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# OAR Box 1865 Prepped byCharmelle Mathews



### Document

Number: 

# 105)IV-K-(A)- 3 Docket Number: 

# A-83-2 7

Printed 12/3/20089:15:33 AM

Sheet 105of 105P. 2

0.



## ENERG YAND ENVTOONMENTA LANALYSIS , INC
. 165 5 NORT

HFOR TMYE RD R ARLINGTON , VIRGINI A2220 9
^P. 3 

# i i i i i i i i i i REVISE DIMPACT S O F ALTERNATIV E SULFURDIOXID E NE

W SOURC E PERFORMANC E STANDARD S FO RINDUSTRIAL FOSSI L FUEL-FIRE DBOILER S

Prepare d for : U.S . ENVIRONMENTAL PROTECTION AGENC Y Offic e o f Ai r Qualit yPlannin g and Standard s Researc hTriangl e Park , Nort hCarolin a 2771 1

Prepare d by : ENERGYANDENVIRONMENTAL ANALYSIS , INC . 165 5 Nort hFor t Mye r Drive , Suit e 600 . Arlington , Virgini a 2220 9
Februar y198 7P. 4 

# 1 I 1 1 I 1 I 1 I I fl I 

# u B I 

# n i 

# i i Thi s repor t wa s furnishe dt o th e U.S . Environmenta l Protectio nAgenc y b y Energy an dEnvironmenta l Analysis , Inc. , Arlington , Virginia , infulfillmen t o f Contrac t Numbe r 68-02-4202 . Th e content s o f thi s repor t ar e reproduce d herei na s receive dfro m th e contractor . Th e opinions , findings , an dconclusion s expresse dar e thos e o f th e autho r an dno t necessaril y

thos e o f th e U.S . Environmenta l Protectio nAgency .



# JP. 5 

# I I I I 1 I I I D I I 1 I I TABL E O F CONTENT S

Pag e 1 . INTRODUCTIO N1- 1
2 . METHODOLOG Y 2- 1 2. 1 Analytica l Approac h2- 1 2. 2 Ke yMode l ing Assumption s 2- 2 2. 3 Evaluatio n Criteri a 2-1 4 Reference s 2-1 6
3 . PROJECTE D IMPACT S O F ALTERNATIV E S0 2 EMISSION S STANDARD S 3- 1 3. 1 Regulator yBaselin e and Alternativ e SO 2 Emission s Standard s 3- 1 3. 2 Projecte d Nationa l Impact s o f th e Alternativ e SO 2 Emission s Standard s 3- 1 • 3. 3 Regiona l SO 2 Emission s Forecast s 3-1 8

I TP. 6



# I I I I 

# n i 

# i i i LIS T O F TABLE S

Pag e 2- 1 Industria l Boile r Pollutio n Contro l Equipmen t Option s i n IFCA M. 2- 3 2- 2 Projecte d Industria l Fossi l Fue l Deman d 2- 5 2- 3 Crud e Oi l Pric e Forecast s 2-1 0 2- 4 Industria l Oi l and Natura l Ga s Pric e Scenario s 2-1 1 2- 5 Projecte d Trend s i n Industria l Burnerti p Price s i n

th e Middl e Atlanti c Regio n 2-1 2 3- 1 Regulator yBaselin e NSP S Assumption s 3- 2 3- 2 Alternativ e SO 2 NSP S Emission s Standard s fo r Ne w

Industria l Fossi l Fuel-Fire d Boiler s 3- 3 3- 3 Projecte d Fue l Deman d i n 199 0 fo r Larg e Ne wIndustria l

Fossi l Fuel-Fire d Boiler s 3- 5 3- 4 Compariso n o f Tota l Projecte d SO 2 Emission s i n 199 0 fro m

Ne wLarg e Industria l Fossi l Fuel-Fire d Boiler s 3- 7 3- 5 Comparison s o f Projecte d Cost s 3-1 0 3- 6 Projecte d Deman d fo r Scrubber s 3-1 2 3- 7 Compariso n o f Projecte d PMEmission s i n 199 0 fro m

Ne wLarg e Industria l Fossi l Fuel-Fire d Boiler s 3-1 3 3- 8 Compariso n o f IFCA MProjection s 3-1 4 3- 9 Projecte d Regiona l SO 2 Emission s i n 199 0 3-1 9 3-1 0 Projecte d Regiona l SO 2 Emission s i n 199 0 3-2 0 3-1 1 Projecte d Regiona l S0 2 Emission s i n 199 0 3-2 1 3-1 2 Projecte d Regiona l SO 2 Emission s i n 199 0 3-2 2 3-1 3 Projecte d Regiona l SO 2 Emission s i n 199 0 3-2 3



### mP. 7



# I I I I I 1 I I LIS T O F FIGURE S

Pag e 1 Federa l Region s o f th e Unite d State s 2- 6

i vP. 8



# I I I I I 1 I I fl I I fl I I I 1 . INTRODUCTION

Thi s repor t present s projecte d environmental , cost , and energ yimpact s o f alternativ e sulfu r dioxid e (SO2 ) ai r emissio n standard s fo r ne windustria l fossi l fuel-fire d boilers . Thes e draf t standard s woul d supersed e th e emissio n regulation s tha t currentl yexis t i n Subpar t D o f 4 0 CF R Par t 60 . Th e effect s o f th e alternativ e SO 2 emissio n standard s ar e assesse d i n thi s report . Th e methodolog yuse d t o examin e environmental , cost , and fossi l fue l result s projecte d unde r curren t and alternativ e SO 2 emissio n regulation s als o i s discussed . Fo r individua l boilers , ai r emissio n regulation s ca n pla ya significan t rol e i n determinin g boile r fue l choic e and th e level s o f ai r emissions . Ai r emissio n regulation s ca n resul t i n measurabl e nationa l and regiona l environ

mental , cost , and energ yimpacts , includin g change s i n th e type s o f fossi l fuel s combuste d and change s i n th e leve l o f ai r pollutan t emission s generate d b yne windustria l fossi l fuel-fire d boilers . Th e analysi s o f alternativ e regulation s i s designe d t o highligh t potentia l environmental , cost , and energ yimpacts . Thes e impact s ar e measure d i n term s o f th e projecte d chang e unde r curren t versu s alternativ e ai r emissio n regu lations . Th e analysi s o f environmenta l impact s focuse s o n change s i n level s o f ai r emissions . Cos t impact s ar e evaluate d i n term s o f incrementa l change s i n th e tota l annualize d cost s fo r boile r and pollutio n contro l equipmen t capital , operating , and fue l costs . Energ yimpact s ar e evaluate d i n term s o f shift s i n th e deman d betwee n fue l type s (e.g. , coa l o r residua l fue l oi l versu s natura l gas) . Curren t SO 2 emissio n regulation s serv e a s th e bas e case , fro mwhic hal l impact s ar e measured . Briefly , SO 2 emissio n contro l regulation s i n th e bas e cas e fo r ne windustria l boiler s ar e th e curren t Ne wSourc e Performanc e Standard s (NSPS ) fo r boiler s wit hhea t inpu t capacit ygreate r tha n 7 3 MW(25 0 MMBtu/hr) . Curren t SO 2 emissio n regulation s fo r al l smalle r boiler s - - and fo r boiler s large r tha n 7 3 MW(25 0 MMBtu/hr ) hea t inpu t o f mor e stringe r tha n NSP S

- - ar e Stat e Implementatio n Pla n regulation s (SIP's) .



### 1- 1P. 9 

# I

'Thi s analysi s examine s projecte dimpact s inth e fift hyea r followin g

proposa l o f standards . I t wa s assume dtha t th e recommende dstandard s woul dbe propose di n198 5 andtha t th e impac t analysi s should , therefore , focu s on projecte dresult s fo r new industria l fossi l fuel-fire dboiler s installe din th e five-yea r perio dbetwee n198 6 an d1990. * Th e emission s an denerg y demand projection s presente dinthi s repor t represen t annua l estimate s fo r calenda r yea r 1990 . Thi s repor t addresse s onl y fossi l fue l (coal , oi l an dnatura l gas ) consumptio ninlarg e new industria l boilers . I t doe s no t analyz e commercial institutiona l boiler s o r non-fossi l fuel-fire dsteam generatin gunit s (i.e. , woo do r municipa l soli dwast e combustion) . Th e balanc e o f thi s repor t i s presente dintwo parts . Sectio n2 present s th e modelin g approac hemploye dt o analyz e th e alternativ e standard s an d describe s key

assumption s an

dinputs . Th e revise dpotentia l 199 0 nationa l an d regiona l impact s fo r th e alternativ e standard s ar e summarize dinSectio n3 . Thi s repor t i s a

nupdat e o f a repor t date dMarc h1985.* * Thi s updat e summarize s revise dprojecte denvironmental , cos t an denerg y impact s base do

n revise d(lower ) industria l fue l pric e forecasts .

*I nfact , th e recommende dstandard s wer e propose donJun e 19 , 198 6 (5 1 FR 22385) . **Projecte dImpact s o f Alternativ e Sulfu r Dioxid e New Sourc e Performanc e Stan dard s fo r Industria l Fossi l Fuel-Fire dBoilers . Energy an dEnvironmenta l Analysis , Inc. , Arlington , Virginia . Prepare dfo r th e U.S . Environmenta l Protectio nAgency , Offic e o f Ai r Qualit y Plannin gan

dStandards . Marc h1985 .



### 1- 2P.1 0

2 . METHODOLOGY

Th e methodolog yfo r assessin g th e environmental , cost , and energ yimpact s o f th e alternativ e ai r emissio n standard s i s describe d briefl yi n thi s section . Th e firs t par t describe s th e mode l use d t o projec t th e mi xo f industria l boile r fossi l fue l demand , th e leve l o f ai r emissions , and th e annualize d cos t o f generatin g steam . Th e secon d par t summarize s ke ymodelin g assumption s and mode l input s use d i n thi s analysis . Th e thir d par t briefl ydescribe s th e criteri a use d t o evaluat e emission , cost , and energ yimpact s o f alternativ e regulations . 2. 1 ANALYTICAL APPROAC H Thi s analysi s i s base d upo n result s fro m th e Industria l Fue l Choic e Analysi s Mode l (IFCAM) , a n energ ydeman d mode l develope d b yEnerg yand Environ

menta l Analysis , Inc . (EEA) . I n additio n t o generatin g fue l mi xestimates , IFCA Mproject s level s o f ai r emission s and stea mgeneratin g costs . IFCAMi s a disaggregate d proces s engineerin g model ; model s o f thi s typ e simulat e th e effect s o f specifi c policie s o n ne wand existin g technica l alternatives , includin g innovativ e boile r design s and ne wpollutio n contro l equipment . IFCA

Mi s designe d t o asses s th e impac t o f severa l factor s o n fue l choic e decision s i n th e industria l sector , includin g fue l prices , energ yand environmenta l policies , and capita l and annua l operatin g and maintenanc e (O&M ) cost s o f firin g alternativ e fossi l fuels . Th e U.S . Departmen t o f Energ y(DOE ) i s th e primar ysourc e fo r projection s o f overal l industria l fossi l fue l deman d b yregion . IFCA

Mdisaggregate s DO E industria l fossi l fue l deman d forecast s int o nin e industria l subsectors . Energ yus e i n eac ho f thes e industria l subsector s the n i s divide d int o boile r an d proces s hea t applications . Industria l boile r fossi l fue l us e i s subdivide d furthe r t o reflec t th e amoun t o f fue l tha t wil l b e use d i n ne wan d existin g boiler s o f differen t size s and capacit yutilizatio n rates . Existin g boiler s ar e classifie d accordin g t o th e typ e o f fue l the yar e designe d t o fir e and whethe r the yca n b e retrofitte d t o fir e alternativ e fuels . Eigh t siz e classe s and fiv e annua l



### 2- 1P.1 1

' capacit yutilizatio n rat e categorie s ar e delineate d fo r bot hne wand existin g boilers . Eac hne wboile r i s site d i n an Ai r Qualit yContro l Regio n (AQCR) . Ne w boiler s ar e locate d withi n eac hAQC R accordin g t o historica l sitin g patterns . Becaus e Stat e environmenta l regulation s fo r existin g and ne wboiler s ofte n var yb yAQCR , IFCA

Mapplie s curren t regulation s o n a n AQC R basis . Thes e regulation s ar e base d o n Stat e ai r law s fo r existin g fossi l fuel-fire d boilers . Th e boiler s represente d i n IFCA Mar e fire d b

yon e o f severa l type s o f fossi l fuels : coal , distillat e fue l oil , residua l fue l oil , o r natura l gas . IFCA Mprovide s a choic e betwee n nin e coa l type s tha t var yb ysulfur , ash , and Bt u content . Additionally , fou r residua l fue l oi l type s tha t var yb ysulfu r conten t ar e available . Th e pric e o f eac hfue l typ e ca n var ybyregion . Th e pollutio n contro l equipmen t option s availabl e i n IFCA Mar e presente d i n Tabl e 2-1 . Fo r eac hfue l typ e (i.e. , coal , oil , and gas) , th e leas t cos t pollutio n contro l strateg ytha t meet s th e alternativ e standar d i s calculated . Th e leas t cos t strateg yinclude s findin g th e lowes t cos t optio n i n term s o f th e boiler , pollutio n contro l equipment , and annua l fue l costs . Base d o n th e characteristic s o f eac hcombusto r (e.g. , size , operatin g rate , pollutio n contro l requirements) , capita l and operatin g cost s ar e generate d fo r eac hfue l type . Th e fue l typ e associate d wit hth e lowes t after-ta xpresen t valu e (includin g expecte d fue l expense s and boile r and pollutio n contro l equipmen t capita l an d O& Mcosts ) o f th e tota l cos t o f generatin g stea move r th e boiler' s investmen t perio d i s selected . 2. 2 KE YMODELINGASSUMPTION S Thi s sectio n present s th e approac huse d i n thi s analysi s t o mode l variable s tha t coul d affec t significantl yth e mi xo f fossi l fuel s demande d b y

. industria l boile r owners. * Thes e variable s are :

• Regiona l industria l fossi l fue l deman d projection s

• Energ ypolicie s

• Fue l pric e forecast s

• Environmenta l policies . *0the r assumption s ar e summarize d i n Referenc e 1 .


### 2-2P.1 2 

# I H 

# 1 H I I I I I I I I I I H I I I I H I I I I TABL E 2-1 . INDUSTRIAL BOILE RPOLLUTION CONTRO L EQUIPMEN T OPTION S I

N IFCA M

Pollutan t Technolog y 

### S0 2



### P M

NO v Flu e ga s desulfurizatio n dua l alkali 3 lime spray

drying b sodiu m Singl e mechanica l collecto r Dua l mechanica l collecto r Sid e stream

separato r Electrostati c precipitato r Fabri c filte r Combustio nmodificatio n lo w exces s ai r stage dcombustio nai r

a Tra y typ e scrubber .
" Combine dSO2/P M

emission s contro l system ; include s a fabri c filter .



### 2- 3P.1 3



# I I 1 I fl I 1 I 2.2. 1 Regiona l Industria l Fossi l Fue l Deman d Projection s

DO E i s th e primar ysourc e o f projection s o f tota l industria l fossi l fue l demand . Th e rat e o f projecte d growt hi n industria l fossi l fue l deman d i s a significan t paramete r becaus e i t determines , t o a larg e extent , th e expecte d deman d fo r ne windustria l fossi l fuel-fire d boilers . DO E doe s no t projec t regiona l estimate s o f fue l consumptio n i n industria l boilers . DO E doe s projec t regiona l estimate s o f tota l industria l fossi l fue l deman d fo r hea t and powe r usin g th e Energ yInformatio n Administration' s (ElA's ) Intermediat e Futur e Forecastin g Syste m(IFFS) . IFF S include s an econometri c industria l energ ydeman d model , th e Purchase d Hea t and Powe r Syste m(PURHAPS). 2 > 3 Th e EI Aregiona l industria l fossi l fue l deman d forecast s ar e summarize d i n Tabl e 2-2 . Th e te n Federa l region s ar e illustrate d i n Figur e 1 . Thes e projection s ar e assume d t o remai n th e sam e fo r th e regulator ybaselin e and alternativ e regulation s examine d i n Sectio n 3 becaus e th e cos t impact s ar e no t expecte d t o b e sufficientl yhig ht o alte r tota l projecte d energ ydemand. Th e projection s shown i n Tabl e 2- 2 ar e a functio n o f macroeconomi c variabl e projections . Fo r example , rea l growt hi n th e Gros s Nationa l Produc t betwee n 198 5 and 199 0 wa s assume d t o averag e 2. 9 percen t pe r yea r and rea l growt hi n manufacturin g outpu t betwee n 198 5 and 199 0 wa s assume d t o averag e 3.3 . percen t pe r year . Th e Federa l Reserv e Boar d industria l productio n inde x wa s expecte d t o increas e a t a rat e o f 3. 7 percen t annuall ybetwee n 198 5 and 1990. 4 No t al l o f th e projecte d ne t increas e i n industria l fossi l fue l deman d shown i n Tabl e 2- 2 i s attributabl e t o ne windustria l boilers . Asignifican t portio n o f thi s ne t increas e i s attributabl e t o ne wproces s hea t equipment . 2.2. 2 Energ yPolicie s Energ ypolicie s containe d i n th e Nationa l Energ yAc t o f 197 8 and th e Omnibu s Reconciliatio n Ac t o f 198 1 ar e ke ymodelin g assumption s i n thi s analysis . Thes e bill s contai n section s relevan t t o industria l boile r fue l choice , including :



### 2-4TABL E 2-2 . PROJECTE DINDUSTRIAL FOSSI L FUE L DEMAND 3 P J(IO 1 2 Btu ) P.1 4

Regio n 198 5 199 0 198 5 199 0 Refinery Refinery

Industry " Industry 0
1 . New England
2 . Ne w York/Ne w

Jerse y 3 . Middl e Atlanti c 4 . Sout hAtlanti c 

### 5 . 6 . 7 . 8 . 9 . 10 . U. S Midwes t
Southwes t
Centra l
Nort hCentra l

Wes t
Northwes t

. Tota l 0 (0 ) 4 8 (43 ) 6 2 (59 ) 4 6 (44 ) 10 7 (101 ) 50 9 (482 ) 2 6 (25 ) 3 4 (32 ) 12 7 (120 ) 3 3 (31 ) 99 2 (937 ) 0

(0 ) 4 3 (41 ) 5 7 (54 ) 4 3 (41 ) 9 9 (94 ) 47 3 (448 ) 2 5 (24 ) 3 2 (30 ) 11 7 (111 ) 3 0 (28 ) 91 9 (871 ) 20 7

(196 ) 51 2 (485 ) 94 6 (897 ) 1,61 5 (1,531 ) 2,33 9 (2,217 ) 2,91 5 (2,763 ) 62 8 (595 ) 55 7 (528 ) 73 3 (695 ) 44 2 (419 ) 10,89 4 (10,326 ) 22 4

(212 ) 54 1 (513 ) 1,01 7 (964 ) 1,72 8 (1,638 ) 2,49 9 (2,369 ) 3,18 0 (3,014 ) 66 8 (633 ) 62 7 (594 ) 81 7 (774 ) 51 0 (483 ) 11,81 1 (11,194 )

a U.S . Departmen t o f Energy , Energy Informatio nAdministration . 198 2 Annua l Energy Outlook , Middl e Worl dOi l Pric e (Cas e A) . Th e regiona l distributio ni s unofficia l an

dha s no t bee nreviewe db y EIA . Su

m o f non-metallurgica l coal , natura l gas , distillat e an dresidua l fue l oil . Exclude s petro-chemica l feedstock s an

dnatura l ga s consume da s leas e an dplan t fuels . Include s tota l boile r an

dproces s hea t fossi l fue l demand . DExclude s fue l consumptio ninpetroleu m refineries . Include s construction , mining , agriculture , fishing , forestry , an dothe r manufacturin g sectors . 

### 2- 5FIGUR E 1 

# Federa l Region s ofth e Unite d State s

REGIO N NAME S 1 . Ne wEnglan d 2 Ne wYoik/Ne wJeise y 3 Middl e Atlanti c 4 Sout h Atlanti c 5 Midwes t 6 . Southwes t 7 Centia l d Noit h Centia l 9 Wes t 1 0 Noitliwes tP.1 6

• ' Th e Energy

Ta xAc t o f 197 8 (ETA ) • Th e Economi c Recover y Ta xAc t o f 198 1 (ERTA) . Th e ETA provide dsevera l ta xincentive s fo r th e us e o f coa l an d alternativ e fuels . Additiona l investmen t ta xcredit s (ITC's ) wer e grante dfo r coa l an dalternativ e fue l commercia l investments . Unde r th e ETA , ITC' s an d accelerate ddepreciatio nalternative s ar e deniedfo r oi l an dga s investments . Th e ETA authorize da 1 0 percen t taxcredi t (i nadditio nt o th e standar d 1 0 percen t ITC ) fo r coa l an dalternativ e fue l investment s mad e betwee nOctobe r 1 , 197 8 an

dDecembe r 31 , 1982 , includin g investment s inth e following : • Boiler s an

dothe r combustor s tha t us e coa l o r a nalternativ e fuel . • Equipmen t t o produc e alternativ e fuels . • Pollutio ncontro l equipment . • Equipmen t fo r handlin g an dstorag e o f alternativ e fuels . Becaus e authorizatio nfo r th e additiona l ITC expire din1982 , thi s provisio n ha s no t bee nmodele dfo r thi s analysi s o f projecte dnew industria l boile r installation s fro

m 198 6 t o 1990 . InIFCAM , thes e provision s ar e modele dfo r th e calculatio no f after-ta x boile r an

dpollutio ncontro l equipmen t capita l cos t cas hflows . Investment s i nnew industria l coal-fire dboiler s receiv e th e standar d1 0 percen t IT C an d qualif y fo r a naccelerate ddepreciatio nmethod , wherea s no ITC' s an dstraigh t lin e depreciatio nar e calculate dfo r new industria l oil - andgas-fire dboile r investments . Th e ERTA revise dth e depreciatio nschedule s fo r capita l investmen t an d thu s improve dth e ta xincentive s fo r new industria l boilers . Th e depreciatio n perio dfo r new

coal- , oil - an

dnatura l gas-fire dindustria l boiler s wa s reduce dt o fiv e years . Th e Ta xEquit y

an dFisca l Responsibilit y Ac t (TEFRA ) o f 198 2 revise dth e Accelerate dCos t Recover y System (ACRS ) annua l recover y percentage s fo r five-yea r perio drecover y propert y

acquire dafte r 1985 . TEFR A als o reduce d th e basi s fo r depreciatio nb y 5 0 percen t o f th e IT C take nwhe nth e regula r ITC (1 0 percen t fo r five-yea r recover y perio dpropert y

place dinservic e afte r 1980 ) i s selected . Thes e TEFR A Federa l taxcod e revision s ar e reflecte din thi s analysis . The y

d o no t appl y

t o new industria l oi l an

dga s boile r invest 
### 2-7P.1 7 

# I I I I I I I I 1 I I ment s becaus e the yar e no t permitte d t o b e depreciate d usin g th e ACR S acceler

ate d depreciatio n schedul e and the yd o no t qualif yfo r th e ITC . Th e TEFRA Federa l ta xcod e revision s d o appl yt o ne windustria l coa l boile r investments . Th e Ta xRefor mAc t o f 198 6 ha s change d severa l o f thes e ke yparameters . Thes e change s hav e no t bee n incorporate d i n thi s analysi s becaus e thi s analysi s wa s initiate d befor e thi s ne wta xlegislatio n wa s passe d b yCongress . Th e Ta x Refor mAc t o f 1986 :

• Reduce d th e busines s Federa l incom e ta xrate .
• Repeale d th e norma l investmen t ta xcredi t fo r propert yplace d i n servic e beginnin g Januar y1 , 1986 . t Modifie d th e ACR S and change d th e metho d o f depreciatio n fo r propert yplac e i n servic e i n 198 7 and later . Repea l o f th e investmen t ta xcredi t doe s increas e th e after-ta xcost s o f capital-intensiv e project s suc ha s investment s i n ne wcoal-fire d boilers . Thes e ne wFedera l ta xcod e revision s ar e no t expecte d t o significantl ychang e th e result s presente d i n Sectio n 3 . I n addition , provision s o f th e Powerplan t and Industria l Fue l Us e Ac t o f 1978 , whic hprohibi t th e us e o f oi l o r natura l ga s i n larg e ne windustria l boilers , ar e a n availabl e featur e i n IFCA Mbu t currentl yar e no t utilize d i n th e analysi s o f th e potentia l impact s o f th e recommende d NSPS . Industria l plant s ca n appl yt o th e U.S . Departmen t o f Energyfo r a permanen t exemptio n fro mthes e restrictions . 2.2. 3 Fue l Pric e Forecast s Fue l choic e decision s i n IFCA Mar e base d o n selectin g th e alternativ e wit hth e lowes t tota l boile r and pollutio n contro l equipmen t after-ta xne t presen t valu e o f capital , annua l O& Mand fue l expense s ove r a 15-yea r period . In thi s analysis , th e fue l expense s ar e estimate d base d o n projecte d regiona l delivere d fue l price s fro m198 7 t o th e yea r 2001 . Naturall yther e i s uncertaint yrelate d t o energ ymarke t condition s ove r th e nex t fiftee n years . Tw o forecast s o f oi l price s wer e develope d i n orde r t o evaluat e th e sensitivit yo f IFCA Mresult s (projecte d impact s o f alternativ e NSPS ) t o thi s ke yexogenou s assumption , industria l fue l pric e differences .



### 2-8P.1 8

Tabl e 2- 3 present s th e two crud e oi l pric e forecasts . Bot hforecast s ar e base donDOE' s (Offic e o f Policy , Plannin g an dAnalysis ) WOI L forecastin g model . EE

A estimate dregiona l industria l distillat e an dresidua l fue l oi l an d natura l ga s price s fo r bot hcrud e oi l pric e projections. ^ EE A develope dsensitivit y case s t o reflec t th e uncertaint y o f how natura l ga s market s wil l respon dt o a marke t environmen t o f lowe r oi l prices . Fo r eac ho f th e two oi l pric e forecasts , EE A estimate dtwo set s o f industria l natura l ga s burnerti pprices : • A "carriage " pric e (inrespons e t o FER C Orde r #436) . • A traditiona l loca l distributio ncompany (LDC ) sale s price . Fo r th e Lo

w Oi l Pric e Scenari o (wher e competitio nwit hresidua l fue l oi l wil l be mos t severe) , EE

A prepare dsensitivit y case s wit hrespec t t o th e degre e o f flexibilit y

tha t th e natura l ga s marke t participant s wil l exercis e inrespons e t o th e lowe r oi l prices . Tabl e 2- 4 show s tha t ther e ar e fou r distinc t industria l natura l ga s pric e projection s fo r th e Low Oi l Pric e Scenari o an dtw o distinc t industria l natura l ga s pric e forecast s fo r th e HighOi l Pric e Scenario . Therefore , ther e ar e si x new combination s o f industria l fue l oi l an dnatura l ga s pric e forecasts . Th e majo r trend s inindustria l burnerti pprice s betwee nthes e si xcombination s ar e highlighte dinTabl e 2- 5 usin g th e Middl e Atlanti c regio na s a nexample . Inth e Low

Oi l Pric e case , 0. 8 percen t sulfu r residua l fue l oi l i s price d t o industria l customer s a t $2.70/MMBt uin199 0 an d$3.71/MMBt ui n1995 . A s shown , natura l ga s price s inth e carriag e marke t are : • Competitiv e wit hresidua l fue l oi l inth e Flexibl e Marke t cas e throug h1995 . t A t parit y

wit hresi din199 0 inth e Rigi dMarke t cas e an dprice d abov e resi din1995 . LDC ga s price s fo r industria l customer s ar e significantl y highe r tha nindus tria l 0. 8 percen t sulfu r residua l fue l oi l price s inbot hcases . Industria l sale s price s offere db y loca l ga s distributio ncompanie s (LDC's ) reflec t th e continuatio no f th e traditiona l utilit y rat e structure s i

n th e ga s industr y

prio r t o FER C Orde r 436 . Burnerti pga s price s t o industria l customer s o f LDC' s ar e muc hhighe r tha ni nth e carriag e marke t du e t o th e



### 2- 9P.1 9

TABL E 2-3 . CRUD E OI L PRIC E FORECASTS 3

(198 5 $/bbl )

Lo w oi l pric e scenari o

26.7 6
13.3 4 14.4 7 20.0 8 Highoi l

pric e scenari o

26.7 6
21.1 6 23.8 7 27.0 2 198 5 actua l 198 8 199 0 199 5
200 0 24.6 1 30.6 1 200 5 30.7 9 37.4 2

a Averag e U.S . refine r acquisitio ncos t o f crud e oi l Analysis , Inc . Summe r 1986 . Referenc e 5 . Energy an dEnvironmenta l

2-1 0P.2 0 

# v

TABL E 2-4 . INDUSTRIAL OI L AN DNATURAL GA S PRIC E SCENARIO S

LO W OI L PRIC E SCENARI O
• Distillat e fue l oi l price s
• Residua l fue l oi l price s (0.3 , 0.8 , 1. 6 an d3. 0 percen t sulfur )
• Natura l ga s

- flexibl e carriag e marke t pric e

- loca l distributio ncompany pric e assumin gth e existenc e o f a flexibl e carriag e marke t

- rigi dcarriag e marke t pric e

- loca l distributio ncompany pric e assumin gth e existenc e o f a rigi d carriag e marke t

HIG HOI L PRIC E SCENARI O
• Distillat e fue l oi l price s
• Residua l fue l oi l price s (0.3 , 0.8 , 1. 6 an d3. 0 percen t sulfur )
• Natura l ga s

- carriag e marke t pric e

- loca l distributio ncompany pric e

2-1 1P.2 1

, |



### TABL E 2-5 . PROJECTE DTREND S I N INDUSTRIAL BURNERTI P PRICE S I N TH E MIDDL E ATLANTI C REGION 1 

# I I I I

I (198 5 $/MMBtu ) 

# I I I 199 0 199 5

2.7 0 2.5 4 3.3 2 3.7 1

3.6 2 4.4 7 

### Lo w oi l pric e wit hflexibl e ga s marke t 0.8 % S residua l oi l Carriag e marke t ga s pric e LDC sale s ga s pric e

Lo w oi l pric e wit hga s marke t rigidit y 0.8 % S residua l oi l Carriag e marke t ga s price LDC sale s ga s price Highoi l pric e 0.8 % S residua l oi l 4.3 9 4.9 6 Carriag e marke t ga s pric e 4.1 8 4.7 4 LDC sale s ga s pric e 4.6 1 5.9 1

3 

### Referenc e 5 . 2.7 0 2.7 3 3.3 0 3.7 1

3.8 1 4.5 3



### 2-1 2P.2 2 

# I I highe r transmissio nan ddistributio nmargins . Thes e highe r margins : • Full y

recove r th e cost s o f th e transmissio ncost s authorize din FER C rate-settin gprocedures . • Ar e applicabl e onl y t o segment s o f th e industria l secto r (primaril y highvalue duse s an

dapplication s no t switchabl e t o oil ) whic hd o no t gai nacces s t o carriage . Thus , th e willingnes s o f natura l ga s pipelin e an ddistributio ncompanie s t o discoun t transmissio nmargin s o ncarriag e transaction s become s a crucia l facto r inga s versu s oi l competitio nunde r low oi l prices . Th e Hig hOi l Pric e Scenari o reflect s a competitiv e outcom e fo r ga s whic h i s ver y simila r t o th e Lo

w Oi l Price/Flexibl e Ga s Marke t case , althoug hth e overal l pric e level s fo r ga s an doi l ar e significantl y higher . Ga s ca nb e delivere dt o th e industria l secto r a t price s competitiv e wit hresidua l fue l oil . IFCA

M result s fro

m fiv e o f thes e si xcombination s o f oi l andnatura l ga s pric e forecast s ar e presente dinSectio n3 . IFCA M ha s no t ye t bee nrunwit h th e Low Oi l Prices/loca l distributio ncompany ga s price s wit hflexibl e carriag e marke t becaus e thes e estimate s ar e ver y simila r t o th e Lo

w Oi l Prices/loca l distributio ncompany

ga s price s wit hrigi dcarriag e marke t (se e Tabl e 2-5) . Onl y on e se t o f projecte dindustria l coa l price s wa s use dinthi s analysis . However , i t i s a recen t forecast.* * Therefore , th e fue l pric e scenario s hav e differen t projecte dindustria l distillat e an dresidua l fue l oi l an dnatura l ga s price s bu t identica l projecte dindustria l coa l prices . Alternativ e coa l pric e projection s ar e no t expecte dt o chang e th e result s whic har e summarize dinSectio n3 . Th e industria l coa l type s inIFCA M hav e bee ndefine db y ICF Incorporate d interm s o f coa l typ e (bituminou s o r subbituminous ) an dsulfur , ash , an

dBt u content . Ther e ar e u pt o nin e distinc t coa l type s pe r regio ninIFCAM : si x sulfu r classe s fo r bituminou s coal s an dthre e sulfu r classe s fo r subbituminou s coals . Al l nin e coa l type s ar e no t applicabl e fo r al l te nFedera l regions . 2.2. 4 Environmenta l Policie s Environmenta l policie s embodie dinth e 197 0 Clea nAi r Ac t (CAA ) an dth e subsequen t 197 7 amendment s defin e th e regulator y contex t fo r thi s analysis . Th e Ac t gav e th e EPA th e authorit y

t o establis hNationa l Ambien t Ai r Qualit y
2-1 3P.2 3

, Standard s (NAAQS ) tha t woul d protec t th e healt hand welfar e o f th e population .

i Ther e ar e currentl yNAAQ S fo r si x"criteri a pollutants" : sulfu r oxides , PM , NO x , lead , carbo n monoxid e (CO) , and ozone . Industria l source s ar e subjec t t o tw o classe s o f environmenta l regulation s adopte d t o ensur e complianc e wit h ambien t ai r standards : Stat e Implementatio n Pla n (SIP's ) and Nonattainmen t (NA)/Preventio n o f Significan t Deterioratio n (PSD) . Th e CA Agav e th e EP Ath e authorit yt o promulgat e NSP S regulation s governin g th e emission s o f pollutant s fro mspecifi c categorie s o f newl yconstructe d sources . Eac hne wsourc e mus t mee t requirement s o f al l o f thes e programs . Fo r purpose s o f thi s analysis , n o attemp t wa s mad e t o predic t th e impac t o f NA , PSD , o r loca l regulation s no t par t o f SIP's . Therefore , eac hne w boile r i s assume d t o b e subjec t t o a SI P o r NSPS , whicheve r ma yb e mor e stringent . Th e SIP' s i n IFCA Mar e characteristi c o f thos e regulation s fo r existin g industria l fossi l fuel-fire d boilers . Ase t o f SI P regulation s reflectin g th e regiona l diversit yo f ai r emissio n limit s ha s bee n compile d fo r us e i n IFCAM . Thes e SIP' s ar e identifie d b y pollutant , fue l type , boile r size , and AQC R and ar e converte d t o pound s o f pollutan t pe r millio n Bt u o f fue l burned . Th e SI P fil e i s curren t a s o f Jul y 198 0 fo r particulat e matte r and nitroge n oxid e emissio n standards . Th e SI P fil e ha s bee n update d t o Marc h198 3 fo r SO 2 emissio n regulations . Th e CA Arequire s tha t SIP' s includ e provision s designe d t o upgrad e area s o f ai r qualit yno t i n attainmen t wit hNAAQS . T o th e exten t tha t nonattainmen t provision s ar e reflecte d i n th e SIP's , nonattainment-relate d SI P revision s ar e incorporate d int o th e IFCA MSI P file . Becaus e onl ya limite d numbe r o f nonattainmen t SI P revision s ar e modele d i n IFCAM , and PS D regulation s hav e no t bee n addressed , th e stringenc yo f loca l regulation s ma yb e understated . Consequently , th e impac t o f th e alternativ e emissio n regulation s ma yb e overstate d becaus e a numbe r o f boiler s ma yb e subjec t t o mor e stringen t loca l regulation s tha n ar e reflecte d i n IFCAM . 2. 3 EVALUATION

CRITERI A Throughou t th e developmen t o f alternativ e emissio n regulation s fo r ne w industria l boilers , a se t o f ke youtpu t parameter s ha s bee n considere d t o b e particularl yusefu l i n comparin g projecte d aggregat e impact s o f alternativ e

2-1 4P.2 4 

# I I I I 1 I 1 I 1 I 1 I I 1 I I I I I I I regulations . Thi s se t o f criteri a include s th e followin g thre e parameters :

• Leve l o f emissions . • Cos t o f generatin g steam . • Coa l an

dresidua l fue l oi l demand . Thes e criteri a ar e use dt o evaluat e impact s o f th e alternativ e standard s fo r distinc t boile r siz e classe s an dar e describe di

nthi s section . Th e leve l o f SO 2 emission s projecte dunder alternativ e regulation s i s a primar y criterio nb

y whic ht o evaluat e thes e regulations . Th e leve l o f emission s i s functio no f bot hth e regulator y scenari o an

dth e mi xo f fuel s demanded . I naddition , th e effec t o f alternativ e regulation s onth e tota l expecte d cos t o f generatin g stea m i nnew industria l boiler s i s evaluated . Steam cost s includ e capita l an

doperatin g cost s fo r th e boiler , capita l an doperatin g cost s fo r an

y require dpollutio ncontro l equipment , an dfue l costs . Th e cos t impac t o f th e alternativ e standard s i s th e chang e fro m th e bas e cas e i

nth e tota l cos t o f generatin g steam . Fo r thi s analysis , aggregat e cost s fo r th e least-cos t fue l type s ar e presente dona before-ta xannualize dbasi s usin g a 1 0 percen t discoun t rat e an da 15-yea r investmen t period . Th e potentia l fo r increas e residua l fue l oi l an dcoa l combustio ninth e industria l secto r i s als o partl y a functio no f environmenta l regulations . Propose dai r emissio nstandard s ma y affec t projecte dresidua l fue l oi l an d coa l demandi

nnew industria l boilers .

2-1 5P.2 5 

# I

REFERENCE S

1 . Descriptio n o f th e Industria l Fue l Choic e Analysi s Model . Energ yand Environmenta l Analysis , Inc . Arlington , Virginia . Prepare d fo r th e U.S . Environmenta l Protectio n Agency , Offic e o f Ai r Qualit yPlannin g and Standards . Ma y1985 . 2 . 198 2 Annua l Energ yOutlook . U.S . Departmen t o f Energy , Energ yInformatio n Administration . D0E/EIA-0383(82) . Apri l 1983 . 3 . Supplemen t t o th e 198 2 Annua l EnergyOutlook . U.S . Departmen t o f Energy , Energ yInformatio n Administration . D0E/EIA-0408(82) . Jul y1983 . 4 . Referenc e 2 , p . 126 ; Referenc e 3 , p . 53 . 5 . Projection s o f Industria l Fue l Oi l and Natura l Ga s Prices . Energyand Environmenta l Analysis , Inc . Arlington , Virginia. Prepare d fo r th e U.S . Environmenta l Protectio n Agency , Offic e o f Ai r Qualit yPlannin g and Standards . Octobe r 1986 . 6 . Memorandu m

fro mEbert , C . (ICF , Inc. ) t o Shelby , M . (EPA) . Ne wCoa l Price s fo r Industria l NSP S Analyses . Jul y31 , 1986 .

2-1 6P.2 6 

# I I I I I I I 1 1 1 I I I I 1 i 1 I I 3 . PROJECTE DIMPACT S OF ALTERNATIVE S0 2 EMISSION STANDARD S

Thi s sectio n describe s th e regulator ybaselin e NSP S ai r emission s stan
dard s and alternativ e SO g emission s regulation s fo r ne windustria l fossi l fuel-fire d boilers . Projecte d emissions , cos t and energ ydeman d effect s o f th e alternativ e standards , relativ e t o th e regulator ybaseline , ar e summarized . 3. 1 REGULATORYBASELIN E ANDALTERNATIVE S0 2 EMISSION S STANDARD S Th e regulator ybaselin e i s represente d b ycurren t and propose d ai r emission s standards : th e curren t SO 2 NSPS , th e recentl ypromulgate d PMNSP S an d SO 2 and PMSIP's . Tabl e 3- 1 present s th e curren t SO 2 NSP S and th e promul

gate d PMNSPS . Ne windustria l boiler s ar e assume d t o b e subjec t t o a SI P i f th e SI P i s mor e stringen t tha n th e applicabl e NSP S shown i n thi s table . N 0 Xemission s regulation s and pollutio n contro l cost s wer e no t considere d i n thi s analysis . EP Apromulgate d a revise d N0 XNSP S fo r ne windustria l stea m generatin g unit s i n Novembe r 198 6 (5 1 FR 42769) . I t wa s assume d tha t th e recentl ypromulgate d N0 XNSP S woul d no t significantl yaffec t th e expecte d impact s o f alternativ e SO 2 NSP S fo r ne windustria l oi l and coa l boilers . Th e alternative SO 2 emission s standard s ar e presente d i n Tabl e 3-2 . Thes e alternative s ar e applicabl e fo r ne windustria l residua l fue l oi l and coa l boiler s large r tha n 2 9 MW(10 0 MMBtu/hr) . Th e applicabl e regulatio n i s eithe r a n emission s ceilin g (i.e. , alternativ e contro l leve l I ) o r a fixe d percentag e reductio n (i.e. , alternativ e contro l leve l III) . Complianc e wit hth e alternativ e SO 2 NSP S emissio n standard s i s achieve d b yburnin g a lo wsulfu r fue l typ e (wit han uncontrolle d emissio n rat e equa l t o o r lowe r tha n th e emission s ceilin g i n Tabl e 3-2 ) o r scrubbin g a hig hsulfu r fue l type . Whe n scrubbing , th e controlle d SO g emissio n rat e mus t remai n lowe r tha n th e ceilin g presente d i n Tabl e 3-2 . 3. 2 PROJECTE DNATIONAL IMPACT S OF TH E ALTERNATIVE S0 2 EMISSION S STANDARD S Thi s sectio n present s IFCA Mprojection s o f tota l SO g emissions , fue l deman d b

yfue l typ e i n 199 0 fro mne windustria l fossi l fuel-fire d boiler s large r tha n 2 9 M W(10 0 MMBtu/hr ) and installe d betwee n 198 5 and 1990 . Thi s sectio n als o present s IFCA Mprojection s o f tota l capita l and annualize d cost s



### 3- 1P.2 7 

# I I I I 1 I

I I I I TABL E 3-1 . REGULATORYBASELIN E NSP S ASSUMPTION S ng/ J(lb/MMBtu )

Fue l typ e
Natura l ga s
Distillat e fue l oi l

Residua l fue l oi l

Coa l Boile r siz e categor y M W (MMBtu/hr )
<7 3 >7 3
<7 3 >7 3
<7 3 >7 3
<2 9 29-7 3 >7 3 (<250 ) (>250 )VArorocncnCDCDVArorocncnCDCD
(<100 ) (100-250 ) (>250 ) 

### 34

4
34 4

51 6 S0 2

- -

(0.8) 3 > e
SI P (0.8) a » e
SI P SI P (1.2) 3 » d 

### 4

3
4 3
4 3CVICVJCVJCVJ 

### P M
(0.1) a ' e

(0.1) 3 > e
SI P (0.1) 3 > e
SI P u (0.05)P' C (0.05) b

3 Curren t NSP S (4 0 CF RPar t 60 , Subpar t Dfo r fossi l fuel-fire dstea m generators) . bPromulgate dNSP S (5 1 F R42769) .
c 8 6 ng/ J(0.2 0 lb/MMBtu ) o f th e annua l capacit y utilizatio nrat e i s les s tha n 3 0 percen t an

dconstructio ncommence dbetwee nJun e 19 , 198 4 an dNovembe r 25 , 1986 . No t directl y

applicabl e i

nthi s analysi s becaus e IFCA M doe s no t selec t coa l a s a new

boile r fue l typ e i f th e annua l capacit y utilizatio nrat e i s les s than3 0 percent .
" 30-da y rollin g average .
e No t applicabl e i

nthi s analysi s becaus e new larg e industria l oil-fire d boiler s inIFCA

M ar e assume dt o be two package dunit s (eachles s tha n7 3 MW) , no t a singl e larg e field-erecte dunit .



### 3- 2P.2 8 

# I I I 1 I 1 I I 1 

# n n i i i i i i TABL E 3-2 . ALTERNATIV E S0 2 

### NSP S EMISSION S STANDARD S FORNE W INDUSTRIAL FOSSI L FUEL-FIRE DBOILER S

Residua l Fue l Oi l Coa l Boile r siz e Alternativ e categor y Ceilin gRequire dCeiling 3 

### Require d contro l (MMBtu / (lb / percentag e (lb / percentage leve l M

W hr ) ng/ JMMBtu ) reductio nng/ JMMBtu ) reductio n Baselin e 29-7 3 (100-250 ) --

>7 3 (>250 )
I >2 9 (>100 ) 34 4 (0.8 )
I I >2 9 (>100 ) 1.2 9 (0.3 )
I I II I >2 9 (>100 ) 34 4 (0.8 ) 

### 51 6 51 6 516 51 6 (1.2 ) (1.2 ) (1.2 ) (1.2 ) —

- - 

### 90 ° 90 b

3 

### 30-da y rollin gaverage . D

### Scrubbin gi s required .

3- 3P.2 9



# I I I 1 1 I 1 I I 

# 0 I fo r thes e new industria l boile r investments . IFCA M projection s fo r th e regulator y

baselin e NSP S assumption s ar e compare dwit hIFCA M forecast s fo r th e thre e alternativ e SO 2 NSP S emission s standards . 3.2. 1 Fue l Deman dImpact s IFCA M project s tha t 60 4 new industria l fossi l fuel-fire d(coal , fue l oil , o r natura l gas ) boilers , eac hlarge r tha n2 9 M W (10 0 MMBtu/hr) , wil l be installe ddurin g thi s perio dinth e Unite dStates . The y ar e expecte dt o consume a tota l o f 52 5 P J(49 8 trillio nBtu ) in1990 . Thi s projecte d"popu lation " o f larg e new

industria l boiler s i s base don : t Th e U.S . Departmen t o f Energy' s assume drat e o f growt hi ntota l industria l fossi l fue l deman d(se e Tabl e 2-2) . t Estimate s o f how muc ho f thi s projecte dincreas e wil l be consume d inindustria l boiler s versu s proces s heaters . • Estimate s o f th e retirement s o f existin g industria l boiler s durin g th e 1986-199 0 period . • Estimate s o f th e distributio no f fue l deman dinne w larg e versu s smal l industria l boilers . Thi s forecas t o f new larg e industria l fossi l fuel-fire dboile r installation s i s hel dconstan t inthi s analysi s an di s no t altere da s a functio no f othe r inpu t assumption s (e.g. , projecte doi l an dga s price s o r alternativ e SO 2 NSPS) . IFCA M select s th e complianc e strateg y fo r eac ho f th e 60 4 new larg e indus tria l fossi l fuel-fire dboiler s b y comparin g th e after-ta xne t presen t value s o f th e projecte dfue l cost s an dboile r an

dpollutio ncontro l equipmen t capita l an dannua l non-fue l 0& M cost s b

y fue l type : • Natura l ga s t Distillat e fue l oi l t Residua l fue l oi l (0.3 , 0.8 , 1. 6 an d3. 0 percen t sulfur ) • Coa l (u

pt o nin e bituminou s an dsubbituminou s types) . Th e alternativ e contro l level s affec t th e selectio no f th e least-cos t fue l typ e b y alterin g th e pollutio ncontro l equipmen t requirement s an dcosts . Tabl e 3- 3 present s th e projecte dfossi l fue l mi xb y fue l pric e scenario , SO 2 NSP S alternative , an dfue l type . Th e fue l mi xi s no t fixed ; i t i s a functio no f th e fue l pric e scenario , th e alternativ e SO 2 NSPS , an dmany othe r mode l parameter s (i.e. , boile r an dpollutio ncontro l equipmen t cos t estimates) .


### 3- 4P.3 0 

# I I I 1 1 I I I 1 I I I I 1 1 1 I I I Oi l price s Lo w

High TABL E 3-3 . PROJECTE DFUE L DEMANDI N 199 0 FORLARG E NE W INDUSTRIAL FOSSI L FUEL-FIRE DBOILERS 3



### P J(10 1 Z 

### Btu )

Ga s price s Alternativ e

contro l leve l Natura l

ga s Residua l

fue l oi l LDC/rigi d

Carriage/rigi d

Carriage/flexibl e



### LD C

Carriage Baselin e 

### I I I II I Baselin e 

### I I I II I Baselin e 

### I I I II I

Baselin e 

### I I I II I Baselin e 

### I I I II I 8 0

20 8 20 8 283 196 410 52 5 525 40 6 52 1 525 525

266 289 299 326 246 517 525 52 5 (76 ) (197 ) (197 ) (268 ) (186 ) (389 ) (498 ) (498 ) (385 ) . (494 ) (498 ) (498 )

(253 ) (274 ) (283 ) (309 ) (233 ) (490 ) (498 ) (498 ) 

### 445 31 7 31 7 242 32 9 11 5 0 0 11 9 4 0 0

259 236 22 7 199 28 0 8 0 0 (422 ) (301 ) (301 ) (229 ) (312 ) (109 ) 

### (0 ) (0 ) (113 ) 

### (4 ) (0 ) (0 )

(246 ) (224 ) (215 ) (189 ) (265 ) 

### (8 ) (0 ) (0 )

3 

### Eachlarge r tha n2 9 M W (10 0 MMBtu/hr ) an

dinstalle dbetwee n198 5 an d1990 . Tota l fossi l fue l deman din199 0 i s 52 5 P J(49 8 trillio nBtu) .

3- 5P.3 1 

# I I I 1 1 1 1 1 I I I I I I I 1 1 1 1 Coal'i s no t selecte d becaus e th e projecte d industria l natura l ga s and residua l fue l oi l price s ar e no t larg e enoug ht o offse t th e relativel yhig hcoa l boile r and pollutio n contro l equipmen t capita l and annua l non-fue l O& Mexpenses . Tabl e 3- 3 present s result s fo r fiv e combination s o f projecte d industria l fue l oi l and natura l ga s prices . Ther e i s significan t deman d fo r residua l fue l oi l unde r eac ho f th e alternativ e contro l level s fo r th e tw o set s o f industria l fue l pric e projection s whic hus e estimate s o f loca l distributio n company(LDC ) natura l ga s prices* . I n thes e cases , tota l residua l fue l oi l deman d i n 199 0 range s fro m

19 9 P J (18 9 trillio n Btu ) t o 44 5 PJ (42 2 trillio n Btu) . However , ther e i s littl e o r n o deman d fo r residua l fue l oi l i n 199 0 i n alternativ e contro l level s I throug hII I fo r th e thre e set s o f industria l fue l pric e forecast s whic hassum e th e carriag e market natura l ga s prices . I n mos t regions , th e industria l carriag e marke t natura l ga s price s ar e expecte d t o b e lowe r tha n th e projecte d industria l 0. 8 percen t sulfu r residua l fue l oi l prices . A s a result , whe n alternativ e contro l leve l I require s a n SO 2 emissio n ceilin g o f 34 4 ng/ J (0. 8 lb/MMBtu ) fo r residua l fue l oil , IFCA Musuall yselect s natura l ga s a s th e leas t cos t complianc e option . Tabl e 3- 3 doe s indicat e tha t natura l ga s i s typicall yth e least-cos t com plianc e strateg yi n IFCA Mi n respons e t o alternativ e SO 2 emissio n standard s fo r industria l boilers . Thi s i s predicate d o n th e assumptio n tha t th e Power
plan t and Industria l Fue l Us e Ac t o f 197 8 wil l no t severel yrestric t th e us e o f oi l and natura l ga s i n ne wlarg e industria l boilers . Fo r example , industria l plant s ca n appl yt o th e U.S . Departmen t o f Energyfo r a permanen t exemptio n fro mthes e restrictions . 3.2. 2 Projecte d SO 2 Emission s Tabl e 3- 4 summarize s th e SO 2 emission s forecast s fo r th e regulator y baseline , thre e alternativ e contro l level s and fiv e combination s o f oi l an d natura l ga s pric e projections . Th e projecte d SO 2 emission s reduction s ar e significan t (u

p t o 9 9 percent) . Som e portio n o f th e SO 2 emission s reductio n presente d i n Tabl e 3- 4 i s du e t o th e fac t tha t th e fue l mi xi s no t hel d constan t betwee n th e regulator y

* Referenc e Sectio n 2.2. 3 fo r a descriptio n o f LD C versu s carriag e marke t natura l ga s prices .


### 3-6P.3 2 

# I 

# I TABL E 3-4 . COMPARISON O F TOTAL PROJECTE DS0 2 

### EMISSION S I N 199 0 FROM NE W LARG E INDUSTRIAL FOSSI L FUEL-FIRE DBOILERS 3 

### G g(IO 3 

### shor t tons ) 

# I I I I I I I I I 1 1 I 1 I I 1 I Oi l Ga s Alternativ e Contro l Leve l price s price s Baselin e I I I II I

Lo w

High LDC/rigi d

Carriage/rigi d

Carriage/flexibl e



### LD C

Carriag e 

### 35

5 (391 ) 

### 32 4 (357 ) 

### 11 8 (130 )


### 18 7 (206 ) 

### 29 7 (327 ) 

### 9

9 (109 ) 

### 4 0 (44 ) 

### 4 (4 )
78 (86 )CVJ 

### (3 ) 4

0 (49 ) 

### b b b b
3 3 (36 ) 

### b b 3

3 (36 ) 

### b b b b
2 8 (31 ) 

### b b

3 

### Eac hlarge r tha n2 9 M W (10 0 MMBtu/hr ) an

dinstalle dbetwee n198 5 an d1990 . b

### Les s tha n50 0 M

g (55 0 shor t tons) .

3- 7P.3 3 

# I 1 I 1 I 1 1 I 1 I 1 1 I I I I 1 1 I I I baselin e an

dth e thre e alternativ e contro l levels . Some o f th e new industria l boiler s ar e projecte dt o bur nresidua l fue l oi l unde r th e regulator y baselin e assumption s an

dselec t natura l ga s a s th e least-cos t complianc e strategy unde r th e alternativ e contro l levels . Fo r thes e units , th e projecte dSO 2 emissio n reductio ni s 9 9 percent . Th e remainin g SO 2 emission s reductio ni s accounte d fo r b y burnin g lowe r sulfu r residua l fue l oi l type s o r scrubbin g a highsulfu r residua l fue l oi l typ e whe nhighsulfu r oi l withou t a scrubbe r wa s selecte d unde r th e regulator y

baselin e assumptions . Th e projection s o f SO 2 emission s fo r th e regulator y baselin e rang e fro

m 11 8 G g (130,00 0 shor t tons ) t o 35 5 G g (391,00 0 shor t tons) . Thi s rang e exist s becaus e th e fue l mi xi s uniqu e fo r eac ho f th e fiv e set s o f fue l pric e projec tion s (referenc e Tabl e 3-3) . Fo r example , th e baselin e fue l mi xi s primaril y residua l fue l oi l fo r th e low oi l price s wit hLD C natura l ga s prices . However , th e baselin e fue l mi xi s primaril y natura l ga s fo r th e low oi l price s wit h flexibl e carriag e marke t natura l ga s prices . Th e averag e residua l fue l oi l SO 2 emissio nrate s inth e regulator y baselin e IFCA

M run s ar e abou t 86 0 ng/ J( 2 lb/MMBtu) . Thi s i s determine db y th e assume dlocatio no f thes e new boiler s an

dth e associate dloca l SIP's . Alternativ e SO 2 emissio nstandard s o f 34 4 ng/ J(0. 8 lb/MMBtu ) an d13 0 ng/ J(0. 3 lb/MMBtu) , therefore , ar e expecte dt o resul t ina significan t SO 2 emissio n reductio n(wit ho r withou t selectin g natura l ga s a s th e least-cos t complianc e optio nwhe nhighsulfu r residua l fue l oi l wa s chose nunde r th e regulator y baselin e assumptions) . Tabl e 3- 4 show s tha t projecte dSO 2 emission s ar e negligibl e fo r alter nativ e contro l level s I I an dI I wit hth e thre e set s o f carriag e marke t natura l ga s pric e projections . I nthes e scenarios , natura l ga s i s th e onl y fue l typ e (referenc e Tabl e 3-3 ) an dther e i s n o projecte ddeman dfo r scrubber s o r oil . Natura l ga s ha s a ver y smal l SO 2 emissio nrate . 3.2. 3 Projecte dCos t Impact s Th e projecte dincreas e intota l annualize dcost s i s expecte dt o rang e fro m $ 5 millio nt o $17 3 million . Th e projecte dincrease s intota l annualize d cost s represent : • Highe r fue l price s associate dwit husin g lowe r sulfu r conten t fue l types . 

### 3- 8P.3 4



# I 1 I 1 I I 1 I t ' Th e levelize dcapita l andannua l operatin gan dmaintenanc e cost s o f a FG Dsystem . Tabl e 3- 5 show s tha t th e tota l projecte dannualize dcos t increase s fo r th e lo w oi l price s wit hth e flexibl e carriag e marke t natura l ga s price s ar e relativel y

low ($ 5 million) . Alternativ e contro l level s I , I I an dI I d o no t includ e deman dfo r FG Dsystems ; th e onl y complianc e strateg y selecte db

y IFCA M inthes e case s i s natura l gas . Ther e i s no expecte ddifferenc e inth e tota l annualize dcos t increase s betwee nalternativ e contro l level s I , I I and II I becaus e th e complianc e strategie s ar e identical : al l o f th e new industria l boiler s ar e expecte dt o bur nnatura l ga s becaus e thes e natura l ga s price s ar e lowe r tha nth e projecte dprice s fo r 0. 8 percen t sulfu r residua l fue l oil . Similarly , ther e i s n o expecte ddifferenc e inth e tota l annualize dcos t increase s betwee nalternativ e contro l level s I , I I an dII I fo r th e highoi l price s wit hcarriag e marke t natura l ga s price s ($2 9 million ) o r fo r th e low oi l price s wit hrigi dcarriag e marke t natura l ga s price s ($4 5 million) . Th e rang e o f tota l annualize dcos t increases , $ 5 millio nt o $4 5 million , i s a functio no f th e fue l pric e projections . Fo r th e lo w oi l price s wit h flexibl e carriag e marke t natura l ga s prices , ther e i s a smal l fue l pric e increas e associate dwit hselectin gnatura l ga s unde r alternativ e contro l leve l I whe nresidua l fue l oi l wa s chosenunde r th e regulator y baselin e assumptions . Fo r th e highoi l price s wit hcarriag e marke t natura l ga s prices , thi s differenc e betwee nnatura l ga s an dresidua l fue l oi l price s i s larger . A s a result , th e tota l annualize dcos t increas e i s $2 9 millio nfo r th e highoi l price s wit hcarriag e marke t natura l ga s price s versu s $ 5 millio nfo r th e low oi l price s wit hflexibl e carriag e marke t natura l ga s prices . Thi s differenc e betwee nnatura l ga s an dresidua l fue l oi l price s i s eve nlarge r fo r th e lo w oi l price s wit hrigi dcarriag e marke t natura l ga s price s an dthi s lead s t o a $4 5 millio ntota l annualize dcos t increase . Th e low an dhig hoi l price s wit hLD C natura l ga s price s IFCA M result s d o show significan t difference s inth e tota l annualize dcos t increase s wit h respec t t o alternativ e contro l level s I , I I an dIII . Tabl e 3- 6 summarize s the complianc e strategie s fo r new larg e industria l residua l fue l oil-fire dboilers . Scrubber s ar e no t th e primar y complianc e optio nselecte dinIFCA M fo r th e regulator y

baselin e o r alternativ e contro l level s I o r II . FGDsystem s ar e th e 

### 3- 9P.3 5

TABL E 3-5 . COMPARISON S O F PROJECTE D COSTS 3

(million s o f 198 5 dollars )

Oi l price s Ga s

price s Alternativ e

contro l leve l Increas e i n

Tota l tota l annualize d Tota l annualize d cost s ove r th e capita l costs' 3 ' 0 Baselin e costs 0 

### Lo w

Hig h LDC/rigi d

Carriage/rigi d

Carriage/flexibl e



### LD C

Carriag e Baselin e 

### I 

### I I II I Baselin e 

### I I I II I Baselin e 

### I I I II I Baselin e 

### I I I 

### II I Baselin e 

### I I I 

### II I 2,36 3

2,42 3 2,46 0 2,53 6 2,34 3 2,39 0 2,38 8 2,38 8 2,85 0 2,85 6 2,85 5 2,85 5 2,89 6 2,95 1 2,98 5 3,00 4 2,32 9 2,35 8 2,35 8 2,35 8 

### 6 0



### 9 7 

### 17 3

. . 

### 4 7 4 5 45


### 6 5 5
5 5 8 9 

### 10 8
2 9 2 9 2 9 2,46 9



### 2,45 6 2,46 8 2,66 3 2,45 1 2,43 7 2,43 4 2,43 4 2,48 9 2,48 5 2,43 4 2,43 4 2,47 6 2,47 6 2,53 7 2,62 9 2,44 3 2,43 4 2,43 4 2,43 4

3 Ne windustria l fossi l fuel-fire d boiler s large r tha n 2 9 MW(10 0 MMBtu/hr ) an d installe d betwee n 198 5 an d 1990 . bCapita l cost s x0.1314 7 ( a capita l recover yfacto r base d o n a 1 0 percen t interes t rat e and a 15-yea r period ) plu s annua l non-fue l 0& Mcost s plu s levelize d fue l costs .
c Include s tota l boile r and pollutio n contro l equipmen t expenses .

3-1 0P.3 6



# 1 I I I I I I I I 1 1 I 1 onl ycomplianc e optio n fo r residua l fue l oi l boiler s fo r alternativ e contro l leve l III . Th e scenario s wit hLD C natura l ga s price s hav e highe r projecte d tota l annualize d cos t increase s ($5 5 millio n t o $18 3 million ) tha n th e scenario s wit h carriag e marke t natura l ga s price s ($ 5 millio n t o $4 7 million ) fo r tw o reasons : t Scrubber s ar e selecte d fo r th e scenario s wit hLD C natura l ga s prices ; scrubber s ar e no t selecte d fo r th e scenario s wit hcarriag e marke t natura l ga s prices . • Th e difference s betwee n natura l ga s and residua l fue l oi l price s ar e large r fo r th e scenario s wit hLD C natura l ga s price s i n compar iso n wit hth e scenario s whic har e base d o n carriag e marke t natura l ga s prices . 3.2. 4 Projecte dP

M Emission s Th e alternativ e contro l level s ar e als o expecte d t o reduc e projecte d PM emission s (beyon d th e reductio n attributabl e t o th e recentl ypromulgate d P M NSPS ) fo r tw o reasons :

• Ther e i s a highe r deman d fo r natura l ga s unde r th e alternativ e contro l level s versu s th e regulator ybaselin e and natura l ga s ha s a lowe r P Memission s rat e tha n residua l fue l oil .
• Th e alternativ e contro l level s resul t i n an increase d us e o f scrubber s (whic hreduc e PMemission s a s wel l a s reduc e SO 2 emissions ) o r i n an increase d deman d fo r lo wo r ver ylo wsulfu r residua l fue l oi l (whic hha s a lowe r PMemission s rat e tha n middl e o r hig hsulfu r residua l fue l oil) . Tabl e 3- 7 summarize s th e projection s o f PMemissions . 3.2. 5 Summarv

o f Projecte dNationa l SO 2 Emission s Reduction s an dTota l Annualize dCos t Increase s Tabl e 3- 8 present s a compariso n o f projecte d nationa l SO 2 emission s reduction s and tota l annualize d cos t increase s fo r eac ho f th e fiv e set s o f industria l fue l pric e forecasts . Nationa l averag e cost-effectivenes s ratio s (tota l annualize d cos t increase s divide d b yth e tota l annua l SO 2 emission s reductions ) ar e als o include d i n thi s table . Thi s tabl e summarize s incrementa l change s i n th e projecte d annua l SO 2 emission s reductions , tota l annualize d cost s increase s and incrementa l cost-effectivenes s ratios . A s note d i n Tabl e 3-7 , th e alternativ e contro l level s ar e expecte d t o resul t i n reduction s i n tota l PMemissions . Thi s i s no t reflecte d i n Tabl e

3-1 1P.3 7 

# 1 1 1 1 1 1 1 1 I 1 1 1 1 1 1 1 1 1 1 TABL E 3-6 . PROJECTE DDEMANC

Alternativ e Tota l no . o f Oi l Ga s contro l residua l fue l price s price s leve l oi l boilers 3
Lo w LDC Baselin e N A I 38 3 I I 38 3 II I 22 3
HighLDC Baselin e 30 8 I 27 8 I I 26 6 II I 19 2 FORSCRUBBER S

Tota l no . o f scrubbers 0 

### 1 6 1 0 1 9 22 3
2 7 3 0 8 7 

### 19 2

3 Ne w industria l boiler s large r tha n2 9 M W (10 0 MMBtu/hr ) and betwee n198 5 and1990 . DSubse t o f th e tota l numbe r o f residua l fue l scrubbers .

3-1 2 Scrubbe r liqui d wast e in199 0 10 3 cubi c meter s 

### 59 0 24 0 74 0 9,58 6 I I i i l 1,21 1 ! 1,75 1 | 5,09 2 8,16 7 1 j installe d oi l boilers . Al l sodiu m

;

I .P.3 8 

# I I I 1 1

I I I I 1 1 1 TABL E 3-7 . COMPARISON O F TOTAL PROJECTE DP

M EMISSION S I

N 199 0 FRO M NE W LARG E INDUSTRIAL FOSSI L FUEL-FIRE DBOILERS 3



### Gg(IO 3 

### shor t tons )

Alternativ e contro l leve l Oi l Ga s price s price s Baselin e I I I II I 

# 1 1 1 H I I fl Lo

w

Hig h LDC/rigi d



### Carriage/rigi d Carriage/flexibl e

LD C Carriag e 15 (17 ) 24 (27 ) 1 1 (12 )

27 (30 )rorocnco 1 0

(11 ) 5 (6 ) 3 (3 )

1 0 (12 ) 3 (3 )lOCOCOCO

3 (3 )

7 (8 ) 3 (3 ) 10

(H ) 3 (3 ) 3 (3 )

12 (13 ) 3 (3 )

3 

### Eac hlarge r tha n2 9 M W (10 0 MMBtu/hr ) an

dinstalle dbetwee n198 5 an d1990 .

3-1 3P.3 9 

# I I I I 1 I I I B I fl fl fl TABL E 3-8 . COMPARISON OF IFCA

M PROJECTIONS 3

Baselin e vs . alternativ e contro l leve l I SO 2 emissio nred. , G

g (10 3 shor t tons ) Tot . ann . cos t increase , $198 5 IO 6 Incrementa l C-E , 198 5 $/M g (198 5 $/shor t ton ) Alternativ e contro l level s I vs . I I SO 2 emissio nred. , G

g (IO 3 shor t tons ) Tot . ann . cos t increase , $198 5 IO 6 Incrementa l C-E , 198 5 $/M g (198 5 $/shor t ton ) Alternativ e contro l level s I I vs . Il l SO 2 emissio nred. , G

g (IO 3 shor t tons ) (rigid ) lo w oi l price s

28 4 (313 ) 

### 4 7
16 5 (150 )

4 0 (44 ) 

### 0
0 (0 )

0 (0 ) Carriag e marke t natura l ga s price s (flexible ) (rigid ) lo w high oi l oi l price s

29 4 (324 ) 

### 2 9
10 0 (91 )

3 (3 ) 

### 0
0 (0 )

0 (0 ) price s

11 4 (126 ) 

### 5
4 7 (43 )

4 (4 ) 

### 0
0 (0 )

0 (0 ) LC D

ga s lo w oi l natura l price s high oi l price s price s

25 6 (282 ) 

### 60
23 4 (212 )

5 4 (60 ) 

### 37
67 5 (612 )

1 2 (13 ) 10 9 (120 ) 

### 5 5
50 3 (456 )

4 5 (50 ) 

### 3 5
77 4 (702 )

5 (6 ) Tot . ann . cos t increase , $198 5 IO 6 Incrementa l C-E , 198 5 $/M g (198 5 $/shor t ton ) 7 6 1 9 6,56 2 3,54 9 (5,953 ) (3,220 )

3 Referenc e Table s 3- 4 an d3-5 .

3-1 4P.4 0 

# I I I I fl I I I I I I I H I 3-8* . Th e procedur e fo r calculatin gincrementa l cost-effectivenes s ratio s in

Tabl e 3- 8 i s base donth e assumption s tha t th e P M emission s reduction s ar e no t considere dand , becaus e th e projecte dtota l annualize dcos t increase s ar e directl y attributabl e t o th e alternativ e SO 2 emission s standar d(i nth e absenc e o f a new

P M emission s standard) , th e tota l annualize dcos t increase s ar e comparabl e t o th e SO 2 emission s reductions . Th e alternativ e woul dbe t o spli t th e tota l annualize dcos t increase s int o two parts , on e par t attributabl e t o th e SO 2 emission s reduction s an dth e remainde r attributabl e t o th e P M emission s reduction . I nthi s manner , incrementa l cost-effectivenes s ratio s coul dbe presente dfo r SO 2 an dPM . Thi s alternativ e wa s no t adopte dinthi s analysis . Th e incrementa l cost-effectivenes s ratio s whic har e summarize dinTabl e 3- 8 ar e nationa l averages . Individua l boiler s ma y hav e significantl y

highe r o r lowe r cost-effectivenes s ratios . Tabl e 3- 8 show s tha t al l o f th e annualize dcos t increase s an dalmos t al l o f th e annua l SO 2 emissio nreduction s ar e attributabl e t o alternativ e contro l leve l I whe nth e carriag e marke t natura l ga s price s ar e used . Ther e i s some additiona l SOg emission s reduction s withou t a tota l annualize dcos t increas e betwee nalternativ e contro l level s I an dI I usin gth e carriag e marke t natura l ga s prices . Thi s i s explaine db y observin gtha t a few boiler s bur n0. 8 percen t sulfu r residua l fue l oi l unde r alternativ e contro l leve l I an dselec t natura l ga s unde r alternativ e contro l leve l I I wit ha miniscul e increas e intota l annualize dcost s an

da significan t emissio nreduction . I nthes e case s whic huse dth e carriag e marke t natura l ga s prices , th e incrementa l cost-effectivenes s ratio s ar e relativel y low , rangin gfro

m zer o t o $165/M g($150/shor t ton) . The y ar e relativel y

lo w fo r two reasons . • Th e fue l mi xi s no t hel dconstan t an dmany boiler s selec t natura l ga s a s th e least-cos t complianc e optio nunde r th e alternativ e contro l scenario s whe nresidua l fue l oi l wa s selecte dunde r th e baselin e ai r emission s regulation s assump tions . Thi s resulte di na smal l fue l pric e increas e an da 9 9 percen t SO 2 emission s reduction . • Some boiler s selecte d1. 6 o r 3. 0 percen t sulfu r residua l fue l oi l inorde r t o compl y wit hth e regulator y baselin e assump tion s (dependin gupo nloca l variabilit y inSIP's ) an

dburne d 0. 8 percen t sulfu r residua l fue l oi l inorde r t o compl y wit h th e alternativ e contro l leve l I requirements . Fo r thes e

3-1 5P.4 1 

# I I I I 1 I H I I N I I 1 I units , th e incrementa l cost-effectivenes s rati o i s relativel y

low becaus e th e SO 2 emissio nreductio ni s a t leas t 5 0 percen t an dth e fue l pric e increas e i s no t very larg e fo r thes e oi l pric e projections . Tabl e 3- 8 als o include s nationa l result s fo r scenario s whic huse dth e LDC (non-carriag e market ) natura l ga s prices . Th e incrementa l cost-effectivenes s ratio s ar e highe r fo r th e LDC natura l ga s pric e result s tha nthey ar e fo r carriag e marke t natura l ga s price s scenarios . Some boiler s ar e expecte dt o burnresidua l fue l oi l unde r th e regulator y baselin e assumption s an dt o selec t natura l ga s as.th e least-cos t complianc e option s unde r on e o r mor e o f th e alternativ e contro l levels . Th e tota l annualize dcos t increas e an dth e incrementa l cost-effectivenes s rati o ar e large r fo r th e LD C natura l ga s pric e scenario s becaus e th e LDC natura l ga s pric e projection s ar e highe r tha nth e carriag e marke t natura l ga s prices . Ther e i s no projecte ddemandfo r scrubber s onnew larg e industria l boiler s usin g th e carriag e marke t natura l ga s prices . A s show ni nTabl e 3-6 , ther e i s demandfo r scrubber s fo r th e LDC natura l ga s pric e scenarios . Thi s represent s anothe r reaso nwhy th e tota l annualize dcost s andincrementa l cost-effectivenes s ratio s ar e highe r fo r th e LDC natura l ga s pric e case s in compariso nwit hth e carriag e marke t natura l ga s prices . Fo r th e carriag e marke t natura l ga s pric e scenarios , al l o f th e annua l fue l demandin199 0 i s expecte dt o be natura l ga s fo r alternativ e contro l leve l I I (referenc e Tabl e 3-3) . A s a result , ther e i s no additiona l nationa l SO 2 emission s reduction s an dno incrementa l nationa l tota l annualize dcos t increas e betwee nalternativ e contro l level s I I an dIII . Alternativ e contro l level s I I an dII I ar e similar . Th e alternativ e contro l leve l I I SO 2 emissio nstandar dfo r residua l fue l oi l combustio nin larg e new

boiler s i s 12 9 ng/ J(0. 3 lb/MMBtu) . Th e comparabl e emissio nstandar d fo r alternativ e contro l leve l II I i s 9 0 percen t SO 2 emission s reductio nwit ha ceilin g o f 34 4 ng/ J(0. 8 lb/MMBtu) . Whe nalternativ e contro l leve l II I an d th e LD C natura l ga s price s ar e selecte da s IFCA M inpu t assumptions , fro m 5 4 t o 6 2 percen t o f th e fue l mi xinlarg e new industria l boiler s i s natura l ga s a s th e least-cos t complianc e strategy an dth e remainde r choos e 9 0 percen t SO 2 emission s remova l o f th e highes t sulfu r residua l fue l oi l typ e inIFCAM , 3. 0 percen t sulfur . Inthi s analysis , alternativ e contro l leve l II I doe s no t

3-1 6

# I I I I I I I I I fl I I I I I I reduc e SO 2 emission s fo r residua l fue l oi l boiler s incompariso nwit halterna tiv e contro l leve l I I becaus e 9 0 percen t SO 2 emission s reductio nfo r a 3. 0 percen t sulfu r residua l fue l oi l an da 12 9 ng/ J(0. 3 lb/MMBtu ) SO 2 emission s ceilin g hav e practicall y th e sam

e controlle dannua l emission s rates . However , residua l fue l oi l boiler s unde r alternativ e contro l level s I I an dII I ar e subjec t t o a

nincreas e i ntota l annualize dcosts . Thi s i s becaus e th e fue l pric e differentia l betwee nhighsulfu r an d0. 3 percen t sulfu r residua l fue l oi l i s smalle r tha nth e annualize dcos t o f scrubbin g highsulfu r residua l fue l oil . Inthi s circumstance , th e incrementa l cost-effectivenes s rati o i s ver y large , a nannualize dcos t increas e divide db y a near-zer o incrementa l annua l SO 2 emissio nreduction . Tabl e 3- 8 show s tha t th e incrementa l annua l SO 2 emissio nreductio n projection s fo r alternativ e contro l level s I I v . Il l range s fro m 5 t o 1 2 Gg (6,000-13,00 0 shor t tons) . Al l o f th e projecte dincrementa l SO 2 emissio n reductio ni s attributabl e t o a nincreas e innatura l ga s demand(referenc e Tabl e 3-3) . Th e incrementa l tota l annualize dcos t increas e range s fro m $1 9 t o 7 6 million . Th e incrementa l cost-effectivenes s ratio s rang e fro m $3,54 9 t o 6,562/Mg ($3,220-5,953/shor t ton) ; thes e ar e weighte daverage s o f ver y larg e incrementa l cost-effectivenes s ratio s fo r th e residua l fue l oi l boiler s unde r alternativ e contro l level s I I an dII I (whic hexperienc e significan t cos t increase s bu t no emissio nreductions ) an dsmalle r incrementa l cost-effec tivenes s ratio s fo r thos e boiler s whic hchos e t o bur na ^ery low sulfu r residua l fue l oi l unde r alternativ e contro l leve l I I an dnatura l ga s unde r alternativ e contro l leve l III . Thi s analysi s doe s no t includ e estimate s o f th e impact s o f alternativ e ai r emission s standard s fo r coa l combustio nbecaus e coa l doe s no t "compete " i n an y o f thes e scenario s accordin g t o th e least-cos t logi c inIFCAM . Thi s analysi s doe s cove r a wid e rang e o f regulator y option s fo r oi l combustio n unde r th e LDC natura l ga s pric e assumptions . Thes e IFCA M ru nresult s ar e relevan t onl y

fo r alternativ e contro l I unde r th e carriag e marke t natura l ga s pric e assumption s becaus e ther e ar e no estimate s o f th e incrementa l cost-effec tivenes s ratio s inTabl e 3- 8 fo r alternativ e contro l level s I versu s I I o r I I versu s III ; ther e i s no expecte dnationa l impac t o f alternativ e contro l level s

3-1 7

# I I I I I I I I 

# H I I I I I I 1 I I a r II I becaus e natura l ga s dominate s th e fue l typ e selectio n unde r altern

ativ e contro l leve l I . New , larg e industria l boiler s ar e mor e likel yt o fac e carriag e market natura l ga s price s thanconventiona l LD C tariffs . Thi s i s becaus e th e new , larg e boiler s ar e mor e likel yt o b e purchase d byrelativel ylarg e companie s wh o tend :

• T o b e mor e sensitiv e t o energ ycost s t T o hav e th e leverag e t o negotiat e wit hproducers , pipeline s and distributor s fo r lowe r rate s I n addition , sinc e thes e ne wboiler s ar e assume d t o b e dual-fired , thei r fue l switchin g cos t i s negligible . Hence , industria l user s ar e likel yt o switc hquickl yi n thes e boilers . I n addition , thes e boiler s mee t th e pre requisit e conditio n i n mos t curren t distributio n companycarriag e program s tha t onl ydual-fire d capacit yi s eligibl e fo r carriag e rates . 3. 3 REGIONAL S0 2 EMISSION S FORECAST S IFCA Mproject s larg e ne windustria l fossi l fuel-fire d boile r SO 2 emission s b yFedera l region . Table s 3- 9 throug h3-1 3 presen t th e regiona l SO 2 emission s forecast s fo r th e regulator ybaselin e and th e thre e alternativ e contro l levels .

3-1 8P.4 4 

# I I I I I I I I I I I I H I I I I I TABL E 3-9 . PROJECTE DREGIONA L S0 2 EMISSION S I

N 1990 3 G g (IO 3 shor t tons )

Lo w oi l price s wit hflexibl e carriag e marke t

natura l ga s price s Federa l region

1 . Ne w Englan d
2 . New York/New

Jerse y 3 . Middl e Atlanti c 4 . Sout hAtlanti c 5 . Midwes t 6 . Southwes t
7 . Centra l 8 . Nort hCentra l
9 . Wes t 10 . Northwes t
U.S . Regulatory baselin e

1. 7 (1.9 ) 4. 0 (4.4 ) 20. 9 (23.0 )
39. 6 (43.6 )
55. 8 (61.5 ) 135. 9 (149.8 ) 19. 8 (21.8 )
12. 4 (13.7 )
5. 6 (6.2 ) 0. 9 (1.0 ) 296. 6 (327.0 ) Alternativ e contro l leve l I I I & II I 

### (b )

b(b )

b(b )



## bXk i
3. 1 (3.4 ) (b ) (b ) 1. 5 (1.7 ) (b ) (b )

(b ) (b ) b b b b (b ) (b ) (b ) (b ) (b )

(b ) (b ) (b ) (b ) (b ) (b ) (b ) (b ) (b ) 1. 5 (1.6 ) (b ) (b )



### ihl ihl
0. 1 (0.1 )

3 Ne w industria l fossi l fuel-fire dboiler s installe dbetwee n198 5 an d199 0 an

d large r than2 9 M

W (10 0 MMBtu/hr) . bLes s than5 0 M

g (5 5 shor t tons) . The projecte dSO 2 emission s ar e relativel y lo w becaus e natura l ga s i s the onl y fue l typ e selected .
3-1 9P.4 5 

# 1 1 1 1 I 1 I I H 1 I I U 1 1 1 1 • • , TABL E 3 -

Federa l region


### 1 . 2 . 3 . 4 . 5 . 6 . 7 . 

### 8 . 9 . 10 . Ne w England 

### 10 .

Ne w York/New

Jerse y Middl e Atlanti c
Sout hAtlanti c Midwes t Southwes t
Centra l
Nort hCentra l
Wes t Northwes t
U.S . PROJECTE DREGIONAL S0 2 EMISSION S I N 1990 3 G g (IO 3 shor t tons )

Lo w oi price s Regulatory baselin e


### 3. 2 4. 5
22. 2 53. 1
55. 8
145. 1
20. 6 12. 4 

### 5. 6 0. 9
323. 4 (3.5 )

(5.0 ) (24.5 ) (58.5 ) (61.5 ) (160.0 ) (22.7 ) (13.7 ) (6.2 ) (1.0 ) (356.5 ) wit hrigi dcarriag e natura l ga s price s Alternativ e I

2. 3 (2.5 )
2. 5 (2.8 ) 10. 7 (11.8 ) 22. 7 (25.0 ) b(b ) b(b )
b(b ) b(b ) 1. 5 (1.6 ) bib l
39. 6 (43.7 ) marke t

contro l leve l I I & II I i 1 b(b )
b(b ) b(b ) b(b ) b(b ) b(b ) b(b ) b(b ) b(b ) bIb l
0. 1 (0.1 ) 

# I I I I 3 Ne

w industria l fossi l fuel-fire dboiler s installe dbetwee n198 5 an d199 0 an

d large r than2 9 M

W (10 0 MMBtu/hr) . bLes s than5 0 M

g (5 5 shor t tons) . Th e projecte dSO 2 emission s ar e relativel y lo w becaus e natura l ga s i s the onl y fue l typ e selected .
3-2 0P.4 6 

# 1 1 1 1 1 V 1 1 I I 

# u 1 1 1 1 1 1 1 1 1 - ' TABL E 3-11 .

Federa l regio n 1 . New England
2 . New York/New

Jerse y 3 . Middl e Atlanti c 4 . Sout hAtlanti c 5 . Midwes t
6 . Southwes t
7 . Centra l 8 . Nort hCentra l 9 . Wes t
10 . Northwes t

U.S .

3 Ne w industria l fossi l large r tha n2 9 M

W (10 0 1 bLes s than5 0 M

g (5 5 s lo w becaus e natura l ga s PROJECTE DREGIONAL G g (IO 3 shor t

Lo w oi l Regulatory baselin e 3. 4 (3.7 ) 5. 9 (6.5 ) 25. 6 (28.2 ) 53. 5 (59.0 ) 65. 0 (71.6 ) 145. 1 (159.9 ) 20. 9 (23.0 ) 12. 4 (13.7 ) 11. 2 (12.4 ) 12. 0 (13.2 ) 345. 9 (391.2 ) S0 2 EMISSION S I N 1990 3 tons ) i

price s wit hLDC natura l ga s price s

fuel-fire dboiler s i WIBtu/hr) . lor t tons) . Th e i s the onl y

fue l


### 3 Alterna t

I 2. 4 (2.7 ) 3. 9 (4.3 ) 13. 8 15.2 ) 24. 6 (27.1 ) 28. 7 (31.6 ) b (b ) 7. 3 (8.0 ) b (b ) 6. 8 (7.5 ) 11. 5 (12.7 ) 99. 0 (109.1 ) nstalle dbetwee n iv

e contro l leve l I I II I 1. 1 (1.2 ) 2. 1 (2.3 ) 6. 4 (7.1 ) 10. 0 (11.0 ) 12. 1 (13.3 ) b (b ) 2. 9 (3.2 ) b (b ) 4. 8 (5.3 ) 4. 7 (5.2 )
44. 2 (48.7 ) 198 5 an d projecte dSO

g emission s ar e re typ e selected . 

### -2 1 i. o ! (i.i ) ! 2. 0 (2.2 ) 5. 9 (6.5 ) ; 9. 3 (10.3 ) 10. 3 (11.3 ) b (b ) 1. 3 (1.4 ) b (b ) 1. 3 (1.4 ) 1. 7 (1-9 ) 32. 7 (36.1 ) 199 0 an d lativel y

<P.4 7

« - . 

### TABL E 3-12 . PROJECTE DREGIONAL S0 2 

### EMISSION S IN 1990 3 

### G g(IO 3 

### shor t tons )



### Federa l region

1 . Ne w Englan d
2 . Ne w York/New

Jerse y 3 . Middl e Atlanti c 4 . Sout hAtlanti c 5 . Midwes t 6 . Southwes t
7 . Centra l
8 . Nort hCentra l
9 . Wes t 10 . Northwes t
U.S . 

### H " ig hoi l price s natura l Regulatory 

### baselin e
1. 7 4. 0
20. 9
16. 0
55. 8 

### b
12. 3 

### 1. 8 5. 3 b
117. 8 (1.9 )

(4.4 ) (23.0 ) (17.6 ) (61.5 ) 

### (b) (13.6 ) (2.0 ) (5.8 ) 

### Ib l (129.9 ) wit h

ga s carriag e price s Alternativ e I


### b 1 . b b b b b 1 . b b 3 . (b)
5 (1.7 ) 

### (b) (b) (b) (b) (b )
8 (2.0 ) 

### (b ) 

### ib l
4 (3.8 ) marke t

contro l leve l I I & II I

b(b ) b(b ) b(b ) b(b ) b(b ) b(b ) b(b ) b(b ) b(b ) 

### bIb l
0. 1 (0.1 )

3 

### New industria l fossi l fuel-fire dboiler s installe dbetwee n198 5 an d199 0 an

d large r tha n2 9 M

W (10 0 MMBtu/hr) . b

### Les s tha n5 0 Mg (5 5 shor t tons) . Th e projecte dSO 2 emission s ar e relativel y lo w becaus e natura l ga s i s th e onl y fue l typ e selected .
3-2 2P.4 8



### TABL E 3-13 . PROJECTE DREGIONAL S0 2 

### EMISSION S IN 1990 3 

### G g(IO 3 

### shor t tons )

Federa l region 1 . Ne w Englan d
2 . New York/New

Jerse y 3 . Middl e Atlanti c 4 . Sout hAtlanti c 5 . Midwes t 6 . Southwes t
7 . Centra l
8 . Nort hCentra l 9 : Wes t 10 . Northwes t

U.S . Hio hoi l price s Regulatory baselin e 3. 4 (3.7 ) 6. 3 (6.9 ) 26. 2 (28.9 ) 56. 1 (61.8 ) 65. 4 (72.1 ) b (b ) 20. 6 (22.7 ) b (b ) 7. 9 (8.7 ) 0. 9 (1.0 ) 186. 8 (205.9 ) wit hLDC natura l ga s or Alterna t I 2. 4 (2.7 ) 4. 3 (4.7 ) 14. 3 (15.8 ) 24. 6 (27.1 ) 28. 9 (31.9 ) b (b ) b ( b ) b (b ) 3. 3 (3.6 ) b 

### ib l 78. 0 (86.0 ) ice s

iv e contro l leve l I I II I 1. 2 (1.3 ) 2. 2 (2.4 ) 6. 6 (7.3 ) 10. 3 (11.4 ) 12. 5 (13.8 ) b (b ) b (b ) b (b ) b (b ) b 

### ib l
32. 9 (36.3 ) 1. 1

(1.2 ) 2. 1 (2.3 ) 5. 9 (6.5 ) 9. 1 (10.0 ) 9. 3 (10.3 ) b (b ) b (b ) b (b ) b (b ) b 

### ib l
27. 7 (30.5 )

3 

### Ne w industria l fossi l fuel-fire dboiler s installe dbetwee n198 5 an d199 0 an

d large r tha n2 9 M

W (10 0 MMBtu/hr) . bLes s tha n5 0 M

g (5 5 shor t tons) . Th e projecte dSO 2 emission s ar e relativel y low becaus e natura l ga s i s th e onl y fue l typ e selected .
3-2 3