The economic impacts of alternative underground storage tank regulations on the vulnerable segments of the retail motor fuel market in Virginia

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Virginia Polytechnic Institute and State University


The passage of the Hazardous and Solid Waste Amendments of 1984 (HSWA) and the Superfund Amendments and Reauthorization Act of 1986 (SARA) amended subtitle I of the Resource Conservation and Recovery Act (RCRA). RCRA now requires the Environmental Protection Agency (EPA) to promulgate regulations applicable to all owners and operators of underground storage tanks (USTs) containing petroleum products, and substances listed as hazardous in the Comprehensive Environmental Response Compensation and Liability Act, but not regulated as hazardous waste under RCRA subtitle C. On 17 April 1987, EPA issued proposed regulations for leak detection, leak prevention, financial responsibility and corrective action for USTs containing regulated substances.

Concern over potential adverse economic impacts caused by UST regulation has centered on the retail motor fuel market, due primarily to its large size and relatively large number of small businesses. While public and private studies have been conducted concerning the economic impact of UST regulation on the retail motor fuel market, a need for additional research is indicated.

This thesis presents the findings to date of a study examining the economic impacts that alternative UST regulatory programs would have on the retail motor fuel market in the United States, with emphasis, where possible, on this market in Virginia. The market is broken into five segments based on similar economic and management characteristics. The segment most likely to contain significant numbers of firms that could be forced out of business due to UST regulation is identified. Proposed minimum federal UST regulations are described and relevant regulatory costs are presented. Three additional UST regulatory programs are developed representing varying degrees of stringency relative to the proposed minimum federal regulations. Case studies of firms located in the vulnerable segment of the retail motor fuel market identified earlier are analyzed in terms of the effect that alternative UST regulations would have on yearly owner remuneration (which is defined to include both the return to the owner as a factor of production and the profit remaining after all returns to land, capital, and labor have been paid). Hypothetical firms with profit levels determined by EPA as average for two segments of the regulated community are analyzed in a similar fashion to reflect the effect of alternative UST regulations on profits.