1The
205
existing
facilities
include
172
MODUs,
8
deepwater
and
8
shallow
water
Gulf
platforms
or
structures,
7
California
platforms,
and
10
Alaska
platforms.

2The
annualized
pre­
permitting
study
costs
for
Region
10
are
$
1,385,
while
repermitting
study
costs
are
$
2,505.
These
costs
were
annualized
over
30
years
(
DCN
7­
4018).

1
MEMORANDUM
Date:
October
15,
2004
To:
316b
Rulemaking
Record
From:
Anne
Jones
and
Ian
Cadillac,
ERG,
Inc.
Subject:
Costs
for
Existing
Oil
and
Gas
Facilities
Had
These
Been
Regulated
Under
316(
b)
Phase
III.

EPA
examined
the
impacts
of
the
proposed
rule
assuming
these
requirements
were
applied
to
all
existing
oil
and
gas
facilities.
Totals
in
this
memo
are
based
on
costs
developed
by
EPA
for
an
estimated
205
existing
MODUs
and
platforms.
Engineering
costs
(
capital
and
O&
M)
are
as
presented
in
the
Technical
Development
Document
for
the
proposal
(
U.
S.
EPA,
2004a),
permitting
and
monitoring
costs
are
as
presented
in
the
316(
b)
Compliance
Cost
Model
(
DCN
7­
4018),
while
weights
for
existing
MODUs
and
platforms
are
described
in
more
detail
in
ERG
(
2004a).
This
source
also
discusses
how
the
estimate
of
205
existing
facilities
that
meet
proposed
316(
b)
criteria
is
developed.
1
Costs
are
annualized
using
the
Office
and
Management
and
Budget's
recommended
7
percent
discount
rate.
This
rate
is
real
and
does
not
need
to
be
adjusted
for
inflation.

Please
note
that
costs
for
bringing
existing
oil
and
gas
facilities
into
compliance
is
an
incremental
cost.
That
is,
the
costs
EPA
has
calculated
for
new
facilities
in
the
Gulf
of
Mexico
and
Alaska
already
includes
costs
assumed
to
be
shared
among
all
facilities
in
a
region
as
well
as
costs
to
individual
facilities.
If
EPA
were
to
promulgate
regulations
that
included
both
new
and
existing
facilities,
the
total
costs
described
in
this
memo
would
be
an
accurate
estimate
of
the
cost
of
such
a
regulation
when
added
to
the
cost
to
new
facilities,
but
the
costs
incurred
by
new
facilities
would
decrease
slightly
and
costs
for
existing
facilities
would
increase
slightly
above
those
shown
here,
since
existing
and
new
facilities
would
be
expected
to
share
pre­
permitting
study
costs.
See
ERG
(
2004b)
for
a
discussion
of
individual
facility
costs
versus
shared
pre­
permitting
and
monitoring
costs.

Most
of
the
costs
to
existing
facilities
are
thus
calculated
using
costs
to
individual
facilities.
However,
in
some
cases,
additional
regional,
shared
pre­
permitting
costs
will
be
incurred.
In
Alaska,
only
the
cost
for
one
pre­
permitting
study
was
assumed.
This
same
study
is
assumed
to
be
conducted
had
existing
facilities
been
regulated,
but
the
cost
to
prepare
a
regional
report
(
see
EPA's
316(
b)
Oil
and
Gas
Compliance
Cost
Model,
DCN
7­
4018)
is
not
a
part
of
the
costs
shown
in
the
Economic
Analysis
report
(
U.
S.
EPA,
2004b).
2
Additionally,
no
new
platforms
were
assumed
to
be
constructed
in
California
(
U.
S.
EPA,
2004b).
Thus,
existing
facilities
in
California
would
need
to
share
the
costs
of
a
regional
prepermitting
study
and
monitoring
program.
3The
annualized
costs
for
Region
9
include
$
17,485
for
monitoring,
$
68,306
for
pre­
permitting
studies,
and
$
116,837
for
repermitting
studies.

2
Section
1
discusses
the
method
for
calculating
and
aggregating
individual
costs
to
existing
facilities.
Section
2
discusses
the
method
for
calculating
the
shared
costs
for
California,
and
Section
3
presents
the
total
costs
for
individual
facilities,
the
additional
Alaska
shared
costs
and
the
additional
California
shared
costs.
All
calculations
and
results
can
be
seen
in
the
Compliance
Cost
Model
(
DCN­
7­
4018)
and
another
spreadsheet
in
the
Rulemaking
Record
(
DCN
7­
4030)

1.
CALCULATION
OF
INDIVIDUAL
FACILITY
TOTALS
The
total
individual
facility
costs
of
compliance
with
the
rule
contain
several
components:
capital,
permitting,
repermitting
and
O&
M
costs.
These
costs
are
incurred
at
different
time
intervals
over
the
life
of
a
facility.
The
bullet
points
below
detail
the
different
time
frames
over
which
the
different
costs
were
annualized.

#
Capital
Costs
are
annualized
over
10
years,
which
is
considered
the
useful
life
of
the
equipment.

#
Permitting
Costs
are
calculated
by
summing
all
facility
specific
costs,
then
annualizing
this
total
over
30
years,
the
life
of
the
initial
permit.
For
more
information
on
facility­
specific
versus
shared
costs,
see
ERG
(
2004b).

#
Repermitting
Costs
are
the
annualized
sum
of
all
facility
specific
repermitting
costs
annualized
over
5
years,
the
time
interval
for
repermitting.

#
O&
M
Costs
are
annual
costs
and
are
not
discounted.

To
calculate
the
annualized
compliance
costs
by
facility,
the
annualized
capital,
permitting,
and
repermitting
costs
are
summed,
and
the
O&
M
costs,
which
are
incurred
annually,
are
added.
The
facility
totals
are
then
weighted,
and
totaled
by
facility
type.

2.
ADDITIONAL
REGIONAL
COSTS
FOR
CALIFORNIA
Since
we
project
no
additional
facilities
to
be
constructed
off
of
California,
the
cost
totals
for
new
facilities
do
not
include
permitting
costs
for
California
(
Region
9).
If
EPA
decided
to
regulate
existing
facilities
then
all
facilities
operating
in
Region
9
would
need
to
incur
extra
costs
associated
with
prepermitting
studies
and
monitoring.
3
These
study
and
monitoring
costs
are
assumed
to
be
shared,
and
for
simplicity
are
assumed
to
all
be
incurred
in
2007.
ERG
assumes
that
the
costs
of
the
regional
shared
prepermitting
and
monitoring
studies
would
be
the
same
as
those
incurred
by
Region
6
facilities
and
has
used
those
costs
as
calculated
in
the
Compliance
Cost
Model,
spreadsheet
labeled
"
Facility
Cost
­
Proposed
Rule"
(
DCN
7­
4018).
For
more
information
on
the
individual
cost
items
that
comprise
monitoring
and
prepermitting
study
costs
see
also
ERG
(
2004b).
These
costs
are
annualized
over
30
years.
3
3.
RESULTS
Overall
total
costs
for
the
estimated
205
existing
facilities
are
presented
below
in
Table
1.
As
the
table
shows,
the
incremental,
pre­
tax,
annualized
cost
of
bringing
the
estimated
205
existing
platforms
and
MODUs
into
compliance
with
the
proposed
rule
is
$
8.0
million
per
year.
Compliance
costs
for
existing
MODUs
are
$
3.6
million
and
compliance
costs
for
existing
platforms
are
$
4.5
million
(
including
additional
costs
for
Region
9
and
.
Region
10
platforms).

Table
1
Total
Annualized
Cost
for
Existing
Facilities
Cost
Type
Total
Annualized
Cost
MODUs
$
3,565,657
Platforms
$
4,244,890
Region
9
$
202,628
Region
10
$
3,890
Total
$
8,017,065
Source:
ERG
estimates
based
on
U.
S.
EPA,
2004a,
DCN
7­
4018,
and
ERG,
2004a.
See
DCN
7­
4030
for
these
calculations.

3.
REFERENCES
U.
S.
Environmental
Protection
Agency
(
U.
S.
EPA).
2004a.
Technical
Development
Document
for
the
Proposed
Section
316(
b)
Phase
III
Rule.

U.
S.
Environmental
Protection
Agency
(
U.
S.
EPA).
2004b.
Economic
Analysis
for
the
Proposed
Section
316(
b)
Rule
for
Phase
III
Facilities.

ERG.
2004a.
Calculation
of
Weights
for
Engineering
Cost
Estimates.
Memorandum
to
the
316(
b)
Phase
III
Rulemaking
Record.
September
24,
2004.

ERG.
2004b.
Cost
Timing
and
Cost
Sharing
Assumptions
for
Industry
Compliance
Costs.
Memorandum
to
the
316(
b)
Phase
III
Rulemaking
Record.
October
15,
2004.
