II. ECONOMIC IMPACT ANALYSIS FOR GASOLINE DISPENSING FACILITIES

• Executive Summary

The proposed rule amendments are not expected to impose substantial additional costs on the affected parties and will result in economic benefits for some. Some may incur low capital costs, in complying with the proposed amendments, for items such as pressure/vacuum valves (approximately $145) and boots on the nozzles of vapor assist systems (approximately $10). In addition, the proposed amendments will encourage owners and operators to repair broken equipment in a more timely fashion. The amendments do not include a number of the more costly elements of the new standards and procedures adopted by CARB on July 25, 2001. Higher-cost measures, such as those that would entail digging up and modifying underground structures solely to meet the new requirements, are not being proposed. Rather this proposal addresses lower cost measures (measures many owners and operators have already undertaken voluntarily at their facilities) and facility maintenance. To the extent that the amendments would require the owners or operators of gasoline dispensing facilities to upgrade certain equipment, this would have a positive economic impact on equipment manufacturers and distributors who would produce and supply the equipment.

The amendments would also require annual testing to ensure that the vapor control systems are well maintained and functioning properly. This testing requirement would impose moderate costs on owners and operators of gasoline dispensing facilities. Typically these costs would be $ 700 to $ 900 annually, depending on whether the facility has a vapor balance system or a vapor assist system. For testing contractors, this requirement would have a positive impact on the level of demand for their services.

In order to assure that their facility passes these new testing requirements, some owners and operators will have to ensure that their facilities are better-maintained and that needed repairs are made. For persons who provide maintenance and repair services to gasoline dispensing stations, this requirement could have a positive impact on the level of demand for their services. Additionally, when stations are maintained so as to be more leak-free, their owners and operators will experience the positive impact of reducing inadvertent product loss, since the recaptured gasoline vapors are condensed back to liquid form and recovered, and are again available for sale.

There are approximately 3,800 retail gasoline dispensing facilities in New Jersey. It is estimated that about 10 percent of these facilities have "vacuum assist" vapor recovery systems, and that the remainder have "vapor balance" systems. In performing this analysis, the costs were estimated separately for gasoline dispensing facilities with "vapor balance" vapor control systems and those with "vapor assist" vapor control systems. Both initial capital costs and the on-going annual costs of testing were estimated for five different categories of gasoline dispensing facilities, based on the size of their gasoline throughput.

A summary of the cost analysis is shown in Table 1 and discussed below. The summary table presents the results of the cost analysis in three ways: 1. estimated total costs per facility, which include capital costs and annual testing costs, 2. estimated cost effectiveness in dollars per pound of VOC reduced, and 3. estimated cost ( in cents) per gallon of gasoline dispensed.

As shown in Table 1, the Department estimates that the total cost to these facilities of implementing the gasoline transfer provision amendments at N.J.A.C. 7:27-16.3 will average less than one tenth of one penny per gallon of gasoline dispensed, and for some facilities will result in cost savings in future years. Also shown in Table 1, the Department estimates that the cost effectiveness of these amendments will average less than one half dollar per pound of VOC reduced or $720 per ton of VOC reduced in the first year, and $180 per ton of VOC reduced in the second and subsequent years.

• Calculation Methodology and Results

The economic impact analysis consists of several parts. First, base assumptions were established such as gasoline throughput, number of gasoline dispensing facilities, distribution of gasoline throughput by facility, number of vapor assist facilities, number of balanced facilities, number of vent pipes, dispensers, nozzles. The cost analysis assumptions and sources are shown in Table 2.

The costs were estimated for balanced facilities and vapor assist facilities separately. Total capital costs and annual costs were estimated per facility. Then the cost effectiveness of the proposal in dollars per pound of Volatile Organic Compounds (VOC) reduced was estimated. Then per gallon costs in cents per gallon were estimated.

In this analysis, the gasoline dispensing facilities were put into five categories (GDF 1 through 5) based on throughput of gasoline. The distribution of the number of facilities in each category was estimated using CARB ⁽¹⁾ methodology. An annual gasoline recovery credit was used in the calculations. This accounts for the retail value of the gasoline recovered that would have been lost as emissions instead of sold as gasoline.

Table 3 shows the results of the cost analysis. Table 4 summarizes the costs for facilities with vapor balance systems. Table 5 summarizes the costs for facilities with vapor assist systems. Tables 4 and 5 also show estimated capital equipment costs.

The tables present the results of the cost analysis in three ways: 1. estimated total costs per facility, which include capital costs and annual testing costs, 2. estimated cost effectiveness in dollars per pound of VOC reduced, and 3. estimated cost ( in cents) per gallon of gasoline dispensed.

The estimated cost per facility assumes a conservative worst case scenario that all facilities do not have complying equipment, which is not the reality. Some facilities have equipment that complies with the proposed rule. All of the calculations conservatively assume that all the equipment will be replaced in one year, when additional time is provided in the proposal.

While economic impacts have been quantified to the extent feasible, some projections are necessarily qualitative or semi-quantitative and based on general observations about the industry. This impact analysis, therefore, serves to provide a general picture of the economic impacts that typical facilities subject to the proposed regulation might encounter. Individual facilities may experience impacts different than those projected in this analysis.

III. ESTIMATED VOLATILE ORGANIC COMPOUND (VOC) EMISSION REDUCTIONS

In this analysis, estimated statewide VOC emission reductions from implementation of this proposed rule are 14.2 tons per day (TPD) in 2005 and 14.5 TPD in 2007. The proposed rule is estimated to result in a reduction in VOC emissions of approximately 3.5 TPD in the New Jersey portions of the Philadelphia Non-attainment Area in 2005 and 9.6 TPD in the New Jersey portion of the New York Non-attainment Area in 2007. A summary of the estimated emission reductions is shown in Table 1. The emission reduction calculations are shown in more detail below ⁽²⁾.

Notes: NJ portions of the Philadelphia and New York non-attainment areas were calculated using VMT data and growth factors used in the March 31, 2001 NJ SIP.

2. Stage I Vapor Recovery