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Economic Impact and Small Business Analysis for the Final Amendments to the 

Compression Ignition (CI) Engine New Source Performance Standard (NSPS) 

 The U.S. EPA is amending the NSPS for stationary CI engines that were published on 

June 11, 2006. Based on a settlement agreement resulting from a legal challenge to the original 

rule, the EPA must promulgate amendments to the CI NSPS by June 8, 2011. The impacts 

discussed in this memorandum are based on implementing more stringent standards for 

stationary CI engines with a displacement greater than or equal to 10 liters/cylinder (l/cyl) and 

less than 30 l/cyl, consistent with recent revisions to standards for similar mobile source marine 

engines. Specifically, the EPA is amending the CI NSPS to require stationary CI engines greater 

than or equal to 10 l/cyl and less than 30 l/cyl to meet the emission standards for the same size 

and displacement engines as currently required under 40 CFR part 1042, Control of Emissions 

from New and In-Use Marine Compression-Ignition Engines and Vessels. These standards will 

be phased-in between 2013 and 2017 model year engines, depending on the size and 

displacement.

BASIS OF ESTIMATED EMISSION REDUCTIONS 

The 40 CFR part 1042 emission standards include recently finalized more stringent 

standards, i.e., Tier 3 and Tier 4 emission standards, and are the standards that the EPA is 

adopting for stationary CI engines greater than or equal to 10 l/cyl and less than 30 l/cyl. Tier 3 

standards are based on in-engine controls and ultra low sulfur diesel fuel use. The Tier 4 

standards are based on diesel particulate filters (DPF) and selective catalytic reduction (SCR). 

Consistent with how the EPA has treated stationary emergency CI engines in the past, the EPA is 

not requiring standards that force aftertreatment for stationary emergency CI engines. Only 

stationary non-emergency CI engines greater than or equal to 10 l/cyl and less than 30 l/cyl will 

be subject to emission standards based on aftertreatment under the final amendments. 

In order to estimate the number of new stationary CI in the displacement range that 

would be subject to Tier 3 and Tier 4 emission standards under the final amendments to the CI 

NSPS, we obtained information from the Engine Manufacturers Association (EMA).1 According 

to EMA, it is estimated that 8 new engines between 10 l/cyl and 30 l/cyl would be produced 

yearly and would become subject to the rule. Of these 8 engines, 3 are expected to be nonemergency engines and 5 are expected to be emergency engines, according to EMA. All engines 

are expected to be used for power generation. 

In order to estimate the pollutant reductions for stationary CI engines between 10 l/cyl 

and 30 l/cyl that would be subject to 40 CFR part 1042 emission standards, we compared Tier 4 

emission standards from 40 CFR part 1042 to the previous standards that applied to these 

engines under the CI NSPS, which were consistent with the emission standards in 40 CFR part 

94. We used emission standards from Tables 3-16 and 3-41 of the 2008 Regulatory Impact 

 

1 Email from Joe Suchecki, EMA to Tanya Parise, EC/R, Inc. April 7, 2010. 
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Analysis (RIA) for locomotive and marine CI engines.2

 The cumulative emissions reductions 

associated with the amendments in the year 2018 are 8 tpy of PM, 295 tpy of NOx, and 4 tpy of 

HC. The year 2018 is the first year these emission standards would be fully implemented for 

stationary CI engines between 10 and 30 liters l/cyl. In the year 2030, the cumulative emissions 

reductions are estimated at 38 tpy of PM, 1,100 tpy of NOx, and 18 tpy of HC. 

BASIS OF ESTIMATED COSTS TO AFFECTED SOURCES 

In order to estimate the costs associated with requiring Tier 4 emission standards for new 

non-emergency stationary CI engines, we consulted with the EPA Office of Transportation and 

Air Quality (OTAQ). We used the costs presented in the 2008 RIA for locomotive and marine 

engines2

 in order to estimate the cost associated with meeting Tier 4 emission standards based on 

aftertreatment controls. Specifically, after consulting with OTAQ, it was found most appropriate 

to use the hardware (or variable) costs in Tables 7A-5 and 7A-6 and the auxiliary engine costs 

from Tables 7B-20 and 7B-21 of the 2008 RIA for locomotive and marine engines.2

 The 

hardware and auxiliary costs were multiplied by the number of new stationary non-emergency CI 

engines between 10 l/cyl and 30 l/cyl to determine the total capital costs. No capital costs were 

attributed to new stationary emergency CI engines between 10 l/cyl and 30 l/cyl because these 

engines will not be subject to emission standards that force aftertreatment. The capital cost 

associated with the amendments to the CI NSPS is $236,000 ($2009) in 2018. 

The annual costs associated with the requirements for new non-emergency CI engines 

between 10 l/cyl and 30 l/cyl include the operating costs for the urea usage for the SCR control 

system, DPF maintenance, and the increased fuel consumption associated with DPF. These 

annual cost elements were estimated based on communication with OTAQ3,4 and information 

from Nonroad Engine Modeling documents.5

 The cumulative annualized cost is estimated to be 

$142,000 ($2009) in 2018 and $711,000 ($2009) in 2030. 

ECONOMIC IMPACTS 

In this economic analysis, we estimate impacts for the year 2018. We allocate the annual 

costs to the electric power generation industry (NAICS 2211), the industry we expect the 3 new 

non-emergency CI engines affected by 2018 will be located, and the industry in which two-thirds 

of the existing CI engines are currently classified.6

 We use the annual average revenue for the 

electric power generation industry, which is projected using U.S. Energy Information 

Administration (EIA) data at $360 billion for 2015 (2009 dollars).7 Assuming that a single 

 

2 Regulatory Impact Analysis: Control of Emissions of Air Pollution from Locomotive Engines and Marine 

Compression Ignition Engines Less than 30 Liters Per Cylinder, EPA/420-R-08-001a May 2008. 

3

 Email from Todd Sherwood, OTAQ to Tanya Parise, EC/R, Inc. October 6, 2009. 

4 Email from Todd Sherwood, OTAQ to Tanya Parise, EC/R, Inc. April 21, 2010. 

5 Exhaust and Crankcase Emission Factors for Nonroad Engine Modeling -- Compression Ignition EPA420--P-04-

009 April 2004 NR-009c. 

6 Regulatory Impact Analysis for the Compression-Ignition (CI) RICE NESHAP. February 2010. Available on the 

Internet at http://www.epa.gov/ttn/ecas/regdata/RIAs/CIRICENESHAPRIA2-17-10cleanpublication.pdf. 7

 This estimate is from EIA’s AEO 2011, and is derived by taking either total electricity use (for generation) or sales 

(transmission and distribution) and multiplying by forecasted prices by service category from Table 8 (Electricity 

Supply, Disposition, Prices, and Emissions). 
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affected non-emergency engine will be owned by one firm, we thus assume three firms are 

affected by the amendments to the NSPS. Thus, the annual cost per affected firm is $47,333 (or 

142,000/3). We estimate economic impacts using the cost-to-receipt (i.e., sales) ratio, or the 

“sales test.” The “sales test” is the impact methodology the EPA employs in analyzing small 

entity impacts as opposed to a “profits test,” in which annualized compliance costs are calculated 

as a share of profits. 

This is because revenues or sales data are commonly available data for entities normally 

impacted by EPA regulations and profits data normally made available are often not the true 

profit earned by firms because of accounting and tax considerations. Revenues as typically 

published are usually correct figures and are more reliably reported when compared to profit 

data. The use of a “sales test” for estimating small business impacts for a rulemaking such as this 

one is consistent with guidance offered by the EPA on compliance with SBREFA8

 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.9 

By using an annualized cost to revenue metric, we estimate the average economic impact 

to firms in the electric power sector to be $142,000/$360 billion, or 0.0.00003 percent of 

revenues. Assuming one of these firms is a small entity, the impact on the small entity is also 

0.00003 percent. Thus, based on this impact and there being only one small entity affected by 

this proposal, we certify that there is no significant economic impact on a substantial impact on 

small entities (SISNOSE) associated with this rule. In addition, since the annualized cost as a 

percent of sales or revenues estimate is an approximation of the maximum price increase 

required for a product for a firm to recover all costs of compliance, the maximum price increase 

associated with this NSPS will be no greater than 0.00003 percent. The change in affected 

product output should also be no higher than this. 

 

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 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/documents/rfafinalguidance06.pdf, pp. 24-25. 9

 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.