## From: "Higgins, Cortney" <Cortney_Higgins@omb.eop.gov> To: Melanie King/RTP/USEPA/US@EPA Cc: RobertJ Wayland/RTP/USEPA/US@EPA, Paula VanLare/DC/USEPA/US@EPA

Date: 01/14/2013 10:36 AM Subject: Suggested Edits to the Impacts Memo and Preamble regarding Reporting

Hi Melanie, We have some questions about the burden estimate in the memo. Can you address the attached comments? In particular, can you further explain how EnerNOC estimated 1000 hours per year in reporting?

Further, on PAGE 35 – can the following change be made:

CURRENT TEXT:

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.

NEW TEXT TO FOLLOW: EPA anticipates that in most cases, the entity that dispatches the engines to operate, such as the curtailment service provider or utility, will report the information to EPA on behalf of the facility that owns the engine. Thus, the burden of the reporting requirement will likely be on the entities that dispatch the engines. {EPA Text from Memo} Our burden estimate (see the PRA section below) assumes the dispatching entity will report the date and hours dispatched without contacting individual engine operators.

And finally, any changes made in the memo (updating burden estimates) will need to be carried forward to the preamble in the PRA section. Consider replacing the new sentence that begins “The EPA estimates...” with the more detailed paragraph from the memo.

Please give me a call if you have any questions.

Regards, Cortney

202.395.7856 (See attached file: RICE NESHAP Reconsideration Impacts - Final Rule 1-11-13 DRAFT._InteragencycommentsunderEO13563.docx)DRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE


# E C 

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501 Eastowne Drive, Suite 325  Chapel Hill, North Carolina 27514 Telephone: (919) 484-0222  Fax: (919) 484-0122 

### MEMORANDUM

DATE: January 11 , 2013

SUBJECT: RICE NESHAP Reconsideration Final Am endments - Cost and Environmental Impacts

FROM: Tanya Parise, EC/R, Inc.

TO: Melanie King, EPA OAQPS/SPPD/ESG

The EPA is finalizing amendments to the national emission standards for hazardous air pollutants (NESHAP) for stationary reciprocating internal com bustion engines (RICE) in 40 CFR part 63, subpart ZZZZ. The purpose of this memorandum is to present the estimated impacts associated with the amendments being promulgated compared to the 2010 final rules (75 FR 9648 and 75 FR 51570) that addressed existing stationary RICE less than or equal to 500 horsepower (H P) located at major sources and existing stationary RICE located at area sources. This memorandum will also discuss amendments that will affect other engines subject to the RICE NESHAP and the effect on impacts for those engines.

The amendments include alternative compliance opti ons for certain stationary engines, management practices for a subset of existing stationary engines in sparsely populated areas, and alternative monitoring and compliance options for the same engines in populat ed areas. In addition, the EPA is increasing the demand response (DR) allowance for stationary emergency RICE. The sp ecific amendments being finalized and how these changes will affect emission reduction estimates and the total costs of the rule are discussed in the paragraphs that follow. It should be noted that these impacts are identical to those estimated for the amendments proposed to the RICE NESHAP in June 2012.

Non-Emergency Stationary SI RICE >500 HP Located at Area Sources

Engines in Sparsely Populated Areas

Existing stationary non-emergency 4-stroke lean burn (4SLB) and 4-stroke rich burn (4SRB) spark ignition (SI) engines greater than 500 HP at area sources that are in sparsely populated (remote) areas will be subject to management practices under the amendments. A remote area is defined as either: (1) an offshore area that is beyond the line of ordinary low water along that portion of the coast of the United States that is in direct contact with the open seas and beyond the line marking the seaward limit of inland waters; (2) a pipeline segment with 10 or fewer buildings intended for human occupancy and no buildings intended for human occupancy with four or more stories within 220 ya rds (200 meters) on either side of the centerline of any continuous 1-mile (1.6 kilometers) length of pipeli ne and that does not lie within 100 yards (91 meters) of either a building or a small, well-defined outsi de area (such as a playground, recreation area, outdoor theater, or other place of public assembly) that is occ upied by 20 or more persons on at least 5 days a week for 10 weeks in any 12-month period; or (3) engines not located on pipelines that have 5 or fewer buildings Field Code Changed

Deleted: 4DRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE

2 intended for human occupancy within a 0.25 mile radius around the engine. Under the amendments, these engines are no longer subject to emission standards necessitating the use of aftertreatment, but subject to management practices instead; no em ission reductions have been estima ted from meeting the management practices. The capital and annual costs for these engine s would decrease substantially from those estimated for the 2010 final rule because owners and operators would not have to purchase, operate and maintain a catalyst, plus owners and operators would not be required to monitor the catalyst inlet temperature continuously or record the pressure drop monthly.

The only costs attributed to engines subject to management practices are for maintaining records of the maintenance conducted on the engine in order to dem onstrate that the engine is operated and maintained according to the manufacturer’s em ission-related operation and main tenance (O&M) requirements or the owner or operator’s own maintenance plan. It is expected that the majority of owners and operators are already following some type of O&M requirements a nd little additional burden is expected. Therefore, minimal recordkeeping costs were estimated at 1 hour per year for each engine at a technical labor rate of $72 per hour. Owners and operators of SI engines that ar e subject to management practices are not subject toany reporting requirements and therefore no reporting costs were estimated for these engines. Existing nonemergency 4-stroke SI engines greater than 500 HP at area sources are predominantly located in sparsely populated areas; more specifically, according to industr y information, about 90 percent of these engines are

in Class 1 areas.

Engines in Populated Areas

Existing stationary non-emergency 4SLB and 4SRB SI engines greater than 500 HP at area sources that are not in remote areas are subject to an equi pment standard under the amendments that would require the use of a catalyst. Under the am endments, existing stationary non- emergency 4SLB SI engines do not have to meet numeric emission limits, but have to demonstrate by testing that the catalyst is achieving a 93 percent carbon monoxide (CO) reduction or that CO em issions at the engine exhaust do not exceed 47 parts per million by volume, dry basis (ppm vd). Existing stationary non-emerge ncy 4SRB engines are required to demonstrate via testing that the catalyst is reducing CO by 75 percent or more, or alternatively that total hydrocarbons (THC) emissions are being reduced by 30 pe rcent or more. Alternatively, 4SRB engines can demonstrate compliance with a CO concentration level of 270 ppmvd at 15 percent O 2

.

Given that owners and operators would still have to use add-on controls on their engines and the same catalyst performance is expect ed as previously estimated, and because pollutant reductions estimated for the 2010 rule are conservatively based on the averag e control efficiencies observed during EPA’s testing program at Colorado State University (CSU) for 4SLB engines and industry testing for 4SRB engines, the same emissions reductions estimated for the 2010 rule are expected under the amendments for existing stationary non-emergency 4SLB and 4SRB SI engines greater than 500 HP at area sources in populated

areas. The control efficiencies are documented in the memorandum “Imp acts Associated with NESHAP for Existing Stationary SI RICE” available from www.regulations.gov as Document ID Numbers EPA-HQOAR-2008-0708-0542,

The changes are expected to lower costs in term s of monitoring and testing expenses. Under the amendments, owners and operators no longer have to perform monthly m easurements of the pressure drop across the catalyst. Owners and operators are still be required to monitor the catalyst inlet temperature or use a high temperature shutdown device to protect the catalyst , but they do not have to continuously record the catalyst inlet temperature. High temperature shut down devices are typical on engines and the EPA hasDRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE

3 assumed that all the engines will already have such a device installed on their units. Therefore, no cost has been estimated for this requirement. The costs would be further reduced for 4SRB SI engines because the rule will allow less expensive CO and THC testing in place of formaldehyde testing, which is more expensive.

Non-emergency engines in populated areas will con tinue to be subject to the same recordkeeping and reporting requirements as required in 2010 rule, such as reading instructions, training personnel, submitting an initial notification, and submitting semi-annual comp liance reports. It is estimated that a total of 14 hours will be needed, including 4 hours for reading the rule , 4 hours for training, and 6 hours for preparing and submitting notifications and compliance reports. Existin g non-emergency 4-stroke engines greater than 500 HP at area sources in populated areas account for 10 percent of the total population of 4-stroke engines above 500 HP at area sources, according to industry estimates.

THC Compliance Demonstration Option

In addition to a reduction in testing costs discu ssed for existing 4-stroke e ngines at area sources and the estimated cost impacts presented in Table 2, additi onal savings are expected for owners and operators of existing and new stationary 4SRB engines above 500 HP located at major sources. Owners and operators of these engines currently have the option of either li miting the concentration of formaldehyde or reducing formaldehyde emissions, a requirement that was promulgated as part of the original 2004 RICE NESHAP rulemaking. The amendments provide these owners and operators an alternative THC compliance demonstration option. It is expected that owners and operators will take advantage of the THC testing option as opposed to testing for formaldehyde, but the number of engines that will be tested for THC instead of formaldehyde is unknown. Therefore, the specific cost savings associated with this amendment has not been calculated, however, it is expected that the testing burden will be substantially reduced. The cost of formaldehyde stack testing used to estimate testing costs for the 2004 rule was close to $6,000. Estimates available today indicate that CO or THC testing can be performed for around $1,000. Subsequently, it is possible that cost savings related to performance testing could be as high as 80 percent.

Emergency DR

The EPA is increasing the DR allowance for sta tionary emergency engines. The amendments would

increase the DR allowance for emer gency engines from 15 hours per year (hrs/yr) to an allowance of 100 hrs/yr that would include operation for maintenance a nd testing purposes and DR operation. Engines greater than 300 HP that operate for more than 15 hrs/yr for emergency DR must use ultra low sulfur diesel (ULSD) and report on an annual basis the dates and time s the engines operated for emergency DR purposes.

To estimate emissions from emergency engines the EPA has previously estimated that these types of engines would on average operate for 50 hrs/yr. The average hours of operation for emergency engines is not expected to change based on the amendments and 50 hrs/yr is still believed to be representative of average emergency engine operation. Therefore, the emissions previously calculated remain appropriate. In terms of any revenue generated from participation in DR programs, the EPA expects owners and operators will benefit financially, however, the EPA does not know to what extent. The EPA expects there will be savings and/or income generated through participation in em ergency DR programs, but the EPA has not accounted for any potential revenue in estimating the costs and be nefits of the amendments. It is uncertain how many engines participate in these programs and how freque ntly stationary emergency engines would operate if they are called upon. According to data from DR progr ams in ISO-NE and PJM territories backup generationDRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE

4 was dispatched for less than 30 hours during the summers of 2008, 2009 and 2010. a Another example of emergency engines operating infrequen tly for DR programs can be found in Table 1 of a 2010 letter from

EnerNOC to EPA b that presents a summary of emergency DR events in New England. According to EnerNOC, emergency engines have only been called upon three times in New England, where the duration of the events was 3.75, 5.95 and 16.5 hours in 2006, 2005 , and 2003, respectively. Other factors, such as the annual revenue from DR programs (which varies), are al so uncertain making it problematic to estimate the economic benefit of such programs. As such, the EPA has not estimated any costs associated with the emergency engine amendments.

For the final rule, the EPA is requiring that if engines greater than 300 HP exceed or agree to be

available for more than 15 hrs/yr for emergency DR that the owners/operators use ULSD fuel and report annually the dates and times the engines operated for emergency DR purposes. The rule requires owners/operators to being using ULSD on January 1, 2015. Owners and operators would have to begin tracking engine operation for the 2015 calendar year and submit the first annual report early in 2016 that would cover 2015. The costs associated with other requ irements of the rule discussed in this memorandum have been assessed for 2013, the year owners and oper ators will have to start complying with the rule. However, the costs associated with ULSD fuel and annual reporting would not be incurred in 2013, but will start later in 2015/2016, which for NESHAPs is outside the typical time period the EPA presents estimates

for.

With that said, conducting a complete estimate of the total impact of the ULSD requirement associated with operating for more than 15 hrs/yr for emergency DR in any year is still not possible because the number of engines that would be affected by th is requirement is unknown. The EPA does not know the number of engines that will be operated for emergenc y DR and the EPA does not know how many of those engines would operate for more than 15 hrs/yr.

The EPA believes the ULSD cost would be balanced out by the reduced engine maintenance that is expected from using this fuel. Also, the cost difference between ULSD fuel and higher sulfur fuel is small, especially considering that the yearly operation for emergency DR would be limited to no more than 100 hours per year, and subsequently also the fuel consumption. As of July 2012, the pre-tax cost of ULSD to the end user was $3.003 per gallon. c The cost of other No. 2 diesel fuels ranged from $2.753 to $2.989 per gallon, depending on the sulfur content and other fuel characteristics. The difference in fuel costs could therefore range from 1.4 to 25 cents per gallon between UL SD and various No. 2 diesel fuels. At the end of July 2012, the cost of residual fuel oil was $2.406, which compared to the cost of ULSD is about 60 cents per gallon higher.

Based on the amount of and heating value of the fu el currently used by these engines, switching to ULSD fuel would have a small cost impact because the engines are used so infrequently. Based on the lower heating value of U.S. conventional diesel of 128,450 Btu/gal d , a 300 HP engine operating for 100 hrs/yr may use approximately 1,560 gal diesel/yr. Therefore, the fuel cost differential of switching from No. 2 diesel

a Memorandum from Stacy Angel, Synapse Energy Economics, Inc. to Doug Hurley, Synapse Energy Economics. Sample Revenue for a 1 MW Backup Generation Unit. June 27, 2011.

b Attachment 2 to Letter from Richard H. Counihan, EnerNOC to Melanie King, EPA. February 11, 2011.EPA-HQOAR-2008.0708-0748.2.

c Refiner Petroleum Product Prices by Sales Type. Sales to End Users. http://www.eia.gov/dnav/pet/p et_pri_refoth_dcu_nus_m.htm . July 2012.

d http://cta.ornl.gov/bedb/appendix_a/Lower_and_Higher_Heating_Values_of_Gas_Liquid_and_Solid_Fuels.pdf. Deleted: and reporting

Deleted: sDRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE

5 fuel to ULSD may cost between $22 and $391 on an annua l basis for each engine, as a rough estimate. Based on the lower heating value, switching from residual fuel oil to ULSD may cost $860 per year, depending on the residual fuel oil quality, hours of operation, and size of the engine.

Regarding the impact of the requirement to report emergency DR operation, the EPA anticipates that in most cases, the entity that dispatches the engines to operate, such as the curtailment service provider or utility, will report the information to EPA on behalf of the facility that owns the engine. Thus, the burden of the reporting requirement will likely be on the entities that dispatch the engines. The number of entities is uncertain, but the EPA was able to obtain estima tes from the National Rural Electric Cooperative Association of the number of cooperatives that have engines participating in demand response. The NRECA estimated that approximately 446 local utilities w ould engage in the reporting requirement. The EPA estimates that each utility would spend approximately 16 hours per year reporting the information to the EPA. This results in an estimated burden of 7,128 hour s at a cost of $610,000 per year, beginning in the year

2015. The EPA also received information from one cu rtailment service provider, EnerNOC, who estimated the burden of the requirement to be 1,000 hours at a co st of $60,000 in the first year of implementation, 2015, and 250 hours at a cost of $15,000 in subsequent years. Using an estimated number of 70 curtailment service providers nationwide that are operating engi nes for emergency demand response, the burden for curtailment service providers would be 70,000 hours at a cost of $4.2 million in the first year of implementation, 2015, and 17,500 hours at a cost of $1 m illion in subsequent years. Summing the totals for the cooperatives and curtailment service providers yiel ds a total of 77,128 labor hours at a cost of $4.8 million in the first year that reporting is required, 2015, and 24,628 labor hours at a cost of $1.7 million in subsequent years.

Finally, as discussed above, the EPA has not estima ted the increased revenue from DR participation by generators with emergency engines, which would likely offset some of the costs (if not all) associated with the ULSD and reporting requirements. Therefore, the EPA believes it is justified in not quantifying these costs that begin to be incurred in 2016, which, as discussed, will be difficult to fully estimate.

Stationary Agricultural RICE

The EPA is specifying that certified Tier 3 existi ng stationary compression ignition (CI) engines at area sources that were installed before June 12, 2006, are automatically be in compliance with the NESHAP and are not be subject to aftertreatment-forcing standards. This means that these engines will not be required to install add-on controls and subsequently no emission reduction has been estimated for this group of engines. The EPA is no longer accounting for a redu ction in emissions from these engines effectively lowering the estimate of emissions reductions previous ly estimated for the 2010 rule. In California, San Joaquin Valley has identified 17 Tier 3 CI engines in stalled between January 1 and June 12, 2006, which is the number of engines that EPA has used to estimate the impacts of this amendment.

In addition, the EPA is specifying that certifie d Tier 1 and Tier 2 existing stationary CI engines greater than 300 HP at area sources th at will be replaced within the next few years due to state/local rules are subject to management practices until 2015, after whic h the numeric emission limits of the NESHAP apply. In California there are 49 of these Tier 1 engines and 360 of these Tier 2 engines, which are the number of engines the EPA has used to estimate the impacts of this amendment. The EPA has not estimated any

emissions reductions or control costs under the RICE NE SHAP for these 409 stationary Tier 1 and Tier 2 certified CI engines in the year 2013. Deleted: The costs associated with the reporting requirements would be minimal since facilities are already required to keep records. Because the number of engines that would be reporting the dates/times of emergency DR operation is not known, a total estimate cannot be generated. In terms of the effort to submit annual reports, it is expected that one hour per year per facility would be sufficient to comply with this requirement. As of June 2012, the total compensation for management/professional staff was $51.23 e . Adjusting this compensation rate by applying an overhead rate of 167 percent yields a total wage rate of $85.60, which is expected to cover the reporting requirement.

Comment [A1]: Shouldn’t this be 7136? (16hrs x 446 = 7136)

Comment [A2]: Please add in parentheses the wage rate used – I think it was $85.60. If using 7136 hours, the total cost will be $611,000 (rounded to 3 significant figures).

Comment [A3]: This seems high – can you provide a little more information about this estimate. If I understand this currently, EnerNOC estimates it will take 125 days (8 hrs each) to report to EPA? That seems high. Assuming a single worker reporting, that works out to 10 work days a month that they are reporting to EPA.

Comment [A4]: Again, please provide the labor rate used in parentheses.DRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE

6 Remote Stationary RICE in Alaska

The EPA is also broadening the definition of remo te area sources of Alaska in the RICE NESHAP. Currently, remote areas are those that are not on th e Federal Aid Highway System (FAHS). This change permits existing stationary CI engines at other remote area sources in Alaska to meet management practices as opposed to emission standards likely necessitating af tertreatment. However, the EPA is unable to quantify the number of engines in remote areas of Alaska that w ould be able to qualify for this provision. Therefore, it was not possible to assess the environmental and econo mic impacts associated wi th this amendment. The EPA does not know how many facilities would be consid ered remote and does not have any information on how many engines are affected.

While the EPA does not have sufficient information to quantify the total impact of this change, the EPA can provide an example of the impact for an individual facility. For instance, the Bailey Power Plant operated by the Ketchikan Public Utilities has four (4) stationary diesel engines. Two (2) rated at 4,500 kilowatt (KW), one (1) rated at 6,450 KW and one (1 ) rated at 10,500 KW. If these four engines would be subject to management practices instead of aftertreatme nt, the lost HAP reductions is estimated to be 1.3 tpy total from the four engines. The lost CO, PM, and VOC emissions are estimated at 1 tpy, 3.7 tpy, and 35 tpy, respectively, in total from these four engines. Under the amendments, the facility would avoid total capital costs associated with required aftertreatment of ove r $960,000. The facility would avoid annual expenditures related to aftertreatment operating and maintenance costs of more than $176,000 per year, if management practices only are required for these engines.

A summary of the emission reductions associated wi th the amendments and those estimated for the 2010 final rule are presented in Table 1.

Table 1. Summary of Pollutant Reductions for Existing Stationary RICE f

Pollutant Emission Reductions (tpy) in the year 2013

Previous Estimate (2010 Final Rule) RICE Reconsideration (2012 Amendments)

CI SI CI SI

HAP 1,014 6,008 1,005 1,778

CO 14,342 109,321 14,238 22,211

PM 2,844 N/A 2,818 N/A

NO

x N/A 96,479 N/A 9,648

VOC 27,395 30,907 27,142 9,147

Tables 2 and 3 present the pollutant reductions by HP and by area/major sources for the SI and CI portion of the rule, respectively.

f The estimates presented in Tables 1 through 6 are for existing stationary RICE less than or equal to 500 HP located at major sources and existing stationary RICE located at area sources.DRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE

7 Table 2. Pollutant Reductions for Existing Stationary SI RICE – by HP b

Size Range (HP) Emission Reductions (tpy) in the year 2013

HAP CO NO

x VOC Major Sources

25-50 0 0 0 0

50-100 0 0 0 0
100-175 744 7,124 0 3,826
175-300 277 2,653 0 1,424
300-500 288 2,755 0 1,480

500-600 N/A N/A N/A N/A

600-750 N/A N/A N/A N/A

>750 N/A N/A N/A N/A Total Major 1,308 12,532 0 6,730

Area Sources

25-50 0 0 0 0

50-100 0 0 0 0

100-175 0 0 0 0

175-300 0 0 0 0

300-500 0 0 0 0
500-600 101 2,070 2,063 517

600-750 22 453 452 113

>750 347 7,156 7,133 1,787

Total Area 470 9,679 9,648 2,418

Total 1,778 22,211 9,648 9,147DRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE

8 Table 3. Pollutant Reductions for Existing Stationary CI RICE – by HP b

Size Range (HP) Emission Reductions (tpy) in the year 2013

HAP CO PM VOC Major Sources

50-100 0 0 0 0
100-175 44 2,072 123 1,183
175-300 57 1,571 161 1,549
300-500 145 2,362 407 3,923

500-600 18 209 50 478

600-750 11 107 31 300

>750 36 236 102 982 Total Major 312 6,558 874 8,416

Area Sources

50-100 0 0 0 0

100-175 0 0 0 0

175-300 0 0 0 0
300-600 363 5,244 1,017 9,798
600-750 91 879 256 2,463

>750 239 1,557 671 6,466

Total Area 693 7,680 1,944 18,727
Total 1,005 14,238 2,818 27,142

A summary of the costs associated with the amendm ents and those estimated for the 2010 final rule are presented in Table 4. All costs were converted to 2010 dollars for purposes of presenting costs associated with the rule in present day terms. However, because the costs estimated for the 2010 rule were in 2008 and 2009 dollars for the CI and SI engine portion of the rule , respectively, the costs fo r the amendments in Table 2 are also shown in those years in order to be able to compare on a consistent basis. Tables 5 and 6 present the cost impacts by NAICS code for the SI and CI portion of the rule, respectively.

Table 4. Summary of Cost Impacts for Existing Stationary RICE b

Engine Previous Estimate (2010 Final Rule) RICE Reconsideration (2012 Amendments)

Total Annual Cost

SI $253 million ($2009) $251 million ($2010) $115 million ($2009) $115 million ($2010)

CI $373 million ($2008) $375 million ($2010) $372 million ($2008) $373 million ($2010) Total Capital Cost

SI $383 million ($2009) $380 million ($2010) $103 million ($2009) $103 million ($2010)

CI $744 million ($2008) $748 million ($2010) $737 million ($2008) $740 million ($2010)DRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE

9 Please refer to the memoranda enti tled “Impacts Associated with NESHAP for Existing Stationary CI RICE” and “Impacts Associated with NESHAP fo r Existing Stationary SI RICE” available from www.regulations.gov as Document ID Numbers EPA-HQ-OAR-2008-0708-0329 and EPA-HQ-OAR-2008- 0708-0542 for additional assumptions and further information on the 2010 rule estimates.

The EPA used cost indicies in order to convert between 2008, 2009, and 2010 dollars. Specifically, the Marshall & Swift (M&S) Equipment Cost Index for the different years were applied to total cost estimates to convert the costs to a specific year. To convert the 2009 costs associated with the existing SI engine portion of the rule to 2010 dollars, the EPA divided the total cost by the M&S Annual Index for 2009 (1,468.6) and multiplied the resulting cost by the M& S Equipment Cost Index for 2010 (1,457.4). Similarly, to convert from 2008 dollars, which was the year the costs were previously presented for the existing CI engine portion of the rule, the EPA divided the tota l cost by the M&S Annual Index for 2008 (1,449.3) and multiplied the resulting cost by the M&S Annual Index for 2010 (1,457.4).10Table 5. Summary of Cost Impacts for ExistingStationary SI RICE – by NAICS (2009 Dollars)NAICSMajor SourceArea SourceTotal (Major + Area)Capital CostAnnual CostCapital CostAnnual CostCapital CostAnnual CostElectric Power Generation (2211)$52,905,258 $63,062,494 $11,698,144 $12,138,277 $64,603,403 $75,200,772Natural Gas Transmission (48621)$1,484,494 $1,462,530 $13,718,381 $6,142,839 $15,202,876 $7,605,369Crude Petroleum & NG Production (211111) $4,561,236 $6,138,383 $71,439 $951,462 $4,632,675 $7,089,844Natural Gas Liquid Producers (211112) $4,561,236 $6,138,383 $71,439 $951,462 $4,632,675 $7,089,844National Security (92811) $5,878,362 $7,006,944 $1,299,794 $1,348,697 $7,178,156 $8,355,641HydroPowerUnits(335312) $0 $25,248 $0 $37,872 $0 $63,120Irrigation Sets (335312) $3,025,050 $3,230,856 $3,285,890 $4,999,041 $6,310,940 $8,229,896Welders (333992) $247,440 $679,896 $0 $570,130 $247,440 $1,250,027Total $72,663,076$87,744,734$30,145,088$27,139,780$102,808,163$114,884,514Table 6. Summary of Cost Impacts for ExistingStationary CI RICE – by NAICS (2008 Dollars)NAICSMajor SourceArea SourceTotal (Major + Area)Capital CostAnnual CostCapital CostAnnual CostCapital CostAnnual CostElectric Power Generation (2211)$161,766,376 $90,982,105 $464,947,798 $202,463,116 $626,714,174 $293,445,222Hospitals (622110)$20,220,797 $11,372,763 $0$0 $20,220,797 $11,372,763Crude Petroleum & NG Production (211111) $2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314Natural Gas Liquid Producers (211112) $2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314National Security (92811)$20,220,797 $11,372,763 $51,660,866 $22,495,902 $71,881,663 $33,868,665Hydro Power Units (335312)$0 $16,637$0$22,959$0$39,597Irrigation Sets (335312)$10,294,073 $11,791,567 $34,145 $5,208,084 $10,328,218 $16,999,651Welders (333992)$108,260 $1,481,447 $0 $1,881,380 $108,260 $3,362,827Total $217,359,106$134,632,238$519,823,039$237,267,114$737,182,145$371,899,352

### 11 Stationary Diesel RICE on OCS Vessels and Rigs

In the original assessment of affected sources that would be covered by the amendments, the

EPA did not consider that there could be circum stances during which stationary CI RICE on Outer Continental Shelf (OCS) vessels could be considered stationary and consequently subject to the RICE NESHAP. Therefore, impacts from these units were not assessed in the proposed rule impacts analysis dated May 10, 2012 (EPA-HQ-OAR-2008-0708-0857). The engines in question would be larger than 500 HP and would be considered area sources when they become stationary sources during drilling in the OCS. Consequently, under the proposed rule, thes e engines would have been subject to emission standards outlined in Table 2d of the proposal. Mee ting the emission standards under the proposal would likely have required the use of add-on controls , namely oxidation catalyst, in this case.

Comments received on the June 7, 2012, proposed rule argued that there are feasibility issues with complying with the RICE NESHAP for sta tionary diesel engines on offshore vessels and platforms/rigs. Specifically, according to commenters, OCS facilities face strict weight and space constraints for instance, which limit control and testin g options. To comply with the requirements of the RICE NESHAP would not be cost effective, accord ing to commenters. Instead, commenters with sources on the OCS affected by the RICE NESHAP reque sted that stationary engines in these locations be permitted to comply with the rule by following ma intenance practices, similar to those required for smaller (less than 300 HP) existi ng stationary diesel engines.

Based on information obtained from EPA Regional Offices, the EPA has identified that in 2013 there are expected to be up to 5 vessels or drilling rigs operating on the OCS that would be subject to the RICE NESHAP as existing sources. Specifically, ba sed on available information obtained from EPA Regions 4 and 10, there would be one drillship in the Chukchi Sea on the Alaska OCS and four drilling rigs or drillships on the OCS of the Gulf of Mexi co. The EPA estimated baseline HAP emissions from these units according to information available in their permits. To be conservative and to estimate the worst-case scenario, HAP emissions were estimated based the maximum allowable amount of operation per drilling season. A summary of the estimated HAP emissions for 2013 are presented in Table 7.

Table 7. Total Baseline HAP Emissions from Stationary Engines on OCS Vessels Based on Projected Activity for 2013

Vessel/Rig g 

### tons/yr lb/yr
Deepwater Nautilus 2.13E-01 426
Discoverer Spirit 4.76E-03 10

Discoverer 1.13E-01 226

Pathfinder 6.85E-01 1,369

DD1 7.34E-01 1,469

Total: 1.75 h 

### 3,500

As indicated in Table 7, baseli ne emissions from stationary e ngines on OCS sources are low and represent a small amount of total emissions (less than 0.06 percent) from all stationary diesel engines in the U.S. It is unlikely that in the event that the fina l rule did not allow these engines to comply with the rule by following maintenance practices that thes e units would be equipped with oxidation catalyst.

g These are known vessels/rigs that are currently permitted, but similar rigs may be used from year to year.

h Note that the HAP emissions are conservative estimates an d may be higher than actual emissions from these sources.DRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE



### 12 More than likely, owners and operators of these e ngines would have sought a technical infeasibility exemption under 40 CFR 55.7, and if granted, these engines would not have been required to use oxidation catalyst or any other HAP-reducing contro l technology. The exemption would have required the engines to employ a substitute requirement in place of the orig inal RICE NESHAP requirements, which may have involved measures to offset the emis sions from these engines. However, the amount of

HAP emissions that would have be en offset is unknown and the EPA is not able to estimate the magnitude of those emissions in the absence of requi ring maintenance practice for these engines. Also, according to Region 4, because the only criteria pollutants the RICE NESHAP requires are CO and formaldehyde as VOC, it is possible that under the ex emption only offsets for these pollutants would be required. Also, the EPA has the discretion to set th e offset ratio to ensure onshore standards and increments are met. Therefore, it is not possibly to quantify the potential offset s that would be required, if the engines were to seek a technical in feasibility exemption under 40 CFR part 55.