Regulatory Impact Analysis (RIA) for the 

Reconsideration of the Existing Stationary 

Compression Ignition (CI) Engines 

NESHAP

Final Report
This page is intentionally blank.
EPA-452/R-13-001

January 2013

Regulatory Impact Analysis (RIA) for Reconsideration of the Existing Stationary Compression 

Ignition (CI) Engines NESHAP

U.S. Environmental Protection Agency

Office of Air Quality Planning and Standards

Health and Environmental Impacts Division

Air Economics Group and Risk and Benefits Group

Research Triangle Park, NC

iii

CONTENTS

Section Page

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

ES.1 Summary of Impacts for CI RICE NESHAP Reconsideration .......................1-1

ES.2 Comparison with Results from 2010 Final CI RICE NESHAP......................1-2

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

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

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

3.1.1 Overview.................................................................................................. 3-1

3.1.2 Goods and Services Used......................................................................... 3-4

3.1.3 Business Statistics.................................................................................... 3-5

3.2 Oil and Gas Extraction......................................................................................... 3-7

3.2.1 Overview.................................................................................................. 3-7

3.2.2 Goods and Services Used....................................................................... 3-10

3.2.3 Business Statistics.................................................................................. 3-11

3.3 Pipeline Transportation of Natural Gas ............................................................. 3-16

3.3.1 Overview................................................................................................ 3-16

3.3.2 Goods and Services Used....................................................................... 3-17

3.4 General Medical and Surgical Hospitals............................................................ 3-21

3.4.1 Overview................................................................................................ 3-21

3.4.2 Goods and Services Used....................................................................... 3-21

3.4.3 Business Statistics.................................................................................. 3-23

3.5 Irrigation Sets and Welding Equipment............................................................. 3-26

3.5.1 Overview................................................................................................ 3-26

3.5.2 Irrigation and Welding Services ............................................................ 3-26

3.5.3 Business Statistics.................................................................................. 3-32
iv

Section 4 Regulatory Alternatives, Costs, and Emission Impacts........................... 4-1

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

4.2 Summary of the Final Reconsideration Rule ....................................................... 4-4

4.2.1 Emergency Demand Response.................................................4-4

4.2.2 Peak Shaving.......................................................................................... 4-13

4.2.3 Stationary Agricultural Engines - San Joaquin Valley.....................4-18

4.2.4 Remote Areas of Alaska.......................................................4-20

4.2.5 Offshore Vessels................................................................4-23

4.4 Cost Impacts....................................................................................................... 4-26

4.4.1 Introduction............................................................................................ 4-26

4.4.2 Major Sources........................................................................................ 4-18

4.4.3 Area Sources.......................................................................................... 4-21

4.5 Baseline Emissions and Emission Reductions................................................... 4-42

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

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

5.2 Social Cost Estimate ............................................................................................ 5-4

5.3 How Might People and Firms Respond? A Partial Equilibrium Analysis........... 5-5

5.3.1 Changes in Market Prices and Quantities................................................ 5-5

5.3.2 Regulated Markets: The Electric Power Generation, Transmission, 

and Distribution Sector ............................................................................ 5-7

5.3.3 Partial Equilibrium Measures of Social Cost: Changes Consumer 

and Producer Surplus............................................................................... 5-8

5.4 Energy Impacts .................................................................................................... 5-9

5.5 Unfunded Mandates........................................................................................... 5-10

5.5.1 Future and Disproportionate Costs ........................................................ 5-11

5.5.2 Effects on the National Economy .......................................................... 5-11

5.6 Environmental Justice........................................................................................ 5-12

 5.7 Employment Impacts....................................................................5-12

5.7.1 Employment Impacts from Pollution Control 

Requirements......................................................................................5-14
v

5.7.2 Employment Impacts within the Regulated Industry............................. 5-17

Section 6 Small Entity Screening Analysis ............................................................. 6-1

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

6.2 Small Entity Economic Impact Measures............................................................ 6-2

6.2.1 Model Establishment Receipts and Annual Compliance Costs............... 6-2

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

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

7.1 Calculation of PM2.5-Related Human Health Co-Benefits .................................. 7-1

7.2 Unquantified Benefits........................................................................................ 7-15

7.2.1 HAP Benefits............................................................................................ 7-15

7.2.2 Ozone Co-Benefits................................................................................. 7-26

7.2.3 Carbon Monoxide Co-Benefits.............................................................. 7-26

7.2.4 Visibility Impairment Co-Benefits ........................................................ 7-26

7.3 Characterization of Uncertainty in the Monetized Co-Benefits ........................ 7-27

7.4 Comparison of Co-Benefits and Costs............................................................... 7-32

7.5 References.......................................................................................................... 7-35

Section 8 References for RIA .................................................................................. 8-1
vi

LIST OF FIGURES

Number Page

3-1. Industrial Production Index (NAICS 2211) ................................................................ 3-3

3-2. Internal Combustion Generators by State: 2006 ......................................................... 3-4

3-3. 2002 Regional Distribution of Establishments: Electric Power Generation, 

Transmission, and Distribution Industry (NAICS 2211) ............................................ 3-6

3-4. Industrial Production Index (NAICS 211) ................................................................ 3-13

3-5. Distribution of Establishments within Pipeline Transportation (NAICS 486).......... 3-18

3-6. Distribution of Revenue within Pipeline Transportation (NAICS 486).................... 3-18

3-7. Share of Establishments by Legal Form of Organization in the Pipeline 

Transportation of Natural Gas Industry (NAICS 48621): 2002................................ 3-20

3-8. Share of Establishments by Legal Form of Organization in the General Medical 

and Surgical Hospitals Industry (NAICS 6221): 2002.............................................. 3-24

3-9. Industrial Production Index (NAICS 333111) .......................................................... 3-29

5-1. Distribution of Annualized Direct Compliance 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: With 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).............................................................................................. 7-10

7-2. Total Monetized PM2.5 Co-Benefits of CI RICE NESHAP Reconsideration in 

2013........................................................................................................................... 7-14

7-3. Breakdown of Total Monetized Co-benefits for CI RICE NESHAP

Reconsideration by Engine Size...................................................7-15

7-4. Estimated Chronic Census Tract Carcinogenic Risk from HAP exposure from 

outdoor sources (2005 NATA) .................................................................................. 7-17

7-5. Estimated Chronic Census Tract Noncancer (Respiratory)Risk from HAP

exposure from outdoor sources (2005 NATA).............. ....................................... 7-18

7-6. Percentage of Adult Population by Annual Mean PM2.5 Exposure in the 

Baseline.................................................................................7-29

7-7 Cumulative Distribution of Adult Population by Annual Mean PM2.5 Exposure 

in the Baseline........................................................................7-30

7-8. Net Benefits for Proposed CI RICE NESHAP Reconsideration 

 at 3% discount rate..................................................................7-34
vii

7-9. Net Benefits for Proposed CI RICE NESHAP Reconsideration 

 at 7% discount rate..................................................................7-35
viii

LIST OF TABLES

Number Page

1-1. Summary of the Annualized Monetized Benefits, Social Costs, and Net 

Benefits for the Reconsidered CI RICE NESHAP in 2013 (millions of 2010$) ........ 1-2

1-2. Comparison of Benefits and Costs for 2020 CI RICE Final Rule and 2012 

Reconsideration CI RICE Rule...............................................................1-3

1-3. Summary of the Monetized Benefits, Compliance Costs and Net benefits for the 2010 

Rule with the Final Amendments to the Stationary CI Engine NESHAP in 2013

(millions of 2010 

dollars)..................................................................................................1-9

3-1. Key Statistics: Electric Power Generation, Transmission, and Distribution 

(NAICS 2211) ($2007)................................................................................................ 3-2

3-2. Direct Requirements for Electric Power Generation, Transmission, and 

Distribution (NAICS 2211): 2007............................................................................... 3-5

3-3. Firm Concentration for Electric Power Generation, Transmission, and 

Distribution (NAICS 2211): 2002............................................................................... 3-7

3-4. United States Retail Electricity Sales Statistics: 2008 ................................................ 3-8

3-5. FY 2010 Financial Data for 70 U.S. Shareholder-Owned Electric Utilities............. 3-10

3-6. Aggregate Tax Data for Accounting Period 7/07–6/08: NAICS 2211 ..................... 3-10

3-7. Key Enterprise Statistics by Receipt Size for Electric Power Generation, 

Transmission, and Distribution (NAICS 2211): 2007............................................... 3-11

3-8. Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111): 

($2007) ...................................................................................................................... 3-11

3-9. Key Statistics: Natural Gas Liquid Extraction (NAICS 211112) ($2007)................ 3-12

3-10. Direct Requirements for Oil and Gas Extraction (NAICS 211): 2002...................... 3-12

3-11. Key Statistics for Crude Petroleum and Natural Gas Extraction (NAICS 

211111): 2007............................................................................................................ 3-13

3-12. Key Statistics for Crude Natural Gas Liquid Extraction (NAICS 211112): 2007 .... 3-13

3-13. Aggregate Tax Data for Accounting Period 7/07–6/08: NAICS 211 ....................... 3-14

3-14. Key Statistics: Pipeline Transportation of Natural Gas (NAICS 48621) ($2007) .... 3-15

3-15. Direct Requirements for Pipeline Transportation (NAICS 486): 2002..................... 3-17

3-16. Aggregate Tax Data for Accounting Period 7/07–6/08: NAICS 486 ....................... 3-19

3-17 Key Enterprise Statistics by Employee Size for Pipeline Transportation of 

Natural Gas (NAICS 48621): 2007........................................................................... 3-20

3-18. Key Statistics: General Medical and Surgical Hospitals (NAICS 6221) ($2007) .... 3-23

3-19. Direct Requirements for Hospitals (NAICS 622): 2002 ........................................... 3-23
ix

3-20. Data for General Medical and Surgical Hospitals (NAICS 6221): 2007 ................. 3-24

3-21. Hospital Statistics: 2010............................................................................................ 3-25

3-22. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 622-4.................... 3-25

3-23. Key Enterprise Statistics by Receipt Size for General Medical and Surgical 

Hospitals (NAICS 6221): 2007 ($2007) ................................................................... 3-27

3-24. Key Statistics: Farm Machinery and Equipment Manufacturing (NAICS 

333111) ($2007)........................................................................................................ 3-28

3-25. Key Statistics: Welding and Soldering Equipment Manufacturing (NAICS 

333992) ($2007)........................................................................................................ 3-29

3-26. Expenses per Acre by Type of Energy: 2008............................................................ 3-30

3-27. Number of On-Farm Pumps of Irrigation Water by Type of Energy: 2003 and 

2008........................................................................................................................... 3-30

3-28. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 3331 and 3339...... 3-31

3-29. Key Enterprise Statistics by Receipt Size for Heavy Construction: 2007 ................ 3-34

4-1. CI RICE Control Technologies and Costs ................................................................ 4-26

4-2. Summary of Major Source and Area Source Costs for the CI RICE NESHAP ....... 4-24

4-3. Summary of Major Source and Area Source NAICS Costs for the CI RICE 

NESHAP ................................................................................................................... 4-25

4-4. Summary of Major Source and Area Source NAICS Costs for the CI RICE 

NESHAP – by Size.................................................................................................... 4-26

4-5. Summary of Major Source and Area Source NAICS Costs for the CI RICE 

NESHAP – by Number of Engines........................................................................... 4-29

4-6. Summary of Major Source and Area Source Baseline Emissions for the CI RICE 

NESHAP – 2013 ......................................................................................4-44

4-7. Summary of Major Source and Area Source Emission Reductions for the CI RICE 

NESHAP – by 2013 ..................................................................................4-45

5-1. Selected Industry-Level Annualized Compliance 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 PoweraSector Energy Consumption (Quadrillion BTUs): 2013 ......... 5-11

5-5 Labor-based Employment Estimates for Reporting and Recordkeeping and Installing, 

Operating, and Maintaining Control Equipment Requirements for the Final

Reconsideration CI RICE NESHAP........................................................5-16

6-1. Final NESHAP for Existing Stationary Reciprocating Internal Combustion 

Engines (RICE): Affected Sectors and SBA Small Business Size Standards............. 6-3

6-2. Average Receipts for Affected Industry by Enterprise: 2007 ($2008 

Million/establishment)................................................................................................. 6-5
x

6-3. Average Receipts for Affected Industry by Enterprise Receipt Range: 2007

($2008 /establishment) ................................................................................................ 6-6

6-4. Representative Establishment Costs Used for Small Entity Analysis ($2008)........... 6-8

7-1. Human Health and Welfare Effects of PM2.5 .............................................................. 7-3

7-2. General Summary of Monetized PM2.5-Related Co-benefits Estimates for the 

CI RICE Reconsideration (millions of 2010$).......................................................... 7-11

7-3. Summary of Reductions in Health Incidences from PM2.5-Related Co-benefits 

for CI RICE Reconsideration in 2013 ....................................................................... 7-12

7-4 All PM2.5 Co-benefits Estimates for the RICE NESHAP Reconsideration at 

discount rates of 3% and 7% in 2013 (in millions of 2010$).................................... 7-13

7-5. Summary of the Monetized Benefits, Compliance Costs and Net benefits for 

the 2010 Rule with the Final Amendments to the Stationary CI Engine 

NESHAP in 2013 (millions of 2010 dollars)a........................................................... 7-32
1-1

SECTION 1

EXECUTIVE SUMMARY

ES.1. Summary of Impacts for CI RICE NESHAP Final Reconsideration 

The EPA estimates that complying with the reconsideration of the stationary compression 

ignition (CI) reciprocating internal combustion engine (RICE) rule will have an annualized cost 

of approximately $372 million per year (2008 dollars) or $373 million per year (2010 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 

and their consumers. Using sales data obtained for affected small entities in an analysis of the 

impacts 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 also does not 

expect significant adverse energy impacts based on Executive Order 13211, an Executive Order 

that requires analysis of energy impacts for rules such as this one that are economically 

significant under Executive Order 12866. All of these analysis results are practically identical to 

the results for the CI RICE NESHAP when it was promulgated in March 2010.

The RICE rule is also considered subject to the requirements of the Office of 

Management and Budget’s (OMB’s) Circular A-4 because EPA expects that either the annual 

benefits or the costs are potentially $100 million or higher. EPA estimates the total monetized 

co-benefits of the NESHAP to be $770 million to $1.9 billion (2010$) at a 3% discount rate and 

$690 million to $1.7 billion at a 7% discount rate in the year of full implementation of the rule 

(2013). These co-benefit estimates are lower than those for the CI rule promulgated two years 

ago. The previous co-benefit estimates were $940 million to $2,300 million (2008 dollars) at a

3-percent discount rate and $850 million to $2,100 million (2008 dollars) at a 7-percent discount 

rate. The previous estimates will be greater in a nominal (not inflation-adjusted) sense if shown

in 2010 dollars, and thus the reduction in the benefits for the reconsidered rule compared to the 

benefits for the 2010 final rule will therefore be greater. Since the reconsideration proposal, we 

have made several updates to the approach we use to estimate mortality and morbidity benefits in 

the PM NAAQS RIAs (U.S. EPA, 2012a,b) including updated epidemiology studies, health 

endpoints, and population data. Although we have not re-estimated the benefits for this rule to 

apply this new approach, these updates generally offset each other, and we anticipate that the 

rounded benefits estimated for this rule are unlikely to be different than those provided below.
1-2

The net benefits of the final CI RICE reconsideration are therefore $400 million to $1.5

billion at a 3% discount rate and $320 million to $1.3 billion at a 7% discount rate (in 2010$) in 

2013. These estimates are shown in Table 1-1. EPA believes that the benefits are likely to 

exceed the annualized costs 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 costs at year 2013. 

Table 1-1. Summary of the Annualized Monetized Benefits, Social Costs, and Net 

Benefits for the Reconsidered CI RICE NESHAP in 2013 (millions of 2010$)1

3% Discount Rate 7% Discount Rate

Total Monetized Benefits2$770 to $1,900 $690 to $1,700

Total Compliance Costs3$373 $373

Net Benefits $400 to $1,500 $320 to $1,300

Non-monetized Benefits

Health effects from HAP exposure

Health effects from PM2.5 exposure from VOC emissions

Ecosystem effects 

Visibility impairment 

1All estimates are for the implementation year (2013), and are rounded to two significant figures. 

2 The total monetized benefits reflect the human health benefits associated with reducing exposure to PM2.5 through 

reductions of PM2.5 precursors such as directly emitted fine particles. Human health benefits are shown as a range 

from Pope et al. (2002) to Laden et al. (2006). These models assume that all fine particles, regardless of their 

chemical composition, are equally potent in causing premature mortality because the scientific evidence is not yet 

sufficient to allow differentiation of effects estimates by particle type. Although we have not re-estimated the 

benefits for this rule to apply the updated methods in the PM NAAQS RIA (U.S. EPA, 2012b), these updates 

generally offset each other, and we anticipate that the rounded benefits estimated for this rule are unlikely to be 

different than those provided here. 

3

The annual compliance costs serve as a proxy for the annual social costs of this rule given the lack of difference 

between the two. The engineering compliance costs are annualized using a 7 percent discount rate. These costs are 

$372 million in 2008 dollars. Costs are updated to 2010 dollars using the Marshall & Swift (M&S) Annual Cost 

Index. The escalation is done by multiplying the 2008 costs by the ratio of the 2010 annual M&S index value 

(1,457.4), and the 2008 annual M&S index value (1,449.3). 
1-3

ES-2. Comparison with Results from 2010 Final CI RICE NESHAP 

 The EPA analyzed the costs, economic impacts and benefits of this final rule using the 

identical methodology as the RIA for the CI RICE final rule promulgated in May, 2010.

Therefore, all changes to the costs, benefits, and economic impacts for this rule are due to 

changes (or amendments) to this rule for CI RICE, which are fully described later in this RIA 

and the preamble for the final rule. Our baseline does not assume compliance with the 2010 CI 

RICE final rule. This assumption is based on the fact that full implementation of the final rule 

has not taken place as of yet (it will take place by May, 2013). In addition, this assumption is 

consistent with the baseline definition applied in the recently finalized ICI boilers and CISWI 

NESHAP rulemakings. Monetized benefits are the co-benefits of this rule from reductions in 

directly emitted PM2.5 emissions. 

The following table shows an approximation of the changes in monetized benefits and 

engineering costs due to changes to the CI RICE rule included in the CI RICE reconsideration, 

and includes values that show a comparison based on the final rule emissions inventory. All 

values in Table 1-2 are in 2010 dollars.

Table 1-2. Comparison of Benefits and Costs for 2012 CI RICE Final Rule and 2012 

Final Reconsideration CI RICE Rule

Monetized Benefits in 2013 Annual Engineering Costs in 

2013

CI RICE Final Rule (May 2010) $0.940 to $2.3 billion $373 million

Changes due to the final amendments to 

the final CI RICE rule -$0.170 to $0.400 billion -$0.7 million

Final CI RICE rule (2012) +$0.770 to $1.9 billion $372 million

* Monetized benefits are shown at a 3% discount rate and are from reductions in PM2.5 emissions. These benefits do 

not include benefits associated with reduced exposure to HAP, visibility impairment, or ecosystem effects. 

Monetary estimates are in 2010 dollars.

The results for the economic impacts are essentially unchanged from those for the CI 

final rule. This outcome is due to the minor changes in compliance costs associated with the 

amendments in this final rule. All of these results for this rule are found in Section 5 in this RIA.

The results for sales tests (i.e. annual cost/sales analysis) for small businesses are also 

essentially unchanged from those calculated for the final CI RICE rule. This outcome is also due 
1-4

to the overall minor changes in compliance costs. All of these results for this rule are found in 

Section 6 in this RIA.

We estimate changes in employment for this CI RICE rule. These estimates reflect the 

employment impacts associated with installation and operation of monitoring equipment, and 

also activities for recordkeeping, reporting, and testing. We estimate that 1,300 full-time 

equivalents (FTEs) will be required as one-time labor for installation of equipment, and 2,000

FTEs will be required as ongoing labor for compliance with the proposed rule. The results are 

presented and explained in detail in Section 5 of this RIA. We did not estimate changes in 

employment for the 2010 final CI RICE rule. 

The benefits estimates decreased for the final reconsidered CI RICE as compared to the 

2010 final CI RICE NESHAP. The range for the 2010 final CI RICE RIA was $940 million 

(2008$) to $2.3 billion (2008$) at 3 percent discount rate. The range for this rule is $770 million 

(2010$) to $1.9 billion (2010$) at 3 percent discount rate. The range for the 2010 final SI RICE 

RIA was $850 million (2008$) to $2.1 billion (2008$) at 7 percent discount rate. The range for 

this final rule was $690 million (2010$) to $1.7 billion (2010$) at 7 percent discount rate. 
1-5

Table 1-3 shows the estimated costs and benefits for the 2010 final CI Rule and the 

reconsideration. The estimated net benefits for the reconsideration are smaller than the range for 

the 2010 final CI RICE rule RIA, which was $480 million to $1.7 billion at a 7 percent discount 

rate and was $520 million to $1.9 billion at 3 percent (in 2010 dollars).

Table 1-3. Summary of the Monetized Benefits, Compliance Costs and Net benefits for the 

2010 Rule with the Amendments to the Stationary CI Engine NESHAP in 2013 (millions of 

2010 dollars)a

3% Discount Rate 7% Discount Rate

2010 Final CI RICE NESHAP

Total Monetized Benefits $940 to $2,300 $850 to $2,100

Total Social Costs $373 $373

Net Benefits $520 to $1,900 $480 to $1,700

Reconsideration CI RICE NESHAP

Total Monetized Benefits $770 to $1,900 $690 to $1,700

Total Social Costs $373 $373

Net Benefits $400 to $1,500 $320 to $1,300

1All estimates are for the implementation year (2013), and are rounded to two significant figures. All monetized 

benefits are from reductions of PM2.5 emissions, a co-benefits of this rule . The annual ized compliance costs are 

$373 million in 2010$ as noted earlier in this RIA, and are annualized using a 7% interest rate. Compliance costs 

are used as an approximation for social costs in this RIA. Although we have not re-estimated the benefits for this 

rule to apply the updated methods in the PM NAAQS RIA (U.S. EPA, 2012b), these updates generally offset each 

other, and we anticipate that the rounded benefits estimated for this rule are unlikely to be different than those 

provided here.
1-6
SECTION 2

INTRODUCTION

EPA has reconsidered national emission standards for hazardous air pollutants 

(NESHAP) for existing stationary compression ignition (CI) reciprocating internal combustion 

engines (RICE) that either are located at area sources of hazardous air pollutant (HAP) emissions 

or that have a site rating of less than or equal to 500 brake horsepower (HP) and are located at 

major sources of HAP The final amendments to the CI RICE NESHAP are provided in detail in 

Section 4 of this RIA. 

The rule is economically significant according to Executive Order 12866. As part of the 

regulatory process of preparing these standards, EPA has prepared a regulatory impact analysis 

(RIA). This analysis includes an analysis of impacts to small entities as part of compliance with 

the Small Business Regulatory Enforcement Fairness Act (SBREFA) and an analysis of impacts 

on energy consumption and production to comply with Executive Order 13211 (Statement of 

Energy Effects). An analysis of economic impacts, along with an analysis of impacts on 

employment, is also included in this RIA. Finally, an analysis of the benefits of the rule is 

included in this RIA. It should be noted that the data that supports the analyses listed above have 

been updated where possible and appropriate from the data used in the RIA for the CI RICE 

NESHAP promulgated in March 2010. 

2.1 Organization of this Report

The remainder of this report supports and details the methodology and the results of the 

RIA:

 Section 3 presents a profile of the affected industries.

 Section 4 presents a summary of the final amendments to the rule, and provides the 

compliance costs and emission reductions estimated for the rule. 

 Section 5 describes the estimated costs of the regulation and describes the EIA 

methodology and reports market, welfare, energy, and employment impacts.

 Section 6 presents estimated impacts on small entities.

 Section 7 presents the benefits and net benefits (benefits – costs) estimates.
SECTION 3

INDUSTRY PROFILE

Stationary CI engines almost always operate as lean burn engines. They can be 

configured as either two-stroke lean burn (2SLB) or 4-stroke lean burn (4SLB); the distinction is 

that CI engines are fueled by distillate fuel oil (diesel fuel), not by natural gas or any other 

gaseous fuel. Industries in which stationary CI engines are found are:

 electric power generation, transmission, and distribution (NAICS 2211),

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

 pipeline transportation of natural gas (NAICS 211112),

 general medical and surgical hospitals (NAICS 622110), and

 irrigation sets and welding equipment (NAICS 335312 and 333992).

This section provides an introduction to the industries affected by the reconsidered rule. 

The purpose is to give the reader a general understanding of the economic aspects of the 

industry; their relative size, relationships with other sectors in the economy, trends for the 

industries, and financial statistics. 

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 transmission to the final consumer. 

From 2002 to 2007, revenues from electric power grew about 18% to over $440 billion 

($2007) (Table 3-1). At the same time, payroll rose about 7.6% and the number of employees 

decreased by over 6%. The number of establishments rose by a little more than 2%, resulting in a 

increase in average establishment revenue of almost 24%. Industrial production within NAICS 

2211 has increased 25% since 1997 (Figure 3-1).

Electric utility companies have traditionally been tightly regulated monopolies. Since 

1978, several laws and orders have been passed to encourage competition within the electricity 

market. In the late 1990s, many states began the process of restructuring their utility regulatory 

framework to support a competitive market. Following market manipulation in the early 2000s, 
however, several states have suspended their restructuring efforts. The majority (58%) of diesel 

power generators controlled by combined heat and power (CHP) or independent power 

producers are located in states undergoing active restructuring (Figure 3-2).

Table 3-1. Key Statistics: Electric Power Generation, Transmission, and Distribution 

(NAICS 2211) ($2007)

2002 2007

Revenue ($106) 373,309 440,342

Payroll ($106) 40,842 43,266

Employees 535,675 503,134

Establishments 9,394 9,611

Source: U.S. Census Bureau; Number of Firms, Number of Establishments, Employment, Annual Payroll, and 

Estimated Receipts by Enterprise Receipt Size for the United States, All Industries: 2007. Statistics for U.S. 

Businesses. Found at http://www.census.gov/econ/susb/data/susb2007.html. 
Figure 3-1. Industrial Production Index (NAICS 2211)

Source: The Federal Reserve Board. “Industrial Production and Capacity Utilization: Industrial Production” Series 

ID: G17/IP_MINING_AND_UTILITY_DETAIL/IP.G2211.S <http://www.federalreserve.gov/datadownload/>. 

(January 27, 2010).

3.1.2 Goods and Services Used

In Table 3-2, we use the latest detailed benchmark input-output data report by the Bureau 

of Economic Analysis (BEA) (2002) to identify the goods and services used in electric power 

generation. As shown, labor and tax requirements represent a significant share of the value of

8 0

8 5

9 0

9 5

100

105

110

115

1997-0 11997-0 61997-1 1 1998-0 41998-0 91999-0 21999-0 71999-1 2 2000-0 52000-1 02001-0 32001-0 82002-0 12002-0 62002-1 1 2003-0 42003-0 92004-0 22004-0 72004-1 2 2005-0 52005-1 02006-0 32006-0 82007-0 12007-0 62007-1 1 2008-0 42008-0 92009-0 22009-0 72009-1 2 Index Value (Jan 2002=100)
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, refining, and equipment requirements potentially 

associated with reciprocating internal combustion engines (oil and gas extraction, pipeline 

transportation, petroleum refineries, and turbine manufacturing) represent around 10% of the 

value of services.

3.1.3 Business Statistics

The U.S. Economic Census and Statistics of U.S. Businesses (SUSB) programs provide 

national information on the distribution of economic variables by industry, location, and size of 

business. Throughout this section and report, we use the following definitions:

 Establishment: An establishment is a single physical location where business is 

conducted or where services or industrial operations are performed. 

Diesel and Natural Gas Internal

Combustion Generators By State

No Restructuring

Suspended Restructuring

Active Restructuring

100

50

10

1
Table 3-2. Direct Requirements for Electric Power Generation, Transmission, and 

Distribution (NAICS 2211): 2002

Commodity Commodity Description

Direct Requirements 

Coefficientsa

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 and 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 defined as the revenue for goods produced, 

distributed, or services provided, including revenue earned from premiums, 

commissions and fees, rents, interest, dividends, 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 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 organization consisting of one or more 

domestic establishments that were specified 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 associated establishments. Enterprise size 

designations are determined by the summed employment of all associated 

establishments.

In 2002, Texas had almost 1,000 power establishments, 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.
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 International; 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 receipts/revenue. The 50 largest firms accounted for 

almost 6,000 establishments and about 78% of total receipts/revenue. 

Investor-owned energy providers accounted for 67.5% of retail electricity sold in the 

United States in 2006 (Table 3-4). In 2010, 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-tax profit margin of only 0.9% (Table 3-6).

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 establishments that operate or develop oil and gas field properties 

Establishments by State

Less than 100

100 - 199

200 - 349

350 - 500

More than 500
Table 3-3. Firm Concentration for Electric Power Generation, Transmission, and 

Distribution (NAICS 2211): 2002

Commodity Establishments

Receipts/Revenue

Number of 

Employees

Employees per 

Amount ($10 Establishment 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 International; 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 and gas, drilling and equipping wells, operating onsite equipment, and conducting other activities up to the point of shipment from the property. 

Oil and gas extraction consists of two industries: crude petroleum and natural gas 

extraction (NAICS 211111) and natural gas liquid extraction (NAICS 211112). Crude petroleum 

and natural gas extraction is the larger industry; in 2007, it accounted for 93% of establishments 

and 75% of oil and gas extraction revenues.

Industrial production in this industry is particularly sensitive to hurricanes in the Gulf 

Coast. In September of both 2005 and 2008, production dropped 14% from the previous month. 

From 2002 to 2007, revenues from crude petroleum and natural gas extraction (NAICS 

211111) nearly doubled to $194 billion ($2007) (Table 3-8). At the same time, payroll increased 

55% and the number of employees dropped by almost 40%. The number of establishments 

increased only slightly (1%); as a result, the average establishment revenue nearly doubled%. 

From 2002 to 2007, revenue from natural gas liquid extraction (NAICS 211112) grew 

over 19% to about $40 billion (Table 3-9). At the same time, payroll increased by only 1% and 

the number of employees dropped by almost 14%. The number of establishments dropped by 

over 59%, resulting in an increase of revenue per establishment of about 85%.
3-9

Table 3-4. United States Retail Electricity Sales Statistics: 2008

Full-Service Providers Other Providers

Item Investor-Owned Public Federal Cooperative Facility Energy Delivery Total

Number of entities 3 62 1 25 1 NA NA 92 

Number of retail customers 46,985 2,160,220 36 940,697 1 NA NA 3,147,939 

Retail sales (103 megawatthours) 2,257 70,303 9,625 21,868 117 NA NA 104,170 

Percentage of retail sales 2 67 9 21 0 — — 100 

Revenue from retail sales ($106) 113 5,934 473 1,994 6 NA NA 8,520 

Percentage of revenue 1.33 69.65 5.55 23.41 0.07 — — 100 

Average retail price (cents/kWh) 5.01 8.44 4.91 9.12 5.25 NA NA 8.18 

Source: U.S. Department of Energy, Energy Information Administration. 2009. “State Electricity Profiles 2008.” DOE/EIA-0348(01)/2. p. 260. < 

http://www.eia.doe.gov/cneaf/electricity/st_profiles/sep2008.pdf>.
3-10

Table 3-5. FY 2010 Financial Data for 70 U.S. Shareholder-Owned Electric Utilities

Profit Margin Net Income Operating Revenues

Investor-Owned Utilities 4.81% $27,728 $371,545

Regulateda6.80% $12,341 $158,657

Mostly regulatedb8.50% $17,815 $175,218

Diversifiedc-16.78% -$2,429 $37,671

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 2010 Financial Update. Quarterly Report of the U.S. 

Shareholder-Owned Electric Utility Industry.” <http://www.eei.org>.

Table 3-6. Aggregate Tax Data for Accounting Period 2009: NAICS 2211

Number of enterprisesa1,187

Total receipts (103) $323,522,443

Net sales(10

3

) $328,017,143

Profit margin before tax 3.1%

Profit margin after tax 2.0%

a

Includes corporations with and without net income.

Source: Internal Revenue Service, U.S. Department of Treasury. 2010. “Corporation Source Book: Data Files 2000–

2009.” <http://www.irs.gov/taxstats/article/0,,id=167415,00.html>; (May 2, 2010).

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. Extraction, support, power, and equipment requirements potentially 

associated with reciprocating internal combustion engines (oil and gas extraction, support 

activities, electric power generation, machinery and equipment rental and leasing, and pipeline 

transportation) represent around 8% of the value of services (Table 3-10).
3-11

3.2.3 Business Statistics

The U.S. Economic Census and SUSB programs provide national information on the 

distribution of economic variables by industry, location, and size of business. Throughout this 

section and report, we use the following definitions:

 Establishment: An establishment is a single physical location where business is 

conducted or where services or industrial operations are performed. 
3-12

Table 3-7. Key Enterprise Statistics by Employee Size for Electric Power Generation, Transmission, and Distribution (NAICS 

2211): 2007

Variable All Enterprises

<20 

Employees

20–99

Employee s

100–499 

Employees

500+

Employees

Firms 1,687 630 670 251 136

Establishments 9,611 687 1,110 999 6,815

Employment 503,134 3,622 31,455 42,527 425,530

Receipts ($103) $440,342,284 $8,364,773 $21,825,969 $41,370,375 $368,781,167

Receipts/firm ($103) $261,021 $13,277 $32,576 $164,822 $2,711,626

Receipts/establishment 

($103) $45,817 $12,176 $19,663 $41,412 $54,113

Receipts/employment 

($) $875 $2,309 $694 $973 $867

Source: U.S. Census Bureau. 2010. “Firm Size Data from the Statistics of U.S. Businesses: U.S. All Industries Tabulated by Receipt Size: 2007.”

<http://www.census.gov/csd/susb/susb07.htm>.
3-13

Figure 3-4. Industrial Production Index (NAICS 211)

Source: The Federal Reserve Board. “Industrial Production and Capacity Utilization: Industrial Production” Series 

ID: G17/IP_MINING_AND_UTILITY_DETAIL/IP.G211.S <http://www.federalreserve.gov/datadownload/>. 

(January 27, 2010).

Table 3-8. Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111): 

($2007)

2002 2007

Revenue ($106) 98,667 194,107

Payroll ($106) 5,785 8,988

Employees 94,886 133,286

Establishments 7,178 7,221

Source: U.S. Census Bureau; Factfinder Series: “2002 and 2007.” <http://factfinder.census.gov>; (February 23, 

2012).

 Receipts: Receipts (net of taxes) are defined as the revenue for goods produced, 

distributed, or services provided, including revenue earned from premiums, 

commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all 

revenue collected for local, state, and federal taxes.

7 5

8 0

8 5

9 0

9 5

100

105

110 1997-01 1997-06 1997-11 1998-04 1998-09 1999-02 1999-07 1999-12 2000-05 2000-10 2001-03 2001-08 2002-01 2002-06 2002-11 2003-04 2003-09 2004-02 2004-07 2004-12 2005-05 2005-10 2006-03 2006-08 2007-01 2007-06 2007-11 2008-04 2008-09 2009-02 2009-07 2009-12 Index Value (Jan 2002=100)
3-14

 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 singleTable 3-9. Key Statistics: Natural Gas Liquid Extraction (NAICS 211112) ($2007)

2002 2007

Revenue ($106) 33,579 39,978

Payroll ($106) 607 617

Employees 9,693 8,523

Establishments 511 321

Source: U.S. Census Bureau; 2002 and 2007.” <http://factfinder.census.gov>; (February 23, 2012).

Table 3-10. Direct Requirements for Oil and Gas Extraction (NAICS 211): 2002

Commodity Commodity Description

Direct Requirements 

Coefficientsa

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 organization consisting of one or more 

domestic establishments that were specified 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 associated establishments. Enterprise size 
3-15

designations are determined by the summed employment of all associated 

establishments.

As of 2007, there were 6,563 firms within the NAICS 211111 code, of which 6427 (98 

percent) were considered small businesses (Table 3-11). Within NAICS 211111, large firms 

compose about 2 percent of the firms, but account for 59 percent of employment and generate 

about 80 percent of estimated receipts listed under the NAICS. Within NAICS 211112, there 

are 139 firms, of which 95 (71 percent) were considered small businesses (Table 3-12). As 

shown in this table, large firms compose 29 percent of the firms, but account for 78 percent of 

employment and generate about 95 percent of estimated receipts. 

Enterprises within NAICS 211111 generated $194 billion in total receipts in 2007. 

Enterprises within NAICS 211112 generated nearly $40 billion in total receipts in 2007. 

Including those enterprises without net income, NAICS 211 averaged an after-tax profit margin 

of 8.5% in 2008 (Table 3-13).

Table 3-11. Key Statistics for Crude Petroleum and Natural Gas Extraction (NAICS 

211111): 2007

NAICS NAICS Description

SBA Size 

Standard 

Small 

Firms Large Firms Total Firms

Number of Firms by Firm Size

Crude Petroleum and Natural Gas Extraction 500 6,329 95 6,424

Total Employment by Firm Size

55,622 77,664 133,286

Estimated Receipts by Firm Size ($1000)

44,965,936 149,141,316 194,107,252

Note: *The counts of small and large firms in NAICS 486210 is based upon firms with less than $7.5 million in 

receipts, rather than the $7 million required by the SBA Size Standard. We used this value because U.S. Census 

reports firm counts for firms with receipts less than $7.5 million. **Employment and receipts could not be split 

between small and large businesses because of non-disclosure requirements faced by the U.S. Census Bureau.

Source: U.S. Census Bureau. 2010. “Number of Firms, Number of Establishments, Employment, Annual Payroll, 

and Estimated Receipts by Enterprise Receipt Size for the United States, All Industries: 2007.” 

<http://www.census.gov/econ/susb/>
3-16

Table 3-12. Key Statistics for Crude Natural Gas Liquid Extraction (NAICS 211112): 2007

NAICS Description

SBA Size 

Standard 

Small 

Firms Large Firms Total Firms

Number of Firms by Firm Size

Natural Gas Liquid Extraction 500 98 41 139

Total Employment by Firm Size

1,875 6,648 8,523

Estimated Receipts by Firm Size ($1000)

2,164,328 37,813,413 39,977,741

Note: *The counts of small and large firms in NAICS 486210 is based upon firms with less than $7.5 million in 

receipts, rather than the $7 million required by the SBA Size Standard. We used this value because U.S. Census 

reports firm counts for firms with receipts less than $7.5 million. **Employment and receipts could not be split 

between small and large businesses because of non-disclosure requirements faced by the U.S. Census Bureau.

Source: U.S. Census Bureau. 2010. “Number of Firms, Number of Establishments, Employment, Annual Payroll, 

and Estimated Receipts by Enterprise Receipt Size for the United States, All Industries: 2007.” 

<http://www.census.gov/econ/susb/>

Table 3-13. Aggregate Tax Data for Accounting Period 7/07–6/08: NAICS 211

Number of enterprisesa19,441

Total receipts (103) $193,230,241

Net sales(103) $166,989,539

Profit margin before tax 12.9%

Profit margin after tax 8.5%

a

Includes corporations with and without net income.

Source: Internal Revenue Service, U.S. Department of Treasury. 2010. “Corporation Source Book: Data Files 2004-

2007.” <http://www.irs.gov/taxstats/article/0,,id=167415,00.html>; (May 2, 2010).

3.3 Pipeline Transportation of Natural Gas

3.3.1 Overview

Pipeline transportation of natural gas (NAICS 48621) is an industry group within the 

transportation and warehousing sector (NAICS 48-49), but more specifically in the pipeline 
3-17

transportation subsector (486). It includes the transmission of natural gas as well as the 

distribution of the gas through a local network to participating businesses. 

From 2002 to 2007, natural gas transportation revenues fell by 10% to just under $21

billion ($2007) (Table 3-15). At the same time, payroll decreased by 18%, while the number of 

paid employees decreased by nearly 32%. The number of establishments decreased by 13% from 

1,701 establishments in 2002 to 1,479 in 2007.

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 transportation of natural gas (NAICS 

4862), this industry includes pipeline 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 transportation of natural gas accounts for 68% of NAICS 486 

establishments and 72% of revenues (Figures 3-5 and 3-6).

Table 3-14. Key Statistics: Pipeline Transportation of Natural Gas (NAICS 48621) ($2007)

Year 2002 2007

Revenue ($106) 22,964 20,797

Payroll ($106) 2,438 2,064

Employees 32,542 24,683

Establishments 1,701 1,479

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48: EC0748I1: 

Transportation and Warehousing: Industry Series: Preliminary Summary Statistics for the United States: 2002 and 

2007.” http://factfinder.census.gov (January 27, 2010).

In Table 3-15, we use the latest detailed benchmark input-output data report by the BEA 

(2002) to identify the goods and services used by pipeline transportation (NAICS 486). As 

shown, labor, refineries, and maintenance requirements represent significant share of the cost 

associated with pipeline transportation. Power and equipment requirements potentially associated 

with reciprocating internal combustion engines (electric power generation and commercial and 

industrial machinery and equipment repair and maintenance) represent less than 2% of the value 

of services.
3-18

Figure 3-5. 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).

Figure 3-6. Distribution of Revenue 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).

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

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
3-19

Table 3-15. Direct Requirements for Pipeline Transportation (NAICS 486): 2002

Commodity Commodity Description

Direct 

Requirements 

Coefficientsa

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.

According to 2007 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 partnerships (Figure 3-7). 

Enterprises within pipeline transportation (NAICS 486) generated $11.1 billion in total 

receipts in 2007. Including those enterprises without net income, the industry averaged an aftertax profit margin of 9.6% (Table 3-16).

The 2007 SUSB shows that about half of all firms have fewer than 20 employees, but 

only 1% of all employees in this industry. Firms with more than 500 employees generate 89% of 

all receipts in this industry (Table 3-17). 
3-20

Figure 3-7. 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://factfinder.census.gov>; (December 12, 2008).

Table 3-16. Aggregate Tax Data for Accounting Period 7/07–6/08: NAICS 486

Number of enterprisesa

321

Total receipts (103)

$11,062,608

Net sales (103)

$10,210,083

Profit margin before tax 13.2%

Profit margin after tax 9.6%

a

Includes corporations with and without net income.

Source: Internal Revenue Service, U.S. Department of Treasury. 2010. “Corporation Source Book: Data Files 2004-

2007.” <http://www.irs.gov/taxstats/article/0,id=167415,00.html>; (May 2, 2010).

86%

8% 6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Corporations Individual Proprietorships Partnerships
3-21

Table 3-17. Key Enterprise Statistics by Employee Size for Pipeline Transportation of 

Natural Gas (NAICS 48621): 2007

Variable All Enterprises

<20 

Employees

20–99 

Employees

100–499 

Employees 500+ Employees

Firms 126 63 12 9 42

Establishments 1.479 66 26 70 1,317

Employment 24,683 241 382 1,479 22,581

Receipts ($103) $20,796,681 N/A $518,341 $1,448,020 $18,498,143

Receipts/firm ($103) $165,053 N/A $43,195 $160,891 $440,432

Receipts/establishment 

($103)

$14,061 N/A $19,936 $20,686 $14,046

Receipts/employment 

($)

$843 N/A $1,357 $979 $819

Source: U.S. Census Bureau. 2011. Firm Size Data from the Statistics of U.S. Businesses, U.S. All Industries 

Tabulated by Employee Size: 2007. http://www2.census.gov/csd/susb/2007/usalli_r07.xls.

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 nonsurgical) for inpatients with a broad range of 

medical conditions. They usually provide other services as well, including outpatient care, 

anatomical pathology, diagnostic X-rays, clinical laboratory work, and pharmacy services. 

From 2002 to 2007, hospital revenues grew about 21% to over $650 billion ($2007) 

(Table 3-18). At the same time, payroll rose about 15%, while the number of employees 

increased by only 6%. The number of establishments increased during this period by almost 4%, 

resulting in an increase in revenue per establishment of almost 16%.

3.4.2 Goods and Services Used

The BEA reports hospital expenditures only 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 hospitals (NAICS 6223). However, these data 
3-22

should be representative of the affected sector since in 2007, general medical and surgical 

hospitals accounted for 92% of NAICS 622 establishments and 94% of revenues.

In Table 3-19, we use the latest detailed benchmark input-output data 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 with reciprocating internal combustion engines 

(electric power generation and commercial and industrial machinery and equipment repair and 

maintenance) represent less than 2% of the value of services.
3-23

Table 3-18. Key Statistics: General Medical and Surgical Hospitals (NAICS 6221) 

($2007)

2002 2007

Revenue ($106) 539,502 651,639

Payroll ($106) 209,063 240,638

Employees 4,772,422 5,042

Establishments 5,193 5,404

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 62: Health Care 

and Social Assistance: Geographic Area Series: 2002 and 2007.” <http://factfinder.census.gov>; (February 22, 

2012).

Table 3-19. Direct Requirements for Hospitals (NAICS 622): 2002

Commodity Commodity Description

Direct Requirements 

Coefficientsa

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 preparation 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 2010, the United States had 5,754 hospitals (Table 3-20). As shown in Table 3-1, 

nongovernmental not-for-profit hospitals accounted for 2,904 (or 50%) of these hospitals, and 

State and local government hospitals accounted for 1,068 (or 19%) of these hospitals. 
3-24

General medical and surgical hospitals (NAICS 6221) generated $652 billion in total 

receipts in 2007. Including those enterprises without net income, the industry averaged an aftertax profit margin of 3.1% (Table 3-22). Also, each firm in this industry had an average of about 

$202 million in revenue and a great majority of these firms had more than 500 employees in 

2007 (Table 3-23). 

Figure 3-8. Share of Establishments by Legal 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 Size: Legal Form of Organization for the United States: 

2002” <http://factfinder.census.gov>; (November 21, 2008).

Table 3-20. Data for General Medical and Surgical Hospitals (NAICS 6221): 2007

Commodity Establishments

Amount 

($106)

Number of 

Employees

Employees per 

Establishment

All firms 5,404 $651,639 5,041,848 933

Source: U.S. Census Bureau, 2011; Statistics for U.S. Businesses (SUSB), 2007. 

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
3-25

Table 3-21. Hospital Statistics: 2010

Hospitals Number

Total 5,754

Nongovernment not-forprofit 2,904

Investor-owned (for-profit) 1,013

State and local government 1,068

Federal government 213

NA = Not available

Source: American Hospital Association. 2011. “AHA Hospital Statistics: 2010 Edition.” Health Forum.

Table 3-22. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 622-4

Number of enterprisesa18,263

Total receipts (103) $108,074,793 

Net sales(103) $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.

Table 3-23. Key Enterprise Statistics by Employee Size for General Medical and Surgical 

Hospitals (NAICS 6221): 2007 ($2007)

Variable

All 

Enterprises <20 Employees

20-99 

Employees

100-499

Employees 500+ Employees

Firms 3,225 170 277 1,227 1,551

Establishments 5,404 173 282 1,286 3,663

Employment 5,041,848 606 18,718 294,247 4,728,277

Receipts ($103) $651,639,328 346.216 1,553,004 $27,889,532 $621,850,576

Receipts/firm ($103) $202,059 2,037 5,607 $22,730 $400,935

Receipts/establishment 

($103)

$120,585 2,001 5,508 $21,687 $169,766
3-26

Receipts/employment 

($)

$129 $571 $83 $95 $132

Source: U.S. Small Business Administration (SBA). 2010. “Firm Size Data from the Statistics of U.S. Businesses: 

U.S. All Industries Tabulated by Receipt Size: 2007.” <http://www.census.gov/csd/susb/susb07.htm>.

3.5 Irrigation Sets and Welding Equipment

3.5.1 Overview

The U.S. Economic Census classifies irrigation equipment under the farm machinery and 

equipment manufacturing industry group (NAICS 333111). This U.S. industry comprises 

establishments primarily engaged in manufacturing agricultural and farm machinery and 

equipment and other turf and grounds care equipment, including planting, harvesting, and grassmowing equipment (except lawn and garden type). 

From 2002 to 2007, farm machinery and equipment manufacturing revenues increased 

by $8 billion from $15 billion to $23 billion (Table 3-24). At the same time, payroll increased by 

21% and the number of paid employees increased by nearly 9%. The number of establishments 

dropped by 2% from 1,214 establishments in 2002 to 1,191 in 2007. Industrial production in the 

industry has been increasing since 1997 (Figure 3-9).

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 2002 to 2007 welding and soldering equipment manufacturing revenue increased 

by about 53% to nearly $6 billion (Table 3-25). At the same time, payroll increased by 12% and 

the number of paid employees increased by nearly 9%. The number of establishments increased 

by 31% from 250 establishments in 2002 to 303 in 2007.

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 industrial consumers of this equipment.
3-27

3.5.2.1 Irrigation

Demand for irrigation equipment is driven by farm operation decisions, optimal 

replacement considerations, and climate and weather conditions. The National Agriculture 

Statistics Service (NASS) 2008 Farm and Ranch Irrigation Survey (USDA-NASS, 2010) shows
 

3-28

3-28
3-29

Table 3-24. Key Statistics: Farm Machinery and Equipment Manufacturing (NAICS 

333111) ($2007)

2002 2007

Revenue ($106) $15,006 $23,009

Payroll ($106) $2,132 $2,580

Employees 53,817 58,838

Establishments 1,214 1,191

Source: U.S. Census Bureau, Statistics of U.S. Business (SUSB), 2007. 

Figure 3-9. Industrial Production Index (NAICS 333111)

40

50

60

70

80

90

100

110

120

130

Index Values (Jan-97=100)

Industrial Production Index (NAICS 333111)
3-30

Table 3-25. Key Statistics: Welding and Soldering Equipment Manufacturing (NAICS 

333992) ($2007)

2002 2007

Revenue ($106) $3,880 $5,935

Payroll ($106) $811 $910

Employees 16,128 17,529

Establishments 231 303

Source: U.S. Census Bureau; using American FactFinder; “Sector 31: Manufacturing: Industry Series: Historical 

Statistics for the Industry: 2002 and 2007” <http://factfinder.census.gov>; (February 15, 2012).

that the top five states ranked by total acres irrigated are Nebraska, California, Texas, Arkansas, 

and Idaho. Virtually all of the irrigated areas in the U.S. are west of the Mississippi River. 

The survey reported that approximately 546,000 pumps were used on U.S. farms in 2008

with energy expenses totaling approximately $2.7 billion. Electricity is the dominant form of 

energy expense for irrigation pumps, accounting for 59% of total energy expenses. Diesel fuel is 

second (25%), followed by natural gas (17%) and other forms of energy such as gasoline (2%). 

Per-acre operating costs for these irrigation systems vary by fuel type, and natural gas 

was the most expensive in 2008 ($93 per acre for well systems and $44 per acre for surface water 

systems) (Table 3-26). Systems using diesel fuel were operated at approximately half of these 

per-acre costs ($54 per acre for well systems and $42 per acre for surface water systems). 

Gasoline- and gasohol-powered systems offered the least expensive operating costs for well 

systems ($39 per acre) and electricity-power systems offered the least expensive operating costs 

for surface water systems ($45 per acre). As shown in Table 3-27, the number of on-farm pumps 

increased to 546,308 from 489,434 (12%) between 2003 and 2008. The use of electric- and 

diesel-powered pumps increased during this period (21% and 3%, respectively), while other fuel 

sources such as liquid petroleum (LP) gas, propane, and butane declined significantly (31%). It 

should be noted that the acreages included in Table 3-27 incorporate both irrigated and nonirrigated land. 
3-31

Table 3-26. Expenses per Acre by Type of Energy: 2008

Fuel Type Irrigated by Water from Wells Irrigated by Surface Water

Electricity $57.80 $35.07

Natural gas $93.03 $43.85

LP gas, propane, butane $38.72 $45.40

Diesel fuel $54.20 $41.94

Gasoline and gasohol $84.98 $39.24

Total $60.90 $36.13

Source: U.S. Department of Agriculture, National Agricultural Statistics Service. 2010. “2008 Farm and Ranch 

Irrigation Survey.” Washington, DC: USDA-NASS. Table 20. Found on the Internet at 

http://www.agcensus.usda.gov/Publications/2007/Online_Highlights/Farm_and_Ranch_Irrigation_Survey/fris08_

1_20.pdf. 

Table 3-27. Number of On-Farm Pumps of Irrigation Water by Type of Energy: 2003 and 

2008

Fuel Type 2003 2008 Percentage Change

Electricity 312,145 377,492 21%

Natural gas 41,768 36,176 –13%

LP gas, propane, butane 17,786 12,203 –31%

Diesel fuel 112,133 115,249 3%

Gasoline and gasohol 5,602 5,188 –7%

Total 489,434 546,308 12%

Source: U.S. Department of Agriculture, National Agricultural Statistics Service. 2010. “2008 Farm and Ranch 

Irrigation Survey.” Washington, DC: USDA-NASS. Table 20. Found on the Internet at 

http://www.agcensus.usda.gov/Publications/2007/Online_Highlights/Farm_and_Ranch_Irrigation_Survey/fris08_

1_20.pdf

No information is available on the use and construction of on-farm pumps specifically. 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 applications. One of the biggest manufacturers of 

welding products identifies the following key end-user segments:

 general metal fabrication;
3-32

 infrastructure including oil and gas pipelines and platforms, buildings, bridges, and 

power generation;

 transportation and defense industries (automotive, trucks, rail, ships, and aerospace);

 equipment manufacturers in construction, farming, and mining;

 retail resellers; and

 rental market (Lincoln Electric Holdings, 2006).

Lincoln Electric further describes 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

Enterprises within agriculture, construction, and mining machinery manufacturing 

(NAICS 3331) generated $88 billion of total receipts in 2007, while those in other general 

purpose machinery manufacturing (NAICS 3339) generated $85.7 billion. The average after-tax 

profit margin in these two industries was 6.9% and 4.7%, respectively (Table 3-28).

Table 3-28. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 3331 and 3339

Agriculture, Construction, & Mining 

Machinery Manufacturing

Other General Purpose Machinery 

Manufacturing

Number of enterprisesa3,064 6,231

Total receipts (103) $88,255,496 $85,653,046

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 distribution for a representative sector in this 

section (NAICS 237, Heavy and Civil Engineering Construction); other subsections in Section 3

cover other sectors that potentially use equipment powered by diesel engines (e.g., power 

generation and offshore gas distribution). As shown in Table 3-29, SUSB data suggest that more 

than 80% of firms are below the Small Business Administration (SBA) small business size 
3-33

standard for this industry. However, it is not clear what fraction of these firms use stationary 

diesel engines.
3-34

Table 3-29. Key Enterprise Statistics by Receipt Size for Heavy Construction: 2007

a

Variable All Enterprises

<20

Employees

20–99 

Employees

100–499 

Employees 500+

Firms 49,228 40,654 6,793 1,422 359

Establishments 51,421 40,670 6,947 1,847 1,987

Employment 1,016,407 183,487 273,867 238,342 320,711

Receipts ($103) $263,941,774 $46,766,241 $68,078,765 $69,190,739 $79,906,029

Receipts/firm ($103) $5,362 $1,150 $10,022 $48,657 $222,579

Receipts/establishment 

($103)

$5,133 $1,150 $9,800 $37,461 $40,214

Receipts/employment 

($)

$260 $255 $249 $290 $249

a

2007 SUSB. The most comparable 2007 NAICS code for this industry is 237.

Source: U.S. Census Bureau. 2012b. Firm Size Data from the Statistics of U.S. Businesses, U.S. All Industries Tabulated by Receipt Size: 2007. 

http://www2.census.gov/csd/susb/2007/usalli_r07.xls.
4-1

SECTION 4

REGULATORY ALTERNATIVES, COSTS, AND EMISSION IMPACTS

4.1 Background

This section of the RIA includes a discussion of the regulatory alternatives considered for 

the final reconsidered rule, the costs associated with these regulatory alternatives, and the 

impacts on affected emissions (both HAP and non-HAP). All impacts presented are for the year 

of full implementation, 2013. Costs in the chapter are in 2008$. Costs in 2010$ shown in other 

parts of the RIA are updated values of these 2008$. Although the estimates presented are 

annualized, they should be understood as a “snapshot” in analyzing costs. Annualized costs are 

estimated as equal for each year that control equipment is operated. 

After promulgation of the 2010 RICE NESHAP amendments, the EPA received several 

petitions for reconsideration, legal challenges, and other communications raising issues of 

practical implementability, and certain factual information that had not been brought to the 

EPA’s attention during the rulemaking. The EPA has considered this information and believes 

that amendments to the rule to address certain of these issues are appropriate. Therefore,the 

EPA is finalizing amendments to NESHAP for stationary RICE signed in March 2010 for CI 

engines and August 2010 for SI engines under section 112 of the Clean Air Act. This final rule 

was developed to address certain issues that have been raised by different stakeholders through 

lawsuits, several petitions for reconsideration of the 2010 RICE NESHAP amendments and other 

communications. The EPA is also finalizing revisions to 40 CFR part 60, subparts IIII and JJJJ 

for consistency with the RICE NESHAP and to make minor corrections and clarifications. The 

current regulation applies to owners and operators of existing and new stationary RICE at major 

and area sources of HAP emissions. The applicability of the CI rule remains the same and is not 

changed by this final rule. The EPA is also finalizing amendments to the NSPS for stationary 

engines to conform with certain amendments finalized for the RICE NESHAP. 

Certain stationary RICE are maintained in order to be able to respond to emergency 

power needs. This action finalizes limitations on the operation of emergency engines for 

emergency demand response programs. The final rule limits operation of stationary emergency 

RICE as part of an emergency demand response program to within the 100 hours per year that 

were already permitted for maintenance and testing of the engines. The limitation of 100 hours 

per year ensures that a sufficient number of hours are available for engines to meet regional 

transmission organization and independent system operator tariffs and other requirements for 

participating in various emergency demand response programs and will assist in stabilizing the 
4-2

grid during periods of instability, preventing electrical blackouts and supporting local electric 

system reliability. The final rule also limits operation of certain emergency engines used to avert 

potential voltage collapse or line overloads that could lead to the interruption of power supply in 

a local area or region to 50 hours per year; this operation counts as part of the 100 hours of year 

permitted for maintenance and testing of the engine. This rule also establishes fuel and reporting 

requirements for emergency engines larger than 100 horsepower (HP) used for this purpose or 

used (or contractually obligated to be available) for more than 15 hours of emergency demand 

response per calendar year.

To address how certain existing compression ignition (CI) engines are currently 

regulated, the EPA is specifying that any existing CI engine above 300 HP at an area source of 

HAP emissions that was certified to meet the Tier 3 engine standards and was installed before 

June 12, 2006, is in compliance with the NESHAP. This provision creates regulatory consistency 

between the same engines installed before and after June 12, 2006. Engines at area sources of 

HAP for which construction commenced before June 12, 2006, are considered existing engines 

under the NESHAP. 

The EPA is finalizing amendments to the requirements for existing stationary Tier 1 and 

Tier 2 certified CI engines located at area sources that are subject to state and locally enforceable 

requirements requiring replacement of the engine by June 1, 2018. This addresses a specific 

concern regarding the interaction of the NESHAP with certain rules for agricultural engines in 

the San Joaquin Valley in California. The EPA is allowing these engines to meet management 

practices under the RICE NESHAP from the May 3, 2013, compliance date until January 1, 

2015, or 12 years after installation date, but not later than June 1, 2018. This provision addresses 

concerns about requiring owners and operators to install controls on their engines in order to 

meet the RICE NESHAP, and then having to replace their engines shortly thereafter due to state 

and local rules specifying the replacement of engines. Owners and operators will have additional 

time to replace their engines without having to install controls, but are required to use 

management practices during that period.

Another change the EPA is making is to broaden the definition of remote area sources in 

Alaska in the RICE NESHAP. Previously, remote areas were considered those that are not on the 

Federal Aid Highway System (FAHS). This change permits existing stationary CI engines at 

other remote area sources in Alaska to meet management practices rather than numerical 

emission standards likely to require aftertreatment. These remote areas have the same challenges 

as areas not on the FAHS, and complying with the current rule would similarly be prohibitively 

costly and potentially infeasible. In addition to area sources located in areas of Alaska that are 
4-3

not accessible by the FAHS being defined as remote and subject to management practices, any 

stationary RICE in Alaska meeting all of the following conditions are subject to management 

practices: 

(1) The only connection to the FAHS is through the Alaska Marine Highway System, or 

the stationary RICE operation is within an isolated grid in Alaska that is not connected to the 

statewide electrical grid referred to as the Alaska Railbelt Grid, and

(2) At least 10 percent of the power generated by the stationary RICE on an annual basis 

is used for residential purposes, and

(3) The generating capacity of the area source is less than 12 megawatts (MW), or the 

stationary RICE is used exclusively for backup power for renewable energy.

The last significant change the EPA is finalizing is to require compliance with 

management practices rather than numeric emission limits in the RICE NESHAP for existing CI 

RICE on offshore drilling vessels on the Outer Continental Shelf (OCS) that become subject to 

the RICE NESHAP as a result of the operation of the OCS regulations (40 CFR part 55). The 

final amendments specify that owners and operators of existing non-emergency CI RICE with a 

site rating greater than 300 HP on offshore drilling vessels on the OCS are required to change the 

oil every 1,000 hours of operation or annually, whichever occurs first; inspect and clean air 

filters every 750 hours of operation or annually and replace as necessary; inspect fuel filters and 

belts, if installed, every 750 hours of operation or annually and replace as necessary; and inspect 

all flexible hoses every 1,000 hours of operation or annually and replace as necessary. Owners 

and operators can elect to use an oil analysis program to extend the oil change requirement

EPA has taken several actions over the past several years to reduce exhaust pollutants 

from stationary diesel engines, but believes that further reducing exhaust pollutants from 

stationary diesel engines, particularly existing stationary diesel engines that have not been 

subject to federal standards, is justified. Therefore, EPA is issuing this rulemaking that 

reconsiders the 2010 final rule requiring emissions reductions from existing stationary diesel 

engines. The full preamble for the final CI RICE NESHAP and the rule itself can be reviewed at

http://www.epa.gov/ttn/atw/rice/fr03mr10.pdf. 
4-4

4.2 Summary of the Final Reconsideration Rule

4.2.1. Emergency Demand Response. 

The EPA proposed to limit operation of emergency stationary RICE as part of an 

emergency demand response program to within the 100 hours per year that is already permitted 

for maintenance and testing of the engines. The EPA proposed that owners and operators of 

stationary emergency engines could operate the engines for emergency demand response when 

the Reliability Coordinator, or other authorized entity as determined by the Reliability 

Coordinator, has declared an EEA Level 2 as defined in the NERC Reliability Standard EOP002-3, Capacity and Energy Emergencies, plus during periods where there is a deviation of 

voltage or frequency of 5 percent or more below standard voltage or frequency. After 

considering public comments received on the proposed rule, the EPA is finalizing the proposed 

amendment to limit operation for maintenance and testing and emergency demand response to no 

more than 100 hours per year. 

The EPA received some comments in support of the provision for emergency demand 

response operation, while other commenters opposed the limitation. The commenters who 

supported the provision noted that the engines are rarely called for emergency demand response, 

and that the EPA has limited the emergency demand response operation to emergency situations 

where a blackout is imminent. The commenters also noted that the public health impacts created 

by a widespread power outage outweigh the air quality impacts from the engines. The EPA 

agrees with the commenters that it is appropriate to include a provision for operation of 

emergency engines for a limited number of hours per year as part of emergency demand 

response programs to help prevent grid failure or blackouts. Preventing stationary emergency 

engines from being able to qualify and participate in emergency demand response programs 

without having to apply aftertreatment could force owners and operators to remove their engines 

from these programs, which could impair the ability of regional transmission organizations and 

independent system operators to use these relatively small, quick-starting and reliable sources of 

energy to protect the reliability of their systems. 

The commenters who opposed the provision for demand response provided no significant 

argument that the conditions under which these engines would be permitted to operate for 

emergency demand response would not be emergency conditions.

Commenters who opposed the provision were concerned about the air quality and health 

impacts of emissions from stationary engines. The commenters were concerned that recent 

actions by the Federal Energy Regulatory Commission (FERC) that impact demand response 
4-5

compensation in organized wholesale energy markets will greatly increase the amount of demand 

response participating in organized wholesale capacity markets. In response to the commenters, 

the EPA notes that, prior to the 2013 compliance dates for existing engines, there are no 

limitations on the hours of operation for those engines. The standards that go into effect in 2013 

will for the first time establish requirements for these engines, including limitations on their 

hours of operation in certain situations such as emergency demand response, and ULSD fuel 

requirements which will reduce HAP emissions from the engines. Regarding the FERC 

regulations and their effect on use of demand response in capacity markets, these are comments 

more appropriately directed towards the FERC. As noted above, the emergency demand response 

situations during which the emergency engines may be used for a limited number of hours per 

year are appropriately considered emergency situations.

Commenters were also concerned that these engines would be called to operate for 

demand response on high ozone days, further contributing to nonattainment with ozone 

standards. However, other commenters noted that emergency demand response events do not 

predominantly occur on ozone exceedance days. These commenters also note that some of the 

commenters opposing use of emergency engines during emergency demand response would 

benefit by such a limitation because other emission sources may be used instead of the 

emergency engines, including sources that some of these commenters may operate, and that the 

effect on total emissions of using these alternative emission sources is not clear. Concerns about 

contribution to ozone nonattainment by stationary engines can be addressed through areaspecific requirements such as state-based State Implementation Plans that would be directed 

towards ozone nonattainment areas. More detail regarding the public comments and the EPA’s 

responses can be found in the Response to Public Comments document available in the 

rulemaking docket.

As mentioned in the previous paragraph, in response to the concerns about the air quality 

impact of emissions from emergency engines operating in emergency demand response 

programs, and based on public comments received on the proposed rule, the EPA is finalizing a 

requirement for owners and operators of existing emergency CI stationary RICE with a site 

rating of more than 100 brake HP and a displacement of less than 30 liters per cylinder that use 

diesel fuel and operate or are contractually obligated to be available for more than 15 hours per 

year (up to a maximum of 100 hours per year) for emergency demand response to use diesel fuel 

that meets the requirements in 40 CFR 80.510(b) for nonroad diesel fuel. This fuel requirement 

also applies to owners and operators of new emergency CI stationary RICE with a site rating of 

more than 500 brake HP with a displacement of less than 30 liters per cylinder located at a major 
4-6

source of HAP that use diesel fuel and operate or are contractually obligated to be available for 

more than 15 hours per year (up to a maximum of 100 hours per year) for emergency demand 

response. Owners and operators must begin meeting this ULSD fuel requirement on January 1, 

2015, except that any existing diesel fuel purchased (or otherwise obtained) prior to January 1, 

2015, may be used until depleted. As noted by commenters on the proposed amendments and as 

discussed in section II.B of the preamble, requiring the use of diesel fuel meeting the 

requirements of 40 CFR 80.510(b) is expected to reduce the HAP emissions significantly from 

the engines compared to emissions resulting from use of unregulated diesel fuel. The fuel 

requirement begins on January 1, 2015, in order to give affected sources appropriate lead time to 

institute these new requirements and make any physical adjustments to engines and other 

facilities like tanks or containment structures, as well as any needed adjustments to contracts and 

other business activities, that may be necessitated by these new requirements.

The final amendments also require owners and operators of emergency stationary RICE 

larger than 100 HP that operate or are contractually obligated to be available for more than 15 

hours per year (up to a maximum of 100 hours per year) for emergency demand response to 

submit an annual report to the EPA documenting the dates and times that the emergency 

stationary RICE operated for emergency demand response, beginning with the 2015 calendar 

year. Commenters on the proposed amendments recommended that the EPA gather information 

on the impacts of the emissions from emergency engines during emergency demand response 

situations. The EPA agrees that a reporting requirement will increase the EPA’s ability to ensure 

that these engines are operating in compliance with the regulations and that it will provide 

further information regarding the impacts of these engines on emissions. In response to these 

comments, the EPA is establishing a requirement to annually report to EPA the engine location 

and duration of operation for emergency demand response. This information will be used by the 

EPA, as well as state and local air pollution control agencies, to assess the health impacts of the 

emissions from these engines and to aid the EPA in ensuring that these engines comply with the 

regulations. Additional discussion of the rationale for the fuel and reporting requirements, as 

well as responses to other significant comments regarding emergency engines engaged in 

emergency demand response, can be found in the Response to Public Comments document in the 

docket.

Public commenters, in particular the National Rural Electric Cooperative Association 

(NRECA), indicated that the proposed EEA Level 2 and 5 percent voltage or frequency deviation 

triggers did not account for situations when the local balancing authority or transmission 

operator for the local electric system has determined that electric reliability is in jeopardy, and 
4-7

recommended that the EPA include additional situations where the local transmission and 

distribution system operator has determined that there are conditions that could lead to a blackout 

for the local area. The comments from NRECA indicated that rural distribution lines are not 

configured in a typical grid pattern, but instead have distribution lines that can run well over 50 

miles from a substation and regularly extend 15 miles or longer. During periods of exceptionally 

heavy stress within the region or sub-region, electricity from regional power generators may not 

be available because of transmission constraints, according to the commenter. The commenter 

indicated that in many cases, there may be only one transmission line that feeds the rural 

distribution system, and no alternative means to transmit power into the local system. 

In response to those comments and in recognition of the unique challenges faced by the 

local transmission and distribution system operators in rural areas, the EPA is specifying in the 

final rule that existing emergency stationary RICE at area sources can be used for 50 hours per 

year as part of a financial arrangement with another entity if all of the following conditions are 

met: 

The engine is dispatched by the local balancing authority or local transmission and 

distribution system operator.

The dispatch is intended to mitigate local transmission and/or distribution limitations so 

as to avert potential voltage collapse or line overloads that could lead to the interruption 

of power supply in a local area or region.

The dispatch follows reliability, emergency operation or similar protocols that follow 

specific NERC, regional, state, public utility commission or local standards or guidelines. 

The power is provided only to the facility itself or to support the local transmission and 

distribution system.

The owner or operator identifies and records the specific NERC, regional, state, public 

utility commission or local standards or guidelines that are being followed for dispatching 

the engine. The local balancing authority or local transmission and distribution system 

operator may keep these records on behalf of the engine owner or operator.

Engines operating in systems that do not meet the conditions described here will not be 

considered emergency engines if they operate for these purposes as part of a financial 

arrangement with another entity.

Stationary emergency CI RICE with a site rating of more than 100 brake HP and a 

displacement of less than 30 liters per cylinder located at area sources that operate for this 

purpose are also required to use diesel fuel meeting the specifications of 40 CFR 80.510(b) 
4-8

beginning January 1, 2015, except that any existing diesel fuel purchased (or otherwise obtained) 

prior to January 1, 2015, may be used until depleted. Owners and operators of these engines are 

also required to report the dates and times the engines operated for this purpose annually to the 

EPA, beginning with operation during the 2015 calendar year. The report must also identify the 

entity that dispatched the engine and the situation that necessitated the dispatch of the engine. 

Further discussion of the rationale for the changes is available in the Response to Public 

Comments document in the docket.

4.2.2. Peak Shaving 

The EPA proposed a temporary provision for existing stationary emergency engines 

located at area sources to apply the 50 hours per year that is allowed under §63.6640(f) for nonemergency operation towards any non-emergency operation, including operation as part of a 

financial agreement with another entity. The peak shaving provision was proposed to expire in 

April 2017. The purpose of the proposed provision for peak shaving was to give sources an 

additional resource for maintaining reliability while facilities are coming into compliance with 

the NESHAP From Coal and Oil-Fired Electric Utility Steam Generating Units (77 FR 9304). 

Based on public comments received on the proposal, the EPA is not finalizing the proposed 

provision for peak shaving in this action. Commenters noted that the allowance was not 

necessary for maintaining electric reliability, and that alternative methods for meeting peak 

demand are readily available. In addition, commenters indicated that use for peak shaving does 

not fairly come under the definition of emergency use as it is designed to increase capacity in the 

system. Further discussion is available in the Response to Public Comments document in the 

docket.

However, in consideration of the short time between this final rule and the May 3, 2013, 

or October 19, 2013 compliance dates for affected sources, this final rule permits the use of 

existing stationary emergency engines located at area sources for 50 hours per year through May 

3, 2014 for peak shaving or non-emergency demand response to generate income for a facility, 

or to otherwise supply power as part of a financial arrangement with another entity if the engines 

are operated as part of a peak shaving (load management) program with the local distribution 

system operator and the power is provided only to the facility itself or to support the local 

distribution system. Owners and operators of these engines, which have heretofore not been 

regulated, may have taken actions based on the June 7, 2012, proposal that would now leave 

them in danger of being in noncompliance with the applicable requirements for the engine in the 

RICE NESHAP.
4-9

4.2.3. Final Amendment - Stationary Agricultural RICE in San Joaquin Valley

In the 2010 amendments to the RICE NESHAP, the EPA required existing nonemergency CI engines above 300 HP to meet a standard of either 70 percent reduction of CO 

emissions or 49 ppmvd CO, for engines between 300 and 500 HP, or 23 ppmvd CO for engines 

above 500 HP. The requirements also included testing and monitoring provisions. As with all 

requirements for existing engines in that rule, owners and operators were required to meet the 

requirements within 3 years of the effective date of the regulations (May 3, 2013). 

Since the finalization of the 2010 rule for existing stationary CI engines, stakeholders 

from the agricultural industry in the San Joaquin Valley area of California have expressed 

concern regarding the effect of certain of these requirements on engines in the San Joaquin 

Valley. The San Joaquin Valley Air Pollution Control District (APCD) has indicated that there 

are 17 stationary CI engines at area sources in San Joaquin Valley certified to the Tier 3 

standards in 40 CFR part 89 that were installed between January 1 and June 12, 2006. Under the 

NESHAP, stationary CI engines at area sources are existing if construction of the engine 

commenced prior to June 12, 2006. These 17 Tier 3 engines in the San Joaquin Valley, which 

were built to meet stringent emission standards, would not be able to comply with the applicable 

RICE NESHAP emission standards for existing engines without further testing and monitoring, 

and possible retrofit with further controls, due to differences in the emission standards and 

testing protocols in the RICE NESHAP versus the Tier 3 standards in 40 CFR part 89. However, 

an identical engine certified to the Tier 3 standards (or Tier 2 standards for engines above 560 

kilowatts (kW)) in 40 CFR part 89 that was installed after June 12, 2006, would not have to be 

retrofit in order to comply with the NESHAP. Stationary CI engines installed after June 12, 

2006, at area sources of HAP are required to comply with the NSPS for stationary CI engines, 

which requires engines to be certified to the standards in 40 CFR parts 89, 94, 1039, and 1042, as 

applicable. Thus, a 2006 model year stationary CI engine installed after June 12, 2006, that is 

certified to the applicable standards would meet the requirements of the NESHAP without 

further controls or testing. While the EPA does not know if other certified Tier 3 engines besides 

these 17 engines in the San Joaquin Valley were installed prior to June 12, 2006, EPA believes 

the same rationale should apply to any such engine.

The EPA believes that the Tier 3 standards (Tier 2 for engines above 560 kW) are 

technologically stringent regulations and believes it is unnecessary to require further regulation 

of engines meeting these standards. In order to address this concern, the EPA is finalizing 
4-10

changes to amend the requirements for any certified Tier 3 (Tier 2 for engines above 560 kW) 

stationary CI engine located at an area source and installed before June 12, 2006. The EPA is 

finalizing amendments to specify that any existing certified Tier 3 (Tier 2 for engines above 560 

kW) CI engine that was installed before June 12, 2006, is in compliance with the NESHAP. This 

amendment would include any existing stationary Tier 3 (Tier 2 for engines above 560 kW) 

certified CI engine located at an area source of HAP emissions.

Another concern brought to the EPA’s attention by the San Joaquin Valley agricultural 

industry is that due to state and local requirements in the San Joaquin Valley, many of the Tier 1 

and Tier 2 stationary CI engines that are regulated as existing sources under the NESHAP must 

be replaced in the next few years, only a short time after the emission standards for existing 

engines must be met. Specifically, the San Joaquin Valley APCD rule for internal combustion 

engines (Rule 4702) requires Tier 1 and Tier 2 certified engines to meet Tier 4 standards by 

January 1, 2015, or 12 years after the installation date, but no later than June 1, 2018. The 

concern is that owners and operators of these engines would have to install aftertreatment by 

2013 to meet the emission standards of the RICE NESHAP and then only a few years later be 

required to replace their engines per San Joaquin Valley APCD Rule 4702. The San Joaquin 

Valley APCD has identified 49 Tier 1 engines and 360 Tier 2 engines that are scheduled to be 

replaced under the local rule. The EPA has not identified any engines outside the San Joaquin 

Valley APCD area that are in the same or similar situation (i.e., required to be replaced shortly 

after the compliance date for existing engines), but the EPA does not preclude the possibility that 

there are such engines in other areas, and requests comment and information on other areas that 

may have similar concerns.

The EPA does not think it is appropriate to require emission controls on a stationary CI 

engine that is going to be retired only a short time after the rule goes into effect. Stationary CI 

engines would have to comply with this rule by May 3, 2013, and owners of engines above 300 

HP are expected to have to install aftertreatment on their engines in order to meet the emission 

standards. The EPA estimates that the one-time cost to equip a 500 HP stationary CI engine with 

the controls necessary to meet the emission standards under this rule is close to $14,000 and 

more than $3,000 on a yearly basis, not accounting for additional costs associated with 

monitoring, testing, recordkeeping and reporting. These engines (equipped with aftertreatment) 

could end up being in operation for less than 2 years or at most only 5 years before having to be 

replaced with a certified Tier 4 engine, as required by San Joaquin Valley District Rule 4702. It 

would not be reasonable to require the engine owner to invest in costly controls and monitoring 

equipment for an engine that will be replaced shortly after the installation of the controls.
4-11

Consequently, the EPA is finalizing amendments to existing stationary CI engines located 

at area sources of HAP emissions to address this concern. The EPA is amending the 

requirements for existing stationary Tier 1 and Tier 2 certified CI engines located at area sources 

that are greater than 300 HP that are subject to a state or local rule that requires the engine to be 

replaced. The EPA is allowing these engines to meet management practices for a period of 2 

years starting with the applicable May 3, 2013, compliance date until January 1, 2015, or 12 

years after installation date (whichever is later), but not later than June 1, 2018. This change 

would provide owners enough time to replace their engines without mandating a possibly cost 

prohibitive requirement to change all of the engines in a short amount of time, while still 

requiring that replacement of the engine or a retrofit of the engine occur relatively quickly after 

the owner would have to comply with the NESHAP. The EPA is requiring that these engines be 

subject to management practices until January 1, 2015, or 12 years after installation date 

(whichever is later), but not later than June 1, 2018, after which time the CO emission standards 

discussed above (and that are in Table 2d of the rule) apply. The management practices include 

requirements for when to inspect and replace the engine oil and filter, air cleaner, hoses and 

belts. The complete details of which management practices are required are shown in Table 2d of 

the rule. Owners and operators of these existing stationary CI engines located at area sources of 

HAP emissions that intend to meet management practices rather than the emission limits prior to 

May 3, 2015, must submit a notification by March 3, 2013, stating that they intend to use this 

provision and identifying the state or local regulation that the engine is subject to.

4.2.4 Final Amendments – for Remote Areas of Alaska

The EPA proposed to expand the definition of remote areas of Alaska to extend beyond 

areas that are not accessible by the FAHS. Specifically, the EPA proposed that areas of Alaska 

that are accessible by the FAHS and that met all of the following criteria would also be 

considered remote and subject to management practices under the rule: (1) the stationary CI 

engine is located in an area not connected to the Alaska Railbelt Grid; (2) at least 10 percent of 

the power generated by the engine per year is used for residential purposes; and (3) the 

generating capacity of the area source is less than 12 MW, or the engine is used exclusively for 

backup power for renewable energy and is used less than 500 hours per year on a 10-year rolling 

average. 

After considering the public comments received on the proposed criteria, the EPA is 

finalizing the first two criteria as proposed, but finalizing a slightly different third criterion. In 

this final rule, existing CI engines at area sources of HAP are considered remote if they meet the 

first and second criteria above and they are either at a source with a generating capacity less than 
4-12

12 MW, or used exclusively for backup power for renewable energy. Based on public comments 

received on the proposal, the EPA is not finalizing the limitation that the engine be used less than 

500 hours per year on a 10-year rolling average. Commenters indicated that basing the 

applicability on the previous 10 years of operation would ignore recent investments in renewable 

energy that have significantly decreased engine hours of operation in recent years. The EPA is 

also defining “backup power for renewable energy” in this final rule as engines that provide 

backup power to a facility that generates electricity from renewable energy resources, as that 

term is defined in Alaska Statute 42.45.045(l)(5). The rationale for these changes can be found in 

the Response to Public Comments document available in the docket. 

4.2.5. Offshore Vessels

The RICE NESHAP does not on its face apply to mobile sources, including marine 

vessels. However, the regulations applicable to sources on the OCS, codified at 40 CFR part 55, 

specify that vessels are OCS sources when they are (1) permanently or temporarily attached to 

the seabed and erected thereon and used for the purpose of exploring, developing or producing 

resources there from, within the meaning of section 4(a)(1) of the OCS Lands Act (43 U.S.C. 

§1331, et seq.); or (2) physically attached to an OCS facility, in which case only the stationary 

sources aspects of the vessels will be regulated. 40 CFR 55.2. The OCS regulations provide that 

NESHAP requirements apply to a vessel that is an OCS source where the provisions are 

“rationally related to the attainment and maintenance of the federal or state ambient air quality 

standards or the requirements of part C of title I of the Act.” 40 CFR 55.13(e).

The EPA received comments during the public comment period for the June 7, 2012, 

proposal recommending that the RICE NESHAP be amended such that for any existing nonemergency CI RICE above 300 HP on offshore vessels on the OCS that become subject to the 

RICE NESHAP as a result of the operation of the OCS regulations (40 CFR part 55), such 

engines may meet the NESHAP through management practices rather than numeric emission 

limits. This amendment was not contained or contemplated in the June 7, 2012, proposal. 

However, the comments indicated several significant issues related to application of the 

NESHAP to regulation of existing marine vessel engines located in the OCS as a result of the 

OCS regulations; in particular, whether the numerical standards applicable to other CI engines 

located at area sources (marine vessels located in the OCS are generally located at area sources) 

are technologically feasible for existing marine engines located in the OCS. Some commenters 

noted specific technological issues relevant to engines on marine vessels in the OCS. The 

commenters indicated that emission controls for existing CI RICE to meet the NESHAP may be 

technically infeasible due to weight and space constraints, catalyst fouling from the low-load 
4-13

engine operation required by the U.S. Coast Guard, safety concerns regarding engine 

backpressure and lack of catalyst vendor experience with retrofitting. Commenters suggested 

that, to the extent marine vessel engines become subject to the NESHAP as a result of the OCS 

regulations, these engines should be subject to GACT requirements that the commenters believe 

are more appropriate for these types of engines. The commenters indicated that management 

practices similar to those currently required in the rule for existing non-emergency stationary CI 

RICE smaller than 300 HP are more appropriate as GACT for existing non-emergency stationary 

CI RICE above 300 HP on vessels operating on the OCS. 

Based on these comments, the EPA published a reopening of the comment period to take further 

comment on whether the RICE NESHAP should be revised to require management practices for 

these vessels. Based on the comments received during the two comment periods, the EPA agrees 

with the commenters that management practices are more reasonable as GACT for existing nonemergency stationary CI RICE larger than 300 HP on vessels operating on the OCS and is 

finalizing management practices for these engines. The EPA did not receive any public 

comments indicating that HAP emission controls were generally available and had been 

demonstrated for the large engines on the vessels. The final management practices include 

changing the oil every 1,000 hours of operation or annually, whichever comes first; inspecting 

and cleaning air filters every 750 hours of operation or annually, whichever comes first, and 

replacing as necessary; inspecting fuel filters and belts, if installed, every 750 hours of operation 

or annually, whichever comes first, and replacing as necessary; and inspecting all flexible hoses 

every 1,000 hours of operation or annually, whichever comes first, and replacing as necessary. 

Facilities have the option of using an oil analysis program to extend the oil change requirement. 

Additional discussion of the rationale for these changes can be found in the Response to Public 

Comments document available in the docket. 

4.3 What Are the Pollutants Regulated by this Final Reconsideration Rule?

The final reconsideration rule regulates emissions of HAP. Available emissions data 

show that several HAP, which are formed during the combustion process or which are contained 

within the fuel burned, are emitted from stationary engines. The HAP which have been measured 

in emission tests conducted on diesel fired RICE include: 1,3-butadiene, acetaldehyde, acrolein, 

benzene, ethylbenzene, formaldehyde, n-hexane, naphthalene, polycyclic aromatic hydrocarbons, 

polycyclic organic matter, styrene, toluene, and xylene. Metallic HAP from diesel fired 

stationary RICE that have been measured are: cadmium, chromium, lead, manganese, mercury, 

nickel, and selenium.
4-14

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 amendments will continue to limit emissions of HAP through emissions 

standards for CO for existing stationary CI RICE in similar quantities as estimated for the 2010 

final rule. 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 reductions and HAP emissions reductions from CI 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 included 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 surrogates for HAP are still valid.1 Therefore, the EPA is retaining the emission 

standards for CO for CI engines in order to regulate HAP emissions.

In addition to reducing HAP and CO, the final amendments will result in the reduction of 

PM emissions from existing diesel engines. The aftertreatment 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 non-emergency CI engines 

greater than 300 hp with a displacement of less than 30 liters per cylinder. This will result in 

lower emissions of sulfur oxides (SOx) and sulfate particulate from these engines by reducing the 

sulfur content in the fuel. 

4.4 Cost Impacts

4.4.1 Introduction

The cost impacts associated with this rule consist of different types of costs, which 

include the annual and capital costs of controls, costs associated with keeping records of 

 

1

In contrast, mobile source emission standards for diesel engines (both nonroad and on-highway) are promulgated 

on a mass basis rather than concentration. 
4-15

information necessary to demonstrate compliance, costs associated with reporting requirements 

under the General Provisions of 40 CFR part 63, subpart A, costs of purchasing and operating 

equipment associated with continuous parametric 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 calculated based on the control cost methodology 

presented in the EPA (2002) Air Pollution Control 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 costs presented in this section 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. Note that the methodologies and procedures presented in the 

following sections are the same as those used for the 2010 final rule. 

4.4.1.1 Control Costs

For engines that will need to add control technology to meet the emission standards, the 

following equations were used to estimate capital and annual control costs as shown in Table 4-

1:

Table 4-1: CI RICE Control Technologies and Costs

Technology Capital Cost ($2008) Annual Cost ($2008)

Diesel oxidation catalyst (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 using cost data obtained from a California Air 

Resources Board (CARB) study.4 The study provided cost ranges for diesel engines ranging from 

40 hp to 1400 hp. The average cost from the range was selected and was adjusted to 2008 

dollars. The capital and annual cost were calculated using maintenance data from the CARB 

study and cost assumptions from the EPA Air Pollution Control Cost Manual. The control costs 

for the OCV system were calculated using 2008 cost data obtained from 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 the DOC and OCV using the capital cost data and 

 

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. 

4Diesel PM Control Technologies, Appendix IX, California Air Resource Board, October 2000. 

http://www.arb.ca.gov/diesel/documents/rrpapp9.pdf
4-16

the engine size in hp. This approach was used to develop a linear regression equation for annual 

cost.

4.4.1.2 Recordkeeping

Minimal 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 majority of owners and operators are 

already following some type of O&M requirements and a small additional burden is expected.

The EPA expects that at most 1 hour will be necessary per year in order to keep track of 

maintenance. Owners and operator of stationary emergency engines are required to keep track of 

the hours of operation and 1 hour per year was estimated to cover that recordkeeping activity. 

For emergency engines 1 hour is expected to cover tracking hours of operation plus recording 

maintenance activities. No cost is attributed to purchasing and installing an hour-meter since the 

majority of stationary engines already come equipped with such equipment. 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 overhead 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 the rule in present day terms.

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 notification, submitting a 

notification of performance test(s), and submitting 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-emergency 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 subject to numerical emission limitations. 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.

 

5U.S. Department of Labor, Employer Costs for Employee Compensation, 

http://www.bls.gov/news.release/ecec.toc.htm
4-17

4.4.1.4 Monitoring

The cost of monitoring includes the purchase of a continuous parametric monitoring 

system (CPMS). Non-emergency engines greater 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 limitations. The cost of 

purchasing and operating a CPMS was obtained 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 needed to record information from the CPMS. It 

is assumed that all engines subject to continuous monitoring would be located at large engine 

facilities. 

4.4.1.5 Performance Testing

Initial performance testing is required for non-emergency engines greater than 100 hp at 

major sources and non-emergency engines greater than 300 hp located at area sources. The cost 

of 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 daily 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 assumed 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 were not included in these impact calculations.

The work practices are based on engine maintenance procedures that the owner/operators 

perform regardless of the regulation. These work practices include:

 Changing the oil and filter;

 Inspecting the air cleaner and replacing as necessary; and

 Inspecting all hoses and belts, and replacing as necessary.

 

6

Part A of the Supporting Statement for Standard Form 83 Stationary Reciprocating Internal Combustion Engines, 

November 17, 2003.

7Memorandum from Bradley Nelson, Alpha-Gamma Technologies, Inc. to Sims Roy, 

EPA/OAQPS/ESD/Combustion Group, Portable Emissions Analyzer Cost Information, August 31, 2005. 
4-18

EPA believes that these work practices will limit HAP emissions from these engines, 

because these work practices ensure that the engine is operating efficiently. Owner/operators of 

these engines regularly perform these work practices 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 practices for non-emergency CI engines less than 

or equal to 300 hp located at area sources and all emergency engines located at area sources was 

assumed to be negligible and were not included in these impact calculations. The management 

practices are based on engine maintenance procedures that the owner/operators perform 

regardless of the regulation. These management practices include:

 Changing the oil and filter;

 Inspecting the air cleaner, and replacing as necessary; and

 Inspecting all hoses and belts, and replacing as necessary.

EPA believes that these work practices will limit HAP emissions from these engines, 

because these work practices ensure that the engine is operating efficiently. Owner/operators of 

these engines regularly perform these work practices 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 that apply to each subcategory 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 minimal requirements.

Owners and operators of engines less than 100 hp are required to follow the manufacturer’s 

emission-related O&M requirements or must develop their own maintenance plan to follow.

Emergency engines must record the hours of operation, which is estimated at one hour per year 

at $72 per hour.
4-19

4.4.2.2 Non-emergency 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, recordkeeping, and reporting. In 

addition, EPA assumes that some of these engines will be required to install a control device to 

meet the emissions standard. To estimate the number of CI engines that would be required to 

install control technology, EPA compared the emission 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 engines and greater would be able to meet the final 

emission standard. The model year for Tier 1 engines 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 greater 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 additives to ULSD would increase the cost of the 

fuel by 0.2 cents per gallon,9 which EPA believes is negligible. In addition, there are 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 engines 

using ULSD fuel, which would decrease the overall 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.

4.4.2.3 Nonemergency CI Engines > 300 hp

The costs associated with non-emergency 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. Non-emergency 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 compliance with the emission limitation. Owners and 

operators of engines above 500 hp must conduct 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 possible fuel price increases that may result from 

 

8Exhaust and Crankcase Emission Factors for Nonroad Engine Modeling--Compression-Ignition, U.S. EPA, Office 

of Transportation and Air Quality, Assessment and Standards Division, EPA420-P-04-009, Revised April 2004.

http://www.epa.gov/oms/models/nonrdmdl/nonrdmdl2004/420p04009.pdf

9Memorandum 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.
4-20

using ULSD. EPA estimated the cost of lubricity 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 requirements for owner/operators using ULSD in existing diesel engines.

Many owner/operators have found that time between oil changes can be extended for engines 

using ULSD fuel, which would decrease the overall 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.

4.4.2.4 Emergency CI Engines 

The costs associated with emergency CI engines greater than 300 hp and less than or 

equal to 500 hp (emergency CI engines above 500 hp were subject to an earlier rule and are not 

subject to further regulation in this rule) include minimal recordkeeping requirements. The 

owners and operators must follow the manufacturer’s emission-related operating and 

maintenance (O&M) requirements or must develop their own maintenance plan to follow and 

must also keep records of the hours of operation. It is estimated that one hour per year at $68 per 

hour would be sufficient to record the hours of operation. Regarding the reporting requirements, 

the EPA anticipates that in most cases regarding demand response, the entity that dispatches the 

engines to operate, such as the curtailment service provider or utility, will report the information 

to EPA on behalf of the facility that owns the engine. Thus, the burden of the reporting 

requirement will likely be on the entities that dispatch the engines. The number of entities is 

uncertain, but the EPA estimates that approximately 446 local utilities would engage in the 

reporting requirement. The EPA estimates that each utility would spend approximately 16 hours 

per year reporting the information to the EPA. As of June 2012, the total compensation for 

management/professional staff was $51.23 per hour. Adjusting this compensation rate by 

applying an overhead rate of 167 percent yields a total wage rate of $85.60 per hour.11 This 

results in an estimated burden of 7,136 hours at a cost of $611,000 per year, beginning in the 

year 2015. For curtailment service providers, the EPA estimated the burden of the requirement to 

be 1,000 hours at a cost of $60,000 in the first year of implementation, 2015, and 250 hours at a 

cost of $15,000 in subsequent years (using a wage rate of $60 per hour). Using an estimated 

number of 70 curtailment service providers nationwide that are operating engines for emergency 

demand response, the burden for curtailment service providers would be 70,000 hours at a cost 

of $4.2 million in the first year of implementation, 2015, and 17,500 hours at a cost of $1 million 

in subsequent years. Summing the totals for the cooperatives and curtailment service providers 

 

10Memorandum 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.

11 http://www.bls.gov/news.release/ecec.t05.htm
4-21

yields a total of 77,136 labor hours at a cost (in 2012 dollars) of $4.8 million in the first year that 

reporting is required, 2015, and 24,636 labor hours at a cost of $1.7 million (in 2012 dollars) in 

subsequent years.

No costs were included in the impacts for following the manufacturer’s emission-related 

O&M plan, because it is expected that owner/operators will follow this plan regardless of the 

regulation. The cost of the ULSD fuel requirement including the cost of fuel and the potential 

cost of segregating the fuel is not included in the cost estimate. The cost of the ULSD fuel 

requirement including the cost of fuel and the potential cost of segregating the fuel is not 

included in the cost estimate. The EPA believes the ULSD fuel cost would be balanced out by 

the reduced engine maintenance that is expected from using this fuel. Also, the cost difference 

between ULSD fuel and higher sulfur fuel is small, especially considering that the yearly 

operation for emergency DR would be limited to no more than 100 hours per year, and 

subsequently also the fuel consumption. More information on the burden cost and ULSD cost 

estimates can be found in the impacts memo for the final reconsideration rulemaking.12

4.4.3 Area Sources

4.4.3.1 All Emergency CI Engines

The costs associated with emergency CI engines include recordkeeping requirements for 

tracking the hours of operation, but these engines are not subject to any performance testing. The 

owners and operators must follow 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. The EPA anticipates that in most 

cases, the entity that dispatches the engines to operate, such as the curtailment service provider 

or utility, will report the information to EPA on behalf of the facility that owns the engine. Thus, 

the burden of the reporting requirement will likely be on the entities that dispatch the engines. 

The number of entities is uncertain, but the EPA estimates that approximately 446 local utilities 

would engage in the reporting requirement. The EPA estimates that each utility would spend 

approximately 16 hours per year reporting the information to the EPA. As of June 2012, the total 

compensation for management/professional staff was $51.23 per hour. Adjusting this 

compensation rate by applying an overhead rate of 167 percent yields a total wage rate of $85.60 

 

12 Memorandum to Melanie King, U.S. EPA. RICE NESHAP Reconsideration Final Amendments - Cost and 

Environmental Impacts. Prepared by Tanya Parise, Ec/R, Inc. January 14, 2013. 
4-22

per hour.13 This results in an estimated burden of 7,136 hours at a cost of $611,000 per year, 

beginning in the year 2015. For curtailment service providers, the EPA estimated the burden of 

the requirement to be 1,000 hours at a cost of $60,000 in the first year of implementation, 2015, 

and 250 hours at a cost of $15,000 in subsequent years (using a wage rate of $60 per hour). 

Using an estimated number of 70 curtailment service providers nationwide that are operating 

engines for emergency demand response, the burden for curtailment service providers would be 

70,000 hours at a cost of $4.2 million in the first year of implementation, 2015, and 17,500 hours 

at a cost of $1 million in subsequent years. Summing the totals for the cooperatives and 

curtailment service providers yields a total of 77,136 labor hours at a cost of $4.8 million (2012 

dollars) in the first year that reporting is required, 2015, and 24,636 labor hours at a cost of $1.7 

million (2012 dollars) in subsequent years.

Emergency CI engines at areas sources will be subject to management practices, rather 

numerical emission limits. The management practices do not require aftertreatment controls.

Therefore, 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. The cost of the ULSD fuel 

requirement including the cost of fuel and the potential cost of segregating the fuel is not 

included in the cost estimate for the same reasons as mentioned in the previous subsection of this 

section of the RIA.

4.4.3.2 Non-emergency 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 manufacturer’s emission-related O&M requirements or 

the owner or operator’s own maintenance plan. These engines are not subject to any numerical 

emission limitations, therefore no control costs apply and no performance testing is required. 

These engines will be subject to management practices which are not included in the costs, 

because it is assumed that these management practices are done regardless of the regulation.

4.4.3.3 Non-emergency 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. Nonemergency CI engines greater than 500 hp are also 

 

13 http://www.bls.gov/news.release/ecec.t05.htm
4-23

subject to continuous monitoring requirements. In addition, owners and operators must conduct 

an initial performance test to demonstrate compliance with the emission limitation and engines 

above 500 hp must conduct subsequent performance 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 ULSD. The cost estimates for this 

subcategory of engines do not account for possible fuel price increases that may result from 

using ULSD. EPA estimated the cost of lubricity additives to ULSD would increase the cost of 

the fuel by 0.2 cents per gallon, which EPA believes is negligible. In addition, there are 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 engines 

using ULSD fuel, which would decrease the overall 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.

A summary of the total costs associated with the rule by major source and area source 

categories is found in Table 4-2. A summary of the costs by NAICS codes is found in Table 4-3. 

Table 4-4 provides a summary of costs by engine size, and a presentation of the number of 

engines by engine size is in Table 4-5. All cost estimates are from “RICE NESHAP 

Reconsideration Amendment – Cost and Environmental Impacts RICE,” prepared by Tanya 

Parise, EC/R, Inc. for Melanie King, U.S. EPA, Office of Air Quality Planning and Standards.

These costs, presented in 2008 dollars, can be updated to 2010 dollars by applying the ratio of 

the 2010 Marshall & Swift (M&S) annual cost index and the 2008 M&S annual cost index, 

which is 1,457.4/1,449.3 = 1.01. 
4-24

Table 4-2. Summary of Major Source and Area Source Costs for the CI RICE NESHAPa

Size 

Range 

(hp)

Non-Emergency 

CI Capital 

Control Cost

Non-Emergency 

CI Annual 

Control Cost Initial Test Recordkeeping Reporting

Monitoring –

Capital Cost

Monitoring –

Annual Cost

Total Annual 

Costs

Total Capital 

Costs

Major Sources

50–100 $0 $0 $0 $6,654,888 $0 $0 $0 $6,654,888 $0

100–175 $24,057,778 $9,918,465 $14,150,269 $8,719,731 $5,973, 016 $0 $0 $38,761,480 $24,057,778

175–300 $35,917,270 $10,740,189 $10,730,759 $6,612,548 $4,529,595 $0 $0 $32,613,092 $35,917,270

300–500 $107,841,136 $26,722,727 $5,645,923 $3,479,152 $2,383,219 $0 $0 $38,231,021 $107,841,136

500–600 $13,126,952 $3,020,849 $500,530 $61,688 $211,280 $481,765 $2,220,755 $6,015,102 $13,608,716

600–750 $8,240,540 $1,824,295 $256,204 $31,576 $108,147 $246,599 $1,136,729 $3,356,951 $8,487,139

>750 $26,903,091 $5,618,803 $565,163 $69,653 $238,563 $543,975 $2,507,521 $8,999,703 $27,447,066

Total $216,086,768 $57,845,329 $31,848,848 $25,629,236 $13,443,820 $1,272,338 $5,865,005 $134,632,238 $217,359,106

Area Sources

50–100 $0 $0 $0 $9,183,746 $0 $0 $0 $9,183,746 $0

100–175 $0 $0 $0 $12,033,196 5,231,824 $0 $0 $17,265,000 $0

175–300 $0 $0 $0 $9,125,316 $3,967,529 $0 $0 $13,092,845 $0

300–600 269, 176, 789 $64,764,947 $12,533,931 $7,180,954 $5,290,738 $4,021,343 $18,536,893 $108,307,463 $273,198,131

600–750 67,576,980 $14,964,227 $2,101,015 $1,203,716 $886,866 $674,082 $9,321,806 $28,473,630, $68,251,062,

>750 177,179,667 $37,004,585 $3,722,077 $2,132,457 $1,571,138 $1,194,178 $16,514,152 $60,944,409 $178,373,845

Total 513,933,435 $116,729,759 $18,357,024 $40,859,384 $16,948, 096 $5,889,603 $44,372,851 $237,267,114 $519,823,039

Grand Total

Total $730,020,203 $174,575,088 $50,205,872 $66,480,620 $30,391,916 $7,161,941 $50,237,856 $371,899,352 $737,182,145

a Costs are presented in 2008 dollars.
4-25

Table 4-3. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAPa

NAICS

Major Source Area Source Total (Major + Area)

Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost

Electric Power Generation 

(2211)

$161,766,376 $90,982,105 $464,947,798 $202,463,116 $626,714,174 $293,445,222

Hospitals (622110) $20,220,797 $11,372,763 $0 $0 $20,220,797 $11,372,763

Crude Petroleum & NG 

Production (211111)

$2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314

Natural Gas Liquid Producers 

(211112)

$2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314

National Security (92811) $20,220,797 $11,372,763 $51,660,866 $22,495,902 $71,881,663 $33,868,665

Hydro Power Units (335312) $0 $16,637 $0 $22,959 $0 $39,597

Irrigation Sets (335312) $10,294,073 $11,791,567 $34,145 $5,208,084 $10,328218 $16,999,651

Welders (333992) $108,260 $1,481,447 $0 $1,881,380 $108,260 $3,362,827

Total $217,359,106 $134,632,238 $519,823,039 $237,267,114 $737,182,145 $371,899,352

a Costs are presented in 2008 dollars.
4-26

Table 4-4. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Sizea

NAICS

Major Source Area Source Total (Major + Area)

Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost

Electric Power Generation (2211)

50–100 hp $0 $3,396,123 $0 $5,272,480 $0 $8,668,603

100–175 hp $13,406,919 $21,600,998 $0 $10,824,132 $13,406,919 $32,425,129

175–300 hp $23,012,914 $20,895,861 $0 $9,437,454 $23,012,914 $30,333,314

300–600 hp $96,907,266 $35,304,866 $245,239,035 $97,223,277 $342,146,301 $132,528,144

600–750 hp $6,789,032 $2,685,292 $61,419,814 $25,623,705 $68,208,846 $28,308,997

>750 hp $21,650,245 $7,098,966 $158,288,950 $54,082,069 $179,939,195 $61,181,035

Total 2211 $161,766,376 $90,982,105 $464,947,798 $202,463,116 $626,717,174 $293,445,222

Hospitals (622110)

50–100 hp $0 $424,515 $0 $0 $0 $424,515

100–175 hp $1,675,865 $2,700,125 $0 $0 $1,675,865 $2,700,125

175–300 hp $2,876,614 $2,611,983 $0 $0 $2,876,614 $2,611,983

300–600 hp $12,113,408 $4,413,108 $0 $0 $12,113,408 $4,413,108

600–750 hp $848,629 $335,662 $0 $0 $848,629 $335,662

>750 hp $2,706,281 $887,371 $0 $0 $2,706,281 $887,371

Total 622110 $20,220,797 $11,372,763 $0 $0 $20,220,797 $11,372,763

Crude Petroleum & NG Production (211111)

50–100 hp $0 $420,256 $0 $579,954 $0 $1,000,210

100–175 hp $2,026,868 $3,265,655 $0 $1,454,578 $2,026,868 $4,720,233

175–300 hp $3,592 $3,261 $0 $1,309 $3,592 $4,571

300–600 hp $151,812 $55,308 $341,498 $135,384 $493,310 $190,692

600–750 hp $0 $0 $0 0 $0 $0

>750 hp $192,129 $62,998 $1,248,617 $426,611 $1,440,746 $489,609

Total 211111 $2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314

(continued)
4-27

Table 4-4. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Sizea(continued)

NAICS

Major Source Area Source Total (Major + Area)

Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost

Natural Gas Liquid Producers (211112)

50–100 hp $0 $420,256 $0 $579,954 $0 $1,000,210

100–175 hp $2,026,868 $3,265,655 $0 $1,454,578 $2,026,868 $4,720,233

175–300 hp $3,592 $3,261 $0 $1,309 $3,592 $4,571

300–600 hp $151,812 $55,308 $341,498 $135,384 $493,310 $190,692

600–750 hp 0 0 0 0 $0 $0

>750 hp $192,129 $62,998 $1,248,617 $426,611 $1,440,746 $489,609

Total 211112 $2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314

National Security (92811)

50–100 hp $0 $424,515 $0 $585,831 $0 $1,010,346

100–175 hp $1,675,865 $2,700,125 $0 $1,202,681 $1,675,865 $3,902,806

175–300 hp $2,876,614 $2,611,983 $0 $1,048,606 $2,876,614 $3,660,589

300–600 hp $12,113,408 $4,413,108 $27,248,782 $10,802,586 $39,362,190 $15,215,695

600–750 hp $848,629 $335,662 $6,824,424 $2,847,078 $7,673,053 $3,182,740

>750 hp $2,706,281 $887,371 $17,587,661 $6,009,119 $20,293,942 $6,896,489

Total 92811 $20,220,797 $11,372,763 $51,660,866 $22,495,902 $71,881,663 $33,86,665

Hydro Power Units (335312)

50–100 hp $0 $16,637 $0 $22,959 $0 $39,597

100–175 hp $0 $0 $0 $0 $0 $0

175–300 hp $0 $0 $0 $0 $0 $0

300–600 hp $0 $0 $0 $0 $0 $0

600–750 hp $0 $0 $0 $0 $0 $0

>750 hp $0 $0 $0 $0 $0 $0

Total 335312 $0 $16,637 $0 $22,959 $0 $39,597

(continued)
4-28

Table 4-4. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Sizea(continued)

NAICS

Major Source Area Source Total (Major + Area)

Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost

Irrigation Sets (335312)

50–100 hp $0 $245,565 $0 $338,880 $0 $584,446

100–175 hp $3,137,134 $5,054,497 $0 $2,251,359 $3,137,134 $7,305,856

175–300 hp $7,143,945 $6,486,744 $0 $2,604,167 $7,143,945 $9,090,911

300–600 hp $12,145 $4,425 $27,320 $10,831 $39,465 $15,255

600–750 hp $849 $336 $6,825 $2,847 $7,674 $3,183

>750 hp $0 $0 $0 $0 $0 $0

Total 335312 $10,294,073 $11,791,567 $34,145 $5,208,984 $10,328,218 $16,999,651

Welders (333992)

50–100 hp $0 $1,307,020 $0 $1,803,688 $0 $3,110,708

100–175 hp $108,260 $174,427 $0 $77,693 $108,260 $252,119

175–300 hp $0 $0 $0 $0 $0 $0

300–600 hp $0 $0 $0 $0 $0 $0

600–750 hp $0 $0 $0 $0 $0 $0

>750 hp $0 $0 $0 $0 $0 $0

Total 333992 $108,260 $1,481,447 $0 $1,881,380 $108,260 $3,362,827

Grand Total

Total $217,359,106 $134,632,238 $519,823,039 $237, 267,114 $737,182,145 $371,899,352

a Costs are presented in 2008 dollars.
4-29

Table 4-5. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Number of Enginesa

NAICS

Number of Engines Total (Major + Area)

Major Area Total Capital Cost Annual Cost

Electric Power Generation (2211)

50–100 hp 47,324 79,859 127,183 $0 $8,668,603

100–175 hp 67,713 114,266 181,980 $13,406,919 $32,425,129

175–300 hp 59,039 99,627 158,666 $23,012,914 $30,333,314

300–600 hp 42,113 97,919 140,032 $342,146,301 $132,528,144

600–750 hp 1,760 16,455 18,215 $68,208,846 $28,308,997

>750 hp 3,828 28,746 32,574 $179,939,195 $61,181,035

Total 2211 221,777 436,872 658,649 $626,717,174 $293,445,222

Hospitals (622110)

50–100 hp 5,916 0 5,916 $0 $424,515

100–175 hp 8,464 0 8,464 $1,675,865 $2,700,125

175–300 hp 7,380 0 7,380 $2,876,614 $2,611,983

300–600 hp 5,264 0 5,264 $12,113,408 $4,413,108

600–750 hp 220 0 220 $848,629 $335,662

>750 hp 479 0 479 $2,706,281 $887,371

Total 622110 27,722 0 27,722 $20,220,797 $11,372,763

Crude Petroleum & NG Production (211111)

50–100 hp 5,856 8,784 14,640 $0 $1,000,210

100–175 hp 10,237 15,355 25,592 $2,026,868 $4,720,233

175–300 hp 9 14 23 $3,592 $4,571

300–600 hp 66 136 202 $493,310 $190,692

600–750 hp 0 0 0 $0 $0

>750 hp 34 227 261 $1,440,746 $489,609

Total 211111 16,202 24,517 40,719 $3,964,516 $6,405,314

(continued)
4-30

Table 4-5. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Number of Enginesa

(continued)

NAICS

Number of Engines Total (Major + Area)

Major Area Total Capital Cost Annual Cost

Natural Gas Liquid Producers (211112)

50–100 hp 5,856 8,784 14,640 $0 $1,000,210

100–175 hp 10,237 15,355 25,592 $2,026,868 $4,720,233

175–300 hp 9 14 23 $3,592 $4,571

300–600 hp 66 136 202 $493,310 $190,692

600–750 hp 0 0 0 $0 $0

>750 hp 34 227 261 $1,440,746 $489,609

Total 211112 16,202 24,517 40,719 $3,964,516 $6,405,314

National Security (92811)

50–100 hp 5,916 8,873 14,789 $0 $1,010,346

100–175 hp 8,464 12,696 21,160 $1,675,865 $3,902,806

175–300 hp 7,380 11,070 18,450 $2,876,614 $3,660,589

300–600 hp 5,264 10,880 16,144 $39,362,190 $15,215,695

600–750 hp 220 1,828 2,048 $7,673,053 $3,182,740

>750 hp 479 3,194 3,672 $20,293,942 $6,896,489

Total 92811 27,722 48,541 76,263 $71,881,663 $33,868,665

Hydro Power Units (335312)

50–100 hp 232 348 580 $0 $39,597

100–175 hp 0 0 0 $0 $0

175–300 hp 0 0 0 $0 $0

300–600 hp 0 0 0 $0 $0

600–750 hp 0 0 0 $0 $0

>750 hp 0 0 0 $0 $0

Total 335312 232 348 580 $0 $39,597

(continued)
4-31

Table 4-5. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Number of Enginesa

(continued)

NAICS

Number of Engines Total (Major + Area)

Major Area Total Capital Cost Annual Cost

Irrigation Sets (335312)

50–100 hp 3,422 5,133 8,555 $0 $584,446

100–175 hp 15,845 23,767 39,611 $3,137,134 $7,305,856

175–300 hp 18,327 27,491 45,819 $7,143,945 $9,090,911

300–600 hp 5 11 16 $39,465 $15,255

600–750 hp 0 2 2 $7,674 $3,183

>750 hp 0 0 0 $0 $0

Total 335312 37,599 56,403 94,003 $10,328,218 $16,999,651

Welders (333992)

50–100 hp 18,213 27,319 45,532 $0 $3,110,708

100–175 hp 547 820 1,367 $108,260 $252,119

175–300 hp 0 0 0 $0 $0

300–600 hp 0 0 0 $0 $0

600–750 hp 0 0 0 $0 $0

>750 hp 0 0 0 $0 $0

Total 333992 18,760 28,140 46,899 $108,260 $3,362,827

Grand Total

Total 366,217 619,337 957,832 $737,182,145 $371,899,352

a Costs are presented in 2008 dollars.
4-32

4.5 Baseline Emissions and Emission Reductions

Baseline emissions are estimated for 2013 using the emissions dataset generated for the 

final CI RICE rule in 2010. The baseline emissions thus assume the final CI RICE rule has not 

been implemented. The emissions reductions in 2013 associated with the reconsidered rule are 

based on requiring emission standards that are based on applying add-on controls to nonemergency CI engines greater than 500 HP. Baseline emissions from the current population of 

stationary RICE less than or equal to 500 HP at major sources and existing 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. While the amendments for stationary emergency 

engines increases the time allowed for participation in emergency demand response programs 

and for certain engines to operate for peak shaving or other income-generating activities, the 

EPA believes that 50 hours per year is still representative of emergency engine operation. There 

is a wide range in how much stationary emergency engines operate. Some emergency units 

operate well below 50 hrs/yr, while some emergency engines are run above 50 hrs/yr. However, 

on average and to be conservative, the EPA believes that 50 hrs/yr is still representative and 

consequently to estimate emissions from stationary emergency engines, the EPA has retained the 

assumption that 50 hrs/yr is appropriate. The following additional assumptions were used:

Emission Factors:

Engine HAP 

(lb/hp-hr)

CO 

(lb/hr)

PM 

(lb/hp-hr)

SO2

(lb/hp-hr)

CI 1.07x10-46.96x10-17.00x10-40.00809xS1

*

*Obtained from AP-42, section 3.4 where S1 is sulfur content.

Control Efficiencies:

Technology HAP CO PM

Oxidation catalyst 70% 70% 30%

Based on the above assumptions and the existing population of engines shown earlier in 

this section, the HAP, CO, and PM baseline emissions and reductions were calculated.

The estimated baseline emissions for each HAP and criteria pollutant in tons per year 

(tpy) for the final rule are shown in Table 4-6. The estimated emission reductions for each HAP 

and criteria pollutant reductions in tons per year (tpy) as a result of the final rule are shown in 

Table 4-7. In addition, it is expected that additional PM reductions will be achieved by the 
4-33

requirement to use ULSD for CI engines that install a DOC. The use of ULSD reduces the 

formation of sulfates in the exhaust gas, therefore reducing the emission of these sulfate PM 

emissions from the exhaust. EPA has estimated that the use of ULSD can reduce PM emissions 

by 5 to 30 percent depending on the sulfur 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 EPA is requiring that existing stationary Tier 1 and Tier 2 certified CI engines 

located at area sources that are subject to state and locally enforceable rules requiring 

replacement of the engine by January 1, 2018 can meet management practices under the RICE 

NESHAP for a period of 2 years until May 3, 2015. The San Joaquin Valley APCD has 

identified 49 Tier 1 engines and 360 Tier 2 engines that are scheduled to be replaced under the 

local rule. The EPA has not identified any engines outside the San Joaquin Valley APCD area 

that are in the same or similar situation and although the EPA does not preclude the possibility 

that there are additional such engines, the EPA has no information on this. Therefore, for 

purposes of estimating reductions under the final amendments, the EPA has subtracted only 

those 409 engines from the previous control cost estimate and assumed that an additional 409 

engines will be meeting management practices under the rule. 

The EPA is also specifying that any existing certified Tier 3 CI engine that was installed 

before June 12, 2006, is in compliance with the NESHAP. This amendment would include any 

existing stationary Tier 3 certified CI engine located at an area source of HAP emissions. There 

are 17 Tier 3 engines (2006 model year) located in San Joaquin Valley that were installed 

between January 1 and June 12, 2006. The EPA does not know if there are additional engines in 

other areas that in a similar situation and the EPA has no information indicating how many such 

engines there could be in the rest of the country. Therefore, for purposes of calculating 

reductions, the EPA has included 17 less engines from the control cost estimate. These 17 

engines would under the final amendments be subject to management practices.

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. Also, all PM emissions are assumed to be in 

the fine particle emissions; thus all emissions and PM emission reductions are assumed to be 

PM2.5. 
4-34

Table 4-6. Summary of Major Source and Area Source Baseline Emissions for the 

CI RICE NESHAP in 2013 

Size Range (HP)

Baseline Emissions (tpy)

HAP CO NOx PM SO2 VOC

Major Sources

50-100 89 7,745 18,361 584 338 2,412

100-175 215 10,148 44,107 1,403 811 5,794

175-300 281 7,696 57,774 1,838 1,062 7,589

300-500 249 4,049 51,196 1,629 941 6,725

500-600 25 299 5,201 165 115 683

600-750 16 153 3,267 104 72 429

>750 52 338 10,677 340 236 1,402

Total 927 30,428 190,583 6,064 3,575 25,035

Area Sources

50-100 132 11,424 27,083 862 498 3,558

100-175 316 14,969 65,058 2,070 1,196 8,546

175-300 414 11,351 85,217 2,711 1,567 11,194

300-600 613 8,857 106,551 4,009 2,083 16,550

600-750 154 1,485 26,791 1,008 589 4,161

>750 404 2,630 70,314 2,645 1,546 10,921

Total 2,034 50,717 381,015 13,305 7,479 54,930

Grand Total 2,961 81,145 571,598 19,369 11,053 79,965
4-35

Table 4-7. Summary of Major Source and Area Source Emissions Reductions for 

the CI RICE NESHAP in 2013 

Size Range (HP)

Emission Reductions (tpy)

HAP CO PM VOC

Major Sources

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

Area Sources

50-100 0 0 0 0

100-175 0 0 0 0

175-300 0 0 0 0

300-600 363 5,244 1,017 9,798

600-750 91 879 256 2,463

>750 239 1,557 671 6,466

Total 693 7,680 1,944 18,727

Total 1,005 14,238 2,818 27,142

28

PM Estimate for 

2010 Final CI Rule 1,014 14,342 2,844 27,395

Difference 9 104 26 253

Note: All emission reduction estimates are from “ RICE NESHAP Reconsideration Amendments- Cost 

and Environmental Impacts,” prepared by Tanya Parise, Ec/R, Inc. for Melanie King, U.S. EPA, Office of 

Air Quality Planning and Standards. January 26, 2012.
5-1

SECTION 5

ECONOMIC IMPACT ANALYSIS, ENERGY IMPACTS, AND SOCIAL COSTS

The EIA provides decision makers with social cost estimates and enhances understanding 

of how the costs may be distributed across stakeholders (EPA, 2010). 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 addition, some sectors have 

unique market characteristics (e.g., hospitals) that make developing partial equilibrium models 

difficult. Given these constraints, we believed the direct compliance costs as a reasonable 

approximation of total social costs. In addition, we also provide a qualitative analysis of the 

proposed rule’s economic impact on stakeholder decisions, a qualitative discussion on if 

unfunded mandates occur as a result of this final rule, and a qualitative discussion of the

potential distribution of social costs between consumers and producers.

5.1 Compliance Costs of the Final Rule

For the year 2013, EPA’s engineering cost analysis estimates the total annualized costs of 

the final rule are $372 million (in 2008 dollars) (EC/R, 2012).

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 classification for each engine is taken from the Power 

Systems Research (PSR) database, which is the major 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 onroad 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 Quality (OTAQ) uses this database frequently in the 

development of their mobile source rules. 

The annualized compliance costs per engine vary by the engine size (see Figure 5-2). For 

300 hp engines or less, the annualized per-engine 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 million existing stationary diesel engines. As 

shown in Figure 5-3, most of the affected engines 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%).

Figure 5-1. Distribution of Annualized Direct Compliance Costs by Industry: 2013

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 & NG Production (211111) Natural Gas Liquid Producers (211112) National Security (92811)

Hydro Power Units (335312)

Irrigation Sets (335312) Welders (333992)
5-3

Figure 5-2. Average Annualized Cost per Engine by Horsepower Group: 2013 ($2008)

Figure 5-3. Distribution of Engine Population by Horsepower Group: 2013

$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

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
5-4

To assess the size of the compliance cost relative to the value of the goods and services 

for industries using affected engines, 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 interpreted as an average impact on 

potentially affected firms in these industries. Based on the cost-to-sales ratios, we can conclude 

that the annualized cost of this rule should be no higher than 1% of the 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 

($2007) ($2008) Ratio

2211 Electric Power Generation $293.4 $440.4 $449.8 0.07%

622110 Hospitals $11.4 $663.6 $677.8 0.00%

211111 Crude Petroleum & NG 

Production 

$6.4 $214.2 $218.8 0.00%

211112 Natural Gas Liquid 

Producers 

$6.4 $42.4 $43.3 0.02%

92811 National Security $33,9 #N/A #N/A #N/A

333992 Welders $3.4 $5.2 $5.3 0.06%

111 and 112 Agriculture using irrigation 

systemsa

$17.0 $27.9 $28.5 0.05%

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 Agricultural Statistics Service (NASS). 2009. “2008 Farm and 

Ranch Irrigation Survey.” Washington, DC: USDA-NASS.

Nelson, B., EC/R Inc. February 17, 2010. Memorandum to Melanie King, U.S. Environmental Protection 

Agency. Impacts Associated with NESHAP for Existing Stationary CI RICE.

5.2 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 reasonable approximation of the social cost of this final rule. EPA 

believes this approximation is better for industries whose markets are well characterized as 
5-5

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 approximately 80 percent of the 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 hypothetical analyses and the results are later in the RIA in Tables 5-

2 and 5-3. 

5.3 How Might People and Firms Respond? A Partial Equilibrium Analysis

Markets are composed of people as consumers and producers trying to maximize utility 

(consumers) and maximize profits (producers) they can given their economic circumstances. One 

way economists illustrate behavioral responses to pollution control 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 particular price; this curve is typically upward 

sloping because some production resources are fixed. As a result, the cost of producing an 

additional unit typically rises as more units are 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 (P0) and quantity (Q0) is determined by the intersection of 

the supply and demand curves (see Figure 5-4).

5.3.1 Changes in Market Prices and Quantities 

To qualitatively assess how the regulation may influence the equilibrium price and 

quantity in the affected markets, we assumed 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 (Q0) (see Figure 5-4). As 

shown, this model makes two predictions: the price of the affected goods and services are likely 

to rise and the consumption/production 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 Model: With and Without Regulation

The size of these changes depends on two factors: the size of the unit production cost 

increase (supply shift) and differences in how each side of the market (supply and demand) 

responds to changes in price. Economists measure responses using the concept of price elasticity, 

which represents the percentage change in quantity divided by the percentage change in price. 

This dependence has been expressed in the following formula:1

PriceElasticityo f Supply - PriceElasticityo f Demand)

PriceElasticityo f Supply Share of per-unit productioncost 

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 people 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).

Q1 Q0

P1

P0 h c

a

$

Output

e d

S1 : With Regulation S0 : Without Regulation Price Increase } Unit Cost Increase g } f b
5-7

 suppliers have excess capacity and can easily adjust production levels at minimal

costs, or the time period of analysis is long enough that suppliers can change their 

fixed resources; supply is more elastic over longer periods. 

Short-run demand elasticities for energy goods (electricity and natural gas), agricultural 

products, and construction are often inelastic. Specific estimates of short-run demand elasticities 

for these products can be obtained from existing literature. For the short-run demand of energy 

products, the National Energy Modeling System (NEMS) 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 agriculture and approximately 1 for construction (EPA, 2004). As a 

result, a 1% increase in the prices of agriculture products would lead to a 0.2% decrease in 

demand for those products, while a 1% increase 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 consumption in these markets (Table 5-3). 

Table 5-2. Hypothetical Price Increases 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%

5.3.2 Regulated Markets: The Electric Power Generation, 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 regulated energy industries in the 

United States (EIA, 2000), the competitive model is not necessarily applicable 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 industry continues to go through a process of restructuring, whereby the 

industry is moving toward a more competitive framework (see Figure 5-5 for the status of 

restructuring by state),2in many states, electricity prices continue to be fully regulated by Public 

Service Commissions. As a result, the rules and processes outlined by these agencies would 

ultimately determine how these additional regulatory costs would be recovered by affected 

entities.

5.3.3 Partial Equilibrium Measures of Social Cost: Changes Consumer and Producer 

Surplus 

In partial equilibrium analysis, the social costs 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 consumer surplus is measured as follows:

CS = – [ Q1 × p] + [0.5 × Q × p]. (5.1)

Higher market prices and lower quantities lead to consumer welfare losses. Similarly, the change 

in producer surplus is measured as follows:

PS = [ Q1 × p] – [ Q1 × t] – [0.5 × Q × ( p – t)]. (5.2)

Higher unit costs and lower production level reduce producer surplus because the net 

price change ( p – t) is negative. However, these losses are mitigated because market prices tend

to rise. 

 

2

http://tonto.eia.doe.gov/energy_in_brief/print_pages/electricity.pdf.
5-9

Figure 5-5. Electricity Restructuring by State

Source. U.S. Energy Information Administration. 2010a. 

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

2010.

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.” Section 4(b) of Executive Order 13211 defines “significant energy 

actions” as any action by an agency (normally published in the Federal Register) that 

promulgates or is expected to lead to the promulgation 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 regulatory action under Executive Order 12866 or any successor order, 

and (ii) is likely to have a significant adverse effect on the supply, distribution, or use of energy; 

or (2) that is designated by the Administrator of the Office of Information and Regulatory Affairs 

as a significant energy action.
5-10

This rule is not a significant 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 energy. EPA has prepared an analysis of energy 

impacts that explains this conclusion as follows below.

With respect to energy supply and prices, the analysis in Table 5-1 suggests at the 

industry level, the annualized costs represent a very small fraction of revenue (less than 0.7%). 

As a result, we can conclude supply and price impacts should be small. 

To enhance understanding regarding the regulation’s influence on energy consumption, 

we examined publicly available data describing energy consumption for the electric power sector 

that will be affected by this rule. The Annual Energy Outlook 2011 (EIA, 2011) provides energy 

consumption data. As shown in Table 5-4, this industry account for about 0.3% of the U.S. total 

liquid fuels and less than 8% of natural gas. As a result, any energy consumption changes 

attributable to the regulatory program should not significantly influence the supply, distribution, 

or use of energy.

5.5 Unfunded Mandates

Title II of the Unfunded Mandates Reform 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 private 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 aggregate, or the private sector in any one year.

Accordingly, EPA has prepared under section 202 of the UMRA a written statement which is 

summarized below in this section.
5-11

Table 5-4. U.S. Electric PoweraSector Energy Consumption (Quadrillion BTUs): 2013

Quantity Share of Total Energy Use

Distillate fuel oil 0.09 0.1%

Residual fuel oil 0.22 0.2%

Liquid fuels subtotal 0.31 0.3%

Natural gas 7.63 7.9%

Steam coal 17.37 18.0%

Nuclear power 8.50 8.8%

Renewable energyb4.63 4.8%

Electricity Imports 0.12 0.1%

Total Electric Power Energy Consumptionc38.77 40.1%

Delivered Energy Use 70.56 73.2%

Total Energy Use 96.66 100.0%

a

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

to sell electricity, or electricity and 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. 2011a. Supplemental Tables to the Annual Energy Outlook 2011, 

projections for 2013. Available at: http://www.eia.gov/oiaf/aeo/tablebrowser/#release=EARLY2012&subject=6-

EARLY2012&table=2-EARLY2012®ion=1-0&cases=full2011-d020911a,early2012-d121011b

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 disproportionate budgetary effects. Our 

estimates of the future compliance costs of the final rule are discussed previously in Section 4 of 

this RIA. We do not believe that there will be any disproportionate budgetary effects of the final

rule on any particular areas of the country, State or local governments, types of communities 

(e.g., urban, rural), or particular 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 the effect on productivity, economic growth, full 

employment, creation of productive jobs, and international competitiveness of the U.S. goods 

and services if we determine that accurate estimates are reasonably feasible and that such effect 

is relevant and material. The nationwide economic impact of the final rule is presented earlier in 

this RIA chapter. This analysis provides estimates of the effect of the rule on most of the 
5-12

categories mentioned above, and these estimates are presented earlier in this RIA chapter. In 

addition, we have determined that the final rule contains no regulatory requirements that might 

significantly or uniquely affect small governments. Therefore, today’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 (Feb. 16, 1994)) establishes federal executive 

policy on environmental justice. Its main provision 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, disproportionately high and adverse human health or 

environmental effects of their programs, policies, and activities on minority populations and lowincome populations in the United States. 

Assuming that our baseline for this RIA does not include implementation of the final 

2010 CI RICE rule, as we state earlier in this document, EPA has determined that this final rule

will not have disproportionately high and adverse human health or environmental effects on 

minority or low-income populations because it increases the level of environmental protection 

for all affected populations without having any disproportionately high and adverse human 

health or environmental effects on any population, including any minority or low-income 

population. This rule is a nationwide standard that reduces air toxics emissions from existing 

stationary CI engines, thus decreasing the amount of such emissions to which all affected 

populations are exposed. 

5.7 Employment Impact Analysis

In addition to addressing the costs and benefits of the final rule, EPA has analyzed the 

impacts of this rulemaking on employment, which are presented in this section. While a 

standalone analysis of employment impacts is not included in a standard cost-benefit analysis, 

such an analysis is of particular concern in the current economic climate of sustained high 

unemployment. Executive Order 13563, states, “Our regulatory system must protect public 

health, welfare, safety, and our environment while promoting economic growth, innovation,

competitiveness, and job creation” (emphasis added). Therefore, and consistent with recent 

efforts to characterize the employment effects of economically significant rules, the Agency has 

provided this analysis to inform the discussion of labor demand and employment impacts. 
5-13

This employment impact analysis includes estimates of certain short-term and on-going 

labor requirements (increase in labor demand) associated with reporting and recordkeeping, and 

the installation, operating and maintenance of control devices. EPA estimates that 

approximately 1,300 full-time equivalents (FTEs) will be created or supported in the short-term 

(the compliance period of the regulation) and approximately 2,000 FTEs will be created or 

supported annually on a permanent basis. EPA also provides a qualitative discussion of other 

potential employment effects, including both increases and decreases. Because of the 

uncertainties involved, these sets of estimates should not be added in an attempt to characterize 

the overall employment effect.

We have not quantified the rule’s net effects on the overall labor market, or the potential 

changes to workers’ incomes. EPA continues to explore the relevant theoretical and empirical 

literature and to seek public comments in order to ensure that such estimates are as accurate, 

useful and informative as possible.

From an economic perspective, labor is an input into producing goods and services; if 

regulation requires that more labor be used to produce a given amount of output, that additional 

labor is reflected in an increase in the cost of production.3 When an increase in employment 

occurs as a result of a regulation, it is a cost to firms. Moreover, when the economy is at full 

employment, we would not expect an environmental regulation to have an impact on overall 

employment because labor is being shifted from one sector to another. On the other hand, in 

periods of high unemployment, an increase in labor demand due to regulation may result in a 

short-term net increase in overall employment due to the potential hiring of previously 

unemployed workers by the regulated sector to help meet new requirements (e.g., to install new 

equipment) or by the environmental protection sector to produce new abatement capital. When

significant numbers of workers are unemployed, the opportunity costs associated with displacing 

jobs in other sectors are likely to be smaller. To provide a partial picture of the employment 

consequences of this rule, EPA takes two approaches. First, EPA uses information such as 

monitoring, recordkeeping, and reporting estimates derived from its cost analysis documentation 

to generate estimates of employment impacts. Second, the analysis considers the results of 

Morgenstern, Pizer, and Shih (2002) in estimating the effects of the regulation on the regulated 

industry. This approach has been used by EPA previously in recent Regulatory Impact Analyses. 

 

3

It should be noted that if more labor must be used to produce a given amount of output, then this implies a decrease 

in labor productivity. A decrease in labor productivity will cause a short-run aggregate supply curve to shift to 

the left, and businesses will produce less, all other things being equal. 
5-14

EPA is interested in public comments on the merits of including information derived in this 

fashion for assessing the employment consequences of regulations.

5.7.1 Employment Impacts from Pollution Control Requirements

Regulations set in motion new orders for pollution control equipment and services. When 

a new regulation is promulgated, one typical response of industry is to order pollution control 

equipment and services in order to comply with the regulation when it becomes effective, while 

closure of plants that choose not to comply is assumed to occur after the compliance date. With 

such a response by industry as a basis, this section presents estimates for short term labor 

requirement needed associated with the monitoring, recordkeeping, and reporting requirements 

for this final rule. Environmental regulation may increase revenue and employment in the 

environmental technology industry. While these increases represent gains for that industry, they 

are costs to the regulated industries required to install the equipment. As with any pool of labor, 

the gross size of the labor pool does not reflect the net impact on overall employment after 

adjusting for shifts in other sectors.

Regulated firms may hire workers to design and build pollution controls. Once the 

equipment is installed, regulated firms may hire workers to operate and maintain the pollution 

control equipment – much like they may hire workers to produce more output. Of course, these 

firms may also reassign existing employees to do these activities. A study including an analysis 

of environmental protection employment in six U.S. states in 2003 by Bezdek, Wendling, and 

DiPernab (2008) found that “investments in environmental protection create jobs and displace 

jobs, but the net effect on employment is positive.”4 

Once the equipment is installed, regulated firms may hire workers to operate and 

maintain the pollution control equipment – much like they may hire workers to produce more 

output.

The focus of this part of the analysis is on labor requirements related to the compliance

actions of the affected entities within the affected sector. The employment analysis uses a 

bottom-up engineering-based methodology to estimate employment impacts. The engineering 

cost analysis summarized in Section 4 of this RIA includes estimates of the labor requirements 

 

4 Environmental protection, the economy, and jobs: National and regional analyses, Roger H. Bezdek, Robert M. 

Wendling and Paula DiPerna, Journal of Environmental Management Volume 86, Issue 1, January 2008, Pages 

63-79.
5-15

associated with implementing the final regulations. Each of these labor changes may either be 

required as part of an initial effort to comply with the new regulation or required as a continuous 

or annual effort to maintain compliance. We estimate up-front and continual, annual labor 

requirements by estimating hours of labor required and converting this number to full-time 

equivalents (FTEs) by dividing by 2,080 (40 hours per week multiplied by 52 weeks). We note 

that this type of FTE estimate cannot be used to make assumptions about the specific number of 

people involved or whether new jobs are created for new employees.

The results of this employment estimate are presented in Table 5-5 for the final 

reconsidered NESHAP. The tables breaks down the installation, operation, and maintenance 

estimates by type of pollution control evaluated in the RIA and present both the estimated hours 

required and the conversion of this estimate to FTE. For the final NESHAP, reporting and 

recordkeeping requirements were estimated requirements were estimated for the entire rule 

rather than by anticipated control requirements; the reporting and recordkeeping estimates are 

consistent with estimates EPA submitted as part of its Information Collection Request (ICR) that 

is in the Supporting Statement for the final reconsideration rule.

The up-front labor requirement is estimated at 1,300 FTEs for the reconsidered NESHAP. 

These up-front FTE labor requirements can be viewed as short-term labor requirements required 

for affected entities to comply with the new regulation. Ongoing requirements are estimated at 

about 2,000 FTEs for the reconsidered NESHAP. These ongoing FTE labor requirements can be 

viewed as sustained labor requirements required for affected entities to continuously comply 

with the new regulation. All of this data is found in the cost memorandum for this reconsidered 

rule, and can be found in the docket for the rulemaking. It is important to recognize that these 

seemingly precise estimates are not to be assumed to be exact measures of the employment 

impacts of this rulemaking. They represent a rough approximation of the small positive impacts 

that this rule may have on employment.
5-16

Table 5-5. Labor-based Employment Estimates for Reporting and Recordkeeping and 

Installing, Operating, and Maintaining Control Equipment Requirements for 

Reconsidered CI RICE NESHAP 

Source

Emission 

Control 

Measure

Projected 

No. of 

Affected 

Units

Per-Unit 

OneTime 

Labor 

Estimate 

(Hours)

Total 

OneTime 

Labor 

Estimate 

(Hours)

Per-Unit 

Annual 

Labor 

Estimate 

(Hours)

Total 

Annual 

Labor 

Estimate 

(Hours) 

One-Time 

Full-Time 

Equivalent

Annual 

Full-Time 

Equivalent

All CI RICE

-O&M 

Recordkeeping N/A 366,217 N/A N/A 1 366,217 N/A 176

Non-Emergency 

CI RICE 100-

300 HP

-Testing Oxidation 

Catalyst 54,697 11 593,496 2 738,404 285 355

-Reporting 8

Non-Emergency 

CI RICE > 300 

HP

3.5

-Testing Oxidation 

Catalyst + 

Crankcase 

Ventilation

11,966 47 563,170 5 636,134 271 306

-Reporting 8

-CPMS Install 3.5

-CPMS O&M 1

-CPMS 

Recording 30

Area Sources 6

All CI RICE

-O&M 

Recordkeeping

Non-Emergency 

CI RICE 100-

300 HP

N/A 569,364 N/A N/A 1 569,364 N/A 274

-Testing N/A 64,095 N/A N/A 2 128,190 N/A 62

-Reporting

Non-Emergency 

CI RICE > 300 

HP

Oxidation 

Catalyst + 

Crankcase 

Ventilation 

+ CPMS

31,526 47 1,483,695 5 1,675,922 713 806

-Testing 8

-Reporting 3.5

--CPMS Install 1

CPMS O&M 30

-CPMS 

Recording 6

Total 105 2,640,361 124 4,114,232 1,269 1,978

Note: Full-time equivalents (FTE) are estimated by first multiplying the projected number of affected units by the 

per unit labor requirements and then dividing by 2,080 (40 hours multiplied by 52 weeks). Totals may not sum due 

to independent rounding.

CPMS = Continuous Parameter Measurement System

HP = horsepower

N/A = Not Applicable.

O&M = Operating and Maintenance
5-17

5.7.2 Employment Impacts within the Regulated Industry

In recent RIAs we have applied estimates from a study by Morgenstern, Pizer and 

Shih (2002)5to derive the employment effects of new regulations within the regulated 

industry. (See, for example, the Regulatory Impact Analyses for the recently released 

final MATS and final CSAPR regulations). Determining the direction of employment 

effects in the regulated industry is also challenging due to competing effects. Complying 

with the new or more stringent regulation requires additional inputs, including labor, and 

may alter the relative proportions of labor and capital used by regulated firms in their

production processes. Morgenstern, et al. (2002) demonstrate that environmental 

regulations can be understood as requiring regulated firms to add a new output 

(environmental quality) to their product mixes. Although legally compelled to satisfy this 

new demand, regulated firms have to finance this additional production with the proceeds 

of sales of their other (market) products. Satisfying this new demand requires additional 

inputs, including labor, and may alter the relative proportions of labor and capital used by 

regulated firms in their production processes.

More specifically, Morgenstern, Pizer, and Shih (2002) decompose the effect of 

regulation on net employment in the regulated sector into the following three subcomponents:

 The Demand Effect: higher production costs from complying with the regulation will 

raise market prices, reducing consumption (and production), thereby reducing 

demand for labor within the regulated industry. The “extent of this effect depends on 

the cost increase passed on to consumers as well as the demand elasticity of industry 

output.” (p. 416)

 The Cost Effect: Assuming that the capital/labor ratio in the production process is 

held fixed, as “production costs rise, more inputs, including labor, are used to produce 

the same amount of output,” (p. 416). For example, to reduce pollutant emissions 

while holding output levels constant, regulated firms may require additional labor. 

 

5 Morgenstern, R. D., W. A. Pizer, and J. S. Shih. 2002. Jobs versus the Environment: An Industry-Level 

Perspective.‖ Journal of Environmental Economics and Management 43(3):412-436.
5-18

 The Factor-Shift Effect: Regulated firms’ production technologies may be more or 

less labor intensive after complying with the regulation (i.e., more/less labor is 

required relative to capital per dollar of output). “Environmental activities may be 

more labor intensive than conventional production,” meaning that “the amount of 

labor per dollar of output will rise.” However, activities may, instead, be less labor 

intensive because “cleaner operations could involve automation and less employment, 

for example.” (p. 416)

The demand effect is expected to have an unambiguously negative effect on employment, 

the cost effect to have an unambiguously positive effect on employment, and the factor-shift 

effect to have an ambiguous effect on employment. Without more information with respect to 

the magnitudes of these three competing effects, it is not possible to predict the net

environmental employment effect in the regulated sector.

Using plant-level Census information between the years 1979 and 1991, Morgenstern et 

al. estimate the effects of pollution abatement expenditures on net employment in four highly 

polluting/regulated sectors (pulp and paper, plastics, steel, and petroleum refining). They 

conclude that increased abatement expenditures generally have not caused a significant change in 

net employment in those sectors. More specifically, their results show that, on average across the 

industries studied, each additional $1 million (in 1987$) spent on pollution abatement results in a 

(statistically insignificant) net increase of 1.55 (+/- 2.24) jobs. As a result, the authors conclude 

that increases in pollution abatement expenditures can have positive effects on employment and 

do not necessarily cause economically significant employment changes. The conclusion is 

similar to Berman and Bui (2001), who found that increased air quality regulation in Los 

Angeles did not cause large employment changes. 

Ideally, the EPA would first apply the methodology of Morgenstern et al. to current 

pollution expenditure and market data for the regulated firms to identify the relationship between 

abatement costs and employment, then use this relationship to extrapolate the effect of new 

projected abatement costs on these firms. Unfortunately, current firm-level abatement cost and 

market characteristics are not available. In addition, there are important differences in the 

markets and regulatory settings analyzed in their study and the setting presented here that lead us 

to conclude that it is inappropriate to utilize their quantitative estimates to estimate the 

employment impacts from this reconsideration proposal. The differences between the underlying 

regulations motivating the abatement expenditures studied in Morgenstern et al. are potentially 

too many to allow for the direct transfer of their quantitative estimates for use in analysis of the 

proposed rule. There are also important differences between the industries affected by this rule 
5-19

and the four manufacturing industries studied by Morgenstern et al. For these reasons, we 

conclude there are too many uncertainties as to the comparability of the Morgenstern et al. study 

to apply their estimates to quantify the employment impacts within the regulated sector for this 

regulation. 
6-1

SECTION 6

SMALL ENTITY SCREENING ANALYSIS

The Regulatory Flexibility Act as amended by the Small Business Regulatory 

Enforcement Fairness Act (SBREFA) generally requires 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 agency certifies that the rule will 

not have a significant economic impact on a substantial number of small entities. Small entities 

as defined by the Small Business Administration (SBA) include small businesses, small 

governmental jurisdictions, and small not-for-profit enterprises.

After considering the economic impact of the final reconsideration rule on small entities, 

the screening analysis indicates that this rule will not have a significant economic impact on a 

substantial number of small entities (or “SISNOSE”). Under the primary cost analyses EPA 

considered, sales and revenue tests for establishments owned by model small entities are less 

than 3% and only one group of establishments (irrigated farms with receipts less than $25,000) 

has a ratio exceeding 1%. These results are identical to those from the small entity analysis done 

for the final CI RICE rule promulgated in March 2010. 

6.1 Small Entity Data Set

The industry sectors covered by the final rule were identified during the development of 

the cost analysis (Nelson, 2012). The SUSB provides national information on the distribution of 

economic variables by industry and enterprise 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 may 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 the SUSB, which are stated in Section 3 and 

restated here for clarity of presentation, are as follows:

 Establishment: An establishment is a single physical location where business is 

conducted or where services or industrial operations are performed. 

 

1The SUSB data do not provide establishment information for the national security NAICS code (92811) or irrigated 

farms. Since most national security installations are owned 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

 Receipts: Receipts (net of taxes) are defined as the revenue for goods produced, 

distributed, or services provided, including revenue earned from premiums, 

commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all 

revenue collected for local, state, and federal taxes. 

 Enterprise: An enterprise is a business organization consisting of one or more 

domestic establishments that were specified 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 associated establishments. Enterprise size 

designations are determined by the summed employment of all associated 

establishments.

Because the SBA’s business size definitions (SBA, 2010) apply to an establishment’s 

“ultimate parent company,” we assumed in this analysis that the “enterprise” 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)3for NAICS codes associated with sectors listed in Table 6-1. Although the appropriate 

SBA size definition should be applied at the parent company (enterprise) level, we can only 

compute and compare ratios for a model establishment owned by an enterprise within an SUSB 

size range (employment or receipts). Using the 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 definitions across affected industries. Using 

establishment receipts is also a conservative approach, because an establishment’s parent 

company (the “enterprise”) may have other economic resources that could be used to cover the 

costs of the final rule.

6.2.1 Model Establishment Receipts and Annual Compliance Costs

The sales test compares a representative establishment’s total annual engine costs to the 

average establishment receipts for enterprises in several size categories.

4 For industries with SBA 

 

3The 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 category, we excluded SUSB data for enterprises with zero employees. These enterprises 

did not operate the entire year.
6-3

employment size standards, we calculated average 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 Stationary CI Reciprocating Internal Combustion 

Engines (RICE): Affected Sectors and SBA Small Business Size Standards

Industry Description

Corresponding 

NAICS

SBA Size Standard for 

Businesses (effective January

7 , 2013) Type of Small Entity

Electric power generation 2211 a Business and government

Natural Gas Transmission 48621 $7.0 million in annual receipts Business

General medical & 

surgical hospitals 

622110 $35.5 million in annual receipts 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 a 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

aNAICS 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 Administration (SBA). 2010. “Table of Small Business Size Standards Matched to 

North American Industry Classification System Codes.” Effective January 7

th , 2013. Downloaded 1/7/13. 

average establishment receipts for each enterprise receipt range (Table 6-3). We included the 

utility sector in the second group, although the SBA size standard for this industry is defined in 

terms of physical units (megawatt hours) versus receipts. Crop and animal production (NAICS 

111 and 112) also have an SBA receipt size standard 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 test using the following range of establishment 

 

5We use 2007 Economic Census data in estimating number of establishments by industry. The release schedules for 

different types of 2007 Economic Census data are at 

http://www.census.gov/econ/census07/pdf/EconCensusScheduleByDate.pdf.
6-4

receipts: farms with annual receipts of $25,000 or less, farms with annual receipts of $100,000 or 

less, farms with annual receipts of $500,000 or less, and farms with annual receipts of $750,000 

or less.
6-5

Table 6-2. Average Receipts for Affected Industry by Enterprise: 2009 ($2008 Million/establishment)

SBA Size 

Standard 

for Businesses

(effective 

January 7, 2013)

Owned By Enterprises with Employee Range:

NAICS NAICS Description

All 

Enterprises

1–20 

Employees

20–99 

Employees

100–499 

Employees

500+

Employees

211111 Crude petroleum & 

natural gas extraction 

500 employees $30.22 $2.15 $33.02 $151,76 1,570

211112 Natural gas liquid 

extraction 

500 employees $172.81 $0.30 NA $11.88 NA

335312 Motor & generator mfg 1,000 employees $18.58 $1.37 $6.14 $15.96 $29.47

333992 Welding & soldering 

equipment mfg 

500 employees $18.51 $1.56 $6.60 $33.25 NA .

NA = Not available.

Source: U.S. Census Bureau. 2012a. “Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 2009.” 

<http://www.census.gov/csd/susb/ Downloaded 2/22/12.
6-6

Table 6-3. Average Receipts for Affected Industry by Enterprise Receipt Range: 2007 ($2008 /establishment)

SBA Size Standard 

for Businesses

(effective January 7, 

2013)

Owned By Enterprises with Receipt Range:

NAICS NAICS Description

All 

Enterprises

0–99K 

Receipts

100–

499.9K 

Receipts

500–

999.9K

Receipts

1,000–

4,999.9K 

Receipts

5,000,000–

9,999,999K 

Receipts

<10,000K 

Receipts

10,000–

49,999K 

Receipts

50,000–

99,999K 

Receipts

100,000K+ 

Receipts

2211 Electric Power 

Generation 

a

$261.0 $31.2 $272.5 $724.9 $2,399.5 $7,330.5 $2,617.7 $24,786.

9

$67,706.

8

$1,394,051

.0

622110 General Medical and 

Surgical Hospitals

$35.5 million in annual 

receipts

$202,058.7 NA $23.82 NA $3,255.0 $7,291.0 $4,692.1 $23,481.

9

$67,545,

6

$508,705.8

237310 Highway , street, and 

bride construction 

$33.5 million in 

Annual Receipts

$7.74 $0.06 $0.32 $0.84 $2.74 $8.11 $2.00 $22.62 $56.48 $56.81

237110 Water and sewer line 

and related structures, 

construction 

$33.5 million in 

Annual Receipts

$3.89 $0.06 $0.32 $0.85 $2.73 $8.17 $1.84 $20.62 $45.05 $47.27

237130 Power and

communication line 

and related structures 

construction 

$33.5 million in 

Annual Receipts

$3.39 $0.06 $0.31 $0.83 $2.52 $7.75 $1.32 $16.84 $34.50 $23.86

237990 Other heavy and civil 

engineering 

construction 

$33.5 million in 

Annual Receipts

$2.66 $0.06 $0.30 $0.83 $2.48 $7.76 $0.99 $18.72 $40.53 $42.35

92811 National Security NA NA NA NA NA NA NA NA NA NA NA

Notes: . National Security is included in this table but does not have size standards.

a NAICS codes 221111, 221112, 221113, 221119, 221121, 221122: A firm in these industries is defined as small by SBA 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.

NA = Not available. SUSB did not report this data for disclosure or other reasons.

Source: U.S. Census Bureau. 2009a. “Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 2009.” 

<http://www.census.gov/csd/susb/
6-7

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. Compliance costs are calculated by summing the total 

annualized compliance costs for the relevant engine 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 the establishment. Since NAICS 2211 and 622110 are fundamentally 

different than other industries considered 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 industries uses three 750+ hp engines 

with an average compliance cost of $1,878 per engine, resulting in a total annualized 

compliance cost of approximately $5,634 for this representative establishment. 

 Case 2: The representative establishment in NACIS 2211 and 622110 uses two 50 to 

750+ hp engines with an average compliance cost of $419 per engine, resulting in a 

total annualized compliance cost of $838 for this representative establishment. For all 

other industries, the representative establishment uses two 50 to 300 hp engines with 

an average compliance cost of $146 per engine, resulting in a total compliance cost of 

$292 for this representative establishment. 

 Case 3: The representative establishment for all industries uses two 50 to 100 hp 

engines with an average compliance cost of $68 per engine, resulting in a total 

compliance cost of $137 for this representative establishment. 

EPA believes that small entities are most likely 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 engines of this size or smaller. This is corroborated by Figure 6-1 

and 6-2 which shows the distribution of engine population and compliance 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 engines is expected to be classified as nonemergency. 

 

6This 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. 
6-8

For the sales test, we divided the representative establishment compliance costs reported 

in Table 6-4 by the representative receipts reported in Tables 6-2 and 6-3. This is known as the 

cost-to-receipt (i.e., sales) ratio, or the “sales test.” The “sales test” is the impact 

Table 6-4. Representative Establishment Costs 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 ($) $62,068,406 $7,875,707 $304,817,985 $40,407,406 $9,093,118 $6,745,516

Engine Population 33,052 4,194 727,090 276,374 133,099 98,736

Average Engine Cost 

($/engine)

$1,878 $1,878 $419 $146 $68 $68

Assumed Engines Per 

Establishment

3 3 2 2 2 2

Total Annualized Costs per 

Establishment

$5,634 $5,634 $838 $292 $137 $137

* Engine population estimates taken 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 19, 2010. 
6-9

Figure 6-1. Distribution of Engine Population by Size for All Industries

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

5 0-100 hp
6-10

Figure 6-2. Distribution of Compliance Costs 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 normally made available are often not the true 

profit earned by firms because of accounting and tax considerations. Revenues as typically 

published are usually correct figures and are more reliably reported when compared to profit 

data. The use of a “sales test” for estimating small business impacts for a rulemaking such as this 

one is consistent with guidance offered by EPA on compliance with SBREFA7and is consistent 

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

 

7The SBREFA compliance guidance to EPA rulewriters regarding the types of small business analysis that should be 

considered can be found at http://www.epa.gov/sbrefa/documents/rfafinalguidance06.pdf, pp. 24-25.

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

5 0-100 hp
6-11

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

to increases on large entities.8

If the cost-to-receipt ratio is less than 1%, then we consider the final 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 

 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 receipts of $500,000 or less per year

In the Case 2 primary analysis, only establishments in NAICS 2211 with receipts less 

than $100,000 per year have cost-to-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. 

After considering the economic impacts of this final rule on small entities, we certify that 

this action will not have a significant economic impact on a substantial number of small entities. 

This certification is based on the economic impact of this action to all affected small entities 

across all industries affected. The percentage of small entities impacted by this final rule having 

annualized costs greater than 1 percent of sales is less than 2 percent according to this analysis. 

We thus conclude that there is no significant economic impact on a substantial number of small 

entities (SISNOSE) for this final rule.

Although the final rule would not have a significant economic impact on a substantial 

number of small entities, EPA nonetheless tried to reduce the impact of the rule on small entities. 

When developing the revised standards, EPA took special steps to ensure that the burdens 

imposed on small entities were minimal. EPA conducted several meetings with industry trade 

 

8U.S. SBA, Office of Advocacy. A Guide for Government Agencies, How to Comply with the Regulatory 

Flexibility Act, Implementing the President’s Small Business Agenda and Executive Order 13272, May 2003.
6-12

associations to discuss regulatory options and the corresponding burden on industry, such as 

recordkeeping and reporting. In addition, as mentioned in the preamble, EPA is reducing

regulatory requirements for a variety of area sources affected under this RICE rule with 

amendments to the final RICE rules promulgated in 2010

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 limitations 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 “revenue test” for estimating impacts to small 

governments for a rulemaking such as this one is consistent with guidance offered by EPA on 

compliance with SBREFA,9and is consistent with guidance published by the US SBA’s Office 

of Advocacy.10 For example, from the 2002 Census (in 2008 dollars), the average revenue for 

small governments (counties and municipalities) with populations fewer than 10,000 are $3

million per entity, and the average revenue for local governments with populations fewer than 

50,000 is $8 million per entity. For the smallest group of local governments (<10,000 people), 

the cost-to-revenue ratio would be 0.2% or less under each case. For the larger group of 

governments (<50,000 people), the cost-to-revenue ratio is 0.1% or less under all cases.

 

9The SBREFA compliance guidance to EPA rule writers regarding the types of small business analysis that should 

be considered can be found at http://www.epa.gov/sbrefa/documents/rfafinalguidance06.pdf, pp. 24-25.

10U.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. 
7-1

SECTION 7

HUMAN HEALTH BENEFITS OF EMISSIONS REDUCTIONS

Synopsis

Implementation of emissions controls required by the CI RICE NESHAP reconsideration 

is expected to reduce emissions of hazardous air pollutants (HAP) and have ancillary co-benefits

that would lower ambient concentrations of PM2.5 and ozone. In this section, we quantify the 

monetized co-benefits for this rule associated with reducing exposure to ambient fine particulate 

matter (PM2.5) by reducing emissions of precursors. We estimate the total monetized co-benefits 

to be $770 million to $1.9 billion at a 3% discount rate and $690 million to $1.7 billion at a 7% 

discount rate in 2013. All estimates are in 2010$. These estimates reflect the monetized human 

health benefits of reducing cases of morbidity and premature mortality among populations 

exposed to PM2.5 reduced by this rule. These estimates reflect EPA’s most current interpretation 

of the scientific literature. Higher or lower estimates of benefits are possible using other 

assumptions; examples of this are provided in Figure 7-2. Data, resource, and methodological 

limitations prevented EPA from monetizing the benefits from several important benefit 

categories, including benefits from reducing exposure to HAP, carbon monoxide, and ozone, as 

well as visibility impairment. In addition to reducing emissions of PM precursors, this rule would 

reduce 1,000 tons of HAP and 14,000 tons of carbon monoxide each year.

7.1 Calculation of PM2.5-Related Human Health Co-Benefits

Assuming that the baseline for this RIA does not include implementation of the 2010 

final CI RICE rule, as we state earlier in this document, this final reconsideration would reduce 

emissions of directly emitted particles and VOCs. Because these emissions are precursors to 

PM2.5, reducing these emissions would also reduce PM2.5 formation, human exposure and the 

incidence of PM2.5-related health effects. Due to analytical limitations, it was not possible to 

provide a comprehensive estimate of PM2.5-related benefits or provide estimates of the health 

benefits associated with exposure to HAP, CO, or ozone. Instead, we used the “benefit-per-ton” 

approach to estimate these benefits. The methodology employed in this analysis is similar to the 

work described in Fann, Fulcher, and Hubbell (2009), but represents an improvement that EPA 

believes would provide more reliable estimates of PM2.5-related health benefits for emissions 

reductions in specific sectors. The key assumptions are described in detail below. These PM2.5 

benefit-per-ton estimates provide the total monetized human health benefits (the sum of 

premature mortality and premature morbidity) of reducing one ton of PM2.5 from a specified 
7-2

source. EPA has used the benefit per-ton technique in several previous RIAs, including the 

recent SO2 NAAQS RIA (U.S. EPA, 2010). 

The Integrated Science Assessment (ISA) for Particulate Matter (U.S. EPA, 2009b) 

identified the human health effects associated with ambient PM2.5, which include premature 

morality and a variety of morbidity effects associated with acute and chronic exposures. Table 7-

1 shows the quantified and unquantified benefits captured in those benefit-per-ton estimates, but 

this table does not include entries for the unquantified health effects associated with exposure to 

HAP, CO, or ozone nor welfare effects such visibility impairment that are described in section 

7.2. It is important to emphasize that the list of unquantified benefit categories is not exhaustive, 

nor is quantification of each effect complete.
7-3

Table 7-1: Human Health Effects of PM2.5 

Category Specific Effect

Effect Has 

Been 

Quantified

Effect Has 

Been 

Monetized

More 

Information 

(refers to 

CSAPR RIA)

Improved Human Health

Reduced incidence of 

premature mortality 

from exposure to PM2.5

Adult premature mortality based on cohort 

study estimates and expert elicitation 

estimates (age >25 or age >30)

  Section 5.4

Infant mortality (age <1)   Section 5.4

Reduced incidence of 

morbidity from 

exposure to PM2.5

Non-fatal heart attacks (age > 18)   Section 5.4

Hospital admissions—respiratory (all 

ages)   Section 5.4

Hospital admissions—cardiovascular (age 

>20)

  Section 5.4

Emergency room visits for asthma (all 

ages)   Section 5.4

Acute bronchitis (age 8-12)   Section 5.4

Lower respiratory symptoms (age 7-14)   Section 5.4

Upper respiratory symptoms (asthmatics 

age 9-11)

  Section 5.4

Asthma exacerbation (asthmatics age 6-

18)   Section 5.4

Lost work days (age 18-65)   Section 5.4

Minor restricted-activity days (age 18-65)   Section 5.4

Chronic Bronchitis (age >26)   Section 5.4

Emergency room visits for cardiovascular 

effects (all ages) -- -- Section 5.4

Strokes and cerebrovascular disease (age 

50-79) -- -- Section 5.4

Other cardiovascular effects (e.g., other 

ages) -- -- PM ISA2

Other respiratory effects (e.g., pulmonary 

function, non-asthma ER visits, nonbronchitis chronic diseases, other ages and 

populations)

-- -- PM ISA2

Reproductive and developmental effects 

(e.g., low birth weight, pre-term births, 

etc)

-- -- PM ISA2,3

Cancer, mutagenicity, and genotoxicity 

effects -- -- PM ISA2,3

1 We assess these benefits qualitatively due to time and resource limitations for this analysis.

2 We assess these benefits qualitatively because we do not have sufficient confidence in available data or methods.

3 We assess these benefits qualitatively because current evidence is only suggestive of causality or there are other 

significant concerns over the strength of the association.

Consistent with the Portland Cement NESHAP (U.S. EPA, 2009a), the benefits estimates 

utilize the concentration-response functions as reported in the epidemiology literature, as well as 

the 12 functions obtained in EPA’s expert elicitation study as a sensitivity analysis. 
7-4

 One estimate is based on the concentration-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 benefits 

estimate. When calculating the estimate, EPA applied the effect coefficient as 

reported in the study without an adjustment for assumed concentration threshold of 10 

μg/m3as was done in recent (2006-2009) 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 reported by Laden et al (2006). This study, 

published after the completion of the Staff Paper for the 2006 PM2.5 NAAQS, has 

been used as an alternative estimate in the PM2.5 NAAQS RIA and PM2.5 benefits 

estimates in RIAs completed since the PM2.5 NAAQS. When calculating the 

estimate, EPA applied the effect coefficient as reported in the study without an 

adjustment for assumed concentration threshold of 10 μg/m3as was done in recent 

(2006-2009) RIAs.

 Twelve estimates are based on the C-R functions from EPA’s expert elicitation study 

(Roman et al., 2008) on the PM2.5 -mortality relationship and interpreted for benefits 

analysis in EPA’s final RIA for the PM2.5 NAAQS. For that study, twelve experts 

(labeled A through L) provided independent estimates of the PM2.5 -mortality 

concentration-response function. EPA practice has been to develop independent 

estimates of PM2.5 -mortality estimates corresponding to the concentration-response 

function provided by each of the twelve experts, 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 anchor points in our 

presentation because, while both studies are well designed and peer reviewed, there are strengths 

and weaknesses inherent in each, which we believe argues for using both studies to generate 

benefits estimates. Previously, EPA had calculated benefits based on these two empirical 

studies, but derived the range of benefits, including the minimum and maximum results, from an 

expert elicitation of the relationship between exposure to PM2.5 and premature mortality (Roman 

 

1 These two studies specify multi-pollutant models that control for SO2, among other co-pollutants.
7-5

et al., 2008).2 Within this assessment, we include the benefits estimates derived from the 

concentration-response function provided by each of the twelve experts to better characterize the 

uncertainty in the concentration-response function for mortality and the degree of variability in 

the expert responses. Because the experts used these cohort studies to inform their 

concentration-response functions, benefits estimates using these functions generally fall between 

results using these epidemiology studies (see Figure 7-2). In general, the expert elicitation 

results support the conclusion that the benefits of PM2.5 control are very likely to be substantial.

Readers interested in reviewing the general methodology for creating the benefit-per-ton 

estimates used in this analysis should consult the draft Technical Support Document (TSD) on

estimating the benefits per ton of reducing PM2.5 and its precursors in the “Other Non-EGU 

Point” category (U.S. EPA, 2012).3 The primary difference between the estimates used in this 

analysis and the estimates reported in Fann, Fulcher, and Hubbell (2009) is the air quality 

modeling data utilized. The air quality modeling data used in this analysis use more narrow 

sectors. In addition, the updated air quality modeling data reflects more recent emissions data 

(2005 rather than 2001) and has a higher spatial resolution (12km rather than 36 km grid cells). 

The benefits methodology, such as health endpoints assessed, risk estimates applied, and 

valuation techniques applied did not change. As noted below in the characterization of 

uncertainty, these updated estimates still have similar limitations as all national-average benefitper-ton estimates in that they reflect the geographic distribution of the modeled emissions, which 

may not exactly match the emission reductions in this rulemaking, and they may not reflect local 

variability in population density, meteorology, exposure, baseline health incidence rates, or other 

local factors for any specific location. In this analysis, we apply these national benefit-per-ton 

estimates calculated for this category for directly emitted particles and multiply them by the 

corresponding emission reductions.

These models assume that all fine particles, regardless of their chemical composition, are 

equally potent in causing premature mortality because the scientific evidence is not yet sufficient 

to allow differentiation of effects estimates by particle type. Directly emitted particles are the 

primary PM2.5 precursors affected by this rule. Even though we assume that all fine particles 

 

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. 

3

Stationary engines are included in the other non-EGU point source category. If the affected stationary engines are 

more rural than the average of the non-EGU sources modeled, then it is possible that the benefits may be 

somewhat less than we have estimated here. The TSD provides the geographic distribution of the air quality 

changes associated with this sector. It is important to emphasize that this modeling represents the best available 

information on the air quality impact on a per ton basis for these sources.
7-6

have equivalent health effects, the benefit-per-ton estimates vary between precursors depending 

on the location and magnitude of their impact on PM2.5 levels, which drive population exposure.

The sector-specific modeling does not provide estimates of the PM2.5-related benefits associated 

with reducing VOC emissions, but these unquantified benefits are generally small compared to 

other PM2.5 precursors (U.S. EPA, 2012).

The benefit-per-ton coefficients in this analysis were derived using modified versions of 

the health impact functions used in the PM NAAQS Regulatory Impact Analysis (U.S. EPA, 

2006). Specifically, this analysis uses the method first applied in the Portland Cement NESHAP 

RIA (U.S. EPA, 2009a), which applied the functions directly from the epidemiology studies 

without an adjustment for an assumed threshold. Removing the threshold assumption is a key 

difference between the method used in this analysis of PM benefits and the methods used in 

RIAs prior to Portland Cement proposal, and we now calculate incremental benefits down to the 

lowest modeled PM2.5 air quality levels.4 

Based on our review of the current body of scientific literature, EPA now estimates PMrelated mortality without applying an assumed concentration threshold. EPA’s Integrated 

Science Assessment for Particulate Matter (U.S. EPA, 2009b), which was reviewed by EPA’s 

Clean Air Scientific Advisory Committee (U.S. EPA-SAB, 2009a; U.S. EPA-SAB, 2009b), 

concluded that the scientific literature consistently finds that a no-threshold log-linear model 

most adequately portrays the PM-mortality concentration-response relationship while 

recognizing potential uncertainty about the exact shape of the concentration-response function. 

Consistent with this finding, we have conformed the previous threshold sensitivity 

analysis to the current state of the PM science by incorporating a “Lowest Measured Level” 

(LML) assessment, which is a method EPA has employed in several recent RIAs including the 

Cross-State Air Pollution Rule (U.S. EPA, 2011b). This information allows readers to determine 

the portion of population exposed to annual mean PM2.5 levels at or above the LML of each 

study; in general, our confidence in the estimated PM mortality decreases as we consider air 

quality levels further below the LML in major cohort studies that estimate PM-related mortality. 

While an LML assessment provides some insight into the level of uncertainty in the estimated 

PM mortality benefits, EPA does not view the LML as a threshold and continues to quantify PMrelated mortality impacts using a full range of modeled air quality concentrations. It is important 

to emphasize that we have high confidence in PM2.5-related effects down to the lowest LML of 

the major cohort studies, which is 5.8 μg/m3. Just because we have greater confidence in the 

 

4

 Additional updates since the Cement RIA include a revised VSL and updated baseline incidence rates.
7-7

benefits above the LML, this does not mean that we have no confidence that benefits occur 

below the LML. For a summary of the scientific review statements regarding the lack of a 

threshold in the PM2.5-mortality relationship, see the Technical Support Document (TSD) 

entitled Summary of Expert Opinions on the Existence of a Threshold in the ConcentrationResponse Function for PM2.5-related Mortality (U.S. EPA, 2010b).

For this analysis, policy-specific air quality data is not available due to time or resource 

limitations. For these rules, we are unable to estimate the percentage of premature mortality 

associated with this specific rule’s emission reductions at each PM2.5 level. However, we believe 

that it is still important to characterize the distribution of exposure to baseline air quality levels. 

As a surrogate measure of mortality impacts, we provide the percentage of the population 

exposed at each PM2.5 level using the source apportionment modeling used to calculate the 

benefit-per-ton estimates for this sector. It is important to note that baseline exposure is only one 

parameter in the health impact function, along with baseline incidence rates population, and 

change in air quality. In other words, the percentage of the population exposed to air pollution 

below the LML is not the same as the percentage of the population experiencing health impacts 

as a result of a specific emission reduction policy. The most important aspect, which we are 

unable to quantify for rules without rule-specific air quality modeling, is the shift in exposure 

associated with this specific rule. Therefore, caution is warranted when interpreting the LML 

assessment for this rule. The results of this analysis are provided in Section 7.3.

As is the nature of RIAs, the assumptions and methods used to estimate air quality 

benefits evolve over time to reflect the Agency’s most current interpretation of the scientific 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 available 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-analysis of 33 studies. The $10 million value represented the upper end of 

the interquartile range from the Viscusi and Aldy (2003) meta-analysis of 43 studies. The mean 

estimate of $5.5 million (2000$)5 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 rulemakings nor subjected the interim estimate to a 

 

5 After adjusting the VSL for a different currency year (2010$) and to account for income growth to 2015 of the $5.5 

million value, the VSL is $8.0 million. 
7-8

scientific peer-review process through the Science Advisory Board (SAB) or other peer-review 

group. 

During this time, the Agency continued work to update its guidance on valuing mortality 

risk reductions, including commissioning a report 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 Agency consulted several times with the Science Advisory Board 

Environmental Economics Advisory Committee (SAB-EEAC) on the issue. With input from the 

meta-analytic experts, the SAB-EEAC advised the Agency to update its guidance using specific, 

appropriate meta-analytic techniques to combine estimates from unique data sources and 

different studies, including those using different methodologies (i.e., wage-risk and stated 

preference) (U.S. EPA-SAB, 2007). 

Until updated guidance is available, the Agency determined that a single, peer-reviewed 

estimate applied consistently best reflects the SAB-EEAC advice it has received. 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)6 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 studies published between 1974 and 

1991. The mean VSL across these studies is $6.3 million (2000$).7 The Agency is committed to 

using scientifically sound, appropriately reviewed evidence in valuing mortality risk reductions 

and has made significant progress in responding to the SAB-EEAC’s specific recommendations. 

In implementing these rules, emission controls may lead to reductions in ambient PM2.5 

below the National Ambient Air Quality Standards (NAAQS) for PM in some areas and assist 

other areas with attaining the PM NAAQS. Because the PM NAAQS RIAs also calculate PM 

benefits, there are important differences worth noting in the design and analytical objectives of 

each RIA. The NAAQS RIAs illustrate the potential costs and benefits of attaining a new air 

quality standard nationwide based on an array of emission control strategies for different sources. 

In short, NAAQS RIAs hypothesize, but do not predict, the control strategies that States may 

choose to enact when implementing a NAAQS. The setting of a NAAQS does not directly result 

 

6

In revised Economic Guidelines (U.S. EPA, 2010c), 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 does not represent final agency policy. 

7 This value is $4.8 million in 1990$. In this analysis, we adjust the VSL to account for a different currency year 

($2010) and to account for income growth to 2015. After applying these adjustments to the $6.3 million value, the 

VSL is $9.2 million. 
7-9

in costs or benefits, and as such, the NAAQS RIAs are merely illustrative and are not intended to 

be added to the costs and benefits of other regulations that result in specific costs of control and 

emission reductions. However, some costs and benefits estimated in this RIA account for the 

same air quality improvements as estimated in the illustrative PM2.5 NAAQS RIA. 

By contrast, the emission reductions for implementation rules are from a specific class of 

well-characterized sources. In general, EPA is more confident in the magnitude and location of 

the emission reductions for implementation rules rather than illustrative NAAQS analyses. 

Emission reductions achieved under these and other promulgated rules will ultimately be 

reflected in the baseline of future NAAQS analyses, which would reduce the incremental costs 

and benefits associated with attaining the NAAQS. EPA remains forward looking towards the 

next iteration of the 5-year review cycle for the NAAQS, and as a result does not issue updated 

RIAs for existing NAAQS that retroactively update the baseline for NAAQS implementation. 

For more information on the relationship between the NAAQS and rules such as analyzed here, 

please see Section 1.2.4 of the SO2 NAAQS RIA (U.S. EPA, 2010a).
7-10

Figure 7.1 illustrates the relative breakdown of the monetized PM2.5 health benefits. 

Figure 7-1: Breakdown of Monetized PM2.5 Health Benefits using Mortality Function 

from Pope et al. (2002)*

*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 mortality, the percentage of total monetized benefits due to adult 

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 monetized PM-related health benefits by 

precursor, including the emission reductions and benefit-per-ton estimates at discount rates of 

3% and 7%.8 Table 7-3 provides a summary of the reductions in health incidences as a result of 

the pollution reductions. In Table 7-4, we provide the benefits using our anchor points of Pope 

et al. and Laden et al. as well as the results from the expert elicitation on PM mortality. Figure 

7-2 provides a visual representation of the range of PM2.5-related benefits estimates using 

 

8 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 benefits occur within 

that year with two exceptions: acute myocardial infarctions (AMIs) and premature mortality. For AMIs, we 

assume 5 years of follow-up medical costs and lost wages. For premature mortality, we assume that there is a 

“cessation” lag between PM exposures and the total realization 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 year, 50% over years 2 to 5, and 20% over the years 6 to 

20 after the reduction in PM2.5 (U.S. EPA-SAB, 2004). Changes in the lag 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. 

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%

Breakdown of Monetized PM2.5 Health Benefits using Pope et al. 

Mortality Function
7-11

concentration-response functions supplied by experts. Figure 7-3 shows a breakdown of 

monetized benefits by engine size. 

The benefit-per-ton estimates shown in this RIA are different than the benefit-per-ton 

estimates cited in the 2010 final SI RICE RIA for two reasons. First, these estimates are based 

on updated air quality modeling, which results in slightly higher benefits per ton for other nonEGU point sources than the previous modeling. Second, these estimates have been inflated to 

2010$. Third, the new air quality modeling did not provide estimates associated with reducing 

VOCs. Since the reconsideration proposal, EPA has made several updates to the approach we 

use to estimate mortality and morbidity benefits in the PM NAAQS RIAs (U.S. EPA, 2012a,b) 

including updated epidemiology studies, health endpoints, and population data. Although we 

have not re-estimated the benefits for this rule to apply this new approach, these updates 

generally offset each other, and we anticipate that the rounded benefits estimated for this rule are 

unlikely to be different than those provided below.

Table 7-2: General Summary of Monetized PM2.5-Related Health Co-Benefits Estimates 

for the CI RICE NESHAP Reconsideration (millions of 2010$)

*

Pollutant

Emissions 

Reductions 

(tons)

Benefit 

per ton 

(Pope, 

3%)

Benefit 

per ton 

(Laden, 

3%)

Benefit 

per ton 

(Pope, 

7%)

Benefit 

per ton 

(Laden, 

7%)

Total Monetized 

Benefits (millions 

of 2010$ at 3%)

Total Monetized 

Benefits (millions 

of 2010$ at 7%)

PM2.5 Precursors

Direct 

PM2.5

2,818 $270,000 $670,000 $240,000 $610,000 $770 to $1,900 $690 to $1,700

Total $770 to $1,900 $690 to $1,700

* All estimates are for the analysis year (2013), and are rounded to two significant figures so numbers may not sum 

across columns. It is important to note that the monetized benefits do not include reduced health effects from direct 

exposure to NO2, ozone exposure, ecosystem effects, or visibility impairment. All fine particles are assumed to have 

equivalent health effects, but the benefit per ton estimates vary because each ton of precursor reduced has a different 

propensity to form PM2.5. The monetized benefits incorporate the conversion from precursor emissions to ambient 

fine particles. Confidence intervals are unavailable for this analysis because of the benefit-per-ton methodology.

Although we have not re-estimated the benefits for this rule to apply the updated methods in the PM NAAQS RIA 

(U.S. EPA, 2012b), these updates generally offset each other, and we anticipate that the rounded benefits estimated 

for this rule are unlikely to be different than those provided here.
7-12

Table 7-3: Summary of Reductions in Health Incidences from PM2.5-Related Co-Benefits 

for CI RICE NESHAP Reconsideration*

Avoided Premature Mortality

Pope et al. 85

Laden et al. 220

Avoided Morbidity

Chronic Bronchitis 59

Emergency Department Visits, Respiratory 66

Hospital Admissions, Respiratory 16

Hospital Admissions, Cardiovascular 35

Acute Bronchitis 130

Lower Respiratory 1,700

Upper Respiratory 1,300

Minor Restricted Activity Days 68,000

Work Loss Days 12,000

Asthma Exacerbation 2,800

Acute Myocardial Infarction 94

* 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 equivalent health effects because the scientific evidence is not yet sufficient to 

allow differentiation of effects estimates by particle type. Confidence intervals are unavailable for this analysis 

because of the benefit-per-ton methodology.
7-13

Table 7-4: All PM2.5 Co-Benefits Estimates for the CI RICE NESHAP Reconsideration at 

discount rates of 3% and 7% in 2013 (in millions of 2010$)*

3% 7%

Benefit-per-ton Coefficients Derived from Epidemiology Literature

Pope et al. $770 $690

Laden et al. $1,900 $1,700

Benefit-per-ton Coefficients Derived from Expert Elicitation

Expert A $2,000 $1,800

Expert B $1,500 $1,400

Expert C $1,500 $1,400

Expert D $1,100 $970

Expert E $2,500 $2,200

Expert F $1,400 $1,200

Expert G $920 $820

Expert H $1,200 $1,000

Expert I $1,500 $1,400

Expert J $1,200 $1,100

Expert K $290 $260

Expert L $1,000 $910

*All estimates are rounded to two significant figures. The benefits estimates from the Expert Elicitation are provided 

as a reasonable characterization of the uncertainty in the mortality estimates associated with the concentrationresponse function. Confidence intervals are unavailable for this analysis because of the benefit-per-ton methodology
7-14

Figure 7-2: Total Monetized PM2.5 Co-Benefits of CI RICE NESHAP Reconsideration in 

2013

*This graph shows the estimated benefits at discount rates of 3% and 7% using effect coefficients derived from the 

Pope et al. study and the Laden et al study, as well 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 part on the concentration-response function provided in those studies. 

$0

$500

$1,000

$1,500

$2,000

$2,500

Pope et al.

Laden et al. Millions (2010$)

PM2.5 mortality benefits estimates derived from 2 epidemiology functions and 12 expert functions

Total Monetized Benefits for CI RICE NESHAP Reconsideration by 

2013*

3% DR

7% DR
7-15

Figure 7-3: Breakdown of Total Monetized PM2.5 Co-Benefits of CI RICE NESHAP 

Reconsideration by Engine Size

7.2 Unquantified Benefits

The monetized benefits estimated in this RIA only reflect a subset of benefits attributable 

to the health effect reductions associated with ambient fine particles. Data, time, and resource

limitations prevented EPA from quantifying the impacts to, or monetizing the benefits from 

several important benefit categories, including benefits from reducing exposure to HAP, CO, and 

ozone exposure, as well as ecosystem effects, and visibility impairment. This does not imply that 

there are no benefits associated with these emission reductions. These benefits are described 

qualitatively in this section. 

7.2.1 HAP Benefits

Even though emissions of air toxics from all sources in the U.S. declined by approximately 

42% since 1990, the 2005 National-Scale Air Toxics Assessment (NATA) predicts that most 

Americans are exposed to ambient concentrations of air toxics at levels that have the potential to 

cause adverse health effects (U.S. EPA, 2011c).9 The levels of air toxics to which people are 

exposed vary depending on where people live and work and the kinds of activities in which they 

engage. In order to identify and prioritize air toxics, emission source types and locations that are 

 

9 The 2005 NATA is available on the Internet at http://www.epa.gov/ttn/atw/nata2005/ .

Major <500 HP

25%

Major >500 HP

6%

Area <600 HP

36%

Area >600 HP

33%
7-16

of greatest potential concern, U.S. EPA conducts the NATA.10 The most recent NATA was 

conducted for calendar year 2005 and was released in March 2011. NATA includes four steps:

1) Compiling a national emissions inventory of air toxics emissions from outdoor sources

2) Estimating ambient and exposure concentrations of air toxics across the United States

3) Estimating population exposures across the United States

4) Characterizing potential public health risk due to inhalation of air toxics including both 

cancer and noncancer effects

Based on the 2005 NATA, EPA estimates that about 5% of census tracts nationwide have 

increased cancer risks greater than 100 in a million. The average national cancer risk is about 50 

in a million. Nationwide, the key pollutants that contribute most to the overall cancer risks are 

formaldehyde and benzene.11 Secondary formation (e.g., formaldehyde forming from other 

emitted pollutants) was the largest contributor to cancer risks, while stationary, mobile and 

background sources contribute almost equal portions of the remaining cancer risk.

Noncancer health effects can result from chronic,12 subchronic,13 or acute14 inhalation 

exposures to air toxics, and include neurological, cardiovascular, liver, kidney, and respiratory 

effects as well as effects on the immune and reproductive systems. According to the 2005 

NATA, about three-fourths of the U.S. population was exposed to an average chronic 

concentration of air toxics that has the potential for adverse noncancer respiratory health effects.

Results from the 2005 NATA indicate that acrolein is the primary driver for noncancer 

respiratory risk. 

 

10 The NATA modeling framework has a number of limitations that prevent its use as the sole basis for setting 

regulatory standards. These limitations and uncertainties are discussed on the 2005 NATA website. Even so, 

this modeling framework is very useful in identifying air toxic pollutants and sources of greatest concern, setting 

regulatory priorities, and informing the decision making process. U.S. EPA. (2011) 2005 National-Scale Air 

Toxics Assessment. http://www.epa.gov/ttn/atw/nata2005/

11 Details about the overall confidence of certainty ranking of the individual pieces of NATA assessments including 

both quantitative (e.g., model-to-monitor ratios) and qualitative (e.g., quality of data, review of emission 

inventories) judgments can be found at http://www.epa.gov/ttn/atw/nata/roy/page16.html.

12 Chronic exposure is defined in the glossary of the Integrated Risk Information (IRIS) database 

(http://www.epa.gov/iris ) as repeated exposure by the oral, dermal, or inhalation route for more than 

approximately 10% of the life span in humans (more than approximately 90 days to 2 years in typically used 

laboratory animal species).

13 Defined in the IRIS database as repeated exposure by the oral, dermal, or inhalation route for more than 30 days, 

up to approximately 10% of the life span in humans (more than 30 days up to approximately 90 days in typically 

used laboratory animal species).

14 Defined in the IRIS database as exposure by the oral, dermal, or inhalation route for 24 hours or less.
7-17

Figure 7-4 and Figure 7-5 depict the estimated census tract-level carcinogenic risk and 

noncancer respiratory hazard from the assessment. It is important to note that large reductions in 

HAP emissions may not necessarily translate into significant reductions in health risk because 

toxicity varies by pollutant, and exposures may or may not exceed levels of concern. For 

example, acetaldehyde mass emissions are more than double acrolein emissions on a national 

basis, according to EPA’s 2005 National Emissions Inventory (NEI). However, the Integrated 

Risk Information System (IRIS) reference concentration (RfC) for acrolein is considerably lower 

than that for acetaldehyde, suggesting that acrolein could be potentially more toxic than 

acetaldehyde. Thus, it is important to account for the toxicity and exposure, as well as the mass 

of the targeted emissions. 

Figure 7-4 Estimated Chronic Census Tract Carcinogenic Risk from HAP exposure 

from outdoor sources (2005 NATA)
7-18

Figure 7-5 Estimated Chronic Census Tract Noncancer (Respiratory) Risk from HAP 

exposure from outdoor sources (2005 NATA)

Due to methodology and time limitations under the court-ordered schedule, we were 

unable to estimate the benefits associated with the hazardous air pollutants that would be reduced 

as a result of these rules. In a few previous analyses of the benefits of reductions in HAP, EPA 

has quantified the benefits of potential reductions in the incidences of cancer and non-cancer risk 

(e.g., U.S. EPA, 1995). In those analyses, EPA relied on unit risk factors (URF) developed 

through risk assessment procedures.15 These URFs are designed to be conservative, and as such, 

are more likely to represent the high end of the distribution of risk rather than a best or most 

likely estimate of risk. As the purpose of a benefit analysis is to describe the benefits most likely 

to occur from a reduction in pollution, use of high-end, conservative risk estimates would 

overestimate the benefits of the regulation. While we used high-end risk estimates in past 

analyses, advice from the EPA’s Science Advisory Board (SAB) recommended that we avoid 

 

15The unit risk factor is a quantitative estimate of the carcinogenic potency of a pollutant, often expressed as the 

probability of contracting cancer from a 70-year lifetime continuous exposure to a concentration of one μg/m3of 

a pollutant.
7-19

using high-end estimates in benefit analyses (U.S. EPA-SAB, 2002). Since this time, EPA has 

continued to develop better methods for analyzing the benefits of reductions in HAP.

As part of the second prospective analysis of the benefits and costs of the Clean Air Act 

(U.S. EPA, 2011a), EPA conducted a case study analysis of the health effects associated with 

reducing exposure to benzene in Houston from implementation of the Clean Air Act (IEc, 2009). 

While reviewing the draft report, EPA’s Advisory Council on Clean Air Compliance Analysis 

concluded that “the challenges for assessing progress in health improvement as a result of 

reductions in emissions of hazardous air pollutants (HAPs) are daunting...due to a lack of 

exposure-response functions, uncertainties in emissions inventories and background levels, the 

difficulty of extrapolating risk estimates to low doses and the challenges of tracking health 

progress for diseases, such as cancer, that have long latency periods” (U.S. EPA-SAB, 2008).

In 2009, EPA convened a workshop to address the inherent complexities, limitations, and 

uncertainties in current methods to quantify the benefits of reducing HAP. Recommendations 

from this workshop included identifying research priorities, focusing on susceptible and 

vulnerable populations, and improving dose-response relationships (Gwinn et al., 2011). 

In summary, monetization of the benefits of reductions in cancer incidences requires 

several important inputs, including central estimates of cancer risks, estimates of exposure to 

carcinogenic HAP, and estimates of the value of an avoided case of cancer (fatal and non-fatal). 

Due to methodology and time limitations under the court-ordered schedule, we did not attempt to 

monetize the health benefits of reductions in HAP in this analysis. Instead, we provide a 

qualitative analysis of the health effects associated with the HAP anticipated to be reduced by 

these rules.EPA remains committed to improving methods for estimating HAP benefits by 

continuing to explore additional concepts of benefits, including changes in the distribution of 

risk. 

Although numerous HAP may be emitted from CI RICE, a few HAP account for over 90% of 

the total mass of HAP emissions emitted. These HAP are formaldehyde (72%), acetaldehyde (8%), 

acrolein (7%), methanol (3%), and benzene (3%). Although we do not have estimates of emission 

reductions for each HAP, this rule for existing CI engines is anticipated to reduce 1,000 tons of HAP 

each year. Below we describe the health effects associated with the top 5 HAP by mass emitted from 

CI RICE.
7-20

Formaldehyde

Since 1987, EPA has classified formaldehyde as a probable human carcinogen based on 

evidence in humans and in rats, mice, hamsters, and monkeys.16 Substantial additional research 

since that time informs current scientific understanding of the health effects associated with 

exposure to formaldehyde. These include recently published research conducted by the National 

Cancer Institute (NCI) which found an increased risk of nasopharyngeal cancer and 

lymphohematopoietic malignancies such as leukemia among workers exposed to 

formaldehyde.17,18 In an analysis of the lymphohematopoietic cancer mortality from an extended 

follow-up of these workers, NCI confirmed an association between lymphohematopoietic cancer 

risk and peak formaldehyde exposures.19 A recent NIOSH study of garment workers also found 

increased risk of death due to leukemia among workers exposed to formaldehyde.20 Extended 

follow-up of a cohort of British chemical workers did not find evidence of an increase in 

nasopharyngeal or lymphohematopoietic cancers, but a continuing statistically significant excess 

in lung cancers was reported.21

In the past 15 years there has been substantial research on the inhalation dosimetry for 

formaldehyde in rodents and primates by the Chemical Industry Institute of Toxicology (CIIT, 

now renamed the Hamner Institutes for Health Sciences), with a focus on use of rodent data for 

refinement of the quantitative cancer dose-response assessment.22,23,24 CIIT’s risk assessment of 

 

16 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. Docket EPA-HQ-OAR-2010-0162.

17 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. Docket EPA-HQ-OAR-2010-0162.

18 Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Blair, A. 2004. Mortality from solid cancers among 

workers in formaldehyde industries. American Journal of Epidemiology 159: 1117-1130. Docket EPA-HQOAR-2010-0162.

19 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. Docket EPA-HQ-OAR-2010-0162.

20 Pinkerton, L. E. 2004. Mortality among a cohort of garment workers exposed to formaldehyde: an update. 

Occup. Environ. Med. 61: 193-200. Docket EPA-HQ-OAR-2010-0162.

21 Coggon, D, EC Harris, J Poole, KT Palmer. 2003. Extended follow-up of a cohort of British chemical workers 

exposed to formaldehyde. J National Cancer Inst. 95:1608-1615. Docket EPA-HQ-OAR-2010-0162.

22 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. 

Docket EPA-HQ-OAR-2010-0162.

23 Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D Kalisak, J Preston, and 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. Docket EPA-HQ-OAR2010-0162.
7-21

formaldehyde incorporated mechanistic and dosimetric information on formaldehyde. These data 

were modeled using a biologically-motivated two-stage clonal growth model for cancer and also 

a point of departure based on a Benchmark Dose approach. However, it should be noted that 

recent research published by EPA indicates that when two-stage modeling assumptions are 

varied, resulting dose-response estimates can vary by several orders of magnitude.25,26,27,28 These 

findings are not supportive of interpreting the CIIT model results as providing a conservative 

(health protective) estimate of human risk.29 EPA research also examined the contribution of the 

two-stage modeling for formaldehyde towards characterizing the relative weights of key events 

in the mode-of-action of a carcinogen. For example, the model-based inference in the published 

CIIT study that formaldehyde’s direct mutagenic action is not relevant to the compound’s 

tumorigenicity was found not to hold under variations of modeling assumptions.30

Based on the developments of the last decade, 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 experimental animals - a higher classification than 

previous IARC evaluations. After reviewing the currently available epidemiological evidence, 

the IARC (2006) characterized the human evidence for formaldehyde carcinogenicity as 

“sufficient,” based upon the data on nasopharyngeal cancers; the epidemiologic evidence on 

leukemia was characterized as “strong.”31

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 

 

24 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. Docket EPA-HQ-OAR-2010-0162.

25 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. Docket EPA-HQ-OAR-2010-0162.

26 Subramaniam, R; Chen, C; Crump, K; .et .al. (2008) Uncertainties in biologically-based modeling of 

formaldehyde-induced cancer risk: identification of key issues. Risk Anal 28(4):907-923. Docket EPA-HQOAR-2010-0162.

27 Subramaniam RP; Crump KS; Van Landingham C; et. al. (2007) Uncertainties in the CIIT model for 

formaldehyde-induced carcinogenicity in the rat: A limited sensitivity analysis–I. Risk Anal, 27: 1237–1254. 

Docket EPA-HQ-OAR-2010-0162.

28 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. Docket EPA-HQ-OAR-2010-0162.

29 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. Docket EPA-HQ-OAR-2010-0162.

30 Subramaniam RP; Crump KS; Van Landingham C; et. al. (2007) Uncertainties in the CIIT model for 

formaldehyde-induced carcinogenicity in the rat: A limited sensitivity analysis–I. Risk Anal, 27: 1237–1254. 

Docket EPA-HQ-OAR-2010-0162.

31 International Agency for Research on Cancer (2006) Formaldehyde, 2-Butoxyethanol and 1-tert-Butoxypropan-2-

ol. Monographs Volume 88. World Health Organization, Lyon, France. Docket EPA-HQ-OAR-2010-0162.
7-22

exposure in humans include respiratory tract irritation, chronic bronchitis and nasal epithelial 

lesions such as metaplasia and loss of cilia. Animal studies suggest that formaldehyde may also 

cause airway inflammation – including eosinophil infiltration into the airways. There are several 

studies that suggest that formaldehyde may increase the risk of asthma – particularly in the 

young.32,33

The above-mentioned rodent and human studies, as well as mechanistic information and 

their analyses, were evaluated in EPA’s recent Draft Toxicological Review of Formaldehyde –

Inhalation Assessment through the Integrated Risk Information System (IRIS) program. This 

draft IRIS assessment was released in June 2010 for public review and comment and external 

peer review by the National Research Council (NRC). The NRC released their review report in 

April 2011 (http://www.nap.edu/catalog.php?record_id=13142). The EPA is currently revising 

the draft assessment in response to this review.

Acetaldehyde

Acetaldehyde is classified in EPA’s IRIS database as a probable human carcinogen, based 

on nasal tumors in rats, and is considered toxic by the inhalation, oral, and intravenous routes.34 

Acetaldehyde is reasonably anticipated to be a human carcinogen by the U.S. Department of 

Health and Human Services (DHHS) in the 11th Report on Carcinogens and is classified as 

possibly carcinogenic to humans (Group 2B) by the IARC.35,36 The primary noncancer effects of 

exposure to acetaldehyde vapors include irritation of the eyes, skin, and respiratory tract.37 

 

32 Agency for Toxic Substances and Disease Registry (ATSDR). 1999. Toxicological profile for Formaldehyde. 

Atlanta, GA: U.S. Department of Health and Human Services, Public Health Service. 

http://www.atsdr.cdc.gov/toxprofiles/tp111.html. Docket EPA-HQ-OAR-2010-0162.

33 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. Docket EPA-HQ-OAR-2010-0162.

34 U.S. Environmental Protection Agency (U.S. EPA). 1991. 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 .

35 U.S. Department of Health and Human Services National Toxicology Program 11th Report on Carcinogens 

available at: http://ntp.niehs.nih.gov/go/16183 .

36 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.

37 U.S. Environmental Protection Agency (U.S. EPA). 1991. 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 .
7-23

Acrolein

EPA determined in 2003 that the human carcinogenic potential of acrolein could not be 

determined because the available data were inadequate. No information was available on the 

carcinogenic effects of acrolein in humans and the animal data provided inadequate evidence of 

carcinogenicity.38 The IARC determined in 1995 that acrolein was not classifiable as to its 

carcinogenicity in humans.39

Acrolein is extremely acrid and irritating to humans when inhaled, with acute exposure 

resulting in upper respiratory tract irritation, mucus hypersecretion and congestion. The intense 

irritancy of this carbonyl has been demonstrated during controlled tests in human subjects, who 

suffer intolerable eye and nasal mucosal sensory reactions within minutes of exposure.40 These 

data and additional studies regarding acute effects of human exposure to acrolein are 

summarized in EPA’s 2003 IRIS Human Health Assessment for acrolein.41 Evidence available 

from studies in humans indicate that levels as low as 0.09 ppm (0.21 mg/m3) for five minutes 

may elicit subjective complaints of eye irritation with increasing concentrations leading to more 

extensive eye, nose and respiratory symptoms.42 Lesions to the lungs and upper respiratory tract 

of rats, rabbits, and hamsters have been observed after subchronic exposure to acrolein.43 Acute 

exposure effects in animal studies report bronchial hyper-responsiveness.44 In a recent study, the 

acute respiratory irritant effects of exposure to 1.1 ppm acrolein were more pronounced in mice 

with allergic airway disease by comparison to non-diseased mice which also showed decreases in 

 

38 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

Research and Development, National Center for Environmental Assessment, Washington, DC. This material is 

available at http://www.epa.gov/iris/toxreviews/0364tr.pdf .

39 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 solvents and other industrial chemicals, World 

Health Organization, Lyon, France.

40 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

EPA/635/R-03/003. p. 10. Research and Development, National Center for Environmental Assessment, 

Washington, DC. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf .

41 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

2003. Research and Development, National Center for Environmental Assessment, Washington, DC. 

EPA/635/R-03/003. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf .

42 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

Research and Development, National Center for Environmental Assessment, Washington, DC. EPA/635/R03/003. p. 11. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf .

43 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

Research and Development, National Center for Environmental Assessment, Washington, DC. EPA/635/R03/003. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf .

44 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

Research and Development, National Center for Environmental Assessment, Washington, DC. EPA/635/R03/003. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf .
7-24

respiratory rate.45 Based on these animal data and demonstration of similar effects in humans 

(i.e., reduction in respiratory rate), individuals with compromised respiratory function (e.g., 

emphysema, asthma) are expected to be at increased risk of developing adverse responses to 

strong respiratory irritants such as acrolein.

Benzene

The EPA’s IRIS database lists benzene as a known human carcinogen (causing leukemia) 

by all routes of exposure, and concludes that exposure is associated with additional health effects, 

including genetic changes in both humans and animals and increased proliferation of bone marrow 

cells in mice.46,47,48 EPA states in its IRIS database that data indicate a causal relationship between 

benzene exposure and acute lymphocytic leukemia and suggest a relationship between benzene 

exposure and chronic non-lymphocytic leukemia and chronic lymphocytic leukemia. The IARC 

has determined that benzene is a human carcinogen and the DHHS has characterized benzene as a 

known human carcinogen.49,50 A number of adverse noncancer health effects including blood 

disorders, such as preleukemia and aplastic anemia, have also been associated with long-term 

exposure to benzene.51,52 

 

45 Morris JB, Symanowicz PT, Olsen JE, et al. 2003. Immediate sensory nerve-mediated respiratory responses to 

irritants in healthy and allergic airway-diseased mice. J Appl Physiol 94(4):1563-1571.

46

 U.S. Environmental Protection Agency (U.S. EPA). 2000. Integrated Risk Information System File for Benzene. 

Research and Development, National Center for Environmental Assessment, Washington, DC. This material is 

available electronically at: http://www.epa.gov/iris/subst/0276.htm .

47 International Agency for Research on Cancer, IARC monographs on the evaluation of carcinogenic risk of 

chemicals to humans, Volume 29, Some industrial chemicals and dyestuffs, International Agency for Research 

on Cancer, World Health Organization, Lyon, France, p. 345-389, 1982. 

48 Irons, R.D.; Stillman, W.S.; Colagiovanni, D.B.; Henry, V.A. (1992) Synergistic action of the benzene metabolite 

hydroquinone on myelopoietic stimulating activity of granulocyte/macrophage colony-stimulating factor in vitro, 

Proc. Natl. Acad. Sci. 89:3691-3695.

49 International Agency for Research on Cancer (IARC). 1987. Monographs on the evaluation of carcinogenic risk 

of chemicals to humans, Volume 29, Supplement 7, Some industrial chemicals and dyestuffs, World Health 

Organization, Lyon, France.

50 U.S. Department of Health and Human Services National Toxicology Program 11th Report on Carcinogens 

available at: http://ntp.niehs.nih.gov/go/16183 .

51

 Aksoy, M. (1989). Hematotoxicity and carcinogenicity of benzene. Environ. Health Perspect. 82: 193-197.

52 Goldstein, B.D. (1988). Benzene toxicity. Occupational medicine. State of the Art Reviews. 3: 541-554.
7-25

Methanol

Exposure of humans to methanol by inhalation or ingestion may result in central nervous 

system depression and degenerative changes in the brain and visual systems. After inhaled or 

ingested, methanol is converted to formate, a highly toxic metabolite that within the course of a 

few hours can cause narcosis, metabolic acidosis, headaches, severe abdominal and leg pain and 

visual degeneration that can lead to blindness.

53

Methanol has been demonstrated to cause developmental toxicity in rats and mice, and 

reproductive and developmental toxicity in monkeys. A number of studies have reported adverse 

effects in the offspring of rats and mice exposed to methanol by inhalation including reduced 

weight of brain pituitary gland, thymus, thyroid, reduced overall fetal body weight and increased 

incidence of extra ribs and cleft palate.54,55,56 Methanol inhalation studies using rhesus monkeys 

have reported a decrease in the length of pregnancy, and limited evidence of impaired learning 

ability in offspring.

57,58,59,60 EPA has not classified methanol with respect to its carcinogenicity. 

Other Air Toxics

In addition to the compounds described above, other toxic compounds might be affected 

by these rules. Information regarding the health effects of those compounds can be found in 

EPA’s IRIS database.61

 

53 Rowe, VK and McCollister, SB. 1981. Alcohols. In: Patty's Industrial Hygiene and Toxicology, 3rd ed. Vol. 2C, 

GD Clayton, FE Clayton, Eds. John Wiley & Sons, New York, pp. 4528-4541.

54 New Energy Development Organization (NEDO). 1987. Toxicological research of methanol as a fuel for power 

station: summary report on tests with monkeys, rats and mice. Tokyo, Japan.

55 Nelson, BK; Brightwell, WS; MacKenzie, DR; Khan, A; Burg, JR; Weigel, WW; Goad, PT. 1985. Teratological 

assessment of methanol and ethanol at high inhalation levels in rats. Toxicol Sci, 5: 727-736.

56 Rogers, JM; Barbee, BD; Rehnberg, BF. 1993. Critical periods of sensitivity for the developmental toxicity of 

inhaled methanol. Teratology, 47: 395.

57 Burbacher, T; Grant, K; Shen, D; Damian, D; Ellis, S; Liberato, N. 1999. Reproductive and offspring 

developmental effects following maternal inhalation exposure to methanol in nonhuman primates Part II: 

developmental effects in infants exposed prenatally to methanol. Health Effects Institute. Cambridge, MA.

58 Burbacher, T; Shen, D; Grant, K; Sheppard, L; Damian, D; Ellis, S; Liberato, N. 1999. Reproductive and offspring 

developmental effects following maternal inhalation exposure to methanol in nonhuman primates Part I: 

methanol disposition and reproductive toxicity in adult females. Health Effects Institute. Cambridge, MA.

59 Burbacher, TM; Grant, KS; Shen, DD; Sheppard, L; Damian, D; Ellis, S; Liberato, N. 2004. Chronic maternal 

methanol inhalation in nonhuman primates (Macaca fascicularis): reproductive performance and birth outcome. 

Neurotoxicol Teratol, 26: 639-650.

60 Burbacher, TM; Shen, DD; Lalovic, B; Grant, KS; Sheppard, L; Damian, D; Ellis, S; Liberato, N. 2004. Chronic 

maternal methanol inhalation in nonhuman primates (Macaca fascicularis): exposure and toxicokinetics prior to 

and during pregnancy. Neurotoxicol Teratol, 26: 201-221.

61 U.S. EPA Integrated Risk Information System (IRIS) database is available at: www.epa.gov/iris
7-26

7.2.2 Ozone Co-Benefits

In the presence of sunlight, NOx and VOCs can undergo a chemical reaction in the 

atmosphere to form ozone. Reducing ambient ozone concentrations is associated with 

significant human health benefits, including mortality and respiratory morbidity (U.S. EPA, 

2008a). Epidemiological researchers have associated ozone exposure with adverse health effects 

in numerous toxicological, clinical and epidemiological studies (U.S. EPA, 2006c). These health 

effects include respiratory morbidity such as fewer asthma attacks, hospital and ER visits, school 

loss days, as well as premature mortality.

7.2.3 Carbon Monoxide Co-Benefits

Carbon monoxide in ambient air is formed primarily by the incomplete combustion of 

carbon-containing fuels and photochemical reactions in the atmosphere. The amount of CO emitted 

from these reactions, relative to carbon dioxide (CO2), is sensitive to conditions in the combustion 

zone, such as fuel oxygen content, burn temperature, or mixing time. Upon 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 duration of exposure. The Integrated Science Assessment for 

Carbon 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 coronary heart 

disease. Epidemiologic studies associate short-term CO exposure with increased risk of emergency 

department visits and hospital admissions. Coronary heart disease includes those who have angina 

pectoris (cardiac chest pain), as well as those who have experienced a heart attack. Other 

subpopulations potentially at risk include individuals with diseases such as chronic obstructive 

pulmonary disease (COPD), anemia, or diabetes, 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 between 

short-term exposure to CO and respiratory morbidity and mortality. The evidence is also suggestive 

of a causal relationship for birth outcomes and developmental effects following long-term exposure 

to CO, and for central nervous system effects linked to short- and long-term exposure to CO.

7.2.4 Visibility Impairment Co-Benefits

Reducing secondary formation of PM2.5 would improve visibility throughout the U.S.

Fine particles with significant light-extinction efficiencies include sulfates, nitrates, organic

carbon, elemental carbon, and soil (Sisler, 1996). Suspended particles and gases degrade

visibility by scattering and absorbing light. Higher visibility impairment levels in the East are

due to generally higher concentrations of fine particles, particularly sulfates, and higher average
7-27

relative humidity levels. Visibility has direct significance to people’s enjoyment of daily

activities and their overall sense of wellbeing. Good visibility increases the quality of life where

individuals live and work, and where they engage in recreational activities. Previous analyses

(U.S. EPA, 2006; U.S. EPA, 2011a; U.S. EPA, 2011b) show that visibility benefits are a 

significant welfare benefit category. Without air quality modeling, we are unable to estimate

visibility related benefits, nor are we able to determine whether VOC emission reductions would 

be likely to have a significant impact on visibility in urban areas or Class I areas.

7.3 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 economic benefits, including emission inventories, air 

quality models (with their associated parameters and inputs), epidemiological estimates of 

concentration-response (C-R) functions, estimates of values, population estimates, income 

estimates, and estimates of the future state of the world (i.e., regulations, technology, and human 

behavior). For some parameters or inputs it may be possible to provide a statistical 

representation of the underlying uncertainty distribution. For other parameters or inputs, the 

necessary information is not available. As discussed in the PM2.5 NAAQS RIA (Table 5.5) (U.S. 

EPA, 2006), there are a variety of uncertainties associated with these PM benefits. Therefore, 

the estimates of annual benefits should be viewed as representative of the magnitude of benefits 

expected, rather than the actual benefits that would occur every year. 

It is important to note that the monetized benefit-per-ton estimates used here reflect 

specific geographic patterns of emissions reductions and specific air quality and benefits 

modeling assumptions. For example, these estimates do not reflect local variability in population 

density, meteorology, exposure, baseline health incidence rates, or other local factors. Use of 

these $/ton values to estimate benefits may lead to higher or lower benefit estimates than if 

benefits were calculated based on direct air quality modeling. Great care should be taken in 

applying these estimates to emission reductions occurring in any specific location, as these are 

all based on national or broad regional emission reduction programs and therefore represent 

average benefits-per-ton over the entire United States. The benefits-per-ton for emission 

reductions in specific locations may be very different than the estimates presented here. For more 

information, see the TSD describing the calculation of the new benefit-per-ton estimates (U.S. 

EPA, 2012).
7-28

PM2.5 mortality benefits are the largest benefit category that we monetized in this 

analysis. To better characterize the uncertainty associated with mortality impacts that are 

estimated to occur in areas with low baseline levels of PM2.5, we included the LML assessment. 

For this analysis, policy-specific air quality data is not available due to time or resource 

limitations, thus we are unable to estimate the percentage of premature mortality associated with 

this specific rule’s emission reductions at each PM2.5 level. As a surrogate measure of mortality 

impacts, we provide the percentage of the population exposed at each PM2.5 level using the 

source apportionment modeling used to calculate the benefit-per-ton estimates for this sector. A 

very large proportion of the population is exposed at or above the lowest LML of the cohort 

studies (Figures 7-6 and 7-7), increasing our confidence in the PM mortality analysis. Figure 7-6

shows a bar chart of the percentage of the population exposed to various air quality levels in the 

pre- and post-policy policy. Figure 7-7 shows a cumulative distribution function of the same 

data. Both figures identify the LML for each of the major cohort studies. As the policy shifts 

the distribution of air quality levels, fewer people are exposed to PM2.5 levels at or above the 

LML. Using the Pope et al. (2002) study, the 77% of the population is exposed to annual mean 

PM2.5 levels at or above the LML of 7.5 μg/m3. Using the Laden et al. (2006) study, 25% of the 

population is exposed above the LML of 10 μg/m3.

 As we model avoided premature deaths 

among populations exposed to levels of PM2.5, we have lower confidence in levels below the 

LML for each study. It is important to emphasize that we have high confidence in PM2.5-related 

effects down to the lowest LML of the major cohort studies. Just because we have greater 

confidence in the benefits above the LML, this does not mean that we have no confidence that 

benefits occur below the LML. 

A large fraction of the baseline exposure occurs below the level of the National Ambient 

Air Quality Standard (NAAQS) for annual PM2.5 at 15 μg/m3, which wasset in 2006. It is 

important to emphasize that NAAQS are not set at a level of zero risk. Instead, the NAAQS 

reflect the level determined by the Administrator to be protective of public health within an 

adequate margin of safety, taking into consideration effects on susceptible populations. While 

benefits occurring below the standard may be less certain than those occurring above the 

standard, EPA considers them to be legitimate components of the total benefits estimate.
7-29

Figure 7-6. Percentage of Adult Population by Annual Mean PM2.5 Exposure in the 

Baseline
7-30

Figure 7-7. Cumulative Distribution of Adult Population by Annual Mean PM2.5 

Exposure in the Baseline

Above we present the estimates of the total benefits, based on our interpretation of the 

best available scientific literature and methods and supported by the SAB-HES and the NAS 

(NRC, 2002). The benefits estimates are subject to a number of assumptions and uncertainties. 

For example, for key assumptions underlying the estimates for premature mortality, which 

typically account for more than 90% of the total benefits, we were able to quantify include the 

following: 

1. PM2.5 benefits were derived through benefit per-ton estimates, which do not reflect 

local variability in population density, meteorology, exposure, baseline health 

incidence rates, or other local factors that might lead to an over-estimate or underestimate of the actual benefits of controlling directly emitted fine particulates. We do 

not have data on the specific location of the air quality changes associated with this 

rulemaking; as such, it is not feasible to estimate the proportion of benefits occurring 

in different locations, such as designated nonattainment areas. In addition, the 

benefit-per-ton estimates are based on emissions from existing sources. To the extent 
7-31

that the geographic distribution of the emissions reductions for this rule are different 

than the modeled emissions, the benefits may be underestimated or overestimated. In 

general, there is inherently more uncertainty for new sources, which may not be 

included in the emissions inventory, than existing sources.

2. We assume that all fine particles, regardless of their chemical composition, are 

equally potent in causing premature mortality. This is an important assumption, 

because PM2.5 produced via transported precursors emitted from EGUs may differ 

significantly from direct PM2.5 released from diesel engines and other industrial 

sources, but no clear scientific grounds exist for supporting differential effects 

estimates by particle type. 

3. We assume that the health impact function 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 PM2.5,

including both regions that are in attainment with fine particle standard and those that 

do not meet the standard down to the lowest modeled concentrations. 

4. To characterize the uncertainty in the relationship between PM2.5 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 in 

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 PM2.5 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 PM2.5 benefits, please consult the 

PM2.5 NAAQS RIA (Table 5.5).

This RIA does not include the type of detailed uncertainty assessment found in the PM 

NAAQS RIA because we lack the necessary air quality input and monitoring data to run the 

benefits model. In addition, we have not conducted any air quality modeling for this rule. 

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 benefits results presented in this 

analysis. 
7-32

7.4 Comparison of Co-Benefits and Costs

Using a 3% discount rate, we estimate the total combined monetized co-benefits of the 

reconsidered CI RICE NESHAP to be $770 million to $1.9 billion in the implementation year 

(2013). Using a 7% discount rate, we estimate the total monetized co-benefits of the reconsidered 

CI RICE NESHAP proposal to be $690 million to $1.7 billion. The annualized social costs of the

reconsidered CI RICE NESHAP are $373 million (2010$) at a 7% interest rate.62 The annualized 

social costs of the reconsidered NESHAP are $372 million in 2008$. As stated in Section 4 of 

this RIA, the costs in 2008 dollars can be updated to 2010 dollars by applying the ratio of the 

2010 Marshall & Swift (M&S) annual cost index and the 2008 M&S annual cost index, which is 

1,457.4/1,449.3 = 1.01. Thus, the net benefits are $400 million to $1.5 billion at a 3% discount 

rate and $320 million to $1.3 billion at a 7% discount rate. All of these estimates are in 2010$ for 

the year 2013. 

Table 7-5 shows a summary of the monetized co-benefits, social costs, and net benefits 

for the reconsidered CI RICE NESHAP, respectively. Figures 7-8 and 7-9 show the full range of 

net benefits estimates (i.e., annual co-benefits minus annualized costs) utilizing the 14 different 

PM2.5 mortality functions at discount rates of 3% and 7%. In addition, the benefits from reducing 

14,000 tons of carbon monoxide and 1,000 tons of HAP each year from existing CI RICE have 

not been included in these estimates. EPA believes that the co-benefits are likely to exceed the 

costs under this rulemaking even when taking into account uncertainties in the cost and benefit 

estimates.

Table 7-5. Summary of the Monetized Benefits, Compliance Costs and Net benefits for 

the 2010 Rule with the Final Amendments to the Stationary CI Engine NESHAP in 2013 

(millions of 2010 dollars)a

3% Discount Rate 7% Discount Rate

Total Monetized Benefits2$770 to $1,900 $690 to $1,700

Total Compliance Costs3$373 $373

Net Benefits $400 to $1,500 $320 to $1,300

Non-monetized Benefits

Health effects from HAP exposure

Health effects from PM2.5 exposure from VOC emissions

Ecosystem effects 

 

62 For more information on the annualized social costs, please refer to Section 5 of this RIA.
7-33

Visibility impairment 

1All estimates are for the implementation year (2013), and are rounded to two significant figures. The annual ized 

compliance costs are $373 million in 2010$ as noted earlier in this RIA. These costs, presented in 2008 dollars, 

can be updated to 2010 dollars by applying the ratio of the 2010 Marshall & Swift (M&S) annual cost index and 

the 2008 M&S annual cost index, which is 1,457.4/1,449.3 = 1.01. Compliance costs are used as an 

approximation for social costs in this RIA. 

2 The total monetized benefits reflect the human health benefits associated with reducing exposure to PM2.5 through 

reductions of PM2.5 precursors such as directly emitted fine particles. Human health benefits are shown as a range 

from Pope et al. (2002) to Laden et al. (2006). These models assume that all fine particles, regardless of their 

chemical composition, are equally potent in causing premature mortality because the scientific evidence is not yet 

sufficient to allow differentiation of effects estimates by particle type. Although we have not re-estimated the 

benefits for this rule to apply the updated methods in the PM NAAQS RIA (U.S. EPA, 2012b), these updates 

generally offset each other, and we anticipate that the rounded benefits estimated for this rule are unlikely to be 

different than those provided here.

3

The engineering compliance costs are annualized using a 7 percent discount rate. 
7-34

Figure 7-8. Net Benefits for CI RICE NESHAP Reconsideration at 3% discount rate*

*Net Benefits are quantified in terms of PM2.5 at a 3% discount rate for 2013 and are in 2010$. This graph shows 14 

benefits estimates combined with the cost estimate. All fine particles are assumed to have equivalent health effects, 

but the benefit per ton estimates vary because each ton of precursor reduced has a different propensity to become 

PM2.5. The monetized benefits incorporate the conversion from precursor emissions to ambient fine particles. 

-$100

-$80

-$60

-$40

-$20

$0

$20

$40

$60

$80

$100

Pope et al.

Laden et al.

Millions (2010$)

Cost estimate combined with total monetized benefits estimates derived from 2 

epidemiology functions and 12 expert functions

-$500

$ 0

$500

$1,000

$1,500

$2,000

$2,500

Pope et al.

Laden et al. Millions (2010$)

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

functions
7-35

Figure 7-9. Net Benefits for CI RICE NESHAP Reconsideration at 7% discount rate*

*Net Benefits are quantified in terms of PM2.5 benefits at a 7% discount rate at a 7% discount rate for 2013 and are 

in 2010$. This graph shows 14 benefits estimates combined with the cost estimate. All fine particles are assumed to 

have equivalent health effects. The monetized benefits incorporate the conversion from precursor emissions to 

ambient fine particles. 

7.5 References

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Atmos Health 2:169–176.

-$500

$ 0

$500

$1,000

$1,500

$2,000

$2,500

Pope et al.

Laden et al. Millions (2010$)

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

functions
7-36

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7-38

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7-39

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8-1

SECTION 8

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8-2

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8-3

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United States

Environmental Protection

Agency

Office of Air Quality Planning and

Standards

Health and Environmental Impacts 

Division

Research Triangle Park, NC

EPA-452/R-13-001

January 2013