Date of requirement   ta./22/ZI _    Date of inspection   *f fl* ffO
Date of compliance   If 12/11	   Explanation (if appropriate):

1.  Days of noncomoliance   IS.O	

2.  Number of tanks     H	
                       PART 2- ECONOWC BENEFIT COMPONENT
Avoided Expenditures   ^ 3OO           Baste:  J 3.S~0  er   .   ->s mo-ora
Delayed Expenditures  * otOtO          Basis:  JS£0  p*r -t^nk  -for  fyh+MKs  -fes-fr

Weighted Tax Rate  d/S"  (t$%)        Source: MTR.  4of  tACet**.  ^  i SQ OOP

Interest Rate dJgf  (\%% )           Source: 8ifA/
AVOIDED
COSTS
            Avoided  +   Avoided  x  Interest x  Number
            Expenditures   Expenditures	cfDavs
                                   385 Days

                                   f . t$l
x  (1 - Weighted Tax Rate)
                                                  J
3.   Calculated Avoided Cost:_	

                                        C-3

-------
  OSWER Directive 9610.12
I                       UST PENALTY COUPUTATIOli WORKSHEET                       I


DELAYED COSTS = Delayed Expenditures x  Interest x Number of Dave
                                      365Daye
4.   Calculated Delayed Cost:     / / 3 *t
5.   Economic Benefit Component:    X  3?Y	(cany figure to Line 16).
    (Line 3 + Line 4)
               PART 3 - MATRIX VALUE FOR THE GRAVITY-BASED COMPONENT
Potential for Harm:   fYl&tof	     Extent of Deviation
6.   Matrix Value fMVt:  ^ l$00          (from document page 16 or Appendix A)

7.   Per-i ink MV:   4 (t OOP	     (» violation is per facility, the amount on Line 7 will
    (Line 2 x Line 6)                       be the same as the amount on Line 6)
               PART 4 . VIOLATOR.SPECIFIC ADJUSTMENTS TO MATRIX VALUE
                        Percentage x Matrix   =  Dollar
                        Change      Value      Adjustment
                        f+or-1                 (+ or -1    Justification for Adjustment:
8.   Degree of cooperation/                                          f
    noncooperation          0        4(0000      Q      -ratio  '  j
                                                                          Xtrt«j|
9.   Degree of willfulness      ^        ^/« *      *        T/- f^f-   r.a, •--**-
    or negligence:           0        IbOOO      0        V(*{<*   re
-------
                                                              OSWER Directive 9610.12
I                       U8T PENALTY CCttPlHATIOK WORKSHEET                       I
                         PART 5 - GRAVITY-BASED COMPONENT
Level of
Environmental Sensitivity  Mod-era"te.       Justification:  A-ny fC.\<6S£.  f'S
                                         f;Uf
-------
  OSWER Directive 9610.12
                                         EXAMPLE 2
                                         BACKGROUND
Inspection Date: March 20,1992

Facility Name and Description:  Johnson's Petromart, located at Prairie View Lane, is one of eight facilities
in a convenience store chain that spans three counties. This facility has a total of 5 USTs, and there are a
total of 34 USTs at the 8 facilities.  Based on an examination of the parent company's tax returns, it was
determined that the company's taxable income was $280,000.

Violations:  During the inspection, the inspector observed that the facility had no records of financial
assurance coverage as required by the April 26,1991 deadline.  Subsequently, the inspector requested
records for each of the 8 Johnson facilities. Upon further investigation, the inspector determined that the
owner of the chain, Jack Johnson, had acquired private insurance (the owner did not qualify to self-insure)
for the other 7 facilities. At the remaining facility, however, neither the owner nor the operator had obtained
the required coverage, thereby constituting a violation of 40 CFR section 280.93(a). This facility is among
the oldest in the Johnson's chain and is operated with 4 bare steel LIST systems and one cathodicafly
protected UST system. The other 7 facilities were opened subsequent to the interim prohibition and
installed USTs that meet the Federal design, construction, and installation requirements. Therefore,
obtaining insurance for these USTs was easier than for the facility in violation.  The  insurance company
had indicated that it would be willing to ensure the remaining facility provided that the tanks were retrofitted
with spill/overfill protection andcathodic protection.

Owner/Operator Response:  Jack Johnson argued that it was the responsibility of the operator to upgrade
his USTs so as to make them insurable. The operator of the facility claimed that he lacked the resources
to upgrade his USTs and believed that the responsibility for meeting the PR requirements was the owner's.
The enforcement staff  determined that the owner was aware of his responsibility to  insure the USTs at all of
his facilities and that only he had the means to do so. The Agency attempted to enter into compliance
negotiations with Jack Johnson, but to no avail. The Agency planned to Issue  an administrative complaint
on July  1,1992.

Previous Actions at Facility:  Previously, one of the Johnson's facilities had been issued a warning letter for
failure to notify the Agency after bringing a new UST into operation. The owner had complied after
receiving the letter. Three other facilities had been issued warning letters for failure to maintain all of the
required monitoring records for release detection.

Current Status at Site:  At the time of the most recent inspection, it was determined that the facility in
violation of the PR requirements had an adequate method of release detection, and no releases were
determined to have occurred The geology in the area of the facility Is clay. The facility is located in a
semi-residential/commercial area; however, there are no drinking water wells or sensitive wildlife receptors
within a 3-mile radius of the site.
                                               C-6

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                                                                       OSWER Directive 9610.12
                                 PENALTY CALCULATION DATA
Violation: 40 CFR section 2B0.93(a)

Days of violation: 430 days from date of noncomplfance (April 26,1991) to date of compliance (which, for
purposes of assessing the penalty, was determined to be July 1,1992, to coincide with the date of the
administrative complaint),

Avoided expenditures: $27.40 per day = $11,781 for 430 days (estimated insurance premium, based on
an annual premium of $2,000 per UST for 5 USTs)

Delayed expenditures: $15,000 x 4 = $60,000 (where the average cost for system retrofit is $15,000).
This fs considered a delayed cost because retrofitting would enable Johnson's to achieve compliance with
the financial responsibility requirement

Interest rate: 18.1% (the  equity discount rate used in the BEN model for 1990).

Tax rate:  33% {the weighted average rate for a facility with $280,000 In taxable Income).
{NOTE:  The numbers used to determine avoided and delayed expenditures wars chosen for convenience
only. They do not necessarily represent true costs in any State or Region in the country.]

                                              C-7

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  OSWER Directive 9610.12
|                      U9T PENALTY COMPUTATION WORKSHEET                      |





Assessments for each violation should be determined on separate worksheets and totaled.  (If more space

is needed, attach separate sheet)
                                PART 1 - BACKGROUND
Company name    ^ToninzatfS    Pffrv rflgf"t
Regulation violated  ^0  C?R s^cfrgv*  3L%0  93 (*} -  ?<*.<(<"«. 4o
               ^^"^™^~"-    ~^^                         ~~                 I



	-Pull   •finartc.i&f  c0i/£rage   lo^t  Co*HQ/fanc£,   dead(it>i€
                                    j-   -r
Previous violations   A}o-f-< -face -fid*  t/i o
                                                                  A.g
Date of requirement    ^laCr 111 _    Date of inspection   1 / 3.O
Date of compliance    W/ / ^3. _    Explanation (if appropriate):  
-------
                                                                OSWER Directive 9610.12
I	       UST PENALTY COMWTATPHWOJgCKgET     	I
DELAYED COSTS a  Delayed Expenditures x Intereet x  Number of Dave
                                      SSBDaye
                 _      ^ <*"-, OOP  *  •
4.   Calculated Delayed Cost:    $ CS;
s.   Economic Benefit Component:  4 33. s 3ihO     (cany figure to line 16).
    (Line 3 + Line 4)
               PART 3 - MATRIX VALUE FOR THE GRAVITY-BASED COMPONENT
Potential for Harm:  ModerATe,         Extent of Deviation.
                                                         ttfgj
6.   Matrix Value fMVi:   * r5P          (from document page 16 or Appendix A)
7.   Per-tank MV:     » Y^U	    (if violation Is per facility, the amount on Line 7 will
    (Line 2 x Line 6)                      be the same as the amount on Line 6)
               PART 4 • VTOLATOR-SPECIFIC ADJUSTMENTS TO MATRIX VALUE
                        Percentage x Matrix  =  Dollar
                        Change      Value      Adjustment
                        f+ or-1                (+ or -1    Justification for Adjustment:

8.   Degree of cooperation/       «      ...         ._             /•  /-  /     #w7£  ,
    noncooperation       * 40/»     ?75P   *• ->3QO    /Kjot'tfCe te^J^r  ^<

9.   Degree of willfulness                           -        0t*>«er  M$  aw*   of
    or negligence:
10.  History oJ
    noncomplianca       ^^Q/o    *-f$u   r *f&U     Hv''*i/s  i/'"o

11.  Unique factors:
12.  Adjusted Matrix Value
    (Uns 7 + Lines 8-11)
                                          C-9

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  OSWER Directive 9610.12
 I
UST PENALTY COMPUTATION WORKSHEET
                          PART S - GRAVITY-BASED COMPONENT
 Level of                 .
 Environmental Sensitivity   A 0 tO _   Justification:   Pofenh'tJ  im  Act   
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                                                                        OSWER Directive 9610.12
                                         EXAMPLES
                                         BACKGROUND
Inspection Dae:  N/A

Facility Name and Description:  Kelly's Kwik Stop is a convenience store that recently had its three USTs
taken out of operation.  Prior to their removal, the USTs were operated by the owner of the convenience
store, Karen Kelly, and owned by Darby Distributors,  an oil jobber. The taxable income of Darby
Distributors was $400,000 in 1988.

Violations:  On May 20,1989, Ms. Kelly reported the presence of petroleum vapors outside of her
convenience store. The Agency investigated the site and confirmed the presence of a petroleum release.
Ms. Kelly reported that Darby Distributors had removed the 3 USTs located at her place of business on
March 17,1989; she was not aware of the requirement to notify the Agency prior to permanent closure or
of the requirement to conduct a site assessment Ms. Kelly also could not say whether Darby Distributors
had fulfilled these requirements. Upon a review of the Agency's records, it was determined that Darby
Distributors had failed to notify the Agency of the closure, thereby constituting a violation of 40 CFR  section
280.71.  The distributor was also unable to produce records demonstrating compliance with the closure \\
site assessment requirements, constituting a violation of 40 CFR section 280.74. The distributor also failed
to assess the site for the presence of a release before permanent closure, in violation of 40 CFR section
260.72(3).

Owner/Operator Response:  When the Agency contacted Darby Distributors, they indicated that they would
initiate corrective action only if they, and not Ms. Kelly, were actually responsible for the release.  The
Agency informed them that as the owner of the USTs formerly in operation at KeDy's Kwik Stop they as well
as Ms. Kelly are responsible for addressing any release from those USTs. The Agency also Informed
Darby Distributors that administrative orders were being prepared to compel them to dean up the release
and pay penalties for violations of the closure requirements (the Agency was dealing separately with Ms.
Kelly).  At that time, the company requested to enter Into negotiations with the Agency In order to establish
a corrective action schedule and determine the amount of the penalties to be assessed.

Previous Actions at Facility:  There were no previous incidents of violation at the facility.

Current Status at Site:  Kelly's Kwik Stop is located in a rural part of the county. There are, however, two
private drinking-water wells within a mile of the facility and several others within 4 miles of the facility. The
facility is located one-half mile from a river that is used lor recreational purposes as wefl as by various
wildlife as a source of water.  The geology in the area of the site is silt
                                              C-11

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  OSWER Directive 9610.12
                                 PENALTY CALCULATION DATA
Violation: 40 CFR section 280.71 (a)
Days of Violation: 94 days, from the latest required date of compliance (February 17,1989) to the actual
date of compliance (May 20,1989), where actual compliance is assumed to be coincident with Ms. Kelly's
report to the Agency.
Avoided expenditures:  Deemed negligible.
Delayed expenditures:  None.
Interest rate: 18.1% (the equity discount rate used in the BEN model for 1989).
Tax rate: 34% (the weighted average rate for a company with taxable income greater than $340,000).

                                 PENALTY CALCULATION DATA
Violation: 40 CFR section 280.72(a)
Days of Violation: 64 days, from the latest required date of compliance (March 17,1989) to the actual
date of compliance (May 20,1989), where actual compliance is assumed to be coincident with Ms. Kelly's
report to'the Agency.
Avoided expenditures:  $8,500 x 3 USTs = $25,500 (where the average cost for a site assessment at
closure i j $8,500 per UST).
Delayed expenditure*  None.
Interest rate: 18.1% (the equity discount rate used in the BEN model for 1989).
Tax rate: 34% (the weighted average rate for a company with taxable income greater than $340,000).

                                 PENALTY CALCULATION DATA
Violation: 40 CFR section 280.74
Days of Violation: 64 days, from the latest required date of compliance (March 17,1989) to the actual
date of compliance (May 20,1989), where actual compliance is assumed to be coincident with Ms. Kelly's
report to the Agency.
Avoided expenditure*:  None.
Delayed expenditures:  Deemed negligible.
Interest rate: 18.1% {the equity discount rate used in the BEN model for 1989).
Tax rate: 34% (the weighted average rate for a company with taxable income greater than $340,000).
        TU*.- -.imbers used to determine avdc&cH&rj ckxyed expenditures were chosen for convenience
           <&o not necessarily represent true costs in any State or Region in the country.)
                                             C-12

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                                                               OSWER Directive 9610.12
I                       UST«NALTVCO*IPinATlOWWOflKS*«ET                       I

Assessments for each violation should be determined on separate worksheets and totaled. (If more space
is needed, attach separate sheet)

                                PART I-BACKGROUND
                  ^^\   I     ^\ •»  / «  /   t
Company name     Uarhu   tsfSTnburDrS	
Regulation violated   *fO  £*FR  sech'eM  a?gQ  7-J (e^ ~  Ferlt/re
                30 tLaui   J>fiOf  -fa
Previous violations
                  A/0/7&
Date of requirement  S. I If I gr <7	    Date of inspection.
Date of compliance  £/20 /of	    Explanation (if appropriate):
1.   Days of noncompliance	
2.   Number of tanks     i3
                        WWT 2 - ECONOMIC BENEFIT COMPONENT
Avoided Expenditures     O	      Basis:  C,OS>te  -for  nafiftcafitM  HCqliq>'
Delayed Expenditures   A/1 A	      Basis:
Weighted Tax Rate   /VM	      Source:
Interest Rate    Wn    	      Source:	.
AVOIDED =  [Avoided   +   Avoided  x  Interest  x  NumbeT]  x   0 - Weighted Tax Rate)
            Expenditures   Expenditures	
            L                       365 Days
COSTS      {Expenditures   Expenditures	of Dave
7\
'J
3.   Calculated Avoids   >35S-_   v  0
                                         C-13

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  OSWER Directive 9610.12
L
                         UST PENALTY COMPUTATION WORKSHEET
DELAYED COSTS = Delayed Expenditures  x Interest  x  Number of Days
                                       365 Days
4.   Calculated Delayed Cost:.
5   Economic Benefit Component:.
    (Line 3 + Line 4)
                                                .(carry figure to Line 16).
               PART 3 - MATRIX VALUE FOR THE GRAVITY-BASED COMPONENT
Potential for Harm:
6.   Matrix Value (MV):.

7.   Per-iank MV:	
    (Line 2 x Line 6)
                        tAf
                                        Extent of Deviation
                                        (from document page 16 or Appendix A)

                                        (if violation is per facility, the amount on Line 7 will
                                        be the same as the amount on Line 6)
               PART 4 - VIOLATOR-SPECIFIC ADJUSTMENTS TO MATRIX VALUE
                        Percentage x  Matrix
                        Change       Value
8.   Degree of cooperation/
    noncoo Deration
                          /ol
9.   Degree of willfulness         «
    or negligence:         * 'iOl*

10.  History of
    noncompliance:         0
11.  Unique factors:
12  Adjusted fv.;.1'.
    (Line? + i.i,-«ji 8-1
                          0
1 tSDO


tl^OO


 JISVO
                                               Dollar
                                               Adjustment
                                               (+ or -\     Justification for Adjustment:
                                                          on 1 14
                                                '600
                                                 o
                                                                        belt*
                                          C-14

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                                                               OSWER Directive 9610.12
                        UST PENALTY COMPUTATION WORKSHEET
                         PART S • GRAVITY-BASED COMPONENT
Level of
Level 01
Environmental Sensitivity   /fiat) _   Justification:   1\e,/-t4S£
                        V               se&r+J  cfrtfibA* -
                                J       ant- OL  river  VSed b*i  kvn*a»
13.  ESM from document Page 21 )___2*__    .            ,         »  J     / 1 i-
                                         (>T'5D
    (Line 12 x Line 13 x Line 14)
                        PART 6 • INITIAL PENALTY TARGET FIGURE
16.  Economic Benefit Component     O
    (from Line 5)


17.  Gravity-Based Component   * (f f SO
    (from Line 15)
18.  Initial Penalty Target Roure
    (Line 16 + Line 17)
SIGNATURE	                  DATE.

                                         C-15

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 OSWER Directive 9610.12
L
           U8T PENALTY COMPUTATION WORKSHEET
Assessments for each violation should be determined on separate worksheets and totaled. (If more space
is needed, attach separate sheet.)


II                              PART 1 - BACKGROUND


Company nama    ufafku  UfSJrt otsfon'S

Regulation violated   *fQ  CF& s-<-L& 0-f- -tank
Previous violations.
Date of requirement   3 / / 7- / 9 3 •           Date of Inspection
Date of compliance   &/3Q'fsl _    Explanation fif appropriate):
1.  Days of noncompliance

2.  Number of tanks     -3
                       PART 2 - ECONOMIC BENEFIT COMPONENT
Avoided Expenditures  4 SS, SD&       Basis:  ^ SSDO per VST sfc

Delayed Expenditures   A/ 1 A _     Basis:  __

Weighted Tax Rate  0.34  /3» ^>)     Source: MrR  -for J
Interest Rate  C IBt   ( 1%. I %}        Source:  8£XJ nnadef  ftftu  4is(au*+ rote )
AVOIDED
COSTS
Avoided   +   Avoided   x  Interest  x  Number
Expenditures  Expenditures	QfDavs
                                   365 Days

      Ac *  [fas, 57?*
x  (1-Weighted Tax Rate)
 3.  Catculated Avoided Coat:   £ I v ^
                                 i
                                        C-16

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                                                                 OSWER Directive 9610.12
                         UST PENALTY COMPUTATION WORKSHEET
DELAYED COSTS = Delayed Expenditures  x  Interest x  Number of Dav«
                                       365 Days
4.   Calculated Delayed Cost:	Q_	

5.   Economic Benefit Component:    ^/"ft ,?6.V     (carry figure to Line 16).
    (Line 3 + Line 4)
               PART 3 • MATRIX VALUE FOR THE GRAVITY-BASED COMPONENT
Potential for Harm:   ftldtof	     Extern of Deviation     ffldi
6.   Matrix Value (MV>:  J /SOU           (from document page 16 or Appendix A)
7.   Per-iank MV:    4 (oQ06	     (if violation is per facility, the amount on Line 7 will
    (Line 2 x Line 6)                       be the same as the amount on Line 6)
               PART 4 - VIOLATOR-SPECIFIC ADJUSTMENTS TO MATRIX VALUE
                        Percentage x  Matrix   =  Dollar
                        Change       Value      Adjustment
                        (+ or -1                 (+ or -)    Justification tor Adjustment:
8.   Degree of cooperation/
    noncooperatton       * /07a      JleQQQ   +_	
«   «.     _.  -i«.j_                                       0***t.r  *jppe#rtd -h
9.   Degree of willfulness        .       .           *         ^~\ ,*~L~T1<  *.£ **•*
    or negligence:        •*  'iQ/e     r (pQOti     3HQO    ^  '"
                                                          Q
10.  History of
    noncompliance:          O        & bOOO     0

11.  Unique factors:        	     MaMO      0      fiJlA


12.  Adjusted Matrix Value                         43000
    (L-   7 + Lines 8-11)
                                          C-17

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 OSWER Directive 9610.12
L
UST PENALTY COMPUTATION WORKSHEET
                         PART S - GRAV1TY-8ASED COMPONENT
Level of
Environmental Sensitivity__£tL422 _   Justification:  Re (445*-  Co /%,  000
    (from Line 15)
18.  Initial Penalty Target Figure   '$€.'& (a
    (Line 16 + Line 17)
SIGNATURE	                  DATE,

                                        C-18

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                                                                  OSWER Directive 9610,12
Assessments tor each violation should be determined on separate worksheets and totaled. (H more space
is needed, attach separate sheet)
                                  PART 1 - BACKGROUND

Company name      Tkrbu   'DiS'hri :£?«/Tfe>rS
                         u
Regulation violated   HO  £PR  St chart  £%Q.  3t-   "Fzf/vre.   -bo
             i//\  fe.c.Grd<*   tag* bit  
Weighted Tax Rate    Af IA	      Source:
Interest Rate	All A	     Source:
AVOIDED  = I Avoided   +   Avoided  x   Interest  x  Number |   x  (1 - Weighted Tax Rate)
COSTS       Expenditures   Expenditures	of Dave
            L                       365Daya
                                                         r"!   *  0 '
                                                        a
3.  Calculated Avoicied Cost:
                                           C-10

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  OSWER Directive 9610.12
I                      U9T PEHALTY COMPUTATION WORKSHEET	I


DELAYED COSTS o Delayed Expenditures  x Interest x  Number of Dave
                                       365 Days
4.   Calculated Delayed Cost:       ^ O
5.   Economic Benefit Component:    £ O	(carry figure to Line 16).
    (Line 3 + Line 4)
               PART 3 - MATRIX VALUE FOR THE GRAVITY-BASED COMPONENT
Potential for Harm:    VY\4ior	    Extent of Deviation
6.   Matrix Value fMVl:  1  I€>OO          (from document page 16 or Appendix A)

7.   PeM.Tnk MV:     4 (G~00	     (If violation is per facility, the amount on Line 7 will
    (Line 2 x Line 6)                       be the same as the amount on Una 6)
               PART 4 - VfOLATOR-SPECfFiC ADJUSTMENTS TO MATRIX VALUE
                        Percentage  x Matrix  =  Dollar
                        Change      Value      Adjustment
                        f-KQT -1                 (4. or.)    Justification for Adjustment:
8.   Degree of cooperation/      ^                  j         onU.  d-H*.*  be)**  u&med. af
    noncooperation

9.   Degree of willfulness
    or negligence:

10. History of
    noncompliance:
              *
      r» mCt.  of-
A///4
11. Unique factors:           O       i\5VO       O      Ail A
1Z Adjusted Matrix Value
    (Urn 7 + Lines 8-11)
                                          C-20

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                                                              OSWER Directive 9610.12
L
liST PENALTY COWPUTATOK WORKSHEET
                         PART 5 - GRAVITY-BASED COMPONENT
Levelot                 /^' /                                        />
Environmental Sensitivity   Hi a~k	   Justlflcatton:   Re(f&s<  CQvt& f

                               x,        <*i\A.  o.  river  tX-ctf  fa
13.  ESM (from document Pace 21)   £                     v*r  *****  **


14.  ONM (from document Page 21)   /	
                                                    Environmental     Day* of
GRAVITY-BASED COMPONENT  =  Adjusted Matrix Value x  SeneKMty     x  Noncompllance
                                                    Multiplier         Multiplier
15.  Gravity-Based Component:  &HSDO
    (Line 12 x Line 13 x Line 14)
                       PART 6 - INITIAL PENALTY TARGET FIGURE
H 6.  Economic Benefit Component   * O
    (from Line 5)


17.  Gravity-Based Component  ?
    (from Line 15)


18.  Initial Penalty Taroet Figure  * H 57? 0
    (Line 16 + Line 17)
               2* >'+>'« I  Ptnaiht T+reftf  -for  Darby

       =.  \/t'0 (Abff* #1   f    tftol^tto*  #2.    «•   l/ro
       cessaniv .-eov^.,., :rua ^

SK3NATURE_ _                  DATE

                                        021

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  OSWER Directive 9610.12
                                         EXAMPLE 4
                                         BACKGROUND

Inspection Date: December 15, 1991

Facility Name and Description: Jerry's Gas and Grocery is a medium-sized facility in a commercial section
of town.  The facility has 4 USTs, 3 of which were installed in 1968 and one in 1989. It was estimated that
the company's taxable income was $70,000 in  1990.

Violations: On October 16,1991, the Agency discovered that Jerry's Gas and Grocery had a release. At
the time of the release, an adequate method of release detection was not in use at the facility, constituting
a violation of 40 CFR section 280.40(c) for the 3 tanks installed in  1968.  The Agency sent written
notification (after informing the owner of the release by telephone) of the release to the facility and
requested, among other things, that the facility report evidence of financial responsibility within 30 days.
While conducting a file review on December 15, the compliance staff observed that the facility had failed to
report this evidence, in violation of 40  CPR section 280.106(a)(1).  A site inspection conducted on this date
indicated that an adequate method of release detection was still not In use.

Owner/Operator Response: When notified of these violations, the owner submitted evidence that he had,.
acquired a letter of credit from a bank to meet the FR requirement and began to conduct inventory control
and daily monitoring immediately, and arranged for tank tightness tests.  The owner, however, had failed to
initiate corrective actions (beyond the initial abatement measures) for lack of funds. The owner's failure to
report his financial assurance mechanism within the required time period, therefore, delayed the contacting
of the bank and the collection of funds with which to initiate corrective action.

Previous Actions at Facility: In 1989, the facility was assessed penalties for failure to notify the Agency of
the new UST installation.

Current Status at Site: Because an adequate method of release detection was not in operation, the
release went undetected for a matter of months.  The geology In the area of the facility Is fractured shale.
The facility is located in a commercial area. There are no drinking water wells or sensitive wildlife receptors
within a 5-mile radius of the site.
                                  PENALTY CALCULATION DATA

Violation: 40 CFR section 280.40(c)

Days of violation: 358 days, from the latest required date of compliance (December 22,1990) to the
actual date of compliance (December 15,1991).

Avoided expenditures:  $2455 total = $895 labor for 358 days, at $2.50 per day (estimated cost for labor
needed to conduct daily inventory control based on 1/2 hour labor at $5.00 per hour) + $1560 for
tightness testing for 3 tanks (where the average cost for tank tightness testing is $520 per tank).

Delayed expenditures:  None.

Interest rate:  18.1% (the equity discount rate used In the BEN model for 1991).

Tax rate: 18% (the  weighted average rate for a company with taxeL            $70,000).
                                              C-22

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                                                                       OSWER Directive 9610.12
                                 PENALTY CALCULATION DATA
Violation: 40 CF« section 280.106(a)(l)
Days of Violation: 30 days from the latest required date of compliance (November 15,1991) to the actual
date of compliance (December 15,1991).
Avoided expenditures:  $8219 = Amount of interest avoided on $1,000,000 letter of credit because of
failure to provide the Agency with evidence of financial responsibility (based on 30 days of interest at 10%,
the rate charged by Jerry's bank for letter of credit drawdown).
Delayed expenditures:  None.
Interest rate: 18.1% (the equity discount rate used In the BEN model for 1990 and 1991).
Tax rate:  18% (the weighted average rate for a company with taxable income of $70,000).
[NOTE:  The numbers UKX* to determine svoided and delayed expenditures; were clvosen for convenience
only. They do not ne'  •  ~-: «. -.-•;«..-. •*     -rjsts in any State or Region in the cojrfiry.)
                                             C-23

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 OSWER Directive 9610.12
I.       	U8T PENALTY COMPtflATION WORKSHEET	I

Assessments for each violation should be determined on separate worksheets and totaled. (If more space
is needed, attach separate sheet.)
                                PART 1 • BACKGROUND
Company name      "J^ffciS   6&S
Regulation violated   Hft C1=-R ena.(Kje.S
                             o-f   n ew  US?  i/\s4* II* h'art.
Date of requirement   f&.Ill./tTO _    Date of Inspection  12. //5" fa I
Date of compliance    /g //5" / model (cq^hj discoi»4-
AVOIDED
COSTS
Avoided  +   Avoided   x   Interest  x  Number
Expenditures  Expenditures	of Dave
                       365 Days
x  (1 - Weighted Tax Rate)
3.  Calculated Avoided Cost:    4,	
                                         C-24

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                                                                  OSWER Directive 9610.12
                                                                                       I
DELAYED COSTS
                   Delayed Expenditures x Intereat x Number of Dava
                                       368 Day*
4.   Calculated Delayed Cost:

5.   Economic Benefit Component:
    (Line 3 + Une 4)
                                                 (carry figure to Une 16).
               PART 3 - MATRIX VALUE FOR THE GRAVITY-BASED COMPONENT
Potential for Harm:
6.   Matrix Value fMVl:   4
7.   Per tank MV:    4 HS'OQ
    (Line 2 x Line 6)
                                        Extent of Deviation
                                        (from document page 1 6 or Appendix A)

                                        (if violation is per facility, the amount on Line 7 will
                                        be the same as the amount on Line 6}
               PART 4 • VIOLATOR-SPECIRC ADJUSTMENTS TO MATRIX VALUE
                         Percentage x Matrix
                         Change
                         f+or-1
n   «       ,        ,   ,
8.   Degree of cooperation/
    noncooperation

9.   Degree of willfulness
    or negligence:

10.  History of
    noncompliance:

11.  Unique factors:
                           O
                                     Value
                                     .
                           O       JHSVO
                                    1*1500
                                                Dollar
                                                Adjustment
                                                1+ or •)     Justification for Adjustment:

                                                          Complied  as
                                                          »   , r          i*t-
                                                  0      ^llo^Ji     no
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 OSWER Directive 9610.12
                        UST PENALTY COMPUTATION WORKSHEET
                          PART 5 • GRAVITY-BASED COMPONENT
Level of
Environmental Sensitivity  t/ftadLertJQ         Justification:  &{*«&& W  liuUi TO


13.  ESM (from document Page 21)   /• 6
                          n^
14.  PNM (from document Page 21) 3-S              **  /.^^

                                                      Environmental    Days of
GRAVITY-BASED COMPONENT  =  Adjusted Matrix Value  x  Sensitivity     x  Noncompllance
                                                      Muttlpller         Multiplier


                                           '   '•£•   *   2.S"   *
15.  Gravity-Based Component:
    (Li.ie 12 x Line 13 x Line 14)
                        PART 6 • INITIAL PENALTY TARGET FIGURE
16.  Economic Benefit Component
    (from Line 5)
17.  Gravitv-Based Component
    (from Line 15)
18.  Initial Penalty Target Figure  /2V 30?
    (Line 16 + Line 17)
SIGNATURE	                  DATE.

                                          C-26

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                                                               OSWER Directive 9610.12
 I	              U8T PENALTY COUPUTATlOff WORKSHEET                      I


 Assessments for each violation should be determined on separate worksheets and totaled. (If more space
 is needed, attach separate sheet)


                                PART 1 - BACKGROUND


 Company name	7Isrr  &a &  4.  &
                                                ^

Regulation violated    HO £?R Stc.+>OY\  3&0. /0&M&}-   Faitvre.   -to

               e.\/'>cUnc*-   fyf  -fi'nana'al  assurance
Previous violations   A/aft -fat* H*os\
Date of requirement   ////5"/J tnoejeA fee^tit  eJirce>t,n't


AVOIDED  =  Avoided  +   Avoided  x  Interest  x  Number
COSTS      Expenditures  Expenditures	of Dava
                                   385 Day*
                                                          x  (1 • Weighted Tax Rate)
                                        x.,*,  ,  30  1

                                        T><*5-         J
3.   Calculated Avoided Cost:

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 OSWER Directive 9610.12
L
08T PENALTY COMPUTATION WORKSHEET
DELAYED COSTS » Delayed Expenditures x Interest  x Number of Dava
                                       385 Days
4.   Calculated Delayed Cost:	

5.   Economic Benefit Component:  ?(f&7&	(carry figure to Line 16).
    (Line 3 + Line 4)
               PART 9 - MATRIX VALUE FOR THE GRAVITY-BASED COMPONENT
Potential for Harm:   moa-erflt          Extent of Deviation
6.   Matrix Value (MV):    »  /SO          (from document page 16 or Appendix A)
7.  Per-iunk MV:      •> rSO	    (if violation is per facility, the amount on Line 7
    (Line 2 x Line 6)                       be the same as the amount on Line 6)
               PART 4 - VIOLATOR-SPECIFIC ADJUSTMENTS TO MATRIX VALUE
                        Percentage x Matrix  =  Dollar
                        Change      Value      Adjustment
                        f+or-i                 f+ or -)    Justification for Adjustment:

8.  Degree of cooperation/              ^                    /,  ,,    .
    noncooperation          O        ST-SD      O      ft>floi~»*j

9.  Degree of willfulness
    or negligence:           0
1°' JSnpllance:       +30%     ^SO  *'t&f   Mw/»/r,

11. Unique factors:           O
 12. •££['•&.. .\   '.'U Value
    (Line 7 4-Unas 8-11)
                                           C-28

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                                                              OSWER Directive 9610.12
I                      U8T PENALTY CCWPtHATTON WORKSHEET                      I
                         PART 5 • GRAVITY-BASED COMPONENT
Level of
Environmental Sensithritv   V\A AeLl. rgjfc       Justification:  "R^U^-f  /l5  *0f  lifafu
                                         hive.  ii***ci  cm  etrov^cS er
                              ,  -
13.  ESM (from document Page 21)_L£ -

                                        pofaivtotJ ln*~i*\6n  f-
14.  DNMffrom document Paoa 211  /.fP         /4X"+.  Tr^c^^ect  sh+tt.
                                                         /5
                                            p tt'c&&
                                                    Environmental    Days of
GRAVITY-BASED COMPONENT  a  Adjusted Matrix Value x  SerwWvtty     x  Noncompllanoe
                                                    Multiplier        Multiplier
15.  Gravity-Based Component:  $ I'J
    (LJne12xLine13xLine14)
                       PART $' INITIAL PENALTY TARGET FIGURE
16.  Economic Benefit Component  $>
    (from Line 5)
17.  Gravftv-Based Component  i
    (from Line 15)
18.  Initial Penalty Taroet Figure
    (Line 16 -HJne 17)
SIGNATURE _                  DATE

                                        C-29

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  OSWER Directive 9610.12
                                         EXAMPLES
                                         BACKGROUND

Inspection Dae:  January 8,1990

Facility Name and Description: The Mammoth Oil facility located at 345 Pine Street has 5 USTs and is
owned and operated by Mammoth Oil Company, a national petroleum marketer with taxable income over
$335,000.

Violations:  Upon inspection of the facility, the Agency discovered that 2 new bare steel USTs were
installed on November 15,1989 without cathodic protection. This omission constituted a violation of 40
CFR section 280.20(a)(2)(iQ. The tanks failed to meet the performance standards specified in section
280.20(a)(2)(ii), or any of the codes or standards outlined by the regulations as acceptable for compliance.

Owner/Operator Response:  When notified of the violation, the company's attorneys asked to enter into
negotiations to determine the schedule and terms of compliance, as well as any penalties that might be
assessed.  The result of the negotiations was a consent order in which the owner agreed to install properly
designed cathodic protection (in accordance with the National Association of Corrosion Engineers
Standard RP-02-85) and pay the penalty by March 1, 1990.

Previous Actions at Facility:  The facility was issued a notice of violation in 1987 for failure to notify the
Agency of a new UST installation.  In 1988, the company was issued two administrative orders, one
compelling remediation of a release and the other assessing penalties for failure to report the release to
the Agency.

Current Status at Site:  At the time of the inspection, the facility was conducting a method of release
detection in accordance with the requirements. The Agency determined that It was unlikely that there was
a release at the present time. The geology in the area of the facility is gravel  The facility is located In an
urban residential area  There are  no drinking water wells or sensitive wildlife receptors within a 3-mile
radius of the area
                                 PENALTY CALCULATION DATA

Violation: 40 CFR section 280.20(a)(2)(ii)

Days of violation: 105 days, from the required date of compliance (November 15,1989) to the actual date
of compliance (March 1,1990).

Avoided expenditures: None.

Delayed expenditures: $3,050 x 2 USTs = $6,100 (where the average cost for installation of a cathodic
protection system is $3,050 per UST).

Interest rate: 18.1% (the equity discount rate used in the BEN model for 1990).

Tex rate: 34% (the weighted average rate for a company with taxable income of $335,000).

[NOTE: The numbr,.  •'-.;;'»..: .tarmine avoided and delayed expenditures were chosen for convenience
only.  They do not iv  :*-si::.  ^present true costs in any State or Region in the country.)
                                              C-30

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                                                                OSWER Directive 9610.12
                        QST PENALTY CO*H»tnATIOH WORKSHEET
                                                                                     I
Assessments for each violation should be determined on separate worksheets and totaled.  (N more space
is needed, attach separate sheet.)
                                 FARM-BACKGROUND
Company name
                                     Oil
Regulation violated   HO  CJP&.
                                               3iO
                                                   rtV
                                                   LeC](^--  frti
                                                        Ca-Hn
                                                                          4t>
Previous violations
                                 £ cat} art
                                                           -  4-ifJO  ad Vu'/*rs^* -fe'i/g
Date of requirement    //
Date of eompliance   3/ /  l1O
1.   Days 3f noncompliance   /OS"
Z   Number of tanks      o2
                                           Date of Inspection
                                                              / Iff ItO
                                           Explanation (tf appropriate):
                        PART 2 • ECONOMIC BENEFIT COMPONENT
Avoided Expenditures  fi) I A
                                        Basis:.
Delayed Expenditures 4 (01 00
Weighted Tax Rate  O-W ( $H *)•}
                                        Basis:  £0
                                        Source: rflTR  £>r  i
Interest Rate  G.IKi  ( (&.  / >> rtodLd  (e
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 OSWER Directive 9610.12
I
                        U8T PENALTY COMPUTATION WORKSHEET
                                                 J
DELAYED COSTS
                   Delayed Expenditures x Interest x Number of Days
                                      365 Days
                         blQQ   x .(Gl  r   105°
4.   Calculated Delayed Cost:
5.   Economic Benefit Component:
    (Line 3 •»• Une 4)
                                               .(carry figure to Line 16).
               PART 3 - MATRIX VALUE FOR THE GRAVITY-BASED COMPONENT
                                       Extent of Deviation   fftodsra
Potential for Harm:   Ml ode,

G.   Matrix Value fMW.   4 S~00
7.   Per-t«nk MV:
                    I OOP
    (Line 2 x Line 6)
    (from document page 16 or Appendix A)

    (if violation is per facility, the amount on Une 7 will
    be the same as the amount on Une 6)
               PART 4 - VIOLATOR-SPECIFfC ADJUSTMENTS TO MATRIX VALUE
                       Percentage x  Matrix
                       Change      Value
                       f+or-\
8.   Degree of cooperation/
    noncooperation

9.   Degree of willfulness
    or negligence:

10.  History of
    noncompliance:
                                              Dollar
                                              Adjustment
                                              f+ or -)    Justification for
                                    .     ^
                                  31000      Q
                         50%   4000
11.  Unique factors:       	6> .
tlOOO  +	

41000    	0
12.  Adjusted Matrix Value
    (Une? + Lines 8-11)
                                             43000
                                         C-32

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                                                              OSWER Directive 9610.12
I	U8T PENALTY COMPUTATION WORKSHEET	  |
                         PART 5 • GRAVITY-BASED COMPONENT
Level of
Environmental Sensitivity   W\a dLt. raJb       Justification:  fact Iffy i'S  loca'ticx  »
                                                           fi
13.  ESM (from document Page 21)__Afl_    tjri*k'Aj - VGr  Ut-tfl  or
                                                                t  ar*
14.  DNM (from document Page 21)_I£_   P*'""  tAir****  of
                                                    Environmental    Day* of
GRAVITY-BASED COMPONENT = Adjusted Matrix Value  x SenaMMty     x  Noneompllanee
                                                    Multiplier        Multiplier


                    *   $3000   r  /. 5"  *  i. S  ~
15.  Gravity-Based Component:
     (Line 12 x Line 13 x Line 14)
                        PART 6 - INITIAL PENALTY TARGET FIGURE
16.  Economic Benefit Component
    (from Line 5)
17.  Gravity-Based Component  ¥ tf 5~00
    (from Line 15)
18.  Initial Penalty Taroet Figure
    (Line 16 -t- Line 17)
SIGNATURE	                  DATE.

                                        C-33

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