iii 

# Regulatory Impact Analysis (RIA) for Reconsideration of Existing Stationary Spark Ignition (SI) RICE NESHAP

Final Reportiv EPA

- 452/R

- 13

- 002 January 2013

Regulatory Impact Analysis for Reconsideration of Existing Stationary Spark Ignition (SI) RICE NESHAP

U.S. Environmental Protection Agency Office of Air Quality Planning and Standards Health and Environmental Impact Division Air Economics Group and Risk and Benefits Group

Research Triangle Park, NCv CONTENTS

Section Page

1 Executive Summary

................................ ................................ ................................ ...... 1

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

... ... ... .. 1

- 1 ES.2 Comparison of Impacts for 2010 Final SI RICE NESHAP and SI RICE NESHAP Reconsideration

..................... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... 1

- 3

2 Introduction

................................ ................................ ................................ ................... 2

- 7

2.1 Organization of this Report

................................ ................................ .................. 2

- 7

3 Industry Profile

................................ ................................ ................................ ............. 3

- 1

3.1 Electric Power Generation, Transmission, and Distribution

............................... 3

- 1
3.1.1 Overview

................................ ................................ ................................ .. 3

- 1
3.1.2 Goods and Services Used

................................ ................................ ......... 3

- 3
3.1.3 Business Statistics

................................ ................................ .................... 3

- 4

3.2 Oil and Gas Extraction

................................ ................................ ....................... 3

- 11
3.2.1 Overview

................................ ................................ ................................ 3

- 11
3.2.2 Goods and Services Used

................................ ................................ ....... 3

- 11vi 3.2.3 Business Statistics

................................ ................................ .................. 3

- 13
3 .2.4 Case Study: Marginal Wells

................................ ................................ .. 3

- 17

3.3 Pipeline Transportation of Natural Gas

................................ ............................. 3

- 18
3.3.1 Overview

................................ ................................ ................................ 3

- 18
3.3.2 Goods and Services Used

................................ ................................ ....... 3

- 18
3.3.3 Business Statistics

................................ ................................ .................. 3

- 20

4 Regulatory Alternatives, Costs, and Emission Impacts

................................ ................ 4

- 1

4.1 Background

................................ ................................ ................................ .......... 4

- 1

4.2 Proposed Amendments to SI RICE NESHAP

................................ ..................... 4

- 3
4.2.1 Total Hydrocarbon Complianc e (THC) Demonstration Option

.............. 4

- 3
4.2.2 Emergency Demand Response and Reliability

................................ ........ 4

- 8
4.2.3 Non

- Emergency Stationary SI RICE Greater than 500 HP Located at Area Sources

...... ................................ ................................ .............. 4

- 17 4.2.4 Compliance Date............................................................

... 4

- 2 6

4. 3 What Are the Pollutants Regulated by the Rule?

................................ ............... 4

- 26

4. 4 Cost Impacts

................................ ................................ ................................ ....... 4

- 27
4. 4 .1 Introduction

................................ ................................ ............................ 4

- 27
4. 4 .2 Control Cost Methodology

................................ ................................ .... 4

- 28
4. 4 .3 Control Cost Equations

................................ ................................ .......... 4

- 30
4. 4 .4 Summary

................................ ................................ ................................ 4

- 34
4. 4 .5 Caveats and Limitations for Cost Estimates

................................ .......... 4

- 45

4. 5 Baseline Emissions and Emission Reductions

................................ ................... 4

- 4 6

5 Economic Impact Analysis, Energy Impacts, and Social Costs

................................ ... 5

- 1

5.1 Compliance Costs of the Reconsidered Rule

................................ ....................... 5

- 1

5. 2 Social Cost Estimate

................................ ................................ ............................ 5

- 3

5. 3 How Might People and Firms Respond? A Partial Equilibrium Analysis

........... 5

- 3
5. 3 .1 Changes in Market Prices and Quantities

................................ ................ 5

- 4vii 5. 3 .2 Regulated Markets: The Electric Power Generation, Transmission, and Distribution Sector

................................ ................................ ............ 5

- 6
5. 3 .3 Partial Equilibrium Measures of Social Cost: Changes Consumer and Producer Surplus

................................ ................................ ............... 5

- 7

5.4 Energy Impacts

................................ ................................ ................................ .... 5

- 8

5.5 Unfun ded Mandates

................................ ................................ ........................... 5

- 10
5.5.1 Future and Disproportionate Costs

................................ ........................ 5

- 10
5.5.2 Effects on the National Economy

................................ .......................... 5

- 10

5.6 Environmental Justice

................................ ................................ ........................ 5

- 11

5.7 Employment Impact Analysis

................................ ................................ ............ 5

- 10
5.7.1 Employment Impacts from Pollution Control Requirements

................ 5

- 1 2
5.7.2 Employment Impacts within the Regulated Industry

............................. 5

- 1 6

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 Compl iance Costs

............... 6

- 2

6.3 Small Government Entities

................................ ................................ ................ 6

- 12

7 Benefits of Emissions Reductions

................................ ................................ ................ 7

- 1

7

. 1 Calculation of PM 2.5 Human Health Co

- Benefits

................................ ................ 7

- 1

7

. 2 Unquantified Benefits

................................ ................................ ........................ 7

- 1 5
7

. 2

. 1 HAP Benefits

................................ ................................ ......................... 7

- 1 5
7

. 2

. 2 Additional NO 2 Co

- Benefits

................................ ................................ .. 7

- 26
7

. 2

. 3 Ozone Co

- Benefits

................................ ................................ ................ 7

- 27
7. 2

. 4 Carbon Monoxide Co

- Benefits

................................ .............................. 7

- 28 7.2.5 Visibility Impairment Co

- Benefits..................................7

- 2 8

7

. 3 Characterization of Uncertainty in the Monetized PM 2.5 Co

- Benefits

............... 7

- 2 8

7

. 4 Comparison of Co

- Benefits and Costs

................................ ............................... 7

- 3 3viii

8 References for RIA

................................ ................................ ................................ ....... 8

- 1ix 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

- 12 3

- 5 2002 Regional Distribution of Establishments: Crude Petroleum and Natural Gas Extraction Industry (NAICS 211111)

................................ ................................ 3

- 15 3

- 6 2002 Regional Distribution of Establishments: Natural Gas Liquid Extraction Industry (NAICS 211112)

................................ ................................ ......................... 3

- 16 3

- 7 Distribution of Establishments within Pipeline Transportation (NAICS 486)

.......... 3

- 19 3

- 8 Distribution of Revenue within Pipeline Transportation (NAICS 486)

.................... 3

- 20 3

- 9 2002 Regional Dis tribution of Establishments: Pipeline Transportation (NAICS 486)

................................ ................................ ................................ ............................ 3

- 22 3

- 10 Share of Establishments by Legal Form of Organization in the Pipeline Transportation of Natural Gas Industry (NAICS 48621): 2002

................................ 3

- 22

5

- 1 Distribution of Engine Population by Horsepower Group

................................ .......... 5

- 2 5

- 2 Market Demand and Supply Model: With and Without R egulation

........................... 5

- 5 5

- 3 Electricity Restructuring by State

................................ ................................ ................ 5

- 8

6

- 1 Distribution of Engine Population by Size for All Industries

................................ ..... 6

- 9 6

- 2 Distribution of Compliance Costs by Engine Size for All Industries

....................... 6

- 10

7

- 1

. Breakdown of Monetized PM 2.5 Health Co

- Benefits using Mortality Function from Pope et al. (2002)

................................ ................................ .............................. 7

- 10 7

- 2

. Total Monetized PM 2.5 Co

- Benefits for the SI RICE Reconsidered NESHAP in 2013

................................ ................................ ................................ ........................... 7

- 1 4 7

- 3

. Breakdown of Monetized Co

- Benefits for the SI RICE Reconsidered NESHAP by Engine Size e

................................ ................................ ........................ 7

- 1 5 7

- 4

. Estimated Chronic C ensus Tract Carcinogenic Risk from HAP exposure from outdoor sources ( 2005 NATA)

................................ ................................ .................. 7

- 1 7 7

- 5

. Estimated C hronic Census Tract Noncancer (Respiratory) Risk from HAP exposure from outdoor sources ( 2005 NATA)

................................ .......................... 7

- 1 8 7

- 6

. Percentage of Adult Popu lation by Annual Mean PM 2.5 Exposure in the Baseline

................................ ................................ ................................ .................... 7

- 30x

7

- 7. Cumulative Distribution of Adult Population at Annual Mean PM 2.5 Exposure in the Baseline

................................ ................................ ................................ .......... 7

- 31 7

- 8

. Net Benefits for the SI RICE Reconsidered NESHAP at 3% Discount Rate

.......... 7

- 3 5 7

- 9

. Net Benefits for the SI RICE Reconsidered NESHAP at 7% Discount Rate

........... 7

- 3 6xi LIST OF TABLES

Number Page

1

- 1 Summary of the Monetized Co

- Benefits, Social Costs, and Net benefits for the SI RICE Reconsidered NESHAP in 2013 (millions of 20 10 $)

................................ ... 1

- 3 1

- 2. Summary of th e Monetized Co

- Benefits, Compliance Costs, and Net benefits for the 2010 Rule with the Amendments to the Stationary SI RICE Engine NESHAP in 2013 (millions of 20 10 $)

............................................................... ...................................... 1

- 4 ...........................................................1

- 7 1

- 3. Summary of Estimated Monetized Benefits , Compliance Costs and Net Benefits for the 2010 Rule with the Amendments to the Stationary SI Engine NESHAP in 2013 Reconsideration (millions of 2010 dollars)........................1

- 10

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 Distri bution (NAICS 2211): 2002

................................ ................................ ............... 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 20 10 Financial Data fo r 70 U.S. Shareholder

- Owned Electric Utilities

............... 3

- 9 3

- 6 Aggregate Tax Data for Accounting Period 7/07

– 6/08: NAICS 2211

....................... 3

- 9 3

- 7 Key Enterprise Statistics by Receipt Size for Electric Power Generation, Transmission, and Distribution (NAICS 2211): 200 7

................................ ............... 3

- 10 3

- 8 Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111): (2007)

................................ ................................ ................................ ........................ 3

- 12 3

- 9 Key Statistics: Natural Gas Liquid Extraction (NAICS 211112) (2007)

.................. 3

- 13 3

- 10 Direct Requireme nts for Oil and Gas Extraction (NAICS 211): 2002

...................... 3

- 13 3

- 11 Key Enterprise Statistics by Employment Size for Crude Petroleum and Natural Gas Extraction (NAICS 21111 1): 200 7

................................ ....................... 3

- 17 3

- 12 Key Enterprise Statistics by Employment Size for Crude Natural Gas Liquid Extraction (NAICS 211112): 200 7

................................ ................................ ............ 3

- 1 7 3

- 13 Aggregate Tax Data for Accou nting Period 7/07

– 6/08: NAICS 211

....................... 3

- 18 3

- 1 4 Key Statistics: Pipeline Transportation of Natural Gas (NAICS 48621) (2007)

...... 3

- 19 3

- 1 5 Direct Requirements for Pipeline Transportation (NAICS 486): 2002

..................... 3

- 21 3

- 1 6 Firm Concentrati on for Pipeline Transportation of Natural Gas (NAICS 48621): 2002

................................ ................................ ................................ .............. 3

- 23 3

- 1 7 Aggregate Tax Data for Accounting Period 7/07

– 6/08: NAICS 486

....................... 3

- 23xii

3

- 1 8 Key Enterprise Statistics by Receipt Size for Pipeline Transportation of Natural Gas (NAICS 48621): 200 7

................................ ................................ ........................ 3

- 24

4

- 1 Summary of Annual and Capital Costs Equations for Existing Stationary SI Engines

................................ ................................ ................................ ...................... 4

- 34 4

- 2 Summary of Major Source and Area Source Costs for the SI RICE NESHAP

........ 4

- 35 4

- 3 Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP

................................ ................................ ................................ ................... 4

- 36 4

- 4 Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Size

................................ ................................ ................................ ...... 4

- 37 4

- 5 Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Number of Engines

................................ ................................ ............. 4

- 41 4

- 6 Summary of Major Source and A rea Source Baseline Emissions for the SI RICE NESHAP

................................ ................................ ................................ ......... 4

- 46 4

- 7 Emissions Factors

................................ ................................ ................................ ...... 4

- 47 4

- 8 Summary of Major Source and Area Source Emissions Reductions for the SI RICE NESHAP by 2013

................................ ................................ ........................... 4

- 47

5

- 1 Selected Industry

- Level Annualized Compliance Costs as a Fraction of Total Industry Revenue: 2009

................................ ................................ ............................... 5

- 3 5

- 2 Hypothetical Price Increases for a 1% Increase in Unit Costs

................................ .... 5

- 6 5

- 3 Hypothetical Consumption Decreases for a 1% Increase in Unit Costs

..................... 5

- 7 5

- 4 U.S. Electric Power a Sector Energy Consumption (Quadrillion BTUs): 2013

........... 5

- 9 5

- 5 Labor

- based Employment Estimates for Reporting and Recordkeeping and Installing, Operating, and Maintaining Control Equipment Requirements for Reconsideration SI RICE NESHAP......................................................

......................... 5

- 1 5

6

- 1 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 Enterpr ise: 200 7 ($2009 Million/Establishment)

................................ ................................ ................................ 6

- 5 6

- 3 Average Receipts for Affected Industry by Enterprise Receipt Range: 200 7 ($2009/Establishment)

................................ ................................ ................................ . 6

- 6 6

- 4 Representative Establishment Costs Used for Small Entity Analysis ($2009)

........... 6

- 8

7

- 1 Human Health Effect s of PM 2.5
................................ ................................ ................... 7

- 3 7

- 2. General Summary of Monetized PM 2. 5 – Related Health Co

- Benefits Estimates for the SI RICE Reconsidered NESHAP in 2013 (millions of 20 10 $)

.................... 7

- 11 7

- 3. Summary of Reductions in Health Incidences from PM 2.5 Co

- Benefits for the SI RICE Reconsidered NESHAP in 2013

................................ ................................ . 7

- 1 2xiii

7

- 4

. All Monetized PM 2.5 Co

- Benefits from PM 2.5 Benefits for the SI RICE Reconsidered NESHAP in 2013

................................ ................................ ................ 7

- 1 3 7

- 5

. Summary of the Monetized Benefits, Compliance Costs and Net benefits for the 2010 Rule with the Amendments to th e Stat ionary CI Engine NESHAP in 2013 (millions of 2010 dollars) .......................................................................7

- 3 31

- 1 Section 1
EXECUTIVE SUMMARY

ES.1 Summary of Impacts for the Reconsideration

This action is a reconsideration of the promulgate d NESHAP for existing stationary SI RICE with a site rating of less than or equal to 500 HP located at major sources, and existing stationary SI RICE of any site rating located at area sources.

EPA estimates that complying with the reconsidered national emission standards for hazardous air pollutants (NESHA P ) for stationary spark

- ignition (SI) reciprocating internal combustion engines ( RICE ) will have an annualized cost of approximately $ 115 million per year ( 200 9 or 2010 dollars) in the year of full implementation of the rule (2013). The total annualized
costs of the reconsidered rule are 55% less than those for the final SI RICE NESHAP promulgated in 2010. Using these costs, EPA estimates in its economic impact analysis that the
NESHAP will h ave limited impacts on the industries affected and their consumers. Using sales
data obtained for affected small entities in an analysi s of the impacts of this rule on small
entities , EPA e xpects that the NESHAP will not result in a SISNOSE ( significant economic impacts for a subs tantial number of small entities ) , a result consistent with the conclusion for the
final SI RICE NESHAP issued in 2010

. EPA also does not expect significant adverse energy impacts based on Executive Order 13211, an Executive Orde r that requires analysis of energy impacts for rules such as this one that are economically significant under Executive Order 12866.

In the year of full implementation (2013), EPA estimates that the total monetized benefits
of the reconsidered NESHAP are $ 62 million to $ 150 m illion and $ 55 million to $ 140 m illion, at 3% and 7% discount rates, respectively (Table 1

- 1). All estimates are in 20 10 dollars for the year
2013. These estimates reflect the co

- benefits from 9,600 tons of NOx emission reductions

asso ciated with implementing the controls to reduce hazardous air pollutants (HAPs) required
under this reconsideration. Using alternate relationships between PM 2.5 and premature mortality supplied by experts, higher and lower benefits estimates are plausible, but most of the expert

based estimates fall between these estimates. The benefits from reducing other air pollutants have not been monetized in this analysis, including reducing 22

, 2 00 tons of carbon monoxide (CO) and 1

, 8 00 tons of hazardous air pollutant s ( HAPs ) each year. In addition, ecosystem benefits and visibility benefits have not been monetized in this analysis. 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

-1

- 2

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.

In the year of full implementation (2013), EPA estimates the net benefits of the NESHAP are $

- 53 m illion to $ 35 m illion and $

- 60 m illion to $ 25 m illion at 3% and 7% discount rates, respectively (Table 1

- 1)

. These estimates are “snapshots” of benefits and costs at year 2013 and
are in 2010 dollars

.1

- 3

Table 1

- 1

. Summary of the Annualized Monetized Co

- Benefits, Social Costs, and Net

benefits f or the Reconsideration SI RICE NESHAP in 2013 (millions of 20 10 $) 1

3% Discount Rate 7% Discount Rate

Total Monetized Benefits 2 $62 to $150 $55 to $140

Total Compliance Costs 3 $115 $115

Net Benefits $

- 53 to $35 $

- 60 to $25

Non

- monetized Benefits Health effects from HAP exposure
Health effects from CO

, NO 2 , and ozone exposure Ecosystem effects Visibility impairment

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

- benefits reflect the human health co

- benefits associated with reducing exposure to PM 2.5 through reductions of PM 2.5 precursors such as NOx and VOC. It is important to note that the monetized co

benefits include many but not all hea lth effects associated with PM 2.5 exposure. It is important to note that the monetized benefits include many but not all health effects associated with PM 2.5 exposure. Benefits are shown as a range from Pope et al. (2002) to Laden et al. (2006). These mode ls assume that all fine particles, regardless of their chemical composition, are equally potent in causing premature mortality because there is no clear scientific evidence that would support the development of differential effects estimates by particle ty pe. 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 unlikel y 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 annual compliance costs are calculated using a 7 percent discount rate.

ES.2 Comparison of Impacts for Final 2010 SI RICE Final Rule and SI RICE NESHAP Reconsideration

The EPA analyzed the costs, economic impacts and benefits of this rule using the
identical methodology as the RIA for the SI RICE final rule promulgated in October, 2010

. Therefore, all changes to the costs, benefits, and economic impacts for this rule are due to changes (amendments) to this rule for SI RICE, which are fully described later in this RIA and the preamb le for the rule

. Our baseline does not assume compliance with the 2010 SI RICE final rule. This assumption is based on the fact that full implementation of the final SI RICE rule has not taken place as of yet (it will take p lace by October , 2013). In add ition, 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 PM 2.5 emissions.1

- 4

The following table shows an approximation of the changes in monetized benefits and engineering costs due to changes to the SI RICE rule included in the SI RICE reconsideration, and includes values that show a comparison based on the 2010 final rule emissions inventory.
All values in this table are in 2010 dollars.

Table 1

- 2. Comparison of Benefits and Costs for 20 12 S I RICE Final Rule and 2012 Reconsideration S I RICE Rule

Monetized Benefits in 2013 Annual Engineering Costs in 2013
SI RICE Final Rule (May 2010) $ 510 to $ 1,200 m illion $253 m illion Changes due to the amendments to the final SI RICE rule - $ 448 to $ 1,050 m illion

- $138 m illion

Final SI RICE reconsideration rule (2012) +$ 62 to $ 150 m illion $115 m illion

* Monetized benefits are shown at a 3% discount rate and are from reductions in PM 2.5 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 econo mic impacts fall by more than half from those for the SI final rule. This outcome is due to the significant reduction in compliance costs associated with the
amendments to the 2010 SI final rule in this rulemaking . All of the se 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 also fall
from those calculated for the final SI RICE rule

. This outcome is also due to the overall large reductions in compliance costs. All of the results for this rule are found in Section 6 in this RIA.

We estimate change s in employment for this SI RICE rule. These estimates reflect the employment impacts a ssociated with installation and operation of monitoring equipment, and also activities for recordkeeping, reporting, and testing. We estimate that 200 full

- time equivalents (FTEs) will be required as one

- time labor for installation of equipment, and 400
F TEs will be required as ongoing labor for compliance with the 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 SI RICE rule.1

- 5

The benefits estimates decreas ed significantly from those estimated for the 2010 final SI
RICE rule . The range for the 2010 final SI RICE R IA was $510 m illion (200 9 $) to $1,200

m illion (200 9 $) at 3 percent discount rate. The range for this rule is $62 million (2010$) to $150 million (2010 $) at 3 percent discount rat e. The range for the 2010 final SI RICE RIA was $460 million (2009$) to $1,100 million (2009 $) at 7 percent discount rate. Th e range for th is rule was $55 million (2010$) to $ 1 40 million (2010 $) at 7 percent discount rate.1

- 6

Table 1

- 5 shows the estimated costs and benefits for the 2010 final SI RICE Rule and the
reconsideration rule

. T he estimated net benefits for the reconsideration rule are considerably smaller than the range for the 2010 final SI RICE rule RIA, which was $ 210 million to $ 860 million at a 7 percent discount rate and was $ 250 million to $ 980 billion at 3 percent.

Table 1

- 3

. Summary of the Monetized Benefits, Compliance Costs and Net benefits for the 2010 Rule with the Amendments to the Stationary S I Engine NESHAP in 2013 (millions of 2010 dollars) a

3% Discount Rate 7% Discount Rate

2010 Final SI RICE NESHAP

Total Monetized Benefits $510 to $1,200 $460 to $1,100

Total Social Costs $253 $253

Net Benefits $250 to $980 $210 to $860

Final Reconsideration SI RICE NESHAP

Total Monetized Benefits $62 to $150 $55 to $140

Total Social Costs $115 $115

Net Benefits $

- 53 to $35 $

- 60 to $25

1 All estimates are for the implementation year ( 2013 ), and are rounded to two significant figures. All monetized benefits are from reductions of PM 2.5 emissions, a co

- benefit of this final rule

. 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 r ounded benefits estimated for this rule are unlikely to be different than those provided here. The annual ized compliance costs are $115 million in 2010$ 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.2

- 7 Section 2
INTRODUCTION

EPA is finaliz ing NESHAP for existing stationary SI RICE that either are located at area sources of hazardous air pollutant emissions or that have a site rating of less than or equal to 500 horsepower and are located at major sources of haza rdous air pollutant emissions. The final amendments to the SI 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 s tandards, EPA has prepared a regulatory impact analysis ( R IA ). 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 SI RICE NESHAP promulgated in 2010.

2.1 Organization of this Report

The remainder of this report supports and details the meth odology and the results of the
R IA:

 Section 3 presents a profile of the affected industries.

 Section 4 presents a summary of regulatory alternatives considered in the final rule, and provides the compli ance costs of the rule.2

- 8  Section 5 describes the estimated costs of the regulation and describes the economic impact analysis ( EIA ) methodology and reports market

, welfare , energy , and employment impacts.

 Section 6 presents estimated impacts on small enti ties.

 Section 7 presents the benefits and net benefits (benefits

- costs) estimates.3

- 1 Section 3
INDUSTRY PROFILE

This section provides an introduction to the industries affected by the rule , i.e., industries
in which the spark

- ignition ( SI ) RICE being regulated are found

. SI RICE generate electric power, pump gas or other fluids, or compress air for machinery. The primary non

- utility application of internal combustion (IC) engines is in the natural gas industry to po wer compressors used for pipeline transportation, field gathering (collecting gas from wells), underground storage tanks, and in

- gas processing plants. RICEs are separated into three design classes: 2 cycle (stroke) lean burn, 4

- stroke lean burn, and 4

- str oke rich burn. Each of these ha s design differences that affect both baseline emissions as well as the potential for emissions
control.

The se industries include the following:

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

,

 oil and gas extraction (including marginal wells) (NAICS 211)

, and

 pipeline transportation of natural gas (NAICS 48621)

.
While this is not an exhaustive list of the industries affected by this final reconsideration rule, t hese three industries incur about 8 3 percent of the annualized costs of the rule. A full listing of all industries affected in this rulemaking can be found in Chapter 4. The purpose of this profile chapter 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 generation grew about 18 % to over $ 440 billion ($2007) ( Table 3

- 1). 1 At the same time, payroll rose about 7 % and the number of

1 We provide revenues from electric power generation for the years 2002 and 2007 for these are years of the Economic Census. We reference data from these Economic Censuses frequently in this industry profile and show revenues from this industry over this t ime frame due to availability of such data.3

- 2

employees decreased by around 4 %. The number of establishments rose by about 3 %

. Industrial production within NAICS 2211 has increased 2 6 % 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 power generators controlled by com bined 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 ($10 6 ) 373,309 440,355 Payroll ($10 6 ) 40,842 43,792 Employees 535,675 515,335

Establishments 9,394 9,642

Source: U.S. Census Bureau; American FactFinder; “ Sector 22: EC0722I2: Utilities: Industry Series: Preliminary Comparative Statistics for the United States (2002 NAICS Basis): 2007 and 2002. ” http://factfinder.census.gov3

- 3

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 power generation. Extraction, transportation, refining, and equipment requirements potentially3

- 4

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. ”

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 th is section and report, we use the following definitions:

 Establishmen t: An establishment is a single physical location where business is conducted or where services or industrial operations are performed.3

- 5

Table 3

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

Distribution (NAICS 2211): 2002

Commodity Commodity Description Direct Requirements Coefficients a

V00100 Compensation of employees 20.52%

V00200 Taxes on production and imports, less subsidies 13.71%

211000 Oil and gas extraction 6.16%

212100 Coal mining 5.86%

482000 Rail transportation 3.01%

230301 Nonresidential maintenance and repair 2.83%

486000 Pipeline transportation 1.70%

722000 Food services 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 single

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 summ ed 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 singl e

- 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.3

- 6

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: S ummary 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 an d about 78% of total receipts/revenue.

Investor

- owned energy providers accounted for only 2 % of retail electricity sold in the
United States in 200 8 ( Table 3

- 4). In 200 8

, investor

- owned energy provider companies with less
than 50% of their assets regulate d were unprofitable overall , while other companies in this category were profitable

. ( Table 3

- 5). In 200 8 , enterprises within NAICS 2211 had a pre

- tax profit margin of 8.1 % ( Table 3

- 6 ).

In 2002, about 82% of firms generating, transmitting, or distributing electric power had receipts of under $50 million ( Table 3

- 7). However, these firms accounted for only 11% of employment, with 89% of employees working for firms with revenues in excess of $100 million.3

- 7

Table 3

- 3. Firm Concentration for Electric Power Gener ation, Transmission, and

Distribution (NAICS 2211): 2002

Commodity Establishments Receipts/Revenue

Number of Employees Employees per

Establishment Amount ($10 6 ) Percentage

of Total

All firms 9,394 $325,028 100.0% 535,675 57
4 largest firms 1,260 $52,349 16.1% 68,432 54
8 largest firms 2,566 $95,223 29.3% 151,575 59
20 largest firms 3,942 $173,207 53.3% 271,393 69
50 largest firms 5,887 $253,015 77.8% 408,021 69

Source: U.S. Census Bureau; generated by RTI 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).3
- 8 Table 3

- 4. United States Retail Electricity Sales Statistics: 200 8

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

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

Retail s ales (10 3 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 ($10 6 ) 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

Sourc e: 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

- 9

Table 3

- 5. FY 20 10 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
Regulated a 7.25% $12,341 $158,657
Mostly regulated b 8.50% $17, 815 $175,218

Diversified c

- 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 20 10 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 enterprises a 1,187
Total receipts (10 3 ) $3 23,522,443
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 200 0

– 200 9

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

, 2010).3
- 10 Table 3

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

(NAICS 2211): 200 7

Variable All Enterprises <20 Employee s 2 0

– 99

Employee s 1 00

– 4 99

Employees 5 00 +

Employee s

Firms 1, 687 630 670 251 136

Establishments 9, 611 687 1,110 999 6,815
Employment 5 03,134 3,622 31,455 42,527 425,530
Receipts ($10 3 ) $ 440,342,284 $ 8,364,773 $ 21,825,969 $ 41,370,375 $ 368,781,167
Receipts/firm ($10 3 ) $ 261,021 $ 13,277 $ 32,576 $ 164,822 $ 2,711,626
Receipts/establishment ($10 3 ) $ 45,817 $ 12,176 $ 19,663 $ 41,412 $ 54,113
Receipts/employment ($) $ 875 $ 2,309 $ 694 $ 973 $ 867

Source: U.S. Census Bureau

. 20 10

. “ Firm Size Data from the Statistics of U.S. Businesses: U.S. All Industries Tabulated by Receipt Size: 200 7

. ” <http://www.census.gov/csd/susb/susb0 7 .htm>.3

- 11

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 develo p oil and gas field properties through such activities as exploring for oil and gas, drilling and equipping wells, operating on

site equipment, and conducting other activities up to the point of shipment from the proper ty.

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 2002, 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. ( Figure 3

- 4).

From 2002 to 200 7 , revenues from crude petroleum and natural gas extraction (NAICS 211111) grew over 117 % to almost $ 215 billion ($2007) ( Table 3

- 8). At the same time, payroll

grew 55 % and the number of employees grew by 48 %. The number of establishments dropped by over 17 %; as a result, the average establishment revenue increased by 162 %. Materials costs were approximately 18 % of revenue over the period.

From 2002 to 200 7 , revenue from natural gas liquid extraction (NAICS 2 11112) grew

over 26 % to about $ 42 billion ( Table 3

- 9). At the same time, payroll dropped 1 8 % and the number of employees dropped by 24 %. The number of establishments dropped by 43 %, resulting in an increase of revenue per establishment of about 122 %.

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 RICE (oil and gas extraction, su pport 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

- 12

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 Natu ral Gas Extraction (NAICS 211111):

($2007)

2002 2007
Revenue ($10 6 ) $98,667 $214,198
Payroll ($10 6 ) $5,785 $8,980
Employees 94,886 140,160

Establishments 7,178 5,956

Source s : U.S. Census Bureau; generated by RTI International; using American FactFinder; “ Sector 21: Mining: Industry Series: Historical Statistics for the Industry: 2002 and 1997. ” <http://factfinder.census.gov>; (November 26, 2008)

. U.S. Census Bureau; generated by RTI International; using American FactFinder; “ Sector 21: EC0721I1: Mining: I ndustry Series: Detailed Statistics by Industry for the United States: 2007 ” <http://factfinder.census.gov>; (April 27, 2010).3

- 13

Table 3

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

2002 2007
Revenue ($10 6 ) $33,579 $42,363 Payroll ($10 6 ) $607 $501
Employees 9,693 7,343

Establishments 511 291

Source s : U.S. Census Bureau; generated by RTI International; using American FactFinder; “ Sector 21: Mining: Industry Series: Historical Statistics for the Industry: 2002 and 1997. ” < http://factfinder.census.gov>; (November 26, 2008)

. U.S. Census Bureau; generated by RTI International; using American FactFinder; “ Sector 21: EC0721I1: Mining: Industry Series: Detailed Statistics by Industry for the United States: 2007 ” <http://factfinder.census.gov >; (April 27, 2010).

Table 3

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

Commodity Commodity Description Direct Requirements Coefficients a

V00200 Taxes on production and imports, less subsidies 8.93%

V00100 Compensation of employees 6.67%

230301 Nonresidential maintenance and repair 6.36%

211000 Oil and gas extraction 1.91%

213112 Support activities for oil and gas operations 1.51%

221100 Electric power generation, transmission, and distribution 1.47%

541300 Architectural, engineering, and related services 1.24%

532400 Commercial and industrial machinery and equipment rental and leasing 1.20%

33291A Valve and fittings other than plumbing 1.10%

541511 Custom computer programming services 0.99%

a These values show the amount of the commodity required to produce $1.00 of the industry ’ s output. The values are expressed in percentage terms (coefficient ×100).

Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input

- Output Accounts: Detailed Make Table, Use Table and Direct Requirements Table. Tables 4 and 5.

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

- 14  Receipts : Receipts (net of taxes) are defined a s 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 single

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 o ne 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 sum m ed 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 2111 11, 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 211 112, 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 rece ipts.

Enterprises within this industry generated $1 93 billion in total receipts in 200 8 . Including those enterprises without net income, the industry averaged an after

- tax profit margin of 8.5 % ( Table 3

- 13).3

- 15

Figure 3

- 5. 2002 Regional Distribution of Establishments: Crude Petroleum and Natural

Gas Extraction Industry (NAICS 211111)
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “ Sector 21: Mining: Geographic Area Series: Industry Statistics for the State or Offsh ore Areas: 200 7

. ” <http://factfinder.census.gov>; ( January 27, 2010).3

- 16

Figure 3

- 6. 2002 Regional Distribution of Establishments: Natural Gas Liquid

Extraction Industry (NAICS 211112) Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “ Sector 21: Mining: Geographic Area Series: Industry Statistics for the State or Offshore Areas: 200 7

. ” <http://factfinder.census.gov>; ( January 27, 2010).3

- 17

Table 3

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

211111): 200 7

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/>

Table 3

- 12. Key Statistics for Crude Natural Gas Liquid Extraction (NAICS 211112): 200 7

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 millio n. **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 Pay roll, and Estimated Receipts by Enterprise Receipt Size for the United States, All Industries: 2007.” <http://www.census.gov/econ/susb/>3

- 18

Table 3

- 13. Aggregate Tax Data for Accounting Period 7/0 7

– 6/0 8 : NAICS 211

Number of enterprises a 19,441

Total receipts (10 3 ) $193,230,241

Net sales(10 3 ) $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 sp ecifically in the pipeline 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 200 7 , natural gas transportation revenues fell by 29 % to just over $ 16 billion ($2007) ( Table 3

- 1 4 ). At the same time, payroll decreased by 14 %, while the number of paid employees decreased by nearly 25 %. T he number of establishments also fell by 8 % from 1,701 establishments in 2002 to 1, 560 in 200 7

.
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 transportati on 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 60 % of NAICS 486
establishments and 66 % of revenue s (Figures 3

- 8 and 3

- 9).3

- 19

Table 3

- 1 4

. Key Statistics: Pipeline Transportation of Natural Gas (NAICS 48621) ($2007)

Year 2002 200 7 Revenue ($10 6 ) 16,368 20,797 Payroll ($10 6 ) 2,086 2,064 Employees 24,519 24,683

Establishments 1,560 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.go v (January 27, 2010).

Figure 3

- 7

. 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>; ( January 27, 2010 ).

In Table 3

- 1 5 , 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 po tentially associated with reciprocating internal combustion engines (electric power generation and distribution ) represent less than 2% of the value of services.3

- 20

Figure 3

- 8

. 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>; ( January 27, 2010)

.
3 .3.3 Business Sta tistics
The pipeline transportation of natural gas is clearly concentrated in the two states closest to the refineries in the Gulf of Mexico. In 2002, Texas and Louisiana contributed to 31% of all pipeline transportation establishments in the United States ( Figure 3

- 10) and 41% of all U.S. revenues. Other larger contributors with over 50 establishments in their states include Oklahoma, Pennsylvania, Kansas, Mississippi, and West Virginia.

According to 2002 U.S. Census data, about 86% of transportation of na tural gas establishments were owned by corporations and about 8% were owned by individual proprietorships. About 6% were owned by partnerships ( Figure 3

- 11). As shown in Table 3

- 1 6
, the four largest firms accounted for nearly half of the establishments, an d just over half, 51%, of total revenue. The 50 largest firms accounted for over 1,354 establishments and about 99% of total revenue. The average number of employees per establishment was approximately 17 across all groups of firms.

Enterprises within pip eline transportation (NAICS 486) generated $ 11.1 billion in total receipts in 200 8 . Including those enterprises without net income, the industry averaged an after

tax profit margin of 9.6 % ( Table 3

- 1 7 ).3

- 21

Table 3

- 1 5

. Direct Requirements for Pipeline Transpor tation (NAICS 486): 2002

Commodity Commodity Description Direct Requirements Coefficients a

V00100 Compensation of employees 14.78%

324110 Petroleum refineries 13.55%

230301 Nonresidential maintenance and repair 6.07%

211000 Oil and gas extraction 4.94%

333415 Air conditioning, refrigeration, and warm air heating equipment

manufacturing 4.40%

561300 Employment services 4.26%

5416A0 Environmental and other technical consulting services 3.04%

541300 Architectural, engineering, and related services 3.04%

420000 Wholesale trade 2.79%

332310 Plate work and fabricated structural product manufacturing 2.72%

5419A0 All other miscellaneous professional, scientific, and technical services 2.48%

524100 Insurance carriers 2.38%

531000 Real estate 2.33%

52A000 Monetary authorities and depository credit intermediation 1.76%

V00200 Taxes on production and imports, less subsidies 1.41%

541100 Legal services 1.19%

221100 Electric power generation, transmission, and distribution 1.13%

a These values show the amount of the commodity required to produce $1.00 of the industry ’ s output. The values are expressed in percentage terms (coefficient ×100). Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input

- Output Accounts: Detailed Make Table, Use Table and Direct Requirements Table. Tables 4 and 5.

The 200 7 SUSB shows that 47% of all fi rms in this industry made under $5 million in revenue. Enterprises with revenue over $100 million provided an overwhelming share of employment in this industry (98%) ( Table 3

- 1 8 ).3

- 22

Figure 3

- . 2002 Regional Distribution of Establishments: Pipeline Transportation

(NAICS 486)
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “ Sector 48

- 49: Geographic Distribution

— Pipeline transportation of natural gas: 2002

. <http://factfinder.census.gov>; (November 10, 2008).

Figure 3

- 1 0

. Share of Est ablishments 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: Subje ct Series

— Estab & Firm Size: Legal Form of Organization for the United States: 2002

. <http://factfinder.census.gov>; (December 12, 2008).3

- 23

Table 3

- 1 6

. Firm Concentration for Pipeline Transportation of Natural Gas (NAICS

48621) : 2002

Commodity Establishments Receipts/Revenue

Number of Employees Employees per

Establishment Amount ($10 6 ) Percentage of

Total

All firms 1,431 $14,797 100% 23,677 16.5
4 largest firms 698 $7,551 51% 11,814 16.9
8 largest firms 912 $10,059 68% 15,296 16.8
20 largest firms 1,283 $13,730 93% 21,792 17.0
50 largest firms 1,354 $14,718 99% 23,346 17.2

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “ Sector 48: Transportation and Warehousing: Subject Series

— Estab & Firm Size: Concentration by Largest Firms for the United States: 2002 ” <http://factfinder.census.gov>; (December 12, 2008).

Table 3

- 1 7

. Aggregate Tax Data for Accounting Period 7/07

– 6/08: NAICS 486

Number of enterprises a 321

Total receipts (10 3 ) $11,062,608

Net sales (10 3 ) $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).3
- 24 Table 3

- 1 8

. Key Enterprise Statistics by Employee Size for Pipeline Transportation of Natural Gas (NAICS 48621): 200 7

Variable All Enterprises <2 0 Employee s 2 0

– 99

Employee s 1 00

– 4 99

Employee s 500+ Employee s
Firms 126 63 12 9 42

Establishments 1.479 66 26 7 0 1,317 Employment 24,683 241 3 8 2 1,479 22,581 Receipts ($10 3 ) $ 20,796,681 N/A $ 518,341 $ 1,448,020 $ 18,498,143 Receipts/firm ($10 3 ) $ 165,053 N/A $ 43,195 $ 160,891 $ 440,432 Receipts/establishment ($10 3 ) $ 14,061 N/A $ 19,936 $ 20,686 $ 14,046

Receipts/employment ($) $ 843 N/A $ 1,357 $ 979 $ 819

Source: U.S. Census Bureau. 20 11 . Firm Size Data from the Statistics of U.S. Businesses, U.S. All Industries Tabulated by Employee Size: 200 7

. http://www2.census.gov/csd/susb/200 7 /usalli_r0 7 .xls.4

- 1 Section 4
REGULATORY ALTERNATI VES, COSTS, AND EMIS SION IMPACTS

4.1 Background
This section of the RIA includes a discussion of the regulatory alternatives considered for the 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 this section are in 2009$. Costs in 2010$ presented elsewhere
in the RIA are updat ed values based on the 2009$ costs presented in this section. Although the estimates presented are annualized, the y should be understood as a “snapshot” in analyzing costs. Annualized costs are estimated as equal for each year that control equipment is operated.

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. After promulgation of the 2010 RICE NESHAP
amendmen ts, 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, t he EPA is finaliz ing amendments to the national emission standards for hazardous air pollutants for stationary rec iprocating internal combustion engines under section
112 of the Clean Air Act. The final amendments include alternative testing options for certain large spark ignition (generally natural gas

- fueled) stationary reciprocating internal combustion engines, ma nagement practices for a subset of existing spark ignition stationary reciprocating internal combustion engines in sparsely populated areas, and alternative and less burdensome monitoring and compliance options for the same engines in populated areas. 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. The full preamble for the final SI RICE
NESHAP and this rule itself can be reviewed at http://www.epa.gov/ttn/atw/rice/fr20au10.pdf

.
The EPA is adding an alternative compliance demon stration option for stationary 4

- stroke rich burn (4SRB) spark ignition (SI) engines subject to a 76 percent or more formaldehyde4

- 2

reduction requirement. Owners and operators of 4SRB engines will be permitted to demonstrate compliance with the 76 percent fo rmaldehyde reduction emission standard by testing emissions of total hydrocarbons (THC) and showing that the engine is achieving at least a 30 percent reduction of THC emissions. The alternative compliance option provides a less expensive and less complex, but equally effective, method for demonstrating compliance than testing for formaldehyde.

The EPA is finalizing management practices for owners and operators of existing stationary 4

- stroke SI engines above 500 HP that are area sources of HAP emissions an d where the engines are remote from human activity. A remote area is defined as either a Department of Transportation (DOT) Class 1 pipeline location 2 , or, if the engine is not on a pipeline, if within a 0.25 mile radius of the facility there are 5 or fewe r buildings intended for human occupancy. The EPA determined that a 0.25 mile radius was appropriate because it is similar to the area used for the DOT Class 1 pipeline location. This final rule establishes management practices for these
sources rather tha n numeric emission limits and associated testing and monitoring. This provision and the division of remote and non

- remote engines into two separate subcategories addresses reasonable concerns with accessibility, infrastructure and staffing that stem from t he remoteness of the engines and higher costs that would be associated with compliance with the existing requirements. Existing stationary 4

- stroke SI engines above 500 HP at area sources that are in populated areas (defined as not in DOT pipeline Class 1 areas, or if not on a pipeline, if within a 0.25 mile radius of the engine there are more than 5 buildings intended for human occupancy) are subject to an equipment standard that requires the installation of HAP

- reducing
aftertreatment. The EPA has the dis cretion to set an equipment standard as generally available control technology (GACT) for engines located at area sources of HAP. Sources are required to test their engines to demonstrate compliance initially, perform catalyst activity check

- ups and
either monitor the catalyst inlet temperature continuously or employ high temperature shutdown devices to protect the catalyst

4.2 Final Amendments to SI RICE NESHAP

4.2.1

. Total Hydrocarbon Compliance (THC) Demonstration Option

Currently, SI 4SRB non

- emergency engines greater than 500 HP and located at major sources and existing SI 4SRB non

- emergency engines greater than 500 HP located at area sources have the option of meeting either a formaldehyde percent reduction or a formald ehyde

2 A Class 1 location is defined as an offshore area or a ny class location unit that has 10 or fewer buildings intended for human occupancy.4

- 3

concentration standard. Formaldehyde was established in the original 2004 RICE NESHAP as an appropriate surrogate for HAP emissions from 4SRB engines based on industry test data available at that time. Based on testing conducted at Colorado State Uni versity (CSU) of stationary lean burn engines, the EPA was able to establish CO as a surrogate for HAP for lean burn engines. Rich burn engines were not tested at CSU and the data the EPA had available at
the time that were used to set the standards for ri ch burn engines did not support the same relationship between CO and HAP reductions for rich burn engines. Therefore, the EPA was unable to establish CO as a surrogate for HAP emissions for rich burn engines and the emission standard for rich burn engines was specified in terms of formaldehyde, the hazardous air pollutant emitted in the largest quantity from stationary engines.

The EPA is adding an alternative method of demonstrating compliance with the NESHAP for existing and new stationary 4SRB non

- eme rgency engines greater than 500 HP that are located at major sources of HAP emissions. Under these final amendments, the emission standard remains the same, that is, existing and new stationary 4SRB engines greater than 500 HP and located at major sources are still required to reduce formaldehyde emissions by 76 percent or more or limit the concentration of formaldehyde in the stationary RICE exhaust to 350 parts per billion by volume, dry basis or less at 15 percent oxygen (O 2 ). This final rule adds an
alt ernative compliance demonstration option to the existing method of demonstrating compliance with the formaldehyde percent reduction standard. The current method is to test engines for formaldehyde. The alternative for owners and operators of 4SRB engines m eeting a 76 percent or more formaldehyde reduction is to test their engines for THC showing that the engine is achieving at least a 30 percent reduction of THC emissions. Including this optional THC compliance demonstration option reduces the cost of compl iance significantly while continuing
to achieve the same level of HAP emission reduction because the emission standards would
remain the same.

As discussed in the June 7, 2012 proposal, data provided to EPA indicate that a strong relationship exists betwe en percentage reductions of THC and percentage reductions of formaldehyde (the surrogate for HAP emissions in the NESHAP) on rich burn engines using

non

- selective catalytic reduction (NSCR). Data analyzed by the EPA indicate that if the NSCR is reducing TH C by at least 30 percent from 4SRB engines, formaldehyde emissions are guaranteed to be reduced by at least 76 percent, which is the percentage reduction required for the relevant engines. Indeed, the percentage reduction of formaldehyde is invariably well above the 76 percent level, and is usually above 90 percent. Therefore, the EPA concluded that for SI 4SRB engines using NSCR and meeting the NESHAP by showing a percentage reduction of HAP, it4

- 4

would be appropriate to allow sources to demonstrate complian ce with the NESHAP by showing a THC reduction of at least 30 percent. Owners and operators of existing stationary 4SRB engines less than or equal to 500 HP that are required to limit the concentration of formaldehyde in the stationary RICE exhaust to 10.3 parts per million by volume, dry basis (ppmvd) or less at 15 percent O 2 do not have the option to demonstrate compliance using THC and must continue to demonstrate compliance by testing for formaldehyde following the methods and procedures specified in the rule because the EPA could not verify a clear relationship between concentrations of THC and concentrations of formaldehyde in the exhaust from these SI 4SRB engines.

Owners and operators opting to use the THC compliance demonstration method must
demonst rate compliance by showing that the average reduction of THC is equal to or greater than 30 percent. Owners and operators of 4SRB stationary RICE complying with the requirement to reduce formaldehyde emissions and demonstrating compliance by using the THC compliance demonstration option must conduct performance testing using Method 25A of 40 CFR part 60, appendix A

– Determination of Total Gaseous Organic Concentration Using a Flame Ionization Analyzer. Measurements of THC at the inlet and the outlet of the NSCR must be on a dry basis and corrected to 15 percent O 2 or equivalent carbon dioxide content. To correct to 15 percent O 2 , dry basis, owners and operators must measure oxygen using Method 3, 3A or 3B of 40 CFR part 60, appendix A, or ASTM Method D6522

- 00 (2005) and measure moisture using Method 4 of 40 CFR part 60, appendix A, or Test Method 320 of 40 CFR part 63, appendix A, or ASTM D6348

- 03. Because owners and operators are complying with a percent reduction requirement, the
method used must be suitab le for the entire range of emissions since pre and post

- catalyst emissions must be measured. Method 25A is capable of measuring emissions down to 5 ppmv and is, therefore, an appropriate method for measuring THC emissions for compliance demonstration purpo ses. The EPA is allowing sources the option to meet a minimum THC percent reduction of 30 percent by using Method 25A of 40 CFR part 60, appendix A to demonstrate compliance with the formaldehyde percent reduction in 40 CFR part 63, subpart
ZZZZ.4

- 5

4.2.2

. Emergency Demand Response and Reliability

The EPA is finalizing certain revisions to the proposal regarding use of existing engines for emergency demand response and system reliability. Following is a summary of the prior requirements for these engines, including those in the 2010 regulation, a discussion of the information and input the EPA received in response to the proposal, and a description of the provisions being finalized in this action.

Existing emergency engines less than or equal to 50 0 HP located at major sources of HAP and existing emergency engines located at area sources of HAP were not regulated under the RICE NESHAP rulemakings finalized in 2004 and 2008. They could operate uncontrolled for
an unlimited amount of time. The 2010 RI CE NESHAP rulemaking for the first time established requirements for these existing emergency engines, requiring affected engines to comply by May 3, 2013, for stationary CI RICE and October 19, 2013, for stationary SI RICE. Under the RICE NESHAP requireme nts originally finalized in 2010, these existing emergency stationary engines must limit operation to situations like blackouts and floods and to a maximum of 100 hours per year for other specified operations beginning with the applicable compliance date i n 2013 for the engine. The limitation of 100 hours per year included maintenance checks and readiness testing of the engine, as well as a limit of 15 hours per year for use as part of a demand response program if the regional transmission organization or e quivalent balancing authority and transmission operator has determined there are emergency conditions that could lead to a potential electrical blackout, such as unusually low frequency, equipment overload, capacity or energy deficiency, or unacceptable vo ltage level. Under the 2010 regulation, existing emergency engines were required to meet management practice standards based on proper operation and maintenance of the engine; meeting these standards would not require installation of
aftertreatment to cont rol emissions.

Soon after the 2010 rule was final, the EPA received petitions for reconsideration of the
15

- hour limitation for emergency demand response that was finalized in the 2010 rule. According to one petition, the 15

- hour limit, while usually ade quate to cover the limited hours in which these engines are expected to be called upon, would not be sufficient to allow these emergency engines to participate in emergency demand response programs since some regional transmission organizations and indepen dent system operators require engines be available for more than 15 hours in order to meet emergency demand response situations. For example, PJM’s Emergency Load Response Program requires that emergency engines guarantee that they will be
available for 60 hours per year. By contrast, another petition asked EPA to eliminate the4

- 6

emergency demand response provision because of the adverse effects that the petitioner believes would result from increased emissions from these engines. The EPA received other comme nts that addressed the types of situations in which engines are called upon for emergency demand response and system reliability.

The EPA believes that the emergency demand response programs that exist across the country are important programs that protect the reliability and stability of the national electric service grid. The use of stationary emergency engines as part of emergency demand response programs can help prevent grid failure or blackouts , by allowing these engines to be used for
limited hours i n specific circumstances of grid instability prior to the occurrence of blackouts. A standard that requires owners and operators of stationary emergency engines that participate in emergency demand response programs to apply aftertreatment could make it ec onomically infeasible for these engines to participate in these programs, impairing 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 in times of critical need. Information provided by commenters on the proposal indicates that these emergency demand response events are rarely called. 3

The limited circumstances specified in the final rule for operation of stationary emergency engines for emergency demand response purposes include periods during which the Reliability Coordinator, or other authorized entity as determined by the Reliability Coordinator, has declared an Energy Emergency Alert (EEA) Level 2 as defined in the North American Electric Reliability Corporation (NERC) Reliability Standard EOP

- 002

- 3, Capacity and Energy Emergency, and during periods where there is a deviation of voltage or frequency of 5 percent or more below standard voltage or freque ncy. During EEA Level 2 alerts there is insufficient energy supply and a true potential for electrical blackouts. System operators must call on all available resources during EEA Level 2 alerts in order to stabilize the grid to prevent failure. Therefore, this situation is a good indicator of severe instability on the system, which the EPA believes is appropriately considered an emergency situation. Consistent normal voltage provided by the utility is often called power quality and is an important factor in local electric system reliability. Reliability of the system requires electricity being provided at a normal expected voltage. The American National Standards Institute standard C84.1

- 1989 defines the maximum allowable voltage sag at below 5 percent. On t he local distribution level local voltage levels are therefore important and a 5 percent or more change in the normal voltage or frequency is

3 See document number EPA

- HQ

- OAR

- 2008

- 0708

- 1142 in the rulemaking docket

.4

- 7

substantial and an indication that additional resources are needed to ensure local distribution system reliability

.
In addition to the circumstances described above, the EPA also received comments on other 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 w here the ready availability of emergency engines is critical to system reliability. These include situations where:

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 EPA believes the operation of emergency engines in these situations should be addressed in
the final rule as well.

Therefore, based on the EPA’s review of the petitions and comments that the EPA has received with respect to emergency demand response and system reliability, the EPA has concluded that it is appropriate to revise the proposed provisions for stationary engines used i n these limited circumstances. The provisions the EPA is amending are in §§63.6640(f) and 63.6675 of 40 CFR part 63, subpart ZZZZ. The final amendments to those sections specify that owners and operators of stationary emergency RICE can operate their engin es as part of an emergency demand response program within the 100 hours provided in the proposed rule for

non

- emergency operation. Owners and operators of stationary emergency engines can operate for up to 100 hours per year for emergency demand response a nd system reliability during periods in which 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 EOP

002

- 3, Capacity and Energy Emerg ency, and during periods where there is a deviation of voltage or frequency of 5 percent or greater below standard voltage or frequency. In addition, existing emergency stationary RICE at area sources of HAP can operate for up to 50 hours per year if all

o f the following conditions are met:

The engine is dispatched by the local balancing authority or local transmission and distribution system operator.4

- 8

The dispatch is intended to mitigate local transmission and/or distribution limitations so
as to avert po tential 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 owner or operator has a pre

- existing plan that contemplates the engine’s operation under the circumstances described above; and 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 op erator. For all engines operating to satisfy emergency demand response or system reliability under the circumstances described above, the hours spent for emergency demand response operation and local system reliability are added to the hours spent for
main tenance and testing purposes and are counted towards the limit of 100 hours per year. If the total time spent for maintenance and testing, emergency demand response, and system reliability operation exceeds 100 hours per year, the engine will not be
consid ered an emergency engine under this subpart and will need to meet all requirements for non

- emergency engines.

As noted above, the EPA received comments expressing concerns about the emissions from emergency engines, noting that the engines are likely to b e dispatched on days when energy demand is high, which often coincides with days when air quality is poor. While the EPA is sensitive to these concerns, the availability of these engines for a more tailored response to emergencies may be preferable in term s of air quality impacts than relying on other generation, including coal

- fired spinning reserve generation. After consideration of the concerns raised in the comments, the EPA is finalizing provisions that require stationary emergency CI RICE with a site rating of more than 100 brake HP and a displacement of less than 30 liters per cylinder 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, or th at operate for local system reliability, to use diesel fuel meeting the specifications of 40 CFR 80.510(b) beginning January 1, 2015, except that any existing diesel fuel purchased (or otherwise obtained) prior to January 1, 2015, may be used until deplete d. The specifications of 40 CFR 80.510(b) require that diesel fuel have a maximum sulfur content of 15 ppm and either a minimum cetane index of 40 or a maximum aromatic content of 35 volume percent; this fuel is4

- 9

referred to as “ultra low sulfur diesel fuel ” (ULSD). This emission reduction requirement was not part of the original 2010 rulemaking. Although the EPA does not have information specifying the percentage of existing stationary emergency CI engines currently using residual fuel oil or non

- ULSD disti llate fuel, the most recent U.S. Energy
Information Administration data available for sales of distillate and residual fuel oil to
end users 4 show that significant amounts of non

- ULSD are still being purchased by end users that typically operate stationary combustion sources, including stationary emergency CI engines. For example, in the category of Commercial End Use, sales data for the year 2010 show that only 45 percent of the total distillate and residual fuel oil sold was ULSD. The data provided for El ectric Power End Use show that 68 percent of total fuel sold was residual fuel oil. For Industrial End Use, the percentage of total fuel that was residual fuel oil was 20 percent. The EPA believes that requiring cleaner fuel for these stationary emergency CI engines will significantly limit or reduce the emissions of regulated air pollutants emitted from these engines, further protecting public health and the environment. Information provided to EPA by commenters 5 showed that the use of ULSD will significan tly reduce emissions of air toxics, including metallic HAP (e.g., nickel, zinc, lead) and benzene.

In addition to the fuel requirement, owners and operators of stationary emergency CI 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 must report the dates and times the engines operate for emergency demand response annually to the EPA, beginning with operation during the 20 15 calendar year. Owners and operators of these engines are also required to report the dates, times and situations that the engines operate to mitigate local transmission and/or distribution limitations annually to the EPA, beginning with operation during the 2015 calendar year. This information is necessary to determine whether these engines are operating in compliance with the regulations and will assist the EPA in assessing the impacts of the emissions from these engines.

The EPA is adding these requi rements beginning in January, 2015, rather than upon initial implementation of the NESHAP for existing engines in May or October of 2013, to provide sources with appropriate lead time to institute these new requirements and make any physical adjustments to engines and other facilities like tanks or other containment structures, as

4 U.S. Energy Information Administration. Distillate Fuel Oil and Kerosene Sales by End Use. Available at http://www.eia.gov/dnav/pet/pet_cons_821use_dcu_nus_a.htm. 5 See document num

ber EPA

- HQ

- OAR

- 2008

- 0708

- 1459 in the rulemaking docket.4

- 10

well as any needed adjustments to contracts and other business activities, that may be necessitated by these new requirements.

The EPA is also amending the NSPS for stationary CI and SI engines in 40 CFR part 60, subparts IIII and JJJJ, respectively, to provide the same limitation for stationary emergency engines for emergency demand response and system reliability operation as for engines subject to the RICE NESHAP. The NSPS regu lations currently do not include such a provision for emergency demand response or system reliability operation; the issue was not raised during the original promulgation of the NSPS. The EPA is adding an emergency demand response and system reliability pr ovision under the NSPS regulations in these final amendments. The EPA is revising the existing language in §§60.4211(f) and 60.4219 of 40 CFR part 60, subpart IIII, and §§60.4243(d) and 60.4248 of 40 CFR part 60, subpart JJJJ, to specify that emergency eng ines must limit operation for engine maintenance and testing and emergency demand response to a maximum of 100 hours per year; 50 of the 100 hours may be used to operate to mitigate local reliability issues, as discussed previously for the RICE NESHAP.

The EPA is also finalizing amendments to the NSPS regulations that require owners and operators of stationary emergency engines 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 report the dates and times the engines operated for emergency demand response annually to the EPA, beginning with operation during the 2015 calendar year. Owners and operators of these engines are also r equired to report the dates, times and situations that the engines operate to mitigate local transmission and/or distribution limitations annually to the EPA, beginning with operation during the 2015 calendar year. Emergency engines subject to 40 CFR part 60, subpart IIII are already required by subpart IIII to use diesel fuel that meets the requirements of 40 CFR 80.510(b).

The 2010 regulation specified that existing emergency engines at area sources of HAP that are residential, commercial, or institutiona l facilities were not subject to the RICE NESHAP requirements as long as the engines were limited to no more than 15 hours per year for emergency demand response. The EPA is specifying in the final rule that existing emergency engines at area sources of HA P that are residential, commercial, or institutional facilities are subject to the applicable requirements for stationary emergency engines in the RICE NESHAP if they operate or are contractually obligated to be available for more than 15 hours per year (u p to a maximum of 100 hours per year) for emergency demand response, or they operate to mitigate local transmission and/or distribution limitations. Information provided by commenters on the4

- 11

2010 regulation and the amendments proposed in June 2012 indicate s that these engines typically operate less than 15 hours per year for emergency demand response.

For stationary emergency engines above 500 HP at major sources of HAP that were installed before June 12, 2006, prior to these final amendments, there was no emergency demand response provision and there was no time limit on the use of emergency engines for routine testing and maintenance in §63.6640(f)(2)(ii). Those engines were not the focus of the 2010 RICE NESHAP amendments; therefore, the EPA did not make any changes to the requirements for those engines as part of the 2010 amendments. For consistency, the EPA is now also revising 40 CFR part 63, subpart ZZZZ to require owners and operators of stationary emergency engines above 500 HP at major sources of HA P installed prior to June 12, 2006, to limit operation of their engines for maintenance and testing and emergency demand response program to a total of 100 hours per year. These engines would also be required to use diesel fuel meeting the specifications o f 40 CFR 80.510(b) beginning January 1, 2015, however, if the engine operates or is contractually obligated to be available for more than 15 hours per year. Any existing diesel fuel purchased (or otherwise obtained) prior to January 1, 2015 may be used unt il depleted. In addition to the fuel requirement, owners and operators of these engines must report the dates and times the engines operate for emergency demand response annually to the EPA, beginning with operation during the 2015 calendar year.

More deta il regarding the public comments regarding emergency demand response and the EPA’s responses can be found in the Response to Public Comments document available in the rulemaking docket.

4.2.3 Amendment

- Non

- Emergency Stationary SI RICE Greater than 500 HP Located at Area
Sources4

- 12

The EPA is finalizing amendments to the requirements that apply to existing stationary

non

- emergency 4

- stroke SI RICE greater than 500 HP located at area sources of HAP emissions, which are generally natural gas fired engines.

The EPA is creating a subcategory for existing spark ignition engines located in sparsely populated areas. Engines located in remote areas that are not close to significant human activity may be difficult to access, may not have electr icity or communications, and may be unmanned most of the time. The costs of the emission controls, testing, and continuous monitoring requirements may be unreasonable when compared to the HAP emission reductions that would be achieved, considering that the engines are in sparsely populated areas. Moreover, the location of these engines is such that there would be limited public exposure to the emissions. The EPA believes that establishing a subcategory for SI engines at area sources of HAP located in sparse ly populated areas accomplishes the agency’s goals and is adequate in protecting public health. The EPA is creating this subcategory using criteria based on the existing DOT classification system for natural gas pipelines. This system classifies locations based on their distance to natural gas pipelines covered by the Pipeline and Hazardous Materials Safety Administration regulations. The DOT system defines a class location unit as an onshore area that extends 220 yards or 200
meters on either side of the c enterline of any continuous 1

- mile (1.6 kilometers) length of natural gas pipeline. The DOT approach further classifies pipeline locations into Class 1 through Class 4 locations based on the number of buildings intended for human occupancy. A Class 1 locat ion is
defined as an offshore area or a ny class location unit that has 10 or fewer buildings intended for human occupancy. The DOT classification system also has special provisions for locations where buildings with four or more stories above ground are pr evalent and locations that lie within 100 yards (91 meters) of either a building or a small, well

- defined outside area (such as a playground, recreation area, outdoor theater, or other place of public assembly) that is occupied by 20 or more persons on at least 5 days a week for 10 weeks in any 12

- month period. To be considered remote under this final rule, a source on a pipeline could not fall under these special provisions and, in addition, must be in a Class 1 location. For those engines not associated w ith pipelines, the EPA is using similar criteria. An engine would be considered to be in sparsely populated areas if within 0.25 mile radius of the engine there are 5 or fewer buildings intended for human occupancy.

Owners and operators of existing statio nary non

- emergency 4

- stroke lean burn (4SLB) and 4SRB RICE greater than 500 HP at area sources that are in sparsely populated areas as described above would be required to perform the following:4

- 13

Change oil and filter every 2,160 hours of operation or annua lly, whichever comes first; Inspect spark plugs every 2,160 hours of operation or annually, whichever comes first, and replace as necessary; and Inspect all hoses and belts every 2,160 hours of operation or annually, whichever comes first, and replace as necessary.

Sources have the option to use an oil analysis program as described in §63.6625(i) of the rule in order to extend the specified oil change requirement. The oil analysis must be performed at the same frequency specified for changing the oil in Ta ble 2d of the rule. The analysis program must at a minimum analyze the following three parameters: Total Acid Number, viscosity, and percent water content. The condemning limits for these parameters are as follows: Total Acid Number increases by more than 3.0 milligrams of potassium hydroxide per gram from Total Acid Number of the oil when new; viscosity of the oil has changed by more than 20 percent from the viscosity of the oil when new; or percent water content (by volume) is greater than 0.5. If none of these condemning limits are exceeded, the engine owner or operator is not required to change the oil. If any of the limits are exceeded, the engine owner or operator must change the oil within 2 business days of receiving the results of the analysis; if t he engine is not in operation when the results of the analysis are received, the engine owner or operator must change the oil within 2 business days or before commencing operation, whichever is later. The owner or operator must keep records of the paramete rs that are analyzed as part of the program, the results of the analysis, and the oil changes for the engine. The analysis program must be part of the maintenance plan for the engine.

Owners and operators of existing stationary 4SLB and 4SRB area source en gines above 500 HP in sparsely populated areas would also have to operate and maintain the stationary RICE and aftertreatment control device (if any) according to the manufacturer's emission

- related written instructions or develop their own maintenance pla n, which must provide to the extent practicable for the maintenance and operation of the engine in a manner consistent with good air pollution control practice for minimizing emissions.

Owners and operators of engines in sparsely populated areas would h ave to conduct a review of the surrounding area every 12 months to determine if the nearby population has changed. If the engine no longer meets the criteria for a sparsely populated area, the owner and operator must within 1 year comply with the emission standards specified below for populated

areas.4

- 14

For engines in populated areas, i.e., existing stationary 4SLB and 4SRB non

- emergency engines greater than 500 HP at area sources that are located on DOT Class 2 through Class 4 pipeline segments or, for engin es not associated with pipelines, that do not meet the 0.25 mile radius with 5 or less buildings criteria, the EPA is adopting an equipment standard requiring the installation of a catalyst to reduce HAP emissions. Owners and operators of existing area sou rce 4SLB non

- emergency engines greater than 500 HP in populated areas would be required to install an oxidation catalyst. Owners and operators of existing area source 4SRB non

- emergency engines greater than 500 HP in populated areas would be required to in stall NSCR. Owners and operators must conduct an initial test to demonstrate that the engine achieves at least a 93 percent reduction in CO emissions or a CO concentration level of 47 ppmvd at 15 percent O 2 , if the engine is a 4SLB engine. Similarly, owner s and operators must conduct an initial performance test to demonstrate that the engine achieves at least either a 75 percent CO reduction, a 30 percent THC reduction, or a CO concentration level of 270 ppmvd at 15 percent O 2 if the engine is a 4SRB engine . The initial test must consist of three test runs. Each test run must be of at least 15 minute duration, except that each test run conducted using appendix A to 40 CFR part 63, subpart ZZZZ must consist of one measurement cycle as defined by the method an d include at least 2 minutes of test data phase measurement. To measure CO, emission sources must use the CO methods already specified in subpart ZZZZ, or appendix A to 40 CFR part 63, subpart ZZZZ. The THC testing must be conducted using EPA Method 25A.

T he owner or operator of both engine types must also use a high temperature shutdown device that detects if the catalyst inlet temperature is too high, or, alternatively, the owner or operator can monitor the catalyst inlet temperature continuously and main tain the temperature within the range specified in the rule. For 4SLB engines the catalyst inlet temperature must remain at or above 450°F and at or below 1,350°F. For 4SRB engines the temperature must be greater than or equal to 750°F and less than or equ al to 1,250°F at the catalyst inlet.

Owners and operators must in addition to the initial performance test conduct annual checks of the catalyst to ensure proper catalyst activity. The annual check of the catalyst must at
a minimum consist of one 15

- minut e run using the methods discussed above, except that each test run conducted using appendix A to 40 CFR part 63, subpart ZZZZ must consist of one measurement cycle as defined by the method and include at least 2 minutes of test data phase
measurement. Owne rs and operators of 4SLB engines must demonstrate during the catalyst activity test that the catalyst achieves at least a 93 percent reduction in CO emissions or that the engine exhaust CO emissions are no more than 47 ppmvd at 15 percent O 2 . Owners and

op erators of 4SRB engines must demonstrate during the catalyst activity check that their catalyst4

- 15

is reducing CO emissions by 75 percent or more, the CO concentration level at the engine exhaust is less than or equal to 270 ppmvd at 15 percent O 2, or THC emi ssions are being reduced by at least 30 percent.

If the emissions from the engine do not exceed the levels required for the initial test or annual checks of the catalyst, then the catalyst is considered to be working properly. If the
emissions exceed the specified pollutant levels in the rule, the exceedance(s) is/are not considered a violation, but the owner or operator would be required to shut down the engine and take appropriate corrective action (e.g., repairs, clean or replace the catalyst, as approp riate). A
follow

- up test must be conducted within 7 days of the engine being started up again to demonstrate that the emission levels are being met. If the retest shows that the emissions continue to exceed the specified levels, the stationary RICE must ag ain be shut down as soon as safely possible, and the engine may not operate, except for purposes of start

- up and testing, until the owner/operator demonstrates through testing that the emissions do not exceed the levels specified.

4.2. 4 Compliance Date

The EPA has received some questions regarding whether the compliance dates for engines impacted by the 2010 amendments and this reconsideration will be extended. Affected sources that may be impacted by this action have expressed concern about having suffi cient time to comply with the rule by the compliance date, which is May 3, 2013, for existing stationary CI RICE and October 19, 2013, for existing stationary SI RICE. Sources impacted by this reconsideration are particularly concerned with compliance in t he event that the EPA does not finalize changes that are substantially similar to the changes includ ed in this action. The EPA does not intend to extend the May 3, 2013, and October 19, 2013, compliance dates, because there are many engines that must meet those compliance dates that are not impacted by this reconsideration. However, we note that sources that are affected by the reconsideration and that may need additional time to install controls to comply with the applicable requirements can
request up to an additional year to install controls, as specified in 40 CFR 63.6(i).4

- 16

4. 3 What Are the Pollu tants Regulated by the Rule?

The reconsideration ru le regulates emissions of HAP. Available emissions data show that several HAP, which are formed during the co mbustion process or which are contained within the fuel burned, are em itted from stationary engines. The HAP which have been measured in emission tests conducted on SI stationary RICE include: formaldehyde, acetaldehyde, acrolein, methanol, benzene, tolue ne, 1,3

- butadiene, 2,2,4

- trimethylpentane, hexane, xylene, naphthalene, PAH, methylene chloride, and ethylbenzene

. 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.

For the standards included in this actio n, EPA believes that previous determinations regarding the appropriateness of using formaldehyde and carbon monoxide (CO) both in concentration (parts per million (ppm)) levels as surrogates for HAP for stationary RICE are still
valid

. Consequently, EPA is promulgating CO or formaldehyde standards in order to regulate
HAP emissions

.
In addition to reducing HAP, the emission control technologies that will be installed on stationary RICE to reduce HAP will also reduce CO and VOC, and for rich burn engines wi ll
also reduce NOx.

4.4 Cost Impacts

4.4.1 Introduction
EPA has determined that oxidation catalysts for two

- stroke lean burn (2SLB) and four

stroke lean burn (4SLB) engines, and non

- selective catalytic reduction (NSCR) for four

- stroke rich burn (4SRB) engines a re applicable controls for HAP reduction from existing stationary SI
RICE. To determine the capital and annual costs for these control technologies, e quipment cost
information was obtained from industry groups 6 and vendors and manufacturers of SI engine control technology. In some cases, the industry groups provided a breakdown of the capital and annual cost components for each of the retrofit options. Using this cost data, annualized cost and capital cost equat ions for oxidation catalysts and NSCR were developed.

6 Reciprocating Internal Combustion Engine National Emission Standards for Hazardous Air Pollutants (RICE NESHAP) Proposed Revisions

– Emission Control Costs Analysis Background for “Above the Floor” Emission Controls for Natural Gas

- Fired RICE, Innovative Environmental Solutions Inc., October 2009. (EPA

- HQ

- OAR

2008

- 0708

- 0279).4

- 17

4.4.2 Control Cost M

ethodology
The following section s describe the methodology used to derive the total capital and total
annual costs for each of the control technolog y options

. These methodologies w ere used to calculate total capital and total annual costs when only purchased equipment costs were available (e.g., vendor equipment costs). The methodologies were not used for cost data provided by industry groups because they included a breakdown of the actual total capital and total annual

costs. A summary of the m ethodolog ies, equations, and assumptions used to estimate the total capital and total annual costs for some of the cost data are described in the following sections.

4.4.2.1 Total Capital Cost s The total capital cost includes the direct and indirect costs of purchasing and installing the control equipment. The direct cost includes the cost of purchasing the equipment and instrumentation, cost of shipping, and the cost of installing the control equipment. The indirect cost includes the costs for engineering, contractor fees, testing costs, and also includes costs for contingencies, such as additional modifications, or delays in startup. The total capital cost equation can be summarized as follows :

Total Capital Cost (TCC) = Direct Costs (DC) + Indirect Costs (IC)

The direct costs include the costs of purchasing and installing the control equipment and can be summarized using the following equation;

DC = Purchased E quipment C ost (PEC) + Direct Ins tallation Costs ( DIC ).

A summary of the cost assumptions for PEC includes the following :

 Control Device and Auxiliary Equipment (EC) ;

 Instrumentation (10% of EC) ;

 Sales Tax (3% of EC) ;

 Freight (5% of EC) ;

and can be summarized as:

PEC = 118% EC

.
A summary of the cost assumptions for DIC includes the following:

 Foundations and Supports (8% of PEC) ;4

- 18  Handling and Erection (14% of PEC) ;

 Electrical (4% of PEC) ;

 Piping (2% of PEC) ;

 Insulation for Ductwork (1% of PEC) ;

 Painting (1% of PEC) ;

and can be summarized as:

DIC = 30% PEC = 0.3 PEC.

Therefore, the direct costs can be simplified using the following equation:

DC = PEC + 0.3 PEC = 1.3 PEC

.
The indirect costs include the costs of engineering and contractor fees and contingencies and can be summarized using the following equation:

IC = Indirect Installation Costs ( ICC ) + Contingencies ( C ).

A summary of the cost assumptions for ICC includes the following :

 Engineering (10% of PEC) ;

 Construction and Field Expenses (5% of PEC) ;

 Contractor Fees (10% of PEC) ;

 Startup (2% of PEC) ;

 Performance Test (1% of PEC) ;

and can be summarized as:

IIC = 28% PEC = 0.28 PEC

.
A summary of the cost assumptions for C includes the following :

 Equipment Redesign and Modifications ;

 Cost Escalations ;

 Delays in Startup ;4

- 19

and is assumed to be:

C = 3% PEC = 0.03 PEC

.
Therefore, the IC can be summarized using the following equation:

IC = 0.28 PEC + 0.03 PEC = 0.31 PEC

,
and the simplified TCC equation can be expressed as:

TCC = 1.3 PEC + 0.31 PEC = 1.61 PEC = 1.61 (1.18 EC) = 1.9 EC

4.4.2.2 Total A nnual Costs
The total annual cost includes the direct and indirect annual costs of operating and maintaining the control equipment. The direct annual cost includes the cost of the utilities, operating labor, and control device cleaning and maintenance. The indirect annual cost includes the overhead costs such as spare parts for the control equipment, administrative charges, and the capital recovery of the control technology. The total annual cost equation can be summarized as
follows:

Total Annual Cost (TAC ) = Direct Annual Costs (D A C) + Indirect Annual Costs (I A C)

.
The DAC includes the following parameters :

 Utilities ;

 Operating Labor ;

 Maintenance ;

 Annual Compliance Test ;

 Catalyst Cleaning ;

 Catalyst Replacement ;

 Catalyst Disposal

.

The IAC includes the following parameters :

 Overhead ;

 Fuel Penalty ;4

- 20  Property Tax ;

 Insurance ;

 Administrative Charges ;

 Capital Recovery = {I(1+I) n /((1+I) n

- 1)*TCC} where I is the interest rate, and n is the equipment life.

To calculate DAC, the costs were broken up into three sepa rate costs: operation and maintenance materials cost, operation and maintenance labor cost, and the cost for annual performance testing or downtime or allowance for catalyst washing. Actual annual cost data from the industry groups were used to estimate th e DAC for each of the control technologies. The IAC was broken up into three separate costs: administrative, fuel penalty, and capital

recovery. Again, cost data from the industry groups was used to estimate these costs for each of the control technologies

. No fuel penalty was estimated for the oxidation catalyst control technologies, because this control technology does not increase the fuel usage of the SI engine.

4.4.3 Control Cost Equations
Control cost equations were developed for 2SLB oxidation cataly st, 4SLB oxidation catalyst, and a NSCR for 4SRB engines using the total capital cost and total annual cost data for each control technology. Control cost equations for 2SLB and 4SLB oxidation catalysts were developed separately because the 2SLB oxidation catalyst requires a premium catalyst to reduce the HAP compounds because of the low exhaust temperature of 2SLB engines.

4.4.3.1 2SLB Oxidation Catalys t
The 2SLB oxidation catalyst is an effective control technology that reduces HAP
emissions from a 2SLB S I engine by oxidizing organic compounds using a catalyst. The oxidation catalyst unit contains a honeycomb

- like structure or substrate with a large surface area
that is coated with a premium active cataly st layer such as platinum or palladium. The oxidatio n catalyst works by oxidizing carbon monoxide ( CO ) and gaseous hydrocarbons (HAP) in the exhaust gas to carbon dioxide (CO 2 ) and water

. The reduction of CO and HAP var ies depending
on the type of catalyst used and the exhaust temperature of the pollutant stream.

The cost of retrofitting a n oxidation catalyst to a n existing 2SLB engine was estimated using cost data obtained from vendors and industry groups covering engines ranging from 58 horsepower (HP) to 4,670 HP. An equipment life of 1 0 years and an in terest rate of 7 percent
were used to estimate the capital recovery of the control technology and the fuel penalty was assumed to be negligible. The cost equations are presented in 20 09 dollars.4

- 21

The total annualized cost equation for retrofitting an oxidat ion catalyst on a 2SLB engine
was estimated to be :

2SLB Oxidation Catalyst Total Annual Cost = $11.4 x HP + $13,928

where

HP = engine size in HP.

The linear equation has a correlation coefficient of 0. 8046 , which shows the data fit s the equation closely. Therefore, this equation was used to estimate annualized cost for an oxidation catalyst on a 2SLB engine

.

The total capital cost equation for retrofitting an oxidation catalyst on a 2SLB engine was
estimated to be:

2SLB Oxidation Catalyst Total Capital C ost = $47.1 x HP + $41,603

where

HP = engine size in HP.

4.4.3.2 4SLB Oxidation Catalyst
The 4SLB oxidation catalyst is an effective control technology that reduces HAP emissions from a 4SLB SI engine by oxidizing organic compounds using a catalyst. The

ox idation catalyst unit contains a honeycomb

- like structure or substrate with a large surface area
that is coated with a premium active catalyst layer such as platinum or palladi um. The oxidation catalyst works by oxidizing CO and gaseous hydrocarbons (HAP) in the exhaust gas to CO 2 and

water

. The reduction s of CO and HAP vary depending on the type of catalyst used and the exhaust temperature of the pollutant stream.

The cost of retrofitting a n oxidation catalyst to a n existing 4SLB engine was estimated
usin g cost data obtained from vendors and industry groups covering engines ranging from 400 HP to 8,000 HP. Again, a n equipment life of 1 0 years and an interest rate of 7 percent were used
to estimate the capital recovery of the control technology and the fuel penalty was assumed to be negligible. The cost equations are presented in 2009 dollars.

The total annualized cost equation for retrofitting an oxidation catalyst on a 4SLB engine
was estimated to be :4

- 22 4SLB Oxidation Catalyst Total Annual Cost = $1.81 x HP + $3,442

where

HP = engine size in HP.

The linear equation has a correlation coefficient of 0. 9779 , which shows the data fit s the equation very closely. Therefore, this equation was used to estimate annualized cost for an oxidation catalyst on a 4SLB engin e

.

The total capital cost equation for retrofitting an oxidation catalyst on a 4SLB SI engine was
estimated to be:

4SLB Oxidation Catalyst Total Capital Cost = $12.8 x HP + $3,069

where

HP = engine size in HP.

A summary of the cost calculations, regressi on analyses, and graphical representations of the annual and capital cost data are presented in Appendix A of the cost memo that is the basis for the cost data presented in this RIA

. 7

4.4.3.3 Non

- Selective Catalytic Reduction

The NSCR or three

- way catalyst is used to control HAP emissions from 4SRB engines. In addition to HAP reductions, NSCR also reduces the emissions of nitrogen oxides (NO x ), CO

, and other hydrocarbons (HC)

. The reduction of HAP and CO takes place through an oxidation

re action that converts HAP to CO 2 and water and converts CO to CO 2
. The conversion of NO x takes place through a reduction of the NO x to nitrogen gas and oxygen.

The cost of retrofitting a n NSCR on a n existing 4SRB engine was estimated based on
cost data rece ived from vendors and industry groups. A linear regression analysis was done on the data set and the linear equation for annualized cost was;

NSCR Annual Cost = $4.77 x HP + $5,679

where

7 Memorandum from Bradley Nelson, EC/R to M elanie King, EPA. OAQPS/SPPD/ESG. Impacts Associated with NESHAP for Existing Stationary SI RICE

. June 29, 2010

.4

- 23

HP = engine size in HP.

The linear equation has a correlation coefficient of 0. 7987 , which shows an acceptable representation of the cost data

. Therefore, this equation was used to estimate annualized cost for retrofitting the NSCR control technology on 4SRB engines

.
The capital cost equation for retrofitting an air

- to

- fuel ratio (AFR) controller and NSCR on a 4SRB engine was estimated to be:

NSCR Capital Cost = $24.9 x HP + $13,118

where

HP = engine size in HP.

4.4.4 S ummary

Table 4

- 1 presents a summary of the annual and capital control costs as a function of engine size for the control technologies applicable to existing stationary SI engines, as discussed
in this memorandum.

Table 4

- 1

. Summary of Annual and Capital Costs Equations for Existing Stationary SI

Engines

HAP Control Device Annual Cost ($20 09 ) Capi tal Cost ($20 09 ) 2SLB Oxidation Catalyst $11.4 x HP + $13,928 $47.1 x HP + $41,603 4SLB Oxidation Catalyst $1.81 x HP + $3,442 $12.8 x HP + $3,069

NSCR $4.77 x HP + $5,679 $24.9 x HP + $13,118

A summary of the annual and capital costs associated with the rule and obtained using the methodology described above are presented in T ables 4

- 2 t o 4

- 5 below

. 8 These costs are used as input to the economic impact as well as the small entity analysis.

8 Memorandum from Bradley Nelson, EC/R to Melanie King, EPA. OAQPS/SPPD/ESG. Impacts Associated with NESHAP for Existing Stationary SI RICE

. June 29, 2010

.Table 4

- 2

. Summary of Major Source and Area Source Costs for the SI RICE NESHAP a

Size Range (HP) Capital

Control Cost Annual

Control Cost Initial Test Record

keeping Reporting Monitoring

— Capital Cost Monitoring

—Annual Cost Total Annual

Costs Total Capital

Costs Major Sources

25

– 50 $0 $0 $0 $4,060,795 $0 $0 $0 $4,060,795 $0

50

– 100 $0 $0 $0 $1,087,540 $0 $0 $0 $1,087,540 $0

100

– 175 $48,502,361 $37,071,061 $15,971,384 $1,721,899 $5,725,314 $0 $0 $60,489,657 $48,502,361

175

– 300 $13,225,919 $8,382,568 $3,442,648 $371,157 $1,234,097 $0 $0 $13,430,470 $13,225,919

300

– 500 $ 10

, 93 4, 795 $ 5

, 562

, 872 $2,123,326 $228,919 $761,155 $0 $0 $ 8,676,262 $ 10

, 934

, 795
500

– 600 $0 $0 $0 $0 $0 $0 $0 $0 $0

600

– 750 $0 $0 $0 $0 $0 $0 $0 $0 $0

>750 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total $ 72 , 663 , 076 $5 1 ,0 16 , 500 $21,537,358 $7,470,310 $7,720,566 $0 $0 $87,744,734 $72 , 663 , 076
Area Sources

25

– 50 $0 $0 $0 $6,668,944 $0 $0 $0 $6,668,944 $0

50

– 100 $0 $0 $0 $2,868,511 $0 $0 $0 $2,868,511 $0

100

– 175 $0 $0 $0 $3,529,711 $0 $0 $0 $3,529,711 $0

175

– 300 $0 $0 $0 $1,264,799 $0 $0 $0 $1,264,799 $0

300

– 500 $0 $0 $0 $908,913 $0 $0 $0 $908,913 $0

500

– 600 $ 7,547,433 $2 ,662,805 $ 248,366 $454,493 $1,26

, 426 0 0 $ 3,492,090 $7 ,547,433
600

– 750 $ 1,522,236 $5 05,221 $ 44,323 $77,882 $22

, 562 0 0 $ 649,988 $1

, 5 22,236
>750 $ 21,075,418 $6 ,214,397 $ 472,244 $829,795 $240

, 387 0 0 $ 7,756,823 $21 ,075,418

Total $ 30,145,088 $9 ,382,423 $ 764,933 $16,603,048 $389 , 375 0 0 $ 27,139,780 $30, 145,088
Grand Total
Total $ 102.808,163 $ 60,398,923 $ 2 2 ,302,292 $24,073,358 $ 8,106,972 0 0 $ 114,884,514 $ 102,808.163

a Costs are presented in 2009 dollars.4
- 25 Table 4

- 3

. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP a

Major Source Area Source Total (Major + Area)

NAICS Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost

2211 Electric Power Generation $52,905,258 $63,062,494 $1 1,698,144 $ 12,138,277 $ 64,603,403 $ 75,200,772

48621 Natural Gas Transmission $1,484,494 $1,462,530 $1 3,718,381 $ 6,142,839 $1 5,202,876 $ 7,605,369

211111 Crude Petroleum & NG

Production $4,561,236 $6,138,383 $7 1,439 $ 951,46 2 $ 4,632,675 $7, 089,844

211112 Natural Gas Liquid Producers $4,561,236 $6,138,383 $7 1,439 $ 951,46 2 $ 4,632,675 $7, 089,844

92811 National Security $5,878,362 $7,006,944 $1 , 299,79 4 $ 1,348,697 $ 7,178,156 6 $ 8,355,641

335312 Hydro Power Units $0 $25,248 $0 $37,872 $0 $63,120

335312 Irrigation Sets $3,025,050 $3,230,856 $3 ,285,990 $ 4,999,04 1 $ 6,310,940 $ 8,229,896

333992 Welders $247,440 $679,896 $0 $570,130 $247,440 $1,250,027

Total $72,663,076 $87,744,734 $3 0,145,088 $ 27,139,780 $ 102,808,163 $ 114,884,514

a Costs are presented in 2009 dollars.4
- 26 Table 4

- 4

. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP , by Size a

Major Source Area Source Total (Major + Area)
NAICS Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost Electric Power Generation (2211)

25

– 50 hp $0 $2,758,459 $0 $4,137,688 $0 $6,896,147

50

– 100 hp $0 $606,144 $0 $909,215 $0 $1,515,359

100

– 175 hp $33,868,173 $42,238,648 $0 $1,803,548 $33,868,173 $44,042,196

175

– 300 hp $10,603,849 $10,767,847 $0 $446,361 $10,603,849 $11,214,209

300

– 500 hp $8,433,236 $6,691,397 $0 $264,820 $8,433,236 $6,956,217

500

– 600 hp $0 $0 $2 ,543,944 $1 ,177,047 $2 ,543,944 $1 ,177,047
600

– 750 hp $0 $0 $ 515,514 $2 20,122 $5 15,514 $2 20,122 >750 hp $0 $0 $8 ,638,687 $3 ,179,475 $8 ,638,687 $ 3,179,475
Total Electric Power Generation 2211 $52,905,258 $63,062,494 $1 1,698,144 $ 12,138,277 $ 64,603,403 $ 75,200,772 Natural Gas Transmission (48621)

25

– 50 hp $0 $102 $0 $1,934 $0 $2,036

50

– 100 hp $0 $4,872 $0 $92,571 $0 $97,443

100

– 175 hp $301,721 $376,291 $0 $203,518 $301,721 $579,809

175

– 300 hp $643,157 $653,104 $0 $342,928 $643,157 $996,032

300

– 500 hp $539,617 $428,162 $0 $214,637 $539,617 $642,799

500

– 600 hp $0 $0 $1 ,925,560 $ 890,929 $1 ,925,560 $ 890,929
600

– 750 hp $0 $0 $9 49,443 $ 405,408 $9 49,443 $ 405,408 >750 hp $0 $0 $1 0,843,377 $ 3 ,9 90,913 $1 0,843,377 $ 3

, 990,913 Total Natural Gas Transmission (48621) $1,484,494 $1,462,530 $1 3,781,381 $6 ,142,839 $1 5,202,876 $ 7,605,369 Crude Petroleum & NG Production (211111)

25

– 50 hp $0 $388,115 $0 $582,173 $0 $970,288

50

– 100 hp $0 $66,698 $0 $100,047 $0 $166,744

100

– 175 hp $4,549,775 $5,674,246 $0 $242,285 $4,549,775 $5,916,531

(continued)4
- 27 Table 4

- 4

. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP , by Size a (continued)

Major Source Area Source Total (Major + Area)
NAICS Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost

175

– 300 hp $1,037 $1,053 $0 $44 $1,037 $1,096

300

– 500 hp $10,424 $8,271 $0 $327 $10,424 $8,598

500

– 600 hp $0 $0 $3 ,102 $1 ,435 $3 .102 $1 ,435

600

– 750 hp $0 $0 $0 $0 $0 $0 >750 hp $0 $0 $ 68,337 $ 25,151 $ 68,337 $ 25,151
Total Crude Petroleum & NG Production (211111) $4,561,236 $6,138,383 $7 1,439 $ 951,462 $ 4,632,675 $7, 089,844 Natural Gas Liquid Producers (211112)

25

– 50 hp $0 $388,115 $0 $582,173 $0 $970,288

50

– 100 hp $0 $66,698 $0 $100,047 $0 $166,744

100

– 175 hp $4,549,775 $5,674,246 $0 $242,285 $4,549,775 $5,916,531

175

– 300 hp $1,037 $1,053 $0 $44 $1,037 $1,096

300

– 500 hp $10,424 $8,271 $0 $327 $10,424 $8,598

500

– 600 hp $0 $0 $3 ,102 $1 ,435 $3,1 02 $1, 43 5
600

– 750 hp $0 $0 $0 $0 $0 $0 >750 hp $0 $0 $ 68,337 $ 25,151 $ 68,337 $ 25,151 Total Natural Gas Liquid Producers (211112) $4,561,236 $6,138,383 $7 1,439 $ 951,462 $ 4,632,675 $7, 089,844 National Security (92811)

25

– 50 hp $0 $306,495 $0 $459,743 $0 $766,239

50

– 100 hp $0 $67,349 $0 $101,024 $0 $168,373

100

– 175 hp $3,763,130 $4,693,183 $0 $200,394 $3,763,130 $4,893,577

175

– 300 hp $1,178,205 $1,196,427 $0 $49,596 $1,178,205 $1,246,023

300

– 500 hp $937,026 $743,489 $0 $29,424 $937,026 $772,913

500

– 600 hp $0 $0 $2 82,660 $1 30,783 $2 82,660 $1 30,783
(continued)4
- 28 Table 4

- 4

. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP , by Size a (continued)

Major Source Area Source Total (Major + Area)
NAICS Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost

600

– 750 hp $0 $0 $ 57,279 $ 24,458 $5 7,279 $ 24,45 8 >750 hp $0 $0 $9 59,854 $ 353,275 $9 59,854 $ 353,275
Total Nat ional Security ( 92811 ) $5,878,362 $7,006,944 $1 ,299,794, $ 1

, 348,697 $ 7,178,156 $ 8,355,641 Hydro Power Units (335312)

25

– 50 hp $0 $22,688 $0 $34,032 $0 $56,721

50

– 100 hp $0 $2,560 $0 $3,840 $0 $6,399

100

– 175 hp $0 $0 $0 $0 $0 $0

175

– 300 hp $0 $0 $0 $0 $0 $0

300

– 500 hp $0 $0 $0 $0 $0 $0

500

– 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 Hydro Power Units (335312) $0 $25,248 $0 $37,872 $0 $63,120 Irrigation Sets (335312)

25

– 50 hp $0 $32,913 $0 $625,338 $0 $658,251

50

– 100 hp $0 $65,825 $0 $1,250,677 $0 $1,316,502

100

– 175 hp $1,222,348 $1,524,449 $0 $824,505 $1,222,348 $2,348,954

175

– 300 hp $798,634 $810,986 $0 $425,827 $798,634 $1,236,813

300

– 500 hp $1,004,068 $796,683 $0 $399,376 $1,004,068 $1,196,060

500

– 600 hp $0 $0 $2 ,789,064 $1 ,290,460 $2 ,789,064 $1 ,290,460
600

– 750 hp $0 $0 $0 $0 $0 $0 >750 hp $0 $0 $ 496,827 $ 182,857 $ 496,827 $ 182,857 Total Irrigation Sets (335312) $3,025,050 $3,230,856 $ 3,285,890 $ 4,999,041 $ 6,310,940 $ 8,229,896
(continued)4
- 29 Table 4

- 4

. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP , by Size a (continued)

Major Source Area Source Total (Major + Area)
NAICS Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost Welders (333992)

25

– 50 hp $0 $163,908 $0 $245,862 $0 $409,771

50

– 100 hp $0 $207,394 $0 $311,091 $0 $518,485

100

– 175 hp $247,440 $308,594 $0 $13,177 $247,440 $321,771

175

– 300 hp $0 $0 $0 $0 $0 $0

300

– 500 hp $0 $0 $0 $0 $0 $0

500

– 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 Welders (333992) $247,440 $679,896 $0 $570,130 $247,440 $1,250,027

Total $72,663,076 $87,744,734 $3 0,145,088 $ 27,139,780 $ 102,808,163 $ 114,884,514

a Costs are presented in 2009 dollars.4
- 30 Table 4

- 5

. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP , by Number of Engines a

Number of Engines Total (Major + Area)
NAICS Major Area Total Capital Cost Annual Cost Electric Power Generation (2211)

25

– 50 hp 37,933 56,900 94,833 $0 $6,896,147

50

– 100 hp 8,336 12,503 20,839 $0 $1,515,359

100

– 175 hp 16,534 24,802 41,336 $33,868,173 $44,042,196

175

– 300 hp 4,092 6,138 10,230 $10,603,849 $11,214,209

300

– 500 hp 2,428 3,642 6,070 $8,433,236 $6,956,217

500

– 600 hp 0 2,107 2,107 $ 2,543,944 $1 ,177,047
600

– 750 hp 0 363 363 $ 515,944 $2 20,122
>750 hp 0 4,677 4,677 $8 ,638,687 $3 ,179,475
Total Electric Power Generation ( 2211 ) 69,323 111,132 180,455 $ 64,603,403 $ 75,200,772 Natural Gas Transmission (48621)

25

– 50 hp 1 27 28 $0 $2,036

50

– 100 hp 67 1,273 1,340 $0 $97,443

100

– 175 hp 147 2,799 2,946 $301,721 $579,809

175

– 300 hp 248 4,716 4,964 $643,157 $996,032

300

– 500 hp 155 2,952 3,107 $539,617 $642,799

500

– 600 hp 0 1,595 1,595 $1 ,925,560 $ 890,929
600

– 750 hp 0 668 668 $9 49,443 $ 405,408 >750 hp 0 5,871 5,871 $1 0,843,377 $ 3,990,913
Total Natural Gas Transmission (48621) 619 19,899 20,519 $1 5,202,876 $ 7,605,369 Crude Petroleum & NG Production (211111)

25

– 50 hp 5,337 8,006 13,343 $0 $970,288

50

– 100 hp 917 1,376 2,293 $0 $166,744

100

– 175 hp 2,221 3,332 5,553 $4,549,775 $5,916,531

(continued)4
- 31 Table 4

- 5

. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP , by Number of Engines a

(continued)

Number of Engines Total (Major + Area)
NAICS Major Area Total Capital Cost Annual Cost

175

– 300 hp 0 1 1 $1,037 $1,096

300

– 500 hp 3 5 8 $10,424 $8,598

500

– 600 hp 0 3 3 $3 ,102 $1 ,435

600

– 750 hp 0 0 0 $0 $0 >750 hp 0 37 37 $ 68,337 $ 25,151 Total Crude Petroleum & NG Production (211111) 8,479 12,758 21,237 $ 4,632,675 $ 7,089,844 Natural Gas Liquid Producers (211112)

25

– 50 hp 5,337 8,006 13,343 $0 $970,288

50

– 100 hp 917 1,376 2,293 $0 $166,744

100

– 175 hp 2,221 3,332 5,553 $4,549,775 $5,916,531

175

– 300 hp 0 1 1 $1,037 $1,096

300

– 500 hp 3 5 8 $10,424 $8,598

500

– 600 hp 0 3 3 $3 ,102 $1 ,435
600

– 750 hp 0 0 0 $0 $0

> 750 hp 0 37 37 $ 68,337 $ 25,151 Total Natural Gas Liquid Producers (211112) 8,479 12,758 21,237 $ 4,632,675 $7, 089,844 National Security (92811)

25

– 50 hp 4,215 6,322 10,537 $0 $766,239

50

– 100 hp 926 1,389 2,315 $0 $168,373

100

– 175 hp 1,837 2,756 4,593 $3,763,130 $4,893,577

175

– 300 hp 455 682 1,137 $1,178,205 $1,246,023

300

– 500 hp 270 404 674 $937,026 $772,913

500

– 600 hp 0 234 234 $2 82,660 $1 30,783
(continued)4
- 32 Table 4

- 5

. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP , by Number of Engines a

(continued)

Number of Engines Total (Major + Area)
NAICS Major Area Total Capital Cost Annual Cost

600

– 750 hp 0 40 40 $5 7,279 $ 24,458 >750 hp 0 520 520 $9 59.854 $ 353,275 Total Natural Gas Liquid Producers (211112) 7,702 12,347 20,050 $ 7,178,156 $ 8,355,641 Hydro Power Units (335312)

25

– 50 hp 312 468 780 $0 $56,721

50

– 100 hp 35 53 88 $0 $6,399

100

– 175 hp 0 0 0 $0 $0

175

– 300 hp 0 0 0 $0 $0

300

– 500 hp 0 0 0 $0 $0

500

– 600 hp 0 0 0 $0 $0

600

– 750 hp 0 0 0 $0 $0 >750 hp 0 0 0 $0 $0 Total Hydro Power Units (335312) 347 521 868 $0 $63,120 Irrigation Sets (335312)

25

– 50 hp 453 8,599 9,052 $0 $658,251

50

– 100 hp 905 17,199 18,104 $0 $1,316,502

100

– 175 hp 597 11,338 11,935 $1,222,348 $2,348,954

175

– 300 hp 308 5,856 6,164 $798,634 $1,236,813

300

– 500 hp 289 5,492 5,781 $1,004,068 $1,196,060

500

– 600 hp 0 2,310 2,310 $2 ,789,064 $1 ,290,460
600

– 750 hp 0 0 0 $0 $0 >750 hp 0 269 269 $ 496,827 $ 182857 Total Irrigation Sets (335312) 2,552 51,063 53,615 $ 6,310,940 $ 8,229,896
(continued)4
- 33 Table 4

- 5

. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP , by Number of Engines a

(continued)

Number of Engines Total (Major + Area)
NAICS Major Area Total Capital Cost Annual Cost Welders (333992)

25

– 50 hp 2,254 3,381 5,635 $0 $409,771

50

– 100 hp 2,852 4,278 7,130 $0 $518,485

100

– 175 hp 121 181 302 $247,440 $321,771

175

– 300 hp 0 0 0 $0 $0

300

– 500 hp 0 0 0 $0 $0

500

– 600 hp 0 0 0 $0 $0

600

– 750 hp 0 0 0 $0 $0 >750 hp 0 0 0 $0 $0

Total Welders (333992) 5,227 7,840 13,067 $247,440 $1,250,027

Total 102,729 228,319 331,047 $382,802,298 $253,374,939

1 Costs are presented in 2009 dollars.4.4.5 Caveats and Uncerta i nties in the Cost Estimates

* Current knowledge about NOx control techniques and costs is applied in this study. Advances such as alternative catalyst formulations may occur between now and when sources comply with this rulemaking that may lower costs. Sc ale economies can also lower per unit production costs as the market for these NOx control techniques expands.

* The alternative control techniques and corresponding emission reductions and costs may not apply to every unit within the source category. Many factors influence the performance and cost of any control technique. Because control technology references typically evaluate average retrofit situations, costs may be underestimated for the fraction of the source population with difficult to

retrofit conditions. Difficult to retrofit conditions may be less of an issue for RICEs than for other point sources, however.

* NOx control efficiency and cost estimates associated with source category

- control strategy combinations are represented as point estim ates. In practice, control

effectiveness and costs will vary by engine

.4

- 35

4.5 Baseline Emissions and Emission Reductions

The baseline emissions, emissions factors and emissions reductions associated with the
reconsideration rule are provided in the ta bles below. Baseline emissions are estimated for 2013 using the emissions dataset generated for the final SI RICE rule in 2010. The baseline emissions
estimates thus assume the final SI RICE rule has not been implemented. Emissions are in tons

per year

.
Table 4

- 6

. Summary of Major Source and Area Source Baseline Emissions for the SI

RICE NESHAP in 2013

Baseline Emissions (TPY) Size Range (HP) HAP CO NOx VOC Major Sources

25

– 50 hp 1, 107 28,557 41,751 5

, 696
50

– 100 hp 593 15,296 22,363 3

, 0 5 1

100

– 175 hp 1,721 44,399 64,913 8

, 855
175

– 300 hp 641 16,530 24,168 3

, 297
300

– 500 hp 666 17,171 25,105 3

, 4 2 5
500

– 600 hp 0 0 0 0
600

– 750 hp 0 0 0 0 >750 hp 0 0 0 0

Total 4 ,728 121,953 178,301 24 , 3 2 3
Area Sources

25

– 50 hp 1 ,8 1 8 46,898 68,566 9
, 3 54
50

– 100 hp 1

, 564 40,344 58,985 8

, 0 4 7
100

– 175 hp 3

, 529 91,013 133,065 1 8

, 1 53
175

– 300 hp 2

, 184 56,331 82,359 1 1

, 2 3 5

300

– 500 hp 2

, 643 68,178 99,679 1 3

, 59 8
500

– 600 hp 1 ,8 30 47,273 69,094 9
, 415
600

– 750 hp 383 9,876 14,438 1

, 969 >750 hp 6 ,0 4 1 155,890 227,890 31

, 076
Total 1 9 , 993 515,803 754,077 1 02,846 Major + Area
Total 24,72 2 637,756 932,37 7 127,1 694

- 36

Table 4

- 7

. Emissions Factors

Engine HAP

(lb/hp

- hr) CO

(lb/hp

- hr) NOx

(lb/hp

- hr) V O C

(lb/hp

- hr) Formaldehyde

(lb/hp

- hr)

2SLB 5.96 10 - 4 1.06 10 - 2 4.18 10 - 2 3.07 10 - 3 4

. 29 10 - 4

4SLB 5

. 41 10 - 4 3.92 10 - 3 1.15 10 - 2 2. 78 10 - 3 3

. 96 10 - 4

4SRB 2

. 43 10 - 4 1.93 10 - 2 1.47 10 - 2 1.25 10 - 3 1 .7 5 10 - 4

Table 4

- 8

. Summary of Major Source and Area Source Emissions Reductions for the SI

RICE NESHAP in 2013

Emission Reductions (TPY) Size Range (HP) HAP CO NOx VOC Major Sources

25

– 50 hp 0 0 0 0
50

– 100 hp 0 0 0 0
100

– 175 hp 744 7,124 0 3

, 8 26
175

– 300 hp 277 2,653 0 1

, 424

300

– 500 hp 288 2,755 0 1,480
500

– 600 hp N/A N/A N/A 0
600

– 750 hp N/A N/A N/A 0
>750 hp N/A N/A N/A 0
Total 1 , 3 0 8 1 2 , 532 0 6 , 730
Area Sources

25

– 50 hp 0 0 0 0
50

– 100 hp 0 0 0 0
100

– 175 hp 0 0 0 0
175

– 300 hp 0 0 0 0
300

– 500 hp 0 0 0 0
500

– 600 hp 1 01 2, 070 2

, , 0 63 517

600

– 750 hp 22 453 45 2 113 >750 hp 347 7
, 15 6 7
, 13 3 1

, 787
Total 470 9 , 679 9 , 64 8 2 , 41 8 Major + Area Total 1,77 8 22 ,2 1 1 9 , 64 8 9 ,14 75

- 1 Section 5
ECONOMIC IMPACT ANAL YSIS , ENERGY I MPACTS , AND S OCIAL C OSTS

The EIA provides decision makers with social cost estimates and enhances understanding of how the costs may be distributed across stakeholders (EPA, 20 1 0 ). Although several economic frameworks can be used to estimate social costs for regulations of this size and sector scope, OAQPS has typically used part ial 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

un ique market characteristics that make developing partial equilibrium models difficult. Given these constraints, we used the direct compliance costs as a measure of total social costs. In addition, we also provide a qualitative analysis of the reconsidered rule’s impact on stakeholder decisions, a qualitative discussion on if unfunded mandates occur as a result of this reconsidered rule, and the potential distribution of social costs between consumers and producers.

5.1 Compliance Costs of the Reconsidered Rule
EPA’s engineering cost analysis estimates the total annualized cost s of the reconsidered
rule are $ 115 million (in 20 10 dollars) ( EC/R , 201 2 )

.

T he majority of the costs are incurred by the electric power sector ( 65 %). The remaining
industries each account for less than 8 % 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 this rule. The PSR database used as a basis for the analyses in this RIA contains information on both mobile and stationary 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 Of

fice 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

. For 500 hp engines or less, the annualized per

- engine costs ar e below $ 371 per engine. Per

- engine annualized compliance costs for higher horsepower (hp) engines range up to $ 2,800

.

The reconsidered rule will affect approximately 331,000 existing stationary SI engines. As shown in Figure 5

- 1 , most of the affected engi nes fall within the 25 to 50 hp category ( 45 %). The next highest categories are 100 to 175 hp ( 22 %) and 50 to 100 hp ( 16 %).5

- 2

Figure 5

- 1

. Distribution of Engine Population by Horsepower Group

To assess the size of the compliance relative to the value of the goods and services for industries using affected engines, we collected C ensus data for selected industries. At the industry level, the annualized costs represent a very small fraction of rev enue (less than 1 % ) , for
all affected industries. Results for affected industries can be found in 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 , excluding natural gas transmission and natural gas liquid producers, which face slightly higher costs to sales ratios

.5

- 3

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 t he national annu alized compliance cost estimates provide a reasonable approximation of the social cost of this reconsidered rule. EPA believes this approximation is better for industries whose markets are well characterized as perfectly competitive. This approximation i s 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 65 percent of the annualized compliance cost. However, g iven 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 in Ta bles 5

- 2 and 5

- 3 later
in this RIA

.

5.3 How Might People and Firms Respond? A Partial Equilibrium Analysis
Markets are composed of people as consumers and producers trying to do the best they can given their economic circumstances. One way economists illus trate 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

Table 5

- 1. Selected Industry

- Level Annua lized Compliance Costs as a Fract ion of Total

Industry Revenue: 200 9

Total Annualized Costs Sales, Shipments, Receipt,

or Revenue ($Billion) Industry (NAICS) Industry Name ($ million) a ($2007) ($2009) Cost

- to

Sales Ratio

2211 Electric Power Generation $1 28

. 4 $440.4 $453.7 0.004 %
48621 Natural Gas Transmission $6 8

. 9 $16.4 $16.9 0.41 %

211111 Crude Petroleum & NG Production $7.4 $214.2 $220.5 0.001 %
211112 Natural Gas Liquid Producers $7.4 $42.4 $43.6 0.005 %
92811 National Security $14. 3 #N/A #N/A #N/A
333992 Welders $1. 3 $5.2 $5. 5 0.0 2 5%
111 and 112 Agriculture using irrigation systems a $2 5

. 7 $27.9 $28.8 0.09%

a Irrigation engine costs assumed to be passed on to agricultural sectors that use irrigation systems. N/A: receipts are Not Available for National Security5

- 4

So urce s : 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>; (July 7th , 2010). U.S. Department of Agriculture (USDA), National Agricultural Statistics Service (NASS). 2009. “2008 Farm and Ranch Irrigation Survey.” Washington, DC: USDA

- NASS. Costs from Existing SI RICE NESHAP Impacts received from EPA 1/26/12

particular price; we oft en draw this curve as 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 wi lling and able to buy at some price. Holding other factors constant, the quantity demand is assumed to fall when prices rise. In a perfectly competitive market, equilibrium price (P 0 ) and quantity (Q 0 ) is determined by the intersection of the supply and de mand 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 (Q 0 ) (see Figure 5

- 4). As shown, this model makes two predictions: the price of the af fected goods and services are likely to rise and the consumption/production levels are likely to fall.5

- 5 consumer surplus =

– [fghd + dhc] producer surplus = [fghd

– aehb]

– bdc total surplus = consumer surplus + producer surplus =

– [aehb + dhc + bdc]

Fi gure 5

- 2

. Market Demand and Supply Model: With and Without Regulation

The size of these changes depends on two factors: the size of the unit cost increase (supply shift) and differences in how each side of the market (supply and demand) responds to change s 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: 9

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

9 For examples of similar mathematical models in the public finance literature, see Nicholson (1998) , pages 444

– 447, or Fullerton and Metcalf (2002)

.5

- 6  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 elasticiti es 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 ene rgy 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 ( U.S. 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
incre ase 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 (Tabl e 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 and the industry is also among the last major regulated energy industries in the United States (EIA,
20 1 0 ), the competitive model is not necessarily applicable for this industry

.5

- 7

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

- 3 for the status of restructuring by state), 10 in 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 re gulatory 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 produ cer surplus, and these values can be determined using the market supply and demand model (Figure 5

- 2 ). T he change in consumer surplus is measured as follows :

CS =

– [ Q 1 × p ] + [ 0.5 × Q × p ]

. (5.1 )

H igher market prices and lower quantities lead to consumer welfare losses. Similarly, the change in producer surplus is measured as follows :

PS = [ Q 1 × p ]

– [ Q 1 × 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.

10 http://tonto.eia.doe.gov/energy_in_brief/print_pages/electricity.pdf

.5

- 8

Figure 5

- 3

. Electricity Restructuring by State

Source. U.S. Energy Information Administration. 20 10b

. <http://www.eia.doe.gov/cneaf/electricity/page/restructuring/restructure_elect.html>. Last updated September 20 10

.

5.4 Energy Impacts
Executive Order 13211 (66 FR 28355, May 22, 2001) provides that agen cies 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 notice s 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;5

- 9

or (2) that is designated by the Administrator of the Office of Information and Regulatory Affairs as a significant energy action.

This rule is not a significant energy action as designated by the Administrator of the
Office of Inf

ormation and Reg ulatory 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 pr ices, the analysis in Table 5

- 4 suggests at the industry level, the annualized costs represent a very small fraction of revenue (all industries are impacted under 1% ). 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 201 1 (EIA, 20 11 ) provides energy consumption data. As shown in Table 5

- 4, this industry account for less than 0. 3 % of the U.S. total liquid fuels and less than 8

. 0 % of natural gas. As a result, any energy consumption changes attributable to the regulatory p rogram should not significantly influence the supply, distribution, or use of energy.

Table 5

- 4. U.S. Electric Power a Sector 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 energy b 4.63 4.8% Electricity Imports 0.12 0.1%
Total Electric Power Energy Consumption c 38.77 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.5

- 10 c Includes non

- biogen ic municipal waste not included above.

Source: U.S. Energy Information Administration. 20 11 a

. Supplemental Tables to the Annual Energy Outlook 20 1 1

. Table 2

. Available at: < http://www.eia.doe.gov/oiaf/aeo/aeoref_tab.htm l >

.
5.5 Unfunded Mandates
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 governm ents, types of communities (e.g., urban, rural), or particular industry segments.

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 Chapter 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 reaso nably 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 final rule on most of the categories mentioned a bove, 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 subje ct 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 by5

- 11

identifying and addressing, as appr opriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low

income populations in the United States.

Assuming that our baseline for this RIA does not inclu de implementation of the final 2010 SI 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 hig h 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 emis sions from existing stationary S I 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 cos ts and benefits of the reconsideration rule , EPA has analyzed the impacts of this rulemaking on employment , which are presen ted 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, st ates, “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 t he employment effects of economically significant rules, the Agency has provided this analysis to inform the discussion of labor demand and employment impacts.

This employment impact analysis includes estimates of certain short

- term and on

- going labor requirements (increase in labor demand) a ssociated with reporting and recordkeeping, and the installation, operating and maintenance of control devices. EPA estimates that about 200
full

- time equivalents (FTE) will be created or supported in the s hort

- term and about 400 FTE s 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, thes e 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 relev ant theoretical and empirical5

- 12

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 regulatio n 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. 11 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 environment al protection sector to produce new abatement capital. Wh en 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

cons equences of this final 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 co nsiders 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. EPA is interested in public comments on th e 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 be comes 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 monit oring, 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

11 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 productiv ity will cause a short

- run aggregate supply curve to shift to the left, and businesses will produce less, all other things being equal.5

- 13

are costs to the re gulated 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 exi sting 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 j obs, but the net effect on employment is positive.” 12

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 associated with implementing the proposed 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 requiremen ts 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 specifi c 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 NESHAP. The tables breaks down the installation, operation, and maintenance estimates by type

o f 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 rul e rather than by

12 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

- 14

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 reconsideration rule.

The up

- front labor requirement is estimated at 200 FTEs for the final 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 requir ements are estimated at about 400 FTEs for the final 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 r ulemaking. They represent a rough approximation of the small positive impacts that this rule may have on employment.5

- 15

Table 5

- 5. Labor

- based Employment Estimates for Reporting and Recordkeeping and Instal ling, Operating, and Maintaining Control Equipment Requirements for the Final Reconsideration SI RICE NESHAP

Source Emission Control Measure Projected No. of

Affected Units Per

- Unit One

Time Labor Estimate (Hours) Total One

Time Labor Estimate (Hours) Per

- Unit

Annual Labor Estimate (Hours) Total

Annual Labor Estimate (Hours) One

- Time Full

- Time Equivalent Annu

al Full

Time Equiv alent Major Sources

SI RICE <100 HP

N/A 70,798 N/A N/A 1 70,798 N/A 34

- O& M/Recordkeeping

2SLB RICE 100

- 500 HP

N/A 7,398 N/A N/A N/A

92,480 N/A 34 - O&M/R ecordkeeping 1

- Testing 8

- Reporting 3.5 Emergency 4SRB SI RICE 100

- 500 HP N/A 1,597 N/A N/A 1 1,597 N/A 0.77

Non

- Emergency 4SRB SI RICE 100

- 500 HP
N/A 12,740 N/A N/A N/A

146,515 N/A 70 - Testi ng 8

- Reporting 3.5

4SLB SI RICE 100

- 500 HP

Oxidation Catalyst 14,257 21 300,255 15

163,956 144 34 - Testi ng 8

- Reporting 3.5

Area Sources

All SI RICE
N/A 228,31 8 N/A N/A 1 228,318 N/A 110

- O&M /Recordkeeping

Non

- Emergency 4SLB SI RICE >500 HP in Populated Areas Oxidation Catalyst 768 37 28,117 15

15,734 14 7.56

- Testi ng 2

- Reporting 3.5

Non

- Emergency 4SRB SI RICE >500 HP in Populated Areas NSCR 578 86 49,918 33

22,236 24 10.69

- Testi ng 2

- Reporting 3.5

Total 144 378,290 113 741,633 182 357

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. HP = horsepower N/A = Not Applicable. O&M = Operating and Maintenance5

- 16 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) 1 to derive the employment effects of new regulations within the regulated industry. (See, for example, the Regulatory Impact Analyses for the recent 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 compel led 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 propo rtions 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, a s “production costs rise, more inputs, including labor, are used to pr oduce the same amount of output, ” (p. 416). For example, to reduce pollutant emissions while holding output levels constant, regulated firms may require additional labor.

1 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

- 17  The Factor

- Shift Effect : Regulated firms’ production technologies may be mor e or less labor intensive after complying with the regulation (i.e., more/less labor is required relative to capital per dollar of output). “ E nvironmental activities may be more labor intensive than conventional production,” meaning that “the amount of
lab or 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 a n unambiguously negative e ffect on employment,
the cost effect to have a n 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, i t 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 employmen t 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 co nclude 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 qua lity 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

a batement 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 im portant 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 reconsi deration rule . 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
fina l rule. There are also important differences between the industries affected by this final rule5

- 18

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 SCREENI NG 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 include small businesses, small governmental jurisdictions, and small not

- for

- profit ente rprises.

After considering the economic impact of the rule on small entities, the screening analysis indicate s that this rule will not have a significant economic impact on a substantial
number of small entities (or “SISNOSE”) . Under the analyses EPA consi dered, sales and revenue tests for establishments owned by model small entities are less than 1 % except electric power generation (NAICS 2211 with receipts less than $100,000 per year) and crop and animal production (NAICS 111 and 112 with receipts less th an $25,000 per year )

. The se findings are similar to those for the final SI RICE rule promulgated in August 2010, though the impacts are
lower due to the reduction in the cost estimates for these industries.

6.1 Small Entity Data Set
The industry sectors covered by the final rule were identified during the development of the cost analysis ( EC/R, 20 1 2 ). The Statistics of United States Business ( SUSB ) provide s national information on the distribution of economic variables by industry and ente rprise size (U.S. Census, 20 12 a, 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 are as follows:

 E stablishmen t: An establishment is a single physical location where business is conducted or where services or industrial operations are performed.

1 The SUSB data do not provide establishment information for the national security NAICS code (92811) or irrigated farms. Since most national security installa tions 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 Se e http://www.census.gov/csd/susb/ and http://www.sba.gov/advo/research/data.html for ad ditional details.6

- 2  R eceipts : 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.

 E nterprise : 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 multi establishment company forms one enterprise

— th e 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 busin ess size definitions (SBA, 20 1 3 ) apply to an establishment ’ s

“ ultimate parent company, ” we assume d 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 term s are used int erchangeably.

6.2 Small Entity Economic Impact Measures

T he analysis generated a set of establishment sales tests (represented as cost

- to

- receipt ratios) 3 for 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 e nterprise within an SUSB
size range (employment or receipts). Using the SUSB size range helps us accou nt 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

, beca use an establishment ’ s parent company (the “ enterprise ” ) may have other economic resources that could be used to c over 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

averag e establishment receipts for enterprises in several size categories

. 4 For industries with SBA

3 The following metrics for other small entity eco nomic 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 rang e (Table 6

- 2). 5 For industries with SBA receipt size standards, we calculated

Table 6

- 1. SI NESHAP for Existing Stationary Reciprocating Internal Combustion

Engines (RICE): Affected Sectors and SBA Small Business Size Standards

Industry Description Corresponding NAICS SBA Size Standard for

Businesses ( January 7th ,

20 1 3 ) Type of Small Entity

Electric Power Generation 2211 a Business and government
Natural Gas Transmission 48621 $7.0 million in annual receipts Business
Crude Petroleum & NG Production 211111 500 employees Business

Natural Gas Liquid Producers 211112 500 employees Business National Security 92811 NA Government Hydro Power Units See NAICS 2211 1,000 employees Business and government Irrigation Sets Affects NAICS 111 and 112 Generally $750,000 or less in annual receipts Business

Welders Affects industries that use heavy equipment such as construction, mining, farming Varies by 6

- digit NAICS code; Business
Example industry:
NAICS 238 = $14 million in annual receipts

a NAICS codes 221111, 221112, 221113, 221119, 221121, 221122: A firm is small if, including its affiliates, it is primarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the preceding fi scal year did not exceed 4 million megawatt hours. Source: U. S. Small Business Administration (SBA). 20 1 3 . “Table of Small Business Size Standards Matched to North American Industry Classification Sy stem Codes.” Effective January 7th , 20 1 3

. Downloaded 1 / 7 /1 3

.

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 a vailable for these industries. Therefore, we conducted the sales test using the following range of establishment 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.

5 2007 Economic Census data are at http://www.c ensus.gov/econ/census07/

.6
- 4 Table 6

- 2. Average Receipts for Affected Industry by E nterprise: 200 9 ($2009 Million/E stablishment)

SBA Size Standard for Businesses (effective January 7 , 20 1 3 ) Owned By Enterprises with Employee Range:

NAICS NAICS Description All Enterprises 1

– 20

E mployees 20

– 99

E mployees 100

– 499

E mployees 500 +

E mployees

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

Source: U.S. Census Bureau. 2012a

. “Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 200 9 .” <http://www.census.gov/csd/susb/ Downloaded 2 / 22 /1 2.

NA = Not available.6
- 5 Table 6

- 3. Average Receipts for Affected Industry by Enterprise Receipt Range: 200 7 ($2008 /establishment)

SBA Size Standard for Businesses (effective January 7 , 20 1 3 ) 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 $3 5 .5 million in annual

receipts $ 202,058.7 NA $23.82 NA $3 ,255.0 $ 7,291.0 $ 4,692.1 $2 3,481. 9 $6 7,545,

6 $ 508,705.8

23 73 10 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

23 71 10 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

23 713 0 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

23 7 990 zO ther 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

Note: Industries in green were included for consistency with the analysis done for the final rule

. 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 i s 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 fis cal 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: 200 9 .” <http://www.census.gov/csd/susb/6

- 6

Annual entity compliance costs vary depending on the size of the SI 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 Tab le 6

- 4). Each representative establishment differs based on the size and number of SI 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 exi sting 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 48621 are fundamentally different than other industries considered in this analysis due to the numb er of engines affected and amount of cost incurred resulting from this final rule , we used different assumptions about what constitutes the representative establishment and report these assumptions separately.

 Case 1: The representative establishment fo r all industries uses three 750+ hp engines with an average compliance cost of $ 680 to $ 730 per engine, resulting in a total annualized compliance cost of approximately $ 2,040 to $ 2,200 for this representative establishment.

 Case 2: The representative est ablishment in NACIS 2211 and 48621 uses two 25 to 750+ hp engines with an average compliance cost of $ 412 per engine, resulting in a total annualized compliance cost of $ 824 for this representative establishment. For all other industries, the representativ e establishment uses two 25 to 300 hp engines with an average compliance cost of $ 24 6 per engine, resulting in a total compliance cost of $ 49 2 for this representative establishment.

 Case 3: The representative establishment for all industries uses two 50 t o 100 hp engines with an average compliance cost of $ 73 per engine, resulting in a total compliance cost of $ 145 for this representative establishment.

EPA believes that small entities are most likely to face costs similar to Case 2 (columns shaded in gra y in Table 6

- 4) because most of the engines to be affected by this final rule 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 48621 based on the existing distribution of engines in these industries. 6

6 This claim also cannot be made for NAICS 92811: National Security. However, since most national security installations are owned by the federal government (e.g., military bases), EPA assumes these entities would not be considered small.6

- 7

For the sales test, we divided the representative establishment compliance costs reported
in Table 6

- 4 by the representative establishment 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 ($200 9 )

Case 1 Case 2 Case 3

NAICS 2211, 48621 (+750 hp only) All Other

NAICS (+750 hp only) NAICS

2211,48621 (25

- 750+ hp) All Other

NAICS (25

– 300 hp) NAICS

2211, 48621 (25

– 100 hp only) All Other

NAICS (25

– 100 hp only) Total Annualized Costs ($) $ 7,710,388 $ 586,434 $ 82,806,141 $28,057, 798 $8,510,985 $6,174,805 Engine Population 10,548 863 200,974 114,517 117,040 84,913 Average Engine Cost ($/engine) $ 731 $ 680 $ 412 $24 6 $73 $73 Assumed Engines Per Establishment 3 3 2 2 2 2 Total Annualized Costs per Establishment $2 ,193 $2 ,040 $ 824 $49 2 $145 $1456

- 8

Figure 6

- 1

. Distribution of Engine Population by Size for All Industries6

- 9

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 rep orted 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 SBREFA 7 and is consistent with guidance published by the U.S . SBA’s Office of Advocacy that suggests that cost as a percentage of total revenues is a metric for evaluating cost increases on small entities in relation to increases on large entities. 8

7 The 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/document s/rfafinalguidance06.pdf

, pp. 24

- 25.
8 U.S. SBA, Office of Advocacy. A Guide for Government Agencies, How to Comply with the Regulatory Flexibility Act, Implementing the President’s Small Business Agenda and Executive Order 13272, May 2003

.6

- 10

If the cost

- to

- receipt ratio is less than 1%, then we consider the rule to not have a significant impact on the establishment company in question. We summarize the industries with

cost

- to

- receipt ratios exceeding 1% below:

Primary Analysis:

 Case 2 : NAICS 2211 with receipts less than $100,000 per year and NAICS 111 and 11 2 with receipt s less than $25,000 per year

 Case 3 : No industries

Sensitivity Analysis (unlikely):

 Case 1 : NAICS 2211 with receipts less than $ 1 00,000 per year

In the Case 2 primary analysis, only establishments in NAICS 2211 with recei pts less than $100,00 0 per year (less than 5 percent of the total) , and establishments in NAICS 111 and 112 with receipts less than $25 ,000 per year (around 30 percent of the total) have cost

- to

- receipt ratios above 1%. However, establishments earning this level of receipts ar e likely to be using smaller engines than those assumed in Case 2, such as 25 to 3 00 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 consi dering the economic impacts of this rule o n 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 final action to all affected small entities
across all industries affected. The percentage of small entities impacted by this 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 re consider ed standards, EPA took special steps to ensure that the burdens imposed on small entities were minimal. EPA conducted several meetings with industry trade associations to discuss regulat ory options and the corresponding burden on industry, such as recordkeeping and reporting. In addition, as mentioned earlier in this preamble, EPA ’s final
action reduce s regulatory requirements for a variety of area so urces affected under this RICE rule
wi th amendments to the final RICE rules promulgated in 2010.6

- 11

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 percent age of annual governme nt revenues (U.S. Census, 2005a, b ). The use o f 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, 9 and is consistent with guidance published by the US SBA’s Office of Advocacy. 10 For example, from the 200 7 Census (in 200 8 dollars ), the average revenue for small governments (counties and municipalities) with populations fewer than 10,000 is $ 4
million per entity , and the average revenue for local governments with populations fewer than 50,000 is $ 9 million per entity (U.S. Census Bureau, 200 9 a; U.S. Census Bureau, 200 9 b) . F or the smallest group of local governments (<10,000 people), the co st

- 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

.

9 The 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.
10 U.S. SBA, Office of Advocacy. A Guide for Government Agencies, How to Comply with the Regulatory Flexibility Act, Implementing the President’s Small Business Agenda and Executive Orde r 13272, May 2003

.7

- 1 Section 7
HUMAN HEALTH BENEFIT S OF EMISSIONS REDUC TIONS

Synopsis

Implementation of emissions controls required by the final SI RICE NESHAP reconsideration is expected to reduce emissions of hazardous air pollutants (HAP) and have ancillary co

- benefits that would lower ambient concentrations of NO 2 , PM 2.5 and ozone

. In this section, we quantify the monetized co

- benefits for this rule associated with reducing exposure to
ambient fine particulate matter (PM 2.5 ) by reducing emissions of precursors. We estimate the
total monetized co

- benefits to be $62 million to $ 150 million at a 3% discount rate and $ 55 million to $ 140 million 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 PM 2.5 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 monetiz ing the benefits from several important benefit categories, including benefits from reducing exposure to HAP, carbon monoxide, NO 2 and ozone, as well as ecosystem effects and visibility impairment. In addition to reducing emissions of PM precursors such as NOx , this rule would reduce 1,800 tons of HAP and 22,000 tons of carbon monoxide each year.

7.1 Calculation of PM 2.5 - Related Human Health Co

- Benefits

Assuming that our baseline does not include implementation of the 2010 final SI RICE rule, as we state earlier in this RIA, t his final reconsideration NESHAP would reduce emissions
of NO X , and VOCs. Because these emissions are precursor s to PM 2.5, reducing these emissions
would also reduce PM 2.5 formation, human exposure and the incidence of PM 2.5 - related health
effects. Due to analytical limitations, it was not possible to provide a comprehensive estimate of
PM 2.5 - related benefits or provide estimates of the health benefits associated with exposure to HAP, CO, NO 2 or ozone . Instead, we used the “benefit

- p er

- 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 PM 2.5 - rel ated health benefits for emissions reductions in specific

sectors. The key assumptions are described in detail below. These PM 2.5 benefit

- per

- ton estimates provide the total monetized human health benefits (the sum of premature mortality and7

- 2

premature morbidity) of reducing one ton of PM 2.5 f rom a specified source. EPA has used the benefit per

- ton technique in several previous RIAs, including the recent S O 2 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 PM 2.5, 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
ozone and NO 2 nor welfare effects such as ecosyst em effects and 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 PM 2.5

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 PM 2.5 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 PM 2.5 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 ISA 2
Other respiratory effects (e.g., pulmonary function, non

- asthma ER visits, non

bronchitis chronic diseases, other ages and populations) -- -- PM ISA 2

Reproductive and developmental effects (e.g., low birth weight, pre

- term births, etc) -- -- PM ISA 2,3

Cancer, mutagenicity, and genotoxicity effects -- -- PM ISA 2,3

1 We assess these benefits qualitative ly 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 ov er 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/m 3 as was d one 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 t he Staff Paper for the 2006 PM 2.5 NAAQS, has
been used as an alternative estimate in the PM 2.5 NAAQS RIA and PM 2.5 benefits estimates in RIAs completed since the PM 2.5 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/m 3 as 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 PM 2.5 - mortality relationship and interpreted for benefits analysis in EPA’s final RIA for the PM 2.5 NAAQS. For that study, twelve experts (labeled A through L) provided independent estimates of the PM 2.5 - mortality
concentration

- response function. EPA practice has been to develop independent
estimates of PM 2.5 - 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 a re 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 c hoices 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 PM 2.5 and premature mortality (Roman

1 These two studies specify multi

- pollutant models that control for SO 2 , 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 functio n 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 epid emiology studies (see Figure 7

- 2 ). In general, the expert elicitation results support the conclusion that the benefits of PM 2.5 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 PM 2.5 and its precursors from in the “ Other Non

- EGU
Point” sector (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

sect ors. 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 e stimates 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 benefit

per

- ton estimates in that they reflect the geog raphic 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 f actors for any specific location. 4 In this analysis, we apply the se national benefit

- per

- ton

2 Please see the Section 5.2 of the Portland Cement RIA in Appendix 5A for more informati on regarding the change in the presentation of benefits estimates.
3 Stationary RICE 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.
4 To the extent that the PM 2.5 improvements achieved by the 2010 final rule would have been located in areas with lower average population density compared to the areas with engines regulated under these amendments, there is a potential for the estimated loss in benefits to be overstated by the use of national

- average benefit

- per

- ton estimates. For example, if only engines in areas with higher population density are regulated, this scenario should result in higher benefit

- per

- ton estimates than a scenario only regulating engines in areas with lower population density. It is important to note that the benefit

- per

- ton estimates that EPA applied in this assessment reflect pollutio n transport as well as a variety of emission source locations, including areas with high and low population density. Without information regarding the specific location of the engines affected by the 2010 final rule and the amendments, it is not possible t o be more precise regarding the true magnitude of the loss in benefits

.7

- 6

estimate s calculated for this category for NOx and multiply them by the corresponding emission
reductions

.

These models assume that all fine particles, regardles s 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. NOx is the primary PM 2.5 precursors affected by this ru le. Even though we assume that all fine particles have equivalent health effects, the benefit

- per

- ton estimates vary between precursors depending on the location and magnitude of their impact on PM 2.5 levels, which drive population exposure

. The sector

- specific modeling does not provide estimates of the PM 2.5 - related benefits associated with reducing VOC emissions, but these unquantified benefits are generally small compared to other PM 2.5 precursors (U.S. EPA, 2012).

The benefit

- per

- ton coefficie nts 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. EP A, 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 use d in RIAs prior to the Portland Cement proposal NESHAP , and we now calculate incremental
benefits down to the lowest modeled PM 2.5 air quality levels. 5

Based on our review of the current body of scientific literature, EPA now estimates PM

related mortali ty 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

- respons e 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, 2011 b ). This information allows readers to determine the portion of population exposed to annual mean PM 2.5 levels at or above the LML of each

5 Additional updates since the Portland Cement RIA include a revised VSL and updated baseline incidence rates.7

- 7

study; in general, o ur 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 est imated PM mortality benefits, EPA does not view the LML as a threshold and continues to quantify PM

related mortality impacts using a full range of modeled air quality concentrations. It is important to emphasize that we have high confidence in PM 2.5 - rela ted effects down to the lowest LML of the major cohort studies, which is 5.8 μg/m 3 . J ust 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. F or a summary of the scientific review statements regarding the lack of a
threshold in the PM 2.5 - mortality relationship, see the Technical Support Document (TSD)
entitled Summary of Expert Opinions on the Existence of a Threshold in the Concentration

Response Function for PM 2.5 - related Mortality (U.S. EPA, 2010 b )

.
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 PM 2.5 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 PM 2.5 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 s pecific 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 interpre ting 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 interpretati on 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 availabl e studies. OAR arrived at a VSL using a range of $1 million to $10 million (2000$) consistent with two meta

- analyses of the wage

- risk literature. The $1 million value represented the lower end of the interquartile range from the Mrozek and Taylor (2002) meta

- analysis of 33 studies. The $10 million value represented the upper end of7

- 8

the interquartile range from the Viscusi and Aldy (2003) meta

- analysis of 43 studies. The mean estimate of $5.5 million (2000$) 6 was also consistent with the mean VSL of $5.4 million estimated in the Kochi et al. (2006) meta

- analysis. However, the Agency neither changed its official guidance on the use of VSL in rulemakings nor subjected the interim estimate to a scientific peer

- review process through the Science Advisory Boa rd (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 up date 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).

Unt il 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 SA B in the Guidelines for Preparing Economic Analyses (U.S. EPA, 2000) 7 while the Agency continues its efforts to update its guidance on this issue. This approach calculates a mean value across VSL estimates derived from 26 labor market and contingent valua tion studies published between 1974 and 1991. The mean VSL across these studies is $6.3 million (2000$). 8 The Agency is committed to using scientifically sound, appropriately reviewed evidence in valuing mortality risk reductions and has made significant progress in responding to the SAB

- EEAC’s specific recommendations.

In implementing these rules, emission controls may lead to reductions in ambient PM 2.5 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

6 After adjusting the VSL for a different currency year ( 2010$ ) and to a ccount for income growth to 2015 of the $5.5 million value, the VSL is $ 8.0 million.
7 In the 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.
8 This value is $4. 8 million in 1990$. In this analysis, we adjust the VSL to account for a different currency year ($20 10 ) and to account for income growth to 20 15 . After applying these adjustments to the $6.3 million value, the VSL is $ 9.2 m illion

.7

- 9

benefits, t here are important differences worth noting in the design and analytical objectives of each RIA. The NAAQS RIAs illustr ate 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
cho ose to enact when implementing a NAAQS. The setting of a NAAQS does not directly result 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 PM 2.5 NAAQS RIA.

By contrast, the emission redu ctions for implementa tion rule s 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 un der 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 o f 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 h ere, please see Section 1.2.4 of the SO 2 NAAQS RIA (U.S. EPA, 2010 a ).7

- 10

Figure 7.1 illustrates the relative breakdown of the monetized PM 2.5 he alth benefits.

Figure 7

- 1: Breakdown of Monetized PM 2.5 Health Benefits using Mortality F unction

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

precurso r , including the emission reductions and benefit

- per

- ton estimates at discount rates of
3% and 7%. 9 Table 7

- 3 provides a summary of the reductions in health incidences as a result of the polluti on reductions. In Table 7

- 4, we provide the benefits using o ur anchor points of Pope et al. and Laden et al. as well as the results from the expert elicitation on P M mortality. Figure
7

- 2 provide s a visual representation of the range of PM 2.5 - related benefits estimates using

9 To comply with Circ ular 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 infarc tions (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. Alt hough 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 PM 2.5 (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 prematur e mortalities that occur after the analysis year. As such, the monetized benefits using a 7% discount rate are only approximately 10% less than the monetized benefits using a 3% discount rate.7

- 11

concentration

- response functions suppli ed 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 benefi ts per ton for other non

EGU 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 Monet ized PM 2.5 - Related Health Co

- Benefits Estimates

for the SI 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%)

PM 2.5 Precursors

NO X 9,648 $6,400 $16,000 $5,700 $14,000 $62 to $150 $55 to $140

Total $62 to $150 $55 to $140

* 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 NO 2 , ozone expo sure, 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 PM 2.5 . 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 appl y 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 Red uctions in Health Incidences from PM 2.5

- Related Co

- B enefits

for the SI RICE NESHAP Reconsideration*

Avoided Premature Mortality
Pope et al. 7

Laden et al. 18 Avoided Morbidity

Chronic Bronchitis 5 Emergency Department Visits, Respiratory 5 Hospital Admissions, Respiratory 1 Hospital Admissions, Cardiovascular 3

Acute Bronchitis 11 Lower Respiratory 140 Upper Respiratory 110 Minor Restricted Activity Days 5,600 Work Loss Days 950

Asthma Exacerbation 230 Acute Myocardial Infarction 8

* 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 PM 2.5 Co

- Benefits Estimates for the SI RICE NESHAP Reconsideration at

discount rates of 3% and 7% i n 2013 (in millions of 2010$ )*

3% 7%

Benefit

- per - ton Coefficients Derived from Epidemiology Literature Pope et al. $62 $55

Laden et al. $150 $140

Benefit

- per - ton Coefficients Derived from Expert Elicitation
Expert A $160 $150
Expert B $120 $110
Expert C $120 $110
Expert D $87 $78
Expert E $200 $180
Expert F $110 $100
Expert G $74 $66
Expert H $93 $83
Expert I $120 $110
Expert J $100 $89
Expert K $24 $21
Expert L $82 $73

* 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 concentration

response function. Confi dence intervals are unavailable for this analysis because of the benefit

- per

- ton methodology7

- 14

Figure 7

- 2: Total Monetized PM 2.5 Co

- Benefits of SI 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 res ults 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.7

- 15

Figure 7

- 3: Breakdown of Total Monetized PM 2.5 Co

- Benefits of SI RIC E 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
limi tations prevented EPA from quantifying the impacts to, or monetizing the benefits from several important benefit categories, including benefits from reducing exposure to HAP, CO,
NO 2 , and ozone exposure, as well as ecosystem effects, and visibility impairm ent

. 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 pot ential to cause adverse health effects (U.S. EPA, 2011 c ). 10 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

10 The 2005 NATA is available on the Internet at http://www.epa.gov/ttn/atw/nata2005/

. Area 500

- 600 HP 21%

Area 600

- 750 HP

5%

Area >750 HP 74%7

- 16

of greatest potential concern, U.S. EPA conducts the NATA. 11 The most recent NATA was conducted for calendar year 2005 and was released in March 2011. NATA includes four steps:

1) Compiling a national emission s 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 5 0 in a million. Nationwide, the key pollutants that contribute most to the overall cancer risks are formaldehyde and benzene. 12 Secondary formation (e.g., formaldehyde forming from other emitted pollutants) was the largest contributor to cancer risks, whi le stationary, mobile and background sources contribute almost equal portions of the remaining cancer risk.

Noncancer health effects can result from chronic, 13 subchronic, 14 or acute 15 inhalation exposures to air toxics, and include neurological, cardiovascul ar, 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 potenti al for adverse noncancer respiratory health effects. Results from the 2005 NATA indicate that acrolein is the primary driver for noncancer respiratory risk.

11 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/
12 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.
13 Chronic exposure is defined in the glossary of the Integrated Risk Information (IRIS) database (http://www.epa.gov/iris) a s 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).
14 Defined in the IRIS database as repeated exp osure 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).
15 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 depict the estimated census tract

- level carcinogenic risk and

nonca ncer respiratory hazard from the assessment. It is important to note that l arge 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 concentr ation (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 emis sions.

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 met hodology 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. 16 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

16 The 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 exposur e to a concentration of one μg/m 3 of 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 prospect ive analysis of the benefits and costs of the Clean Air Act (U.S. EPA, 2011 a ), 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 dau nting...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, tha t 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 reduct ions 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
th ese 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 HAPs may be emitted from SI RICE, a few HAPs accoun t for over 90% of the total mass of HAPs emissions emitted. These HAPs 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 is anticipate d to reduce 1,800 tons of HAPs each year. Below we describe the health effects associated with the top 5 HAPs by mass emitted from SI 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. 17 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. 18

, 19 In an analysis of the lymphohematopoietic cancer mortality from an exte nded
follow

- up of these workers, NCI confirmed an association between lymphohematopoietic cancer risk and peak formaldehyde exposure s. 20 A recent NIOSH study of garment workers also found increased risk of death due to leukemia among workers exposed to form aldehyde. 21 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. 22

In the past 15 ye ars 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. 23 , 24 , 25 CIIT’s risk assessment of

17 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

. 18 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

. 19 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

- HQ

OAR

- 2010

- 0162

. 20 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 In st. 101: 751

- 761. Docket EPA

- HQ

- OAR

- 2010

- 0162

. 21 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

. 22 Coggon, D, EC Harris, J Poole, KT Pa lmer. 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

. 23 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

. 24 Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D Kalisak, J Preston, and FJ Miller. 2004. Human respir atory 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

- OAR

2010

- 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. 26 , 27 , 28 , 29 These findings are not supportive of interpreting the C IIT model results as providing a conservative (health protective) estimate o f human risk. 30 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

- acti on 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. 31

Based on t he developments of the last decade, i n 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 classificat ion 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 epi demiologic evidence on leukemia was characterized as “strong.” 32

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

25 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

. 26 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

. 27 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

- HQ

OAR

- 2010

- 0162

. 28 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

. 29 Crump, K; Chen, C; Fox, J; .et .al. (2008) Sensitiv ity analysis of biologically motivated model for formaldehyde

induced respiratory cancer in humans. Ann Occup Hyg 52:481

- 495. Docket EPA

- HQ

- OAR

- 2010

- 0162

. 30 Crump, K; Chen, C; Fox, J; .et .al. (2008) Sensitivity analysis of biologically motivated model for formaldehyde

induced respiratory cancer in humans. Ann Occup Hyg 52:481

- 495. Docket EPA

- HQ

- OAR

- 2010

- 0162

. 31 Subramaniam RP; Crump KS; Van Landingham C; et. al. (2007) Uncertainties in the CIIT model for formaldehyde

- induced carcinogenicity in the rat: A l imited sensitivity analysis

– I. Risk Anal, 27: 1237

– 1254. Docket EPA

- HQ

- OAR

- 2010

- 0162

. 32 International Agency for Research on Cancer (2006) Formaldehyde, 2

- Butoxyethanol and 1

- tert

- Butoxypropan

- 2

- ol. Monographs Volume 88. World Health Organization, Lyon, F rance. Docket EPA

- HQ

- OAR

- 2010

- 0162

.7

- 22

exposure i n 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 a irways. There are several studies that suggest that formaldehyde may increase the risk of asthma

– particularly in the

young. 33 , 34

The above

- mentioned rodent and human studies, as well as mechanistic information and their analyses, were evaluated in EPA’s r ecent 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 Nati onal 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. 35 Acetaldehyde is reasonably anticipated to be a human carcinogen by the U.S. Department of Health and Human Services (DHHS) in the 11 th Report on Carcinogens and is classified as possibly carcinogenic to humans (Group 2B) by the IARC. 36

, 37 The primary nonc ancer effects of exposure to acetaldehyde vapors include irritation of the eyes, skin, and respiratory tract. 38

33 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

. 34 WHO (2002) Concise International Chemical Assessment Document 40: Formaldehyde. Published under the joint sponsorship of the United Nations Envir onment 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

. 35 U.S. Environme ntal 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.
36 U.S. Department of Health and Human Services National Toxicology Program 11th Report on Carcinogens available at: http://ntp.niehs.nih.gov/go/16183.
37 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.
38 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 ina dequate. No information was available on the carcinogenic effects of acrolein in humans and the animal data provided inadequate evidence of carcinogenicity. 39 The IARC determined in 1995 that acrolein was not classifiable as to its carcinogenicity in huma ns. 40

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 controlle d tests in human subjects, who suffer intolerable eye and nasal mucosal sensory reactions within minutes of exposure. 41 These data and additional studies regarding acute effects of human exposure to acrolein are
summarized in EPA’s 2003 IRIS Human Health A ssessment for acrolein. 42 Evidence available from studies in humans indicate that levels as low as 0.09 ppm (0.21 mg/m 3 ) for five minutes may elicit subjective complaints of eye irritation with increasing concentrations leading to more extensive eye, nose and respiratory symptoms. 43 Lesions to the lungs and upper respiratory tract of rats, rabbits, and hamsters have been observed after subchronic exposure to acrolein. 44 Acute exposure effects in animal studies report bronchial hyper

- responsiveness. 45 In a r ecent 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

39 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.
40 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.
41 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.pd f.
42 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.
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/R

03/003. p. 11. 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/R

03/003. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf.
45 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. Rese arch 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.7

- 24

respiratory rate. 46 Based on these animal data a nd 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 irri tants 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 huma ns and animals and increased proliferation of bone marrow
cells in mice. 47

, 48

, 49 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

expos ure 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. 50

, 51 A number of adverse noncancer health effects inclu ding blood disorders, such as preleukemia and aplastic anemia, have also been associated with long

- term exposure to benzene. 52

, 53

46 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.
47 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.
48 International Agency for Research on Cancer, IARC monographs on the evaluati on 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.
49 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.
50 International Agency for Research on Ca ncer (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.
51 U.S. Department of Health and Human Services Nationa l Toxicology Program 11th Report on Carcinogens available at: http://ntp.niehs.nih.gov/go/16183.
52 Aksoy, M. (1989). Hematotoxicity and carcinogenicity of benzene. Environ. Health Perspect. 82: 193

- 197.
53 Goldstein, B.D. (1988). Benzene toxicity. Occupational medicine. State of the Art Reviews. 3: 541

- 554.7

- 25

Methanol

E xposure 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, sev ere abdominal and leg pain and visual degeneration that can lead to blindness. 54

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 adve rse 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. 55

, 56

, 57 Methanol inh alation studies using rhesus monkeys have reported a decrease in the length of pregnancy, and limited evidence of impaired learning ability in offspring

. 58

, 59

, 60

, 61 EPA has not classified methanol with respect to its carcinogenicity.

Other Air Toxics

In addi tion 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. 62

54 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.
55 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.
56 Nelson, BK; Brightwell, WS; MacKenzie, DR; Khan, A; Burg, JR; Weigel, WW; Goa d, PT. 1985. Teratological assessment of methanol and ethanol at high inhalation levels in rats. Toxicol Sci, 5: 727

- 736.
57 Rogers, JM; Barbee, BD; Rehnberg, BF. 1993. Critical periods of sensitivity for the developmental toxicity of inhaled methanol. Tera tology, 47: 395.
58 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 e xposed prenatally to methanol. Health Effects Institute. Cambridge, MA.
59 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 metha nol in nonhuman primates Part I: methanol disposition and reproductive toxicity in adult females. Health Effects Institute. Cambridge, MA.
60 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.
61 Burbacher, TM; Shen, DD; Lalovic, B; Grant, KS; Sheppard, L; Damian, D; Ellis, S; Liberato, N. 2004. Chronic maternal me thanol inhalation in nonhuman primates (Macaca fascicularis): exposure and toxicokinetics prior to and during pregnancy. Neurotoxicol Teratol, 26: 201

- 221.
62 U.S. EPA Integrated Risk Information System (IRIS) database is available at: www.epa.gov/iris7

- 26

7.2

. 2 Additional NO 2 Co

- Benefits
In addition to being a precur sor to PM 2.5 , NO x emissions are also associated with a variety of respiratory health effects. Unfortunately, we were unable to estimate the health
benefits associated with reduced NO 2 or ozone exposure in this analysis because we do not have air quality modeling data available. Therefore, this analysis only quantifies and monetizes the
PM 2.5 benefits associated with the reductions in NO 2 emissions.

Following an extensive evaluation of health evidence from epidemiologic and laboratory studies, the Integrated Science Assessment (ISA) for Nitrogen Dioxide concluded that there is a likely causal relationship between respiratory health effects and short

- term exposure to NO 2 (U.S. EPA, 2008c ). Perso ns with preexisting respiratory disease, children, and older adults may be more susceptible to the effects of NO 2 exposure. Based on our review of this information, we
identified four short

- term morbidity endpoints that the NO 2 ISA identified as a “likely causal relationship”: asthma exacerbation, respiratory

- related emergency department visits, and respiratory

- related hospitalizations. The differing evidence and associated strength of the
evidence for these different effects is described in detail in the N O 2 ISA. The NO 2 ISA also concluded that the relationship between short

- term NO 2 exposure and premature mortality was “suggestive but not sufficient to infer a causal relationship” because it is difficult to attribute the mortality risk effects to NO 2 alone . Although the NO 2 ISA stated that studies consistently reported a relationship between NO 2 exposure and mortality, the effect was generally smaller than that for other pollutants such as PM.

NOx emissions also contribute to a variety of adverse welfare e ffects , including acidic deposition, visibility impairment, nutrient enrichment

. Deposition of nitrogen causes acidification, which can cause a loss of biodiversity of fishes, zooplankton, and macro invertebrates in aquatic ecosystems, as well as a decline in sensitive tree species, such as red spruce ( Picea rubens ) and sugar maple ( Acer saccharum ) in terrestrial ecosystems

. In the northeastern United States, the surface waters affected by acidification are a source of food for
some recreational and subsist ence fishermen and for other consumers and support several cultural services, including aesthetic and educational services and recreational fishing. B iological effects of acidification in terrestrial ecosystems are generally linked to aluminum toxicity, wh ich

can cause reduced root growth, which restricts the ability of the plant to take up water and nutrients. These direct effects can, in turn, increase the sensitivity of these plants to stresses, such as droughts, cold temperatures, insect pests, and dise ase leading to increased mortality of canopy trees. Terrestrial acidification affects several important ecological services, including declines in habitat for threatened and endangered species (cultural), declines in forest aesthetics (cultural),7

- 27

declines in forest productivity (provisioning), and increases in forest soil erosion and reductions in water retention (cultural and regulating). (U.S. EPA, 2008d)

Deposition of nitrogen is also associated with aquatic and terrestrial nutrient enrichment.
In estuarine waters, excess nutrient enrichment can lead to eutrophication. Eutrophication of estuaries can disrupt an important source of food production, particularly fish and shellfish production, and a variety of cultural ecosystem services, including w ater

- based recreational and aesthetic services. Terrestrial nutrient enrichment is associated with changes in the types and number of species and biodiversity in terrestrial systems. Excessive nitrogen deposition upsets
the balance between native and nonn ative plants, changing the ability of an area to support biodiversity. When the composition of species changes, then fire frequency and intensity can also change, as nonnative grasses fuel more frequent and more intense wildfires. (U.S. EPA, 2008d)

7.2.3 Ozone Co

- Benefits
In the presence of sunlight, NOx and VOCs can undergo a chemical reaction in the atmosphere to form ozone. Reducing ambient o zone concentrations is associated with significant human health benefits, including mortality and respiratory mo rbidity (U.S. EPA,
2008 a ). Epidemiological researchers have associated ozone exposure with adverse health effects in numerous toxicological, clinical and epidemio logical studies (U.S. EPA, 2006c ). These health effects include respiratory morbidity such a s fewer asthma attacks, hospital and ER visits, school loss days, as well as premature mortality.

7.2.4 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 (CO 2 ), is sensitive to conditions in the combustion zone, such as fuel oxygen content, burn temperature, or mixing time. Upon inhalation, CO diffuses
th rough 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 stu dies 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. Oth er7

- 28

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.

7.2.5 Visibility Impairment Co

- Benefits

Reducing secondary formation of PM 2.5 would improve visibility throughout the U.S. Fine particles with significant light

- extinction e fficiencies 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 high er concentrations of fine particles, particularly sulfates, and higher average relative humidity levels. Visibility has direct significance to people’s enjoyment of daily activities and their overall sense of wellbeing. Good visibility increases the qualit y 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 param eters 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 so me 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 PM 2.5 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 ev ery 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 benefits7

- 29

modeling assumptions. For example, these estimates do not reflect l ocal 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 d irect 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 b enefits

- 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

- t on estimates (U.S. EPA, 2012).

PM 2.5 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 PM 2.5 , 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 r

ule’s emission reductions at each PM 2.5 level. As a surrogate measure of mortality impacts, we provide the percentage of the population exposed at each PM 2.5 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 p ercentage of the popula tion 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 distributio n of air quality levels, fewer people are exposed to PM 2.5 levels at or above the
LML. Using the Pope et al. (2002) study, the 77 % of the population is exposed to annual mean
PM 2.5 levels at or above the LML of 7.5 μg/m 3 . Using the Laden et al. (2006) study, 25 % of the population is exposed above the LML of 10 μg/m 3

. As we model avoided premature deaths among populations exposed to levels of PM 2.5 , we have lower confidence in levels below the LML for each study. It is important to emphasize that we have high confidence in PM 2.5 - 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
ben efits occur below the LML.

A large fraction of the baseline exposure occur s below the level of the National Ambient Air Quality Standard (NAAQS) for annual PM 2.5 at 15 μg/m 3

, which was set in 2006. It is7

- 30

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.

Figure 7

- 6. Percentage of Adult Population by Annual Mean PM 2.5 Exposure in the

Baseline7

- 31

Figur e 7

- 7. Cumulative Distribution of Adult Population by Annual Mean PM 2.5

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. PM 2.5 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 under

estimate of t he actual benefits of controlling PM precursors

. 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 that the geographic distribution of the emissions reductions for this rule are different than the7

- 32 modeled emiss ions, 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 PM 2.5 produced via transported precursors emitted from EGUs may differ significantly from direct PM 2.5 released from diesel engines and othe r 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 analys is. Thus, the estimates include health benefits from reducing fine particles in areas with varied concentrations of PM 2.5, including both regions that are in attainment with fine particle standard and those that do not meet the standard down to the lowest modeled concentrations.

4. To characterize the uncertainty in the relationship between PM 2.5 and premature mortality (which typically accounts for 85% to 95% of total monetized benefits), we include a set of twelve estimates based on results of the expert e licitation 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 r esult, the reported confidence intervals and range of estimates give an incomplete picture about the overall uncertainty in the PM 2.5 estimates. This information should be interpreted within the context of the larger uncertainty surrounding the entire ana lysis. For more information on the uncertainties associated with PM 2.5 benefits, please consult the
PM 2.5 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 th e PM RIA can provide some evidence of the uncertainty surrounding the benefits results presented in this analysis.7

- 33

7.4 Comparison of Co

- Benefits and Costs
Using a 3% discount rate, we estimate the total combined mon etized co

- benefits of the
reconsidered SI RICE NESHAP to be $ 62 million to $150 m illion in the implementation year (2013). Using a 7% discount rate, we estimate the total monetized co

- benefits of the final rule to be $ 55 million to $140 m illion. The annualized social costs of the reconsidered SI RICE NESHAP are $ 115 million at a 7% interest rate. 63 Thus, the net benefits are $

- 53 million to $ 35

m illion at a 3% discount rate and $

- 60 million to $ 25 m illion at a 7% discount rate. All 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 SI 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 t he 14 different
PM 2.5 mortality functions at discount rates of 3% and 7%. In addition, the benefits from reducing
22 ,000 tons of carbon monoxide and 1,8 00 tons of HAPs each year from SI RICE have not been
included in these estimates.

Table 7

- 5

. Summary o f the Monetized Benefits, Compliance Costs and Net benefits for the 2010 Rule with the Amendments to the Stationary S I Engine NESHAP in 2013 (millions of 2010 dollars) a

3% Discount Rate 7% Discount Rate

Total Monetized Benefits 2 $62 to $150 $55 to $140

Total Compliance Costs 3 $115 $115

Net Benefits $

- 53 to $35 $

- 60 to $25

Non

- monetized Benefits Health effects from HAP exposure
Health effects from CO

, NO 2 , and ozone exposure Ecosystem effects Visibility impairment

1 All 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 PM 2.5 through reductions of PM 2.5 precursors such as NOx. Human health b enefi ts 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 suf ficient 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 antici pate that the rounded benefits estimated for this rule are unlikely to be different than those provided here.

63 For more information on the annualized social costs, please refer to Section 5 of this RIA.7

- 34

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 engine ering compliance costs are annualized using a 7 percent discount rate.7

- 35

Figure 7

- 8. Net Benefits for SI RICE NESHAP Reconsideration at 3% discount rate * *Net Benefits are quantified in terms of PM 2.5 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. 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 functions7

- 36

Figure 7

- 9. Net Benefits for SI RICE NESHAP Reconsideration at 7% discount rate * *Net Benefits are quantified in terms of PM 2.5 benefits at a 7 % discount rate at a 3% discount rate for 2013 and are in 2010$ . This graph shows 14 benefits estimates combined with t he cost estimate. The monetized benefits incorporate the conversion from precursor emissions to ambient fine particles. - $100 - $80 - $60 - $40 - $20 $0 $20 $40 $60 $80

Pope et al. Laden et al. Millions (2010$)

Cost estimate combined with total monetized benefits estimates derived from 2

epidemiology functions and 12 expert functions7

- 37

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mission Standards for Hazardous Air Pollutants from the Portland Cement Manufacturing Industry . Office of Air Quality Planning and Standards, Research Triangle Park, NC. April. Available on the Internet at

< http://www.epa.gov/ttn/ecas/regdata/RIAs/portlandcementria_4

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. Office of Air Quality Planning and Standards, Research Triangle Park, NC. June. Available at http://www.epa.gov/ttn/ecas/ria.html

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