1 Memorandum

Subject: Economic Impact Analysis for the Final Reconsideration of the Mercury and

Air Toxics Standards

Date: M a r c h 2 1 , 2013

From: Amanda Curry Brown

Economist

Air Economics Group (C439

- 02)

To: Bill Maxwell

Environmental Engineer Energy Strategies Group (D243

- 01)

This document addresses the economic impacts of the final reconsideration of the Me rcury and
Air Toxics Standards

. Based on our analysis, we anticip ate that there will be minimal compliance costs, emission changes, or economic impacts associated with this reconsideration.

Background

In December 2011, the U.S. Environmental Protection Agency (EPA) finalized the Mercury and Air Toxics Standards (MATS)

. Following promulgation of the final rule, the EPA received 20 petitions for reconsideration of numerous provisions of the National Emission Standards for Hazardous Air Pollutants ( NESHAP ) portion of the rule pursuant and 4 petitions for
reconsideration o f numerous provisions of the New Source Performance Standard ( NSPS ) portion of the rule. The EPA granted reconsideration of the NESHAP new

- source emission limits

, including filterable PM monitoring and one issue raised in the NSPS portion ( notice and comment for the definition of natural gas ) . These issues are discussed in detail in the preamble
for the reconsideration.

This document focuses on the analysis of impacts for the revised emission limits in this
reconsideration. For the NSPS, the EPA simpl y took comment on the definition of natural gas that was previously finalized. As such, there would be no costs or emission changes associated
with this issue.

Costs and Emission Impacts

To determine whether there would be any change in compliance costs or emissions resulting
from the revised standards finalized in this reconsideration, the EPA considered the level of
control required to meet each standard at a model 500 megawatt (MW) electricity generating unit (EGU) o perating at 85 percent capacit y . The analysis then considered the implications of
the revised standard for the installation of control technology. More detail can be found in the2

technical support document “ Analysis of Control Technology Needs for Revised Proposed
Emission Standards ”.

Mercury (Hg) from EGUs burning non

- low rank virgin coal

For the analysis of the revised Hg standard, the EPA assumed the model plant burns coal with an average Hg content of 11.10 lb/trillion British thermal units (TBtu). This is equivalent to t he average Hg content reported for non

- low rank virgin coals in the information collection request (ICR) for MATS.

Table 1 . Hg Standards for New EGUs Burning Non

- low Rank Virgin Coal

Standard % control Final New Source Hg Standard 0.0002 0 lb/GWh 99.8% Revised New Source Hg Standard 0. 00 3 0 lb/GWh 97.0 %

While the level of control required decreases from 99.8 percent under the finalized Hg standard

to 97.0 percent under the revised standard, this does not reflect a change in the control technology that would be required to achieve the standard. A n EGU would need to install advanced Hg controls, such as activated carbon injection (ACI) with a fabric filter , selective catalytic reduction (SCR), or flue

- gas desulfurization (FG D) in order to comply with either
standard

. This means there would be no significant incremental change in costs resulting from
the revised standard.

While mathematically the revision of the standard would result in an increase in emissions at this hypot hetical plant , in practice any increase would be minimal

. The control devices needed to comply with the Hg standard cannot be fine

- tuned to achieve a precise level of emission reductions, but instead are used to achieve reductions within a range. For this reason, the revision of the Hg standard and subsequent selection and installation of control equipment
should not result in a significant increase in emissions beyond what was estimated for the final
MATS rule.

While EPA did not conduct a separate analysi s for new EGUs burning low rank virgin coal, the changes in this reconsideration package for these units would not impact the anticipated control installations, nor do they significantly change the costs and benefits of the final MATS regulations.

Particulates (PM) from coal

- fired EGUs

For the analysis of the revised filterable PM (fPM) standard, the EPA assumed the model plant burns coal with an ash content of 10 percent. This is at the high end of expected values for bituminous coals and, therefo re, a conservative estimate.3

Table 2 . fPM Standards for New Coal

- fired EGUs

Standard % control
Final New Source fPM Standard 0.00 70 lb/M Wh 99. 99 %
Revised New Source fPM Standard 0.09 0 lb/ M Wh 99.88 %

Both the previously finalized f PM standard and the revised standard would result in the installation of high efficiency fabric filters

, so there would be no significant change in cost relative to the previously finalize standard . As noted for the Hg standa rd, in practice, the
revision of the f PM standard would not result in a significant increase in emissions over what
was estimated for the final MATS rule.

While the EPA did not conduct a separate analysis for solid oil

- derived fuel (pet coke) fired units, there are a limited number of these EGUs and the same technology choices would apply, resulting in no significant change in costs or emission reductions.

Sulfur Dioxide (SO 2 ) from coal

- fired EGUs

For the analysis of the revised SO 2 s tandard, the EPA assumed the model plant uses coal with a range of sulfur content from 0.6 lbs/MMBtu to 2.5 lbs/MMBtu.

Table 3 . SO 2 Standards for New Coal

- fired EGUs

Standard % control
Final New Source SO 2 Standard 0.4 lb/MWh 92.6

- 98.2%
Revised New Source SO 2 Standard 1.0 lb/MWh 81.5

- 95.6%

The EPA believes that many units will choose to meet the alternative SO 2 emission standard in lieu of meeting the HCl emission standard because they are already required to monitor for

SO 2 . Additionally, Prevention of Significant Deterioration (PSD) requirements for SO 2 under the New Source Review (NSR) program will drive the installation of high performing spray drier absorbers (SDAs) or wet

- FGD scrubbers, regardless of the level of the MATS new source
standard. 1

While the EPA did not conduct a separate analysis for solid oil

- derived fuel (pet coke) fired units, there are a limited number of these EGUs and the same technology choices would apply, resulting in no significant change in costs or emission reductions.

1 NSR permit requirements include, among other things, the application of BACT (best available control technology) under PSD. BACT control technology determinations and associated
emission limit establishment involve case

- by

- case analyses and such analyses take into account

site

- specific factors such as energy, environmental and economic impacts. For that reason, it is impossible to strictly predict the outcome of such analyses. However, based on recent BACT
determinations for SO 2 emissions from coal

- fired E GUs, it is reasonable to expect that in most, if not all, cases, advanced flue gas desulfurization control technologies (such as wet

- FGD scrubbers or high efficiency spray drier absorbers) would be required.4

Hydrochloric Acid (HCl) from coal

- fired EGUs

For the analysis of the revised HCl standard, the EPA assumed the model plant uses coal with a range of chlorine content , based on the averages reported in the MATS ICR.

Table 4 . HCl Standards for New Coal

- fired EGUs

Standard % control
Final New Source HCl Standard 0.00040 lb/MWh 99.6

– 99.9%
Revised New Source HCl Standard 0.020 lb/MWh 81.0

– 96.6%
Revised New Source HCl Standard * 0.010 lb/MWh 90.5

– 98.3%
*Beyond

- the

- floor (BTF) emission standard

Some low

- chlorine coals have high native capture due to the natural alkalinity of the fly ash and

may only require limited incremental control , such as dry sorbent injection (DSI), to achieve
either the final or revised new

- source HCl limit. Units burning higher chlorine coals would need high performing FGD to achieve the previously final ized HCl limit, while the adjusted limit could possibly be met with lower performing controls. As explained for the SO 2 standard, the EPA believes that many units will choose to meet the alternative SO 2 emission standard in lieu of
the HCl emission standard and that PSD requirements for SO 2 will drive the installation of high performing SDAs or wet

- FGD scrubbers, regardless of the level of the MATS new source
standard. For that reason, the EPA conducted a beyond

- the

- floor analysis to determine the level of control achieved by applying expected FGD controls. Units with SDAs in the MATS ICR
database were examined to determine the level of control achieved for low

- chlorine and high

chlorine coals. The analysis showed that the average level of control for units firing low

- chlorine coals was approximately 90 percent while that of units firing high

- chlorine coals was approximately 98 percent (coal

- to

- stack control). 2 The new source HCl emission standard was then adjusted downward so that the model plant burning a range of coals met that expected level of control. In this case, there is likely to be no significant change in cost or emissions resulting from the revised HCl limit.

Filterable PM Monitoring

T he EPA is finalizing the use of the same PM continuous parameter monitoring system (CPMS) approach employed in the proposed Portland cement NESHAP . Th is CPMS approach , which requires emissions testing after each deviation of the operating limit , is a procedural change
and will no t impact the monitoring technology employed by affected sources. The EPA anticipates there will be negligible compliance costs or emission changes associated with this

revision.

Economic, Employment, and Energy Impacts

2 Note that the differences in level of control are simply due to the fact that coals may have a range of chlorine contents. The emissions in either case are expected to be the same.5

Based on the analysis presented here, the EPA expects that the revisions to the MATS standards for Hg from EGUs firing non

- low rank virgin coal

, and for PM, SO 2 , and HCl from coal

- fired EGUs

, along with revisions to the filterable PM monitoring requirement s, will not result in significant changes in costs or emission reductions relative to the previously finalized standards. As a result, the EPA does not anticipate any impacts on the price of electricity or energy suppl y

. Additionally, for the reasons described above, the reconsideration is not expected to raise any reliability concerns, since reserve margins will not be impacted and the revisions do not impose new requirements on new or existing facilities.

The EPA typically presents the economic impacts to seco ndary markets (e.g., changes in industrial markets resulting from changes in electricity price s) and impacts to employment or
labor markets associated with regulations based on the estimated compliance costs and other energy impacts , which serve as i nput s to such analys es. However, because we do not estimate

any significant change in cost in response to this reconsideration

, there would also be no macroeconomic or employment impacts expected as a result of this rule.

Small Entity Impacts

The Regulatory Flexibility Act 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 agenc y certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small not

- for

- profit enterprises, and small governmental jurisdictions.

According to the SBA size st andards for NAICS code 221122 Utilities

- Fossil Fuel Electric Power Generation, a firm is small if, including its affiliates, it is primarily engaged in the generation, transmission, and or distribution of electric energy for sale and its total electric out put for the preceding fiscal year did not exceed 4 million MWh.

The EPA has determined that no small entities will experience a significant impact because the notice of reconsideration imposes no additional regulatory requirements on owners or
operators o f affected sources. We have therefore concluded that today's notice of reconsideration will not result in a significant economic impact on a substantial number of small

entities.

Conclusions

Our analysis shows that new EGUs would choose to install the sa me control and monitoring technology in order to meet the revised emission limits as would have been necessary to meet the previously finalized standard. Under the relevant assumptions, we project that this rule wil l
result in no significant change in comp liance costs or emission reductions relative to the previously finalize standards and, as a result, no economic, energy, or employment impacts

. Additionally, there will be no impact on small entities.