# Regulatory Impact Analysis (RIA) for Existing Stationary Compression Ignition Engines NESHAP

Final DraftThis page is intentionally blank.EPA 452/R-10-002 February 2010

Regulatory Impact Analysis (RIA) for Exis ting Stationary Compre ssion Ignition Engines NESHAP

By: Paramita Sinha, Brooks Depro, and Fern Braun RTI International Research Triangle Park, North Carolina

Prepared for: Larry Sorrels

Contract No. EP-D-06-003

U.S. Environmental Protection Agency Office of Air Quality Planning and Standards Health and Environmental Impacts Division Air Benefits and Costs Group Research Triangle Park, NCRTI Project Number 0209897.003.061


# Regulatory Impact Analysis (RIA) for Existing Stationary Compression Ignition Engines NESHAP

Final Report

February 2010
Prepared for
Larry Sorrels U.S. Environmental Protection Agency Office of Air Quality Planning and Standards (OAQPS) Air Benefit and Cost Group (ABCG) (MD-C439-02) Research Triangle Park, NC 27711

Prepared by

Paramita Sinha Brooks Depro Fern Braun RTI International 3040 Cornwallis Road Research Triangle Park, NC 27709iii CONTENTS

Section Page

1 Executive Summary ...................................................................................................... 1-1

2 Introduction .................................................................................................................. . 2-1

2.1 Organization of this Report .................................................................................. 2-1

3 Industry Profile ............................................................................................................. 3-1

3.1 Electric Power Generation, Transm ission, and Distribution ............................... 3-1 3.1.1 Overview .................................................................................................. 3-1 3.1.2 Goods and Services Used ......................................................................... 3-3 3.1.3 Business Statistics .................................................................................... 3-4

3.2 Oil and Gas Extraction ......................................................................................... 3-6 3.2.1 Overview .................................................................................................. 3-6 3.2.2 Goods and Services Used ......................................................................... 3-9 3.2.3 Business Statistics .................................................................................... 3-9 3.2.4 Case Study: Marginal Wells .................................................................. 3-14

3.3 Pipeline Transportation of Natural Gas ............................................................. 3-16 3.3.1 Overview ................................................................................................ 3-16 3.3.2 Goods and Services Used ....................................................................... 3-16 3.3.3 Business Statistics .................................................................................. 3-19

3.4 General Medical and Surg ical Hospitals ............................................................ 3-22 3.4.1 Overview ................................................................................................ 3-22 3.4.2 Goods and Services Used ....................................................................... 3-22 3.4.3 Business Statistics .................................................................................. 3-24

3.5 Irrigation Sets and Welding Equipment ............................................................. 3-28 3.5.1 Overview ................................................................................................ 3-28 3.5.2 Irrigation and Weldi ng Services ............................................................ 3-28 3.5.3 Business Statistics .................................................................................. 3-33iv 4 Regulatory Alternatives, Costs, and Emission Impacts ................................................ 4-1

4.1 Background .......................................................................................................... 4-1

4.2 Summary of the Proposed Rule ........................................................................... 4-2 4.2.1 What Is the Source Category Regulated by this Proposed Rule? ............ 4-2 4.2.2 What Are the Pollutants Regulated by this Proposed Rule? .................... 4-5 4.2.3 What Are the Final Requirements? .......................................................... 4-6 4.2.4 What Are the Requirements for Demonstrating Compliance? .............. 4-12 4.2.5 What Are the Reporting and Reco rdkeeping Requirements? ................ 4-14

4.3 Summary of Significant Cha nges Since Proposal ............................................. 4-16 4.3.1 Applicability .......................................................................................... 4-16 4.3.2 Final Emission Limits ............................................................................ 4-17 4.3.3 Management Practices ........................................................................... 4-19

4.4 Cost Impacts....................................................................................................... 4-22 4.4.1 Introduction ............................................................................................ 4-22 4.4.2 Major Sources ........................................................................................ 4-26 4.4.3 Area Sources .......................................................................................... 4-28

4.5 Emissions and Emission Reductions ................................................................. 4-38

5 Economic Impact Analysis, Energy Impacts, and Social Costs ................................... 5-1

5.1 Compliance Costs of the Final Rule .................................................................... 5-1

5.2 How Might People and Firms Respond? A Partial Equilibrium Analysis .......... 5-5 5.2.1 Changes in Market Prices and Quantities ................................................ 5-5 5.2.2 Regulated Markets: The Electri c Power Generation, Transmission, and Distribution Sector ............................................................................ 5-7 5.2.3 Partial Equilibrium Measures of Social Cost: Changes Consumer and Producer Surplus ............................................................................... 5-8

5.3 Social Cost Estimate ............................................................................................ 5-9

5.4 Energy Impacts .................................................................................................. 5-10

5.5 Unfunded Mandates ........................................................................................... 5-10 . 5.5.1 Future and Disproportionate Costs ........................................................ 5-12v 5.5.2 Effects on the National Economy .......................................................... 5-12 5.6 Environmental Justice.................................................................5-11

6 Small Entity Screeni ng Analysis .................................................................................. 6-1

6.1 Small Entity Data Set ........................................................................................... 6-1

6.2 Small Entity Economic Im pact Measures ............................................................ 6-2 6.2.1 Model Establishment Receipts and Annual Compliance Costs ............... 6-2

6.3 Small Government Entities ................................................................................ 6-12

7 Human Health Benefits of Emissions Reductions ........................................................ 7-1

7.1 Synopsis ............................................................................................................... 7-1

7.2 Calculation of Human H ealth Co-benefits ........................................................... 7-1

7.3 Unquantified Benefits ........................................................................................ 7-11

7.4 Characterization of Uncertainty in the Monetized Co-benefits ......................... 7-21

7.5 Comparison of Benefits and Costs ..................................................................... 7-23

8 References .................................................................................................................... . 8-1vi LIST OF FIGURES

Number Page

3-1. Industrial Production Index (NAICS 2211) ................................................................ 3-2 3-2. Internal Combustion Generato rs by State: 2006 ......................................................... 3-3 3-3. 2002 Regional Distribution of Establis hments: Electric Power Generation, Transmission, and Distribution Industry (NAICS 2211) ............................................ 3-5 3-4. Industrial Production Index (NAICS 211) ................................................................ 3-11 3-5. 2002 Regional Distribution of Establishm ents: Crude Petroleum and Natural Gas Extraction Industry (NAICS 211111) ................................................................ 3-13 3-6. 2002 Regional Distribution of Establishm ents: Natural Gas Liquid Extraction Industry (NAICS 211112) ......................................................................................... 3-14 3-7. Trends in Marginal Oil and Gas Production: 1997 to 2006 ...................................... 3-17 3-8. Distribution of Establishments within Pi peline Transportation (NAICS 486) .......... 3-18 3-9. Distribution of Revenue within Pipeli ne Transportation (NAICS 486) .................... 3-18 3-10. 2002 Regional Distribution of Establishm ents: Pipeline Transportation (NAICS 486) .......................................................................................................................... .. 3-20 3-11. Share of Establishments by Legal Form of Organization in the Pipeline Transportation of Natural Gas Industry (NAICS 48621): 2002 ................................ 3-21 3-12. 2002 Regional Distribution of Establishm ents: General Medical and Surgical Hospital Industry (NAICS 6221) .............................................................................. 3-25 3-13. Share of Establishments by Legal Form of Organization in the General Medical and Surgical Hospitals Industry (NAICS 6221): 2002 .............................................. 3-26 3-14. Industrial Production Index (NAICS 333111) .......................................................... 3-30 3-15. 2003 Regional Distribution of Irrigated Acres .......................................................... 3-33 3-16. 2002 Regional Distribution of Establishm ents: Heavy and Civil Engineering Construction (NAICS 237) ........................................................................................ 3-34

5-1. Distribution of Annualized Direct Co mpliance Costs by Industry: 2013 ................... 5-2 5-2. Distribution of Engine Population by Horsepower Group: 2013 ................................ 5-3 5-3. Average Annualized Cost per Engine by Horsepower Group: 2013 ($2007) ............. 5-3 5-4. Market Demand and Supply Model: W ith and Without Regulation ........................... 5-6 5-5. Electricity Restructuring by State ................................................................................ 5-9

7-1. Breakdown of Monetized PM2.5 Health Co -benefits using Mortality Function from Pope et al. (2002) ................................................................................................ 7-7 7-2. Total Monetized PM2.5 Co-Benefits of RICE NESHAP in 2013 ............................ 7-10 7-3. Breakdown of Monetized Co-benefits for RICE NESHAP by PM 2.5 Precursor Pollutant and Source .................................................................................................. 7-10vii 7-4. Net Benefits for RICE NESHAP at 3% Discount Rate ............................................. 7-24 7-5. Net Benefits for RICE NESHAP at 7% Discount Rate ............................................. 7-25viii LIST OF TABLES

Number Page

3-1. Key Statistics: Electric Power Gene ration, Transmission, and Distribution (NAICS 2211) ($2007) ................................................................................................ 3-2 3-2. Direct Requirements for Electric Power Generation, Transmission, and Distribution (NAICS 2211): 2002 ............................................................................... 3-4 3-3. Firm Concentration for Electric Power Generation, Transmission, and Distribution (NAICS 2211): 2002 ............................................................................... 3-6 3-4. United States Retail Electricity Sales Statistics: 2006 ................................................ 3-8 3-5. FY 2007 Financial Data for 70 U.S. Share holder-Owned Electric Utilities ............... 3-9 3-6. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 2211 ....................... 3-9 3-7. Key Enterprise Statistics by Receipt Size for Electric Power Generation, Transmission, and Distribution (NAICS 2211): 2002 ............................................... 3-10 3-8. Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111): ($2007) ...................................................................................................................... 3-11 3-9. Key Statistics: Natural Gas Liquid Ex traction (NAICS 211112) ($2007) ................ 3-12 3-10. Direct Requirements for Oil and Gas Extraction (NAICS 211): 2002 ...................... 3-12 3-11. Key Enterprise Statistics by Employment Size for Crude Petroleum and Natural Gas Extraction ( NAICS 211111): 2002 ....................................................... 3-14 3-12. Key Enterprise Statistics by Employmen t Size for Crude Natural Gas Liquid Extraction (NAICS 211112): 2002 ............................................................................ 3-15 3-13. Aggregate Tax Data for Accounting Period 7/05

– 6/06: NAICS 211 ....................... 3-15 3-14. Reported Gross Revenue Estimates from Marginal Wells: 2006 .............................. 3-16 3-15. Key Statistics: Pipeline Transportation of Natural Gas (NAICS 48621) ($2007) .... 3-17 3-16. Direct Requirements for Pipeline Transportation (NAICS 486): 2002 ..................... 3-19 3-17. Firm Concentration for Pipeline Tran sportation of Natural Gas (NAICS 48621): 2002 .............................................................................................................. 3-2 1 3-18. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 486 ....................... 3-22 3-19. Key Enterprise Statistics by Receipt Size for Pipeline Transportation of Natural Gas (NAICS 48621): 2002 ........................................................................................ 3-23 3-20. Key Statistics: General Medical and Surg ical Hospitals (NAICS 6221) ($2007) .... 3-24 3-21. Direct Requirements for Ho spitals (NAICS 622): 2002 ........................................... 3-24 3-22. Firm Concentration for General Medi cal and Surgical Hospitals (NAICS 6221): 2002 ................................................................................................................ 3- 26 3-23. Government Control and Ownership for General Medical and Surgical Hospitals (NAICS 6221): 2002 ................................................................................. 3-27 3-24. Hospital Statistics: 2006 ............................................................................................ 3-27 3-25. Aggregate Tax Data for Accounting Period 7/05

– 6/06: NAICS 622-4 .................... 3-27ix 3-26. Key Enterprise Statistics by Receipt Si ze for General Medical and Surgical Hospitals (NAICS 6221): 2002 ($2007) ................................................................... 3-29 3-27. Key Statistics: Farm Machinery a nd Equipment Manufacturing (NAICS 333111) ($2007) ........................................................................................................ 3-30 3-28. Key Statistics: Welding and Solder ing Equipment Manufacturing (NAICS 333992) ($2007) ........................................................................................................ 3-31 3-29. Expenses per Acre by Type of Energy: 2003 ............................................................ 3-32 3-30. Number of On-Farm Pumps of Irrigati on Water by Type of Energy: 1998 and 2003 .......................................................................................................................... . 3-32 3-31. Distribution of Farm Statis tics by Market Value of Agricultural Products Sold: 2003 .......................................................................................................................... . 3-34 3-32. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 3331,9 .................. 3-35 3-33. Key Enterprise Statistics by Recei pt Size for Heavy Construction: 2002 ................ 3-36

4-1. Requirements for Existing Stationary CI RICE Located at Major Sources ................ 4-7 4-2. Requirements for Existing Stationary RICE Located at Area Sources ....................... 4-9 4-3. CI RICE Control Techno logies and Costs .................................................................. 4-9 4-4. Summary of Major Source and Area Source Costs for the CI RI CE NESHAP ....... 4-30 4-5. Summary of Major Source and Area S ource NAICS Costs for the CI RICE NESHAP ................................................................................................................... 4-31 4-6. Summary of Major Source and Area S ource NAICS Costs for the CI RICE NESHAP – by Size .................................................................................................... 4-32 4-7. Summary of Major Source and Area S ource NAICS Costs for the CI RICE NESHAP – by Number of Engines ........................................................................... 4-35 4-8. Summary of Major Source and Area S ource Emission Reductions for the CI RICE ......... NESHAP – by 2013 ...........................................................................4-36

5-1. Selected Industry-Level Annualized Co mpliance Costs as a Fraction of Total Industry Revenue: 2008 ............................................................................................... 5-4 5-2. Hypothetical Price Increases for a 1% Increase in Unit Costs .................................... 5-7 5-3. Hypothetical Consumption Decreases for a 1% Increase in Unit Costs ..................... 5-8 5-4. U.S. Electric Power a Sector Energy Consumption (Quadrillion BTUs): 2013 ......... 5-12

6-1. Final NESHAP for Existing Stationary Reciprocating Internal Combustion Engines (RICE): Affected Sectors and SBA Small Busi ness Size Standards ............. 6-3 6-2. Average Receipts for Affected Industry by Enterprise: 2002 ($2008 Million/establishment) ................................................................................................. 6-6 6-3. Average Receipts for Affected Industr y by Enterprise Receipt Range: 2002 ($2008 /establishment) ................................................................................................ 6-7 6-4. Representative Establishment Costs Used for Small Entity Analysis ($2008) ........... 6-9

7-1. Human Health and Welfare Effects of PM 2.5 .............................................................. 7-2x 7-2. Summary of Monetized Co-benefits Estimates for RICE NESHAP for Compression Ignition in 2013 (2008$) ....................................................................... 7-8 7-3. Summary of Reductions in H ealth Incidences from PM 2.5 Co-benefits for RICE NESHAP in 2013 ........................................................................................................ 7-8 7-4 All PM 2.5 Co-benefits Estimates for the RICE NESHAP at discount rates of 3% and 7% in 2013 (in millions of 2008$) ........................................................................ 7-9 7-5. Sensitivity Analyses for Monetized Health Co-benefits (millions of 2008$) ........... 7-221-1 SECTION 1 EXECUTIVE SUMMARY
EPA estimates that complying with the final RICE rule will have an annualized cost of approximately $373 million per year (2008 dollars) in the year of full implementation of the rule (2013). Using these costs, EPA estimates in its economic impact analysis that the NESHAP will have limited impacts on the industries affected an d their consumers. Using sales data obtained for affected small entities in an analysis of th e impacts of this proposal on small entities, EPA expects that the NESHAP will not result in a SISNOSE (significant economic impacts for a substantial number of small entities). EPA al so does not expect significant adverse energy impacts based on Executive Order 13211, an Executiv e Order that requires analysis of energy impacts for rules such as this one that are economically significant under Executive Order 12866.
The RICE rule is also considered subj ect to the requirements of the Office of Management and Budget’s (OMB’s) Circular A-4 b ecause EPA expects that either the benefits or the costs are potentially $1 billion or higher. EPA, estimates the total monetized co-benefits of the NESHAP to be $940 million to $2.3 billion (2008$) at a 3% discount rate and $850 million to $2.1 billion at a 7% discount ra te in the year of full implemen tation of the rule (2013). EPA believes that the benefits are likely to exceed the annualized costs of $373 million by a substantial margin under this rulemaking even when taking into account uncertainties in the cost and benefit estimates

. These estimates are “snapshots” of benefits and cost s at year 2013

.2-1 SECTION 2 INTRODUCTION
EPA is promulgating national emission standards for hazardous air pollutants for existing stationary compression igni tion reciprocating internal combusti on engines that either are located at area sources of hazardous air pollutant emissions or that have a site rati ng of less than or equal to 500 brake horsepower and are located at major sources of hazardous air pollutant emissions. In addition, EPA is promulgating national emissi on standards for hazardous air pollutants for existing nonemergency stationary compressi on ignition engines greater than 500 brake horsepower that are located at major sour ces of hazardous air pollutant emissions.
The rule is economically significant accordi ng to Executive Order 12866. As part of the regulatory process of preparing th ese standards, EPA has prepared a regulatory impact analysis (RIA). This analysis includes an analysis of impacts to small enti ties as part of compliance with the Small Business Regulatory Enforcement Fair ness Act (SBREFA) and an analysis of impacts on energy consumption and production to comply with Executive Orde r 13211 (Statement of Energy Effects).

2.1 Organization of this Report The remainder of this report supports and details the methodology a nd the results of the EIA:

 Section 3 presents a profile of the affected industries.

 Section 4 presents a summary of regulatory alternatives considered in the proposed rule, and provides the compliance costs of the rule.

 Section 5 describes the estimated costs of the regulation and describes the EIA methodology and reports market, welfare, and energy impacts.

 Section 6 presents estimated impacts on small entities.

 Section 7 presents the benefits estimates.3-1 SECTION 3 INDUSTRY PROFILE Compression-ignition (CI) engines CI units almost always oper ate as lean burn engines. They can be configured as either two-stroke le an burn (2SLB) or 4-str oke lean burn (4SLB); the distinction is that CI engines are fueled by dist illate fuel oil (diesel oil), not by natural gas. Industries in which CI engines are found are:

 electric power generation, transm ission, and distribution (NAICS 2211)

 oil and gas extraction (including marginal wells) (NAICS 211111)

 pipeline transportation of natural gas (NAICS 211112),

 general medical and surgi cal hospitals (NAICS 622110)

 irrigation sets and welding e quipment (NAICS 335312 and 333992).
This section provides an introduction to the industries affected by th e rule. The purpose is to give the reader a general unde rstanding of the economic aspects of the industry; their relative size, relationships with other sectors in the ec onomy, trends for the industries, and financial statistics. The sectors discussed are

3.1 Electric Power Generation, Transmission, and Distribution

3.1.1 Overview Electric power generation, transmission, and distribution (NAICS 2211) is an industry group within the utilities sector (NAICS 22). It includes establishments that produce electrical energy or facilitate its transm ission to the final consumer.
From 1997 to 2002, revenues from electric pow er grew about 10% to over $373 billion ($2007) (Table 3-1). At the same time, payroll rose about 6.5% and the number of employees decreased by over 5%. The number of establishmen ts rose by over 15%, resulting in a decrease in average establishment revenue of almost 7%. Industrial production within NAICS 2211 has increased 25% since 1997 (Figure 3-1).
Electric utility companies have traditionall y been tightly regula ted monopolies. Since 1978, several laws and orders have been passed to encourage competition w ithin the electricity market. In the late 1990s, many states began the process of restructuring their utility regulatory framework to support a competitive market. Follo wing market manipulation in the early 2000s, however, several states have susp ended their restructuring efforts. The majority (58%) of diesel3-2 power generators controlled by combined he at and power (CHP) or independent power producers are located in st ates undergoing active restructuring (Figure 3-2).
Table 3-1. Key Statistics: Electric Power Ge neration, Transmission, and Distribution (NAICS 2211) ($2007)

1997 2002 Revenue ($10 6 ) 337,490 373,309 Payroll ($10 6 ) 38,176 40,842 Employees 564,525 535,675 Establishments 7,935 9,394
Source: U.S. Census Bureau; generated by RTI Interna tional; using American FactFinder; “Sector 22: Utilities:

Geographic Area Series: Summary Statistics: 2002 an d 1997.” <http://factfinder.census.gov>; (November 26, 2008).

90 100 110 120 130Index Values (Jan-97=100)

Figure 3-1. Industrial Pro duction Index (NAICS 2211)
Source: The Federal Reserve Board. “Industrial Production and Capacity Utilization: Indu strial Production” Series

ID: G17/IP_MINING_AND_UTILITY_DETAIL/IP.G2211.S <http://www.federalreserve.gov/datadownload/>. (15 December, 2008)3-3 3.1.2 Goods and Services Used In Table 3-2, we use the latest detailed be nchmark input-output data report by the Bureau of Economic Analysis (BEA) (2002) to identify the goods and serv ices used in electric power generation. As shown, labor and ta x requirements represent a signi ficant share of the value of

Diesel and Natural Gas Internal Combustion Generators By State
No Restructuring Suspended Restructuring Active Restructuring 100

50

10 1
Figure 3-2. Internal Combustion Generators by State: 2006 Source: U.S. Department of Energy, Energy Information Administration. 2007. “2006 EIA-906/920 Monthly Time

Series.”
power generation. Extraction, transportation, re fining, and equipment requirements potentially associated with reciprocating internal combustion engines (o il and gas extraction, pipeline transportation, petroleum refineries, and turb ine manufacturing) repr esent around 10% of the value of services.3-4 3.1.3 Business Statistics
The U.S. Economic Census and Statistics of U.S. Businesses (SUSB) programs provide national information on the dist ribution of economic variables by industry, location, and size of business. Throughout this section and re port, we use the following definitions:

 Establishmen t: An establishment is a single phys ical location wh ere business is conducted or where services or i ndustrial operations are performed.
Table 3-2. Direct Requirements for Electri c Power Generation, Transmission, and Distribution (NAICS 2211): 2002

Commodity Commodity Description Direct Requirements Coefficients a V00100 Compensation of employees 20.52% V00200 Taxes on production and imports, less subsidies 13.71% 211000 Oil and gas extraction 6.16% 212100 Coal mining 5.86% 482000 Rail transportation 3.01% 230301 Nonresidential maintenance and repair 2.83% 486000 Pipeline transportation 1.70%
722000 Food services an d drinking places 1.40% 52A000 Monetary authorities and depository credit intermediation 1.39% 541100 Legal services 1.13%

a These values show the amount of the commodity required to produce $1.00 of the industry’s output. The values

are expressed in percentage terms (coefficient ×100). Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table,

Use Table and Direct Requirements Table. Tables 4 and 5.

 Receipts : Receipts (net of taxes) are define d as the revenue for goods produced, distributed, or services provided, in cluding revenue earned from premiums, commissions and fees, rents, interest, divi dends, and royalties. Receipts exclude all revenue collected for local, state, and federal taxes.

 Firm : A firm is a business organization consisting of one or more domestic establishments in the same state and industry that were specified under common ownership or control. The firm and th e establishment are the same for singleestablishment firms. For each multiestablishment firm, establishments in the same industry within a state are counted as one firm; the firm employment and annual payroll are summed from the associated establishments.

 Enterprise : An enterprise is a business organi zation consisting of one or more domestic establishments that were specifi ed under common ownership or control. The3-5 enterprise and the establishment are the same for single-establishment firms. Each multiestablishment company forms one enterprise; the enterprise employment and annual payroll are summed from the asso ciated establishmen ts. Enterprise size designations are determined by the su mmed employment of all associated establishments.
In 2002, Texas had almost 1,000 power establis hments, while California, Georgia, and Ohio all had between 400 and 500 (Figure 3-3) . Hawaii, Nebraska, and Rhode Island all had fewer than 20 establishments in their states.

Establishments by State

Less than 100

100 - 199

200 - 349

350 - 500

More than 500

Figure 3-3. 2002 Regional Distribution of Establishments: Electric Power Generation, Transmission, and Distribution Industry (NAICS 2211) Source: U.S. Census Bureau; generated by RTI Interna tional; using American FactFinder; “Sector 22: Utilities:

Geographic Area Series: Summary Statistics: 2002.” <http://factfinder.census.gov>; (November 10, 2008).
As shown in Table 3-3, the four largest firms owned over 1,200 establishments and accounted for about 16% of total industry receip ts/revenue. The 50 largest firms accounted for almost 6,000 establishments and about 78% of total rece ipts/revenue.
Investor-owned energy providers accounted fo r 67.5% of retail electricity sold in the United States in 2006 (Table 3-4). In 2007, less regulated investor-owned electric utility companies were on average more profitable than companies with greater regulation (Table 3-5). In 2006, enterprises within NAICS 2211 had a pre-ta x profit margin of only 0.9% (Table 3-6).3-6 In 2002, about 82% of firms generating, transm itting, or distributing electric power had receipts of under $50 million (Table 3-7). Ho wever, these firms accounted for only 11% of employment, with 89% of employees working fo r firms with revenues in excess of $100 million.

3.2 Oil and Gas Extraction

3.2.1 Overview Oil and gas extraction (NAICS 211) is an industry group within the mining sector (NAICS 21). It includes establishm ents that operate or develop oil and gas field properties

Table 3-3. Firm Concentration for Electri c Power Generation, Transmission, and Distribution (NAICS 2211): 2002

Commodity Establishments Receipts/Revenue

Number of Employees Employees per Establishment Amount ($10 6 ) Percentage of Total All firms 9,394 $325,028 100.0% 535,675 57 4 largest firms 1,260 $52,349 16.1% 68,432 54 8 largest firms 2,566 $95,223 29.3% 151,575 59 20 largest firms 3,942 $173,207 53.3% 271,393 69 50 largest firms 5,887 $253,015 77.8% 408,021 69
Source: U.S. Census Bureau; generated by RTI Interna tional; using American FactFinder; “Sector 22: Utilities:

Subject Series—Estab & Firm Size: Concentration by Largest Firms for the United States: 2002.” <http://factfinder.census.gov>; (November 21, 2008).
through such activities as exploring for oil a nd gas, drilling and e quipping wells, operating onsite equipment, and conducting ot her activities up to the point of shipment from the property.
Oil and gas extraction consists of two i ndustries: crude petroleum and natural gas extraction (NAICS 211111) and na tural gas liquid extraction ( NAICS 211112). Crude petroleum and natural gas extraction is the larger industry; in 2002, it account ed for 93% of establishments and 75% of oil and ga s extraction revenues.
Industrial production in this indus try is particularly sensitiv e to hurricanes in the Gulf Coast. In September of both 2005 and 2008, produc tion dropped 14% from the previous month. Production is currently 6% lower th an it was in 1997 (Figure 3-4).
From 1997 to 2002, revenues from crude petrol eum and natural gas extraction (NAICS 211111) grew less than 1% to almost $100 billion ( $2007) (Table 3-8). At the same time, payroll3-7 dropped almost 8% and the number of empl oyees dropped by almost 6%. The number of establishments dropped by over 8%; as a result, the average establishment revenue increased by 2.5%. Materials costs were approximately 25% of revenue over the period.
From 1997 to 2002, revenue from natural ga s liquid extraction ( NAICS 211112) grew over 7% to about $34 billion (Table 3-9). At the same time, payr oll dropped 12% and the number of employees dropped by almost 9%. The num ber of establishments dropped by over 3%, resulting in an increase of revenue per establishment of about 10%.3-8Table 3-4. United States Retail Electricity Sales Statistics: 2006Full-Service Providers Other ProvidersItem Investor-Owned Public Federal Cooperative Facility Energy Delivery TotalNumber of entities 215 2,010 9 882 49 150 64 3,379Number of retail customers 100,245,547 20,345,236 39,430 17,465,423 2,166 2,306,163 NA 140,403,965Retail Sales (103megawatthours) 2,476,445 549,124 42,359 370,410 12,397 219,185 NA 3,669,919Percentage of retail sales 67.48 14.96 1.15 10.09 0.34 5.97 NA 100Revenue from retail sales ($106) 224,637 44,271 1,494 31,411 868 16,784 7,040 326,506Percentage of revenue 68.8 13.56 0.46 9.62 0.27 5.14 2.16 100Average retail price (cents/kWh) 9.06 8.06 3.53 8.48 7 7.66 3.21 8.93-9 Table 3-5. FY 2007 Financial Data for 70 U. S. Shareholder-Owned Electric Utilities

Profit Margin Net Income Operating Revenues Investor-Owned Utilities 8.36% $33,933 $405,938

Regulated a 7.12% $12,078 $169,699 Mostly regulated b 8.89% $13,776 $154,916
Diversified c 9.93% $8,078 $81,323

a 80%+ of total assets are regulated.
b 50% to 80% of total assets are regulated.

c Less than 50% of total assets are regulated. Source: Edison Electric Institute. “Income Statement: Q4 2007 Financial Update. Quarterly Report of the U.S.

Shareholder-Owned Electric Utility Industry.” <http://www.eei.org>. Table 3-6. Aggregate Tax Data for A ccounting Period 7/05–6/06: NAICS 2211

Number of enterprises a 836 Total receipts (10 3 ) $308,702,953 Net sales(10 3 ) $289,887,930 Profit margin before tax 0.9% Profit margin after tax —

a Includes corporations with and without net income. Source: Troy, Leo. 2008. “Almanac of Business and Industrial Financial Ratios: 2009 Edition.” CCH.
3.2.2 Goods and Services Used The oil and gas extraction industry has similar labor and tax requirements as the electric power generation sector. Extrac tion, support, power, and equipm ent requirements potentially associated with reciprocati ng internal combustion engines (oil and gas extraction, support activities, electric power genera tion, machinery and equipment rent al and leasing, and pipeline transportation) represent around 8% of the value of services (Table 3-10).

3.2.3 Business Statistics The U.S. Economic Census and SUSB progr ams provide national information on the distribution of economic variable s by industry, location, and size of business. Throughout this section and report, we use the following definitions:

 Establishment : An establishment is a single phys ical location wh ere business is conducted or where services or i ndustrial operations are performed.3-10Table 3-7. Key Enterprise Statistics by Receipt Size for Electric Power Generation, Transmission, and Distribution (NAICS2211): 2002Owned by Enterprises withVariableAllEnterprises0–99KReceipts100–499.9KReceipts500–999.9KReceipts1,000–4,999.9KReceipts5,000,000–9,999,999KReceipts<10,000KReceipts10,000–49,999KReceipts50,000–99,999KReceipts100,000K+ReceiptsFirms 1,756 129 250 80 232 205 896 538 112 210Establishments 9,493 129 250 85 245 262 971 978 403 7,141Employment 515,769 429 834 3,139 2,712 5,620 12,734 31,573 14,858 456,604Receipts ($103) $320,502,670 $5,596 $63,339 $57,363 $627,414 $1,472,405 $2,226,117 $12,171,098 $7,607,166 $298,498,289Receipts/firm ($103) $182,519 $43 $253 $717 $2,704 $7,182 $2,485 $22,623 $67,921 $1,421,420Receipts/establishment($103)$33,762 $43 $253 $675 $2,561 $5,620 $2,293 $12,445 $18,876 $41,801Receipts/employment($)$621,407 $13,044 $75,946 $18,274 $231,347 $261,994 $174,817 $385,491 $511,991 $653,736Source: U.S. Small Business Administration (SBA). 2008. “Firm Size Data from the Statistics of U.S. Businesses: U.S. All Industries Tabulated by Receipt Size:2002.” <http://www.census.gov/csd/susb/susb02.htm>.3-11 70 80 90 100 110Index Values (Jan-97=100)

Figure 3-4. Industrial Pro duction Index (NAICS 211)
Source: The Federal Reserve Board. “Industrial Production and Capacity Utilization: Indu strial Production” Series

ID: G17/IP_MINING_AND_UTILITY_D ETAIL/IP.G211.S <http://www.feder alreserve.gov/datadownload/>. (December 15, 2008). Table 3-8. Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111): ($2007)

1997 2002 Revenue ($10 6 ) 97,832 98,667 Payroll ($10 6 ) 6,232 5,785 Employees 100,333 94,886 Establishments 7,784 7,178
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 21: Mining:

Industry Series: Historical Statistics for the Industry: 2002 and 1997.” <http://factfinder.census.gov>; (November 26, 2008).

 Receipts : Receipts (net of taxes) are define d as the revenue for goods produced, distributed, or services provided, in cluding revenue earned from premiums, commissions and fees, rents, interest, divi dends, and royalties. Receipts exclude all revenue collected for local, state, and federal taxes.

 Firm : A firm is a business organization consisting of one or more domestic establishments in the same state and industry that were specified under common ownership or control. The firm and the establishment are the same for single-3-12 Table 3-9. Key Statistics: Natural Gas Li quid Extraction (NAI CS 211112) ($2007)

1997 2002 Revenue ($10 6 ) 31,139 33,579 Payroll ($10 6 ) 679 607 Employees 10,548 9,693
Establishments 528 511
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 21: Mining:

Industry Series: Historical Statistics for the Industry: 2002 and 1997.” <http://factfinder.census.gov>; (November 26, 2008). Table 3-10. Direct Requirements for Oil and Gas Extraction (NAICS 211): 2002

Commodity Commodity Description Direct Requirements Coefficients a V00200 Taxes on production and imports, less subsidies 8.93% V00100 Compensation of employees 6.67% 230301 Nonresidential maintenance and repair 6.36% 211000 Oil and gas extraction 1.91% 213112 Support activities for oil and gas operations 1.51% 221100 Electric power generation, transmission, and distribution 1.47% 541300 Architectural, engineering, and related services 1.24% 532400 Commercial and industrial machinery and equipment rental and leasing 1.20% 33291A Valve and fittings other than plumbing 1.10% 541511 Custom computer programming services 0.99%

a These values show the amount of the commodity required to produce $1.00 of the industry’s output. The values

are expressed in percentage terms (coefficient ×100). Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table,

Use Table and Direct Requirements Table. Tables 4 and 5. establishment firms. For each multiestablishment firm, establishments in the same industry within a state are counted as one firm; the firm employment and annual payroll are summed from the associated establishments.

 Enterprise : An enterprise is a business organi zation consisting of one or more domestic establishments that were specifi ed under common ownership or control. The enterprise and the establishment are the same for single-establishment firms. Each multiestablishment company forms one enterprise; the enterprise employment and annual payroll are summed from the asso ciated establishmen ts. Enterprise size designations are determined by the su mmed employment of all associated establishments.3-13 In 2002, Texas had almost 3,000 crude pe troleum and natural gas extraction establishments, Oklahoma had about 1,000, and ev ery other state had under 450 (Figure 3-5). Twenty states had fewer than 10 establishmen ts. Similarly, Texas had 180 natural gas liquid extraction establishments, Louisiana had 76, and every other state had under 40 (Figure 3-6). Only nine states had 10 or more esta blishments, and 17 had no establishments.

Establishments by State

Less than 100

100 - 249

249 - 499
500 - 1,000
More than 1,000 Figure 3-5. 2002 Regional Distribution of Es tablishments: Crude Petroleum and Natural Gas Extraction Industry (NAICS 211111) Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 21: Mining:

Geographic Area Series: Industry Statistics for the State or Offshore Areas: 2002.” <http://factfinder.census.gov>; (November 10, 2008).
According to the SUSB, 89% of crude petr oleum and natural gas extraction firms had fewer than 500 employees in 2002 (Table 3-11). Sixty-three percent of natural gas liquid extraction firms had fewer than 500 employees in 2002 (Table 3-12).
Enterprises within this industry generated $165 billion in total receipts in 2006. Including those enterprises withou t net income, the industry averaged an after-tax profit margin of 18.3% (Table 3-13).3-14 Establishments by State

Less than 5

5 - 19

20 - 49

50 - 75

More than 75 Figure 3-6. 2002 Regional Distribution of Establishments: Natural Gas Liquid Extraction Industry (NAICS 211112) Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 21: Mining:

Geographic Area Series: Industry Statistics for the State or Offshore Areas: 2002.” <http://factfinder.census.gov>; (November 10, 2008). Table 3-11. Key Enterprise Statistics by Employment Size for Crude Petroleum and Natural Gas Extraction (NAICS 211111): 2002

Owned by Enterprises with

Variable All Enterprises 1–20 Employees 20–99 Employees 100–499 Employees 500–749 Employees 750–999 Employees 1,000–1,499 Employees Firms 6,238 5,130 348 85 11 11 5 Establishments 7,135 5,185 449 254 37 63 25 Employment 76,794 5,825 5,171 2,757 Not di sclosed Not disclosed Not disclosed Receipts ($ 10 3 ) $88,388,300 $2,353,181 $2,559,239 $2,051, 860 Not disclosed Not disclosed Not disclosed Receipts/firm ($ 10 3 ) $14,169 $459 $7,354 $24,140 Not disclosed N ot disclosed Not disclosed Receipts/establishment ($ 10 3 ) $12,388 $454 $5,700 $8,078 Not disclosed N ot disclosed Not disclosed

Receipts/employment ($) $1,150,979 $403,980 $494,921 $744,236 Not disclosed Not disclosed Not disclosed
Source: U.S. Census Bureau. 2008a. Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment

Sizes: 2002. <http://www2.census.gov/csd/susb/20 02/02us_detailed%20sizes_6digitnaics.txt>. 3.2.4 Case Study: Marginal Wells To provide additional context for understanding energy sectors that use reciprocating internal combustion engines, we examine one segmen t of the oil and gas sect or: marginal wells.3-15 Table 3-12. Key Enterprise Statistics by Em ployment Size for Crude Natural Gas Liquid Extraction (NAICS 211112): 2002

Owned by Enterprises with

Variable All Enterprises 1–20 Employees 20–99 Employees 100–499 Employees 500–749 Employees 750–999 Employees 1,000–1,499 Employees

Firms 113 54 7 10 2 1 2

Establishments 494 54 7 38 23 1 6 Employment 11,486 65 Not disclosed 241 No t disclosed Not disclosed Not disclosed Receipts ($10 3 ) $72,490,930 $13,862 Not disclosed $383,496 Not disclosed Not disclosed Not disclosed Receipts/firm ($10 3 ) $641,513 $257 Not disclosed $38,350 Not di sclosed Not disclosed Not disclosed Receipts/establishment ($10 3 ) $146,743 $257 Not disclosed $10,092 Not di sclosed Not disclosed Not disclosed

Receipts/employment ($) $6,311,242 $213, 262 Not disclosed $1,591,270 Not disc losed Not disclosed Not disclosed
Source: U.S. Census Bureau. 2008a. Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment

Sizes: 2002. <http://www2.census.gov/csd/susb/20 02/02us_detailed%20sizes_6digitnaics.txt>. Table 3-13. Aggregate Tax Data for Accounting Period 7/05

– 6/06: NAICS 211

Number of enterprises a 17,097 Total receipts (10 3 ) $164,841,432 Net sales(10 3 ) $142,424,188 Profit margin before tax 24.6% Profit margin after tax 18.3%

a Includes corporations with and without net income. Source: Troy, Leo. 2008. “Almanac of Business and Industrial Financial Ratios: 2009 Edition.” CCH.
This industry includes small-volume wells that are ma ture in age, are more difficult to extract oil or natural gas from than other types of wells, and generally operate at very low levels of profitability. As a result, well operations can be qu ite responsive to small ch anges in the benefits and costs of their operation.
In 2006, there were approximately 420,000 marg inal oil wells and 300,000 marginal gas wells (Interstate Oil and Ga s Compact Commission [IOGCC], 2007). These wells provide the United States with 18% of oil and 9% of natural gas production (IOGCC, 2007). Data for 2006 show that revenue from the over 700,000 wells was approximately $31.3 billion (Table 3-14).
Historical data show marginal oil production fluctuated between 1997 and 2006, reflecting the industry’s sensitivity to changes in economic conditions of fuel markets (see3-16 Table 3-14. Reported Gross Revenue Es timates from Marginal Wells: 2006

Well Type Number of Wells Production from Marginal Wells Estimated Gross Revenue ($10 9 ) Oil 422,255 335.312467 MMbbls $20.1 Natural gas 296,721 1708.407584 MCF $11.1 Total 718,976 $31.3
Source: Interstate Oil & Gas Compact Commission. 2007. “Marginal Wells: Fuel for Economic Growth.” Table 3.B.

Available at <http://iogcc.publishpath.com/Websites /iogcc/pdfs/2007-Marginal-Well-Report.pdf>.
Figure 3-7). In contrast, the number of marginal gas wells has continually increased during the past decade; the IOGCC estimates that daily production levels from these wells reached a 10-year high in 2005. Although we have been una ble to find data on what fraction of these marginal wells are operated by small businesses, the IOGCC states that many are run by “mom and pop operators” (IOGCC, 2007).

3.3 Pipeline Transportation of Natural Gas

3.3.1 Overview Pipeline transportation of natu ral gas (NAICS 48621) is an industry group within the transportation and warehousing se ctor (NAICS 48-49), but more specifically in the pipeline transportation subsector (486). It includes the transmission of natural gas as well as the distribution of the gas through a local ne twork to participating businesses.
From 1997 to 2002, natural gas transportation revenues fell by 7% to just under $23 billion ($2007) (Table 3-15). At the same time , payroll decreased by 7%, while the number of paid employees decreased by nearly 9%. Howeve r, the number of estab lishments increased by 17% from 1,450 establishments in 1997 to 1,701 in 2002.

3.3.2 Goods and Services Used The BEA reports pipeline transportation of natural gas only for total pipeline transportation (3-digit NAICS 486). In addition to pipeline trans portation of natural gas (NAICS 4862), this industry includes pi peline transportation of crude oil (NAICS 4861) and other pipeline transportation (NAICS 4869). However, the BEA data are likely representative of the affected sector since pipeline transportati on of natural gas accounts for 68% of NAICS 486 establishments and 72% of re venues (Figures 3-8 and 3-9).3-17 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000

295 300 305 310 315 320 325 330 335 340

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006Billion Cubic FeetMillion Barrels

Year
Marginal Oil Production Marginal Gas Production Figure 3-7. Trends in Marginal Oil and Gas Production: 1997 to 2006 Source: Interstate Oil & Gas Compact Commission. 2007. “Marginal Wells: Fuel for Economic Growth.” Pages 3

and 11. Available at < http://iogcc.my shopify.com/collections/frontpage/p roducts/2007-marginal-well-report2007.pdf>. Table 3-15. Key Statistics: Pipeline Transporta tion of Natural Gas (NAICS 48621) ($2007)

Year 1997 2002 Revenue ($10 6 ) 24,646 22,964 Payroll ($10 6 ) 2,662 2,438 Employees 35,789 32,542
Establishments 1,450 1,701
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48:

Transportation and Warehousing: Industry Series: Comp arative Statistics for the United States (1997 NAICS Basis): 2002 and 1997” <http://factfinder.census.gov>; (December 12, 2008).
In Table 3-16, we use the latest detailed benchmark input-output da ta report by the BEA (2002) to identify the goods and services used by pipeline transportation (NAICS 486). As shown, labor, refineries, and maintenance requirem ents represent significant share of the cost associated with pipeline transportation. Power a nd equipment requirements potentially associated with reciprocating internal co mbustion engines (electric power generation and commercial and industrial machinery and equipment repair and maintenance) repres ent less than 2% of the value of services.3-18 68%

21% 11%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

4862 Pipeline Transportation of Natural Gas 4869 Other Pipeline Transportation 4861 Pipeline Transportation of Crude Oil

Figure 3-8. Distribution of Establishments within Pipeline Transportation (NAICS 486) Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48:

Transportation and Warehousing: Industry Series : Summary Statistics for the United States: 2002” <http://factfinder.census.gov >; (December 12, 2008).

72%

16% 12%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

4862 Pipeline Transportation of Natural Gas 4869 Other Pipeline Transportation 4861 Pipeline Transportation of Crude Oil

Figure 3-9. Distribution of Revenue with in Pipeline Transportation (NAICS 486) Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48:

Transportation and Warehousing: Industry Series : Summary Statistics for the United States: 2002” <http://factfinder.census.gov >; (December 12, 2008).3-19 Table 3-16. Direct Requirements for Pipe line Transportation (NAICS 486): 2002

Commodity Commodity Description Direct Requirements Coefficients a V00100 Compensation of employees 14.78%
324110 Petroleum refineries 13.55% 230301 Nonresidential maintenance and repair 6.07% 211000 Oil and gas extraction 4.94% 333415 Air conditioning, refrigeration, and warm air heating equipment manufacturing 4.40%

561300 Employment services 4.26% 5416A0 Environmental and other technical consulting services 3.04% 541300 Architectural, engineering, and related services 3.04%
420000 Wholesale trade 2.79% 332310 Plate work and fabricated structural product manufacturing 2.72% 5419A0 All other miscellaneous professional, scientific, and technical services 2.48%
524100 Insurance carriers 2.38%
531000 Real estate 2.33% 52A000 Monetary authorities and depository credit intermediation 1.76% V00200 Taxes on production and imports, less subsidies 1.41% 541100 Legal services 1.19% 221100 Electric power generation, transmission, and distribution 1.13%

a These values show the amount of the commodity required to produce $1.00 of the industry’s output. The values

are expressed in percentage terms (coefficient ×100). Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table,

Use Table and Direct Requirements Table. Tables 4 and 5.

3.3.3 Business Statistics The pipeline transportation of natural gas is cl early concentrated in the two states closest to the refineries in the Gulf of Mexico. In 2002, Texas and Louisiana contributed to 31% of all pipeline transportation establishments in the Un ited States (Figure 3-10) and 41% of all U.S. revenues. Other larger co ntributors with over 50 establishments in their states include Oklahoma, Pennsylvania, Kansas, Mississi ppi, and West Virginia.3-20 Establishments by State

Less than 15

15 - 39

40 - 79

80 - 149

More than 150

Figure 3-10. 2002 Regional Distribution of Establishments: Pipeline Transportation (NAICS 486) Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48-49:

Geographic Distribution—Pipeline transportation of na tural gas: 2002.” <http://factfinder.census.gov>; (November 10, 2008).
According to 2002 U.S. Census data, about 86% of transportation of natural gas establishments were owned by corporations and about 8% were owned by individual proprietorships. About 6% were owned by partne rships (Figure 3-11). As shown in Table 3-17, the four largest firms accounted for nearly half of the establishments with 698, and just over half, 51%, of total revenue. The 50 largest firms accounted for over 1,354 establishments and about 99% of total revenue. The averag e number of employees per es tablishment was approximately 17 across all groups of firms.
Enterprises within pipeline transportation (NAICS 486) generated $6.6 billion in total receipts in 2006. Includi ng those enterprises without net income , the industry averaged an aftertax profit margin of 7.9% (Table 3-18).

The 2002 SUSB shows that 47% of all firms in this industry made under $5 million in revenue. Enterprises with revenue over $100 million provided an overwhelming share of employment in this indust ry (98%) (Table 3-19).3-21 86%

8% 6%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Corporations Individual Proprietorships Partnerships Figure 3-11. Share of Establishments by Legal Form of Organization in the Pipeline Transportation of Natural Gas Industry (NAICS 48621): 2002 Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48-49:

Transportation and Warehousing: Subject Series—Estab & Firm Size: Legal Form of Organization for the United States: 2002” <http://f actfinder.census.gov>; (December 12, 2008).
Table 3-17. Firm Concentration for Pipeline Transportation of Natural Gas (NAICS 48621): 2002

Commodity Establishments Receipts/Revenue
Number of Employees Employees per Establishment Amount ($10 6 ) Percentage of Total
All firms 1,431 $14,797 100% 23,677 16.5 4 largest firms 698 $7,551 51% 11,814 16.9 8 largest firms 912 $10,059 68% 15,296 16.8 20 largest firms 1,283 $13,730 93% 21,792 17.0 50 largest firms 1,354 $14,718 99% 23,346 17.2
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48:

Transportation and Warehousing: Subject Series—Estab & Firm Size: Concentration by Largest Firms for the United States: 2002” <http://factfinder. census.gov>; (December 12, 2008).3-22 Table 3-18. Aggregate Tax Data for A ccounting Period 7/05–6/06: NAICS 486

Number of enterprises a 410 Total receipts (10 3 ) $6,606,472 Net sales(10 3 ) $6,118,827 Profit margin before tax 12.9% Profit margin after tax 7.8%

a Includes corporations with and without net income. Source: Troy, Leo. 2008. “Almanac of Business and Industrial Financial Ratios: 2009 Edition.” CCH.

3.4 General Medical and Surgical Hospitals

3.4.1 Overview General medical and surgical hospitals (NAICS 6221) is an industry group within the health care and social assistance sector (NAICS 62). It includes hospitals engaged in diagnostic and medical treatment (both surgical and nonsur gical) for inpatients with a broad range of medical conditions. They usually provide other services as well, in cluding outpatient care, anatomical pathology, diagnostic X-rays, clinical laboratory wo rk, and pharmacy services.
From 1997 to 2002, hospital revenues grew about 18% to over $500 billion ($2007) (Table 3-20). At the same time, payroll rose about 14%, while the number of employees increased by only 5%. The number of establishmen ts declined during this period by almost 6%, resulting in an increase in revenue per establishment of almost 22%.

3.4.2 Goods and Services Used The BEA reports hospital expenditures onl y for hospitals (3-digit NAICS 622). In addition to general hospitals (NAICS 6221), this industry includes psychiatric and substance abuse hospitals (NAICS 6222) and specialty hos pitals (NAICS 6223). However, these data should be representative of the affected sect or since in 2002, general medical and surgical hospitals accounted for 92% of NAICS 622 establishments and 94% of revenues.

In Table 3-21, we use the latest detailed benchmark input-output da ta report by the BEA (2002) to identify the goods and services used by hospitals (NAICS 622). As shown, labor and land requirements represent a significant share of the value of hospital services. Power and equipment requirements potentially associated w ith reciprocating intern al combustion engines (electric power generation and commercial and industrial machinery and equipment repair and maintenance) represent less than 2% of the value of services.3-23Table 3-19. Key Enterprise Statistics by Receipt Size for Pipeline Transportation ofNatural Gas (NAICS 48621): 2002Owned by Enterprises withVariableAllEnterprises0–99KReceipts100–499.9KReceipts500–999.9KReceipts1,000–4,999.9KReceipts5,000,000–9,999,999KReceipts<10,000KReceipts10,000–49,999KReceipts50,000–99,999KReceipts100,000K+ReceiptsFirms 154 8 32 10 22 6 78 11 4 61Establishments 1,936 8 32 10 22 7 79 21 4 1,832Employment 37,450 15 58 69 138 88 368 216 274 36,592Receipts ($103) $35,896,535 $524 $8,681 $7,451 $46,429 $40,967 $104,052 $188,424 $154,384 $35,449,675Receipts/firm ($103) $233,094 $66 $271 $745 $2,110 $6,828 $1,334 $17,129 $38,596 $581,142Receipts/establishment($103)$18,542 $66 $271 $745 $2,110 $5,852 $1,317 $8,973 $38,596 $19,350Receipts/employment($)$958,519 $34,933 $149,672 $107,986 $336,442 $465,534 $282,750 $872,333 $563,445 $968,782Source: U.S. Census Bureau. 2008b. Firm Size Data from the Statistics of U.S. Businesses, U.S. All Industries Tabulated by Receipt Size: 2002.http://www2.census.gov/csd/susb/2002/usalli_r02.xls.3-24 Table 3-20. Key Statistics: General Medical and Surgical Hospitals (NAICS 6221) ($2007)

1997 2002 Revenue ($10 6 ) 444,141 539,502 Payroll ($10 6 ) 178,874 209,063 Employees 4,526,591 4,772,422 Establishments 5,487 5,193
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 62: Health Care

and Social Assistance: Geographic Area Series: 2002 and 1997.” <http://factfinder.census.gov>; (November 10, 2008).
Table 3-21. Direct Requirements for Hospitals (NAICS 622): 2002

Commodity Commodity Description Direct Requirements Coefficients a V00100 Compensation of employees 51.90%
531000 Real estate 10.76% 550000 Management of companies and enterprises 4.02% 621B00 Medical and diagnostic labs and outpatient and other ambulatory care services 2.22%

561300 Employment services 1.90% 325412 Pharmaceutical prepar ation manufacturing 1.86% 325413 In-vitro diagnostic substance manufacturing 1.66%
524100 Insurance carriers 1.66%
420000 Wholesale trade 1.62% 221100 Electric power generation, transmission, and distribution 1.14%

a These values show the amount of the commodity required to produce $1.00 of the industry’s output. The values

are expressed in percentage terms (coefficient ×100). Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table,

Use Table and Direct Requirements Table. Tables 4 and 5.

3.4.3 Business Statistics In 2002, California and Texas each ha d around 400 hospitals, and New York, Pennsylvania, Florida, and Illi nois all had more than 200 (Figure 3-12). Vermont, Rhode Island, Delaware, and the District of Columbia all had fewer than 20 hospital establishments in their
states.3-25 Establishments by State

Less than 50

50 - 99

100 - 149

150 - 249

Above 250

Figure 3-12. 2002 Regional Distribution of Es tablishments: General Medical and Surgical Hospital Industry (NAICS 6221) Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 62: Health Care

and Social Assistance: Geographic Area Series: Summ ary Statistics: 2002.” <http://factfinder.census.gov>; (November 10, 2008).

According to 2002 Census data, 79.6% of genera l hospitals were owned by corporations, 19.5% were individual proprietors hips, and about 0.7% were part nerships (Figure 3-13). As shown in Table 3-22, the four largest firms acc ounted for almost 400 establishments and about 10% of total revenue. The 50 largest firms acc ounted for over 1,100 establishments and about 30% of total revenue. In addition, about 27% of all general hospita ls are owned or controlled by the government, with most of those at the local level (Table 3-23).
In 2006, the United States had 4,927 community hospitals (Table 3-24); nongovernmental not-for-profit hospitals accounted for 59% of these hospitals, and 75% of the expenses of all community hospitals.
Enterprises including hospitals, nursing and re sidential care facilities, and social assistance (NAICS 622-4) generated $108 billion in total receipts in 2006. Including those enterprises without net income, th e industry averaged an after-tax profit margin of 3.1% (Table 3-25).3-26 79.6%

19.5%

0.7% 0.1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Corporations Partnerships Individual Proprietorships Other Legal Forms of Organization

Figure 3-13. Share of Establishments by Le gal Form of Organization in the General Medical and Surgical Hospitals Industry (NAICS 6221): 2002 Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 62: Health Care

and Social Assistance: Subject Series—Estab & Firm Si ze: Legal Form of Organization for the United States: 2002” <http://factfinder.census.gov>; (November 21, 2008).

Table 3-22. Firm Concentration for General Medical and Surgical Hospitals (NAICS 6221): 2002

Receipts/Revenue

Commodity Establishments Amount ($10 6 ) Percentage of Total Number of Employees Employees per Establishment All firms 5,193 $469,727 100.0% 4,772,422 919 4 largest firms 391 $44,124 9.4% 389,152 995 8 largest firms 507 $60,708 12.9% 537,695 1,061 20 largest firms 777 $92,466 19.7% 831,988 1,071 50 largest firms 1,138 $139,501 29.7% 1,279,444 1,124
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 62: Health Care

and Social Assistance: Subject Series—Estab & Firm Size: Concentration by Largest Firms for the United States: 2002” <http://factfinder.census.gov>; (November 21, 2008).3-27 Table 3-23. Government Control and Ownership for General Medical and Surgical

Hospitals (NAICS 6221): 2002

Receipts/Revenue

Commodity Establishments Percentage of Total Amount ($10 6 ) Percentage of Total Number of Employees Employees per Establishment All firms 5,193 100.0% $469,727 100.0% 4,772,422 919 All government owned and controlled hospitals 1,408 27.1% $91,956 19.6% 962,772 684

Federal government 258 5.0% $25,993 5.5% 257,766 999 State government 98 1.9% $19,029 4.1% 176,754 1,804 Local government 1,052 20.3% $46,934 10.0% 528,252 502
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 62: Health Care

and Social Assistance: Subject Series—Estab & Firm Size: Concentration by Largest Firms for the United States: 2002” <http://factfinder.census.gov>; (November 21, 2008).
Table 3-24. Hospital Statistics: 2006

Community Hospitals Number Total Expenses (10 3 ) Total Net Revenue (10 3 ) Total 4,927 $551,835,328 $587,050,914 Nongovernment not-for-profit 2,919 $412,867,575 NA Investor-owned 889 $54,994,199 NA State and local government 1,119 $83,973,554 NA

NA = Not available Source: American Hospital Association. 2007. “AHA Hospital Statistics: 2008 Edition.” Health Forum.
Table 3-25. Aggregate Tax Data for Accounting Period 7/05

– 6/06: NAICS 622-4

Number of enterprises a 18,263 Total receipts (10 3 ) $108,074,793 Net sales(10 3 ) $102,300,229 Profit margin before tax 4.4% Profit margin after tax 3.1%

a Includes corporations with and without net income. Source: Troy, Leo. 2008. “Almanac of Business and Industrial Financial Ratios: 2009 Edition.” CCH.3-28 The SUSB reports 27% of general hospitals have receipts of less than $10 million and 41% report receipts above $50 million (Table 3-26). Large hospitals employ a significant share of the people working in this industry.

3.5 Irrigation Sets and Welding Equipment

3.5.1 Overview The U.S. Economic Census classifies irriga tion equipment under the farm machinery and equipment manufacturing i ndustry group (NAICS 333111). This U.S. industry comprises establishments primarily enga ged in manufacturing agricultural and farm machinery and equipment and other turf and grounds care equipm ent, including planting, harvesting, and grassmowing equipment (except lawn and garden type).
From 1997 to 2002, farm machinery and equi pment manufacturing revenues fell by $3 billion from $18 billion to $15 billion (Table 3-27 ). At the same time, payroll decreased by 19% and the number of paid employees decreased by nearly 19%. The number of establishments dropped by 9% from 1,339 establishments in 1997 to 1,214 in 2002. Industrial production in the industry is currently 13% lowe r than in 1997 (Figure 3-14).

The U.S. Economic Census classifies welding equipment under the welding and soldering equipment manufacturing industry group (NAICS 333992). This U.S. industry comprises establishments primarily engaged in manufacturing welding and soldering equipment and accessories (except transformers), such as welding electrodes, welding wire, and soldering equipment (except handheld).
From 1997 to 2002 welding and soldering eq uipment manufactur ing revenue fell by about 22% to $1 billion (Table 3-28). At the same time, payroll decreased by 21% and the number of paid employees decreased by nearly 28%. The number of establishments dropped by 8% from 250 establishments in 1997 to 231 in 2002.
3.5.2 Irrigation and Welding Services The demand for equipment is derived from the demand for the services the equipment provides. We describe uses and indust rial consumers of this equipment.
3.5.2.1 Irrigation Demand for irrigation equipment is driv en by farm operation decisions, optimal replacement considerations, and climate and weather conditions. The National Agriculture Statistics Service (NASS) 2003 Farm and Ranc h Irrigation Survey (USDA-NASS, 2004) shows3-29Table 3-26. Key Enterprise Statistics by Receipt Size forGeneral Medical and Surgical Hospitals (NAICS 6221): 2002 ($2007)Owned by Enterprises withVariableAllEnterprises0–99KReceipts100–499.9KReceipts500–999.9KReceipts1,000–4,999.9KReceipts5,000,000–9,999,999KReceipts<10,000KReceipts10,000–49,999KReceipts50,000–99,999KReceipts100,000K+ReceiptsFirms 3,581 64 77 59 344 437 981 1,116 438 1,046Establishments 5,971 64 77 59 356 454 1,010 1,203 519 3,239Employment 4,713,450 2,500–4999 250–499 730 18,675 56,296 78,980 347,613 337,885 3,948,972Receipts ($103) $468,007,640 Not disclosed Not disclosed $42,017 $1,084,945 $3,165,513 $4,317,321 $26,036,570 $29,039,799 $408,613,950Receipts/firm ($103) $130,692 Not disclosed Not disclosed $712 $3,154 $7,244 $4,401 $23,330 $66,301 $390,644Receipts/establishment($103)$78,380 Not disclosed Not disclosed $712 $3,048 $6,972 $4,275 $21,643 $55,953 $126,154Receipts/employment($)$99,292 Not disclosed Not disclosed $57,558 $58,096 $56,230 $54,663 $74,901 $85,946 $103,473Source: U.S. Small Business Administration (SBA). 2008. “Firm Size Data from the Statistics of U.S. Businesses: U.S. All Industries Tabulated by Receipt Size:2002.” <http://www.census.gov/csd/susb/susb02.htm>.3-30 Table 3-27. Key Statistics: Farm Machinery and Equipment Manufacturing (NAICS 333111) ($2007)

1997 2002 Revenue ($10 6 ) $17,838 $15,006 Payroll ($10 6 ) $2,644 $2,132 Employees 66,370 53,817 Establishments 1,339 1,214
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 31:

Manufacturing: Industry Series: Historical Statistics for the Industry: 2002 and Earlier Years” <http://factfinder.census.gov>; (November 25, 2008).

40 50 60 70 80 90 100 110 120 130Index Values (Jan-97=100) Industrial Production Index (NAICS 333111)

Figure 3-14. Industrial Pro duction Index (NAICS 333111)3-31 Table 3-28. Key Statistics: Welding and Soldering Equipment Manufacturing (NAICS 333992) ($2007)

1997 2002 Revenue ($10 6 ) $4,957 $3,880 Payroll ($10 6 ) $1,024 $811 Employees 22,505 16,128
Establishments 250 231
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 31:

Manufacturing: Industry Series: Historical Statistics for the Industry: 2002 and Earlier Years.” <http://factfinder.census.gov>; (November 25, 2008). that the top five states ranked by total acres irrigated are Califor nia, Nebraska, Texas, Arkansas, and Idaho. Approximately 32 million of the 53 million, or 68%, of U.S. irrigated acres are used to support oilseed and grain farming and othe r crop farming (tobacco, cotton, sugar cane, and other). Virtually all of th ese irrigated areas are west of the Mississippi River.
The survey reported that approximately 500,000 pumps were used on U.S. farms in 2003 with energy expenses totaling $1.6 billion. Electricity is the dominant form of energy expense for irrigation pumps, accounting for 60% of total en ergy expenses. Diesel fu el is second (18%), followed by natural gas (18%) and other form s of energy such as gasoline (4%).
Per-acre operating costs for these irrigation sy stems vary by fuel type, and natural gas was the most expensive in 2003 ($57 per acre fo r well systems and $34 per acre for surface water systems) (Table 3-29). Systems using diesel fuel were operated at approximately half of these per-acre costs ($25 per acre for well systems and $16 per acre for surface water systems). Gasoline- and gasohol-powered sy stems offered the least expensiv e operating costs ($12 per acre for well systems and $18 per acre for surface water systems).
As shown in Table 3-30, the number of on-farm pumps fell from 508,727 to 497,443 (2%) between 1998 and 2003. However, the use of electric- and dies el-powered pumps increased during this period (3% and 4%, resp ectively), while other fuel sources such as gasoline declined significantly. Pumps powered by ga soline and gasohol, for example, declined from 8,965 to 6,178, a 31% change during this period. Pumps power ed by natural gas, LP gas, propane, and butane also declined by 26% to 29%. Although 1998 ope rating cost data are not available, the change in relative costs of operation across fuels between 1998 and 2003 may partly explain3-32 Table 3-29. Expenses per Acre by Type of Energy: 2003

Fuel Type Irrigated by Water from Wells Irrigated by Surface Water Electricity $42.64 $29.84 Natural gas $57.25 $33.67 LP gas, propane, butane $27.21 $22.68 Diesel fuel $25.09 $16.27 Gasoline and gasohol $11.60 $18.05 Total $39.50 $26.39
Source: U.S. Department of Agriculture, National Agricultural Statistics Service. 2004. “2003 Farm and Ranch

Irrigation Survey.” Washington, DC: USDA-NASS. Table 20.

Table 3-30. Number of On-Farm Pumps of Ir rigation Water by Type of Energy: 1998 and 2003

Fuel Type 1998 2003 Percentage Change Electricity 308,579 319,102 3% Natural gas 58,880 41,771 –29% LP gas, propane, butane 23,964 17,792 –26% Diesel fuel 108,339 112,600 4% Gasoline and gasohol 8,965 6,178 –31% Total 508,727 497,443 –2%
Source: U.S. Department of Agriculture, National Agricultural Statistics Service. 2004. “2003 Farm and Ranch

Irrigation Survey.” Washington, DC: USDA-NASS. Table 20.
these patterns. Although no information is available on the use and construction of on-farm pumps specifically, their use is tied to the amount of agricultural land in production. USDA reports that planted acres of the eight major crops hit a 5-year high of 252 million acres in 2008 but will fall and level off to around 244 million acres over the next 2 to 4 years (USDA, 2008). 3.5.2.2 Welding Welding is used in a wide variety of app lications. One of the biggest manufacturers of welding products identifies the following key end-user segments:

 general metal fabrication;

 infrastructure including oil and gas pipelines and platform s, buildings, bridges, and power generation;3-33  transportation and defense industries (automo tive, trucks, rail, ships, and aerospace);

 equipment manufacturers in c onstruction, farming, and mining;

 retail resellers; and

 rental market (Lincoln Electric Holdings, 2006).

Lincoln Electric further descri bes the following key applications : power generation and process industries, offshore production of oil and gas, pipelines/pipemills, and heavy fabrication (earthmoving and construction equipment and agricultural and farm equipment.

3.5.3 Business Statistics In 2003, California and Texas each had more th an 5 million irrigated acres (Figure 3-15). Midwest states like Arkansas and Nebraska had more than 2.5 million irrigated acres. Heavy and civil engineering construction establishmen ts are spread throughout the United States, particularly in areas such as California, Texas, North Carolina, and Florida (Figure 3-16). Each of these states has more than 2,000 establishments.

Irrigated Acres by State

Less than 625,000
625,000 - 1,249,999
1,250,000 - 2,499,999
2,500,000 - 4,999,999
More than 5,000,000

Figure 3-15. 2003 Regional Distri bution of Irrigated Acres3-34 Establishments by State

Less than 250

250 - 499

500 - 999
1,000 - 1,999
More than 2,000

Figure 3-16. 2002 Regional Distribution of Establishments: Heavy and Civil Engineering Construction (NAICS 237)
As shown in Table 3-31, the market value of agriculture products sold was less than $25,000 per year on almost half the irrigated farms in the 2003 Farm and Ranch Irrigation Survey. Over 90% of the irrigated farms had agricultural product revenue below $750,000. It is not clear what fraction of these farms use statio nary diesel engines or are owned by corporate farming operations. Thus, there is uncertainly about how many of these irrigated farms have stationary diesel engines that wi ll be impacted by this rule. In a ddition, there is uncertainty about what fraction of these farms are small businesses. However, SUSB data also suggest 65% of firms in NAICS 11 have receipts less than $500,000 per year.

Table 3-31. Distribution of Farm Statistics by Market Valu e of Agricultural Products Sold: 2003

Variable All Farms <$25K $25– $49K $50– $99K $100– $250K $250– $500K $500– $999K $1,000K or More
Farms 220,163 48% 10% 11% 13% 8% 5% 4%
Land in farms (acres) 196,515,390 8% 6% 9% 21% 17% 16% 23%

Acres irrigated 52,583,431 5% 4% 7% 18% 18% 19% 29% Irrigate cropland harvest (acres) 48,626,955 4% 3% 7% 18% 19% 20% 30%3-35 Source: U.S. Department of Agriculture (USDA), National Agricultural Statistics Service (NASS). 2004. “2003

Farm and Ranch Irrigation Survey.” Washington, DC: USDA-NASS. Table 34.
Enterprises within agriculture, constr uction, and mining machinery manufacturing (NAICS 3331) generated $118 billion of total rece ipts in 2006, while t hose in other general purpose machinery manufacturing (NAICS 3339) ge nerated $69.8 billion. Th e average after-tax profit margin in these two industries wa s 6.9% and 4.7%, respectively (Table 3-32).
Table 3-32. Aggregate Tax Data for A ccounting Period 7/05–6/06: NAICS 3331,9

Agriculture, Construction, & Mining Machinery Manufacturing Other General Purpose Machinery Manufacturing Number of enterprises a 2,485 7,288 Total receipts (10 3 ) $118,369,636 $69,813,244 Net sales(10 3 ) $108,210,188 $65,256,901 Profit margin before tax 9.1% 6.1% Profit Margin after tax 6.9% 4.7%

a Includes corporations with and without net income. Source: Troy, Leo. 2008. “Almanac of Business and Industrial Financial Ratios: 2009 Edition.” CCH.
As noted earlier, welding equipment is used in heavy fabrication such as earthmoving and construction equipment. We focus on the size dist ribution for a representa tive sector in this section (NAICS 327, Heavy and Civil Engineering Construction); other subs ections in Section 2 cover other sectors that poten tially use equipment powered by diesel engines (e.g., power generation and offshore gas distribution). As sh own in Table 3-33, SUSB data suggest 60% of firms in this industry have receipts less than $1 million per year; 90% are below the Small Business Administration (SBA) threshold on $50 milli on per year. However, it is not clear what fraction of these firms use stationary diesel engines.3-36Table 3-33. Key Enterprise Statistics byReceipt Size for Heavy Construction: 2002aOwned by Enterprises withVariableAllEnterprises0–99KReceipts100–499.9KReceipts500–999.9KReceipts1,000–4,999.9KReceipts5,000,000–9,999,999KReceipts<10,000KReceipts10,000–49,999KReceipts50,000–99,999KReceipts100,000K+ReceiptsFirms 38,610 4,570 12,733 5,882 9,994 2,398 35,577 2,395 294 344Establishments 39,949 4,570 12,733 5,883 10,025 2,427 35,638 2,561 405 1,345Employment 856,312 5,219 35,592 37,498 156,941 87,858 323,108 199,532 64,681 268,991Receipts ($103) $174,384,008 $237,458 $3,346,936 $4,191,113 $22,641,664 $16,573,417 $46,990,588 $46,244,065 $16,728,737 $64,420,618Receipts/firm ($103) $4,517 $52 $263 $713 $2,266 $6,911 $1,321 $19,309 $56,900 $187,269Receipts/establishment($103)$4,365 $52 $263 $712 $2,259 $6,829 $1,319 $18,057 $41,306 $47,896Receipts/employment($)$203,645 $45,499 $94,036 $111,769 $144,269 $188,639 $145,433 $231,763 $258,634 $239,490a2002 SUSB NAICS 224. The most comparable 2002 NAICS code for this industry is 237.Source: U.S. Census Bureau. 2008b. Firm Size Data from the Statistics of U.S. Businesses, U.S. All Industries Tabulated by Receipt Size: 2002.http://www2.census.gov/csd/susb/2002/usalli_r02.xls.4-1 SECTION 4 REGULATORY ALTERNATIVES, CO STS, AND EMISSION IMPACTS

4.1 Background
This section of the RIA includes a discussion of the regulatory alternatives considered for the final rule, the costs associated with these re gulatory alternatives, and the impacts on affected emissions (both HAP and non-HAP). All imp acts presented are fo r the year of full implementation, 2013. Although the estimates presented are annualized, they should be understood as a “snapshot” in analyzing costs.
This action promulgates NESHAP for existing st ationary CI RICE w ith a site rating of less than or equal to 500 hp located at major sources, existing non-emergency CI engines with a site rating greater than 500 hp at major sources, and existing stationary CI RICE of any power rating located at area sources. EPA is finalizi ng these requirements to meet its statutory obligation to address HAP emissions from thes e sources under sections 112(d), 112(c)(3) and 112(k) of the CAA. The final NESHAP for sta tionary CI RICE will be promulgated under 40 CFR part 63, subpart ZZZZ, which al ready contains standards appli cable to new stationary RICE and some existing stationary RICE.
EPA promulgated NESHAP for existing, new, a nd reconstructed stationary RICE greater than 500 hp located at major sources on June 15, 2004 (69 FR 33474). EPA promulgated NESHAP for new and reconstructe d stationary RICE that are lo cated at area sources of HAP emissions and for new and reconstructed stationary RICE that have a site rating of less than or equal to 500 hp that are located at major sour ces of HAP emissions on January 18, 2008 (73 FR 3568). At that time, EPA did not promulgate final requirements for existing stationary RICE that are located at area sources of HAP emissions or for existing stat ionary RICE that have a site rating of less than or equal to 500 hp that are located at major sources of HAP emissions. Although EPA proposed requirements for these sour ces, EPA did not finalize these requirements due to comments received indicating that the proposed Maximum Achievable Control Technology (MACT) determinations for existing s ources were inappropriate and because of a decision by the U.S. Court of Appeals for the District of Columbia Circuit on March 13, 2007, which vacated EPA’s MACT standards for the Brick and Structural Clay Products Manufacturing source category (40 CFR part 63, subpart JJJJJ). Sierra Club v. EPA, 479 F.3d 875 (DC Cir 2007). Among other things, the D. C. Circuit found that EPA’s no emission reduction MACT determination in the challenged rule was unlawful. Because in the proposed stationary RICE rule, EPA had used a MACT floor methodology similar to the methodology4-2 used in the Brick MACT, EPA decided to re -evaluate the MACT floors for existing major sources that have a site rating of less than or equal to 500 brak e hp consistent with the Court’s decision in the Brick MACT case. EPA has also re-evaluated the standards for existing area sources in light of the comments received on the proposed rule.
In addition, stakeholders have encouraged the Agency to review whether there are further ways to reduce emissions of pollutants from exis ting stationary diesel engines. In its comments on EPA’s 2005 proposed rule for new statio nary diesel engines (70 FR 39870), the Environmental Defense Fund (EDF) suggested se veral possible avenues for the regulation of existing stationary diesel engine s, including use of diesel oxidati on catalysts or catalyzed diesel particulate filters (CDPF), as well as the use of ultra low sulfur diesel (ULSD) fuel. EDF suggested that such controls can provide significant pollution reductions at reasonable cost. EPA issued an advance notice of proposed rulema king (ANPRM) in January 2008, where it solicited comment on several issues concerning options to regulate emissions of pollutants from existing stationary diesel engines, genera lly, and specifically from larger, ol der stationary diesel engines. EPA solicited comment and collected information to aid decision-making re lated to the reduction of HAP emissions from existing stationary dies el engines and specifically from larger, older engines under Clean Air Act (CAA) section 112 authorities. The Agency sought comment on the larger, older engines because available data indi cate that those engines emit the majority of particulate matter (PM) and toxi c emissions from nonemergency st ationary engines as a whole. A summary of comments and res ponses that were received on the ANPRM is included in docket EPA-HQ-OAR-2007-0995.
EPA has taken several actions over the past several years to reduce exhaust pollutants from stationary diesel engines, but believe s that further reducing exhaust pollutants from stationary diesel engines, part icularly existing stationary dies el engines that have not been subject to Federal standards, is justified. Therefore, EPA is fina lizing emissions reductions from existing stationary diesel engines.

4.2 Summary of the Proposed Rule 4.2.1 What Is the Source Category Regulated by this Proposed Rule?
This final rule addresses emissions from existi ng stationary CI engines less than or equal to 500 hp located at major sources and all existing stationary CI e ngines located at area sources. This final rule also addresses emissions from existing stationary nonemergency CI engines greater than 500 hp at major sources. A major sour ce of HAP emissions is a stationary source that emits or has the potential to emit any single HAP at a rate of 10 tons (9.07 megagrams) or4-3 more per year or any combination of HAP at a rate of 25 tons (22.68 megagrams) or more per year, except that for oil and gas production f acilities, a major source of HAP emissions is determined for each surface site. An area source of HAP emissions is a source that is not a major

source.
This action revises the regulat ions at 40 CFR part 63, subpart ZZZZ, currently applicable to new and reconstructed stationary RICE and to existing stationary RICE greater than 500 hp located at major sources. Through this action, we are adding to subpart ZZZZ requirements for: existing CI stationary RICE less than or equal to 500 HP located at major sources and existing CI stationary RICE located at area sources. When the subpart ZZZZ regulations were promulgated (see 69 FR 33474, June 15, 2004), EPA deferred prom ulgating regulations with respect to stationary engines 500 hp or less at major sources until further information on the engines could be obtained and analyzed. EPA deci ded to regulate these smaller engines at the same time that it regulated engines located at area sources. EPA is sued regulations for new stationary engines located at area sources of HAP emissions and ne w stationary engines located at major sources with a site rating of 500 hp or less in the rulemaking issued on January 18, 2008 (73 FR 3568), but did not promulgate a final regulati on for existing stationary engines.
4.2.1.1 Stationary CI RICE ≤ 500 hp at Major Sources This action revises 40 CFR part 63, subpart ZZZZ, to address HAP emissions from existing stationary CI RICE less than or equal to 500 hp located at major sources. For stationary engines less than or equal to 500 hp at majo r sources, EPA must determine what is the appropriate MACT for those engines under se ction 112(d) (2) and (d )(3) of the CAA.
EPA has divided stationary CI RICE into emergency and nonemergency engines in order to capture the unique differences between these types of engines.
4.2.1.2 Stationary CI RICE at Area Sources This action revises 40 CFR part 63, subpart ZZZZ, in order to address HAP emissions from existing stationary RICE located at ar ea sources. Section 112(d) of the Clean Air Act (CAA) requires EPA to establish national emi ssion standards for h azardous air pollutants (NESHAP) for both major and area sources of HAP that are listed for regulation under CAA section 112(c).
Section 112(k)(3)(B) of the CAA calls for EPA to identify at least 30 HAP that, as a result of emissions of area sources, pose the great est threat to public health in the largest number of urban areas. EPA implemented this provisi on in 1999 in the Integrated Urban Air Toxics4-4 Strategy (64 FR 38715, July 19, 1999). Specifically, in the Strategy, EPA identified 30 HAP that pose the greatest potential health threat in urban areas , and these HAP are referred to as the “30 urban HAP.” Section 112(c)(3) requires EPA to list sufficient categories or subcategories of area sources to ensure that area sources representing 90 percent of the emissions of the 30 urban HAP are subject to regulation. EPA implemented thes e requirements through the Integrated Urban Air Toxics Strategy (64 FR 38715, July 19, 1999). The ar ea source stationary e ngine source category was one of the listed categories. A primary goa l of the Strategy is to achieve a 75 percent reduction in cancer incidence attributable to HAP emitted from stationary sources.
Under CAA section 112(d)(5), EPA may elect to promulgate standards or requirements for area sources “which provide for the use of generally available co ntrol technologies or management practices by such sources to reduce emissions of h azardous air pollutants.” Additional information on generally available co ntrol technologies (GACT)- or management practices is found in the Senate report on the legislation (Senate report Number 101-228, December 20, 1989), which describes GACT as: . . . methods, practices and techniques whic h are commercially available and appropriate for application by the sources in the categ ory considering economic impacts and the technical capabilities of the firms to operate and maintain the emissions control systems.

Consistent with the legislat ive history, EPA can consider costs and economic impacts in determining GACT, which is particularly impor tant when developing regulations for source categories, like this one, that have many small businesses.
Determining what constitutes GACT involves considering the control technologies and management practices that are generally available to the area sources in the source category. EPA also considers the standards applicable to major sources in the same industrial sector to determine if the control technol ogies and management practices are transferable and generally available to area sources. In appropriate circumst ances, EPA may also consider technologies and practices at area and major source s in similar categories to dete rmine whether such technologies and practices could be considered generally av ailable for the area source category at issue. Finally, as EPA has already noted, in determin ing GACT for a particular area source category, EPA considers the costs and economic impact s of available control technologies and management practices on that category.
The urban HAP that must be regulated at stationary RICE to achieve the section 112(c)(3) requirement to regulate categories accoun ting for 90 percent of the urban HAP are: 7 PAH, formaldehyde, acetaldehyde, arsenic, benzene, beryllium compounds, and cadmium4-5 compounds. As explained below, EPA chose to sele ct formaldehyde to serve as a surrogate for HAP emissions. Formaldehyde is the hazardous air po llutant present in the highest concentration from stationary engines. In addition, emissions data show that formaldehyde emission levels are related to other HAP emission levels. EPA has previously de monstrated that CO is an appropriate surrogate for formaldehyde from stationa ry CI engines and is c onsequently finalizing emission standards in terms of CO for existing stationary CI RICE at area sources.
Consistent with stationary CI RICE at majo r sources, EPA has also divided the stationary CI RICE at area sources into emergency and none mergency engines in order to properly take into account the differences between these engines. 4.2.1.3 Stationary Non-Emergency CI RICE >500 hp at Major Sources In addition, EPA is finalizing emission st andards for non-emergency stationary CI engines greater than 500 hp at ma jor sources under its authority to review and revise emission standards as necessary under section 112(d) of the CAA. 4.2.2 What Are the Pollutants Regulated by this Proposed Rule? The final rule regulates emi ssions of HAP. Available emissi ons data show that several HAP, which are formed during the combustion process or which ar e contained within the fuel burned, are emitted from stationary engines. Th e HAP which have been measured in emission tests conducted on diesel fired RICE include: 1,3-butadiene, acetaldehyde, acrolein, benzene, ethylbenzene, formaldehyde, n-hexane, napht halene, polycyclic aromatic hydrocarbons, polycyclic organic matter, styrene, toluene, and xylene. Metallic HAP from diesel fired stationary RICE that have been measured ar e: cadmium, chromium, lead, manganese, mercury, nickel, and selenium.
EPA described the health effects of these HAP and other HAP emitted from the operation of stationary RICE in the preamble to 40 CFR part 63, subpart ZZZZ, published on June 15, 2004 (69 FR 33474). These HAP emissions are known to cause, or contribute significantly to air pollution, which may reasonably be anticipated to endanger public health or welfare. More details on the health effects of these HAP and other HAP emitted from operation of stationary RICE can be found in Section 7 of this RIA.

The final rule will limit emissions of HAP through emissions standards for CO for existing stationary CI RICE. Carbon monoxide has been shown to be an appropriate surrogate for HAP emissions from CI engines. For the NESHAP promulgated in 2004, EPA found that there is a relationship between CO emissions re ductions and HAP emissions reductions from CI4-6 stationary engines. Therefore, because testing for CO emissions has many advantages over testing for HAP emissions, CO emissions were chosen as a surrogate for HAP emissions reductions for CI stationary engines.
For the standards being finalized in this action, EPA believes that previous decisions regarding the appropriateness of using CO in concentration (ppm ) levels as has been done for stationary sources before as su rrogates for HAP are still valid. 1 Consequently, EPA is finalizing emission standards for CO for CI engines in or der to regulate HAP emissions. In addition, EPA is promulgating separate provisions relevant to emissions of metallic HAP from existing diesel engines, as discussed in sect ion III.C. of the preamble.
In addition to reducing HAP and CO, the final rule will result in the reduction of PM emissions from existing diesel engines. The aftert reatment technologies expected to be used to reduce HAP and CO emissions also reduce emissions of PM from diesel engines. Also, the final rule requires the use of ULSD for diesel-fueled stationary nonemergency CI engines greater than 300 hp with a displacement of less th an 30 liters per cylinder. This will result in lower emissions of sulfur oxides (SO x ) and sulfate particulate from these e ngines by reducing the sulfur content in the fuel. 4.2.3 What Are the Final Requirements?
4.2.3.1 Existing Stationary RICE at Major Sources The emission requirements that are being finali zed in this action for stationary CI RICE less than or equal to 500 hp located at major sources and stationary nonemergency CI RICE greater than 500 hp located at major sources ar e shown in Table 4-1. The numerical emission standards are in units of ppm by volume, dr y basis (ppmvd) or percent reduction.
In addition, certain existing sta tionary RICE located at major sources are subject to fuel requirements. Owners and operators of existing stationary nonemergency diesel-fueled CI engines greater than 300 hp with a displacement of less than 30 liters per cylinder located at major sources that use diesel fuel must use onl y diesel fuel meeting th e requirements of 40 CFR 80.510(b). This section requires that diesel fuel have a maximum sulfur content of 15 parts per million (ppm) and either a minimum cetane index of 40 or a maximum aromatic content of 35 volume percent. These fuel requirements are be ing finalized in order to reduce the potential formation of sulfate compounds that are emitted when high sulfur diesel fuel is used in

1 In contrast, mobile source emission standards for diesel engines (both nonroad and on-highway) are promulgated on a mass basis rather than concentration.4-7 combination with oxidation catalysts and to assi st in the efficient operation of the oxidation catalysts.
EPA is also including work practices in th e final rule that will capture and collect metallic HAP emissions. Owners and operators of existing stationary nonemergency CI engines greater than 300 hp located at major sources must do one of the following if the engine is not already equipped with a closed crankcase ventil ation system: 1) install a closed crankcase ventilation system that prevents crankcase emissi ons from being emitted to the atmosphere, or 2) install an open crankcase filtration emission control system that reduces emissions from the crankcase by filtering the exhaust stream to remove oil mist, particulates, and metals.
Table 4-1. Requirements for Existing Statio nary CI RICE Located at Major Sources

Subcategory Except during Periods of Startup During Periods of Startup Emergency CI Change oil and filter every 500 hours of operation or annually, whichever comes first a ; inspect air cleaner every 1000 hours of operation or annually, whichever comes first; and inspect all hoses and belts every 500 hours of operation or annually, whichever comes first, and replace as necessary b
Minimize the engine’s time spent at idle and minimize the engine’s startup time at startup to a period needed for appropriate and safe loading of the engine, not to exceed 30 minutes, after which time the non-startup emission limitations apply. c Nonemergency CI ≤ 100hp • change oil and filter every 1000 hours of operation or annually, whichever comes first, except that sources can extend the period for changing the oil if the oil is part of an oil analysis program as discussed below and none of the condemning limits are exceeded;

• inspect air cleaner every 1000 hours of operation or annually, whichever comes first; and

• inspect all hoses and belts every 500 hours or annually, whichever comes first, and replace as necessary. Nonemergency CI 100 ≤ hp ≤ 300 230 ppmvd CO at 15% O 24-8 Nonemergency CI 300<hp ≤ 500 49 ppmvd CO at 15% O 2

or 70% CO reduction Nonemergency CI >500 hp 23 ppmvd CO at 15% O 2

or 70% CO reduction

a Sources have the option to utilize an oil analysis program in order to extend the specified oil change requirement

in Table 4-2. .
b Sources have the option to petition the Administrator for approval of alternative maintenance practices. The

alternative maintenance practices must be at least as stringent as those specified in this Table 4-1.

c Sources have the option to petition the Administrator for a longer period of time for engine startup. Any petition

must be based on specific factual info rmation indicating the reason that a lo nger period is necessary for that engine.
Sources also have the option to use an oil change analysis pr ogram to extend the oil change frequencies specified above. The analysis pr ogram must at a minimum analyze the following three parameters: Total Base Number, viscosity, and percent water content. The analysis must be conducted at the same frequencies specified fo r changing the engine o il. If the condemning limits provided below are not exceeded, the engine owner or operator is not required to change the oil. If any of the condemning limits are exc eeded, the engine owner or operator must change the oil before continuing to use the engi ne. The condemning limits are as follows:

• Total Base Number is less than 30 percent of the Total Base Number of the oil when
new; or

• viscosity of the oil has changed by more than 20 percent from the viscosity of the oil when new; or

• percent water content (by vol ume) is greater than 0.5.
Pursuant to the provisions of 40 CFR 63.6(g), sources can also re quest that the Administrator approve alternative work practices.
4.2.3.2 Existing Stationary RICE at Area Sources The emission requirements that ar e being finalized in this acti on for existing stationary CI RICE located at area sources are shown in Table 4-2. Existing stationary emergency engines at area sources located at residential, commercial, or institutional facili ties are not part of the source category and therefore are not subject to any requirements under this final rule.4-9 Existing stationary nonemergency CI RICE gr eater than 300 hp located at area sources in Alaska not accessible by the Fede ral Aid Highway System (FAHS) do not have to meet the CO emission standards specified in Table 4-2. Existi ng stationary nonemergency CI RICE greater than 300 hp located at area sources in Alaska not accessible by the FAHS must meet the maintenance practices that are s hown for stationary nonemergency CI RICE less than or equal to 300 hp in Table 4-2.
Also, owners and operators of existing stati onary nonemergency diesel-fueled CI engines greater than 300 hp with a displacem ent of less than 30 liters per cylinder located at area sources that use diesel fuel must use only diesel fuel meeting the requirements of 40 CFR 80.510(b). This section requires that diesel fuel have a maximu m sulfur content of 15 ppm and either a minimum cetane index of 40 or a maximum aromatic conten t of 35 volume percent. Finally, in order to reduce metallic HAP emissions, existing stationa ry nonemergency CI engines greater than 300 hp located at area sources must do one of the follow ing if the engine is not already equipped with a closed crankcase ventilation system: 1) inst all a closed crankcase ventilation system that prevents crankcase emissions from being emitted to the atmosphere, or 2) install an open crankcase filtration emission control system th at reduces emissions from the crankcase by filtering the exhaust stream to remove oil mist, particulates, and metals.
Table 4-2. Requirements for Existing Stationary RICE Located at Area Sources

Subcategory Except during Periods of Startup During Periods of Startup Nonemergency CI ≤ 300 hp Change oil and filter every 1000 hours of operation or annually, whichever comes first a ; inspect air cleaner every 1000 hours of operation or annually, whichever comes first; and inspect all hoses and belts every 500 hours or annually, whichever comes first, and replace as necessary b Minimize the engine’s time spent at idle and minimize the engine’s startup to a period needed for appropriate and safe loading of the engine, not to exceed 30 minutes, after which time the non-startup emission limitations apply. c Nonemergency CI 300<hp ≤ 500 49 ppmvd CO at 15% O 2

or 70% CO reduction Nonemergency CI >500 hp 23 ppmvd CO at 15% O 2

or 70% CO reduction4-10 Emergency CI Change oil and filter every 500 hours of operation or annually, whichever comes first a ; inspect air cleaner every 1000 hours of operation or annually, whichever comes first; and inspect all hoses and belts every 500 hours of operation or annually, whichever comes first, and replace as necessary b

a Sources have the option to utilize an oil analysis program in order to extend the specified oil change requirement.
b Sources have the option to petition the Administrator for approval of alternative maintenance practices. The

alternative maintenance practices must be at least as stringent as those specified in this Table 4-2.

c Sources have the option to petition the Administrator for a longer period of time for engine startup. Any petition

must be based on specific factual info rmation indicating the reason that a lo nger period is necessary for that engine.

4.2.3.3 Operating Limitations for Nonemergency CI Engines >500 hp
In addition to the standards discussed above , EPA is finalizing operating limitations for stationary nonemergency CI RICE that are gr eater than 500 hp. Owners and operators of engines that are equipped with oxidation catalyst must ma intain the catalyst so that the pressure drop across the catalyst does not change by more than 2 inches of water from the pressure drop across the catalyst that was measured during the initial performance test. Owners and operators of these engines must also maintain the temperature of th e stationary RICE exhaust so that the catalyst inlet temperature is between 450 and 1350 degrees Fahrenheit (°F) for engines with an oxidation catalyst. Owners and operators of engines that ar e not using oxidation catal yst must comply with any operating limitations approve d by the Administrator.
4.2.3.4 Startup Requirements As shown in Tables 4-1 and 4-2, the following stationary engines ar e subject to specific operational standards, du ring engine startup:

 Existing CI RICE less than or equal to 500 hp located at major sources,

 Existing nonemergency CI RICE greater than 500 hp located at major sources,

 Existing CI RICE located at area sources,

 New or reconstructed nonemergency 2SLB >500 hp located at a major source of HAP emissions,4-11  New or reconstructed nonemergency 4SLB >500 hp located at a major source of HAP emissions,

 Existing nonemergency 4SRB >500 hp located at a major source of HAP emissions,

 New or reconstructed nonemergency 4SRB >500 hp located at a major source of HAP emissions, and

 New or reconstructed nonemergency CI >500 hp located at a major source of HAP emissions.
Engine startup is defined as the time from initial start until applied load and engine and associated equipment reaches steady state or normal operation. For stationary engine with catalytic controls, engine startup means the time from initial start until applied load and engine and associated equipment reaches steady state, or normal operation, including the catalyst. Owners and operators must minimize the engine’s tim e spent at idle and limit startup time to 30 minutes. These requirements will limit the HAP emissions during periods of engine startup. Pursuant to the provisions of 40 CFR 63.6(g), engines at major sources may petition the Administrator for an alternative work practice. An owner or operator of an engine at an area source can work with its state permitting author ity pursuant to EPA’s regulations at 40 CFR subpart E for approval of an alternative manageme nt practice. See 40 C.F.R. Subpart E (setting forth requirements for, among other things, equivalency by permit, rule substitution).
What Are the Operating Limitations?

In addition to the standards discussed above , EPA is finalizing operating limitations for stationary non-emergency CI RICE that are gr eater than 500 HP. Owne rs and operators of engines that are equipped with oxida tion catalyst must maintain the catalyst so that the pressure drop across the catalyst does not change by more th an 2 inches of water from the pressure drop across the catalyst that was measured during the initial performance test. Owners and operators of these engines must also maintain the temperat ure of the stationary RI CE exhaust so that the catalyst inlet temperature is between 450 a nd 1350 degrees Fahrenheit (°F). Owners and operators may petition for a different temperatur e range; the petition must demonstrate why it is operationally necessary and appropr iate to operate below the temperature range specified in the rule (see 40 CFR 63.8(f)). Owners and operators of engines that are not using oxidation catalyst must comply with any operating lim itations approved by the Administrator.
Owners and operators of existing stationary non-emergency CI engines greater than 300 HP meeting the requirement to use open or closed crankcases must follow the manufacturer’s4-12 specified maintenance requirements for operating and maintaining the open or closed crankcase ventilation systems and replacing the crankcase filters, or can request the Administrator to approve different maintenance requirements that are as protective as manufacturer requirements. 4.2.3.5 Fuel Requirements In addition to emission standards and manageme nt practices, certain stationary CI RICE located at existing area sources are subject to fuel requirements. These fuel requirements are being finalized in order to reduce the potential formation of sulfate compounds that are emitted when high sulfur diesel fuel is used in combina tion with oxidation catalysts and to assist in the efficient operation of the oxidation catalysts. Thus, owners and opera tors of stationary nonemergency diesel-fueled CI engines greater than 300 hp with a displacement of less than 30 liters per cylinder located at existing area sour ces must only use diesel fuel meeting the requirements of 40 CFR 80.510(b), which requires th at diesel fuel have a maximum sulfur content of 15 ppm and either a minimum cetane index of 40 or a maximum aromatic content of 35 volume percent. 4.2.4 What Are the Requirements for Demonstrating Compliance? The following sections describe the require ments for demonstrating compliance under the final rule.
4.2.4.1 Existing Stationary CI RICE at Major Sources Owners and operators of existing stationary nonemergency CI RICE located at major sources that are less than 100 hp and stationary emergency CI RI CE located at major sources must operate and maintain their stationary RICE and after-treatment control device (if any) according to the manufacturer’s emission-related written instru ctions or develop their own maintenance plan. Owners and operators of exis ting stationary nonemergency CI RICE located at major sources that are less th an 100 hp and existing stationary emergency CI RICE located at major sources do not have to conduct any performa nce testing because they are not subject to numerical emission standards.
Owners and operators of existing stationary nonemergency CI RICE located at major sources that are greater than or equal to 100 hp and less than or equal to 500 hp must conduct an initial performance test to demonstrate that they are achieving the requir ed emission standards.
Owners and operators of existing stationary nonemergency CI RICE greater than 500 hp located at major sources must c onduct an initial performance test and must test every 8,760 hours4-13 of operation or 3 years, whiche ver comes first, to demonstrate that they are achieving the required emission standards.
Owners and operators of stationary nonemerg ency CI RICE that are greater than 500 hp and are located at a major source must conti nuously monitor and record the catalyst inlet temperature if an oxidation catal yst is being used on the engine. The pressure drop across the catalyst must also be measured monthly. If an oxidation catalyst is not being used on the engine, the owner or operator must cont inuously monitor and record the operating parameters (if any) approved by the Administrator.
4.2.4.2 Existing Stationary RICE at Area Sources Owners and operators of existing stationary RI CE located at area sources that are subject to management practices, as shown in Table 4-2, must develop a maintenance plan that specifies how the management practices will be met. Own ers and operators of existing stationary RICE that are subject to management practices do not have to conduct any performance testing.
Owners and operators of existing stationary nonemergency CI RICE greater than 300 hp that are located at area sources must conduct an initial performa nce test to demonstrate that they are achieving the required emission standards.
Owners and operators of existing stationary nonemergency RICE that are greater than 500 hp and located at area sources must conduct an initial performance test and must test every 8,760 hours of operation or 3 years, whichever comes first, to demonstrate that they are achieving the required emission standards.
Owners and operators of existing stationary none mergency CI RICE that are greater than 500 hp and are located at an area source must con tinuously monitor and reco rd the catalyst inlet temperature if an oxidation catal yst is being used on the engine. The pressure drop across the catalyst must also be measured monthly. If an oxidation catalyst is not being used on the engine, the owner or operator must cont inuously monitor and record the operating parameters (if any) approved by the Administrator.
On October 9, 2008 (73 FR 59956), EPA proposed performance specification requirements for continuous parametric monito ring systems (CPMS). Currently there are no performance specifications for the CPMS that are required for continuously monitoring the catalyst inlet temperature. The timetable for finalizing the proposed performance specification requirements is uncertain; therefore, EPA plans to finalize performance specification4-14 requirements in 40 CFR part 63, subpart ZZZZ for the CPMS systems used for continuous catalyst inlet temperature monitoring when the fina l requirements are promulgated for existing SI engines in August 2010.
2. Existing Stationary RICE at Area Sources
Owners and operators of existing stationary RI CE located at area sources that are subject to management practices, as shown in Table 4-2, must develop a maintenance plan that specifies how the management practices will be met. Own ers and operators of existing stationary RICE that are subject to management practices do not have to conduct any performance testing.
Owners and operators of existing stationary non- emergency CI RICE that are greater than 300 HP and located at area sources and are not limited use stationary RICE must conduct an initial performance test to demonstrate that they are achieving the required emission standards. Owners and operators of existing stationary non- emergency CI RICE that are greater than 500 HP and located at area sources and are limited use stationary RICE must conduct an initial performance test and must test every 8,760 hours of operation or 5 years, whichever comes first, to demonstrate that they are achievi ng the required emission standards.
Owners and operators of existing stationary non-emergency RICE that are greater than 500 HP and located at area sources must conduct an initial performance test and must test every 8,760 hours of operation or 3 years, whichever comes first, to demonstrate that they are achieving the required emission standards.
Owners and operators of existing stationary non- emergency CI RICE that are greater than 500 HP and are located at an area source must con tinuously monitor and reco rd the catalyst inlet temperature if an oxidation catal yst is being used on the engine . The pressure drop across the catalyst must also be measured monthly. If an oxidation catalyst is not be ing used on the engine, the owner or operator must cont inuously monitor and record the operating parameters (if any) approved by the Administrator. 4.2.5 What Are the Reporting and Recordkeeping Requirements? The following sections describe the reporting and recordkeeping requirements that are required under the final rule.
Owners and operators of existing stationary emergency RICE that do not meet the requirements for nonemergency engines are required to keep records of their hours of operation. Owners and operators of existing stationary em ergency RICE must install a non-resettable hour4-15 meter on their engines to record the necessary information. The information must include how many hours are spent for emergency operation, in cluding what classifi ed the operation as emergency and how many hours are spent for nonemergency operation.
Emergency stationary RICE may be operate d for the purpose of ma intenance checks and readiness testing, provided th at the tests are recommended by the Federal, State or local government, the manufacturer, the vendor, or the in surance company associated with the engine. Maintenance checks and readiness testing of su ch units are limited to 100 hours per year. Owners and operators can petition the Administrator for additional hours, beyond the allowed 100 hours per year, if such additional hours should prove to be necessary for maintenance and testing reasons. A petition is not required if the engine is mandated by regulation such as State or local requirements to run more than 100 hours per year for maintenance and testing purposes. There is no time limit on the use of emergency stationary engines in emergency situations; however, the owner or operator is required to record the length of operation and the reason the engine was in operation during that time. Records must be maintained documenting why the engine was operating to ensure the 100 hours per year limit for maintenance and testing operation is not exceeded. In addition, owners and operators are a llowed to operate their stationary emergency RICE for nonemergency purposes for 50 hours pe r year, but those 50 hours are counted towards the total 100 hours provided for operation other than for true emergencies and owners and operators may not engage in income-generati ng activities during those 50 hours. The 50 hours per year for nonemergency purposes cannot be us ed to generate income for a facility, for example, to supply power to an electric grid or otherwise supply power as part of a financial arrangement with another entit y. However, owners and operators may operate the emergency engine for a maximum of 15 hours per year as pa rt of an emergency demand response program if the utility distribution company has determined that a bl ackout is imminent. The engine operation must be terminated immediately after the utility distribution company advises that a blackout is no longer imminent. The 15 hours pe r year of emergency demand response operation are counted as part of the 50 hours of operation per year provided for nonemergency situations. Owners and operators must keep records showin g how they were notified of the emergency condition and by whom, and the time that the en gine was operated as part of demand response.
Owners and operators of existing stationary RI CE located at area sources that are subject to management practices as shown in Table 4-2, are required to keep records that show that management practices that are required are being met. These records must include, at a minimum: oil and filter change dates, o il amounts added and corresponding hour on the hour4-16 meter, fuel consumption rates, air filter (if app licable) change dates, reco rds of repairs and other maintenance performed.
Owners and operators of existing non-emergency stationary CI RICE greater than 300 HP must keep records of the manu facturer’s recommended maintenance procedures for the closed crankcase ventilation system or open crankcase f iltration system and records of the maintenance performed on the system.
In terms of reporting requirements, owners and operators of exis ting stationary RICE, except stationary RICE that are less than 100 hp, existing emergency stationary RICE, and existing stationary RICE that are not subject to numerical emission standard s, must submit all of the applicable notificat ions as listed in the NESHAP General Provisions (40 CFR part 63, subpart A), including an initial no tification, notification of perform ance test, and a notification of compliance for each stationary RICE which must comply with the specified emission limitations.

4.3 Summary of Significant Changes Since Proposal Most of the rationale used to develop the proposed rule remains the same for the final rule. Therefore, the rationale previously provide d in the preamble to the proposed rule is not repeated in the final rule, and the rationale sec tions of the rule, as proposed, should be referred to. Major changes that have been made to the ru le since proposal are di scussed in this section with rationale following in the Summary of Respons es to Comments report that is in the docket for this rulemaking. 4.3.1 Applicability EPA proposed to regulate HAP emissions from existing stationary engines less than or equal to 500 hp located at major sources and a ll existing stationary engines located at area sources. EPA also proposed NESHAP for existing stationary CI engines greater than 500 hp that are located at major sources.
In the final rule, EPA is only regulating HAP emissions from existing stationary CI engines. EPA will address HAP emissions from ex isting stationary SI engines in a separate rulemaking later this year.
Another change from the proposal is that th e final rule is not a pplicable to existing stationary emergency engines at area sources that are located at residential, commercial, or institutional facilities. These e ngines are not subject to any re quirements under the final rule because they are not part of the regulated source category. EPA has found that existing4-17 emergency engines located at residential, co mmercial, and institutional facilities were not included in the original Urban Ai r Toxics Strategy inventory and we re not included in the listing of urban area sources. More information on this issue can be found in the memorandum entitled “Analysis of the Types of Engines Used to Estimate the CAA S ection 112(k) Area Source Inventory for Stationary Reci procating Internal Combustion Engines,” available from the rulemaking docket.

4.3.2 Final Emission Limits
4.3.2.1 Existing Stationary CI Engines < 100 hp Located at Major Sources For the proposed rule, EPA required existing stationary engines less than 50 hp that are located at major sources to meet a formaldehyde emission standard that was based on the levels achievable without aftertreatment. Based on comment s received including the feasibility of being able to achieve the proposed emission standa rd and being able to measure formaldehyde emissions of that magnitude, EPA is not finali zing a formaldehyde emission standard for this group of engines. In addition, in light of severa l comments asserting that the cutoff for requiring emission standards for engines less than 50 hp at major sources was inappropriate, EPA is finalizing a threshold of 100 hp.
In the proposed rule, existing stationary CI engines less than 100 HP located at major sources were required to meet a 40 ppmvd CO at 15 percent oxygen (O 2 ) standard. In the final rule, all existing stationary CI e ngines less than 100 HP located at major sources must meet work practices. These work practices are described in section III.C. of the preamble. EPA believes that work practices are appropriate and justified for this group of stationary engines because the application of measurement me thodology is not practicable due to technological and economic limitations. Further information on EPA’s deci sion can be found in the memorandum entitled “MACT Floor Determination for Existing Statio nary Non-Emergency CI RICE Less Than 100 HP and Existing Stationary Emergency CI RI CE Located at Major Sources and GACT for Existing Stationary CI RICE Located at Area So urces,” which is available from the rulemaking docket.
4.3.2.2 Existing Stationary Nonemergency CI Engines 100 ≤ hp ≤ 300 Located at Major Sources EPA is finalizing a CO emission standard fo r existing nonemergency CI engines greater than or equal to 100 hp and less th an or equal to 300 hp located at major sources based on levels achieved without add-on control. All existing stationary CI engi nes less than or equal to 300 hp located at major sources must m eet a 157 ppmvd CO at 15 percent O 2 standard. EPA revised the proposed CO standard for this group of engines based on additional information received after4-18 the proposal, which led to a reevaluation of the MACT floor for these engines. A discussion of the final MACT floor determination can be f ound in the memo entitled “Subcategorization and MACT Floor Determination for Existing Stati onary CI Reciprocating Internal Combustion Engines at Major Sources,” which is availa ble from the rulemaking docket. All existing stationary CI engines less than or equal to 300 hp located at area sources, both emergency and nonemergency, are subject to management prac tice standards under the final rule, as was proposed. 4.3.2.3 Existing Stationary Nonemergency CI Engines >300 hp EPA proposed that existing stationary none mergency CI engines greater than 300 hp meet a 4 ppmvd at 15 percent O 2 CO standard or a 90 percent CO reduction standard. Numerous commenters indicated that EPA’s da taset was insufficient and urged EPA to gather more data to obtain a more complete representation of emi ssions from existing stationary CI engines. Commenters also questioned the emission standard setting approach that EPA used at proposal and claimed that the proposed st andards did not take into account emissions variability and may not be achievable. For the final ru le EPA has obtained additional test data for existing stationary CI engines and has included this additional in the MACT floor analysis. EPA is also using an approach that better considers emissions variability as well.
In the final rule, EPA is providing owners a nd operators the option of meeting either a CO concentration or a CO percent reduction standard. Owners and operators of existing stationary non-emergency CI e ngines greater than 300 HP and le ss than or equal to 500 HP located at major and area sources must either reduce CO emissions by at least 70 percent or limit the concentration of CO in the engine exhaust to 49 ppmvd, at 15 percent O 2 . Owners and operators of existing stationary non-emergency CI engines greater than 500 HP located at major and area sources must either reduce CO emi ssions by at least 70 percent or limit the concentration of CO in the engine exhaust to 23 ppmvd, at 15 percent O 2 . EPA’s review of the data indicate that it is appropriate to base the MACT standard on a reducti on level of 70 percent, which takes into account the variability of the emission reduction efficiency of aftertreatment under various operational conditions.

4.3.2.4 Existing Stationary Emergency CI Engines 100 ≤ hp ≤ 500 Located at Major Sources For existing stationary emergency engines lo cated at major sources, we proposed that these engines be subject to a 40 ppmvd CO at 15 percent O 2 standard. In the final rule, existing stationary emergency CI engines greater than or equal to 100 HP and less than or equal to 500 HP and located at major sources must meet work practices. These work practices are described4-19 in section III.C. of the preamble. EPA believes that work practices are appropriate and justified for this group of stationary engines because the application of measurement methodology is not practicable due to technological and economic limitations. Further information on EPA’s decision can be found in the memorandum entitl ed “MACT Floor Determination for Existing Stationary Non-Emergency CI RICE Less Than 100 HP and Existing Stationary Emergency CI RICE Located at Major Sources and GACT for Ex isting Stationary CI RICE Located at Area Sources,” which is available from the rulemaking docket.
4.3.2.5 Existing Stationary Emergency CI Engi nes >500 hp Located at Area Sources For existing stationary emergency engines lo cated at area sources, EPA reevaluated the information available for emergency engines a nd considered extensive input received from industry and other groups who asserted that the proposed standards were not GACT for emergency engines at area sources.
In the final rule, all existing stationary emerge ncy CI engines located at area sources must meet management practice standards.
4.3.3 Management Practices EPA proposed management practices for severa l subcategories of engines located at area sources. EPA explained that the proposed manage ment practices would be expected to ensure that emission control systems are working pr operly and would help minimize HAP emissions from the engines. EPA proposed specific mainte nance practices and asked for comments on the need and appropriateness for those procedures . Based on feedback received during the public comment period, which included information s ubmitted in comment letters and additional information EPA specifically asked for following the close of the comment period from different industry groups, EPA is finalizing management practices for existing stationary nonemergency CI engines less than or equal to 300 hp located at area sources and all existing emergency stationary CI engines lo cated at area sources.
Existing stationary nonemergency CI engines less than or equal to 300 hp located at area sources are required to change the oil and f ilter every 1,000 hours of operation or annually, whichever comes first, inspect air cleaner ev ery 1,000 hours of operation or annually, whichever comes first, and inspect all hos es and belts every 500 hours of operation or annually, whichever comes first, and replace as necessary. EPA is addi ng an option for sources to use an oil change analysis program to extend the oil change fre quencies specified above. The analysis program must at a minimum analyze the following three pa rameters: Total Base Number, viscosity, and percent water content. If any of the limits below are exceeded , the engine owner or operator4-20 must change the oil before continuing to ope rate the engine. The condemning limits are as follows:

• Total Base Number is less than 30 percent of the Total Base Number of the oil when
new; or

• viscosity of the oil has changed by more than 20 percent from the viscosity of the oil when new; or

• percent water content (by vol ume) is greater than 0.5.
Owners and operators of all engines subject to ma nagement practices also have the option work with state permitting authorities pursuant to EPA’s regulations at 40 CFR subpart E for alternative maintenance practices to be used instead of the specific maintenance practices promulgated in this rule. The maintenance prac tices must be at least as stringent as those specified in the final rule.
The final rule specifies that in situations where an emergency engine is operating during an emergency and it is not possible to shut down the engine in order to perform the work or management practice requirements on the schedule re quired in the final rule , or if performing the work or management practice on the required sc hedule would otherwise pose an unacceptable risk under federal, state, or local law, the maintenance activity can be delayed until the emergency is over or the unacceptable risk under fe deral, state, or local law has abated. The maintenance should be performed as soon as prac ticable after the emerge ncy has ended or the unacceptable risk under federal, stat e, or local law has abated. S ources must report any failure to perform the work practice on the schedule require d and the federal, state or local law under which the risk was deemed unacceptable.

4.3.3.1 Startup, Shutdown and Malfunction EPA proposed formaldehyde and CO emission st andards for existing stationary engines at major sources to apply during periods of star tup and malfunction. EPA also proposed certain standards for existing stationary engines at area sources that would apply during startup and malfunction. Based on various comments and concer ns with the proposed emission standards for periods of startup, EPA has determined that it is not feasible to fi nalize numerical emission standards that would apply dur ing startup because the applic ation of measurement methodology to this operation is not practi cable due to technological and ec onomic limitations. As a result, EPA is promulgating operational st andards during startup that spec ify that owners and operators4-21 must limit the engine startup time to no more th an 30 minutes and must minimize the engine’s time spent at idle during startup. Based on in formation reviewed by EPA, engine startup typically requires no more than 30 minutes. We received comments indicating that there are conditions where it may take more than 30 minutes to startup the engine, for example for cold starts or where the ambient conditions are very cold. However, commenters did not provide enough specificity in their comments, nor did co mmenters provide data, to determine whether any scenarios were appropriate to allow a l onger startup period. Owners and operators of engines at major sources have the option to petition the Administrator pursuant to 40 CFR 63.6(g) for alternative work practices. Any petition must be based on specific factual information indicating the reason the alternative work practice is necessary for that engine and is no less stringent than start-up requirements in the ru le. An owner or operator of an engine at an area source can work with its state permitting aut hority pursuant to EPA’s regulations at 40 CFR subpart E for approval of an alternative ma nagement practice, based on specific factual information indicating the reason that a longer period is necessary for that engine. Such alternative management practice must be dem onstrated to be no less stringent than EPA promulgated standards.

As discussed further below, EPA is not setti ng separate standards fo r malfunctions in this rule. Therefore, the standards that apply duri ng normal operation also apply during malfunction. EPA believes that any emissions occurring duri ng a malfunction would be of such a short duration compared to the emissions averaged du ring overall testing time (three one-hour runs) that the engine would still be ab le to comply with the emission standard. In addition, EPA does not view malfunction as a distinct operating mode and, therefore, any emissions that occur at such times do not need to be taken into accoun t in setting CAA section 112(d) standards. Further, as is explained in more detail in Sec tion V.D. of the preamble, even if malfunctions were considered a distinct opera ting mode, we believe it would be impracticable to take into account malfunctions in setting CA A section 112(d) standards.

4.3.3.2 Other EPA is including an additional requirement in the final rule that will reduce metallic HAP emissions. Owners and operators of existing stat ionary non-emergency CI engines greater than 300 HP must do one of the following if the e ngine is not already e quipped with a closed crankcase ventilation system: 1) install a clos ed crankcase ventilation system that prevents crankcase emissions from being emitted to the atmosphere, or 2) install an open crankcase filtration emission control system that reduces the crankcase emissions by filtering the exhaust stream to remove oil mist, particulates, and metals. Owners and operators must follow the4-22 manufacturer’s specified main tenance requirements for operati ng and maintaining the open or closed crankcase ventilation systems and replaci ng the crankcase filters, or can request the Administrator to approve diffe rent maintenance requirements that are as protective as manufacturer requirements.
EPA is including special provisions in th e final rule for existing stationary nonemergency CI RICE greater than 300 HP located at area sources in Alaska not accessible by the FAHS. Owners and operators of these engines do not have to meet the CO emission standards specified in Table 4-2, but must instead meet the management pr actices that are described for stationary non-emergency CI RICE less than or equal to 300 HP in section III.C. of the preamble.
The final rule specifies that stationary CI engines that are used to startup combustion turbines should meet the same requirement s as stationary emergency CI engines.

4.4 Cost Impacts

4.4.1 Introduction The cost impacts associated with the final rule consist of different types of costs, which include the annual and capital co sts of controls, costs associat ed with keeping records of information necessary to demonstrate compliance, costs associated with reporting requirements under the General Provisions of 40 CFR part 63, s ubpart A, costs of purchasing and operating equipment associated with continuous parame tric monitoring, and the cost of conducting performance testing to demonstrate compliance with the emission standards. The capital and annual costs presented in this section are ca lculated based on the control cost methodology presented in the EPA (2002) Air Pollution C ontrol Cost Manual prepared by the U.S. Environmental Protection Agency. 2 This methodology sets out a procedure by which capital and annualized costs are defined and estimated, and this procedure is often used to estimate the costs of rulemakings such as this one. The capital cost s presented in this sect ion are annualized using a 7% interest rate, a rate that is consistent with the guidance provided in the Office of Management and Budget’s (OMB’s) (2003) Circular A-4. 3 The following sections describe how the various cost elements were estimated.

2 Available on the Internet at http://epa.gov/ttn/catc/ products.html#cccinfo

. 3 Available on the Internet at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf

.4-23 4.4.1.1 Control Costs For engines that will need to add control t echnology to meet the em ission standards, the following equations were used to estimate capita l and annual control costs as shown in Table 4- 3:

Table 4-3 : CI RICE Control T echnologies and Costs Technology Capital Cost ($2008) Annual Cost ($2008) Diesel oxidation ca talyst (DOC) $27.4 x hp

− $939 $4.99 x hp + $480 Open crankcase ventilation (OCV) $0.26 x hp + $997 $0.065 x hp + $254

The control costs for DOC were calculated usi ng cost data obtained from a California Air Resources Board (CARB) study. 4 The study provided cost ranges fo r diesel engines ranging from 40 hp to 1400 hp. The average cost from the rang e was selected and was adjusted to 2008 dollars. The capital and annual co st were calculated using maintenance data from the CARB study and cost assumptions from the EPA Air Po llution Control Cost Manual. The control costs for the OCV system were calculated using 2008 cost data obtained fr om a diesel engine equipment vendor. An equipment life of 10 years was used to calculate the capital recovery factor (CRF) for developing the annual cost for each of the control devices. A linear regression equation was developed for the capital cost of th e DOC and OCV using the capital cost data and the engine size in horsepower (hp). This approa ch was used to develop a linear regression equation for annual cost. 4.4.1.2 Recordkeeping No recordkeeping costs were attributed to the requirement of following the manufacturer’s emission-related operation and maintenance (O&M ) requirements or the owner or operator’s own maintenance plan. It is expected that the major ity of owners and operators are already following some type of O&M requirements and minimal to no additional burden is expected. Labor costs associated with recording the hours of operation of emergency engines are based on a technical labor rate of $68 per hour which was obtained from the Department of Labor Statistics web site. 5 The final total wage rate was based on the 2005 compensation rates for professional staff and adjusted by an overh ead and profit rate of 167 percent. The year 2005 was used for consistency in order to have the same basis for all costs. All costs were later converted to 2008 dollars for purposes of presenting costs associated with th e rule in present day

4 Diesel PM Control Technologies, Appendix IX, California Air Resource Board, October 2000. http://www.arb.ca.gov/diesel/documents/rrpapp9.pdf 5 U.S. Department of Labor, Employer Costs for Employee Compensation, http://www.bls.gov/news .release/ecec.toc.htm4-24 terms. One hour per year is expected to be suffi cient to record hours of operation for stationary emergency engines. No cost is attributed to purchasing and installing an hour-meter since the majority of stationary engines already come e quipped with such equipment. For owner/operators of nonemergency CI engines, EPA assumed that one hour per year was sufficient for recordkeeping for these engines.
4.4.1.3 Reporting Most engines affected by this rule will be subject to reporting requirements such as reading instructions, training personnel, submitting an initial no tification, submitting a notification of performance test(s), and submitti ng a compliance report. . However, owners and operators of engines less than 100 HP, existing stationary emergency engines, and existing stationary engines less than 300 HP located at area sources are not subject to any specific reporting requirements. . For stationary non-emerge ncy limited use CI engines that operate less than 100 hours per year, EPA is finalizing less burdensome reporting requirements by requiring these engines to submit compliance reports on an annual basis, as opposed to semiannually as is required for other engines subjec t to numerical emission limitati ons. The reporting requirements are based on $68 per hour for technical labor to comply with the reporting requirements. It is estimated that a total of 14 hours will be needed, and 13 hours for limited use engines.
4.4.1.4 Monitoring The cost of monitoring includes the purchas e of a continuous parametric monitoring system (CPMS). Nonemergency engines greate r than 500 hp that have add-on controls are required to use a CPMS to monitor the catalyst inlet temperature and pressure drop across the catalyst to ensure those parameters do not exceed the operating limita tions. The cost of purchasing and operating a CPMS was obtaine d from vendor quotes received for previous rulemaking and adjusted to 2008 dollars. 6 The capital cost of a CPMS for a large engine facility is $531. It is estimated that 30 hours per year is necessary to operate and maintain the CPMS and that 6 hours per year (or 0.5 hours per month) is n eeded to record information from the CPMS. It is assumed that all engines subject to continuous monitoring would be lo cated at large engine facilities. 4.4.1.5 Performance Testing Initial performance testing is required for nonemergency en gines greater than 100 hp at major sources and nonemergency engines greater th an 300 hp located at area sources. The cost of

6 Part A of the Supporting Statement for Standard Form 83 Stationary Reciprocating Internal Combustion Engines, November 17, 2003.4-25 conducting a performance test on a CI engine is based on cost information gathered for previous rulemakings. 7 The performance testing cost is based the use of a portable analyzer and was estimated to cost $1,000 per day of testing. This da ily performance test cost was adjusted to 2008 dollars and was estimated to be $1,165. Because the regulation requires three-1 hour runs, EPA assumed that two engines could be tested at each facility in one day. Therefore, the estimated impacts performance testing cost will be assu med to be $583 per engine (or half of the $1,165 daily cost) using a portable analyzer.

4.4.1.6 Work Practices The costs for performing work practices for CI engines less than 100 hp located at a major source was assumed to be negligible and we re not included in these impact calculations. The work practices are based on engine mainte nance procedures that the owner/operators perform regardless of the regulati on. These work practices include:

 Changing the oil and filter;

 Inspecting the air cleaner;

 Inspecting all hoses and belts , and replacing as necessary.
EPA believes that these work practices w ill limit HAP emissions from these engines, because these work practices ensure that the e ngine is operating efficiently. Owner/operators of these engines regularly perform these work prac tices as part of the preventive maintenance schedule for the engine. Therefore, EPA believes that it is appropriate to not include these work practice costs in the impacts determination.
4.4.1.7 Management Practices The costs for performing management practic es for nonemergency CI engines less than or equal to 300 hp located at ar ea sources and all emergency engines located at area sources was assumed to be negligible and were not included in these impact calcul ations. The management practices are based on engine maintenance pr ocedures that the owner/operators perform regardless of the regulation. Thes e management practices include:

 Changing the oil and filter;

 Inspecting the air cleaner; and

 Inspecting all hoses and belts , and replacing as necessary.

7 Memorandum from Bradley Nelson, Alpha-Gamma Technologies, Inc. to Sims Roy, EPA/OAQPS/ESD/Combustion Group, Portable Emissions Analyzer Cost Information, August 31, 2005.4-26 EPA believes that these work practices w ill limit HAP emissions from these engines, because these work practices ensure that the e ngine is operating efficiently. Owner/operators of these engines regularly perform these work prac tices as part of the preventive maintenance schedule for the engine. Therefore, EPA believes that it is appropriate to not include these work practice costs in the impacts determination.
4.4.2 Major Sources The cost impacts for stationary RICE vary depending on the engine type and size. The following sections describe the specific costs th at apply to each sub category of CI engines located at major sources. 4.4.2.1 All CI Engines hp < 100 The costs associated with CI engines less than 100 hp include mi nimal requirements. Owners and operators of engines less than 100 hp are required to follow the manufacturer’s emission-related O&M requirements or must deve lop their own maintenance plan to follow. Emergency engines must record the hours of opera tion, which is estimated at one hour per year at $72 per hour.
4.4.2.2 Nonemergency CI Engines 100 ≤ hp ≤ 300 hp The costs associated with nonemergency CI engines greater than or equal to 100 hp and less than or equal to 300 hp include the cost of an initial test, recor dkeeping, and reporting. In addition, EPA assumes that some of these engines w ill be required to install a control device to meet the emissions standard. To estimate the num ber of CI engines that would be required to install control technology, EPA compared the emissi on rate of the test that was used to determine the MACT floor with the CI nonroad emission factors. 8 EPA found that only the emission factors for Tier 0 CI engines were greater than the 1.2 g/hp-hr value that was used to set the MACT floor. Therefore, it was assumed that Tier 1 engi nes and greater would be able to meet the final emission standard. The model year for Tier 1 en gines begins in 1997 for 100 to 175 CI engines, and 1996 for 175 to 300 hp CI engines. Using the model year data in the population memorandum, EPA estimated that 35 percent of the existing CI engines great er than or equal to 100 hp and less than or equal to 300 hp are Tier 0 engines and would need to install control technology to meet the emission standard. The cost estimates for this subcategory of engines do not account for possible fuel price increases that may result from using ultra-low sulfur diesel (ULSD). EPA estimated the cost of lubricity addi tives to ULSD would in crease the cost of the

8 Exhaust and Crankcase Emission Factors for Nonroad E ngine Modeling--Compression-Ignition, U.S. EPA, Office of Transportation and Air Quality, Assessment and Standa rds Division, EPA420-P-04-009, Revised April 2004. http://www.epa.gov/oms/models/nonrdmdl/nonrdmdl2004/420p04009.pdf4-27 fuel by 0.2 cents per gallon, 9 which EPA believes is negligib le. In addition, there are no additional maintenance requirements for owner/opera tors using ULSD in existing diesel engines. Many owner/operators have found that time betw een oil changes can be extended for engines using ULSD fuel, which would decrease the overa ll cost of switching to ULSD fuel. Therefore, EPA believes that it is appropriate to not include any costs for switching to ULSD in the impacts for this NESHAP. 4.4.2.2 Nonemergency CI Engines > 300 hp The costs associated with nonemergency CI engines above 300 hp include the cost of installing and operating an oxidation catalyst for reducing HAP, as well as the cost of installing an open crankcase ventilation system. Nonemerg ency CI engines greater than 500 hp are also subject to continuous monitoring requirements. In addition, owners and operators must conduct an initial performance test to demonstrate co mpliance with the emission limitation. Owners and operators of engines above 500 hp must conduc t subsequent performance testing every 8,760 hours or 3 years, whichever comes first to demonstrate compliance. The cost estimates for this subcategory of engines do not account for possibl e fuel price increases that may result from using ultra-low sulfur diesel (ULSD). EPA estimat ed the cost of lubric ity additives to ULSD would increase the cost of the fuel by 0.2 cents per gallon, 10 which EPA believes is negligible. In addition, there are no additional maintenance requ irements for owner/operators using ULSD in existing diesel engines. Many ow ner/operators have found that time between oil changes can be extended for engines using ULSD fuel, which w ould decrease the overall co st of switching to ULSD fuel. Therefore, EPA believes that it is ap propriate to not include any costs for switching to ULSD in the impacts for this NESHAP.
4.4.2.3 Emergency CI Engines The costs associated with emergency CI e ngines greater than 300 hp and less than or equal to 500 hp (emergency CI engines above 500 hp were subject to an ear lier rule and are not subject to further regulation in this rule) in clude minimal recordkeeping requirements. The owners and operators must follow the manu facturer’s emission-related operating and maintenance (O&M) requirements or must develo p their own maintenance plan to follow and must also keep records of the hour s of operation. It is estimated th at one hour per year at $68 per hour would be sufficient to record the hours of operation. No costs were included in the impacts

9 Memorandum from Melanie Taylor and Brad Nelson, AGTI to Sims Roy, EPA OAQPS ESD Combustion Group, Lubricity of Ultra Low Sulfur Diesel Fuel, June 2, 2004. 10 Memorandum from Melanie Taylor and Brad Nelson, AGTI to Sims Roy, EPA OAQPS ESD Combustion Group, Lubricity of Ultra Low Sulfur Diesel Fuel, June 2, 2004.4-28 for following the manufacturer’s emission-relate d O&M plan, because it is expected that owner/operators will follow this plan regardless of the regulation.

4.4.3 Area Sources 4.4.3.1 All Emergency CI Engines The costs associated with emergency CI e ngines include recordk eeping requirements for tracking the hours of operation, but these engines are not subject to any performance testing. The owners and operators must follo w the manufacturer’s emission -related O&M requirements or must develop their own maintenance plan to follow . It is estimated that one hour per year at $68 per hour would be sufficient to record the hours of operation. Emergency CI engines at areas sources will be subject to management prac tices, rather numerical emission limits. The management practices do not requ ire aftertreatment controls. Ther efore, no control costs have been estimated for these engines. These engines will be subject to management practices which are not included in the costs, because it is assumed that these management practices are performed regardless of the regulation.
4.4.3.2 Nonemergency CI Engines ≤ 300 hp The costs associated with nonemergency CI engines less than or equal to 300 hp are minimal and only include following the manufact urer’s emission-related O&M requirements or the owner or operator’s own maintenance plan. Th ese engines are not subject to any numerical emission limitations, therefore no control costs apply and no pe rformance testing is required. These engines will be subject to management pr actices which are not included in the costs, because it is assumed that these management prac tices are done regardless of the regulation. 4.4.3.3 Nonemergency CI Engines > 300 hp The costs associated with nonemergency CI engines above 300 hp include the cost of installing and operating an oxidation catalyst for reducing HAP, as well as the cost of installing an open crankcase ventilation system. Nonemerg ency CI engines greater than 500 hp are also subject to continuous monitoring requirements. In addition, owners and operators must conduct an initial performance test to demonstrate comp liance with the emission limitation and engines above 500 hp must conduct subsequent perfor mance testing every 8,760 hours or 3 years, whichever comes first. The cost estimates for this subcategory of engines do not account for possible fuel price increases that may result from using ultra-low su lfur diesel. The cost estimates for this subcategory of engines do not account for possible fuel price increases that may result from using ultra-low sulfur diesel (ULSD). EPA estimated the cost of lubricity additives to ULSD would increase the cost of the fuel by 0.2 cents per gallon, which EPA4-29 believes is negligible. In addition, there ar e no additional maintenance requirements for owner/operators using ULSD in existing diesel engines. Many owner/operators have found that time between oil changes can be extended for en gines using ULSD fuel, which would decrease the overall cost of switching to ULSD fuel. Theref ore, EPA believes that it is appropriate to not include any costs for switching to UL SD in the impacts for this NESHAP.
A summary of the total costs associated w ith the rule by major source and area source categories is found in Table 4-4. A summary of the costs by NAICS codes is found in Table 4-5. Table 4-6 provides a summary of costs by engine size, and a pr esentation of the number of engines by engine size is in Table 4-7. All co st estimates are from “Impacts Associated with NESHAP for Existing Stationary CI RICE,” prepared by Bradley Nelson, Ec/R, Inc. for Melanie King, U.S. EPA, Office of Air Quality Planning and Standards, February 17, 2010.4-30Table 4-4. Summary of Major Source and Area Source Costs for the CI RICE NESHAPaSizeRange(hp)Non-EmergencyCI CapitalControl CostNon-EmergencyCI AnnualControl Cost Initial Test Recordkeeping ReportingMonitoring –Capital CostMonitoring –Annual CostTotal AnnualCostsTotal CapitalCostsMajor Sources50–100 $0 $0 $0 $6,654,888 $0 $0 $0 $6,654,888 $0100–175 $24,057,778 $9,918,465 $14,150,269 $8,719,731 $6,103,812 $0 $0 $38,892,276 $24,057,778175–300 $35,917,270 $10,740,189 $10,730,759 $6,612,548 $4,628,784 $0 $0 $32,712,281 $35,917,270300–500 $107,841,136 $26,722,727 $5,645,923 $3,479,152 $2,435,406 $0 $0 $38,283,208 $107,841,136500–600 $13,126,952 $3,020,849 $500,530 $61,688 $215,907 $481,765 $2,220,755 $6,019,729 $13,608,716600–750 $8,240,540 $1,824,295 $256,204 $31,576 $110,515 $246,599 $1,136,729 $3,359,319 $8,487,139>750 $26,903,091 $5,618,803 $565,163 $69,653 $243,787 $543,975 $2,507,521 $9,004,927 $27,447,066Total $216,086,768 $57,845,329 $31,848,848 $25,629,236 $13,738,210 $1,272,338 $5,865,005 $134,926,628 $217,359,106Area Sources50–100 $0 $0 $0 $9,183,746 $0 $0 $0 $9,183,746 $0100–175 $0 $0 $0 $12,033,196 $9,155,692 $0 $0 $17,265,000 $0175–300 $0 $0 $0 $9,125,316 $6,943,176 $0 $0 $13,092,845 $0300–600 $272,814,082 $65,640,094 $12,703,298 $7,201,827$5,362,230 $4,075,682$18,787,376 $109,694,825$276,889,764600–750 $68,490,125 $15,162,379 $2,129,405 $1,207,215$898,850 $683,191 $8,952,336 $28,350,186$69,173,315>750 $179,573,835 $37,504,615 $3,772,372 $2,138,655$1,592,368 $1,210,315$15,859,613 $60,867,624$180,784,150Total $520,878,041 $118,307,088 $18,605,076 $40,889,956$17,052,802 $5,969,187$43,599,324 $238,454,245$526,847,229Grand TotalTotal $736,964,809 $176,152,417 $50,453,924 $66,519,191 $30,496,622 $7,241,526$49,464,330 $373,086,483 $744,206,335aCosts are presented in 2008 dollars.4-31Table 4-5. Summary of Major Source and AreaSource NAICS Costs for the CI RICE NESHAPaNAICSMajor Source Area Source Total (Major + Area)Capital Cost Annual Cost Capital CostAnnual Cost Capital Cost Annual CostElectric Power Generation(2211)$161,766,376 $90,982,105 $471,230,478 $203,529,267 $632,996,854 $294,511,373Hospitals (622110) $20,220,797 $11,372,763 $0 $0 $20,220,797 $11,372,763Crude Petroleum & NGProduction (211111)$2,374,401 $3,807,478 $1,611,601$2,599,033 $3,986,003 $6,406,510Natural Gas Liquid Producers(211112)$2,374,401 $3,807,478 $1,611,601$2,599,033 $3,986,003 $6,406,510National Security (92811) $20,220,797 $11,372,763 $52,358,942 $22,614,363 $72,579,739 $33,987,126Hydro Power Units (335312) $0 $16,637 $0 $22,959 $0 $39,597Irrigation Sets (335312) $10,294,073 $11,791,567 $34,606 $5,208,210 $10,328,679 $16,999,777Welders (333992) $108,260 $1,481,447 $0 $1,881,380 $108,260 $3,362,827Total $217,359,106 $134,632,238 $526,847,229 $238,454,245 $744,206,335 $373,086,483aCosts are presented in 2008 dollars.4-32Table 4-6. Summary of Major Source and Area SourceNAICS Costs for the CI RICE NESHAP – by SizeaNAICSMajor Source Area Source Total (Major + Area)Capital Cost Annual Cost Capital CostAnnual Cost Capital Cost Annual CostElectric Power Generation (2211)50–100 hp $0 $3,396,123 $0 $5,272,480 $0 $8,668,603100–175 hp $13,406,919 $21,600,998 $0$10,824,132 $13,406,919 $32,425,129175–300 hp $23,012,914 $20,895,861 $0$9,437,454 $23,012,914 $30,333,314300–600 hp $96,907,266 $35,304,866 $248,552,865 $98,468,656 $345,460,132 $133,773,522600–750 hp $6,789,032 $2,685,292 $62,249,758 $25,512,616 $69,038,790 $28,197,908>750 hp $21,650,245 $7,098,966 $160,427,854 $54,013,930 $182,078,100 $61,112,896Total 2211 $161,766,376 $90,982,105 $471,230,478 $203,529,267 $632,996,854 $294,511,373Hospitals (622110)50–100 hp $0 $424,515 $0 $0 $0 $424,515100–175 hp $1,675,865 $2,709,236 $0 $0 $1,675,865 $2,700,125175–300 hp $2,876,614 $2,619,927 $0 $0 $2,876,614 $2,611,983300–600 hp $12,113,408 $4,418,775 $0 $0 $12,113,408 $4,413,108600–750 hp $848,629 $335,898 $0 $0 $848,629 $335,662>750 hp $2,706,281 $887,886 $0 $0 $2,706,281 $887,371Total 622110 $20,220,797 $11,396,237 $0 $0 $20,220,797 $11,372,763Crude Petroleum & NG Production (211111)50–100 hp $0 $420,256 $0 $579,954 $0 $1,000,210100–175 hp $2,026,868 $3,265,655 $0$1,454,578 $2,026,868 $4,720,233175–300 hp $3,592 $3,261 $0 $1,309 $3,592 $4,571300–600 hp $151,812 $55,308 $346,112 $137,119 $497,925 $192,426600–750 hp $0 $0 $0 0 $0 $0>750 hp $192,129 $62,998 $1,265,489 $426,073 $1,457,619 $489,071Total 211111 $2,374,401 $3,807,478 $1,611,601 $2,599,033 $3,986,003 $6,406,510(continued)4-33Table 4-6. Summary of Major Source and Area SourceNAICS Costs for the CI RICE NESHAP – by Sizea(continued)NAICSMajor Source Area Source Total (Major + Area)Capital Cost Annual Cost Capital CostAnnual Cost Capital Cost Annual CostNatural Gas Liquid Producers (211112)50–100 hp $0 $420,256 $0 $579,954 $0 $1,000,210100–175 hp $2,026,868 $3,265,655 $0$1,454,578 $2,026,868 $4,720,233175–300 hp $3,592 $3,261 $0 $1,309 $3,592 $4,571300–600 hp $151,812 $55,308 $346,112 $137,119 $497,925 $192,426600–750 hp 0 0 0 0 $0 $0>750 hp $192,129 $62,998 $1,265,489 $426,073 $1,457,619 $489,071Total 211112 $2,374,401 $3,807,478 $1,611,601 $2,599,033 $3,986,003 $6,406,510National Security (92811)50–100 hp $0 $424,515 $0 $585,831 $0 $1,010,346100–175 hp $1,675,865 $2,700,125 $0$1,202,681 $1,675,865 $3,902,806175–300 hp $2,876,614 $2,611,983 $0$1,048,606 $2,876,614 $3,660,589300–600 hp $12,113,408 $4,413,108 $27,616,985 $10,940,962 $39,730,393 $15,354,070600–750 hp $848,629 $335,662 $6,916,640 $2,834,735 $7,765,269 $3,170,397>750 hp $2,706,281 $887,371 $17,825,317 $6,001,548 $20,531,598 $6,888,919Total 92811 $20,220,797 $11,372,763 $52,358,942 $22,614,363 $72,579,739 $33,987,126Hydro Power Units (335312)50–100 hp $0 $16,637 $0 $22,959 $0 $39,597100–175 hp $0 $0 $0 $0 $0 $0175–300 hp $0 $0 $0 $0 $0 $0300–600 hp $0 $0 $0 $0 $0 $0600–750 hp $0 $0 $0 $0 $0 $0>750 hp $0 $0 $0 $0 $0 $0Total 335312 $0 $16,637 $0 $22,959 $0 $39,597(continued)4-34Table 4-6. Summary of Major Source and Area SourceNAICS Costs for the CI RICE NESHAP – by Sizea(continued)NAICSMajor Source Area Source Total (Major + Area)Capital Cost Annual Cost Capital CostAnnual Cost Capital Cost Annual CostIrrigation Sets (335312)50–100 hp $0 $245,565 $0 $338,880 $0 $584,446100–175 hp $3,137,134 $5,054,497 $0$2,251,359 $3,137,134 $7,305,856175–300 hp $7,143,945 $6,486,744 $0$2,604,167 $7,143,945 $9,090,911300–600 hp $12,145 $4,425 $27,689 $10,969 $39,834 $15,394600–750 hp $849 $336 $6,917 $2,835 $7,766 $3,171>750 hp $0 $0 $0 $0 $0 $0Total 335312 $10,294,073 $11,791,567 $34,606 $5,208,210 $10,328,679 $16,999,777Welders (333992)50–100 hp $0 $1,307,020 $0 $1,803,688 $0 $3,110,708100–175 hp $108,260 $174,427 $0 $77,693 $108,260 $252,119175–300 hp $0 $0 $0 $0 $0 $0300–600 hp $0 $0 $0 $0 $0 $0600–750 hp $0 $0 $0 $0 $0 $0>750 hp $0 $0 $0 $0 $0 $0Total 333992 $108,260 $1,481,447 $0 $1,881,380 $108,260 $3,362,827Grand TotalTotal $217,359,106 $134,632,238 $526,847,229 $238,454,245 $744,206,335$373,086,483$aCosts are presented in 2008 dollars.4-35Table 4-7. Summary of Major Source and Area Source NAICSCosts for the CI RICE NESHAP – by Number of EnginesaNAICSNumber of Engines Total (Major + Area)Major Area Total Capital Cost Annual CostElectric Power Generation (2211)50–100 hp 47,324 79,859 127,183 $0 $8,668,603100–175 hp 67,713 114,266 181,980 $13,406,919 $32,498,019175–300 hp 59,039 99,627 158,666 $23,012,914 $30,396,866300–600 hp 42,113 97,919 140,032 $345,460,132 $133,924,260600–750 hp 1,760 16,455 18,215 $69,038,790 $28,217,515>750 hp 3,828 28,746 32,574 $182,078,100 $61,147,960Total 2211 221,777 436,872 658,649 $632,996,854 $294,853,223Hospitals (622110)50–100 hp 5,916 0 5,916 $0 $424,515100–175 hp 8,464 0 8,464 $1,675,865 $2,709,236175–300 hp 7,380 0 7,380 $2,876,614 $2,619,927300–600 hp 5,264 0 5,264 $12,113,408 $4,418,775600–750 hp 220 0 220 $848,629 $335,898>750 hp 479 0 479 $2,706,281 $887,886Total 622110 27,722 0 27,722 $20,220,797 $11,396,237Crude Petroleum & NG Production (211111)50–100 hp 5,856 8,784 14,640 $0 $1,000,210100–175 hp 10,237 15,355 25,592 $2,026,868 $4,731,252175–300 hp 9 14 23 $3,592 $4,581300–600 hp 66 136 202 $497,925 $192,644600–750 hp 0 0 0 $0 $0>750 hp 34 227 261 $1,457,619 $489,352Total 211111 16,202 24,517 40,719 $3,986,003 $6,418,038(continued)4-36Table 4-7. Summary of Major Source and Area Source NAICSCosts for the CI RICE NESHAP – by Number of Enginesa(continued)NAICSNumber of Engines Total (Major + Area)Major Area Total Capital Cost Annual CostNatural Gas Liquid Producers (211112)50–100 hp 5,856 8,784 14,640 $0 $1,000,210100–175 hp 10,237 15,355 25,592 $2,026,868 $4,720,233175–300 hp 9 14 23 $3,592 $4,571300–600 hp 66 136 202 $497,925 $192,426600–750 hp 0 0 0 $0 $0>750 hp 34 227 261 $1,457,619 $489,071Total 211112 16,202 24,517 40,719 $3,986,003 $6,406,510National Security (92811)50–100 hp 5,916 8,873 14,789 $0 $1,010,346100–175 hp 8,464 12,696 21,160 $1,675,865 $3,902,806175–300 hp 7,380 11,070 18,450 $2,876,614 $3,660,589300–600 hp 5,264 10,880 16,144 $39,730,393 $15,354,070600–750 hp 220 1,828 2,048 $7,765,269 $3,170,397>750 hp 479 3,194 3,672 $20,531,598 $6,888,919Total 92811 27,722 48,541 76,263 $72,579,739 $33,987,126Hydro Power Units (335312)50–100 hp 232 348 580 $0 $39,597100–175 hp 0 0 0 $0 $0175–300 hp 0 0 0 $0 $0300–600 hp 0 0 0 $0 $0600–750 hp 0 0 0 $0 $0>750 hp 0 0 0 $0 $0Total 335312 232 348 580 $0 $39,597(continued)4-37Table 4-7. Summary of Major Source and Area Source NAICSCosts for the CI RICE NESHAP – by Number of Enginesa(continued)NAICSNumber of Engines Total (Major + Area)Major Area Total Capital Cost Annual CostIrrigation Sets (335312)50–100 hp 3,422 5,133 8,555 $0 $584,446100–175 hp 15,845 23,767 39,611 $3,137,134 $7,305,856175–300 hp 18,327 27,491 45,819 $7,143,945 $9,090,911300–600 hp 5 11 16 $39,834 $15,394600–750 hp 0 2 2 $7,766 $3,171>750 hp 0 0 0 $0 $0Total 335312 37,599 56,403 94,003 $10,328,679 $16,999,777Welders (333992)50–100 hp 18,213 27,319 45,532 $0 $3,110,708100–175 hp 547 820 1,367 $108,260 $252,119175–300 hp 0 0 0 $0 $0300–600 hp 0 0 0 $0 $0600–750 hp 0 0 0 $0 $0>750 hp 0 0 0 $0 $0Total 333992 18,760 28,140 46,899 $108,260 $3,362,827Grand TotalTotal 366,217 619,337 957,832 $744,206,335$373,086,483aCosts are presented in 2008 dollars.4-38 4.5 Emissions and Emission Reductions

The emissions reductions associated with th e final rule are based on requiring emission standards that are based on appl ying add-on controls to non-emerge ncy CI engines greater than 300 HP. Baseline emissions from the current populat ion of stationary RICE less than or equal to 500 HP at major sources and exis ting stationary RICE at area sources were calculated based on non-emergency CI engines operating 1,000 hrs/yr , and emergency CI engines operating 50 hrs/yr. The following additional assumptions were used:

Emission Factors: Engine HAP (lb/hp-hr) CO (lb/hr) PM (lb/hp-hr) SO 2 (lb/hp-hr) CI 1.07x10 -4 6.96x10 -1 7.00x10 -4 0.00809xS 1 * *Obtained from AP-42, section 3.4 where S 1 is sulfur content.

Control Efficiencies: Technology HAP CO PM Oxidation catalyst 70% 70% 30%

Based on the above assumptions and the exis ting population of engine s shown earlier in this section, the HAP, CO, and PM baseline em issions and reductions were calculated. In addition to the final rule reducing HAP, CO, and PM, the rule will also lead to reductions in sulfur dioxide (SO 2 ) emissions by requiring existing non-emer gency CI engines greater than 300 HP that use diesel fuel to use diesel fuel c ontaining no more than 15 parts per million (ppm) of sulfur. We have not quantified the SO x reductions that would occur as a result of engines switching to ULSD because we are unable to es timate the number of engines that already use ULSD and therefore we are unable to estimate th e percentage of engines that may switch to ULSD due to this rule. If none of the affected engines would use ULSD w ithout this rule, then we estimate the SO x reductions are 31,000 tpy in the year 2013. If all of the affected engines would use ULSD regardless of the rule, then the additional SO x reductions would be zero.
The estimated reductions in tons per year (tpy) as a result of the fi nal rule are shown in Table 4-8. In addition, it is e xpected that additional PM reduc tions will be achieved by the requirement to use ULSD for CI engines that install a DOC. The use of ULSD reduces the formation of sulfates in the exhaust gas, ther efore reducing the emissi on of these sulfate PM emissions from the exhaust. EPA has estimated that the use of ULSD can reduce PM emissions4-39 by 5-30 percent depending on the sulf ur concentration of the diesel fuel that is being replaced. Because EPA has no information on the type of fuel that CI engines are currently using, the PM reductions from switching to ULSD were not quantified and included in this summary.
The work practice requirement of using an open crankcase ventilation system to control metallic HAP emissions is expected to achieve additional HAP reductions from CI engines. However, the metallic HAP emission reduction cannot be quantified because of the difficulty of measuring metallic HAP from the crankcase exhaust. Therefore, the metallic HAP reductions are not included in the total emission reductions.

Table 4-8. Summary of Major Source a nd Area Source Emissions Reductions for the CI RICE NESHAP in 2013

Size Range (HP) Emission Reductions (tpy) HAP CO PM VOC 50-100 0 0 0 0 100-175 44 2,072 123 1,183 175-300 57 1,571 161 1,549 300-500 145 2,362 407 3,923 500-600 18 209 50 478 600-750 11 107 31 300

>750 36 236 102 982 Total 312 6,558 874 8,416 50-100 0 0 0 0 100-175 0 0 0 0 175-300 0 0 0 0 300-600 368 5,314 1,031 9,930 600-750 92 891 259 2,497

>750 243 1,578 680 6,553 Total 703 7,784 1,970 18,980 Grand Total 1,014 14,342 2,844 27,395 Note: All emission reduction estimates are from “Impacts Associated with NESHAP for Existing Stationary CI RICE,” prepared by Bradley Nelson, Ec/R, Inc. for Melanie King, U.S. EPA, Office of Air Quality Planning and Standa rds, February 17, 2010

.5-1 SECTION 5 ECONOMIC IMPACT ANALYSIS, ENER GY IMPACTS, AND SOCIAL COSTS
The EIA provides decision makers with social cost estimates and enhances understanding of how the costs may be distributed acro ss stakeholders (EPA , 2000). Although several economic frameworks can be used to estimate social costs for regulations of this size and sector scope, OAQPS has typically used partial equilibrium market models. However, the current data do not provide sufficient details to develop a market model; the data that are available have little or no sector/firm detail and are reported at the national level. In addi tion, some sectors have unique market characteristics (e.g., hospitals) that make developing partial equilibrium models difficult. Given these constraints, we believe d the direct compliance costs as a reasonable approximation of total social costs. In addition, we also provide a qualitative analysis of the final rule’s economic impact on stakeholder decisi ons, a qualitative disc ussion on if unfunded mandates occur as a result of this final rule, and a qualitative discus sion of the potential distribution of social costs be tween consumers and producers.

5.1 Compliance Costs of the Final Rule For the year 2013, EPA’s engineerin g cost analysis estimates the total annualized costs of the final rule are $373 million (i n 2008 dollars) (Nelson, 2010).
As shown in Figure 5-1, the majority of the costs fall on the electric power sector (79%), followed by national security (9%). The remaining industries each account for 5% or less of the total annualized cost. The industrial classificat ion for each engine is taken from the Power Systems Research (PSR) database, which is the ma jor source of data for the engines affected by the final rule. The PSR database used as a basis for the analyses in this RIA contains information on both mobile and stationary onr oad and nonroad engines, among other data, and does so not only for the U.S. but worldwide. PSR has collected such data for more than 30 years. The Office of Transportation and Air Qualit y (OTAQ) uses this data base frequently in the development of their mobile source rules.
The annualized compliance costs per engine va ry by the engine size (see Figure 5-2). For 300 hp engines or less, the annualized per-engin e costs are below $215 per engine. Per-engine costs for higher horsepower (hp) engines range between $950 and $1,900.
The final rule will affect approximately one m illion existing stationary diesel engines. As shown in Figure 5-3, most of the affected engi nes fall within the 100 to 175 hp category (31%).5-2 The next highest categories are 50 to 100 hp (24%) and 175 to 300 hp (23%). The remaining engines are concentrated in the 300 to 600 hp category (16%).

79%

3% 2% 2% 9%

0% 5%

1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Electric Power Generation(2211)Hospitals (622110)Crude Petroleum & NGProduction (211111)Natural Gas Liquid Producers(211112)National Security (92811)Hydro Power Units (335312)Irrigation Sets (335312)Welders (333992)

Figure 5-1. Distribution of Annualized Direct Compliance Costs by Industry: 20135-3 $68 $198 $212 $952 $1,549 $1,877

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000

50-100 hp 100-175 hp 175-300 hp 300-600 hp 600-750 hp >750 hp
Figure 5-2. Average Annualized Cost per Engine by Horsepower Group: 2013 ($2008)

24% 31%

23%

16%

2% 4%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

50-100 hp 100-175 hp 175-300 hp 300-600 hp 600-750 hp >750 hp
Figure 5-3. Distribution of Engine Population by Horsepower Group: 20135-4 To assess the size of the comp liance cost relative to the va lue of the goods and services for industries using affected engi nes, we collected Census data for selected industries. At the industry level, the annualized costs represent a very small fraction of revenue (less than 0.07%) (Table 5-1). These industry level cost-to-sales ratios can be inte rpreted as an average impact on potentially affected firms in these industries. Ba sed on the cost-to-sales ratios, we can conclude that the annualized cost of this rule should be no higher than 1% of th e sales on average for a firm in each of these industries.
Table 5-1. Selected Industry-Level Annualized Compliance Costs as a Fraction of Total Industry Revenue: 2008

Industry (NAICS) Industry Name Total Annualized Costs ($ million) a Sales, Shipments, Receipt, or Revenue ($Billion) Cost-to-Sales Ratio ($2007) ($2008) 2211 Electric Power Generation $299.5 $440.4 $449.8 0.07% 622110 Hospitals $11.4 $663.6 $677.8 0.00%
211111 Crude Petroleum & NG Production $6.7 $214.2 $218.8 0.00%

211112 Natural Gas Liquid Producers $6.7 $42.4 $43.3 0.02%

92811 National Security $34.5 #N/A #N/A #N/A 333992 Welders $3.4 $5.2 $5.3 0.06%
111 and 112 Agriculture using irrigation systems a $18.1 $27.9 $28.5 0.06%

a Irrigation engine costs assumed to be passed on to agricultural sectors that use irrigation systems. N/A: receipts are Not Available for National Security Sources: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 00: All sectors:

Geographic Area Series: Economy-Wide Key Statistics: 2007” <http://factfinder.census.gov>; (January 4th , 2010). U.S. Department of Agriculture (USDA), National Agri cultural Statistics Service (NASS). 2009. “2008 Farm and

Ranch Irrigation Survey.” Washington, DC: USDA-NASS. Nelson, B., EC/R Inc. January 7, 2010. Memorandum to Melanie King, U.S. Environmental Protection Agency.

Impacts Associated with NESHAP for Existing Stationary CI RICE.5-5 5.2 How Might People and Firms Respond? A Partial Equilibrium Analysis Markets are composed of people as consum ers and producers trying to maximize utility (consumers) and maximize profits (producers) th ey can given their economic circumstances. One way economists illustrate behavi oral responses to pollution cont rol costs is by using market supply and demand diagrams. The market supply curve describes how much of a good or service firms are willing and able to sell to people at a pa rticular price; this curve is typically upward sloping because some production resources are fi xed. As a result, the cost of producing an additional unit typically rises as more units ar e made. The market demand curve describes how much of a good or service consumers are willing and able to buy at some price. Holding other factors constant, the quantity demand is assumed to fall when prices rise. In a perfectly competitive market, equilibrium price (P 0 ) and quantity (Q 0 ) is determined by the intersection of the supply and demand curves (see Figure 5-4). 5.2.1 Changes in Market Prices and Quantities To qualitatively assess how the regulation may influence the equilibrium price and quantity in the affected markets, we assume d the market supply function shifts up by the additional cost of producing the good or service; the unit cost increase is typically calculated by dividing the annual compliance cost estimate by the baseline quantity (Q 0 ) (see Figure 5-4). As shown, this model makes two predic tions: the price of the affected goods and services are likely to rise and the consumption/product ion levels are likely to fall.5-6 consumer surplus = –[fghd + dhc] producer surplus = [fghd – aehb] – bdc total surplus = consumer surplus + producer surplus = –[aehb + dhc + bdc]
Figure 5-4. Market Demand and Supply Mo del: With and Without Regulation

The size of these changes depends on two f actors: the size of the unit production cost increase (supply shift) and differences in how each side of the mark et (supply and demand) responds to changes in price. Economists measure responses using the con cept of price elasticity, which represents the percentage change in quantity divided by th e percentage change in price. This dependence has been expressed in the following formula: 1


## ( ) Demand) of Elasticity Price

- Supply of Elasticity Price Supply of Elasticity Price

= cost production unit er- Share of p

As a general rule, a higher share of the per-unit cost increases will be passed on to consumers in markets where

 goods and services are necessities and peopl e do not have good substitutes that they can switch to easily (demand is inelastic) and

1 For examples of similar mathematical models in the public finance literature, see Nicholson (1998), pages 444–447, or Fullerton and Metcalf (2002).5-7  suppliers have excess capacity and can eas ily adjust production levels at minimal costs, or the time period of analysis is long enough that suppli ers can change their fixed resources; supply is more elastic over longer periods.
Short-run demand elasticities for energy goods (e lectricity and natura l gas), agricultural products, and construction are ofte n inelastic. Specific estimates of short-run demand elasticities for these products can be obtained from existi ng literature. For the s hort-run demand of energy products, the National Energy Modeling System (N EMS) buildings module uses values between 0.1 and 0.3; a 1% increase in price leads to a 0.1 to 0.3% decrease in energy demand (Wade, 2003). For the short-run demand of agriculture and construction, the EPA has estimated elasticities to be 0.2 for agri culture and approximately 1 fo r construction (EPA, 2004). As a result, a 1% increase in the prices of agricu lture products would lead to a 0.2% decrease in demand for those products, while a 1% increas e in construction prices would lead to approximately a 1% decrease in demand for construction. Given these demand elasticity scenarios (shaded in gray), approximately a 1% increase unit costs would result in a price increase of 0.1 to 1% (Table 5-2). As a result , 10 to 100% of the unit cost increase could be passed on to consumers in the form of higher goods/services prices. This price increase would correspond to a 0.1 to 0.8% decline in cons umption in these markets (Table 5-3).
Table 5-2. Hypothetical Price Increase s for a 1% Increase in Unit Costs

Market Demand Elasticity Market Supply Elasticity
0.1 0.3 0.5 0.7 1 1.5 3

− 0.1 0.5% 0.8% 0.8% 0.9% 0.9% 0.9% 1.0%

− 0.3 0.3% 0.5% 0.6% 0.7% 0.8% 0.8% 0.9%

− 0.5 0.2% 0.4% 0.5% 0.6% 0.7% 0.8% 0.9%

− 0.7 0.1% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8%

− 1.0 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.8%

− 1.5 0.1% 0.2% 0.3% 0.3% 0.4% 0.5% 0.7%

− 3.0 0.0% 0.1% 0.1% 0.2% 0.3% 0.3% 0.5%

5.2.2 Regulated Markets: The Electric Power Ge neration, Transmission, and Distribution Sector Given that the electric power sector bears majority of the estimated compliance costs (Figure 5-1) and the industry is also among the last major regu lated energy industries in the United States (EIA, 2000), the competitive model is not necessarily applicab le for this industry.5-8 Table 5-3. Hypothetical Consumption Decreases for a 1% Increase in Unit Costs

Market Demand Elasticity Market Supply Elasticity
0.1 0.3 0.5 0.7 1 1.5 3

− 0.1

− 0.1%

− 0.1%

− 0.1%

− 0.1%

− 0.1%

− 0.1%

− 0.1%

− 0.3

− 0.1% − 0.2%

− 0.2%

− 0.2%

− 0.2%

− 0.3%

− 0.3%

− 0.5

− 0.1%

− 0.2% − 0.3%

− 0.3%

− 0.3%

− 0.4%

− 0.4%

− 0.7

− 0.1%

− 0.2%

− 0.3% − 0.4%

− 0.4%

− 0.5%

− 0.6%

− 1.0

− 0.1%

− 0.2%

− 0.3%

− 0.4% − 0.5%

− 0.6%

− 0.8%

− 1.5

− 0.1%

− 0.3%

− 0.4%

− 0.5%

− 0.6% − 0.8%

− 1.0%

− 3.0

− 0.1%

− 0.3%

− 0.4%

− 0.6%

− 0.8%

− 1.0% − 1.5%

Although the electricity i ndustry continues to go through a pro cess of restructuring, whereby the industry is moving toward a more competitive framework (see Figure 5-5 for the status of restructuring by state), 2 in many states, electricity prices con tinue to be fully regulated by Public Service Commissions. As a result, the rules a nd processes outlined by these agencies would ultimately determine how these additional regulatory costs would be recovered by affected entities. 5.2.3 Partial Equilibrium Measures of Soci al Cost: Changes Consumer and Producer Surplus In partial equilibrium analysis, the social co sts are estimated by measuring the changes in consumer and producer surplus, and these values can be determined using the market supply and demand model (Figure 5-4). The change in c onsumer surplus is measured as follows:

Δ

CS = – [ Δ Q 1 × Δ p ] + [0.5 × Δ Q × Δ p ]. (5.1)
Higher market prices and lower quantities lead to consumer welfare losses. Similarly, the change in producer surplus is measured as follows:

Δ

PS = [ Δ Q 1 × Δ p ] – [ Δ Q 1 × t] – [0.5 × Δ Q × ( Δ p – t )]. (5.2)
Higher unit costs and lower production level reduce producer surplus because the net price change ( Δ p – t) is negative. However, these losses are mitigated because market prices tend to rise.

2 http://tonto.eia.doe.gov/energy_in_br ief/print_pages/electricity.pdf.5-9 Figure 5-5. Electricity Restructuring by State Source. U.S. Energy Information Administration. 2008a.

<http://www.eia.doe.gov/cneaf/electricity/page/restructur ing/restructure_elect.html>. Last updated September 2008.

5.3 Social Cost Estimate As shown in Table 5-1 the compliance costs are only a small fraction of the affected product value; this suggests that shift of the supply curve may also be small and result in small changes in market prices and consumption. EPA believes the national annualized compliance cost estimates provide a reasonabl e approximation of the social co st of this final rule. EPA believes this approximation is better for indus tries whose markets are well characterized as perfectly competitive. This approximation is less well understood for industries where the characterization of markets is not always perfectly competitive such as electric power generation .whose legal incidence of this rule is approxi mately 80 percent of th e annualized compliance cost. However, given the data limitation noted earlier, EPA believes the accounting for compliance cost is a reasonable approximation to inform policy discussion in this rulemaking. To shed more light on this issue, EPA ran hypothetic al analyses and the results are in Tables 5-2 and 5-3.5-10 5.4 Energy Impacts Executive Order 13211 (66 FR 28355, May 22, 2001) provides that agencies will prepare and submit to the Administrator of the Office of Information and Regulatory Affairs, Office of Management and Budget, a Statement of Energy Effects for certain actions identified as “significant energy actions.” S ection 4(b) of Executive Order 13211 defines “significant energy actions” as any action by an ag ency (normally published in the Federal Register ) that promulgates or is expected to lead to the pr omulgation of a final rule or regulation, including notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking: (1) (i) that is a significant re gulatory action under Executive Order 12866 or any successor order, and (ii) is likely to have a significant adverse effect on the supply, distri bution, or use of energy; or (2) that is designated by the Administrator of the Office of In formation and Regulatory Affairs as a significant energy action.
This rule is not a signifi cant energy action as designated by the Administrator of the Office of Information and Regulatory Affairs because it is not likely to have a significant adverse impact on the supply, distribution, or use of ener gy. EPA has prepared an analysis of energy impacts that explains this conclusion as follows below.
With respect to energy supply and prices, th e analysis in Table 5-1 suggests at the industry level, the annualized cost s represent a very small fracti on of revenue (less than 0.7%). As a result, we can conclude supply a nd price impacts should be small.
To enhance understanding regarding the regu lation’s influence on energy consumption, we examined publicly available data describing en ergy consumption for the electric power sector that will be affected by this rule. The A nnual Energy Outlook 2010 (EIA, 2009) provides energy consumption data. As shown in Table 5-4, this industry account for less than 0.5% of the U.S. total liquid fuels and less than 5.2% of natural gas. As a result, any energy consumption changes attributable to the regulatory program should not significantly influen ce the supply, distribution, or use of energy.

5.5 Unfunded Mandates
Title II of the Unfunded Mandates Refo rm Act of 1995 (UMRA), 2 U.S.C. 1531-1538, requires Federal agencies, unless otherwise prohibited by law, to assess the effects of their regulatory actions on State, local, and tribal governments and the privat e sector. This rule contains a Federal mandate that may result in expenditures of $100 million or more for State, local, and tribal governments, in the aggregat e, or the private sect or in any one year.5-11 Accordingly, EPA has prepared under section 20 2 of the UMRA a written statement which is summarized below in this section.5-12 Table 5-4. U.S. Electric Power a Sector Energy Consumption (Quadrillion BTUs): 2013

Quantity Share of Total Energy Use
Distillate fuel oil 0.12 0.1%
Residual fuel oil 0.34 0.3% Liquid fuels subtotal 0.45 0.5% Natural gas 5.17 5.1%
Steam coal 20.69 20.6% Nuclear power 8.59 8.5% Renewable energy b 6.06 6.0% Electricity Imports 0.09 0.1%

Total Electric Power Energy Consumption c 41.18 40.9% Delivered Energy Use 72.41 72.0% Total Energy Use 100.59 100.0%

a Includes consumption of energy by electricity-only and combined heat and power plants whose primary business is

to sell electricity, or electricity an d heat, to the public. Includes small power producers and exempt wholesale generators.
b Includes conventional hydroelectric, geothermal, wood and wood waste, biogenic municipal solid waste, other

biomass, petroleum coke, wind, photovoltaic and solar thermal sources. Excludes net electricity imports.

c Includes non-biogenic municipal waste not included above. Source: U.S. Energy Information Administration. 2009a. Supplemental Tables to the Annual Energy Outlook 2010.

Table 2. Available at: <http://www.eia.doe.gov/oiaf/aeo/aeoref_tab.html>. 5.5.1 Future and Disproportionate Costs The UMRA requires that we estimate, where accurate estimation is reasonably feasible, future compliance costs imposed by the rule and any disproportio nate budgetary effects. Our estimates of the future compliance costs of the fina l rule are discussed prev iously in Section 4 of this RIA. We do not believe that there will be any disproportionate budgetar y effects of the final rule on any particular areas of the country, St ate or local governments, types of communities (e.g., urban, rural), or partic ular industry segments. 5.5.2 Effects on the National Economy The UMRA requires that we estimate the effect of the final rule on the national economy. To the extent feasible, we must estimate th e effect on productivity, economic growth, full employment, creation of productive jobs, and in ternational competitiveness of the U.S. goods and services if we determine that accurate estima tes are reasonably feasible and that such effect is relevant and material. The nationwide economic im pact of the final rule is presented earlier in this RIA chapter. This analysis provides estimates of the effect of the final rule on most of the5-13 categories mentioned above, and these estimates ar e presented earlier in this RIA chapter. In addition, we have determined that the final rule contains no regulatory requirements that might significantly or uniquely a ffect small governments. Therefore, t oday’s rule is not subject to the requirements of section 203 of the UMRA.

5.6 Environmental Justice

Executive Order (EO) 12898 (59 FR 7629 (Fe b. 16, 1994)) establishes federal executive policy on environmental justice. Its main provi sion directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disp roportionately high and adverse human health or environmental effects of their programs, policie s, and activities on minority populations and lowincome populations in the United States.

EPA has determined that this final rule will not have disproportionately high and adverse human health or environmental effects on mi nority or low-income populations because it increases the level of environm ental protection for all affected populations without having any disproportionately high and adve rse human health or environm ental effects on any population, including any minority or low-income population. This rule is a nationwide standard that reduces air toxics emissions from existing statio nary CI engines, thus decreasing the amount of such emissions to which all a ffected populations are exposed.6-1 SECTION 6 SMALL ENTITY SCREENING ANALYSIS
The Regulatory Flexibility Act as am ended by the Small Business Regulatory Enforcement Fairness Act (SBREFA) generally re quires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute, unless the agen cy certifies that the rule will not have a significant economic impact on a substa ntial number of small entities. Small entities as defined by the Small Business Administra tion (SBA) include small businesses, small governmental jurisdictions, and sm all not-for-prof it enterprises.
After considering the economic impact of the final rule on small entities, the screening analysis indicates that this final rule will not have a significant economic impact on a substantial number of small entities (or “SISNOSE”). Unde r the primary cost analyses EPA considered, sales and revenue tests for establishments owne d by model small entities are less than 3% and only one group of establishments (irrigated fa rms with receipts less than $25,000) has a ratio exceeding 1%.

6.1 Small Entity Data Set The industry sectors covered by the final rule were identified during the development of the cost analysis (Nelson, 2009). The SUSB provi des national information on the distribution of economic variables by industry and ente rprise size (U.S. Census, 2006a, b). 1 The Census Bureau and the Office of Advocacy of the SBA supported and developed these files for use in a broad range of economic analyses. 2 Statistics include the total number of establishments and receipts for all entities in an industry; however, many of these entities ma y not necessarily be covered by the final rule. SUSB also provides statistics by enterprise employment and receipt size.

The Census Bureau’s definitions used in th e SUSB, which are stated in Section 3 and restated here for clarity of presentation, are as follows:

 Establishmen t: An establishment is a single phys ical location wh ere business is conducted or where services or i ndustrial operations are performed.

 Receipts : Receipts (net of taxes) are define d as the revenue for goods produced, distributed, or services provided, in cluding revenue earned from premiums,

1 The SUSB data do not provide establishment information fo r the national security NAICS code (92811) or irrigated farms. Since most national security installations are owne d by the federal government (e.g., military bases), EPA assumes these entities would not be considered small. For irrigated farms, we relied on receipt data provided in the 2008 Farm and Irrigation Survey (USDA, 2009). 2 See http://www.census.gov/csd/susb/ and http://www.sba .gov/advo/research/data.html for additional details.6-2 commissions and fees, rents, interest, divi dends, and royalties. Receipts exclude all revenue collected for local, state, and federal taxes.

 Enterprise : An enterprise is a business organi zation consisting of one or more domestic establishments that were specifi ed under common ownership or control. The enterprise and the establishment are the same for single-establishment firms. Each multiestablishment company forms one enterprise—the enterprise employment and annual payroll are summed from the asso ciated establishmen ts. Enterprise size designations are determined by the su mmed employment of all associated establishments.
Because the SBA’s business size definitions (SBA, 2008) apply to an establishment’s “ultimate parent company,” we assumed in this an alysis that the “enterpri se” definition above is consistent with the concept of ultimate parent company that is typically used for SBREFA screening analyses and the terms are used interchangeably.

6.2 Small Entity Economic Impact Measures The analysis generated a set of establishment sales tests (represented as cost-to-receipt ratios) 3 for NAICS codes associated with sectors li sted in Table 6-1. Although the appropriate SBA size definition should be applied at the pa rent company (enterpris e) level, we can only compute and compare ratios for a model establishm ent owned by an enterpri se within an SUSB size range (employment or receipts). Using th e SUSB size range helps us account for receipt differences between establishments owned by large and small enterprises and also allows us to consider the variation in small business de finitions across affect ed industries. Using establishment receipts is also a conservative approach, because an establishment’s parent company (the “enterprise”) may have other economi c resources that could be used to cover the costs of the final rule. 6.2.1 Model Establishment Receipt s and Annual Compliance Costs The sales test compares a representative esta blishment’s total annual engine costs to the average establishment receipts for ente rprises in several size categories. 4 For industries with SBA

3 The following metrics for other small entity economic impact measures (if applicable) would potentially include

• small governments (if applicable): “revenue” test; annualized compliance cost as a percentage of annual government revenues and

• small nonprofits (if applicable): “expenditure” test; annualized compliance cost as a percentage of annual operating expenses, 4 For the 1 to 20 employee categ ory, we excluded SUSB data for enterpri ses with zero employees. These enterprises did not operate the entire year.6-3 employment size standards, we calculated aver age establishment receipts for each enterprise employment range (Table 6-2). 5 For industries with SBA receipt size standards, we calculated
Table 6-1. Final NESHAP for Existing Stationa ry CI Reciprocating Internal Combustion Engines (RICE): Affected Sectors and SBA Small Business Size Standards

Industry Description Corresponding NAICS SBA Size Standard for Businesses (effective March 11, 2008) Type of Small Entity Electric power generation 2211 a Business and government
General medical & surgical hospitals 622110 $34.5 million in annual r eceipts Business and government

Crude petroleum and natural gas production 211111 500 employees Business

Natural gas liquid producers 211112 500 employees Business

National security 92811 NA Government Hydro power units See NAICS 2211 1,000 employees Business and government Irrigation sets Affects NAICS 111 and 112 Generally $750,000 or less in annual receipts Business

Welders Affects industries that use heavy equipment such as construction,

mining, farming Varies by 6-digit NAICS code; Example industry: NAICS 238 = $14 million in annual receipts Business

a NAICS codes 221111, 221112, 221113, 221119, 221121, 221122: A firm is small if, including its affiliates, it is

primarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the preceding fiscal year did not exceed 4 million megawatt hours.
Source: U.S. Small Business Administ ration (SBA). 2008. “Table of Small Business Size Standards Matched to North American Industry Classification System Codes.” Effective August 22nd, 2008. Downloaded 1/11/10.
average establishment receipts fo r each enterprise r eceipt range (Table 6-3). We included the utility sector in the second gr oup, although the SBA size standard fo r this industry is defined in terms of physical units (megawatt hours) versus receipts. Crop and an imal production (NAICS 111 and 112) also have an SBA receipt size stan dard that defines a small business as receiving $750,000 or less in receipts per year. However, SUSB data were not available for these industries. Therefore, we conducted the sales te st using the following range of establishment receipts: farms with annual recei pts of $25,000 or less, farms with annual receipts of $100,000 or

5 We use 2002 Economic Census data in estimating number of establishments by industry instead of using 2007 Economic Census since this data was not available in time for use in our analysis. The release schedules for different types of 2007 Economic Census data are at http://www.census.gov/econ/census07/ pdf/EconCensusScheduleByDate.pdf

.6-4 less, farms with annual receip ts of $500,000 or less, and farm s with annual receipts of $750,000 or less.6-56-6Table 6-2. Average Receipts for Affected Industryby Enterprise: 2002 ($2008 Million/establishment)SBA SizeStandardfor Businesses(effective August22, 2008)Owned By Enterprises with Employee Range:NAICS NAICS DescriptionAllEnterprises1–20Employees20–99Employees100–499Employees500–749Employees750–999Employees1,000–1,499Employees211111 Crude petroleum &natural gas extraction500 employees $14.59 $0.53 $6.71 $9.51 NA NA NA211112 Natural gas liquidextraction500 employees $172.81 $0.30 NA $11.88 NA NA NA335312 Motor & generator mfg 1,000 employees $18.58 $1.37 $6.14 $15.96 $29.47 NA NA333992 Welding & solderingequipment mfg500 employees $18.51 $1.56 $6.60 $33.25 NA NA $114.55NA = Not available.Source: U.S. Census Bureau. 2006a. “Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 2002.”<http://www.census.gov/csd/susb/download_susb02.htm>. Downloaded 1/11/10.6-7Table 6-3. Average Receipts for Affected Industry byEnterprise Receipt Range:2002 ($2008 /establishment)SBA Size Standardfor Businesses(effective August22nd, 2008)Owned By Enterprises with Receipt Range:NAICS NAICS DescriptionAllEnterprises0–99KReceipts100–499.9KReceipts500–999.9KReceipts1,000–4,999.9KReceipts5,000,000–9,999,999KReceipts<10,000KReceipts10,000–49,999KReceipts50,000–99,999KReceipts100,000K+Receipts2211Electric PowerGenerationa$39.8 $0.1 $0.3 $0.8 $3.0$6.6 $2.7 $14.7 $22.2 $49.2622110 Hospitals$34.5 million in annualreceipts$92.30 NA NA $0.84 $3.59 $8.21 $5.03 $25.49 $65.89 $148.57234110Highway & streetconstruction$33.5 million inAnnual Receipts$7.74$0.06$0.32$0.84$2.74$8.11$2.00$22.62$56.48$56.81234120Bridge & tunnelconstruction$33.5 million inAnnual Receipts$14.09$0.05$0.30$0.89$2.90$8.08$2.53$25.25$57.00$79.62234910Water, sewer, &pipeline construction$33.5 million inAnnual Receipts$3.89$0.06$0.32$0.85$2.73$8.17$1.84$20.62$45.05$47.27234920Power &communicationtransmission lineconstruction$33.5 million inAnnual Receipts$3.39$0.06$0.31$0.83$2.52$7.75$1.32$16.84$34.50$23.86234930Industrial nonbuildingstructure construction$33.5 million inAnnual Receipts$35.93$0.05$0.30$0.85$2.71$8.38$1.73$22.34$30.90$174.38234990All other heavyconstruction$33.5 million inAnnual Receipts$2.66$0.06$0.30$0.83$2.48$7.76$0.99$18.72$40.53$42.3592811 National Security NA NA NANA NA NA NANA NA NA NANotes: Note: Industries in green were included for consistency with the analysis done for proposed rule (Under direction from EPA - to investigate if rule affectsdownstream users of engines).National Security is included in this table but does not have size standards.aNAICS codes 221111, 221112, 221113, 221119, 221121, 221122: A firm in these industries is defined as small by SBA if, including its affiliates, it isprimarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the preceding fiscal year did notexceed 4 million megawatt hours.NA = Not available. SUSB did not report this data for disclosure or other reasons.Source: U.S. Census Bureau. 2006a. “Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 2002.”<http://www.census.gov/csd/susb/download_susb02.htm>.6-8 Annual entity compliance costs vary depending on the size of the diesel engines used at the affected establishment. Absent facility -specific information, we computed per-entity compliance costs based for three different cases based on representative establishments—Cases 1, 2, and 3 (see Table 6-4). Each representative establishment differs based on the size and number of diesel engines being used. Complia nce costs are calculated by summing the total annualized compliance costs for the relevant engi ne categories, dividing the sum by the total existing population of those engines, and multiplying the average engine cost by the number of engines assumed to be at th e establishment. Since NAICS 2211 and 622110 are fundamentally different than other industries c onsidered in this analysis, we used different assumptions about what constitutes the representative establishment and report these assumptions separately.

 Case 1: The representative establishment for all industrie s uses three 750+ hp engines with an average compliance cost of $1,877 pe r engine, resulting in a total annualized compliance cost of approximately $5,631 for this representative establishment.

 Case 2: The representati ve establishment in NACIS 2211 and 622110 uses two 50 to 750+ hp engines with an average compliance cost of $437 per engine, resulting in a total annualized compliance cost of $874 for th is representative es tablishment. For all other industries, the repres entative establishment uses two 50 to 300 hp engines with an average compliance cost of $155 per engine , resulting in a total compliance cost of $310 for this representati ve establishment.

 Case 3: The representative establishment for all indus tries uses two 50 to 100 hp engines with an average co mpliance cost of $68 per engine, resulting in a total compliance cost of $137 for this representative establishment.

EPA believes that small entities are most likel y to face costs similar to Case 2 (columns shaded in gray in Table 6-4) because most of the engines to be affected by this proposal in NAICS 335312, 333992, 211111, and 211112 are under 300 hp capacity, and most small entities in these industries will own engi nes of this size or smaller. This is corroborated by Figure 6-1 and 6-2 which shows the distribu tion of engine population and co mpliance costs by engine size for all industries. However, it is difficult to make a similar claim for NAICS 2211 and 622110 based on the existing distribution of engines in these industries. 6 As noted earlier in the RIA, only 20 percent of the existing distribution of e ngines is expected to be classified as nonemergency.

6 This claim also cannot be made for NAICS 92811: National Security. However, since most national security installations are owned by the federal government (e.g., military bases), EPA assumes these entities would not be considered small.6-9 For the sales test, we divided the representative establishment compliance costs reported in Table 6-4 by the representative establishment r eceipts reported in Tables 6-2 and 6-3. This is known as the cost-to-receipt (i.e., sa les) ratio, or the “sales test.” The “sales test” is the impact
Table 6-4. Representative Establishment Cost s Used for Small Entity Analysis ($2008)

Case 1 Case 2 Case 3 NAICS 2211, 622110 (+750 hp

only) All Other NAICS (+750 hp

only) NAICS 2211, 622110 (50–750+ hp) All Other NAICS (50–300 hp) NAICS 2211, 622110 (50–100 hp only) All Other NAICS (50–100 hp only) Total Annualized Costs ($) $62,035,845 $7,871,576 $317,603,287 $42,778,499 $9,093,118 $6,745,516 Engine Population 33,052 4,194 727,090 276,374 133,099 98,736 Average Engine Cost ($/engine) $1,877 $1,877 $437 $155 $68 $68

Assumed Engines Per Establishment 3 3 2 2 2 2

Total Annualized Costs per Establishment $5,631 $5,631 $874 $310 $137 $137

* Engine population estimates taken from “Impacts Associ ated with NESHAP for Exis ting Stationary CI RICE,”

prepared by Bradley Nelson, Ec/R, Inc. for Melanie King, U.S. EPA, Office of Air Quality Planning and Standards, February 10, 2010.6-10 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Electric Power Generation

(2211) Hospitals (622110) Crude Petroleum & NG Production (211111) Natural Gas Liquid Producers

(211112) National Security (92811) Hydro Power Units (335312) Irrigation Sets (335312) Welders (333992) >750 hp

600

‐ 750 hp

300

‐ 600 hp

175

‐ 300 hp

100

‐ 175 hp

50

‐ 100 hp

Figure 6-1. Distribution of Engine Po pulation by Size for All Industries6-11 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Electric Power Generation

(2211) Hospitals (622110) Crude Petroleum & NG Production (211111) Natural Gas Liquid Producers

(211112) National Security (92811) Hydro Power Units (335312) Irrigation Sets (335312) Welders (333992) >750 hp

600

‐ 750 hp

300

‐ 600 hp

175

‐ 300 hp

100

‐ 175 hp

50

‐ 100 hp

Figure 6-2. Distribution of Compliance Co sts by Engine Size for All Industries

methodology EPA employs in analyzing small entity impacts as opposed to a “profits test,” in which annualized compliance costs are calculated as a share of profits.

This is because revenues or sales data are commonly available data for entities normally impacted by EPA regulations and profits data no rmally made available are often not the true profit earned by firms because of accounting an d tax considerations. Revenues as typically published are usually correct figures and are more reliably reported when compared to profit data. The use of a “sales test” for estimating small business impacts for a rulemaking such as this one is consistent with guidance offe red by EPA on compliance with SBREFA 7 and is consistent with guidance published by the U.S. SBA’s Office of Advocacy that suggests that cost as a

7 The SBREFA compliance guidance to EPA ru lewriters regarding the types of small business analysis that should be considered can be found at http://www.epa.gov/sbre fa/documents/rfafinalguidance06.pdf, pp. 24-25.6-12 percentage of total revenues is a metric for ev aluating cost increases on small entities in relation to increases on large entities. 8
If the cost-to-receipt ratio is less than 1%, th en we consider the fina l rule to not have a significant impact on the establishment company in question. We summarize the industries with cost-to-receipt ratios exceeding 1% below:
Primary Analysis:

 Case 2 : NAICS 2211 with receipts less than $100,000 per year

 Case 3 : No industries
Sensitivity Analysis (unlikely):

 Case 1 : NAICS 211111, 211112, with less than 20 employees, NAICS 2211 with receipts less than $500,000 per year, NAICS 234 with receipts less than $500,000 per year, and irrigated farms with re ceipts of $500,000 or less per year
In the Case 2 primary analysis, only esta blishments in NAICS 2211 with receipts less than $100,000 per year have cost-t o-receipt ratios above 1%. These establishments represent less than 5 percent of affected small establishments. However, establishments earning this level of receipts are likely to be using smaller engines than those assumed in Case 2, such as 50 to 100 hp engines. The results of our Case 3 analysis demonstrate that these establishments are not significantly impacted when taking this engine size into account.

6.3 Small Government Entities
The rule also covers sectors that include entities owned by small and large governments. However, given the uncertainty and data li mitations associated with identifying and appropriately classifying these entities, we computed a “revenue” test for a model small government, where the annualized compliance cost is a percentage of annual government revenues (U.S. Census, 2005a, b). The use of a “r evenue test” for estimating impacts to small governments for a rulemaking such as this one is consistent with gui dance offered by EPA on compliance with SBREFA, 9 and is consistent with guidan ce published by the US SBA’s Office of Advocacy. 10 For example, from the 2002 Census (in 2008 dollars), the average revenue for

8 U.S. SBA, Office of Advocacy. A Guide for Government Agencies, How to Comply with the Regulatory Flexibility Act, Implementing the President’s Small Business Agenda and Executive Order 13272, May 2003. 9 The SBREFA compliance guidance to EPA rule writers regard ing the types of small business analysis that should be considered can be found at http://www.epa.gov/sbrefa/documents/rfafinalguidance06.pdf , pp. 24-25. 10 U.S. SBA, Office of Advocacy. A Guide for Government Agencies, How to Comply with the Regulatory Flexibility Act, Implementing the President’s Small Business Agenda and Executive Order 13272, May 2003.6-13 small governments (counties and municipalitie s) with populations fewer than 10,000 are $3 million per entity, and the average revenue for lo cal governments with populations fewer than 50,000 is $8 million per entity. For the smalle st group of local governments (<10,000 people), the cost-to-revenue ratio would be 0.2% or less under each case. Fo r the larger group of governments (<50,000 people), the cost-to-revenue ratio is 0.1% or less under all cases.7-1 SECTION 7 HUMAN HEALTH BENEFITS OF EMISSIONS REDUCTIONS

7.1 Synopsis In this section, we provide an estimate of the particulate matter (PM) co-benefits for the final NESHAP for existing stationary compressi on ignition (RICE). Specifically, we calculated the benefits of this rule in terms of the co-b enefits associated with reducing PM rather than calculating the benefits associated with reduc ing hazardous air pollutants (HAPs). These PM reductions are a consequence of the technologies installed to reduce HAP emissions from RICE. These estimates reflect the monetized human hea lth co-benefits of reduc ing cases of morbidity and premature mortality associated with reducing exposure to the PM 2.5 precursors from the current RICE technology. We es timate the total monetized PM 2.5 co-benefits to be $940 million to $2.3 billion (2008$) at a 3% discount rate and $850 million to $2.1 billion at a 7% discount rate in the year of full implementation (2013). Data, resource, and methodological limitations prevented EPA from quantifying or monetizing the benefits fr om several important benefit categories, including benefits from reduci ng carbon monoxide (CO) and HAPs, ecosystem effects, and visibility impairment. The bene fits from reducing 1,014 tons of hazardous air pollutants each year have not been monetized in this analysis.
These estimates of the reduction in particulat e matter-related health effects reflect EPA’s most current interpretation of the scientific literature and include four key updates: (1) a nothreshold model for PM 2.5 that calculates incremental co-benef its down to the lowest modeled air quality levels; (2) a revised Value of a Statistical Life (VSL); (3) two te chnical updates to the population dataset and aggregation method; (4) presen tation of results derived from Pope et al. (2002) and Laden et al. ( 2006) instead of using the extremes of EPA’s Expert Elicitation on PM Mortality (Roman et al., 2008). Higher or lower es timates of co-benefits are possible using other assumptions; examples of this are provided in Figure 7-2.

7.2 Calculation of PM 2.5 Human Health Co-benefits This rulemaking would reduce emissions of PM 2.5 , SO 2, and VOCs. Because SOx and VOCs are also precursors to PM 2.5, reducing these emissions would also reduce PM 2.5 formation, human exposure and the incidence of PM 2.5 -related health effects. In this analysis, we estimated the co-benefits of reducing PM 2.5 exposure for the alternative st andards. Due to analytical limitations, it was not possible to pr ovide a comprehensive estimate of PM 2.5 -related co-benefits. Instead, we used the “benefit-pe r-ton” method to estimate these co-benefits (Fann et al., 2009). The PM 2.5 benefit-per-ton methodol ogy incorporates key assumptions described in detail below.7-2 These PM 2.5 benefit-per-ton estimates provi de the total monetized human health co-benefits (the sum of premature mortality and prematur e morbidity) of reducing one ton of PM 2.5 from a specified source. EPA has used the benefit per- ton technique in previous RIAs, including the recent SO 2 NAAQS RIA (U.S. EPA, 2009b). Table 7-1 shows the quantifie d and unquantified co-benefits captured in those benefit-per-ton estimates.

Table 7-1. Human Health and Welfare Effects of PM 2.5

Pollutant /

Effect Quantified and Monetized in Primary Estimates Unquantified Effects Changes in:
PM 2.5 Adult premature mortality Bronchitis: chronic and acute Hospital admissions: respiratory and cardiovascular Emergency room visits for asthma Nonfatal heart attacks (myocardial infarction) Lower and upper respiratory illness Minor restricted-activity days Work loss days Asthma exacerbations (a sthmatic population) Infant mortality Subchronic bronchitis cases Low birth weight Pulmonary function Chronic respiratory diseases other than chronic bronchitis Non-asthma respiratory emergency room visits Visibility Household soiling

Consistent with the Portland Cement NES HAP (U.S. EPA, 2009a), the co-benefits estimates utilize the concentratio n-response functions as reported in the epidemiology literature, as well as the 12 functions obtained in EPA’s expe rt elicitation study as a sensitivity analysis.

 One estimate is based on the concentrati on-response (C-R) function developed from the extended analysis of American Cancer Society (ACS) cohort, as reported in Pope et al. (2002), a study that EPA has previously used to generate its primary PM cobenefits estimate. When calculating the esti mate, EPA applied the effect coefficient as reported in the study without an adjustme nt for assumed concentration threshold of 10 μg/m3 as was done in recent (post-2006) Office of Air and Radiation RIAs.

 One estimate is based on the C-R function developed from the extended analysis of the Harvard Six Cities cohort, as report ed by Laden et al (2006). This study, published after the completion of the Staff Paper for the 2006 PM2.5 NAAQS, hasbeen used as an alternative estimate in the PM2.5 NAAQS RIA and PM2.5 cobenefits estimates in RIAs completed si nce the PM2.5 NAAQS. When calculating the estimate, EPA applied the effect coeffici ent as reported in the study without an adjustment for assumed concentration thre shold of 10 μg/m3 as was done in recent (post 2006) RIAs.7-3  Twelve estimates are based on the C-R func tions from EPA’s e xpert elicitation study (Roman et al., 2008) on the PM2.5 -mortality relationship and interpreted for PM cobenefits analysis in EPA’s final RIA fo r the PM2.5 NAAQS. For that study, twelve experts (labeled A through L) provided i ndependent estimates of the PM2.5-mortality concentration-response function. EPA pract ice has been to develop independent estimates of PM2.5-mortality estimates co rresponding to the c oncentration-response function provided by each of the twelve expe rts, to better characterize the degree of variability in the expert responses.

The effect coefficients are drawn from epidemiology studies examining two large population cohorts: the American Cancer Society cohort (Pope et al., 2002) and the Harvard Six Cities cohort (Laden et al., 2006). 1 These are logical choices for an chor points in our presentation because, while both studies are well designed and peer reviewed, there are strengths and weaknesses inherent in each, wh ich we believe argues for using both studies to generate cobenefits estimates. Previously, EPA had calcu lated co-benefits based on these two empirical studies, but derived the range of co-benefits, including the minimum and maximum results, from an expert elicitation of the re lationship between exposure to PM 2.5 and premature mortality (Roman et al., 2008). 2 Within this assessment, we include the co-benefits estimates derived from the concentration-response function provided by each of the twelve experts to better characterize the uncertainty in the concentration-response func tion for mortality and th e degree of variability in the expert responses. Because the experts used these cohort studies to inform their concentration-response functions , co-benefits estimates using these functions generally fall between results using these epid emiology studies (see Figure 7- 2). In general, the expert elicitation results support the conclusion that the co-benefits of PM 2.5 control are very likely to be substantial.

Readers interested in re viewing the methodology for cr eating the benefit-per-ton estimates used in this analys is should consult Fann et al. (2009). As described in the documentation for the benefit per-ton estimates cited above, national per-ton estimates are developed for selected pollutant/source category combinations. The per-ton values calculated therefore apply only to tons re duced from those specific pollu tant/source combinations (e.g., NO 2 emitted from electric generating units; NO 2 emitted from mobile sources). Our estimate of PM 2.5 co-control benefits is therefore based on the total PM 2.5 emissions controlled by sector and multiplied by this per-ton value.

1 These two studies specify multi-pollutant models that control for SO 2 , among other co-pollutants. 2 Please see the Section 5.2 of the Portland Cement RIA in Appendix 5A for more information regarding the change in the presentation of benefits estimates.7-4 The underlying emissions modeling and air quality modeling account for the current distribution of emissions sources , including both urban and rural sources. In addition, the air quality modeling included 14 vert ical layers to simulate the differences between ground-level emissions and higher stack emissions (U.S. EPA, 2006a). The distance that particles travel primarily depends on the size of the particle, the amount and release height of emissions, terrain, and meteorological conditions, such as wind speed and pr ecipitation. Fine part icles can have an atmospheric half-life of days to weeks and trav el hundreds to thousands of kilometers, whereas ultrafine and coarse particles travel less than te n kilometers (U.S. EPA, 2009c). Because we have not undertaken a study specific to emissions at ground level from RI CE, with regard to transport issues and to si ze fraction of PM 2.5 emissions (e.g., ultrafines and near ultrafines), there is uncertainty as to how far such emissions will travel and thus with regard to populations affected. Evidence from recent air quality modeling for mob ile source rules with similar engines (U.S. EPA, 1999; U.S. EPA, 2000; U.S. EPA, 2004; U. S. EPA, 2008e; U.S. EPA, 2010c) shows that some fine particles can travel long distances in the atmosphe re, but the proportion of such emissions from RICE that travel more than short distances is not yet definitively known.
The benefit-per-ton coefficients in this analys is were derived using modified versions of the health impact functions used in the PM NAAQS Regulatory Impact Analysis (U.S. EPA, 2006b). Specifically, this analysis uses the benef it-per-ton method first applied in the Portland Cement NESHAP RIA (U.S. EPA, 2009a), whic h incorporated three updates: a new population dataset, an expanded geographic scope of th e benefit-per-ton calcula tion, and the functions directly from the epidemiology studies withou t an adjustment for an assumed threshold. 3 Removing the threshold assumption is a key difference between the method used in this analysis of PM co-benefits and the methods used in RIAs prior to that for the Portland Cement NESHAP, and we now calculate incremental co-benefits down to the lowest modeled PM 2.5 air quality levels.

EPA strives to use the best available science to support our benefits analyses, and we recognize that interpreta tion of the science rega rding air pollution and h ealth is dynamic and evolving. Based on our review of the body of scien tific literature, EPA a pplied the no-threshold model in this analysis. EPA’s Integrated Science Assessment for Particulate Matter (U.S. EPA, 2009c), which was recently reviewed by EPA’s Cl ean Air Scientific Advisory Committee (U.S. EPA-SAB, 2009a; U.S. EPA-SAB, 2009b), concluded th at the scientific lit erature consistently finds that a no-threshold log-linear model most adequately portrays the PM-mortality

3 The benefit-per-ton estimates have also been updated since the Cement RIA to incorporate a revised VSL, as discussed on the next page.7-5 concentration-response relationship while recogn izing potential uncerta inty about the exact shape of the concentr ation-response function. 4 Although this document does not necessarily represent agency policy, it provides a basis for reconsidering the application of thresholds in PM 2.5 concentration-response func tions used in EPA’s RIAs. 5

Because the co-benefits are sens itive to the assumption of a threshold, we also provide a sensitivity analysis using the previous methodology (i.e., a threshold model at 10 μg/m 3 without the two technical updates) as a historical reference. Table 7-5 shows the sensitivity of an assumed threshold on the monetized results, with and without an assumed threshold at 10 μg/m 3

. As is the nature of Regulatory Impact An alyses (RIAs), the assumptions and methods used to estimate air quality benefits evolve over time to reflect the Agency’s most current interpretation of the scientif ic and economic literature. For a period of time (2004–2008), the Office of Air and Radiation (OAR) valued mortality risk reductions using a value of statistical life (VSL) estimate derived from a limited analysis of some of the availabl e studies. OAR arrived at a VSL using a range of $1 million to $10 million (2000$) consistent with two meta-analyses of the wage-risk literature. The $1 million value represented the lower end of the interquartile range from the Mrozek and Taylor (2002) meta-a nalysis of 33 studies. The $10 million value represented the upper end of the interquartile range from the Viscusi and Aldy (2003) metaanalysis of 43 studies. The mean estimate of $5.5 million (2000$) 6 was also consistent with the mean VSL of $5.4 million estimated in the Kochi et al. (2006) meta-analysis. However, the Agency neither changed its official guidance on the use of VSL in rule-makings nor subjected the interim estimate to a scientific peer-review process through the Science Advisory Board (SAB) or other pe er-review group.
During this time, the Agency continued work to update its guidance on valuing mortality risk reductions, including commissioning a repo rt from meta-analytic experts to evaluate methodological questions raised by EPA and the SAB on combining estimates from the various data sources. In addition, the Ag ency consulted several times w ith the Science Advisory Board Environmental Economics Advisory Committee (SAB-EEAC) on the i ssue. With input from the

4 It is important to note that uncertainty regarding the shape of the concentration-response function is conceptually distinct from an assumed threshold. An assumed threshold (below which there are no health effects) is a discontinuity, which is a specific example of non-linearity. 5 In the Portland Cement RIA (U.S. EPA, 2009a), EPA solicited comment on the use of the no-threshold model for benefits analysis within the preamble of that proposed rule. The comment period for the Portland Cement proposed NESHAP closed on September 4, 2009 (Docket ID No. EPA–HQ–OAR–2002–0051 available at http://www.regulations.gov ). EPA is currently reviewing those comments. 6 In this analysis, we adjust the VSL to account for a different currency year (2008$) and to account for income growth to 2015. After applying these adjustments to the $5.5 million value, the VSL is $7.9 million.7-6 meta-analytic experts, the SAB-EEAC advised the Agency to update its guidance using specific, appropriate meta-analytic tech niques to combine estimates from unique data sources and different studies, including those using differe nt methodologies (i.e., wage-risk and stated preference) (U.S. EPA-SAB, 2007).
Until updated guidance is availabl e, the Agency determined that a single, peer-reviewed estimate applied consistently best reflects the SAB-EEAC advice it has re ceived. Therefore, the Agency has decided to apply the VSL that was vetted and endorsed by the SAB in the Guidelines for Preparing Economic Analyses (U.S. EPA, 2000) 7 while the Agency continues its efforts to update its guidance on this issue. This approach calculates a mean value across VSL estimates derived from 26 labor market and contingent valuation st udies published between 1974 and 1991. The mean VSL across these studies is $6.3 million (2000$). 8 The Agency is committed to using scientifically sound, appropriately reviewed evidence in valuing mortality risk reductions and has made significant progr ess in responding to the SAB-EEA C’s specific recommendations. The Agency anticipates presenting results from this effort to the SAB-EEAC in Spring 2010 and that draft guidance will be av ailable shortly thereafter.
Figure 7-1 illustrates the relativ e breakdown of the monetized PM 2.5 health co-benefits.

7 In the (draft) update of the Economic Guidelines (U.S . EPA, 2008), EPA retained the VSL endorsed by the SAB with the understanding that further updates to the mortality risk valuation guidance would be forthcoming in the near future. Therefore, this report doe s not represent final agency policy. 8 In this analysis, we adjust the VSL to account for a different currency year (2008$) and to account for income growth to 2015. After applying these adjustments to the $6.3 million value, the VSL is $9.1m.7-7 Adult Mortality ‐ Pope et al. 93% Chronic Bronchitis 4%
AMI 2% Acute Respiratory Symptoms 0.5%

Infant Mortality 0.4%

Work Loss Days 0.2%

Hospital Admissions, Cardio 0.2% Hospital Admissions, Resp 0.04% Asthma Exacerbation 0.01% Acute Bronchitis 0.01% Upper Resp Symp 0.00% Lower Resp Symp 0.00% ER Visits, Resp 0.00% Other 1%

Figure 7-1. Breakdown of Monetized PM 2.5 Health Co-benefits using Mortality Function from Pope et al. (2002) a

a This pie chart breakdown is illustrative, using the results based on Pope et al. (2002 ) as an example. Using the

Laden et al. (2006) function for premature mort ality, the percentage of total monetized PM 2.5 co-benefits due to adult premature mortality would be 97%. This chart shows the breakdown using a 3% discount rate, and the results would be similar if a 7% discount rate was used.
Table 7-2 provides a general summary of the results by pollutant, including the emission reductions and monetized benefits-per-t on at discount rates of 3% and 7%. 9 . Table 7-3 provides a summary of the reductions in he alth incidences as a result of the pollution reductions. In Table 7- 4, we provide the co-benefits using our anchor poin ts of Pope et al. and Laden et al. as well as the results from the expert elicitation on PM 2.5 -related premature mortality. Figures 7-2 and 7-3 provide a visual representation of the range of co-benefits estimates a nd the pollutant breakdown of the monetized co-benefits.

9 To comply with Circular A-4, EPA provides monetized benefits using discount rates of 3% and 7% (OMB, 2003). These benefits are estimated for a specific analysis year (i .e., 2013), and most of the PM co-benefits occur within that year with two ex ceptions: acute myocardial in farctions (AMIs) and premature mortality. For AMIs, we assume 5 years of follow-up medical co sts and lost wages. For premature mo rtality, we assume that there is a “cessation” lag between PM exposures and the total reali zation of changes in health effects. Although the structure of the lag is uncertain, EPA follows the advice of the SAB-HES to assume a segmented lag structure characterized by 30% of mortality reductions in the first y ear, 50% over years 2 to 5, and 20% over the years 6 to 20 after the reduction in PM 2.5 (U.S. EPA-SAB, 2004). Changes in the la g assumptions do not change the total number of estimated deaths but rather the timing of those deaths. Therefore, discounting only affects the AMI costs after the analysis year and the valuation of premature mortalities that occur after the analysis year. As such, the monetized benefits using a 7% discount rate are only approximately 10% less than the monetized benefits using a 3% discount rate.7-8 . Table 7-2. Summary of Monetized PM 2.5 -related Co-benefits Estimates for RICE NESHAP for Compression Ignition in 2013 (2008$) a

Pollutant Emissions Reduction

s (tons) Benefit per ton (Pope,

3%) Benefit per ton (Laden,

3%) Benefit per ton (Pope,

7%) Benefit per ton (Laden,

7%) Total Monetized Co-benefits (millions 2008$ at 3%) Total Monetized Co-benefits (millions 2008$ at 7%)
Direct PM 2.5 Major 874 $230,000 $560,000 $210,000 $500,000 $200 to $490 $180 to $440
Direct PM 2.5 Area 1,970 $360,000 $880,000 $330,000 $790,000 $710 to $1,700 $640 to $1,600
PM 2.5 Precursors

VOC 27,395 $1,200 $3,000 $1,100 $2,700 $33 to $82 $30 to $74 Total $940 to $2,300 $850 to $2,100

a All estimates are for the analysis year (year of implementation, 2013), and are rounded to two significant figures so numbers may not sum across columns. All fine particles are assumed to have equivalent health effects, but the benefit per ton estimates vary because each ton of prec ursor reduced has a different propensity to become PM 2.5 . The monetized co-benefits incorporate the conversion from precursor emissions to ambient fine particles. Table 7-3. Summary of Reductions in Health Incidences from PM 2.5 Co-benefits for RICE NESHAP in 2013 a

Avoided Premature Mortality Pope et al. 110 Laden et al. 270 Avoided Morbidity Chronic Bronchitis 75 Acute Myocardial Infarction 170 Hospital Admissions, Respiratory 25 Hospital Admissions, Cardiovascular 53 Emergency Room Visits, Respiratory 84 Acute Bronchitis 180 Work Loss Days 15,000 Asthma Exacerbation 1,900 Acute Respiratory Symptoms 87,000 Lower Respiratory Symptoms 2,100 Upper Respiratory Symptoms 1,600

a All estimates are for the analysis year (2013) and are rounded to whole numbers with two significant figures. All fine particles are assumed to have eq uivalent health effects, but each PM 2.5 precursor pollutant has a different propensity to form PM 2.5 . Confidence intervals are unavailable for th is analysis because of the benefit-per-ton methodology.7-9 Table 7-4. All PM 2.5 Co-benefits Estimates for the RICE NESHAP at discount rates of 3% and 7% in 2013 (in millions of 2008$) a

3% 7% Benefit-per-ton Coefficients Deri ved from Epidemiology Literature Pope et al. $940 $850 Laden et al. $2,300 $2,100 Benefit-per-ton Coefficients D erived from Expert Elicitation Expert A $2,400 $2,200 Expert B $1,900 $1,700 Expert C $1,900 $1,700 Expert D $1,300 $1,200 Expert E $3,000 $2,700 Expert F $1,700 $1,500 Expert G $1,100 $1,000 Expert H $1,400 $1,300 Expert I $1,800 $1,700 Expert J $1,500 $1,400 Expert K $380 $350 Expert L $1,400 $1,200

a All estimates are rounded to two significant figures. Es timates do not include confidence intervals because they

were derived through the benefit-per-ton technique described above. The co-benefits estimates from the Expert Elicitation are provided as a reasonable characterization of the uncertainty in the mort ality estimates associated with the concentration-response function. Confidence intervals are unavailable for this analysis because of the benefit-per-ton methodology.7-10 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000

Pope et al. Laden et al.Millions(2008$)

Benefits estimates derived from 2 e p idemiolo gy functions and 12 ex p ert functions 3% DR 7% DR

Figure 7-2. Total Monetized PM2.5 Co -Benefits of RICE NESHAP in 2013 a

a This graph shows the estimated co-ben efits at discount rates of 3% and 7% using effect coefficients derived from

the Pope et al. study and the Laden et al. study, as we ll as 12 effect coefficients derived from EPA’s expert elicitation on PM mortality. The results shown are not the direct results from the studies or expert elicitation; rather, the estimates are based in pa rt on the concentration-response function provided in those studies.

Figure 7-3. Breakdown of Monetized Co-benefits for RICE NESHAP by PM 2.5 Precursor Pollutant and Source7-11 7.3 Unquantified Benefits
The monetized co-benefits estimated in this RIA only reflect the portion of benefits attributable to the health effect reductions associated with ambient fine particles. Data, resource, and methodological limitations prevented EPA fro m quantifying or monetizing the benefits from several important benefit categories, includi ng benefits from reducing carbon monoxide and hazardous air pollutants, ecosystem effects, and visibility impairment. The health benefits from reducing 1,014 tons of hazardous air pollutant s (HAPs) and the 14,000 tons of carbon monoxide each year have not been monetized in this analysis.
In this analysis, we have not quantifie d the benefits attributable to the SO 2 reductions that would occur as a result of these engines switching to ultra-low sulfur diesel (ULSD). Although we are confident that some SO 2 reductions would occur as a result of this rule, we are unable to estimate the percentage of engines that may switch to ULSD in the absence of this rule or the number of engines that al ready use ULSD. As a PM 2.5 precursor, these SO 2 emission reductions would lead to fewer PM 2.5 -related health effects. Because of uncertainty in the magnitude of the attributable SO 2 reductions and to avoid the appearance of double-counting, we have chosen to not include these estimates in any of the results ta bles or graphics in this RIA. If none of the affected engines would use ULSD without this rule, then we estimate the additional monetized PM 2.5 -related health co-benefits would be $720 million to $1.8 billion in 2013 (2008$, 3% discount rate). This is based on reductions of 31,000 tons of SO 2 emission reductions in the year 2013 that will take place if all affected engines would switch to ULSD for higher-sulfur diesel fuel (3000 ppm sulfur content) as mentioned in S ection 4. If all of the affected engines would use ULSD regardless of the rule, then the monetized co-benefits from SO 2 reductions would be zero. In addition to being a PM 2.5 precursor, SO 2 emissions also contri bute to adverse effects from acidic deposition in aquatic and terrestrial ecosystems as well as visibility impairment.
HAP benefits
Due to data, resource, and methodology limita tions, we were unable to estimate the benefits associated with the 1,014 tons of hazard ous air pollutants that would be reduced as a result of this rule. Available emissions data show that several different HAPs are emitted from stationary engines, either c ontained within the fuel burned or formed during the combustion7-12 process. 10 Although numerous HAPs may be emitted fr om diesel stationary RICE, a few HAPs account for 80% of the total mass of HAPs emissions emitted. These HAPs are formaldehyde (25%), acetaldehyde (19%), polycyclic aromatic hydrocarbons (PAHs) (18%), naphthalene (9%), and acrolein (9%). Other HAPs from diesel stationary RICE repres ent less than 5% each of the total mass of HAP emissions, including 1,3-butadie ne (4.4%), toluene ( 3.8%), styrene (3.5%) , benzene (2.8%), xylene (2.7%), hexane (1.8%), and ethylbenzene (0.3%). Metallic HAPs from diesel fired stationary RICE represent less th an 0.3% each of total mass of HAP emissions, including cadmium, lead, nickel, chromium, se lenium, and mercury. Below we describe the health effects associated with the top 5 HAPs by mass emitted from RICE.
Formaldehyde
Since 1987, EPA has classified formaldehyde as a probable huma n carcinogen based on evidence in humans and in rats, mice, hamsters, and monkeys. 11 EPA is currently reviewing recently published epidemiological data. For instance, research conducted by the National Cancer Institute (NCI) found an increas ed risk of nasopharyngeal cancer and lymphohematopoietic malignancies such as leukemia among workers exposed to formaldehyde. 12,13 In an analysis of the lymphohematopoi etic cancer mortality from an extended follow-up of these workers, NCI confirmed an a ssociation between lymph ohematopoietic cancer risk and peak exposures. 14 A recent National Institute of Occupational Safety and Health (NIOSH) study of garment workers also found incr eased risk of death due to leukemia among workers exposed to formaldehyde. 15 Extended follow-up of a cohort of British chemical workers did not find evidence of an increase in nasopha ryngeal or lymphohematopo ietic cancers, but a continuing statistically significant excess in lung cancers was reported. 16

10 Alpha-Gamma Technologies, Inc. 2004. Memo to U.S. EPA: Development of HAP Emission Factors for Small (<500 HP) Stationary Reciprocating Internal Combustion Engines (RICE). Attachment A. April 13. Available in the docket at EPA-HQ-OAR-2005-0030-0009 at www.regulations.gov. 11 U.S. EPA. 1987. Assessment of Health Risks to Garment Workers and Certain Home Residents from Exposure to Formaldehyde, Office of Pesticides and Toxic Substances, April 1987. 12 Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Blair, A. 2003. Mortality from lymphohematopoetic malignancies among workers in formaldehyde industries. Journal of the National Cancer Institute 95: 1615- 1623. 13 Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Blair, A. 20 04. Mortality from solid cancers among workers in formaldehyde industries. American Journal of Epidemiology 159: 1117-1130. 14 Beane Freeman, L. E.; Blair, A.; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Hoover, R. N.; Hauptmann, M. 2009. Mortality from lymphohematopoietic malignancies among workers in formaldehyde industries: The National Cancer Institute cohort. J. National Cancer Inst. 101: 751-761. 15 Pinkerton, L. E. 2004. Mortality among a cohort of garment workers e xposed to formaldehyde: an update. Occup. Environ. Med. 61: 193-200. 16 Coggon, D, EC Harris, J Poole, KT Palmer. 2003. Exte nded follow-up of a cohort of British chemical workers exposed to formaldehyde. J National Cancer Inst. 95:1608-1615.7-13 In the past 15 years there has been substa ntial research on the inhalation dosimetry for formaldehyde in rodents and primates by the CIIT Centers for Health Research (formerly the Chemical Industry Institute of T oxicology), with a focus on use of rodent data for refinement of the quantitative cancer dose-response assessment. 17 , 18 , 19 CIIT’s risk assessment of formaldehyde incorporated mechanistic and dosimetric info rmation on formaldehyde. However, it should be noted that recent research published by EPA indicates that when two-stage modeling assumptions are varied, result ing dose-response estimates can vary by several orders of magnitude. 20 , 21 , 22 , 23 These findings are not supportive of in terpreting the CIIT model results as providing a conservative (health prot ective) estimate of human risk. 24 EPA research also examined the contribution of the two-stage m odeling for formaldehyde towards characterizing the relative weights of key events in the m ode-of-action of a carcinogen. For example, the model-based inference in the publ ished CIIT study that formalde hyde’s direct mutagenic action is not relevant to the compound’s tumorigenic ity was found not to hold under variations of modeling assumptions. 25
Based on the developments of the last d ecade, in 2004, the working group of the IARC concluded that formaldehyde is carcinogenic to humans (Group 1), on the basis of sufficient evidence in humans and sufficient evidence in expe rimental animals - a higher classification than previous IARC evaluations. Afte r reviewing the currently available epidemiological evidence, the IARC (2006) characterized the human evid ence for formaldehyde carcinogenicity as “sufficient,” based upon the data on nasophar yngeal cancers; the epid emiologic evidence on

17 Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D Kalisak, J Preston, and FJ Miller. 2003. Biologically motivated computational modeling of formaldehyde carcinogenicity in the F344 rat. Tox Sci 75: 432-447. 18 Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D Kalisak, J Preston, an d FJ Miller. 2004. Human respiratory tract cancer risks of inhaled formaldehyde: Dose-response predictions derived from biologically-motivated computational modeling of a combined rodent and human dataset. Tox Sci 82: 279-296. 19 Chemical Industry Institute of Toxicology (CIIT).1999 . Formaldehyde: Hazard characterization and dose-response assessment for carcinogenicity by the route of inhalation. CIIT, September 28, 1999. Research Triangle Park, NC. 20 U.S. EPA. Analysis of the Sensitivity and Uncertainty in 2-Stage Clonal Growth Models for Formaldehyde with Relevance to Other Biologically-Based Dose Response (BBDR) Models. U.S. Environmental Protection Agency, Washington, D.C., EPA/600/R-08/103, 2008 21 Subramaniam, R; Chen, C; Crump, K; .et .al. (2008) Uncertainties in biologically-based modeling of formaldehyde-induced can cer risk: identification of key issues. Risk Anal 28(4):907-923. 22 Subramaniam, R; Chen, C; Crump, K; .et .al. (2007). Uncertainties in the CIIT 2-stage model for formaldehydeinduced nasal cancer in the F344 rat: a limited sensitivity analysis-I. Risk Anal 27:1237 23 Crump, K; Chen, C; Fox, J; .et .al. (2008) Sensitivity analysis of biologically motivated model for formaldehydeinduced respiratory cancer in humans. Ann Occup Hyg 52:481-495. 24 Crump, K; Chen, C; Fox, J; .et .al. (2008) Sensitivity analysis of biologically motivated model for formaldehydeinduced respiratory cancer in humans. Ann Occup Hyg 52:481-495. 25 Subramaniam, R; Chen, C; Crump, K; .et .al. (2007). Uncertainties in the CIIT 2-stage model for formaldehydeinduced nasal cancer in the F344 rat: a limited sensitivity analysis-I. Risk Anal 27:12377-14 leukemia was characterized as “strong.” 26 EPA is reviewing the recent work cited above from the NCI and NIOSH, as well as the analysis by the CIIT Centers for Health Research and other studies, as part of a reassessment of the hum an hazard and dose-response associated with formaldehyde.
Formaldehyde exposure also causes a range of noncancer health effects, including irritation of the eyes (burning and watering of the eyes), nose and throat. Effects from repeated exposure in humans include resp iratory tract irritation, chronic bronchitis and na sal epithelial lesions such as metaplasia and loss of cilia. Animal studies suggest that formaldehyde may also cause airway inflammation – including eosinophil infi ltration into the airways. There are several studies that suggest that formal dehyde may increase the risk of asthma – particularly in the
young. 27 , 28
Acetaldehyde
Acetaldehyde is classified in EPA’s IRIS database as a probable human carcinogen, based on nasal tumors in rats, and is consider ed toxic by the inhalati on, oral, and intravenous
routes. 29 Acetaldehyde is reasonably anticipated to be a human carcinogen by the U.S. DHHS in the 11 th Report on Carcinogens and is classified as possibly carcinogenic to humans (Group 2B) by the IARC. 30 , 31 EPA is currently conducting a reasse ssment of cancer risk from inhalation exposure to acetaldehyde.
The primary noncancer effects of exposure to acetaldehyde vapors in clude irritation of the eyes, skin, and respiratory tract. 32 In short-term (4 week) rat studies, degeneration of

26 International Agency for Research on Cancer (2006) Formaldehyde, 2-Butoxyethanol and 1-tert-Butoxypropan-2- ol. Monographs Volume 88. World Health Organization, Lyon, France. 27 Agency for Toxic Substances and Disease Registry (A TSDR). 1999. Toxicological profile for Formaldehyde. Atlanta, GA: U.S. Department of Health an d Human Services, Pub lic Health Service. http://www.atsdr.cdc.gov/to xprofiles/tp111.html 28 WHO (2002) Concise International Chemical Assessment Document 40: Formaldehyde. Published under the joint sponsorship of the United Nations Environment Programme, the International Labour Organization, and the World Health Organization, and produced within the framework of the Inter-Organization Programme for the Sound Management of Chemicals. Geneva. 29 U.S. EPA (1988). Integrated Risk Information System File of Acetaldehyde. Research and Development, National Center for Environmental Assessment, Washington, DC. This material is available electronically at http://www.epa.gov/iris/subst/0290.htm. 30 U.S. Department of Health and Human Services National Toxicology Program 11th Report on Carcinogens available at: http://ntp.niehs.nih.gov/go/16183. 31 International Agency for Research on Cancer (IARC). 1999. Re-evaluation of some organic chemicals, hydrazine, and hydrogen peroxide. IARC Monographs on the Evaluation of Carcinogenic Risk of Chemical to Humans, Vol 71. Lyon, France. 32 U.S. EPA (1988). Integrated Risk Information System File of Acetaldehyde. This material is available electronically at http://www.e pa.gov/iris/subst/0290.htm.7-15 olfactory epithelium was observe d at various concentration le vels of acetaldehyde exposure. 33 , 34 Data from these studies were used by EPA to develop an inhalation reference concentration. Some asthmatics have been shown to be a sens itive subpopulation to decrements in functional expiratory volume (FEV1 test) and br onchoconstriction upon acetaldehyde inhalation. 35 The agency is currently conducting a reassessment of the health hazards from inhalation exposure to acetaldehyde.
Polycyclic Aromatic Hydrocarbons (PAHs) At least eight PAH compou nds are classified by EPA as probable human carcinogens based on animal data, including acenaphthene 36
, benzo(a)anthracene 37 , benzo(b)fluoranthene 38 , benzo(k)fluoranthene 39 , benzo(a)pyrene 40
, chrysene 41 , dibenz(a,h)anthracene 42 , and indeno(1,2,3-cd)pyrene 43 . Recent studies have found that maternal exposures to PAHs in a populat ion of pregnant women were associated with

33 U.S. EPA. 2003. Integrated Risk In formation System File of Acrolein. Research and Development, National Center for Environmental Assessment, Washington, DC . This material is available electronically at http://www.epa.gov/iris/subst/0364.htm. 34 Appleman, L.M., R.A. Woutersen, and V. J. Feron. (1982). Inhalation toxicity of acetaldehyde in rats. I. Acute and subacute studies. Toxicology. 23: 293-297. 35 Myou, S.; Fujimura, M.; Nishi K.; Ohka, T.; and Mats uda, T. (1993) Aerosolized acetaldehyde induces histamine-mediated bronchoconstriction in asthmatics. Am. Rev. Respir.Dis.148(4 Pt 1): 940-943. 36 U.S. EPA (1997). Integrated Risk Information System File of acenaphthene. Research and Development, National Center for Environmental Assessment, Washington, DC. This material is available electronically at http://www.epa.gov/ncea /iris/subst/0442.htm. 37 U.S. EPA (1997). Integrated Risk Information System File of benzo(a)anthracene. Research and Development, National Center for Environmental Assessment, Washington, DC. This material is available electronically at http://www.epa.gov/ncea /iris/subst/0454.htm. 38 U.S. EPA (1997). Integrated Risk Information System File of benzo(b)fluoranthene. Research and Development, National Center for Environmental Assessment, Washington, DC. This material is available electronically at http://www.epa.gov/ncea /iris/subst/0452.htm 39 U.S. EPA (1997). Integrated Risk Information System File of benzo(k)fluoranthene. Research and Development, National Center for Environmental Assessment, Washington, DC. This material is available electronically at http://www.epa.gov/ncea /iris/subst/0452.htm. 40 U.S. EPA (1998). Integrated Risk Information System File of benzo(a)pyrene. Research and Development, National Center for Environmental Assessment, Washington, DC. This material is available electronically at http://www.epa.gov/ncea /iris/subst/0136.htm. 41 U.S. EPA (1997). Integrated Risk Information System File of chrysene. Research and Development, National Center for Environmental Assessment, Washington, DC . This material is available electronically at http://www.epa.gov/ncea /iris/subst/0455.htm 42 U.S. EPA (1997). Integrated Ri sk Information System File of di benz(a,h)anthracene. Research and Development, National Center for Environmental Assessm ent, Washington, DC. This material is available electronically at http://www.epa .gov/ncea/iris/s ubst/0456.htm. 43 U.S. EPA (1997). Integrated Risk Information Syst em File of indeno(1,2,3-cd)pyrene. Research and Development, National Center for Environmental Assessm ent, Washington, DC. This material is available electronically at http://www.epa .gov/ncea/iris/s ubst/0457.htm.7-16 several adverse birth outcomes, including low birth weight and reduced length at birth, as well as impaired cognitive development at age three. 44 , 45 EPA has not yet evaluated these recent studies.
Naphthalene
Naphthalene is found in small quantities in gasoline and diesel fuels. Naphthalene emissions have been measured in larger quantit ies in both gasoline and diesel exhaust compared with evaporative emissions from mobile sour ces, indicating it is primarily a product of combustion. EPA released an external review draft of a reassessment of the inhalation carcinogenicity of naphthalene based on a numbe r of recent animal carcinogenicity studies. 46 The draft reassessment completed external peer review. 47 Based on external peer review comments received, additional analyses are being undertaken. This external review draft does not represent official agency opi nion and was released solely for the purposes of external peer review and public comment. The National Toxicology Program listed naphthalene as "reasonably anticipated to be a human carcinoge n" in 2004 on the basis of bioassays reporting clear evidence of carcinogenici ty in rats and some evidence of carcinogenicity in mice. 48 California EPA has released a new risk assessment for naphthalene, and the IARC has reevaluated naphthalene and re -classified it as Group 2B: possi bly carcinogenic to humans. 49 Naphthalene also causes a number of chronic non- cancer effects in animal s, including abnormal cell changes and growth in re spiratory and nasal tissues. 50

44 Perera, F.P.; Rauh, V.; Tsai, W-Y.; et al. (2002) Effect of transplacental exposure to environmental pollutants on birth outcomes in a multiethnic population. Environ Health Perspect. 111: 201-205. 45 Perera, F.P.; Rauh, V.; Whyatt, R.M.; Tsai, W.Y.; Tang, D.; Diaz, D.; Hoepner, L.; Barr, D.; Tu, Y.H.; Camann, D.; Kinney, P. (2006) Effect of prenatal exposure to airborne polycyclic aromatic hydrocarbons on neurodevelopment in the first 3 years of life among inner-city children. Environ Health Perspect 114: 1287- 1292. 46 U. S. EPA. 2004. Toxicological Review of Naph thalene (Reassessment of the Inhalation Cancer Risk), Environmental Protection Agency, Inte grated Risk Information System, Research and Development, National Center for Environmental Assessment, Washington, DC . This material is available electronically at http://www.epa.gov/iris/subst/0436.htm. 47 Oak Ridge Institute for Science and Education. (2004). External Peer Review for the IRIS Reassessment of the Inhalation Carcinogenicity of Naphthalene. August 2004. http://cfpub.epa.gov/ncea/cfm/ recordisplay.cfm?deid=84403 48 National Toxicology Program (NTP). (2004). 11th Report on Carcinogens. Public Health Service, U.S. Department of Health and Human Services, Research Triangle Park, NC. Available from: http://ntpserver.niehs.nih.gov. 49 International Agency for Research on Cancer (IARC). (2002). Monographs on the Evaluation of the Carcinogenic Risk of Chemicals for Humans. Vol. 82. Lyon, France. 50 U. S. EPA. 1998. Toxicological Review of Naphthalen e, Environmental Protection Agency, Integrated Risk Information System, Research and Development, National Center for Environmental Assessment, Washington, DC. This material is available electronica lly at http://www.epa.g ov/iris/subst/0436.htm7-17 Acrolein

EPA determined in 2003 that the human carci nogenic potential of ac rolein could not be determined because the available data were in adequate. No information was available on the carcinogenic effects of acrolein in humans and th e animal data provided inadequate evidence of carcinogenicity. 51 The IARC determined in 1995 that acro lein was not classifiable as to its carcinogenicity in humans. 52
Acrolein is extremely acrid and irritating to humans when inhaled, with acute exposure resulting in upper respiratory tr act irritation, mucus hypersecreti on and congestion. The intense irritancy of this carbonyl has been demonstrated during controlled tests in human subjects, who suffer intolerable eye and nasal mucosal sens ory reactions within minutes of exposure. 53 These data and additional studies regarding acute effects of human exposure to acrolein are summarized in EPA’s 2003 IRIS Huma n Health Assessment for acrolein. 54 Evidence available from studies in humans indicate that levels as low as 0.09 ppm (0.21 mg/m 3 ) for five minutes may elicit subjective complaints of eye irritation with increasing concentrations leading to more extensive eye, nose and respiratory symptoms. 55 Lesions to the lungs a nd upper respiratory tract of rats, rabbits, and hamsters have been observed after subchronic exposure to acrolein. 56 Acute exposure effects in animal studies report bronchial hyper-responsiveness. 57 In a recent study, the acute respiratory irrita nt effects of exposure to 1.1 ppm acrolein were more pronounced in mice with allergic airway disease by comparison to non-diseased mice wh ich also showed decreases in respiratory rate. 58 Based on these animal data and demons tration of similar effects in humans (i.e., reduction in respiratory ra te), individuals with compro mised respiratory function (e.g., emphysema, asthma) are expected to be at incr eased risk of developi ng adverse responses to

51 Integrated Risk Information System File of Acrole in. Research and Development, National Center for Environmental Assessment, Washington, DC. This material is available at http://www .epa.gov/iris/subst/0364.htm 52 International Agency for Research on Cancer (IARC). 1995. Monographs on the evaluation of carcinogenic risk of chemicals to humans, Volume 63, Dry cleaning, some chlorinated solven ts and other industrial chemicals, World Health Organization, Lyon, France. 53 Sim VM, Pattle RE. Effect of possible smog irrita nts on human subjects JAMA165: 1980-2010, 1957. 54 U.S. EPA (U.S. Environmental Protection Agency). (2003) Toxicological review of acrolein in support of summary information on Integrated Risk Informati on System (IRIS) National Center for Environmental Assessment, Washington, DC. EP A/635/R-03/003. Available onlin e at: http://www.epa.gov/ncea/iris

. 55 Weber-Tschopp, A; Fischer, T; Gierer, R; et al. (1977) Experimentelle reizwirkungen von Acrolein auf den Menschen. Int Arch Occup Environ Hlth 40(2):117-130. In German 56 Integrated Risk Information System File of Acrolein. Office of Research and Deve lopment, National Center for Environmental Assessment, Washington, DC. This material is available at http://www .epa.gov/iris/subst/0364.htm 57 U.S. EPA (U.S. Environmental Protection Agency). (2003) Toxicological review of acrolein in support of summary information on Integrated Risk Info rmation System (IRIS) National Cent er for Environmental Assessment, Washington, DC. EPA/635/R- 03/003. Available online a t: http://www.epa.gov/ncea/iris

. 58 Morris JB, Symanowicz PT, Olsen JE, et al. 2003. Imme diate sensory nerve-mediated respiratory responses to irritants in healthy and allergic airway-diseased mice. J Appl Physiol 94(4):1563-1571.7-18 strong respiratory irritant s such as acrolein.

Other Air Toxics
In addition to the compounds described a bove, other compounds in gaseous hydrocarbon and PM emissions from RICE engines would be a ffected by this rule. Information regarding the health effects of these compounds can be found in EPA’s IRIS database. 59

The distance that these HAPs travel away from the emission source depends on several factors. HAPs such as formaldehyde, acetaldeh yde, PAHs, and acrolein are emitted as gases. Regional photochemical model simulations, examini ng particular scenarios, have shown that gaseous HAPs like formaldehyde and acetaldehyde can be transported hundreds of kilometers from their emissions source in distinct plumes (U.S. EPA, 2010b). Further, these emissions can contribute to regional airmasses w ith elevated concentrations of gaseous HAPs. These polluted airmasses can be transported thousands of kilome ters and affect locations well distant from the original emissions source. Some gaseous HAPs with higher mol ecular weight, such as toluene, can transform into particles in the atmosphere. For engines examined in this rule, EPA does not have enough information to determin e the extent of transport specif ic to the HAPs. In general, for HAPs emitted as particles, such as metals, the travel distance primarily depends on the size of the particle and meteorological conditions, such as wind speed a nd precipitation. Fine particles can have an atmospheric half-life of days to weeks and travel hundreds to thousands of kilometers, whereas ultrafine and coarse particles travel less than ten kilometers (U.S. EPA, 2009c).
Carbon monoxide co-benefits
Carbon monoxide (CO) exposure is associated with a variety of health effects. Without knowing the location of the emission reductions a nd the resulting ambient concentrations using fine-scale air quality modeling, we were unabl e to estimate the exposure to CO for nearby populations. Due to data limitations, we were unabl e to estimate the benefits associated with the 14,000 tons reductions in CO emissions that wo uld occur as a result of this rule.

Carbon monoxide in ambient air is formed primarily by the incomplete combustion of carbon-containing fuels and photoc hemical reactions in the atmosphere. The amount of CO emitted from these reactions, re lative to carbon dioxide (CO 2 ), is sensitive to conditions in the combustion zone, such as fuel oxygen content, burn temperature, or mixing time. Upon

59 U.S. EPA Integrated Risk Information Sy stem (IRIS) database is available at: http://www.epa.gov/iris7-19 inhalation, CO diffuses through the respiratory system to the blood, which can cause hypoxia (reduced oxygen availability). Carbon monoxide can elicit a broad range of effects in multiple tissues and organ systems that are dependent upon concentration and dur ation of exposure.
The Integrated Science Assessment for Ca rbon Monoxide (U.S. EPA, 2010a) concluded that short-term exposure to CO is “likely to have a causal relationship” with cardiovascular morbidity, particularly in individuals with co ronary heart disease. Epidemiologic studies associate short-term CO exposure with increased risk of emergency de partment visits and hospital admissions. Coronary he art disease includes t hose who have angina pectoris (cardiac chest pain), as well as those who have e xperienced a heart attack. Other subpopulations potentially at risk include i ndividuals with diseases such as chronic obstructive pulmonary disease (COPD), anemia, or diabet es, and individuals in very early or late life stages, such as older adults or the developing young. The evidence is suggestive of a causal relationship from short-term exposure to CO with respiratory morbidity and mortality, from long-term exposure to CO with adverse birth outcomes and developmen tal effects, and from short- and long-term exposure to CO with central nervous system effects.

Other SO 2 co- benefits
In addition to being a precursor to PM 2.5 , SO 2 emissions are also associated with a variety of respiratory health effects. Unfortunately, we were unable to estimate the health benefits associated with reduced SO 2 exposure in this analysis because we do not have air quality modeling data available. Without knowing the loca tion of the 31,000 tons of SO 2 emission reductions and the resulting ambien t concentrations, we were unabl e to estimate the exposure to SO 2 for nearby populations. Therefore, this an alysis only quantifies and monetizes the PM 2.5 cobenefits associated with those SO 2 emissions reductions.
Following an extensive evaluation of health evidence from epidemiologic and laboratory studies, the U.S. EPA has concluded that there is a causal relationship betw een respiratory health effects and short-term exposure to SO 2 (U.S. EPA, 2008b). The immediate effect of SO 2 on the respiratory system in humans is bronchoconstric tion. Asthmatics are more sensitive to the effects of SO 2 likely resulting from preexisting inflammati on associated with this disease. A clear concentration-response rela tionship has been demonstrated in laboratory studies following exposures to SO 2 at concentrations between 20 and 100 ppb, both in terms of increasing severity of effect and percentage of as thmatics adversely affected. The SO 2 ISA identified four short-term morbidity endpoints with a “causal relationshi p”: asthma exacerbation, respiratory-related emergency department visits, and respir atory-related hospita lizations. The SO 2 ISA also7-20 concluded that the relations hip between short-term SO 2 exposure and premature mortality was “suggestive of a causal relationship” because it is difficult to attribut e the mortality risk effects to SO 2 alone. Although the SO 2 ISA stated that studies are gene rally consistent in reporting a relationship between SO 2 exposure and mortality, there was a lack of robustness of the observed associations to adjustment for co-pollutants. The differing evidence and associated strength of the evidence for these different eff ects is described in detail in the SO 2 ISA.

SO 2 emissions also contribute to adverse we lfare effects from aci dic deposition, mercury methylation, and visibility impairment. Sulfur deposition causes acidificati on, leading to a loss of biodiversity of fishes, zooplankt on, and macro invertebrates in a quatic ecosystems, as well as a decline in sensitive tree species, such as red spruce ( Picea rubens ) and sugar maple ( Acer saccharum ) in terrestrial ecosystems. In the northeastern United States, the surface waters affected by acidification are a source of food for some recreational and subsistence fishermen and support several cultural services, includ ing aesthetic and educational services and recreational fishing. Biological e ffects of acidification in terrest rial ecosystems are generally linked to aluminum toxicity, which can reduce root growth and restrict the ability of the plant to take up water and nutrients. These direct effect s increase the sensitivity of these plants to stresses, such as droughts, cold temperatures, in sect pests, and disease leading to increased mortality of canopy trees. Terrestri al acidification affects severa l important ecological services, including declines in forest pr oductivity (provisioning), declines in habitat for threatened and endangered species (cultural), declin es in forest aesthetics (cultural), and increases in forest soil erosion and reductions in water retention (c ultural and regulating). (U.S. EPA, 2008c)
Mercury is a highly neurotoxic contaminant th at enters the food web as a methylated compound, methylmercury (U.S. EPA, 2008c). Th e contaminant is concentrated in higher trophic levels, including fish eaten by humans. Experimental evid ence has established that only inconsequential amounts of methylmercury can be produced in the absence of sulfate. Current evidence indicates that in watersheds where mercury is present, increased SO x deposition very likely results in methylmercury accumulation in fish (Drevnick et al., 2007; Munthe et al, 2007). The SO 2 ISA concluded that evidence is sufficient to infer a casual relationship between sulfur deposition and increased mercury methylati on in wetlands and aquatic environments.
Reducing SO 2 emissions and the secondary formation of PM 2.5 would improve the level of visibility throughout the Unite d States. Fine particles w ith significant light-extinction efficiencies include sulfates , nitrates, organic carbon, elemental carbon, and soil. These suspended particles and gases degrade visibil ity by scattering and absorbing light. Higher visibility impairment levels in the East are due to generally higher c oncentrations of fine7-21 particles, particularly sulfates, and higher average relative humidity levels. In fact, particulate sulfate is the largest contributor to regional haze in th e eastern U.S. (i.e., 40% or more annually and 75% during summer). In the western U.S., particulate sulfate contributes to 20-50% of regional haze. Visibility has direct significance to people’s en joyment of daily activities and their overall sense of wellbeing. Go od visibility increases the qua lity of life where individuals live and work, and where they engage in recreational activities. (U.S. EPA, 2009c)

7.4 Characterization of Uncertainty in the Monetized Co-benefits

In any complex analysis, there are likely to be many sources of uncertainty. Many inputs are used to derive the final estimate of econo mic benefits, including emission inventories, air quality models (with their associated paramete rs and inputs), epidemio logical estimates of concentration-response (C-R) f unctions, estimates of values , population estimates, income estimates, and estimates of the future state of the world (i.e., regula tions, technology, and human behavior). For some parameters or inputs it may be possible to provide a st atistical representation of the underlying uncertainty distribution. For other parameters or inputs, the necessary information is not available.

The annual benefit estimates presen ted in this analysis are also inherently variable due to the processes that govern pollutant emissions a nd ambient air quality in a given year. Factors such as hours of equipment use a nd weather are constantly variable , regardless of our ability to measure them accurately. As discussed in the PM 2.5 NAAQS RIA (Table 5.5) (U.S. EPA, 2006), there are a variety of uncertainties associated with these PM co-ben efits. Therefore, the estimates of annual co-benefits should be viewed as re presentative of the magn itude of co-benefits expected, rather than the actual bene fits that would occur every year.
We performed a couple of sensitivity analyses on the benefits results to assess the sensitivity of the primary results to various da ta inputs and assumptions. We then changed each default input one at a time and re calculated the total monetized co-benefits to assess the percent change from the default. We present the results of this sensitivity analysis in Table 7-5. We indicated each input parameter, th e value used as the default, and the values for the sensitivity analyses, and then we provide the total moneta ry co-benefits for each input and the percent change from the default value.7-22 Table 7-5. Sensitivity Analyses for Monetized PM 2.5 -related Co-benef its (millions of 2008$)

Total PM 2.5 Cobenefits % Change from Default Threshold Assumption (with Epidemiology Study) No Threshold (Pope) $1,100 N/A No Threshold (Laden) $2,600 N/A

Threshold (Pope) $860 28% Threshold (Laden) $1,900 37% Discount Rate (with Epidemiology Study) 3% (Pope) $1,100 N/A 3% (Laden) $2,600 N/A 7% (Pope) $1,000 10% 7% (Laden) $2,300 11%

Above we present the estimates of the total monetized co-b enefits, based on our interpretation of the best avai lable scientific literature a nd methods and supported by the SABHES and the NAS (NRC, 2002). The co-benefit s estimates are subject to a number of assumptions and uncertainties. For example, fo r key assumptions underlying the estimates for premature mortality, which typically account for at least 90% of th e total monetized benefits, we were able to quantify include the following:

1. PM 2.5 co-benefits were derived through benef it per-ton estimates, which do not reflect local variability in popula tion density, meteorology, exposure, baseline health incidence rates, or other local factors thatmight lead to an over-estimate or underestimate of the actual benefits of control ling directly emitted fine particulates.

2. We assume that all fine particles, re gardless of their chemical composition, are equally potent in causing premature mortality. This is an important assumption, because PM 2.5 produced via transported precursors emitted from EGUs may differ significantly from direct PM 2.5 released from diesel engines and other industrial sources, but no clear scien tific grounds exist for s upporting differential effects estimates by particle type.

3. We assume that the health impact functi on for fine particles is linear down to the lowest air quality levels modeled in this analysis. Thus, the estimates include health benefits from reducing fine particles in areas with varied concentrations of PM 2.5, including both regions that are in attainment with fine particle standard and those that do not meet the standard down to th e lowest modeled concentrations.

4. To characterize the uncertainty in the relationship between PM 2.5 and premature mortality (which typically accounts for 85% to 95% of total monetized benefits), we include a set of twelve estimates based on results of the expert elicitation study in7-23 addition to our core estimates. Even these multiple characterizations omit the uncertainty in air quality estimates, baseline incidence rates, populations exposed and transferability of the effect estimate to diverse locations. As a result, the reported confidence intervals and range of estimates give an incomplete picture about the overall uncertainty in the PM 2.5 estimates. This information should be interpreted within the context of the larger uncertainty surrounding the entire analysis. For more information on the uncertainties associated with PM 2.5 co-benefits, please consult the PM 2.5 NAAQS RIA (Table 5.5).
This RIA does not include the type of detail ed uncertainty assessment found in the PM NAAQS RIA (U.S. EPA, 2006b) because we lack th e necessary air quality input and monitoring data to run the benefits model. Moreover, it was not possible to develop benefit-per-ton metrics and associated estimates of uncertainty using the benefits estimates from the PM RIA because of the significant differences between the sources affected in that rule and those regulated here. However, the results of the Monte Carlo analyses of the health and welfare benefits presented in Chapter 5 of the PM RIA can provide some evidence of the uncertainty surrounding the cobenefits results presented in this analysis.
It is important to note that the monetized benefit-per-ton estimates used here reflect specific geographic patterns of emissions redu ctions and specific air quality and benefits modeling assumptions. For example, these estimates do not reflect local va riability in population density, meteorology, exposure, baseline health incide nce rates, or other local factors. Use of these $/ton values to estimate co-benefits asso ciated with different emission control programs (e.g., for reducing emissions from large stationary sources like EGUs) may lead to higher or lower benefit estimates than if co-benefits were calculated based on dire ct air quality modeling. Great care should be taken in applying these esti mates to emission reductions occurring in any specific location, as these ar e all based on national or br oad regional emission reduction programs and therefore represent average benef its-per-ton over the entire United States. The benefits- per-ton for emission reductions in spec ific locations may be very different than the estimates presented here.

7.5 Comparison of Benefits and Costs EPA estimates the range of co-benefits of th is final rule to be $940 million to $2.3 billion (2008$) at a 3% discount rate and $850 million to $2.1 billion at a 7% discount rate in the year of implementation (2013). The annualized costs ar e $373 million (2008$) at a 7% interest rate. 60 Thus, net benefits are $570 milli on to $1.9 billion at a 3% discount rate for the benefits and $480 million to $1.7 billion at a 7% discount rate. Figures 7-4 and 7-5 show the full range of net

60 For more information on the annualized cost s, please refer to Section 4 of this RIA.7-24 benefits estimates (i.e., annual co-benefits minus annualized cost s) utilizing the 14 different PM 2.5 mortality functions at discount rates of 3% a nd 7%. In addition, the benefits from reducing 1,014 tons of hazardous air pollutants each year have not been included in these estimates. EPA believes that the benefits are likely to exceed the costs under this rulemaking even when taking into account uncertainties in th e cost and benefit estimates.

$0 $500 $1,000 $1,500 $2,000 $2,500

Pope et al. Laden et al.Millions(2008$)

Cost estimate combined with total monetized benefits estimates derived from 2 epidemiology functions and 12 expert functions

Figure 7-4. Net Benefits for RICE NESHAP at 3% Discount Rate

a Net benefits are quantified in terms of PM 2.5 co-benefits for the year of implementation. This graph shows 14 cobenefits estimates combined with the cost estimate. A ll combinations are treated as independent and equally probable. All fine particles are assumed to have equivalent health effects, but the benefit per ton estimates vary because each ton of precursor reduced ha s a different propensity to become PM 2.5 . The monetized co-benefits incorporate the conversion from precursor emissions to ambient fine particles.7-25 ‐ $500 $0 $500 $1,000 $1,500 $2,000 $2,500

Pope et al. Laden et al.Millions(2008$)

Cost estimate combined with total monetized benefits estimates derived from 2 epidemiology functions and 12 expert functions

Figure 7-5. Net Benefits for RICE NESHAP at 7% Discount Rate a

a Net benefits are quantified in terms of PM 2.5 co-benefits for the year of implementation.. This graph shows 14 cobenefits estimates combined with the cost estimate. A ll combinations are treated as independent and equally probable. All fine particles are assumed to have equivalent health effects, but the benefit per ton estimates vary because each ton of precursor reduced ha s a different propensity to become PM 2.5 . The monetized co-benefits incorporate the conversion from precursor emissions to ambient fine particles.8-1 SECTION 8 REFERENCES American Hospital Associati on. 2007. “AHA Hospital Statistics : 2008 Edition.” Health Forum.
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