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Economic Impact and Small Business Analysis for the Proposed Compression-Ignition (CI) 

New Source Performance Standards (NSPS)

EPA is proposing to amend the CI NSPS for stationary engines that were published on 

June 11, 2006. Based on a settlement agreement resulting from a legal challenge to the original 

rule, EPA must propose amendments to the CI NSPS by May 22, 2010. The impacts discussed 

in this memorandum are based on proposing to implement more stringent standards for 

stationary CI engines with a displacement greater than or equal to 10 liters/cylinder (l/cyl) and 

less than 30 l/cyl, consistent with recent revisions to standards for similar mobile source marine 

engines. Specifically, EPA is proposing to amend the CI NSPS to require stationary CI engines 

greater than or equal to 10 l/cyl and less than 30 l/cyl to meet the emission standards for the same 

size and displacement engines as currently required under 40 CFR part 1042, Control of 

Emissions from New and In-Use Marine Compression-Ignition Engines and Vessels. These 

standards will be phased-in between 2013 and 2017 model year engines depending on the size 

and displacement.

BASIS OF ESTIMATED EMISSION REDUCTIONS

The 40 CFR part 1042 emission standards include recently finalized more stringent 

standards, i.e., Tier 3 and Tier 4 emission standards, and are the standards that EPA is proposing 

to adopt for stationary CI engines greater than or equal to 10 l/cyl and less than 30 l/cyl. Tier 3 

standards are based on in-engine controls and ultra low sulfur diesel fuel use. The Tier 4 

standards are based on diesel particulate filters (DPF) and selective catalytic reduction (SCR). 

Consistent with how EPA has treated stationary emergency CI engines in the past, EPA is not 

requiring standards that force aftertreatment for stationary emergency CI engines. Only 

stationary non-emergency CI engines greater than or equal to 10 l/cyl and less than 30 l/cyl will 

be subject to emission standards based on aftertreatment under the proposed amendments

In order to estimate the number of new stationary CI engines in the displacement range 

that would be subject to Tier 3 and Tier 4 emission standards under the proposed amendments to 

the CI NSPS, EPA obtained information from the Engine Manufacturers Association (EMA).1

According to EMA, it is estimated that 8 new engines between 10 l/cyl and 30 l/cyl would be 

produced yearly and would become subject to the rule. Of these 8 engines, 3 are expected to be 

non-emergency engines and 5 are expected to be emergency engines, according to EMA. All 

engines are expected to be used for power generation.

In order to estimate the pollutant reductions for stationary CI engines between 10 l/cyl 

and 30 l/cyl that would be subject to 40 CFR part 1042 emission standards, EPA compared Tier 

4 emission standards from 40 CFR part 1042 to the previous standards that applied to these 

engines under the CI NSPS, which were consistent with the emission standards in 40 CFR part 

94. EPA used emission standards from Tables 3-16 and 3-41 of the 2008 Regulatory Impact 

 

1 Email from Joe Suchecki, EMA to Tanya Parise, EC/R, Inc. April 7, 2010.
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Analysis (RIA) for locomotive and marine CI engines.2 The cumulative emissions reductions 

associated with the proposed amendments in the year 2018 are 8 tpy of PM, 295 tpy of NOx, and 

4 tpy of HC. The year 2018 is the first year these emission standards would be fully

implemented for stationary CI engines between 10 and 30 liters l/cyl. In the year 2030, the 

cumulative emissions reductions are estimated at 38 tpy of PM, 1,100 tpy of NOx, and 18 tpy of 

HC. 

BASIS OF ESTIMATED COSTS TO AFFECTED SOURCES

In order to estimate the costs associated with requiring Tier 4 emission standards for new 

non-emergency stationary CI engines, EPA consulted with the Office of Transportation and Air 

Quality (OTAQ). EPA used the costs presented in the 2008 RIA for locomotive and marine 

engines2in order to estimate the cost associated with meeting Tier 4 emission standards based on 

aftertreatment controls. Specifically, after consulting with OTAQ, it was found most appropriate 

to use the hardware (or variable) costs in Tables 7A-5 and 7A-6 and the auxiliary engine costs 

from Tables 7B-20 and 7B-21 of the 2008 RIA for locomotive and marine engines.2 The

hardware and auxiliary costs were multiplied by the number of new stationary non-emergency CI 

engines between 10 l/cyl and 30 l/cyl to determine the total capital costs. No capital costs were 

attributed to new stationary emergency CI engines between 10 l/cyl and 30 l/cyl because these 

engines will not be subject to emission standards that force aftertreatment. The capital cost 

associated with the proposed amendments to the CI NSPS is $236,000 ($2009) in 2018.

The annual costs associated with the proposed requirements for new non-emergency CI 

engines between 10 l/cyl and 30 l/cyl include the operating costs for the urea usage for the SCR 

control system, DPF maintenance, and the increased fuel consumption associated with DPF. 

These annual cost elements were estimated based on communication with OTAQ3,4and 

information from Nonroad Engine Modeling documents.5The cumulative annual cost is 

estimated to be $142,000 ($2009) in 2018 and $711,000 ($2009) in 2030. 

ECONOMIC IMPACTS

In this economic analysis, we estimate impacts for the year 2018. We allocate the annual 

costs to the electric power generation industry (NAICS 2211), the industry we expect the 3 new 

non-emergency CI engines affected by 2018 will be located and the industry in which two-thirds 

of the existing CI engines are currently classified.6 We use the annual average revenue for the 

electric power generation industry, which is estimated using U.S. Census Bureau data at $41.2 

million (2009 dollars). Assuming that a single affected non-emergency engine will be owned by

one firm, we thus assume three firms affected by this NSPS. Thus, the annual cost per affected 

firm is $47,333 (or $142,000/3). We estimate economic impacts using the cost-to-receipt (i.e., 

 

2Regulatory Impact Analysis: Control of Emissions of Air Pollution from Locomotive Engines and 

Marine Compression Ignition Engines Less than 30 Liters Per Cylinder, EPA/420-R-08-001a May 2008.

3 Email from Todd Sherwood, OTAQ to Tanya Parise, EC/R, Inc. October 6, 2009.

4Email from Todd Sherwood, OTAQ to Tanya Parise, EC/R, Inc. April 21, 2010.

5 Exhaust and Crankcase Emission Factors for Nonroad Engine Modeling -- Compression Ignition 

EPA420--P-04-009 April 2004 NR-009c.

6Regulatory Impact Analysis for the Compression-Ignition (CI) RICE NESHAP. February 2010. 
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sales) ratio, or the “sales test.” The “sales test” is the impact 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 SBREFA7and is 

consistent with guidance published by the U.S. SBA’s Office of Advocacy that suggests that cost 

as a percentage of total revenues is a metric for evaluating cost increases on small entities in 

relation to increases on large entities.8

By using an annualized cost to revenue metric, we estimate the economic impact to be 

$47,333/$183 million, or 0.03 percent of revenues.

9,7

 Assuming one of these firms is a small 

entity, the impact on the small entity is also 0.03 percent. Thus, based on this impact and there 

being only one small entity affected by this proposal, we certify that there is no significant 

economic impact on a substantial impact on small entities (SISNOSE) associated with this rule. 

In addition, since the annualized cost as a percent of sales or revenues estimate is an 

approximation of the maximum price increase required for a product for a firm to recover all 

costs of compliance, the maximum price increase associated with this NSPS will be no greater 

than 0.03 percent. The change in affected product output should also be no higher than this. 

 

7The 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.

8U.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 U.S. Census Bureau .2008. “Firm Size Data from the Statistics of U.S. Businesses: U.S. All Industries 

Tabulated by Receipt Size: 2002.” <http://www.census.gov/csd/susb/susb02.htm>. Key Enterprise 

Statistics for Electric Power Generation, Transmission, and Distribution (NAICS 2211): 2002.