May 16, 2014 Abt Associates | Costs for Alternative Regulatory Option 4 Cases and Final Rule | pg 1

Date 

### May 16, 2014

To 

### The Final Section 316(b) Existing Facilities Rule Record

From 

### Abt Associates

Subject 

### Comparison of Social Costs for Alternative Regulatory Option 4 Cases and Final Rule



### 1 Overview

As described in Chapter 1 of the Economic Analysis for the Final Section 316(b) Existing Facilities Rule (EA), in addition to analyzing the final rule, EPA considered and analyzed two more options for existing

unit s. In the EA for the final rule, EPA refers to these additional options as Proposal Option 4 and Proposal Option 2 because they are based on Options 4 and 2, as defined in the pr oposed rule EA , in terms of the design intake flow (DIF) specifications of a cooling water intake system that would be subject to given technology requirements

. Specifically, Proposal Option 4, as analyzed in the final rule EA, requires regulated facilitie s with a DIF of greater than 50 MGD to achieve the uniform national impingement mortality standards while existing units with DIF between 2 and 50 MGD would remain subject to 316(b) permitting based on best professional judgment. This is the same applicabi lity specification as for Option 4 in the proposed rule EA. However, the final rule EA’s Option 4 ( Proposal Option 4 ) differs from the proposed rule EA’s Option 4 in that the final rule EA ’s Option 4 incorporates

the flexibilities and additional cost

- reduc tion measures that are included in the final rule.

To provide a more consistent comparison of Option 4, as defined at proposal , with the final rule, EPA defined and analyzed an alternative to the final rule EA’s Option 4 (herein referred to as Alternative Option 4 ), which does not incorporate the flexibilities and additional cost

- reduction measures that are

included in the final rule and in the final rule EA’s Option 4. This Alternative Option 4 retains the regulatory specifications of the proposed rule in terms of technology choice and applicability based on DIF coverage, but adjusts technology costs to the current dollar year and used the updated framework of administrative requirements

.
EPA’s analysis of the social costs and benefits of the final rule and other options EPA considered , as described in EA Chapter 8: Social Costs and Benefits

, assumes that all facilities with cooling water system impoundments will qualify as baseline closed

- cycle recirculating system ( CCRS ) , and will not need to install additional technology under the final rule and other options considered

. EPA’s analysis of the social costs and benefits presented in this memorandum also reflects this assumption. To the extent

th at some of these facilities do not qualify as baseline CCRS and would need to install additional compliance technology, the social costs and benefits reported in this memorandum may be

underestimates. 1



### As discussed in the EA, under the final rule’s new un its provision, e ntrainment control measures are required for stand

- alone new units . I n developing this provision , EPA considered three additional options

– A, B, and C

– which , in addition to covering stand

- alone new units , extend the new units provision to specific definitions of repower ed units

. This memorandum discusses only the final rule’s new units provision

.

1 For a more complete discussion of the Impoundments Provision and assumptions EPA made for its analysis, please see EA Chapter 1 : Introduction

. 

# Memorandum

Environment and ResourcesMay 16, 2014 Abt Associates | Costs for Alternative Regulatory Option 4 Cases and Final Rule | pg 2



### Below , EPA compares the social cost of existing units provision of Alternative Option 4 to the costs of

the existing units provision s of the final rule and to the final rule EA’s Option 4 ( Proposal Option 4 ) ( Section 2 )

. EPA also presents costs for the new units provision of the final ru le ( Section 3 )

, and compares

the total social cost of Alternative Option 4 , including both the existing and new units provisions, to the

total soci al costs of the final rule and Proposal Option 4

, also including the existing and new units provisions

. The differences between the cost for Alternative Option 4 and the options considered in the

EA reflect the final rule’s flexibilities and additional cost

- reduction measures.



### 2 Total Social Costs for Existing Units

This section presents and compar es social costs associated with existing units only

. Table 2

- 1 report s annualized direct compliance costs to existing units at regulated facilities

. The cost of Alternative Option

4 is $ 280.8 million at the 3

- percent discount rate and $ 306.3 million at the 7

- percent discount rate. At the

3

- percent discount rate

, the cost of Alternative Option 4 is 3 percent higher than the cost of the existing units provision of the final rule

, and 1 2 percent higher than the cost of Proposal Option 4. At the 7

- percent discount rate, the cost of Alternative Option 4 is 4 percent higher than the cost of the existing units provision of the final rule and 1 3 percent higher than the cost of Proposal Option 4.

Table 2

- 1 : Annualized Direct Compliance Costs for Final Rule and Alternative Definitions of Option 4

– Existing Units Provisions Only (Millions; $2011; at 2013)

Discount Rate Alternative Option 4 Final Rule

- Existing Units Proposal Option 4

3% $ 280.8 $ 271.4 $ 250.7

7% $ 306.3 $ 294.3 $ 271.1 Source: U.S. EPA analysis for this memorandum



### Table 2

- 2 report s the annualized costs to States and the federal government for administering the existing units provision of the final rule and the alternative definitions of Option 4

. These costs are the same for Alternative Option 4, Proposal Option 4, and the final rule. As mentioned above, Alternative Option 4

refl ects updates made to the framework of administrative requirements and therefore has the same administrative costs to governments as the final rule and Proposal Option 4. State s would incur annualized costs of $1.0 million, at both the 3

- percent and 7

- perce nt discount rate s , while the federal
government would incur annualized administrative costs of less than $40,000.

Table 2

- 2 : Annualized Government Administrative Costs for Final Rule and Alternative Definitio ns of Option 4

– Existing Units Provisions Only (Millions; $2011; at 2013)

Discount Rate Government Level Alternative Option 4 Final Rule

- Existing Units Proposal Option 4

3% State/Territory $1.0 $1.0 $1.0

Federal b $0.0 $0.0 $0.0

Total a $1.0 $1.0 $1.0

7% State/Territory $1.0 $1.0 $1.0

Federal b $0.0 $0.0 $0.0

Total a $1.0 $1.0 $1.0
a. Values may not sum to totals due to independent rounding. b. The value is less than $ 40,000

. Source: U.S. EPA analysis for this memorandum



### Table 2

- 3 presents total social costs for the existing units provisions of the final rule and the alternative definitions of Option 4 . At the 3

- percent discount rate, the total social cost of Alternati ve Option 4 is $ 281.8 million, which exceed s the cost of the existing units provision of the final rule by $ 9.4 million and the cost of Proposal Option 4 by $3 0.0 million. At the 7

- percent discount rate, the total social cost ofMay 16, 2014 Abt Associates | Costs for Alternative Regulatory Option 4 Cases and Final Rule | pg 3



### Alternative Option 4 is $ 30 7.3 million, $1 2.1 million higher than the cost of the existing units provision

of the final rule and $ 35.2 million higher than the cost of Proposal Option 4.

Table 2

- 3 : Annualized Total Social Costs for Final Rule and Alternative Definitions of Option 4

– Existing Units Provisions Only (Millions; $2011; at 2013)

Discount Rate Cost Category Alternative Option 4 Final Rule

- Existing Units Proposal Option 4

3% Compliance Cost $ 280.8 $ 271.4 $ 250.7

Gov. Admin. $1.0 $1.0 $1.0

Total a $ 281.8 $ 272.4 $ 251.8

7% Compliance Cost $ 306.3 $ 294.3 $ 271.1

Gov. Admin. $1.0 $1.0 $1.0

Total a $ 307.3 $ 295.3 $ 272.1 a. Values may not sum to totals due to independent rounding. Source: U.S. EPA analysis for this memorandum



### 3 Total Social Costs for New Units

Table 3

- 1 presents annualized direct compliance costs for new units to Electric Generators and annualized

administrat ive costs to States and the federal government under the new units provision of the final rule

. EPA assumed that all new units activity will occur in States with NPDES permitting authority. A s reported in Table 3

- 1

, EPA estimates that under the new units provision of the final rule, direct compliance costs to facilities will be $2.5 million at the 3

- percent discount rate and $1.9 million at the 7

- percen t discount rate

. States will incur approximately $0.1 million to administer the new units provision

of the final rule

, regardless of the discount rate. The total social cost of the new units provision of the final rule will be $2.6 million at the 3

- percent discount rate and $2.0 million at the 7

- percent discount rate.

Table 3

- 1 : Summary of Annualized Direct Compliance Costs
to Facilities and Administrative Costs to the Government

– New Units Provision Only (Millions; $2011; at 2013)

Discount Rate Cost Category Costs

3% Compliance Costs $2.5

Gov. Admin. $0.1

Total $2.6

7% Compliance Costs $1.9

Gov. Admin. $0.1

Total $2.0 Source: U.S. EPA analysis for this memorandum



### 4 Total Social Costs for Existing and New Units

This section presents and compares social costs associated with both existing and new units. Table 4

- 1
reports annualized direct compliance costs for the existing and new units provisions. The cost of Alternative Option 4 is $ 283.2 million at the 3

- percent discount rate and $3 08.3 million at the 7

- percent
discount rate. At the 3

- percent discount rate, the cost of A lternative Option 4 is approximately 3 percent higher than the cost of the final rule, and 12 percent higher than the cost of Proposal Option 4. At the 7

- percent discount rate, the cost of Alternative Option 4 is 4 percent higher than the cost of the final rule

and approximately 1 3 percent higher than the cost of Proposal Option 4

.May 16, 2014 Abt Associates | Costs for Alternative Regulatory Option 4 Cases and Final Rule | pg 4

Table 4

- 1 : Annualized Direct Compliance Costs for Final Rule and Alternative Definitions of Option 4

– Existing Units an d New Units Provisions (Millions; $2011; at 2013)

Discount
Rate New Units Existing Units Total a

Final Rule Alternative

Option 4 Final Rule Proposal Option 4 Alternative

Option 4 Final Rule Proposal Option 4

3% $2.5 $ 280.8 $ 271.4 $ 250.7 $ 283.2 $ 273.8 $ 253.2
7% $1.9 $ 30 6 .3 $ 294.3 $ 271.1 $ 308.3 $ 296.2 $ 273.1

a. Values may not sum to totals due to independent rounding. Source: U.S. EPA analysis for this memorandum



### Table 4

- 2 reports the annualized costs to States and federal government for administering the existing and

new units provision s of the final rule and the alternative definitions of Option 4 . These costs are approximately the same for Alternative Option 4, Proposal Option 4, and the final rule

– $1.1 million regardless of the discount rate

. As stated above, EPA assumed that all new units activity will occur in States with NPDES permitting aut hority.

Table 4

- 2 : Annualized Government Administrative Costs for Final Rule and Alternative Definitions of Option 4

– Existing Units and New Units Provisions (Millions; $2011; at 2013)

Discount
Rate Government

Level New

Units Existing Units Existing and New Units

Final
Rule Alternative

Option 4 Final

Rule Proposal Option 4 Alternative

Option 4 Final

Rule Proposal Option 4

3% State/Territory $0.1 $1.0 $1.0 $1.0 $1.1 $1.1 $1.1

Federal a $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0

Total b $0.1 $1.0 $1.0 $1.0 $1.1 $1.1 $1.1

7% State/Territory $0.1 $1.0 $1.0 $1.0 $1.1 $1.1 $1.1

Federal a $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0

Total b $0.1 $1.0 $1.0 $1.0 $1.1 $1.1 $1.1

a . The value is less than $40,000.

b

. Values may not sum to totals due to independent rounding. Source: U.S. EPA analysis for this memorandum



### Table 4

- 3 presents total social costs for the existing and new units provision s of the final rule and the alternative definitions of Option 4 . At the 3

- percent discount rate, the total social cost of A lternative Option 4 is $ 284.3 million , which exceeds the total social cost of the final rule by $ 9.4 million and the

total social cost of Proposal Option 4 by $ 30.0 million . At the 7

- percent discount rate, the total social cost of Alternative Option 4 is $ 3 09.3 million

, which is $1 2.1 million higher than the total social cost of the final rule and $ 35.2 million higher than the total social cost of Proposal Option 4.

Table 4

- 3 : Annualized Total Social Costs for Final Rule and Alternative Definitions of Option 4

– Existing Units and New Units Provisions (Millions; $2011; at 2013)

Discount
Rate Cost Category New Units Existing Units Existing and New Units

Final
Rule Alternative

Option 4 Final

Rule Proposal Option 4 Alternative

Option 4 Final

Rule Proposal

Option 4

3% Compliance Cost $2.5 $ 280.8 $ 271.4 $ 250.7 $ 283.2 $ 273.8 $ 253.2
Gov. Admin. $0.1 $1.0 $1.0 $1.0 $1.1 $1.1 $1.1

Total a $2.6 $ 281.8 $ 272.4 $ 251.8 $ 284.3 $ 274.9 $ 254.3

7% Compliance Cost $1.9 $ 306.3 $ 294.3 $ 271.1 $ 308.3 $ 296.2 $ 273.1

Gov. Admin. $0.1 $1.0 $1.0 $1.0 $1.1 $1.1 $1.1

Total a $2.0 $ 307.3 $ 295.3 $ 272.1 $ 309.3 $ 297.3 $ 274.1 a. Values may not sum to totals due to independent rounding.
Source: U.S. EPA analysis for this memorandum