1 UNFUNDED MANDATES REFORM ACT ANALYSIS FOR THE COMPRESSION-IGNITION (CI) STATIONARY RECIPROCATING INTERNAL COMBUSTION ENGINE (RICE)
NESHAP UNDER THE CLEAN AIR ACT (February, 2010)

This document provides an analysis of the effects of the U.S. Environmental Protection Agency’s (“EPA”) stationary compression-igni tion (CI) reciprocating internal combustion engine (RICE) national emissions standard fo r hazardous air pollutants (NESHAP) rulemaking under Title III of the Clean Air Act (“CAA”) on St ate, local, and tribal governments, and the private sector as required by the Unfunded Mandates Reform Act of 1995 (“UMRA”). EPA has determined that an UMRA analysis is required because the CI RICE rulemaking will affect units operated by State and local governme nts, and will impose a cost on the private sector greater than $100 million in any one year.

This UMRA analysis examines the impacts of the rule on units that are owned by State, local, tribal governments and the private sector. Th is analysis is based on the regulatory impact analysis (“RIA”) prepared for this rule. The RIA for this rule includes EPA’s assessment of costs, benefits, and economic impacts and can be found in the docket for this rulemaking at www.regulations.gov

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This rule includes a maximum achievable control technology (MACT) standard for CI RICE that are major sources of HAP and a generally available control technology (GACT)

standard for RICE that are area sources of HAP. Spark-ignition (SI) RICE, a type of RICE covered in the proposed rule published in March of last year, will be regulated under a final rulemaking that will be signed by August 10, 20 10. Existing compression ignition engines will incur compliance costs (the costs of control meas ures and testing, monitoring, recordkeeping, and reporting) under this rule.

This rule affects existing CI RICE (defined as RICE constructed before 2006) but not new ones. Estimates of existing CI RICE by engine type and compliance cost estimates by engine type were used as inputs to calculate the economic impact of the rule.

The economic impact analysis (“EIA”) that is included in the RIA indicates that prices of affected output from the affected industries will increase as a result of the rule, but the changes will be small. The largest impacts are on the electric power generating industry because it bears more costs from the rule than any other affected industry (nearly 80 percent of the total annualized costs). For all affected industries, an nualized compliance costs are 0.6 percent or less on average of sales for firms.2 Based on the estimated compliance costs associated with this rule and the predicted changes in prices and output in affected market s, the estimated social costs are $373 million (2008 dollars), which is the same as the estimated compliance costs.

It is estimated that HAP emissions from exis ting RICE will be reduced by 1,000 tons per year by 2013. Reductions in formaldehyde, acetaldehyde, acrolein, methanol, and other HAPs are included in this estimate. The rule will also achieve in 2013 reductions in criteria pollutants. Reductions in carbon monoxide (CO) will total ab out 14,000 tons per year, about 27,000 tons of volatile organic compounds (VOC), n early 2,800 tons per year of pa rticulate matter (PM), all of which are in the fine fraction (PM 2.5 - 2.5 microns in diameter and below). The final rule will

also reduce emissions of SO

x through the use of ultra-low sulfur diesel fuel (ULSD). We have not quantified the SO

x reductions that would occur as a re sult of engines switching to ULSD because we are unable to estimate the number of engines that already use ULSD and therefore we are unable to estimate the percentage of engines that may switch to ULSD due to this rule. If none of the affected engines would use ULSD without this rule, then we estimate the SO

x reductions are 31,000 tpy in the year 2013. If all of the affected engines would use ULSD regardless of the rule, then the additional SO

x reductions would be zero.

Exposure to CO can affect the cardiovascular system and the central nervous system. Emissions of PM can result in premature fata lities and many respiratory problems (such as asthma and bronchitis) and emissions of NOx and SO 2 can also transform into PM in the atmosphere. NOx and VOC can also transform into ozone, and this can also lead to premature mortalities and many respiratory problems.

The total monetized benefits of the rule range from $940 million to $2.3 billion (2008 dollars) in 2013 with a 3 percent discount rate and $850 m illion to $2.1 billion (2008 dollars) in 2013 with a 7 percent discount rate . The monetized benefits are comprised primarily of the benefits from reductions in directly emitted PM 2.5 and PM 2.5 created from transformation of NOx

and SO 2 . We cannot provide a monetary estimate for the benefits associated with reductions of HAP and CO due to a lack of scientific knowledge of the links between the reductions in incidence of the health and environmental effects listed and a value that can be placed on them. EPA currently has research going on to provide such monetized estimates. The methodology for estimating monetized benefits is discussed in more detail in the RIA.

Our analysis also includes the economic impacts on small entities. The analysis of impacts on small entities is done as part of compliance with the Small Business Regulatory Enforcement Fairness Act (SBREFA), and is referred to by reference in this report. We estimate that all small private sector entities will have annualized costs of less than 1 percent of their sales in all industries except NAICS 2211 (electric po wer generation, transmission, and distribution) and NAICS 111 (Crop and Animal Production). For these industries, the number of private sector small entities having annual ized costs of greater than 1 percent of their sales is less than 5
percent.

Small government entities may also be affected by this rule as well as small private sector entities. As presented in the RIA, we find that no small government entity will have compliance Formatted: Font: (Default) Times New Roman, Complex Script Font: Times New Roman

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Formatted: Font: (Default) Times New Roman, Complex Script Font: Times New Roman3 costs of more than 0.2 percent of their revenues. Hence, no small government entity will be impacted significantly by this rule.

Although this rule will not have a signifi cant impact on a substantial number of small entities (SISNOSE), EPA nonetheless has tried to re duce the impact of this rule on small entities. EPA carefully examined the regulatory alternatives, and selected the lowest cost/least burdensome alternative that EPA deems adequate to achieve the statutory requirements of Clean Air Act section 112 and effectively reduce emissions of HAP. Some alternatives considered that provided more than the minimum level of control were deemed as not technically feasible or cost-effective for EPA to implement for small engines and emergency engines. All of these actions should reduce the level of small entity impacts including impacts to small governments.

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