***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-1 **EO12866_GHG EGU RIA ModifiedSources 2060-AR88 Proposal Chapter9_20140417** 


### CHAPTER 9: B ENEFITS 

### , C OSTS 

### , AND 

### E CONOMIC 

### I MPACTS OF 

### S TANDARDS OF 

### P ERFORMANCE FOR 

### R ECONSTRUCTED AND 

### M ODIFIED 

### E LECTRIC 

### U TILITY 

### G ENERATING 

### U NITS

9.1 Introduction
The U.S. Environmental Protection Agency (E PA) is proposing emission limits for carbon dioxide (CO 2 ) emitted from reconstructed and modified electric utility generating units (EGUs) under section 111(b) of the Clean Air Act (CAA). This chapter presents the proposed standards of performance for reconstructed and modified EGUs, as well as the expected economic impacts of the proposed standards. Based on historical info rmation that has been reported to the EPA, the EPA anticipates few, if any, covered units wi ll trigger the reconstr uction or modification provisions in the period of analysis (through 2025). As a result, we do not anticipate any significant costs or benefits associated with th is proposal. However, because there have been a few units that have notified EPA of modifications in the past, in this chapter we present an illustrative analysis of the costs and benefits for a hypothetical unit if it were to trigger the modification provision. We also discuss how the costs and benefits for compliance with the proposed standards may vary as a result of inte ractions with the CAA 111(d) emission guidelines for existing sources. This chapter also presen ts the relevant executive order and statutory requirements related to this proposal.
9.2 Legal Basis for this Rulemaking
Section 111 of the CAA requires performance st andards for air pollutant emissions from categories of stationary sources that may reas onably contribute to the endangerment of public health or welfare. In April 2007, the Supreme Court ruled in Massachusetts v. EPA that greenhouse gases (GHGs) meet the definition of an “air pollutant” under the CAA. This ruling clarified that the authorities and requirements of the CAA apply to GHGs. The EPA issued a final determination that GHG emissions endanger both the public health and the public welfare***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-2 of current and future generations in the Enda ngerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the CAA (74 FR 66,496; Dec. 15, 2009).
On September 20, 2013, the EPA announced its first steps under President Obama’s Climate Action Plan to reduce CO 2 emissions from power plants by proposing standards for new power plants built in the future (79 FR 1430, Ja nuary 8, 2014). Specifically, under the authority of CAA section 111(b), the EPA propos ed standards for emissions of CO 2 from new utility boilers and integrated gasification combined cycle (IGCC) units, and for natural gas-fired stationary combustion turbines. This act ion proposes standards to address CO 2 emissions from reconstructed and modified power plants under the authority of CAA section 111(b).
9.3 Background for the Proposed EGU Reconstructed and Modified Source GHG Standards
9.3.1 Definition of Affected Sources
This action proposes emission limits for EGUs that undergo r econstruction or modification. This rulemaking does not addres s GHG emissions from new sources or existing sources that do not undertake rec onstruction or modification. (Analy sis of the impact of emission guidelines for existing sources is presented in th e preceding chapters.) The EPA is proposing that an existing unit that becomes subject to requirements under section 111(d) will continue to be subject to those requirements even after it becomes a modified or reconstructed source. Under this interpretation, the modified or reconstructed source w ould be subject to both the section 111(d) requirements that it had previously been subject to and the modi fied or reconstructed source standard under 111(b) that it became subject to as a modified or reconstructed source.

9.3.1.1 Reconstructed Sources

Under the EPA’s CAA section 111 standards of performance for new stationary sources, reconstructed sources are defined, in general, as existing sources that replace components to such an extent that the capital costs of the new components exceed 50 percent of the capital costs of an entirely new facility, and for which complia nce with standards of performance for new sources is technologically and economically feasible.***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-3 9.3.1.2 Modified Sources
A modification is any physical or operational change to a source that increases the source’s maximum achievable hourly rate of emissions (i.e., lbs/MWh) . The EPA, through regulations, has determined that certain types of changes (suc h as pollution control proj ects) are exempt from consideration as a modificat ion (40 CFR 60.2, 60.14(e)).

9.3.2 Emission Limits
This action proposes standards of performan ce for reconstructed utility boilers and IGCC units based on current best-performing gene rating technology (e.g., use of the highest demonstrated steam temperatures and pressures) as the best system of emission reductions (BSER). This action also proposes standards of performance for reconstructed natural gas-fired stationary combustion turbines based on modern, efficient natura l gas combined cycle (NGCC) technology as the BSER. The proposed emissi on limits are calculated on a 12-month rolling average basis. The proposed emission limits for th ese units are shown in table 9-1. All existing sources that reconstruct after becoming subjec t to an approved CAA 111(d) state plan will remain in the plan and remain subject to regulat ory requirements in the plan in addition to its regulatory requirements as a reconstructed unit.
Table 9-1. Proposed Emission Limits - Reconstructions Subcategory Emission Limit

Reconstructed Utility Boilers and IGCC Units (heat input rating > 2,000 MMBtu/h) 1,900 lb CO 2 /MWhnet

Reconstructed Utility Boilers and IGCC Units (heat input rating <= 2,000 MMBtu/h) 2,100 lb CO 2 /MWhnet Reconstructed Natural Gas-Fired Stationary Combustion Turbines (heat input rating > 850 MMBtu/h) 1,000 lb CO 2 /MWhgross Reconstructed Natural Gas-Fired Stationary Combustion Turbines (heat input rating <= 850 MMBtu/h) 1,100 lb CO 2 /MWhgross***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-4 This action proposes that modified utility bo ilers and IGCC units must meet one of two alternative requirements, depending on the timing of the modification. 1 Sources that modify prior to becoming subject to an approved section 111(d ) state plan would be required to meet a unitspecific numerical emission standard that is base d on the source’s best demonstrated historical performance. Specifically, a modified utility boil er or IGCC unit would be required to maintain an emission rate that is two percent less than the unit’s best demonstrated annual performance during the years from 2002 to the year the modification occurs (o r the emission limitation applicable to a corresponding reconstructed sour ce, whichever is less stringent). The EPA has determined that this standard can be met through a combination of best operating practices and equipment upgrades. In co-proposed alternative #2, existing utility boilers and IGCC units that modify after becoming subject to requirements under an approved 111(d) plan would be required to meet a unit-specific emission limitation that is determined from a third party assessment to identify energy efficiency improvement opportunities for the affected source. 2 All existing sources that are subject to re quirements under an approved sec tion 111(d) plan would remain subject to those require ments after modifying.
For affected modified natural gas-fired stat ionary combustion turbines not subject to a 111(d) plan, this action proposes standards of performance based on efficient NGCC technology as the BSER. The EPA is also proposing that affe cted stationary combustion turbines that are subject to an approved section 111(d) plan must remain in the plan. The proposed emission limits for modified sources (for co-proposed alternative #2) are shown in Table 9-2.

1 Units triggering both the modification and reconstruction provisions would be subject to the reconstructed source standards.

2 In co-proposed alternative #1, units would be required to meet the same 111(b) standard both before and after participation in a state 111(d) program.***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-5 Table 9-2. Proposed Emissi on Limits - Modifications Subcategory Emission Limit

Not Subject to State

CAA 111(d) Plan Modified Utility Boilers and IGCC Units (heat input rating > 2,000 MMBtu/h) 2% less than unit’s best demonstrated annual performance NO LOWER THAN 1,900 lb CO 2 /MWh-net

Modified Utility Boilers and IGCC Units (heat input rating <= 2,000 MMBtu/h) 2% less than unit’s best demonstrated annual performance NO LOWER THAN 2,100 lb CO 2 /MWh-net Modified Natural Gas-Fired Stationary Combustion Turbines (heat input rating > 850 MMBtu/h) 1,000 lb CO 2 /MWh-gross

Modified Natural Gas-Fired Stationary Combustion Turbines (heat input rating <= 850 MMBtu/h ) 1,100 lb CO 2 /MWh-gross

After Becoming Subject to State CAA 111(d) Plan Modified Utility Boilers and IGCC Units Unit-specific emission limit determined by the expected performance after implementation of identified energy efficiency improvement opportunities AND 111(d) requirements Modified Natural Gas-Fired Stationary Combustion Turbines (heat input rating > 850 MMBtu/h) 1,000 lb CO 2 /MWh-gross AND 111(d) requirements Modified Natural Gas-Fired Stationary Combustion Turbines (heat input rating <= 850 MMBtu/h ) 1,100 lb CO 2 /MWh-gross AND 111(d) requirements Note: The proposed emission limits are calcula ted on a 12-month rolling average basis.

9.4 Impacts of the Proposed Reconstr ucted and Modified Source Standards

9.4.1 Reconstructed Sources
Historically, we are only aware of one E GU that has notified the EPA that it has reconstructed under the reconstructi on provision of section 111(b). As a result, we anticipate that***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-6 few, if any, EGUs will undertake reconstruc tion through 2025. For this reason, the proposed standards will not result in any si gnificant emission reductions, cost s, or quantified benefits in the period of analysis. Likewise, the Agency doe s not anticipate any impacts on the price of electricity or energy supply. The proposed rule is not expected to raise any reliability concerns, since reserve margins will not be impacted and the rule does not impose any additional requirements on existing facili ties not triggering the reconstruction provision. There are no macroeconomic or employment impacts expected as a result of these proposed standards.
Due to the extremely limited data available on reconstructions, it is not possible to conduct a representative illustrative anal ysis of what costs and benefits might result from this proposal in the unlikely case that a unit were to reconstruct.
9.4.2 Modified Sources
Historically, few EGUs have notified the EPA that they have modified under the modification provision of section 111(b). The EPA’s current regulations define an NSPS “modification” as a physical or operational ch ange that increases the source’s maximum achievable hourly rate of emissions, but specifica lly exempt from that definition projects that entail the installation of pollution control equipm ent or systems. The EPA expects that most of the actions EGUs are likely to take in the fo reseeable future that would be classified as “modifications” would qualify as pollution control projects. In many cases, those projects would involve the installation of a dd-on control equipment needed to meet CAA requirements for criteria and air toxics air pollutants. Any associated CO 2 emissions increases would generally be small and would occur as a chemical byproduct of the operation of the control equipment. In other cases, those projects would involve equipmen t changes to improve fuel efficiency to meet state requirements for implementation of the fu ture CAA section 111(d) rulemaking for existing sources and would have the effect of increa sing a source’s maximum achievable hourly emission rate (lb CO 2 /hr), even while decreasing its actu al output based emission rate (lb CO 2 /MWh). Because all of these actions would be treate d as pollution control projects under the EPA’s current NSPS regulations, they would be specifically exempted from the definition of modification.***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-7 Based on this information, we anticipate that few, if any, EGUs will take actions that would be considered modifications during the pe riod of analysis. For this reason, the proposed standards will result in minimal emission reduc tions, costs, or quan tified benefits by 2025. Likewise, the Agency does not anticipate any impacts on the pr ice of electricity or energy supplies. This proposed rule is not expected to raise any reliability concerns, since reserve margins will not be impacted and the rule does not impose any additional requirements on existing facilities not tr iggering the reconstruction provision. There are no macroeconomic or employment impacts expected as a result of these pr oposed standards.
9.4.2.1 Illustrative Analysis – Emission Reductions
In the unlikely event that a unit were to tr igger the modification provision, the proposed standards would result in some costs and bene fits. Based on available data, we conducted an analysis of a hypothetical unit to illustrate the potential cost s and benefits of the proposed standards. The hypothetical plant presented in this section is a coal-fired boiler 3 and is assumed to be in compliance with all on-the-books federa l regulations. In the illustrative analysis, costs and benefits are presented for co mpliance in 2025. Section 111(b) st andards are subject to review every eight years. While we do not know when the hypothetical plant wo uld choose to undertake a modification, it is necessary to se lect a year of analysis in order to value the climate benefits and health co-benefits resulting from these pr oposed standards. We ha ve selected 2025 to approximate the end of the eight year peri od. All estimates are presented in 2011 dollars.
The hypothetical unit used in this analysis is a 33 percent efficient 500 MW bituminous coalfired unit operating at 78 per cent capacity. The assumptions for capacity and efficiency were based on the average projected coal fleet in IP M in 2020. The emission rate specifications are (1)

3 IGCC and NGCC units are significantly less likely to trigge r the modification provision due to the way in which these units are constructed. Simple-cycle combustion turb ines (CT) have lower fuel efficiencies and produce a significantly higher cost of electricity (cost per kWh) at higher capacity factors and consequently are typically utilized at levels well below the proposed threshold cove red sources (1/3 of potential electric output). Instead, these units are most often built to ensure reserve margins are met during peak periods (typically in the summer), and in some instances are able to generate additional re venues by selling capacity into power markets. Thus, in practice, EPA expects that potential CT units would not meet the applicability threshold in this proposed action and would not be subject to any standard.***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-8 SO 2 = 0.30 lb/MMBtu (3.3% weight Illinois bituminous coal with 95% efficient scrubber), (2) NO X = 0.30 lb/MMBtu (low NO X burners plus overfire ai r and SNCR), and (3) PM = 0.024 lb/MMBtu (8 lb/MMBtu ash with 99.7% control) . In this analysis, we examine the costs and benefits that would occur if this unit were able to make a 4 percent, 6 percent, or 8 percent heat rate improvement as a result of measures implem ented in order to comply with the proposed standards for modified sources. Costs. We assume the hypothetical unit will impl ement a range of energy efficiency improvements at an annual cost of $8.3 million. 4 At this cost, we estimate the typical unit would be able to implement a set of efficiency improve ment measures that would achieve a heat rate improvement of approximately 6 percent. The ac tual efficiency improvement a unit can achieve for this cost will depend on its starting efficien cy and operating capacity. Less efficient units may have more efficiency improvement options availabl e and be able to achieve greater efficiency for the same cost. Relatively more efficient units ma y have fewer remaining cost-effective options to improve efficiency. Improvements in efficiency w ill result in fuel savings, which can offset the cost of implementing those improvements. Cost a nd fuel savings information is shown in Table 9-3. For units that modify prior to being part of a section 111(d) exis ting source program that choose to comply with a source- specific standard that is a 2 percent improvement from the previous best performance, costs will vary de pending on the current a nd prior performance of that unit. For a unit that modifi es after being covered by a sec tion 111(d) program, it is possible that the energy assessment may not identify any further efficiency improvements that unit can economically undertake considering the overall 1 11(d) program requirements. In those cases, there would be no additional costs to th e unit as a result of this proposal.

4 Calculated based on a total capital cost of $50 million ($ 100/kilowatt), financed over 15 years at a capital charge rate of 14.29%. The capital charge rate value and useful life are based on assumptions used when modeling the electricity sector in the Integrated Planning Model (IPM). Please see chapter 8 of EPA’s documentation for the IPM for more information on the assumed capital charge rate: http://www.epa.gov/airmarkets/progsregs/epaipm/docs/v513/Chapter_8.pdf

. See the See Technical Support Docume nt – GHG Abatement Measures” for information about the cost of efficiency improvements.***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-9 Table 9-3. Annualized Costs and Fuel Savi ngs of Efficiency Improvements (millions of 2011$) 4% Efficiency Improvement 6% Efficiency Improvement 8% Efficiency Improvement Annual Cost $8.3 $8.3 $8.3 Fuel Savings $3.7 $5.6 $7.5 Net Cost $4.5 $2.6 $0.78

Emission Reductions. By improving the efficiency of its operations, the hypothetical unit would reduce emissions of CO 2 and may reduce emissions of (SO 2 ), nitrogen dioxide (NO x ), and fine particulate matter (PM 2.5 ), which would lead to lower ambient concentrations of PM 2.5 and ozone. Table 9-4 shows the expected emission reductions from each level of efficiency improvement for the hypothetical un it. For a unit participating in a 111(d) plan, it is possible that the CO 2 emission reductions could be offset by in creases elsewhere in the system depending on the structure of that plan. Ancillary emission reductions may be offset if, as a result of these reductions, a unit is able to reduc e operation of pollution control equipment and still meet outputbased standards for these pollutants or pollutants related to their control (such as the Mercury and Air Toxics Standards limit for SO 2 to control hydrogen chloride). Additionally, if efficiency improvements lead to decreased operating costs, it may result in changes to the frequency of dispatch for the unit. In that case, the unit ma y run more often, offsetting some of the emission decreases. Furthermore, for units that choose to co mply with a source-specific standard that is a 2 percent improvement from the previous best performance, emission reductions will vary depending on the current and prior performance of that unit. Additionally, it is possible that the energy assessment for a unit participating in a 11 1(d) program may not identify any further fuel efficiency improvements that unit can economi cally undertake after implementing the overall 111(d) program requirements. In those cases, there would be no additional emission reductions or control costs as a re sult of this proposal.***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-10 Table 9-4. Emission Reductions from Efficiency Improvements (tons/year) 4% Efficiency Improvement 6% Efficiency Improvement 8% Efficiency Improvement CO 2 132,790 199,184 265,579 SO 2 214 321 428 NO x (Total) 214 321 428 NO x (Ozone Season) 89 134 178 PM 2.5 17 26 34 Notes: SO 2 , NO X , and PM 2.5 in short tons, CO 2 in metric tonnes.

Benefits. Reducing CO 2 and criteria pollutant emissions will result in both climate and human health benefits. The impacts of these pollutants on the environment and health are discussed in detail in Chapter 4 of this RIA. In sum, to estimate climate benefits the EPA uses the U.S. government’s global social cost of carbon (USG SCC) estimates—i.e, the monetary value of impacts associated with a marginal change in CO 2 emissions in a given year. The EPA has applied the USG SCC estimates to the CO 2 reductions described above for the hypothetical unit. The four USG SCC estimates are as follo ws: $15, $50, $74, and $153 per metric ton of CO 2 emissions in the year 2025 (2011$). To estimate human health co-benefit s for this hypothetical scenario, the EPA used benefit-per-ton estimates for PM 2.5 and ozone precursors described in detail in Chapter 4 of this RIA. Table 9-5 show s the quantified per ton co -benefits for reductions in SO 2 , directly emitted PM 2.5 , and NO X emissions in 2025.

Table 9-5. Summary of National Bene fit-per-ton Estimates for EGUs in 2025
Discount Rate Pollutant 3% 7% SO 2 $41,000 to $93,000 $37,000 to $84,000 Directly emitted PM 2.5 (EC+OC) $150,000 to $350,000 $140,000 to $310,000 Directly emitted PM 2.5 (crustal) $17,000 to $39,000 $15,000 to $35,000 NO X (as PM 2.5 ) $6,000 to $14,000 $5,400 to $12,000 NO X (as Ozone)* $4,900 to $21,000 * Ozone co-benefits occur in analysis year, so they are the same for all discount rates. Note: See Table 4-8 for discussion of the assumptions, and uncertainty for these estimates.

To estimate the benefits associated with improvi ng efficiency of operations, we determine the emission reductions for efficiency improvements in Table 9-4 and apply the 2025 social benefit***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-11 values discussed in Chapter 4. Specifically, we multiply the reduction in CO 2 emissions by the estimates of the SCC, multiply the reduction in SO 2 , NO X , and PM 2.5 emissions by the PM 2.5 - related BPT estimates, multiply the reductions in ozone season NO X emissions by the ozonerelated BPT estimate, and add those values to get a measure of 2025 benefits. Tables 9-6, 9-7, and 9-8 show the climate, human health, and comb ined benefits expected based on the estimated emission reductions that would occur. These be nefits are subject to the same uncertainties discussed for emission reductions in the previous section.

Table 9-6. Estimated Global Climat e Benefits of Illustrative CO 2 Reductions in 2025 (millions of 2011$)*

Discount Rate and Statistic 4% Efficiency Improvement 6% Efficiency Improvement 8% Efficiency Improvement Metric tonnes of CO 2 reduced 132,790 199,184 265,579 5% (average) $2.0 $3.0 $4.0 3% (average) $6.7 $10 $13 2.5% (average) $9.8 $15 $20 3% (95 th percentile) $20 $30 $41 * The SCC values are dollar-year and emissions-year speci fic. SCC values represent only a partial accounting of climate impacts.***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-12 Table 9-7. Summary of Estimated Monetized Health Co -benefits of Illustrative Efficiency Improvements in 2025 (thousands of 2011$)*
Pollutant 3% Discount Rate 7% Discount Rate 4% Efficiency Improvement

SO 2 $8,900 to $20,000 $8,000 to $18,000 Directly emitted PM 2.5 (EC+OC) $260 to $590 $240 to $530 Directly emitted PM 2.5 (crustal) $230 to $510 $200 to $460 NOx (as PM 2.5 ) $1,300 to $2,900 $1,200 to $2,600 NOx (as Ozone) $440 to $1,900 $440 to $1,900
Total $11,000 to $26,000 $10,000 to $23,000 6% Efficiency Improvement

SO 2 $13,000 to $30,000 $12,000 to $27,000 Directly emitted PM 2.5 (EC+OC) $400 to $900 $360 to $810 Directly emitted PM 2.5 (crustal) $350 to $780 $310 to $710 NOx (as PM 2.5 ) $1,900 to $4,300 $1,700 to $3,900 NOx (as Ozone) $660 to $2,800 $660 to $2,800
Total $17,000 to $39,000 $15,000 to $35,000 8% Efficiency Improvement

SO 2 $18,000 to $40,000 $16,000 to $36,000 Directly emitted PM 2.5 (EC+OC) $520 to $1,200 $470 to $1,100 Directly emitted PM 2.5 (crustal) $450 to $1,000 $410 to $930 NOx (as PM 2.5 ) $2,600 to $5,800 $2,300 to $5,200 NOx (as Ozone) $880 to $3,800 $880 to $3,800
Total $22,000 to $52,000 $20,000 to $47,000
* All estimates are rounded to two si gnificant figures so numbers may not sum down columns. The estimated monetized co-benefits do not include climate benefits or health effects from direct exposure to NO2, SO2, and hazardous air pollutants (HAP); ecosystem effects; or visibility impairment. All fine particles are assumed to have equivalent health effects. The monetized co-benefits incorporate the co nversion from precursor emissions to ambient fine particles and ozone. Co-benefits for PM2.5 and ozone are based on national benefit-per-ton estimates. Co-benefits for ozone are based on ozone seas on NOx emissions. Ozone co-benefits occur in analysis year, so they are the same for all discount rates. The health co-benefits reflect th e sum of the PM2.5 and ozone co-benefits and reflect the range based on adult mortality functions (e.g., from Krewski et al. (2009) with Bell et al. (2004) to Lepeule et al. (2012) with Levy et al. (2005 )). Confidence intervals are unavailable for this analysis because of the benefit-per-ton methodology. In general, the 95th percentile confidence interval for monetized PM2.5 benefits ranges from approximately -90 percent to +180 percent of the central estimates based on Krewski et al. (2009) and Lepeule et al. (2012). Emissions of di rectly emitted particles are di saggregated into EC+OC or crustal components using the method discussed in Appendix 4A of this RIA.***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-13 Table 9-8. Combined Illustrative Climate Benefits and He alth Co-Benefits of Illustrative Efficiency Improvements in 2025 (millions of 2011$)*

SCC Discount Rate Climate Benefits Only Climate Benefits and Health Co-Benefits (Discount Rate Applied to Health Co-Benefits) 3% 7% 4% Efficiency Improvement 132,790 metric tonnes CO 2 5% $2.0 $13 to $28 $12 to $25 3% $6.7 $18 to $33 $17 to $30 2.5% $9.8 $21 to $36 $20 to $33 3% (95 th percentile) $20 $31 to $46 $30 to $44 6% Efficiency Improvement 199,184 metric tonnes CO 2

5% $3.0 $20 to $42 $18 to $38
3% $10 $27 to $49 $25 to $45
2.5% $15 $31 to $53 $30 to $50 3% (95 th percentile) $30 $47 to $69 $45 to $66 8% Efficiency Improvement 265,579 metric tonnes CO 2

5% $4.0 $26 to $56 $24 to $51 3% $13 $35 to $65 $33 to $60 2.5% $20 $42 to $71 $40 to $67 3% (95 th percentile) $41 $63 to $92 $61 to $88 *All estimates are rounded to two significant figures. Climate benefits are based on reductions in CO2 emissions. The estimated monetized co-ben efits do not include climate benefits or health effects from direct exposure to NO2, SO2, and HAP; ecosystem effect s; or visibility impairment. All fine particles are assumed to have equivalent health effects. The mone tized co-benefits incorpor ate the conversion from precursor emissions to ambient fine particles and ozone. Co-benefits for PM2.5 and ozone are based on national benefit-per-ton estimates. Co-benefits for ozone are based on ozone seas on NOx emissions. Ozone co-benefits occur in analysis year, so they are the same for all discount rates. The health co-benefits reflect th e sum of the PM2.5 and ozone co-benefits and reflect the range based on adult mortality functions (e.g., from Krewski et al. (2009) with Bell et al. (2004) to Lepeule et al. (2012) with Levy et al. (2005 )). Confidence intervals are unavailable for this analysis because of the benefit-per-ton methodology. In general, the 95th percentile confidence interval for monetized PM2.5 benefits ranges from approximately -90 percent to +180 percent of the central estimates based on Krewski et al. (2009) and Lepeule et al. (2012). Emissions of di rectly emitted particles are di saggregated into EC+OC or crustal components using the method discussed in Appendix 4A of this RIA.

Summary. In the unlikely event that a unit were to trigger the modification provision, the proposed standards would result in some costs and benefits. Based on the illu strative analysis of a hypothetical unit implementing efficiency measur es in 2025 to comply with the proposed***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-14 requirements, this proposal would re sult in a net benefit (benefits out weigh costs) for all levels of efficiency improvement and combinations of be nefits. The net benefit would be even greater when potential fuel savings are taken into acco unt. The actual costs, emission reductions, and benefits resulting from this proposal will vary ba sed on the specifications of the modified unit, the efficiency improvements undertaken, the unit’s participation in a section 111(d) plan, and the influence of the control requirements it faces for non-CO 2 pollutants.
9.5 Statutory and Executi ve Order Requirements
9.5.1 Executive Order 12866, Regulatory Planni ng and Review, and Executive Order 13563, Improving Regulation and Regulatory Review

Under Executive Order (EO) 12866 (58 FR 51,735, October 4, 1993), this action is a “significant regulatory action” b ecause it “raises novel legal or polic y issues arising out of legal mandates.” Accordingly, the EPA submitted this action to the Office of Management and Budget (OMB) for review under Executive Orders 1286 6 and 13563 (76 FR 3821, January 21, 2011) and any changes made in response to OMB recommendations have been documented in the docket for this action. In addition, the EP A prepared an analysis of th e potential costs and benefits associated with this action. This analysis is pres ented in the preceding secti ons of this chapter.
In the period of analysis (through 2025) the EPA anticipates few, if any, sources will trigger either the modification or the recons truction provisions proposed. Because there have been a few units that have notified the EPA of NSPS modifications in the past, we have conducted an illustrative analysis of the costs an d benefits for a representative unit that is presented above.
9.5.2 Paperwork Reduction Act
This proposed action does not impose an information collection burden under the provisions of the Paperwork Reduction Act, 44 U.S. C. 3501 et seq. Burden is defined at 5 CFR 1320.3(b). As previously stated, the EPA expects few, if any, modifi ed or reconstructed EGUs in the period of analysis. Specifica lly, the EPA believes it unlikely that fossil fuel-fired electric utility steam generating units (utility boilers a nd IGCC units) or stationary combustion turbines will take actions that would constitute modifi cations or reconstructions as defined under the***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-15 EPA’s NSPS regulations. Accordingly, this propos ed action is not anticipated to impose any information collection burden over the 3-year period covered by the Information Collection Request (ICR) for this proposed rule.
The EPA intends to codify the standards of performance in the same way for both this proposed action and the January 2014 proposal fo r new sources and is proposing the same recordkeeping and reporting requirements that we re included in the January 2014 proposal. (See 79 FR at 1,498/3 – 1,499/3.) Although not anticipated, if an EGU were to modify or reconstruct, this proposed action would impose minimal inform ation collection burden on affected sources. Apart from certain reporting costs, which are manda tory for all owners/operators subject to CAA section 111 national emission standa rds, there would be no new information collection costs, as the information required by this proposed ru le is already collected and reported by other regulatory programs. The information collection requirements in the January 2014 proposal have been submitted for approval to the OMB under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. The ICR document prepared by the EPA fo r the January 2014 proposal has been assigned the EPA ICR number 2465.02.
9.5.3 Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) 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 agen cy certifies that the rule will not have a significant economic impact on a substa ntial number of small entities. Small entities include small businesses, small organizati ons, and small governmental jurisdictions.
For purposes of assessing the impacts of this ru le on small entities, small entity is defined

as:

1. A small business that is defined by the SB A’s regulations at 13 CFR 121.201 (for the electric power generation industry, the sm all business size standard is an ultimate parent entity with less th an 750 employees). The NAICS codes for the affected industry are in Table 9-9 below. 2. A small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-16 3. A small organization that is any not-for-p rofit enterprise which is independently owned and operated and is not dominant in its field.

Table 9-9. Potentially Regu lated Categories and Entities a Category NAICS Code Examples of Potentially Regulated Entities Industry 221112 Fossil fuel electric power generating units State/Local Government 221112 b Fossil fuel electric power generating units owned by municipalities

a Include NAICS categories for source categories that own and operate elect ric power generating units (includes boilers and stationary combined cycle combustion turbines).
b State or local government-owned and operated establishmen ts are classified according to the activity in which they are engaged. After considering the economic im pacts of this proposed rule on small entities, we certify that this action will not have a significant economic impact on a substantial number of small entities.
The EPA expects few, if any, modified ut ility boilers, IGCC units, or stationary combustion turbines in the period of analysis. An NSPS modification is defined as a physical or operational change that increases the source’s maximum achievable hourly rate of emissions. The EPA does not believe that there are likely to be EGUs that will take actions that would constitute modifications as define d under the EPA’s NSPS regulations.

Because there have been a limited number of units that have notified the EPA of NSPS modifications in the past, the RIA for this propose d rule includes an illustrative analysis of the costs and benefits for a representative unit.
Based on the analysis, the EPA estimates th at this proposed rule could result in CO 2 emission changes, quantified benefits, or co sts for a hypothetical uni t that triggered the modification provision. However, we do not anticipate this proposed rule would impose significant costs on those sources, including any that are owned by small entities.
In addition, the EPA expects few, if any, The EPA expects few, if any, reconstructed fossil fuel-fired electric utility steam generating units (utility boilers and IGCC units) or stationary combustion turbines in the peri od of analysis. Reconstruction occurs when a single project replaces components or equipment in an existin g facility and exceeds 50 percent of the fixed***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-17 capital cost that would be required to construct a comparable entirely new facility. Due to the limited data available on reconstructions, it is not possible to conduct a representative illustrative analysis of what costs and benef its might result from this proposal in the unlikely case that a unit were to reconstruct. However, based on the lo w number of previous reconstructions and the BSER determination based on the most effici ent available generating technology, we would expect this proposal to result in no significant CO 2 emission changes, quantified benefits, or costs for NSPS reconstructions.

Nevertheless, the EPA is aware th at there is substantial intere st in the proposed rule among small entities (municipal and rura l electric cooperatives). As summa rized in section II.G. of the preamble, the EPA has conducted an unprecedented amount of stakeholder outreach. As part of that outreach, agency officials participated in ma ny meetings with individu al utilities as well as meetings with electric utility associations. Sp ecifically, the EPA Admini strator, Gina McCarthy, participated in separate meetings with both the National Rura l Electric Cooperative Association (NRECA) and the American Public Power Associ ation (APPA). The meetin gs brought together leaders of the rural cooperat ives and public power utilitie s from across the country. The Administrator discussed and exchanged informati on on the unique challenges, in particular the financial structure of NRECA and APPA member utilities. A detailed discussion of the stakeholder outreach is included in the preamble to the emission guidelines for existing affected electric utility generating units be ing proposed in a separate action.

In addition, as described in the RFA section of the preamble to the proposed standards of performance for GHG emissions from new EGUs (79 FR 1499-1500, January 8, 2014), the EPA conducted outreach to representatives of small entities while formulating the provisions of the proposed standards. Although only new EGUs woul d be affected by those proposed standards, the outreach regarded planned actions for new, reconstructed, modified and existing sources.
While formulating the provisions of the pr oposed rule, the EPA considered the input provided over the course of the stakeholder outreach. We invite comments on all aspects of this proposal and its impacts, including potential impacts on small entities.***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-18 9.5.4 Unfunded Mandates Reform Act (UMRA)
This proposed rule does not contain a federal mandate that may result in expenditures of $100 million or more for state, local, and tribal g overnments, in the aggregate, or the private sector in any one year. As pr eviously stated, the EPA expect s few, if any, modified or reconstructed fossil fuel-fired electric utility steam generating units (u tility boilers and IGCC units) or stationary combustion tu rbines in the period of analysis . Accordingly, this proposed rule is not subject to the requirements of sections 202 or 205 of UMRA.
This proposed rule is also not subject to th e requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments.
In light of the interest among governmental entities, the EPA initiated consultations with governmental entities while formulating the pr ovisions of the proposed standards for newly constructed EGUs. This outreach regarded planne d actions for new, reconstructed, modified and existing sources. As described in the UMRA discussion in the preamble to the proposed standards of performance for GHG emissions from new EGUs (79 FR 1500-1501, January 8, 2014), the EPA consulted with the following 10 na tional organizations representing state and local elected officials:

 National Governors Association

 National Conference of State Legislatures

 Council of State Governments

 National League of Cities

 U.S. Conference of Mayors

 National Association of Counties

 International City/County Management Association

 National Association of Towns and Townships

 County Executives of America

 Environmental Council of States

On February 26, 2014, the EPA re-engaged with those governmental entities to provide a pre-proposal update on the emission guidelines fo r existing EGUs and emission standards for modified and reconstructed EGUs.***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-19 While formulating the provisions of these propo sed standards, the EPA also considered the input provided over the course of extensive stake holder outreach conducted by the EPA (see section II.G. of the preamb le for more information).
9.5.5 Executive Order 13132, Federalism
This proposed action does not have federalism implications. It would not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the vari ous levels of government, as specified in EO 13132. This proposed action woul d not impose substantial direct compliance costs on state or local governments, nor woul d it preempt state law. Thus, EO 13132 does not apply to this action.

However, as described in the Federalism discussion in the preamble to the proposed standards of performance for GHG emissions from new EGUs (79 FR 1501, January 8, 2014), the EPA consulted with state and local official s in the process of de veloping the proposed standards for newly constructed EGUs. This outreach regarded planned actions for new, reconstructed, modified and existing sources . The EPA engaged 10 national organizations representing state and local elected officials. The UMRA discussion in the preamble to the proposed standards of performance for GHG emissions from new EGUs (79 FR 1500-1501, January 8, 2014) includes a description of the consultation. In addition, on February 26, 2014, the EPA re-engaged with those governmental ent ities to provide a pre-proposal update on the emission guidelines for existing EGUs and emissi on standards for modified and reconstructed EGUs. While formulating the prov isions of these proposed standa rds, the EPA also considered the input provided over the course of the exte nsive stakeholder outreach conducted by the EPA (see section II.G. of the preamble). In the spirit of EO 13132, and consiste nt with the EPA policy to promote communications between the EPA and state and local governments, the EPA specifically solicits comment on this proposed action from state a nd local officials.
9.5.6 Executive Order 13175, Consultation and Coordi nation with Indian Tribal Governments
This action does not have tribal implicat ions, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000). It would neither im pose substantial direct compliance costs on***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-20 tribal governments, nor preempt Tribal law. This proposed rule would impose requirements on owners and operators of reconstr ucted and modified EGUs. The EPA is aware of three coal-fired EGUs located in Indian Country but is not aw are of any EGUs owned or operated by tribal entities. The EPA notes that this proposal would only affect existing sources such as the three coal-fired EGUs located in Indian Country, if those EGUs were to ta ke actions constituting modifications or reconstructi ons as defined under the EPA’s NSPS regulations. However, as previously stated, the EPA expects few, if any, m odified or reconstructed EGUs in the period of analysis. Thus, Executive Order 13175 does not apply to this action.
Although Executive Order 13175 does not appl y to this action, the EPA conducted outreach to tribal environmental staff and offered consultation with tribal officials in developing this action. Because the EPA is aware of tribal interest in carbon pollution standards for the power sector, prior to proposal of GHG standa rds for new power plants, the EPA offered consultation with tribal officials early in the process of developing the proposed regulation to permit them to have meaningful and timely input into its development. The EPA’s consultation regarded planned actions for new, recons tructed, modified, and existing sources. The Consultation and Coordination with Indian Tribal Governments disc ussion in the preamble to the proposed standards of performance for GHG emi ssions from new EGUs (79 FR 1501, January 8, 2014) includes a descripti on of that consultation.
During development of this proposed regulation, consultation letters were sent to 584 tribal leaders. The letters provided information regard ing the EPA’s development of both the NSPS for modified and reconstructed EGUs and emissi on guidelines for existing EGUs and offered consultation. None have requested consultation. Trib es were invited to par ticipate in the national informational webinar held August 27, 2013, and to which tribes were invited. In addition, a consultation/outreach meeting was held on Septem ber 9, 2013, with tribal representatives from some of the 584 tribes. The EPA also met with tribal environm ental staff with the National Tribal Air Association, by teleconference, on July 25, 2013, and December 19, 2013. In those teleconferences, the EPA provided background in formation on the GHG emission guidelines to be developed and a summary of issues being explored by the Agency. Additional detail regarding this stakeholder outreach is included in the executive order discussion for the emission guidelines for existing affected el ectric utility generating units in Chapter 7 of this RIA. The***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-21 EPA also held a series of listening sessions pr ior to proposal of GHG standards for new power plants. Tribes participated in a session on Febr uary 17, 2011, with state agencies, as well as in a separate session with tribes on April 20, 2011.
The EPA will also hold additional meetings w ith tribal environmental staff during the public comment period, to inform them of the content of this proposal, and offer further consultation with tribal elected o fficials where it is appropriate. We specifically solicit additional comment from tribal officials on this proposed rule.
9.5.7 Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks
The EPA interprets EO 13045 (62 FR 19885, April 23, 1997) as applying to those regulatory actions that c oncern health or safety risks, such that the analysis required under section 5-501 of the Order ha s the potential to influen ce the regulation. This action is not subject to EO 13045 because it is based solely on technology performance.
9.5.8 Executive Order 13211, Actions Concerning Regulations that Significantly Affect Energy Supply, Distribution, or Use
This proposed action is not a “significant energy action” as defined in EO 13211 (66 FR 28355 [May 22, 2001]), because it is not likely to ha ve a significant adverse effect on the supply, distribution, or use of energy. This proposed ac tion is not anticipated to have impacts on emissions, costs or energy supply decisions for the affected elect ric utility industry.
9.5.9 National Technology Transfer and Advancement Act

Section 12(d) of the NTT AA of 1995 (Public Law No. 104-113; 15 U.S.C. 272 note) directs the EPA to use voluntary consensus standa rds (VCS) in their regulatory and procurement activities unless to do so would be inconsistent with appli cable law or otherwise impractical. VCS are technical standards (e.g., materials spec ifications, test methods, sampling procedures, business practices) developed or adopted by one or more voluntary consensus bodies. The NTTAA directs the EPA to provide Congress, through annual reports to the OMB, with explanations when an agency does not use available and applicable VCS.***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-22 This proposed rulemaking involves technical standards. The EPA proposes to use the following standards in this proposed rule:

 D5287-08 (Standard Practice for Automatic Sampling of Gaseous Fuels)

 D4057-06 (Standard Practice for Manual Sampling of Petroleum and Petroleum Products)

 D4177-95(2010) (Standard Pr actice for Automatic Sa mpling of Petroleum and Petroleum Products)
The EPA is proposing use of Appendices B, D, F and G to 40 CFR part 75. These Appendices contain standards th at have already been review ed under the NTTAA. The EPA welcomes comments on this aspect of the pr oposed rulemaking and, specifically, invites the public to identify potentially-applicable VCS and to explain why such standards should be used in this action.

9.5.9 Executive Order 12898: Federal Actions to A ddress Environmental Justice in Minority Populations and Low-Income Populations
Executive Order 12898 (59 FR 7629, February 16, 1994) establishes federal executive policy on environmental justice. It s main provision directs federal ag encies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disp roportionately high and adverse human health or environmental effects of their programs, policie s, and activities on minority populations and lowincome populations in the U.S.
This proposed rule limits GHG emissions frommodified and reconstructed fossil fuelfired electric utility steam generating units (u tility boilers and IGCC units) and stationary combustion turbines by establishing national emission standards for CO 2 . The EPA has determined that this proposed rule would not result in disproportio nately high and adverse human health or environmental effects on mi nority, low-income, and indigenous populations because it does not affect the level of pr otection provided to human health or the environment. As previously stated, the EPA exp ects few, if any, modified or reconstructed fossil***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-23 fuel-fired electric utility steam generating units (utility boilers and IGCC units) or stationary combustion turbines in the period of analysis.***E.O. 12866 Review – Draft – Do Not C ite, Quote or Release During Review***

9-24 9.6 References

Bell, M.L., et al. 2004. “Ozone and Short-Term Mortality in 95 U.S. Urban Communities, 1987- 2000.” Journal of the Americ an Medical Association , 292(19): p. 2372-8. Krewski D.; M. Jerrett; R.T. Burnett; R. Ma; E. Hughes; Y. Shi, et al. 2009. Extended Follow-Up and Spatial Analysis of the American Cancer Soc iety Study Linking Particulate Air Pollution and Mortality. HEI Research Report, 140, Health Effects Institute, Boston, MA. Lepeule, J.; F. Laden; D. Dock ery; J. Schwartz. 2012. “Chronic Exposure to Fine Particles and Mortality: An Extended Follow-Up of the Harvard Six Cities Study from 1974 to 2009.” Environmental Health Perspectives, July, 120(7):965-70. Levy, J.I.; S.M. Chemerynski and J.A. Sarnat . 2005. “Ozone Exposure and Mortality: An Empiric Bayes Metaregression Analysis.” Epidemiology, 16(4): pp. 458-68.