My name is Jim Bertelsmeyer and I am Chairman of Heritage Propane, headquartered in Tulsa, Oklahoma. In my real life I run a propane marketing company, but I appear before you today as President of the National Propane Gas Association.
NPGA is the national trade association representing the propane gas industry. The association's membership includes around 3,700 companies that market propane gas and equipment in all 50 states and in every congressional district. The single largest group of members are retail marketers of propane gas, but the association also includes propane producers, transporters, manufacturers and distributors of equipment, containers, and appliances. Propane is used in over 18 million installations nationwide for home and commercial heating and cooking, in agriculture, in industrial processing, and as a clean air alternative engine fuel for both over-the-road vehicles and forklifts.
As strong advocates for increased alternative fuel usage in the U.S., NPGA supported many of the goals and provisions of the Clean Air Act Amendments of 1990 and the Energy Policy Act of 1992. We continue to support the intent of these laws, but we cannot support the way in which they are being abused by the EPA. The unintended consequences of implementing the Section 112(r) of the Clean Air Act in ways never envisioned by Congress have led us to this situation today.
My statement today focuses on the many concerns the propane industry has with EPA's Risk Management Program (RMP) regulations, issued under authority of Section 112(r) of the Clean Air Act Amendments of 1990. Our concerns are that EPA's rules will:
duplicate an extensive and credible safety infrastructure that has existed for decades in all 50 states without exception through state building and fire codes;
reduce safety in the propane industry by causing customers to demand more small deliveries rather than the safer alternative if fewer large deliveries;
degrade air quality by stifling development of propane use as an alternative fuel;
cause propane users to switch to less environmentally desirable fuels not similarly covered; and
cost the propane marketers and customers vast sums of money for little or no increase in safety.
The remainder of this statement provides additional information supporting these concerns.
PROPANE FACILITIES ARE ALREADY CLOSELY REGULATED AT THE STATE AND FEDERAL LEVELS
Propane facilities, whether they be bulk storage plants owned by marketers or smaller storage facilities operated by customers, are subject to regulation in all 50 states through building and fire codes. These codes without exception adopt or incorporate Safety Standard 58, Liquefied Petroleum Gas Code, published by the National Fire Protection Association (NFPA).
NFPA 58 is adopted by state agencies either by reference or by direct incorporation. Forty- eight states have adopted NFPA 58 by reference, which means that the state agency's rules simply require propane facilities to be designed, constructed, and operated in accordance with NFPA 58. The remaining two states (Texas and Arkansas) have adopted NFPA 58 by direct incorporation, which means that they have taken the substance of the standard and written it into their own building or fire codes. Both methods allow for code inspectors to determine compliance with NFPA 58, thereby ensuring they are operated as safely as possible.
As a service to its members, NPGA recently published a new edition of the State Laws and Regulations Handbook, which summarizes the status of propane regulation in all 50 states. A copy of that document is attached to this statement for incorporation in the record.
The propane industry also complies with the following federal regulations:
DOT's hazardous materials regulations, which as of October 1, 1998 apply to both interstate and intrastate operations; OSHA's workplace safety rules, including the Process Safety Management (PSM) rules where applicable; and EPA's rules implementing the Emergency Planning and Community Right-to-Know Act of 1986 which requires facility data to be available to emergency responders and to the public.
PROPANE MARKETERS ACTIVELY PROMOTE SAFETY
The propane industry takes its safety responsibilities very seriously. Indeed, NPGA is now engaged with numerous other stakeholders in a major DOT regulatory proceeding that promises dramatic increases in safety. NPGA is proud to be an active participant in a negotiated rulemaking committee charged with updating delivery truck safety features and operating procedures for the safe unloading of propane at the customer's tank. The results of this reg-neg will be a significant jump in safety taking full advantage of both new technologies and the industry's commitment to safety.
The propane industry voluntarily spends significant time and money training local fire departments all over the nation. Emergency responders need to be as highly trained as possible, and we are putting our money where our mouth is. This industry is spending $652,000 on the national level this year alone to develop a comprehensive training curriculum for emergency response personnel, which should be available for free later this summer. Furthermore, through the national association, we are adopting the safety recommendations of the U.S. Chemical Safety Board to upgrade the training materials available to the emergency response community.
HISTORY OF SECTION 112(r) AND EPA's RISK MANAGEMENT PROGRAM RULES
On November 15, 1990, President Bush signed the Clean Air Act Amendments of 1990 into law. Section 112(r) of the Act requires EPA to publish regulations to prevent and minimize the consequences of accidental releases of hazardous substances. EPA was to publish a list of at least 100 hazardous substances and implement a program whereby facilities using listed substances would make detailed risk management plans available to EPA and the public. EPA finalized its list of substances, which included propane, on January 31, 1994, and its Risk Management Program (RMP) regulations applicable to listed substances on June 20, 1996. Since NPGA comments were largely ignored by the Agency in both rulemakings, NPGA sued on August 18, 1996 seeking relief from the regulations.
The RMP regulations establish three increasingly rigorous compliance paths for facilities having listed hazardous materials on site in greater than threshold quantities. For propane facilities, the threshold quantity is 10,000 pounds or 2381 gallons at 60 degrees Farenheit. EPA's RMP rules cover all facilities, whether they be industrial, commercial, agricultural, or residential, having more than the threshold quantity of 10,000 pounds of propane on site. The propane need not be in a single tank, or even in interconnected tanks. 2381 gallons of propane is typically the amount that a small commercial facility would have, although there are many residences that have this amount.
Program 1 participants must develop a worst-case scenario and analyze all releases over the past 5 years, and coordinate emergency efforts with local responders. Propane marketers will qualify for Program 1 if their worst-case scenario demonstrates that there are no "public receptors" within range of the worst case scenario and if their 5-year accident history shows no deaths, injuries, or offsite restoration activities. The term "public receptor" means offsite residences, institutions such as schools and hospitals, industrial, commercial and office buildings, parks, or recreational areas inhabited or occupied at any time without restriction where members of the public could be exposed to radiant heat or overpressure as a result of an accidental release.
Program 2 requires more detailed hazard assessments and implementation of prescribed accident prevention steps. Program 2 participants must prepare at least one alternative release scenario that is more likely to occur than a worst case scenario. In addition, Program 2 participants must: (1) ensure that up-to-date safety information is available; (2) conduct a detailed hazard review of each facility; (3) prepare written operating procedures; (4) ensure each employee has been trained in the operating procedures; (5) maintain the mechanical integrity of all equipment; (6) complete compliance audits every 3 years; and (7) investigate each incident.
Program 3 is the most rigorous and will affect those propane marketers who are covered by OSHA's Process Safety Management (PSM) regulations (i.e., do not qualify for the retail exemption). Program 3 facilities must perform the same tasks as Program 2 facilities plus many others that are analogous, but not necessarily identical, to OSHA's PSM requirements.
The Clean Air Act imposes both civil and criminal penalties for violations of EPA rules. For civil violations, EPA may impose monetary penalties of no more than $25,000 per day per violation. For knowing violations of the Act, criminal monetary penalties of up to $25,000 per day per violation and/or up to 5 years in prison may be imposed.
EPA's RULES WILL DEGRADE SAFETY AT PROPANE FACILITIES
EPA's regulations, despite its "motherhood and apple pie" sounding requirements, will have unintended consequences that actually reduce safety. The unfortunate thing is that these unintended consequences are entirely foreseeable.
It goes without saying that many propane customers will seek to reduce the amount of propane they store to levels below the 10,000 pound threshold for coverage by the RMP rules. This will not, however, reduce customers' demands for timely deliveries of propane from their suppliers. Therefore, one of the major unintended consequences of EPA's RMP rules will be that propane delivery will be made much less safe. And since the industry's busiest time is during the winter heating season, these trucks will also have to deal with winter driving conditions that can be particularly challenging.
Not only will customers decide on their own to keep their storage low or switch fuels, they will be counseled or actually forced to do so by government agencies. Two particular cases have arisen in California. First, the Orange County Certified Unified Program Agency stated in a letter to businesses, "Should your business so choose, you may implement one of the following options in lieu of developing an RMP: (1) Eliminate or replace the Regulated Substance with a non-regulated substance, or (2) Reduce the amount onsite to below the federal threshold quantity." Secondly, California Assembly Bill 172 was introduced by Assembly Member Firebaugh on January 15, 1999. The bill would prohibit after January 1, 2000 any person from commencing any process involving propane or any other regulated substance that is located adjacent to a school. Notwithstanding the fact that the bill lumps propane - a non-toxic substance - in with many other exotic and lethal toxic substances, many schools use propane themselves and will therefore be forced to switch to other fuels.
Fuel switching is a reality. New information from the North Carolina Propane Gas Association shows that propane marketers in the state have already lost 213 customers, which is a demand loss of almost 5 million gallons. Furthermore, 360 customers are expected to downsize their storage capacity to avoid compliance.
While the industry prides itself on its excellent safety record, accidents do occasionally happen. But more often than not accidents are caused by or occur during transportation activities, which are not covered by the RMP rules. EPA's own data demonstrate that many more accidents occur during transportation than when propane is held for storage at a stationary site covered by the RMP rules. Conversely, EPA's data shows that (1) only a small minority of incidents occur at facilities targeted by the RMP rules, and (2) the majority of incidents are related to transportation activities not covered by the RMP rules.
NPGA reviewed the data that EPA placed in the RMP rule docket to justify its decision to cover propane. The EPA data obtained by NPGA is an undated printout of 112 incidents logged by the Major Hazard Incident Data Service (MHIDAS) and 52 pages of reprinted news articles covering propane incidents. EPA's data includes incidents going all the way back to 1951, and even includes an incident from Japan. Of the 157 incidents reviewed:
Only 31 incidents (19%) could be confirmed to have occurred at what would have been an RMP-covered facility. Of the remaining incidents, 89 incidents (57%) could be confirmed to have occurred at a facility not covered by the RMP rules. The record was too incomplete to make a judgment on 37 incidents.
Of the 31 incidents that occurred at RMP-covered facilities, only 16 incidents could be confirmed to have not been caused by or during transportation activities. Of the 16 non-transportation related incidents at RMP-covered facilities, only 11 incidents (7%) could be confirmed to have had offsite consequences. This is a critical figure because prevention of offsite consequences is the fundamental reason for the entire RMP regulation. Moreover, offsite consequences included such purely precautionary measures as evacuations, so actual damage did not occur in all cases. Finally, EPA's record justifying the RMP rules includes 8 incidents (5%) where propane was either not involved or was found not to have leaked.
EPA's RMP RULES WILL DEGRADE AIR QUALITY BY BURDENING A CLEAN ALTERNATIVE FUEL
EPA has adopted a regulation that will actually make air quality worse. Propane is a federally-approved alternative fuel under Section 241 of the Clean Air Act and Section 301 of the Energy Policy Act of 1992. NPGA strongly supported enactment of these provisions by Congress.
EPA's RMP rules will affect air quality in two ways. The first way is through actual fuel switching by customers to less environmentally desirable fuels that either are specifically not covered by RMP, such as fuel oil and electricity, or that are typically not stored in bulk quantities, like natural gas. Customers switch fuels for a variety of reasons. First, companies are considering switching fuels because the RMP rules are very complex and burdensome. Not only do they require a substantial initial investment to get into compliance, they require continuing allocation of resources to ensure continued compliance in the future. Remember, too, that companies will be urged in no uncertain terms by agencies like Orange County California's that fuel switching is a viable alternative to compliance. Second, companies are considering switching fuels because the RMP rules come with a high public relations price tag. What facility will feel its position in the community has been enhanced by the publication of information showing that an accident could devastate its neighborhood? Such information is a powerful incentive to switch fuels. And such information will be unnecessarily scary because EPA's modeling requirements, according to the National Fire Protection Association, will predict impacts far greater than an actual worst case release could produce.
The second way EPA's rules will degrade air quality is through stigmatizing the use of propane as an alternative engine fuel. Propane is widely used as an engine fuel. Due to the low pollution characteristics of propane, more than 300,000 forklifts and other indoor vehicles use this fuel. In addition, over 80,000 bus, taxi, and delivery services and fleets are powered by propane. It is common knowledge that the alternative fuel vehicle industry remains in its infancy, and needs all the help it can get, especially in these times of unprecedented low gasoline prices. The RMP rules will erect just one more burden that propane needs to overcome as the industry strives to make widespread acceptance and commercialization a reality.
Congressional interest in removing impediments to usage of alternative fuels has been strong and consistent. For example, on August 5, 1997, President Clinton signed the Taxpayer Relief Act of 1987 into law which included a provision to remove tax-related burdens on propane use as an alternative fuel. Specifically, the Act included a provision providing propane and other alternative motor fuels federal excise tax parity with gasoline. Under this provision, the effective rate of the federal excise tax on these fuels should be the same as the rate on gasoline.
EPA VASTLY UNDERESTIMATES THE REACH OF THE RMP PROGRAM
EPA estimated in its final RMP rule that only 66,100 stationary sources would be covered by the entire RMP rule, which applies to 140 different toxic And flammable substances.
Subsequently, EPA estimated that approximately 28,000 facilities will be brought into the RMP program specifically because of propane storage.
NPGA believes EPA's estimates to be spectacularly low. In 1991, NPGA commissioned a statistical survey of the propane industry, and the responses were compiled by the independent accounting firm Baldwin & Brooks. That study shows that 660,000 farms, 350,000 industrial and utility sites, and over 1 million commercial facilities use propane on their sites. Of these use sectors, we believe that 100% of the industrial facilities will be RMP-covered, 50% of the farms will RMP-covered, and 30% of commercial facilities will be RMP-covered. This totals over 1 million RMP sites just for propane alone.
Another indicator of the vast underestimation of the regulated community comes from North Carolina's Department of Environment and Natural Resources. The Department sent a letter to EPA on November 9, 1998 stating that in North Carolina, approximately 11,000 farms use propane to cure tobacco. In other words, a single propane user sector - farmers-- of a single propane use -- curing tobacco-- in a single state totals nearly 33% of EPA's entire national estimate for propane. Add in the 12,000 marketer facilities that exist across the nation, and you've already accounted for over 80% of EPA's national estimate.
EPA ALSO VASTLY UNDERESTIMATES THE COSTS OF THE RMP PROGRAM
Many propane marketers and customers will need to rely on outside assistance to comply with the RMP rules, and their reasons vary. EPA protestations to the contrary, the RMP rules are complex and take significant amounts of time and effort to comply. A marketer may have numerous bulk storage facilities, or may have numerous customers who ask for help and advice. Most customers will be unprepared to comply from a technical standpoint.
NPGA sought information on the fees being charged by 36 engineering consulting firms. 23 consultants declined to give figures. Of the 13 firms who did provide fee estimates for RMP preparation, only two came in below $2000, while 11 firms were equal to or greater than $2000.
Hourly fees ranged from $25-140, and daily fees ranged from $500-2000. One firm said that RMPs could cost as much as $20,000! Most recently, a consultant stated during his presentation to the New York Propane Gas Association that a Program 2 RMP takes 30-70 hours to complete and costs from $3-5,000, depending on the amount of site-specific preparation that has taken place.
Even if a marketer or user chooses to avail himself of the EPA's free RMP submittal software or other compliance assistance tools, compliance with the RMP rules will drain scarce resources away from other activities that increase safety. For example, one propane marketer in Wisconsin sends its drivers to a special driving track where they learn how to handle their delivery trucks on frozen pavement. This is not a free activity, of course, and may well have to be dropped if the money must be spent complying with the RMP rules.
NPGA has quantified the costs of the RMP program to propane marketers and customers. Our estimate does not include any fees assessed by those states that have taken over RMP enforcement from EPA, which can be hundreds or even thousands of dollars per site. While compliance with EPA's rules does not entail a fee, EPA explicitly recommended that all states adopt fees for administering the program for EPA.
Using a conservative estimate of $1,000 per site in compliance costs, which includes direct costs such as consulting fees or computer software and also indirect costs such as company staff time, the RMP rules will cost:
--$330 million to the farm sector;
--$675 million to all other covered propane customers;
--$12 million to propane bulk storage plants.
The bottom line is that the RMP rules are an expensive and duplicative paperwork exercise that will have little or no discernible impact on safety, but which will drain more than $1 billion away from marketers and their customers.
RECENT DEVELOPMENTS ON NPGA'S LAWSUIT
NPGA has pursued all available avenues to obtain relief from the burdensome RMP rules, including filing a lawsuit on August 19, 1996. Despite industry's good-faith attempts to negotiate a settlement, the Agency has consistently rebuffed the industry. Most recently, EPA extended a 4-part settlement offer to make minor changes to the guidance documents and the rules specifically targeting rural agricultural users. NPGA rejected the offer on February 22, 1999 on both procedural and substantive grounds. Not only would the changes not have had the force of law, they would not have addressed the underlying issues of fuel switching and decreases in safety that have been detailed elsewhere in this testimony.
NPGA is prepared to brief the case, but we are unable to get a court date until October 1999 at the earliest. This is, of course, 4 months after the compliance date for the RMP rules. We have formally requested EPA for at least a one-year stay in the rules' effective date to allow resolution of the case. We are hopeful that the Agency will respond favorably, of course, but we are not optimistic.
CONCLUSION
Mr. Chairman, EPA's RMP rules should not cover propane. The rules will cause customers to switch to other less environmentally friendly fuels. The rules will decrease safety by increasing the number of small deliveries on America's roads. The rules will erect disincentives to use of a Congressionally-approved clean air fuel. The rules will cause confusion in the marketplace by duplicating safety standards that have existed in all 50 states for many years. The rules will drain scarce resources away from real safety initiatives and into a paperwork exercise with few benefits. The rules are an expensive paperwork burden that are clearly not justified.
Thank you for this opportunity to testify.