Enhancements planned for the ISIS-cement based on PCA’s review comments 

Meeting with the Portland Cement Association (PCA) 

November 23, 2009 

Portland Cement Association and constituents joined EPA over the phone 

Tyrone Wilson 

Stuart Sessions 

Doug Roark 

Ed Sullivan 

Tian Liu 

EPA 

Elineth Torres 

Ravi Srivastava 

Tom Walton 

Lisa Conner – over the phone 

Keith Barnett 

Will Yerlverton 

Contractors 

Samudra Vijay- Sam Analytic Solutions LLC 

Brooks Depro- RTI 

Topics for discussion 

I. Market Structure 

1. EPA explained that in ISIS the new market structure to use the states as “demand 

centers” 

2. Demand centers within each state will be based on metropolitan area(s) 

3. Import terminals will be based on USGS custom districts (36) 

4. Other cement terminals – per PCA information on other terminals including 

distribution terminals is not available and will need to be developed. Developing these 

data will take time, resource commitment, and considerable expense on the part of PCA. 

PCA indicated it cannot commit to developing these data given the time constraint. 

II. Transportation - Ravi 

1. Transportation matrix will be expanded to reflect the impact of terminals and the 

frequent use of models other than truck. (TRAGIS Model) - distance 

a. Barge 

a. Rail 

b. Transportation cost by truck 

2. Cost of transporting cement - 

Ravi proposed to send to PCA a transportation matrix (with supply points including 

plants and import districts and demand centers by states) for review and feedback on 

whether there are additional data industry might be able to contribute 

 
Stu- said that the matrix concept is reasonable 

- plants on rivers and lakes will be serving primarily terminals – then from 

terminals to consumers the transportation method is truck or rail (15-20% of 

plants) 

- Transportation from plant to terminal is usually 15% rail, 15% truck, remainder is 

barge and from the terminal the product is transported by truck 

III. AVC – Elineth and Brooks 

1. EPA is revising the AVC functions to account for SG&A, cost of shipping within a 

region and to terminals, property taxes and insurance – 

Brooks - Overall comments from PCA on AVC are reasonable. Need feedback from 

PCA on the missing cost elements - SG&A, cost of shipping within a region and to 

terminals, property taxes and insurance – do these costs vary by year, are these costs fix 

or variable? 

a. PCA will provide EPA with a similar table as the one provided on the 

NESHAP comments for year 2005- EPA will use the table to incorporate 

these elements to AVC for the NESHAP. 

b. Also, Ed Sullivan will work with PCA members to get a sign off for providing 

somewhat aggregated data from the benchmarking survey. This data will 

likely be more detailed than that in the table referred to above, and will show 

some variation across groups of kilns/plants rather than only the industry-wide 

average. PCA’s benchmarking survey report is produced annually and dates 

back to 1996.. 

2. Repair and maintenance costs- Use a price index more specific to repair/maintenance 

than GDP deflator to escalate cost - 

3. Labor costs- Work with PCA to update these costs if needed. Draw earning data from 

BLS consistent with PCA PCA’s comments: include benefits and reflect appropriate 

mix of salaried and hourly employees. 

4. Fuel cost and availability- coke, and TDF, natural gas (availability) – 

Samudra- Current data on fuels is SEEDS data but we need information on cost, 

availability and emission intensity for the fuels that are not common: 

Availability of natural gasTdf ? availability and price and emission intensity 

Mid-kiln firing? availability and price, emission intensity 

Other fuels ?? (USGS) availability and price, emission intensity 

PCA commented that the ISIS Model is unrealistic in simulating the possibility that kilns 

would change from a primary fuel to 100% alternate fuel, and instead the following fuel 

use pattern may be used: 
TDF and MKF 20% maximum for wet, long dry- 10-12% preheater, and 

precalciner 

Natural gas- 1-2% co-firing 

Pet Coke- 20% 

Stu- PCA has the labor energy survey- fuel use info, cost. Ed will be providing thru Ty 

Wilson the Annual Year Book that contains aggregate information on fuels 

EPA will send to PCA a matrix with the information on fuels – to get feedback on cost, 

availability and intensities 

5. Updating escalation factors 

IV. Demand projections - 

1. Updating consumption data based on the latest projections from PCA (summer 2009 

Forecast and 2009 Long-term forecast which reflects the deeper and prolonged slump 

for cement consumption with recession) – 

a. Ed Sullivan- PCA will share with EPA their latest long-term forecast on a 

yearly basis. We will get the forecast by State 

2. historical data – yearly data- for calibration 

a. Ed Sullivan- PCA will share with EPA historical data – yearly data by State 

we might also get county level data – county level data are estimates based on 

population 

V. Supply 

1. Updating for the cancel or deferral of most of the industry’s previously planned 

capacity expansion projections over the next few years. 

2. Adding new projections beyond 2010 based on PCA Plant Summary Book of 2009 

Ed Sullivan- PCA will provide EPA with the latest information on capacity shutdown, 

expansion and postponements. Data is a snap-shot. Report to be shared with EPA was 

done on Oct. and won’t reflect any decisions made after October 2009. 

Also the Long-term consumption outlook to be shared by PCA has information on longterm supply. Long-tem supply from PCA accounts for capacity changes and climate 

change. 

VI. Capacity Replacement 

1. Updating cost of installing new equipment, substitution of new/expansion/upgrade 

production capacity for existing capacity based on data provided by PCA 
2. Abandoning the “conversions” - EPA should abandon the “conversion” concept 

altogether, and instead assume only expansions/replacement and/or Greenfield. 

o PCA- commented on capacity constraints in the model: 

a. If reasonable values are used for: a) the $/ton for greenfield facilities as well 

as replacements; and b) rate of return required for investment in new capacity, 

then ISIS would not need to focus that much on capacity constraints. 

o PCA suggested that instead of having a capacity constraint for greenfield facilities 

or replacements, ISIS perhaps could have an aggregate constraint on capital 

availability for the entire industry. EPA will need some guidance from PCA on 

what is acceptable- annually or in five year blocks. This to be discussed as an 

agenda item in the call to address the transportation matrix. PCA concurred. 

o PCA mentioned that the 7%- OMB social discount rate is not reasonable as the 

minimum rate of return required for new capital investment. Ravi suggested that 

perhaps a 12-15% discount rate is more appropriate. PCA agreed. We need to 

agree to a number that is reasonable. This also will be an agenda item for our next 

call. PCA agreed. 

VII. Imports - 

1. Modeling to include imports to meet demand, peak demand and competitiveness 

-Ravi- EPA is working with Dallas Burtraw and other economist from RFF to 

develop elasticities that will reflect freight rates, and other variables that can constraint 

imports in the future. Data being used on the analysis is USGS data – import district data 

and c.i.f data, etc. 

Elineth will share with all the methodology that Dallas Burtraw from Resources for the 

Future (RFF) developed for the econometric analysis on cement imports. 

VIII. Calibration 

1. Will be done using data set that spans for many years for calibration and validation 

instead of one year 

2. “The calibration constant” will be eliminated once the AVC function is updated to 

include the missing elements (SG&A, cost of shipping within a region and to 

terminals, property taxes, insurance 

3. Will perform sensitivity analysis on key years 

Stu mentioned that calibration should include up to 2008 

Other Topics: 

Ty Wilson asked about how EPA intends to work around the GAMS license issue when 

the ISIS model is released to the general public and emphasized that the potential cost 

associated with securing access to the license is a likely concern for probable users. Ravi 

mentioned there is a license fee for using the GAMS software, that the cost is a one-time 

fee from the GAMS Corporation, and that EPA will investigate whether there is some 

possibility for reducing the license cost for the public to use ISIS.