## D-1 

# Appendix D

EPA Extension of Cost Effectiveness Analysis

I. Background

As is noted in Appendix C to this TSD, OG& E costed a scrubber th at was larger than necessary to control SO 2 

## from the coal they currently burn. As it appears that was OG&E’s preferred option, perhaps for flexib ility in future coal selection, it was carried forward for the bulk of the analysis as Option 1. Option 2, es timating cost effectiven ess on the basis of a minimally sized scrubber to treat the coal currently burned, was al so investigated. This was done by application of the "six-tenth rule ,” to the annualized capital cost.

Unlike Option 1, due to contracting limitations , Option 2 was not further adjusted within Appendix C to correct for cost estimating errors , such as (1) not following the Air Pollution Control Cost Manual, (2) adjusting costs that were outside of the range of the actual costs, (3) eliminating double counted costs, an d (4) failing to evaluate the most cost effective options. However, even though it appeared that costing the larger scrubber was OG&E’s preferred option, we did not wish to propose our decision solely on that basis, as we wanted to investigate whether it was still cost effective to scrub the coal cu rrently being burned. Therefore, we extended Option 2 to account for some of the issues that we re rectified in Option 1. Also, as Option 2 was performed on the basis of a scrubber outlet of 0.10 lbs/MMBtu, and we determined that an emission rate of 0.06 lbs/MMBtu was appropriate, we also further adjusted Option 2 to account for a scrubber outlet of 0.06 lbs/MMBtu. This exte nsion of the cost effectiveness of Option 2 is housed in a spreadsheet entitled, “EPA Modificati on of Appendix 1.xls,” which is present in our docket. A copy of that spreadsheet is attached to this Appendix (see primarily Columns F and I).

II. Reapplication of the "Six-Tenth Rule."

Please refer to Appendix C for a discussion of th e "six-tenth rule." As discussed above, we reapplied the “six-tenth rule,” to adjust the assumed controlled emission rate of 0.10 lbs/MMBtu were reduced to 0.06 lbs/MMBtu. This required recalculatio n of the size factor, S b 

## /S a 

## , that appears in the equation:

C b 

## = C a 

## (S b 

## /S a 

## ) n



## For the Sooner units, the scrubber inlet rema ins at 6,015 lb/hr. The scrubber outlet is calculated as:

(5,611 MMBtu/hr)(0.055 lb /MMBtu) = 308.6 lb/hr

In the above calculation, a controlled SO 2 

## emission rate of 0.55 lb/MMBtu was used, in lieu of the design emission rate of 0.06 lbs/MMBtu, in order to build in a sli ght safety factor. For the low sulfur case of Option 2, the scrubber inlet SO 2 

## remains at 2,605 lb/hr. Therefore, the SO 2 

## removed is calculated as:

## D-2 2,605 lb/hr - 309 lb/hr = 2,296 lb/hr

The size factor is then calculated as:

(2,296 lbs/hr/6,015 lbs/hr) 0.69 

## = 0.5145

Similarly, for the Muskogee units, the scrubber outlet is calculated as:

(5,480 MMBtu/hr)(0.055 lbs/MMBtu) = 301.4 lb/hr

For the low sulfur case of Option 2, the scrubber inlet SO 2 

## remains at 2,778 lb/hr. Therefore, the SO 2 

## removed is calculated as:

2,778 lbs/hr – 301 lbs/hr = 2,477 lb/hr

The size factor is then calculated as:

(2,477 lbs/hr/6,442 lbs/hr) 0.69 

## = 0.5171

These size factors were then appl ied to the Option 1 Total Project Costs, in cells F44 and I44.

III. Remaining Cost Adjustments

The remaining cost adjustments were made to the lime, water, FGD waste disposal, property taxes, insurance, and SO 2 

## emission reductions. These adjustme nts are explained as notes that follow the copy of the spreadsheet below.

## D-3 1 EPA modification of Exhibit 1

2 Revised Cost Effectiveness Analysis fo r Dry Flue Gas Desulfurization at

3 Sooner Units 1 and 2 and Muskogee Units 4 and 5

4 to Extend Fox Option 2 Case

5

6 Sooner 1 &2 Sooner 1&2 Sooner 1&2 Muskog ee 4&5 Muskog ee 4&5 Muskog ee 4&5 Not

es

7 S&L Fox EPA S&L Fox EPA 1

8

9 1 0 Capacity (MW) 570 570 572 572 1 1 Vendor Quote 70,500,00 0 70,500,0 00 71,200,0 00 71,200,0 00 1 2 Dry FGD System 86,859,60 0 86,859,6 00 86,741,2 00 86,741,2 00 1 3 Fabric Filter 46,335,00 0 46,335,0 00 45,872,9 00 45,872,9 00

1 4 Ash Recycling System - DFGD Contractor's Scope 11,116,90 0 11,116,9 00 12,102,9 00 12,102,9 00 1 5 Waste Ash and Fly Ash Handling System 14,265,60 0 14,265,6 00 14,311,5 00 14,311,5 00 1 6 Ash Recycling - BOP Scope 955,600 955,600 1 7 Flue Gas System 42,463,00 0 42,463,0 00 52,238,2 00 52,238,2 00 1 8 Mechanical - Balance of Plant 6,891,300 6,891,30 0 6,201,40 0 6,201,40 0

1 9 Electrical:Auxiliary Power and Balance of Plant Electrical Work 41,935,10 0 41,935,1 00 37,923,6 00 37,923,6 00 2 0 Controls & Instrumentation 5,088,500 5,088,50 0 5,088,50 0 5,088,50 0 2 1 Civil Work 3,597,400 3,597,40 0 3,597,40 0 3,597,40 0

2 2 Removal & Relocation of Existing Equipment & Infrastructure 2,047,600 2,047,60 0 4,134,80 0 4,134,80 0

2 3 Manhour Productivity Factor - 14,276,5 30 - 14,918,1 00

2 4 Vendor Discount Equipment - 3,525,00 0 - 3,560,00 0

2 5 Optimizing Design Vendor Scope - 8,734,80 0 - 9,073,56 0 2 6 Subtotal Equipment Material & Labor Costs 261,555,6 00 235,019, 270 268,212, 400 240,660, 740 2 7 Other Costs 61,016,90 0 61,016,9 00 63,987,8 00 63,987,8 00

2 8 Overtime Inefficiency - 9,518,00 0 - 9,945,00 0 2 9 BOP Contractor's General & Admin - 7,408,60 - 7,855,50

## D-4 0 0

3 0 Spare Parts, Special Tools % Consumables 794,000 794,000 807,000 807,000 3 1 Freight, Duties & Taxes 1,936,000 1,936,00 0 2,136,90 0 2,136,90 0 3 2 325,302,5 00 281,839, 570 335,144, 100 289,791, 940 3 3 Total Indirect Costs 48,090,10 0 48,090,1 00 49,601,9 00 49,601,9 00

3 4 Engineering/Procurement - 12,205,3 38 - 12,354,4 95 3 5 Construction Management -869,259 -907,043

3 6 Startup & Commissioning Craft Support - 3,273,90 0 - 3,417,60 0 3 7 Operator Training & Manuals -900,300 -939,800

3 8 Owner's Cost - 16,265,1 25 - 16,757,2 05 3 9 Revised Total Indirect Costs 48,090,10 0 14,576,1 78 49,601,9 00 15,225,7 56 4 0 Escalation 46,602,90 0 0 63,277,1 00 0 4 1 Contingency 58,673,40 0 2,115,00 0 63,104,1 00 2,136,00 0 4 2 Bond Cost 4,786,700 0 5,111,30 0 0 4 3 AFUDC 101,133,8 00 0 118,148, 300 0 4 4 Total Project Cost 584,589,4 00 298,530, 748 153,594, 070 634,386, 800 307,153, 696 158,829, 176 2 4 5 CRF 0.1036 0.0806 0.1036 0.0806 4 6 Annual Capital 60,563,46 2 24,057,5 19 12,377,5 94 65,722,4 72 24,752,4 12 12,799,4 72 4 7 Variable O&M 19,899,40 0 19,899,4 00 19,899,4 00 21,292,2 00 21,292,2 00 21,292,2 00 4 8 Fixed O&M 8,027,400 8,027,40 0 8,027,40 0 8,439,20 0 8,439,20 0 8,439,20 0 4 9 Indirect O&M 5,174,200 5,174,20 0 5,174,20 0 7,146,40 0 7,146,40 0 7,146,40 0 5 0 Total O&M 33,101,00 0 33,101,0 00 33,101,0 00 36,877,8 00 36,877,8 00 36,877,8 00 5 1 Lime 4,682,11 0 0 4,476,06 4 0 3 5 2 Water -19,602 0 -180,730 0 4 5 3 FGD Waste Disposal Cost 4,738,72 1 0 5,310,68 5 0 5 5 4 Bag & Cage Replacement Cost -218,548 -218,548 -152,160 -152,160 6

5 5 Auxiliary Power - 5,368,40 0 - 5,368,40 0 - 5,886,80 0 - 5,886,80 0 7

5 6 Property Taxes - 4,862,99 7 - 7,326,92 1 - 3,926,79 7 - 5,706,69 1 8 5 7 Insurance -60,072 -90,509 -68,719 -99,867 9

## D-5 5 8 Revised O&M 33,101,00 0 31,992,2 12 20,096,6 22 36,877,8 00 36,449,3 43 25,032,2 81 5 9 Total Annual Cost ($) 93,664,46 2 56,049,7 31 32,474,2 16 102,600, 272 61,201,7 55 37,831,7 54 6 0 SO2 Emission Reduction (ton/yr) 13,930 13,930 13,799 13,799 6 1 Revised Emission Reduction (ton/yr) 43,428 15,860 46,458 15,989 10 6 2 S&L Cost Effectiveness ($/ton) 6,724 7,435 6 3 Revised Cost Effectiveness ($/ton) 1,291 2,048 1,317 2,366 6 4 Revised (AFUDC, escalation, contingency) 1,670 1,738 6 5 Cost ($/kw) 513 262 555 268 6 6 Cost ($/kw) Utility Comparison 351 372

1. This spreadsheet is a modification of "Exhibit 1," prepared by Phyllis Fox as part of her report "Revised BART Cost-Effectiveness Analysis for Flue Gas Desulfurization at Coal-Fired Electric Generating Units in Oklahoma: S ooner Units 1 & 2, Muskogee Units 4 & 5, Northeastern Units 3 & 4," October 2010, RTI Project Number 0209897.004.085. This spreadsheet is used to extend her cost analysis as part of EPA's proposed SO2 BART FIP for Units 4 and 5 of the OG&E Muskogee plant, Units 1 and 2 of the OG&E Sooner plant, and Units 3 and 4 of the AEP/PSO Northeastern plant. Any errors contained in this spreadsheet are solely the fault of EPA.

2 . Modified total project cost by application of t he "6/10" rule as per email from Phyllis Fox to Joe Kordzi on 9/30/10 2:15 PM.

3. Zeroed out Fox correction for lime, as the correction was needed to correct a S&L error for assuming lime use based on an inlet of 0. 509 lbs/MMBtu SO2 at Sooner and 0.507 lbs/MMBtu at Muskogee to an inlet of 1.176 lbs/ MMBtu. Since this is an extension of the cost evalution for those lower inlet values, the correction doesn't apply.

4. Zeroed out Fox correction for water for the sake of expediency. This assumption biases the $/ton calculation upward.

5. Zeroed out Fox correction for FGD waste disposal, as the correction was needed to correct a S&L error for assuming FGD waste disposal based on an inlet of 0.509 lbs/MMBtu SO2 at Sooner and 0.507 lbs/MMBtu at Muskogee to an in let of 1.176 lbs/MMBtu. Since this is an extension of the cost evalution for those lower inlet values, the correction doesn't apply.

6. Retained Fox bag and cage correction. This is slightly conservative towards OG&E because the correction in going to the 80% contro l case would actually be slightly larger due to the slight decrease in the flow rate thro ugh the baghouse OG&E uses in their design basis for the 80% control cases vs the 91% cont rol cases on pdf 76 - 79 of their report.

7. Retained Fox auxiliary power correction, as t he correction as calculated is independent of the size of the scrubber.

8. Modified Fox property tax correction by using a recalculated total project cost, since S&L assumed ptoperty taxes were a percent of that figure. Project cost was recalculated using the "6/10" rule as per email from Phyllis Fox to Joe Kordzi on 9/30/10 2:15 PM

9. Modified Fox insurance correction by recalculating the total project cost, since S&L assumed ptoperty taxes were a percent of that figure.

## D-6 10. The baseline emissions in line 61 are tak en from the S&L report, Table 5. These baseline emissions correspond to uncontrolled emissions rates of 0.509 lbs/MMBtu for Sooner 1, 0.516 for Sooner 2, 0.507 for Muskogee 4, and 0.514 for Muskogee 5 (see Table 9, S&L Report 12/28/09). EPA's reductions in line 61 are based on 0.06 lbs/MMBtu. The post control emissions are calculated by multip lying the baseline emissions by (0.06/0.509) for Sooner 1, (0.06/0.516) for Sooner 2, (0 .06/0.507) for Muskogee 4, and (0.06/0.514) for Muskogee 5. The emissions reductions are then calculated by subtracting the post control emissions from the baseline emissions.