SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost Effectiveness Analysis August 18, 2011

C - 1 Final Staff Report with Appendices

For Revised Proposed New Rule 4566 

## APPENDIX C

Cost Effectiveness Analysis For Revised Proposed New Rule 4566

August 18, 2011SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost Effectiveness Analysis August 18, 2011

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Appendix C: Cost Effectiveness Analysis August 18, 2011

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For Revised Proposed New Rule 4566 COST EFFECTIVENESS ANALYSIS FOR REVISED PROPOSED NEW RULE 4566 (ORGANIC MATERIAL CO MPOSTING OPERATIONS)

I. SUMMARY

Cost effectiveness is a metric used to compare the relative cost between various control techniques and rules. The cost effectiveness of a rule is estimated by dividing the annualized cost of a control by the estimated emiss ion reductions.

Revised Proposed New Rule 4566 (Organic Material Co mposting Operations) would require operators who manage these materials to red uce VOC emissions through mitigation measures, which include the watering sys tem, finished compost cover, and engineered emission control systems. In the case o f composting operations, smaller facilities, which have fewer resources and lower to tal emissions, would be required to implement the watering system requirements. Medium facilities, that have greater resources and higher total emissions, would be requ ired to implement both the watering system and finished compost cover requirements or a n alternative mitigation measure that achieves equivalent VOC reductions. Large fac ilities would be required to implement an engineered control system that demonst rates at least 80% reduction, by weight, in VOC emission for organic material underg oing active composting.

District staff has received cost information from s takeholders and vendors during the rule development process to aid District staff with the cost effectiveness analysis. The proposed rule requirements have been revised to mit igate significant impacts to the operators based on the cost-effectiveness of the co ntrol measures.

II. REQUIREMENTS OF COST EFFECTIVENESS ANALYSIS

The San Joaquin Valley Unified Air Pollution Contro l District conducts a cost effectiveness analysis of available emission contro l options before adopting each Best Available Retrofit Control Technology (BARCT) rule pursuant to California Health and Safety Code 40920.6(a). The purpose of conducting a cost effectiveness analysis is to evaluate the economic reasonableness of the polluti on control measure or rule. The analysis also serves as a guideline in developing t he control requirements listed in a rule. Absolute cost effectiveness of a control opt ion is the added annual compliance cost in dollars per year divided by the emission re duction achieved in tons VOC reduced per year. This report presents the Distric t staff's analysis of the absolute cost effectiveness of Revised Proposed New Rule 4566.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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For Revised Proposed New Rule 4566 For composting operations, the additional annual co sts will be developed as follows:

Additional Cost = Cost to Implement Control ($ /wet-ton) × Throughput (wet-ton/year) = $/year

Absolute Cost Effectiveness = Additional Cost ($/ year) Reductions (ton-VOC/year) = $/ton-VOC

Incremental cost effectiveness is intended to measu re the change in costs, in dollars per year, and emissions reductions, in tons of VOC reduced per year, between two progressively more effective control options or tec hnologies. Incremental cost

effectiveness examines the additional costs and emi ssion reductions that can be achieved by adding a second control to the primary control. Because the incremental reductions from the controlled source operation are typically low, incremental cost effectiveness produces a much higher cost-to-reduct ion ratio than the primary control and should not be compared to the absolute cost eff ectiveness value.

Revised Proposed New Rule 4566 would provide operat ors with the flexibility to comply with the VOC control requirements using equipment a nd resources appropriate for their facilities or developing mitigation measures of the ir own provided they demonstrate that such measures would achieve specified VOC emission reductions. Since operators have this flexibility, District staff assumed that the operators will choose the option with the best cost effectiveness for their particular op eration.

III. SOURCES OF COST DATA

Since the September 2010 public workshop, District staff has continued to refine the draft rule requirements and work with the affected operators to update the cost data for the proposed mitigation measures, specifically for the watering system and finished compost cover application. Costs for composting ope rations were taken from two general categories of sources: composting operators in the San Joaquin Valley and vendors of composting emission control systems. Th e vendors who provided data are Engineered Compost Systems (ECS), W.L. Gore & Assoc iates (GORE), and Managed Organic Recycling (MOR). The Valley operators who provided data are from Tulare County Compost and Biomass (Tulare), HWY 59 (Merced ), Mt Vernon Composting & Recycling (Bakersfield), Community Recycling and Re source Recovery (Lamont), the City of Modesto Compost Facility, Recology Grover E nvironmental Products (Vernalis), E&J Gallo Compost Facility (Fresno).SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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For Revised Proposed New Rule 4566 A. Cost Data for Stockpile Requirements

Based on discussion with the composting industry, t he operators are already complying or would be able to comply with the proposed stockp ile requirements. Currently, two existing composting operations with less than 100,0 00 wet tons per year (tpy) of organic material would be affected by the more stringent 10 -day stockpile limit. As mentioned in the staff report, CalRecycle has more stringent stockpile requirements for chipping and grinding operations; however, there are current ly no CalRecycle stockpile requirements for a site that is regulated as a comp ostable material handling operation or facility. The affected operators have indicated that they would be able to comply with the stockpile requirements most of the time unless there are any unforeseen events, such as equipment breakdown, where operators would need to cover the organic material with a tarp or implement other alternative mitigation measures.

B. Cost Data for Composting Requirements

1. Watering System Mitigation Measure

District staff received several cost estimates from the industry operators, which are based on site-specific requirements. Operators pro vided costs data for additional equipment and infrastructure necessary to implement the watering system requirements, such as sprinkler piping, water pumpi ng equipment, power/fuel, and water. Since the costs are based on site-specific conditions, there is a wide range of cost estimates to implement the control method. Fo r example, one facility may have rights to water, while another would need to purcha se the water needed for this control

method. Staff assumed that the additional costs in clude increased labor, fuel, equipment, and maintenance.

2. Finished Compost Cover Mitigation Measure

The industry operators’ cost estimates were based o n site-specific requirements, which include a wide range of cost estimates to implement the control method. For the finished compost cover control method, operators pr ovided costs including possible additional front-end loaders, dump trucks, and conv eyors. While some facilities may need the additional heavy equipment, other faciliti es may be able to use existing equipment for the control measures. It is assumed that the finished compost cover control method include increased labor, fuel, equip ment, maintenance, and decreased amount of available finished compost for all applic able facilities. A loss of production

revenue has also been factored into the cost estima tes.

To mitigate the impact of the draft rule and allow operators time to adjust to the practices, the draft rule would allow five years fo r full implementation, rather than a phase-in period. The five years would allow operat ors the flexibility to work around their operation and generate enough finished compost for the mitigation measure. The draftSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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For Revised Proposed New Rule 4566 would also allow operators to generate the finished compost cover using overs or finished compost, as defined in the revised propose d new rule.

Figure 1 below shows the surface area of the finish ed compost windrow during the active phase as it marginally increases in volume a nd returns to its initial formation. As the material composts, moisture and carbon are lost so that the normal compost pile is reduced by 60 to 70% in volume by the end of the co mpost cycle. In addition, the windrow turners produce a consistent pile footprint . The data below are based on the field study results.

Figure 1 - Comparison of Feedstock During Active Cu ring

0 10 20 30 40 50 60 70

2 3 4 5 7 10 15 22

DaySurface Area (m2) Finished Compost

Typical Windrow

Source: Appendix D to study results report (SJVAPSA , 2011)

3. Engineered Control Systems

District staff received cost estimates from several vendors in 2008 and most recently in 2010, many of which have been involved with the rul emaking process since 2007. Brief descriptions of information received from the vendo rs are given below. Inclusion of these vendors in this report does not imply or serv e as an endorsement of any vendor or product by the District.

Engineered Compost Systems (ECS) provided cost esti mates (T. O’Neill, e-mail correspondence to District, 2008) for the AC Compos terTM and CompDogTM (inflatableSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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For Revised Proposed New Rule 4566 form) cover systems (negative ASPs vented to biofil ter). The key assumptions are as

follows:

• Capital costs of equipment, construction and start -up of control system

(annualized over 10 years at 10%).

• Annual cost also includes operation and maintenanc e (O&M) of all equipment, labor, electrical power, and fuel.

• Paved surface for the AC ComposterTM system to be b uilt, unpaved for the CompDogTM cover system.

• Concrete pushwalls for both AC ComposterTM and Comp DogTM cover
systems.

• Aeration vented to biofilter for both AC Composter TM and CompDogTM

cover systems.

• Water management control system for separation of leachate and storm

water to be built.

• Covered bunker or enclosed reception area to be bu ilt

• Water and electricity in place

Gore & Associates, Inc. (GORE) provided cost estima tes (B. Fuchs, e-mail correspondence to District, 2008) for a GORETM Cover System technology (positive ASPs with cover). The key assumptions are as follo ws:

• Annualized capital costs of equipment, constructio n and start-up of control system over 10 years at 10%,

• Annual cost also includes operation and maintenanc e (O&M) of all equipment, labor, electrical power, and fuel,

• Paved surface for the GORETM Cover System to be bui lt,

• Water management control system for separation of leachate and storm water to be built,

• Paved tipping area to be built,

• Water and electricity in place

Managed Organic Recycling (MOR) provided cost estimates (J. Bouey, e-mail correspondence to District) for a positive ASP with cover system. The key assumptions

are as follows:

• Annualized capital costs of equipment, constructio n and start-up of control system over 10 years at 10%,

• Annual cost also includes operation and maintenanc e (O&M) of all equipment, labor, electrical power, and fuel,

• Paved surface for the covered system to be built,

• Water management control system for separation of leachate and storm water to be built,

• Paved tipping area to be built,

• Water and electricity in placeSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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For Revised Proposed New Rule 4566 According to the vendors, the cost estimates are hi ghly variable depending upon site specific requirements. For the purpose of this ana lysis, the cost estimates associated with the capture and control systems assume a flat and buildable site with all utilities in place. The District staff obtained as much data as available to establish the range of costs to implement an “engineered control system”. The collected cost estimations are for the purposes of the District’s rulemaking proce ss for Rule 4566 only. The budgetary pricing from the mentioned vendors are the most cur rent and best available information

obtained at the time.

4. Other Cost Data

Other cost information that District staff has cons idered in the revised cost analysis are

as follows:

Tipping Fees:

o Composting: City of Modesto indicated that tipping fees are around $18.35 per ton for organic material (City of Modesto, publ ic comment letter dated January 4, 2008). Discussion with CalRecycle also indicated an average of about $18 per ton for compost tipping fees, which c ould vary depending on source and type of material. However, tipping fees have been observed as high as $35 for facilities processing materials gen erated outside of the Valley.

o Landfills: Landfill tip fees within the region cur rently range from $25 per ton to $30 per ton for organic material (an average of about $27.50 per ton)

o Compost Alternative: Stanislaus Resource Recovery Facility is a Waste-toEnergy plant that charges a tipping fee of $28 per ton for organic material.

As mentioned in the final staff report, composting helps local government agencies meet state solid waste diversion goals to preserve landfill capacity by reducing the amount of organic material sent to landfills for di sposal. While diversion of materials from landfill disposal to composting will help ease the burden on landfills and achieve associated environmental benefits, the increase in composting will also increase VOC emissions associated with the operations and possib ly NOx emissions from increased trucking of organic materials from outside of the S JVAB. The draft rule would seek to balance air quality goals with diversion goals by a lso considering the impact of the proposed mitigation measures to the industry on a c ost per wet ton of organic material.

IV. COSTS AND COST EFFECTIVENESS ESTIMATES

Revised Proposed New Rule 4566 would require operat ors to comply with specific mitigation measures, based on the throughput catego ries for organic materialSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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For Revised Proposed New Rule 4566 composting operations. Each of the throughput cate gories were determined based on the following:

• Technological and economic feasibility of implemen ting the mitigation measures.

• The additional cost to operators to implement the mitigation measures.

The watering system requirements would apply to a c omposting operation with an organic material receiving volume of less than 200, 000 tpy. For a composting operation with an organic material receiving volume of greate r than or equal to 200,000 tpy and less than 750,000 tpy, an operator would be require d to comply with both the watering system and the finished compost cover requirements. An operator that compost 750,000 tpy or more or organic material would be re quired to implement a mitigation measure that demonstrates at least 80% reduction, b y weight, in VOC emissions. Any facilities below 750,000 tpy also have the option t o implement an equally effective alternative mitigation measure.

District’s throughput determinations and cost analy sis for the mitigation measures are presented below.

A. Cost Analysis for Stockpile Requirements

District staff did not receive information about ad ditional costs to compost the materials within 10 days. For the stockpile holding times fo r composting operations with less than 100,000 wet tpy of organic material, operators have indicated that it would be feasible to comply with the 10-day stockpile holding time an d therefore, District staff considers any additional costs to be insignificant and did no t conduct further analysis on the

absolute cost-effectiveness.

District staff also did not conduct a cost effectiv eness analysis for composting operations with 100,000 wet tpy or more of organic materials since all of the operators already meet the three-day stockpile requirements.

B. Cost Analysis for Watering System Requirements

Table 1 summarizes the cost information received fr om operators for site-specific costs to implement the watering system requirements. The costs reflect the limited resources of the smaller facilities and a necessity to purcha se equipment and water to implement the watering system requirements, resulting in a hi gher, per-ton implementation cost.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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For Revised Proposed New Rule 4566 Table 1: Watering System Costs Feedstock Throughput (wet ton/yr) Range in Cost to Implement ($/wet ton) Throughput < 200,000 $2.23 to $4.30

200,000 ≤ Throughput < 750,000 $0.66 to $1.07 Throughput ≥ 750,000 No facilities

However, the additional costs, on per wet ton basis , shows that it is feasible for all of the facilities to implement the watering system. D istrict staff has continued to work with the composting operators to reconcile the increment al cost for the watering system.

Table 2 below shows a conservative estimate of what operators would incur as added costs to their existing operation.

Table 2: Watering System Costs Feedstock Throughput (wet ton/yr) Estimated Incremental Cost ($/wet ton) Throughput < 200,000 $0.19

200,000 ≤ Throughput < 750,000 $0.36 Throughput ≥ 750,000 No facilities

For composting operations with less than 200,000 tp y of organic material, the total annualized costs for the watering system would be a bout $95,107 per year, depending on availability and use of water. Based on 244 ton s per year of VOC emission reductions, the cost effectiveness for composting o perations with less than 200,000 tpy of organic material would be $390 per ton VOC reduc ed.

The cost effectiveness analysis for composting oper ations with 200,000 tpy or more and less than 750,000 tpy of organic material is in cluded with the finished compost cover analysis in the following section, since the costs to implement the watering system is even lower for this category.

C. Cost Analysis for Finished Compost Cover Require ments

Table 3 summarizes the cost information received fr om operators for site-specific costs to implement the requirement for a finished compost cover. These costs reflect the

limited resources of the smaller facilities and a n ecessity to purchase additional equipment, resulting in a higher, per-ton implement ation cost. Larger facilities may have greater equipment inventories and could possib ly implement the rule requirements with existing resources.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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For Revised Proposed New Rule 4566 Table 3: Finished Compost Cover Costs Feedstock Throughput (wet ton/yr) Range in Cost to Implement ($/wet ton) Throughput < 200,000 $7.88 to $10.81

200,000 ≤ Throughput < 750,000 $3.33 to $3.53 Throughput ≥ 750,000 No facilities

Based on the costs above, it is not feasible for co mposting operations with less than 200,000 tpy of organic material to implement the fi nished compost cover.

For composting operations with 200,000 tpy or more and less than 750,000 tpy of organic material, the total annualized costs for th e watering system and finished compost cover would range from $2,055,214 per year to $2,169,134 per year. The range in costs is based on different operational me thods and equipment at the facilities. Based on a total of 859 tons per year of VOC emissi on reductions, the cost effectiveness for composting operations in this cat egory ranges from about $2,393 to $2,525 per ton VOC reduced.

D. Cost Analysis for Engineered Control Systems

Various engineered control systems have demonstrate d at least 80% reduction, by weight, in VOC emissions. Table 4 summarizes the c ost information received from vendors for hypothetical site-specific costs to ins tall their specific control system. These costs reflect possible factors that could influence the installation and operation of the control system. In general, the cost per ton is lo wer for larger facilities since common equipment costs, like fans and ducting can be sprea d over a greater throughput.

Revised Proposed New Rule 4566 would require any co mposting operation with an organic material receiving volume of 750,000 tpy or more to install an engineered control system. An operator may consider installin g other technologies in lieu of using an engineered control system, provided that it is d emonstrated to achieve the same or better control efficiency. Based on the data below , the trend shows that the cost of the systems becomes more cost effective as the throughp ut of the organic material

increases.

Table 4: Engineered Controls Costs Feedstock Throughput (wet ton/yr) Cost Averages by Throughput ($/wet ton) 25,000 $16.03 50,000 $13.41 100,000 $11.13 200,000 $9.71

If all of the facilities were required to implement the engineered controls, the costs are estimated from $10 million per year to $17 million per year. Based on 2,174 tons per year of VOC emission reductions, the cost effective ness ranges from about $4,724 toSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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For Revised Proposed New Rule 4566 $7,802 per ton VOC reduced. However, the cost to i mplement the engineered control systems is well above the cost to dispose the organ ic material at the landfill and would not be economically feasible for the operators to i mplement at this time. For composting operations that have the capacity to com post 750,000 tpy or more of organic material, the draft rule would require inst allation of the engineered control systems, since the costs are expected to decrease.

Table 5 summarizes the Cost Effectiveness informati on based on draft rule requirements. The low - high range reflects the in formation received to date from stakeholders on possible implementation costs.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICTAppendix C: Cost Effectiveness AnalysisAugust 18, 2011C - 13Final Staff Report with AppendicesFor Revised Proposed New Rule 4566*N/A: Not applicable. There currently no facilities that process more than 750,000 tons per year of organic material.Therefore, no additional emissions reduction is expected from this category.Table 5 Cost Effectiveness SummaryFacilityReceivingVolumeActualWasteReceived Control MethodEmissionReductionsAdditionalCost (toIndustry)AdditionalCost (toIndustry)CostEffectivenessCostEffectiveness(wetton/year)(ton-VOC/year)($/year) LowEnd($/year) HighEnd($/ton-VOCRed) Low End($/ton-VOC Red)High EndProcesses≥750,000N/A Engineered ControlsN/A N/A N/A N/A N/AWindrowComposting(Processes≥200,000 tpyand < 750,000tpy)557,618Active Windrow (FinishedCompost Cover andWatering System onActive - 60% control)859 2,055,214 2,169,134 2,393 2,525Curing Phase Windrow(No Control)No emissions reduction.WindrowComposting(Processes <200,000 tpy)500,565Active Phase Windrow(Watering System – 19%control)244 95,107 390Curing Phase Windrow(No Control)No emissions reduction.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost Effectiveness Analysis August 18, 2011

C - 14 Final Staff Report with Appendices For Revised Proposed New Rule 4566 V. REFERENCES

San Joaquin Valleywide Air Pollution Study Agency [ SJVAPSA]. (2011). Comparison of Mitigation Measures for Reduction of Emissions Resu lting from Greenwaste Composting. Fresno, CA: San Joaquin Valleywide Air Pollution St udy Agency.

Retrieved from http://www.valleyair.org/busind/pto/emission_factor s/Criteria/Criteria/Composting/Comp ost%20Study%20Draft%20Report.pdf (Report) and http://www.valleyair.org/busind/pto/emission_factor s/Criteria/Criteria/Composting/Comp ost%20Study%20Appendices.pdf (Appendices)