EPA estimated that about 571,000 facilities were regulated  under the SPCC rule as of 2005. Specifically, EPA’s 2002 analysis  was limited because it did not (1) assess the uncertainty associated with  key data and assumptions, such as the degree to which facilities were  already in compliance with the amendments, (2) analyze the effect of  regulatory alternatives to the amendments, (3) provide the compliance  costs that EPA expected facilities to incur or save as a result of the  amendments in comparable present value terms, and (4) estimate the  effect of the amendments on the risk of an oil spill and on public health  and welfare and the environment. Therefore, in its analysis, EPA assumed that all  regulated facilities were in full compliance with these existing provisions  and would not incur any additional compliance costs as a result of the  amendments. However, EPA’s 2002 analysis did not assess alternatives to the  amendments, such as alternative levels of stringency or alternative lead  times to comply. As  depicted in table 1, EPA did not present the total cost estimate (costs  incurred minus cost savings) of the amendments in comparable, net  present value terms. EPA’s Economic Analysis of the 2006 SPCC Amendments Improved on the Earlier Study but Also Had Limitations

EPA’s economic analysis of the 2006 amendments to the SPCC rule  addressed several of the limitations in the agency’s 2002 analysis. EPA’s 2006 Analysis Included Elements Absent from Its Earlier Study

As shown in table 2, EPA estimated the compliance cost savings that  would be generated by the 2006 amendments under (1) a baseline  assuming full compliance with the existing SPCC rule including the 2002  amendments, (2) an alternative baseline assuming only 50 percent  compliance with the existing SPCC rule including the 2002 amendments,  and (3) different assumptions about the number of facilities that would be  affected by the 2006 amendments. EPA’s 2006 Analysis Also Had Limitations

Despite the improvements over its 2002 analysis, EPA’s analysis of the  2006 amendments also had some limitations that made it less useful than it  could have been for assessing the economic trade-offs associated with the  amendments. For example, EPA did not quantify or monetize the potential  impacts of the 2006 amendments on the risk of an oil spill and on public  health and welfare and the environment. In addition, because EPA’s estimates of the number of facilities that would  be affected by the 2006 amendments were not based on nationally  representative samples, the results may not be accurate. In particular, for  the one amendment that would reduce the burden for certain SPCC- regulated facilities, EPA based its estimates of the number of facilities that  would be affected by this amendment on data drawn from eight states:  Florida, Kansas, Maryland, Minnesota, New York, Oklahoma, Virginia, and  Wisconsin. Because facilities in these states may not have been  representative of facilities nationwide, EPA’s use of these data in its  analysis could have introduced bias into its estimates of the number of  facilities and costs for this amendment. EPA acknowledged these limitations in its analysis and  stated that the analysis provided the best possible results given time and  resource constraints. Overall, EPA reported that its analysis did not fully comply with OMB  guidelines for conducting economic analyses of significant regulatory  actions. Moreover, because EPA did not  estimate the impact of the amendments on the potential risk of an oil spill  and on public health and welfare and the environment for either the 2002  or the 2006 amendments, EPA’s economic analyses may not provide  decision makers, stakeholders, and the public with a sufficient basis for  concluding that the benefits of the amendments outweigh their costs, as  EPA did. As criteria for evaluating the  reasonableness of the economic analyses, we used guidelines for federal  agencies in assessing regulatory impacts that the Office of Management  and Budget (OMB) developed under Executive Order 12866, including its  Economic Analysis of Federal Regulations Under Executive Order 12966;  Guidelines to Standardize Measures of Costs and Benefits and the Format  of Accounting Statements; and Circular A-4.
Why GAO Did This Study

Oil in aboveground tanks can leak into soil and nearby water, threatening human health and wildlife. To prevent certain oil spills, the Environmental Protection Agency (EPA) issued the Spill Prevention, Control, and Countermeasure (SPCC) rule in 1973. EPA estimated that, in 2005, about 571,000 facilities were regulated under this rule. When finalizing amendments to the rule in 2002 and 2006 to both strengthen the rule and reduce industry burden, EPA analyzed the amendments' potential impacts and concluded that the amendments were economically justified. As requested, GAO assessed the reasonableness of EPA's economic analyses of the 2002 and 2006 SPCC amendments, using Office of Management and Budget (OMB) guidelines for federal agencies in determining regulatory impacts, among other criteria, and discussed EPA's analyses with EPA officials.

What GAO Found

EPA's economic analysis of the 2002 SPCC amendments had several limitations that reduced its usefulness for assessing the amendments' benefits and costs. In particular, EPA did not include in its analysis a number of the elements recommended by OMB guidelines for assessing regulatory impacts. For example, EPA did not assess the uncertainty of key assumptions and data. In the analysis, EPA assumed that certain facilities were already complying with at least some of the rule's provisions and, as a result, they would not incur any additional compliance costs because of the amendments. However, the extent of facility compliance with the rule was highly uncertain. EPA did not analyze the effects of alternative rates of industry compliance on the estimated costs and benefits of the revised rule and, therefore, potentially misstated these amounts. Furthermore, EPA's 2002 analysis was limited in that it (1) did not analyze alternatives to the amendments, such as alternative lead times for industry to comply or alternative levels of stringency; (2) did not present the compliance costs that EPA expects facilities to incur or save in the second and subsequent years under the amendments in comparable present value terms (through discounting); and (3) provided only limited general information on the amendments' potential benefits in reducing the risk of an oil spill and its potential effects on human health and the environment. EPA's economic analysis of the 2006 amendments addressed several of the limitations of its 2002 analysis, but it also had some limitations that made it less useful than it could have been for assessing the amendments' costs and benefits. For example, EPA's 2006 analysis assessed the potential effect of industry noncompliance on the estimated costs (or cost savings) and estimated the present value of costs (or cost savings) associated with different alternatives for burden reduction. Nevertheless, as with the 2002 analysis, EPA did not estimate the potential benefits of the 2006 amendments, such as the extent to which they would affect the risk of an oil spill and public health and welfare and the environment. In addition, EPA did not have available nationally representative samples for its analysis; therefore, its estimates of the number of facilities that would be affected by the 2006 amendments may not be accurate. In particular, for one category of facilities, EPA based its estimates of the number of facilities on data available from eight states. Because facilities in these states may not have been representative of facilities nationwide, EPA's use of these data in its analysis could have introduced bias into its estimates of the number of facilities and costs for this amendment. EPA acknowledged that its analysis of the 2006 amendments was not a full accounting of all social benefits and costs but stated that the results were based on the best available information given time and resource constraints.