Regulatory Impact Analysis (RIA) for Existing 

Stationary Compression Ignition Engines 

NESHAP 

 Final Draft 
This page is intentionally blank. 
EPA 452/R-10-002 

February 2010 

Regulatory Impact Analysis (RIA) for Existing Stationary Compression Ignition Engines 

NESHAP 

By: 

Paramita Sinha, Brooks Depro, and Fern Braun 

RTI International 

Research Triangle Park, North Carolina 

Prepared for: 

Larry Sorrels 

Contract No. EP-D-06-003 

U.S. Environmental Protection Agency 

Office of Air Quality Planning and Standards 

Health and Environmental Impacts Division 

Air Benefits and Costs Group 

Research Triangle Park, NC 
 RTI Project Number 

 0209897.003.061 

 

Regulatory Impact Analysis (RIA) 

for Existing Stationary 

Compression Ignition Engines 

NESHAP 

Final Report

February 2010 

Prepared for 

Larry Sorrels 

U.S. Environmental Protection Agency 

Office of Air Quality Planning and Standards (OAQPS) 

Air Benefit and Cost Group (ABCG) 

(MD-C439-02)

Research Triangle Park, NC 27711 

Prepared by 

Paramita Sinha 

Brooks Depro 

Fern Braun 

RTI International 

3040 Cornwallis Road 

Research Triangle Park, NC 27709
iii 

CONTENTS 

Section Page

1 Executive Summary ...................................................................................................... 1-1

2 Introduction ................................................................................................................... 2-1

2.1 Organization of this Report .................................................................................. 2-1

3 Industry Profile ............................................................................................................. 3-1

3.1 Electric Power Generation, Transmission, and Distribution ............................... 3-1

3.1.1 Overview .................................................................................................. 3-1

3.1.2 Goods and Services Used ......................................................................... 3-3

3.1.3 Business Statistics .................................................................................... 3-4

3.2 Oil and Gas Extraction ......................................................................................... 3-6

3.2.1 Overview .................................................................................................. 3-6

3.2.2 Goods and Services Used ......................................................................... 3-9

3.2.3 Business Statistics .................................................................................... 3-9

3.2.4 Case Study: Marginal Wells .................................................................. 3-14

3.3 Pipeline Transportation of Natural Gas ............................................................. 3-16

3.3.1 Overview ................................................................................................ 3-16

3.3.2 Goods and Services Used ....................................................................... 3-16

3.3.3 Business Statistics .................................................................................. 3-19

3.4 General Medical and Surgical Hospitals ............................................................ 3-22

3.4.1 Overview ................................................................................................ 3-22

3.4.2 Goods and Services Used ....................................................................... 3-22

3.4.3 Business Statistics .................................................................................. 3-24

3.5 Irrigation Sets and Welding Equipment ............................................................. 3-28

3.5.1 Overview ................................................................................................ 3-28

3.5.2 Irrigation and Welding Services ............................................................ 3-28

3.5.3 Business Statistics .................................................................................. 3-33
iv 

4 Regulatory Alternatives, Costs, and Emission Impacts ................................................ 4-1

4.1 Background .......................................................................................................... 4-1

4.2 Summary of the Proposed Rule ........................................................................... 4-2

4.2.1 What Is the Source Category Regulated by this Proposed Rule? ............ 4-2

4.2.2 What Are the Pollutants Regulated by this Proposed Rule? .................... 4-5

4.2.3 What Are the Final Requirements? .......................................................... 4-6

4.2.4 What Are the Requirements for Demonstrating Compliance? .............. 4-12

4.2.5 What Are the Reporting and Recordkeeping Requirements? ................ 4-14

4.3 Summary of Significant Changes Since Proposal ............................................. 4-16

4.3.1 Applicability .......................................................................................... 4-16

4.3.2 Final Emission Limits ............................................................................ 4-17

4.3.3 Management Practices ........................................................................... 4-19

4.4 Cost Impacts....................................................................................................... 4-22

4.4.1 Introduction ............................................................................................ 4-22

4.4.2 Major Sources ........................................................................................ 4-26

4.4.3 Area Sources .......................................................................................... 4-28 

4.5 Emissions and Emission Reductions ................................................................. 4-38

5 Economic Impact Analysis, Energy Impacts, and Social Costs ................................... 5-1

5.1 Compliance Costs of the Final Rule .................................................................... 5-1

5.2 How Might People and Firms Respond? A Partial Equilibrium Analysis .......... 5-5

5.2.1 Changes in Market Prices and Quantities ................................................ 5-5

5.2.2 Regulated Markets: The Electric Power Generation, Transmission, 

and Distribution Sector ............................................................................ 5-7

5.2.3 Partial Equilibrium Measures of Social Cost: Changes Consumer 

and Producer Surplus ............................................................................... 5-8

5.3 Social Cost Estimate ............................................................................................ 5-9

5.4 Energy Impacts .................................................................................................. 5-10

5.5 Unfunded Mandates ........................................................................................... 5-10 

. 5.5.1 Future and Disproportionate Costs ........................................................ 5-12
v 

5.5.2 Effects on the National Economy .......................................................... 5-12 

 5.6 Environmental Justice.................................................................5-11 

6 Small Entity Screening Analysis .................................................................................. 6-1

6.1 Small Entity Data Set ........................................................................................... 6-1

6.2 Small Entity Economic Impact Measures ............................................................ 6-2

6.2.1 Model Establishment Receipts and Annual Compliance Costs ............... 6-2

6.3 Small Government Entities ................................................................................ 6-12

7 Human Health Benefits of Emissions Reductions ........................................................ 7-1

7.1 Synopsis ............................................................................................................... 7-1

7.2 Calculation of Human Health Co-benefits ........................................................... 7-1

7.3 Unquantified Benefits ........................................................................................ 7-11

7.4 Characterization of Uncertainty in the Monetized Co-benefits ......................... 7-21

7.5 Comparison of Benefits and Costs ..................................................................... 7-23

8 References ..................................................................................................................... 8-1
vi 

LIST OF FIGURES 

Number Page

3-1. Industrial Production Index (NAICS 2211) ................................................................ 3-2

3-2. Internal Combustion Generators by State: 2006 ......................................................... 3-3

3-3. 2002 Regional Distribution of Establishments: Electric Power Generation, 

Transmission, and Distribution Industry (NAICS 2211) ............................................ 3-5

3-4. Industrial Production Index (NAICS 211) ................................................................ 3-11

3-5. 2002 Regional Distribution of Establishments: Crude Petroleum and Natural 

Gas Extraction Industry (NAICS 211111) ................................................................ 3-13

3-6. 2002 Regional Distribution of Establishments: Natural Gas Liquid Extraction 

Industry (NAICS 211112) ......................................................................................... 3-14

3-7. Trends in Marginal Oil and Gas Production: 1997 to 2006 ...................................... 3-17

3-8. Distribution of Establishments within Pipeline Transportation (NAICS 486) .......... 3-18

3-9. Distribution of Revenue within Pipeline Transportation (NAICS 486) .................... 3-18

3-10. 2002 Regional Distribution of Establishments: Pipeline Transportation (NAICS 

486) ............................................................................................................................ 3-20

3-11. Share of Establishments by Legal Form of Organization in the Pipeline 

Transportation of Natural Gas Industry (NAICS 48621): 2002 ................................ 3-21

3-12. 2002 Regional Distribution of Establishments: General Medical and Surgical 

Hospital Industry (NAICS 6221) .............................................................................. 3-25

3-13. Share of Establishments by Legal Form of Organization in the General Medical 

and Surgical Hospitals Industry (NAICS 6221): 2002 .............................................. 3-26

3-14. Industrial Production Index (NAICS 333111) .......................................................... 3-30

3-15. 2003 Regional Distribution of Irrigated Acres .......................................................... 3-33

3-16. 2002 Regional Distribution of Establishments: Heavy and Civil Engineering 

Construction (NAICS 237) ........................................................................................ 3-34

5-1. Distribution of Annualized Direct Compliance Costs by Industry: 2013 ................... 5-2

5-2. Distribution of Engine Population by Horsepower Group: 2013 ................................ 5-3

5-3. Average Annualized Cost per Engine by Horsepower Group: 2013 ($2007) ............. 5-3

5-4. Market Demand and Supply Model: With and Without Regulation ........................... 5-6

5-5. Electricity Restructuring by State ................................................................................ 5-9

7-1. Breakdown of Monetized PM2.5 Health Co-benefits using Mortality Function 

from Pope et al. (2002) ................................................................................................ 7-7

7-2. Total Monetized PM2.5 Co-Benefits of RICE NESHAP in 2013 ............................ 7-10

7-3. Breakdown of Monetized Co-benefits for RICE NESHAP by PM2.5 Precursor 

Pollutant and Source .................................................................................................. 7-10
vii 

7-4. Net Benefits for RICE NESHAP at 3% Discount Rate ............................................. 7-24

7-5. Net Benefits for RICE NESHAP at 7% Discount Rate ............................................. 7-25
viii 

LIST OF TABLES 

Number Page

3-1. Key Statistics: Electric Power Generation, Transmission, and Distribution 

(NAICS 2211) ($2007) ................................................................................................ 3-2

3-2. Direct Requirements for Electric Power Generation, Transmission, and 

Distribution (NAICS 2211): 2002 ............................................................................... 3-4

3-3. Firm Concentration for Electric Power Generation, Transmission, and 

Distribution (NAICS 2211): 2002 ............................................................................... 3-6

3-4. United States Retail Electricity Sales Statistics: 2006 ................................................ 3-8

3-5. FY 2007 Financial Data for 70 U.S. Shareholder-Owned Electric Utilities ............... 3-9

3-6. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 2211 ....................... 3-9

3-7. Key Enterprise Statistics by Receipt Size for Electric Power Generation, 

Transmission, and Distribution (NAICS 2211): 2002 ............................................... 3-10

3-8. Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111): 

($2007) ...................................................................................................................... 3-11

3-9. Key Statistics: Natural Gas Liquid Extraction (NAICS 211112) ($2007) ................ 3-12

3-10. Direct Requirements for Oil and Gas Extraction (NAICS 211): 2002 ...................... 3-12

3-11. Key Enterprise Statistics by Employment Size for Crude Petroleum and 

Natural Gas Extraction (NAICS 211111): 2002 ....................................................... 3-14

3-12. Key Enterprise Statistics by Employment Size for Crude Natural Gas Liquid 

Extraction (NAICS 211112): 2002 ............................................................................ 3-15

3-13. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 211 ....................... 3-15

3-14. Reported Gross Revenue Estimates from Marginal Wells: 2006 .............................. 3-16

3-15. Key Statistics: Pipeline Transportation of Natural Gas (NAICS 48621) ($2007) .... 3-17

3-16. Direct Requirements for Pipeline Transportation (NAICS 486): 2002 ..................... 3-19

3-17. Firm Concentration for Pipeline Transportation of Natural Gas (NAICS 

48621): 2002 .............................................................................................................. 3-21

3-18. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 486 ....................... 3-22

3-19. Key Enterprise Statistics by Receipt Size for Pipeline Transportation of Natural 

Gas (NAICS 48621): 2002 ........................................................................................ 3-23

3-20. Key Statistics: General Medical and Surgical Hospitals (NAICS 6221) ($2007) .... 3-24

3-21. Direct Requirements for Hospitals (NAICS 622): 2002 ........................................... 3-24

3-22. Firm Concentration for General Medical and Surgical Hospitals (NAICS 

6221): 2002 ................................................................................................................ 3-26

3-23. Government Control and Ownership for General Medical and Surgical 

Hospitals (NAICS 6221): 2002 ................................................................................. 3-27

3-24. Hospital Statistics: 2006 ............................................................................................ 3-27

3-25. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 622-4 .................... 3-27
ix 

3-26. Key Enterprise Statistics by Receipt Size for General Medical and Surgical 

Hospitals (NAICS 6221): 2002 ($2007) ................................................................... 3-29

3-27. Key Statistics: Farm Machinery and Equipment Manufacturing (NAICS 

333111) ($2007) ........................................................................................................ 3-30

3-28. Key Statistics: Welding and Soldering Equipment Manufacturing (NAICS 

333992) ($2007) ........................................................................................................ 3-31

3-29. Expenses per Acre by Type of Energy: 2003 ............................................................ 3-32

3-30. Number of On-Farm Pumps of Irrigation Water by Type of Energy: 1998 and 

2003 ........................................................................................................................... 3-32

3-31. Distribution of Farm Statistics by Market Value of Agricultural Products Sold: 

2003 ........................................................................................................................... 3-34

3-32. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 3331,9 .................. 3-35

3-33. Key Enterprise Statistics by Receipt Size for Heavy Construction: 2002 ................ 3-36

4-1. Requirements for Existing Stationary CI RICE Located at Major Sources ................ 4-7

4-2. Requirements for Existing Stationary RICE Located at Area Sources ....................... 4-9

4-3. CI RICE Control Technologies and Costs .................................................................. 4-9

4-4. Summary of Major Source and Area Source Costs for the CI RICE NESHAP ....... 4-30

4-5. Summary of Major Source and Area Source NAICS Costs for the CI RICE 

NESHAP ................................................................................................................... 4-31

4-6. Summary of Major Source and Area Source NAICS Costs for the CI RICE 

NESHAP – by Size .................................................................................................... 4-32

4-7. Summary of Major Source and Area Source NAICS Costs for the CI RICE 

NESHAP – by Number of Engines ........................................................................... 4-35 

4-8. Summary of Major Source and Area Source Emission Reductions for the CI RICE 

......... NESHAP – by 2013 ...........................................................................4-36 

5-1. Selected Industry-Level Annualized Compliance Costs as a Fraction of Total 

Industry Revenue: 2008 ............................................................................................... 5-4

5-2. Hypothetical Price Increases for a 1% Increase in Unit Costs .................................... 5-7

5-3. Hypothetical Consumption Decreases for a 1% Increase in Unit Costs ..................... 5-8

5-4. U.S. Electric Powera Sector Energy Consumption (Quadrillion BTUs): 2013 ......... 5-12

6-1. Final NESHAP for Existing Stationary Reciprocating Internal Combustion 

Engines (RICE): Affected Sectors and SBA Small Business Size Standards ............. 6-3

6-2. Average Receipts for Affected Industry by Enterprise: 2002 ($2008 

Million/establishment) ................................................................................................. 6-6

6-3. Average Receipts for Affected Industry by Enterprise Receipt Range: 2002 

($2008 /establishment) ................................................................................................ 6-7

6-4. Representative Establishment Costs Used for Small Entity Analysis ($2008) ........... 6-9

7-1. Human Health and Welfare Effects of PM2.5 .............................................................. 7-2
x 

7-2. Summary of Monetized Co-benefits Estimates for RICE NESHAP for 

Compression Ignition in 2013 (2008$) ....................................................................... 7-8

7-3. Summary of Reductions in Health Incidences from PM2.5 Co-benefits for RICE 

NESHAP in 2013 ........................................................................................................ 7-8

7-4 All PM2.5 Co-benefits Estimates for the RICE NESHAP at discount rates of 3% 

and 7% in 2013 (in millions of 2008$) ........................................................................ 7-9

7-5. Sensitivity Analyses for Monetized Health Co-benefits (millions of 2008$) ........... 7-22
1-1 

SECTION 1

EXECUTIVE SUMMARY 

EPA estimates that complying with the final RICE rule will have an annualized cost of 

approximately $373 million per year (2008 dollars) in the year of full implementation of the rule 

(2013). Using these costs, EPA estimates in its economic impact analysis that the NESHAP will 

have limited impacts on the industries affected and their consumers. Using sales data obtained 

for affected small entities in an analysis of the impacts of this proposal on small entities, EPA 

expects that the NESHAP will not result in a SISNOSE (significant economic impacts for a 

substantial number of small entities). EPA also does not expect significant adverse energy 

impacts based on Executive Order 13211, an Executive Order that requires analysis of energy 

impacts for rules such as this one that are economically significant under Executive Order 12866. 

The RICE rule is also considered subject to the requirements of the Office of 

Management and Budget’s (OMB’s) Circular A-4 because EPA expects that either the benefits 

or the costs are potentially $1 billion or higher. EPA, estimates the total monetized co-benefits of 

the NESHAP to be $940 million to $2.3 billion (2008$) at a 3% discount rate and $850 million 

to $2.1 billion at a 7% discount rate in the year of full implementation of the rule (2013). EPA 

believes that the benefits are likely to exceed the annualized costs of $373 million by a 

substantial margin under this rulemaking even when taking into account uncertainties in the cost 

and benefit estimates. These estimates are “snapshots” of benefits and costs at year 2013. 
2-1 

SECTION 2

INTRODUCTION 

EPA is promulgating national emission standards for hazardous air pollutants for existing 

stationary compression ignition reciprocating internal combustion engines that either are located 

at area sources of hazardous air pollutant emissions or that have a site rating of less than or equal 

to 500 brake horsepower and are located at major sources of hazardous air pollutant emissions. 

In addition, EPA is promulgating national emission standards for hazardous air pollutants for 

existing nonemergency stationary compression ignition engines greater than 500 brake 

horsepower that are located at major sources of hazardous air pollutant emissions. 

The rule is economically significant according to Executive Order 12866. As part of the 

regulatory process of preparing these standards, EPA has prepared a regulatory impact analysis 

(RIA). This analysis includes an analysis of impacts to small entities as part of compliance with 

the Small Business Regulatory Enforcement Fairness Act (SBREFA) and an analysis of impacts 

on energy consumption and production to comply with Executive Order 13211 (Statement of 

Energy Effects). 

2.1 Organization of this Report 

The remainder of this report supports and details the methodology and the results of the 

EIA: 

 Section 3 presents a profile of the affected industries. 

 Section 4 presents a summary of regulatory alternatives considered in the proposed 

rule, and provides the compliance costs of the rule. 

 Section 5 describes the estimated costs of the regulation and describes the EIA 

methodology and reports market, welfare, and energy impacts. 

 Section 6 presents estimated impacts on small entities. 

 Section 7 presents the benefits estimates. 
3-1 

SECTION 3

INDUSTRY PROFILE 

Compression-ignition (CI) engines CI units almost always operate as lean burn engines. 

They can be configured as either two-stroke lean burn (2SLB) or 4-stroke lean burn (4SLB); the 

distinction is that CI engines are fueled by distillate fuel oil (diesel oil), not by natural gas. 

Industries in which CI engines are found are: 

 electric power generation, transmission, and distribution (NAICS 2211) 

 oil and gas extraction (including marginal wells) (NAICS 211111) 

 pipeline transportation of natural gas (NAICS 211112), 

 general medical and surgical hospitals (NAICS 622110) 

 irrigation sets and welding equipment (NAICS 335312 and 333992). 

This section provides an introduction to the industries affected by the rule. The purpose is 

to give the reader a general understanding of the economic aspects of the industry; their relative 

size, relationships with other sectors in the economy, trends for the industries, and financial 

statistics. The sectors discussed are 

3.1 Electric Power Generation, Transmission, and Distribution 

3.1.1 Overview 

Electric power generation, transmission, and distribution (NAICS 2211) is an industry 

group within the utilities sector (NAICS 22). It includes establishments that produce electrical 

energy or facilitate its transmission to the final consumer. 

From 1997 to 2002, revenues from electric power grew about 10% to over $373 billion 

($2007) (Table 3-1). At the same time, payroll rose about 6.5% and the number of employees 

decreased by over 5%. The number of establishments rose by over 15%, resulting in a decrease 

in average establishment revenue of almost 7%. Industrial production within NAICS 2211 has 

increased 25% since 1997 (Figure 3-1). 

Electric utility companies have traditionally been tightly regulated monopolies. Since 

1978, several laws and orders have been passed to encourage competition within the electricity 

market. In the late 1990s, many states began the process of restructuring their utility regulatory 

framework to support a competitive market. Following market manipulation in the early 2000s, 

however, several states have suspended their restructuring efforts. The majority (58%) of diesel 
3-2 

power generators controlled by combined heat and power (CHP) or independent power 

producers are located in states undergoing active restructuring (Figure 3-2). 

Table 3-1. Key Statistics: Electric Power Generation, Transmission, and Distribution 

(NAICS 2211) ($2007) 

1997 2002 

Revenue ($106) 337,490 373,309 

Payroll ($106) 38,176 40,842 

Employees 564,525 535,675 

Establishments 7,935 9,394 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 22: Utilities: 

Geographic Area Series: Summary Statistics: 2002 and 1997.” <http://factfinder.census.gov>; (November 26, 

2008). 

90

100

110

120

130

Index Values (Jan-97=100)

Figure 3-1. Industrial Production Index (NAICS 2211) 

Source: The Federal Reserve Board. “Industrial Production and Capacity Utilization: Industrial Production” Series 

ID: G17/IP_MINING_AND_UTILITY_DETAIL/IP.G2211.S <http://www.federalreserve.gov/datadownload/>. 

(15 December, 2008) 
3-3 

3.1.2 Goods and Services Used 

In Table 3-2, we use the latest detailed benchmark input-output data report by the Bureau 

of Economic Analysis (BEA) (2002) to identify the goods and services used in electric power 

generation. As shown, labor and tax requirements represent a significant share of the value of 

Diesel and Natural Gas Internal

Combustion Generators By State

No Restructuring

Suspended Restructuring

Active Restructuring

100

50

10

1

Figure 3-2. Internal Combustion Generators by State: 2006 

Source: U.S. Department of Energy, Energy Information Administration. 2007. “2006 EIA-906/920 Monthly Time 

Series.” 

power generation. Extraction, transportation, refining, and equipment requirements potentially 

associated with reciprocating internal combustion engines (oil and gas extraction, pipeline 

transportation, petroleum refineries, and turbine manufacturing) represent around 10% of the 

value of services. 
3-4 

3.1.3 Business Statistics 

The U.S. Economic Census and Statistics of U.S. Businesses (SUSB) programs provide 

national information on the distribution of economic variables by industry, location, and size of 

business. Throughout this section and report, we use the following definitions: 

 Establishment: An establishment is a single physical location where business is 

conducted or where services or industrial operations are performed. 

Table 3-2. Direct Requirements for Electric Power Generation, Transmission, and 

Distribution (NAICS 2211): 2002 

Commodity Commodity Description 

Direct Requirements 

Coefficientsa

V00100 Compensation of employees 20.52% 

V00200 Taxes on production and imports, less subsidies 13.71% 

211000 Oil and gas extraction 6.16% 

212100 Coal mining 5.86% 

482000 Rail transportation 3.01% 

230301 Nonresidential maintenance and repair 2.83% 

486000 Pipeline transportation 1.70% 

722000 Food services and drinking places 1.40% 

52A000 Monetary authorities and depository credit intermediation 1.39% 

541100 Legal services 1.13% 

a

 These values show the amount of the commodity required to produce $1.00 of the industry’s output. The values 

are expressed in percentage terms (coefficient ×100). 

Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table, 

Use Table and Direct Requirements Table. Tables 4 and 5. 

 Receipts: Receipts (net of taxes) are defined as the revenue for goods produced, 

distributed, or services provided, including revenue earned from premiums, 

commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all 

revenue collected for local, state, and federal taxes. 

 Firm: A firm is a business organization consisting of one or more domestic 

establishments in the same state and industry that were specified under common 

ownership or control. The firm and the establishment are the same for singleestablishment firms. For each multiestablishment firm, establishments in the same 

industry within a state are counted as one firm; the firm employment and annual 

payroll are summed from the associated establishments. 

 Enterprise: An enterprise is a business organization consisting of one or more 

domestic establishments that were specified under common ownership or control. The 
3-5 

enterprise and the establishment are the same for single-establishment firms. Each 

multiestablishment company forms one enterprise; the enterprise employment and 

annual payroll are summed from the associated establishments. Enterprise size 

designations are determined by the summed employment of all associated 

establishments. 

In 2002, Texas had almost 1,000 power establishments, while California, Georgia, and 

Ohio all had between 400 and 500 (Figure 3-3). Hawaii, Nebraska, and Rhode Island all had 

fewer than 20 establishments in their states. 

Establishments by State

Less than 100

100 - 199

200 - 349

350 - 500

More than 500

Figure 3-3. 2002 Regional Distribution of Establishments: Electric Power Generation, 

Transmission, and Distribution Industry (NAICS 2211) 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 22: Utilities: 

Geographic Area Series: Summary Statistics: 2002.” <http://factfinder.census.gov>; (November 10, 2008). 

As shown in Table 3-3, the four largest firms owned over 1,200 establishments and 

accounted for about 16% of total industry receipts/revenue. The 50 largest firms accounted for 

almost 6,000 establishments and about 78% of total receipts/revenue. 

Investor-owned energy providers accounted for 67.5% of retail electricity sold in the 

United States in 2006 (Table 3-4). In 2007, less regulated investor-owned electric utility 

companies were on average more profitable than companies with greater regulation (Table 3-5). 

In 2006, enterprises within NAICS 2211 had a pre-tax profit margin of only 0.9% (Table 3-6). 
3-6 

In 2002, about 82% of firms generating, transmitting, or distributing electric power had 

receipts of under $50 million (Table 3-7). However, these firms accounted for only 11% of 

employment, with 89% of employees working for firms with revenues in excess of $100 million. 

3.2 Oil and Gas Extraction 

3.2.1 Overview 

Oil and gas extraction (NAICS 211) is an industry group within the mining sector 

(NAICS 21). It includes establishments that operate or develop oil and gas field properties 

Table 3-3. Firm Concentration for Electric Power Generation, Transmission, and 

Distribution (NAICS 2211): 2002 

Commodity Establishments 

Receipts/Revenue 

Number of 

Employees 

Employees per 

Amount ($10 Establishment 6) 

Percentage 

of Total 

All firms 9,394 $325,028 100.0% 535,675 57 

4 largest firms 1,260 $52,349 16.1% 68,432 54 

8 largest firms 2,566 $95,223 29.3% 151,575 59 

20 largest firms 3,942 $173,207 53.3% 271,393 69 

50 largest firms 5,887 $253,015 77.8% 408,021 69 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 22: Utilities: 

Subject Series—Estab & Firm Size: Concentration by Largest Firms for the United States: 2002.” 

<http://factfinder.census.gov>; (November 21, 2008). 

through such activities as exploring for oil and gas, drilling and equipping wells, operating onsite equipment, and conducting other activities up to the point of shipment from the property. 

Oil and gas extraction consists of two industries: crude petroleum and natural gas 

extraction (NAICS 211111) and natural gas liquid extraction (NAICS 211112). Crude petroleum 

and natural gas extraction is the larger industry; in 2002, it accounted for 93% of establishments 

and 75% of oil and gas extraction revenues. 

Industrial production in this industry is particularly sensitive to hurricanes in the Gulf 

Coast. In September of both 2005 and 2008, production dropped 14% from the previous month. 

Production is currently 6% lower than it was in 1997 (Figure 3-4). 

From 1997 to 2002, revenues from crude petroleum and natural gas extraction (NAICS 

211111) grew less than 1% to almost $100 billion ($2007) (Table 3-8). At the same time, payroll 
3-7 

dropped almost 8% and the number of employees dropped by almost 6%. The number of 

establishments dropped by over 8%; as a result, the average establishment revenue increased by 

2.5%. Materials costs were approximately 25% of revenue over the period. 

From 1997 to 2002, revenue from natural gas liquid extraction (NAICS 211112) grew 

over 7% to about $34 billion (Table 3-9). At the same time, payroll dropped 12% and the number 

of employees dropped by almost 9%. The number of establishments dropped by over 3%, 

resulting in an increase of revenue per establishment of about 10%. 
3-8 

Table 3-4. United States Retail Electricity Sales Statistics: 2006  Full-Service Providers Other ProviItem Investor-Owned Public Federal Cooperative Facility Energy DeNumber of entities 215 2,010 9 882 49 150 Number of retail customers 100,245,547 20,345,236 39,430 17,465,423 2,166 2,306,163 Retail Sales (103 megawatthours) 2,476,445 549,124 42,359 370,410 12,397 219,185 Percentage of retail sales 67.48 14.96 1.15 10.09 0.34 5.97 Revenue from retail sales ($106) 224,637 44,271 1,494 31,411 868 16,784 7Percentage of revenue 68.8 13.56 0.46 9.62 0.27 5.14 Average retail price (cents/kWh) 9.06 8.06 3.53 8.48 7 7.66 
3-9 

Table 3-5. FY 2007 Financial Data for 70 U.S. Shareholder-Owned Electric Utilities 

 Profit Margin Net Income Operating Revenues 

Investor-Owned Utilities 8.36% $33,933 $405,938 

Regulateda 7.12% $12,078 $169,699 

Mostly regulatedb

 8.89% $13,776 $154,916 

Diversifiedc

 9.93% $8,078 $81,323 

a 80%+ of total assets are regulated. 

b 50% to 80% of total assets are regulated. 

c Less than 50% of total assets are regulated. 

Source: Edison Electric Institute. “Income Statement: Q4 2007 Financial Update. Quarterly Report of the U.S. 

Shareholder-Owned Electric Utility Industry.” <http://www.eei.org>. 

Table 3-6. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 2211 

Number of enterprisesa 836 

Total receipts (103) $308,702,953 

Net sales(103

) $289,887,930 

Profit margin before tax 0.9% 

Profit margin after tax — 

a Includes corporations with and without net income. 

Source: Troy, Leo. 2008. “Almanac of Business and Industrial Financial Ratios: 2009 Edition.” CCH. 

3.2.2 Goods and Services Used 

The oil and gas extraction industry has similar labor and tax requirements as the electric 

power generation sector. Extraction, support, power, and equipment requirements potentially 

associated with reciprocating internal combustion engines (oil and gas extraction, support 

activities, electric power generation, machinery and equipment rental and leasing, and pipeline 

transportation) represent around 8% of the value of services (Table 3-10). 

3.2.3 Business Statistics 

The U.S. Economic Census and SUSB programs provide national information on the 

distribution of economic variables by industry, location, and size of business. Throughout this 

section and report, we use the following definitions: 

 Establishment: An establishment is a single physical location where business is 

conducted or where services or industrial operations are performed. 
3-10 

Table 3-7. Key Enterprise Statistics by Receipt Size for Electric Power Generation, Transmission, and D

2211): 2002 

 Owned by Enterprises with 

Variable 

All 

Enterprises 

0–99K 

Receipts 

100–

499.9K 

Receipts 

500–

999.9K 

Receipts 

1,000–

4,999.9K 

Receipts 

5,000,000–

9,999,999K 

Receipts 

<10,000K 

Receipts 

10,000–

49,999K 

Receipts 

Firms 1,756 129 250 80 232 205 896 538 Establishments 9,493 129 250 85 245 262 971 978 Employment 515,769 429 834 3,139 2,712 5,620 12,734 31,573 Receipts ($103) $320,502,670 $5,596 $63,339 $57,363 $627,414 $1,472,405 $2,226,117 $12,171,098 

Receipts/firm ($103) $182,519 $43 $253 $717 $2,704 $7,182 $2,485 $22,623 

Receipts/establishment ($103) 

$33,762 $43 $253 $675 $2,561 $5,620 $2,293 $12,445 

Receipts/employment ($) 

$621,407 $13,044 $75,946 $18,274 $231,347 $261,994 $174,817 $385,491 

Source: U.S. Small Business Administration (SBA). 2008. “Firm Size Data from the Statistics of U.S. Businesses: U.S. All Industries T

2002.” <http://www.census.gov/csd/susb/susb02.htm>. 
3-11 

70

80

90

100

110

Index Values (Jan-97=100)

Figure 3-4. Industrial Production Index (NAICS 211) 

Source: The Federal Reserve Board. “Industrial Production and Capacity Utilization: Industrial Production” Series 

ID: G17/IP_MINING_AND_UTILITY_DETAIL/IP.G211.S <http://www.federalreserve.gov/datadownload/>. 

(December 15, 2008). 

Table 3-8. Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111): 

($2007) 

1997 2002 

Revenue ($106) 97,832 98,667 

Payroll ($106) 6,232 5,785 

Employees 100,333 94,886 

Establishments 7,784 7,178 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 21: Mining: 

Industry Series: Historical Statistics for the Industry: 2002 and 1997.” <http://factfinder.census.gov>; (November 

26, 2008). 

 Receipts: Receipts (net of taxes) are defined as the revenue for goods produced, 

distributed, or services provided, including revenue earned from premiums, 

commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all 

revenue collected for local, state, and federal taxes. 

 Firm: A firm is a business organization consisting of one or more domestic 

establishments in the same state and industry that were specified under common 

ownership or control. The firm and the establishment are the same for single- 
3-12 

Table 3-9. Key Statistics: Natural Gas Liquid Extraction (NAICS 211112) ($2007) 

1997 2002 

Revenue ($106) 31,139 33,579 

Payroll ($106) 679 607 

Employees 10,548 9,693 

Establishments 528 511 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 21: Mining: 

Industry Series: Historical Statistics for the Industry: 2002 and 1997.” <http://factfinder.census.gov>; (November 

26, 2008). 

Table 3-10. Direct Requirements for Oil and Gas Extraction (NAICS 211): 2002 

Commodity Commodity Description 

Direct Requirements 

Coefficientsa

V00200 Taxes on production and imports, less subsidies 8.93% 

V00100 Compensation of employees 6.67% 

230301 Nonresidential maintenance and repair 6.36% 

211000 Oil and gas extraction 1.91% 

213112 Support activities for oil and gas operations 1.51% 

221100 Electric power generation, transmission, and distribution 1.47% 

541300 Architectural, engineering, and related services 1.24% 

532400 Commercial and industrial machinery and equipment rental and leasing 1.20% 

33291A Valve and fittings other than plumbing 1.10% 

541511 Custom computer programming services 0.99% 

a

 These values show the amount of the commodity required to produce $1.00 of the industry’s output. The values 

are expressed in percentage terms (coefficient ×100). 

Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table, 

Use Table and Direct Requirements Table. Tables 4 and 5. 

establishment firms. For each multiestablishment firm, establishments in the same 

industry within a state are counted as one firm; the firm employment and annual 

payroll are summed from the associated establishments. 

 Enterprise: An enterprise is a business organization consisting of one or more 

domestic establishments that were specified under common ownership or control. The 

enterprise and the establishment are the same for single-establishment firms. Each 

multiestablishment company forms one enterprise; the enterprise employment and 

annual payroll are summed from the associated establishments. Enterprise size 

designations are determined by the summed employment of all associated 

establishments. 
3-13 

In 2002, Texas had almost 3,000 crude petroleum and natural gas extraction 

establishments, Oklahoma had about 1,000, and every other state had under 450 (Figure 3-5). 

Twenty states had fewer than 10 establishments. Similarly, Texas had 180 natural gas liquid 

extraction establishments, Louisiana had 76, and every other state had under 40 (Figure 3-6). 

Only nine states had 10 or more establishments, and 17 had no establishments. 

Establishments by State

Less than 100

100 - 249

249 - 499

500 - 1,000

More than 1,000

Figure 3-5. 2002 Regional Distribution of Establishments: Crude Petroleum and Natural 

Gas Extraction Industry (NAICS 211111) 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 21: Mining: 

Geographic Area Series: Industry Statistics for the State or Offshore Areas: 2002.” <http://factfinder.census.gov>; 

(November 10, 2008). 

According to the SUSB, 89% of crude petroleum and natural gas extraction firms had 

fewer than 500 employees in 2002 (Table 3-11). Sixty-three percent of natural gas liquid 

extraction firms had fewer than 500 employees in 2002 (Table 3-12). 

Enterprises within this industry generated $165 billion in total receipts in 2006. Including 

those enterprises without net income, the industry averaged an after-tax profit margin of 18.3% 

(Table 3-13). 
3-14 

Establishments by State

Less than 5

5 - 19

20 - 49

50 - 75

More than 75

Figure 3-6. 2002 Regional Distribution of Establishments: Natural Gas Liquid 

Extraction Industry (NAICS 211112) 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 21: Mining: 

Geographic Area Series: Industry Statistics for the State or Offshore Areas: 2002.” <http://factfinder.census.gov>; 

(November 10, 2008). 

Table 3-11. Key Enterprise Statistics by Employment Size for Crude Petroleum and 

Natural Gas Extraction (NAICS 211111): 2002 

 Owned by Enterprises with 

Variable 

All 

Enterprises 

1–20 

Employees

20–99 

Employees

100–499 

Employees

500–749 

Employees 

750–999 

Employees 

1,000–1,499 

Employees 

Firms 6,238 5,130 348 85 11 11 5

Establishments 7,135 5,185 449 254 37 63 25

Employment 76,794 5,825 5,171 2,757 Not disclosed Not disclosed Not disclosed

Receipts ($103

) $88,388,300 $2,353,181 $2,559,239 $2,051,860 Not disclosed Not disclosed Not disclosed

Receipts/firm ($103

) $14,169 $459 $7,354 $24,140 Not disclosed Not disclosed Not disclosed

Receipts/establishment 

($103

) 

$12,388 $454 $5,700 $8,078 Not disclosed Not disclosed Not disclosed

Receipts/employment ($) $1,150,979 $403,980 $494,921 $744,236 Not disclosed Not disclosed Not disclosed

Source: U.S. Census Bureau. 2008a. Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment 

Sizes: 2002. <http://www2.census.gov/csd/susb/2002/02us_detailed%20sizes_6digitnaics.txt>. 

3.2.4 Case Study: Marginal Wells 

To provide additional context for understanding energy sectors that use reciprocating 

internal combustion engines, we examine one segment of the oil and gas sector: marginal wells. 
3-15 

Table 3-12. Key Enterprise Statistics by Employment Size for Crude Natural Gas Liquid 

Extraction (NAICS 211112): 2002 

 Owned by Enterprises with 

Variable 

All 

Enterprises 

1–20 

Employees 

20–99 

Employees 

100–499 

Employees 

500–749 

Employees 

750–999 

Employees 

1,000–1,499 

Employees 

Firms 113 54 7 10 2 1 2 

Establishments 494 54 7 38 23 1 6 

Employment 11,486 65 Not disclosed 241 Not disclosed Not disclosed Not disclosed 

Receipts ($103

) $72,490,930 $13,862 Not disclosed $383,496 Not disclosed Not disclosed Not disclosed 

Receipts/firm ($103) $641,513 $257 Not disclosed $38,350 Not disclosed Not disclosed Not disclosed 

Receipts/establishment 

($103

) 

$146,743 $257 Not disclosed $10,092 Not disclosed Not disclosed Not disclosed 

Receipts/employment ($) $6,311,242 $213,262 Not disclosed $1,591,270 Not disclosed Not disclosed Not disclosed 

Source: U.S. Census Bureau. 2008a. Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment 

Sizes: 2002. <http://www2.census.gov/csd/susb/2002/02us_detailed%20sizes_6digitnaics.txt>. 

Table 3-13. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 211 

Number of enterprisesa 17,097 

Total receipts (103) $164,841,432 

Net sales(103

) $142,424,188 

Profit margin before tax 24.6% 

Profit margin after tax 18.3% 

a Includes corporations with and without net income. 

Source: Troy, Leo. 2008. “Almanac of Business and Industrial Financial Ratios: 2009 Edition.” CCH. 

This industry includes small-volume wells that are mature in age, are more difficult to extract oil 

or natural gas from than other types of wells, and generally operate at very low levels of 

profitability. As a result, well operations can be quite responsive to small changes in the benefits 

and costs of their operation. 

In 2006, there were approximately 420,000 marginal oil wells and 300,000 marginal gas 

wells (Interstate Oil and Gas Compact Commission [IOGCC], 2007). These wells provide the 

United States with 18% of oil and 9% of natural gas production (IOGCC, 2007). Data for 2006 

show that revenue from the over 700,000 wells was approximately $31.3 billion (Table 3-14). 

Historical data show marginal oil production fluctuated between 1997 and 2006, 

reflecting the industry’s sensitivity to changes in economic conditions of fuel markets (see 
3-16 

Table 3-14. Reported Gross Revenue Estimates from Marginal Wells: 2006 

Well Type Number of Wells 

Production from 

Marginal Wells 

Estimated Gross 

Revenue ($109) 

Oil 422,255 335.312467 MMbbls $20.1 

Natural gas 296,721 1708.407584 MCF $11.1 

Total 718,976 $31.3 

Source: Interstate Oil & Gas Compact Commission. 2007. “Marginal Wells: Fuel for Economic Growth.” Table 3.B. 

Available at <http://iogcc.publishpath.com/Websites/iogcc/pdfs/2007-Marginal-Well-Report.pdf>. 

Figure 3-7). In contrast, the number of marginal gas wells has continually increased during the 

past decade; the IOGCC estimates that daily production levels from these wells reached a 

10-year high in 2005. Although we have been unable to find data on what fraction of these 

marginal wells are operated by small businesses, the IOGCC states that many are run by “mom 

and pop operators” (IOGCC, 2007). 

3.3 Pipeline Transportation of Natural Gas 

3.3.1 Overview 

Pipeline transportation of natural gas (NAICS 48621) is an industry group within the 

transportation and warehousing sector (NAICS 48-49), but more specifically in the pipeline 

transportation subsector (486). It includes the transmission of natural gas as well as the 

distribution of the gas through a local network to participating businesses. 

From 1997 to 2002, natural gas transportation revenues fell by 7% to just under $23 

billion ($2007) (Table 3-15). At the same time, payroll decreased by 7%, while the number of 

paid employees decreased by nearly 9%. However, the number of establishments increased by 

17% from 1,450 establishments in 1997 to 1,701 in 2002. 

3.3.2 Goods and Services Used 

The BEA reports pipeline transportation of natural gas only for total pipeline 

transportation (3-digit NAICS 486). In addition to pipeline transportation of natural gas (NAICS 

4862), this industry includes pipeline transportation of crude oil (NAICS 4861) and other 

pipeline transportation (NAICS 4869). However, the BEA data are likely representative of the 

affected sector since pipeline transportation of natural gas accounts for 68% of NAICS 486 

establishments and 72% of revenues (Figures 3-8 and 3-9). 
3-17 

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

295

300

305

310

315

320

325

330

335

340

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Billion Cubic Feet

Million Barrels

Year

Marginal Oil Production Marginal Gas Production

Figure 3-7. Trends in Marginal Oil and Gas Production: 1997 to 2006 

Source: Interstate Oil & Gas Compact Commission. 2007. “Marginal Wells: Fuel for Economic Growth.” Pages 3 

and 11. Available at < http://iogcc.myshopify.com/collections/frontpage/products/2007-marginal-well-report2007.pdf>. 

Table 3-15. Key Statistics: Pipeline Transportation of Natural Gas (NAICS 48621) ($2007) 

Year 1997 2002 

Revenue ($106) 24,646 22,964 

Payroll ($106) 2,662 2,438 

Employees 35,789 32,542 

Establishments 1,450 1,701 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48: 

Transportation and Warehousing: Industry Series: Comparative Statistics for the United States (1997 NAICS 

Basis): 2002 and 1997” <http://factfinder.census.gov>; (December 12, 2008). 

In Table 3-16, we use the latest detailed benchmark input-output data report by the BEA 

(2002) to identify the goods and services used by pipeline transportation (NAICS 486). As 

shown, labor, refineries, and maintenance requirements represent significant share of the cost 

associated with pipeline transportation. Power and equipment requirements potentially associated 

with reciprocating internal combustion engines (electric power generation and commercial and 

industrial machinery and equipment repair and maintenance) represent less than 2% of the value 

of services. 
3-18 

68%

21%

11%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

4862 Pipeline 

Transportation of Natural 

Gas

4869 Other Pipeline 

Transportation

4861 Pipeline 

Transportation of Crude Oil

Figure 3-8. Distribution of Establishments within Pipeline Transportation (NAICS 486) 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48: 

Transportation and Warehousing: Industry Series: Summary Statistics for the United States: 2002” 

<http://factfinder.census.gov>; (December 12, 2008). 

72%

16% 12%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

4862 Pipeline 

Transportation of Natural 

Gas

4869 Other Pipeline 

Transportation

4861 Pipeline 

Transportation of Crude Oil

Figure 3-9. Distribution of Revenue within Pipeline Transportation (NAICS 486) 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48: 

Transportation and Warehousing: Industry Series: Summary Statistics for the United States: 2002” 

<http://factfinder.census.gov>; (December 12, 2008). 
3-19 

Table 3-16. Direct Requirements for Pipeline Transportation (NAICS 486): 2002 

Commodity Commodity Description 

Direct 

Requirements 

Coefficientsa

V00100 Compensation of employees 14.78% 

324110 Petroleum refineries 13.55% 

230301 Nonresidential maintenance and repair 6.07% 

211000 Oil and gas extraction 4.94% 

333415 Air conditioning, refrigeration, and warm air heating equipment 

manufacturing 

4.40% 

561300 Employment services 4.26% 

5416A0 Environmental and other technical consulting services 3.04% 

541300 Architectural, engineering, and related services 3.04% 

420000 Wholesale trade 2.79% 

332310 Plate work and fabricated structural product manufacturing 2.72% 

5419A0 All other miscellaneous professional, scientific, and technical services 2.48% 

524100 Insurance carriers 2.38% 

531000 Real estate 2.33% 

52A000 Monetary authorities and depository credit intermediation 1.76% 

V00200 Taxes on production and imports, less subsidies 1.41% 

541100 Legal services 1.19% 

221100 Electric power generation, transmission, and distribution 1.13% 

a These values show the amount of the commodity required to produce $1.00 of the industry’s output. The values 

are expressed in percentage terms (coefficient ×100). 

Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table, 

Use Table and Direct Requirements Table. Tables 4 and 5. 

3.3.3 Business Statistics 

The pipeline transportation of natural gas is clearly concentrated in the two states closest 

to the refineries in the Gulf of Mexico. In 2002, Texas and Louisiana contributed to 31% of all 

pipeline transportation establishments in the United States (Figure 3-10) and 41% of all U.S. 

revenues. Other larger contributors with over 50 establishments in their states include Oklahoma, 

Pennsylvania, Kansas, Mississippi, and West Virginia. 
3-20 

Establishments by State

Less than 15

15 - 39

40 - 79

80 - 149

More than 150

Figure 3-10. 2002 Regional Distribution of Establishments: Pipeline Transportation 

(NAICS 486) 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48-49: 

Geographic Distribution—Pipeline transportation of natural gas: 2002.” <http://factfinder.census.gov>; 

(November 10, 2008). 

According to 2002 U.S. Census data, about 86% of transportation of natural gas 

establishments were owned by corporations and about 8% were owned by individual 

proprietorships. About 6% were owned by partnerships (Figure 3-11). As shown in Table 3-17, 

the four largest firms accounted for nearly half of the establishments with 698, and just over half, 

51%, of total revenue. The 50 largest firms accounted for over 1,354 establishments and about 

99% of total revenue. The average number of employees per establishment was approximately 

17 across all groups of firms. 

Enterprises within pipeline transportation (NAICS 486) generated $6.6 billion in total 

receipts in 2006. Including those enterprises without net income, the industry averaged an aftertax profit margin of 7.9% (Table 3-18). 

The 2002 SUSB shows that 47% of all firms in this industry made under $5 million in 

revenue. Enterprises with revenue over $100 million provided an overwhelming share of 

employment in this industry (98%) (Table 3-19). 
3-21 

86%

8% 6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Corporations Individual Proprietorships Partnerships

Figure 3-11. Share of Establishments by Legal Form of Organization in the Pipeline 

Transportation of Natural Gas Industry (NAICS 48621): 2002 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48-49: 

Transportation and Warehousing: Subject Series—Estab & Firm Size: Legal Form of Organization for the United 

States: 2002” <http://factfinder.census.gov>; (December 12, 2008). 

Table 3-17. Firm Concentration for Pipeline Transportation of Natural Gas (NAICS 

48621): 2002

Commodity Establishments 

Receipts/Revenue 

Number of 

Employees 

Employees per 

Amount ($10 Establishment 6) 

Percentage of 

Total 

All firms 1,431 $14,797 100% 23,677 16.5 

4 largest firms 698 $7,551 51% 11,814 16.9 

8 largest firms 912 $10,059 68% 15,296 16.8 

20 largest firms 1,283 $13,730 93% 21,792 17.0 

50 largest firms 1,354 $14,718 99% 23,346 17.2 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48: 

Transportation and Warehousing: Subject Series—Estab & Firm Size: Concentration by Largest Firms for the 

United States: 2002” <http://factfinder.census.gov>; (December 12, 2008). 
3-22 

Table 3-18. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 486 

Number of enterprisesa

410 

Total receipts (103) $6,606,472 

Net sales(103

) $6,118,827 

Profit margin before tax 12.9% 

Profit margin after tax 7.8% 

a Includes corporations with and without net income. 

Source: Troy, Leo. 2008. “Almanac of Business and Industrial Financial Ratios: 2009 Edition.” CCH. 

3.4 General Medical and Surgical Hospitals 

3.4.1 Overview 

General medical and surgical hospitals (NAICS 6221) is an industry group within the 

health care and social assistance sector (NAICS 62). It includes hospitals engaged in diagnostic 

and medical treatment (both surgical and nonsurgical) for inpatients with a broad range of 

medical conditions. They usually provide other services as well, including outpatient care, 

anatomical pathology, diagnostic X-rays, clinical laboratory work, and pharmacy services. 

From 1997 to 2002, hospital revenues grew about 18% to over $500 billion ($2007) 

(Table 3-20). At the same time, payroll rose about 14%, while the number of employees 

increased by only 5%. The number of establishments declined during this period by almost 6%, 

resulting in an increase in revenue per establishment of almost 22%. 

3.4.2 Goods and Services Used 

The BEA reports hospital expenditures only for hospitals (3-digit NAICS 622). In 

addition to general hospitals (NAICS 6221), this industry includes psychiatric and substance 

abuse hospitals (NAICS 6222) and specialty hospitals (NAICS 6223). However, these data 

should be representative of the affected sector since in 2002, general medical and surgical 

hospitals accounted for 92% of NAICS 622 establishments and 94% of revenues. 

In Table 3-21, we use the latest detailed benchmark input-output data report by the BEA 

(2002) to identify the goods and services used by hospitals (NAICS 622). As shown, labor and 

land requirements represent a significant share of the value of hospital services. Power and 

equipment requirements potentially associated with reciprocating internal combustion engines 

(electric power generation and commercial and industrial machinery and equipment repair and 

maintenance) represent less than 2% of the value of services. 
3-23 

Table 3-19. Key Enterprise Statistics by Receipt Size for Pipeline Transportation of Natural Gas (NAICS  Owned by Enterprises with

Variable 

All 

Enterprises 

0–99K 

Receipts 

100–

499.9K 

Receipts 

500–999.9K 

Receipts 

1,000–

4,999.9K 

Receipts 

5,000,000–

9,999,999K 

Receipts 

<10,000K 

Receipts 

10,000–

49,999K 

Receipts 

Firms 154 8 32 10 22 6 78 1Establishments 1,936 8 32 10 22 7 79 2Employment 37,450 15 58 69 138 88 368 216 Receipts ($103) $35,896,535 $524 $8,681 $7,451 $46,429 $40,967 $104,052 $188,424 

Receipts/firm ($103) $233,094 $66 $271 $745 $2,110 $6,828 $1,334 $17,129 

Receipts/establishment ($103) 

$18,542 $66 $271 $745 $2,110 $5,852 $1,317 $8,973 

Receipts/employment ($) 

$958,519 $34,933 $149,672 $107,986 $336,442 $465,534 $282,750 $872,333 

Source: U.S. Census Bureau. 2008b. Firm Size Data from the Statistics of U.S. Businesses, U.S. All Industries Tabulated by Receipt Si

http://www2.census.gov/csd/susb/2002/usalli_r02.xls. 
3-24 

Table 3-20. Key Statistics: General Medical and Surgical Hospitals (NAICS 6221) ($2007) 

 1997 2002 

Revenue ($106) 444,141 539,502 

Payroll ($106) 178,874 209,063 

Employees 4,526,591 4,772,422 

Establishments 5,487 5,193 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 62: Health Care 

and Social Assistance: Geographic Area Series: 2002 and 1997.” <http://factfinder.census.gov>; (November 10, 

2008). 

Table 3-21. Direct Requirements for Hospitals (NAICS 622): 2002 

Commodity Commodity Description 

Direct Requirements 

Coefficientsa

V00100 Compensation of employees 51.90% 

531000 Real estate 10.76% 

550000 Management of companies and enterprises 4.02% 

621B00 Medical and diagnostic labs and outpatient and other ambulatory care 

services 

2.22% 

561300 Employment services 1.90% 

325412 Pharmaceutical preparation manufacturing 1.86% 

325413 In-vitro diagnostic substance manufacturing 1.66% 

524100 Insurance carriers 1.66% 

420000 Wholesale trade 1.62% 

221100 Electric power generation, transmission, and distribution 1.14% 

a These values show the amount of the commodity required to produce $1.00 of the industry’s output. The values 

are expressed in percentage terms (coefficient ×100). 

Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table, 

Use Table and Direct Requirements Table. Tables 4 and 5. 

3.4.3 Business Statistics 

In 2002, California and Texas each had around 400 hospitals, and New York, 

Pennsylvania, Florida, and Illinois all had more than 200 (Figure 3-12). Vermont, Rhode Island, 

Delaware, and the District of Columbia all had fewer than 20 hospital establishments in their 

states. 
3-25 

Establishments by State

Less than 50

50 - 99

100 - 149

150 - 249

Above 250

Figure 3-12. 2002 Regional Distribution of Establishments: General Medical and Surgical 

Hospital Industry (NAICS 6221) 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 62: Health Care 

and Social Assistance: Geographic Area Series: Summary Statistics: 2002.” <http://factfinder.census.gov>; 

(November 10, 2008). 

According to 2002 Census data, 79.6% of general hospitals were owned by corporations, 

19.5% were individual proprietorships, and about 0.7% were partnerships (Figure 3-13). As 

shown in Table 3-22, the four largest firms accounted for almost 400 establishments and about 

10% of total revenue. The 50 largest firms accounted for over 1,100 establishments and about 

30% of total revenue. In addition, about 27% of all general hospitals are owned or controlled by 

the government, with most of those at the local level (Table 3-23). 

In 2006, the United States had 4,927 community hospitals (Table 3-24); 

nongovernmental not-for-profit hospitals accounted for 59% of these hospitals, and 75% of the 

expenses of all community hospitals. 

Enterprises including hospitals, nursing and residential care facilities, and social 

assistance (NAICS 622-4) generated $108 billion in total receipts in 2006. Including those 

enterprises without net income, the industry averaged an after-tax profit margin of 3.1% (Table 

3-25). 
3-26 

79.6%

19.5%

0.7% 0.1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Corporations Partnerships Individual 

Proprietorships

Other Legal Forms 

of Organization

Figure 3-13. Share of Establishments by Legal Form of Organization in the General 

Medical and Surgical Hospitals Industry (NAICS 6221): 2002 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 62: Health Care 

and Social Assistance: Subject Series—Estab & Firm Size: Legal Form of Organization for the United States: 

2002” <http://factfinder.census.gov>; (November 21, 2008). 

Table 3-22. Firm Concentration for General Medical and Surgical Hospitals (NAICS 

6221): 2002 

 Receipts/Revenue 

Commodity Establishments Amount ($106) 

Percentage of 

Total 

Number of 

Employees 

Employees per 

Establishment 

All firms 5,193 $469,727 100.0% 4,772,422 919 

4 largest firms 391 $44,124 9.4% 389,152 995 

8 largest firms 507 $60,708 12.9% 537,695 1,061 

20 largest firms 777 $92,466 19.7% 831,988 1,071 

50 largest firms 1,138 $139,501 29.7% 1,279,444 1,124 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 62: Health Care 

and Social Assistance: Subject Series—Estab & Firm Size: Concentration by Largest Firms for the United States: 

2002” <http://factfinder.census.gov>; (November 21, 2008). 
3-27 

Table 3-23. Government Control and Ownership for General Medical and Surgical 

Hospitals (NAICS 6221): 2002 

 Receipts/Revenue 

Commodity Establishments 

Percentage 

of Total 

Amount 

($106) 

Percentage 

of Total 

Number of 

Employees 

Employees per 

Establishment 

All firms 5,193 100.0% $469,727 100.0% 4,772,422 919 

All government owned 

and controlled hospitals 

1,408 27.1% $91,956 19.6% 962,772 684 

Federal government 258 5.0% $25,993 5.5% 257,766 999 

State government 98 1.9% $19,029 4.1% 176,754 1,804 

Local government 1,052 20.3% $46,934 10.0% 528,252 502 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 62: Health Care 

and Social Assistance: Subject Series—Estab & Firm Size: Concentration by Largest Firms for the United States: 

2002” <http://factfinder.census.gov>; (November 21, 2008). 

Table 3-24. Hospital Statistics: 2006 

Community Hospitals Number Total Expenses (103) 

Total Net 

Revenue (103

) 

Total 4,927 $551,835,328 $587,050,914 

Nongovernment not-for-profit 2,919 $412,867,575 NA 

Investor-owned 889 $54,994,199 NA 

State and local government 1,119 $83,973,554 NA 

NA = Not available 

Source: American Hospital Association. 2007. “AHA Hospital Statistics: 2008 Edition.” Health Forum. 

Table 3-25. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 622-4 

Number of enterprisesa 18,263 

Total receipts (103) $108,074,793 

Net sales(103

) $102,300,229 

Profit margin before tax 4.4% 

Profit margin after tax 3.1% 

a Includes corporations with and without net income. 

Source: Troy, Leo. 2008. “Almanac of Business and Industrial Financial Ratios: 2009 Edition.” CCH. 
3-28 

The SUSB reports 27% of general hospitals have receipts of less than $10 million and 

41% report receipts above $50 million (Table 3-26). Large hospitals employ a significant share 

of the people working in this industry. 

3.5 Irrigation Sets and Welding Equipment 

3.5.1 Overview 

The U.S. Economic Census classifies irrigation equipment under the farm machinery and 

equipment manufacturing industry group (NAICS 333111). This U.S. industry comprises 

establishments primarily engaged in manufacturing agricultural and farm machinery and 

equipment and other turf and grounds care equipment, including planting, harvesting, and grassmowing equipment (except lawn and garden type). 

From 1997 to 2002, farm machinery and equipment manufacturing revenues fell by $3 

billion from $18 billion to $15 billion (Table 3-27). At the same time, payroll decreased by 19% 

and the number of paid employees decreased by nearly 19%. The number of establishments 

dropped by 9% from 1,339 establishments in 1997 to 1,214 in 2002. Industrial production in the 

industry is currently 13% lower than in 1997 (Figure 3-14). 

The U.S. Economic Census classifies welding equipment under the welding and 

soldering equipment manufacturing industry group (NAICS 333992). This U.S. industry 

comprises establishments primarily engaged in manufacturing welding and soldering equipment 

and accessories (except transformers), such as welding electrodes, welding wire, and soldering 

equipment (except handheld). 

From 1997 to 2002 welding and soldering equipment manufacturing revenue fell by 

about 22% to $1 billion (Table 3-28). At the same time, payroll decreased by 21% and the 

number of paid employees decreased by nearly 28%. The number of establishments dropped by 

8% from 250 establishments in 1997 to 231 in 2002. 

3.5.2 Irrigation and Welding Services 

The demand for equipment is derived from the demand for the services the equipment 

provides. We describe uses and industrial consumers of this equipment. 

3.5.2.1 Irrigation 

Demand for irrigation equipment is driven by farm operation decisions, optimal 

replacement considerations, and climate and weather conditions. The National Agriculture 

Statistics Service (NASS) 2003 Farm and Ranch Irrigation Survey (USDA-NASS, 2004) shows 
3-29 

Table 3-26. Key Enterprise Statistics by Receipt Size for General Medical and Surgical Hospitals (NAICS  Owned by Enterprises with 

Variable 

All 

Enterprises 

0–99K 

Receipts 

100–499.9K 

Receipts 

500–

999.9K 

Receipts

1,000–

4,999.9K 

Receipts 

5,000,000–

9,999,999K 

Receipts 

<10,000K 

Receipts 

10,000–

49,999K 

Receipts 

Firms 3,581 64 77 59 344 437 981 1,116 Establishments 5,971 64 77 59 356 454 1,010 1,203 Employment 4,713,450 2,500–4999 250–499 730 18,675 56,296 78,980 347,613 Receipts ($103) $468,007,640 Not disclosed Not disclosed $42,017 $1,084,945 $3,165,513 $4,317,321 $26,036,570 

Receipts/firm ($103) $130,692 Not disclosed Not disclosed $712 $3,154 $7,244 $4,401 $23,330 

Receipts/establishment ($103) 

$78,380 Not disclosed Not disclosed $712 $3,048 $6,972 $4,275 $21,643 

Receipts/employment ($) 

$99,292 Not disclosed Not disclosed $57,558 $58,096 $56,230 $54,663 $74,901 

Source: U.S. Small Business Administration (SBA). 2008. “Firm Size Data from the Statistics of U.S. Businesses: U.S. All Industries T

2002.” <http://www.census.gov/csd/susb/susb02.htm>. 
3-30 

Table 3-27. Key Statistics: Farm Machinery and Equipment Manufacturing (NAICS 

333111) ($2007) 

1997 2002 

Revenue ($106) $17,838 $15,006 

Payroll ($106) $2,644 $2,132 

Employees 66,370 53,817 

Establishments 1,339 1,214 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 31: 

Manufacturing: Industry Series: Historical Statistics for the Industry: 2002 and Earlier Years” 

<http://factfinder.census.gov>; (November 25, 2008). 

40

50

60

70

80

90

100

110

120

130

Index Values (Jan-97=100)

Industrial Production Index (NAICS 333111)

Figure 3-14. Industrial Production Index (NAICS 333111) 
3-31 

Table 3-28. Key Statistics: Welding and Soldering Equipment Manufacturing (NAICS 

333992) ($2007) 

1997 2002 

Revenue ($106) $4,957 $3,880 

Payroll ($106) $1,024 $811 

Employees 22,505 16,128 

Establishments 250 231 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 31: 

Manufacturing: Industry Series: Historical Statistics for the Industry: 2002 and Earlier Years.” 

<http://factfinder.census.gov>; (November 25, 2008). 

that the top five states ranked by total acres irrigated are California, Nebraska, Texas, Arkansas, 

and Idaho. Approximately 32 million of the 53 million, or 68%, of U.S. irrigated acres are used 

to support oilseed and grain farming and other crop farming (tobacco, cotton, sugar cane, and 

other). Virtually all of these irrigated areas are west of the Mississippi River. 

The survey reported that approximately 500,000 pumps were used on U.S. farms in 2003 

with energy expenses totaling $1.6 billion. Electricity is the dominant form of energy expense for 

irrigation pumps, accounting for 60% of total energy expenses. Diesel fuel is second (18%), 

followed by natural gas (18%) and other forms of energy such as gasoline (4%). 

Per-acre operating costs for these irrigation systems vary by fuel type, and natural gas 

was the most expensive in 2003 ($57 per acre for well systems and $34 per acre for surface water 

systems) (Table 3-29). Systems using diesel fuel were operated at approximately half of these 

per-acre costs ($25 per acre for well systems and $16 per acre for surface water systems). 

Gasoline- and gasohol-powered systems offered the least expensive operating costs ($12 per acre 

for well systems and $18 per acre for surface water systems). 

As shown in Table 3-30, the number of on-farm pumps fell from 508,727 to 497,443 

(2%) between 1998 and 2003. However, the use of electric- and diesel-powered pumps increased 

during this period (3% and 4%, respectively), while other fuel sources such as gasoline declined 

significantly. Pumps powered by gasoline and gasohol, for example, declined from 8,965 to 

6,178, a 31% change during this period. Pumps powered by natural gas, LP gas, propane, and 

butane also declined by 26% to 29%. Although 1998 operating cost data are not available, the 

change in relative costs of operation across fuels between 1998 and 2003 may partly explain 
3-32 

Table 3-29. Expenses per Acre by Type of Energy: 2003 

Fuel Type Irrigated by Water from Wells Irrigated by Surface Water 

Electricity $42.64 $29.84 

Natural gas $57.25 $33.67 

LP gas, propane, butane $27.21 $22.68 

Diesel fuel $25.09 $16.27 

Gasoline and gasohol $11.60 $18.05 

Total $39.50 $26.39 

Source: U.S. Department of Agriculture, National Agricultural Statistics Service. 2004. “2003 Farm and Ranch 

Irrigation Survey.” Washington, DC: USDA-NASS. Table 20. 

Table 3-30. Number of On-Farm Pumps of Irrigation Water by Type of Energy: 1998 and 

2003 

Fuel Type 1998 2003 Percentage Change 

Electricity 308,579 319,102 3% 

Natural gas 58,880 41,771 –29% 

LP gas, propane, butane 23,964 17,792 –26% 

Diesel fuel 108,339 112,600 4% 

Gasoline and gasohol 8,965 6,178 –31% 

Total 508,727 497,443 –2% 

Source: U.S. Department of Agriculture, National Agricultural Statistics Service. 2004. “2003 Farm and Ranch 

Irrigation Survey.” Washington, DC: USDA-NASS. Table 20. 

these patterns. Although no information is available on the use and construction of on-farm 

pumps specifically, their use is tied to the amount of agricultural land in production. USDA 

reports that planted acres of the eight major crops hit a 5-year high of 252 million acres in 2008 

but will fall and level off to around 244 million acres over the next 2 to 4 years (USDA, 2008). 

3.5.2.2 Welding 

Welding is used in a wide variety of applications. One of the biggest manufacturers of 

welding products identifies the following key end-user segments: 

 general metal fabrication; 

 infrastructure including oil and gas pipelines and platforms, buildings, bridges, and 

power generation; 
3-33 

 transportation and defense industries (automotive, trucks, rail, ships, and aerospace); 

 equipment manufacturers in construction, farming, and mining; 

 retail resellers; and 

 rental market (Lincoln Electric Holdings, 2006). 

Lincoln Electric further describes the following key applications: power generation and process 

industries, offshore production of oil and gas, pipelines/pipemills, and heavy fabrication 

(earthmoving and construction equipment and agricultural and farm equipment. 

3.5.3 Business Statistics 

In 2003, California and Texas each had more than 5 million irrigated acres (Figure 3-15). 

Midwest states like Arkansas and Nebraska had more than 2.5 million irrigated acres. Heavy and 

civil engineering construction establishments are spread throughout the United States, 

particularly in areas such as California, Texas, North Carolina, and Florida (Figure 3-16). Each 

of these states has more than 2,000 establishments. 

Irrigated Acres by State

Less than 625,000

625,000 - 1,249,999

1,250,000 - 2,499,999

2,500,000 - 4,999,999

More than 5,000,000

Figure 3-15. 2003 Regional Distribution of Irrigated Acres 
3-34 

Establishments by State

Less than 250

250 - 499

500 - 999

1,000 - 1,999

More than 2,000

Figure 3-16. 2002 Regional Distribution of Establishments: Heavy and Civil Engineering 

Construction (NAICS 237) 

As shown in Table 3-31, the market value of agriculture products sold was less than 

$25,000 per year on almost half the irrigated farms in the 2003 Farm and Ranch Irrigation 

Survey. Over 90% of the irrigated farms had agricultural product revenue below $750,000. It is 

not clear what fraction of these farms use stationary diesel engines or are owned by corporate 

farming operations. Thus, there is uncertainly about how many of these irrigated farms have 

stationary diesel engines that will be impacted by this rule. In addition, there is uncertainty about 

what fraction of these farms are small businesses. However, SUSB data also suggest 65% of 

firms in NAICS 11 have receipts less than $500,000 per year. 

Table 3-31. Distribution of Farm Statistics by Market Value of Agricultural Products 

Sold: 2003 

Variable All Farms <$25K 

$25–

$49K 

$50–

$99K 

$100–

$250K 

$250–

$500K 

$500–

$999K 

$1,000K 

or More 

Farms 220,163 48% 10% 11% 13% 8% 5% 4% 

Land in farms 

(acres) 

196,515,390 8% 6% 9% 21% 17% 16% 23% 

Acres irrigated 52,583,431 5% 4% 7% 18% 18% 19% 29% 

Irrigate cropland 

harvest (acres) 

48,626,955 4% 3% 7% 18% 19% 20% 30% 
3-35 

Source: U.S. Department of Agriculture (USDA), National Agricultural Statistics Service (NASS). 2004. “2003 

Farm and Ranch Irrigation Survey.” Washington, DC: USDA-NASS. Table 34. 

Enterprises within agriculture, construction, and mining machinery manufacturing 

(NAICS 3331) generated $118 billion of total receipts in 2006, while those in other general 

purpose machinery manufacturing (NAICS 3339) generated $69.8 billion. The average after-tax 

profit margin in these two industries was 6.9% and 4.7%, respectively (Table 3-32). 

Table 3-32. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 3331,9 

Agriculture, Construction, & Mining 

Machinery Manufacturing 

Other General Purpose Machinery 

Manufacturing 

Number of enterprisesa 2,485 7,288 

Total receipts (103) $118,369,636 $69,813,244 

Net sales(103

) $108,210,188 $65,256,901 

Profit margin before tax 9.1% 6.1% 

Profit Margin after tax 6.9% 4.7% 

a Includes corporations with and without net income. 

Source: Troy, Leo. 2008. “Almanac of Business and Industrial Financial Ratios: 2009 Edition.” CCH. 

As noted earlier, welding equipment is used in heavy fabrication such as earthmoving and 

construction equipment. We focus on the size distribution for a representative sector in this 

section (NAICS 327, Heavy and Civil Engineering Construction); other subsections in Section 2 

cover other sectors that potentially use equipment powered by diesel engines (e.g., power 

generation and offshore gas distribution). As shown in Table 3-33, SUSB data suggest 60% of 

firms in this industry have receipts less than $1 million per year; 90% are below the Small 

Business Administration (SBA) threshold on $50 million per year. However, it is not clear what 

fraction of these firms use stationary diesel engines. 
3-36 

Table 3-33. Key Enterprise Statistics by Receipt Size for Heavy Construction: 2002a Owned by Enterprises with

Variable 

All 

Enterprises 

0–99K 

Receipts

100–

499.9K 

Receipts 

500–

999.9K 

Receipts 

1,000–

4,999.9K 

Receipts 

5,000,000–

9,999,999K 

Receipts 

<10,000K 

Receipts 

10,000–

49,999K 

Receipts 

Firms 38,610 4,570 12,733 5,882 9,994 2,398 35,577 2,395 Establishments 39,949 4,570 12,733 5,883 10,025 2,427 35,638 2,561 Employment 856,312 5,219 35,592 37,498 156,941 87,858 323,108 199,532 Receipts ($103) $174,384,008 $237,458 $3,346,936 $4,191,113 $22,641,664 $16,573,417 $46,990,588 $46,244,065 

Receipts/firm ($103) $4,517 $52 $263 $713 $2,266 $6,911 $1,321 $19,309 

Receipts/establishment ($103) 

$4,365 $52 $263 $712 $2,259 $6,829 $1,319 $18,057 

Receipts/employment ($) 

$203,645 $45,499 $94,036 $111,769 $144,269 $188,639 $145,433 $231,763 

a 2002 SUSB NAICS 224. The most comparable 2002 NAICS code for this industry is 237. 

Source: U.S. Census Bureau. 2008b. Firm Size Data from the Statistics of U.S. Businesses, U.S. All Industries Tabulated by Receipt Si

http://www2.census.gov/csd/susb/2002/usalli_r02.xls. 
4-1 

SECTION 4

REGULATORY ALTERNATIVES, COSTS, AND EMISSION IMPACTS 

4.1 Background 

This section of the RIA includes a discussion of the regulatory alternatives considered for 

the final rule, the costs associated with these regulatory alternatives, and the impacts on affected 

emissions (both HAP and non-HAP). All impacts presented are for the year of full 

implementation, 2013. Although the estimates presented are annualized, they should be 

understood as a “snapshot” in analyzing costs. 

This action promulgates NESHAP for existing stationary CI RICE with a site rating of 

less than or equal to 500 hp located at major sources, existing non-emergency CI engines with a 

site rating greater than 500 hp at major sources, and existing stationary CI RICE of any power 

rating located at area sources. EPA is finalizing these requirements to meet its statutory 

obligation to address HAP emissions from these sources under sections 112(d), 112(c)(3) and 

112(k) of the CAA. The final NESHAP for stationary CI RICE will be promulgated under 40 

CFR part 63, subpart ZZZZ, which already contains standards applicable to new stationary RICE 

and some existing stationary RICE. 

EPA promulgated NESHAP for existing, new, and reconstructed stationary RICE greater 

than 500 hp located at major sources on June 15, 2004 (69 FR 33474). EPA promulgated 

NESHAP for new and reconstructed stationary RICE that are located at area sources of HAP 

emissions and for new and reconstructed stationary RICE that have a site rating of less than or 

equal to 500 hp that are located at major sources of HAP emissions on January 18, 2008 (73 FR 

3568). At that time, EPA did not promulgate final requirements for existing stationary RICE that 

are located at area sources of HAP emissions or for existing stationary RICE that have a site 

rating of less than or equal to 500 hp that are located at major sources of HAP emissions. 

Although EPA proposed requirements for these sources, EPA did not finalize these requirements 

due to comments received indicating that the proposed Maximum Achievable Control 

Technology (MACT) determinations for existing sources were inappropriate and because of a 

decision by the U.S. Court of Appeals for the District of Columbia Circuit on March 13, 2007, 

which vacated EPA’s MACT standards for the Brick and Structural Clay Products 

Manufacturing source category (40 CFR part 63, subpart JJJJJ). Sierra Club v. EPA, 479 F.3d 

875 (DC Cir 2007). Among other things, the D.C. Circuit found that EPA’s no emission 

reduction MACT determination in the challenged rule was unlawful. Because in the proposed 

stationary RICE rule, EPA had used a MACT floor methodology similar to the methodology 
4-2 

used in the Brick MACT, EPA decided to re-evaluate the MACT floors for existing major 

sources that have a site rating of less than or equal to 500 brake hp consistent with the Court’s 

decision in the Brick MACT case. EPA has also re-evaluated the standards for existing area 

sources in light of the comments received on the proposed rule. 

In addition, stakeholders have encouraged the Agency to review whether there are further 

ways to reduce emissions of pollutants from existing stationary diesel engines. In its comments 

on EPA’s 2005 proposed rule for new stationary diesel engines (70 FR 39870), the 

Environmental Defense Fund (EDF) suggested several possible avenues for the regulation of 

existing stationary diesel engines, including use of diesel oxidation catalysts or catalyzed diesel 

particulate filters (CDPF), as well as the use of ultra low sulfur diesel (ULSD) fuel. EDF 

suggested that such controls can provide significant pollution reductions at reasonable cost. EPA 

issued an advance notice of proposed rulemaking (ANPRM) in January 2008, where it solicited 

comment on several issues concerning options to regulate emissions of pollutants from existing 

stationary diesel engines, generally, and specifically from larger, older stationary diesel engines. 

EPA solicited comment and collected information to aid decision-making related to the reduction 

of HAP emissions from existing stationary diesel engines and specifically from larger, older 

engines under Clean Air Act (CAA) section 112 authorities. The Agency sought comment on the 

larger, older engines because available data indicate that those engines emit the majority of 

particulate matter (PM) and toxic emissions from nonemergency stationary engines as a whole. 

A summary of comments and responses that were received on the ANPRM is included in docket 

EPA-HQ-OAR-2007-0995. 

EPA has taken several actions over the past several years to reduce exhaust pollutants 

from stationary diesel engines, but believes that further reducing exhaust pollutants from 

stationary diesel engines, particularly existing stationary diesel engines that have not been 

subject to Federal standards, is justified. Therefore, EPA is finalizing emissions reductions from 

existing stationary diesel engines. 

4.2 Summary of the Proposed Rule 

4.2.1 What Is the Source Category Regulated by this Proposed Rule? 

This final rule addresses emissions from existing stationary CI engines less than or equal 

to 500 hp located at major sources and all existing stationary CI engines located at area sources. 

This final rule also addresses emissions from existing stationary nonemergency CI engines 

greater than 500 hp at major sources. A major source of HAP emissions is a stationary source 

that emits or has the potential to emit any single HAP at a rate of 10 tons (9.07 megagrams) or 
4-3 

more per year or any combination of HAP at a rate of 25 tons (22.68 megagrams) or more per 

year, except that for oil and gas production facilities, a major source of HAP emissions is 

determined for each surface site. An area source of HAP emissions is a source that is not a major 

source. 

This action revises the regulations at 40 CFR part 63, subpart ZZZZ, currently applicable 

to new and reconstructed stationary RICE and to existing stationary RICE greater than 500 hp 

located at major sources. Through this action, we are adding to subpart ZZZZ requirements for: 

existing CI stationary RICE less than or equal to 500 HP located at major sources and existing CI 

stationary RICE located at area sources. When the subpart ZZZZ regulations were promulgated 

(see 69 FR 33474, June 15, 2004), EPA deferred promulgating regulations with respect to 

stationary engines 500 hp or less at major sources until further information on the engines could 

be obtained and analyzed. EPA decided to regulate these smaller engines at the same time that it 

regulated engines located at area sources. EPA issued regulations for new stationary engines 

located at area sources of HAP emissions and new stationary engines located at major sources 

with a site rating of 500 hp or less in the rulemaking issued on January 18, 2008 (73 FR 3568), 

but did not promulgate a final regulation for existing stationary engines. 

4.2.1.1 Stationary CI RICE ≤500 hp at Major Sources 

This action revises 40 CFR part 63, subpart ZZZZ, to address HAP emissions from 

existing stationary CI RICE less than or equal to 500 hp located at major sources. For stationary 

engines less than or equal to 500 hp at major sources, EPA must determine what is the 

appropriate MACT for those engines under section 112(d) (2) and (d)(3) of the CAA. 

EPA has divided stationary CI RICE into emergency and nonemergency engines in order 

to capture the unique differences between these types of engines. 

4.2.1.2 Stationary CI RICE at Area Sources 

This action revises 40 CFR part 63, subpart ZZZZ, in order to address HAP emissions 

from existing stationary RICE located at area sources. Section 112(d) of the Clean Air Act 

(CAA) requires EPA to establish national emission standards for hazardous air pollutants 

(NESHAP) for both major and area sources of HAP that are listed for regulation under CAA 

section 112(c). 

Section 112(k)(3)(B) of the CAA calls for EPA to identify at least 30 HAP that, as a 

result of emissions of area sources, pose the greatest threat to public health in the largest number 

of urban areas. EPA implemented this provision in 1999 in the Integrated Urban Air Toxics 
4-4 

Strategy (64 FR 38715, July 19, 1999). Specifically, in the Strategy, EPA identified 30 HAP that 

pose the greatest potential health threat in urban areas, and these HAP are referred to as the “30 

urban HAP.” Section 112(c)(3) requires EPA to list sufficient categories or subcategories of area 

sources to ensure that area sources representing 90 percent of the emissions of the 30 urban HAP 

are subject to regulation. EPA implemented these requirements through the Integrated Urban Air 

Toxics Strategy (64 FR 38715, July 19, 1999). The area source stationary engine source category 

was one of the listed categories. A primary goal of the Strategy is to achieve a 75 percent 

reduction in cancer incidence attributable to HAP emitted from stationary sources. 

Under CAA section 112(d)(5), EPA may elect to promulgate standards or requirements 

for area sources “which provide for the use of generally available control technologies or 

management practices by such sources to reduce emissions of hazardous air pollutants.” 

Additional information on generally available control technologies (GACT)- or management 

practices is found in the Senate report on the legislation (Senate report Number 101-228, 

December 20, 1989), which describes GACT as: 

. . . methods, practices and techniques which are commercially available and appropriate 

for application by the sources in the category considering economic impacts and the 

technical capabilities of the firms to operate and maintain the emissions control systems. 

Consistent with the legislative history, EPA can consider costs and economic impacts in 

determining GACT, which is particularly important when developing regulations for source 

categories, like this one, that have many small businesses. 

Determining what constitutes GACT involves considering the control technologies and 

management practices that are generally available to the area sources in the source category. 

EPA also considers the standards applicable to major sources in the same industrial sector to 

determine if the control technologies and management practices are transferable and generally 

available to area sources. In appropriate circumstances, EPA may also consider technologies and 

practices at area and major sources in similar categories to determine whether such technologies 

and practices could be considered generally available for the area source category at issue. 

Finally, as EPA has already noted, in determining GACT for a particular area source category, 

EPA considers the costs and economic impacts of available control technologies and 

management practices on that category. 

The urban HAP that must be regulated at stationary RICE to achieve the section 

112(c)(3) requirement to regulate categories accounting for 90 percent of the urban HAP are: 7 

PAH, formaldehyde, acetaldehyde, arsenic, benzene, beryllium compounds, and cadmium 
4-5 

compounds. As explained below, EPA chose to select formaldehyde to serve as a surrogate for 

HAP emissions. Formaldehyde is the hazardous air pollutant present in the highest concentration 

from stationary engines. In addition, emissions data show that formaldehyde emission levels are 

related to other HAP emission levels. EPA has previously demonstrated that CO is an 

appropriate surrogate for formaldehyde from stationary CI engines and is consequently finalizing 

emission standards in terms of CO for existing stationary CI RICE at area sources. 

Consistent with stationary CI RICE at major sources, EPA has also divided the stationary 

CI RICE at area sources into emergency and nonemergency engines in order to properly take 

into account the differences between these engines. 

4.2.1.3 Stationary Non-Emergency CI RICE >500 hp at Major Sources 

In addition, EPA is finalizing emission standards for non-emergency stationary CI 

engines greater than 500 hp at major sources under its authority to review and revise emission 

standards as necessary under section 112(d) of the CAA. 

4.2.2 What Are the Pollutants Regulated by this Proposed Rule? 

The final rule regulates emissions of HAP. Available emissions data show that several 

HAP, which are formed during the combustion process or which are contained within the fuel 

burned, are emitted from stationary engines. The HAP which have been measured in emission 

tests conducted on diesel fired RICE include: 1,3-butadiene, acetaldehyde, acrolein, benzene, 

ethylbenzene, formaldehyde, n-hexane, naphthalene, polycyclic aromatic hydrocarbons, 

polycyclic organic matter, styrene, toluene, and xylene. Metallic HAP from diesel fired 

stationary RICE that have been measured are: cadmium, chromium, lead, manganese, mercury, 

nickel, and selenium. 

EPA described the health effects of these HAP and other HAP emitted from the operation 

of stationary RICE in the preamble to 40 CFR part 63, subpart ZZZZ, published on June 15, 

2004 (69 FR 33474). These HAP emissions are known to cause, or contribute significantly to air 

pollution, which may reasonably be anticipated to endanger public health or welfare. More 

details on the health effects of these HAP and other HAP emitted from operation of stationary 

RICE can be found in Section 7 of this RIA. 

The final rule will limit emissions of HAP through emissions standards for CO for 

existing stationary CI RICE. Carbon monoxide has been shown to be an appropriate surrogate 

for HAP emissions from CI engines. For the NESHAP promulgated in 2004, EPA found that 

there is a relationship between CO emissions reductions and HAP emissions reductions from CI 
4-6 

stationary engines. Therefore, because testing for CO emissions has many advantages over 

testing for HAP emissions, CO emissions were chosen as a surrogate for HAP emissions 

reductions for CI stationary engines. 

For the standards being finalized in this action, EPA believes that previous decisions 

regarding the appropriateness of using CO in concentration (ppm) levels as has been done for 

stationary sources before as surrogates for HAP are still valid.1

 Consequently, EPA is finalizing 

emission standards for CO for CI engines in order to regulate HAP emissions. In addition, EPA 

is promulgating separate provisions relevant to emissions of metallic HAP from existing diesel 

engines, as discussed in section III.C. of the preamble. 

In addition to reducing HAP and CO, the final rule will result in the reduction of PM 

emissions from existing diesel engines. The aftertreatment technologies expected to be used to 

reduce HAP and CO emissions also reduce emissions of PM from diesel engines. Also, the final 

rule requires the use of ULSD for diesel-fueled stationary nonemergency CI engines greater than 

300 hp with a displacement of less than 30 liters per cylinder. This will result in lower emissions 

of sulfur oxides (SOx) and sulfate particulate from these engines by reducing the sulfur content in 

the fuel. 

4.2.3 What Are the Final Requirements? 

4.2.3.1 Existing Stationary RICE at Major Sources 

The emission requirements that are being finalized in this action for stationary CI RICE 

less than or equal to 500 hp located at major sources and stationary nonemergency CI RICE 

greater than 500 hp located at major sources are shown in Table 4-1. The numerical emission 

standards are in units of ppm by volume, dry basis (ppmvd) or percent reduction. 

In addition, certain existing stationary RICE located at major sources are subject to fuel 

requirements. Owners and operators of existing stationary nonemergency diesel-fueled CI 

engines greater than 300 hp with a displacement of less than 30 liters per cylinder located at 

major sources that use diesel fuel must use only diesel fuel meeting the requirements of 40 CFR 

80.510(b). This section requires that diesel fuel have a maximum sulfur content of 15 parts per 

million (ppm) and either a minimum cetane index of 40 or a maximum aromatic content of 35 

volume percent. These fuel requirements are being finalized in order to reduce the potential 

formation of sulfate compounds that are emitted when high sulfur diesel fuel is used in 

 

1

In contrast, mobile source emission standards for diesel engines (both nonroad and on-highway) are promulgated 

on a mass basis rather than concentration. 
4-7 

combination with oxidation catalysts and to assist in the efficient operation of the oxidation 

catalysts. 

EPA is also including work practices in the final rule that will capture and collect 

metallic HAP emissions. Owners and operators of existing stationary nonemergency CI engines 

greater than 300 hp located at major sources must do one of the following if the engine is not 

already equipped with a closed crankcase ventilation system: 1) install a closed crankcase 

ventilation system that prevents crankcase emissions from being emitted to the atmosphere, or 2) 

install an open crankcase filtration emission control system that reduces emissions from the 

crankcase by filtering the exhaust stream to remove oil mist, particulates, and metals. 

Table 4-1. Requirements for Existing Stationary CI RICE Located at Major Sources 

Subcategory Except during Periods of Startup During Periods of Startup 

Emergency CI Change oil and filter every 500 

hours of operation or annually, 

whichever comes firsta

; inspect air 

cleaner every 1000 hours of 

operation or annually, whichever 

comes first; and inspect all hoses 

and belts every 500 hours of 

operation or annually, whichever 

comes first, and replace as 

necessaryb

Minimize the engine’s time spent at 

idle 

and 

minimize the engine’s startup time 

at startup to a period needed for 

appropriate and safe loading of the 

engine, not to exceed 30 minutes, 

after which time the non-startup 

emission limitations apply.c

Nonemergency CI 

≤100hp 

• change oil and filter every 

1000 hours of operation or 

annually, whichever comes 

first, except that sources 

can extend the period for 

changing the oil if the oil is 

part of an oil analysis 

program as discussed 

below and none of the 

condemning limits are 

exceeded; 

• inspect air cleaner every 

1000 hours of operation or 

annually, whichever comes 

first; and 

• inspect all hoses and belts 

every 500 hours or 

annually, whichever comes 

first, and replace as 

necessary. 

Nonemergency CI 

100≤hp≤300 

230 ppmvd CO at 15% O2 
4-8 

Nonemergency CI 

300<hp≤500 

49 ppmvd CO at 15% O2 

or 

70% CO reduction

Nonemergency CI 

>500 hp 

23 ppmvd CO at 15% O2 

or 

70% CO reduction 

a Sources have the option to utilize an oil analysis program in order to extend the specified oil change requirement 

in Table 4-2. . 

b Sources have the option to petition the Administrator for approval of alternative maintenance practices. The 

alternative maintenance practices must be at least as stringent as those specified in this Table 4-1. c Sources have the option to petition the Administrator for a longer period of time for engine startup. Any petition 

must be based on specific factual information indicating the reason that a longer period is necessary for that 

engine. 

Sources also have the option to use an oil change analysis program to extend the oil change 

frequencies specified above. The analysis program must at a minimum analyze the following 

three parameters: Total Base Number, viscosity, and percent water content. The analysis must 

be conducted at the same frequencies specified for changing the engine oil. If the condemning 

limits provided below are not exceeded, the engine owner or operator is not required to change 

the oil. If any of the condemning limits are exceeded, the engine owner or operator must change 

the oil before continuing to use the engine. The condemning limits are as follows: 

• Total Base Number is less than 30 percent of the Total Base Number of the oil when 

new; or 

• viscosity of the oil has changed by more than 20 percent from the viscosity of the oil 

when new; or 

• percent water content (by volume) is greater than 0.5. 

Pursuant to the provisions of 40 CFR 63.6(g), sources can also request that the Administrator 

approve alternative work practices. 

4.2.3.2 Existing Stationary RICE at Area Sources 

The emission requirements that are being finalized in this action for existing stationary CI 

RICE located at area sources are shown in Table 4-2. Existing stationary emergency engines at 

area sources located at residential, commercial, or institutional facilities are not part of the source 

category and therefore are not subject to any requirements under this final rule. 
4-9 

Existing stationary nonemergency CI RICE greater than 300 hp located at area sources in 

Alaska not accessible by the Federal Aid Highway System (FAHS) do not have to meet the CO 

emission standards specified in Table 4-2. Existing stationary nonemergency CI RICE greater 

than 300 hp located at area sources in Alaska not accessible by the FAHS must meet the 

maintenance practices that are shown for stationary nonemergency CI RICE less than or equal to 

300 hp in Table 4-2. 

Also, owners and operators of existing stationary nonemergency diesel-fueled CI engines 

greater than 300 hp with a displacement of less than 30 liters per cylinder located at area sources 

that use diesel fuel must use only diesel fuel meeting the requirements of 40 CFR 80.510(b). This 

section requires that diesel fuel have a maximum sulfur content of 15 ppm and either a minimum 

cetane index of 40 or a maximum aromatic content of 35 volume percent. Finally, in order to 

reduce metallic HAP emissions, existing stationary nonemergency CI engines greater than 300 

hp located at area sources must do one of the following if the engine is not already equipped with 

a closed crankcase ventilation system: 1) install a closed crankcase ventilation system that 

prevents crankcase emissions from being emitted to the atmosphere, or 2) install an open 

crankcase filtration emission control system that reduces emissions from the crankcase by 

filtering the exhaust stream to remove oil mist, particulates, and metals. 

Table 4-2. Requirements for Existing Stationary RICE Located at Area Sources 

Subcategory Except during Periods of Startup During Periods of Startup 

Nonemergency CI 

≤300 hp 

Change oil and filter every 1000 

hours of operation or annually, 

whichever comes firsta

; inspect air 

cleaner every 1000 hours of 

operation or annually, whichever 

comes first; and inspect all hoses 

and belts every 500 hours or 

annually, whichever comes first, 

and replace as necessaryb

Minimize the engine’s time spent at 

idle and 

minimize the engine’s startup to a 

period needed for appropriate and 

safe loading of the engine, not to 

exceed 30 minutes, after which time 

the non-startup emission limitations 

apply.c

Nonemergency CI 

300<hp≤500 

49 ppmvd CO at 15% O2 

or 

70% CO reduction

Nonemergency CI 

>500 hp 

23 ppmvd CO at 15% O2 

or 

70% CO reduction 
4-10 

Emergency CI Change oil and filter every 500 

hours of operation or annually, 

whichever comes firsta; inspect air 

cleaner every 1000 hours of 

operation or annually, whichever 

comes first; and inspect all hoses 

and belts every 500 hours of 

operation or annually, whichever 

comes first, and replace as 

necessaryb

a Sources have the option to utilize an oil analysis program in order to extend the specified oil change requirement. 

b Sources have the option to petition the Administrator for approval of alternative maintenance practices. The 

alternative maintenance practices must be at least as stringent as those specified in this Table 4-2. c Sources have the option to petition the Administrator for a longer period of time for engine startup. Any petition 

must be based on specific factual information indicating the reason that a longer period is necessary for that 

engine. 

4.2.3.3 Operating Limitations for Nonemergency CI Engines >500 hp 

In addition to the standards discussed above, EPA is finalizing operating limitations for 

stationary nonemergency CI RICE that are greater than 500 hp. Owners and operators of engines 

that are equipped with oxidation catalyst must maintain the catalyst so that the pressure drop 

across the catalyst does not change by more than 2 inches of water from the pressure drop across 

the catalyst that was measured during the initial performance test. Owners and operators of these 

engines must also maintain the temperature of the stationary RICE exhaust so that the catalyst 

inlet temperature is between 450 and 1350 degrees Fahrenheit (°F) for engines with an oxidation 

catalyst. Owners and operators of engines that are not using oxidation catalyst must comply with 

any operating limitations approved by the Administrator. 

4.2.3.4 Startup Requirements 

As shown in Tables 4-1 and 4-2, the following stationary engines are subject to specific 

operational standards, during engine startup: 

 Existing CI RICE less than or equal to 500 hp located at major sources, 

 Existing nonemergency CI RICE greater than 500 hp located at major sources, 

 Existing CI RICE located at area sources, 

 New or reconstructed nonemergency 2SLB >500 hp located at a major source of HAP 

emissions, 
4-11 

 New or reconstructed nonemergency 4SLB >500 hp located at a major source of HAP 

emissions, 

 Existing nonemergency 4SRB >500 hp located at a major source of HAP emissions, 

 New or reconstructed nonemergency 4SRB >500 hp located at a major source of 

HAP emissions, and 

 New or reconstructed nonemergency CI >500 hp located at a major source of HAP 

emissions. 

Engine startup is defined as the time from initial start until applied load and engine and 

associated equipment reaches steady state or normal operation. For stationary engine with 

catalytic controls, engine startup means the time from initial start until applied load and engine 

and associated equipment reaches steady state, or normal operation, including the catalyst. 

Owners and operators must minimize the engine’s time spent at idle and limit startup time to 30 

minutes. These requirements will limit the HAP emissions during periods of engine startup. 

Pursuant to the provisions of 40 CFR 63.6(g), engines at major sources may petition the 

Administrator for an alternative work practice. An owner or operator of an engine at an area 

source can work with its state permitting authority pursuant to EPA’s regulations at 40 CFR 

subpart E for approval of an alternative management practice. See 40 C.F.R. Subpart E (setting 

forth requirements for, among other things, equivalency by permit, rule substitution). 

What Are the Operating Limitations? 

In addition to the standards discussed above, EPA is finalizing operating limitations for 

stationary non-emergency CI RICE that are greater than 500 HP. Owners and operators of 

engines that are equipped with oxidation catalyst must maintain the catalyst so that the pressure 

drop across the catalyst does not change by more than 2 inches of water from the pressure drop 

across the catalyst that was measured during the initial performance test. Owners and operators 

of these engines must also maintain the temperature of the stationary RICE exhaust so that the 

catalyst inlet temperature is between 450 and 1350 degrees Fahrenheit (°F). Owners and 

operators may petition for a different temperature range; the petition must demonstrate why it is 

operationally necessary and appropriate to operate below the temperature range specified in the 

rule (see 40 CFR 63.8(f)). Owners and operators of engines that are not using oxidation catalyst 

must comply with any operating limitations approved by the Administrator. 

 Owners and operators of existing stationary non-emergency CI engines greater than 300 

HP meeting the requirement to use open or closed crankcases must follow the manufacturer’s 
4-12 

specified maintenance requirements for operating and maintaining the open or closed crankcase 

ventilation systems and replacing the crankcase filters, or can request the Administrator to 

approve different maintenance requirements that are as protective as manufacturer requirements. 

4.2.3.5 Fuel Requirements 

In addition to emission standards and management practices, certain stationary CI RICE 

located at existing area sources are subject to fuel requirements. These fuel requirements are 

being finalized in order to reduce the potential formation of sulfate compounds that are emitted 

when high sulfur diesel fuel is used in combination with oxidation catalysts and to assist in the 

efficient operation of the oxidation catalysts. Thus, owners and operators of stationary 

nonemergency diesel-fueled CI engines greater than 300 hp with a displacement of less than 30 

liters per cylinder located at existing area sources must only use diesel fuel meeting the 

requirements of 40 CFR 80.510(b), which requires that diesel fuel have a maximum sulfur 

content of 15 ppm and either a minimum cetane index of 40 or a maximum aromatic content of 

35 volume percent. 

4.2.4 What Are the Requirements for Demonstrating Compliance? 

The following sections describe the requirements for demonstrating compliance under the 

final rule. 

4.2.4.1 Existing Stationary CI RICE at Major Sources 

Owners and operators of existing stationary nonemergency CI RICE located at major 

sources that are less than 100 hp and stationary emergency CI RICE located at major sources 

must operate and maintain their stationary RICE and after-treatment control device (if any) 

according to the manufacturer’s emission-related written instructions or develop their own 

maintenance plan. Owners and operators of existing stationary nonemergency CI RICE located 

at major sources that are less than 100 hp and existing stationary emergency CI RICE located at 

major sources do not have to conduct any performance testing because they are not subject to 

numerical emission standards. 

Owners and operators of existing stationary nonemergency CI RICE located at major 

sources that are greater than or equal to 100 hp and less than or equal to 500 hp must conduct an 

initial performance test to demonstrate that they are achieving the required emission standards. 

Owners and operators of existing stationary nonemergency CI RICE greater than 500 hp 

located at major sources must conduct an initial performance test and must test every 8,760 hours 
4-13 

of operation or 3 years, whichever comes first, to demonstrate that they are achieving the 

required emission standards. 

Owners and operators of stationary nonemergency CI RICE that are greater than 500 hp 

and are located at a major source must continuously monitor and record the catalyst inlet 

temperature if an oxidation catalyst is being used on the engine. The pressure drop across the 

catalyst must also be measured monthly. If an oxidation catalyst is not being used on the engine, 

the owner or operator must continuously monitor and record the operating parameters (if any) 

approved by the Administrator. 

4.2.4.2 Existing Stationary RICE at Area Sources 

Owners and operators of existing stationary RICE located at area sources that are subject 

to management practices, as shown in Table 4-2, must develop a maintenance plan that specifies 

how the management practices will be met. Owners and operators of existing stationary RICE 

that are subject to management practices do not have to conduct any performance testing. 

Owners and operators of existing stationary nonemergency CI RICE greater than 300 hp 

that are located at area sources must conduct an initial performance test to demonstrate that they 

are achieving the required emission standards. 

Owners and operators of existing stationary nonemergency RICE that are greater than 

500 hp and located at area sources must conduct an initial performance test and must test every 

8,760 hours of operation or 3 years, whichever comes first, to demonstrate that they are 

achieving the required emission standards. 

Owners and operators of existing stationary nonemergency CI RICE that are greater than 

500 hp and are located at an area source must continuously monitor and record the catalyst inlet 

temperature if an oxidation catalyst is being used on the engine. The pressure drop across the 

catalyst must also be measured monthly. If an oxidation catalyst is not being used on the engine, 

the owner or operator must continuously monitor and record the operating parameters (if any) 

approved by the Administrator. 

On October 9, 2008 (73 FR 59956), EPA proposed performance specification 

requirements for continuous parametric monitoring systems (CPMS). Currently there are no 

performance specifications for the CPMS that are required for continuously monitoring the 

catalyst inlet temperature. The timetable for finalizing the proposed performance specification 

requirements is uncertain; therefore, EPA plans to finalize performance specification 
4-14 

requirements in 40 CFR part 63, subpart ZZZZ for the CPMS systems used for continuous 

catalyst inlet temperature monitoring when the final requirements are promulgated for existing SI 

engines in August 2010. 

2. Existing Stationary RICE at Area Sources 

Owners and operators of existing stationary RICE located at area sources that are subject 

to management practices, as shown in Table 4-2, must develop a maintenance plan that specifies 

how the management practices will be met. Owners and operators of existing stationary RICE 

that are subject to management practices do not have to conduct any performance testing. 

Owners and operators of existing stationary non-emergency CI RICE that are greater than 

300 HP and located at area sources and are not limited use stationary RICE must conduct an 

initial performance test to demonstrate that they are achieving the required emission standards.

Owners and operators of existing stationary non-emergency CI RICE that are greater than 500 

HP and located at area sources and are limited use stationary RICE must conduct an initial 

performance test and must test every 8,760 hours of operation or 5 years, whichever comes first, 

to demonstrate that they are achieving the required emission standards. 

Owners and operators of existing stationary non-emergency RICE that are greater than 

500 HP and located at area sources must conduct an initial performance test and must test every 

8,760 hours of operation or 3 years, whichever comes first, to demonstrate that they are 

achieving the required emission standards. 

Owners and operators of existing stationary non-emergency CI RICE that are greater than 

500 HP and are located at an area source must continuously monitor and record the catalyst inlet 

temperature if an oxidation catalyst is being used on the engine. The pressure drop across the 

catalyst must also be measured monthly. If an oxidation catalyst is not being used on the engine, 

the owner or operator must continuously monitor and record the operating parameters (if any) 

approved by the Administrator. 

4.2.5 What Are the Reporting and Recordkeeping Requirements? 

The following sections describe the reporting and recordkeeping requirements that are 

required under the final rule. 

Owners and operators of existing stationary emergency RICE that do not meet the 

requirements for nonemergency engines are required to keep records of their hours of operation. 

Owners and operators of existing stationary emergency RICE must install a non-resettable hour 
4-15 

meter on their engines to record the necessary information. The information must include how 

many hours are spent for emergency operation, including what classified the operation as 

emergency and how many hours are spent for nonemergency operation. 

Emergency stationary RICE may be operated for the purpose of maintenance checks and 

readiness testing, provided that the tests are recommended by the Federal, State or local 

government, the manufacturer, the vendor, or the insurance company associated with the engine. 

Maintenance checks and readiness testing of such units are limited to 100 hours per year. Owners 

and operators can petition the Administrator for additional hours, beyond the allowed 100 hours 

per year, if such additional hours should prove to be necessary for maintenance and testing 

reasons. A petition is not required if the engine is mandated by regulation such as State or local 

requirements to run more than 100 hours per year for maintenance and testing purposes. There is 

no time limit on the use of emergency stationary engines in emergency situations; however, the 

owner or operator is required to record the length of operation and the reason the engine was in 

operation during that time. Records must be maintained documenting why the engine was 

operating to ensure the 100 hours per year limit for maintenance and testing operation is not 

exceeded. In addition, owners and operators are allowed to operate their stationary emergency 

RICE for nonemergency purposes for 50 hours per year, but those 50 hours are counted towards 

the total 100 hours provided for operation other than for true emergencies and owners and 

operators may not engage in income-generating activities during those 50 hours. The 50 hours 

per year for nonemergency purposes cannot be used to generate income for a facility, for 

example, to supply power to an electric grid or otherwise supply power as part of a financial 

arrangement with another entity. However, owners and operators may operate the emergency 

engine for a maximum of 15 hours per year as part of an emergency demand response program if 

the utility distribution company has determined that a blackout is imminent. The engine 

operation must be terminated immediately after the utility distribution company advises that a 

blackout is no longer imminent. The 15 hours per year of emergency demand response operation 

are counted as part of the 50 hours of operation per year provided for nonemergency situations.

Owners and operators must keep records showing how they were notified of the emergency 

condition and by whom, and the time that the engine was operated as part of demand response. 

Owners and operators of existing stationary RICE located at area sources that are subject 

to management practices as shown in Table 4-2, are required to keep records that show that 

management practices that are required are being met. These records must include, at a 

minimum: oil and filter change dates, oil amounts added and corresponding hour on the hour 
4-16 

meter, fuel consumption rates, air filter (if applicable) change dates, records of repairs and other 

maintenance performed. 

Owners and operators of existing non-emergency stationary CI RICE greater than 300 HP 

must keep records of the manufacturer’s recommended maintenance procedures for the closed 

crankcase ventilation system or open crankcase filtration system and records of the maintenance 

performed on the system. 

In terms of reporting requirements, owners and operators of existing stationary RICE, 

except stationary RICE that are less than 100 hp, existing emergency stationary RICE, and 

existing stationary RICE that are not subject to numerical emission standards, must submit all of 

the applicable notifications as listed in the NESHAP General Provisions (40 CFR part 63, 

subpart A), including an initial notification, notification of performance test, and a notification of 

compliance for each stationary RICE which must comply with the specified emission limitations. 

4.3 Summary of Significant Changes Since Proposal 

Most of the rationale used to develop the proposed rule remains the same for the final 

rule. Therefore, the rationale previously provided in the preamble to the proposed rule is not 

repeated in the final rule, and the rationale sections of the rule, as proposed, should be referred 

to. Major changes that have been made to the rule since proposal are discussed in this section 

with rationale following in the Summary of Responses to Comments report that is in the docket 

for this rulemaking. 

4.3.1 Applicability 

EPA proposed to regulate HAP emissions from existing stationary engines less than or 

equal to 500 hp located at major sources and all existing stationary engines located at area 

sources. EPA also proposed NESHAP for existing stationary CI engines greater than 500 hp that 

are located at major sources. 

In the final rule, EPA is only regulating HAP emissions from existing stationary CI 

engines. EPA will address HAP emissions from existing stationary SI engines in a separate 

rulemaking later this year. 

Another change from the proposal is that the final rule is not applicable to existing 

stationary emergency engines at area sources that are located at residential, commercial, or 

institutional facilities. These engines are not subject to any requirements under the final rule 

because they are not part of the regulated source category. EPA has found that existing 
4-17 

emergency engines located at residential, commercial, and institutional facilities were not 

included in the original Urban Air Toxics Strategy inventory and were not included in the listing 

of urban area sources. More information on this issue can be found in the memorandum entitled 

“Analysis of the Types of Engines Used to Estimate the CAA Section 112(k) Area Source 

Inventory for Stationary Reciprocating Internal Combustion Engines,” available from the 

rulemaking docket. 

4.3.2 Final Emission Limits 

4.3.2.1 Existing Stationary CI Engines <100 hp Located at Major Sources 

For the proposed rule, EPA required existing stationary engines less than 50 hp that are 

located at major sources to meet a formaldehyde emission standard that was based on the levels 

achievable without aftertreatment. Based on comments received including the feasibility of being 

able to achieve the proposed emission standard and being able to measure formaldehyde 

emissions of that magnitude, EPA is not finalizing a formaldehyde emission standard for this 

group of engines. In addition, in light of several comments asserting that the cutoff for requiring 

emission standards for engines less than 50 hp at major sources was inappropriate, EPA is 

finalizing a threshold of 100 hp. 

In the proposed rule, existing stationary CI engines less than 100 HP located at major 

sources were required to meet a 40 ppmvd CO at 15 percent oxygen (O2) standard. In the final 

rule, all existing stationary CI engines less than 100 HP located at major sources must meet work 

practices. These work practices are described in section III.C. of the preamble. EPA believes 

that work practices are appropriate and justified for this group of stationary engines because the 

application of measurement methodology is not practicable due to technological and economic 

limitations. Further information on EPA’s decision can be found in the memorandum entitled 

“MACT Floor Determination for Existing Stationary Non-Emergency CI RICE Less Than 100 

HP and Existing Stationary Emergency CI RICE Located at Major Sources and GACT for 

Existing Stationary CI RICE Located at Area Sources,” which is available from the rulemaking 

docket. 

4.3.2.2 Existing Stationary Nonemergency CI Engines 100≤hp≤300 Located at Major Sources 

EPA is finalizing a CO emission standard for existing nonemergency CI engines greater 

than or equal to 100 hp and less than or equal to 300 hp located at major sources based on levels 

achieved without add-on control. All existing stationary CI engines less than or equal to 300 hp 

located at major sources must meet a 157 ppmvd CO at 15 percent O2 standard. EPA revised the 

proposed CO standard for this group of engines based on additional information received after 
4-18 

the proposal, which led to a reevaluation of the MACT floor for these engines. A discussion of 

the final MACT floor determination can be found in the memo entitled “Subcategorization and 

MACT Floor Determination for Existing Stationary CI Reciprocating Internal Combustion 

Engines at Major Sources,” which is available from the rulemaking docket. All existing 

stationary CI engines less than or equal to 300 hp located at area sources, both emergency and 

nonemergency, are subject to management practice standards under the final rule, as was 

proposed. 

4.3.2.3 Existing Stationary Nonemergency CI Engines >300 hp 

EPA proposed that existing stationary nonemergency CI engines greater than 300 hp 

meet a 4 ppmvd at 15 percent O2 CO standard or a 90 percent CO reduction standard. Numerous 

commenters indicated that EPA’s dataset was insufficient and urged EPA to gather more data to 

obtain a more complete representation of emissions from existing stationary CI engines. 

Commenters also questioned the emission standard setting approach that EPA used at proposal 

and claimed that the proposed standards did not take into account emissions variability and may 

not be achievable. For the final rule EPA has obtained additional test data for existing stationary 

CI engines and has included this additional in the MACT floor analysis. EPA is also using an 

approach that better considers emissions variability as well. 

In the final rule, EPA is providing owners and operators the option of meeting either a 

CO concentration or a CO percent reduction standard. Owners and operators of existing 

stationary non-emergency CI engines greater than 300 HP and less than or equal to 500 HP 

located at major and area sources must either reduce CO emissions by at least 70 percent or limit 

the concentration of CO in the engine exhaust to 49 ppmvd, at 15 percent O2. Owners and 

operators of existing stationary non-emergency CI engines greater than 500 HP located at major 

and area sources must either reduce CO emissions by at least 70 percent or limit the 

concentration of CO in the engine exhaust to 23 ppmvd, at 15 percent O2. EPA’s review of the 

data indicate that it is appropriate to base the MACT standard on a reduction level of 70 percent, 

which takes into account the variability of the emission reduction efficiency of aftertreatment 

under various operational conditions. 

4.3.2.4 Existing Stationary Emergency CI Engines 100≤hp≤500 Located at Major Sources 

For existing stationary emergency engines located at major sources, we proposed that 

these engines be subject to a 40 ppmvd CO at 15 percent O2 standard. In the final rule, existing 

stationary emergency CI engines greater than or equal to 100 HP and less than or equal to 500 

HP and located at major sources must meet work practices. These work practices are described 
4-19 

in section III.C. of the preamble. EPA believes that work practices are appropriate and justified 

for this group of stationary engines because the application of measurement methodology is not 

practicable due to technological and economic limitations. Further information on EPA’s 

decision can be found in the memorandum entitled “MACT Floor Determination for Existing 

Stationary Non-Emergency CI RICE Less Than 100 HP and Existing Stationary Emergency CI 

RICE Located at Major Sources and GACT for Existing Stationary CI RICE Located at Area 

Sources,” which is available from the rulemaking docket. 

4.3.2.5 Existing Stationary Emergency CI Engines >500 hp Located at Area Sources 

For existing stationary emergency engines located at area sources, EPA reevaluated the 

information available for emergency engines and considered extensive input received from 

industry and other groups who asserted that the proposed standards were not GACT for 

emergency engines at area sources. 

In the final rule, all existing stationary emergency CI engines located at area sources must 

meet management practice standards. 

4.3.3 Management Practices 

EPA proposed management practices for several subcategories of engines located at area 

sources. EPA explained that the proposed management practices would be expected to ensure 

that emission control systems are working properly and would help minimize HAP emissions 

from the engines. EPA proposed specific maintenance practices and asked for comments on the 

need and appropriateness for those procedures. Based on feedback received during the public 

comment period, which included information submitted in comment letters and additional 

information EPA specifically asked for following the close of the comment period from different 

industry groups, EPA is finalizing management practices for existing stationary nonemergency 

CI engines less than or equal to 300 hp located at area sources and all existing emergency 

stationary CI engines located at area sources. 

Existing stationary nonemergency CI engines less than or equal to 300 hp located at area 

sources are required to change the oil and filter every 1,000 hours of operation or annually, 

whichever comes first, inspect air cleaner every 1,000 hours of operation or annually, whichever 

comes first, and inspect all hoses and belts every 500 hours of operation or annually, whichever 

comes first, and replace as necessary. EPA is adding an option for sources to use an oil change 

analysis program to extend the oil change frequencies specified above. The analysis program 

must at a minimum analyze the following three parameters: Total Base Number, viscosity, and 

percent water content. If any of the limits below are exceeded, the engine owner or operator 
4-20 

must change the oil before continuing to operate the engine. The condemning limits are as 

follows: 

• Total Base Number is less than 30 percent of the Total Base Number of the oil when 

new; or 

• viscosity of the oil has changed by more than 20 percent from the viscosity of the oil 

when new; or 

• percent water content (by volume) is greater than 0.5. 

Owners and operators of all engines subject to management practices also have the option work 

with state permitting authorities pursuant to EPA’s regulations at 40 CFR subpart E for 

alternative maintenance practices to be used instead of the specific maintenance practices 

promulgated in this rule. The maintenance practices must be at least as stringent as those 

specified in the final rule. 

The final rule specifies that in situations where an emergency engine is operating during 

an emergency and it is not possible to shut down the engine in order to perform the work or 

management practice requirements on the schedule required in the final rule, or if performing the 

work or management practice on the required schedule would otherwise pose an unacceptable 

risk under federal, state, or local law, the maintenance activity can be delayed until the 

emergency is over or the unacceptable risk under federal, state, or local law has abated. The 

maintenance should be performed as soon as practicable after the emergency has ended or the 

unacceptable risk under federal, state, or local law has abated. Sources must report any failure to 

perform the work practice on the schedule required and the federal, state or local law under 

which the risk was deemed unacceptable. 

4.3.3.1 Startup, Shutdown and Malfunction 

EPA proposed formaldehyde and CO emission standards for existing stationary engines 

at major sources to apply during periods of startup and malfunction. EPA also proposed certain 

standards for existing stationary engines at area sources that would apply during startup and 

malfunction. Based on various comments and concerns with the proposed emission standards for 

periods of startup, EPA has determined that it is not feasible to finalize numerical emission 

standards that would apply during startup because the application of measurement methodology 

to this operation is not practicable due to technological and economic limitations. As a result, 

EPA is promulgating operational standards during startup that specify that owners and operators 
4-21 

must limit the engine startup time to no more than 30 minutes and must minimize the engine’s 

time spent at idle during startup. Based on information reviewed by EPA, engine startup 

typically requires no more than 30 minutes. We received comments indicating that there are 

conditions where it may take more than 30 minutes to startup the engine, for example for cold 

starts or where the ambient conditions are very cold. However, commenters did not provide 

enough specificity in their comments, nor did commenters provide data, to determine whether 

any scenarios were appropriate to allow a longer startup period. Owners and operators of 

engines at major sources have the option to petition the Administrator pursuant to 40 CFR 

63.6(g) for alternative work practices. Any petition must be based on specific factual 

information indicating the reason the alternative work practice is necessary for that engine and is 

no less stringent than start-up requirements in the rule. An owner or operator of an engine at an 

area source can work with its state permitting authority pursuant to EPA’s regulations at 40 CFR 

subpart E for approval of an alternative management practice, based on specific factual 

information indicating the reason that a longer period is necessary for that engine. Such 

alternative management practice must be demonstrated to be no less stringent than EPA 

promulgated standards. 

As discussed further below, EPA is not setting separate standards for malfunctions in this 

rule. Therefore, the standards that apply during normal operation also apply during malfunction. 

EPA believes that any emissions occurring during a malfunction would be of such a short 

duration compared to the emissions averaged during overall testing time (three one-hour runs) 

that the engine would still be able to comply with the emission standard. In addition, EPA does 

not view malfunction as a distinct operating mode and, therefore, any emissions that occur at 

such times do not need to be taken into account in setting CAA section 112(d) standards. 

Further, as is explained in more detail in Section V.D. of the preamble, even if malfunctions 

were considered a distinct operating mode, we believe it would be impracticable to take into 

account malfunctions in setting CAA section 112(d) standards. 

4.3.3.2 Other 

EPA is including an additional requirement in the final rule that will reduce metallic HAP 

emissions. Owners and operators of existing stationary non-emergency CI engines greater than 

300 HP must do one of the following if the engine is not already equipped with a closed 

crankcase ventilation system: 1) install a closed crankcase ventilation system that prevents 

crankcase emissions from being emitted to the atmosphere, or 2) install an open crankcase 

filtration emission control system that reduces the crankcase emissions by filtering the exhaust 

stream to remove oil mist, particulates, and metals. Owners and operators must follow the 
4-22 

manufacturer’s specified maintenance requirements for operating and maintaining the open or 

closed crankcase ventilation systems and replacing the crankcase filters, or can request the 

Administrator to approve different maintenance requirements that are as protective as 

manufacturer requirements. 

EPA is including special provisions in the final rule for existing stationary nonemergency CI RICE greater than 300 HP located at area sources in Alaska not accessible by the 

FAHS. Owners and operators of these engines do not have to meet the CO emission standards 

specified in Table 4-2, but must instead meet the management practices that are described for 

stationary non-emergency CI RICE less than or equal to 300 HP in section III.C. of the 

preamble. 

The final rule specifies that stationary CI engines that are used to startup combustion 

turbines should meet the same requirements as stationary emergency CI engines. 

4.4 Cost Impacts 

4.4.1 Introduction 

The cost impacts associated with the final rule consist of different types of costs, which 

include the annual and capital costs of controls, costs associated with keeping records of 

information necessary to demonstrate compliance, costs associated with reporting requirements 

under the General Provisions of 40 CFR part 63, subpart A, costs of purchasing and operating 

equipment associated with continuous parametric monitoring, and the cost of conducting 

performance testing to demonstrate compliance with the emission standards. The capital and 

annual costs presented in this section are calculated based on the control cost methodology 

presented in the EPA (2002) Air Pollution Control Cost Manual prepared by the U.S. 

Environmental Protection Agency.2

 This methodology sets out a procedure by which capital and 

annualized costs are defined and estimated, and this procedure is often used to estimate the costs 

of rulemakings such as this one. The capital costs presented in this section are annualized using a 

7% interest rate, a rate that is consistent with the guidance provided in the Office of Management 

and Budget’s (OMB’s) (2003) Circular A-4.3 The following sections describe how the various 

cost elements were estimated. 

 

2

 Available on the Internet at http://epa.gov/ttn/catc/products.html#cccinfo. 3

 Available on the Internet at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf. 
4-23 

4.4.1.1 Control Costs 

For engines that will need to add control technology to meet the emission standards, the 

following equations were used to estimate capital and annual control costs as shown in Table 4-

3: 

Table 4-3: CI RICE Control Technologies and Costs 

Technology Capital Cost ($2008) Annual Cost ($2008) 

Diesel oxidation catalyst (DOC) $27.4 x hp − $939 $4.99 x hp + $480 

Open crankcase ventilation (OCV) $0.26 x hp + $997 $0.065 x hp + $254 

The control costs for DOC were calculated using cost data obtained from a California Air 

Resources Board (CARB) study.4 The study provided cost ranges for diesel engines ranging from 

40 hp to 1400 hp. The average cost from the range was selected and was adjusted to 2008 

dollars. The capital and annual cost were calculated using maintenance data from the CARB 

study and cost assumptions from the EPA Air Pollution Control Cost Manual. The control costs 

for the OCV system were calculated using 2008 cost data obtained from a diesel engine 

equipment vendor. An equipment life of 10 years was used to calculate the capital recovery 

factor (CRF) for developing the annual cost for each of the control devices. A linear regression 

equation was developed for the capital cost of the DOC and OCV using the capital cost data and 

the engine size in horsepower (hp). This approach was used to develop a linear regression 

equation for annual cost. 

4.4.1.2 Recordkeeping 

No recordkeeping costs were attributed to the requirement of following the 

manufacturer’s emission-related operation and maintenance (O&M) requirements or the owner 

or operator’s own maintenance plan. It is expected that the majority of owners and operators are 

already following some type of O&M requirements and minimal to no additional burden is 

expected. Labor costs associated with recording the hours of operation of emergency engines are 

based on a technical labor rate of $68 per hour which was obtained from the Department of 

Labor Statistics web site.5

 The final total wage rate was based on the 2005 compensation rates 

for professional staff and adjusted by an overhead and profit rate of 167 percent. The year 2005 

was used for consistency in order to have the same basis for all costs. All costs were later 

converted to 2008 dollars for purposes of presenting costs associated with the rule in present day 

 

4

Diesel PM Control Technologies, Appendix IX, California Air Resource Board, October 2000. 

http://www.arb.ca.gov/diesel/documents/rrpapp9.pdf 5

U.S. Department of Labor, Employer Costs for Employee Compensation, 

http://www.bls.gov/news.release/ecec.toc.htm 
4-24 

terms. One hour per year is expected to be sufficient to record hours of operation for stationary 

emergency engines. No cost is attributed to purchasing and installing an hour-meter since the 

majority of stationary engines already come equipped with such equipment. For owner/operators 

of nonemergency CI engines, EPA assumed that one hour per year was sufficient for 

recordkeeping for these engines. 

4.4.1.3 Reporting 

Most engines affected by this rule will be subject to reporting requirements such as 

reading instructions, training personnel, submitting an initial notification, submitting a 

notification of performance test(s), and submitting a compliance report. . However, owners and 

operators of engines less than 100 HP, existing stationary emergency engines, and existing 

stationary engines less than 300 HP located at area sources are not subject to any specific 

reporting requirements. . For stationary non-emergency limited use CI engines that operate less 

than 100 hours per year, EPA is finalizing less burdensome reporting requirements by requiring 

these engines to submit compliance reports on an annual basis, as opposed to semiannually as is 

required for other engines subject to numerical emission limitations. The reporting requirements 

are based on $68 per hour for technical labor to comply with the reporting requirements. It is 

estimated that a total of 14 hours will be needed, and 13 hours for limited use engines. 

4.4.1.4 Monitoring 

The cost of monitoring includes the purchase of a continuous parametric monitoring 

system (CPMS). Nonemergency engines greater than 500 hp that have add-on controls are 

required to use a CPMS to monitor the catalyst inlet temperature and pressure drop across the 

catalyst to ensure those parameters do not exceed the operating limitations. The cost of 

purchasing and operating a CPMS was obtained from vendor quotes received for previous 

rulemaking and adjusted to 2008 dollars.6

 The capital cost of a CPMS for a large engine facility 

is $531. It is estimated that 30 hours per year is necessary to operate and maintain the CPMS and 

that 6 hours per year (or 0.5 hours per month) is needed to record information from the CPMS. It 

is assumed that all engines subject to continuous monitoring would be located at large engine 

facilities. 

4.4.1.5 Performance Testing 

Initial performance testing is required for nonemergency engines greater than 100 hp at 

major sources and nonemergency engines greater than 300 hp located at area sources. The cost of 

 

6

Part A of the Supporting Statement for Standard Form 83 Stationary Reciprocating Internal Combustion Engines, 

November 17, 2003. 
4-25 

conducting a performance test on a CI engine is based on cost information gathered for previous 

rulemakings.7

 The performance testing cost is based the use of a portable analyzer and was 

estimated to cost $1,000 per day of testing. This daily performance test cost was adjusted to 2008 

dollars and was estimated to be $1,165. Because the regulation requires three-1 hour runs, EPA 

assumed that two engines could be tested at each facility in one day. Therefore, the estimated 

impacts performance testing cost will be assumed to be $583 per engine (or half of the $1,165 

daily cost) using a portable analyzer. 

4.4.1.6 Work Practices 

The costs for performing work practices for CI engines less than 100 hp located at a 

major source was assumed to be negligible and were not included in these impact calculations. 

The work practices are based on engine maintenance procedures that the owner/operators 

perform regardless of the regulation. These work practices include: 

 Changing the oil and filter; 

 Inspecting the air cleaner; 

 Inspecting all hoses and belts, and replacing as necessary. 

EPA believes that these work practices will limit HAP emissions from these engines, 

because these work practices ensure that the engine is operating efficiently. Owner/operators of 

these engines regularly perform these work practices as part of the preventive maintenance 

schedule for the engine. Therefore, EPA believes that it is appropriate to not include these work 

practice costs in the impacts determination. 

4.4.1.7 Management Practices 

The costs for performing management practices for nonemergency CI engines less than 

or equal to 300 hp located at area sources and all emergency engines located at area sources was 

assumed to be negligible and were not included in these impact calculations. The management 

practices are based on engine maintenance procedures that the owner/operators perform 

regardless of the regulation. These management practices include: 

 Changing the oil and filter; 

 Inspecting the air cleaner; and 

 Inspecting all hoses and belts, and replacing as necessary. 

 

7

Memorandum from Bradley Nelson, Alpha-Gamma Technologies, Inc. to Sims Roy, 

EPA/OAQPS/ESD/Combustion Group, Portable Emissions Analyzer Cost Information, August 31, 2005. 
4-26 

EPA believes that these work practices will limit HAP emissions from these engines, 

because these work practices ensure that the engine is operating efficiently. Owner/operators of 

these engines regularly perform these work practices as part of the preventive maintenance 

schedule for the engine. Therefore, EPA believes that it is appropriate to not include these work 

practice costs in the impacts determination. 

4.4.2 Major Sources 

The cost impacts for stationary RICE vary depending on the engine type and size. The 

following sections describe the specific costs that apply to each subcategory of CI engines 

located at major sources.

4.4.2.1 All CI Engines hp < 100 

The costs associated with CI engines less than 100 hp include minimal requirements. 

Owners and operators of engines less than 100 hp are required to follow the manufacturer’s 

emission-related O&M requirements or must develop their own maintenance plan to follow. 

Emergency engines must record the hours of operation, which is estimated at one hour per year 

at $72 per hour. 

4.4.2.2 Nonemergency CI Engines 100 ≤ hp ≤ 300 hp 

The costs associated with nonemergency CI engines greater than or equal to 100 hp and 

less than or equal to 300 hp include the cost of an initial test, recordkeeping, and reporting. In 

addition, EPA assumes that some of these engines will be required to install a control device to 

meet the emissions standard. To estimate the number of CI engines that would be required to 

install control technology, EPA compared the emission rate of the test that was used to determine 

the MACT floor with the CI nonroad emission factors.8

 EPA found that only the emission factors 

for Tier 0 CI engines were greater than the 1.2 g/hp-hr value that was used to set the MACT 

floor. Therefore, it was assumed that Tier 1 engines and greater would be able to meet the final 

emission standard. The model year for Tier 1 engines begins in 1997 for 100 to 175 CI engines, 

and 1996 for 175 to 300 hp CI engines. Using the model year data in the population 

memorandum, EPA estimated that 35 percent of the existing CI engines greater than or equal to 

100 hp and less than or equal to 300 hp are Tier 0 engines and would need to install control 

technology to meet the emission standard. The cost estimates for this subcategory of engines do 

not account for possible fuel price increases that may result from using ultra-low sulfur diesel 

(ULSD). EPA estimated the cost of lubricity additives to ULSD would increase the cost of the 

 

8

Exhaust and Crankcase Emission Factors for Nonroad Engine Modeling--Compression-Ignition, U.S. EPA, Office 

of Transportation and Air Quality, Assessment and Standards Division, EPA420-P-04-009, Revised April 2004. 

http://www.epa.gov/oms/models/nonrdmdl/nonrdmdl2004/420p04009.pdf 
4-27 

fuel by 0.2 cents per gallon,9

 which EPA believes is negligible. In addition, there are no 

additional maintenance requirements for owner/operators using ULSD in existing diesel engines. 

Many owner/operators have found that time between oil changes can be extended for engines 

using ULSD fuel, which would decrease the overall cost of switching to ULSD fuel. Therefore, 

EPA believes that it is appropriate to not include any costs for switching to ULSD in the impacts 

for this NESHAP. 

4.4.2.2 Nonemergency CI Engines > 300 hp 

The costs associated with nonemergency CI engines above 300 hp include the cost of 

installing and operating an oxidation catalyst for reducing HAP, as well as the cost of installing 

an open crankcase ventilation system. Nonemergency CI engines greater than 500 hp are also 

subject to continuous monitoring requirements. In addition, owners and operators must conduct 

an initial performance test to demonstrate compliance with the emission limitation. Owners and 

operators of engines above 500 hp must conduct subsequent performance testing every 8,760 

hours or 3 years, whichever comes first to demonstrate compliance. The cost estimates for this 

subcategory of engines do not account for possible fuel price increases that may result from 

using ultra-low sulfur diesel (ULSD). EPA estimated the cost of lubricity additives to ULSD 

would increase the cost of the fuel by 0.2 cents per gallon,10 which EPA believes is negligible. In 

addition, there are no additional maintenance requirements for owner/operators using ULSD in 

existing diesel engines. Many owner/operators have found that time between oil changes can be 

extended for engines using ULSD fuel, which would decrease the overall cost of switching to 

ULSD fuel. Therefore, EPA believes that it is appropriate to not include any costs for switching 

to ULSD in the impacts for this NESHAP. 

4.4.2.3 Emergency CI Engines 

The costs associated with emergency CI engines greater than 300 hp and less than or 

equal to 500 hp (emergency CI engines above 500 hp were subject to an earlier rule and are not 

subject to further regulation in this rule) include minimal recordkeeping requirements. The 

owners and operators must follow the manufacturer’s emission-related operating and 

maintenance (O&M) requirements or must develop their own maintenance plan to follow and 

must also keep records of the hours of operation. It is estimated that one hour per year at $68 per 

hour would be sufficient to record the hours of operation. No costs were included in the impacts 

 

9

Memorandum from Melanie Taylor and Brad Nelson, AGTI to Sims Roy, EPA OAQPS ESD Combustion Group, 

Lubricity of Ultra Low Sulfur Diesel Fuel, June 2, 2004. 10Memorandum from Melanie Taylor and Brad Nelson, AGTI to Sims Roy, EPA OAQPS ESD Combustion Group, 

Lubricity of Ultra Low Sulfur Diesel Fuel, June 2, 2004. 
4-28 

for following the manufacturer’s emission-related O&M plan, because it is expected that 

owner/operators will follow this plan regardless of the regulation. 

4.4.3 Area Sources 

4.4.3.1 All Emergency CI Engines 

The costs associated with emergency CI engines include recordkeeping requirements for 

tracking the hours of operation, but these engines are not subject to any performance testing. The 

owners and operators must follow the manufacturer’s emission-related O&M requirements or 

must develop their own maintenance plan to follow. It is estimated that one hour per year at $68 

per hour would be sufficient to record the hours of operation. Emergency CI engines at areas 

sources will be subject to management practices, rather numerical emission limits. The 

management practices do not require aftertreatment controls. Therefore, no control costs have 

been estimated for these engines. These engines will be subject to management practices which 

are not included in the costs, because it is assumed that these management practices are 

performed regardless of the regulation. 

4.4.3.2 Nonemergency CI Engines ≤ 300 hp 

The costs associated with nonemergency CI engines less than or equal to 300 hp are 

minimal and only include following the manufacturer’s emission-related O&M requirements or 

the owner or operator’s own maintenance plan. These engines are not subject to any numerical 

emission limitations, therefore no control costs apply and no performance testing is required. 

These engines will be subject to management practices which are not included in the costs, 

because it is assumed that these management practices are done regardless of the regulation. 

4.4.3.3 Nonemergency CI Engines > 300 hp 

The costs associated with nonemergency CI engines above 300 hp include the cost of 

installing and operating an oxidation catalyst for reducing HAP, as well as the cost of installing 

an open crankcase ventilation system. Nonemergency CI engines greater than 500 hp are also 

subject to continuous monitoring requirements. In addition, owners and operators must conduct 

an initial performance test to demonstrate compliance with the emission limitation and engines 

above 500 hp must conduct subsequent performance testing every 8,760 hours or 3 years, 

whichever comes first. The cost estimates for this subcategory of engines do not account for 

possible fuel price increases that may result from using ultra-low sulfur diesel. The cost 

estimates for this subcategory of engines do not account for possible fuel price increases that 

may result from using ultra-low sulfur diesel (ULSD). EPA estimated the cost of lubricity 

additives to ULSD would increase the cost of the fuel by 0.2 cents per gallon, which EPA 
4-29 

believes is negligible. In addition, there are no additional maintenance requirements for 

owner/operators using ULSD in existing diesel engines. Many owner/operators have found that 

time between oil changes can be extended for engines using ULSD fuel, which would decrease 

the overall cost of switching to ULSD fuel. Therefore, EPA believes that it is appropriate to not 

include any costs for switching to ULSD in the impacts for this NESHAP. 

A summary of the total costs associated with the rule by major source and area source 

categories is found in Table 4-4. A summary of the costs by NAICS codes is found in Table 4-5. 

Table 4-6 provides a summary of costs by engine size, and a presentation of the number of 

engines by engine size is in Table 4-7. All cost estimates are from “Impacts Associated with 

NESHAP for Existing Stationary CI RICE,” prepared by Bradley Nelson, Ec/R, Inc. for Melanie 

King, U.S. EPA, Office of Air Quality Planning and Standards, February 17, 2010.
4-30 

Table 4-4. Summary of Major Source and Area Source Costs for the CI RICE NESHAPa 

Size 

Range 

(hp) 

Non-Emergency 

CI Capital 

Control Cost 

Non-Emergency 

CI Annual 

Control Cost Initial Test Recordkeeping Reporting 

Monitoring – 

Capital Cost 

Monitoring – 

Annual Cost 

Tota

Major Sources 

50–100 $0 $0 $0 $6,654,888 $0 $0 $0 $

100–175 $24,057,778 $9,918,465 $14,150,269 $8,719,731 $6,103,812 $0 $0 $3

175–300 $35,917,270 $10,740,189 $10,730,759 $6,612,548 $4,628,784 $0 $0 $3300–500 $107,841,136 $26,722,727 $5,645,923 $3,479,152 $2,435,406 $0 $0 $3500–600 $13,126,952 $3,020,849 $500,530 $61,688 $215,907 $481,765 $2,220,755 $600–750 $8,240,540 $1,824,295 $256,204 $31,576 $110,515 $246,599 $1,136,729 $

>750 $26,903,091 $5,618,803 $565,163 $69,653 $243,787 $543,975 $2,507,521 $

Total $216,086,768 $57,845,329 $31,848,848 $25,629,236 $13,738,210 $1,272,338 $5,865,005 $13

Area Sources 

50–100 $0 $0 $0 $9,183,746 $0 $0 $0 $

100–175 $0 $0 $0 $12,033,196 $9,155,692 $0 $0 $1175–300 $0 $0 $0 $9,125,316 $6,943,176 $0 $0 $1300–600 $272,814,082 $65,640,094 $12,703,298 $7,201,827 $5,362,230 $4,075,682 $18,787,376 $10

600–750 $68,490,125 $15,162,379 $2,129,405 $1,207,215 $898,850 $683,191 $8,952,336 $2

>750 $179,573,835 $37,504,615 $3,772,372 $2,138,655 $1,592,368 $1,210,315 $15,859,613 $6

Total $520,878,041 $118,307,088 $18,605,076 $40,889,956 $17,052,802 $5,969,187 $43,599,324 $23

Grand Total 

Total $736,964,809 $176,152,417 $50,453,924 $66,519,191 $30,496,622 $7,241,526 $49,464,330 $37

a Costs are presented in 2008 dollars. 
4-31 

Table 4-5. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAPa 

NAICS 

Major Source Area Source Total 

Capital Cost Annual Cost Capital Cost Annual Cost Capital Cos

Electric Power Generation (2211) 

$161,766,376 $90,982,105 $471,230,478 $203,529,267 $632,996,85

Hospitals (622110) $20,220,797 $11,372,763 $0 $0 $20,220,79Crude Petroleum & NG Production (211111) 

$2,374,401 $3,807,478 $1,611,601 $2,599,033 $3,986,00

Natural Gas Liquid Producers (211112) 

$2,374,401 $3,807,478 $1,611,601 $2,599,033 $3,986,00

National Security (92811) $20,220,797 $11,372,763 $52,358,942 $22,614,363 $72,579,73Hydro Power Units (335312) $0 $16,637 $0 $22,959 $Irrigation Sets (335312) $10,294,073 $11,791,567 $34,606 $5,208,210 $10,328,67Welders (333992) $108,260 $1,481,447 $0 $1,881,380 $108,26Total $217,359,106 $134,632,238 $526,847,229 $238,454,245 $744,206,33a Costs are presented in 2008 dollars. 
4-32 

Table 4-6. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Siz

NAICS 

Major Source Area Source Tota

Capital Cost Annual Cost Capital Cost Annual Cost Capital C

Electric Power Generation (2211)

50–100 hp $0 $3,396,123 $0 $5,272,480 100–175 hp $13,406,919 $21,600,998 $0 $10,824,132 $13,406,9175–300 hp $23,012,914 $20,895,861 $0 $9,437,454 $23,012,9300–600 hp $96,907,266 $35,304,866 $248,552,865 $98,468,656 $345,460,1600–750 hp $6,789,032 $2,685,292 $62,249,758 $25,512,616 $69,038,7>750 hp $21,650,245 $7,098,966 $160,427,854 $54,013,930 $182,078,1

Total 2211 $161,766,376 $90,982,105 $471,230,478 $203,529,267 $632,996,8Hospitals (622110)

50–100 hp $0 $424,515 $0 $0 100–175 hp $1,675,865 $2,709,236 $0 $0 $1,675,8175–300 hp $2,876,614 $2,619,927 $0 $0 $2,876,6300–600 hp $12,113,408 $4,418,775 $0 $0 $12,113,4600–750 hp $848,629 $335,898 $0 $0 $848,6>750 hp $2,706,281 $887,886 $0 $0 $2,706,2

Total 622110 $20,220,797 $11,396,237 $0 $0 $20,220,7Crude Petroleum & NG Production (211111)

50–100 hp $0 $420,256 $0 $579,954 100–175 hp $2,026,868 $3,265,655 $0 $1,454,578 $2,026,8175–300 hp $3,592 $3,261 $0 $1,309 $3,5300–600 hp $151,812 $55,308 $346,112 $137,119 $497,9600–750 hp $0 $0 $0 0 >750 hp $192,129 $62,998 $1,265,489 $426,073 $1,457,6

Total 211111 $2,374,401 $3,807,478 $1,611,601 $2,599,033 $3,986,0
4-33 

Table 4-6. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Siz

NAICS 

Major Source Area Source Tota

Capital Cost Annual Cost Capital Cost Annual Cost Capital C

Natural Gas Liquid Producers (211112)

50–100 hp $0 $420,256 $0 $579,954 100–175 hp $2,026,868 $3,265,655 $0 $1,454,578 $2,026,8175–300 hp $3,592 $3,261 $0 $1,309 $3,5300–600 hp $151,812 $55,308 $346,112 $137,119 $497,9600–750 hp 0 0 0 0 >750 hp $192,129 $62,998 $1,265,489 $426,073 $1,457,6

Total 211112 $2,374,401 $3,807,478 $1,611,601 $2,599,033 $3,986,0National Security (92811)

50–100 hp $0 $424,515 $0 $585,831 100–175 hp $1,675,865 $2,700,125 $0 $1,202,681 $1,675175–300 hp $2,876,614 $2,611,983 $0 $1,048,606 $2,876300–600 hp $12,113,408 $4,413,108 $27,616,985 $10,940,962 $39,730600–750 hp $848,629 $335,662 $6,916,640 $2,834,735 $7,765>750 hp $2,706,281 $887,371 $17,825,317 $6,001,548 $20,531

Total 92811 $20,220,797 $11,372,763 $52,358,942 $22,614,363 $72,579Hydro Power Units (335312)

50–100 hp $0 $16,637 $0 $22,959 100–175 hp $0 $0 $0 $0 175–300 hp $0 $0 $0 $0 300–600 hp $0 $0 $0 $0 600–750 hp $0 $0 $0 $0 >750 hp $0 $0 $0 $0 

Total 335312 $0 $16,637 $0 $22,959 
4-34 

Table 4-6. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Siz

NAICS 

Major Source Area Source Tota

Capital Cost Annual Cost Capital Cost Annual Cost Capital C

Irrigation Sets (335312)

50–100 hp $0 $245,565 $0 $338,880 100–175 hp $3,137,134 $5,054,497 $0 $2,251,359 $3,137,1175–300 hp $7,143,945 $6,486,744 $0 $2,604,167 $7,143,9300–600 hp $12,145 $4,425 $27,689 $10,969 $39,8600–750 hp $849 $336 $6,917 $2,835 $7,7>750 hp $0 $0 $0 $0 

Total 335312 $10,294,073 $11,791,567 $34,606 $5,208,210 $10,328,6Welders (333992)

50–100 hp $0 $1,307,020 $0 $1,803,688 100–175 hp $108,260 $174,427 $0 $77,693 $108,2175–300 hp $0 $0 $0 $0 300–600 hp $0 $0 $0 $0 600–750 hp $0 $0 $0 $0 >750 hp $0 $0 $0 $0 

Total 333992 $108,260 $1,481,447 $0 $1,881,380 $108,2Grand Total Total $217,359,106 $134,632,238 $526,847,229 $238,454,245 $744,206,3a Costs are presented in 2008 dollars. 
4-35 

Table 4-7. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Nu

NAICS 

Number of Engines Total 

Major Area Total Capital Cos

Electric Power Generation (2211)

50–100 hp 47,324 79,859 127,183 $0 100–175 hp 67,713 114,266 181,980 $13,406,919 175–300 hp 59,039 99,627 158,666 $23,012,914 300–600 hp 42,113 97,919 140,032 $345,460,132 600–750 hp 1,760 16,455 18,215 $69,038,790 >750 hp 3,828 28,746 32,574 $182,078,100 

Total 2211 221,777 436,872 658,649 $632,996,854 Hospitals (622110)

50–100 hp 5,916 0 5,916 $0 

100–175 hp 8,464 0 8,464 $1,675,865 175–300 hp 7,380 0 7,380 $2,876,614 300–600 hp 5,264 0 5,264 $12,113,408 600–750 hp 220 0 220 $848,629 >750 hp 479 0 479 $2,706,28

Total 622110 27,722 0 27,722 $20,220,797 Crude Petroleum & NG Production (211111)

50–100 hp 5,856 8,784 14,640 $0 

100–175 hp 10,237 15,355 25,592 $2,026,868 175–300 hp 9 14 23 $3,592 300–600 hp 66 136 202 $497,925 600–750 hp 0 0 0 $0 >750 hp 34 227 261 $1,457,619 

Total 211111 16,202 24,517 40,719 $3,986,003 
4-36 

Table 4-7. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Nu

(continued) 

NAICS 

Number of Engines Total 

Major Area Total Capital Cos

Natural Gas Liquid Producers (211112)

50–100 hp 5,856 8,784 14,640 $0 100–175 hp 10,237 15,355 25,592 $2,026,868 175–300 hp 9 14 23 $3,592 300–600 hp 66 136 202 $497,925 600–750 hp 0 0 0 $0 >750 hp 34 227 261 $1,457,619 

Total 211112 16,202 24,517 40,719 $3,986,003 National Security (92811)

50–100 hp 5,916 8,873 14,789 $0 

100–175 hp 8,464 12,696 21,160 $1,675,865 175–300 hp 7,380 11,070 18,450 $2,876,614 300–600 hp 5,264 10,880 16,144 $39,730,393 600–750 hp 220 1,828 2,048 $7,765,269 >750 hp 479 3,194 3,672 $20,531,598 

Total 92811 27,722 48,541 76,263 $72,579,739 Hydro Power Units (335312)

50–100 hp 232 348 580 $0 

100–175 hp 0 0 0 $0 175–300 hp 0 0 0 $0 300–600 hp 0 0 0 $0 600–750 hp 0 0 0 $0 >750 hp 0 0 0 $0 

Total 335312 232 348 580 $0 
4-37 

Table 4-7. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Nu

(continued) 

NAICS 

Number of Engines Total 

Major Area Total Capital Cos

Irrigation Sets (335312)

50–100 hp 3,422 5,133 8,555 $0 100–175 hp 15,845 23,767 39,611 $3,137,134 175–300 hp 18,327 27,491 45,819 $7,143,945 300–600 hp 5 11 16 $39,834 600–750 hp 0 2 2 $7,766 >750 hp 0 0 0 $0 

Total 335312 37,599 56,403 94,003 $10,328,679 Welders (333992)

50–100 hp 18,213 27,319 45,532 $0 

100–175 hp 547 820 1,367 $108,260 175–300 hp 0 0 0 $0 300–600 hp 0 0 0 $0 600–750 hp 0 0 0 $0 >750 hp 0 0 0 $0 

Total 333992 18,760 28,140 46,899 $108,260 Grand Total Total 366,217 619,337 957,832 $744,206,335 a Costs are presented in 2008 dollars. 
4-38 

4.5 Emissions and Emission Reductions 

The emissions reductions associated with the final rule are based on requiring emission 

standards that are based on applying add-on controls to non-emergency CI engines greater than 

300 HP. Baseline emissions from the current population of stationary RICE less than or equal to 

500 HP at major sources and existing stationary RICE at area sources were calculated based on 

non-emergency CI engines operating 1,000 hrs/yr, and emergency CI engines operating 50 

hrs/yr. The following additional assumptions were used: 

Emission Factors: 

Engine HAP 

(lb/hp-hr) 

CO 

(lb/hr) 

PM 

(lb/hp-hr) 

SO2 

(lb/hp-hr) 

CI 1.07x10-4 6.96x10-1 7.00x10-4 0.00809xS1

*

*Obtained from AP-42, section 3.4 where S1 is sulfur content. 

 

Control Efficiencies: 

Technology HAP CO PM 

Oxidation catalyst 70% 70% 30% 

 Based on the above assumptions and the existing population of engines shown earlier in 

this section, the HAP, CO, and PM baseline emissions and reductions were calculated. In 

addition to the final rule reducing HAP, CO, and PM, the rule will also lead to reductions in 

sulfur dioxide (SO2) emissions by requiring existing non-emergency CI engines greater than 300 

HP that use diesel fuel to use diesel fuel containing no more than 15 parts per million (ppm) of 

sulfur. We have not quantified the SOx reductions that would occur as a result of engines 

switching to ULSD because we are unable to estimate the number of engines that already use 

ULSD and therefore we are unable to estimate the percentage of engines that may switch to 

ULSD due to this rule. If none of the affected engines would use ULSD without this rule, then 

we estimate the SOx reductions are 31,000 tpy in the year 2013. If all of the affected engines 

would use ULSD regardless of the rule, then the additional SOx reductions would be zero. 

The estimated reductions in tons per year (tpy) as a result of the final rule are shown in 

Table 4-8. In addition, it is expected that additional PM reductions will be achieved by the 

requirement to use ULSD for CI engines that install a DOC. The use of ULSD reduces the 

formation of sulfates in the exhaust gas, therefore reducing the emission of these sulfate PM 

emissions from the exhaust. EPA has estimated that the use of ULSD can reduce PM emissions 
4-39 

by 5-30 percent depending on the sulfur concentration of the diesel fuel that is being replaced. 

Because EPA has no information on the type of fuel that CI engines are currently using, the PM 

reductions from switching to ULSD were not quantified and included in this summary. 

 The work practice requirement of using an open crankcase ventilation system to control 

metallic HAP emissions is expected to achieve additional HAP reductions from CI engines. 

However, the metallic HAP emission reduction cannot be quantified because of the difficulty of 

measuring metallic HAP from the crankcase exhaust. Therefore, the metallic HAP reductions 

are not included in the total emission reductions. 

 

Table 4-8. Summary of Major Source and Area Source Emissions Reductions for 

the CI RICE NESHAP in 2013 

Size Range 

(HP) 

Emission 

Reductions 

(tpy) 

 

HAP CO PM VOC 

50-100 0 0 0 0 

100-175 44 2,072 123 1,183 

175-300 57 1,571 161 1,549 

300-500 145 2,362 407 3,923 

500-600 18 209 50 478 

600-750 11 107 31 300 

>750 36 236 102 982 

Total 312 6,558 874 8,416 

50-100 0 0 0 0 

100-175 0 0 0 0 

175-300 0 0 0 0 

300-600 368 5,314 1,031 9,930 

600-750 92 891 259 2,497 

>750 243 1,578 680 6,553 

Total 703 7,784 1,970 18,980 

Grand Total 1,014 14,342 2,844 27,395 

Note: All emission reduction estimates are from “Impacts Associated with NESHAP for Existing 

Stationary CI RICE,” prepared by Bradley Nelson, Ec/R, Inc. for Melanie King, U.S. EPA, Office of Air 

Quality Planning and Standards, February 17, 2010.
5-1 

SECTION 5

ECONOMIC IMPACT ANALYSIS, ENERGY IMPACTS, AND SOCIAL COSTS 

The EIA provides decision makers with social cost estimates and enhances understanding 

of how the costs may be distributed across stakeholders (EPA, 2000). Although several 

economic frameworks can be used to estimate social costs for regulations of this size and sector 

scope, OAQPS has typically used partial equilibrium market models. However, the current data 

do not provide sufficient details to develop a market model; the data that are available have little 

or no sector/firm detail and are reported at the national level. In addition, some sectors have 

unique market characteristics (e.g., hospitals) that make developing partial equilibrium models 

difficult. Given these constraints, we believed the direct compliance costs as a reasonable 

approximation of total social costs. In addition, we also provide a qualitative analysis of the final 

rule’s economic impact on stakeholder decisions, a qualitative discussion on if unfunded 

mandates occur as a result of this final rule, and a qualitative discussion of the potential 

distribution of social costs between consumers and producers. 

5.1 Compliance Costs of the Final Rule 

For the year 2013, EPA’s engineering cost analysis estimates the total annualized costs of 

the final rule are $373 million (in 2008 dollars) (Nelson, 2010). 

As shown in Figure 5-1, the majority of the costs fall on the electric power sector (79%), 

followed by national security (9%). The remaining industries each account for 5% or less of the 

total annualized cost. The industrial classification for each engine is taken from the Power 

Systems Research (PSR) database, which is the major source of data for the engines affected by 

the final rule. The PSR database used as a basis for the analyses in this RIA contains 

information on both mobile and stationary onroad and nonroad engines, among other data, and 

does so not only for the U.S. but worldwide. PSR has collected such data for more than 30 

years. The Office of Transportation and Air Quality (OTAQ) uses this database frequently in the 

development of their mobile source rules. 

The annualized compliance costs per engine vary by the engine size (see Figure 5-2). For 

300 hp engines or less, the annualized per-engine costs are below $215 per engine. Per-engine 

costs for higher horsepower (hp) engines range between $950 and $1,900. 

The final rule will affect approximately one million existing stationary diesel engines. As 

shown in Figure 5-3, most of the affected engines fall within the 100 to 175 hp category (31%). 
5-2 

The next highest categories are 50 to 100 hp (24%) and 175 to 300 hp (23%). The remaining 

engines are concentrated in the 300 to 600 hp category (16%). 

79%

3% 2% 2%

9%

0%

5%

1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Electric Power Generation 

(2211)

Hospitals (622110)

Crude Petroleum & NG 

Production (211111)

Natural Gas Liquid Producers 

(211112)

National Security (92811)

Hydro Power Units (335312)

Irrigation Sets (335312)

Welders (333992)

Figure 5-1. Distribution of Annualized Direct Compliance Costs by Industry: 2013 
5-3 

$68

$198 $212

$952

$1,549

$1,877

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

50-100 hp 100-175 hp 175-300 hp 300-600 hp 600-750 hp >750 hp

Figure 5-2. Average Annualized Cost per Engine by Horsepower Group: 2013 ($2008) 

24%

31%

23%

16%

2%

4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

50-100 hp 100-175 hp 175-300 hp 300-600 hp 600-750 hp >750 hp

Figure 5-3. Distribution of Engine Population by Horsepower Group: 2013 
5-4 

To assess the size of the compliance cost relative to the value of the goods and services 

for industries using affected engines, we collected Census data for selected industries. At the 

industry level, the annualized costs represent a very small fraction of revenue (less than 0.07%) 

(Table 5-1). These industry level cost-to-sales ratios can be interpreted as an average impact on 

potentially affected firms in these industries. Based on the cost-to-sales ratios, we can conclude 

that the annualized cost of this rule should be no higher than 1% of the sales on average for a 

firm in each of these industries. 

Table 5-1. Selected Industry-Level Annualized Compliance Costs as a Fraction of Total 

Industry Revenue: 2008 

Industry 

(NAICS) Industry Name 

Total Annualized 

Costs 

($ million)a

Sales, Shipments, Receipt, or 

Revenue ($Billion) Cost-to-Sales 

($2007) ($2008) Ratio 

2211 Electric Power Generation $299.5 $440.4 $449.8 0.07% 

622110 Hospitals $11.4 $663.6 $677.8 0.00% 

211111 Crude Petroleum & NG 

Production 

$6.7 $214.2 $218.8 0.00% 

211112 Natural Gas Liquid 

Producers 

$6.7 $42.4 $43.3 0.02% 

92811 National Security $34.5 #N/A #N/A #N/A 

333992 Welders $3.4 $5.2 $5.3 0.06% 

111 and 112 Agriculture using irrigation 

systemsa

$18.1 $27.9 $28.5 0.06% 

a Irrigation engine costs assumed to be passed on to agricultural sectors that use irrigation systems. 

N/A: receipts are Not Available for National Security 

Sources: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 00: All sectors: 

Geographic Area Series: Economy-Wide Key Statistics: 2007” <http://factfinder.census.gov>; (January 4th , 

2010). 

 U.S. Department of Agriculture (USDA), National Agricultural Statistics Service (NASS). 2009. “2008 Farm and 

Ranch Irrigation Survey.” Washington, DC: USDA-NASS. 

 Nelson, B., EC/R Inc. January 7, 2010. Memorandum to Melanie King, U.S. Environmental Protection Agency. 

Impacts Associated with NESHAP for Existing Stationary CI RICE. 
5-5 

5.2 How Might People and Firms Respond? A Partial Equilibrium Analysis 

Markets are composed of people as consumers and producers trying to maximize utility 

(consumers) and maximize profits (producers) they can given their economic circumstances. One 

way economists illustrate behavioral responses to pollution control costs is by using market 

supply and demand diagrams. The market supply curve describes how much of a good or service 

firms are willing and able to sell to people at a particular price; this curve is typically upward 

sloping because some production resources are fixed. As a result, the cost of producing an 

additional unit typically rises as more units are made. The market demand curve describes how 

much of a good or service consumers are willing and able to buy at some price. Holding other 

factors constant, the quantity demand is assumed to fall when prices rise. In a perfectly 

competitive market, equilibrium price (P0) and quantity (Q0) is determined by the intersection of 

the supply and demand curves (see Figure 5-4). 

5.2.1 Changes in Market Prices and Quantities 

To qualitatively assess how the regulation may influence the equilibrium price and 

quantity in the affected markets, we assumed the market supply function shifts up by the 

additional cost of producing the good or service; the unit cost increase is typically calculated by 

dividing the annual compliance cost estimate by the baseline quantity (Q0) (see Figure 5-4). As 

shown, this model makes two predictions: the price of the affected goods and services are likely 

to rise and the consumption/production levels are likely to fall. 
5-6 

consumer surplus = –[fghd + dhc] 

producer surplus = [fghd – aehb] – bdc 

total surplus = consumer surplus + producer surplus = 

–[aehb + dhc + bdc] 

Figure 5-4. Market Demand and Supply Model: With and Without Regulation 

The size of these changes depends on two factors: the size of the unit production cost 

increase (supply shift) and differences in how each side of the market (supply and demand) 

responds to changes in price. Economists measure responses using the concept of price elasticity, 

which represents the percentage change in quantity divided by the percentage change in price. 

This dependence has been expressed in the following formula:1

( ) Price Elasticity of Supply - Price Elasticity of Demand)

Price Elasticity of Supply Share of per-unit productioncost =

As a general rule, a higher share of the per-unit cost increases will be passed on to 

consumers in markets where 

 goods and services are necessities and people do not have good substitutes that they 

can switch to easily (demand is inelastic) and 

 

1

For examples of similar mathematical models in the public finance literature, see Nicholson (1998), pages 444–447, 

or Fullerton and Metcalf (2002). 
5-7 

 suppliers have excess capacity and can easily adjust production levels at minimal 

costs, or the time period of analysis is long enough that suppliers can change their 

fixed resources; supply is more elastic over longer periods. 

Short-run demand elasticities for energy goods (electricity and natural gas), agricultural 

products, and construction are often inelastic. Specific estimates of short-run demand elasticities 

for these products can be obtained from existing literature. For the short-run demand of energy 

products, the National Energy Modeling System (NEMS) buildings module uses values between 

0.1 and 0.3; a 1% increase in price leads to a 0.1 to 0.3% decrease in energy demand (Wade, 

2003). For the short-run demand of agriculture and construction, the EPA has estimated 

elasticities to be 0.2 for agriculture and approximately 1 for construction (EPA, 2004). As a 

result, a 1% increase in the prices of agriculture products would lead to a 0.2% decrease in 

demand for those products, while a 1% increase in construction prices would lead to 

approximately a 1% decrease in demand for construction. Given these demand elasticity 

scenarios (shaded in gray), approximately a 1% increase unit costs would result in a price 

increase of 0.1 to 1% (Table 5-2). As a result, 10 to 100% of the unit cost increase could be 

passed on to consumers in the form of higher goods/services prices. This price increase would 

correspond to a 0.1 to 0.8% decline in consumption in these markets (Table 5-3). 

Table 5-2. Hypothetical Price Increases for a 1% Increase in Unit Costs 

Market Demand 

Elasticity 

Market Supply Elasticity 

0.1 0.3 0.5 0.7 1 1.5 3 

−0.1 0.5% 0.8% 0.8% 0.9% 0.9% 0.9% 1.0% 

−0.3 0.3% 0.5% 0.6% 0.7% 0.8% 0.8% 0.9% 

−0.5 0.2% 0.4% 0.5% 0.6% 0.7% 0.8% 0.9% 

−0.7 0.1% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% 

−1.0 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.8% 

−1.5 0.1% 0.2% 0.3% 0.3% 0.4% 0.5% 0.7% 

−3.0 0.0% 0.1% 0.1% 0.2% 0.3% 0.3% 0.5% 

5.2.2 Regulated Markets: The Electric Power Generation, Transmission, and Distribution 

Sector 

Given that the electric power sector bears majority of the estimated compliance costs 

(Figure 5-1) and the industry is also among the last major regulated energy industries in the 

United States (EIA, 2000), the competitive model is not necessarily applicable for this industry. 
5-8 

Table 5-3. Hypothetical Consumption Decreases for a 1% Increase in Unit Costs 

Market Demand 

Elasticity 

Market Supply Elasticity 

0.1 0.3 0.5 0.7 1 1.5 3 

−0.1 −0.1% −0.1% −0.1% −0.1% −0.1% −0.1% −0.1% 

−0.3 −0.1% −0.2% −0.2% −0.2% −0.2% −0.3% −0.3% 

−0.5 −0.1% −0.2% −0.3% −0.3% −0.3% −0.4% −0.4% 

−0.7 −0.1% −0.2% −0.3% −0.4% −0.4% −0.5% −0.6% 

−1.0 −0.1% −0.2% −0.3% −0.4% −0.5% −0.6% −0.8% 

−1.5 −0.1% −0.3% −0.4% −0.5% −0.6% −0.8% −1.0% 

−3.0 −0.1% −0.3% −0.4% −0.6% −0.8% −1.0% −1.5% 

Although the electricity industry continues to go through a process of restructuring, whereby the 

industry is moving toward a more competitive framework (see Figure 5-5 for the status of 

restructuring by state),2 in many states, electricity prices continue to be fully regulated by Public 

Service Commissions. As a result, the rules and processes outlined by these agencies would 

ultimately determine how these additional regulatory costs would be recovered by affected 

entities. 

5.2.3 Partial Equilibrium Measures of Social Cost: Changes Consumer and Producer 

Surplus 

In partial equilibrium analysis, the social costs are estimated by measuring the changes in 

consumer and producer surplus, and these values can be determined using the market supply and 

demand model (Figure 5-4). The change in consumer surplus is measured as follows: 

ΔCS = – [ΔQ1 × Δp] + [0.5 × ΔQ × Δp]. (5.1) 

Higher market prices and lower quantities lead to consumer welfare losses. Similarly, the change 

in producer surplus is measured as follows: 

ΔPS = [ΔQ1 × Δp] – [ΔQ1 × t] – [0.5 × ΔQ × (Δp – t)]. (5.2) 

Higher unit costs and lower production level reduce producer surplus because the net 

price change (Δp – t) is negative. However, these losses are mitigated because market prices tend 

to rise. 

 

2

http://tonto.eia.doe.gov/energy_in_brief/print_pages/electricity.pdf. 
5-9 

Figure 5-5. Electricity Restructuring by State 

Source. U.S. Energy Information Administration. 2008a. 

<http://www.eia.doe.gov/cneaf/electricity/page/restructuring/restructure_elect.html>. Last updated September 

2008. 

5.3 Social Cost Estimate 

As shown in Table 5-1 the compliance costs are only a small fraction of the affected 

product value; this suggests that shift of the supply curve may also be small and result in small 

changes in market prices and consumption. EPA believes the national annualized compliance 

cost estimates provide a reasonable approximation of the social cost of this final rule. EPA 

believes this approximation is better for industries whose markets are well characterized as 

perfectly competitive. This approximation is less well understood for industries where the 

characterization of markets is not always perfectly competitive such as electric power generation 

.whose legal incidence of this rule is approximately 80 percent of the annualized compliance 

cost. However, given the data limitation noted earlier, EPA believes the accounting for 

compliance cost is a reasonable approximation to inform policy discussion in this rulemaking. 

To shed more light on this issue, EPA ran hypothetical analyses and the results are in Tables 5-2 

and 5-3. 
5-10 

5.4 Energy Impacts 

Executive Order 13211 (66 FR 28355, May 22, 2001) provides that agencies will prepare 

and submit to the Administrator of the Office of Information and Regulatory Affairs, Office of 

Management and Budget, a Statement of Energy Effects for certain actions identified as 

“significant energy actions.” Section 4(b) of Executive Order 13211 defines “significant energy 

actions” as any action by an agency (normally published in the Federal Register) that 

promulgates or is expected to lead to the promulgation of a final rule or regulation, including 

notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking: 

(1) (i) that is a significant regulatory action under Executive Order 12866 or any successor order, 

and (ii) is likely to have a significant adverse effect on the supply, distribution, or use of energy; 

or (2) that is designated by the Administrator of the Office of Information and Regulatory Affairs 

as a significant energy action. 

This rule is not a significant energy action as designated by the Administrator of the 

Office of Information and Regulatory Affairs because it is not likely to have a significant adverse 

impact on the supply, distribution, or use of energy. EPA has prepared an analysis of energy 

impacts that explains this conclusion as follows below. 

With respect to energy supply and prices, the analysis in Table 5-1 suggests at the 

industry level, the annualized costs represent a very small fraction of revenue (less than 0.7%). 

As a result, we can conclude supply and price impacts should be small. 

To enhance understanding regarding the regulation’s influence on energy consumption, 

we examined publicly available data describing energy consumption for the electric power sector 

that will be affected by this rule. The Annual Energy Outlook 2010 (EIA, 2009) provides energy 

consumption data. As shown in Table 5-4, this industry account for less than 0.5% of the U.S. 

total liquid fuels and less than 5.2% of natural gas. As a result, any energy consumption changes 

attributable to the regulatory program should not significantly influence the supply, distribution, 

or use of energy. 

5.5 Unfunded Mandates 

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1531-1538, 

requires Federal agencies, unless otherwise prohibited by law, to assess the effects of their 

regulatory actions on State, local, and tribal governments and the private sector. This rule 

contains a Federal mandate that may result in expenditures of $100 million or more for State, 

local, and tribal governments, in the aggregate, or the private sector in any one year. 
5-11 

Accordingly, EPA has prepared under section 202 of the UMRA a written statement which is 

summarized below in this section. 
5-12 

Table 5-4. U.S. Electric Powera

 Sector Energy Consumption (Quadrillion BTUs): 2013 

Quantity Share of Total Energy Use 

Distillate fuel oil 0.12 0.1% 

Residual fuel oil 0.34 0.3% 

Liquid fuels subtotal 0.45 0.5% 

Natural gas 5.17 5.1% 

Steam coal 20.69 20.6% 

Nuclear power 8.59 8.5% 

Renewable energyb

 6.06 6.0% 

Electricity Imports 0.09 0.1% 

Total Electric Power Energy Consumptionc

 41.18 40.9% 

Delivered Energy Use 72.41 72.0% 

Total Energy Use 100.59 100.0% 

a

Includes consumption of energy by electricity-only and combined heat and power plants whose primary business is 

to sell electricity, or electricity and heat, to the public. Includes small power producers and exempt wholesale 

generators. 

b

Includes conventional hydroelectric, geothermal, wood and wood waste, biogenic municipal solid waste, other 

biomass, petroleum coke, wind, photovoltaic and solar thermal sources. Excludes net electricity imports. 

c

Includes non-biogenic municipal waste not included above. 

Source: U.S. Energy Information Administration. 2009a. Supplemental Tables to the Annual Energy Outlook 2010. 

Table 2. Available at: <http://www.eia.doe.gov/oiaf/aeo/aeoref_tab.html>. 

5.5.1 Future and Disproportionate Costs 

The UMRA requires that we estimate, where accurate estimation is reasonably feasible, 

future compliance costs imposed by the rule and any disproportionate budgetary effects. Our 

estimates of the future compliance costs of the final rule are discussed previously in Section 4 of 

this RIA. We do not believe that there will be any disproportionate budgetary effects of the final 

rule on any particular areas of the country, State or local governments, types of communities 

(e.g., urban, rural), or particular industry segments. 

5.5.2 Effects on the National Economy 

The UMRA requires that we estimate the effect of the final rule on the national economy. 

To the extent feasible, we must estimate the effect on productivity, economic growth, full 

employment, creation of productive jobs, and international competitiveness of the U.S. goods 

and services if we determine that accurate estimates are reasonably feasible and that such effect 

is relevant and material. The nationwide economic impact of the final rule is presented earlier in 

this RIA chapter. This analysis provides estimates of the effect of the final rule on most of the 
5-13 

categories mentioned above, and these estimates are presented earlier in this RIA chapter. In 

addition, we have determined that the final rule contains no regulatory requirements that might 

significantly or uniquely affect small governments. Therefore, today’s rule is not subject to the 

requirements of section 203 of the UMRA. 

5.6 Environmental Justice 

Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes federal executive 

policy on environmental justice. Its main provision directs federal agencies, to the greatest 

extent practicable and permitted by law, to make environmental justice part of their mission by 

identifying and addressing, as appropriate, disproportionately high and adverse human health or 

environmental effects of their programs, policies, and activities on minority populations and lowincome populations in the United States. 

EPA has determined that this final rule will not have disproportionately high and adverse 

human health or environmental effects on minority or low-income populations because it 

increases the level of environmental protection for all affected populations without having any 

disproportionately high and adverse human health or environmental effects on any population, 

including any minority or low-income population. This rule is a nationwide standard that 

reduces air toxics emissions from existing stationary CI engines, thus decreasing the amount of 

such emissions to which all affected populations are exposed. 
6-1 

SECTION 6

SMALL ENTITY SCREENING ANALYSIS 

The Regulatory Flexibility Act as amended by the Small Business Regulatory 

Enforcement Fairness Act (SBREFA) generally requires an agency to prepare a regulatory 

flexibility analysis of any rule subject to notice and comment rulemaking requirements under the 

Administrative Procedure Act or any other statute, unless the agency certifies that the rule will 

not have a significant economic impact on a substantial number of small entities. Small entities 

as defined by the Small Business Administration (SBA) include small businesses, small 

governmental jurisdictions, and small not-for-profit enterprises. 

After considering the economic impact of the final rule on small entities, the screening 

analysis indicates that this final rule will not have a significant economic impact on a substantial 

number of small entities (or “SISNOSE”). Under the primary cost analyses EPA considered, 

sales and revenue tests for establishments owned by model small entities are less than 3% and 

only one group of establishments (irrigated farms with receipts less than $25,000) has a ratio 

exceeding 1%. 

6.1 Small Entity Data Set 

The industry sectors covered by the final rule were identified during the development of 

the cost analysis (Nelson, 2009). The SUSB provides national information on the distribution of 

economic variables by industry and enterprise size (U.S. Census, 2006a, b).1

 The Census Bureau 

and the Office of Advocacy of the SBA supported and developed these files for use in a broad 

range of economic analyses.2 Statistics include the total number of establishments and receipts 

for all entities in an industry; however, many of these entities may not necessarily be covered by 

the final rule. SUSB also provides statistics by enterprise employment and receipt size. 

The Census Bureau’s definitions used in the SUSB, which are stated in Section 3 and 

restated here for clarity of presentation, are as follows: 

 Establishment: An establishment is a single physical location where business is 

conducted or where services or industrial operations are performed. 

 Receipts: Receipts (net of taxes) are defined as the revenue for goods produced, 

distributed, or services provided, including revenue earned from premiums, 

 

1

The SUSB data do not provide establishment information for the national security NAICS code (92811) or irrigated 

farms. Since most national security installations are owned by the federal government (e.g., military bases), EPA 

assumes these entities would not be considered small. For irrigated farms, we relied on receipt data provided in 

the 2008 Farm and Irrigation Survey (USDA, 2009). 2

See http://www.census.gov/csd/susb/ and http://www.sba.gov/advo/research/data.html for additional details. 
6-2 

commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all 

revenue collected for local, state, and federal taxes. 

 Enterprise: An enterprise is a business organization consisting of one or more 

domestic establishments that were specified under common ownership or control. The 

enterprise and the establishment are the same for single-establishment firms. Each 

multiestablishment company forms one enterprise—the enterprise employment and 

annual payroll are summed from the associated establishments. Enterprise size 

designations are determined by the summed employment of all associated 

establishments. 

Because the SBA’s business size definitions (SBA, 2008) apply to an establishment’s 

“ultimate parent company,” we assumed in this analysis that the “enterprise” definition above is 

consistent with the concept of ultimate parent company that is typically used for SBREFA 

screening analyses and the terms are used interchangeably. 

6.2 Small Entity Economic Impact Measures 

The analysis generated a set of establishment sales tests (represented as cost-to-receipt 

ratios)3

 for NAICS codes associated with sectors listed in Table 6-1. Although the appropriate 

SBA size definition should be applied at the parent company (enterprise) level, we can only 

compute and compare ratios for a model establishment owned by an enterprise within an SUSB 

size range (employment or receipts). Using the SUSB size range helps us account for receipt 

differences between establishments owned by large and small enterprises and also allows us to 

consider the variation in small business definitions across affected industries. Using 

establishment receipts is also a conservative approach, because an establishment’s parent 

company (the “enterprise”) may have other economic resources that could be used to cover the 

costs of the final rule. 

6.2.1 Model Establishment Receipts and Annual Compliance Costs 

The sales test compares a representative establishment’s total annual engine costs to the 

average establishment receipts for enterprises in several size categories.4

 For industries with SBA 

 

3

The following metrics for other small entity economic impact measures (if applicable) would potentially include 

• small governments (if applicable): “revenue” test; annualized compliance cost as a percentage of annual 

government revenues and 

• small nonprofits (if applicable): “expenditure” test; annualized compliance cost as a percentage of annual 

operating expenses, 4

For the 1 to 20 employee category, we excluded SUSB data for enterprises with zero employees. These enterprises 

did not operate the entire year. 
6-3 

employment size standards, we calculated average establishment receipts for each enterprise 

employment range (Table 6-2).5 For industries with SBA receipt size standards, we calculated 

Table 6-1. Final NESHAP for Existing Stationary CI Reciprocating Internal Combustion 

Engines (RICE): Affected Sectors and SBA Small Business Size Standards 

Industry Description 

Corresponding 

NAICS 

SBA Size Standard for 

Businesses (effective March 

11, 2008) Type of Small Entity 

Electric power generation 2211 a Business and government 

General medical & 

surgical hospitals 

622110 $34.5 million in annual receipts Business and government 

Crude petroleum and 

natural gas production 

211111 500 employees Business 

Natural gas liquid 

producers 

211112 500 employees Business 

National security 92811 NA Government 

Hydro power units See NAICS 2211 1,000 employees Business and government 

Irrigation sets Affects NAICS 111 

and 112 

Generally $750,000 or less in 

annual receipts 

Business 

Welders Affects industries that 

use heavy equipment 

such as construction, 

mining, farming 

Varies by 6-digit NAICS code; 

Example industry: 

NAICS 238 = $14 million in 

annual receipts 

Business 

a

NAICS codes 221111, 221112, 221113, 221119, 221121, 221122: A firm is small if, including its affiliates, it is 

primarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total 

electric output for the preceding fiscal year did not exceed 4 million megawatt hours. 

 Source: U.S. Small Business Administration (SBA). 2008. “Table of Small Business Size Standards Matched to 

North American Industry Classification System Codes.” Effective August 22nd, 2008. Downloaded 1/11/10. 

average establishment receipts for each enterprise receipt range (Table 6-3). We included the 

utility sector in the second group, although the SBA size standard for this industry is defined in 

terms of physical units (megawatt hours) versus receipts. Crop and animal production (NAICS 

111 and 112) also have an SBA receipt size standard that defines a small business as receiving 

$750,000 or less in receipts per year. However, SUSB data were not available for these 

industries. Therefore, we conducted the sales test using the following range of establishment 

receipts: farms with annual receipts of $25,000 or less, farms with annual receipts of $100,000 or 

 

5

We use 2002 Economic Census data in estimating number of establishments by industry instead of using 2007 

Economic Census since this data was not available in time for use in our analysis. The release schedules for 

different types of 2007 Economic Census data are at 

http://www.census.gov/econ/census07/pdf/EconCensusScheduleByDate.pdf. 
6-4 

less, farms with annual receipts of $500,000 or less, and farms with annual receipts of $750,000 

or less. 
6-5
6-6

Table 6-2. Average Receipts for Affected Industry by Enterprise: 2002 ($2008 Million/establishment) 

SBA Size 

Standard 

for Businesses 

(effective August 

22, 2008)

Owned By Enterprises with Employee 

NAICS NAICS Description 

All 

Enterprises 

1–20 

Employees 

20–99 

Employees 

100–499 

Employees 

500–749 

Employees 

E

211111 Crude petroleum & 

natural gas extraction 

500 employees $14.59 $0.53 $6.71 $9.51 NA 

211112 Natural gas liquid 

extraction 

500 employees $172.81 $0.30 NA $11.88 NA 

335312 Motor & generator mfg 1,000 employees $18.58 $1.37 $6.14 $15.96 $29.47 333992 Welding & soldering 

equipment mfg 

500 employees $18.51 $1.56 $6.60 $33.25 NA 

NA = Not available. Source: U.S. Census Bureau. 2006a. “Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 2002.”

<http://www.census.gov/csd/susb/download_susb02.htm>. Downloaded 1/11/10. 
6-7

Table 6-3. Average Receipts for Affected Industry by Enterprise Receipt Range: 2002 ($2008 /establishm

SBA Size Standard 

for Businesses 

(effective August 

22nd, 2008)

Owned By Enterprises with Receipt 

NAICS NAICS Description 

All 

Enterprises 

0–99K 

Receipts

100–

499.9K 

Receipts

500–

999.9K

Receipts 

1,000–

4,999.9K 

Receipts 

5,000,000–

9,999,999K 

Receipts 

<10,000K 

Receipts 

1

4

R

2211 Electric Power 

Generation 

a $39.8 $0.1 $0.3 $0.8 $3.0 $6.6 $2.7 $

622110 Hospitals $34.5 million in annual 

receipts 

$92.30 NA NA $0.84 $3.59 $8.21 $5.03 $

234110 Highway & street 

construction 

$33.5 million in Annual Receipts 

$7.74 $0.06 $0.32 $0.84 $2.74 $8.11 $2.00 $

234120 Bridge & tunnel 

construction 

$33.5 million in Annual Receipts 

$14.09 $0.05 $0.30 $0.89 $2.90 $8.08 $2.53 $

234910 Water, sewer, & 

pipeline construction 

$33.5 million in Annual Receipts 

$3.89 $0.06 $0.32 $0.85 $2.73 $8.17 $1.84 $

234920 Power & 

communication transmission line construction 

$33.5 million in Annual Receipts 

$3.39 $0.06 $0.31 $0.83 $2.52 $7.75 $1.32 $

234930 Industrial nonbuilding 

structure construction 

$33.5 million in Annual Receipts 

$35.93 $0.05 $0.30 $0.85 $2.71 $8.38 $1.73 $

234990 All other heavy 

construction 

$33.5 million in Annual Receipts 

$2.66 $0.06 $0.30 $0.83 $2.48 $7.76 $0.99 $

92811 National Security NA NA NA NA NA NA NA NA 

Notes: Note: Industries in green were included for consistency with the analysis done for proposed rule (Under direction from EPA - to 

downstream users of engines). National Security is included in this table but does not have size standards. 

a NAICS codes 221111, 221112, 221113, 221119, 221121, 221122: A firm in these industries is defined as small by SBA if, including 

primarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the prexceed 4 million megawatt hours. 

NA = Not available. SUSB did not report this data for disclosure or other reasons. Source: U.S. Census Bureau. 2006a. “Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 2002.”

<http://www.census.gov/csd/susb/download_susb02.htm>. 
6-8 

Annual entity compliance costs vary depending on the size of the diesel engines used at 

the affected establishment. Absent facility-specific information, we computed per-entity 

compliance costs based for three different cases based on representative establishments—Cases 

1, 2, and 3 (see Table 6-4). Each representative establishment differs based on the size and 

number of diesel engines being used. Compliance costs are calculated by summing the total 

annualized compliance costs for the relevant engine categories, dividing the sum by the total 

existing population of those engines, and multiplying the average engine cost by the number of 

engines assumed to be at the establishment. Since NAICS 2211 and 622110 are fundamentally 

different than other industries considered in this analysis, we used different assumptions about 

what constitutes the representative establishment and report these assumptions separately. 

 Case 1: The representative establishment for all industries uses three 750+ hp engines 

with an average compliance cost of $1,877 per engine, resulting in a total annualized 

compliance cost of approximately $5,631 for this representative establishment. 

 Case 2: The representative establishment in NACIS 2211 and 622110 uses two 50 to 

750+ hp engines with an average compliance cost of $437 per engine, resulting in a 

total annualized compliance cost of $874 for this representative establishment. For all 

other industries, the representative establishment uses two 50 to 300 hp engines with 

an average compliance cost of $155 per engine, resulting in a total compliance cost of 

$310 for this representative establishment. 

 Case 3: The representative establishment for all industries uses two 50 to 100 hp 

engines with an average compliance cost of $68 per engine, resulting in a total 

compliance cost of $137 for this representative establishment. 

EPA believes that small entities are most likely to face costs similar to Case 2 (columns 

shaded in gray in Table 6-4) because most of the engines to be affected by this proposal in 

NAICS 335312, 333992, 211111, and 211112 are under 300 hp capacity, and most small entities 

in these industries will own engines of this size or smaller. This is corroborated by Figure 6-1 

and 6-2 which shows the distribution of engine population and compliance costs by engine size 

for all industries. However, it is difficult to make a similar claim for NAICS 2211 and 622110 

based on the existing distribution of engines in these industries.6

 As noted earlier in the RIA, 

only 20 percent of the existing distribution of engines is expected to be classified as nonemergency. 

 

6

This claim also cannot be made for NAICS 92811: National Security. However, since most national security 

installations are owned by the federal government (e.g., military bases), EPA assumes these entities would not be 

considered small. 
6-9 

For the sales test, we divided the representative establishment compliance costs reported 

in Table 6-4 by the representative establishment receipts reported in Tables 6-2 and 6-3. This is 

known as the cost-to-receipt (i.e., sales) ratio, or the “sales test.” The “sales test” is the impact 

Table 6-4. Representative Establishment Costs Used for Small Entity Analysis ($2008) 

 Case 1 Case 2 Case 3 

 

NAICS 2211, 

622110 

(+750 hp 

only) 

All Other 

NAICS 

(+750 hp 

only) 

NAICS 2211, 

622110 

(50–750+ hp) 

All Other 

NAICS 

(50–300 hp) 

NAICS 2211, 

622110 

(50–100 hp 

only) 

All Other 

NAICS 

(50–100 hp 

only) 

Total Annualized Costs ($) $62,035,845 $7,871,576 $317,603,287 $42,778,499 $9,093,118 $6,745,516 

Engine Population 33,052 4,194 727,090 276,374 133,099 98,736 

Average Engine Cost 

($/engine) 

$1,877 $1,877 $437 $155 $68 $68 

Assumed Engines Per 

Establishment 

3 3 2 2 2 2 

Total Annualized Costs per 

Establishment 

$5,631 $5,631 $874 $310 $137 $137 

* Engine population estimates taken from “Impacts Associated with NESHAP for Existing Stationary CI RICE,” 

prepared by Bradley Nelson, Ec/R, Inc. for Melanie King, U.S. EPA, Office of Air Quality Planning and 

Standards, February 10, 2010. 
6-10 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Electric Power

Generation

(2211)

Hospitals

(622110)

Crude Petroleum

&NG Production

(211111)

Natural Gas

Liquid Producers

(211112)

National Security

(92811)

Hydro Power

Units (335312)

Irrigation Sets

(335312)

Welders

(333992)

>750 hp

600‐750 hp

300‐600 hp

175‐300 hp

100‐175 hp

50‐100 hp

Figure 6-1. Distribution of Engine Population by Size for All Industries 
6-11 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Electric Power

Generation

(2211)

Hospitals

(622110)

Crude Petroleum

&NG Production

(211111)

Natural Gas

Liquid Producers

(211112)

National Security

(92811)

Hydro Power

Units (335312)

Irrigation Sets

(335312)

Welders

(333992)

>750 hp

600‐750 hp

300‐600 hp

175‐300 hp

100‐175 hp

50‐100 hp

Figure 6-2. Distribution of Compliance Costs by Engine Size for All Industries 

methodology EPA employs in analyzing small entity impacts as opposed to a “profits test,” in 

which annualized compliance costs are calculated as a share of profits. 

This is because revenues or sales data are commonly available data for entities normally 

impacted by EPA regulations and profits data normally made available are often not the true 

profit earned by firms because of accounting and tax considerations. Revenues as typically 

published are usually correct figures and are more reliably reported when compared to profit 

data. The use of a “sales test” for estimating small business impacts for a rulemaking such as this 

one is consistent with guidance offered by EPA on compliance with SBREFA7 and is consistent 

with guidance published by the U.S. SBA’s Office of Advocacy that suggests that cost as a 

 

7

The SBREFA compliance guidance to EPA rulewriters regarding the types of small business analysis that should be 

considered can be found at http://www.epa.gov/sbrefa/documents/rfafinalguidance06.pdf, pp. 24-25. 
6-12 

percentage of total revenues is a metric for evaluating cost increases on small entities in relation 

to increases on large entities.8

If the cost-to-receipt ratio is less than 1%, then we consider the final rule to not have a 

significant impact on the establishment company in question. We summarize the industries with 

cost-to-receipt ratios exceeding 1% below: 

Primary Analysis: 

 Case 2: NAICS 2211 with receipts less than $100,000 per year 

 Case 3: No industries 

Sensitivity Analysis (unlikely): 

 Case 1: NAICS 211111, 211112, with less than 20 employees, NAICS 2211 with 

receipts less than $500,000 per year, NAICS 234 with receipts less than $500,000 per 

year, and irrigated farms with receipts of $500,000 or less per year 

In the Case 2 primary analysis, only establishments in NAICS 2211 with receipts less 

than $100,000 per year have cost-to-receipt ratios above 1%. These establishments represent less 

than 5 percent of affected small establishments. However, establishments earning this level of 

receipts are likely to be using smaller engines than those assumed in Case 2, such as 50 to 100 hp 

engines. The results of our Case 3 analysis demonstrate that these establishments are not 

significantly impacted when taking this engine size into account. 

6.3 Small Government Entities 

The rule also covers sectors that include entities owned by small and large governments. 

However, given the uncertainty and data limitations associated with identifying and 

appropriately classifying these entities, we computed a “revenue” test for a model small 

government, where the annualized compliance cost is a percentage of annual government 

revenues (U.S. Census, 2005a, b). The use of a “revenue test” for estimating impacts to small 

governments for a rulemaking such as this one is consistent with guidance offered by EPA on 

compliance with SBREFA,9

 and is consistent with guidance published by the US SBA’s Office 

of Advocacy.10 For example, from the 2002 Census (in 2008 dollars), the average revenue for 

 

8

U.S. SBA, Office of Advocacy. A Guide for Government Agencies, How to Comply with the Regulatory 

Flexibility Act, Implementing the President’s Small Business Agenda and Executive Order 13272, May 2003. 9

The SBREFA compliance guidance to EPA rule writers regarding the types of small business analysis that should 

be considered can be found at http://www.epa.gov/sbrefa/documents/rfafinalguidance06.pdf, pp. 24-25. 10U.S. SBA, Office of Advocacy. A Guide for Government Agencies, How to Comply with the Regulatory 

Flexibility Act, Implementing the President’s Small Business Agenda and Executive Order 13272, May 2003. 
6-13 

small governments (counties and municipalities) with populations fewer than 10,000 are $3 

million per entity, and the average revenue for local governments with populations fewer than 

50,000 is $8 million per entity. For the smallest group of local governments (<10,000 people), 

the cost-to-revenue ratio would be 0.2% or less under each case. For the larger group of 

governments (<50,000 people), the cost-to-revenue ratio is 0.1% or less under all cases. 
7-1 

SECTION 7

HUMAN HEALTH BENEFITS OF EMISSIONS REDUCTIONS 

7.1 Synopsis 

In this section, we provide an estimate of the particulate matter (PM) co-benefits for the 

final NESHAP for existing stationary compression ignition (RICE). Specifically, we calculated 

the benefits of this rule in terms of the co-benefits associated with reducing PM rather than 

calculating the benefits associated with reducing hazardous air pollutants (HAPs). These PM 

reductions are a consequence of the technologies installed to reduce HAP emissions from RICE. 

These estimates reflect the monetized human health co-benefits of reducing cases of morbidity 

and premature mortality associated with reducing exposure to the PM2.5 precursors from the 

current RICE technology. We estimate the total monetized PM2.5 co-benefits to be $940 million 

to $2.3 billion (2008$) at a 3% discount rate and $850 million to $2.1 billion at a 7% discount 

rate in the year of full implementation (2013). Data, resource, and methodological limitations 

prevented EPA from quantifying or monetizing the benefits from several important benefit 

categories, including benefits from reducing carbon monoxide (CO) and HAPs, ecosystem 

effects, and visibility impairment. The benefits from reducing 1,014 tons of hazardous air 

pollutants each year have not been monetized in this analysis. 

These estimates of the reduction in particulate matter-related health effects reflect EPA’s 

most current interpretation of the scientific literature and include four key updates: (1) a nothreshold model for PM2.5 that calculates incremental co-benefits down to the lowest modeled air 

quality levels; (2) a revised Value of a Statistical Life (VSL); (3) two technical updates to the 

population dataset and aggregation method; (4) presentation of results derived from Pope et al. 

(2002) and Laden et al. (2006) instead of using the extremes of EPA’s Expert Elicitation on PM 

Mortality (Roman et al., 2008). Higher or lower estimates of co-benefits are possible using other 

assumptions; examples of this are provided in Figure 7-2. 

7.2 Calculation of PM2.5 Human Health Co-benefits 

 This rulemaking would reduce emissions of PM2.5, SO2, and VOCs. Because SOx and 

VOCs are also precursors to PM2.5, reducing these emissions would also reduce PM2.5 formation, 

human exposure and the incidence of PM2.5-related health effects. In this analysis, we estimated 

the co-benefits of reducing PM2.5 exposure for the alternative standards. Due to analytical 

limitations, it was not possible to provide a comprehensive estimate of PM2.5-related co-benefits. 

Instead, we used the “benefit-per-ton” method to estimate these co-benefits (Fann et al., 2009). 

The PM2.5 benefit-per-ton methodology incorporates key assumptions described in detail below. 
7-2 

These PM2.5 benefit-per-ton estimates provide the total monetized human health co-benefits (the 

sum of premature mortality and premature morbidity) of reducing one ton of PM2.5 from a 

specified source. EPA has used the benefit per-ton technique in previous RIAs, including the 

recent SO2 NAAQS RIA (U.S. EPA, 2009b). Table 7-1 shows the quantified and unquantified 

co-benefits captured in those benefit-per-ton estimates. 

Table 7-1. Human Health and Welfare Effects of PM2.5 

Pollutant / 

Effect 

Quantified and Monetized 

in Primary Estimates 

Unquantified Effects 

Changes in: 

PM2.5 Adult premature mortality 

Bronchitis: chronic and acute 

Hospital admissions: respiratory and 

cardiovascular 

Emergency room visits for asthma 

Nonfatal heart attacks (myocardial infarction) 

Lower and upper respiratory illness 

Minor restricted-activity days 

Work loss days 

Asthma exacerbations (asthmatic population) 

Infant mortality 

Subchronic bronchitis cases 

Low birth weight 

Pulmonary function 

Chronic respiratory diseases other than chronic 

bronchitis 

Non-asthma respiratory emergency room visits 

Visibility 

Household soiling 

Consistent with the Portland Cement NESHAP (U.S. EPA, 2009a), the co-benefits 

estimates utilize the concentration-response functions as reported in the epidemiology literature, 

as well as the 12 functions obtained in EPA’s expert elicitation study as a sensitivity analysis. 

 One estimate is based on the concentration-response (C-R) function developed from 

the extended analysis of American Cancer Society (ACS) cohort, as reported in Pope 

et al. (2002), a study that EPA has previously used to generate its primary PM cobenefits estimate. When calculating the estimate, EPA applied the effect coefficient 

as reported in the study without an adjustment for assumed concentration threshold of 

10 μg/m3 as was done in recent (post-2006) Office of Air and Radiation RIAs. 

 One estimate is based on the C-R function developed from the extended analysis of 

the Harvard Six Cities cohort, as reported by Laden et al (2006). This study, 

published after the completion of the Staff Paper for the 2006 PM2.5 NAAQS, has 

been used as an alternative estimate in the PM2.5 NAAQS RIA and PM2.5 cobenefits estimates in RIAs completed since the PM2.5 NAAQS. When calculating the 

estimate, EPA applied the effect coefficient as reported in the study without an 

adjustment for assumed concentration threshold of 10 μg/m3 as was done in recent 

(post 2006) RIAs. 
7-3 

 Twelve estimates are based on the C-R functions from EPA’s expert elicitation study 

(Roman et al., 2008) on the PM2.5 -mortality relationship and interpreted for PM cobenefits analysis in EPA’s final RIA for the PM2.5 NAAQS. For that study, twelve 

experts (labeled A through L) provided independent estimates of the PM2.5-mortality 

concentration-response function. EPA practice has been to develop independent 

estimates of PM2.5-mortality estimates corresponding to the concentration-response 

function provided by each of the twelve experts, to better characterize the degree of 

variability in the expert responses. 

The effect coefficients are drawn from epidemiology studies examining two large 

population cohorts: the American Cancer Society cohort (Pope et al., 2002) and the Harvard Six 

Cities cohort (Laden et al., 2006).1

 These are logical choices for anchor points in our presentation 

because, while both studies are well designed and peer reviewed, there are strengths and 

weaknesses inherent in each, which we believe argues for using both studies to generate cobenefits estimates. Previously, EPA had calculated co-benefits based on these two empirical 

studies, but derived the range of co-benefits, including the minimum and maximum results, from 

an expert elicitation of the relationship between exposure to PM2.5 and premature mortality 

(Roman et al., 2008).2 Within this assessment, we include the co-benefits estimates derived from 

the concentration-response function provided by each of the twelve experts to better characterize 

the uncertainty in the concentration-response function for mortality and the degree of variability 

in the expert responses. Because the experts used these cohort studies to inform their 

concentration-response functions, co-benefits estimates using these functions generally fall 

between results using these epidemiology studies (see Figure 7-2). In general, the expert 

elicitation results support the conclusion that the co-benefits of PM2.5 control are very likely to be 

substantial. 

Readers interested in reviewing the methodology for creating the benefit-per-ton 

estimates used in this analysis should consult Fann et al. (2009). As described in the 

documentation for the benefit per-ton estimates cited above, national per-ton estimates are 

developed for selected pollutant/source category combinations. The per-ton values calculated 

therefore apply only to tons reduced from those specific pollutant/source combinations (e.g., 

NO2 emitted from electric generating units; NO2 emitted from mobile sources). Our estimate of 

PM2.5 co-control benefits is therefore based on the total PM2.5 emissions controlled by sector and 

multiplied by this per-ton value. 

 

1

 These two studies specify multi-pollutant models that control for SO2, among other co-pollutants. 2

 Please see the Section 5.2 of the Portland Cement RIA in Appendix 5A for more information regarding the change 

in the presentation of benefits estimates. 
7-4 

The underlying emissions modeling and air quality modeling account for the current 

distribution of emissions sources, including both urban and rural sources. In addition, the air 

quality modeling included 14 vertical layers to simulate the differences between ground-level 

emissions and higher stack emissions (U.S. EPA, 2006a). The distance that particles travel 

primarily depends on the size of the particle, the amount and release height of emissions, terrain, 

and meteorological conditions, such as wind speed and precipitation. Fine particles can have an 

atmospheric half-life of days to weeks and travel hundreds to thousands of kilometers, whereas 

ultrafine and coarse particles travel less than ten kilometers (U.S. EPA, 2009c). Because we have 

not undertaken a study specific to emissions at ground level from RICE, with regard to transport 

issues and to size fraction of PM2.5 emissions (e.g., ultrafines and near ultrafines), there is 

uncertainty as to how far such emissions will travel and thus with regard to populations affected. 

Evidence from recent air quality modeling for mobile source rules with similar engines (U.S. 

EPA, 1999; U.S. EPA, 2000; U.S. EPA, 2004; U.S. EPA, 2008e; U.S. EPA, 2010c) shows that 

some fine particles can travel long distances in the atmosphere, but the proportion of such 

emissions from RICE that travel more than short distances is not yet definitively known. 

The benefit-per-ton coefficients in this analysis were derived using modified versions of 

the health impact functions used in the PM NAAQS Regulatory Impact Analysis (U.S. EPA, 

2006b). Specifically, this analysis uses the benefit-per-ton method first applied in the Portland 

Cement NESHAP RIA (U.S. EPA, 2009a), which incorporated three updates: a new population 

dataset, an expanded geographic scope of the benefit-per-ton calculation, and the functions 

directly from the epidemiology studies without an adjustment for an assumed threshold.3

Removing the threshold assumption is a key difference between the method used in this analysis 

of PM co-benefits and the methods used in RIAs prior to that for the Portland Cement NESHAP, 

and we now calculate incremental co-benefits down to the lowest modeled PM2.5 air quality 

levels. 

EPA strives to use the best available science to support our benefits analyses, and we 

recognize that interpretation of the science regarding air pollution and health is dynamic and 

evolving. Based on our review of the body of scientific literature, EPA applied the no-threshold 

model in this analysis. EPA’s Integrated Science Assessment for Particulate Matter (U.S. EPA, 

2009c), which was recently reviewed by EPA’s Clean Air Scientific Advisory Committee (U.S. 

EPA-SAB, 2009a; U.S. EPA-SAB, 2009b), concluded that the scientific literature consistently 

finds that a no-threshold log-linear model most adequately portrays the PM-mortality 

 

3

 The benefit-per-ton estimates have also been updated since the Cement RIA to incorporate a revised VSL, as 

discussed on the next page. 
7-5 

concentration-response relationship while recognizing potential uncertainty about the exact 

shape of the concentration-response function.4

 Although this document does not necessarily 

represent agency policy, it provides a basis for reconsidering the application of thresholds in 

PM2.5 concentration-response functions used in EPA’s RIAs. 5 

Because the co-benefits are sensitive to the assumption of a threshold, we also provide a 

sensitivity analysis using the previous methodology (i.e., a threshold model at 10 μg/m3

 without 

the two technical updates) as a historical reference. Table 7-5 shows the sensitivity of an 

assumed threshold on the monetized results, with and without an assumed threshold at 10 μg/m3. 

As is the nature of Regulatory Impact Analyses (RIAs), the assumptions and methods 

used to estimate air quality benefits evolve over time to reflect the Agency’s most current 

interpretation of the scientific and economic literature. For a period of time (2004–2008), the 

Office of Air and Radiation (OAR) valued mortality risk reductions using a value of statistical 

life (VSL) estimate derived from a limited analysis of some of the available studies. OAR arrived 

at a VSL using a range of $1 million to $10 million (2000$) consistent with two meta-analyses of 

the wage-risk literature. The $1 million value represented the lower end of the interquartile range 

from the Mrozek and Taylor (2002) meta-analysis of 33 studies. The $10 million value 

represented the upper end of the interquartile range from the Viscusi and Aldy (2003) metaanalysis of 43 studies. The mean estimate of $5.5 million (2000$)6

 was also consistent with the 

mean VSL of $5.4 million estimated in the Kochi et al. (2006) meta-analysis. However, the 

Agency neither changed its official guidance on the use of VSL in rule-makings nor subjected 

the interim estimate to a scientific peer-review process through the Science Advisory Board 

(SAB) or other peer-review group. 

During this time, the Agency continued work to update its guidance on valuing mortality 

risk reductions, including commissioning a report from meta-analytic experts to evaluate 

methodological questions raised by EPA and the SAB on combining estimates from the various 

data sources. In addition, the Agency consulted several times with the Science Advisory Board 

Environmental Economics Advisory Committee (SAB-EEAC) on the issue. With input from the 

 

4

 It is important to note that uncertainty regarding the shape of the concentration-response function is conceptually 

distinct from an assumed threshold. An assumed threshold (below which there are no health effects) is a 

discontinuity, which is a specific example of non-linearity. 5

 In the Portland Cement RIA (U.S. EPA, 2009a), EPA solicited comment on the use of the no-threshold model for 

benefits analysis within the preamble of that proposed rule. The comment period for the Portland Cement 

proposed NESHAP closed on September 4, 2009 (Docket ID No. EPA–HQ–OAR–2002–0051 available at 

http://www.regulations.gov). EPA is currently reviewing those comments. 6

 In this analysis, we adjust the VSL to account for a different currency year (2008$) and to account for income 

growth to 2015. After applying these adjustments to the $5.5 million value, the VSL is $7.9 million. 
7-6 

meta-analytic experts, the SAB-EEAC advised the Agency to update its guidance using specific, 

appropriate meta-analytic techniques to combine estimates from unique data sources and 

different studies, including those using different methodologies (i.e., wage-risk and stated 

preference) (U.S. EPA-SAB, 2007). 

Until updated guidance is available, the Agency determined that a single, peer-reviewed 

estimate applied consistently best reflects the SAB-EEAC advice it has received. Therefore, the 

Agency has decided to apply the VSL that was vetted and endorsed by the SAB in the Guidelines 

for Preparing Economic Analyses (U.S. EPA, 2000)7

 while the Agency continues its efforts to 

update its guidance on this issue. This approach calculates a mean value across VSL estimates 

derived from 26 labor market and contingent valuation studies published between 1974 and 

1991. The mean VSL across these studies is $6.3 million (2000$).8 The Agency is committed to 

using scientifically sound, appropriately reviewed evidence in valuing mortality risk reductions 

and has made significant progress in responding to the SAB-EEAC’s specific recommendations. 

The Agency anticipates presenting results from this effort to the SAB-EEAC in Spring 2010 and 

that draft guidance will be available shortly thereafter. 

Figure 7-1 illustrates the relative breakdown of the monetized PM2.5 health co-benefits. 

 

7

 In the (draft) update of the Economic Guidelines (U.S. EPA, 2008), EPA retained the VSL endorsed by the SAB 

with the understanding that further updates to the mortality risk valuation guidance would be forthcoming in the 

near future. Therefore, this report does not represent final agency policy. 8

 In this analysis, we adjust the VSL to account for a different currency year (2008$) and to account for income 

growth to 2015. After applying these adjustments to the $6.3 million value, the VSL is $9.1m. 
7-7 

Adult Mortality ‐ Pope et

al. 93%

ChronicBronchitis 4%

AMI 2%

Acute Respiratory Symptoms

0.5%

InfantMortality 0.4%

Work Loss Days 0.2%

HospitalAdmissions, Cardio

0.2%

HospitalAdmissions, Resp

0.04%

AsthmaExacerbation 0.01%

Acute Bronchitis 0.01%

UpperResp Symp 0.00%

LowerResp Symp 0.00%

ERVisits, Resp 0.00%

Other1%

Figure 7-1. Breakdown of Monetized PM2.5 Health Co-benefits using Mortality 

Function from Pope et al. (2002)a

a This pie chart breakdown is illustrative, using the results based on Pope et al. (2002) as an example. Using the 

Laden et al. (2006) function for premature mortality, the percentage of total monetized PM2.5 co-benefits due to 

adult premature mortality would be 97%. This chart shows the breakdown using a 3% discount rate, and the 

results would be similar if a 7% discount rate was used. 

Table 7-2 provides a general summary of the results by pollutant, including the emission 

reductions and monetized benefits-per-ton at discount rates of 3% and 7%.9. Table 7-3 provides a 

summary of the reductions in health incidences as a result of the pollution reductions. In Table 7-

4, we provide the co-benefits using our anchor points of Pope et al. and Laden et al. as well as 

the results from the expert elicitation on PM2.5-related premature mortality. Figures 7-2 and 7-3 

provide a visual representation of the range of co-benefits estimates and the pollutant breakdown 

of the monetized co-benefits. 

 

9

 To comply with Circular A-4, EPA provides monetized benefits using discount rates of 3% and 7% (OMB, 2003). 

These benefits are estimated for a specific analysis year (i.e., 2013), and most of the PM co-benefits occur within 

that year with two exceptions: acute myocardial infarctions (AMIs) and premature mortality. For AMIs, we 

assume 5 years of follow-up medical costs and lost wages. For premature mortality, we assume that there is a 

“cessation” lag between PM exposures and the total realization of changes in health effects. Although the 

structure of the lag is uncertain, EPA follows the advice of the SAB-HES to assume a segmented lag structure 

characterized by 30% of mortality reductions in the first year, 50% over years 2 to 5, and 20% over the years 6 to 

20 after the reduction in PM2.5 (U.S. EPA-SAB, 2004). Changes in the lag assumptions do not change the total 

number of estimated deaths but rather the timing of those deaths. Therefore, discounting only affects the AMI 

costs after the analysis year and the valuation of premature mortalities that occur after the analysis year. As 

such, the monetized benefits using a 7% discount rate are only approximately 10% less than the monetized 

benefits using a 3% discount rate. 
7-8 

. 

Table 7-2. Summary of Monetized PM2.5-related Co-benefits Estimates for RICE 

NESHAP for Compression Ignition in 2013 (2008$)a

Pollutant 

Emissions 

Reduction

s (tons) 

Benefit 

per ton 

(Pope, 

3%) 

Benefit 

per ton 

(Laden, 

3%) 

Benefit 

per ton 

(Pope, 

7%) 

Benefit 

per ton 

(Laden, 

7%) 

Total Monetized 

Co-benefits 

(millions 2008$ at 

3%) 

Total Monetized 

Co-benefits 

(millions 2008$ at 

7%) 

Direct PM2.5 Major 874 $230,000 $560,000 $210,000 $500,000 $200 to $490 $180 to $440 

Direct PM2.5 Area 1,970 $360,000 $880,000 $330,000 $790,000 $710 to $1,700 $640 to $1,600 

PM2.5 Precursors 

VOC 27,395 $1,200 $3,000 $1,100 $2,700 $33 to $82 $30 to $74 

 Total $940 to $2,300 $850 to $2,100 

a

 All estimates are for the analysis year (year of implementation, 2013), and are rounded to two significant figures 

so numbers may not sum across columns. All fine particles are assumed to have equivalent health effects, but the 

benefit per ton estimates vary because each ton of precursor reduced has a different propensity to become PM2.5. 

The monetized co-benefits incorporate the conversion from precursor emissions to ambient fine particles. 

Table 7-3. Summary of Reductions in Health Incidences from PM2.5 Co-benefits for RICE 

NESHAP in 2013a

Avoided Premature Mortality 

Pope et al. 110 

Laden et al. 270 

Avoided Morbidity 

Chronic Bronchitis 75 

Acute Myocardial Infarction 170 

Hospital Admissions, Respiratory 25 

Hospital Admissions, Cardiovascular 53 

Emergency Room Visits, Respiratory 84 

Acute Bronchitis 180 

Work Loss Days 15,000 

Asthma Exacerbation 1,900 

Acute Respiratory Symptoms 87,000 

Lower Respiratory Symptoms 2,100 

Upper Respiratory Symptoms 1,600 

a

 All estimates are for the analysis year (2013) and are rounded to whole numbers with two significant figures. All 

fine particles are assumed to have equivalent health effects, but each PM2.5 precursor pollutant has a different 

propensity to form PM2.5. Confidence intervals are unavailable for this analysis because of the benefit-per-ton 

methodology. 
7-9 

Table 7-4. All PM2.5 Co-benefits Estimates for the RICE NESHAP at discount rates of 3% 

and 7% in 2013 (in millions of 2008$)a

 3% 7% 

Benefit-per-ton Coefficients Derived from Epidemiology Literature 

Pope et al. $940 $850 

Laden et al. $2,300 $2,100 

Benefit-per-ton Coefficients Derived from Expert Elicitation 

Expert A $2,400 $2,200 

Expert B $1,900 $1,700 

Expert C $1,900 $1,700 

Expert D $1,300 $1,200 

Expert E $3,000 $2,700 

Expert F $1,700 $1,500 

Expert G $1,100 $1,000 

Expert H $1,400 $1,300 

Expert I $1,800 $1,700 

Expert J $1,500 $1,400 

Expert K $380 $350 

Expert L $1,400 $1,200 

a All estimates are rounded to two significant figures. Estimates do not include confidence intervals because they 

were derived through the benefit-per-ton technique described above. The co-benefits estimates from the Expert 

Elicitation are provided as a reasonable characterization of the uncertainty in the mortality estimates associated 

with the concentration-response function. Confidence intervals are unavailable for this analysis because of the 

benefit-per-ton methodology. 
7-10 

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Pope et al.

Laden et al.

Millions(2008$)

Benefits estimates derived from2 epidemiology functions and 12 expert functions

3% DR

7% DR

Figure 7-2. Total Monetized PM2.5 Co-Benefits of RICE NESHAP in 2013a

a

 This graph shows the estimated co-benefits at discount rates of 3% and 7% using effect coefficients derived from 

the Pope et al. study and the Laden et al. study, as well as 12 effect coefficients derived from EPA’s expert 

elicitation on PM mortality. The results shown are not the direct results from the studies or expert elicitation; 

rather, the estimates are based in part on the concentration-response function provided in those studies. 

Figure 7-3. Breakdown of Monetized Co-benefits for RICE NESHAP by PM2.5 Precursor 

Pollutant and Source 
7-11 

7.3 Unquantified Benefits 

The monetized co-benefits estimated in this RIA only reflect the portion of benefits 

attributable to the health effect reductions associated with ambient fine particles. Data, resource, 

and methodological limitations prevented EPA from quantifying or monetizing the benefits from 

several important benefit categories, including benefits from reducing carbon monoxide and 

hazardous air pollutants, ecosystem effects, and visibility impairment. The health benefits from 

reducing 1,014 tons of hazardous air pollutants (HAPs) and the 14,000 tons of carbon monoxide 

each year have not been monetized in this analysis. 

In this analysis, we have not quantified the benefits attributable to the SO2 reductions that 

would occur as a result of these engines switching to ultra-low sulfur diesel (ULSD). Although 

we are confident that some SO2 reductions would occur as a result of this rule, we are unable to 

estimate the percentage of engines that may switch to ULSD in the absence of this rule or the 

number of engines that already use ULSD. As a PM2.5 precursor, these SO2 emission reductions 

would lead to fewer PM2.5-related health effects. Because of uncertainty in the magnitude of the 

attributable SO2 reductions and to avoid the appearance of double-counting, we have chosen to 

not include these estimates in any of the results tables or graphics in this RIA. If none of the 

affected engines would use ULSD without this rule, then we estimate the additional monetized 

PM2.5-related health co-benefits would be $720 million to $1.8 billion in 2013 (2008$, 3% 

discount rate). This is based on reductions of 31,000 tons of SO2 emission reductions in the year 

2013 that will take place if all affected engines would switch to ULSD for higher-sulfur diesel 

fuel (3000 ppm sulfur content) as mentioned in Section 4. If all of the affected engines would 

use ULSD regardless of the rule, then the monetized co-benefits from SO2 reductions would be 

zero. In addition to being a PM2.5 precursor, SO2 emissions also contribute to adverse effects 

from acidic deposition in aquatic and terrestrial ecosystems as well as visibility impairment. 

HAP benefits 

Due to data, resource, and methodology limitations, we were unable to estimate the 

benefits associated with the 1,014 tons of hazardous air pollutants that would be reduced as a 

result of this rule. Available emissions data show that several different HAPs are emitted from 

stationary engines, either contained within the fuel burned or formed during the combustion 
7-12 

process.10 Although numerous HAPs may be emitted from diesel stationary RICE, a few HAPs 

account for 80% of the total mass of HAPs emissions emitted. These HAPs are formaldehyde 

(25%), acetaldehyde (19%), polycyclic aromatic hydrocarbons (PAHs) (18%), naphthalene (9%), 

and acrolein (9%). Other HAPs from diesel stationary RICE represent less than 5% each of the 

total mass of HAP emissions, including 1,3-butadiene (4.4%), toluene (3.8%), styrene (3.5%) , 

benzene (2.8%), xylene (2.7%), hexane (1.8%), and ethylbenzene (0.3%). Metallic HAPs from 

diesel fired stationary RICE represent less than 0.3% each of total mass of HAP emissions, 

including cadmium, lead, nickel, chromium, selenium, and mercury. Below we describe the 

health effects associated with the top 5 HAPs by mass emitted from RICE. 

Formaldehyde 

 Since 1987, EPA has classified formaldehyde as a probable human carcinogen based on 

evidence in humans and in rats, mice, hamsters, and monkeys.11 EPA is currently reviewing 

recently published epidemiological data. For instance, research conducted by the National 

Cancer Institute (NCI) found an increased risk of nasopharyngeal cancer and 

lymphohematopoietic malignancies such as leukemia among workers exposed to 

formaldehyde.12,13 In an analysis of the lymphohematopoietic cancer mortality from an extended 

follow-up of these workers, NCI confirmed an association between lymphohematopoietic cancer 

risk and peak exposures.14 A recent National Institute of Occupational Safety and Health 

(NIOSH) study of garment workers also found increased risk of death due to leukemia among 

workers exposed to formaldehyde.15 Extended follow-up of a cohort of British chemical workers 

did not find evidence of an increase in nasopharyngeal or lymphohematopoietic cancers, but a 

continuing statistically significant excess in lung cancers was reported.16

 

10 Alpha-Gamma Technologies, Inc. 2004. Memo to U.S. EPA: Development of HAP Emission Factors for Small 

(<500 HP) Stationary Reciprocating Internal Combustion Engines (RICE). Attachment A. April 13. Available in 

the docket at EPA-HQ-OAR-2005-0030-0009 at www.regulations.gov. 11 U.S. EPA. 1987. Assessment of Health Risks to Garment Workers and Certain Home Residents from Exposure to 

Formaldehyde, Office of Pesticides and Toxic Substances, April 1987. 12 Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Blair, A. 2003. Mortality from lymphohematopoetic 

malignancies among workers in formaldehyde industries. Journal of the National Cancer Institute 95: 1615-

1623. 13 Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Blair, A. 2004. Mortality from solid cancers among 

workers in formaldehyde industries. American Journal of Epidemiology 159: 1117-1130. 14 Beane Freeman, L. E.; Blair, A.; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Hoover, R. N.; Hauptmann, M. 2009. 

Mortality from lymphohematopoietic malignancies among workers in formaldehyde industries: The National 

Cancer Institute cohort. J. National Cancer Inst. 101: 751-761. 15 Pinkerton, L. E. 2004. Mortality among a cohort of garment workers exposed to formaldehyde: an update. 

Occup. Environ. Med. 61: 193-200. 16 Coggon, D, EC Harris, J Poole, KT Palmer. 2003. Extended follow-up of a cohort of British chemical workers 

exposed to formaldehyde. J National Cancer Inst. 95:1608-1615. 
7-13 

 In the past 15 years there has been substantial research on the inhalation dosimetry for 

formaldehyde in rodents and primates by the CIIT Centers for Health Research (formerly the 

Chemical Industry Institute of Toxicology), with a focus on use of rodent data for refinement of 

the quantitative cancer dose-response assessment.17,18,19 CIIT’s risk assessment of formaldehyde 

incorporated mechanistic and dosimetric information on formaldehyde. However, it should be 

noted that recent research published by EPA indicates that when two-stage modeling 

assumptions are varied, resulting dose-response estimates can vary by several orders of 

magnitude.20,21,22,23 These findings are not supportive of interpreting the CIIT model results as 

providing a conservative (health protective) estimate of human risk.24 EPA research also 

examined the contribution of the two-stage modeling for formaldehyde towards characterizing 

the relative weights of key events in the mode-of-action of a carcinogen. For example, the 

model-based inference in the published CIIT study that formaldehyde’s direct mutagenic action 

is not relevant to the compound’s tumorigenicity was found not to hold under variations of 

modeling assumptions.25

Based on the developments of the last decade, in 2004, the working group of the IARC 

concluded that formaldehyde is carcinogenic to humans (Group 1), on the basis of sufficient 

evidence in humans and sufficient evidence in experimental animals - a higher classification than 

previous IARC evaluations. After reviewing the currently available epidemiological evidence, 

the IARC (2006) characterized the human evidence for formaldehyde carcinogenicity as 

“sufficient,” based upon the data on nasopharyngeal cancers; the epidemiologic evidence on 

 

17 Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D Kalisak, J Preston, and FJ Miller. 2003. Biologically 

motivated computational modeling of formaldehyde carcinogenicity in the F344 rat. Tox Sci 75: 432-447. 18 Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D Kalisak, J Preston, and FJ Miller. 2004. Human respiratory 

tract cancer risks of inhaled formaldehyde: Dose-response predictions derived from biologically-motivated 

computational modeling of a combined rodent and human dataset. Tox Sci 82: 279-296. 19 Chemical Industry Institute of Toxicology (CIIT).1999. Formaldehyde: Hazard characterization and dose-response 

assessment for carcinogenicity by the route of inhalation. CIIT, September 28, 1999. Research Triangle Park, 

NC. 20 U.S. EPA. Analysis of the Sensitivity and Uncertainty in 2-Stage Clonal Growth Models for Formaldehyde with 

Relevance to Other Biologically-Based Dose Response (BBDR) Models. U.S. Environmental Protection Agency, 

Washington, D.C., EPA/600/R-08/103, 2008 21 Subramaniam, R; Chen, C; Crump, K; .et .al. (2008) Uncertainties in biologically-based modeling of 

formaldehyde-induced cancer risk: identification of key issues. Risk Anal 28(4):907-923. 22 Subramaniam, R; Chen, C; Crump, K; .et .al. (2007). Uncertainties in the CIIT 2-stage model for formaldehydeinduced nasal cancer in the F344 rat: a limited sensitivity analysis-I. Risk Anal 27:1237 23 Crump, K; Chen, C; Fox, J; .et .al. (2008) Sensitivity analysis of biologically motivated model for formaldehydeinduced respiratory cancer in humans. Ann Occup Hyg 52:481-495. 24 Crump, K; Chen, C; Fox, J; .et .al. (2008) Sensitivity analysis of biologically motivated model for formaldehydeinduced respiratory cancer in humans. Ann Occup Hyg 52:481-495. 25 Subramaniam, R; Chen, C; Crump, K; .et .al. (2007). Uncertainties in the CIIT 2-stage model for formaldehydeinduced nasal cancer in the F344 rat: a limited sensitivity analysis-I. Risk Anal 27:1237 
7-14 

leukemia was characterized as “strong.”26 EPA is reviewing the recent work cited above from the 

NCI and NIOSH, as well as the analysis by the CIIT Centers for Health Research and other 

studies, as part of a reassessment of the human hazard and dose-response associated with 

formaldehyde. 

Formaldehyde exposure also causes a range of noncancer health effects, including 

irritation of the eyes (burning and watering of the eyes), nose and throat. Effects from repeated 

exposure in humans include respiratory tract irritation, chronic bronchitis and nasal epithelial 

lesions such as metaplasia and loss of cilia. Animal studies suggest that formaldehyde may also 

cause airway inflammation – including eosinophil infiltration into the airways. There are several 

studies that suggest that formaldehyde may increase the risk of asthma – particularly in the 

young.27,28

 Acetaldehyde

Acetaldehyde is classified in EPA’s IRIS database as a probable human carcinogen, 

based on nasal tumors in rats, and is considered toxic by the inhalation, oral, and intravenous 

routes.29 Acetaldehyde is reasonably anticipated to be a human carcinogen by the U.S. DHHS in 

the 11th Report on Carcinogens and is classified as possibly carcinogenic to humans (Group 2B) 

by the IARC.30,31 EPA is currently conducting a reassessment of cancer risk from inhalation 

exposure to acetaldehyde. 

The primary noncancer effects of exposure to acetaldehyde vapors include irritation of 

the eyes, skin, and respiratory tract.32 In short-term (4 week) rat studies, degeneration of 

 

26 International Agency for Research on Cancer (2006) Formaldehyde, 2-Butoxyethanol and 1-tert-Butoxypropan-2-

ol. Monographs Volume 88. World Health Organization, Lyon, France. 27 Agency for Toxic Substances and Disease Registry (ATSDR). 1999. Toxicological profile for Formaldehyde. 

Atlanta, GA: U.S. Department of Health and Human Services, Public Health Service. 

http://www.atsdr.cdc.gov/toxprofiles/tp111.html 28 WHO (2002) Concise International Chemical Assessment Document 40: Formaldehyde. Published under the joint 

sponsorship of the United Nations Environment Programme, the International Labour Organization, and the 

World Health Organization, and produced within the framework of the Inter-Organization Programme for the 

Sound Management of Chemicals. Geneva. 29 U.S. EPA (1988). Integrated Risk Information System File of Acetaldehyde. Research and Development, 

National Center for Environmental Assessment, Washington, DC. This material is available electronically at 

http://www.epa.gov/iris/subst/0290.htm. 30 U.S. Department of Health and Human Services National Toxicology Program 11th Report on Carcinogens 

available at: http://ntp.niehs.nih.gov/go/16183. 31 International Agency for Research on Cancer (IARC). 1999. Re-evaluation of some organic chemicals, hydrazine, 

and hydrogen peroxide. IARC Monographs on the Evaluation of Carcinogenic Risk of Chemical to Humans, 

Vol 71. Lyon, France. 32 U.S. EPA (1988). Integrated Risk Information System File of Acetaldehyde. This material is available 

electronically at http://www.epa.gov/iris/subst/0290.htm. 
7-15 

olfactory epithelium was observed at various concentration levels of acetaldehyde exposure.33,34 

Data from these studies were used by EPA to develop an inhalation reference concentration. 

Some asthmatics have been shown to be a sensitive subpopulation to decrements in functional 

expiratory volume (FEV1 test) and bronchoconstriction upon acetaldehyde inhalation.35 The 

agency is currently conducting a reassessment of the health hazards from inhalation exposure to 

acetaldehyde. 

Polycyclic Aromatic Hydrocarbons (PAHs) At least eight PAH compounds are classified 

by EPA as probable human carcinogens based on animal data, including acenaphthene36, 

benzo(a)anthracene37, benzo(b)fluoranthene38, benzo(k)fluoranthene39, benzo(a)pyrene40, 

chrysene41, dibenz(a,h)anthracene42, and indeno(1,2,3-cd)pyrene43. Recent studies have found 

that maternal exposures to PAHs in a population of pregnant women were associated with 

 

33 U.S. EPA. 2003. Integrated Risk Information System File of Acrolein. Research and Development, National 

Center for Environmental Assessment, Washington, DC. This material is available electronically at 

http://www.epa.gov/iris/subst/0364.htm. 34 Appleman, L.M., R.A. Woutersen, and V.J. Feron. (1982). Inhalation toxicity of acetaldehyde in rats. I. Acute and 

subacute studies. Toxicology. 23: 293-297. 35 Myou, S.; Fujimura, M.; Nishi K.; Ohka, T.; and Matsuda, T. (1993) Aerosolized acetaldehyde induces 

histamine-mediated bronchoconstriction in asthmatics. Am. Rev. Respir.Dis.148(4 Pt 1): 940-943. 36 U.S. EPA (1997). Integrated Risk Information System File of acenaphthene. Research and Development, 

National Center for Environmental Assessment, Washington, DC. This material is available electronically at 

http://www.epa.gov/ncea/iris/subst/0442.htm. 37 U.S. EPA (1997). Integrated Risk Information System File of benzo(a)anthracene. Research and Development, 

National Center for Environmental Assessment, Washington, DC. This material is available electronically at 

http://www.epa.gov/ncea/iris/subst/0454.htm. 38 U.S. EPA (1997). Integrated Risk Information System File of benzo(b)fluoranthene. Research and Development, 

National Center for Environmental Assessment, Washington, DC. This material is available electronically at 

http://www.epa.gov/ncea/iris/subst/0452.htm 39 U.S. EPA (1997). Integrated Risk Information System File of benzo(k)fluoranthene. Research and Development, 

National Center for Environmental Assessment, Washington, DC. This material is available electronically at 

http://www.epa.gov/ncea/iris/subst/0452.htm. 40 U.S. EPA (1998). Integrated Risk Information System File of benzo(a)pyrene. Research and Development, 

National Center for Environmental Assessment, Washington, DC. This material is available electronically at 

http://www.epa.gov/ncea/iris/subst/0136.htm. 41U.S. EPA (1997). Integrated Risk Information System File of chrysene. Research and Development, National 

Center for Environmental Assessment, Washington, DC. This material is available electronically at 

http://www.epa.gov/ncea/iris/subst/0455.htm 42 U.S. EPA (1997). Integrated Risk Information System File of dibenz(a,h)anthracene. Research and 

Development, National Center for Environmental Assessment, Washington, DC. This material is available 

electronically at http://www.epa.gov/ncea/iris/subst/0456.htm. 43 U.S. EPA (1997). Integrated Risk Information System File of indeno(1,2,3-cd)pyrene. Research and 

Development, National Center for Environmental Assessment, Washington, DC. This material is available 

electronically at http://www.epa.gov/ncea/iris/subst/0457.htm. 
7-16 

several adverse birth outcomes, including low birth weight and reduced length at birth, as well as 

impaired cognitive development at age three.44,45 EPA has not yet evaluated these recent studies. 

 Naphthalene

Naphthalene is found in small quantities in gasoline and diesel fuels. Naphthalene 

emissions have been measured in larger quantities in both gasoline and diesel exhaust compared 

with evaporative emissions from mobile sources, indicating it is primarily a product of 

combustion. EPA released an external review draft of a reassessment of the inhalation 

carcinogenicity of naphthalene based on a number of recent animal carcinogenicity studies.46 

The draft reassessment completed external peer review.47 Based on external peer review 

comments received, additional analyses are being undertaken. This external review draft does 

not represent official agency opinion and was released solely for the purposes of external peer 

review and public comment. The National Toxicology Program listed naphthalene as 

"reasonably anticipated to be a human carcinogen" in 2004 on the basis of bioassays reporting 

clear evidence of carcinogenicity in rats and some evidence of carcinogenicity in mice.48 

California EPA has released a new risk assessment for naphthalene, and the IARC has 

reevaluated naphthalene and re-classified it as Group 2B: possibly carcinogenic to humans.49 

Naphthalene also causes a number of chronic non-cancer effects in animals, including abnormal 

cell changes and growth in respiratory and nasal tissues.50

 

44 Perera, F.P.; Rauh, V.; Tsai, W-Y.; et al. (2002) Effect of transplacental exposure to environmental pollutants on 

birth outcomes in a multiethnic population. Environ Health Perspect. 111: 201-205. 45 Perera, F.P.; Rauh, V.; Whyatt, R.M.; Tsai, W.Y.; Tang, D.; Diaz, D.; Hoepner, L.; Barr, D.; Tu, Y.H.; Camann, 

D.; Kinney, P. (2006) Effect of prenatal exposure to airborne polycyclic aromatic hydrocarbons on 

neurodevelopment in the first 3 years of life among inner-city children. Environ Health Perspect 114: 1287-

1292. 46 U. S. EPA. 2004. Toxicological Review of Naphthalene (Reassessment of the Inhalation Cancer Risk), 

Environmental Protection Agency, Integrated Risk Information System, Research and Development, National 

Center for Environmental Assessment, Washington, DC. This material is available electronically at 

http://www.epa.gov/iris/subst/0436.htm. 47 Oak Ridge Institute for Science and Education. (2004). External Peer Review for the IRIS Reassessment of the 

Inhalation Carcinogenicity of Naphthalene. August 2004. 

http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=84403 48 National Toxicology Program (NTP). (2004). 11th Report on Carcinogens. Public Health Service, U.S. 

Department of Health and Human Services, Research Triangle Park, NC. Available from: http://ntpserver.niehs.nih.gov. 49 International Agency for Research on Cancer (IARC). (2002). Monographs on the Evaluation of the 

Carcinogenic Risk of Chemicals for Humans. Vol. 82. Lyon, France. 50 U. S. EPA. 1998. Toxicological Review of Naphthalene, Environmental Protection Agency, Integrated Risk 

Information System, Research and Development, National Center for Environmental Assessment, Washington, 

DC. This material is available electronically at http://www.epa.gov/iris/subst/0436.htm 
7-17 

 Acrolein

 EPA determined in 2003 that the human carcinogenic potential of acrolein could not be 

determined because the available data were inadequate. No information was available on the 

carcinogenic effects of acrolein in humans and the animal data provided inadequate evidence of 

carcinogenicity.51 The IARC determined in 1995 that acrolein was not classifiable as to its 

carcinogenicity in humans.52

Acrolein is extremely acrid and irritating to humans when inhaled, with acute exposure 

resulting in upper respiratory tract irritation, mucus hypersecretion and congestion. The intense 

irritancy of this carbonyl has been demonstrated during controlled tests in human subjects, who 

suffer intolerable eye and nasal mucosal sensory reactions within minutes of exposure.53 These 

data and additional studies regarding acute effects of human exposure to acrolein are 

summarized in EPA’s 2003 IRIS Human Health Assessment for acrolein.54 Evidence available 

from studies in humans indicate that levels as low as 0.09 ppm (0.21 mg/m3) for five minutes 

may elicit subjective complaints of eye irritation with increasing concentrations leading to more 

extensive eye, nose and respiratory symptoms.55 Lesions to the lungs and upper respiratory tract 

of rats, rabbits, and hamsters have been observed after subchronic exposure to acrolein.56 Acute 

exposure effects in animal studies report bronchial hyper-responsiveness.57 In a recent study, the 

acute respiratory irritant effects of exposure to 1.1 ppm acrolein were more pronounced in mice 

with allergic airway disease by comparison to non-diseased mice which also showed decreases in 

respiratory rate.58 Based on these animal data and demonstration of similar effects in humans 

(i.e., reduction in respiratory rate), individuals with compromised respiratory function (e.g., 

emphysema, asthma) are expected to be at increased risk of developing adverse responses to 

 

51 Integrated Risk Information System File of Acrolein. Research and Development, National Center for 

Environmental Assessment, Washington, DC. This material is available at http://www.epa.gov/iris/subst/0364.htm 52 International Agency for Research on Cancer (IARC). 1995. Monographs on the evaluation of carcinogenic risk 

of chemicals to humans, Volume 63, Dry cleaning, some chlorinated solvents and other industrial chemicals, 

World Health Organization, Lyon, France. 53 Sim VM, Pattle RE. Effect of possible smog irritants on human subjects JAMA165: 1980-2010, 1957. 54 U.S. EPA (U.S. Environmental Protection Agency). (2003) Toxicological review of acrolein in support of 

summary information on Integrated Risk Information System (IRIS) National Center for Environmental 

Assessment, Washington, DC. EPA/635/R-03/003. Available online at: http://www.epa.gov/ncea/iris. 55 Weber-Tschopp, A; Fischer, T; Gierer, R; et al. (1977) Experimentelle reizwirkungen von Acrolein auf den 

Menschen. Int Arch Occup Environ Hlth 40(2):117-130. In German 56 Integrated Risk Information System File of Acrolein. Office of Research and Development, National Center for 

Environmental Assessment, Washington, DC. This material is available at http://www.epa.gov/iris/subst/0364.htm 57 U.S. EPA (U.S. Environmental Protection Agency). (2003) Toxicological review of acrolein in support of summary 

information on Integrated Risk Information System (IRIS) National Center for Environmental Assessment, 

Washington, DC. EPA/635/R-03/003. Available online at: http://www.epa.gov/ncea/iris. 58 Morris JB, Symanowicz PT, Olsen JE, et al. 2003. Immediate sensory nerve-mediated respiratory responses to 

irritants in healthy and allergic airway-diseased mice. J Appl Physiol 94(4):1563-1571. 
7-18 

strong respiratory irritants such as acrolein. 

Other Air Toxics

In addition to the compounds described above, other compounds in gaseous hydrocarbon 

and PM emissions from RICE engines would be affected by this rule. Information regarding the 

health effects of these compounds can be found in EPA’s IRIS database.59

The distance that these HAPs travel away from the emission source depends on several 

factors. HAPs such as formaldehyde, acetaldehyde, PAHs, and acrolein are emitted as gases. 

Regional photochemical model simulations, examining particular scenarios, have shown that 

gaseous HAPs like formaldehyde and acetaldehyde can be transported hundreds of kilometers 

from their emissions source in distinct plumes (U.S. EPA, 2010b). Further, these emissions can 

contribute to regional airmasses with elevated concentrations of gaseous HAPs. These polluted 

airmasses can be transported thousands of kilometers and affect locations well distant from the 

original emissions source. Some gaseous HAPs with higher molecular weight, such as toluene, 

can transform into particles in the atmosphere. For engines examined in this rule, EPA does not 

have enough information to determine the extent of transport specific to the HAPs. In general, 

for HAPs emitted as particles, such as metals, the travel distance primarily depends on the size of 

the particle and meteorological conditions, such as wind speed and precipitation. Fine particles 

can have an atmospheric half-life of days to weeks and travel hundreds to thousands of 

kilometers, whereas ultrafine and coarse particles travel less than ten kilometers (U.S. EPA, 

2009c). 

Carbon monoxide co-benefits 

Carbon monoxide (CO) exposure is associated with a variety of health effects. Without 

knowing the location of the emission reductions and the resulting ambient concentrations using 

fine-scale air quality modeling, we were unable to estimate the exposure to CO for nearby 

populations. Due to data limitations, we were unable to estimate the benefits associated with the 

14,000 tons reductions in CO emissions that would occur as a result of this rule. 

Carbon monoxide in ambient air is formed primarily by the incomplete combustion of 

carbon-containing fuels and photochemical reactions in the atmosphere. The amount of CO 

emitted from these reactions, relative to carbon dioxide (CO2), is sensitive to conditions in the 

combustion zone, such as fuel oxygen content, burn temperature, or mixing time. Upon 

 

59 U.S. EPA Integrated Risk Information System (IRIS) database is available at: http://www.epa.gov/iris 
7-19 

inhalation, CO diffuses through the respiratory system to the blood, which can cause hypoxia 

(reduced oxygen availability). Carbon monoxide can elicit a broad range of effects in multiple 

tissues and organ systems that are dependent upon concentration and duration of exposure. 

The Integrated Science Assessment for Carbon Monoxide (U.S. EPA, 2010a) concluded 

that short-term exposure to CO is “likely to have a causal relationship” with cardiovascular 

morbidity, particularly in individuals with coronary heart disease. Epidemiologic studies 

associate short-term CO exposure with increased risk of emergency department visits and 

hospital admissions. Coronary heart disease includes those who have angina pectoris (cardiac 

chest pain), as well as those who have experienced a heart attack. Other subpopulations 

potentially at risk include individuals with diseases such as chronic obstructive pulmonary 

disease (COPD), anemia, or diabetes, and individuals in very early or late life stages, such as 

older adults or the developing young. The evidence is suggestive of a causal relationship from 

short-term exposure to CO with respiratory morbidity and mortality, from long-term exposure to 

CO with adverse birth outcomes and developmental effects, and from short- and long-term 

exposure to CO with central nervous system effects. 

Other SO2co- benefits 

In addition to being a precursor to PM2.5, SO2 emissions are also associated with a variety 

of respiratory health effects. Unfortunately, we were unable to estimate the health benefits 

associated with reduced SO2 exposure in this analysis because we do not have air quality 

modeling data available. Without knowing the location of the 31,000 tons of SO2 emission 

reductions and the resulting ambient concentrations, we were unable to estimate the exposure to 

SO2 for nearby populations. Therefore, this analysis only quantifies and monetizes the PM2.5 cobenefits associated with those SO2 emissions reductions. 

Following an extensive evaluation of health evidence from epidemiologic and laboratory 

studies, the U.S. EPA has concluded that there is a causal relationship between respiratory health 

effects and short-term exposure to SO2 (U.S. EPA, 2008b). The immediate effect of SO2 on the 

respiratory system in humans is bronchoconstriction. Asthmatics are more sensitive to the 

effects of SO2 likely resulting from preexisting inflammation associated with this disease. A 

clear concentration-response relationship has been demonstrated in laboratory studies following 

exposures to SO2 at concentrations between 20 and 100 ppb, both in terms of increasing severity 

of effect and percentage of asthmatics adversely affected. The SO2 ISA identified four short-term 

morbidity endpoints with a “causal relationship”: asthma exacerbation, respiratory-related 

emergency department visits, and respiratory-related hospitalizations. The SO2 ISA also 
7-20 

concluded that the relationship between short-term SO2 exposure and premature mortality was 

“suggestive of a causal relationship” because it is difficult to attribute the mortality risk effects to 

SO2 alone. Although the SO2 ISA stated that studies are generally consistent in reporting a 

relationship between SO2 exposure and mortality, there was a lack of robustness of the observed 

associations to adjustment for co-pollutants. The differing evidence and associated strength of 

the evidence for these different effects is described in detail in the SO2 ISA. 

SO2 emissions also contribute to adverse welfare effects from acidic deposition, mercury 

methylation, and visibility impairment. Sulfur deposition causes acidification, leading to a loss of 

biodiversity of fishes, zooplankton, and macro invertebrates in aquatic ecosystems, as well as a 

decline in sensitive tree species, such as red spruce (Picea rubens) and sugar maple (Acer 

saccharum) in terrestrial ecosystems. In the northeastern United States, the surface waters 

affected by acidification are a source of food for some recreational and subsistence fishermen 

and support several cultural services, including aesthetic and educational services and 

recreational fishing. Biological effects of acidification in terrestrial ecosystems are generally 

linked to aluminum toxicity, which can reduce root growth and restrict the ability of the plant to 

take up water and nutrients. These direct effects increase the sensitivity of these plants to 

stresses, such as droughts, cold temperatures, insect pests, and disease leading to increased 

mortality of canopy trees. Terrestrial acidification affects several important ecological services, 

including declines in forest productivity (provisioning), declines in habitat for threatened and 

endangered species (cultural), declines in forest aesthetics (cultural), and increases in forest soil 

erosion and reductions in water retention (cultural and regulating). (U.S. EPA, 2008c) 

Mercury is a highly neurotoxic contaminant that enters the food web as a methylated 

compound, methylmercury (U.S. EPA, 2008c). The contaminant is concentrated in higher 

trophic levels, including fish eaten by humans. Experimental evidence has established that only 

inconsequential amounts of methylmercury can be produced in the absence of sulfate. Current 

evidence indicates that in watersheds where mercury is present, increased SOx deposition very 

likely results in methylmercury accumulation in fish (Drevnick et al., 2007; Munthe et al, 2007). 

The SO2 ISA concluded that evidence is sufficient to infer a casual relationship between sulfur 

deposition and increased mercury methylation in wetlands and aquatic environments. 

Reducing SO2 emissions and the secondary formation of PM2.5 would improve the level 

of visibility throughout the United States. Fine particles with significant light-extinction 

efficiencies include sulfates, nitrates, organic carbon, elemental carbon, and soil. These 

suspended particles and gases degrade visibility by scattering and absorbing light. Higher 

visibility impairment levels in the East are due to generally higher concentrations of fine 
7-21 

particles, particularly sulfates, and higher average relative humidity levels. In fact, particulate 

sulfate is the largest contributor to regional haze in the eastern U.S. (i.e., 40% or more annually 

and 75% during summer). In the western U.S., particulate sulfate contributes to 20-50% of 

regional haze. Visibility has direct significance to people’s enjoyment of daily activities and 

their overall sense of wellbeing. Good visibility increases the quality of life where individuals 

live and work, and where they engage in recreational activities. (U.S. EPA, 2009c) 

7.4 Characterization of Uncertainty in the Monetized Co-benefits 

In any complex analysis, there are likely to be many sources of uncertainty. Many inputs 

are used to derive the final estimate of economic benefits, including emission inventories, air 

quality models (with their associated parameters and inputs), epidemiological estimates of 

concentration-response (C-R) functions, estimates of values, population estimates, income 

estimates, and estimates of the future state of the world (i.e., regulations, technology, and human 

behavior). For some parameters or inputs it may be possible to provide a statistical representation 

of the underlying uncertainty distribution. For other parameters or inputs, the necessary 

information is not available. 

The annual benefit estimates presented in this analysis are also inherently variable due to 

the processes that govern pollutant emissions and ambient air quality in a given year. Factors 

such as hours of equipment use and weather are constantly variable, regardless of our ability to 

measure them accurately. As discussed in the PM2.5 NAAQS RIA (Table 5.5) (U.S. EPA, 2006), 

there are a variety of uncertainties associated with these PM co-benefits. Therefore, the estimates 

of annual co-benefits should be viewed as representative of the magnitude of co-benefits 

expected, rather than the actual benefits that would occur every year. 

We performed a couple of sensitivity analyses on the benefits results to assess the 

sensitivity of the primary results to various data inputs and assumptions. We then changed each 

default input one at a time and recalculated the total monetized co-benefits to assess the percent 

change from the default. We present the results of this sensitivity analysis in Table 7-5. We 

indicated each input parameter, the value used as the default, and the values for the sensitivity 

analyses, and then we provide the total monetary co-benefits for each input and the percent 

change from the default value. 
7-22 

Table 7-5. Sensitivity Analyses for Monetized PM2.5-related Co-benefits (millions of 

2008$) 

 

Total PM2.5 Cobenefits % Change from Default 

Threshold Assumption (with 

Epidemiology Study) 

No Threshold (Pope) $1,100 N/A 

No Threshold (Laden) $2,600 N/A 

 Threshold (Pope) $860 28% 

Threshold (Laden) $1,900 37% 

Discount Rate (with 

Epidemiology Study) 

3% (Pope) $1,100 N/A 

3% (Laden) $2,600 N/A 

7% (Pope) $1,000 10% 

 7% (Laden) $2,300 11% 

Above we present the estimates of the total monetized co-benefits, based on our 

interpretation of the best available scientific literature and methods and supported by the SABHES and the NAS (NRC, 2002). The co-benefits estimates are subject to a number of 

assumptions and uncertainties. For example, for key assumptions underlying the estimates for 

premature mortality, which typically account for at least 90% of the total monetized benefits, we 

were able to quantify include the following: 

1. PM2.5 co-benefits were derived through benefit per-ton estimates, which do not reflect 

local variability in population density, meteorology, exposure, baseline health 

incidence rates, or other local factors that might lead to an over-estimate or underestimate of the actual benefits of controlling directly emitted fine particulates. 

2. We assume that all fine particles, regardless of their chemical composition, are 

equally potent in causing premature mortality. This is an important assumption, 

because PM2.5 produced via transported precursors emitted from EGUs may differ 

significantly from direct PM2.5 released from diesel engines and other industrial 

sources, but no clear scientific grounds exist for supporting differential effects 

estimates by particle type. 

3. We assume that the health impact function for fine particles is linear down to the 

lowest air quality levels modeled in this analysis. Thus, the estimates include health 

benefits from reducing fine particles in areas with varied concentrations of PM2.5,

including both regions that are in attainment with fine particle standard and those that 

do not meet the standard down to the lowest modeled concentrations. 

4. To characterize the uncertainty in the relationship between PM2.5 and premature 

mortality (which typically accounts for 85% to 95% of total monetized benefits), we 

include a set of twelve estimates based on results of the expert elicitation study in 
7-23 

addition to our core estimates. Even these multiple characterizations omit the 

uncertainty in air quality estimates, baseline incidence rates, populations exposed and 

transferability of the effect estimate to diverse locations. As a result, the reported 

confidence intervals and range of estimates give an incomplete picture about the 

overall uncertainty in the PM2.5 estimates. This information should be interpreted 

within the context of the larger uncertainty surrounding the entire analysis. For more 

information on the uncertainties associated with PM2.5 co-benefits, please consult the 

PM2.5 NAAQS RIA (Table 5.5). 

This RIA does not include the type of detailed uncertainty assessment found in the PM 

NAAQS RIA (U.S. EPA, 2006b) because we lack the necessary air quality input and monitoring 

data to run the benefits model. Moreover, it was not possible to develop benefit-per-ton metrics 

and associated estimates of uncertainty using the benefits estimates from the PM RIA because of 

the significant differences between the sources affected in that rule and those regulated here. 

However, the results of the Monte Carlo analyses of the health and welfare benefits presented in 

Chapter 5 of the PM RIA can provide some evidence of the uncertainty surrounding the cobenefits results presented in this analysis. 

It is important to note that the monetized benefit-per-ton estimates used here reflect 

specific geographic patterns of emissions reductions and specific air quality and benefits 

modeling assumptions. For example, these estimates do not reflect local variability in population 

density, meteorology, exposure, baseline health incidence rates, or other local factors. Use of 

these $/ton values to estimate co-benefits associated with different emission control programs 

(e.g., for reducing emissions from large stationary sources like EGUs) may lead to higher or 

lower benefit estimates than if co-benefits were calculated based on direct air quality modeling. 

Great care should be taken in applying these estimates to emission reductions occurring in any 

specific location, as these are all based on national or broad regional emission reduction 

programs and therefore represent average benefits-per-ton over the entire United States. The 

benefits- per-ton for emission reductions in specific locations may be very different than the 

estimates presented here. 

7.5 Comparison of Benefits and Costs 

EPA estimates the range of co-benefits of this final rule to be $940 million to $2.3 billion 

(2008$) at a 3% discount rate and $850 million to $2.1 billion at a 7% discount rate in the year of 

implementation (2013). The annualized costs are $373 million (2008$) at a 7% interest rate.60

Thus, net benefits are $570 million to $1.9 billion at a 3% discount rate for the benefits and $480 

million to $1.7 billion at a 7% discount rate. Figures 7-4 and 7-5 show the full range of net 

 

60For more information on the annualized costs, please refer to Section 4 of this RIA. 
7-24 

benefits estimates (i.e., annual co-benefits minus annualized costs) utilizing the 14 different 

PM2.5 mortality functions at discount rates of 3% and 7%. In addition, the benefits from reducing 

1,014 tons of hazardous air pollutants each year have not been included in these estimates. EPA 

believes that the benefits are likely to exceed the costs under this rulemaking even when taking 

into account uncertainties in the cost and benefit estimates. 

$0

$500

$1,000

$1,500

$2,000

$2,500

Pope et al.

Laden et al.

Millions(2008$)

Cost estimate combined with total monetized benefits estimates derived from2

epidemiology functions and 12 expert functions

Figure 7-4. Net Benefits for RICE NESHAP at 3% Discount Rate 

a

 Net benefits are quantified in terms of PM2.5 co-benefits for the year of implementation. This graph shows 14 cobenefits estimates combined with the cost estimate. All combinations are treated as independent and equally 

probable. All fine particles are assumed to have equivalent health effects, but the benefit per ton estimates vary 

because each ton of precursor reduced has a different propensity to become PM2.5. The monetized co-benefits 

incorporate the conversion from precursor emissions to ambient fine particles. 
7-25 

‐$500

$0

$500

$1,000

$1,500

$2,000

$2,500

Pope et al.

Laden et al.

Millions(2008$)

Cost estimate combined with total monetized benefits estimates derived from2

epidemiology functions and 12 expert functions

Figure 7-5. Net Benefits for RICE NESHAP at 7% Discount Ratea

a

 Net benefits are quantified in terms of PM2.5 co-benefits for the year of implementation.. This graph shows 14 cobenefits estimates combined with the cost estimate. All combinations are treated as independent and equally 

probable. All fine particles are assumed to have equivalent health effects, but the benefit per ton estimates vary 

because each ton of precursor reduced has a different propensity to become PM2.5. The monetized co-benefits 

incorporate the conversion from precursor emissions to ambient fine particles. 
8-1 

SECTION 8

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8-7 

United States 

Environmental Protection 

Agency 

Office of Air Quality Planning and 

Standards 

Health and Environmental Impacts 

Division 

Research Triangle Park, NC 

Publication No. EPA452/R-10-002

February 2010