p.1 

OAR Box 1828 

Prepped by Ollie Stewart 

Document Number: 

130) ll-K-(B)-120 

Docket Number: 

A-83-27 

Printed 11/12/2008 11:12:52 AM Sheet 130 of 325 
P.2 

ENERGY AND ENVIRONMENTAL ANALYSIS, INCJ A'O O L I 

II-K-(B)-120 

July 14, 1983 

Mr. Robert Short 

Economic Analysis Branch 

U.S. Environmental Protection Agency 

Mail Drop-12 

Research Triangle Park, NC 27711 

Subject: EPA Contract No. 68-02-3564, Work Assignment #8 

Dear Robert: 

EEA provided initial IFCAM projections with the new energy scenario on 

July 8, 1983. Projected demand for new coal-fired industrial boilers is 

lower in these new results than in previous projections. The purpose of 

this letter is to discuss the potential impact of these new results on 

the upcoming SO- NSPS regulatory analysis. 

Table 1 compares the most recent IFCAM projections with the previous set 

of results dated May 5, 1983. Although the total new industrial boiler 

fossil fuel demand is higher in the July 8 projections than in the May 5 

projections, the July 8 results show significantly lower coal demand. 

I believe that the decline in coal demand is due primarily to lower 

projected natural gas prices. Table 2 presents a comparison of old and 

current natural gas price forecasts. The current natural gas price 

forecast is $0.50 - $1.40/MMBtu lower than the old projections for 

several regions. This change in natural gas prices is large enough to 

significantly reduce the projected coal penetration rate in new industrial boilers. 

I expect that the projected level of coal demand in new industrial 

boilers in the 1990 SO- runs scheduled for the end of this month to drop 

from 172 trillion Btu in the 1988 PM/NO runs (see Table 1) to about 100 

trillion Btu. This decline is expected because the total projected 

fossil fuel demand in new industrial boilers will be lower than the July 

8 projections (probably even lower than the May 5 results). The total 

fuel demand in new industrial boilers for the 1990 S0_ analysis will 

decline because the net increase in total projected industrial fossil 

fuel demand between 1985 and 1990 is estimated by EIA to be 0.8 quads. 

By comparison, the EIA estimate of the net increase between 1983 and 

1988 (used for the July 8 projections) is 1.3 quads. As a result, the 

1990 S0_ runs will have fewer new boilers than the 1988 PM/NO runs and, 

therefore, fewer new coal boilers than the May 5 or the July 8 projections 

presented in Table 1. 

Economic s / Enqineerin q 
P.3 

Mr. Robert Short 

July 14, 1983 

Page 2 

To summarize, projected coal demand is low in the new 1988 PM/NO runs 

because of the new natural gas price forecast and is expected to be even 

lower in absolute terms (annual consumption and number of boilers) than 

the future 1990 S0_ runs. The significance of these observations is 

that the national impacts of alternative SO- NSPS regulations are expected to be small because the number of new coal-fired industrial 

boilers is expected to be small. 

A large number of IFCAM runs have been scheduled for the SO NSPS regulatory analysis (minimum: 10; maximum: 23; reference my letter to you 

dated June 23, 1983). I suggest that we review this schedule. Instead 

of producing a large number of runs with small national impacts, it may 

be more appropriate to design and schedule sensitivity analysis on 

natural gas price projections. I am reviewing the available DOE industrial natural gas price projections in order to try to develop recommendations on alternative natural gas price projections. 

Sincerely, 

Tim Hogan (J 

TH:mk 

Attachments 

cc: Al Wehe 
P.4 

TABLE 1. COMPARISON OF IFCAM PROJECTIONS 

May 5, 1983a July 8, 1983b 

Fuel demand (IO12 Btu)C 

- coal 254.1 171.8 

- total coal, oil and gas 573.4 717.7 

Coal demand as a percent of total 

fuel demand 44 24 

Number of coal boilersc,d 287 205 

Base Case NSPS for SO . Proposed NSPS for PM and NO . 1990 run. 

NO emission controls on all new industrial boilers. Option Case 1 

(Base Case NSPS for SO proposed NSPS for PM and NO ). 1988 run. 

Includes new industrial boilers larger than 50 MMBtu/hr. 

By comparison, ABMA projects 213 new coal-fired industrial boiler 

sales larger than 50 KPPH each. 
P.5 

TABLE 2. COMPARISON OF INDUSTRIAL NATURAL GAS PRICE PROJECTIONS 

(1982 $/MMBtu) 

1985 , 1990 

3. n 3. n 

Demand region May 5 July 8 May 5 July 8 

3. Middle Atlantic 5.11 4.29 5.94 4.59 

5. Midwest 5.20 4.14 6.03 4.90 

6. Southwest 4.82 4.27 5.94 4.63 

7. Central 5.13 3.77 5.96 4.55 

aUsed in May 5, 1983 IFCAM projections. 

Used in July 8, 1983 IFCAM projections.