file:///C|/...%20Reconsideration/Docket/Promulgation/OMB%20Attachments/Larry%20Sorrels%20to%20Cortney%20Higgins%201-8-13.txt[1/14/2013 1:41:32 PM]

-----Forwarded by Melanie King/RTP/USEPA/US on 01/08/2013 08:53PM -----

To: cortney_higgins@omb.eop.gov 

From: Larry Sorrels/RTP/USEPA/US 

Date: 01/08/2013 05:28PM 

Cc: Amy Lamson/RTP/USEPA/US@EPA, Melanie King/RTP/USEPA/US@EPA, Paula 

VanLare/DC/USEPA/US@EPA, Paul Balserak/DC/USEPA/US@EPA, Darryl 

Weatherhead/RTP/USEPA/US@EPA, RobertJ Wayland/RTP/USEPA/US@EPA 

Subject: Revised RIAs for final RICE reconsideration - current drafts 

(See attached file: EO12866CIRICERIAfinal_2060-AQ48_201301-07-14version2.docx) 

(See attached file: EO12866SIRICERIAfinal_2060-AQ48_201301-07-14version2.docx)

Cortney,

Attached are the current drafts of the RIAs for the final RICE reconsideration rule with 

requested edits and additions in Track Changes. The change memos have been removed.

Thank you. 

Larry Sorrels 

US EPA/OAQPS/HEID/AEG 

RTP, NC 27711 

919-541-5041 

919-541-0839 (fax) 

C439-02 

Room No. C445-A

=
iii 

Regulatory Impact Analysis (RIA) for 

Reconsideration of Existing Stationary 

Compression Ignition (CI) Engines 

NESHAP 

Final Report 

 January 2013

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mofinal_2060-AQ48_20121101.docx¶

November 1, 2012¶

¶

¶

MEMORANDUM¶

¶

SUBJECT: Regulatory Impact 

Results for the Reconsideration 

Proposal for National Emission 

Standards for Hazardous Air 

Pollutants for Compression Ignition 

(CI) Reciprocating Internal 

Combustion Engines (RICE) at Major 

and Area Sources¶

¶

FROM: Larry Sorrels ¶

Economist¶

AEG (C439-02) ¶

¶

Amy Lamson¶

Economist¶

RBG (C538-02)¶

¶

TO: Melanie King ¶

 Environmental Engineer¶

ESG (D243-01)¶

¶

¶

The EPA is currently working on a 

rulemaking to issue in December, 2012 

final amendments to the CI RICE 

NESHAP that was promulgated in March, 

2010. The proposal to the current 

rulemaking was issued in June, 2012. The 

cost estimates for the final amendments 

are the same as those for the proposal to 

this 2012 rulemaking. There have been 

no changes to the methodologies for 

estimating economic impact, small 

business, and employment impacts. 

Hence, the economic, small business and 

employment impacts are the same as well. 

The estimated emission reductions are 

also unchanged for the final amendments 

as compared to the proposal to this 

rulemaking. The estimated benefits have 

changed, however. Since the June 2012 

proposal to this rulemaking, we have 

updated the epidemiology studies used to 

calculate mortality and morbidity benefits 

in the PM NAAQS proposal RIA1

. These 

updates would reduce the monetized ... [1]

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v 

January 2013

Regulatory Impact Analysis (RIA) for Reconsideration of Existing Stationary Compression 

Ignition (CI) Engines NESHAP 

Prepared by: 

Larry Sorrels 

U.S. Environmental Protection Agency 

Office of Air Quality Planning and Standards 

Health and Environmental Impacts Division 

Air Economics Group 

Research Triangle Park, NC 

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Paramita Sinha, Brooks Depro, and Fern 

Braun¶

RTI International¶

Research Triangle Park, North Carolina¶

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Deleted: Contract No. EP-D-06-003¶

¶
vi 

 

 

CONTENTS 

Section Page

Section 1 Executive Summary .....................................................................................1

 ES.1 Summary of Impacts for CI RICE NESHAP Reconsideration ..............1-1 

 ES.2 Comparison with Results from 2010 Final CI RICE NESHAP.............1-2 

Section 2 Introduction ..................................................................................................1

2.1 Organization of this Report ......................................................................................1

Section 3 Industry Profile ............................................................................................2

3.1.1 Overview ......................................................................................................2

3.1.2 Goods and Services Used .............................................................................4

3.1.3 Business Statistics ........................................................................................5

3.2 Oil and Gas Extraction .............................................................................................7

3.2.1 Overview ......................................................................................................7

3.2.2 Goods and Services Used ...........................................................................10

3.2.3 Business Statistics ......................................................................................11

3.3 Pipeline Transportation of Natural Gas .................................................................16

3.3.1 Overview ....................................................................................................16

3.3.2 Goods and Services Used ...........................................................................17

3.4 General Medical and Surgical Hospitals ................................................................21

3.4.1 Overview ....................................................................................................21

3.4.2 Goods and Services Used ...........................................................................21

3.4.3 Business Statistics ......................................................................................23

3.5 Irrigation Sets and Welding Equipment .................................................................26

3.5.1 Overview ....................................................................................................26

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Analysis (RIA) for Proposed 

Reconsideration of Existing 

Stationary Compression 

Ignition Engines NESHAP¶

¶

¶

Final Report¶

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¶

May 2012¶

¶

Prepared for¶

¶

Larry Sorrels¶

U.S. Environmental Protection Agency¶

Office of Air Quality Planning and 

Standards (OAQPS)¶

Air Economics Group (AEG) ¶

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3.5.2 Irrigation and Welding Services ................................................................26

3.5.3 Business Statistics ......................................................................................30

Section 4 Regulatory Alternatives, Costs, and Emission Impacts ...............................1

4.1 Background ..............................................................................................................1

4.2 Summary of the Final Reconsideration Rule ..........................................................4

 4.2.1 Emergency Demand Response.................................................4-4

4.2.2 Peak Shaving........................................................................................................

14

 4.2.3 Stationary Agricultural Engines - San Joaquin Valley..................... 4-18

 4.2.4 Remote Areas of Alaska.......................................................4-20

 4.2.5 Offshore Vessels................................................................4-23

 4.2.6 Compliance Date...............................................................4-24

4.3 What the Pollutants Regulated by this Final Reconsideration Rule? ................ 4-22

4.4 Cost Impacts....................................................................................................... 4-26

4.4.1 Introduction ............................................................................................ 4-26

4.4.2 Major Sources ............................................................................................19

4.4.3 Area Sources ..............................................................................................21

4.5 Baseline Emissions and Emission Reductions ................................................... 4-42

Section 5 Economic Impact Analysis, Energy Impacts, and Social Costs ..................1

5.1 Compliance Costs of the Final Rule ........................................................................1

5.2 Social Cost Estimate ................................................................................................4

5.3 How Might People and Firms Respond? A Partial Equilibrium Analysis ..............5

5.3.1 Changes in Market Prices and Quantities ....................................................5

5.3.2 Regulated Markets: The Electric Power Generation, Transmission, 

and Distribution Sector ................................................................................7

5.3.3 Partial Equilibrium Measures of Social Cost: Changes Consumer 

and Producer Surplus ...................................................................................8

5.4 Energy Impacts ........................................................................................................9

5.5 Unfunded Mandates ...............................................................................................10

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5.5.1 Future and Disproportionate Costs ............................................................11

5.5.2 Effects on the National Economy ..............................................................11

5.6 Environmental Justice ............................................................................................12

 5.7 Employment Impacts 

 5.7.1 Employment Impacts from Pollution Control Requirements.............5-14

5.7.2 Employment Impacts within the Regulated Industry.................................17

Section 6 Small Entity Screening Analysis .................................................................1

6.1 Small Entity Data Set ...............................................................................................1

6.2 Small Entity Economic Impact Measures ................................................................2

6.2.1 Model Establishment Receipts and Annual Compliance Costs ...................2

6.3 Small Government Entities ....................................................................................12

Section 7 Human Health Benefits of Emissions Reductions .......................................1

7.1 Calculation of PM2.5-Related Human Health Co-Benefits ......................................1

7.2 Unquantified Benefits ............................................................................................15

7.2.1 HAP Benefits ................................................................................................15

7.2.2 Ozone Co-Benefits .....................................................................................26

7.2.3 Carbon Monoxide Co-Benefits ..................................................................26

7.2.4 Visibility Impairment Co-Benefits ............................................................26

7.3 Characterization of Uncertainty in the Monetized Co-Benefits ............................27

7.4 Comparison of Co-Benefits and Costs ...................................................................32

7.5 References ..............................................................................................................35

Section 8 References for RIA ......................................................................................1

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ix 

LIST OF FIGURES 

Number Page

1-1. Breakdown of Total Monetized PM2.5 Co-Benefits of CI RICE Reconsideration by 

Engine Size..............................................................................................1-7 

1-2. Total Monetized PM2.5 Co-Benefits Estimates for the CI RICE Reconsideration in 

2013....................................................................................................1-8 

3-1. Industrial Production Index (NAICS 2211) ................................................................ 3-3

3-2. Internal Combustion Generators by State: 2006 ......................................................... 3-4

3-3. 2002 Regional Distribution of Establishments: Electric Power Generation, 

Transmission, and Distribution Industry (NAICS 2211) ............................................ 3-5

3-4. Industrial Production Index (NAICS 211) .................................................................. 3-1

3-5. Distribution of Establishments within Pipeline Transportation (NAICS 486) .......... 3-17

3-6. Distribution of Revenue within Pipeline Transportation (NAICS 486) .................... 3-17

3-7. Share of Establishments by Legal Form of Organization in the Pipeline 

Transportation of Natural Gas Industry (NAICS 48621): 2002 ................................ 3-19

3-8. Share of Establishments by Legal Form of Organization in the General Medical 

and Surgical Hospitals Industry (NAICS 6221): 2002 .............................................. 3-24

3-9. Industrial Production Index (NAICS 333111) .......................................................... 3-28

5-1. Distribution of Annualized Direct Compliance Costs by Industry: 2013 .......................2

5-2. Distribution of Engine Population by Horsepower Group: 2013 ....................................3

5-3. Average Annualized Cost per Engine by Horsepower Group: 2013 ($2007) .................3

5-4. Market Demand and Supply Model: With and Without Regulation ...............................6

5-5. Electricity Restructuring by State ....................................................................................9

7-1. Breakdown of Monetized PM2.5 Health Co-benefits using Mortality Function 

from Pope et al. (2002) .............................................................................................. 7-10

7-2. Total Monetized PM2.5 Co-Benefits of CI RICE NESHAP Reconsideration in 

2013 ........................................................................................................................... 7-14

7-3. Breakdown of Total Monetized Co-benefits for CI RICE NESHAP 

Reconsideration by Engine Size...................................................7-15

7-4.   Estimated Chronic Census Tract Carcinogenic Risk from HAP exposure from 

outdoor sources (2005 NATA) .................................................................................. 7-17

7-5. Estimated Chronic Census Tract Noncancer (Respiratory)Risk from HAP 

exposure from outdoor sources (2005 NATA).............. ....................................... 7-17

7-6. Percentage of Adult Population by Annual Mean PM2.5 Exposure in the 

Baseline............................................................................................7-29 

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7-7 Cumulative Distribution of Adult Population by Annual Mean PM2.5 Exposure in the 

Baseline..............................................................................................7-29 

7-8. Net Benefits for CI RICE NESHAP Reconsideration 

 at 3% discount rate..............................................................................7-33 

7-9. Net Benefits for CI RICE NESHAP Reconsideration 

 at 7% discount rate..............................................................................7-34 

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LIST OF TABLES 

Number Page

1-1. Summary of the Annualized Monetized Benefits, Social Costs, and Net 

Benefits for the Reconsidered CI RICE NESHAP in 2013 (millions of 2010$) ....... 1-2 

1-2. Comparison of Benefits and Costs for 2020 CI RICE Final Rule and 2012 

Reconsideration CI RICE Rule................................................................1-3 

1-3. Summary of the Monetized Benefits, Compliance Costs and Net benefits for the 2010 

Rule with the Final Amendments to the Stationary CI Engine NESHAP in 2013 

(millions of 2010 dollars).......................................................................1-9 

3-1. Key Statistics: Electric Power Generation, Transmission, and Distribution 

(NAICS 2211) ($2007) ................................................................................................ 3-2

3-2. Direct Requirements for Electric Power Generation, Transmission, and 

Distribution (NAICS 2211): 2007 ............................................................................... 3-5

3-3. Firm Concentration for Electric Power Generation, Transmission, and 

Distribution (NAICS 2211): 2002 ............................................................................... 3-7

3-4. United States Retail Electricity Sales Statistics: 2008 ................................................ 3-8

3-5. FY 2010 Financial Data for 70 U.S. Shareholder-Owned Electric Utilities ............. 3-10

3-6. Aggregate Tax Data for Accounting Period 7/07–6/08: NAICS 2211 ..................... 3-10

3-7. Key Enterprise Statistics by Receipt Size for Electric Power Generation, 

Transmission, and Distribution (NAICS 2211): 2007 ............................................... 3-11 

3-8. Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111): 

($2007) ...................................................................................................................... 3-11

3-9. Key Statistics: Natural Gas Liquid Extraction (NAICS 211112) ($2007) ................ 3-12

3-10. Direct Requirements for Oil and Gas Extraction (NAICS 211): 2002 ...................... 3-12

3-11. Key Statistics for Crude Petroleum and Natural Gas Extraction (NAICS 

211111): 2007 ............................................................................................................ 3-13

3-12. Key Statistics for Crude Natural Gas Liquid Extraction (NAICS 211112): 2007 .... 3-13

3-13. Aggregate Tax Data for Accounting Period 7/07–6/08: NAICS 211 ....................... 3-14

3-14. Key Statistics: Pipeline Transportation of Natural Gas (NAICS 48621) ($2007) .... 3-15

3-15. Direct Requirements for Pipeline Transportation (NAICS 486): 2002 ..................... 3-17

3-16. Aggregate Tax Data for Accounting Period 7/07–6/08: NAICS 486 ....................... 3-19

3-17 Key Enterprise Statistics by Employee Size for Pipeline Transportation of 

Natural Gas (NAICS 48621): 2007 ........................................................................... 3-20

3-18. Key Statistics: General Medical and Surgical Hospitals (NAICS 6221) ($2007) .... 3-23

3-19. Direct Requirements for Hospitals (NAICS 622): 2002 ........................................... 3-23

3-20. Data for General Medical and Surgical Hospitals (NAICS 6221): 2007 ................. 3-24

3-21. Hospital Statistics: 2010 ............................................................................................ 3-25

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3-22. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 622-4 .................... 3-25

3-23. Key Enterprise Statistics by Receipt Size for General Medical and Surgical 

Hospitals (NAICS 6221): 2007 ($2007) ................................................................... 3-27

3-24. Key Statistics: Farm Machinery and Equipment Manufacturing (NAICS 

333111) ($2007) ........................................................................................................ 3-28

3-25. Key Statistics: Welding and Soldering Equipment Manufacturing (NAICS 

333992) ($2007) ........................................................................................................ 3-29

3-26. Expenses per Acre by Type of Energy: 2008 ............................................................ 3-30

3-27. Number of On-Farm Pumps of Irrigation Water by Type of Energy: 2003 and 

2008 ........................................................................................................................... 3-30

3-28. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 3331 and 3339 ...... 3-31

3-29. Key Enterprise Statistics by Receipt Size for Heavy Construction: 2007 ................ 3-34

4-1. CI RICE Control Technologies and Costs .................................................................. 4-9

4-2. Summary of Major Source and Area Source Costs for the CI RICE NESHAP ...........23

4-3. Summary of Major Source and Area Source NAICS Costs for the CI RICE 

NESHAP .......................................................................................................................24

4-4. Summary of Major Source and Area Source NAICS Costs for the CI RICE 

NESHAP – by Size ........................................................................................................25

4-5. Summary of Major Source and Area Source NAICS Costs for the CI RICE 

NESHAP – by Number of Engines ...............................................................................28

4-6. Summary of Major Source and Area Source Baseline Emissions for the CI RICE 

NESHAP – 2013 ..............................................................................4-36 

4-7. Summary of Major Source and Area Source Emission Reductions for the CI RICE 

NESHAP – by 2013 ..........................................................................4-36 

5-1. Selected Industry-Level Annualized Compliance Costs as a Fraction of Total 

Industry Revenue: 2008 ............................................................................................... 5-4

5-2. Hypothetical Price Increases for a 1% Increase in Unit Costs ........................................7

5-3. Hypothetical Consumption Decreases for a 1% Increase in Unit Costs .........................8

5-4. U.S. Electric Powera Sector Energy Consumption (Quadrillion BTUs): 2013 .............11

5-5 Labor-based Employment Estimates for Reporting and Recordkeeping and Installing, 

Operating, and Maintaining Control Equipment Requirements for the Final

Reconsideration CI RICE NESHAP........................................................5-16 

6-1. Final NESHAP for Existing Stationary Reciprocating Internal Combustion 

Engines (RICE): Affected Sectors and SBA Small Business Size Standards .................3

6-2. Average Receipts for Affected Industry by Enterprise: 2007 ($2008 

Million/establishment) .....................................................................................................5

6-3. Average Receipts for Affected Industry by Enterprise Receipt Range: 2007 

($2008 /establishment) ....................................................................................................6

6-4. Representative Establishment Costs Used for Small Entity Analysis ($2008) ...............8

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7-1. Human Health and Welfare Effects of PM2.5 .............................................................. 7-1

7-2. Summary of Monetized Co-benefits Estimates for RICE NESHAP for 

Compression Ignition in 2013 (2008$) ..................................................................... 7-11

7-3. Summary of Reductions in Health Incidences from PM2.5 Co-benefits for RICE 

NESHAP in 2013 ...................................................................................................... 7-12

7-4 All PM2.5 Co-benefits Estimates for the RICE NESHAP at discount rates of 3% 

and 7% in 2013 (in millions of 2008$) ...................................................................... 7-13

7-5. Summary of the Monetized Benefits, Compliance Costs and Net benefits for 

the 2010 Rule with the FinalAmendments to the Stationary CI Engine 

NESHAP in 2013 (millions of 2010 dollars)a ........................................................... 7-32 

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SECTION 1

EXECUTIVE SUMMARY 

ES.1. Summary of Impacts for CI RICE NESHAP Final Reconsideration 

The EPA estimates that complying with the reconsideration of the stationary 

compression ignition (CI) reciprocating internal combustion engine (RICE) rule will have an 

annualized cost of approximately $372 million per year (2008 dollars) or $373 million per year 

(2010 dollars) in the year of full implementation of the rule (2013). Using these costs, EPA 

estimates in its economic impact analysis that the NESHAP will have limited impacts on the 

industries affected and their consumers. Using sales data obtained for affected small entities in 

an analysis of the impacts on small entities, EPA expects that the NESHAP will not result in a 

SISNOSE (significant economic impacts for a substantial number of small entities). EPA also 

does not expect significant adverse energy impacts based on Executive Order 13211, an 

Executive Order that requires analysis of energy impacts for rules such as this one that are 

economically significant under Executive Order 12866. All of these analysis results are 

practically identical to the results for the CI RICE NESHAP when it was promulgated in March 

2010. 

The RICE rule is also considered subject to the requirements of the Office of 

Management and Budget’s (OMB’s) Executive Order 12866 because EPA expects that either the 

annual benefits or the costs are potentially $100 million or higher. EPA estimates the total 

monetized co-benefits of the NESHAP to be $770 million to $1.9 billion (2010$) at a 3% 

discount rate and $690 million to $1.7 billion at a 7% discount rate in the year of full 

implementation of the rule (2013). These co-benefit estimates are lower than those for the CI rule 

promulgated two years ago. The previous co-benefit estimates were $940 million to $2,300 

million (2008 dollars) at a 3-percent discount rate and $850 million to $2,100 million (2008

dollars) at a 7-percent discount rate. The previous estimates will be greater in a nominal (not 

inflation-adjusted) sense if shown in 2010 dollars, and thus the reduction in the benefits for the 

reconsidered rule compared to the benefits for the 2010 final rule will therefore be greater. Since 

the reconsideration proposal, we have made several updates to the approach we use to estimate 

mortality and morbidity benefits in the PM NAAQS RIAs (U.S. EPA, 2012a,b) including 

updated epidemiology studies, health endpoints, and population data. Although we have not reestimated the benefits for this rule to apply this new approach, these updates generally offset 

each other, and we anticipate that the rounded benefits estimated for this rule are unlikely to be 

different than those provided below.

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The net benefits of the final CI RICE reconsideration are therefore $400 million to $1.5 

billion at a 3% discount rate and $320 million to $1.3 billion at a 7% discount rate (in 2010$) in 

2013. These estimates are shown in Table 1-1. EPA believes that the benefits are likely to 

exceed the annualized costs by a substantial margin under this rulemaking even when taking into 

account uncertainties in the cost and benefit estimates. These estimates are “snapshots” of 

benefits and costs at year 2013. 

Table 1-1. Summary of the Annualized Monetized Benefits, Social Costs, and Net 

Benefits for the Reconsidered CI RICE NESHAP in 2013 (millions of 2010$)1

 3% Discount Rate 7% Discount Rate 

Total Monetized Benefits2 $770 to $1,900 $690 to $1,700 

Total Compliance Costs3 $373 $373 

Net Benefits $400 to $1,500 $320 to $1,300 

Non-monetized Benefits 

Health effects from HAP exposure 

Health effects from PM2.5 exposure from VOC emissions 

Ecosystem effects 

Visibility impairment 

1

All estimates are for the implementation year (2013), and are rounded to two significant figures. 

2

 The total monetized benefits reflect the human health benefits associated with reducing exposure to PM2.5 through 

reductions of PM2.5 precursors such as directly emitted fine particles. Human health benefits are shown as a range 

from Pope et al. (2002) to Laden et al. (2006). These models assume that all fine particles, regardless of their 

chemical composition, are equally potent in causing premature mortality because the scientific evidence is not yet 

sufficient to allow differentiation of effects estimates by particle type. Although we have not re-estimated the 

benefits for this rule to apply the updated methods in the PM NAAQS RIA (U.S. EPA, 2012b), these updates 

generally offset each other, and we anticipate that the rounded benefits estimated for this rule are unlikely to be 

different than those provided here. 3

 The annual compliance costs serve as a proxy for the annual social costs of this rule given the lack of difference 

between the two. The engineering compliance costs are annualized using a 7 percent discount rate. These costs are 

$372 million in 2008 dollars. Costs are updated to 2010 dollars using the Marshall & Swift (M&S) Annual Cost 

Index. The escalation is done by multiplying the 2008 costs by the ratio of the 2010 annual M&S index value 

(1,457.4), and the 2008 annual M&S index value (1,449.3). 

ES-2. Comparison with Results from 2010 Final CI RICE NESHAP 

 The EPA analyzed the costs, economic impacts and benefits of this final rule using the 

identical methodology as the RIA for the CI RICE final rule promulgated in May, 2010. 

Therefore, all changes to the costs, benefits, and economic impacts for this rule are due to 

changes (or amendments) to this rule for CI RICE, which are fully described later in this RIA 

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Moved up [1]: These co-benefit 

estimates are lower than those for the CI 

rule promulgated two years ago. The 

previous co-benefit estimates were $940 

million to $2,300 million (2008 dollars) at 

a 3-percent discount rate and $850 million 

to $2,100 million (2008 dollars) at a 7-

percent discount rate. The previous 

estimates will be greater in a nominal (not 

inflation-adjusted) sense if shown in 2010 

dollars, and thus the reduction in the 

benefits for the reconsidered rule 

compared to the benefits for the 2010 final 

rule will therefore be greater.

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See Figure 7-1 for an illustration of the 

breakdown, or the RIA for the final 

Cross-States Air Pollution Rule (EPA, 

2011) for more information.

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and the preamble for the final rule. Our baseline does not assume compliance with the 2010 CI 

RICE final rule. This assumption is based on the fact that full implementation of the final rule 

has not taken place as of yet (it will take place by May, 2013). In addition, this assumption is 

consistent with the baseline definition applied in the recently finalized ICI boilers and CISWI 

NESHAP rulemakings. Monetized benefits are the co-benefits of this rule from reductions in 

directly emitted PM2.5 emissions. 

The following table shows an approximation of the changes in monetized benefits and 

engineering costs due to changes to the CI RICE rule included in the CI RICE reconsideration , 

and includes values that show a comparison based on the final rule emissions inventory. All 

values in Table 1-2 are in 2010 dollars. 

Table 1-2. Comparison of Benefits and Costs for 2012 CI RICE Final Rule and 2012 

Final Reconsideration CI RICE Rule

Monetized Benefits in 2013 Annual Engineering Costs in 

2013 

CI RICE Final Rule (May 2010) $0.940 to $2.3 billion $373 million 

Changes due to the final amendments to the 

final CI RICE rule -$0.170 to $0.400 billion -$0.7 million 

Final CI RICE rule (2012) +$0.770 to $1.9 billion $372 million 

* Monetized benefits are shown at a 3% discount rate and are from reductions in PM2.5 emissions. These benefits do 

not include benefits associated with reduced exposure to HAP, visibility impairment, or ecosystem effects. 

Monetary estimates are in 2010 dollars. 

The results for the economic impacts are essentially unchanged from those for the CI 

final rule. This outcome is due to the minor changes in compliance costs associated with the 

amendments in this final rule. All of these results for this rule are found in Section 5 in this 

RIA. 

The results for sales tests (i.e. annual cost/sales analysis) for small businesses are also 

essentially unchanged from those calculated for the final CI RICE rule. This outcome is also due 

to the overall minor changes in compliance costs. All of these results for this rule are found in 

Section 6 in this RIA. 

We estimate changes in employment for this CI RICE rule. These estimates reflect the 

employment impacts associated with installation and operation of monitoring equipment, and 

also activities for recordkeeping, reporting, and testing. We estimate that 1,300 full-time 

equivalents (FTEs) will be required as one-time labor for installation of equipment, and 2,000 

FTEs will be required as ongoing labor for compliance with the rule. The results are presented 

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and explained in detail in Section 5 of this RIA. We did not estimate changes in employment 

for the 2010 final CI RICE rule. 

The benefits estimates decreased for the final reconsidered CI RICE as compared to the 

2010 final CI RICE NESHAP. The range for the 2010 final CI RICE RIA was $940 million 

(2008$) to $2.3 billion (2008$) at 3 percent discount rate. The range for this rule is $770 million 

(2010$) to $1.9 billion (2010$) at 3 percent discount rate. The range for the 2010 final SI RICE 

RIA was $850 million (2008$) to $2.1 billion (2008$) at 7 percent discount rate. The range for 

this final rule was $690 million (2010$) to $1.7 billion (2010$) at 7 percent discount rate. 

Table 1-3 shows the estimated costs and benefits for the 2010 final CI Rule and the 

reconsideration. The estimated net benefits for the reconsideration are smaller than the range for 

the 2010 final CI RICE rule RIA, which was $480 million to $1.7 billion at a 7 percent discount 

rate and was $520 million to $1.9 billion at 3 percent (in 2010 dollars). 

Table 1-3. Summary of the Monetized Benefits, Compliance Costs and Net benefits for the 

2010 Rule with the Amendments to the Stationary CI Engine NESHAP in 2013 (millions of 

2010 dollars)a 

 3% Discount Rate 7% Discount Rate 

2010 Final CI RICE NESHAP 

Total Monetized Benefits $940 to $2,300 $850 to $2,100 

Total Social Costs $373 $373 

Net Benefits $520 to $1,900 $480 to $1,700 

Reconsideration CI RICE NESHAP 

Total Monetized Benefits $770 to $1,900 $690 to $1,700 

Total Social Costs $373 $373 

Net Benefits $400 to $1,500 $320 to $1,300 

1

All estimates are for the implementation year (2013), and are rounded to two significant figures. All monetized 

benefits are from reductions of PM2.5 emissions, a co-benefits of this rule. The annualized compliance costs are 

$373 million in 2010$ as noted earlier in this RIA, and are annualized using a 7% interest rate. Compliance costs 

are used as an approximation for social costs in this RIA. Although we have not re-estimated the benefits for this 

rule to apply the updated methods in the PM NAAQS RIA (U.S. EPA, 2012b), these updates generally offset each 

other, and we anticipate that the rounded benefits estimated for this rule are unlikely to be different than those 

provided here.

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calculated using a methodology described 

in the 2010 final CI RICE RIA, using the 

revised emission reductions estimated for 

the final reconsideration proposal and 

accounting for other changes discussed in 

detail in Section 7 of this RIA. We were 

unable to estimate the benefits from 

reducing exposure to HAPs, ecosystem 

impairment, and visibility impairment, 

including reducing 14,000 tons of carbon 

monoxide and 1,000 tons of HAPs. 

Please refer to the full description later in 

this RIA of the unquantified benefits as 

well as technical details of the analysis 

and its limitations and uncertainties. 

These monetized benefits are 

approximately 21% lower than the 2010 

final CI RICE rule due to the decrease in 

direct PM2.5 emission reductions. These 

benefit-per-ton estimates were calculated 

for a 2013 analysis year (i.e., using 

population and income growth for 2013). 

See Tables 1-3 and 1-4 for the updated 

benefits results. The benefits analysis for 

the 2010 final rules applied out-dated 

benefit-per-ton estimates compared to the 

updated estimates described in this 

preamble and reflected monetized cobenefits for VOC emissions, which limits 

direct comparability with the monetized 

co-benefits estimated for these proposed 

rules. In addition, these estimates have 

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SECTION 2

INTRODUCTION 

EPA has reconsidered national emission standards for hazardous air pollutants 

(NESHAP) for existing stationary compression ignition (CI) reciprocating internal combustion 

engines (RICE) that either are located at area sources of hazardous air pollutant (HAP) emissions 

or that have a site rating of less than or equal to 500 brake horsepower (HP) and are located at 

major sources of HAP The final amendments to the CI RICE NESHAP are provided in detail in 

Section 4 of this RIA. 

The rule is economically significant according to Executive Order 12866. As part of the 

regulatory process of preparing these standards, EPA has prepared a regulatory impact analysis 

(RIA). This analysis includes an analysis of impacts to small entities as part of compliance with 

the Small Business Regulatory Enforcement Fairness Act (SBREFA) and an analysis of impacts 

on energy consumption and production to comply with Executive Order 13211 (Statement of 

Energy Effects). An analysis of economic impacts, along with an analysis of impacts on 

employment, is also included in this RIA. Finally, an analysis of the benefits of the rule is 

included in this RIA. It should be noted that the data that supports the analyses listed above have 

been updated where possible and appropriate from the data used in the RIA for the CI RICE 

NESHAP promulgated in March 2010. 

2.1 Organization of this Report 

The remainder of this report supports and details the methodology and the results of the 

RIA: 

 Section 3 presents a profile of the affected industries. 

 Section 4 presents a summary of the final amendments to the proposed rule, and 

provides the compliance costs and emission reductions estimated for the rule. 

 Section 5 describes the estimated costs of the regulation and describes the EIA 

methodology and reports market, welfare, energy, and employment impacts. 

 Section 6 presents estimated impacts on small entities. 

 Section 7 presents the benefits and net benefits (benefits – costs) estimates. 

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3-7

SECTION 3

INDUSTRY PROFILE 

Stationary CI engines almost always operate as lean burn engines. They can be 

configured as either two-stroke lean burn (2SLB) or 4-stroke lean burn (4SLB); the distinction is 

that CI engines are fueled by distillate fuel oil (diesel fuel), not by natural gas or any other 

gaseous fuel. Industries in which stationary CI engines are found are: 

 electric power generation, transmission, and distribution (NAICS 2211), 

 oil and gas extraction (including marginal wells) (NAICS 211111), 

 pipeline transportation of natural gas (NAICS 211112), 

 general medical and surgical hospitals (NAICS 622110), and 

 irrigation sets and welding equipment (NAICS 335312 and 333992). 

This section provides an introduction to the industries affected by the final reconsidered 

rule. The purpose is to give the reader a general understanding of the economic aspects of the 

industry; their relative size, relationships with other sectors in the economy, trends for the 

industries, and financial statistics. 

3.1 Electric Power Generation, Transmission, and Distribution 

3.1.1 Overview 

Electric power generation, transmission, and distribution (NAICS 2211) is an industry 

group within the utilities sector (NAICS 22). It includes establishments that produce electrical 

energy or facilitate its transmission to the final consumer. 

From 2002 to 2007, revenues from electric power grew about 18% to over $440 billion 

($2007) (Table 3-1). At the same time, payroll rose about 7.6% and the number of employees 

decreased by over 6%. The number of establishments rose by a little more than 2%, resulting in a 

increase in average establishment revenue of almost 24%. Industrial production within NAICS 

2211 has increased 25% since 1997 (Figure 3-1). 

Electric utility companies have traditionally been tightly regulated monopolies. Since 

1978, several laws and orders have been passed to encourage competition within the electricity 

market. In the late 1990s, many states began the process of restructuring their utility regulatory 

framework to support a competitive market. Following market manipulation in the early 2000s, 

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3-7

however, several states have suspended their restructuring efforts. The majority (58%) of diesel 

power generators controlled by combined heat and power (CHP) or independent power 

producers are located in states undergoing active restructuring (Figure 3-2). 

Table 3-1. Key Statistics: Electric Power Generation, Transmission, and Distribution 

(NAICS 2211) ($2007) 

2002 2007 

Revenue ($106) 373,309 440,342 

Payroll ($106) 40,842 43,266 

Employees 535,675 503,134 

Establishments 9,394 9,611 

Source: U.S. Census Bureau; Number of Firms, Number of Establishments, Employment, Annual Payroll, and 

Estimated Receipts by Enterprise Receipt Size for the United States, All Industries: 2007. Statistics for U.S. 

Businesses. Found at http://www.census.gov/econ/susb/data/susb2007.html. 
3-7

Figure 3-1. Industrial Production Index (NAICS 2211) 

 Source: The Federal Reserve Board. “Industrial Production and Capacity Utilization: Industrial Production” Series 

ID: G17/IP_MINING_AND_UTILITY_DETAIL/IP.G2211.S <http://www.federalreserve.gov/datadownload/>. 

(January 27, 2010). 

3.1.2 Goods and Services Used 

In Table 3-2, we use the latest detailed benchmark input-output data report by the Bureau 

of Economic Analysis (BEA) (2002) to identify the goods and services used in electric power 

generation. As shown, labor and tax requirements represent a significant share of the value of 

80

85

90

95

100

105

110

115

1997‐011997‐061997‐111998‐041998‐091999‐021999‐071999‐122000‐052000‐102001‐032001‐082002‐012002‐062002‐112003‐042003‐092004‐022004‐072004‐122005‐052005‐102006‐032006‐082007‐012007‐062007‐112008‐042008‐092009‐022009‐072009‐12

Index Value (Jan 2002=100)
3-7

Figure 3-2. Internal Combustion Generators by State: 2006 

Source: U.S. Department of Energy, Energy Information Administration. 2007. “2006 EIA-906/920 Monthly Time 

Series.” 

power generation. Extraction, transportation, refining, and equipment requirements potentially 

associated with reciprocating internal combustion engines (oil and gas extraction, pipeline 

transportation, petroleum refineries, and turbine manufacturing) represent around 10% of the 

value of services. 

3.1.3 Business Statistics 

The U.S. Economic Census and Statistics of U.S. Businesses (SUSB) programs provide 

national information on the distribution of economic variables by industry, location, and size of 

business. Throughout this section and report, we use the following definitions: 

 Establishment: An establishment is a single physical location where business is 

conducted or where services or industrial operations are performed. 

Diesel and Natural Gas Internal

Combustion Generators By State

No Restructuring

Suspended Restructuring

Active Restructuring

100

50

10

1
3-7

Table 3-2. Direct Requirements for Electric Power Generation, Transmission, and 

Distribution (NAICS 2211): 2002 

Commodity Commodity Description 

Direct Requirements 

Coefficientsa

V00100 Compensation of employees 20.52% 

V00200 Taxes on production and imports, less subsidies 13.71% 

211000 Oil and gas extraction 6.16% 

212100 Coal mining 5.86% 

482000 Rail transportation 3.01% 

230301 Nonresidential maintenance and repair 2.83% 

486000 Pipeline transportation 1.70% 

722000 Food services and drinking places 1.40% 

52A000 Monetary authorities and depository credit intermediation 1.39% 

541100 Legal services 1.13% 

a

 These values show the amount of the commodity required to produce $1.00 of the industry’s output. The values 

are expressed in percentage terms (coefficient ×100). 

Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table, 

Use Table and Direct Requirements Table. Tables 4 and 5. 

 Receipts: Receipts (net of taxes) are defined as the revenue for goods produced, 

distributed, or services provided, including revenue earned from premiums, 

commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all 

revenue collected for local, state, and federal taxes. 

 Firm: A firm is a business organization consisting of one or more domestic 

establishments in the same state and industry that were specified under common 

ownership or control. The firm and the establishment are the same for singleestablishment firms. For each multiestablishment firm, establishments in the same 

industry within a state are counted as one firm; the firm employment and annual 

payroll are summed from the associated establishments. 

 Enterprise: An enterprise is a business organization consisting of one or more 

domestic establishments that were specified under common ownership or control. The 

enterprise and the establishment are the same for single-establishment firms. Each 

multiestablishment company forms one enterprise; the enterprise employment and 

annual payroll are summed from the associated establishments. Enterprise size 

designations are determined by the summed employment of all associated 

establishments. 

In 2002, Texas had almost 1,000 power establishments, while California, Georgia, and 

Ohio all had between 400 and 500 (Figure 3-3). Hawaii, Nebraska, and Rhode Island all had 

fewer than 20 establishments in their states. 
3-7

Figure 3-3. 2002 Regional Distribution of Establishments: Electric Power Generation, 

Transmission, and Distribution Industry (NAICS 2211) 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 22: Utilities: 

Geographic Area Series: Summary Statistics: 2002.” <http://factfinder.census.gov>; (November 10, 2008). 

As shown in Table 3-3, the four largest firms owned over 1,200 establishments and 

accounted for about 16% of total industry receipts/revenue. The 50 largest firms accounted for 

almost 6,000 establishments and about 78% of total receipts/revenue. 

Investor-owned energy providers accounted for 67.5% of retail electricity sold in the 

United States in 2006 (Table 3-4). In 2010, less regulated investor-owned electric utility 

companies were on average more profitable than companies with greater regulation (Table 3-5). 

In 2006, enterprises within NAICS 2211 had a pre-tax profit margin of only 0.9% (Table 3-6). 

3.2 Oil and Gas Extraction 

3.2.1 Overview 

Oil and gas extraction (NAICS 211) is an industry group within the mining sector 

(NAICS 21). It includes establishments that operate or develop oil and gas field properties 

Establishments by State

Less than 100

100 - 199

200 - 349

350 - 500

More than 500
3-7

Table 3-3. Firm Concentration for Electric Power Generation, Transmission, and 

Distribution (NAICS 2211): 2002 

Commodity Establishments 

Receipts/Revenue 

Number of 

Employees 

Employees per 

Amount ($10 Establishment 6) 

Percentage 

of Total 

All firms 9,394 $325,028 100.0% 535,675 57 

4 largest firms 1,260 $52,349 16.1% 68,432 54 

8 largest firms 2,566 $95,223 29.3% 151,575 59 

20 largest firms 3,942 $173,207 53.3% 271,393 69 

50 largest firms 5,887 $253,015 77.8% 408,021 69 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 22: Utilities: 

Subject Series—Estab & Firm Size: Concentration by Largest Firms for the United States: 2002.” 

<http://factfinder.census.gov>; (November 21, 2008). 

through such activities as exploring for oil and gas, drilling and equipping wells, operating onsite equipment, and conducting other activities up to the point of shipment from the property. 

Oil and gas extraction consists of two industries: crude petroleum and natural gas 

extraction (NAICS 211111) and natural gas liquid extraction (NAICS 211112). Crude petroleum 

and natural gas extraction is the larger industry; in 2007, it accounted for 93% of establishments 

and 75% of oil and gas extraction revenues. 

Industrial production in this industry is particularly sensitive to hurricanes in the Gulf 

Coast. In September of both 2005 and 2008, production dropped 14% from the previous month. 

From 2002 to 2007, revenues from crude petroleum and natural gas extraction (NAICS 

211111) nearly doubled to $194 billion ($2007) (Table 3-8). At the same time, payroll increased 

55% and the number of employees dropped by almost 40%. The number of establishments 

increased only slightly (1%); as a result, the average establishment revenue nearly doubled%. 

From 2002 to 2007, revenue from natural gas liquid extraction (NAICS 211112) grew 

over 19% to about $40 billion (Table 3-9). At the same time, payroll increased by only 1% and 

the number of employees dropped by almost 14%. The number of establishments dropped by 

over 59%, resulting in an increase of revenue per establishment of about 85%. 
3-9 

Table 3-4. United States Retail Electricity Sales Statistics: 2008  Full-Service Providers Other Providers Item Investor-Owned Public Federal Cooperative Facility Energy Delivery Total Number of entities 3 62 1 25 1 NA NA 92 Number of retail customers 46,985 2,160,220 36 940,697 1 NA NA 3,147,939 Retail sales (103 megawatthours) 2,257 70,303 9,625 21,868 117 NA NA 104,170 Percentage of retail sales 2 67 9 21 0 — — 100 Revenue from retail sales ($106) 113 5,934 473 1,994 6 NA NA 8,520 Percentage of revenue 1.33 69.65 5.55 23.41 0.07 — — 100 Average retail price (cents/kWh) 5.01 8.44 4.91 9.12 5.25 NA NA 8.18 Source: U.S. Department of Energy, Energy Information Administration. 2009. “State Electricity Profiles 2008.” DOE/EIA-0348(01)/2. p. 260. < http://www.eia.doe.gov/cneaf/electricity/st_profiles/sep2008.pdf>. 
3-10 

Table 3-5. FY 2010 Financial Data for 70 U.S. Shareholder-Owned Electric Utilities 

 Profit Margin Net Income Operating Revenues 

Investor-Owned Utilities 4.81% $27,728 $371,545 

Regulateda 6.80% $12,341 $158,657 

Mostly regulatedb 8.50% $17,815 $175,218 

Diversifiedc -16.78% -$2,429 $37,671 

a 80%+ of total assets are regulated. 

b 50% to 80% of total assets are regulated. 

c Less than 50% of total assets are regulated. 

 Source: Edison Electric Institute. “Income Statement: Q4 2010 Financial Update. Quarterly Report of the U.S. 

Shareholder-Owned Electric Utility Industry.” <http://www.eei.org>. 

Table 3-6. Aggregate Tax Data for Accounting Period 2009: NAICS 2211 

Number of enterprisesa 1,187 

Total receipts (103) $323,522,443 

Net sales(103

) $328,017,143 

Profit margin before tax 3.1% 

Profit margin after tax 2.0% 

a Includes corporations with and without net income. 

Source: Internal Revenue Service, U.S. Department of Treasury. 2010. “Corporation Source Book: Data Files 2000–

2009.” <http://www.irs.gov/taxstats/article/0,,id=167415,00.html>; (May 2, 2010). 

3.2.2 Goods and Services Used 

The oil and gas extraction industry has similar labor and tax requirements as the electric 

power generation sector. Extraction, support, power, and equipment requirements potentially 

associated with reciprocating internal combustion engines (oil and gas extraction, support 

activities, electric power generation, machinery and equipment rental and leasing, and pipeline 

transportation) represent around 8% of the value of services (Table 3-10). 
3-11 

3.2.3 Business Statistics 

The U.S. Economic Census and SUSB programs provide national information on the 

distribution of economic variables by industry, location, and size of business. Throughout this 

section and report, we use the following definitions: 

 Establishment: An establishment is a single physical location where business is 

conducted or where services or industrial operations are performed. 
3-12 

Table 3-7. Key Enterprise Statistics by Employee Size for Electric Power Generation, Transmission, and Distribution (NAICS 

2211): 2007 

Variable All Enterprises 

<20 

Employees 

20–99 

Employee s

100–499 

Employees 

500+ 

Employees 

Firms 1,687 630 670 251 136 

Establishments 9,611 687 1,110 999 6,815 Employment 503,134 3,622 31,455 42,527 425,530 Receipts ($103) $440,342,284 $8,364,773 $21,825,969 $41,370,375 $368,781,167 

Receipts/firm ($103) $261,021 $13,277 $32,576 $164,822 $2,711,626 

Receipts/establishment ($103) $45,817 $12,176 $19,663 $41,412 $54,113 

Receipts/employment ($) $875 $2,309 $694 $973 $867 

Source: U.S. Census Bureau. 2010. “Firm Size Data from the Statistics of U.S. Businesses: U.S. All Industries Tabulated by Receipt Size: 2007.” 

<http://www.census.gov/csd/susb/susb07.htm>. 
3-13 

Figure 3-4. Industrial Production Index (NAICS 211) 

 Source: The Federal Reserve Board. “Industrial Production and Capacity Utilization: Industrial Production” Series 

ID: G17/IP_MINING_AND_UTILITY_DETAIL/IP.G211.S <http://www.federalreserve.gov/datadownload/>. 

(January 27, 2010). 

Table 3-8. Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111): 

($2007) 

2002 2007 

Revenue ($106) 98,667 194,107 

Payroll ($106) 5,785 8,988 

Employees 94,886 133,286 

Establishments 7,178 7,221 

Source: U.S. Census Bureau; Factfinder Series: “2002 and 2007.” <http://factfinder.census.gov>; (February 23, 

2012). 

 Receipts: Receipts (net of taxes) are defined as the revenue for goods produced, 

distributed, or services provided, including revenue earned from premiums, 

commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all 

revenue collected for local, state, and federal taxes. 

75

80

85

90

95

100

105

110

1997‐01

1997‐06

1997‐11

1998‐04

1998‐09

1999‐02

1999‐07

1999‐12

2000‐05

2000‐10

2001‐03

2001‐08

2002‐01

2002‐06

2002‐11

2003‐04

2003‐09

2004‐02

2004‐07

2004‐12

2005‐05

2005‐10

2006‐03

2006‐08

2007‐01

2007‐06

2007‐11

2008‐04

2008‐09

2009‐02

2009‐07

2009‐12

Index Value (Jan 2002=100)
3-14 

 Firm: A firm is a business organization consisting of one or more domestic 

establishments in the same state and industry that were specified under common 

ownership or control. The firm and the establishment are the same for singleTable 3-9. Key Statistics: Natural Gas Liquid Extraction (NAICS 211112) ($2007) 

2002 2007 

Revenue ($106) 33,579 39,978 

Payroll ($106) 607 617 

Employees 9,693 8,523 

Establishments 511 321 

Source: U.S. Census Bureau; 2002 and 2007.” <http://factfinder.census.gov>; (February 23, 2012). 

Table 3-10. Direct Requirements for Oil and Gas Extraction (NAICS 211): 2002 

Commodity Commodity Description 

Direct Requirements 

Coefficientsa

V00200 Taxes on production and imports, less subsidies 8.93% 

V00100 Compensation of employees 6.67% 

230301 Nonresidential maintenance and repair 6.36% 

211000 Oil and gas extraction 1.91% 

213112 Support activities for oil and gas operations 1.51% 

221100 Electric power generation, transmission, and distribution 1.47% 

541300 Architectural, engineering, and related services 1.24% 

532400 Commercial and industrial machinery and equipment rental and leasing 1.20% 

33291A Valve and fittings other than plumbing 1.10% 

541511 Custom computer programming services 0.99% 

a

 These values show the amount of the commodity required to produce $1.00 of the industry’s output. The values 

are expressed in percentage terms (coefficient ×100). 

Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table, 

Use Table and Direct Requirements Table. Tables 4 and 5. 

establishment firms. For each multiestablishment firm, establishments in the same 

industry within a state are counted as one firm; the firm employment and annual 

payroll are summed from the associated establishments. 

 Enterprise: An enterprise is a business organization consisting of one or more 

domestic establishments that were specified under common ownership or control. The 

enterprise and the establishment are the same for single-establishment firms. Each 

multiestablishment company forms one enterprise; the enterprise employment and 

annual payroll are summed from the associated establishments. Enterprise size 
3-15 

designations are determined by the summed employment of all associated 

establishments. 

As of 2007, there were 6,563 firms within the NAICS 211111 code, of which 6427 (98 

percent) were considered small businesses (Table 3-11). Within NAICS 211111, large firms 

compose about 2 percent of the firms, but account for 59 percent of employment and generate 

about 80 percent of estimated receipts listed under the NAICS. Within NAICS 211112, there 

are 139 firms, of which 95 (71 percent) were considered small businesses (Table 3-12). As 

shown in this table, large firms compose 29 percent of the firms, but account for 78 percent of 

employment and generate about 95 percent of estimated receipts. 

Enterprises within NAICS 211111 generated $194 billion in total receipts in 2007. 

Enterprises within NAICS 211112 generated nearly $40 billion in total receipts in 2007. 

Including those enterprises without net income, NAICS 211 averaged an after-tax profit margin 

of 8.5% in 2008 (Table 3-13). 

Table 3-11. Key Statistics for Crude Petroleum and Natural Gas Extraction (NAICS 

211111): 2007 

NAICS NAICS Description 

SBA Size 

Standard 

 Small 

Firms Large Firms Total Firms 

Number of Firms by Firm Size 

 Crude Petroleum and Natural Gas Extraction 500 6,329 95 6,424 

Total Employment by Firm Size 

 55,622 77,664 133,286 

Estimated Receipts by Firm Size ($1000) 

 44,965,936 149,141,316 194,107,252 

Note: *The counts of small and large firms in NAICS 486210 is based upon firms with less than $7.5 million in 

receipts, rather than the $7 million required by the SBA Size Standard. We used this value because U.S. Census 

reports firm counts for firms with receipts less than $7.5 million. **Employment and receipts could not be split 

between small and large businesses because of non-disclosure requirements faced by the U.S. Census Bureau. 

Source: U.S. Census Bureau. 2010. “Number of Firms, Number of Establishments, Employment, Annual Payroll, 

and Estimated Receipts by Enterprise Receipt Size for the United States, All Industries: 2007.” 

<http://www.census.gov/econ/susb/>
3-16 

Table 3-12. Key Statistics for Crude Natural Gas Liquid Extraction (NAICS 211112): 2007 

 NAICS Description 

SBA Size 

Standard 

 Small 

Firms Large Firms Total Firms 

Number of Firms by Firm Size 

 Natural Gas Liquid Extraction 500 98 41 139 

 

Total Employment by Firm Size 

 1,875 6,648 8,523 

 

Estimated Receipts by Firm Size ($1000) 

 2,164,328 37,813,413 39,977,741 

Note: *The counts of small and large firms in NAICS 486210 is based upon firms with less than $7.5 million in 

receipts, rather than the $7 million required by the SBA Size Standard. We used this value because U.S. Census 

reports firm counts for firms with receipts less than $7.5 million. **Employment and receipts could not be split 

between small and large businesses because of non-disclosure requirements faced by the U.S. Census Bureau. 

Source: U.S. Census Bureau. 2010. “Number of Firms, Number of Establishments, Employment, Annual Payroll, 

and Estimated Receipts by Enterprise Receipt Size for the United States, All Industries: 2007.” 

<http://www.census.gov/econ/susb/>

Table 3-13. Aggregate Tax Data for Accounting Period 7/07–6/08: NAICS 211 

Number of enterprisesa 19,441 

Total receipts (103) $193,230,241 

Net sales(103

) $166,989,539 

Profit margin before tax 12.9% 

Profit margin after tax 8.5% 

a Includes corporations with and without net income. 

Source: Internal Revenue Service, U.S. Department of Treasury. 2010. “Corporation Source Book: Data Files 2004-

2007.” <http://www.irs.gov/taxstats/article/0,,id=167415,00.html>; (May 2, 2010). 

3.3 Pipeline Transportation of Natural Gas 

3.3.1 Overview 

Pipeline transportation of natural gas (NAICS 48621) is an industry group within the 

transportation and warehousing sector (NAICS 48-49), but more specifically in the pipeline 
3-17 

transportation subsector (486). It includes the transmission of natural gas as well as the 

distribution of the gas through a local network to participating businesses. 

From 2002 to 2007, natural gas transportation revenues fell by 10% to just under $21 

billion ($2007) (Table 3-15). At the same time, payroll decreased by 18%, while the number of 

paid employees decreased by nearly 32%. The number of establishments decreased by 13% from 

1,701 establishments in 2002 to 1,479 in 2007. 

3.3.2 Goods and Services Used 

The BEA reports pipeline transportation of natural gas only for total pipeline 

transportation (3-digit NAICS 486). In addition to pipeline transportation of natural gas (NAICS 

4862), this industry includes pipeline transportation of crude oil (NAICS 4861) and other 

pipeline transportation (NAICS 4869). However, the BEA data are likely representative of the 

affected sector since pipeline transportation of natural gas accounts for 68% of NAICS 486 

establishments and 72% of revenues (Figures 3-5 and 3-6). 

Table 3-14. Key Statistics: Pipeline Transportation of Natural Gas (NAICS 48621) ($2007) 

Year 2002 2007 

Revenue ($106) 22,964 20,797 

Payroll ($106) 2,438 2,064 

Employees 32,542 24,683 

Establishments 1,701 1,479 

 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48: EC0748I1: 

Transportation and Warehousing: Industry Series: Preliminary Summary Statistics for the United States: 2002 and 

2007.” http://factfinder.census.gov (January 27, 2010). 

In Table 3-15, we use the latest detailed benchmark input-output data report by the BEA 

(2002) to identify the goods and services used by pipeline transportation (NAICS 486). As 

shown, labor, refineries, and maintenance requirements represent significant share of the cost 

associated with pipeline transportation. Power and equipment requirements potentially associated 

with reciprocating internal combustion engines (electric power generation and commercial and 

industrial machinery and equipment repair and maintenance) represent less than 2% of the value 

of services. 

Deleted: ¶

¶
3-18 

Figure 3-5. Distribution of Establishments within Pipeline Transportation (NAICS 486) 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48: 

Transportation and Warehousing: Industry Series: Summary Statistics for the United States: 2002” 

<http://factfinder.census.gov>; (December 12, 2008). 

Figure 3-6. Distribution of Revenue within Pipeline Transportation (NAICS 486) 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48: 

Transportation and Warehousing: Industry Series: Summary Statistics for the United States: 2002” 

<http://factfinder.census.gov>; (December 12, 2008). 

68%

21%

11%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

4862 Pipeline 

Transportation of Natural 

Gas

4869 Other Pipeline 

Transportation

4861 Pipeline 

Transportation of Crude Oil

72%

16% 12%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

4862 Pipeline 

Transportation of Natural 

Gas

4869 Other Pipeline 

Transportation

4861 Pipeline 

Transportation of Crude Oil
3-19 

Table 3-15. Direct Requirements for Pipeline Transportation (NAICS 486): 2002 

Commodity Commodity Description 

Direct 

Requirements 

Coefficientsa

V00100 Compensation of employees 14.78% 

324110 Petroleum refineries 13.55% 

230301 Nonresidential maintenance and repair 6.07% 

211000 Oil and gas extraction 4.94% 

333415 Air conditioning, refrigeration, and warm air heating equipment 

manufacturing 

4.40% 

561300 Employment services 4.26% 

5416A0 Environmental and other technical consulting services 3.04% 

541300 Architectural, engineering, and related services 3.04% 

420000 Wholesale trade 2.79% 

332310 Plate work and fabricated structural product manufacturing 2.72% 

5419A0 All other miscellaneous professional, scientific, and technical services 2.48% 

524100 Insurance carriers 2.38% 

531000 Real estate 2.33% 

52A000 Monetary authorities and depository credit intermediation 1.76% 

V00200 Taxes on production and imports, less subsidies 1.41% 

541100 Legal services 1.19% 

221100 Electric power generation, transmission, and distribution 1.13% 

a These values show the amount of the commodity required to produce $1.00 of the industry’s output. The values 

are expressed in percentage terms (coefficient ×100). 

Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table, 

Use Table and Direct Requirements Table. Tables 4 and 5. 

According to 2007 U.S. Census data, about 86% of transportation of natural gas 

establishments were owned by corporations and about 8% were owned by individual 

proprietorships. About 6% were owned by partnerships (Figure 3-7). 

Enterprises within pipeline transportation (NAICS 486) generated $11.1 billion in total 

receipts in 2007. Including those enterprises without net income, the industry averaged an aftertax profit margin of 9.6% (Table 3-16). 

The 2007 SUSB shows that about half of all firms have fewer than 20 employees, but 

only 1% of all employees in this industry. Firms with more than 500 employees generate 89% of 

all receipts in this industry (Table 3-17). 
3-20 

Figure 3-7. Share of Establishments by Legal Form of Organization in the Pipeline 

Transportation of Natural Gas Industry (NAICS 48621): 2002 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48-49: 

Transportation and Warehousing: Subject Series—Estab & Firm Size: Legal Form of Organization for the United 

States: 2002” <http://factfinder.census.gov>; (December 12, 2008). 

Table 3-16. Aggregate Tax Data for Accounting Period 7/07–6/08: NAICS 486 

Number of enterprisesa 321 

Total receipts (103) $11,062,608 

Net sales (103

) $10,210,083 

Profit margin before tax 13.2% 

Profit margin after tax 9.6% 

a Includes corporations with and without net income. 

Source: Internal Revenue Service, U.S. Department of Treasury. 2010. “Corporation Source Book: Data Files 2004-

2007.” <http://www.irs.gov/taxstats/article/0,id=167415,00.html>; (May 2, 2010). 

86%

8% 6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Corporations Individual Proprietorships Partnerships
3-21 

Table 3-17. Key Enterprise Statistics by Employee Size for Pipeline Transportation of 

Natural Gas (NAICS 48621): 2007 

 

Variable All Enterprises 

<20 

Employees 

20–99 

Employees 

100–499 

Employees 500+ Employees 

Firms 126 63 12 9 42 

Establishments 1.479 66 26 70 1,317 

Employment 24,683 241 382 1,479 22,581 

Receipts ($103

) $20,796,681 N/A $518,341 $1,448,020 $18,498,143 

Receipts/firm ($103) $165,053 N/A $43,195 $160,891 $440,432 

Receipts/establishment 

($103

) 

$14,061 N/A $19,936 $20,686 $14,046 

Receipts/employment 

($) 

$843 N/A $1,357 $979 $819 

Source: U.S. Census Bureau. 2011. Firm Size Data from the Statistics of U.S. Businesses, U.S. All Industries 

Tabulated by Employee Size: 2007. http://www2.census.gov/csd/susb/2007/usalli_r07.xls. 

3.4 General Medical and Surgical Hospitals 

3.4.1 Overview 

General medical and surgical hospitals (NAICS 6221) is an industry group within the 

health care and social assistance sector (NAICS 62). It includes hospitals engaged in diagnostic 

and medical treatment (both surgical and nonsurgical) for inpatients with a broad range of 

medical conditions. They usually provide other services as well, including outpatient care, 

anatomical pathology, diagnostic X-rays, clinical laboratory work, and pharmacy services. 

From 2002 to 2007, hospital revenues grew about 21% to over $650 billion ($2007) 

(Table 3-18). At the same time, payroll rose about 15%, while the number of employees 

increased by only 6%. The number of establishments increased during this period by almost 4%, 

resulting in an increase in revenue per establishment of almost 16%. 

3.4.2 Goods and Services Used 

The BEA reports hospital expenditures only for hospitals (3-digit NAICS 622). In 

addition to general hospitals (NAICS 6221), this industry includes psychiatric and substance 

abuse hospitals (NAICS 6222) and specialty hospitals (NAICS 6223). However, these data 

Deleted: 3.4.1

Deleted: 3.4.2
3-22 

should be representative of the affected sector since in 2007, general medical and surgical 

hospitals accounted for 92% of NAICS 622 establishments and 94% of revenues. 

In Table 3-19, we use the latest detailed benchmark input-output data report by the BEA 

(2002) to identify the goods and services used by hospitals (NAICS 622). As shown, labor and 

land requirements represent a significant share of the value of hospital services. Power and 

equipment requirements potentially associated with reciprocating internal combustion engines 

(electric power generation and commercial and industrial machinery and equipment repair and 

maintenance) represent less than 2% of the value of services. 
3-23 

Table 3-18. Key Statistics: General Medical and Surgical Hospitals (NAICS 6221) 

($2007) 

 2002 2007 

Revenue ($106) 539,502 651,639 

Payroll ($106) 209,063 240,638 

Employees 4,772,422 5,042 

Establishments 5,193 5,404 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 62: Health Care 

and Social Assistance: Geographic Area Series: 2002 and 2007.” <http://factfinder.census.gov>; (February 22, 

2012). 

Table 3-19. Direct Requirements for Hospitals (NAICS 622): 2002 

Commodity Commodity Description 

Direct Requirements 

Coefficientsa

V00100 Compensation of employees 51.90% 

531000 Real estate 10.76% 

550000 Management of companies and enterprises 4.02% 

621B00 Medical and diagnostic labs and outpatient and other ambulatory care 

services 

2.22% 

561300 Employment services 1.90% 

325412 Pharmaceutical preparation manufacturing 1.86% 

325413 In-vitro diagnostic substance manufacturing 1.66% 

524100 Insurance carriers 1.66% 

420000 Wholesale trade 1.62% 

221100 Electric power generation, transmission, and distribution 1.14% 

a These values show the amount of the commodity required to produce $1.00 of the industry’s output. The values 

are expressed in percentage terms (coefficient ×100). 

Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table, 

Use Table and Direct Requirements Table. Tables 4 and 5. 

3.4.3 Business Statistics 

In 2010, the United States had 5,754 hospitals (Table 3-20). As shown in Table 3-1, 

nongovernmental not-for-profit hospitals accounted for 2,904 (or 50%) of these hospitals, and 

State and local government hospitals accounted for 1,068 (or 19%) of these hospitals. 

Deleted: 3.4.3
3-24 

 General medical and surgical hospitals (NAICS 6221) generated $652 billion in total 

receipts in 2007. Including those enterprises without net income, the industry averaged an aftertax profit margin of 3.1% (Table 3-22). Also, each firm in this industry had an average of about 

$202 million in revenue and a great majority of these firms had more than 500 employees in 

2007 (Table 3-23). 

Figure 3-8. Share of Establishments by Legal Form of Organization in the General 

Medical and Surgical Hospitals Industry (NAICS 6221): 2002 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 62: Health Care 

and Social Assistance: Subject Series—Estab & Firm Size: Legal Form of Organization for the United States: 

2002” <http://factfinder.census.gov>; (November 21, 2008). 

Table 3-20. Data for General Medical and Surgical Hospitals (NAICS 6221): 2007 

Commodity Establishments Amount ($106)

Number of 

Employees 

Employees per 

Establishment 

All firms 5,404 $651,639 5,041,848 933 

Source: U.S. Census Bureau, 2011; Statistics for U.S. Businesses (SUSB), 2007. 

79.6%

19.5%

0.7% 0.1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Corporations Partnerships Individual 

Proprietorships

Other Legal Forms 

of Organization

Deleted: ¶ ... [14]

Formatted Table

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3-25 

Table 3-21. Hospital Statistics: 2010 

Hospitals Number 

Total 5,754 

Nongovernment not-forprofit 2,904 

Investor-owned (for-profit) 1,013 

State and local government 1,068 

Federal government 213 

NA = Not available 

Source: American Hospital Association. 2011. “AHA Hospital Statistics: 2010 Edition.” Health Forum. 

Table 3-22. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 622-4 

Number of enterprisesa 18,263 

Total receipts (103) $108,074,793 

Net sales(103

) $102,300,229 

Profit margin before tax 4.4% 

Profit margin after tax 3.1% 

a Includes corporations with and without net income. 

Source: Troy, Leo. 2008. “Almanac of Business and Industrial Financial Ratios: 2009 Edition.” CCH. 

Table 3-23. Key Enterprise Statistics by Employee Size for General Medical and Surgical 

Hospitals (NAICS 6221): 2007 ($2007) 

Variable 

All 

Enterprises <20 Employees 

20-99 

Employees 

100-499 

Employees 500+ Employees

Firms 3,225 170 277 1,227 1,551 

Establishments 5,404 173 282 1,286 3,663 

Employment 5,041,848 606 18,718 294,247 4,728,277 

Receipts ($103

) $651,639,328 346.216 1,553,004 $27,889,532 $621,850,576 

Receipts/firm ($103

) $202,059 2,037 5,607 $22,730 $400,935 

Receipts/establishment 

($103

) 

$120,585 2,001 5,508 $21,687 $169,766 

Receipts/employment 

($) 

$129 $571 $83 $95 $132 

Source: U.S. Small Business Administration (SBA). 2010. “Firm Size Data from the Statistics of U.S. Businesses: 

U.S. All Industries Tabulated by Receipt Size: 2007.” <http://www.census.gov/csd/susb/susb07.htm>. 

Deleted: ¶

¶

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3-26 

3.5 Irrigation Sets and Welding Equipment 

3.5.1 Overview 

The U.S. Economic Census classifies irrigation equipment under the farm machinery and 

equipment manufacturing industry group (NAICS 333111). This U.S. industry comprises 

establishments primarily engaged in manufacturing agricultural and farm machinery and 

equipment and other turf and grounds care equipment, including planting, harvesting, and grassmowing equipment (except lawn and garden type). 

From 2002 to 2007, farm machinery and equipment manufacturing revenues increased 

by $8 billion from $15 billion to $23 billion (Table 3-24). At the same time, payroll increased by 

21% and the number of paid employees increased by nearly 9%. The number of establishments 

dropped by 2% from 1,214 establishments in 2002 to 1,191 in 2007. Industrial production in the 

industry has been increasing since 1997 (Figure 3-9). 

The U.S. Economic Census classifies welding equipment under the welding and 

soldering equipment manufacturing industry group (NAICS 333992). This U.S. industry 

comprises establishments primarily engaged in manufacturing welding and soldering equipment 

and accessories (except transformers), such as welding electrodes, welding wire, and soldering 

equipment (except handheld). 

From 2002 to 2007 welding and soldering equipment manufacturing revenue increased 

by about 53% to nearly $6 billion (Table 3-25). At the same time, payroll increased by 12% and 

the number of paid employees increased by nearly 9%. The number of establishments increased 

by 31% from 250 establishments in 2002 to 303 in 2007. 

3.5.2 Irrigation and Welding Services 

The demand for equipment is derived from the demand for the services the equipment 

provides. We describe uses and industrial consumers of this equipment. 

3.5.2.1 Irrigation 

Demand for irrigation equipment is driven by farm operation decisions, optimal 

replacement considerations, and climate and weather conditions. The National Agriculture 

Statistics Service (NASS) 2008 Farm and Ranch Irrigation Survey (USDA-NASS, 2010) shows 

Deleted: ¶
3-27 

Table 3-24. Key Statistics: Farm Machinery and Equipment Manufacturing (NAICS 

333111) ($2007) 

2002 2007 

Revenue ($106) $15,006 $23,009 

Payroll ($106) $2,132 $2,580 

Employees 53,817 58,838 

Establishments 1,214 1,191 

Source: U.S. Census Bureau, Statistics of U.S. Business (SUSB), 2007. 

Figure 3-9. Industrial Production Index (NAICS 333111) 

40

50

60

70

80

90

100

110

120

130

Index Values (Jan-97=100)

Industrial Production Index (NAICS 333111)

Deleted: Section Break (Next Page)
3-28 

Table 3-25. Key Statistics: Welding and Soldering Equipment Manufacturing (NAICS 

333992) ($2007) 

2002 2007 

Revenue ($106) $3,880 $5,935 

Payroll ($106) $811 $910 

Employees 16,128 17,529 

Establishments 231 303 

Source: U.S. Census Bureau; using American FactFinder; “Sector 31: Manufacturing: Industry Series: Historical 

Statistics for the Industry: 2002 and 2007” <http://factfinder.census.gov>; (February 15, 2012). 

that the top five states ranked by total acres irrigated are Nebraska, California, Texas, Arkansas, 

and Idaho. Virtually all of the irrigated areas in the U.S. are west of the Mississippi River. 

The survey reported that approximately 546,000 pumps were used on U.S. farms in 2008 

with energy expenses totaling approximately $2.7 billion. Electricity is the dominant form of 

energy expense for irrigation pumps, accounting for 59% of total energy expenses. Diesel fuel is 

second (25%), followed by natural gas (17%) and other forms of energy such as gasoline (2%). 

Per-acre operating costs for these irrigation systems vary by fuel type, and natural gas 

was the most expensive in 2008 ($93 per acre for well systems and $44 per acre for surface water 

systems) (Table 3-26). Systems using diesel fuel were operated at approximately half of these 

per-acre costs ($54 per acre for well systems and $42 per acre for surface water systems). 

Gasoline- and gasohol-powered systems offered the least expensive operating costs for well 

systems ($39 per acre) and electricity-power systems offered the least expensive operating costs 

for surface water systems ($45 per acre). As shown in Table 3-27, the number of on-farm pumps 

increased to 546,308 from 489,434 (12%) between 2003 and 2008. The use of electric- and 

diesel-powered pumps increased during this period (21% and 3%, respectively), while other fuel 

sources such as liquid petroleum (LP) gas, propane, and butane declined significantly (31%). It 

should be noted that the acreages included in Table 3-27 incorporate both irrigated and nonirrigated land. 
3-29 

Table 3-26. Expenses per Acre by Type of Energy: 2008 

Fuel Type Irrigated by Water from Wells Irrigated by Surface Water 

Electricity $57.80 $35.07 

Natural gas $93.03 $43.85 

LP gas, propane, butane $38.72 $45.40 

Diesel fuel $54.20 $41.94 

Gasoline and gasohol $84.98 $39.24 

Total $60.90 $36.13 

Source: U.S. Department of Agriculture, National Agricultural Statistics Service. 2010. “2008 Farm and Ranch 

Irrigation Survey.” Washington, DC: USDA-NASS. Table 20. Found on the Internet at 

http://www.agcensus.usda.gov/Publications/2007/Online_Highlights/Farm_and_Ranch_Irrigation_Survey/fris08_

1_20.pdf. 

Table 3-27. Number of On-Farm Pumps of Irrigation Water by Type of Energy: 2003 and 

2008 

Fuel Type 2003 2008 Percentage Change 

Electricity 312,145 377,492 21% 

Natural gas 41,768 36,176 –13% 

LP gas, propane, butane 17,786 12,203 –31% 

Diesel fuel 112,133 115,249 3% 

Gasoline and gasohol 5,602 5,188 –7% 

Total 489,434 546,308 12% 

Source: U.S. Department of Agriculture, National Agricultural Statistics Service. 2010. “2008 Farm and Ranch 

Irrigation Survey.” Washington, DC: USDA-NASS. Table 20. Found on the Internet at 

http://www.agcensus.usda.gov/Publications/2007/Online_Highlights/Farm_and_Ranch_Irrigation_Survey/fris08_

1_20.pdf

No information is available on the use and construction of on-farm pumps specifically. USDA 

reports that planted acres of the eight major crops hit a 5-year high of 252 million acres in 2008 

but will fall and level off to around 244 million acres over the next 2 to 4 years (USDA, 2008). 

3.5.2.2 Welding 

Welding is used in a wide variety of applications. One of the biggest manufacturers of 

welding products identifies the following key end-user segments: 

 general metal fabrication; 

Deleted: 3.5.2.2
3-30 

 infrastructure including oil and gas pipelines and platforms, buildings, bridges, and 

power generation; 

 transportation and defense industries (automotive, trucks, rail, ships, and aerospace); 

 equipment manufacturers in construction, farming, and mining; 

 retail resellers; and 

 rental market (Lincoln Electric Holdings, 2006). 

Lincoln Electric further describes the following key applications: power generation and process 

industries, offshore production of oil and gas, pipelines/pipemills, and heavy fabrication 

(earthmoving and construction equipment and agricultural and farm equipment. 

3.5.3 Business Statistics 

Enterprises within agriculture, construction, and mining machinery manufacturing 

(NAICS 3331) generated $88 billion of total receipts in 2007, while those in other general 

purpose machinery manufacturing (NAICS 3339) generated $85.7 billion. The average after-tax 

profit margin in these two industries was 6.9% and 4.7%, respectively (Table 3-28). 

Table 3-28. Aggregate Tax Data for Accounting Period 7/05–6/06: NAICS 3331 and 3339 

Agriculture, Construction, & Mining 

Machinery Manufacturing 

Other General Purpose Machinery 

Manufacturing 

Number of enterprisesa 3,064 6,231 

Total receipts (103) $88,255,496 $85,653,046 

 

Profit margin before tax 9.1% 6.1% 

Profit Margin after tax 6.9% 4.7% 

a Includes corporations with and without net income. 

Source: Troy, Leo. 2008. “Almanac of Business and Industrial Financial Ratios: 2009 Edition.” CCH. 

As noted earlier, welding equipment is used in heavy fabrication such as earthmoving and 

construction equipment. We focus on the size distribution for a representative sector in this 

section (NAICS 237, Heavy and Civil Engineering Construction); other subsections in Section 3 

cover other sectors that potentially use equipment powered by diesel engines (e.g., power 

generation and offshore gas distribution). As shown in Table 3-29, SUSB data suggest that more 

than 80% of firms are below the Small Business Administration (SBA) small business size 
3-31 

standard for this industry. However, it is not clear what fraction of these firms use stationary 

diesel engines. Deleted: ¶
32 

Table 3-29. Key Enterprise Statistics by Receipt Size for Heavy Construction: 2007a

Variable All Enterprises <20 Employees 

20–99 

Employees 

100–499 

Employees 500+ 

Firms 49,228 40,654 6,793 1,422 359 

Establishments 51,421 40,670 6,947 1,847 1,987 

Employment 1,016,407 183,487 273,867 238,342 320,711 

Receipts ($103) $263,941,774 $46,766,241 $68,078,765 $69,190,739 $79,906,029 

Receipts/firm ($103) $5,362 $1,150 $10,022 $48,657 $222,579 

Receipts/establishment 

($103) 

$5,133 $1,150 $9,800 $37,461 $40,214 

Receipts/employment ($) $260 $255 $249 $290 $249 

a

 2007 SUSB. The most comparable 2007 NAICS code for this industry is 237. 

Source: U.S. Census Bureau. 2012b. Firm Size Data from the Statistics of U.S. Businesses, U.S. All Industries 

Tabulated by Receipt Size: 2007. http://www2.census.gov/csd/susb/2007/usalli_r07.xls. 

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SECTION 4

REGULATORY ALTERNATIVES, COSTS, AND EMISSION IMPACTS 

4.1 Background 

This section of the RIA includes a discussion of the regulatory alternatives considered for 

the final reconsidered rule, the costs associated with these regulatory alternatives, and the 

impacts on affected emissions (both HAP and non-HAP). All impacts presented are for the year 

of full implementation, 2013. Costs in the chapter are in 2008$. Costs in 2010$ shown in other 

parts of the RIA are updated values of these 2008$. Although the estimates presented are 

annualized, they should be understood as a “snapshot” in analyzing costs. Annualized costs are 

estimated as equal for each year that control equipment is operated. 

After promulgation of the 2010 RICE NESHAP amendments, the EPA received several 

petitions for reconsideration, legal challenges, and other communications raising issues of 

practical implementability, and certain factual information that had not been brought to the 

EPA’s attention during the rulemaking. The EPA has considered this information and believes 

that amendments to the rule to address certain of these issues are appropriate. Therefore, the EPA 

is finalizing amendments to NESHAP for stationary RICE signed in March 2010 for CI engines 

and August 2010 for SI engines under section 112 of the Clean Air Act. This final rule was 

developed to address certain issues that have been raised by different stakeholders through 

lawsuits, several petitions for reconsideration of the 2010 RICE NESHAP amendments and other 

communications. The EPA is also finalizing revisions to 40 CFR part 60, subparts IIII and JJJJ 

for consistency with the RICE NESHAP and to make minor corrections and clarifications. The 

current regulation applies to owners and operators of existing and new stationary RICE at major 

and area sources of HAP emissions. The applicability of the CI rule remains the same and is not 

changed by this final rule. The EPA is also finalizing amendments to the NSPS for stationary 

engines to conform with certain amendments finalized for the RICE NESHAP. 

Certain stationary RICE are maintained in order to be able to respond to emergency 

power needs. This action finalizes limitations on the operation of emergency engines for 

emergency demand response programs. The final rule limits operation of stationary emergency 

RICE as part of an emergency demand response program to within the 100 hours per year that 

were already permitted for maintenance and testing of the engines. The limitation of 100 hours 

per year ensures that a sufficient number of hours are available for engines to meet regional 

transmission organization and independent system operator tariffs and other requirements for 

participating in various emergency demand response programs and will assist in stabilizing the 

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Deleted: The final proposed amendments 

include alternative testing options for 

certain large spark ignition (generally 

natural gas-fueled) stationary 

reciprocating internal combustion engines, 

management practices for a subset of 

existing spark ignition stationary 

reciprocating internal combustion engines 

in sparsely populated areas, and 

alternative and less burdensome 

monitoring and compliance options for the 

same engines in populated areas. The EPA 

is also proposing to includinge a limited 

temporary allowance for existing 

stationary emergency area source engines 

to be used for peak shaving and nonemergency demand response as part of the 

pre-existing allowance for such engines to 

be used for non-emergency use for 50 

hours annually. In addition, the EPA is 

proposing, in both the NESHAP and in 

the new source performance standards for 

stationary internal combustion engines to 

increasinge the hours that stationary 

emergency engines may be used for 

emergency demand response. The 

finalproposed amendments also correct 

minor mistakes in the pre-existing 

regulations.¶

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grid during periods of instability, preventing electrical blackouts and supporting local electric 

system reliability. The final rule also limits operation of certain emergency engines used to avert 

potential voltage collapse or line overloads that could lead to the interruption of power supply in 

a local area or region to 50 hours per year; this operation counts as part of the 100 hours of year 

permitted for maintenance and testing of the engine. This rule also establishes fuel and reporting 

requirements for emergency engines larger than 100 horsepower (HP) used for this purpose or 

used (or contractually obligated to be available) for more than 15 hours of emergency demand 

response per calendar year.

To address how certain existing compression ignition (CI) engines are currently 

regulated, the EPA is specifying that any existing CI engine above 300 HP at an area source of 

HAP emissions that was certified to meet the Tier 3 engine standards and was installed before 

June 12, 2006, is in compliance with the NESHAP. This provision creates regulatory consistency 

between the same engines installed before and after June 12, 2006. Engines at area sources of 

HAP for which construction commenced before June 12, 2006, are considered existing engines 

under the NESHAP. 

The EPA is finalizing amendments to the requirements for existing stationary Tier 1 and 

Tier 2 certified CI engines located at area sources that are subject to state and locally enforceable 

requirements requiring replacement of the engine by June 1, 2018. This addresses a specific 

concern regarding the interaction of the NESHAP with certain rules for agricultural engines in 

the San Joaquin Valley in California. The EPA is allowing these engines to meet management 

practices under the RICE NESHAP from the May 3, 2013, compliance date until January 1, 

2015, or 12 years after installation date, but not later than June 1, 2018. This provision addresses 

concerns about requiring owners and operators to install controls on their engines in order to 

meet the RICE NESHAP, and then having to replace their engines shortly thereafter due to state 

and local rules specifying the replacement of engines. Owners and operators will have additional 

time to replace their engines without having to install controls, but are required to use 

management practices during that period.

Another change the EPA is making is to broaden the definition of remote area sources in 

Alaska in the RICE NESHAP. Previously, remote areas were considered those that are not on the 

Federal Aid Highway System (FAHS). This change permits existing stationary CI engines at

other remote area sources in Alaska to meet management practices rather than numerical 

emission standards likely to require aftertreatment. These remote areas have the same challenges 

as areas not on the FAHS, and complying with the current rule would similarly be prohibitively 

costly and potentially infeasible. In addition to area sources located in areas of Alaska that are 

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not accessible by the FAHS being defined as remote and subject to management practices, any 

stationary RICE in Alaska meeting all of the following conditions are subject to management 

practices: 

 (1) The only connection to the FAHS is through the Alaska Marine Highway System, or 

the stationary RICE operation is within an isolated grid in Alaska that is not connected to the 

statewide electrical grid referred to as the Alaska Railbelt Grid, and

(2) At least 10 percent of the power generated by the stationary RICE on an annual basis 

is used for residential purposes, and

(3) The generating capacity of the area source is less than 12 megawatts (MW), or the 

stationary RICE is used exclusively for backup power for renewable energy.

The last significant change the EPA is finalizing is to require compliance with 

management practices rather than numeric emission limits in the RICE NESHAP for existing CI 

RICE on offshore drilling vessels on the Outer Continental Shelf (OCS) that become subject to 

the RICE NESHAP as a result of the operation of the OCS regulations (40 CFR part 55). The 

final amendments specify that owners and operators of existing non-emergency CI RICE with a 

site rating greater than 300 HP on offshore drilling vessels on the OCS are required to change the 

oil every 1,000 hours of operation or annually, whichever occurs first; inspect and clean air 

filters every 750 hours of operation or annually and replace as necessary; inspect fuel filters and 

belts, if installed, every 750 hours of operation or annually and replace as necessary; and inspect 

all flexible hoses every 1,000 hours of operation or annually and replace as necessary. Owners 

and operators can elect to use an oil analysis program to extend the oil change requirement.

EPA has taken several actions over the past several years to reduce exhaust pollutants 

from stationary diesel engines, but believes that further reducing exhaust pollutants from 

stationary diesel engines, particularly existing stationary diesel engines that have not been 

subject to federal standards, is justified. Therefore, EPA is issuing this rulemaking that 

reconsiders the 2010 final rule requiring emissions reductions from existing stationary diesel 

engines. The full preamble for the final CI RICE NESHAP and the rule itself can be reviewed at 

http://www.epa.gov/ttn/atw/rice/fr03mr10.pdf. 

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4.2 Summary of the Final Reconsideration Rule 

 

4.2.1.. Emergency Demand Response. 

The EPA proposed to limit operation of emergency stationary RICE as part of an 

emergency demand response program to within the 100 hours per year that is already permitted 

for maintenance and testing of the engines. The EPA proposed that owners and operators of 

stationary emergency engines could operate the engines for emergency demand response when 

the Reliability Coordinator, or other authorized entity as determined by the Reliability 

Coordinator, has declared an EEA Level 2 as defined in the NERC Reliability Standard EOP002-3, Capacity and Energy Emergencies, plus during periods where there is a deviation of 

voltage or frequency of 5 percent or more below standard voltage or frequency. After 

considering public comments received on the proposed rule, the EPA is finalizing the proposed 

amendment to limit operation for maintenance and testing and emergency demand response to no 

more than 100 hours per year. 

The EPA received some comments in support of the provision for emergency demand 

response operation, while other commenters opposed the limitation. The commenters who 

supported the provision noted that the engines are rarely called for emergency demand response, 

and that the EPA has limited the emergency demand response operation to emergency situations 

where a blackout is imminent. The commenters also noted that the public health impacts created 

by a widespread power outage outweigh the air quality impacts from the engines. The EPA 

agrees with the commenters that it is appropriate to include a provision for operation of 

emergency engines for a limited number of hours per year as part of emergency demand 

response programs to help prevent grid failure or blackouts. Preventing stationary emergency 

engines from being able to qualify and participate in emergency demand response programs 

without having to apply aftertreatment could force owners and operators to remove their engines 

from these programs, which could impair the ability of regional transmission organizations and 

independent system operators to use these relatively small, quick-starting and reliable sources of 

energy to protect the reliability of their systems. 

The commenters who opposed the provision for demand response provided no significant 

argument that the conditions under which these engines would be permitted to operate for 

emergency demand response would not be emergency conditions.

Deleted: Proposed

Deleted: 4.2.1 FinalProposed 

Amendment - Emergency Demand 

Response/Peak Shaving

Deleted: 4.2.1.1 Background

Deleted: ¶

Deleted: This action proposes to amends 

provisions in the RICE NESHAP that 

currently allow owners and operators to 

operate stationary emergency engines for 

up to 15 hours per year as part of a 

demand response program if the RTO or 

equivalent balancing authority and 

transmission operator have determined 

there are emergency conditions that could 

lead to a potential electrical blackout, such 

as unusually low frequency, equipment 

overload, capacity or energy deficiency, 

or unacceptable voltage level. The 2010 

final rule did not allow emergency 

engines to be used for purposes of peak 

shaving or other non-emergency purposes 

as part of a financial arrangement. These 

provisions were included in the RICE 

NESHAP when requirements for existing 

stationary CI engines were finalized on 

March 3, 2010 (75 FR 9648). Following 

the completion of that portion of the rule, 

the EPA received three main petitions for 

reconsideration. One petition was from 

CPower, Inc., EnergyConnect, Inc., 

EnerNOC, Inc., and Innoventive Power, 

LLC. (EnerNOC et al.)(EPA-HQ-OAR2008-0708-0404). Another petition was 

received from the Delaware Department 

of Natural Resources and Environmental 

Control (DE DNREC) (EPA-HQ-OAR- ... [17]

Deleted: ¶

Deleted: 4.2.1.2. What are the Final 

Proposed Amendments?¶

Deleted: 2

Deleted: 1

Deleted: The EPA is proposing to 

revisinge the current provisions for 

stationary engines used for emergency 

demand response operation. The ... [18]

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Commenters who opposed the provision were concerned about the air quality and health 

impacts of emissions from stationary engines. The commenters were concerned that recent 

actions by the Federal Energy Regulatory Commission (FERC) that impact demand response 

compensation in organized wholesale energy markets will greatly increase the amount of demand 

response participating in organized wholesale capacity markets. In response to the commenters, 

the EPA notes that, prior to the 2013 compliance dates for existing engines, there are no 

limitations on the hours of operation for those engines. The standards that go into effect in 2013 

will for the first time establish requirements for these engines, including limitations on their 

hours of operation in certain situations such as emergency demand response, and ULSD fuel 

requirements which will reduce HAP emissions from the engines. Regarding the FERC 

regulations and their effect on use of demand response in capacity markets, these are comments 

more appropriately directed towards the FERC. As noted above, the emergency demand response 

situations during which the emergency engines may be used for a limited number of hours per 

year are appropriately considered emergency situations.

Commenters were also concerned that these engines would be called to operate for 

demand response on high ozone days, further contributing to nonattainment with ozone 

standards. However, other commenters noted that emergency demand response events do not 

predominantly occur on ozone exceedance days. These commenters also note that some of the 

commenters opposing use of emergency engines during emergency demand response would 

benefit by such a limitation because other emission sources may be used instead of the 

emergency engines, including sources that some of these commenters may operate, and that the 

effect on total emissions of using these alternative emission sources is not clear. Concerns about 

contribution to ozone nonattainment by stationary engines can be addressed through areaspecific requirements such as state-based State Implementation Plans that would be directed 

towards ozone nonattainment areas. More detail regarding the public comments and the EPA’s 

responses can be found in the Response to Public Comments document available in the 

rulemaking docket.

As mentioned in the previous paragraph, in response to the concerns about the air quality 

impact of emissions from emergency engines operating in emergency demand response 

programs, and based on public comments received on the proposed rule, the EPA is finalizing a 

requirement for owners and operators of existing emergency CI stationary RICE with a site 

rating of more than 100 brake HP and a displacement of less than 30 liters per cylinder that use 

diesel fuel and operate or are contractually obligated to be available for more than 15 hours per 

year (up to a maximum of 100 hours per year) for emergency demand response to use diesel fuel 

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that meets the requirements in 40 CFR 80.510(b) for nonroad diesel fuel. This fuel requirement 

also applies to owners and operators of new emergency CI stationary RICE with a site rating of 

more than 500 brake HP with a displacement of less than 30 liters per cylinder located at a major 

source of HAP that use diesel fuel and operate or are contractually obligated to be available for 

more than 15 hours per year (up to a maximum of 100 hours per year) for emergency demand 

response. Owners and operators must begin meeting this ULSD fuel requirement on January 1, 

2015, except that any existing diesel fuel purchased (or otherwise obtained) prior to January 1, 

2015, may be used until depleted. As noted by commenters on the proposed amendments and as 

discussed in section II.B, requiring the use of diesel fuel meeting the requirements of 40 CFR 

80.510(b) is expected to reduce the HAP emissions significantly from the engines compared to 

emissions resulting from use of unregulated diesel fuel. The fuel requirement begins on January 

1, 2015, in order to give affected sources appropriate lead time to institute these new 

requirements and make any physical adjustments to engines and other facilities like tanks or 

containment structures, as well as any needed adjustments to contracts and other business 

activities, that may be necessitated by these new requirements.

 The final amendments also require owners and operators of emergency stationary RICE 

larger than 100 HP that operate or are contractually obligated to be available for more than 15 

hours per year (up to a maximum of 100 hours per year) for emergency demand response to 

submit an annual report to the EPA documenting the dates and times that the emergency 

stationary RICE operated for emergency demand response, beginning with the 2015 calendar 

year. Commenters on the proposed amendments recommended that the EPA gather information 

on the impacts of the emissions from emergency engines during emergency demand response 

situations. The EPA agrees that a reporting requirement will increase the EPA’s ability to ensure 

that these engines are operating in compliance with the regulations and that it will provide 

further information regarding the impacts of these engines on emissions. In response to these 

comments, the EPA is establishing a requirement to annually report to EPA the engine location 

and duration of operation for emergency demand response. This information will be used by the 

EPA, as well as state and local air pollution control agencies, to assess the health impacts of the 

emissions from these engines and to aid the EPA in ensuring that these engines comply with the 

regulations. Additional discussion of the rationale for the fuel and reporting requirements, as 

well as responses to other significant comments regarding emergency engines engaged in 

emergency demand response, can be found in the Response to Public Comments document in the 

docket.
4-7 

 Public commenters, in particular the National Rural Electric Cooperative Association 

(NRECA), indicated that the proposed EEA Level 2 and 5 percent voltage or frequency deviation 

triggers did not account for situations when the local balancing authority or transmission 

operator for the local electric system has determined that electric reliability is in jeopardy, and 

recommended that the EPA include additional situations where the local transmission and 

distribution system operator has determined that there are conditions that could lead to a blackout 

for the local area. The comments from NRECA indicated that rural distribution lines are not 

configured in a typical grid pattern, but instead have distribution lines that can run well over 50 

miles from a substation and regularly extend 15 miles or longer. During periods of exceptionally 

heavy stress within the region or sub-region, electricity from regional power generators may not 

be available because of transmission constraints, according to the commenter. The commenter 

indicated that in many cases, there may be only one transmission line that feeds the rural 

distribution system, and no alternative means to transmit power into the local system. 

In response to those comments and in recognition of the unique challenges faced by the 

local transmission and distribution system operators in rural areas, the EPA is specifying in the 

final rule that existing emergency stationary RICE at area sources can be used for 50 hours per 

year as part of a financial arrangement with another entity if all of the following conditions are 

met: 

 The engine is dispatched by the local balancing authority or local transmission and 

distribution system operator.

 The dispatch is intended to mitigate local transmission and/or distribution limitations so 

as to avert potential voltage collapse or line overloads that could lead to the interruption 

of power supply in a local area or region.

 The dispatch follows reliability, emergency operation or similar protocols that follow 

specific NERC, regional, state, public utility commission or local standards or guidelines. 

 The power is provided only to the facility itself or to support the local transmission and 

distribution system.

 The owner or operator identifies and records the specific NERC, regional, state, public 

utility commission or local standards or guidelines that are being followed for dispatching 

the engine. The local balancing authority or local transmission and distribution system 

operator may keep these records on behalf of the engine owner or operator.

Engines operating in systems that do not meet the conditions described here will not be 

considered emergency engines if they operate for these purposes as part of a financial 

arrangement with another entity.

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Stationary emergency CI RICE with a site rating of more than 100 brake HP and a 

displacement of less than 30 liters per cylinder located at area sources that operate for this 

purpose are also required to use diesel fuel meeting the specifications of 40 CFR 80.510(b) 

beginning January 1, 2015, except that any existing diesel fuel purchased (or otherwise obtained) 

prior to January 1, 2015, may be used until depleted. Owners and operators of these engines are 

also required to report the dates and times the engines operated for this purpose annually to the 

EPA, beginning with operation during the 2015 calendar year. The report must also identify the 

entity that dispatched the engine and the situation that necessitated the dispatch of the engine. 

Further discussion of the rationale for the changes is available in the Response to Public 

Comments document in the docket.

4.2..2 Peak Shaving 

The EPA proposed a temporary provision for existing stationary emergency engines 

located at area sources to apply the 50 hours per year that is allowed under §63.6640(f) for nonemergency operation towards any non-emergency operation, including operation as part of a 

financial agreement with another entity. The peak shaving provision was proposed to expire in 

April 2017. The purpose of the proposed provision for peak shaving was to give sources an 

additional resource for maintaining reliability while facilities are coming into compliance with 

the NESHAP From Coal and Oil-Fired Electric Utility Steam Generating Units (77 FR 9304). 

Based on public comments received on the proposal, the EPA is not finalizing the proposed 

provision for peak shaving in this action. Commenters noted that the allowance was not 

necessary for maintaining electric reliability, and that alternative methods for meeting peak 

demand are readily available. In addition, commenters indicated that use for peak shaving does 

not fairly come under the definition of emergency use as it is designed to increase capacity in the 

system. Further discussion is available in the Response to Public Comments document in the 

docket.

 However, in consideration of the short time between this final rule and the May 3, 2013, 

or October 19, 2013 compliance dates for affected sources, this final rule permits the use of 

existing stationary emergency engines located at area sources for 50 hours per year through May 

3, 2014 for peak shaving or non-emergency demand response to generate income for a facility, 

or to otherwise supply power as part of a financial arrangement with another entity if the engines 

are operated as part of a peak shaving (load management) program with the local distribution 

system operator and the power is provided only to the facility itself or to support the local 

distribution system. Owners and operators of these engines, which have heretofore not been 

regulated, may have taken actions based on the June 7, 2012, proposal that would now leave 

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Deleted: 1

Deleted: 3

Deleted: and other Non-emergency Use 

as Part of a Financial Arrangement. 

Deleted: In addition to the changes the 

EPA is finalizproposing related to 

emergency demand response operation, 

the EPA is also including a further 

provision for owners and operators of 

existing stationary emergency RICE 

located at area sources. Paragraph 

§63.6640(f) currently allows owners and 

operators of emergency stationary RICE 

to operate their engine for 50 hours per 

year in non-emergency situations. As 

currently written, the 50 hours per year for 

non-emergency situations cannot be used 

for peak shaving or to generate income for 

a facility to supply power to an electric 

grid or otherwise supply power as part of 

a financial arrangement with another 

entity; except that owners and operators of 

certain emergency engines may operate 

the engine for a maximum of 15 hours per 

year as part of an emergency demand 

response program. As discussed, the 15 

hours per year allowance for emergency 

engines to participate in emergency 

demand response programs is being 

increased to 100 hours per year, but will 

also include hours spent towards 

maintaining and conducting readiness 

testing of the emergency engines. 

However, additionally, the EPA is also 

allowproposing that stationary emergency 

engines located at area sources be 

permitted to apply the 50 hours per year 

that is currently allowed under 

§63.6640(f) for non-emergency operation 

towards any non-emergency operation, 

including operation as part of a financial 

agreement with another entity. The peak ... [19]

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them in danger of being in noncompliance with the applicable requirements for the engine in the 

RICE NESHAP.

4.2.3. Final Amendment - Stationary Agricultural RICE in San Joaquin Valley 

In the 2010 amendments to the RICE NESHAP, the EPA required existing nonemergency CI engines above 300 HP to meet a standard of either 70 percent reduction of CO 

emissions or 49 ppmvd CO, for engines between 300 and 500 HP, or 23 ppmvd CO for engines 

above 500 HP. The requirements also included testing and monitoring provisions. As with all 

requirements for existing engines in that rule, owners and operators were required to meet the 

requirements within 3 years of the effective date of the regulations (May 3, 2013). 

Since the finalization of the 2010 rule for existing stationary CI engines, stakeholders 

from the agricultural industry in the San Joaquin Valley area of California have expressed 

concern regarding the effect of certain of these requirements on engines in the San Joaquin 

Valley. The San Joaquin Valley Air Pollution Control District (APCD) has indicated that there 

are 17 stationary CI engines at area sources in San Joaquin Valley certified to the Tier 3 

standards in 40 CFR part 89 that were installed between January 1 and June 12, 2006. Under the 

NESHAP, stationary CI engines at area sources are existing if construction of the engine 

commenced prior to June 12, 2006. These 17 Tier 3 engines in the San Joaquin Valley, which 

were built to meet stringent emission standards, would not be able to comply with the applicable 

RICE NESHAP emission standards for existing engines without further testing and monitoring, 

and possible retrofit with further controls, due to differences in the emission standards and 

testing protocols in the RICE NESHAP versus the Tier 3 standards in 40 CFR part 89. However, 

an identical engine certified to the Tier 3 standards (or Tier 2 standards for engines above 560 

kilowatts (kW)) in 40 CFR part 89 that was installed after June 12, 2006, would not have to be 

retrofit in order to comply with the NESHAP. Stationary CI engines installed after June 12, 

2006, at area sources of HAP are required to comply with the NSPS for stationary CI engines, 

which requires engines to be certified to the standards in 40 CFR parts 89, 94, 1039, and 1042, as 

applicable. Thus, a 2006 model year stationary CI engine installed after June 12, 2006, that is 

certified to the applicable standards would meet the requirements of the NESHAP without 

further controls or testing. While the EPA does not know if other certified Tier 3 engines besides 

these 17 engines in the San Joaquin Valley were installed prior to June 12, 2006, EPA believes 

the same rationale should apply to any such engine. 

The EPA believes that the Tier 3 standards (Tier 2 for engines above 560 kW) are 

technologically stringent regulations and believes it is unnecessary to require further regulation 

Deleted: ¶

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Deleted: d

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4-10 

of engines meeting these standards. In order to address this concern, the EPA is finalizing 

changes to amend the requirements for any certified Tier 3 (Tier 2 for engines above 560 kW) 

stationary CI engine located at an area source and installed before June 12, 2006. The EPA is 

finalizing amendments to specify that any existing certified Tier 3 (Tier 2 for engines above 560 

kW) CI engine that was installed before June 12, 2006, is in compliance with the NESHAP. This 

amendment would include any existing stationary Tier 3 (Tier 2 for engines above 560 kW) 

certified CI engine located at an area source of HAP emissions. 

 Another concern brought to the EPA’s attention by the San Joaquin Valley agricultural 

industry is that due to state and local requirements in the San Joaquin Valley, many of the Tier 1 

and Tier 2 stationary CI engines that are regulated as existing sources under the NESHAP must 

be replaced in the next few years, only a short time after the emission standards for existing 

engines must be met. Specifically, the San Joaquin Valley APCD rule for internal combustion 

engines (Rule 4702) requires Tier 1 and Tier 2 certified engines to meet Tier 4 standards by 

January 1, 2015, or 12 years after the installation date, but no later than June 1, 2018. The 

concern is that owners and operators of these engines would have to install aftertreatment by 

2013 to meet the emission standards of the RICE NESHAP and then only a few years later be 

required to replace their engines per San Joaquin Valley APCD Rule 4702. The San Joaquin 

Valley APCD has identified 49 Tier 1 engines and 360 Tier 2 engines that are scheduled to be 

replaced under the local rule. The EPA has not identified any engines outside the San Joaquin 

Valley APCD area that are in the same or similar situation (i.e., required to be replaced shortly 

after the compliance date for existing engines), but the EPA does not preclude the possibility that 

there are such engines in other areas, and requests comment and information on other areas that 

may have similar concerns. 

 The EPA does not think it is appropriate to require emission controls on a stationary CI 

engine that is going to be retired only a short time after the rule goes into effect. Stationary CI 

engines would have to comply with this rule by May 3, 2013, and owners of engines above 300 

HP are expected to have to install aftertreatment on their engines in order to meet the emission 

standards. The EPA estimates that the one-time cost to equip a 500 HP stationary CI engine with 

the controls necessary to meet the emission standards under this rule is close to $14,000 and 

more than $3,000 on a yearly basis, not accounting for additional costs associated with 

monitoring, testing, recordkeeping and reporting. These engines (equipped with aftertreatment) 

could end up being in operation for less than 2 years or at most only 5 years before having to be 

replaced with a certified Tier 4 engine, as required by San Joaquin Valley District Rule 4702. It 

Deleted: propos

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4-11 

would not be reasonable to require the engine owner to invest in costly controls and monitoring 

equipment for an engine that will be replaced shortly after the installation of the controls. 

Consequently, the EPA is finalizing amendments to existing stationary CI engines located 

at area sources of HAP emissions to address this concern. The EPA is finalizing to amend the 

requirements for existing stationary Tier 1 and Tier 2 certified CI engines located at area sources 

that are greater than 300 HP that are subject to a state or local rule that requires the engine to be 

replaced. The EPA is allowing these engines to meet management practices for a period of 2 

years starting with the applicable May 3, 2013, compliance date until January 1, 2015, or 12 

years after installation date (whichever is later), but not later than June 1, 2018. This change 

would provide owners enough time to replace their engines without mandating a possibly cost 

prohibitive requirement to change all of the engines in a short amount of time, while still 

requiring that replacement of the engine or a retrofit of the engine occur relatively quickly after 

the owner would have to comply with the NESHAP. The EPA is requiring that these engines be 

subject to management practices until January 1, 2015, or 12 years after installation date 

(whichever is later), but not later than June 1, 2018, after which time the CO emission standards 

discussed above (and that are in Table 2d of the rule) apply. The management practices include 

requirements for when to inspect and replace the engine oil and filter, air cleaner, hoses and 

belts. The complete details of which management practices are required are shown in Table 2d of 

the rule. Owners and operators of these existing stationary CI engines located at area sources of 

HAP emissions that intend to meet management practices rather than the emission limits prior to 

May 3, 2015, must submit a notification by March 3, 2013, stating that they intend to use this 

provision and identifying the state or local regulation that the engine is subject to. 

4.2.4 Final Amendments – for Remote Areas of Alaska

The EPA proposed to expand the definition of remote areas of Alaska to extend 

beyond areas that are not accessible by the FAHS. Specifically, the EPA proposed that areas of 

Alaska that are accessible by the FAHS and that met all of the following criteria would also be 

considered remote and subject to management practices under the rule: (1) the stationary CI 

engine is located in an area not connected to the Alaska Railbelt Grid; (2) at least 10 percent of 

the power generated by the engine per year is used for residential purposes; and (3) the 

generating capacity of the area source is less than 12 MW, or the engine is used exclusively for 

backup power for renewable energy and is used less than 500 hours per year on a 10-year rolling 

average. 

Deleted: propos

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Deleted: proposing to

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Deleted: until

Deleted: ,

Deleted: 

Deleted: 1.5

Deleted: Proposed

Deleted: 4.2.1.5.1 Background for 

FinalProposed Amendments¶

The RICE NESHAP currently specifies 

less stringent requirements for existing 

non-emergency CI engines at area sources 

located in remote areas of Alaska. Remote 

areas are defined as those not accessible 

by the FAHS. The FAHS includes areas 

with year-round ferry service that are not 

on the contiguous road system. Under the 

current regulation, stationary nonemergency CI engines at area sources in 

areas of Alaska that are not accessible by 

the FAHS are subject to management 

practices as opposed to numerical 

emission standards. ¶

Following the publication of the final rule 

in 2010, the EPA received requests to 

expand the definition of remote areas of 

Alaska. Stakeholders asserted that 

facilities in areas that are accessible by the 

FAHS but are not connected to the Alaska 

Railbelt grid face the same challenges as 

those in areas not accessible by the FAHS. 

The Alaska Railbelt Grid refers to the 

service areas of the six regulated public 

utilities that extend from Fairbanks to 

Anchorage and the Kenai Peninsula. 

These utilities are the Golden Valley 

Electric Association, Chugach Electric ... [20]

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expanding the current definition of remote 

areas of Alaska to extend beyond areas ... [21]

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After considering the public comments received on the proposed criteria, the EPA is 

finalizing the first two criteria as proposed, but finalizing a slightly different third criterion. In 

this final rule, existing CI engines at area sources of HAP are considered remote if they meet the 

first and second criteria above and they are either at a source with a generating capacity less than 

12 MW, or used exclusively for backup power for renewable energy. Based on public comments 

received on the proposal, the EPA is not finalizing the limitation that the engine be used less than

500 hours per year on a 10-year rolling average. Commenters indicated that basing the 

applicability on the previous 10 years of operation would ignore recent investments in renewable 

energy that have significantly decreased engine hours of operation in recent years. The EPA is 

also defining “backup power for renewable energy” in this final rule as engines that provide 

backup power to a facility that generates electricity from renewable energy resources, as that 

term is defined in Alaska Statute 42.45.045(l)(5). The rationale for these changes can be found in 

the Response to Public Comments document available in the docket. 

4.2.5. Offshore Vessels

The RICE NESHAP does not on its face apply to mobile sources, including marine 

vessels. However, the regulations applicable to sources on the OCS, codified at 40 CFR part 55, 

specify that vessels are OCS sources when they are (1) permanently or temporarily attached to 

the seabed and erected thereon and used for the purpose of exploring, developing or producing 

resources there from, within the meaning of section 4(a)(1) of the OCS Lands Act (43 U.S.C. 

§1331, et seq.); or (2) physically attached to an OCS facility, in which case only the stationary 

sources aspects of the vessels will be regulated. 40 CFR 55.2. The OCS regulations provide that 

NESHAP requirements apply to a vessel that is an OCS source where the provisions are 

“rationally related to the attainment and maintenance of the federal or state ambient air quality 

standards or the requirements of part C of title I of the Act.” 40 CFR 55.13(e).

The EPA received comments during the public comment period for the June 7, 2012, 

proposal recommending that the RICE NESHAP be amended such that for any existing nonemergency CI RICE above 300 HP on offshore vessels on the OCS that become subject to the 

RICE NESHAP as a result of the operation of the OCS regulations (40 CFR part 55), such 

engines may meet the NESHAP through management practices rather than numeric emission 

limits. This amendment was not contained or contemplated in the June 7, 2012, proposal. 

However, the comments indicated several significant issues related to application of the 

NESHAP to regulation of existing marine vessel engines located in the OCS as a result of the 

OCS regulations; in particular, whether the numerical standards applicable to other CI engines 

located at area sources (marine vessels located in the OCS are generally located at area sources) 

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are technologically feasible for existing marine engines located in the OCS. Some commenters 

noted specific technological issues relevant to engines on marine vessels in the OCS. The 

commenters indicated that emission controls for existing CI RICE to meet the NESHAP may be 

technically infeasible due to weight and space constraints, catalyst fouling from the low-load 

engine operation required by the U.S. Coast Guard, safety concerns regarding engine 

backpressure and lack of catalyst vendor experience with retrofitting. Commenters suggested 

that, to the extent marine vessel engines become subject to the NESHAP as a result of the OCS 

regulations, these engines should be subject to GACT requirements that the commenters believe 

are more appropriate for these types of engines. The commenters indicated that management 

practices similar to those currently required in the rule for existing non-emergency stationary CI 

RICE smaller than 300 HP are more appropriate as GACT for existing non-emergency stationary 

CI RICE above 300 HP on vessels operating on the OCS. 

Based on these comments, the EPA published a reopening of the comment period to take 

further comment on whether the RICE NESHAP should be revised to require management 

practices for these vessels. Based on the comments received during the two comment periods, the 

EPA agrees with the commenters that management practices are more reasonable as GACT for 

existing non-emergency stationary CI RICE larger than 300 HP on vessels operating on the OCS 

and is finalizing management practices for these engines. The EPA did not receive any public 

comments indicating that HAP emission controls were generally available and had been 

demonstrated for the large engines on the vessels. The final management practices include 

changing the oil every 1,000 hours of operation or annually, whichever comes first; inspecting 

and cleaning air filters every 750 hours of operation or annually, whichever comes first, and 

replacing as necessary; inspecting fuel filters and belts, if installed, every 750 hours of operation 

or annually, whichever comes first, and replacing as necessary; and inspecting all flexible hoses 

every 1,000 hours of operation or annually, whichever comes first, and replacing as necessary. 

Facilities have the option of using an oil analysis program to extend the oil change requirement. 

Additional discussion of the rationale for these changes can be found in the Response to Public 

Comments document available in the docket. 

 4.2..6 Compliance Date 

 The EPA has received some questions regarding whether the compliance dates for 

engines impacted by the 2010 amendments and this reconsideration will be extended. Affected 

sources that may be impacted by this action have expressed concern about having sufficient time 

to comply with the rule by the compliance date, which is May 3, 2013, for existing stationary CI 

RICE and October 19, 2013, for existing stationary SI RICE. Sources impacted by this 

Deleted: ¶

Deleted: 1

Deleted: 6

Deleted: proposed
4-14 

reconsideration are particularly concerned with compliance in the event that the EPA does not 

finalize changes that are substantially similar to the changes being proposed in this action. The 

EPA does not intend to extend the May 3, 2013, and October 19, 2013, compliance dates, 

because there are many engines that must meet those compliance dates that are not impacted by 

this reconsideration. However, we note that sources that are affected by the reconsideration and 

that may need additional time to install controls to comply with the applicable requirements can 

request up to an additional year to install controls, as specified in 40 CFR 63.6(i). 

4.3 What Are the Pollutants Regulated by this Final Reconsideration Rule? 

The final reconsideration rule regulates emissions of HAP. Available emissions data 

show that several HAP, which are formed during the combustion process or which are contained 

within the fuel burned, are emitted from stationary engines. The HAP which have been measured 

in emission tests conducted on diesel fired RICE include: 1,3-butadiene, acetaldehyde, acrolein, 

benzene, ethylbenzene, formaldehyde, n-hexane, naphthalene, polycyclic aromatic hydrocarbons, 

polycyclic organic matter, styrene, toluene, and xylene. Metallic HAP from diesel fired 

stationary RICE that have been measured are: cadmium, chromium, lead, manganese, mercury, 

nickel, and selenium. 

EPA described the health effects of these HAP and other HAP emitted from the operation 

of stationary RICE in the preamble to 40 CFR part 63, subpart ZZZZ, published on June 15, 

2004 (69 FR 33474). These HAP emissions are known to cause, or contribute significantly to air 

pollution, which may reasonably be anticipated to endanger public health or welfare. More 

details on the health effects of these HAP and other HAP emitted from operation of stationary 

RICE can be found in Section 7 of this RIA. 

The final amendments will continue to limit emissions of HAP through emissions 

standards for CO for existing stationary CI RICE in similar quantities as estimated for the 2010 

final rule. Carbon monoxide has been shown to be an appropriate surrogate for HAP emissions 

from CI engines. For the NESHAP promulgated in 2004, EPA found that there is a relationship 

between CO emissions reductions and HAP emissions reductions from CI stationary engines. 

Therefore, because testing for CO emissions has many advantages over testing for HAP 

emissions, CO emissions were chosen as a surrogate for HAP emissions reductions for CI 

stationary engines. 

For the standards included in this action, EPA believes that previous decisions regarding 

the appropriateness of using CO in concentration (ppm) levels as has been done for stationary 

Deleted: ¶

Deleted: 2.2

Deleted: Proposed

Deleted: proposed

Deleted: proposed
4-15 

sources before as surrogates for HAP are still valid.2

 Therefore, the EPA is retaining the emission 

standards for CO for CI engines in order to regulate HAP emissions. 

In addition to reducing HAP and CO, the final amendments will result in the reduction of 

PM emissions from existing diesel engines. The aftertreatment technologies expected to be used 

to reduce HAP and CO emissions also reduce emissions of PM from diesel engines. Also, the 

final rule requires the use of ULSD for diesel-fueled stationary non-emergency CI engines 

greater than 300 hp with a displacement of less than 30 liters per cylinder. This will result in 

lower emissions of sulfur oxides (SOx) and sulfate particulate from these engines by reducing the 

sulfur content in the fuel. 

4.4 Cost Impacts 

4.4.1 Introduction 

The cost impacts associated with this rule consist of different types of costs, which 

include the annual and capital costs of controls, costs associated with keeping records of 

information necessary to demonstrate compliance, costs associated with reporting requirements 

under the General Provisions of 40 CFR part 63, subpart A, costs of purchasing and operating 

equipment associated with continuous parametric monitoring, and the cost of conducting 

performance testing to demonstrate compliance with the emission standards. The capital and 

annual costs presented in this section are calculated based on the control cost methodology 

presented in the EPA (2002) Air Pollution Control Cost Manual prepared by the U.S. 

Environmental Protection Agency.3

 This methodology sets out a procedure by which capital and 

annualized costs are defined and estimated, and this procedure is often used to estimate the costs 

of rulemakings such as this one. The capital costs presented in this section are annualized using a 

7% interest rate, a rate that is consistent with the guidance provided in the Office of Management 

and Budget’s (OMB’s) (2003) Circular A-4.4

 The following sections describe how the various 

cost elements were estimated. Note that the methodologies and procedures presented in the 

following sections are the same as those used for the 2010 final rule. 

4.4.1.1 Control Costs 

For engines that will need to add control technology to meet the emission standards, the 

following equations were used to estimate capital and annual control costs as shown in Table 4-

1: 

 

2

In contrast, mobile source emission standards for diesel engines (both nonroad and on-highway) are promulgated 

on a mass basis rather than concentration. 3

 Available on the Internet at http://epa.gov/ttn/catc/products.html#cccinfo. 4

 Available on the Internet at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf. 

Deleted: proposed 

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4-16 

Table 4-1: CI RICE Control Technologies and Costs 

Technology Capital Cost ($2008) Annual Cost ($2008) 

Diesel oxidation catalyst (DOC) $27.4 x hp − $939 $4.99 x hp + $480 

Open crankcase ventilation (OCV) $0.26 x hp + $997 $0.065 x hp + $254 

The control costs for DOC were calculated using cost data obtained from a California Air 

Resources Board (CARB) study.5

 The study provided cost ranges for diesel engines ranging from 

40 hp to 1400 hp. The average cost from the range was selected and was adjusted to 2008 

dollars. The capital and annual cost were calculated using maintenance data from the CARB 

study and cost assumptions from the EPA Air Pollution Control Cost Manual. The control costs 

for the OCV system were calculated using 2008 cost data obtained from a diesel engine 

equipment vendor. An equipment life of 10 years was used to calculate the capital recovery 

factor (CRF) for developing the annual cost for each of the control devices. A linear regression 

equation was developed for the capital cost of the DOC and OCV using the capital cost data and 

the engine size in hp. This approach was used to develop a linear regression equation for annual 

cost. 

4.4.1.2 Recordkeeping 

Minimal recordkeeping costs were attributed to the requirement of following the 

manufacturer’s emission-related operation and maintenance (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 and a small additional burden is expected. 

The EPA expects that at most 1 hour will be necessary per year in order to keep track of 

maintenance. Owners and operator of stationary emergency engines are required to keep track of 

the hours of operation and 1 hour per year was estimated to cover that recordkeeping activity. 

For emergency engines 1 hour is expected to cover tracking hours of operation plus recording 

maintenance activities. No cost is attributed to purchasing and installing an hour-meter since the 

majority of stationary engines already come equipped with such equipment. Labor costs 

associated with recording the hours of operation of emergency engines are based on a technical 

labor rate of $68 per hour which was obtained from the Department of Labor Statistics web site.6

The final total wage rate was based on the 2005 compensation rates for professional staff and 

adjusted by an overhead and profit rate of 167 percent. The year 2005 was used for consistency 

 

5

Diesel PM Control Technologies, Appendix IX, California Air Resource Board, October 2000. 

http://www.arb.ca.gov/diesel/documents/rrpapp9.pdf 6

U.S. Department of Labor, Employer Costs for Employee Compensation, 

http://www.bls.gov/news.release/ecec.toc.htm 

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in order to have the same basis for all costs. All costs were later converted to 2008 dollars for 

purposes of presenting costs associated with the rule in present day terms. 

4.4.1.3 Reporting 

Most engines affected by this rule will be subject to reporting requirements such as 

reading instructions, training personnel, submitting an initial notification, submitting a 

notification of performance test(s), and submitting a compliance report. However, owners and 

operators of engines less than 100 HP, existing stationary emergency engines, and existing 

stationary engines less than 300 HP located at area sources are not subject to any specific 

reporting requirements. For stationary non-emergency limited use CI engines that operate less 

than 100 hours per year, EPA is finalizing less burdensome reporting requirements by requiring 

these engines to submit compliance reports on an annual basis, as opposed to semiannually as is 

required for other engines subject to numerical emission limitations. The reporting requirements 

are based on $68 per hour for technical labor to comply with the reporting requirements. It is 

estimated that a total of 14 hours will be needed, and 13 hours for limited use engines. 

4.4.1.4 Monitoring 

The cost of monitoring includes the purchase of a continuous parametric monitoring 

system (CPMS). Non-emergency engines greater than 500 hp that have add-on controls are 

required to use a CPMS to monitor the catalyst inlet temperature and pressure drop across the 

catalyst to ensure those parameters do not exceed the operating limitations. The cost of 

purchasing and operating a CPMS was obtained from vendor quotes received for previous 

rulemaking and adjusted to 2008 dollars.7

 The capital cost of a CPMS for a large engine facility 

is $531. It is estimated that 30 hours per year is necessary to operate and maintain the CPMS and 

that 6 hours per year (or 0.5 hours per month) is needed to record information from the CPMS. It 

is assumed that all engines subject to continuous monitoring would be located at large engine 

facilities. 

4.4.1.5 Performance Testing 

Initial performance testing is required for non-emergency engines greater than 100 hp at 

major sources and non-emergency engines greater than 300 hp located at area sources. The cost 

of conducting a performance test on a CI engine is based on cost information gathered for 

previous rulemakings.8

 The performance testing cost is based the use of a portable analyzer and 

 

7

Part A of the Supporting Statement for Standard Form 83 Stationary Reciprocating Internal Combustion Engines, 

November 17, 2003. 8

Memorandum from Bradley Nelson, Alpha-Gamma Technologies, Inc. to Sims Roy, 

EPA/OAQPS/ESD/Combustion Group, Portable Emissions Analyzer Cost Information, August 31, 2005. 
4-18 

was estimated to cost $1,000 per day of testing. This daily performance test cost was adjusted to 

2008 dollars and was estimated to be $1,165. Because the regulation requires three-1 hour runs, 

EPA assumed that two engines could be tested at each facility in one day. Therefore, the 

estimated impacts performance testing cost will be assumed to be $583 per engine (or half of the 

$1,165 daily cost) using a portable analyzer. 

4.4.1.6 Work Practices 

The costs for performing work practices for CI engines less than 100 hp located at a 

major source was assumed to be negligible and were not included in these impact calculations. 

The work practices are based on engine maintenance procedures that the owner/operators 

perform regardless of the regulation. These work practices include: 

 Changing the oil and filter; 

 Inspecting the air cleaner and replacing as necessary; and 

 Inspecting all hoses and belts, and replacing as necessary. 

EPA believes that these work practices will limit HAP emissions from these engines, 

because these work practices ensure that the engine is operating efficiently. Owner/operators of 

these engines regularly perform these work practices as part of the preventive maintenance 

schedule for the engine. Therefore, EPA believes that it is appropriate to not include these work 

practice costs in the impacts determination. 

4.4.1.7 Management Practices 

The costs for performing management practices for non-emergency CI engines less than 

or equal to 300 hp located at area sources and all emergency engines located at area sources was 

assumed to be negligible and were not included in these impact calculations. The management 

practices are based on engine maintenance procedures that the owner/operators perform 

regardless of the regulation. These management practices include: 

 Changing the oil and filter; 

 Inspecting the air cleaner, and replacing as necessary; and 

 Inspecting all hoses and belts, and replacing as necessary. 

EPA believes that these work practices will limit HAP emissions from these engines, 

because these work practices ensure that the engine is operating efficiently. Owner/operators of 

these engines regularly perform these work practices as part of the preventive maintenance 
4-19 

schedule for the engine. Therefore, EPA believes that it is appropriate to not include these work 

practice costs in the impacts determination. 

4.4.2 Major Sources 

The cost impacts for stationary RICE vary depending on the engine type and size. The 

following sections describe the specific costs that apply to each subcategory of CI engines 

located at major sources.

4.4.2.1 All CI Engines hp < 100 

The costs associated with CI engines less than 100 hp include minimal requirements. 

Owners and operators of engines less than 100 hp are required to follow the manufacturer’s 

emission-related O&M requirements or must develop their own maintenance plan to follow. 

Emergency engines must record the hours of operation, which is estimated at one hour per year 

at $72 per hour. 

4.4.2.2 Non-emergency CI Engines 100 ≤ hp ≤ 300 hp 

The costs associated with nonemergency CI engines greater than or equal to 100 hp and 

less than or equal to 300 hp include the cost of an initial test, recordkeeping, and reporting. In 

addition, EPA assumes that some of these engines will be required to install a control device to 

meet the emissions standard. To estimate the number of CI engines that would be required to 

install control technology, EPA compared the emission rate of the test that was used to determine 

the MACT floor with the CI nonroad emission factors.9

 EPA found that only the emission factors 

for Tier 0 CI engines were greater than the 1.2 g/hp-hr value that was used to set the MACT 

floor. Therefore, it was assumed that Tier 1 engines and greater would be able to meet the final 

emission standard. The model year for Tier 1 engines begins in 1997 for 100 to 175 CI engines, 

and 1996 for 175 to 300 hp CI engines. Using the model year data in the population 

memorandum, EPA estimated that 35 percent of the existing CI engines greater than or equal to 

100 hp and less than or equal to 300 hp are Tier 0 engines and would need to install control 

technology to meet the emission standard. The cost estimates for this subcategory of engines do 

not account for possible fuel price increases that may result from using ultra-low sulfur diesel 

(ULSD). EPA estimated the cost of lubricity additives to ULSD would increase the cost of the 

fuel by 0.2 cents per gallon,10 which EPA believes is negligible. In addition, there are no 

 

9

Exhaust and Crankcase Emission Factors for Nonroad Engine Modeling--Compression-Ignition, U.S. EPA, Office 

of Transportation and Air Quality, Assessment and Standards Division, EPA420-P-04-009, Revised April 2004. 

http://www.epa.gov/oms/models/nonrdmdl/nonrdmdl2004/420p04009.pdf 10Memorandum from Melanie Taylor and Brad Nelson, AGTI to Sims Roy, EPA OAQPS ESD Combustion Group, 

Lubricity of Ultra Low Sulfur Diesel Fuel, June 2, 2004. 

Deleted: 4.3.2

Deleted: 4.3.2.1
4-20 

additional maintenance requirements for owner/operators using ULSD in existing diesel engines. 

Many owner/operators have found that time between oil changes can be extended for engines 

using ULSD fuel, which would decrease the overall cost of switching to ULSD fuel. Therefore, 

EPA believes that it is appropriate to not include any costs for switching to ULSD in the impacts 

for this NESHAP. 

4.4.2.3 3 Nonemergency CI Engines > 300 hp 

The costs associated with non-emergency CI engines above 300 hp include the cost of 

installing and operating an oxidation catalyst for reducing HAP, as well as the cost of installing 

an open crankcase ventilation system. Non-emergency CI engines greater than 500 hp are also 

subject to continuous monitoring requirements. In addition, owners and operators must conduct 

an initial performance test to demonstrate compliance with the emission limitation. Owners and 

operators of engines above 500 hp must conduct subsequent performance testing every 8,760 

hours or 3 years, whichever comes first to demonstrate compliance. The cost estimates for this 

subcategory of engines do not account for possible fuel price increases that may result from 

using ULSD. EPA estimated the cost of lubricity additives to ULSD would increase the cost of 

the fuel by 0.2 cents per gallon,11 which EPA believes is negligible. In addition, there are no 

additional maintenance requirements for owner/operators using ULSD in existing diesel engines. 

Many owner/operators have found that time between oil changes can be extended for engines 

using ULSD fuel, which would decrease the overall cost of switching to ULSD fuel. Therefore, 

EPA believes that it is appropriate to not include any costs for switching to ULSD in the impacts 

for this NESHAP. 

4.4.2.4 Emergency CI Engines 

The costs associated with emergency CI engines greater than 300 hp and less than or 

equal to 500 hp (emergency CI engines above 500 hp were subject to an earlier rule and are not 

subject to further regulation in this rule) include minimal recordkeeping requirements. The 

owners and operators must follow the manufacturer’s emission-related operating and 

maintenance (O&M) requirements or must develop their own maintenance plan to follow and 

must also keep records of the hours of operation. It is estimated that one hour per year at $68 per 

hour would be sufficient to record the hours of operation. No costs were included in the impacts 

for following the manufacturer’s emission-related O&M plan, because it is expected that 

owner/operators will follow this plan regardless of the regulation. 

 

11Memorandum from Melanie Taylor and Brad Nelson, AGTI to Sims Roy, EPA OAQPS ESD Combustion Group, 

Lubricity of Ultra Low Sulfur Diesel Fuel, June 2, 2004. 

Deleted: 4.3.2.
4-21 

4.4.3 Area Sources 

4.4.3.1 All Emergency CI Engines 

The costs associated with emergency CI engines include recordkeeping requirements for 

tracking the hours of operation, but these engines are not subject to any performance testing. The 

owners and operators must follow the manufacturer’s emission-related O&M requirements or 

must develop their own maintenance plan to follow. It is estimated that one hour per year at $68 

per hour would be sufficient to record the hours of operation. Emergency CI engines at areas 

sources will be subject to management practices, rather numerical emission limits. The 

management practices do not require aftertreatment controls. Therefore, no control costs have 

been estimated for these engines. These engines will be subject to management practices which 

are not included in the costs, because it is assumed that these management practices are 

performed regardless of the regulation. 

4.4.3.2 Non-emergency CI Engines ≤ 300 hp 

The costs associated with nonemergency CI engines less than or equal to 300 hp are 

minimal and only include following the manufacturer’s emission-related O&M requirements or 

the owner or operator’s own maintenance plan. These engines are not subject to any numerical 

emission limitations, therefore no control costs apply and no performance testing is required. 

These engines will be subject to management practices which are not included in the costs, 

because it is assumed that these management practices are done regardless of the regulation. 

4.4.3.3 Non-emergency CI Engines > 300 hp 

The costs associated with nonemergency CI engines above 300 hp include the cost of 

installing and operating an oxidation catalyst for reducing HAP, as well as the cost of installing 

an open crankcase ventilation system. Nonemergency CI engines greater than 500 hp are also 

subject to continuous monitoring requirements. In addition, owners and operators must conduct 

an initial performance test to demonstrate compliance with the emission limitation and engines 

above 500 hp must conduct subsequent performance testing every 8,760 hours or 3 years, 

whichever comes first. The cost estimates for this subcategory of engines do not account for 

possible fuel price increases that may result from using ULSD. The cost estimates for this 

subcategory of engines do not account for possible fuel price increases that may result from 

using ULSD. EPA estimated the cost of lubricity additives to ULSD would increase the cost of 

the fuel by 0.2 cents per gallon, which EPA believes is negligible. In addition, there are no 

additional maintenance requirements for owner/operators using ULSD in existing diesel engines. 

Many owner/operators have found that time between oil changes can be extended for engines 
4-22 

using ULSD fuel, which would decrease the overall cost of switching to ULSD fuel. Therefore, 

EPA believes that it is appropriate to not include any costs for switching to ULSD in the impacts 

for this NESHAP. 

A summary of the total costs associated with the rule by major source and area source 

categories is found in Table 4-2. A summary of the costs by NAICS codes is found in Table 4-3. 

Table 4-4 provides a summary of costs by engine size, and a presentation of the number of 

engines by engine size is in Table 4-5. All cost estimates are from “RICE NESHAP 

Reconsideration Amendment – Cost and Environmental Impacts RICE,” prepared by Tanya 

Parise, EC/R, Inc. for Melanie King, U.S. EPA, Office of Air Quality Planning and Standards. 

These costs, presented in 2008 dollars, can be updated to 2010 dollars by applying the ratio of 

the 2010 Marshall & Swift (M&S) annual cost index and the 2008 M&S annual cost index, 

which is 1,457.4/1,449.3 = 1.01. 
23 

Table 4-2. Summary of Major Source and Area Source Costs for the CI RICE NESHAPa 

Size 

Range 

(hp) 

Non-Emergency 

CI Capital 

Control Cost 

Non-Emergency 

CI Annual 

Control Cost Initial Test Recordkeeping Reporting 

Monitoring – 

Capital Cost 

Monitoring – 

Annual Cost 

Total Annual 

Costs 

Total Capital 

Costs 

Major Sources 

50–100 $0 $0 $0 $6,654,888 $0 $0 $0 $6,654,888 $0 

100–175 $24,057,778 $9,918,465 $14,150,269 $8,719,731 $5,973, 016 $0 $0 $38,761,480 $24,057,778 175–300 $35,917,270 $10,740,189 $10,730,759 $6,612,548 $4,529,595 $0 $0 $32,613,092 $35,917,270 300–500 $107,841,136 $26,722,727 $5,645,923 $3,479,152 $2,383,219 $0 $0 $38,231,021 $107,841,136 500–600 $13,126,952 $3,020,849 $500,530 $61,688 $211,280 $481,765 $2,220,755 $6,015,102 $13,608,716 600–750 $8,240,540 $1,824,295 $256,204 $31,576 $108,147 $246,599 $1,136,729 $3,356,951 $8,487,139 

>750 $26,903,091 $5,618,803 $565,163 $69,653 $238,563 $543,975 $2,507,521 $8,999,703 $27,447,066 

Total $216,086,768 $57,845,329 $31,848,848 $25,629,236 $13,443,820 $1,272,338 $5,865,005 $134,632,238 $217,359,106 

Area Sources 

50–100 $0 $0 $0 $9,183,746 $0 $0 $0 $9,183,746 $0 

100–175 $0 $0 $0 $12,033,196 5,231,824 $0 $0 $17,265,000 $0 175–300 $0 $0 $0 $9,125,316 $3,967,529 $0 $0 $13,092,845 $0 300–600 269, 176, 789 $64,764,947 $12,533,931 $7,180,954 $5,290,738 $4,021,343 $18,536,893 $108,307,463 $273,198,131 

600–750 67,576,980 $14,964,227 $2,101,015 $1,203,716 $886,866 $674,082 $9,321,806 $28,473,630, $68,251,062, 

>750 177,179,667 $37,004,585 $3,722,077 $2,132,457 $1,571,138 $1,194,178 $16,514,152 $60,944,409 $178,373,845 

Total 513,933,435 $116,729,759 $18,357,024 $40,859,384 $16,948, 096 $5,889,603 $44,372,851 $237,267,114 $519,823,039 

Grand Total 

Total $730,020,203 $174,575,088 $50,205,872 $66,480,620 $30,391,916 $7,161,941 $50,237,856 $371,899,352 $737,182,145 

a Costs are presented in 2008 dollars. 
24 

Table 4-3. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAPa 

NAICS 

Major Source Area Source Total (Major + Area) 

Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost 

Electric Power Generation (2211) 

$161,766,376 $90,982,105 $464,947,798 $202,463,116 $626,714,174 $293,445,222 

Hospitals (622110) $20,220,797 $11,372,763 $0 $0 $20,220,797 $11,372,763 Crude Petroleum & NG Production (211111) 

$2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314 

Natural Gas Liquid Producers (211112) 

$2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314 

National Security (92811) $20,220,797 $11,372,763 $51,660,866 $22,495,902 $71,881,663 $33,868,665 Hydro Power Units (335312) $0 $16,637 $0 $22,959 $0 $39,597 Irrigation Sets (335312) $10,294,073 $11,791,567 $34,145 $5,208,084 $10,328218 $16,999,651 Welders (333992) $108,260 $1,481,447 $0 $1,881,380 $108,260 $3,362,827 Total $217,359,106 $134,632,238 $519,823,039 $237,267,114 $737,182,145 $371,899,352 a Costs are presented in 2008 dollars. 
25 

Table 4-4. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Sizea 

NAICS 

Major Source Area Source Total (Major + Area) 

Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost 

Electric Power Generation (2211)

50–100 hp $0 $3,396,123 $0 $5,272,480 $0 $8,668,603 100–175 hp $13,406,919 $21,600,998 $0 $10,824,132 $13,406,919 $32,425,129 175–300 hp $23,012,914 $20,895,861 $0 $9,437,454 $23,012,914 $30,333,314 300–600 hp $96,907,266 $35,304,866 $245,239,035 $97,223,277 $342,146,301 $132,528,144 600–750 hp $6,789,032 $2,685,292 $61,419,814 $25,623,705 $68,208,846 $28,308,997 >750 hp $21,650,245 $7,098,966 $158,288,950 $54,082,069 $179,939,195 $61,181,035 

Total 2211 $161,766,376 $90,982,105 $464,947,798 $202,463,116 $626,717,174 $293,445,222 Hospitals (622110)

50–100 hp $0 $424,515 $0 $0 $0 $424,515 100–175 hp $1,675,865 $2,700,125 $0 $0 $1,675,865 $2,700,125 175–300 hp $2,876,614 $2,611,983 $0 $0 $2,876,614 $2,611,983 300–600 hp $12,113,408 $4,413,108 $0 $0 $12,113,408 $4,413,108 600–750 hp $848,629 $335,662 $0 $0 $848,629 $335,662 >750 hp $2,706,281 $887,371 $0 $0 $2,706,281 $887,371 

Total 622110 $20,220,797 $11,372,763 $0 $0 $20,220,797 $11,372,763 Crude Petroleum & NG Production (211111)

50–100 hp $0 $420,256 $0 $579,954 $0 $1,000,210 100–175 hp $2,026,868 $3,265,655 $0 $1,454,578 $2,026,868 $4,720,233 175–300 hp $3,592 $3,261 $0 $1,309 $3,592 $4,571 300–600 hp $151,812 $55,308 $341,498 $135,384 $493,310 $190,692 600–750 hp $0 $0 $0 0 $0 $0 >750 hp $192,129 $62,998 $1,248,617 $426,611 $1,440,746 $489,609 

Total 211111 $2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314 

(continued) 
26 

Table 4-4. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Sizea (continued) 

NAICS 

Major Source Area Source Total (Major + Area) 

Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost 

Natural Gas Liquid Producers (211112)

50–100 hp $0 $420,256 $0 $579,954 $0 $1,000,210 100–175 hp $2,026,868 $3,265,655 $0 $1,454,578 $2,026,868 $4,720,233 175–300 hp $3,592 $3,261 $0 $1,309 $3,592 $4,571 300–600 hp $151,812 $55,308 $341,498 $135,384 $493,310 $190,692 600–750 hp 0 0 0 0 $0 $0 >750 hp $192,129 $62,998 $1,248,617 $426,611 $1,440,746 $489,609 

Total 211112 $2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314 National Security (92811)

50–100 hp $0 $424,515 $0 $585,831 $0 $1,010,346 100–175 hp $1,675,865 $2,700,125 $0 $1,202,681 $1,675,865 $3,902,806 175–300 hp $2,876,614 $2,611,983 $0 $1,048,606 $2,876,614 $3,660,589 300–600 hp $12,113,408 $4,413,108 $27,248,782 $10,802,586 $39,362,190 $15,215,695 600–750 hp $848,629 $335,662 $6,824,424 $2,847,078 $7,673,053 $3,182,740 >750 hp $2,706,281 $887,371 $17,587,661 $6,009,119 $20,293,942 $6,896,489 

Total 92811 $20,220,797 $11,372,763 $51,660,866 $22,495,902 $71,881,663 $33,86,665 Hydro Power Units (335312)

50–100 hp $0 $16,637 $0 $22,959 $0 $39,597 100–175 hp $0 $0 $0 $0 $0 $0 175–300 hp $0 $0 $0 $0 $0 $0 300–600 hp $0 $0 $0 $0 $0 $0 600–750 hp $0 $0 $0 $0 $0 $0 >750 hp $0 $0 $0 $0 $0 $0 

Total 335312 $0 $16,637 $0 $22,959 $0 $39,597 

(continued) 
27 

Table 4-4. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Sizea (continued) 

NAICS 

Major Source Area Source Total (Major + Area) 

Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost 

Irrigation Sets (335312)

50–100 hp $0 $245,565 $0 $338,880 $0 $584,446 100–175 hp $3,137,134 $5,054,497 $0 $2,251,359 $3,137,134 $7,305,856 175–300 hp $7,143,945 $6,486,744 $0 $2,604,167 $7,143,945 $9,090,911 300–600 hp $12,145 $4,425 $27,320 $10,831 $39,465 $15,255 600–750 hp $849 $336 $6,825 $2,847 $7,674 $3,183 >750 hp $0 $0 $0 $0 $0 $0 

Total 335312 $10,294,073 $11,791,567 $34,145 $5,208,984 $10,328,218 $16,999,651 Welders (333992)

50–100 hp $0 $1,307,020 $0 $1,803,688 $0 $3,110,708 100–175 hp $108,260 $174,427 $0 $77,693 $108,260 $252,119 175–300 hp $0 $0 $0 $0 $0 $0 300–600 hp $0 $0 $0 $0 $0 $0 600–750 hp $0 $0 $0 $0 $0 $0 >750 hp $0 $0 $0 $0 $0 $0 

Total 333992 $108,260 $1,481,447 $0 $1,881,380 $108,260 $3,362,827 Grand Total Total $217,359,106 $134,632,238 $519,823,039 $237, 267,114 $737,182,145 $371,899,352 

a Costs are presented in 2008 dollars. 
28 

Table 4-5. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Number of Enginesa 

NAICS 

Number of Engines Total (Major + Area) 

Major Area Total Capital Cost Annual Cost 

Electric Power Generation (2211)

50–100 hp 47,324 79,859 127,183 $0 $8,668,603 100–175 hp 67,713 114,266 181,980 $13,406,919 $32,425,129 175–300 hp 59,039 99,627 158,666 $23,012,914 $30,333,314 300–600 hp 42,113 97,919 140,032 $342,146,301 $132,528,144 600–750 hp 1,760 16,455 18,215 $68,208,846 $28,308,997 >750 hp 3,828 28,746 32,574 $179,939,195 $61,181,035 

Total 2211 221,777 436,872 658,649 $626,717,174 $293,445,222 Hospitals (622110)

50–100 hp 5,916 0 5,916 $0 $424,515 

100–175 hp 8,464 0 8,464 $1,675,865 $2,700,125 175–300 hp 7,380 0 7,380 $2,876,614 $2,611,983 300–600 hp 5,264 0 5,264 $12,113,408 $4,413,108 600–750 hp 220 0 220 $848,629 $335,662 >750 hp 479 0 479 $2,706,281 $887,371 

Total 622110 27,722 0 27,722 $20,220,797 $11,372,763 Crude Petroleum & NG Production (211111)

50–100 hp 5,856 8,784 14,640 $0 $1,000,210 

100–175 hp 10,237 15,355 25,592 $2,026,868 $4,720,233 175–300 hp 9 14 23 $3,592 $4,571 300–600 hp 66 136 202 $493,310 $190,692 600–750 hp 0 0 0 $0 $0 >750 hp 34 227 261 $1,440,746 $489,609 

Total 211111 16,202 24,517 40,719 $3,964,516 $6,405,314 

(continued) 
29 

Table 4-5. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Number of Enginesa

(continued) 

NAICS 

Number of Engines Total (Major + Area) 

Major Area Total Capital Cost Annual Cost 

Natural Gas Liquid Producers (211112)

50–100 hp 5,856 8,784 14,640 $0 $1,000,210 100–175 hp 10,237 15,355 25,592 $2,026,868 $4,720,233 175–300 hp 9 14 23 $3,592 $4,571 300–600 hp 66 136 202 $493,310 $190,692 600–750 hp 0 0 0 $0 $0 >750 hp 34 227 261 $1,440,746 $489,609 

Total 211112 16,202 24,517 40,719 $3,964,516 $6,405,314 National Security (92811)

50–100 hp 5,916 8,873 14,789 $0 $1,010,346 

100–175 hp 8,464 12,696 21,160 $1,675,865 $3,902,806 175–300 hp 7,380 11,070 18,450 $2,876,614 $3,660,589 300–600 hp 5,264 10,880 16,144 $39,362,190 $15,215,695 600–750 hp 220 1,828 2,048 $7,673,053 $3,182,740 >750 hp 479 3,194 3,672 $20,293,942 $6,896,489 

Total 92811 27,722 48,541 76,263 $71,881,663 $33,868,665 Hydro Power Units (335312)

50–100 hp 232 348 580 $0 $39,597 

100–175 hp 0 0 0 $0 $0 175–300 hp 0 0 0 $0 $0 300–600 hp 0 0 0 $0 $0 600–750 hp 0 0 0 $0 $0 >750 hp 0 0 0 $0 $0 

Total 335312 232 348 580 $0 $39,597 

(continued) 
30 

Table 4-5. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP – by Number of Enginesa

(continued) 

NAICS 

Number of Engines Total (Major + Area) 

Major Area Total Capital Cost Annual Cost 

Irrigation Sets (335312)

50–100 hp 3,422 5,133 8,555 $0 $584,446 100–175 hp 15,845 23,767 39,611 $3,137,134 $7,305,856 175–300 hp 18,327 27,491 45,819 $7,143,945 $9,090,911 300–600 hp 5 11 16 $39,465 $15,255 600–750 hp 0 2 2 $7,674 $3,183 >750 hp 0 0 0 $0 $0 

Total 335312 37,599 56,403 94,003 $10,328,218 $16,999,651 Welders (333992)

50–100 hp 18,213 27,319 45,532 $0 $3,110,708 

100–175 hp 547 820 1,367 $108,260 $252,119 175–300 hp 0 0 0 $0 $0 300–600 hp 0 0 0 $0 $0 600–750 hp 0 0 0 $0 $0 >750 hp 0 0 0 $0 $0 

Total 333992 18,760 28,140 46,899 $108,260 $3,362,827 Grand Total Total 366,217 619,337 957,832 $737,182,145 $371,899,352 a Costs are presented in 2008 dollars. 
31 

4.5 Baseline Emissions and Emission Reductions 

Baseline emissions are estimated for 2013 using the emissions dataset generated for the 

final CI RICE rule in 2010. The baseline emissions thus assume the final CI RICE rule has not 

been implemented. The emissions reductions in 2013 associated with the proposed reconsidered 

rule are based on requiring emission standards that are based on applying add-on controls to nonemergency CI engines greater than 500 HP. Baseline emissions from the current population of 

stationary RICE less than or equal to 500 HP at major sources and existing stationary RICE at 

area sources were calculated based on non-emergency CI engines operating 1,000 hrs/yr, and 

emergency CI engines operating 50 hrs/yr. While the amendments the EPA is finalizing for 

stationary emergency engines increases the time allowed for participation in emergency demand 

response programs and for certain engines to operate for peak shaving or other incomegenerating activities, the EPA believes that 50 hours per year is still representative of emergency 

engine operation. There is a wide range in how much stationary emergency engines operate. 

Some emergency units operate well below 50 hrs/yr, while some emergency engines are run 

above 50 hrs/yr. However, on average and to be conservative, the EPA believes that 50 hrs/yr is 

still representative and consequently to estimate emissions from stationary emergency engines, 

the EPA has retained the assumption that 50 hrs/yr is appropriate. The following additional 

assumptions were used: 

Emission Factors: 

Engine HAP 

(lb/hp-hr) 

CO 

(lb/hr) 

PM 

(lb/hp-hr) 

SO2 

(lb/hp-hr) 

CI 1.07x10-4 6.96x10-1 7.00x10-4 0.00809xS1

*

*Obtained from AP-42, section 3.4 where S1 is sulfur content. 

 

Control Efficiencies: 

Technology HAP CO PM 

Oxidation catalyst 70% 70% 30% 

 Based on the above assumptions and the existing population of engines shown earlier in 

this section, the HAP, CO, and PM baseline emissions and reductions were calculated. 

The estimated baseline emissions for each HAP and criteria pollutant in tons per year 

(tpy) for the final rule are shown in Table 4-6. The estimated emission reductions for each HAP 

and criteria pollutant reductions in tons per year (tpy) as a result of the final rule are shown in 

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Table 4-7. In addition, it is expected that additional PM reductions will be achieved by the 

requirement to use ULSD for CI engines that install a DOC. The use of ULSD reduces the 

formation of sulfates in the exhaust gas, therefore reducing the emission of these sulfate PM 

emissions from the exhaust. EPA has estimated that the use of ULSD can reduce PM emissions 

by 5 to 30 percent depending on the sulfur concentration of the diesel fuel that is being replaced. 

Because EPA has no information on the type of fuel that CI engines are currently using, the PM 

reductions from switching to ULSD were not quantified and included in this summary. 

The EPA is requiring that existing stationary Tier 1 and Tier 2 certified CI engines 

located at area sources that are subject to state and locally enforceable rules requiring 

replacement of the engine by January 1, 2018 can meet management practices under the RICE 

NESHAP for a period of 2 years until May 3, 2015. The San Joaquin Valley APCD has 

identified 49 Tier 1 engines and 360 Tier 2 engines that are scheduled to be replaced under the 

local rule. The EPA has not identified any engines outside the San Joaquin Valley APCD area 

that are in the same or similar situation and although the EPA does not preclude the possibility 

that there are additional such engines, the EPA has no information on this. Therefore, for 

purposes of estimating reductions under the final amendments, the EPA has subtracted only 

those 409 engines from the previous control cost estimate and assumed that an additional 409 

engines will be meeting management practices under the rule. 

The EPA is also specifying that any existing certified Tier 3 CI engine that was installed 

before June 12, 2006, is in compliance with the NESHAP. This amendment would include any 

existing stationary Tier 3 certified CI engine located at an area source of HAP emissions. There 

are 17 Tier 3 engines (2006 model year) located in San Joaquin Valley that were installed 

between January 1 and June 12, 2006. The EPA does not know if there are additional engines in 

other areas that in a similar situation and the EPA has no information indicating how many such 

engines there could be in the rest of the country. Therefore, for purposes of calculating 

reductions, the EPA has included 17 less engines from the control cost estimate. These 17 

engines would under the final amendments be subject to management practices. 

 The work practice requirement of using an open crankcase ventilation system to control 

metallic HAP emissions is expected to achieve additional HAP reductions from CI engines. 

However, the metallic HAP emission reduction cannot be quantified because of the difficulty of 

measuring metallic HAP from the crankcase exhaust. Therefore, the metallic HAP reductions 

are not included in the total emission reductions. Also, all PM emissions are assumed to be in 

the fine particle emissions; thus all emissions and PM emission reductions are assumed to be 

PM2.5. 

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33 

 

Table 4-6. Summary of Major Source and Area Source Baseline Emissions for the 

CI RICE NESHAP in 2013 

Size Range (HP) 

Baseline Emissions (tpy) 

HAP CO NOx PM SO2 VOC 

Major Sources 

50-100 89 7,745 18,361 584 338 2,412 

100-175 215 10,148 44,107 1,403 811 5,794 

175-300 281 7,696 57,774 1,838 1,062 7,589 

300-500 249 4,049 51,196 1,629 941 6,725 

500-600 25 299 5,201 165 115 683 

600-750 16 153 3,267 104 72 429 

>750 52 338 10,677 340 236 1,402 

Total 927 30,428 190,583 6,064 3,575 25,035 

Area Sources 

50-100 132 11,424 27,083 862 498 3,558 

100-175 316 14,969 65,058 2,070 1,196 8,546 

175-300 414 11,351 85,217 2,711 1,567 11,194 

300-600 613 8,857 106,551 4,009 2,083 16,550 

600-750 154 1,485 26,791 1,008 589 4,161 

>750 404 2,630 70,314 2,645 1,546 10,921 

Total 2,034 50,717 381,015 13,305 7,479 54,930 

 

Grand Total 2,961 81,145 571,598 19,369 11,053 79,965 

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34 

Table 4-7. Summary of Major Source and Area Source Emissions Reductions for 

the CI RICE NESHAP in 2013 

Summary of Major Source and Area Source Emission Reductions for the CI RICE NESHAP 

Size Range (HP) 

Emission Reductions (tpy) 

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 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 693 7,680 1,944 18,727 

Total 1,005 14,238 2,818 27,142 

28 

PM Estimate for 

2010 Final CI Rule 1,014 14,342 2,844 27,395 

Difference 9 104 26 253 

Note: All emission reduction estimates are from “ RICE NESHAP Reconsideration Amendments- Cost 

and Environmental Impacts,” prepared by Tanya Parise, Ec/R, Inc. for Melanie King, U.S. EPA, Office of 

Air Quality Planning and Standards. January 26, 2012.

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5-1 

SECTION 5

ECONOMIC IMPACT ANALYSIS, ENERGY IMPACTS, AND SOCIAL COSTS 

The EIA provides decision makers with social cost estimates and enhances understanding 

of how the costs may be distributed across stakeholders (EPA, 2010). Although several 

economic frameworks can be used to estimate social costs for regulations of this size and sector 

scope, OAQPS has typically used partial equilibrium market models. However, the current data 

do not provide sufficient details to develop a market model; the data that are available have little 

or no sector/firm detail and are reported at the national level. In addition, some sectors have 

unique market characteristics (e.g., hospitals) that make developing partial equilibrium models 

difficult. Given these constraints, we believed the direct compliance costs as a reasonable 

approximation of total social costs. In addition, we also provide a qualitative analysis of the 

proposed rule’s economic impact on stakeholder decisions, a qualitative discussion on if 

unfunded mandates occur as a result of this final rule, and a qualitative discussion of the 

potential distribution of social costs between consumers and producers. 

5.1 Compliance Costs of the Final Rule 

For the year 2013, EPA’s engineering cost analysis estimates the total annualized costs of 

the final rule are $372 million (in 2008 dollars) (EC/R, 2012). 

As shown in Figure 5-1, the majority of the costs fall on the electric power sector (79%), 

followed by national security (9%). The remaining industries each account for 5% or less of the 

total annualized cost. The industrial classification for each engine is taken from the Power 

Systems Research (PSR) database, which is the major source of data for the engines affected by 

the final rule. The PSR database used as a basis for the analyses in this RIA contains 

information on both mobile and stationary onroad and nonroad engines, among other data, and 

does so not only for the U.S. but worldwide. PSR has collected such data for more than 30 

years. The Office of Transportation and Air Quality (OTAQ) uses this database frequently in the 

development of their mobile source rules. 

The annualized compliance costs per engine vary by the engine size (see Figure 5-2). For 

300 hp engines or less, the annualized per-engine costs are below $215 per engine. Per-engine 

costs for higher horsepower (hp) engines range between $950 and $1,900. 

The final rule will affect approximately one million existing stationary diesel engines. As 

shown in Figure 5-3, most of the affected engines fall within the 100 to 175 hp category (31%). 

Deleted: proposed
5-2 

The next highest categories are 50 to 100 hp (24%) and 175 to 300 hp (23%). The remaining 

engines are concentrated in the 300 to 600 hp category (16%). 

Figure 5-1. Distribution of Annualized Direct Compliance Costs by Industry: 2013 

79%

3% 2% 2%

9%

0%

5%

1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Electric Power Generation 

(2211)

Hospitals (622110)

Crude Petroleum & NG 

Production (211111)

Natural Gas Liquid Producers 

(211112)

National Security (92811)

Hydro Power Units (335312)

Irrigation Sets (335312)

Welders (333992)
5-3 

Figure 5-2. Average Annualized Cost per Engine by Horsepower Group: 2013 ($2008) 

Figure 5-3. Distribution of Engine Population by Horsepower Group: 2013 

$68

$198 $212

$952

$1,549

$1,877

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

50-100 hp 100-175 hp 175-300 hp 300-600 hp 600-750 hp >750 hp

24%

31%

23%

16%

2%

4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

50-100 hp 100-175 hp 175-300 hp 300-600 hp 600-750 hp >750 hp
5-4 

To assess the size of the compliance cost relative to the value of the goods and services 

for industries using affected engines, we collected Census data for selected industries. At the 

industry level, the annualized costs represent a very small fraction of revenue (less than 0.07%) 

(Table 5-1). These industry level cost-to-sales ratios can be interpreted as an average impact on 

potentially affected firms in these industries. Based on the cost-to-sales ratios, we can conclude 

that the annualized cost of this rule should be no higher than 1% of the sales on average for a 

firm in each of these industries. 

Table 5-1. Selected Industry-Level Annualized Compliance Costs as a Fraction of Total 

Industry Revenue: 2008 

Industry 

(NAICS) Industry Name 

Total Annualized 

Costs 

($ million)a

Sales, Shipments, Receipt, or 

Revenue ($ Billion) Cost-to-Sales 

($2007) ($2008) Ratio 

2211 Electric Power Generation $293.4 $440.4 $449.8 0.07% 

622110 Hospitals $11.4 $663.6 $677.8 0.00% 

211111 Crude Petroleum & NG 

Production 

$6.4 $214.2 $218.8 0.00% 

211112 Natural Gas Liquid 

Producers 

$6.4 $42.4 $43.3 0.02% 

92811 National Security $33,9 #N/A #N/A #N/A 

333992 Welders $3.4 $5.2 $5.3 0.06% 

111 and 112 Agriculture using irrigation 

systemsa

$17.0 $27.9 $28.5 0.05% 

a Irrigation engine costs assumed to be passed on to agricultural sectors that use irrigation systems. 

N/A: receipts are Not Available for National Security 

Sources: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 00: All sectors: 

Geographic Area Series: Economy-Wide Key Statistics: 2007” <http://factfinder.census.gov>; (January 4th , 

2010). 

 U.S. Department of Agriculture (USDA), National Agricultural Statistics Service (NASS). 2009. “2008 Farm and 

Ranch Irrigation Survey.” Washington, DC: USDA-NASS. 

 Nelson, B., EC/R Inc. February 17, 2010. Memorandum to Melanie King, U.S. Environmental Protection 

Agency. Impacts Associated with NESHAP for Existing Stationary CI RICE. 

5.2 Social Cost Estimate 

As shown in Table 5-1, the compliance costs are only a small fraction of the affected 

product value; this suggests that shift of the supply curve may also be small and result in small 

changes in market prices and consumption. EPA believes the national annualized compliance 

cost estimates provide a reasonable approximation of the social cost of this final rule. EPA 

believes this approximation is better for industries whose markets are well characterized as 

Deleted: proposed
5-5 

perfectly competitive. This approximation is less well understood for industries where the 

characterization of markets is not always perfectly competitive such as electric power generation 

whose legal incidence of this rule is approximately 80 percent of the annualized compliance cost. 

However, given the data limitation noted earlier, EPA believes the accounting for compliance 

cost is a reasonable approximation to inform policy discussion in this rulemaking. To shed more 

light on this issue, EPA ran hypothetical analyses and the results are later in the RIA in Tables 5-

2 and 5-3. 

5.3 How Might People and Firms Respond? A Partial Equilibrium Analysis 

Markets are composed of people as consumers and producers trying to maximize utility 

(consumers) and maximize profits (producers) they can given their economic circumstances. One 

way economists illustrate behavioral responses to pollution control costs is by using market 

supply and demand diagrams. The market supply curve describes how much of a good or service 

firms are willing and able to sell to people at a particular price; this curve is typically upward 

sloping because some production resources are fixed. As a result, the cost of producing an 

additional unit typically rises as more units are made. The market demand curve describes how 

much of a good or service consumers are willing and able to buy at some price. Holding other 

factors constant, the quantity demand is assumed to fall when prices rise. In a perfectly 

competitive market, equilibrium price (P0) and quantity (Q0) is determined by the intersection of 

the supply and demand curves (see Figure 5-4). 

5.3.1 Changes in Market Prices and Quantities 

To qualitatively assess how the regulation may influence the equilibrium price and 

quantity in the affected markets, we assumed the market supply function shifts up by the 

additional cost of producing the good or service; the unit cost increase is typically calculated by 

dividing the annual compliance cost estimate by the baseline quantity (Q0) (see Figure 5-4). As 

shown, this model makes two predictions: the price of the affected goods and services are likely 

to rise and the consumption/production levels are likely to fall. 
5-6 

consumer surplus = –[fghd + dhc] 

producer surplus = [fghd – aehb] – bdc 

total surplus = consumer surplus + producer surplus = 

–[aehb + dhc + bdc] 

Figure 5-4. Market Demand and Supply Model: With and Without Regulation 

The size of these changes depends on two factors: the size of the unit production cost 

increase (supply shift) and differences in how each side of the market (supply and demand) 

responds to changes in price. Economists measure responses using the concept of price elasticity, 

which represents the percentage change in quantity divided by the percentage change in price. 

This dependence has been expressed in the following formula:1

  Price Elasticity of Supply - Price Elasticity of Demand)

Price Elasticity of Supply Share of per-unit productioncost 

As a general rule, a higher share of the per-unit cost increases will be passed on to 

consumers in markets where 

 goods and services are necessities and people do not have good substitutes that they 

can switch to easily (demand is inelastic) and 

 

1

For examples of similar mathematical models in the public finance literature, see Nicholson (1998), pages 444–447, 

or Fullerton and Metcalf (2002). 
5-7 

 suppliers have excess capacity and can easily adjust production levels at minimal 

costs, or the time period of analysis is long enough that suppliers can change their 

fixed resources; supply is more elastic over longer periods. 

Short-run demand elasticities for energy goods (electricity and natural gas), agricultural 

products, and construction are often inelastic. Specific estimates of short-run demand elasticities 

for these products can be obtained from existing literature. For the short-run demand of energy 

products, the National Energy Modeling System (NEMS) buildings module uses values between 

0.1 and 0.3; a 1% increase in price leads to a 0.1 to 0.3% decrease in energy demand (Wade, 

2003). For the short-run demand of agriculture and construction, the EPA has estimated 

elasticities to be 0.2 for agriculture and approximately 1 for construction (EPA, 2004). As a 

result, a 1% increase in the prices of agriculture products would lead to a 0.2% decrease in 

demand for those products, while a 1% increase in construction prices would lead to 

approximately a 1% decrease in demand for construction. Given these demand elasticity 

scenarios (shaded in gray), approximately a 1% increase unit costs would result in a price 

increase of 0.1 to 1% (Table 5-2). As a result, 10 to 100% of the unit cost increase could be 

passed on to consumers in the form of higher goods/services prices. This price increase would 

correspond to a 0.1 to 0.8% decline in consumption in these markets (Table 5-3). 

Table 5-2. Hypothetical Price Increases for a 1% Increase in Unit Costs 

Market Demand 

Elasticity 

Market Supply Elasticity 

0.1 0.3 0.5 0.7 1 1.5 3 

−0.1 0.5% 0.8% 0.8% 0.9% 0.9% 0.9% 1.0% 

−0.3 0.3% 0.5% 0.6% 0.7% 0.8% 0.8% 0.9% 

−0.5 0.2% 0.4% 0.5% 0.6% 0.7% 0.8% 0.9% 

−0.7 0.1% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% 

−1.0 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.8% 

−1.5 0.1% 0.2% 0.3% 0.3% 0.4% 0.5% 0.7% 

−3.0 0.0% 0.1% 0.1% 0.2% 0.3% 0.3% 0.5% 

5.3.2 Regulated Markets: The Electric Power Generation, Transmission, and 

Distribution Sector 

Given that the electric power sector bears majority of the estimated compliance costs 

(Figure 5-1) and the industry is also among the last major regulated energy industries in the 

United States (EIA, 2000), the competitive model is not necessarily applicable for this industry. 
5-8 

Table 5-3. Hypothetical Consumption Decreases for a 1% Increase in Unit Costs 

Market Demand 

Elasticity 

Market Supply Elasticity 

0.1 0.3 0.5 0.7 1 1.5 3 

−0.1 −0.1% −0.1% −0.1% −0.1% −0.1% −0.1% −0.1% 

−0.3 −0.1% −0.2% −0.2% −0.2% −0.2% −0.3% −0.3% 

−0.5 −0.1% −0.2% −0.3% −0.3% −0.3% −0.4% −0.4% 

−0.7 −0.1% −0.2% −0.3% −0.4% −0.4% −0.5% −0.6% 

−1.0 −0.1% −0.2% −0.3% −0.4% −0.5% −0.6% −0.8% 

−1.5 −0.1% −0.3% −0.4% −0.5% −0.6% −0.8% −1.0% 

−3.0 −0.1% −0.3% −0.4% −0.6% −0.8% −1.0% −1.5% 

Although the electricity industry continues to go through a process of restructuring, whereby the 

industry is moving toward a more competitive framework (see Figure 5-5 for the status of 

restructuring by state),2

 in many states, electricity prices continue to be fully regulated by Public 

Service Commissions. As a result, the rules and processes outlined by these agencies would 

ultimately determine how these additional regulatory costs would be recovered by affected 

entities. 

5.3.3 Partial Equilibrium Measures of Social Cost: Changes Consumer and Producer 

Surplus 

In partial equilibrium analysis, the social costs are estimated by measuring the changes in 

consumer and producer surplus, and these values can be determined using the market supply and 

demand model (Figure 5-4). The change in consumer surplus is measured as follows: 

CS = – [Q1 × p] + [0.5 × Q × p]. (5.1) 

Higher market prices and lower quantities lead to consumer welfare losses. Similarly, the change 

in producer surplus is measured as follows: 

PS = [Q1 × p] – [Q1 × t] – [0.5 × Q × (p – t)]. (5.2) 

Higher unit costs and lower production level reduce producer surplus because the net 

price change (p – t) is negative. However, these losses are mitigated because market prices tend 

to rise. 

 

2

http://tonto.eia.doe.gov/energy_in_brief/print_pages/electricity.pdf. 

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5-9 

Figure 5-5. Electricity Restructuring by State 

Source. U.S. Energy Information Administration. 2010a. 

<http://www.eia.doe.gov/cneaf/electricity/page/restructuring/restructure_elect.html>. Last updated September 

2010. 

5.4 Energy Impacts 

Executive Order 13211 (66 FR 28355, May 22, 2001) provides that agencies will prepare 

and submit to the Administrator of the Office of Information and Regulatory Affairs, Office of 

Management and Budget, a Statement of Energy Effects for certain actions identified as 

“significant energy actions.” Section 4(b) of Executive Order 13211 defines “significant energy 

actions” as any action by an agency (normally published in the Federal Register) that 

promulgates or is expected to lead to the promulgation of a final rule or regulation, including 

notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking: 

(1) (i) that is a significant regulatory action under Executive Order 12866 or any successor order, 

and (ii) is likely to have a significant adverse effect on the supply, distribution, or use of energy; 

or (2) that is designated by the Administrator of the Office of Information and Regulatory Affairs 

as a significant energy action. 
5-10 

This rule is not a significant energy action as designated by the Administrator of the 

Office of Information and Regulatory Affairs because it is not likely to have a significant adverse 

impact on the supply, distribution, or use of energy. EPA has prepared an analysis of energy 

impacts that explains this conclusion as follows below. 

With respect to energy supply and prices, the analysis in Table 5-1 suggests at the 

industry level, the annualized costs represent a very small fraction of revenue (less than 0.7%). 

As a result, we can conclude supply and price impacts should be small. 

To enhance understanding regarding the regulation’s influence on energy consumption, 

we examined publicly available data describing energy consumption for the electric power sector 

that will be affected by this rule. The Annual Energy Outlook 2011 (EIA, 2011) provides energy 

consumption data. As shown in Table 5-4, this industry account for about 0.3% of the U.S. total 

liquid fuels and less than 8% of natural gas. As a result, any energy consumption changes 

attributable to the regulatory program should not significantly influence the supply, distribution, 

or use of energy. 

5.5 Unfunded Mandates 

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1531-1538, 

requires Federal agencies, unless otherwise prohibited by law, to assess the effects of their 

regulatory actions on State, local, and tribal governments and the private sector. This rule 

contains a Federal mandate that may result in expenditures of $100 million or more for State, 

local, and tribal governments, in the aggregate, or the private sector in any one year. 

Accordingly, EPA has prepared under section 202 of the UMRA a written statement which is 

summarized below in this section. 
5-11 

Table 5-4. U.S. Electric Powera

 Sector Energy Consumption (Quadrillion BTUs): 2013 

Quantity Share of Total Energy Use 

Distillate fuel oil 0.09 0.1% 

Residual fuel oil 0.22 0.2% 

Liquid fuels subtotal 0.31 0.3% 

Natural gas 7.63 7.9% 

Steam coal 17.37 18.0% 

Nuclear power 8.50 8.8% 

Renewable energyb

 4.63 4.8% 

Electricity Imports 0.12 0.1% 

Total Electric Power Energy Consumptionc

 38.77 40.1% 

Delivered Energy Use 70.56 73.2% 

Total Energy Use 96.66 100.0% 

a

Includes consumption of energy by electricity-only and combined heat and power plants whose primary business is 

to sell electricity, or electricity and heat, to the public. Includes small power producers and exempt wholesale 

generators. 

b

Includes conventional hydroelectric, geothermal, wood and wood waste, biogenic municipal solid waste, other 

biomass, petroleum coke, wind, photovoltaic and solar thermal sources. Excludes net electricity imports. c

Includes non-biogenic municipal waste not included above. 

Source: U.S. Energy Information Administration. 2011a. Supplemental Tables to the Annual Energy Outlook 2011, 

projections for 2013. Available at: http://www.eia.gov/oiaf/aeo/tablebrowser/#release=EARLY2012&subject=6-

EARLY2012&table=2-EARLY2012®ion=1-0&cases=full2011-d020911a,early2012-d121011b 

5.5.1 Future and Disproportionate Costs 

The UMRA requires that we estimate, where accurate estimation is reasonably feasible, 

future compliance costs imposed by the rule and any disproportionate budgetary effects. Our 

estimates of the future compliance costs of the final rule are discussed previously in Section 4 of 

this RIA. We do not believe that there will be any disproportionate budgetary effects of the final 

rule on any particular areas of the country, State or local governments, types of communities 

(e.g., urban, rural), or particular industry segments. 

5.5.2 Effects on the National Economy 

The UMRA requires that we estimate the effect of the final rule on the national economy. 

To the extent feasible, we must estimate the effect on productivity, economic growth, full 

employment, creation of productive jobs, and international competitiveness of the U.S. goods 

and services if we determine that accurate estimates are reasonably feasible and that such effect 

is relevant and material. The nationwide economic impact of the final rule is presented earlier in 

this RIA chapter. This analysis provides estimates of the effect of the proposal rule on most of 

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the categories mentioned above, and these estimates are presented earlier in this RIA chapter. In 

addition, we have determined that the final rule contains no regulatory requirements that might 

significantly or uniquely affect small governments. Therefore, today’s rule is not subject to the 

requirements of section 203 of the UMRA. 

5.6 Environmental Justice 

Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes federal executive 

policy on environmental justice. Its main provision directs federal agencies, to the greatest 

extent practicable and permitted by law, to make environmental justice part of their mission by 

identifying and addressing, as appropriate, disproportionately high and adverse human health or 

environmental effects of their programs, policies, and activities on minority populations and lowincome populations in the United States. 

Assuming that our baseline for this RIA does not include implementation of the final 

2010 CI RICE rule, as we state earlier in this document, EPA has determined that this final rule 

will not have disproportionately high and adverse human health or environmental effects on 

minority or low-income populations because it increases the level of environmental protection 

for all affected populations without having any disproportionately high and adverse human 

health or environmental effects on any population, including any minority or low-income 

population. This rule is a nationwide standard that reduces air toxics emissions from existing 

stationary CI engines, thus decreasing the amount of such emissions to which all affected 

populations are exposed. 

5.7 Employment Impact Analysis 

In addition to addressing the costs and benefits of the final rule, EPA has analyzed the 

impacts of this rulemaking on employment, which are presented in this section. While a 

standalone analysis of employment impacts is not included in a standard cost-benefit analysis, 

such an analysis is of particular concern in the current economic climate of sustained high 

unemployment. Executive Order 13563, states, “Our regulatory system must protect public 

health, welfare, safety, and our environment while promoting economic growth, innovation, 

competitiveness, and job creation” (emphasis added). Therefore, and consistent with recent 

efforts to characterize the employment effects of economically significant rules, the Agency has 

provided this analysis to inform the discussion of labor demand and employment impacts. 

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This employment impact analysis includes estimates of certain short-term and on-going 

labor requirements (increase in labor demand) associated with reporting and recordkeeping, and 

the installation, operating and maintenance of control devices. EPA estimates that 

approximately 1,300 full-time equivalents (FTEs) will be created or supported in the short-term 

(the compliance period of the regulation) and approximately 2,000 FTEs will be created or 

supported annually on a permanent basis. EPA also provides a qualitative discussion of other 

potential employment effects, including both increases and decreases. Because of the 

uncertainties involved, these sets of estimates should not be added in an attempt to characterize 

the overall employment effect.

We have not quantified the rule’s net effects on the overall labor market, or the potential 

changes to workers’ incomes. EPA continues to explore the relevant theoretical and empirical 

literature and to seek public comments in order to ensure that such estimates are as accurate, 

useful and informative as possible. 

From an economic perspective, labor is an input into producing goods and services; if 

regulation requires that more labor be used to produce a given amount of output, that additional 

labor is reflected in an increase in the cost of production.3

 When an increase in employment 

occurs as a result of a regulation, it is a cost to firms. Moreover, when the economy is at full 

employment, we would not expect an environmental regulation to have an impact on overall 

employment because labor is being shifted from one sector to another. On the other hand, in 

periods of high unemployment, an increase in labor demand due to regulation may result in a 

short-term net increase in overall employment due to the potential hiring of previously 

unemployed workers by the regulated sector to help meet new requirements (e.g., to install new 

equipment) or by the environmental protection sector to produce new abatement capital. When 

significant numbers of workers are unemployed, the opportunity costs associated with displacing 

jobs in other sectors are likely to be smaller. To provide a partial picture of the employment 

consequences of this rule, EPA takes two approaches. First, EPA uses information such as 

monitoring, recordkeeping, and reporting estimates derived from its cost analysis documentation 

to generate estimates of employment impacts. Second, the analysis considers the results of 

Morgenstern, Pizer, and Shih (2002) in estimating the effects of the regulation on the regulated 

industry. This approach has been used by EPA previously in recent Regulatory Impact Analyses. 

 

3

 It should be noted that if more labor must be used to produce a given amount of output, then this implies a decrease 

in labor productivity. A decrease in labor productivity will cause a short-run aggregate supply curve to shift to 

the left, and businesses will produce less, all other things being equal. 
5-14 

EPA is interested in public comments on the merits of including information derived in this 

fashion for assessing the employment consequences of regulations. 

 5.7.1 Employment Impacts from Pollution Control Requirements 

Regulations set in motion new orders for pollution control equipment and services. When 

a new regulation is promulgated, one typical response of industry is to order pollution control 

equipment and services in order to comply with the regulation when it becomes effective, while 

closure of plants that choose not to comply is assumed to occur after the compliance date. With 

such a response by industry as a basis, this section presents estimates for short term labor 

requirement needed associated with the monitoring, recordkeeping, and reporting requirements 

for this final rule. Environmental regulation may increase revenue and employment in the 

environmental technology industry. While these increases represent gains for that industry, they 

are costs to the regulated industries required to install the equipment. As with any pool of labor, 

the gross size of the labor pool does not reflect the net impact on overall employment after 

adjusting for shifts in other sectors. 

Regulated firms may hire workers to design and build pollution controls. Once the 

equipment is installed, regulated firms may hire workers to operate and maintain the pollution 

control equipment – much like they may hire workers to produce more output. Of course, these 

firms may also reassign existing employees to do these activities. A study including an analysis 

of environmental protection employment in six U.S. states in 2003 by Bezdek, Wendling, and 

DiPernab (2008) found that “investments in environmental protection create jobs and displace 

jobs, but the net effect on employment is positive.”4

 

Once the equipment is installed, regulated firms may hire workers to operate and 

maintain the pollution control equipment – much like they may hire workers to produce more 

output. 

The focus of this part of the analysis is on labor requirements related to the compliance 

actions of the affected entities within the affected sector. The employment analysis uses a 

bottom-up engineering-based methodology to estimate employment impacts. The engineering 

cost analysis summarized in Section 4 of this RIA includes estimates of the labor requirements 

 

4

 Environmental protection, the economy, and jobs: National and regional analyses, Roger H. Bezdek, Robert M. 

Wendling and Paula DiPerna, Journal of Environmental Management Volume 86, Issue 1, January 2008, Pages 

63-79. 

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associated with implementing the final regulations. Each of these labor changes may either be 

required as part of an initial effort to comply with the new regulation or required as a continuous 

or annual effort to maintain compliance. We estimate up-front and continual, annual labor 

requirements by estimating hours of labor required and converting this number to full-time 

equivalents (FTEs) by dividing by 2,080 (40 hours per week multiplied by 52 weeks). We note 

that this type of FTE estimate cannot be used to make assumptions about the specific number of 

people involved or whether new jobs are created for new employees.

The results of this employment estimate are presented in Table 5-5 for the final 

reconsidered NESHAP. The tables breaks down the installation, operation, and maintenance 

estimates by type of pollution control evaluated in the RIA and present both the estimated hours 

required and the conversion of this estimate to FTE. For the final NESHAP, reporting and 

recordkeeping requirements were estimated requirements were estimated for the entire rule 

rather than by anticipated control requirements; the reporting and recordkeeping estimates are 

consistent with estimates EPA submitted as part of its Information Collection Request (ICR) that 

is in the Supporting Statement for the final reconsideration rule. 

The up-front labor requirement is estimated at 1,300 FTEs for the final reconsidered 

NESHAP. These up-front FTE labor requirements can be viewed as short-term labor 

requirements required for affected entities to comply with the new regulation. Ongoing 

requirements are estimated at about 2,000 FTEs for the final reconsidered NESHAP. These 

ongoing FTE labor requirements can be viewed as sustained labor requirements required for 

affected entities to continuously comply with the new regulation. All of this data is found in the 

cost memorandum for this reconsidered rule, and can be found in the docket for the rulemaking. 

It is important to recognize that these seemingly precise estimates are not to be assumed to be 

exact measures of the employment impacts of this rulemaking. They represent a rough 

approximation of the small positive impacts that this rule may have on employment. 

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Table 5-5. Labor-based Employment Estimates for Reporting and Recordkeeping and 

Installing, Operating, and Maintaining Control Equipment Requirements for 

Reconsidered CI RICE NESHAP 

Source 

Emission 

Control 

Measure 

Projected 

No. of 

Affected 

Units 

Per-Unit 

OneTime 

Labor 

Estimate 

(Hours) 

Total 

One-Time 

Labor 

Estimate 

(Hours) 

Per-Unit 

Annual 

Labor 

Estimate 

(Hours) 

Total 

Annual 

Labor 

Estimate 

(Hours) 

One-Time 

Full-Time 

Equivalent 

Annual 

Full-Time 

Equivalent 

All CI RICE 

-O&M 

Recordkeeping N/A 366,217 N/A N/A 1 366,217 N/A 176

NonEmergency CI 

RICE 100-300 

HP 

-Testing Oxidation 

Catalyst 54,697 11 593,496 2 738,404 285 355

-Reporting 8

NonEmergency CI 

RICE > 300 

HP 

3.5

-Testing 

Oxidation 

Catalyst + 

Crankcase 

Ventilation

11,966 47 563,170 5 636,134 271 306

-Reporting 8

-CPMS Install 3.5

-CPMS O&M 1

-CPMS 

Recording 30

Area Sources 6

All CI RICE

-O&M 

Recordkeeping

NonEmergency CI 

RICE 100-300 

HP

N/A 569,364 N/A N/A 1 569,364 N/A 274

-Testing N/A 64,095 N/A N/A 2 128,190 N/A 62

-Reporting

NonEmergency CI 

RICE > 300 

HP

Oxidation 

Catalyst + 

Crankcase 

Ventilation 

+ CPMS

31,526 47 1,483,695 5 1,675,922 713 806

-Testing 8

-Reporting 3.5

--CPMS Install 1

CPMS O&M 30

-CPMS 

Recording 6

Total 105 2,640,361 124 4,114,232 1,269 1,978

Note: Full-time equivalents (FTE) are estimated by first multiplying the projected number of affected units by the per unit labor 

requirements and then dividing by 2,080 (40 hours multiplied by 52 weeks). Totals may not sum due to independent rounding. 

CPMS = Continuous Parameter Measurement System 

HP = horsepower 

N/A = Not Applicable. 

O&M = Operating and Maintenance 

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5.7.2 Employment Impacts within the Regulated Industry 

In recent RIAs we have applied estimates from a study by Morgenstern, Pizer and 

Shih (2002)5 to derive the employment effects of new regulations within the regulated 

industry. (See, for example, the Regulatory Impact Analyses for the recently released 

final MATS and final CSAPR regulations). Determining the direction of employment 

effects in the regulated industry is also challenging due to competing effects. Complying 

with the new or more stringent regulation requires additional inputs, including labor, and 

may alter the relative proportions of labor and capital used by regulated firms in their 

production processes. Morgenstern, et al. (2002) demonstrate that environmental 

regulations can be understood as requiring regulated firms to add a new output 

(environmental quality) to their product mixes. Although legally compelled to satisfy this 

new demand, regulated firms have to finance this additional production with the proceeds 

of sales of their other (market) products. Satisfying this new demand requires additional 

inputs, including labor, and may alter the relative proportions of labor and capital used by 

regulated firms in their production processes. 

More specifically, Morgenstern, Pizer, and Shih (2002) decompose the effect of 

regulation on net employment in the regulated sector into the following three subcomponents:

 The Demand Effect: higher production costs from complying with the regulation will 

raise market prices, reducing consumption (and production), thereby reducing 

demand for labor within the regulated industry. The “extent of this effect depends on 

the cost increase passed on to consumers as well as the demand elasticity of industry 

output.” (p. 416) 

 The Cost Effect: Assuming that the capital/labor ratio in the production process is 

held fixed, as “production costs rise, more inputs, including labor, are used to produce 

 

5 Morgenstern, R. D., W. A. Pizer, and J. S. Shih. 2002. Jobs versus the Environment: An Industry-Level 

Perspective.‖ Journal of Environmental Economics and Management 43(3):412-436. 
5-18 

the same amount of output,” (p. 416). For example, to reduce pollutant emissions 

while holding output levels constant, regulated firms may require additional labor. 

 The Factor-Shift Effect: Regulated firms’ production technologies may be more or 

less labor intensive after complying with the regulation (i.e., more/less labor is 

required relative to capital per dollar of output). “Environmental activities may be 

more labor intensive than conventional production,” meaning that “the amount of 

labor per dollar of output will rise.” However, activities may, instead, be less labor 

intensive because “cleaner operations could involve automation and less employment, 

for example.” (p. 416) 

The demand effect is expected to have an unambiguously negative effect on employment, 

the cost effect to have an unambiguously positive effect on employment, and the factor-shift 

effect to have an ambiguous effect on employment. Without more information with respect to 

the magnitudes of these three competing effects, it is not possible to predict the net 

environmental employment effect in the regulated sector. 

Using plant-level Census information between the years 1979 and 1991, Morgenstern et 

al. estimate the effects of pollution abatement expenditures on net employment in four highly 

polluting/regulated sectors (pulp and paper, plastics, steel, and petroleum refining). They 

conclude that increased abatement expenditures generally have not caused a significant change in 

net employment in those sectors. More specifically, their results show that, on average across the 

industries studied, each additional $1 million (in 1987$) spent on pollution abatement results in a 

(statistically insignificant) net increase of 1.55 (+/- 2.24) jobs. As a result, the authors conclude 

that increases in pollution abatement expenditures can have positive effects on employment and 

do not necessarily cause economically significant employment changes. The conclusion is 

similar to Berman and Bui (2001), who found that increased air quality regulation in Los 

Angeles did not cause large employment changes. 

Ideally, the EPA would first apply the methodology of Morgenstern et al. to current 

pollution expenditure and market data for the regulated firms to identify the relationship between 

abatement costs and employment, then use this relationship to extrapolate the effect of new 

projected abatement costs on these firms. Unfortunately, current firm-level abatement cost and 

market characteristics are not available. In addition, there are important differences in the 

markets and regulatory settings analyzed in their study and the setting presented here that lead us 

to conclude that it is inappropriate to utilize their quantitative estimates to estimate the 

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5-19 

regulations motivating the abatement expenditures studied in Morgenstern et al. are potentially 

too many to allow for the direct transfer of their quantitative estimates for use in analysis of the 

proposed rule. There are also important differences between the industries affected by this final

rule and the four manufacturing industries studied by Morgenstern et al. For these reasons, we 

conclude there are too many uncertainties as to the comparability of the Morgenstern et al. study 

to apply their estimates to quantify the employment impacts within the regulated sector for this 

regulation. 

 

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6-1 

SECTION 6

SMALL ENTITY SCREENING ANALYSIS 

The Regulatory Flexibility Act as amended by the Small Business Regulatory 

Enforcement Fairness Act (SBREFA) 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 agency certifies that the rule will 

not have a significant economic impact on a substantial number of small entities. Small entities 

as defined by the Small Business Administration (SBA) include small businesses, small 

governmental jurisdictions, and small not-for-profit enterprises. 

After considering the economic impact of the final reconsideration rule on small entities, 

the screening analysis indicates that this rule will not have a significant economic impact on a 

substantial number of small entities (or “SISNOSE”). Under the primary cost analyses EPA 

considered, sales and revenue tests for establishments owned by model small entities are less 

than 3% and only one group of establishments (irrigated farms with receipts less than $25,000) 

has a ratio exceeding 1%. These results are identical to those from the small entity analysis done 

for the final CI RICE rule promulgated in March 2010. 

6.1 Small Entity Data Set 

The industry sectors covered by the final rule were identified during the development of 

the cost analysis (Nelson, 2012). The SUSB provides national information on the distribution of 

economic variables by industry and enterprise size (U.S. Census, 2006a, b).1

 The Census Bureau 

and the Office of Advocacy of the SBA supported and developed these files for use in a broad 

range of economic analyses.2 Statistics include the total number of establishments and receipts 

for all entities in an industry; however, many of these entities may not necessarily be covered by 

the final rule. SUSB also provides statistics by enterprise employment and receipt size. 

The Census Bureau’s definitions used in the SUSB, which are stated in Section 3 and 

restated here for clarity of presentation, are as follows: 

 Establishment: An establishment is a single physical location where business is 

conducted or where services or industrial operations are performed. 

 

1

The SUSB data do not provide establishment information for the national security NAICS code (92811) or irrigated 

farms. Since most national security installations are owned by the federal government (e.g., military bases), EPA 

assumes these entities would not be considered small. For irrigated farms, we relied on receipt data provided in 

the 2008 Farm and Irrigation Survey (USDA, 2009). 2

See http://www.census.gov/csd/susb/ and http://www.sba.gov/advo/research/data.html for additional details. 

Deleted: proposed

Deleted: proposed

Deleted: proposed
6-2 

 Receipts: Receipts (net of taxes) are defined as the revenue for goods produced, 

distributed, or services provided, including revenue earned from premiums, 

commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all 

revenue collected for local, state, and federal taxes. 

 Enterprise: An enterprise is a business organization consisting of one or more 

domestic establishments that were specified under common ownership or control. The 

enterprise and the establishment are the same for single-establishment firms. Each 

multiestablishment company forms one enterprise—the enterprise employment and 

annual payroll are summed from the associated establishments. Enterprise size 

designations are determined by the summed employment of all associated 

establishments. 

Because the SBA’s business size definitions (SBA, 2010) apply to an establishment’s 

“ultimate parent company,” we assumed in this analysis that the “enterprise” definition above is 

consistent with the concept of ultimate parent company that is typically used for SBREFA 

screening analyses and the terms are used interchangeably. 

6.2 Small Entity Economic Impact Measures 

The analysis generated a set of establishment sales tests (represented as cost-to-receipt 

ratios)3

 for NAICS codes associated with sectors listed in Table 6-1. Although the appropriate 

SBA size definition should be applied at the parent company (enterprise) level, we can only 

compute and compare ratios for a model establishment owned by an enterprise within an SUSB 

size range (employment or receipts). Using the SUSB size range helps us account for receipt 

differences between establishments owned by large and small enterprises and also allows us to 

consider the variation in small business definitions across affected industries. Using 

establishment receipts is also a conservative approach, because an establishment’s parent 

company (the “enterprise”) may have other economic resources that could be used to cover the 

costs of the final rule. 

6.2.1 Model Establishment Receipts and Annual Compliance Costs 

The sales test compares a representative establishment’s total annual engine costs to the 

average establishment receipts for enterprises in several size categories.4

 For industries with SBA 

 

3

The following metrics for other small entity economic impact measures (if applicable) would potentially include 

• small governments (if applicable): “revenue” test; annualized compliance cost as a percentage of annual 

government revenues and 

• small nonprofits (if applicable): “expenditure” test; annualized compliance cost as a percentage of annual 

operating expenses, 4

For the 1 to 20 employee category, we excluded SUSB data for enterprises with zero employees. These enterprises 

did not operate the entire year. 
6-3 

employment size standards, we calculated average establishment receipts for each enterprise 

employment range (Table 6-2).5

 For industries with SBA receipt size standards, we calculated 

Table 6-1. Final NESHAP for Existing Stationary CI Reciprocating Internal Combustion 

Engines (RICE): Affected Sectors and SBA Small Business Size Standards 

Industry Description 

Corresponding 

NAICS 

SBA Size Standard for 

Businesses (effective January

7 , 2013) Type of Small Entity 

Electric power generation 2211 a Business and government 

Natural Gas Transmission 48621 $7.0 million in annual receipts Business 

General medical & 

surgical hospitals 

622110 $35.5 million in annual receipts Business and government 

Crude petroleum and 

natural gas production 

211111 500 employees Business 

Natural gas liquid 

producers 

211112 500 employees Business 

National security 92811 NA Government 

Hydro power units See NAICS 2211 a

 Business and government 

Irrigation sets Affects NAICS 111 

and 112 

Generally $750,000 or less in 

annual receipts 

Business 

Welders Affects industries that 

use heavy equipment 

such as construction, 

mining, farming 

Varies by 6-digit NAICS code; 

Example industry: 

NAICS 238 = $14 million in 

annual receipts 

Business 

a

NAICS codes 221111, 221112, 221113, 221119, 221121, 221122: 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 output for the preceding fiscal year did not exceed 4 million megawatt hours. 

 Source: U.S. Small Business Administration (SBA). 2010. “Table of Small Business Size Standards Matched to 

North American Industry Classification System Codes.” Effective November 5nd, 2010. Downloaded 2/16/12. 

average establishment receipts for each enterprise receipt range (Table 6-3). We included the 

utility sector in the second group, although the SBA size standard for this industry is defined in 

terms of physical units (megawatt hours) versus receipts. Crop and animal production (NAICS 

111 and 112) also have an SBA receipt size standard that defines a small business as receiving 

$750,000 or less in receipts per year. However, SUSB data were not available for these 

industries. Therefore, we conducted the sales test using the following range of establishment 

 

5

We use 2007 Economic Census data in estimating number of establishments by industry. The release schedules for 

different types of 2007 Economic Census data are at 

http://www.census.gov/econ/census07/pdf/EconCensusScheduleByDate.pdf. 

Deleted: November

Deleted: 5

Deleted: 0

Deleted: 4
6-4 

receipts: farms with annual receipts of $25,000 or less, farms with annual receipts of $100,000 or 

less, farms with annual receipts of $500,000 or less, and farms with annual receipts of $750,000 

or less. 
5

Table 6-2. Average Receipts for Affected Industry by Enterprise: 2009 ($2008 Million/establishment) 

SBA Size 

Standard 

for Businesses 

(effective 

November 5, 

2010)

Owned By Enterprises with Employee Range: 

NAICS NAICS Description 

All 

Enterprises 

1–20 

Employees 

20–99 

Employees 

100–499 

Employees 

500+ 

Employees 

211111 Crude petroleum & 

natural gas extraction 

500 employees $30.22 $2.15 $33.02 $151,76 1,570 

211112 Natural gas liquid 

extraction 

500 employees $172.81 $0.30 NA $11.88 NA 

335312 Motor & generator mfg 1,000 employees $18.58 $1.37 $6.14 $15.96 $29.47 333992 Welding & soldering 

equipment mfg 

500 employees $18.51 $1.56 $6.60 $33.25 NA . 

NA = Not available. Source: U.S. Census Bureau. 2012a. “Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 2009.”

<http://www.census.gov/csd/susb/ Downloaded 2/22/12. 
6

Table 6-3. Average Receipts for Affected Industry by Enterprise Receipt Range: 2007 ($2008 /establishment) 

SBA Size Standard 

for Businesses 

(effective November 

5, 2010)

Owned By Enterprises with Receipt Range: 

NAICS NAICS Description 

All 

Enterprises 

0–99K 

Receipts

100–

499.9K 

Receipts

500–

999.9K

Receipts

1,000–

4,999.9K 

Receipts 

5,000,000–

9,999,999K 

Receipts 

<10,000K 

Receipts 

10,000–

49,999K 

Receipts

50,000–

99,999K 

Receipts

100,000K+ 

Receipts 

2211 Electric Power 

Generation 

a $261.0 $31.2 $272.5 $724.9 $2,399.5 $7,330.5 $2,617.7 $24,786.

9 

$67,706.

8 

$1,394,051

.0 

622110 Hospitals $34.5 million in annual 

receipts 

$202,058.7 NA $23.82 NA $3,255.0 $7,291.0 $4,692.1 $23,481.

9 

$67,545,

6 

$508,705.8

237310 Highway , street, and 

bride construction 

$33.5 million in Annual Receipts 

$7.74 $0.06 $0.32 $0.84 $2.74 $8.11 $2.00 $22.62 $56.48 $56.81 

237110 Water and sewer line 

and related structures, construction 

$33.5 million in Annual Receipts 

$3.89 $0.06 $0.32 $0.85 $2.73 $8.17 $1.84 $20.62 $45.05 $47.27 

237130 Power and 

communication line and related structures construction 

$33.5 million in Annual Receipts 

$3.39 $0.06 $0.31 $0.83 $2.52 $7.75 $1.32 $16.84 $34.50 $23.86 

237990 Other heavy and civil 

engineering construction 

$33.5 million in Annual Receipts 

$2.66 $0.06 $0.30 $0.83 $2.48 $7.76 $0.99 $18.72 $40.53 $42.35 

92811 National Security NA NA NA NA NA NA NA NA NA NA NA 

Notes: . National Security is included in this table but does not have size standards. a NAICS codes 221111, 221112, 221113, 221119, 221121, 221122: A firm in these industries is defined as small by SBA if, including its affiliates, it is 

primarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the preceding fiscal year did not exceed 4 million megawatt hours. 

NA = Not available. SUSB did not report this data for disclosure or other reasons. 

Source: U.S. Census Bureau. 2009a. “Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 2009.”

<http://www.census.gov/csd/susb/ 
6-7 

Annual entity compliance costs vary depending on the size of the diesel engines used at 

the affected establishment. Absent facility-specific information, we computed per-entity 

compliance costs based for three different cases based on representative establishments—Cases 

1, 2, and 3 (see Table 6-4). Each representative establishment differs based on the size and 

number of diesel engines being used. Compliance costs are calculated by summing the total 

annualized compliance costs for the relevant engine categories, dividing the sum by the total 

existing population of those engines, and multiplying the average engine cost by the number of 

engines assumed to be at the establishment. Since NAICS 2211 and 622110 are fundamentally 

different than other industries considered in this analysis, we used different assumptions about 

what constitutes the representative establishment and report these assumptions separately. 

 Case 1: The representative establishment for all industries uses three 750+ hp engines 

with an average compliance cost of $1,878 per engine, resulting in a total annualized 

compliance cost of approximately $5,634 for this representative establishment. 

 Case 2: The representative establishment in NACIS 2211 and 622110 uses two 50 to 

750+ hp engines with an average compliance cost of $419 per engine, resulting in a 

total annualized compliance cost of $838 for this representative establishment. For all 

other industries, the representative establishment uses two 50 to 300 hp engines with 

an average compliance cost of $146 per engine, resulting in a total compliance cost of 

$292 for this representative establishment. 

 Case 3: The representative establishment for all industries uses two 50 to 100 hp 

engines with an average compliance cost of $68 per engine, resulting in a total 

compliance cost of $137 for this representative establishment. 

EPA believes that small entities are most likely to face costs similar to Case 2 (columns 

shaded in gray in Table 6-4) because most of the engines to be affected by this proposal in 

NAICS 335312, 333992, 211111, and 211112 are under 300 hp capacity, and most small entities 

in these industries will own engines of this size or smaller. This is corroborated by Figure 6-1 

and 6-2 which shows the distribution of engine population and compliance costs by engine size 

for all industries. However, it is difficult to make a similar claim for NAICS 2211 and 622110 

based on the existing distribution of engines in these industries.6

 As noted earlier in the RIA, 

only 20 percent of the existing distribution of engines is expected to be classified as nonemergency. 

 

6

This claim also cannot be made for NAICS 92811: National Security. However, since most national security 

installations are owned by the federal government (e.g., military bases), EPA assumes these entities would not be 

considered small. 
6-8 

For the sales test, we divided the representative establishment compliance costs reported 

in Table 6-4 by the representative receipts reported in Tables 6-2 and 6-3. This is known as the 

cost-to-receipt (i.e., sales) ratio, or the “sales test.” The “sales test” is the impact 

Table 6-4. Representative Establishment Costs Used for Small Entity Analysis ($2008) 

 Case 1 Case 2 Case 3 

 

NAICS 2211, 

622110 

(+750 hp 

only) 

All Other 

NAICS 

(+750 hp 

only) 

NAICS 2211, 

622110 

(50–750+ hp) 

All Other 

NAICS 

(50–300 hp) 

NAICS 2211, 

622110 

(50–100 hp 

only) 

All Other 

NAICS 

(50–100 hp 

only) 

Total Annualized Costs ($) $62,068,406 $7,875,707 $304,817,985 $40,407,406 $9,093,118 $6,745,516 

Engine Population 33,052 4,194 727,090 276,374 133,099 98,736 

Average Engine Cost 

($/engine) 

$1,878 $1,878 $419 $146 $68 $68 

Assumed Engines Per 

Establishment 

3 3 2 2 2 2 

Total Annualized Costs per 

Establishment 

$5,634 $5,634 $838 $292 $137 $137 

* Engine population estimates taken from “Impacts Associated with NESHAP for Existing Stationary CI RICE,” 

prepared by Bradley Nelson, EC/R, Inc. for Melanie King, U.S. EPA, Office of Air Quality Planning and 

Standards, February 19, 2010. 
6-9 

Figure 6-1. Distribution of Engine Population by Size for All Industries 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Electric Power

Generation

(2211)

Hospitals

(622110)

Crude Petroleum

&NG Production

(211111)

Natural Gas

Liquid Producers

(211112)

National Security

(92811)

Hydro Power

Units (335312)

Irrigation Sets

(335312)

Welders

(333992)

>750 hp

600‐750 hp

300‐600 hp

175‐300 hp

100‐175 hp

50‐100 hp
6-10 

Figure 6-2. Distribution of Compliance Costs by Engine Size for All Industries 

methodology EPA employs in analyzing small entity impacts as opposed to a “profits test,” in 

which annualized compliance costs are calculated as a share of profits. 

This is because revenues or sales data are commonly available data for entities normally 

impacted by EPA regulations and profits data normally made available are often not the true 

profit earned by firms because of accounting and tax considerations. Revenues as typically 

published are usually correct figures and are more reliably reported when compared to profit 

data. The use of a “sales test” for estimating small business impacts for a rulemaking such as this 

one is consistent with guidance offered by EPA on compliance with SBREFA7

 and is consistent 

with guidance published by the U.S. SBA’s Office of Advocacy that suggests that cost as a 

 

7

The SBREFA compliance guidance to EPA rulewriters regarding the types of small business analysis that should be 

considered can be found at http://www.epa.gov/sbrefa/documents/rfafinalguidance06.pdf, pp. 24-25. 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Electric Power

Generation

(2211)

Hospitals

(622110)

Crude Petroleum

&NG Production

(211111)

Natural Gas

Liquid Producers

(211112)

National Security

(92811)

Hydro Power

Units (335312)

Irrigation Sets

(335312)

Welders

(333992)

>750 hp

600‐750 hp

300‐600 hp

175‐300 hp

100‐175 hp

50‐100 hp
6-11 

percentage of total revenues is a metric for evaluating cost increases on small entities in relation 

to increases on large entities.8

If the cost-to-receipt ratio is less than 1%, then we consider the final rule to not have a 

significant impact on the establishment company in question. We summarize the industries with 

cost-to-receipt ratios exceeding 1% below: 

Primary Analysis: 

 Case 2: NAICS 2211 

 Case 3: No industries 

Sensitivity Analysis (unlikely): 

 Case 1: NAICS 211111, 211112, with less than 20 employees, NAICS 2211 with 

receipts less than $500,000 per year, NAICS 234 with receipts less than $500,000 per 

year, and irrigated farms with receipts of $500,000 or less per year 

In the Case 2 primary analysis, only establishments in NAICS 2211 with receipts less 

than $100,000 per year have cost-to-receipt ratios above 1%. These establishments represent less 

than 5 percent of affected small establishments. However, establishments earning this level of 

receipts are likely to be using smaller engines than those assumed in Case 2, such as 50 to 100 hp 

engines. The results of our Case 3 analysis demonstrate that these establishments are not 

significantly impacted when taking this engine size into account. 

After considering the economic impacts of this final rule on small entities, we certify that 

this action will not have a significant economic impact on a substantial number of small entities. 

This certification is based on the economic impact of this action to all affected small entities 

across all industries affected. The percentage of small entities impacted by this final rule having 

annualized costs greater than 1 percent of sales is less than 2 percent according to this analysis. 

We thus conclude that there is no significant economic impact on a substantial number of small 

entities (SISNOSE) for this final rule. 

Although the final rule would not have a significant economic impact on a substantial 

number of small entities, EPA nonetheless tried to reduce the impact of the rule on small entities. 

When developing the revised standards, EPA took special steps to ensure that the burdens 

imposed on small entities were minimal. EPA conducted several meetings with industry trade 

 

8

U.S. SBA, Office of Advocacy. A Guide for Government Agencies, How to Comply with the Regulatory 

Flexibility Act, Implementing the President’s Small Business Agenda and Executive Order 13272, May 2003. 

Deleted: proposed

Deleted: proposal

Deleted: proposal

Deleted: proposed

Deleted: proposed
6-12 

associations to discuss regulatory options and the corresponding burden on industry, such as 

recordkeeping and reporting. In addition, as mentioned earlier in this preamble, EPA is 

reducing regulatory requirements for a variety of area sources affected under this RICE rule with 

amendments to the final RICE rules promulgated in 2010. 

6.3 Small Government Entities 

The rule also covers sectors that include entities owned by small and large governments. 

However, given the uncertainty and data limitations associated with identifying and 

appropriately classifying these entities, we computed a “revenue” test for a model small 

government, where the annualized compliance cost is a percentage of annual government 

revenues (U.S. Census, 2005a,b). The use of a “revenue test” for estimating impacts to small 

governments for a rulemaking such as this one is consistent with guidance offered by EPA on 

compliance with SBREFA,9

 and is consistent with guidance published by the US SBA’s Office 

of Advocacy.10 For example, from the 2002 Census (in 2008 dollars), the average revenue for 

small governments (counties and municipalities) with populations fewer than 10,000 are $3 

million per entity, and the average revenue for local governments with populations fewer than 

50,000 is $8 million per entity. For the smallest group of local governments (<10,000 people), 

the cost-to-revenue ratio would be 0.2% or less under each case. For the larger group of 

governments (<50,000 people), the cost-to-revenue ratio is 0.1% or less under all cases. 

 

9

The SBREFA compliance guidance to EPA rule writers regarding the types of small business analysis that should 

be considered can be found at http://www.epa.gov/sbrefa/documents/rfafinalguidance06.pdf, pp. 24-25. 10U.S. SBA, Office of Advocacy. A Guide for Government Agencies, How to Comply with the Regulatory 

Flexibility Act, Implementing the President’s Small Business Agenda and Executive Order 13272, May 2003. 

Deleted: proposes

Deleted: to

Deleted: e

Deleted: We continue to be interested in 

the potential impacts of this proposed rule 

on small entities and welcome comments 

on issues related to such impacts.
7-1 

SECTION 7

HUMAN HEALTH BENEFITS OF EMISSIONS REDUCTIONS 

Synopsis 

Implementation of emissions controls required by the CI RICE NESHAP reconsideration 

is expected to reduce emissions of hazardous air pollutants (HAP) and have ancillary co-benefits 

that would lower ambient concentrations of PM2.5 and ozone. In this section, we quantify the 

monetized co-benefits for this rule associated with reducing exposure to ambient fine particulate 

matter (PM2.5) by reducing emissions of precursors. We estimate the total monetized co-benefits 

to be $770 million to $1.9 billion at a 3% discount rate and $690 million to $1.7 billion at a 7% 

discount rate in 2013. All estimates are in 2010$. These estimates reflect the monetized human 

health benefits of reducing cases of morbidity and premature mortality among populations 

exposed to PM2.5 reduced by this rule. These estimates reflect EPA’s most current interpretation 

of the scientific literature. Higher or lower estimates of benefits are possible using other 

assumptions; examples of this are provided in Figure 7-2. Data, resource, and methodological 

limitations prevented EPA from monetizing the benefits from several important benefit 

categories, including benefits from reducing exposure to HAP, carbon monoxide, and ozone, as 

well as visibility impairment. In addition to reducing emissions of PM precursors, this rule would 

reduce 1,000 tons of HAP and 14,000 tons of carbon monoxide each year.

7.1 Calculation of PM2.5-Related Human Health Co-Benefits 

Assuming that the baseline for this RIA does not include implementation of the 2010 

final CI RICE rule, as we state earlier in this document, this final reconsideration would reduce 

emissions of directly emitted particles and VOCs. Because these emissions are precursors to 

PM2.5, reducing these emissions would also reduce PM2.5 formation, human exposure and the 

incidence of PM2.5-related health effects. Due to analytical limitations, it was not possible to 

provide a comprehensive estimate of PM2.5-related benefits or provide estimates of the health 

benefits associated with exposure to HAP, CO, or ozone. Instead, we used the “benefit-per-ton” 

approach to estimate these benefits. The methodology employed in this analysis is similar to the 

work described in Fann, Fulcher, and Hubbell (2009), but represents an improvement that EPA 

believes would provide more reliable estimates of PM2.5-related health benefits for emissions 

reductions in specific sectors. The key assumptions are described in detail below. These PM2.5 

benefit-per-ton estimates provide the total monetized human health benefits (the sum of 

premature mortality and premature morbidity) of reducing one ton of PM2.5 from a specified 

Deleted: proposed

Deleted: proposed
7-2 

source. EPA has used the benefit per-ton technique in several previous RIAs, including the 

recent SO2 NAAQS RIA (U.S. EPA, 2010). 

The Integrated Science Assessment (ISA) for Particulate Matter (U.S. EPA, 2009b) 

identified the human health effects associated with ambient PM2.5, which include premature 

morality and a variety of morbidity effects associated with acute and chronic exposures. Table 7-

1 shows the quantified and unquantified benefits captured in those benefit-per-ton estimates, but 

this table does not include entries for the unquantified health effects associated with exposure to 

HAP, CO, or ozone nor welfare effects such visibility impairment that are described in section 

7.2. It is important to emphasize that the list of unquantified benefit categories is not exhaustive, 

nor is quantification of each effect complete. 
7-3 

Table 7-1: Human Health Effects of PM2.5 

Category Specific Effect 

Effect Has 

Been 

Quantified 

Effect Has 

Been 

Monetized 

More 

Information 

(refers to 

CSAPR RIA) 

Improved Human Health 

Reduced incidence of 

premature mortality 

from exposure to PM2.5

Adult premature mortality based on cohort 

study estimates and expert elicitation 

estimates (age >25 or age >30) 

  Section 5.4 

Infant mortality (age <1)   Section 5.4 

Reduced incidence of 

morbidity from 

exposure to PM2.5

Non-fatal heart attacks (age > 18)   Section 5.4 

Hospital admissions—respiratory (all 

ages)   Section 5.4 

Hospital admissions—cardiovascular (age 

>20)   Section 5.4 

Emergency room visits for asthma (all 

ages)   Section 5.4 

Acute bronchitis (age 8-12)   Section 5.4 

Lower respiratory symptoms (age 7-14)   Section 5.4 

Upper respiratory symptoms (asthmatics 

age 9-11)   Section 5.4 

Asthma exacerbation (asthmatics age 6-

18)   Section 5.4 

Lost work days (age 18-65)   Section 5.4 

Minor restricted-activity days (age 18-65)   Section 5.4 

Chronic Bronchitis (age >26)   Section 5.4 

Emergency room visits for cardiovascular 

effects (all ages) -- -- Section 5.4 

Strokes and cerebrovascular disease (age 

50-79) -- -- Section 5.4 

Other cardiovascular effects (e.g., other 

ages) -- -- PM ISA2

Other respiratory effects (e.g., pulmonary 

function, non-asthma ER visits, nonbronchitis chronic diseases, other ages and 

populations) 

-- -- PM ISA2

Reproductive and developmental effects 

(e.g., low birth weight, pre-term births, 

etc) 

-- -- PM ISA2,3

Cancer, mutagenicity, and genotoxicity 

effects -- -- PM ISA2,3

1 We assess these benefits qualitatively due to time and resource limitations for this analysis. 2

 We assess these benefits qualitatively because we do not have sufficient confidence in available data or methods. 3

 We assess these benefits qualitatively because current evidence is only suggestive of causality or there are other 

significant concerns over the strength of the association. 

Consistent with the Portland Cement NESHAP (U.S. EPA, 2009a), the benefits estimates 

utilize the concentration-response functions as reported in the epidemiology literature, as well as 

the 12 functions obtained in EPA’s expert elicitation study as a sensitivity analysis. 
7-4 

 One estimate is based on the concentration-response (C-R) function developed from 

the extended analysis of American Cancer Society (ACS) cohort, as reported in Pope 

et al. (2002), a study that EPA has previously used to generate its primary benefits 

estimate. When calculating the estimate, EPA applied the effect coefficient as 

reported in the study without an adjustment for assumed concentration threshold of 10 

μg/m3

 as was done in recent (2006-2009) Office of Air and Radiation RIAs. 

 One estimate is based on the C-R function developed from the extended analysis of 

the Harvard Six Cities cohort, as reported by Laden et al (2006). This study, 

published after the completion of the Staff Paper for the 2006 PM2.5 NAAQS, has 

been used as an alternative estimate in the PM2.5 NAAQS RIA and PM2.5 benefits 

estimates in RIAs completed since the PM2.5 NAAQS. When calculating the 

estimate, EPA applied the effect coefficient as reported in the study without an 

adjustment for assumed concentration threshold of 10 μg/m3

 as was done in recent 

(2006-2009) RIAs. 

 Twelve estimates are based on the C-R functions from EPA’s expert elicitation study 

(Roman et al., 2008) on the PM2.5 -mortality relationship and interpreted for benefits 

analysis in EPA’s final RIA for the PM2.5 NAAQS. For that study, twelve experts 

(labeled A through L) provided independent estimates of the PM2.5 -mortality 

concentration-response function. EPA practice has been to develop independent 

estimates of PM2.5 -mortality estimates corresponding to the concentration-response 

function provided by each of the twelve experts, to better characterize the degree of 

variability in the expert responses. 

The effect coefficients are drawn from epidemiology studies examining two large 

population cohorts: the American Cancer Society cohort (Pope et al., 2002) and the Harvard Six 

Cities cohort (Laden et al., 2006).1

 These are logical choices for anchor points in our 

presentation because, while both studies are well designed and peer reviewed, there are strengths 

and weaknesses inherent in each, which we believe argues for using both studies to generate 

benefits estimates. Previously, EPA had calculated benefits based on these two empirical 

studies, but derived the range of benefits, including the minimum and maximum results, from an 

expert elicitation of the relationship between exposure to PM2.5 and premature mortality (Roman 

 

1

 These two studies specify multi-pollutant models that control for SO2, among other co-pollutants. 
7-5 

et al., 2008).2

 Within this assessment, we include the benefits estimates derived from the 

concentration-response function provided by each of the twelve experts to better characterize the 

uncertainty in the concentration-response function for mortality and the degree of variability in 

the expert responses. Because the experts used these cohort studies to inform their 

concentration-response functions, benefits estimates using these functions generally fall between 

results using these epidemiology studies (see Figure 7-2). In general, the expert elicitation 

results support the conclusion that the benefits of PM2.5 control are very likely to be substantial. 

Readers interested in reviewing the general methodology for creating the benefit-per-ton 

estimates used in this analysis should consult the draft Technical Support Document (TSD) on 

estimating the benefits per ton of reducing PM2.5 and its precursors in the “Other Non-EGU 

Point” category (U.S. EPA, 2012c).3

 The primary difference between the estimates used in this 

analysis and the estimates reported in Fann, Fulcher, and Hubbell (2009) is the air quality 

modeling data utilized. The air quality modeling data used in this analysis use more narrow 

sectors. In addition, the updated air quality modeling data reflects more recent emissions data 

(2005 rather than 2001) and has a higher spatial resolution (12km rather than 36 km grid cells). 

The benefits methodology, such as health endpoints assessed, risk estimates applied, and 

valuation techniques applied did not change. As noted below in the characterization of 

uncertainty, these updated estimates still have similar limitations as all national-average benefitper-ton estimates in that they reflect the geographic distribution of the modeled emissions, which 

may not exactly match the emission reductions in this rulemaking, and they may not reflect local 

variability in population density, meteorology, exposure, baseline health incidence rates, or other 

local factors for any specific location. In this analysis, we apply these national benefit-per-ton 

estimates calculated for this category for directly emitted particles and multiply them by the 

corresponding emission reductions. 

These models assume that all fine particles, regardless of their chemical composition, are 

equally potent in causing premature mortality because the scientific evidence is not yet sufficient 

to allow differentiation of effects estimates by particle type. Directly emitted particles are the 

primary PM2.5 precursors affected by this rule. Even though we assume that all fine particles 

 

2

 Please see the Section 5.2 of the Portland Cement RIA in Appendix 5A for more information regarding the change 

in the presentation of benefits estimates. 3

 Stationary engines are included in the other non-EGU point source category. If the affected stationary engines are 

more rural than the average of the non-EGU sources modeled, then it is possible that the benefits may be 

somewhat less than we have estimated here. The TSD provides the geographic distribution of the air quality 

changes associated with this sector. It is important to emphasize that this modeling represents the best available 

information on the air quality impact on a per ton basis for these sources. 
7-6 

have equivalent health effects, the benefit-per-ton estimates vary between precursors depending 

on the location and magnitude of their impact on PM2.5 levels, which drive population exposure. 

The sector-specific modeling does not provide estimates of the PM2.5-related benefits associated 

with reducing VOC emissions, but these unquantified benefits are generally small compared to 

other PM2.5 precursors (U.S. EPA, 2012). 

The benefit-per-ton coefficients in this analysis were derived using modified versions of 

the health impact functions used in the PM NAAQS Regulatory Impact Analysis (U.S. EPA, 

2006). Specifically, this analysis uses the method first applied in the Portland Cement NESHAP 

RIA (U.S. EPA, 2009a), which applied the functions directly from the epidemiology studies 

without an adjustment for an assumed threshold. Removing the threshold assumption is a key 

difference between the method used in this analysis of PM benefits and the methods used in 

RIAs prior to Portland Cement proposal, and we now calculate incremental benefits down to the 

lowest modeled PM2.5 air quality levels.4

 

Based on our review of the current body of scientific literature, EPA now estimates PMrelated mortality without applying an assumed concentration threshold. EPA’s Integrated 

Science Assessment for Particulate Matter (U.S. EPA, 2009b), which was reviewed by EPA’s 

Clean Air Scientific Advisory Committee (U.S. EPA-SAB, 2009a; U.S. EPA-SAB, 2009b), 

concluded that the scientific literature consistently finds that a no-threshold log-linear model 

most adequately portrays the PM-mortality concentration-response relationship while 

recognizing potential uncertainty about the exact shape of the concentration-response function. 

Consistent with this finding, we have conformed the previous threshold sensitivity 

analysis to the current state of the PM science by incorporating a “Lowest Measured Level” 

(LML) assessment, which is a method EPA has employed in several recent RIAs including the 

Cross-State Air Pollution Rule (U.S. EPA, 2011b). This information allows readers to determine 

the portion of population exposed to annual mean PM2.5 levels at or above the LML of each 

study; in general, our confidence in the estimated PM mortality decreases as we consider air 

quality levels further below the LML in major cohort studies that estimate PM-related mortality. 

While an LML assessment provides some insight into the level of uncertainty in the estimated 

PM mortality benefits, EPA does not view the LML as a threshold and continues to quantify PMrelated mortality impacts using a full range of modeled air quality concentrations. It is important 

to emphasize that we have high confidence in PM2.5-related effects down to the lowest LML of 

the major cohort studies, which is 5.8 μg/m3

. Just because we have greater confidence in the 

 

4

 Additional updates since the Cement RIA include a revised VSL and updated baseline incidence rates. 
7-7 

benefits above the LML, this does not mean that we have no confidence that benefits occur 

below the LML. For a summary of the scientific review statements regarding the lack of a 

threshold in the PM2.5-mortality relationship, see the Technical Support Document (TSD) 

entitled Summary of Expert Opinions on the Existence of a Threshold in the ConcentrationResponse Function for PM2.5-related Mortality (U.S. EPA, 2010b). 

For this analysis, policy-specific air quality data is not available due to time or resource 

limitations. For these rules, we are unable to estimate the percentage of premature mortality 

associated with this specific rule’s emission reductions at each PM2.5 level. However, we believe 

that it is still important to characterize the distribution of exposure to baseline air quality levels. 

As a surrogate measure of mortality impacts, we provide the percentage of the population 

exposed at each PM2.5 level using the source apportionment modeling used to calculate the 

benefit-per-ton estimates for this sector. It is important to note that baseline exposure is only one 

parameter in the health impact function, along with baseline incidence rates population, and 

change in air quality. In other words, the percentage of the population exposed to air pollution 

below the LML is not the same as the percentage of the population experiencing health impacts 

as a result of a specific emission reduction policy. The most important aspect, which we are 

unable to quantify for rules without rule-specific air quality modeling, is the shift in exposure 

associated with this specific rule. Therefore, caution is warranted when interpreting the LML 

assessment for this rule. The results of this analysis are provided in Section 7.3. 

As is the nature of RIAs, the assumptions and methods used to estimate air quality 

benefits evolve over time to reflect the Agency’s most current interpretation of the scientific and 

economic literature. For a period of time (2004-2008), the Office of Air and Radiation (OAR) 

valued mortality risk reductions using a value of statistical life (VSL) estimate derived from a 

limited analysis of some of the available studies. OAR arrived at a VSL using a range of $1 

million to $10 million (2000$) consistent with two meta-analyses of the wage-risk literature. 

The $1 million value represented the lower end of the interquartile range from the Mrozek and 

Taylor (2002) meta-analysis of 33 studies. The $10 million value represented the upper end of 

the interquartile range from the Viscusi and Aldy (2003) meta-analysis of 43 studies. The mean 

estimate of $5.5 million (2000$)5

 was also consistent with the mean VSL of $5.4 million 

estimated in the Kochi et al. (2006) meta-analysis. However, the Agency neither changed its 

official guidance on the use of VSL in rulemakings nor subjected the interim estimate to a 

 

5

 After adjusting the VSL for a different currency year (2010$) and to account for income growth to 2015 of the $5.5 

million value, the VSL is $8.0 million. 
7-8 

scientific peer-review process through the Science Advisory Board (SAB) or other peer-review 

group. 

During this time, the Agency continued work to update its guidance on valuing mortality 

risk reductions, including commissioning a report from meta-analytic experts to evaluate 

methodological questions raised by EPA and the SAB on combining estimates from the various 

data sources. In addition, the Agency consulted several times with the Science Advisory Board 

Environmental Economics Advisory Committee (SAB-EEAC) on the issue. With input from the 

meta-analytic experts, the SAB-EEAC advised the Agency to update its guidance using specific, 

appropriate meta-analytic techniques to combine estimates from unique data sources and 

different studies, including those using different methodologies (i.e., wage-risk and stated 

preference) (U.S. EPA-SAB, 2007). 

 

Until updated guidance is available, the Agency determined that a single, peer-reviewed 

estimate applied consistently best reflects the SAB-EEAC advice it has received. Therefore, the 

Agency has decided to apply the VSL that was vetted and endorsed by the SAB in the Guidelines 

for Preparing Economic Analyses (U.S. EPA, 2000)6

 while the Agency continues its efforts to 

update its guidance on this issue. This approach calculates a mean value across VSL estimates 

derived from 26 labor market and contingent valuation studies published between 1974 and 

1991. The mean VSL across these studies is $6.3 million (2000$).7

 The Agency is committed to 

using scientifically sound, appropriately reviewed evidence in valuing mortality risk reductions 

and has made significant progress in responding to the SAB-EEAC’s specific recommendations. 

In implementing these rules, emission controls may lead to reductions in ambient PM2.5 

below the National Ambient Air Quality Standards (NAAQS) for PM in some areas and assist 

other areas with attaining the PM NAAQS. Because the PM NAAQS RIAs also calculate PM 

benefits, there are important differences worth noting in the design and analytical objectives of 

each RIA. The NAAQS RIAs illustrate the potential costs and benefits of attaining a new air 

quality standard nationwide based on an array of emission control strategies for different sources. 

In short, NAAQS RIAs hypothesize, but do not predict, the control strategies that States may 

choose to enact when implementing a NAAQS. The setting of a NAAQS does not directly result 

 

6

 In revised Economic Guidelines (U.S. EPA, 2010c), EPA retained the VSL endorsed by the SAB with the 

understanding that further updates to the mortality risk valuation guidance would be forthcoming in the near future. 

Therefore, this report does not represent final agency policy. 7

 This value is $4.8 million in 1990$. In this analysis, we adjust the VSL to account for a different currency year 

($2010) and to account for income growth to 2015. After applying these adjustments to the $6.3 million value, the 

VSL is $9.2 million. 
7-9 

in costs or benefits, and as such, the NAAQS RIAs are merely illustrative and are not intended to 

be added to the costs and benefits of other regulations that result in specific costs of control and 

emission reductions. However, some costs and benefits estimated in this RIA account for the 

same air quality improvements as estimated in the illustrative PM2.5 NAAQS RIA. 

By contrast, the emission reductions for implementation rules are from a specific class of 

well-characterized sources. In general, EPA is more confident in the magnitude and location of 

the emission reductions for implementation rules rather than illustrative NAAQS analyses. 

Emission reductions achieved under these and other promulgated rules will ultimately be 

reflected in the baseline of future NAAQS analyses, which would reduce the incremental costs 

and benefits associated with attaining the NAAQS. EPA remains forward looking towards the 

next iteration of the 5-year review cycle for the NAAQS, and as a result does not issue updated 

RIAs for existing NAAQS that retroactively update the baseline for NAAQS implementation. 

For more information on the relationship between the NAAQS and rules such as analyzed here, 

please see Section 1.2.4 of the SO2 NAAQS RIA (U.S. EPA, 2010a). 

 
7-10 

Figure 7.1 illustrates the relative breakdown of the monetized PM2.5 health benefits. 

Figure 7-1: Breakdown of Monetized PM2.5 Health Benefits using Mortality Function 

from Pope et al. (2002)* 

*This pie chart breakdown is illustrative, using the results based on Pope et al. (2002) as an example. Using the 

Laden et al. (2006) function for premature mortality, the percentage of total monetized benefits due to adult 

mortality would be 97%. This chart shows the breakdown using a 3% discount rate, and the results would be similar 

if a 7% discount rate was used. 

 Table 7-2 provides a general summary of the monetized PM-related health benefits by 

precursor, including the emission reductions and benefit-per-ton estimates at discount rates of 

3% and 7%.8

 Table 7-3 provides a summary of the reductions in health incidences as a result of 

the pollution reductions. In Table 7-4, we provide the benefits using our anchor points of Pope 

et al. and Laden et al. as well as the results from the expert elicitation on PM mortality. Figure 

7-2 provides a visual representation of the range of PM2.5-related benefits estimates using 

 

8

 To comply with Circular A-4, EPA provides monetized benefits using discount rates of 3% and 7% (OMB, 2003). 

These benefits are estimated for a specific analysis year (i.e., 2013), and most of the PM benefits occur within 

that year with two exceptions: acute myocardial infarctions (AMIs) and premature mortality. For AMIs, we 

assume 5 years of follow-up medical costs and lost wages. For premature mortality, we assume that there is a 

“cessation” lag between PM exposures and the total realization of changes in health effects. Although the 

structure of the lag is uncertain, EPA follows the advice of the SAB-HES to assume a segmented lag structure 

characterized by 30% of mortality reductions in the first year, 50% over years 2 to 5, and 20% over the years 6 to 

20 after the reduction in PM2.5 (U.S. EPA-SAB, 2004). Changes in the lag assumptions do not change the total 

number of estimated deaths but rather the timing of those deaths. Therefore, discounting only affects the AMI 

costs after the analysis year and the valuation of premature mortalities that occur after the analysis year. As such, 

the monetized benefits using a 7% discount rate are only approximately 10% less than the monetized benefits 

using a 3% discount rate. 

Adult Mortality ‐ Pope et

al. 93%

ChronicBronchitis 4%

AMI 2%

Acute Respiratory Symptoms

0.5%

InfantMortality 0.4%

Work Loss Days 0.2%

HospitalAdmissions, Cardio

0.2% HospitalAdmissions, Resp

0.04%

Asthma Exacerbation 0.01%

Acute Bronchitis 0.01%

UpperResp Symp 0.00%

LowerResp Symp 0.00%

ERVisits, Resp 0.00%

Other1%
7-11 

concentration-response functions supplied by experts. Figure 7-3 shows a breakdown of 

monetized benefits by engine size. 

The benefit-per-ton estimates shown in this RIA are different than the benefit-per-ton 

estimates cited in the 2010 final SI RICE RIA for two reasons. First, these estimates are based 

on updated air quality modeling, which results in slightly higher benefits per ton for other nonEGU point sources than the previous modeling. Second, these estimates have been inflated to 

2010$. Third, the new air quality modeling did not provide estimates associated with reducing 

VOCs. Since the reconsideration proposal, EPA has made several updates to the approach we 

use to estimate mortality and morbidity benefits in the PM NAAQS RIAs (U.S. EPA, 2012a,b) 

including updated epidemiology studies, health endpoints, and population data. Although we 

have not re-estimated the benefits for this rule to apply this new approach, these updates 

generally offset each other, and we anticipate that the rounded benefits estimated for this rule are 

unlikely to be different than those provided below.

Table 7-2: General Summary of Monetized PM2.5-Related Health Co-Benefits Estimates 

for the CI RICE NESHAP Reconsideration (millions of 2010$)*

Pollutant 

Emissions 

Reductions 

(tons) 

Benefit 

per ton 

(Pope, 

3%) 

Benefit 

per ton 

(Laden, 

3%) 

Benefit 

per ton 

(Pope, 

7%) 

Benefit 

per ton 

(Laden, 

7%) 

Total Monetized 

Benefits (millions 

of 2010$ at 3%) 

Total Monetized 

Benefits (millions 

of 2010$ at 7%) 

PM2.5 Precursors 

Direct 

PM2.5

2,818 $270,000 $670,000 $240,000 $610,000 $770 to $1,900 $690 to $1,700 

 Total $770 to $1,900 $690 to $1,700

*

 All estimates are for the analysis year (2013), and are rounded to two significant figures so numbers may not sum 

across columns. It is important to note that the monetized benefits do not include reduced health effects from direct 

exposure to NO2, ozone exposure, ecosystem effects, or visibility impairment. All fine particles are assumed to have 

equivalent health effects, but the benefit per ton estimates vary because each ton of precursor reduced has a different 

propensity to form PM2.5. The monetized benefits incorporate the conversion from precursor emissions to ambient 

fine particles. Confidence intervals are unavailable for this analysis because of the benefit-per-ton methodology.

Although we have not re-estimated the benefits for this rule to apply the updated methods in the PM NAAQS RIA 

(U.S. EPA, 2012b), these updates generally offset each other, and we anticipate that the rounded benefits estimated 

for this rule are unlikely to be different than those provided here.

 

Formatted: Indent: First line: 0.5"

Deleted: ¶

Deleted: Proposed
7-12 

Table 7-3: Summary of Reductions in Health Incidences from PM2.5-Related Co-Benefits 

for CI RICE NESHAP Reconsideration* 

Avoided Premature Mortality

Pope et al. 85 

Laden et al. 220 

Avoided Morbidity 

Chronic Bronchitis 59 

Emergency Department Visits, Respiratory 66 

Hospital Admissions, Respiratory 16 

Hospital Admissions, Cardiovascular 35 

Acute Bronchitis 130 

Lower Respiratory 1,700 

Upper Respiratory 1,300 

Minor Restricted Activity Days 68,000 

Work Loss Days 12,000 

Asthma Exacerbation 2,800 

Acute Myocardial Infarction 94 

* All estimates are for the analysis year (2013) and are rounded to whole numbers with two significant figures. All 

fine particles are assumed to have equivalent health effects because the scientific evidence is not yet sufficient to 

allow differentiation of effects estimates by particle type. Confidence intervals are unavailable for this analysis 

because of the benefit-per-ton methodology. 

Deleted: Proposed
7-13 

Table 7-4: All PM2.5 Co-Benefits Estimates for the CI RICE NESHAP Reconsideration at 

discount rates of 3% and 7% in 2013 (in millions of 2010$)* 

 3% 7% 

Benefit-per-ton Coefficients Derived from Epidemiology Literature

Pope et al. $770 $690 

Laden et al. $1,900 $1,700 

Benefit-per-ton Coefficients Derived from Expert Elicitation 

Expert A $2,000 $1,800 

Expert B $1,500 $1,400 

Expert C $1,500 $1,400 

Expert D $1,100 $970 

Expert E $2,500 $2,200 

Expert F $1,400 $1,200 

Expert G $920 $820 

Expert H $1,200 $1,000 

Expert I $1,500 $1,400 

Expert J $1,200 $1,100 

Expert K $290 $260 

Expert L $1,000 $910 

*

All estimates are rounded to two significant figures. The benefits estimates from the Expert Elicitation are provided 

as a reasonable characterization of the uncertainty in the mortality estimates associated with the concentrationresponse function. Confidence intervals are unavailable for this analysis because of the benefit-per-ton methodology 

Deleted: Proposed
7-14 

 

Figure 7-2: Total Monetized PM2.5 Co-Benefits of CI RICE NESHAP Reconsideration in 

2013 

*This graph shows the estimated benefits at discount rates of 3% and 7% using effect coefficients derived from the 

Pope et al. study and the Laden et al study, as well as 12 effect coefficients derived from EPA’s expert elicitation on 

PM mortality. The results shown are not the direct results from the studies or expert elicitation; rather, the estimates 

are based in part on the concentration-response function provided in those studies. 

$0

$500

$1,000

$1,500

$2,000

$2,500

Pope et al.

Laden et al.

Millions(2010$)

PM2.5mortality benefits estimates derived from 2 epidemiology functions and 12 expert functions

3% DR

7% DR

Deleted: Proposed
7-15 

Figure 7-3: Breakdown of Total Monetized PM2.5 Co-Benefits of CI RICE NESHAP 

Reconsideration by Engine Size 

7.2 Unquantified Benefits 

The monetized benefits estimated in this RIA only reflect a subset of benefits attributable 

to the health effect reductions associated with ambient fine particles. Data, time, and resource 

limitations prevented EPA from quantifying the impacts to, or monetizing the benefits from 

several important benefit categories, including benefits from reducing exposure to HAP, CO, and 

ozone exposure, as well as ecosystem effects, and visibility impairment. This does not imply that 

there are no benefits associated with these emission reductions. These benefits are described 

qualitatively in this section. 

7.2.1 HAP Benefits 

Even though emissions of air toxics from all sources in the U.S. declined by approximately 

42% since 1990, the 2005 National-Scale Air Toxics Assessment (NATA) predicts that most 

Americans are exposed to ambient concentrations of air toxics at levels that have the potential to 

cause adverse health effects (U.S. EPA, 2011c).9

 The levels of air toxics to which people are 

exposed vary depending on where people live and work and the kinds of activities in which they 

engage. In order to identify and prioritize air toxics, emission source types and locations that are 

 

9 The 2005 NATA is available on the Internet at http://www.epa.gov/ttn/atw/nata2005/. 

Major <500 HP

25%

Major >500 HP

6%

Area <600 HP

36%

Area >600 HP

33%

Deleted: Proposed
7-16 

of greatest potential concern, U.S. EPA conducts the NATA.10 The most recent NATA was 

conducted for calendar year 2005 and was released in March 2011. NATA includes four steps: 

1) Compiling a national emissions inventory of air toxics emissions from outdoor sources 

2) Estimating ambient and exposure concentrations of air toxics across the United States 

3) Estimating population exposures across the United States 

4) Characterizing potential public health risk due to inhalation of air toxics including both 

cancer and noncancer effects 

Based on the 2005 NATA, EPA estimates that about 5% of census tracts nationwide have 

increased cancer risks greater than 100 in a million. The average national cancer risk is about 50 

in a million. Nationwide, the key pollutants that contribute most to the overall cancer risks are 

formaldehyde and benzene.11 Secondary formation (e.g., formaldehyde forming from other 

emitted pollutants) was the largest contributor to cancer risks, while stationary, mobile and 

background sources contribute almost equal portions of the remaining cancer risk. 

Noncancer health effects can result from chronic,12 subchronic,13 or acute14 inhalation 

exposures to air toxics, and include neurological, cardiovascular, liver, kidney, and respiratory 

effects as well as effects on the immune and reproductive systems. According to the 2005 

NATA, about three-fourths of the U.S. population was exposed to an average chronic 

concentration of air toxics that has the potential for adverse noncancer respiratory health effects.

Results from the 2005 NATA indicate that acrolein is the primary driver for noncancer 

respiratory risk. 

 

10 The NATA modeling framework has a number of limitations that prevent its use as the sole basis for setting 

regulatory standards. These limitations and uncertainties are discussed on the 2005 NATA website. Even so, 

this modeling framework is very useful in identifying air toxic pollutants and sources of greatest concern, setting 

regulatory priorities, and informing the decision making process. U.S. EPA. (2011) 2005 National-Scale Air 

Toxics Assessment. http://www.epa.gov/ttn/atw/nata2005/ 11 Details about the overall confidence of certainty ranking of the individual pieces of NATA assessments including 

both quantitative (e.g., model-to-monitor ratios) and qualitative (e.g., quality of data, review of emission 

inventories) judgments can be found at http://www.epa.gov/ttn/atw/nata/roy/page16.html. 12 Chronic exposure is defined in the glossary of the Integrated Risk Information (IRIS) database 

(http://www.epa.gov/iris) as repeated exposure by the oral, dermal, or inhalation route for more than 

approximately 10% of the life span in humans (more than approximately 90 days to 2 years in typically used 

laboratory animal species). 13 Defined in the IRIS database as repeated exposure by the oral, dermal, or inhalation route for more than 30 days, 

up to approximately 10% of the life span in humans (more than 30 days up to approximately 90 days in typically 

used laboratory animal species). 14 Defined in the IRIS database as exposure by the oral, dermal, or inhalation route for 24 hours or less. 
7-17 

Figure 7-4 and Figure 7-5 depict the estimated census tract-level carcinogenic risk and 

noncancer respiratory hazard from the assessment. It is important to note that large reductions in 

HAP emissions may not necessarily translate into significant reductions in health risk because 

toxicity varies by pollutant, and exposures may or may not exceed levels of concern. For 

example, acetaldehyde mass emissions are more than double acrolein emissions on a national 

basis, according to EPA’s 2005 National Emissions Inventory (NEI). However, the Integrated 

Risk Information System (IRIS) reference concentration (RfC) for acrolein is considerably lower 

than that for acetaldehyde, suggesting that acrolein could be potentially more toxic than 

acetaldehyde. Thus, it is important to account for the toxicity and exposure, as well as the mass 

of the targeted emissions. 

Figure 7-4 Estimated Chronic Census Tract Carcinogenic Risk from HAP exposure 

from outdoor sources (2005 NATA) 

Deleted: Figure 

Deleted: Figure 
7-18 

Figure 7-5 Estimated Chronic Census Tract Noncancer (Respiratory) Risk from HAP 

exposure from outdoor sources (2005 NATA) 

Due to methodology and time limitations under the court-ordered schedule, we were 

unable to estimate the benefits associated with the hazardous air pollutants that would be reduced 

as a result of these rules. In a few previous analyses of the benefits of reductions in HAP, EPA 

has quantified the benefits of potential reductions in the incidences of cancer and non-cancer risk 

(e.g., U.S. EPA, 1995). In those analyses, EPA relied on unit risk factors (URF) developed 

through risk assessment procedures.15 These URFs are designed to be conservative, and as such, 

are more likely to represent the high end of the distribution of risk rather than a best or most 

likely estimate of risk. As the purpose of a benefit analysis is to describe the benefits most likely 

to occur from a reduction in pollution, use of high-end, conservative risk estimates would 

overestimate the benefits of the regulation. While we used high-end risk estimates in past 

analyses, advice from the EPA’s Science Advisory Board (SAB) recommended that we avoid 

 

15The unit risk factor is a quantitative estimate of the carcinogenic potency of a pollutant, often expressed as the 

probability of contracting cancer from a 70-year lifetime continuous exposure to a concentration of one μg/m3

 of 

a pollutant. 
7-19 

using high-end estimates in benefit analyses (U.S. EPA-SAB, 2002). Since this time, EPA has 

continued to develop better methods for analyzing the benefits of reductions in HAP. 

As part of the second prospective analysis of the benefits and costs of the Clean Air Act 

(U.S. EPA, 2011a), EPA conducted a case study analysis of the health effects associated with 

reducing exposure to benzene in Houston from implementation of the Clean Air Act (IEc, 2009). 

While reviewing the draft report, EPA’s Advisory Council on Clean Air Compliance Analysis 

concluded that “the challenges for assessing progress in health improvement as a result of 

reductions in emissions of hazardous air pollutants (HAPs) are daunting...due to a lack of 

exposure-response functions, uncertainties in emissions inventories and background levels, the 

difficulty of extrapolating risk estimates to low doses and the challenges of tracking health 

progress for diseases, such as cancer, that have long latency periods” (U.S. EPA-SAB, 2008). 

In 2009, EPA convened a workshop to address the inherent complexities, limitations, and 

uncertainties in current methods to quantify the benefits of reducing HAP. Recommendations 

from this workshop included identifying research priorities, focusing on susceptible and 

vulnerable populations, and improving dose-response relationships (Gwinn et al., 2011). 

In summary, monetization of the benefits of reductions in cancer incidences requires 

several important inputs, including central estimates of cancer risks, estimates of exposure to 

carcinogenic HAP, and estimates of the value of an avoided case of cancer (fatal and non-fatal). 

Due to methodology and time limitations under the court-ordered schedule, we did not attempt to 

monetize the health benefits of reductions in HAP in this analysis. Instead, we provide a 

qualitative analysis of the health effects associated with the HAP anticipated to be reduced by 

these rules. EPA remains committed to improving methods for estimating HAP benefits by 

continuing to explore additional concepts of benefits, including changes in the distribution of 

risk. 

Although numerous HAP may be emitted from CI RICE, a few HAP account for over 90% of 

the total mass of HAP emissions emitted. These HAP are formaldehyde (72%), acetaldehyde (8%), 

acrolein (7%), methanol (3%), and benzene (3%). Although we do not have estimates of emission 

reductions for each HAP, this rule for existing CI engines is anticipated to reduce 1,000 tons of HAP 

each year. Below we describe the health effects associated with the top 5 HAP by mass emitted from 

CI RICE.
7-20 

Formaldehyde 

Since 1987, EPA has classified formaldehyde as a probable human carcinogen based on 

evidence in humans and in rats, mice, hamsters, and monkeys.16 Substantial additional research 

since that time informs current scientific understanding of the health effects associated with 

exposure to formaldehyde. These include recently published research conducted by the National 

Cancer Institute (NCI) which found an increased risk of nasopharyngeal cancer and 

lymphohematopoietic malignancies such as leukemia among workers exposed to 

formaldehyde.17,18 In an analysis of the lymphohematopoietic cancer mortality from an extended 

follow-up of these workers, NCI confirmed an association between lymphohematopoietic cancer 

risk and peak formaldehyde exposures.19 A recent NIOSH study of garment workers also found 

increased risk of death due to leukemia among workers exposed to formaldehyde.20 Extended 

follow-up of a cohort of British chemical workers did not find evidence of an increase in 

nasopharyngeal or lymphohematopoietic cancers, but a continuing statistically significant excess 

in lung cancers was reported.21

In the past 15 years there has been substantial research on the inhalation dosimetry for 

formaldehyde in rodents and primates by the Chemical Industry Institute of Toxicology (CIIT, 

now renamed the Hamner Institutes for Health Sciences), with a focus on use of rodent data for 

refinement of the quantitative cancer dose-response assessment.22,23,24 CIIT’s risk assessment of 

 

16 U.S. EPA. 1987. Assessment of Health Risks to Garment Workers and Certain Home Residents from Exposure to 

Formaldehyde, Office of Pesticides and Toxic Substances, April 1987. Docket EPA-HQ-OAR-2010-0162. 17 Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Blair, A. 2003. Mortality from lymphohematopoetic 

malignancies among workers in formaldehyde industries. Journal of the National Cancer Institute 95: 1615-

1623. Docket EPA-HQ-OAR-2010-0162. 18 Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Blair, A. 2004. Mortality from solid cancers among 

workers in formaldehyde industries. American Journal of Epidemiology 159: 1117-1130. Docket EPA-HQOAR-2010-0162. 19 Beane Freeman, L. E.; Blair, A.; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Hoover, R. N.; Hauptmann, M. 2009. 

Mortality from lymphohematopoietic malignancies among workers in formaldehyde industries: The National 

Cancer Institute cohort. J. National Cancer Inst. 101: 751-761. Docket EPA-HQ-OAR-2010-0162. 20 Pinkerton, L. E. 2004. Mortality among a cohort of garment workers exposed to formaldehyde: an update. 

Occup. Environ. Med. 61: 193-200. Docket EPA-HQ-OAR-2010-0162. 21 Coggon, D, EC Harris, J Poole, KT Palmer. 2003. Extended follow-up of a cohort of British chemical workers 

exposed to formaldehyde. J National Cancer Inst. 95:1608-1615. Docket EPA-HQ-OAR-2010-0162. 22 Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D Kalisak, J Preston, and FJ Miller. 2003. Biologically 

motivated computational modeling of formaldehyde carcinogenicity in the F344 rat. Tox Sci 75: 432-447. 

Docket EPA-HQ-OAR-2010-0162. 23 Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D Kalisak, J Preston, and FJ Miller. 2004. Human respiratory 

tract cancer risks of inhaled formaldehyde: Dose-response predictions derived from biologically-motivated 

computational modeling of a combined rodent and human dataset. Tox Sci 82: 279-296. Docket EPA-HQ-OAR2010-0162. 
7-21 

formaldehyde incorporated mechanistic and dosimetric information on formaldehyde. These data 

were modeled using a biologically-motivated two-stage clonal growth model for cancer and also 

a point of departure based on a Benchmark Dose approach. However, it should be noted that 

recent research published by EPA indicates that when two-stage modeling assumptions are 

varied, resulting dose-response estimates can vary by several orders of magnitude.25,26,27,28 These 

findings are not supportive of interpreting the CIIT model results as providing a conservative 

(health protective) estimate of human risk.29 EPA research also examined the contribution of the 

two-stage modeling for formaldehyde towards characterizing the relative weights of key events 

in the mode-of-action of a carcinogen. For example, the model-based inference in the published 

CIIT study that formaldehyde’s direct mutagenic action is not relevant to the compound’s 

tumorigenicity was found not to hold under variations of modeling assumptions.30

Based on the developments of the last decade, in 2004, the working group of the IARC 

concluded that formaldehyde is carcinogenic to humans (Group 1), on the basis of sufficient 

evidence in humans and sufficient evidence in experimental animals - a higher classification than 

previous IARC evaluations. After reviewing the currently available epidemiological evidence, 

the IARC (2006) characterized the human evidence for formaldehyde carcinogenicity as 

“sufficient,” based upon the data on nasopharyngeal cancers; the epidemiologic evidence on 

leukemia was characterized as “strong.”31

Formaldehyde exposure also causes a range of noncancer health effects, including 

irritation of the eyes (burning and watering of the eyes), nose and throat. Effects from repeated 

 24 Chemical Industry Institute of Toxicology (CIIT).1999. Formaldehyde: Hazard characterization and dose-response 

assessment for carcinogenicity by the route of inhalation. CIIT, September 28, 1999. Research Triangle Park, 

NC. Docket EPA-HQ-OAR-2010-0162. 25 U.S. EPA. Analysis of the Sensitivity and Uncertainty in 2-Stage Clonal Growth Models for Formaldehyde with 

Relevance to Other Biologically-Based Dose Response (BBDR) Models. U.S. Environmental Protection Agency, 

Washington, D.C., EPA/600/R-08/103, 2008. Docket EPA-HQ-OAR-2010-0162. 26 Subramaniam, R; Chen, C; Crump, K; .et .al. (2008) Uncertainties in biologically-based modeling of 

formaldehyde-induced cancer risk: identification of key issues. Risk Anal 28(4):907-923. Docket EPA-HQOAR-2010-0162. 27 Subramaniam RP; Crump KS; Van Landingham C; et. al. (2007) Uncertainties in the CIIT model for 

formaldehyde-induced carcinogenicity in the rat: A limited sensitivity analysis–I. Risk Anal, 27: 1237–1254. 

Docket EPA-HQ-OAR-2010-0162. 28 Crump, K; Chen, C; Fox, J; .et .al. (2008) Sensitivity analysis of biologically motivated model for formaldehydeinduced respiratory cancer in humans. Ann Occup Hyg 52:481-495. Docket EPA-HQ-OAR-2010-0162. 29 Crump, K; Chen, C; Fox, J; .et .al. (2008) Sensitivity analysis of biologically motivated model for formaldehydeinduced respiratory cancer in humans. Ann Occup Hyg 52:481-495. Docket EPA-HQ-OAR-2010-0162. 30 Subramaniam RP; Crump KS; Van Landingham C; et. al. (2007) Uncertainties in the CIIT model for 

formaldehyde-induced carcinogenicity in the rat: A limited sensitivity analysis–I. Risk Anal, 27: 1237–1254. 

Docket EPA-HQ-OAR-2010-0162. 31 International Agency for Research on Cancer (2006) Formaldehyde, 2-Butoxyethanol and 1-tert-Butoxypropan-2-

ol. Monographs Volume 88. World Health Organization, Lyon, France. Docket EPA-HQ-OAR-2010-0162. 
7-22 

exposure in humans include respiratory tract irritation, chronic bronchitis and nasal epithelial 

lesions such as metaplasia and loss of cilia. Animal studies suggest that formaldehyde may also 

cause airway inflammation – including eosinophil infiltration into the airways. There are several 

studies that suggest that formaldehyde may increase the risk of asthma – particularly in the 

young.32,33

 The above-mentioned rodent and human studies, as well as mechanistic information and 

their analyses, were evaluated in EPA’s recent Draft Toxicological Review of Formaldehyde – 

Inhalation Assessment through the Integrated Risk Information System (IRIS) program. This 

draft IRIS assessment was released in June 2010 for public review and comment and external 

peer review by the National Research Council (NRC). The NRC released their review report in 

April 2011 (http://www.nap.edu/catalog.php?record_id=13142). The EPA is currently revising 

the draft assessment in response to this review. 

Acetaldehyde 

Acetaldehyde is classified in EPA’s IRIS database as a probable human carcinogen, based 

on nasal tumors in rats, and is considered toxic by the inhalation, oral, and intravenous routes.34 

Acetaldehyde is reasonably anticipated to be a human carcinogen by the U.S. Department of 

Health and Human Services (DHHS) in the 11th Report on Carcinogens and is classified as 

possibly carcinogenic to humans (Group 2B) by the IARC.35,36 The primary noncancer effects of 

exposure to acetaldehyde vapors include irritation of the eyes, skin, and respiratory tract.37 

 

32 Agency for Toxic Substances and Disease Registry (ATSDR). 1999. Toxicological profile for Formaldehyde. 

Atlanta, GA: U.S. Department of Health and Human Services, Public Health Service. 

http://www.atsdr.cdc.gov/toxprofiles/tp111.html. Docket EPA-HQ-OAR-2010-0162. 33 WHO (2002) Concise International Chemical Assessment Document 40: Formaldehyde. Published under the joint 

sponsorship of the United Nations Environment Programme, the International Labour Organization, and the 

World Health Organization, and produced within the framework of the Inter-Organization Programme for the 

Sound Management of Chemicals. Geneva. Docket EPA-HQ-OAR-2010-0162. 34 U.S. Environmental Protection Agency (U.S. EPA). 1991. Integrated Risk Information System File of 

Acetaldehyde. Research and Development, National Center for Environmental Assessment, Washington, DC. 

This material is available electronically at http://www.epa.gov/iris/subst/0290.htm . 35 U.S. Department of Health and Human Services National Toxicology Program 11th Report on Carcinogens 

available at: http://ntp.niehs.nih.gov/go/16183 . 36 International Agency for Research on Cancer (IARC). 1999. Re-evaluation of some organic chemicals, hydrazine, 

and hydrogen peroxide. IARC Monographs on the Evaluation of Carcinogenic Risk of Chemical to Humans, 

Vol 71. Lyon, France. 37 U.S. Environmental Protection Agency (U.S. EPA). 1991. Integrated Risk Information System File of 

Acetaldehyde. Research and Development, National Center for Environmental Assessment, Washington, DC. 

This material is available electronically at http://www.epa.gov/iris/subst/0290.htm . 

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Acrolein 

 EPA determined in 2003 that the human carcinogenic potential of acrolein could not be 

determined because the available data were inadequate. No information was available on the 

carcinogenic effects of acrolein in humans and the animal data provided inadequate evidence of 

carcinogenicity.38 The IARC determined in 1995 that acrolein was not classifiable as to its 

carcinogenicity in humans.39

Acrolein is extremely acrid and irritating to humans when inhaled, with acute exposure 

resulting in upper respiratory tract irritation, mucus hypersecretion and congestion. The intense 

irritancy of this carbonyl has been demonstrated during controlled tests in human subjects, who 

suffer intolerable eye and nasal mucosal sensory reactions within minutes of exposure.40 These 

data and additional studies regarding acute effects of human exposure to acrolein are 

summarized in EPA’s 2003 IRIS Human Health Assessment for acrolein.41 Evidence available 

from studies in humans indicate that levels as low as 0.09 ppm (0.21 mg/m3

) for five minutes 

may elicit subjective complaints of eye irritation with increasing concentrations leading to more 

extensive eye, nose and respiratory symptoms.42 Lesions to the lungs and upper respiratory tract 

of rats, rabbits, and hamsters have been observed after subchronic exposure to acrolein.43 Acute 

exposure effects in animal studies report bronchial hyper-responsiveness.44 In a recent study, the 

acute respiratory irritant effects of exposure to 1.1 ppm acrolein were more pronounced in mice 

with allergic airway disease by comparison to non-diseased mice which also showed decreases in 

 

38 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

Research and Development, National Center for Environmental Assessment, Washington, DC. This material is 

available at http://www.epa.gov/iris/toxreviews/0364tr.pdf . 39 International Agency for Research on Cancer (IARC). 1995. Monographs on the evaluation of carcinogenic risk of 

chemicals to humans, Volume 63, Dry cleaning, some chlorinated solvents and other industrial chemicals, World 

Health Organization, Lyon, France. 40 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

EPA/635/R-03/003. p. 10. Research and Development, National Center for Environmental Assessment, 

Washington, DC. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf . 41 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

2003. Research and Development, National Center for Environmental Assessment, Washington, DC. 

EPA/635/R-03/003. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf . 42 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

Research and Development, National Center for Environmental Assessment, Washington, DC. EPA/635/R03/003. p. 11. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf . 43 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

Research and Development, National Center for Environmental Assessment, Washington, DC. EPA/635/R03/003. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf . 44 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

Research and Development, National Center for Environmental Assessment, Washington, DC. EPA/635/R03/003. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf . 

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respiratory rate.45 Based on these animal data and demonstration of similar effects in humans 

(i.e., reduction in respiratory rate), individuals with compromised respiratory function (e.g., 

emphysema, asthma) are expected to be at increased risk of developing adverse responses to 

strong respiratory irritants such as acrolein. 

Benzene 

The EPA’s IRIS database lists benzene as a known human carcinogen (causing leukemia) 

by all routes of exposure, and concludes that exposure is associated with additional health effects, 

including genetic changes in both humans and animals and increased proliferation of bone marrow 

cells in mice.46,47,48 EPA states in its IRIS database that data indicate a causal relationship between 

benzene exposure and acute lymphocytic leukemia and suggest a relationship between benzene 

exposure and chronic non-lymphocytic leukemia and chronic lymphocytic leukemia. The IARC 

has determined that benzene is a human carcinogen and the DHHS has characterized benzene as a 

known human carcinogen.49,50 A number of adverse noncancer health effects including blood 

disorders, such as preleukemia and aplastic anemia, have also been associated with long-term 

exposure to benzene.51,52 

 

45 Morris JB, Symanowicz PT, Olsen JE, et al. 2003. Immediate sensory nerve-mediated respiratory responses to 

irritants in healthy and allergic airway-diseased mice. J Appl Physiol 94(4):1563-1571. 46 U.S. Environmental Protection Agency (U.S. EPA). 2000. Integrated Risk Information System File for Benzene. 

Research and Development, National Center for Environmental Assessment, Washington, DC. This material is 

available electronically at: http://www.epa.gov/iris/subst/0276.htm . 47 International Agency for Research on Cancer, IARC monographs on the evaluation of carcinogenic risk of 

chemicals to humans, Volume 29, Some industrial chemicals and dyestuffs, International Agency for Research 

on Cancer, World Health Organization, Lyon, France, p. 345-389, 1982. 48 Irons, R.D.; Stillman, W.S.; Colagiovanni, D.B.; Henry, V.A. (1992) Synergistic action of the benzene metabolite 

hydroquinone on myelopoietic stimulating activity of granulocyte/macrophage colony-stimulating factor in vitro, 

Proc. Natl. Acad. Sci. 89:3691-3695. 49 International Agency for Research on Cancer (IARC). 1987. Monographs on the evaluation of carcinogenic risk 

of chemicals to humans, Volume 29, Supplement 7, Some industrial chemicals and dyestuffs, World Health 

Organization, Lyon, France. 50 U.S. Department of Health and Human Services National Toxicology Program 11th Report on Carcinogens 

available at: http://ntp.niehs.nih.gov/go/16183 . 51 Aksoy, M. (1989). Hematotoxicity and carcinogenicity of benzene. Environ. Health Perspect. 82: 193-197. 52 Goldstein, B.D. (1988). Benzene toxicity. Occupational medicine. State of the Art Reviews. 3: 541-554.
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Methanol 

Exposure of humans to methanol by inhalation or ingestion may result in central nervous 

system depression and degenerative changes in the brain and visual systems. After inhaled or 

ingested, methanol is converted to formate, a highly toxic metabolite that within the course of a 

few hours can cause narcosis, metabolic acidosis, headaches, severe abdominal and leg pain and 

visual degeneration that can lead to blindness.53

Methanol has been demonstrated to cause developmental toxicity in rats and mice, and 

reproductive and developmental toxicity in monkeys. A number of studies have reported adverse 

effects in the offspring of rats and mice exposed to methanol by inhalation including reduced 

weight of brain pituitary gland, thymus, thyroid, reduced overall fetal body weight and increased 

incidence of extra ribs and cleft palate.54,55,56 Methanol inhalation studies using rhesus monkeys 

have reported a decrease in the length of pregnancy, and limited evidence of impaired learning 

ability in offspring.57,58,59,60 EPA has not classified methanol with respect to its carcinogenicity. 

Other Air Toxics 

In addition to the compounds described above, other toxic compounds might be affected 

by these rules. Information regarding the health effects of those compounds can be found in 

EPA’s IRIS database.61

 

53 Rowe, VK and McCollister, SB. 1981. Alcohols. In: Patty's Industrial Hygiene and Toxicology, 3rd ed. Vol. 2C, 

GD Clayton, FE Clayton, Eds. John Wiley & Sons, New York, pp. 4528-4541. 54 New Energy Development Organization (NEDO). 1987. Toxicological research of methanol as a fuel for power 

station: summary report on tests with monkeys, rats and mice. Tokyo, Japan. 55 Nelson, BK; Brightwell, WS; MacKenzie, DR; Khan, A; Burg, JR; Weigel, WW; Goad, PT. 1985. Teratological 

assessment of methanol and ethanol at high inhalation levels in rats. Toxicol Sci, 5: 727-736. 56 Rogers, JM; Barbee, BD; Rehnberg, BF. 1993. Critical periods of sensitivity for the developmental toxicity of 

inhaled methanol. Teratology, 47: 395. 57 Burbacher, T; Grant, K; Shen, D; Damian, D; Ellis, S; Liberato, N. 1999. Reproductive and offspring 

developmental effects following maternal inhalation exposure to methanol in nonhuman primates Part II: 

developmental effects in infants exposed prenatally to methanol. Health Effects Institute. Cambridge, MA. 58 Burbacher, T; Shen, D; Grant, K; Sheppard, L; Damian, D; Ellis, S; Liberato, N. 1999. Reproductive and offspring 

developmental effects following maternal inhalation exposure to methanol in nonhuman primates Part I: 

methanol disposition and reproductive toxicity in adult females. Health Effects Institute. Cambridge, MA. 59 Burbacher, TM; Grant, KS; Shen, DD; Sheppard, L; Damian, D; Ellis, S; Liberato, N. 2004. Chronic maternal 

methanol inhalation in nonhuman primates (Macaca fascicularis): reproductive performance and birth outcome. 

Neurotoxicol Teratol, 26: 639-650. 60 Burbacher, TM; Shen, DD; Lalovic, B; Grant, KS; Sheppard, L; Damian, D; Ellis, S; Liberato, N. 2004. Chronic 

maternal methanol inhalation in nonhuman primates (Macaca fascicularis): exposure and toxicokinetics prior to 

and during pregnancy. Neurotoxicol Teratol, 26: 201-221. 61 U.S. EPA Integrated Risk Information System (IRIS) database is available at: www.epa.gov/iris
7-26 

7.2.2 Ozone Co-Benefits 

In the presence of sunlight, NOx and VOCs can undergo a chemical reaction in the 

atmosphere to form ozone. Reducing ambient ozone concentrations is associated with 

significant human health benefits, including mortality and respiratory morbidity (U.S. EPA, 

2008a). Epidemiological researchers have associated ozone exposure with adverse health effects 

in numerous toxicological, clinical and epidemiological studies (U.S. EPA, 2006c). These health 

effects include respiratory morbidity such as fewer asthma attacks, hospital and ER visits, school 

loss days, as well as premature mortality. 

7.2.3 Carbon Monoxide Co-Benefits 

Carbon monoxide in ambient air is formed primarily by the incomplete combustion of 

carbon-containing fuels and photochemical reactions in the atmosphere. The amount of CO emitted 

from these reactions, relative to carbon dioxide (CO2), is sensitive to conditions in the combustion 

zone, such as fuel oxygen content, burn temperature, or mixing time. Upon inhalation, CO diffuses 

through the respiratory system to the blood, which can cause hypoxia (reduced oxygen availability). 

Carbon monoxide can elicit a broad range of effects in multiple tissues and organ systems that are 

dependent upon concentration and duration of exposure. The Integrated Science Assessment for 

Carbon Monoxide (U.S. EPA, 2010a) concluded that short-term exposure to CO is “likely to have a 

causal relationship” with cardiovascular morbidity, particularly in individuals with coronary heart 

disease. Epidemiologic studies associate short-term CO exposure with increased risk of emergency 

department visits and hospital admissions. Coronary heart disease includes those who have angina 

pectoris (cardiac chest pain), as well as those who have experienced a heart attack. Other 

subpopulations potentially at risk include individuals with diseases such as chronic obstructive 

pulmonary disease (COPD), anemia, or diabetes, and individuals in very early or late life stages, such 

as older adults or the developing young. The evidence is suggestive of a causal relationship between 

short-term exposure to CO and respiratory morbidity and mortality. The evidence is also suggestive 

of a causal relationship for birth outcomes and developmental effects following long-term exposure 

to CO, and for central nervous system effects linked to short- and long-term exposure to CO.

7.2.4 Visibility Impairment Co-Benefits 

Reducing secondary formation of PM2.5 would improve visibility throughout the U.S. 

Fine particles with significant light-extinction efficiencies include sulfates, nitrates, organic 

carbon, elemental carbon, and soil (Sisler, 1996). Suspended particles and gases degrade 

visibility by scattering and absorbing light. Higher visibility impairment levels in the East are 

due to generally higher concentrations of fine particles, particularly sulfates, and higher average 
7-27 

relative humidity levels. Visibility has direct significance to people’s enjoyment of daily 

activities and their overall sense of wellbeing. Good visibility increases the quality of life where 

individuals live and work, and where they engage in recreational activities. Previous analyses 

(U.S. EPA, 2006; U.S. EPA, 2011a; U.S. EPA, 2011b) show that visibility benefits are a 

significant welfare benefit category. Without air quality modeling, we are unable to estimate 

visibility related benefits, nor are we able to determine whether VOC emission reductions would 

be likely to have a significant impact on visibility in urban areas or Class I areas. 

7.3 Characterization of Uncertainty in the Monetized Co-Benefits 

In any complex analysis, there are likely to be many sources of uncertainty. Many inputs 

are used to derive the final estimate of economic benefits, including emission inventories, air 

quality models (with their associated parameters and inputs), epidemiological estimates of 

concentration-response (C-R) functions, estimates of values, population estimates, income 

estimates, and estimates of the future state of the world (i.e., regulations, technology, and human 

behavior). For some parameters or inputs it may be possible to provide a statistical 

representation of the underlying uncertainty distribution. For other parameters or inputs, the 

necessary information is not available. As discussed in the PM2.5 NAAQS RIA (Table 5.5) (U.S. 

EPA, 2006), there are a variety of uncertainties associated with these PM benefits. Therefore, 

the estimates of annual benefits should be viewed as representative of the magnitude of benefits 

expected, rather than the actual benefits that would occur every year. 

It is important to note that the monetized benefit-per-ton estimates used here reflect 

specific geographic patterns of emissions reductions and specific air quality and benefits 

modeling assumptions. For example, these estimates do not reflect local variability in population 

density, meteorology, exposure, baseline health incidence rates, or other local factors. Use of 

these $/ton values to estimate benefits may lead to higher or lower benefit estimates than if 

benefits were calculated based on direct air quality modeling. Great care should be taken in 

applying these estimates to emission reductions occurring in any specific location, as these are 

all based on national or broad regional emission reduction programs and therefore represent 

average benefits-per-ton over the entire United States. The benefits-per-ton for emission 

reductions in specific locations may be very different than the estimates presented here. For more 

information, see the TSD describing the calculation of the new benefit-per-ton estimates (U.S. 

EPA, 2012). 
7-28 

PM2.5 mortality benefits are the largest benefit category that we monetized in this 

analysis. To better characterize the uncertainty associated with mortality impacts that are 

estimated to occur in areas with low baseline levels of PM2.5, we included the LML assessment. 

For this analysis, policy-specific air quality data is not available due to time or resource 

limitations, thus we are unable to estimate the percentage of premature mortality associated with 

this specific rule’s emission reductions at each PM2.5 level. As a surrogate measure of mortality 

impacts, we provide the percentage of the population exposed at each PM2.5 level using the 

source apportionment modeling used to calculate the benefit-per-ton estimates for this sector. A 

very large proportion of the population is exposed at or above the lowest LML of the cohort 

studies (Figures 7-6 and 7-7), increasing our confidence in the PM mortality analysis. Figure 7-6 

shows a bar chart of the percentage of the population exposed to various air quality levels in the 

pre- and post-policy policy. Figure 7-7 shows a cumulative distribution function of the same 

data. Both figures identify the LML for each of the major cohort studies. As the policy shifts 

the distribution of air quality levels, fewer people are exposed to PM2.5 levels at or above the 

LML. Using the Pope et al. (2002) study, the 77% of the population is exposed to annual mean 

PM2.5 levels at or above the LML of 7.5 μg/m3

. Using the Laden et al. (2006) study, 25% of the 

population is exposed above the LML of 10 μg/m3

.

 As we model avoided premature deaths 

among populations exposed to levels of PM2.5, we have lower confidence in levels below the 

LML for each study. It is important to emphasize that we have high confidence in PM2.5-related 

effects down to the lowest LML of the major cohort studies. Just because we have greater 

confidence in the benefits above the LML, this does not mean that we have no confidence that 

benefits occur below the LML. 

A large fraction of the baseline exposure occurs below the level of the National Ambient 

Air Quality Standard (NAAQS) for annual PM2.5 at 15 μg/m3

, which wasset in 2006. It is 

important to emphasize that NAAQS are not set at a level of zero risk. Instead, the NAAQS 

reflect the level determined by the Administrator to be protective of public health within an 

adequate margin of safety, taking into consideration effects on susceptible populations. While 

benefits occurring below the standard may be less certain than those occurring above the 

standard, EPA considers them to be legitimate components of the total benefits estimate. 
7-29 

Figure 7-6. Percentage of Adult Population by Annual Mean PM2.5 Exposure in the 

Baseline 

 
7-30 

Figure 7-7. Cumulative Distribution of Adult Population by Annual Mean PM2.5 

Exposure in the Baseline 

Above we present the estimates of the total benefits, based on our interpretation of the 

best available scientific literature and methods and supported by the SAB-HES and the NAS 

(NRC, 2002). The benefits estimates are subject to a number of assumptions and uncertainties. 

For example, for key assumptions underlying the estimates for premature mortality, which 

typically account for more than 90% of the total benefits, we were able to quantify include the 

following: 

1. PM2.5 benefits were derived through benefit per-ton estimates, which do not reflect 

local variability in population density, meteorology, exposure, baseline health 

incidence rates, or other local factors that might lead to an over-estimate or underestimate of the actual benefits of controlling directly emitted fine particulates. We do 

not have data on the specific location of the air quality changes associated with this 

rulemaking; as such, it is not feasible to estimate the proportion of benefits occurring 

in different locations, such as designated nonattainment areas. In addition, the 

benefit-per-ton estimates are based on emissions from existing sources. To the extent 
7-31 

that the geographic distribution of the emissions reductions for this rule are different 

than the modeled emissions, the benefits may be underestimated or overestimated. In 

general, there is inherently more uncertainty for new sources, which may not be 

included in the emissions inventory, than existing sources. 

2. We assume that all fine particles, regardless of their chemical composition, are 

equally potent in causing premature mortality. This is an important assumption, 

because PM2.5 produced via transported precursors emitted from EGUs may differ 

significantly from direct PM2.5 released from diesel engines and other industrial 

sources, but no clear scientific grounds exist for supporting differential effects 

estimates by particle type. 

3. We assume that the health impact function for fine particles is linear down to the 

lowest air quality levels modeled in this analysis. Thus, the estimates include health 

benefits from reducing fine particles in areas with varied concentrations of PM2.5,

including both regions that are in attainment with fine particle standard and those that 

do not meet the standard down to the lowest modeled concentrations. 

4. To characterize the uncertainty in the relationship between PM2.5 and premature 

mortality (which typically accounts for 85% to 95% of total monetized benefits), we 

include a set of twelve estimates based on results of the expert elicitation study in 

addition to our core estimates. Even these multiple characterizations omit the 

uncertainty in air quality estimates, baseline incidence rates, populations exposed and 

transferability of the effect estimate to diverse locations. As a result, the reported 

confidence intervals and range of estimates give an incomplete picture about the 

overall uncertainty in the PM2.5 estimates. This information should be interpreted 

within the context of the larger uncertainty surrounding the entire analysis. For more 

information on the uncertainties associated with PM2.5 benefits, please consult the 

PM2.5 NAAQS RIA (Table 5.5). 

This RIA does not include the type of detailed uncertainty assessment found in the PM 

NAAQS RIA because we lack the necessary air quality input and monitoring data to run the 

benefits model. In addition, we have not conducted any air quality modeling for this rule. 

Moreover, it was not possible to develop benefit-per-ton metrics and associated estimates of 

uncertainty using the benefits estimates from the PM RIA because of the significant differences 

between the sources affected in that rule and those regulated here. However, the results of the 

Monte Carlo analyses of the health and welfare benefits presented in Chapter 5 of the PM RIA 

can provide some evidence of the uncertainty surrounding the benefits results presented in this 

analysis. 
7-32 

7.4 Comparison of Co-Benefits and Costs 

Using a 3% discount rate, we estimate the total combined monetized co-benefits of the 

reconsidered CI RICE NESHAP to be $770 million to $1.9 billion in the implementation year 

(2013). Using a 7% discount rate, we estimate the total monetized co-benefits of the reconsidered 

CI RICE NESHAP to be $690 million to $1.7 billion. The annualized social costs of the 

reconsidered CI RICE NESHAP are $373 million (2010$) at a 7% interest rate.62 The annualized 

social costs of the reconsidered NESHAP are $372 million in 2008$. As stated in Section 4 of 

this RIA, the costs in 2008 dollars can be updated to 2010 dollars by applying the ratio of the 

2010 Marshall & Swift (M&S) annual cost index and the 2008 M&S annual cost index, which is 

1,457.4/1,449.3 = 1.01. Thus, the net benefits are $400 million to $1.5 billion at a 3% discount 

rate and $320 million to $1.3 billion at a 7% discount rate. All of these estimates are in 2010$ for 

the year 2013. 

Table 7-5 shows a summary of the monetized co-benefits, social costs, and net benefits 

for the reconsidered CI RICE NESHAP, respectively. Figures 7-8 and 7-9 show the full range of 

net benefits estimates (i.e., annual co-benefits minus annualized costs) utilizing the 14 different 

PM2.5 mortality functions at discount rates of 3% and 7%. In addition, the benefits from reducing 

14,000 tons of carbon monoxide and 1,000 tons of HAP each year from existing CI RICE have 

not been included in these estimates. EPA believes that the co-benefits are likely to exceed the 

costs under this rulemaking even when taking into account uncertainties in the cost and benefit 

estimates. 

 

 

62 For more information on the annualized social costs, please refer to Section 5 of this RIA. 

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Deleted: proposal

Deleted: proposed

Deleted: proposed

Deleted: S
7-33 

Table 7-5. Summary of the Monetized Benefits, Compliance Costs and Net benefits for 

the 2010 Rule with the Final Amendments to the Stationary CI Engine NESHAP in 2013 

(millions of 2010 dollars)a 

 3% Discount Rate 7% Discount Rate 

Proposed NESHAP 

Total Monetized Benefits2 $770 to $1,900 $690 to $1,700 

Total Compliance Costs3 $373 $373 

Net Benefits $400 to $1,500 $320 to $1,300 

Non-monetized Benefits 

Health effects from HAP exposure 

Health effects from PM2.5 exposure from VOC emissions 

Ecosystem effects 

Visibility impairment 

1

All estimates are for the implementation year (2013), and are rounded to two significant figures. The annual ized 

compliance costs are $373 million in 2010$ as noted earlier in this RIA. These costs, presented in 2008 dollars, 

can be updated to 2010 dollars by applying the ratio of the 2010 Marshall & Swift (M&S) annual cost index and 

the 2008 M&S annual cost index, which is 1,457.4/1,449.3 = 1.01. Compliance costs are used as an 

approximation for social costs in this RIA. 

2

 The total monetized benefits reflect the human health benefits associated with reducing exposure to PM2.5 through 

reductions of PM2.5 precursors such as directly emitted fine particles. Human health benefits are shown as a range 

from Pope et al. (2002) to Laden et al. (2006). These models assume that all fine particles, regardless of their 

chemical composition, are equally potent in causing premature mortality because the scientific evidence is not yet 

sufficient to allow differentiation of effects estimates by particle type. Although we have not re-estimated the 

benefits for this rule to apply the updated methods in the PM NAAQS RIA (U.S. EPA, 2012b), these updates 

generally offset each other, and we anticipate that the rounded benefits estimated for this rule are unlikely to be 

different than those provided here.

3 The engineering compliance costs are annualized using a 7 percent discount rate. 

 

Deleted: Proposed

Deleted: Because these estimates were 

generated using benefit-per-ton estimates, 

we do not break down the total monetized 

benefits into specific components here. 

See Figure 7-1 for an illustration of the 

breakdown, or the RIA for the final 

Cross-States Air Pollution Rule (EPA, 

2011) for more information. 
7-34 

Figure 7-8. Net Benefits for CI RICE NESHAP Reconsideration at 3% discount rate* 

*Net Benefits are quantified in terms of PM2.5 at a 3% discount rate for 2013 and are in 2010$. This graph shows 14 

benefits estimates combined with the cost estimate. All fine particles are assumed to have equivalent health effects, 

but the benefit per ton estimates vary because each ton of precursor reduced has a different propensity to become 

PM2.5. The monetized benefits incorporate the conversion from precursor emissions to ambient fine particles. 

‐$100

‐$80

‐$60

‐$40

‐$20

$0

$20

$40

$60

$80

$100

Pope et al.

Laden et al.

Millions (2010$)

Cost estimate combined with total monetized benefits estimates derived from 2

epidemiology functions and 12 expert functions

‐$500

$0

$500

$1,000

$1,500

$2,000

$2,500

Pope et al.

Laden et al.

Millions (2010$)

Cost estimate combinedwith total monetized benefits estimates derived from2epidemiology functions and 12 expert

functions

Deleted: Proposed
7-35 

Figure 7-9. Net Benefits for CI RICE NESHAP Reconsideration at 7% discount rate* 

*Net Benefits are quantified in terms of PM2.5 benefits at a 7% discount rate at a 7% discount rate for 2013 and are 

in 2010$. This graph shows 14 benefits estimates combined with the cost estimate. All fine particles are assumed to 

have equivalent health effects. The monetized benefits incorporate the conversion from precursor emissions to 

ambient fine particles. 

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Pope et al.

Laden et al.

Millions (2010$)

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functions

Deleted: Proposed

Deleted: ¶

¶

¶

¶

¶

¶

¶
7-36 

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SECTION 8

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8-2 

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8-4 

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U.S. Environmental Protection Agency (U.S. EPA). 2012a. Regulatory Impact Analysis for the 

Proposed Revisions to the National Ambient Air Quality Standards for Particulate 

Matter. EPA-452/R-12-003. Office of Air Quality Planning and Standards, Health and 

Environmental Impacts Division. June. Available at 

http://www.epa.gov/ttnecas1/regdata/RIAs/PMRIACombinedFile_Bookmarked.pdf.

U.S. Environmental Protection Agency (U.S. EPA). 2012b. Regulatory Impact Analysis for the 

Final Revisions to the National Ambient Air Quality Standards for Particulate Matter. 

EPA-452/R-12-003. Office of Air Quality Planning and Standards, Health and 

Environmental Impacts Division. December. Available at 

http://www.epa.gov/pm/2012/finalria.pdf.

U.S. Environmental Protection Agency - Science Advisory Board (U.S. EPA-SAB). 2009a. 

Review of EPA’s Integrated Science Assessment for Particulate Matter (First External 

Review Draft, December 2008). EPA-COUNCIL-09-008. May. Available on the Internet 

at 

<http://yosemite.epa.gov/sab/SABPRODUCT.NSF/81e39f4c09954fcb85256ead006be86

e/73ACCA834AB44A10852575BD0064346B/$File/EPA-CASAC-09-008-

unsigned.pdf>. 
8-6 

U.S. Environmental Protection Agency - Science Advisory Board (U.S. EPA-SAB). 2009b. 

Consultation on EPA’s Particulate Matter National Ambient Air Quality Standards: 

Scope and Methods Plan for Health Risk and Exposure Assessment. EPA-COUNCIL-09-

009. May. Available on the Internet at 

<http://yosemite.epa.gov/sab/SABPRODUCT.NSF/81e39f4c09954fcb85256ead006be86

e/723FE644C5D758DF852575BD00763A32/$File/EPA-CASAC-09-009-unsigned.pdf>. 

U.S. Small Business Administration (SBA). 2008. “Table of Small Business Size Standards 

Matched to North American Industry Classification System Codes.” Effective August 22, 

2008. http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_

tablepdf.pdf . 

Viscusi, V.K., and J.E. Aldy. 2003. “The Value of a Statistical Life: A Critical Review of Market 

Estimates throughout the World.” Journal of Risk and Uncertainty, 27(1):5-76. 

Wade, S.H. 2003. “Price Responsiveness in the AEO2003 NEMS Residential and Commercial 

Buildings Sector Models.” 

http://www.eia.doe.gov/oiaf/analysispaper/elasticity/pdf/buildings.pdf . 
8-7 

United States 

Environmental Protection 

Agency 

Office of Air Quality Planning and Standards 

Health and Environmental Impacts Division 

Research Triangle Park, NC 
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EO12866CIRICERIAchangememofinal_2060-AQ48_20121101.docx 

November 1, 2012 

MEMORANDUM

SUBJECT: Regulatory Impact Results for the Reconsideration Proposal for National 

Emission Standards for Hazardous Air Pollutants for Compression Ignition (CI) 

Reciprocating Internal Combustion Engines (RICE) at Major and Area Sources 

FROM: Larry Sorrels 

Economist 

AEG (C439-02) 

Amy Lamson 

Economist 

RBG (C538-02) 

TO: Melanie King 

 Environmental Engineer 

ESG (D243-01) 

The EPA is currently working on a rulemaking to issue in December, 2012 final 

amendments to the CI RICE NESHAP that was promulgated in March, 2010. The proposal to 

the current rulemaking was issued in June, 2012. The cost estimates for the final amendments 

are the same as those for the proposal to this 2012 rulemaking. There have been no changes to 

the methodologies for estimating economic impact, small business, and employment impacts. 

Hence, the economic, small business and employment impacts are the same as well. The 

estimated emission reductions are also unchanged for the final amendments as compared to the 

proposal to this rulemaking. The estimated benefits have changed, however. Since the June 

2012 proposal to this rulemaking, we have updated the epidemiology studies used to calculate 

mortality and morbidity benefits in the PM NAAQS proposal RIA1

. These updates would reduce 

the monetized benefits estimated for the final RICE amendments by less than 4 percent. More 

information on these updates can be found in the PM NAAQS proposal RIA. 

 The EPA prepared an RIA for the proposal to this rulemaking that includes all of the 

analyses done for the RICE rulemaking. This RIA is an attachment to this memo given that the 

methodologies and analysis results are the same between the proposal and final amendments in 

almost every aspect. 

 

1

 U.S. Environmental Protection Agency (U.S. EPA). 2012. Regulatory Impact Analysis for the Proposed 

Revisions to the National Ambient Air Quality Standards for Particulate Matter. EPA-452/R-12-003. 

Office of Air Quality Planning and Standards, Health and Environmental Impacts Division. June. 

Available at http://www.epa.gov/ttnecas1/regdata/RIAs/PMRIACombinedFile_Bookmarked.pdf. 
*** E.O. 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

 
*** E.O. 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

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Attachment 

 
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Regulatory Impact Analysis (RIA) 

for Proposed Reconsideration of 

Existing Stationary Compression 

Ignition Engines NESHAP 

Final Report

May 2012 

Prepared for 

Larry Sorrels 

U.S. Environmental Protection Agency 

Office of Air Quality Planning and Standards (OAQPS) 

Air Economics Group (AEG) 

(MD-C439-02)

Research Triangle Park, NC 27711 

Prepared by 

Paramita Sinha 

Brooks Depro 

Fern Braun 

RTI International 

3040 Cornwallis Road 

Research Triangle Park, NC 27709

Section Break (Next Page)
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The health benefits were calculated using a methodology described in the 2010 

final CI RICE RIA, using the revised emission reductions estimated for the final reconsideration 

proposal and accounting for other changes discussed in detail in Section 7 of this RIA. We were 

unable to estimate the benefits from reducing exposure to HAPs, ecosystem impairment, and 

visibility impairment, including reducing 14,000 tons of carbon monoxide and 1,000 tons of 

HAPs. Please refer to the full description later in this RIA of the unquantified benefits as well as 

technical details of the analysis and its limitations and uncertainties. These monetized benefits 

are approximately 21% lower than the 2010 final CI RICE rule due to the decrease in direct 
*** E.O. 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

PM2.5 emission reductions. These benefit-per-ton estimates were calculated for a 2013 analysis 

year (i.e., using population and income growth for 2013). See Tables 1-3 and 1-4 for the updated 

benefits results. The benefits analysis for the 2010 final rules applied out-dated benefit-per-ton 

estimates compared to the updated estimates described in this preamble and reflected monetized 

co-benefits for VOC emissions, which limits direct comparability with the monetized co-benefits 

estimated for these proposed rules. In addition, these estimates have been updated from their 

original currency years to 2010$, so the rounded estimates for the 2010 final rules may not match 

the original RIAs. 

Table 1-3: Summary of Monetized Co-Benefits Estimates for CI RICE Reconsideration 

Proposal in 2013 

Pollutant 

Emissions 

Reductions 

(tons) 

Benefit 

per ton 

(Pope, 

3%) 

Benefit 

per ton 

(Laden, 

3%) 

Benefit 

per ton 

(Pope, 

7%) 

Benefit 

per ton 

(Laden, 

7%) 

Total Monetized 

Benefits (millions 

2010$ at 3%) 

Total Monetized 

Benefits (millions 

2010$ at 7%) 

Direct PM2.5 2,818 $270,000 $670,000 $240,000 $610,000 $770 to $1,900 $690 to $1.700

 Total $770 to $1,900 $690 to $1,700

*All estimates are for the implementation year (2013), and are rounded to two significant figures so numbers may 

not sum across columns. It is important to note that the monetized benefits do not include reduced health effects 

from direct exposure to NO2, ozone exposure, ecosystem effects, or visibility impairment. All fine particles are 

assumed to have equivalent health effects, but the benefit per ton estimates vary because each ton of precursor 

reduced has a different propensity to form PM2.5. Confidence intervals are unavailable for this analysis because of 

the benefit-per-ton methodology. 

 
*** E.O. 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Table 1-4: Summary of Estimated Reductions in Health Incidences from PM2.5 for the 

CI RICE Reconsideration Proposal in 2013 

 Final Reconsideration Proposed Option 

Avoided Premature Mortality 

Pope et al. 85 

 Laden et al. 220 

Avoided Morbidity 

Chronic Bronchitis 59 

 Emergency Room Visits, Respiratory 66 

Hospital Admissions, Respiratory 16 

Hospital Admissions, Cardiovascular 35 

 Acute Bronchitis 130 

 Lower Respiratory 1,700 

Upper Respiratory 1,300 

 Minor Restricted Activity Days 68,000 

Work Loss Days 12,000 

Asthma Exacerbation 2,800 

Acute Myocardial Infarction 94 

* All estimates are for the analysis year (2013) and are rounded to whole numbers with two significant figures. All 

fine particles are assumed to have equivalent health effects because the scientific evidence is not yet sufficient to 
*** E.O. 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

allow differentiation of effects estimates by particle type. Confidence intervals are unavailable for this analysis 

because of the benefit-per-ton methodology. 

 Figure 1-1 provides a breakdown of the total monetized co-benefits from reductions of 

PM2.5 emissions by engine size associated with the reconsideration ruleproposal. Figure 1-2 

provides a visual representation of the range of PM2.5-related benefits estimates using 

concentration-response functions supplied by experts. 

Figure 1-1: Breakdown of Total Monetized PM2.5 Co-Benefits of Proposed CI RICE 

Reconsideration by Engine Size 

Major <500 HP

25%

Major >500 HP

6%

Area <600 HP

36%

Area >600 HP

33%
*** E.O. 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Figure 1-2: Total Monetized PM2.5 Co-Benefits Estimates for the CI RICE Reconsideration 

Proposal in 2013 

*This graph shows the estimated benefits at discount rates of 3% and 7% using effect coefficients derived from the 

Pope et al. study and the Laden et al study, as well as 12 effect coefficients derived from EPA’s expert elicitation on 

PM mortality. The results shown are not the direct results from the studies or expert elicitation; rather, the estimates 

are based in part on the concentration-response function provided in those studies. 

 

$0

$500

$1,000

$1,500

$2,000

$2,500

Pope et al.

Laden et al.

Millions(2010$)

PM2.5mortality benefits estimates derived from 2 epidemiology functions and 12 expert functions

3% DR

7% DR
*** E.O. 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

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This action proposes to amends provisions in the RICE NESHAP that currently allow owners 

and operators to operate stationary emergency engines for up to 15 hours per year as part of a 

demand response program if the RTO or equivalent balancing authority and transmission 

operator have determined there are emergency conditions that could lead to a potential electrical 

blackout, such as unusually low frequency, equipment overload, capacity or energy deficiency, 

or unacceptable voltage level. The 2010 final rule did not allow emergency engines to be used 

for purposes of peak shaving or other non-emergency purposes as part of a financial 

arrangement. These provisions were included in the RICE NESHAP when requirements for 

existing stationary CI engines were finalized on March 3, 2010 (75 FR 9648). Following the 

completion of that portion of the rule, the EPA received three main petitions for reconsideration. 

One petition was from CPower, Inc., EnergyConnect, Inc., EnerNOC, Inc., and Innoventive 

Power, LLC. (EnerNOC et al.)(EPA-HQ-OAR-2008-0708-0404). Another petition was received 

from the Delaware Department of Natural Resources and Environmental Control (DE DNREC) 

(EPA-HQ-OAR-2008-0708-0400). The third petition was from the National Rural Electric 

Cooperative Association (NRECA) (OAR-2008-0708-0580). In addition to these main petitions 

the EPA received a substantial number of letters from others in the electric generation industry. 
*** E.O. 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

 The petition from EnerNOC, et al., asked that EPA increase the period of time permitted 

for emergency demand response operation in the rule to 60 hours per year, or the minimum 

number of hours required by the emergency demand response program. By contrast, the DE 

DNREC petition asked EPA to reconsider the emergency demand response provision because of 

the adverse effects that it believes would result from increased emissions from these engines. 

The petition from NRECA requested that the EPA eliminate the restriction on the use of 

stationary emergency engines for demand response purposes. The EPA granted the petitions 

from EnerNOC, et al., DE DNREC and NRECA, and issued a notice on December 7, 2010 (75 

FR 75937), requesting comments on whether to amend the 15 hours per year limitation on the 

operation of stationary emergency RICE participating in emergency demand response programs. 

The EPA received more than 120 comments from a number of different entities including 

various state agencies, utilities, electric cooperatives and industry organizations. Many 

commenters expressed that 15 hours per year is not sufficient to meet current emergency demand 

response requirements for participation. For example, several emergency demand response 

programs have ISO tariff requirements greater than 15 hours per year, including the Electric 

Reliability Council of Texas emergency demand response program, which has a tariff 

requirement of 24 hours per year; the Pennsylvania Jersey Maryland (“PJM”) Interconnection, 

known as the Emergency Load Response Program, which has a tariff requirement of 60 hours 

per year; and the ISO New England (“ISO-NE”), which forecasts that backup resources would be 

expected for 55 hours over a 12-month period. Tariff requirements are developed to specify the 

mandatory time load resources (engines) must be willing and able to operate if the units are 

enrolled in the program. Conversely, some commenters urged the EPA to allow stationary 

emergency engines to only operate during true emergencies or when voltage or frequency varies 

beyond specified parameters. 

 Based on the EPA’s review of the petitions and comments that the EPA has received, the 

EPA has found it appropriate to propose to amend the current rule to increase the allowance for 

stationary emergency engine participation in emergency demand response programs to up to 100 

hours per year, which would be included as part of the pre-existing allowance of 100 hours for 

owners of emergency engines to test and maintain their emergency engines. The EPA believes 

that the emergency demand response programs that exist across the country are important 

programs that protect the reliability and stability of the national electric service grid. Allowing 

stationary emergency engines to operate as part of emergency demand response programs can 

help prevent grid failure or blackouts, by allowing these engines to be used in circumstances of 

grid instability prior to the occurrence of blackouts. Preventing stationary emergency engines 
*** E.O. 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

from being able to qualify and participate in emergency demand response programs without 

having to apply aftertreatment could force owners and operators to leave their engines out of 

these programs, which will impair the ability of ISOs and RTOs to use these relatively small, 

quick-starting and reliable sources of energy to protect the reliability of their systems. The EPA 

does not wish to potentially jeopardize electrical reliability or create a disincentive for stationary 

emergency engines to participate in these programs. The circumstances during which the EPA 

would allow stationary emergency engines to operate for emergency demand response purposes 

include periods during which the regional transmission authority or equivalent balancing 

authority and transmission operator has declared an Energy Emergency Alert Level 2 (EEA 

Level 2) as defined in the North American Electric Reliability Corporation Reliability Standard 

EOP-002-3, Capacity and Energy Emergency, plus during periods where there is a deviation of 

voltage or frequency of 5 percent or more below standard voltage or frequency. During EEA 

Level 2 alerts there is insufficient energy supply and a true potential for electrical blackouts. 

System operators must call on all available resources during EEA Level 2 alerts in order to 

stabilize the grid to prevent failure. Therefore, this situation is a good indicator of severe 

instability on the system. Consistent normal voltage provided by the utility is often called power 

quality and is an important factor in local electric system reliability. Reliability of the system 

requires electricity being provided at a normal expected voltage. The American National 

Standards Institute standard C84.1-1989 defines the maximum allowable voltage sag at below 5 

percent. On the local distribution level local voltage levels are therefore important and a 5 

percent or more change in the normal voltage or frequency is substantial and an indication that 

additional resources are needed to ensure local distribution system reliability. This situation 

would be indicative of severe instability on the system. 

Emergency demand response programs rely on agreements under which owners of engine agree 

to make their engines available to be called upon for a specific number of hours per year, as 

required by the relevant ISO or RTO tariff, under specified circumstances considered to indicate 

emergencies. In order to be enrolled in an emergency demand response program, participants 

must qualify their engines and must be able to use their emergency engines for the number of 

hours the program requires. Engines are not generally called upon for the maximum hours 

required by the tariffs. However, even though the engine may not be called at all or may run for 

fewer hours than the program requires it to be available in a particular year, the engine must still 

be available for those theoretical number of hours in order to join the program. Demand response 

contracts require more hours than the 15 hours per year that is currently in the regulations, and 

the commenters state that the 15 hours per year is not a sufficient amount of time to ensure the 

reliability of the program; some programs require up to 60 hours per year, as discussed earlier. 
*** E.O. 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

For these reasons, the EPA believes it is appropriate to allow additional hours for emergency 

demand response operation in order for such programs to be accessible to stationary emergency 

engines. Consequently, the EPA is proposing amendingdments to the rule to increase the 

limitation on emergency demand response operation to 100 hours per year for stationary 

emergency engines. It is expected that owners and operators of stationary emergency engines 

that seek to qualify their units as demand resources would with the proposed increase to 100 

hours per year be able to meet the operational and qualification requirements of the different 

ISOs and RTOs in the country. 

As stated, stationary emergency engines that participate in demand response programs may not 

be called upon at all, but must nonetheless be available to operate for the required amount 

stipulated by the specific program. The purpose of the limited allowance for demand response is 

to respond to emergencies, and the EPA is persuaded by the information that has been submitted 

that 15 hours per year is an insufficient amount of time to allow for emergency demand response 

needs, given past experience. The EPA believes 100 hours per year is sufficient to cover any 

potential demand response operation as well as the required maintenance and testing that is also 

included within the 100 hours of operation. 

The EPA has previously determined that stationary emergency engines typically operate well 

below 50 hours per year and more commonly about 1 to 2 hours per month. A survey conducted 

by the California Air Resources Board (CA ARB) indicated the average yearly operation for 

emergency diesel engines was 31 hours over a period of 3 years. The majority of those hours 

were for the purpose of maintenance and testing; less than 5 hours was for interruptible service 

contracts, and the remaining amount for emergency/standby operation (EPA-HQ-OAR-2005-

0029-0011). Data from demand response programs in ISO-NE and PJM territories show that 

backup generation was dispatched for less than 30 hours during the summers of 2008, 2009 and 

2010. 

However, again, emergency units must be available to operate more than that in most cases to 

qualify for demand response programs. For instance, PJM requires a minimum ISO tariff of 60 

hours per year of engine availability for program participation. Consequently, in order to ensure 

that a sufficient amount of operating time is available for maintenance and readiness testing, and 

for demand response operation, the EPA is allowing proposing 100 hours of operation. A number 

of commenters requested that an allowance of 100 hours per year be allowed in order to provide 

adequate hours consistent with minimum required hours that customers must be available to 

operate and to address local distribution system emergencies. For instance, in Hawaii, the 
*** E.O. 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

emergency demand response program operated by the Hawaiian Electric Company requires that 

emergency engines be able to operate for 100 hours per year in the event of an emergency in 

order to participate in the program. In order to provide a sufficient amount of time to cover 

annual maintenance and testing, which is typically more than 20 hours per year according to the 

survey conducted by CA ARB (see EPA-HQ-OAR-2005-0029-0011), plus to cover hours 

necessary for qualifying for emergency demand response programs or local distribution system 

emergencies, EPA believes an allowance of 100 hours per year would be appropriate for these 

activities. Taking into account that there may be situations where annual maintenance and testing 

could exceed the typical 1 to 2 hours per month and accounting for other emergency demand 

response programs that require more than 60 hours per year for program participation (e.g., the 

Hawaiian Electric Company), the EPA believes that 100 hours per year is appropriate for 

emergency demand response plus maintenance and testing. 

The finalproposed amendment to the rule would mean that stationary emergency engines could 

operate for a total of 100 hours per year for emergency demand response operation as part of the 

100 hours already permitted for maintenance and readiness testing while maintaining their status 

as emergency units, rather than non-emergency units, and continue to meet the requirements that 

apply to emergency engines. 

 On the issue of peak shaving and non-emergency demand response, the EPA is proposing 

to include a temporary limited allowance for peak shaving and other types of non-emergency use 

as part of a financial arrangement for existing stationary emergency engines at area sources of 

HAP, if the peak shaving is done as part of a peak shaving (or load management) program with 

the local distribution system operator. The power generated under this allowance can only be 

used at the facility or towards the local system. 

 The EPA has determined that it is appropriate to include the option for existing stationary 

emergency engines at area sources to operate for a small number (50) of hours per year for any 

non-emergency reason to generate income locally and not be penalized or considered a nonemergency engine and subsequently required to install aftertreatment that could be prohibitively 

costly for these sources in the near term. The EPA is finalizing proposing that the 50-hour 

allowance for peak shaving for emergency engines at area sources be allowed for a limited 

period of time, but then removed after April 16, 20147. The peak shaving would also be limited 

to operation as part of a peak shaving (load management program) with the local distribution 

system operator. Owners would still have the pre-existing 50 hours per year allowance for nonemergency operation after April 16, 2017, but those 50 hours could no longer be used for peak 
*** E.O. 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

shaving. The temporary allowance for peak shaving would give sources time to address 

reliability issues and develop solutions to reliability issues while facilities are coming into 

compliance with the National Emission Standards for Hazardous Air Pollutants From Coal and 

Oil-Fired Electric Utility Steam Generating Units, which were promulgated on February 16, 

2012 (77 FR 9304). This limited allowance would allow the owners and operators of these 

engines more flexibility to run reliability critical units in order to minimize potential grid-related 

interruptions as coal- and oil-fired baseload power plants may be temporarily shut down to install 

emission controls to comply with the NESHAP From Coal and Oil-Fired Electric Utility Steam 

Generating Units.

 Including this allowance is important for small electric cooperatives and other entities 

located at area sources that use these engines to maintain voltage and electric reliability. Many 

rural electric cooperatives enter agreements with owners of small emergency engines and rely on 

the engines to reduce demand on the central power supply during periods of high demand,, 

which reduces the cost of power during periods of high demand for the members of the 

cooperative. Commenters promoting the continued use of peak shaving programs said that 

maintaining the cost of power as low as possible is important across the country, but is 

particularly of significant importance to rural electric cooperatives that, according to the 

commenter, service customers in the most economically depressed areas of the country, where 

options are the most limited. The commenters argued that if small emergency engines would no 

longer be permitted to operate for peak shaving purposes without having to be reclassified as 

non-emergency engines and subsequently subject to costly emissions controls, owners could no 

longer afford to participate in such programs. Cooperatives argued that this would lead to 

increased costs that would ultimately be passed along to the customers. Commenters also 

maintained that keeping peak shaving programs would not lead to additional public health risks 

or emissions because the operation for peak shaving is minimal. If peak shaving is not allowed 

under the rule, commenters said that this would lead to an increase in central power station 

capacity and possibly more transmission and distribution line capacity to accommodate the 

increase in demand resulting from eliminating small emergency engines from being used. This 

could lead to a larger impact on the environment and public health than allowing a small number 

of hours for peak shaving purposes. Certain small and remote facilities also rely on financial 

programs to generate additional income in order to maintain their engines and stay in operation. 

The additional funds can be essential for many smaller facilities and operations. Providing a 

limited allowance for peak shaving and non-emergency demand response could generate 

sufficient income to prevent small facilities and owners from ceasing operation where these 

engines are in service. In order to further limit the operation of these engines to small, remote 
*** E.O. 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

facilities, the EPA is proposing that the power generated under this allowance can only be used 

at the facility or towards the local system. In addition, while the EPA is proposing this allowance 

until the end of April 16, 20147, the EPA does not believe it is appropriate to continue the 

program beyond that time. Generators receive considerable compensation for their availability in 

peak shaving programs and the EPA believes that it is not appropriate to allow these engines to 

continue receiving compensation for this non-emergency use beyond 2017 without having to 

reduce their emissions. The generators must by that time decide whether to restrict their use to 

emergency or limited non-compensated non-emergency use or to reduce the emissions from their 

engines. The EPA also encourages engine owners and operators, as well as larger system 

planners, to consider the use of alternative peak shaving options, such as load curtailments, lower 

emitting distributed generation, combined heat and power, and reduced line losses on the 

electricity grid. 

The previous estimate of emissions from stationary emergency engines is not expected to change 

due to this proposed limited allowance. To estimate emissions from stationary emergency 

engines, the EPA has previously estimated that emergency engines would on average operate for 

50 hours per year. There is a wide range in how much these engines operate (some well below 50 

hours per year), but on average and to be conservative, the EPA believes that 50 hours per year is 

still representative and consequently the environmental impact the EPA has calculated 

previously remains appropriate. In consideration of all these issues, the EPA is finalizing 

proposing amendments to the rule to provide a limited allowance for peak shaving for existing 

stationary emergency engines at area sources of HAP. The specific amendments the EPA is 

finalizing proposing are discussed below. 

Page 4: [18] Deleted EPA 1/8/2013 9:34:00 AM 

The EPA is proposing to revisinge the current provisions for stationary engines used for 

emergency demand response operation. The provisions the EPA is proposing to amending are in 

§§63.6640(f) and 63.6675 of 40 CFR part 63, subpart ZZZZ. Currently, §63.6640(f)(1)(iii) 

allows a maximum of 15 hours per year to be spent towards demand response operation under 

certain qualifying conditions. Also, §63.6640(f)(1)(ii) currently includes an allowance of 100 

hours per year for purposes of maintenance checks and readiness testing. The EPA is requiring 

proposing that owners and operators of stationary emergency RICE be permitted to operate their 

engines as part of an emergency demand response program within the 100 hours per year that is 

permitted for maintenance and testing in §63.6640(f)(1)(ii). Owners and operators of stationary 

emergency engines can operate for emergency demand response during periods in which the 
*** E.O. 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

regional transmission authority or equivalent balancing authority and transmission operator has 

declared an EEA Level 2 as defined in the North American Electric Reliability Corporation 

Reliability Standard EOP-002-3, Capacity and Energy Emergency and during periods where 

there is a deviation of voltage or frequency of 5 percent or greater below standard voltage or 

frequency. The hours spent for emergency demand response operation are added to the hours 

spent for maintenance and testing purposes and counted towards the 100 hours per year. If the 

total time spent for demand response operation and maintenance and testing exceeds 100 hours 

per year the engine will not be considered an emergency engine under this subpart and will need 

to meet all requirements for non-emergency engines. The EPA is recognizing that these engines 

may be called to operate not only by the regional transmission operator or equivalent to maintain 

the reliability of the bulk power system, but also by the local transmission and distribution 

system operators to support the local power systems. 

 For stationary emergency engines above 500 HP that were installed prior to June 12, 

2006, there is currently no emergency demand response allowance and there is no time limit on 

the use of emergency engines for routine testing and maintenance in §63.6640(f)(2)(ii). Those 

engines were not the focus of the 2010 RICE NESHAP amendments; therefore, the EPA did not 

make any changes to the requirements for those engines as part of the 2010 amendments. For 

consistency, the EPA is now also requiring proposing that owners and operators of stationary 

emergency engines installed prior to June 12, 2006, be permitted to operate their engines as part 

of a demand response program as well for a total of 100 hours per year, including time spent for 

maintenance and testing. 

 The EPA is also proposing to amending the NSPS for stationary CI and SI engines in 40 

CFR part 60, subparts IIII and JJJJ, respectively, to provide the same allowance for stationary 

emergency engines for emergency demand response operation as for engines subject to the RICE 

NESHAP. The NSPS regulations currently do not include such an allowance for emergency 

demand response operation. For the reasons discussed as to why the EPA finds it appropriate to 

allow stationary emergency engines to participate in emergency demand response programs and 

remain being considered emergency units, and for consistency across engine regulations, the 

EPA is is proposing to adding an emergency demand response allowance under the NSPS 

regulations. Consequently, the EPA is proposing to revisinge the existing language in 

§§60.4211(f) and 60.4219 of 40 CFR part 60, subpart IIII, and §§60.4243(d) and 60.4248 of 40 

CFR part 60, subpart JJJJ, to specify that emergency engines may participate in demand response 

programs for up to 100 hours per year, including hours spent towards maintenance and testing of 

the emergency engines. 
*** E.O. 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

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In addition to the changes the EPA is finalizproposing related to emergency demand 

response operation, the EPA is also including a further provision for owners and operators of 

existing stationary emergency RICE located at area sources. Paragraph §63.6640(f) currently 

allows owners and operators of emergency stationary RICE to operate their engine for 50 hours 

per year in non-emergency situations. As currently written, the 50 hours per year for nonemergency situations cannot be used for peak shaving or to generate income for a facility to 

supply power to an electric grid or otherwise supply power as part of a financial arrangement 

with another entity; except that owners and operators of certain emergency engines may operate 

the engine for a maximum of 15 hours per year as part of an emergency demand response 

program. As discussed, the 15 hours per year allowance for emergency engines to participate in 

emergency demand response programs is being increased to 100 hours per year, but will also 

include hours spent towards maintaining and conducting readiness testing of the emergency 

engines. However, additionally, the EPA is also allowproposing that stationary emergency 

engines located at area sources be permitted to apply the 50 hours per year that is currently 

allowed under §63.6640(f) for non-emergency operation towards any non-emergency operation, 

including operation as part of a financial agreement with another entity. The peak shaving 

allowance would expire in 2017. The EPA is specifying that the power can only be used at the 

facility or towards the local system, and the engine can only be operated for peak shaving as part 

of a program with the local distribution system operator. The EPA is also clarifying that an 

engine that exceeds the calendar year limitations on non-emergency operation, including 

emergency demand response or peak shaving, will be considered a non-emergency engine and 

subject to the requirements for non-emergency engines for the remaining life of the engine. 

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4.2.1.5.1 Background for FinalProposed Amendments

 The RICE NESHAP currently specifies less stringent requirements for existing nonemergency CI engines at area sources located in remote areas of Alaska. Remote areas are 

defined as those not accessible by the FAHS. The FAHS includes areas with year-round ferry 

service that are not on the contiguous road system. Under the current regulation, stationary nonemergency CI engines at area sources in areas of Alaska that are not accessible by the FAHS are 

subject to management practices as opposed to numerical emission standards. 

Following the publication of the final rule in 2010, the EPA received requests to expand 

the definition of remote areas of Alaska. Stakeholders asserted that facilities in areas that are 
*** E.O. 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

accessible by the FAHS but are not connected to the Alaska Railbelt grid face the same 

challenges as those in areas not accessible by the FAHS. The Alaska Railbelt Grid refers to the 

service areas of the six regulated public utilities that extend from Fairbanks to Anchorage and the 

Kenai Peninsula. These utilities are the Golden Valley Electric Association, Chugach Electric 

Association, Matanuska Electric Association, Homer Electric Association, Anchorage Municipal 

Light & Power, and the City of Seward Electric System. According to the stakeholders, one 

reason for broadening the definition of remote areas in Alaska is high energy costs, which 

provide a natural incentive to run CI engines as little as possible. The cost of energy is utilities’ 

greatest concern in Alaska. Also, the stakeholders indicated that extreme weather conditions in 

certain areas of Alaska is another reason for including additional areas in the definition of remote 

areas of Alaska. The climate issue is unique to remote areas of Alaska that experience some of 

the most extreme temperatures in the country. Heavy snowfall and high winds are not 

uncommon in several areas that are accessible by the FAHS. For instance, Copper Valley 

Electric Association (CVEA) is a utility accessible by the FAHS, but it includes areas that face 

the same challenges as other communities not accessible by the FAHS. The utility operates on an 

isolated grid and relies on diesel power generation. In one of CVEA’s territories, Valdez, Alaska, 

CVEA indicated that this area experiences brutal conditions and stated that Valdez is considered 

to have the greatest snowfall (326 inches per winter) in any city of the United States. Also, winds 

at more than 100 miles per hour are not uncommon for Valdez, Alaska, according to CVEA. 

Temperatures between 40 and 50 below zero are also not abnormal, which emphasizes the 

extreme reliance on power, CVEA asserted. Travel times and accessibility are issues on a regular 

basis, but can be additionally exacerbated due to severe weather, which in some cases may lead 

to avalanches and road closings. In particular, even if a site is on the FAHS, in the event of poor 

weather conditions and road closings, there are in many cases no alternate roads to travel on. 

Further, access to specific isolated sites can also be problematic in particular remote areas of 

Alaska and the problems are unique to Alaska because of the infrastructure and environment. For 

example, communities made the case that sources along the AMHS that are only accessible by 

the AMHS should be treated the same way as communities not accessible by the FAHS. The 

AMHS primarily serves passengers and vehicles, and is not intended for transporting goods. 

Therefore, the same methods used to bring in goods to communities not on the FAHS are the 

same as those Alaskan villages served only by the AMHS. Goods are typically brought in to 

remote communities by barge and this is another example of a scenario that is unique to Alaska. 

Other arguments for expanding the definition of remote areas of Alaska beyond those not 

accessible by the FAHS include very low population density in many other remote areas 

although accessible by the FAHS, and the fact that many of these areas are not connected to the 
*** E.O. 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

electric grid and rely on back up diesel generation to support fluctuating renewable energy 

systems. The energy supply system is another area that is particularly different in Alaska 

compared to the rest of the country whose majority of customers are connected to the grid. 

Lastly, if sources were to comply with requirements under the RICE NESHAP necessitating addon controls and associated monitoring, testing, and administrative requirements, compliance 

costs would be high and funds needed for sustainable renewable energy goals would be diverted. 

Therefore, for the reasons discussed, the EPA is proposing expandingsion of the remote area 

source category. This amendmentproposal is supported by the Alaska Department of 

Environmental Conservation and communities with whom the EPA has discussed this issue. 

4.2.1.5.2 What are the FinalProposed Amendments? 

Page 11: [21] Deleted EPA 1/8/2013 9:41:00 AM 

The EPA is proposing to expanding the current definition of remote areas of Alaska to extend 

beyond areas that are not accessible by the FAHS. Specifically, the EPA is requiringproposing 

that areas of Alaska that are accessible by the FAHS and that meet all of the following criteria 

are also considered remote and subject to management practices under the rule: 

•The stationary CI engine is located in an area not connected to the Alaska Railbelt Grid, 

•At least 10 percent of the power generated by the engine per year is used for residential 

purposes, and 

•The system capacity is less than 12 megawatts, or the engine is used exclusively for backup 

power for renewable energy and is used less than 500 hours per year on a 10-year rolling 

average. 

The EPA is proposing limiting the remote classification to engines that are used at least partially 

for residential purposes, where the impact of higher energy costs is of greatest concern. The 

classification is further limited to sources that are used infrequently as backup for renewable 

power, or that are at smaller capacity facilities, which are generally in more sparsely populated 

areas. 

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Summary of Major Source and Area Source Baseline Emissions for the RICE NESHAP 

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_________________________________ 

RTI International is a trade name of Research Triangle Institute. 

 January 

2013

Regulatory Impact Analysis (RIA) for 

Reconsideration Existing Stationary Spark 

Ignition RICE NESHAP 

 

Final Report

Prepared for 

Larry Sorrels 

U.S. Environmental Protection Agency 

Office of Air Quality Planning and Standards (OAQPS) 

Air Economics Group (AEG) 

(MD-C439-02)

Research Triangle Park, NC 27711 

 

Formatted: Left

Deleted: M

Deleted: 2

Deleted: Proposed 
_________________________________ 

RTI International is a trade name of Research Triangle Institute. 

 

 

Deleted: Regulatory Impact 

Analysis (RIA) for Existing 

Stationary Spark Ignition RICE 

NESHAP¶

¶

¶

Final Report¶

¶

¶

May 2012¶

¶

Prepared for¶

¶

Larry Sorrels¶

U.S. Environmental Protection Agency¶

Office of Air Quality Planning and 

Standards (OAQPS)¶

Air Benefit and Cost Group (ABCG) ¶

(MD-C439-02) ¶

Research Triangle Park, NC 27711¶

¶

¶

Prepared by¶

¶

Paramita Sinha¶

Fern Braun¶

Brooks Depro¶

RTI International¶

3040 Cornwallis Road¶

Research Triangle Park, NC 27709¶
iii 

CONTENTS 

Section Page

1 Executive Summary ..........................................................................................................1

 ES.1 Summary of Impacts for SI RICE NESHAP Reconsideration ............1-1 

 ES.2 Comparison with Results from 2010 Final SI RICE NESHAP......................1-2 

2 Introduction .......................................................................................................................5

2.1 Organization of this Report ......................................................................................5

3 Industry Profile .................................................................................................................1

3.1 Electric Power Generation, Transmission, and Distribution ...................................1

3.1.1 Overview ......................................................................................................1

3.1.2 Goods and Services Used .............................................................................3

3.1.3 Business Statistics ........................................................................................4

3.2 Oil and Gas Extraction ...........................................................................................11

3.2.1 Overview ....................................................................................................11

3.2.2 Goods and Services Used ...........................................................................11

3.2.3 Business Statistics ......................................................................................13

3.2.4 Case Study: Marginal Wells ......................................................................17

3.3 Pipeline Transportation of Natural Gas ............................................................. 3-18 

3.3.1 Overview ................................................................................................ 3-18

3.3.2 Goods and Services Used ....................................................................... 3-18

3.3.3 Business Statistics .................................................................................. 3-20

4 Regulatory Alternatives, Costs, and Emission Impacts ....................................................1

4.1 Background ..............................................................................................................1

4.2 Amendments to SI RICE NESHAP .................................................................... 4-3

4.2.1 Total Hydrocarbon Compliance (THC) Demonstration Option .............. 4-3

4.2.2 Final Amendment - Emergency Demand Response and Reliability ....... 4-8

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iv 

4.2.3 Non-Emergency Stationary SI RICE Greater than 500 HP Located 

at Area Sources...... .............................................................................. 4-17

 4.2.4 Compliance Date...............................................................4-25

4.3 What Are the Pollutants Regulated by the Rule? ............................................... 4-26

4.4 Cost Impacts....................................................................................................... 4-27

4.4.1 Introduction ............................................................................................ 4-27

4.4.2 Control Cost Methodology .................................................................... 4-28

4.4.3 Control Cost Equations .......................................................................... 4-30

4.4.4 Summary ................................................................................................ 4-34

4.4.5 Caveats and Limitations for Cost Estimates .......................................... 4-45

4.5 Baseline Emissions and Emission Reductions ................................................... 4-46 

5 Economic Impact Analysis, Energy Impacts, and Social Costs ................................... 5-1

5.1 Compliance Costs of the Reconsidered Rule ....................................................... 5-1 

5.2 Social Cost Estimate ............................................................................................ 5-3 

5.3 How Might People and Firms Respond? A Partial Equilibrium Analysis .......... 5-4 

5.2.1 Changes in Market Prices and Quantities ................................................ 5-4

5.2.2 Regulated Markets: The Electric Power Generation, Transmission, 

and Distribution Sector ............................................................................ 5-6

5.2.3 Partial Equilibrium Measures of Social Cost: Changes Consumer 

and Producer Surplus ............................................................................... 5-7

5.4 Energy Impacts .................................................................................................... 5-9 

5.5 Unfunded Mandates ........................................................................................... 5-10 

5.5.1 Future and Disproportionate Costs ........................................................ 5-10

5.5.2 Effects on the National Economy .......................................................... 5-10 

5.6 Environmental Justice ........................................................................................ 5-11 

5.7 Employment Impact Analysis ............................................................................ 5-11 

5.7.1 Employment Impacts from Pollution Control Requirements ................ 5-13

5.7.2 Employment Impacts within the Regulated Industry............................. 5-17

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v 

6 Small Entity Screening Analysis ......................................................................................1

6.1 Small Entity Data Set ...............................................................................................1

6.2 Small Entity Economic Impact Measures ................................................................2

6.2.1 Model Establishment Receipts and Annual Compliance Costs ...................2

6.3 Small Government Entities ....................................................................................11

7 Benefits of Emissions Reductions ................................................................................ 7-1  

7.1 Calculation of PM2.5 Human Health Co-Benefits ................................................ 7-1

7.2 Unquantified Benefits ........................................................................................ 7-13

7.2.1 HAP Benefits ......................................................................................... 7-13

7.2.2 Additional NO2 Co-Benefits .................................................................. 7-14

7.2.3 Ozone Co- Benefits ................................................................................ 7-16

7.2.4 Carbon Monoxide Co-Benefits .............................................................. 7-16 

7.2.5 Visibility Impairment Co-Benefits..................................7-23 

7.3 Characterization of Uncertainty in the Monetized PM2.5 Co-Benefits ............... 7-25

7.4 Comparison of Co-Benefits and Costs ............................................................... 7-30

8 References for RIA ...........................................................................................................1

 

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vi 

LIST OF FIGURES 

Number Page

1-1. Breakdown of Total Monetized PM2.5 Co-Benefits of SI RICE Reconsideration by 

Engine Size............................................................1-8 

1-2. Total Monetized PM2.5 Co-Benefits Estimates for the SI RICE Reconsideration in 

2013...............................................................................1-9 

3-1 Industrial Production Index (NAICS 2211) ......................................................................3

3-2 Internal Combustion Generators by State: 2006 ...............................................................4

3-3 2002 Regional Distribution of Establishments: Electric Power Generation, 

Transmission, and Distribution Industry (NAICS 2211) ..................................................6

3-4 Industrial Production Index (NAICS 211) ......................................................................12

3-5 2002 Regional Distribution of Establishments: Crude Petroleum and Natural 

Gas Extraction Industry (NAICS 211111) ......................................................................15

3-6 2002 Regional Distribution of Establishments: Natural Gas Liquid Extraction 

Industry (NAICS 211112) ..............................................................................................16

3-7 Distribution of Establishments within Pipeline Transportation (NAICS 486) ...............19

3-8 Distribution of Revenue within Pipeline Transportation (NAICS 486) .........................20

3-9 2002 Regional Distribution of Establishments: Pipeline Transportation (NAICS 

486) .................................................................................................................................22

3-10 Share of Establishments by Legal Form of Organization in the Pipeline 

Transportation of Natural Gas Industry (NAICS 48621): 2002 .....................................22

5-1 Distribution of Engine Population by Horsepower Group ........................................... 5-4

5-2 Market Demand and Supply Model: With and Without Regulation ............................ 5-6

5-3 Electricity Restructuring by State ................................................................................. 5-9

6-1 Distribution of Engine Population by Size for All Industries ...........................................8

6-2 Distribution of Compliance Costs by Engine Size for All Industries ...............................9

7-1. Breakdown of Monetized PM2.5 Health Co-Benefits using Mortality Function 

from Pope et al. (2002) ................................................................................................. 7-7

7-2. Total Monetized PM2.5 Co-Benefits for the SI RICE Reconsidered NESHAP in 

2013............................................................................................................................. 7-12

7-3. Breakdown of Monetized Co-Benefits for the SI RICE Reconsidered NESHAP 

by Engine Size ............................................................................................................ 7-13

7-4. Estimated Chronic Census Tract Carcinogenic Risk from HAP exposure from 

outdoor sources (2005 NATA) ................................................................................... 7-18

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vii 

7-5. Estimated Chronic Census Tract Noncancer (Respiratory) Risk from HAP 

exposure from outdoor sources (2005 NATA) ........................................................... 7-18

7-6. Percentage of Adult Population by Annual Mean PM2.5 Exposure in the 

Baseline ...................................................................................................................... 7-28

7-7. Cumulative Distribution of Adult Population at Annual Mean PM2.5 Exposure in 

the Baseline ................................................................................................................ 7-28

7-8. Net Benefits for the SI RICE Reconsidered NESHAP at 3% Discount Rate ............. 7-33

7-9. Net Benefits for the SI RICE Reconsidered NESHAP at 7% Discount Rate ............. 7-34 

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viii 

LIST OF TABLES 

Number Page

1-1 Summary of the Monetized Co-Benefits, Social Costs, and Net benefits for the 

SI RICE Reconsidered NESHAP in 2013 (millions of 2010$) .................................... 1-3 

1-2. Summary of the Monetized Co-Benefits, Compliance Costs, and Net benefits for the 

2010 Rule with the Amendments to the Stationary SI RICE Engine NESHAP in 2013 

(millions of 2010$).........................................................................................1-4 

1-3. Summary of Estimated Social Costs and Benefits for the 2010 Final SI RICE Rule and 

the Reconsideration (millions of 2010 dollars)..................................................1-10 

3-1 Key Statistics: Electric Power Generation, Transmission, and Distribution 

(NAICS 2211) (2007) .......................................................................................................2

3-2 Direct Requirements for Electric Power Generation, Transmission, and 

Distribution (NAICS 2211): 2002 ....................................................................................5

3-3 Firm Concentration for Electric Power Generation, Transmission, and 

Distribution (NAICS 2211): 2002 ....................................................................................7

3-4 United States Retail Electricity Sales Statistics: 2008 ......................................................8

3-5 FY 2010 Financial Data for 70 U.S. Shareholder-Owned Electric Utilities .....................9

3-6 Aggregate Tax Data for Accounting Period 7/07–6/08: NAICS 2211 .............................9

3-7 Key Enterprise Statistics by Receipt Size for Electric Power Generation, 

Transmission, and Distribution (NAICS 2211): 2007 ....................................................10

3-8 Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111): 

(2007) ..............................................................................................................................12

3-9 Key Statistics: Natural Gas Liquid Extraction (NAICS 211112) (2007) .......................13

3-10 Direct Requirements for Oil and Gas Extraction (NAICS 211): 2002 ...........................13

3-11 Key Enterprise Statistics by Employment Size for Crude Petroleum and Natural 

Gas Extraction (NAICS 211111): 2007 ..........................................................................17

3-12 Key Enterprise Statistics by Employment Size for Crude Natural Gas Liquid 

Extraction (NAICS 211112): 2007 ............................................................................. 3-17

3-13 Aggregate Tax Data for Accounting Period 7/07–6/08: NAICS 211 .............................18

3-14 Key Statistics: Pipeline Transportation of Natural Gas (NAICS 48621) (2007) ............19

3-15 Direct Requirements for Pipeline Transportation (NAICS 486): 2002 ..........................21

3-16 Firm Concentration for Pipeline Transportation of Natural Gas (NAICS 48621): 

2002 23

3-17 Aggregate Tax Data for Accounting Period 7/07–6/08: NAICS 486 .............................23

3-18 Key Enterprise Statistics by Receipt Size for Pipeline Transportation of Natural 

Gas (NAICS 48621): 2007 ..............................................................................................24

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Co-Benefits Estimates for SI RICE 

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<#>Summary of Estimated Reductions 

in Health Incidences from PM2.5 for the 

SI RICE Reconsideration Proposal in 

2013.......................................

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ix 

4-1 Summary of Annual and Capital Costs Equations for Existing Stationary SI 

Engines ............................................................................................................................22

4-2 Summary of Major Source and Area Source Costs for the SI RICE NESHAP .............24

4-3 Summary of Major Source and Area Source NAICS Costs for the SI RICE 

NESHAP .........................................................................................................................25

4-4 Summary of Major Source and Area Source NAICS Costs for the SI RICE 

NESHAP, by Size ...........................................................................................................26

4-5 Summary of Major Source and Area Source NAICS Costs for the SI RICE 

NESHAP, by Number of Engines ...................................................................................30

4-6 Summary of Major Source and Area Source Baseline for the SI RICE NESHAP .........35

4-7 Emissions Factors ...........................................................................................................36

4-8 Summary of Major Source and Area Source Baseline Emissions for the SI RICE 

NESHAP by 2013 ...........................................................................................................36

4-9 Summary of Major Source and Area Source Emissions Reductions for the SI 

RICE NESHAP by 2013 .................................................................................................36

5-1 Selected Industry-Level Annualized Compliance Costs as a Fraction of Total 

Industry Revenue: 2009 ................................................................................................ 5-3

5-2 Hypothetical Price Increases for a 1% Increase in Unit Costs ...................................... 5-5

5-3 Hypothetical Consumption Decreases for a 1% Increase in Unit Costs ....................... 5-7

5-4 U.S. Electric Powera Sector Energy Consumption (Quadrillion BTUs): 2013 ............ 5-9 

5-5 Labor-based Employment Estimates for Reporting and Recordkeeping and Installing, 

Operating, and Maintaining Control Equipment Requirements for Reconsideration SI 

RICE NESHAP........................................................5-16 

6-1 NESHAP for Existing Stationary Reciprocating Internal Combustion Engines 

(RICE): Affected Sectors and SBA Small Business Size Standards ................................3

6-2 Average Receipts for Affected Industry by Enterprise: 2007 ($2009 

Million/Establishment) .....................................................................................................4

6-3 Average Receipts for Affected Industry by Enterprise Receipt Range: 2007 

($2009/Establishment) .................................................................................................. 6-5

6-4 Representative Establishment Costs Used for Small Entity Analysis ($2009) .................7

7-1 Human Health Effects of PM2.5 .................................................................................... 7-2

7-2. General Summary of Monetized PM 2.5 –Related Health Co-Benefits Estimates 

for the SI RICE Reconsidered NESHAP in 2013 (millions of 2010$) ........................ 7-9

7-3. Summary of Reductions in Health Incidences from PM2.5 Co-Benefits for the 

SI RICE Reconsidered NESHAP in 2013 .................................................................. 7-10

7-4. All Monetized PM2.5 Co-Benefits from PM2.5 Benefits for the SI RICE 

Reconsidered NESHAP in 2013 ................................................................................. 7-11

7-5. Summary of the Annualized Monetized Benefits, Social Costs, and Net Benefits 

for the SI RICE Reconsidered NESHAP in 2013 (millions of 2010$) ...................... 7-31

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Section 1

EXECUTIVE SUMMARY 

ES.1 Summary of Impacts for the Reconsideration 

This final action is a reconsideration of the promulgated NESHAP for existing stationary 

SI RICE with a site rating of less than or equal to 500 HP located at major sources, and existing 

stationary SI RICE of any site rating located at area sources. 

EPA estimates that complying with the reconsidered national emission standards for 

hazardous air pollutants (NESHAP) for stationary spark-ignition (SI) reciprocating internal 

combustion engines (RICE) will have an annualized cost of approximately $115 million per year 

(2009 or 2010 dollars) in the year of full implementation of the rule (2013). The total annualized 

costs of the reconsidered rule are 55% less than those for the final SI RICE NESHAP 

promulgated in 2010. Using these costs, EPA estimates in its economic impact analysis that the 

NESHAP will have limited impacts on the industries affected and their consumers. Using sales 

data obtained for affected small entities in an analysis of the impacts of this rule on small 

entities, EPA expects that the NESHAP will not result in a SISNOSE (significant economic 

impacts for a substantial number of small entities), a result consistent with the conclusion for the 

final SI RICE NESHAP issued in 2010. EPA also does not expect significant adverse energy 

impacts based on Executive Order 13211, an Executive Order that requires analysis of energy 

impacts for rules such as this one that are economically significant under Executive Order 12866. 

In the year of full implementation (2013), EPA estimates that the total monetized benefits 

of the reconsidered NESHAP are $62 million to $150 million and $55 million to $140 million, 

at 3% and 7% discount rates, respectively (Table 1-1). All estimates are in 2010 dollars for the 

year 2013. These estimates reflect the co-benefits from 9,600 tons of NOx emission reductions 

associated with implementing the controls to reduce hazardous air pollutants (HAPs) required 

under this reconsideration. Using alternate relationships between PM2.5 and premature mortality 

supplied by experts, higher and lower benefits estimates are plausible, but most of the expertbased estimates fall between these estimates. The benefits from reducing other air pollutants 

have not been monetized in this analysis, including reducing 22,200 tons of carbon monoxide 

(CO) and 1,800 tons of hazardous air pollutants (HAPs) each year. In addition, ecosystem 

benefits and visibility benefits have not been monetized in this analysis. Since the 

reconsideration proposal, we have made several updates to the approach we use to estimate 

mortality and morbidity benefits in the PM NAAQS RIAs (U.S. EPA, 2012a,b) including 

updated epidemiology studies, health endpoints, and population data. Although we have not reDeleted: Proposed 

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estimated the benefits for this rule to apply this new approach, these updates generally offset 

each other, and we anticipate that the rounded benefits estimated for this rule are unlikely to be 

different than those provided below.

In the year of full implementation (2013), EPA estimates the net benefits of the 

NESHAP are $-53 million to $35 million and $-60 million to $25 million at 3% and 7% discount 

rates, respectively (Table 1-1). These estimates are “snapshots” of benefits and costs at year 2013 

and are in 2010 dollars. 

Table 1-1. Summary of the Annualized Monetized Co-Benefits, Social Costs, and Net 

benefits for the Reconsideration SI RICE NESHAP in 2013 (millions of 2010$)1

 3% Discount Rate 7% Discount Rate 

Total Monetized Benefits2 $62 to $150 $55 to $140 

Total Compliance Costs3 $115 $115 

Net Benefits $-53 to $35 $-60 to $25 

Non-monetized Benefits 

Health effects from HAP exposure 

Health effects from CO, NO2, and ozone exposure 

Ecosystem effects 

Visibility impairment 

1

All estimates are for the implementation year (2013), and are rounded to two significant figures. 

2

 The total monetized co-benefits reflect the human health co-benefits associated with reducing exposure to PM2.5

through reductions of PM2.5 precursors such as NOx and VOC. It is important to note that the monetized cobenefits include many but not all health effects associated with PM2.5 exposure. It is important to note that the 

monetized benefits include many but not all health effects associated with PM2.5 exposure. Benefits are shown as a range 

from Pope et al. (2002) to Laden et al. (2006). These models assume that all fine particles, regardless of their chemical 

composition, are equally potent in causing premature mortality because there is no clear scientific evidence that would 

support the development of differential effects estimates by particle type. Although we have not re-estimated the 

benefits for this rule to apply the updated methods in the PM NAAQS RIA (U.S. EPA, 2012b), these updates 

generally offset each other, and we anticipate that the rounded benefits estimated for this rule are unlikely to be 

different than those provided here.

3

 The annual compliance costs serve as a proxy for the annual social costs of this rule given the lack of difference 

between the two. The annual compliance costs are calculated using a 7 percent discount rate. 

ES.2 Comparison of Impacts for Final 2010 SI RICE Final Rule and SI RICE NESHAP 

Reconsideration 

The EPA analyzed the costs, economic impacts and benefits of this rule using the 

identical methodology as the RIA for the SI RICE final rule promulgated in October, 2010. 

Therefore, all changes to the costs, benefits, and economic impacts for this rule are due to 

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benefits into specific components here. 

See Figure 7-1 for an illustration of the 

breakdown, or the RIA for the final 

Cross-States Air Pollution Rule (EPA, 

2011) for more information. 

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changes ( amendments) to this rule for SI RICE, which are fully described later in this RIA and 

the preamble for the rule. Our baseline does not assume compliance with the 2010 SI RICE final 

rule. This assumption is based on the fact that full implementation of the final SI RICE rule has 

not taken place as of yet (it will take place by October, 2013). In addition, this assumption is 

consistent with the baseline definition applied in the recently finalized d ICI boilers and CISWI 

NESHAP rulemakings. Monetized benefits are the co-benefits of this rule from reductions in 

directly emitted PM2.5 emissions. 

The following table shows an approximation of the changes in monetized benefits and 

engineering costs due to changes to the SI RICE rule included in the SI RICE reconsideration, 

and includes values that show a comparison based on the 2010 final rule emissions inventory. 

All values in this table are in 2010 dollars. 

Table 1-2. Summary of the Monetized Benefits and Compliance Costs for the 2010 Rule 

with the Amendments to the Stationary SI Engine NESHAP in 2013 (millions of 

2010 dollars)a 

Monetized Benefits in 2013 Annual Engineering Costs in 

2013 

SI RICE Final Rule (May 2010) $510 to $1,200 million $253 million 

Changes due to the amendments to the final 

SI RICE rule -$448 to $1,050 million -$138 million 

Final SI RICE reconsideration rule (2012) +$62 to $150 million $115 million 

* Monetized benefits are shown at a 3% discount rate and are from reductions in PM2.5 emissions. These benefits do 

not include benefits associated with reduced exposure to HAP, visibility impairment, or ecosystem effects. 

Monetary estimates are in 2010 dollars. 

The results for the economic impacts fall by more than half from those for the SI final 

rule. This outcome is due to the significant reduction in compliance costs associated with the 

amendments to the 2010 SI final rule in this rulemaking. All of these results for this rule are 

found in Section 5 in this RIA. 

The results for sales tests (i.e. annual cost/sales analysis) for small businesses also fall 

from those calculated for the final SI RICE rule. This outcome is also due to the overall large 

reductions in compliance costs. All of the results for this rule are found in Section 6 in this 

RIA. 

We estimate changes in employment for this SI RICE rule. These estimates reflect the 

employment impacts associated with installation and operation of monitoring equipment, and 

also activities for recordkeeping, reporting, and testing. We estimate that 200 full-time 

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equivalents (FTEs) will be required as one-time labor for installation of equipment, and 400 

FTEs will be required as ongoing labor for compliance with the rule. The results are presented 

and explained in detail in Section 5 of this RIA. We did not estimate changes in employment 

for the 2010 final SI RICE rule. 

The benefits estimates decreased significantly from those estimated for the 2010 final SI 

RICE rule. The range for the 2010 final SI RICE RIA was $510 million (2009$) to $1,200 

million (2009$) at 3 percent discount rate. The range for this rule is $62 million (2010$) to $150 

million (2010$) at 3 percent discount rate. The range for the 2010 final SI RICE RIA was $460 

million (2009$) to $1,100 million (2009$) at 7 percent discount rate. The range for this rule is 

$55 million (2010$) to $140 million (2010$) at 7 percent discount rate. 

Table 1-5 shows the estimated costs and benefits for the 2010 final SI RICE Rule and the 

reconsideration rule. The estimated net benefits for the reconsideration rule are considerably 

smaller than the range for the 2010 final SI RICE rule RIA, which was $210 million to $860 

million at a 7 percent discount rate and was $250 million to $980 billion at 3 percent. 

Table 1-3. Summary of Estimated Social Costs and Benefits for the 2010 final SI RICE 

Rule and the Reconsideration Rule (millions of 2010 dollars)1 

 3% Discount Rate 7% Discount Rate 

2010 Final SI RICE NESHAP 

Total Monetized Benefits $510 to $1,200 $460 to $1,100 

Total Social Costs $253 $253 

Net Benefits $250 to $980 $210 to $860 

Final Reconsideration SI RICE NESHAP 

Total Monetized Benefits $62 to $150 $55 to $140 

Total Social Costs $115 $115 

Net Benefits $-53 to $35 $-60 to $25 

1

All estimates are for the implementation year (2013), and are rounded to two significant figures. All monetized 

benefits are from reductions of PM2.5 emissions, a co-benefit of this final rule. Although we have not reestimated the benefits for this rule to apply the updated methods in the PM NAAQS RIA (U.S. EPA, 2012b), 

these updates generally offset each other, and we anticipate that the rounded benefits estimated for this rule are 

unlikely to be different than those provided here. The annualized compliance costs are $115 million in 2010$ as 

noted earlier in this RIA, and are annualized using a 7% interest rate. Compliance costs are used as an 

approximation for social costs in this RIA. 

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estimate the benefits from reducing 

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and visibility impairment, including 

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Section 2

INTRODUCTION 

EPA is finalizing NESHAP for existing stationary SI RICE that either are located at area 

sources of hazardous air pollutant emissions or that have a site rating of less than or equal to 500 

horsepower and are located at major sources of hazardous air pollutant emissions. The final 

amendments to the SI RICE NESHAP are provided in detail in Section 4 of this RIA. 

The rule is economically significant according to Executive Order 12866. As part of the 

regulatory process of preparing these standards, EPA has prepared a regulatory impact analysis 

(RIA). This analysis includes an analysis of impacts to small entities as part of compliance with 

the Small Business Regulatory Enforcement Fairness Act (SBREFA) and an analysis of impacts 

on energy consumption and production to comply with Executive Order 13211 (Statement of 

Energy Effects). An analysis of economic impacts, along with an analysis of impacts on 

employment, is also included in this RIA. Finally, an analysis of the benefits of the rule is 

included in this RIA. It should be noted that the data that supports the analyses listed above have 

been updated where possible and appropriate from the data used in the RIA for the SI RICE 

NESHAP promulgated in 2010. 

2.1 Organization of this Report 

The remainder of this report supports and details the methodology and the results of the 

RIA: 

 Section 3 presents a profile of the affected industries. 

 Section 4 presents a summary of regulatory alternatives considered in the final rule, 

and provides the compliance costs of the rule. 

 Section 5 describes the estimated costs of the regulation and describes the economic 

impact analysis (EIA) methodology and reports market, welfare, energy, and 

employment impacts. 

 Section 6 presents estimated impacts on small entities. 

 Section 7 presents the benefits and net benefits (benefits- costs) estimates. 

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Section 3

INDUSTRY PROFILE 

This section provides an introduction to the industries affected by the rule, i.e., industries 

in which the spark-ignition (SI) RICE being regulated are found. SI RICE generate electric 

power, pump gas or other fluids, or compress air for machinery. The primary non-utility 

application of internal combustion (IC) engines is in the natural gas industry to power 

compressors used for pipeline transportation, field gathering (collecting gas from wells), 

underground storage tanks, and in-gas processing plants. RICEs are separated into three design 

classes: 2 cycle (stroke) lean burn, 4-stroke lean burn, and 4-stroke rich burn. Each of these have 

design differences that affect both baseline emissions as well as the potential for emissions 

control. 

These industries include the following: 

 electric power generation, transmission, and distribution (NAICS 2211), 

 oil and gas extraction (including marginal wells) (NAICS 211), and 

 pipeline transportation of natural gas (NAICS 48621). 

While this is not an exhaustive list of the industries affected by this final reconsideration 

rule, these three industries incur about 83 percent of the annualized costs of the rule. A full 

listing of all industries affected in this rulemaking can be found in Chapter 4. The purpose of this 

profile chapter is to give the reader a general understanding of the economic aspects of the 

industry; their relative size, relationships with other sectors in the economy, trends for the 

industries, and financial statistics. 

3.1 Electric Power Generation, Transmission, and Distribution 

3.1.1 Overview 

Electric power generation, transmission, and distribution (NAICS 2211) is an industry 

group within the utilities sector (NAICS 22). It includes establishments that produce electrical 

energy or facilitate its transmission to the final consumer. 

From 2002 to 2007, revenues from electric power generation grew about 18% to over 

$440 billion ($2007) (Table 3-1).1

 At the same time, payroll rose about 7% and the number of 

 

1

 We provide revenues from electric power generation for the years 2002 and 2007 for these are years of the 

Economic Census. We reference data from these Economic Censuses frequently in this industry profile and 

show revenues from this industry over this time frame due to availability of such data. 

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employees decreased by around 4%. The number of establishments rose by about 3%. Industrial 

production within NAICS 2211 has increased 26% since 1997 (Figure 3-1). 

Electric utility companies have traditionally been tightly regulated monopolies. Since 

1978, several laws and orders have been passed to encourage competition within the electricity 

market. In the late 1990s, many states began the process of restructuring their utility regulatory 

framework to support a competitive market. Following market manipulation in the early 2000s, 

however, several states have suspended their restructuring efforts. The majority (58%) of power 

generators controlled by combined heat and power (CHP) or independent power producers are 

located in states undergoing active restructuring (Figure 3-2). 

Table 3-1. Key Statistics: Electric Power Generation, Transmission, and Distribution 

(NAICS 2211) ($2007) 

2002 2007 

Revenue ($106) 373,309 440,355 

Payroll ($106) 40,842 43,792 

Employees 535,675 515,335 

Establishments 9,394 9,642 

Source: U.S. Census Bureau; American FactFinder; “Sector 22: EC0722I2: Utilities: Industry Series: Preliminary 

Comparative Statistics for the United States (2002 NAICS Basis): 2007 and 2002.” http://factfinder.census.gov
3-3 

Figure 3-1. Industrial Production Index (NAICS 2211) 

Source: The Federal Reserve Board. “Industrial Production and Capacity Utilization: Industrial Production” Series 

ID: G17/IP_MINING_AND_UTILITY_DETAIL/IP.G2211.S <http://www.federalreserve.gov/datadownload/>. 

(January 27, 2010). 

3.1.2 Goods and Services Used 

In Table 3-2, we use the latest detailed benchmark input-output data report by the Bureau 

of Economic Analysis (BEA) (2002) to identify the goods and services used in electric power 

generation. As shown, labor and tax requirements represent a significant share of the value of 

power generation. Extraction, transportation, refining, and equipment requirements potentially 

80

85

90

95

100

105

110

115

1997‐01

1997‐06

1997‐11

1998‐04

1998‐09

1999‐02

1999‐07

1999‐12

2000‐05

2000‐10

2001‐03

2001‐08

2002‐01

2002‐06

2002‐11

2003‐04

2003‐09

2004‐02

2004‐07

2004‐12

2005‐05

2005‐10

2006‐03

2006‐08

2007‐01

2007‐06

2007‐11

2008‐04

2008‐09

2009‐02

2009‐07

2009‐12

Index Value (Jan 2002=100)
3-4 

Figure 3-2. Internal Combustion Generators by State: 2006 

Source: U.S. Department of Energy, Energy Information Administration. 2007. “2006 EIA-906/920 Monthly Time 

Series.” 

associated with reciprocating internal combustion engines (oil and gas extraction, pipeline 

transportation, petroleum refineries, and turbine manufacturing) represent around 10% of the 

value of services. 

3.1.3 Business Statistics 

The U.S. Economic Census and Statistics of U.S. Businesses (SUSB) programs provide 

national information on the distribution of economic variables by industry, location, and size of 

business. Throughout this section and report, we use the following definitions: 

 Establishment: An establishment is a single physical location where business is 

conducted or where services or industrial operations are performed. 

Diesel and Natural Gas Internal

Combustion Generators By State

No Restructuring

Suspended Restructuring

Active Restructuring

100

50

10

1
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Table 3-2. Direct Requirements for Electric Power Generation, Transmission, and 

Distribution (NAICS 2211): 2002 

Commodity Commodity Description 

Direct Requirements 

Coefficientsa

V00100 Compensation of employees 20.52% 

V00200 Taxes on production and imports, less subsidies 13.71% 

211000 Oil and gas extraction 6.16% 

212100 Coal mining 5.86% 

482000 Rail transportation 3.01% 

230301 Nonresidential maintenance and repair 2.83% 

486000 Pipeline transportation 1.70% 

722000 Food services and drinking places 1.40% 

52A000 Monetary authorities and depository credit intermediation 1.39% 

541100 Legal services 1.13% 

a

 These values show the amount of the commodity required to produce $1.00 of the industry’s output. The values 

are expressed in percentage terms (coefficient ×100). 

Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table, 

Use Table and Direct Requirements Table. Tables 4 and 5. 

 Receipts: Receipts (net of taxes) are defined as the revenue for goods produced, 

distributed, or services provided, including revenue earned from premiums, 

commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all 

revenue collected for local, state, and federal taxes. 

 Firm: A firm is a business organization consisting of one or more domestic 

establishments in the same state and industry that were specified under common 

ownership or control. The firm and the establishment are the same for singleestablishment firms. For each multiestablishment firm, establishments in the same 

industry within a state are counted as one firm; the firm employment and annual 

payroll are summed from the associated establishments. 

 Enterprise: An enterprise is a business organization consisting of one or more 

domestic establishments that were specified under common ownership or control. The 

enterprise and the establishment are the same for single-establishment firms. Each 

multiestablishment company forms one enterprise; the enterprise employment and 

annual payroll are summed from the associated establishments. Enterprise size 

designations are determined by the summed employment of all associated 

establishments. 
3-6 

In 2002, Texas had almost 1,000 power establishments, while California, Georgia, and 

Ohio all had between 400 and 500 (Figure 3-3). Hawaii, Nebraska, and Rhode Island all had 

fewer than 20 establishments in their states. 

Figure 3-3. 2002 Regional Distribution of Establishments: Electric Power Generation, 

Transmission, and Distribution Industry (NAICS 2211) 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 22: Utilities: 

Geographic Area Series: Summary Statistics: 2002.” <http://factfinder.census.gov>; (November 10, 2008).. 

As shown in Table 3-3, the four largest firms owned over 1,200 establishments and 

accounted for about 16% of total industry receipts/revenue. The 50 largest firms accounted for 

almost 6,000 establishments and about 78% of total receipts/revenue. 

Investor-owned energy providers accounted for only 2% of retail electricity sold in the 

United States in 2008 (Table 3-4). In 2008, investor-owned energy provider companies with less 

than 50% of their assets regulated were unprofitable overall, while other companies in this 

category were profitable. (Table 3-5). In 2008, enterprises within NAICS 2211 had a pre-tax 

profit margin of 8.1% (Table 3-6). 

In 2002, about 82% of firms generating, transmitting, or distributing electric power had 

receipts of under $50 million (Table 3-7). However, these firms accounted for only 11% of 

employment, with 89% of employees working for firms with revenues in excess of $100 million. 

Establishments by State

Less than 100

100 - 199

200 - 349

350 - 500

More than 500
3-7 

Table 3-3. Firm Concentration for Electric Power Generation, Transmission, and 

Distribution (NAICS 2211): 2002 

Commodity Establishments 

Receipts/Revenue 

Number of 

Employees 

Employees per 

Amount ($10 Establishment 6) 

Percentage 

of Total 

All firms 9,394 $325,028 100.0% 535,675 57 

4 largest firms 1,260 $52,349 16.1% 68,432 54 

8 largest firms 2,566 $95,223 29.3% 151,575 59 

20 largest firms 3,942 $173,207 53.3% 271,393 69 

50 largest firms 5,887 $253,015 77.8% 408,021 69 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 22: Utilities: 

Subject Series—Estab & Firm Size: Concentration by Largest Firms for the United States: 2002.” 

<http://factfinder.census.gov>; (November 21, 2008). 
8 

Table 3-4. United States Retail Electricity Sales Statistics: 2008  Full-Service Providers Other Providers Item Investor-Owned Public Federal Cooperative Facility Energy Delivery Total Number of entities 3 62 1 25 1 NA NA 92 Number of retail customers 46,985 2,160,220 36 940,697 1 NA NA 3,147,939 Retail sales (103 megawatthours) 2,257 70,303 9,625 21,868 117 NA NA 104,170 Percentage of retail sales 2 67 9 21 0 — — 100 Revenue from retail sales ($106) 113 5,934 473 1,994 6 NA NA 8,520 Percentage of revenue 1.33 69.65 5.55 23.41 0.07 — — 100 Average retail price (cents/kWh) 5.01 8.44 4.91 9.12 5.25 NA NA 8.18 Source: U.S. Department of Energy, Energy Information Administration. 2009. “State Electricity Profiles 2008.” DOE/EIA-0348(01)/2. p. 260. < 

http://www.eia.doe.gov/cneaf/electricity/st_profiles/sep2008.pdf>. 
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Table 3-5. FY 2010 Financial Data for 70 U.S. Shareholder-Owned Electric Utilities 

 Profit Margin Net Income Operating Revenues 

Investor-Owned Utilities 4.81% $27,728 $371,545 

Regulateda 7.25% $12,341 $158,657 

Mostly regulatedb 8.50% $17,815 $175,218 

Diversifiedc -16.78% -$2,429 $37,671 

a 80%+ of total assets are regulated. 

b 50% to 80% of total assets are regulated. 

c Less than 50% of total assets are regulated. 

Source: Edison Electric Institute. “Income Statement: Q4 2010 Financial Update. Quarterly Report of the U.S. 

Shareholder-Owned Electric Utility Industry.” <http://www.eei.org>. 

Table 3-6. Aggregate Tax Data for Accounting Period 2009: NAICS 2211 

Number of enterprisesa 1,187 

Total receipts (103) $323,522,443 

Net sales(103

) $328,017,143 

Profit margin before tax 3.1% 

Profit margin after tax 2.0% 

a Includes corporations with and without net income. 

Source: Internal Revenue Service, U.S. Department of Treasury. 2010. “Corporation Source Book: Data Files 2000–

2009.” <http://www.irs.gov/taxstats/article/0,,id=167415,00.html>; (May 2, 2010). 
10 

Table 3-7. Key Enterprise Statistics by Employee Size for Electric Power Generation, Transmission, and Distribution 

(NAICS 2211): 2007 

Variable All Enterprises 

<20 

Employees

20–99 

Employees 

100–499 

Employees 

500+ 

Employees 

Firms 1,687 630 670 251 136 

Establishments 9,611 687 1,110 999 6,815 Employment 503,134 3,622 31,455 42,527 425,530 Receipts ($103) $440,342,284 $8,364,773 $21,825,969 $41,370,375 $368,781,167 

Receipts/firm ($103) $261,021 $13,277 $32,576 $164,822 $2,711,626 

Receipts/establishment ($103) $45,817 $12,176 $19,663 $41,412 $54,113 

Receipts/employment ($) $875 $2,309 $694 $973 $867 

Source: U.S. Census Bureau. 2010. “Firm Size Data from the Statistics of U.S. Businesses: U.S. All Industries Tabulated by Receipt Size: 2007.” 

<http://www.census.gov/csd/susb/susb07.htm>. 
3-11 

3.2 Oil and Gas Extraction 

3.2.1 Overview 

Oil and gas extraction (NAICS 211) is an industry group within the mining sector 

(NAICS 21). It includes establishments that operate or develop oil and gas field properties 

through such activities as exploring for oil and gas, drilling and equipping wells, operating onsite equipment, and conducting other activities up to the point of shipment from the property. 

Oil and gas extraction consists of two industries: crude petroleum and natural gas 

extraction (NAICS 211111) and natural gas liquid extraction (NAICS 211112). Crude petroleum 

and natural gas extraction is the larger industry; in 2002, it accounted for 93% of establishments 

and 75% of oil and gas extraction revenues. 

Industrial production in this industry is particularly sensitive to hurricanes in the Gulf 

Coast. In September of both 2005 and 2008, production dropped 14% from the previous month. 

(Figure 3-4). 

From 2002 to 2007, revenues from crude petroleum and natural gas extraction (NAICS 

211111) grew over 117% to almost $215 billion ($2007) (Table 3-8). At the same time, payroll 

grew 55% and the number of employees grew by 48%. The number of establishments dropped 

by over 17%; as a result, the average establishment revenue increased by 162%. Materials costs 

were approximately 18% of revenue over the period. 

From 2002 to 2007, revenue from natural gas liquid extraction (NAICS 211112) grew 

over 26% to about $42 billion (Table 3-9). At the same time, payroll dropped 18% and the 

number of employees dropped by 24%. The number of establishments dropped by 43%, resulting 

in an increase of revenue per establishment of about 122%. 

3.2.2 Goods and Services Used 

The oil and gas extraction industry has similar labor and tax requirements as the electric 

power generation sector. Extraction, support, power, and equipment requirements potentially 

associated with RICE (oil and gas extraction, support activities, electric power generation, 

machinery and equipment rental and leasing, and pipeline transportation) represent around 8% of 

the value of services (Table 3-10). 
3-12 

Figure 3-4. Industrial Production Index (NAICS 211) 

Source: The Federal Reserve Board. “Industrial Production and Capacity Utilization: Industrial Production” Series 

ID: G17/IP_MINING_AND_UTILITY_DETAIL/IP.G211.S <http://www.federalreserve.gov/datadownload/>. 

(January 27, 2010). 

Table 3-8. Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111): 

($2007) 

2002 2007 

Revenue ($106) $98,667 $214,198 

Payroll ($106) $5,785 $8,980 

Employees 94,886 140,160 

Establishments 7,178 5,956 

Sources: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 21: Mining: 

Industry Series: Historical Statistics for the Industry: 2002 and 1997.” <http://factfinder.census.gov>; 

(November 26, 2008). 

U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 21: EC0721I1: Mining: 

Industry Series: Detailed Statistics by Industry for the United States: 2007 ” <http://factfinder.census.gov>; 

(April 27, 2010). 

75

80

85

90

95

100

105

110

1997‐011997‐061997‐111998‐041998‐091999‐021999‐071999‐122000‐052000‐102001‐032001‐082002‐012002‐062002‐112003‐042003‐092004‐022004‐072004‐122005‐052005‐102006‐032006‐082007‐012007‐062007‐112008‐042008‐092009‐022009‐072009‐12

Index Value (Jan 2002=100)
3-13 

Table 3-9. Key Statistics: Natural Gas Liquid Extraction (NAICS 211112) ($2007) 

2002 2007 

Revenue ($106) $33,579 $42,363 

Payroll ($106) $607 $501 

Employees 9,693 7,343 

Establishments 511 291 

Sources: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 21: Mining: 

Industry Series: Historical Statistics for the Industry: 2002 and 1997.” <http://factfinder.census.gov>; 

(November 26, 2008). 

U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 21: EC0721I1: Mining: 

Industry Series: Detailed Statistics by Industry for the United States: 2007 ” <http://factfinder.census.gov>; 

(April 27, 2010). 

Table 3-10. Direct Requirements for Oil and Gas Extraction (NAICS 211): 2002 

Commodity Commodity Description 

Direct Requirements 

Coefficientsa

V00200 Taxes on production and imports, less subsidies 8.93% 

V00100 Compensation of employees 6.67% 

230301 Nonresidential maintenance and repair 6.36% 

211000 Oil and gas extraction 1.91% 

213112 Support activities for oil and gas operations 1.51% 

221100 Electric power generation, transmission, and distribution 1.47% 

541300 Architectural, engineering, and related services 1.24% 

532400 Commercial and industrial machinery and equipment rental and leasing 1.20% 

33291A Valve and fittings other than plumbing 1.10% 

541511 Custom computer programming services 0.99% 

a

 These values show the amount of the commodity required to produce $1.00 of the industry’s output. The values 

are expressed in percentage terms (coefficient ×100). 

Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table, 

Use Table and Direct Requirements Table. Tables 4 and 5. 

3.2.3 Business Statistics 

The U.S. Economic Census and SUSB programs provide national information on the 

distribution of economic variables by industry, location, and size of business. Throughout this 

section and report, we use the following definitions: 

 Establishment: An establishment is a single physical location where business is 

conducted or where services or industrial operations are performed. 
3-14 

 Receipts: Receipts (net of taxes) are defined as the revenue for goods produced, 

distributed, or services provided, including revenue earned from premiums, 

commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all 

revenue collected for local, state, and federal taxes. 

 Firm: A firm is a business organization consisting of one or more domestic 

establishments in the same state and industry that were specified under common 

ownership or control. The firm and the establishment are the same for singleestablishment firms. For each multiestablishment firm, establishments in the same 

industry within a state are counted as one firm; the firm employment and annual 

payroll are summed from the associated establishments. 

 Enterprise: An enterprise is a business organization consisting of one or more 

domestic establishments that were specified under common ownership or control. The 

enterprise and the establishment are the same for single-establishment firms. Each 

multiestablishment company forms one enterprise; the enterprise employment and 

annual payroll are summed from the associated establishments. Enterprise size 

designations are determined by the summed employment of all associated 

establishments. 

 As of 2007, there were 6,563 firms within the NAICS 211111 code, of which 6427 (98 

percent) were considered small businesses (Table 3-11). Within NAICS 211111, large firms 

compose about 2 percent of the firms, but account for 59 percent of employment and generate 

about 80 percent of estimated receipts listed under the NAICS. Within NAICS 211112, there 

are 139 firms, of which 95 (71 percent) were considered small businesses (Table 3-12). As 

shown in this table, large firms compose 29 percent of the firms, but account for 78 percent of 

employment and generate about 95 percent of estimated receipts. 

Enterprises within this industry generated $193 billion in total receipts in 2008. Including 

those enterprises without net income, the industry averaged an after-tax profit margin of 8.5% 

(Table 3-13). 
3-15 

Figure 3-5. 2002 Regional Distribution of Establishments: Crude Petroleum and Natural 

Gas Extraction Industry (NAICS 211111) 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 21: Mining: 

Geographic Area Series: Industry Statistics for the State or Offshore Areas: 2007.” <http://factfinder.census.gov>; 

(January 27, 2010). 

Establishments by State

Less than 100

100 - 249

250 - 499

500 - 1,000

More than 1,000
3-16 

Figure 3-6. 2002 Regional Distribution of Establishments: Natural Gas Liquid 

Extraction Industry (NAICS 211112) 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 21: Mining: 

Geographic Area Series: Industry Statistics for the State or Offshore Areas: 2007.” <http://factfinder.census.gov>; 

(January 27, 2010). 

Establishments by State

Less than 5

5 - 9

10 - 19

20 - 40

More than 40
3-17 

 

Table 3-11. Key Statistics for Crude Petroleum and Natural Gas Extraction (NAICS 

211111): 2007 

NAICS NAICS Description 

SBA Size 

Standard 

 Small 

Firms Large Firms Total Firms 

Number of Firms by Firm Size 

 Crude Petroleum and Natural Gas Extraction 500 6,329 95 6,424 

Total Employment by Firm Size 

 55,622 77,664 133,286 

Estimated Receipts by Firm Size ($1000) 

 44,965,936 149,141,316 194,107,252 

Note: *The counts of small and large firms in NAICS 486210 is based upon firms with less than $7.5 million in 

receipts, rather than the $7 million required by the SBA Size Standard. We used this value because U.S. Census 

reports firm counts for firms with receipts less than $7.5 million. **Employment and receipts could not be split 

between small and large businesses because of non-disclosure requirements faced by the U.S. Census Bureau. 

Source: U.S. Census Bureau. 2010. “Number of Firms, Number of Establishments, Employment, Annual Payroll, 

and Estimated Receipts by Enterprise Receipt Size for the United States, All Industries: 2007.” 

<http://www.census.gov/econ/susb/>

Table 3-12. Key Statistics for Crude Natural Gas Liquid Extraction (NAICS 211112): 2007 

 NAICS Description 

SBA Size 

Standard 

 Small 

Firms Large Firms Total Firms 

Number of Firms by Firm Size 

 Natural Gas Liquid Extraction 500 98 41 139 

 

Total Employment by Firm Size 

 1,875 6,648 8,523 

 

Estimated Receipts by Firm Size ($1000) 

 2,164,328 37,813,413 39,977,741 

Note: *The counts of small and large firms in NAICS 486210 is based upon firms with less than $7.5 million in 

receipts, rather than the $7 million required by the SBA Size Standard. We used this value because U.S. Census 

reports firm counts for firms with receipts less than $7.5 million. **Employment and receipts could not be split 

between small and large businesses because of non-disclosure requirements faced by the U.S. Census Bureau. 

Source: U.S. Census Bureau. 2010. “Number of Firms, Number of Establishments, Employment, Annual Payroll, 

and Estimated Receipts by Enterprise Receipt Size for the United States, All Industries: 2007.” 

<http://www.census.gov/econ/susb/>
3-18 

Table 3-13. Aggregate Tax Data for Accounting Period 7/07–6/08: NAICS 211 

Number of enterprisesa 19,441 

Total receipts (103) $193,230,241 

Net sales(103

) $166,989,539 

Profit margin before tax 12.9% 

Profit margin after tax 8.5% 

a Includes corporations with and without net income. 

Source: Internal Revenue Service, U.S. Department of Treasury. 2010. “Corporation Source Book: Data Files 2004-

2007.” <http://www.irs.gov/taxstats/article/0,,id=167415,00.html>; (May 2, 2010). 

3.3 Pipeline Transportation of Natural Gas 

3.3.1 Overview 

Pipeline transportation of natural gas (NAICS 48621) is an industry group within the 

transportation and warehousing sector (NAICS 48-49), but more specifically in the pipeline 

transportation subsector (486). It includes the transmission of natural gas as well as the 

distribution of the gas through a local network to participating businesses. 

From 2002 to 2007, natural gas transportation revenues fell by 29% to just over $16 

billion ($2007) (Table 3-14). At the same time, payroll decreased by 14%, while the number of 

paid employees decreased by nearly 25%. The number of establishments also fell by 8% from 

1,701 establishments in 2002 to 1,560 in 2007. 

3.3.2 Goods and Services Used 

The BEA reports pipeline transportation of natural gas only for total pipeline 

transportation (3-digit NAICS 486). In addition to pipeline transportation of natural gas (NAICS 

4862), this industry includes pipeline transportation of crude oil (NAICS 4861) and other 

pipeline transportation (NAICS 4869). However, the BEA data are likely representative of the 

affected sector since pipeline transportation of natural gas accounts for 60% of NAICS 486 

establishments and 66% of revenues (Figures 3-8 and 3-9). 
3-19 

Table 3-14. Key Statistics: Pipeline Transportation of Natural Gas (NAICS 48621) ($2007) 

Year 2002 2007 

Revenue ($106) 16,368 20,797 

Payroll ($106) 2,086 2,064 

Employees 24,519 24,683 

Establishments 1,560 1,479 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48: EC0748I1: 

Transportation and Warehousing: Industry Series: Preliminary Summary Statistics for the United States: 2002 and 

2007.” http://factfinder.census.gov (January 27, 2010). 

Figure 3-8. Distribution of Establishments within Pipeline Transportation (NAICS 486) 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48: 

Transportation and Warehousing: Industry Series: Summary Statistics for the United States: 2002 

<http://factfinder.census.gov>; (January 27, 2010). 

In Table 3-15, we use the latest detailed benchmark input-output data report by the BEA 

(2002) to identify the goods and services used by pipeline transportation (NAICS 486). As 

shown, labor, refineries, and maintenance requirements represent significant share of the cost 

associated with pipeline transportation. Power and equipment requirements potentially associated 

with reciprocating internal combustion engines (electric power generation and distribution) 

represent less than 2% of the value of services. 

60%

25%

15%

0%

10%

20%

30%

40%

50%

60%

70%

4862 Pipeline

Transportation of

Natural Gas

4869 Other Pipeline

Transportation

4861 Pipeline

Transportation of Crude

Oil
3-20 

Figure 3-9. Distribution of Revenue within Pipeline Transportation (NAICS 486) 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48: 

Transportation and Warehousing: Industry Series: Summary Statistics for the United States: 2002” 

<http://factfinder.census.gov>; (January 27, 2010). 

3.3.3 Business Statistics 

The pipeline transportation of natural gas is clearly concentrated in the two states closest 

to the refineries in the Gulf of Mexico. In 2002, Texas and Louisiana contributed to 31% of all 

pipeline transportation establishments in the United States (Figure 3-10) and 41% of all U.S. 

revenues. Other larger contributors with over 50 establishments in their states include Oklahoma, 

Pennsylvania, Kansas, Mississippi, and West Virginia. 

According to 2002 U.S. Census data, about 86% of transportation of natural gas 

establishments were owned by corporations and about 8% were owned by individual 

proprietorships. About 6% were owned by partnerships (Figure 3-11). As shown in Table 3-16, 

the four largest firms accounted for nearly half of the establishments, and just over half, 51%, of 

total revenue. The 50 largest firms accounted for over 1,354 establishments and about 99% of 

total revenue. The average number of employees per establishment was approximately 17 across 

all groups of firms. 

Enterprises within pipeline transportation (NAICS 486) generated $11.1 billion in total 

receipts in 2008. Including those enterprises without net income, the industry averaged an aftertax profit margin of 9.6% (Table 3-17). 

66%

19%

15%

0%

10%

20%

30%

40%

50%

60%

70%

4862 Pipeline

Transportation of

Natural Gas

4869 Other Pipeline

Transportation

4861 Pipeline

Transportation of Crude

Oil
3-21 

Table 3-15. Direct Requirements for Pipeline Transportation (NAICS 486): 2002 

Commodity Commodity Description 

Direct 

Requirements 

Coefficientsa

V00100 Compensation of employees 14.78% 

324110 Petroleum refineries 13.55% 

230301 Nonresidential maintenance and repair 6.07% 

211000 Oil and gas extraction 4.94% 

333415 Air conditioning, refrigeration, and warm air heating equipment 

manufacturing 

4.40% 

561300 Employment services 4.26% 

5416A0 Environmental and other technical consulting services 3.04% 

541300 Architectural, engineering, and related services 3.04% 

420000 Wholesale trade 2.79% 

332310 Plate work and fabricated structural product manufacturing 2.72% 

5419A0 All other miscellaneous professional, scientific, and technical services 2.48% 

524100 Insurance carriers 2.38% 

531000 Real estate 2.33% 

52A000 Monetary authorities and depository credit intermediation 1.76% 

V00200 Taxes on production and imports, less subsidies 1.41% 

541100 Legal services 1.19% 

221100 Electric power generation, transmission, and distribution 1.13% 

a These values show the amount of the commodity required to produce $1.00 of the industry’s output. The values 

are expressed in percentage terms (coefficient ×100). 

Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table, 

Use Table and Direct Requirements Table. Tables 4 and 5. 

The 2007 SUSB shows that 47% of all firms in this industry made under $5 million in 

revenue. Enterprises with revenue over $100 million provided an overwhelming share of 

employment in this industry (98%) (Table 3-18). 
3-22 

Figure 3-10. 2002 Regional Distribution of Establishments: Pipeline Transportation 

(NAICS 486) 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48-49: 

Geographic Distribution—Pipeline transportation of natural gas: 2002. <http://factfinder.census.gov>; (November 

10, 2008). 

Figure 3-11. Share of Establishments by Legal Form of Organization in the Pipeline 

Transportation of Natural Gas Industry (NAICS 48621): 2002 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48-49: 

Transportation and Warehousing: Subject Series—Estab & Firm Size: Legal Form of Organization for the United 

States: 2002. <http://factfinder.census.gov>; (December 12, 2008). 

Establishments by State

Less than 15

15 - 39

40 - 79

80 - 149

More than 150

86%

8% 6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Corporations Individual Proprietorships Partnerships
3-23 

Table 3-16. Firm Concentration for Pipeline Transportation of Natural Gas (NAICS 

48621): 2002

Commodity Establishments 

Receipts/Revenue 

Number of 

Employees 

Employees per 

Amount ($10 Establishment 6) 

Percentage of 

Total 

All firms 1,431 $14,797 100% 23,677 16.5 

4 largest firms 698 $7,551 51% 11,814 16.9 

8 largest firms 912 $10,059 68% 15,296 16.8 

20 largest firms 1,283 $13,730 93% 21,792 17.0 

50 largest firms 1,354 $14,718 99% 23,346 17.2 

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48: 

Transportation and Warehousing: Subject Series—Estab & Firm Size: Concentration by Largest Firms for the 

United States: 2002” <http://factfinder.census.gov>; (December 12, 2008). 

Table 3-17. Aggregate Tax Data for Accounting Period 7/07–6/08: NAICS 486 

Number of enterprisesa 321 

Total receipts (103) $11,062,608 

Net sales (103

) $10,210,083 

Profit margin before tax 13.2% 

Profit margin after tax 9.6% 

a Includes corporations with and without net income. 

Source: Internal Revenue Service, U.S. Department of Treasury. 2010. “Corporation Source Book: Data Files 2004-

2007.” <http://www.irs.gov/taxstats/article/0,,id=167415,00.html>; (May 2, 2010). 
24 

Table 3-18. Key Enterprise Statistics by Employee Size for Pipeline Transportation of Natural Gas (NAICS 48621): 2007 

Variable All Enterprises 

<20 

Employees

20–99 

Employees 

100–499 

Employees 500+ Employees 

Firms 126 63 12 9 42 

Establishments 1.479 66 26 70 1,317 Employment 24,683 241 382 1,479 22,581 Receipts ($103) $20,796,681 N/A $518,341 $1,448,020 $18,498,143 

Receipts/firm ($103) $165,053 N/A $43,195 $160,891 $440,432 

Receipts/establishment ($103) 

$14,061 N/A $19,936 $20,686 $14,046 

Receipts/employment ($) 

$843 N/A $1,357 $979 $819 

Source: U.S. Census Bureau. 2011. Firm Size Data from the Statistics of U.S. Businesses, U.S. All Industries Tabulated by Employee Size: 2007. 

http://www2.census.gov/csd/susb/2007/usalli_r07.xls. 
4-1 

Section 4

REGULATORY ALTERNATIVES, COSTS, AND EMISSION IMPACTS 

4.1 Background 

This section of the RIA includes a discussion of the regulatory alternatives considered for 

the reconsidered rule, the costs associated with these regulatory alternatives, and the impacts on 

affected emissions (both HAP and non-HAP). All impacts presented are for the year of full 

implementation, 2013. Costs in this section are in 2009$. Costs in 2010$ presented elsewhere 

in the RIA are updated values based on the 2009$ costs presented in this section. Although the 

estimates presented are annualized, they should be understood as a “snapshot” in analyzing costs. 

Annualized costs are estimated as equal for each year that control equipment is operated. 

This final rule was developed to address certain issues that have been raised by different 

stakeholders through lawsuits, several petitions for reconsideration of the 2010 RICE NESHAP 

amendments and other communications. After promulgation of the 2010 RICE NESHAP 

amendments, the EPA received several petitions for reconsideration, legal challenges, and other 

communications raising issues of practical implementability, and certain factual information that 

had not been brought to the EPA’s attention during the rulemaking. The EPA has considered this 

information and believes that amendments to the rule to address certain of these issues are 

appropriate. Therefore, the EPA is finalizing amendments to the national emission standards for 

hazardous air pollutants for stationary reciprocating internal combustion engines under section 

112 of the Clean Air Act. The final amendments include alternative testing options for certain 

large spark ignition (generally natural gas-fueled) stationary reciprocating internal combustion 

engines, management practices for a subset of existing spark ignition stationary reciprocating 

internal combustion engines in sparsely populated areas, and alternative and less burdensome 

monitoring and compliance options for the same engines in populated areas. The EPA is also 

finalizing revisions to 40 CFR part 60, subparts IIII and JJJJ for consistency with the RICE 

NESHAP and to make minor corrections and clarifications. The current regulation applies to 

owners and operators of existing and new stationary RICE at major and area sources of HAP 

emissions. The applicability of the CI rule remains the same and is not changed by this final rule. 

The EPA is also finalizing amendments to the NSPS for stationary engines to conform with 

certain amendments finalized for the RICE NESHAP. The full preamble for the final SI RICE 

NESHAP and this rule itself can be reviewed at http://www.epa.gov/ttn/atw/rice/fr20au10.pdf. 

The EPA is adding an alternative compliance demonstration option for stationary 4-

stroke rich burn (4SRB) spark ignition (SI) engines subject to a 76 percent or more formaldehyde 

Deleted: proposed

Deleted: proposal

Deleted: proposing

Deleted: proposed

Deleted: The EPA is also finalizing 

proposing to include a limited temporary 

allowance for existing stationary 

emergency area source engines to be used 

for peak shaving and non-emergency 

demand response as part of the preexisting allowance for such engines to be 

used for non-emergency use for 50 hours 

annually. In addition, the EPA is 

proposing, in both the NESHAP and in 

the new source performance standards for 

stationary internal combustion engines to 

increase the hours that stationary 

emergency engines may be used for 

emergency demand response. 

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4-2 

reduction requirement. Owners and operators of 4SRB engines will be permitted to demonstrate 

compliance with the 76 percent formaldehyde reduction emission standard by testing emissions 

of total hydrocarbons (THC) and showing that the engine is achieving at least a 30 percent 

reduction of THC emissions. The alternative compliance option provides a less expensive and 

less complex, but equally effective, method for demonstrating compliance than testing for 

formaldehyde.

The EPA is finalizing management practices for owners and operators of existing 

stationary 4-stroke SI engines above 500 HP that are area sources of HAP emissions and where 

the engines are remote from human activity. A remote area is defined as either a Department of 

Transportation (DOT) Class 1 pipeline location2, or, if the engine is not on a pipeline, if within a 

0.25 mile radius of the facility there are 5 or fewer buildings intended for human occupancy. The 

EPA determined that a 0.25 mile radius was appropriate because it is similar to the area used for 

the DOT Class 1 pipeline location. This final rule establishes management practices for these 

sources rather than numeric emission limits and associated testing and monitoring. This 

provision and the division of remote and non-remote engines into two separate subcategories 

addresses reasonable concerns with accessibility, infrastructure and staffing that stem from the 

remoteness of the engines and higher costs that would be associated with compliance with the 

existing requirements. Existing stationary 4-stroke SI engines above 500 HP at area sources that 

are in populated areas (defined as not in DOT pipeline Class 1 areas, or if not on a pipeline, if 

within a 0.25 mile radius of the engine there are more than 5 buildings intended for human 

occupancy) are subject to an equipment standard that requires the installation of HAP-reducing 

aftertreatment. The EPA has the discretion to set an equipment standard as generally available 

control technology (GACT) for engines located at area sources of HAP. Sources are required to 

test their engines to demonstrate compliance initially, perform catalyst activity check-ups and 

either monitor the catalyst inlet temperature continuously or employ high temperature shutdown 

devices to protect the catalyst.

4.2 Final Amendments to SI RICE NESHAP 

4.2.1. Total Hydrocarbon Compliance (THC) Demonstration Option

 

 

 

2 A Class 1 location is defined as an offshore area or any class location unit that has 10 or fewer buildings intended 

for human occupancy.

Deleted: The proposed final amendments 

also correct minor mistakes in the preexisting regulations. The full preamble for 

the final SI RICE NESHAP and thise rule 

itself can be reviewed at 

http://www.epa.gov/ttn/atw/rice/fr20au10.

pdf. 

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Deleted: Proposed

Deleted: 4.2.1.1. Background

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Deleted: Currently, SI 4SRB nonemergency engines greater than 500 HP 

and located at major sources and existing 

SI 4SRB non-emergency engines greater 

than 500 HP located at area sources have 

the option of meeting either a 

formaldehyde percent reduction or a 

formaldehyde concentration standard. 

Formaldehyde was established in the 

original 2004 RICE NESHAP as an 

appropriate surrogate for HAP emissions 

from 4SRB engines based on industry test 

data available at that time. Based on 

testing conducted at Colorado State 

University (CSU) of stationary lean burn 

engines, the EPA was able to establish CO 

as a surrogate for HAP for lean burn 

engines. Rich burn engines were not 

tested at CSU and the data the EPA had 

available at the time that were used to set 

the standards for rich burn engines did not 

support the same relationship between CO 

and HAP reductions for rich burn engines. 

Therefore, the EPA was unable to 

establish CO as a surrogate for HAP 

emissions for rich burn engines and the ... [4]

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4-3 

The EPA is adding an alternative method of demonstrating compliance with the 

NESHAP for existing and new stationary 4SRB non-emergency engines greater than 500 HP that 

are located at major sources of HAP emissions. Under these final amendments, the emission 

standard remains the same, that is, existing and new stationary 4SRB engines greater than 500 

HP and located at major sources are still required to reduce formaldehyde emissions by 76 

percent or more or limit the concentration of formaldehyde in the stationary RICE exhaust to 350 

parts per billion by volume, dry basis or less at 15 percent oxygen (O2). This final rule adds an 

alternative compliance demonstration option to the existing method of demonstrating compliance 

with the formaldehyde percent reduction standard. The current method is to test engines for 

formaldehyde. The alternative for owners and operators of 4SRB engines meeting a 76 percent 

or more formaldehyde reduction is to test their engines for THC showing that the engine is 

achieving at least a 30 percent reduction of THC emissions. Including this optional THC 

compliance demonstration option reduces the cost of compliance significantly while continuing 

to achieve the same level of HAP emission reduction because the emission standards would 

remain the same. As discussed in the June 7, 2012 proposal, data provided to EPA indicate that a 

strong relationship exists between percentage reductions of THC and percentage reductions of 

formaldehyde (the surrogate for HAP emissions in the NESHAP) on rich burn engines using 

non-selective catalytic reduction (NSCR). Data analyzed by the EPA indicate that if the NSCR is 

reducing THC by at least 30 percent from 4SRB engines, formaldehyde emissions are guaranteed 

to be reduced by at least 76 percent, which is the percentage reduction required for the relevant 

engines. Indeed, the percentage reduction of formaldehyde is invariably well above the 76 

percent level, and is usually above 90 percent. Therefore, the EPA concluded that for SI 4SRB 

engines using NSCR and meeting the NESHAP by showing a percentage reduction of HAP, it 

would be appropriate to allow sources to demonstrate compliance with the NESHAP by showing 

a THC reduction of at least 30 percent. Owners and operators of existing stationary 4SRB 

engines less than or equal to 500 HP that are required to limit the concentration of formaldehyde 

in the stationary RICE exhaust to 10.3 parts per million by volume, dry basis (ppmvd) or less at 

15 percent O2 do not have the option to demonstrate compliance using THC and must continue to 

demonstrate compliance by testing for formaldehyde following the methods and procedures 

specified in the rule because the EPA could not verify a clear relationship between 

concentrations of THC and concentrations of formaldehyde in the exhaust from these SI 4SRB 

engines.

Deleted: 4.2.1.2. Proposed Final 

Amendments¶

Deleted: The EPA is proposing to adding

an alternative method of demonstrating 

compliance with the NESHAP for 

stationary 4SRB non-emergency engines 

greater than 500 HP that are located at 

major sources of HAP emissions and for 

existing stationary 4SRB non-emergency 

engines greater than 500 HP that are 

located at area sources of HAP emissions 

that choose to meet the formaldehyde 

percent reduction requirement of 76 

percent or more. ¶

Based on the arguments and evidence 

presented in the petition discussed above, 

the EPA is proposing to adding a 

compliance demonstration option for 

stationary 4SRB engines meeting a 76 

percent or more formaldehyde reduction. 

The compliance demonstration option 

would be an alternative to the existing 

method of demonstrating compliance with 

the formaldehyde percent reduction 

standard, which is to test engines for 

formaldehyde. The alternative for owners 

and operators of 4SRB engines meeting a 

76 percent or more formaldehyde 

reduction would be to test their engines 

for THC showing that the engine is 

achieving at least a 30 percent reduction 

of THC emissions. ¶

Under the proposed amendments, 

existing and new stationary 4SRB engines ... [5]

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4-4 

 Owners and operators opting to use the THC compliance demonstration method must 

demonstrate compliance by showing that the average reduction of THC is equal to or greater 

than 30 percent. Owners and operators of 4SRB stationary RICE complying with the requirement 

to reduce formaldehyde emissions and demonstrating compliance by using the THC compliance 

demonstration option must conduct performance testing using Method 25A of 40 CFR part 60, 

appendix A – Determination of Total Gaseous Organic Concentration Using a Flame Ionization 

Analyzer. Measurements of THC at the inlet and the outlet of the NSCR must be on a dry basis 

and corrected to 15 percent O2 or equivalent carbon dioxide content. To correct to 15 percent O2, 

dry basis, owners and operators must measure oxygen using Method 3, 3A or 3B of 40 CFR part 

60, appendix A, or ASTM Method D6522-00 (2005) and measure moisture using Method 4 of 40 

CFR part 60, appendix A, or Test Method 320 of 40 CFR part 63, appendix A, or ASTM D6348-

03. Because owners and operators are complying with a percent reduction requirement, the 

method used must be suitable for the entire range of emissions since pre and post-catalyst 

emissions must be measured. Method 25A is capable of measuring emissions down to 5 ppmv 

and is, therefore, an appropriate method for measuring THC emissions for compliance 

demonstration purposes. The EPA is allowing sources the option to meet a minimum THC 

percent reduction of 30 percent by using Method 25A of 40 CFR part 60, appendix A to 

demonstrate compliance with the formaldehyde percent reduction in 40 CFR part 63, subpart 

ZZZZ.

4.2.2. Emergency Demand Response and Reliability

The EPA is finalizing certain revisions to the proposal regarding use of existing 

engines for emergency demand response and system reliability. Following is a summary of the 

prior requirements for these engines, including those in the 2010 regulation, a discussion of the 

information and input the EPA received in response to the proposal, and a description of the 

provisions being finalized in this action.

Existing emergency engines less than or equal to 500 HP located at major sources of 

HAP and existing emergency engines located at area sources of HAP were not regulated under 

the RICE NESHAP rulemakings finalized in 2004 and 2008. They could operate uncontrolled for 

an unlimited amount of time. The 2010 RICE NESHAP rulemaking for the first time established 

requirements for these existing emergency engines, requiring affected engines to comply by May 

3, 2013, for stationary CI RICE and October 19, 2013, for stationary SI RICE. Under the RICE 

NESHAP requirements originally finalized in 2010, these existing emergency stationary engines 

must limit operation to situations like blackouts and floods and to a maximum of 100 hours per 

year for other specified operations beginning with the applicable compliance date in 2013 for the 

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Deleted: The EPA is proposing to 

revisinge the current provisions for 

stationary engines used for emergency 

demand response operation. The 

provisions the EPA is proposing to 

amending are in §§63.6640(f) and 

63.6675 of 40 CFR part 63, subpart 

ZZZZ. Currently, §63.6640(f)(1)(iii) 

allows a maximum of 15 hours per year to 

be spent towards demand response 

operation under certain qualifying 

conditions. Also, §63.6640(f)(1)(ii) 

currently includes an allowance of 100 

hours per year for purposes of 

maintenance checks and readiness testing. 

The EPA is requiring is proposing that 

owners and operators of stationary 

emergency RICE be permitted to operate 

their engines as part of an emergency 

demand response program within the 100 

hours per year that is permitted for 

maintenance and testing in 

§63.6640(f)(1)(ii). Owners and operators 

of stationary emergency engines can 

operate for emergency demand response ... [6]

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engine. The limitation of 100 hours per year included maintenance checks and readiness testing 

of the engine, as well as a limit of 15 hours per year for use as part of a demand response 

program if the regional transmission organization or equivalent balancing authority and 

transmission operator has determined there are emergency conditions that could lead to a 

potential electrical blackout, such as unusually low frequency, equipment overload, capacity or 

energy deficiency, or unacceptable voltage level. Under the 2010 regulation, existing emergency 

engines were required to meet management practice standards based on proper operation and 

maintenance of the engine; meeting these standards would not require installation of 

aftertreatment to control emissions. 

Soon after the 2010 rule was final, the EPA received petitions for reconsideration of the 

15-hour limitation for emergency demand response that was finalized in the 2010 rule. 

According to one petition, the 15-hour limit, while usually adequate to cover the limited hours in 

which these engines are expected to be called upon, would not be sufficient to allow these 

emergency engines to participate in emergency demand response programs since some regional 

transmission organizations and independent system operators require engines be available for 

more than 15 hours in order to meet emergency demand response situations. For example, PJM’s 

Emergency Load Response Program requires that emergency engines guarantee that they will be 

available for 60 hours per year. By contrast, another petition asked EPA to eliminate the 

emergency demand response provision because of the adverse effects that the petitioner believes 

would result from increased emissions from these engines. The EPA received other comments 

that addressed the types of situations in which engines are called upon for emergency demand 

response and system reliability.

The EPA believes that the emergency demand response programs that exist across the 

country are important programs that protect the reliability and stability of the national electric 

service grid. The use of stationary emergency engines as part of emergency demand response 

programs can help prevent grid failure or blackouts, by allowing these engines to be used for 

limited hours in specific circumstances of grid instability prior to the occurrence of blackouts. A 

standard that requires owners and operators of stationary emergency engines that participate in 

emergency demand response programs to apply aftertreatment could make it economically 

infeasible for these engines to participate in these programs, impairing the ability of regional 

transmission organizations and independent system operators to use these relatively small, quickstarting and reliable sources of energy to protect the reliability of their systems in times of 

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critical need. Information provided by commenters on the proposal indicates that these 

emergency demand response events are rarely called.3 

The limited circumstances specified in the final rule for operation of stationary 

emergency engines for emergency demand response purposes include periods during which the 

Reliability Coordinator, or other authorized entity as determined by the Reliability Coordinator, 

has declared an Energy Emergency Alert (EEA) Level 2 as defined in the North American 

Electric Reliability Corporation (NERC) Reliability Standard EOP-002-3, Capacity and Energy 

Emergency, and during periods where there is a deviation of voltage or frequency of 5 percent or 

more below standard voltage or frequency. During EEA Level 2 alerts there is insufficient 

energy supply and a true potential for electrical blackouts. System operators must call on all 

available resources during EEA Level 2 alerts in order to stabilize the grid to prevent failure. 

Therefore, this situation is a good indicator of severe instability on the system, which the EPA 

believes is appropriately considered an emergency situation. Consistent normal voltage provided 

by the utility is often called power quality and is an important factor in local electric system 

reliability. Reliability of the system requires electricity being provided at a normal expected 

voltage. The American National Standards Institute standard C84.1-1989 defines the maximum 

allowable voltage sag at below 5 percent. On the local distribution level local voltage levels are 

therefore important and a 5 percent or more change in the normal voltage or frequency is 

substantial and an indication that additional resources are needed to ensure local distribution 

system reliability.

In addition to the circumstances described above, the EPA also received comments on 

other situations where the local transmission and distribution system operator has determined 

that there are conditions that could lead to a blackout for the local area where the ready 

availability of emergency engines is critical to system reliability. These include situations where: 

 The engine is dispatched by the local balancing authority or local transmission and 

distribution system operator.

 The dispatch is intended to mitigate local transmission and/or distribution limitations so 

as to avert potential voltage collapse or line overloads that could lead to the interruption 

of power supply in a local area or region.

 The dispatch follows reliability, emergency operation or similar protocols that follow 

specific NERC, regional, state, public utility commission or local standards or guidelines. 

 

3

 See document number EPA-HQ-OAR-2008-0708-1142 in the rulemaking docket.

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4-7 

The EPA believes the operation of emergency engines in these situations should be addressed in 

the final rule as well.

Therefore, based on the EPA’s review of the petitions and comments that the EPA has 

received with respect to emergency demand response and system reliability, the EPA has 

concluded that it is appropriate to revise the proposed provisions for stationary engines used in 

these limited circumstances. The provisions the EPA is amending are in §§63.6640(f) and 

63.6675 of 40 CFR part 63, subpart ZZZZ. The final amendments to those sections specify that 

owners and operators of stationary emergency RICE can operate their engines as part of an 

emergency demand response program within the 100 hours provided in the proposed rule for 

non-emergency operation. Owners and operators of stationary emergency engines can operate for 

up to 100 hours per year for emergency demand response and system reliability during periods in 

which the Reliability Coordinator, or other authorized entity as determined by the Reliability 

Coordinator, has declared an EEA Level 2 as defined in the NERC Reliability Standard EOP002-3, Capacity and Energy Emergency, and during periods where there is a deviation of voltage 

or frequency of 5 percent or greater below standard voltage or frequency. In addition, existing 

emergency stationary RICE at area sources of HAP can operate for up to 50 hours per year if all 

of the following conditions are met: 

 The engine is dispatched by the local balancing authority or local transmission and 

distribution system operator.

 The dispatch is intended to mitigate local transmission and/or distribution limitations so 

as to avert potential voltage collapse or line overloads that could lead to the interruption 

of power supply in a local area or region.

 The dispatch follows reliability, emergency operation or similar protocols that follow 

specific NERC, regional, state, public utility commission or local standards or guidelines.

 The owner or operator has a pre-existing plan that contemplates the engine’s operation 

under the circumstances described above; and

 The owner or operator identifies and records the specific NERC, regional, state, public 

utility commission or local standards or guidelines that are being followed for dispatching 

the engine. The local balancing authority or local transmission and distribution system 

operator may keep these records on behalf of the engine owner or operator.

For all engines operating to satisfy emergency demand response or system reliability 

under the circumstances described above, the hours spent for emergency demand response 

operation and local system reliability are added to the hours spent for maintenance and testing 

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purposes and are counted towards the limit of 100 hours per year. If the total time spent for 

maintenance and testing, emergency demand response, and system reliability operation exceeds 

100 hours per year, the engine will not be considered an emergency engine under this subpart 

and will need to meet all requirements for non-emergency engines. 

 As noted above, the EPA received comments expressing concerns about the emissions 

from emergency engines, noting that the engines are likely to be dispatched on days when energy 

demand is high, which often coincides with days when air quality is poor. While the EPA is 

sensitive to these concerns, the availability of these engines for a more tailored response to 

emergencies may be preferable in terms of air quality impacts than relying on other generation, 

including coal-fired spinning reserve generation. After consideration of the concerns raised in the 

comments, the EPA is finalizing provisions that require stationary emergency CI RICE with a 

site rating of more than 100 brake HP and a displacement of less than 30 liters per cylinder that 

operate or are contractually obligated to be available for more than 15 hours per year (up to a 

maximum of 100 hours per year) for emergency demand response, or that operate for local 

system reliability, to use diesel fuel meeting the specifications of 40 CFR 80.510(b) beginning 

January 1, 2015, except that any existing diesel fuel purchased (or otherwise obtained) prior to 

January 1, 2015, may be used until depleted. The specifications of 40 CFR 80.510(b) require that 

diesel fuel have a maximum sulfur content of 15 ppm and either a minimum cetane index of 40 

or a maximum aromatic content of 35 volume percent; this fuel is referred to as “ultra low sulfur 

diesel fuel” (ULSD). This emission reduction requirement was not part of the original 2010 

rulemaking. Although the EPA does not have information specifying the percentage of existing 

stationary emergency CI engines currently using residual fuel oil or non-ULSD distillate fuel, the 

most recent U.S. Energy Information Administration data available for sales of distillate and 

residual fuel oil to end users4 show that significant amounts of non-ULSD are still being 

purchased by end users that typically operate stationary combustion sources, including stationary 

emergency CI engines. For example, in the category of Commercial End Use, sales data for the 

year 2010 show that only 45 percent of the total distillate and residual fuel oil sold was ULSD. 

The data provided for Electric Power End Use show that 68 percent of total fuel sold was 

residual fuel oil. For Industrial End Use, the percentage of total fuel that was residual fuel oil 

was 20 percent. The EPA believes that requiring cleaner fuel for these stationary emergency CI 

engines will significantly limit or reduce the emissions of regulated air pollutants emitted from 

these engines, further protecting public health and the environment. Information provided to 

 

4 U.S. Energy Information Administration. Distillate Fuel Oil and Kerosene Sales by End Use. Available at 

http://www.eia.gov/dnav/pet/pet_cons_821use_dcu_nus_a.htm.

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EPA by commenters5

 showed that the use of ULSD will significantly reduce emissions of air 

toxics, including metallic HAP (e.g., nickel, zinc, lead) and benzene. 

In addition to the fuel requirement, owners and operators of stationary emergency CI 

RICE larger than 100 HP that operate or are contractually obligated to be available for more than 

15 hours per year (up to a maximum of 100 hours per year) for emergency demand response 

must report the dates and times the engines operate for emergency demand response annually to 

the EPA, beginning with operation during the 2015 calendar year. 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. This information is necessary to determine whether 

these engines are operating in compliance with the regulations and will assist the EPA in 

assessing the impacts of the emissions from these engines. 

The EPA is adding these requirements beginning in January, 2015, rather than upon 

initial implementation of the NESHAP for existing engines in May or October of 2013, to 

provide sources with appropriate lead time to institute these new requirements and make any 

physical adjustments to engines and other facilities like tanks or other containment structures, as 

well as any needed adjustments to contracts and other business activities, that may be 

necessitated by these new requirements. 

 The EPA is also amending the NSPS for stationary CI and SI engines in 40 CFR part 60, 

subparts IIII and JJJJ, respectively, to provide the same limitation for stationary emergency 

engines for emergency demand response and system reliability operation as for engines subject 

to the RICE NESHAP. The NSPS regulations currently do not include such a provision for 

emergency demand response or system reliability operation; the issue was not raised during the 

original promulgation of the NSPS. The EPA is adding an emergency demand response and 

system reliability provision under the NSPS regulations in these final amendments. The EPA is 

revising the existing language in §§60.4211(f) and 60.4219 of 40 CFR part 60, subpart IIII, and 

§§60.4243(d) and 60.4248 of 40 CFR part 60, subpart JJJJ, to specify that emergency engines 

must limit operation for engine maintenance and testing and emergency demand response to a 

maximum of 100 hours per year; 50 of the 100 hours may be used to operate to mitigate local 

reliability issues, as discussed previously for the RICE NESHAP.

 

5 See document number EPA-HQ-OAR-2008-0708-1459 in the rulemaking docket.

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The EPA is also finalizing amendments to the NSPS regulations that require owners and 

operators of stationary emergency engines larger than 100 HP that operate or are contractually 

obligated to be available for more than 15 hours per year (up to a maximum of 100 hours per 

year) for emergency demand response to report the dates and times the engines operated for 

emergency demand response annually to the EPA, beginning with operation during the 2015 

calendar year. 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. 

Emergency engines subject to 40 CFR part 60, subpart IIII are already required by subpart IIII to 

use diesel fuel that meets the requirements of 40 CFR 80.510(b).

The 2010 regulation specified that existing emergency engines at area sources of HAP 

that are residential, commercial, or institutional facilities were not subject to the RICE NESHAP 

requirements as long as the engines were limited to no more than 15 hours per year for 

emergency demand response. The EPA is specifying in the final rule that existing emergency 

engines at area sources of HAP that are residential, commercial, or institutional facilities are 

subject to the applicable requirements for stationary emergency engines in the RICE NESHAP if 

they operate or are contractually obligated to be available for more than 15 hours per year (up to 

a maximum of 100 hours per year) for emergency demand response, or they operate to mitigate 

local transmission and/or distribution limitations. Information provided by commenters on the 

2010 regulation and the amendments proposed in June 2012 indicates that these engines typically 

operate less than 15 hours per year for emergency demand response.

 For stationary emergency engines above 500 HP at major sources of HAP that were

installed before June 12, 2006, prior to these final amendments, there was no emergency demand 

response provision and there was no time limit on the use of emergency engines for routine 

testing and maintenance in §63.6640(f)(2)(ii). Those engines were not the focus of the 2010 

RICE NESHAP amendments; therefore, the EPA did not make any changes to the requirements 

for those engines as part of the 2010 amendments. For consistency, the EPA is now also revising 

40 CFR part 63, subpart ZZZZ to require owners and operators of stationary emergency engines 

above 500 HP at major sources of HAP installed prior to June 12, 2006, to limit operation of 

their engines for maintenance and testing and emergency demand response program to a total of 

100 hours per year. These engines would also be required to use diesel fuel meeting the 

specifications of 40 CFR 80.510(b) beginning January 1, 2015, however, if the engine operates 

or is contractually obligated to be available for more than 15 hours per year. Any existing diesel 

fuel purchased (or otherwise obtained) prior to January 1, 2015 may be used until depleted. In 

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addition to the fuel requirement, owners and operators of these engines must report the dates and 

times the engines operate for emergency demand response annually to the EPA, beginning with 

operation during the 2015 calendar year.

More detail regarding the public comments regarding emergency demand response and 

the EPA’s responses can be found in the Response to Public Comments document available in 

the rulemaking docket. 

4.2.3 Non-Emergency Stationary SI RICE Greater than 500 HP Located at Area Sources

The EPA is finalizing amendments to the requirements that apply to existing stationary 

non-emergency 4-stroke SI RICE greater than 500 HP located at area sources of HAP emissions, 

which are generally natural gas fired engines. 

 The EPA is creating a subcategory for existing spark ignition engines located in sparsely 

populated areas. Engines located in remote areas that are not close to significant human activity 

may be difficult to access, may not have electricity or communications, and may be unmanned 

most of the time. The costs of the emission controls, testing, and continuous monitoring 

requirements may be unreasonable when compared to the HAP emission reductions that would 

be achieved, considering that the engines are in sparsely populated areas. Moreover, the location 

of these engines is such that there would be limited public exposure to the emissions. The EPA 

believes that establishing a subcategory for SI engines at area sources of HAP located in sparsely 

populated areas accomplishes the agency’s goals and is adequate in protecting public health. The 

EPA is creating this subcategory using criteria based on the existing DOT classification system 

for natural gas pipelines. This system classifies locations based on their distance to natural gas 

pipelines covered by the Pipeline and Hazardous Materials Safety Administration regulations. 

The DOT system defines a class location unit as an onshore area that extends 220 yards or 200 

meters on either side of the centerline of any continuous 1-mile (1.6 kilometers) length of natural 

gas pipeline. The DOT approach further classifies pipeline locations into Class 1 through Class 4 

locations based on the number of buildings intended for human occupancy. A Class 1 location is 

defined as an offshore area or any class location unit that has 10 or fewer buildings intended for 

human occupancy. The DOT classification system also has special provisions for locations 

where buildings with four or more stories above ground are prevalent and locations that lie 

within 100 yards (91 meters) of either a building or a small, well-defined outside area (such as a 

playground, recreation area, outdoor theater, or other place of public assembly) that is occupied 

by 20 or more persons on at least 5 days a week for 10 weeks in any 12-month period. To be 

considered remote under this final rule, a source on a pipeline could not fall under these special 

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Deleted: The EPA is also proposing to 

amending the requirements that apply to 

existing stationary non-emergency 4 

stroke SI RICE greater than 500 HP 

located at area sources of HAP emissions, 

which are generally natural gas fired 

engines. Currently, the RICE NESHAP 

requires owners and operators of such 

engines to 1) either meet a CO 

concentration limit of 47 parts ppmvd at 

15 percent O2 or reduce emissions of CO 

by 93 percent or more, if the engines are 

4SLB; and 2) to meet a formaldehyde 

concentration limit of 2.7 ppmvd at 15 

percent O2 or reduce formaldehyde 

emissions by 76 percent or more, if the 

engines are 4SRB. In both cases, the EPA 

expects that the standards would be met 

using aftertreatment; oxidation catalysts 

for 4SLB engines and NSCR for 4SRB 

engines. In addition to these emission 

requirements, owners and operators of 

existing stationary 4-stroke engines 

greater than 500 HP at area sources are ... [7]

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4-12 

provisions and, in addition, must be in a Class 1 location. For those engines not associated with 

pipelines, the EPA is using similar criteria. An engine would be considered to be in sparsely 

populated areas if within 0.25 mile radius of the engine there are 5 or fewer buildings intended 

for human occupancy. 

Owners and operators of existing stationary non-emergency 4-stroke lean burn (4SLB) 

and 4SRB RICE greater than 500 HP at area sources that are in sparsely populated areas as 

described above would be required to perform the following:

 Change oil and filter every 2,160 hours of operation or annually, whichever comes first;

 Inspect spark plugs every 2,160 hours of operation or annually, whichever comes first, 

and replace as necessary; and

 Inspect all hoses and belts every 2,160 hours of operation or annually, whichever comes 

first, and replace as necessary.

Sources have the option to use an oil analysis program as described in §63.6625(i) of the rule in 

order to extend the specified oil change requirement. The oil analysis must be performed at the 

same frequency specified for changing the oil in Table 2d of the rule. The analysis program must 

at a minimum analyze the following three parameters: Total Acid Number, viscosity, and percent 

water content. The condemning limits for these parameters are as follows: Total Acid Number 

increases by more than 3.0 milligrams of potassium hydroxide per gram from Total Acid 

Number of the oil when new; viscosity of the oil has changed by more than 20 percent from the 

viscosity of the oil when new; or percent water content (by volume) is greater than 0.5. If none of 

these condemning limits are exceeded, the engine owner or operator is not required to change the 

oil. If any of the limits are exceeded, the engine owner or operator must change the oil within 2 

business days of receiving the results of the analysis; if the engine is not in operation when the 

results of the analysis are received, the engine owner or operator must change the oil within 2 

business days or before commencing operation, whichever is later. The owner or operator must 

keep records of the parameters that are analyzed as part of the program, the results of the 

analysis, and the oil changes for the engine. The analysis program must be part of the 

maintenance plan for the engine.

Owners and operators of existing stationary 4SLB and 4SRB area source engines above 

500 HP in sparsely populated areas would also have to operate and maintain the stationary RICE 

and aftertreatment control device (if any) according to the manufacturer's emission-related 

written instructions or develop their own maintenance plan, which must provide to the extent 

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practicable for the maintenance and operation of the engine in a manner consistent with good air 

pollution control practice for minimizing emissions. 

Owners and operators of engines in sparsely populated areas would have to conduct a 

review of the surrounding area every 12 months to determine if the nearby population has 

changed. If the engine no longer meets the criteria for a sparsely populated area, the owner and 

operator must within 1 year comply with the emission standards specified below for populated 

areas.

 For engines in populated areas, i.e., existing stationary 4SLB and 4SRB non-emergency 

engines greater than 500 HP at area sources that are located on DOT Class 2 through Class 4 

pipeline segments or, for engines not associated with pipelines, that do not meet the 0.25 mile 

radius with 5 or less buildings criteria, the EPA is adopting an equipment standard requiring the 

installation of a catalyst to reduce HAP emissions. Owners and operators of existing area source 

4SLB non-emergency engines greater than 500 HP in populated areas would be required to 

install an oxidation catalyst. Owners and operators of existing area source 4SRB non-emergency 

engines greater than 500 HP in populated areas would be required to install NSCR. Owners and 

operators must conduct an initial test to demonstrate that the engine achieves at least a 93 percent 

reduction in CO emissions or a CO concentration level of 47 ppmvd at 15 percent O2, if the 

engine is a 4SLB engine. Similarly, owners and operators must conduct an initial performance 

test to demonstrate that the engine achieves at least either a 75 percent CO reduction, a 30 

percent THC reduction, or a CO concentration level of 270 ppmvd at 15 percent O2 if the engine 

is a 4SRB engine. The initial test must consist of three test runs. Each test run must be of at least 

15 minute duration, except that each test run conducted using appendix A to 40 CFR part 63, 

subpart ZZZZ must consist of one measurement cycle as defined by the method and include at 

least 2 minutes of test data phase measurement. To measure CO, emission sources must use the 

CO methods already specified in subpart ZZZZ, or appendix A to 40 CFR part 63, subpart 

ZZZZ. The THC testing must be conducted using EPA Method 25A.

 The owner or operator of both engine types must also use a high temperature shutdown 

device that detects if the catalyst inlet temperature is too high, or, alternatively, the owner or 

operator can monitor the catalyst inlet temperature continuously and maintain the temperature 

within the range specified in the rule. For 4SLB engines the catalyst inlet temperature must 

remain at or above 450°F and at or below 1,350°F. For 4SRB engines the temperature must be 

greater than or equal to 750°F and less than or equal to 1,250°F at the catalyst inlet. 

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Owners and operators must in addition to the initial performance test conduct annual 

checks of the catalyst to ensure proper catalyst activity. The annual check of the catalyst must at 

a minimum consist of one 15-minute run using the methods discussed above, except that each 

test run conducted using appendix A to 40 CFR part 63, subpart ZZZZ must consist of one 

measurement cycle as defined by the method and include at least 2 minutes of test data phase 

measurement. Owners and operators of 4SLB engines must demonstrate during the catalyst 

activity test that the catalyst achieves at least a 93 percent reduction in CO emissions or that the 

engine exhaust CO emissions are no more than 47 ppmvd at 15 percent O2. Owners and 

operators of 4SRB engines must demonstrate during the catalyst activity check that their catalyst 

is reducing CO emissions by 75 percent or more, the CO concentration level at the engine 

exhaust is less than or equal to 270 ppmvd at 15 percent O2, or THC emissions are being reduced 

by at least 30 percent. 

If the emissions from the engine do not exceed the levels required for the initial test or 

annual checks of the catalyst, then the catalyst is considered to be working properly. If the 

emissions exceed the specified pollutant levels in the rule, the exceedance(s) is/are not 

considered a violation, but the owner or operator would be required to shut down the engine and 

take appropriate corrective action (e.g., repairs, clean or replace the catalyst, as appropriate). A 

follow-up test must be conducted within 7 days of the engine being started up again to 

demonstrate that the emission levels are being met. If the retest shows that the emissions 

continue to exceed the specified levels, the stationary RICE must again be shut down as soon as 

safely possible, and the engine may not operate, except for purposes of start-up and testing, until 

the owner/operator demonstrates through testing that the emissions do not exceed the levels 

specified.

4.243 Compliance Date 

The EPA has received some questions regarding whether the compliance dates for 

engines impacted by the 2010 amendments and this reconsideration will be extended. Affected 

sources that may be impacted by this action have expressed concern about having sufficient time 

to comply with the rule by the compliance date, which is May 3, 2013, for existing stationary CI 

RICE and October 19, 2013, for existing stationary SI RICE. Sources impacted by this 

reconsideration are particularly concerned with compliance in the event that the EPA does not 

finalize changes that are substantially similar to the changes included in this action. The EPA 

does not intend to extend the May 3, 2013, and October 19, 2013, compliance dates, because 

there are many engines that must meet those compliance dates that are not impacted by this 

reconsideration. However, we note that sources that are affected by the reconsideration and that 

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4-15 

may need additional time to install controls to comply with the applicable requirements can 

request up to an additional year to install controls, as specified in 40 CFR 63.6(i). 

4.3 What Are the Pollutants Regulated by the Rule? 

The reconsideration rule regulates emissions of HAP. Available emissions data show 

that several HAP, which are formed during the combustion process or which are contained 

within the fuel burned, are emitted from stationary engines. The HAP which have been measured 

in emission tests conducted on SI stationary RICE include: formaldehyde, acetaldehyde, 

acrolein, methanol, benzene, toluene, 1,3-butadiene, 2,2,4-trimethylpentane, hexane, xylene, 

naphthalene, PAH, methylene chloride, and ethylbenzene. EPA described the health effects of 

these HAP and other HAP emitted from the operation of stationary RICE in the preamble to 40 

CFR part 63, subpart ZZZZ, published on June 15, 2004 (69 FR 33474). These HAP emissions 

are known to cause, or contribute significantly to air pollution, which may reasonably be 

anticipated to endanger public health or welfare. 

For the standards included in this action, EPA believes that previous determinations 

regarding the appropriateness of using formaldehyde and carbon monoxide (CO) both in 

concentration (parts per million (ppm)) levels as surrogates for HAP for stationary RICE are still 

valid. Consequently, EPA is promulgating CO or formaldehyde standards in order to regulate 

HAP emissions. 

In addition to reducing HAP, the emission control technologies that will be installed on 

stationary RICE to reduce HAP will also reduce CO and VOC, and for rich burn engines will 

also reduce NOx.

4.4 Cost Impacts 

4.4.1 Introduction 

EPA has determined that oxidation catalysts for two-stroke lean burn (2SLB) and fourstroke lean burn (4SLB) engines, and non-selective catalytic reduction (NSCR) for four-stroke 

rich burn (4SRB) engines are applicable controls for HAP reduction from existing stationary SI 

RICE. To determine the capital and annual costs for these control technologies, equipment cost 

information was obtained from industry groups6

 and vendors and manufacturers of SI engine 

control technology. In some cases, the industry groups provided a breakdown of the capital and 

 

6

 Reciprocating Internal Combustion Engine National Emission Standards for Hazardous Air Pollutants (RICE 

NESHAP) Proposed Revisions – Emission Control Costs Analysis Background for “Above the Floor” Emission 

Controls for Natural Gas-Fired RICE, Innovative Environmental Solutions Inc., October 2009. (EPA-HQ-OAR2008-0708-0279). 

Deleted: ¶

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0.5", No bullets or numbering

Deleted: proposed

Deleted: ¶
4-16 

annual cost components for each of the retrofit options. Using this cost data, annualized cost and 

capital cost equations for oxidation catalysts and NSCR were developed. 

4.4.2 Control Cost Methodology 

The following sections describe the methodology used to derive the total capital and total 

annual costs for each of the control technology options. These methodologies were used to 

calculate total capital and total annual costs when only purchased equipment costs were available 

(e.g., vendor equipment costs). The methodologies were not used for cost data provided by 

industry groups because they included a breakdown of the actual total capital and total annual 

costs. A summary of the methodologies, equations, and assumptions used to estimate the total 

capital and total annual costs for some of the cost data are described in the following sections. 

4.4.2.1 Total Capital Costs 

The total capital cost includes the direct and indirect costs of purchasing and installing 

the control equipment. The direct cost includes the cost of purchasing the equipment and 

instrumentation, cost of shipping, and the cost of installing the control equipment. The indirect 

cost includes the costs for engineering, contractor fees, testing costs, and also includes costs for 

contingencies, such as additional modifications, or delays in startup. The total capital cost 

equation can be summarized as follows: 

Total Capital Cost (TCC) = Direct Costs (DC) + Indirect Costs (IC) 

The direct costs include the costs of purchasing and installing the control equipment and can be 

summarized using the following equation; 

DC = Purchased Equipment Cost (PEC) + Direct Installation Costs (DIC). 

A summary of the cost assumptions for PEC includes the following: 

 Control Device and Auxiliary Equipment (EC); 

 Instrumentation (10% of EC); 

 Sales Tax (3% of EC); 

 Freight (5% of EC); 

and can be summarized as: 

PEC = 118% EC. 
4-17 

A summary of the cost assumptions for DIC includes the following: 

 Foundations and Supports (8% of PEC); 

 Handling and Erection (14% of PEC); 

 Electrical (4% of PEC); 

 Piping (2% of PEC); 

 Insulation for Ductwork (1% of PEC); 

 Painting (1% of PEC); 

and can be summarized as: 

DIC = 30% PEC = 0.3 PEC. 

Therefore, the direct costs can be simplified using the following equation: 

DC = PEC + 0.3 PEC = 1.3 PEC. 

The indirect costs include the costs of engineering and contractor fees and contingencies and can 

be summarized using the following equation: 

IC = Indirect Installation Costs (ICC) + Contingencies (C). 

A summary of the cost assumptions for ICC includes the following: 

 Engineering (10% of PEC); 

 Construction and Field Expenses (5% of PEC); 

 Contractor Fees (10% of PEC); 

 Startup (2% of PEC); 

 Performance Test (1% of PEC); 

and can be summarized as: 

IIC = 28% PEC = 0.28 PEC. 

A summary of the cost assumptions for C includes the following: 

 Equipment Redesign and Modifications; 
4-18 

 Cost Escalations; 

 Delays in Startup; 

and is assumed to be: 

C = 3% PEC = 0.03 PEC. 

Therefore, the IC can be summarized using the following equation: 

IC = 0.28 PEC + 0.03 PEC = 0.31 PEC, 

and the simplified TCC equation can be expressed as: 

TCC = 1.3 PEC + 0.31 PEC = 1.61 PEC = 1.61 (1.18 EC) = 1.9 EC 

4.4.2.2 Total Annual Costs 

The total annual cost includes the direct and indirect annual costs of operating and 

maintaining the control equipment. The direct annual cost includes the cost of the utilities, 

operating labor, and control device cleaning and maintenance. The indirect annual cost includes 

the overhead costs such as spare parts for the control equipment, administrative charges, and the 

capital recovery of the control technology. The total annual cost equation can be summarized as 

follows: 

Total Annual Cost (TAC) = Direct Annual Costs (DAC) + Indirect Annual Costs (IAC). 

The DAC includes the following parameters: 

 Utilities; 

 Operating Labor; 

 Maintenance; 

 Annual Compliance Test; 

 Catalyst Cleaning; 

 Catalyst Replacement; 

 Catalyst Disposal. 

The IAC includes the following parameters: 
4-19 

 Overhead; 

 Fuel Penalty; 

 Property Tax; 

 Insurance; 

 Administrative Charges; 

 Capital Recovery = {I(1+I)n/((1+I)n-1)*TCC} where I is the interest rate, and n is the 

equipment life. 

To calculate DAC, the costs were broken up into three separate costs: operation and 

maintenance materials cost, operation and maintenance labor cost, and the cost for annual 

performance testing or downtime or allowance for catalyst washing. Actual annual cost data 

from the industry groups were used to estimate the DAC for each of the control technologies. 

The IAC was broken up into three separate costs: administrative, fuel penalty, and capital 

recovery. Again, cost data from the industry groups was used to estimate these costs for each of 

the control technologies. No fuel penalty was estimated for the oxidation catalyst control 

technologies, because this control technology does not increase the fuel usage of the SI engine. 

4.4.3 Control Cost Equations 

Control cost equations were developed for 2SLB oxidation catalyst, 4SLB oxidation 

catalyst, and a NSCR for 4SRB engines using the total capital cost and total annual cost data for 

each control technology. Control cost equations for 2SLB and 4SLB oxidation catalysts were 

developed separately because the 2SLB oxidation catalyst requires a premium catalyst to reduce 

the HAP compounds because of the low exhaust temperature of 2SLB engines. 

4.4.3.1 2SLB Oxidation Catalyst 

The 2SLB oxidation catalyst is an effective control technology that reduces HAP 

emissions from a 2SLB SI engine by oxidizing organic compounds using a catalyst. The 

oxidation catalyst unit contains a honeycomb-like structure or substrate with a large surface area 

that is coated with a premium active catalyst layer such as platinum or palladium. The oxidation 

catalyst works by oxidizing carbon monoxide (CO) and gaseous hydrocarbons (HAP) in the 

exhaust gas to carbon dioxide (CO2) and water. The reduction of CO and HAP varies depending 

on the type of catalyst used and the exhaust temperature of the pollutant stream. 

The cost of retrofitting an oxidation catalyst to an existing 2SLB engine was estimated 

using cost data obtained from vendors and industry groups covering engines ranging from 58 
4-20 

horsepower (HP) to 4,670 HP. An equipment life of 10 years and an interest rate of 7 percent 

were used to estimate the capital recovery of the control technology and the fuel penalty was 

assumed to be negligible. The cost equations are presented in 2009 dollars. 

The total annualized cost equation for retrofitting an oxidation catalyst on a 2SLB engine 

was estimated to be: 

2SLB Oxidation Catalyst Total Annual Cost = $11.4 x HP + $13,928 

where 

HP = engine size in HP. 

The linear equation has a correlation coefficient of 0.8046, which shows the data fits the 

equation closely. Therefore, this equation was used to estimate annualized cost for an oxidation 

catalyst on a 2SLB engine. 

The total capital cost equation for retrofitting an oxidation catalyst on a 2SLB engine was 

estimated to be: 

2SLB Oxidation Catalyst Total Capital Cost = $47.1 x HP + $41,603 

where 

HP = engine size in HP. 

4.4.3.2 4SLB Oxidation Catalyst 

The 4SLB oxidation catalyst is an effective control technology that reduces HAP 

emissions from a 4SLB SI engine by oxidizing organic compounds using a catalyst. The 

oxidation catalyst unit contains a honeycomb-like structure or substrate with a large surface area 

that is coated with a premium active catalyst layer such as platinum or palladium. The oxidation 

catalyst works by oxidizing CO and gaseous hydrocarbons (HAP) in the exhaust gas to CO2 and 

water. The reductions of CO and HAP vary depending on the type of catalyst used and the 

exhaust temperature of the pollutant stream. 

The cost of retrofitting an oxidation catalyst to an existing 4SLB engine was estimated 

using cost data obtained from vendors and industry groups covering engines ranging from 400 

HP to 8,000 HP. Again, an equipment life of 10 years and an interest rate of 7 percent were used 
4-21 

to estimate the capital recovery of the control technology and the fuel penalty was assumed to be 

negligible. The cost equations are presented in 2009 dollars. 

The total annualized cost equation for retrofitting an oxidation catalyst on a 4SLB engine 

was estimated to be: 

4SLB Oxidation Catalyst Total Annual Cost = $1.81 x HP + $3,442 

where 

HP = engine size in HP. 

The linear equation has a correlation coefficient of 0.9779, which shows the data fits the 

equation very closely. Therefore, this equation was used to estimate annualized cost for an 

oxidation catalyst on a 4SLB engine. 

The total capital cost equation for retrofitting an oxidation catalyst on a 4SLB SI engine was 

estimated to be: 

4SLB Oxidation Catalyst Total Capital Cost = $12.8 x HP + $3,069 

where 

HP = engine size in HP. 

A summary of the cost calculations, regression analyses, and graphical representations of the 

annual and capital cost data are presented in Appendix A of the cost memo that is the basis for 

the cost data presented in this RIA.7

4.4.3.3 Non-Selective Catalytic Reduction 

The NSCR or three-way catalyst is used to control HAP emissions from 4SRB engines. 

In addition to HAP reductions, NSCR also reduces the emissions of nitrogen oxides (NOx), CO, 

and other hydrocarbons (HC). The reduction of HAP and CO takes place through an oxidation 

reaction that converts HAP to CO2 and water and converts CO to CO2. The conversion of NOx

takes place through a reduction of the NOx to nitrogen gas and oxygen. 

 

7

 Memorandum from Bradley Nelson, EC/R to Melanie King, EPA. OAQPS/SPPD/ESG. Impacts Associated with 

NESHAP for Existing Stationary SI RICE. June 29, 2010. 
4-22 

The cost of retrofitting an NSCR on an existing 4SRB engine was estimated based on 

cost data received from vendors and industry groups. A linear regression analysis was done on 

the data set and the linear equation for annualized cost was; 

NSCR Annual Cost = $4.77 x HP + $5,679 

where 

HP = engine size in HP. 

The linear equation has a correlation coefficient of 0.7987, which shows an acceptable 

representation of the cost data. Therefore, this equation was used to estimate annualized cost for 

retrofitting the NSCR control technology on 4SRB engines. 

The capital cost equation for retrofitting an air-to-fuel ratio (AFR) controller and NSCR on a 

4SRB engine was estimated to be: 

NSCR Capital Cost = $24.9 x HP + $13,118 

where 

HP = engine size in HP. 

4.4.4 Summary 

Table 4-1 presents a summary of the annual and capital control costs as a function of 

engine size for the control technologies applicable to existing stationary SI engines, as discussed 

in this memorandum. 

Table 4-1. Summary of Annual and Capital Costs Equations for Existing Stationary SI 

Engines 

HAP Control Device Annual Cost ($2009) Capital Cost ($2009) 

2SLB Oxidation Catalyst $11.4 x HP + $13,928 $47.1 x HP + $41,603 

4SLB Oxidation Catalyst $1.81 x HP + $3,442 $12.8 x HP + $3,069 

NSCR $4.77 x HP + $5,679 $24.9 x HP + $13,118 
4-23 

A summary of the annual and capital costs associated with the rule and obtained using the 

methodology described above are presented in Tables 4-2 to 4-5 below.8

 These costs are used as 

input to the economic impact as well as the small entity analysis. 

 

8

 Memorandum from Bradley Nelson, EC/R to Melanie King, EPA. OAQPS/SPPD/ESG. Impacts Associated with 

NESHAP for Existing Stationary SI RICE. June 29, 2010. 
Table 4-2. Summary of Major Source and Area Source Costs for the SI RICE NESHAPa

Size Range (HP) 

Capital 

Control Cost 

Annual 

Control Cost Initial Test 

Recordkeeping Reporting Monitoring— Capital Cost 

Monitoring

—Annual 

Cost 

Total Annual 

Costs 

Total Capital 

Costs 

Major Sources 

25–50 $0 $0 $0 $4,060,795 $0 $0 $0 $4,060,795 $0 50–100 $0 $0 $0 $1,087,540 $0 $0 $0 $1,087,540 $0 100–175 $48,502,361 $37,071,061 $15,971,384 $1,721,899 $5,725,314 $0 $0 $60,489,657 $48,502,361 175–300 $13,225,919 $8,382,568 $3,442,648 $371,157 $1,234,097 $0 $0 $13,430,470 $13,225,919 300–500 $10,934,795 $5,562,872 $2,123,326 $228,919 $761,155 $0 $0 $8,676,262 $10,934,795 500–600 $0 $0 $0 $0 $0 $0 $0 $0 $0 600–750 $0 $0 $0 $0 $0 $0 $0 $0 $0 >750 $0 $0 $0 $0 $0 $0 $0 $0 $0 

Total $72,663,076 $51,016,500 $21,537,358 $7,470,310 $7,720,566 $0 $0 $87,744,734 $72,663,076 Area Sources 

25–50 $0 $0 $0 $6,668,944 $0 $0 $0 $6,668,944 $0 50–100 $0 $0 $0 $2,868,511 $0 $0 $0 $2,868,511 $0 100–175 $0 $0 $0 $3,529,711 $0 $0 $0 $3,529,711 $0 175–300 $0 $0 $0 $1,264,799 $0 $0 $0 $1,264,799 $0 300–500 $0 $0 $0 $908,913 $0 $0 $0 $908,913 $0 500–600 $7,547,433 $2,662,805 $248,366 $454,493 $1,26,426 0 0 $3,492,090 $7,547,433 600–750 $1,522,236 $505,221 $44,323 $77,882 $22,562 0 0 $649,988 $1,522,236 >750 $21,075,418 $6,214,397 $472,244 $829,795 $240,387 0 0 $7,756,823 $21,075,418 

Total $30,145,088 $9,382,423 $764,933 $16,603,048 $389,375 0 0 $27,139,780 $30,145,088 Grand Total Total $102.808,163 $60,398,923 $22,302,292 $24,073,358 $8,106,972 0 0 $114,884,514 $102,808.163 

a Costs are presented in 2009 dollars. 
25

Table 4-3. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAPa

Major Source Area Source Total (Major + Area) 

NAICS Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost 2211 Electric Power Generation $52,905,258 $63,062,494 $11,698,144 $12,138,277 $64,603,403 $75,200,772 48621 Natural Gas Transmission $1,484,494 $1,462,530 $13,718,381 $6,142,839 $15,202,876 $7,605,369 211111 Crude Petroleum & NG 

Production $4,561,236 $6,138,383 

$71,439 $951,462 

$4,632,675 $7,089,844 

211112 Natural Gas Liquid Producers $4,561,236 $6,138,383 $71,439 $951,462 $4,632,675 $7,089,844 92811 National Security $5,878,362 $7,006,944 $1, 299,794 $1,348,697 $7,178,1566 $8,355,641 335312 Hydro Power Units $0 $25,248 $0 $37,872 $0 $63,120 335312 Irrigation Sets $3,025,050 $3,230,856 $3,285,990 $4,999,041 $6,310,940 $8,229,896 333992 Welders $247,440 $679,896 $0 $570,130 $247,440 $1,250,027  Total $72,663,076 $87,744,734 $30,145,088 $27,139,780 $102,808,163 $114,884,514

a Costs are presented in 2009 dollars. 
26

Table 4-4. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Sizea

 Major Source Area Source Total (Major + Area) NAICS Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost Electric Power Generation (2211) 

25–50 hp $0 $2,758,459 $0 $4,137,688 $0 $6,896,147 50–100 hp $0 $606,144 $0 $909,215 $0 $1,515,359 100–175 hp $33,868,173 $42,238,648 $0 $1,803,548 $33,868,173 $44,042,196 175–300 hp $10,603,849 $10,767,847 $0 $446,361 $10,603,849 $11,214,209 300–500 hp $8,433,236 $6,691,397 $0 $264,820 $8,433,236 $6,956,217 500–600 hp $0 $0 $2,543,944 $1,177,047 $2,543,944 $1,177,047 600–750 hp $0 $0 $515,514 $220,122 $515,514 $220,122 >750 hp $0 $0 $8,638,687 $3,179,475 $8,638,687 $3,179,475 Total Electric Power Generation 2211 $52,905,258 $63,062,494 $11,698,144 $12,138,277 $64,603,403 $75,200,772 

Natural Gas Transmission (48621) 

25–50 hp $0 $102 $0 $1,934 $0 $2,036 50–100 hp $0 $4,872 $0 $92,571 $0 $97,443 100–175 hp $301,721 $376,291 $0 $203,518 $301,721 $579,809 175–300 hp $643,157 $653,104 $0 $342,928 $643,157 $996,032 300–500 hp $539,617 $428,162 $0 $214,637 $539,617 $642,799 500–600 hp $0 $0 $1,925,560 $890,929 $1,925,560 $890,929 600–750 hp $0 $0 $949,443 $405,408 $949,443 $405,408 >750 hp $0 $0 $10,843,377 $3,990,913 $10,843,377 $3,990,913 Total Natural Gas Transmission (48621) $1,484,494 $1,462,530 $13,781,381 $6,142,839 $15,202,876 $7,605,369 

Crude Petroleum & NG Production (211111) 

25–50 hp $0 $388,115 $0 $582,173 $0 $970,288 50–100 hp $0 $66,698 $0 $100,047 $0 $166,744 100–175 hp $4,549,775 $5,674,246 $0 $242,285 $4,549,775 $5,916,531 

(continued) 
27

Table 4-4. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Sizea (continued) 

 Major Source Area Source Total (Major + Area) NAICS Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost 

175–300 hp $1,037 $1,053 $0 $44 $1,037 $1,096 300–500 hp $10,424 $8,271 $0 $327 $10,424 $8,598 500–600 hp $0 $0 $3,102 $1,435 $3.102 $1,435 600–750 hp $0 $0 $0 $0 $0 $0 >750 hp $0 $0 $68,337 $25,151 $68,337 $25,151 Total Crude Petroleum & NG Production (211111) $4,561,236 $6,138,383 $71,439 $951,462 $4,632,675 $7,089,844 

Natural Gas Liquid Producers (211112) 

25–50 hp $0 $388,115 $0 $582,173 $0 $970,288 50–100 hp $0 $66,698 $0 $100,047 $0 $166,744 100–175 hp $4,549,775 $5,674,246 $0 $242,285 $4,549,775 $5,916,531 175–300 hp $1,037 $1,053 $0 $44 $1,037 $1,096 300–500 hp $10,424 $8,271 $0 $327 $10,424 $8,598 500–600 hp $0 $0 $3,102 $1,435 $3,102 $1,435 600–750 hp $0 $0 $0 $0 $0 $0 >750 hp $0 $0 $68,337 $25,151 $68,337 $25,151 Total Natural Gas Liquid Producers (211112) $4,561,236 $6,138,383 $71,439 $951,462 $4,632,675 $7,089,844 

National Security (92811) 

25–50 hp $0 $306,495 $0 $459,743 $0 $766,239 50–100 hp $0 $67,349 $0 $101,024 $0 $168,373 100–175 hp $3,763,130 $4,693,183 $0 $200,394 $3,763,130 $4,893,577 175–300 hp $1,178,205 $1,196,427 $0 $49,596 $1,178,205 $1,246,023 300–500 hp $937,026 $743,489 $0 $29,424 $937,026 $772,913 500–600 hp $0 $0 $282,660 $130,783 $282,660 $130,783 

(continued) 
28

Table 4-4. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Sizea (continued) 

 Major Source Area Source Total (Major + Area) NAICS Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost 

600–750 hp $0 $0 $57,279 $24,458 $57,279 $24,458 >750 hp $0 $0 $959,854 $353,275 $959,854 $353,275 Total National Security (92811) $5,878,362 $7,006,944 $1,299,794, $1,348,697 $7,178,156 $8,355,641 

Hydro Power Units (335312) 

25–50 hp $0 $22,688 $0 $34,032 $0 $56,721 50–100 hp $0 $2,560 $0 $3,840 $0 $6,399 100–175 hp $0 $0 $0 $0 $0 $0 175–300 hp $0 $0 $0 $0 $0 $0 300–500 hp $0 $0 $0 $0 $0 $0 500–600 hp $0 $0 $0 $0 $0 $0 600–750 hp $0 $0 $0 $0 $0 $0 >750 hp $0 $0 $0 $0 $0 $0 Total Hydro Power Units (335312) $0 $25,248 $0 $37,872 $0 $63,120 

Irrigation Sets (335312) 

25–50 hp $0 $32,913 $0 $625,338 $0 $658,251 50–100 hp $0 $65,825 $0 $1,250,677 $0 $1,316,502 100–175 hp $1,222,348 $1,524,449 $0 $824,505 $1,222,348 $2,348,954 175–300 hp $798,634 $810,986 $0 $425,827 $798,634 $1,236,813 300–500 hp $1,004,068 $796,683 $0 $399,376 $1,004,068 $1,196,060 500–600 hp $0 $0 $2,789,064 $1,290,460 $2,789,064 $1,290,460 600–750 hp $0 $0 $0 $0 $0 $0 >750 hp $0 $0 $496,827 $182,857 $496,827 $182,857 Total Irrigation Sets (335312) $3,025,050 $3,230,856 $3,285,890 $4,999,041 $6,310,940 $8,229,896 

(continued) 
29

Table 4-4. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Sizea (continued) 

 Major Source Area Source Total (Major + Area) NAICS Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost Welders (333992) 

25–50 hp $0 $163,908 $0 $245,862 $0 $409,771 50–100 hp $0 $207,394 $0 $311,091 $0 $518,485 100–175 hp $247,440 $308,594 $0 $13,177 $247,440 $321,771 175–300 hp $0 $0 $0 $0 $0 $0 300–500 hp $0 $0 $0 $0 $0 $0 500–600 hp $0 $0 $0 $0 $0 $0 600–750 hp $0 $0 $0 $0 $0 $0 >750 hp $0 $0 $0 $0 $0 $0 Total Welders (333992) $247,440 $679,896 $0 $570,130 $247,440 $1,250,027 

Total $72,663,076 $87,744,734 $30,145,088 $27,139,780 $102,808,163 $114,884,514 

a Costs are presented in 2009 dollars. 
30

Table 4-5. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Number of Enginesa

Number of Engines Total (Major + Area) 

NAICS Major Area Total Capital Cost Annual Cost Electric Power Generation (2211) 

25–50 hp 37,933 56,900 94,833 $0 $6,896,147 50–100 hp 8,336 12,503 20,839 $0 $1,515,359 100–175 hp 16,534 24,802 41,336 $33,868,173 $44,042,196 175–300 hp 4,092 6,138 10,230 $10,603,849 $11,214,209 300–500 hp 2,428 3,642 6,070 $8,433,236 $6,956,217 500–600 hp 0 2,107 2,107 $2,543,944 $1,177,047 600–750 hp 0 363 363 $515,944 $220,122 >750 hp 0 4,677 4,677 $8,638,687 $3,179,475 Total Electric Power Generation (2211) 69,323 111,132 180,455 $64,603,403 $75,200,772 

Natural Gas Transmission (48621) 

25–50 hp 1 27 28 $0 $2,036 50–100 hp 67 1,273 1,340 $0 $97,443 100–175 hp 147 2,799 2,946 $301,721 $579,809 175–300 hp 248 4,716 4,964 $643,157 $996,032 300–500 hp 155 2,952 3,107 $539,617 $642,799 500–600 hp 0 1,595 1,595 $1,925,560 $890,929 600–750 hp 0 668 668 $949,443 $405,408 >750 hp 0 5,871 5,871 $10,843,377 $3,990,913 Total Natural Gas Transmission (48621) 619 19,899 20,519 $15,202,876 $7,605,369 

Crude Petroleum & NG Production (211111) 

25–50 hp 5,337 8,006 13,343 $0 $970,288 50–100 hp 917 1,376 2,293 $0 $166,744 100–175 hp 2,221 3,332 5,553 $4,549,775 $5,916,531 

(continued) 
31

Table 4-5. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Number of Enginesa

(continued) 

Number of Engines Total (Major + Area) 

NAICS Major Area Total Capital Cost Annual Cost 

175–300 hp 0 1 1 $1,037 $1,096 300–500 hp 3 5 8 $10,424 $8,598 500–600 hp 0 3 3 $3,102 $1,435 600–750 hp 0 0 0 $0 $0 >750 hp 0 37 37 $68,337 $25,151 Total Crude Petroleum & NG Production (211111) 8,479 12,758 21,237 $4,632,675 $7,089,844 

Natural Gas Liquid Producers (211112) 

25–50 hp 5,337 8,006 13,343 $0 $970,288 50–100 hp 917 1,376 2,293 $0 $166,744 100–175 hp 2,221 3,332 5,553 $4,549,775 $5,916,531 175–300 hp 0 1 1 $1,037 $1,096 300–500 hp 3 5 8 $10,424 $8,598 500–600 hp 0 3 3 $3,102 $1,435 600–750 hp 0 0 0 $0 $0 >750 hp 0 37 37 $68,337 $25,151 Total Natural Gas Liquid Producers (211112) 8,479 12,758 21,237 $4,632,675 $7,089,844 

National Security (92811) 

25–50 hp 4,215 6,322 10,537 $0 $766,239 50–100 hp 926 1,389 2,315 $0 $168,373 100–175 hp 1,837 2,756 4,593 $3,763,130 $4,893,577 175–300 hp 455 682 1,137 $1,178,205 $1,246,023 300–500 hp 270 404 674 $937,026 $772,913 500–600 hp 0 234 234 $282,660 $130,783 

(continued) 
32

Table 4-5. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Number of Enginesa

(continued) 

Number of Engines Total (Major + Area) 

NAICS Major Area Total Capital Cost Annual Cost 

600–750 hp 0 40 40 $57,279 $24,458 >750 hp 0 520 520 $959.854 $353,275 Total Natural Gas Liquid Producers (211112) 7,702 12,347 20,050 $7,178,156 $8,355,641 

Hydro Power Units (335312) 

25–50 hp 312 468 780 $0 $56,721 50–100 hp 35 53 88 $0 $6,399 100–175 hp 0 0 0 $0 $0 175–300 hp 0 0 0 $0 $0 300–500 hp 0 0 0 $0 $0 500–600 hp 0 0 0 $0 $0 600–750 hp 0 0 0 $0 $0 >750 hp 0 0 0 $0 $0 Total Hydro Power Units (335312) 347 521 868 $0 $63,120 

Irrigation Sets (335312) 

25–50 hp 453 8,599 9,052 $0 $658,251 50–100 hp 905 17,199 18,104 $0 $1,316,502 100–175 hp 597 11,338 11,935 $1,222,348 $2,348,954 175–300 hp 308 5,856 6,164 $798,634 $1,236,813 300–500 hp 289 5,492 5,781 $1,004,068 $1,196,060 500–600 hp 0 2,310 2,310 $2,789,064 $1,290,460 600–750 hp 0 0 0 $0 $0 >750 hp 0 269 269 $496,827 $182857 Total Irrigation Sets (335312) 2,552 51,063 53,615 $6,310,940 $8,229,896 

(continued) 
33

Table 4-5. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Number of Enginesa

(continued) 

Number of Engines Total (Major + Area) 

NAICS Major Area Total Capital Cost Annual Cost Welders (333992) 

25–50 hp 2,254 3,381 5,635 $0 $409,771 50–100 hp 2,852 4,278 7,130 $0 $518,485 100–175 hp 121 181 302 $247,440 $321,771 175–300 hp 0 0 0 $0 $0 300–500 hp 0 0 0 $0 $0 500–600 hp 0 0 0 $0 $0 600–750 hp 0 0 0 $0 $0 >750 hp 0 0 0 $0 $0 Total Welders (333992) 5,227 7,840 13,067 $247,440 $1,250,027 

Total 102,729 228,319 331,047 $382,802,298 $253,374,939 

1 Costs are presented in 2009 dollars. 
4.4.5 Caveats and Uncertainties in the Cost Estimates 

* Current knowledge about NOx control techniques and costs is applied in this 

study. Advances such as alternative catalyst formulations may occur between 

now and when sources comply with this rulemaking that may lower costs. Scale 

economies can also lower per unit production costs as the market for these NOx 

control techniques expands. 

* The alternative control techniques and corresponding emission reductions and 

costs may not apply to every unit within the source category. Many factors 

influence the performance and cost of any control technique. Because control 

technology references typically evaluate average retrofit situations, costs may 

be underestimated for the fraction of the source population with difficult to 

retrofit conditions. Difficult to retrofit conditions may be less of an issue for 

RICEs than for other point sources, however. 

* NOx control efficiency and cost estimates associated with source category-control 

strategy combinations are represented as point estimates. In practice, control 

effectiveness and costs will vary by engine.
4-35 

4.5 Baseline Emissions and Emission Reductions 

The baseline emissions, emissions factors and emissions reductions associated with the 

final reconsideration rule are provided in the tables below. Baseline emissions are estimated for 

2013 using the emissions dataset generated for the final SI RICE rule in 2010. The baseline 

emissions estimates thus assume the final SI RICE rule has not been implemented. Emissions 

are in tons per year. 

Table 4-6. Summary of Major Source and Area Source Baseline Emissions for the SI 

RICE NESHAP in 2013 

 Baseline Emissions (TPY) 

Size Range (HP) HAP CO NOx VOC 

Major Sources 

25–50 hp 1,107 28,557 41,751 5,696 

50–100 hp 593 15,296 22,363 3,051 

100–175 hp 1,721 44,399 64,913 8,855 

175–300 hp 641 16,530 24,168 3,297 

300–500 hp 666 17,171 25,105 3,425 

500–600 hp 0 0 0 0 

600–750 hp 0 0 0 0 

>750 hp 0 0 0 0 

Total 4,728 121,953 178,301 24,323 

Area Sources 

25–50 hp 1,818 46,898 68,566 9,354 

50–100 hp 1,564 40,344 58,985 8,047 

100–175 hp 3,529 91,013 133,065 18,153 

175–300 hp 2,184 56,331 82,359 11,235 

300–500 hp 2,643 68,178 99,679 13,598 

500–600 hp 1,830 47,273 69,094 9,415 

600–750 hp 383 9,876 14,438 1,969 

>750 hp 6,041 155,890 227,890 31,076 

Total 19,993 515,803 754,077 102,846 

Major + Area 

Total 

24,722 637,756 932,377 127,169 

Deleted: proposed
4-36 

Table 4-7. Emissions Factors 

Engine 

HAP 

(lb/hp-hr) 

CO 

(lb/hp-hr) 

NOx 

(lb/hp-hr) 

VOC 

(lb/hp-hr) 

Formaldehyde 

(lb/hp-hr) 

2SLB 5.9610-4 1.0610-2 4.1810-2 3.0710-3 4.2910-4

4SLB 5.4110-4 3.9210-3 1.1510-2 2.7810-3 3.9610-4

4SRB 2.4310-4 1.9310-2 1.4710-2 1.2510-3 1.7510-4

Table 4-8. Summary of Major Source and Area Source Emissions Reductions for the SI 

RICE NESHAP in 2013 

 Emission Reductions (TPY) 

Size Range (HP) HAP CO NOx VOC 

Major Sources 

25–50 hp 0 0 0 0 

50–100 hp 0 0 0 0 

100–175 hp 744 7,124 0 3,826 

175–300 hp 277 2,653 0 1,424 

300–500 hp 288 2,755 0 1,480 

500–600 hp N/A N/A N/A 0 

600–750 hp N/A N/A N/A 0 

>750 hp N/A N/A N/A 0 

Total 1,308 12,532 0 6,730 

Area Sources 

25–50 hp 0 0 0 0 

50–100 hp 0 0 0 0 

100–175 hp 0 0 0 0 

175–300 hp 0 0 0 0 

300–500 hp 0 0 0 0 

500–600 hp 101 2,070 2,,063 517 

600–750 hp 22 453 452 113 

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

Total 470 9,679 9,648 2,418 

Major + Area Total 1,778 22,211 9,648 9,147 
5-1 

Section 5

ECONOMIC IMPACT ANALYSIS, ENERGY IMPACTS, AND SOCIAL COSTS 

The EIA provides decision makers with social cost estimates and enhances understanding 

of how the costs may be distributed across stakeholders (EPA, 2010). Although several 

economic frameworks can be used to estimate social costs for regulations of this size and sector 

scope, OAQPS has typically used partial equilibrium market models. However, the current data 

do not provide sufficient details to develop a market model; the data that are available have little 

or no sector/firm detail and are reported at the national level. In addition, some sectors have 

unique market characteristics that make developing partial equilibrium models difficult. Given 

these constraints, we used the direct compliance costs as a measure of total social costs. In 

addition, we also provide a qualitative analysis of the reconsidered rule’s impact on stakeholder 

decisions, a qualitative discussion on if unfunded mandates occur as a result of this reconsidered 

rule, and the potential distribution of social costs between consumers and producers. 

5.1 Compliance Costs of the Reconsidered Rule 

 EPA’s engineering cost analysis estimates the total annualized costs of the reconsidered 

rule are $115 million (in 2010 dollars) (EC/R, 2012). 

The majority of the costs are incurred by the electric power sector (65%). The remaining 

industries each account for less than 8% of the total annualized cost. The industrial classification 

for each engine is taken from the Power Systems Research (PSR) database, which is the major 

source of data for the engines affected by this rule. The PSR database used as a basis for the 

analyses in this RIA contains information on both mobile and stationary engines, among other 

data, and does so not only for the U.S. but worldwide. PSR has collected such data for more 

than 30 years. The Office of Transportation and Air Quality (OTAQ) uses this database 

frequently in the development of their mobile source rules. 

The annualized compliance costs per engine vary by the engine size. For 500 hp engines 

or less, the annualized per-engine costs are below $371 per engine. Per-engine annualized 

compliance costs for higher horsepower (hp) engines range up to $2,800. 

The reconsidered rule will affect approximately 331,000 existing stationary SI engines. 

As shown in Figure 5-1, most of the affected engines fall within the 25 to 50 hp category (45%). 

The next highest categories are 100 to 175 hp (22%) and 50 to 100 hp (16%). 

Deleted: proposed

Deleted: proposed

Deleted: Proposed

Deleted: proposed 

Deleted: proposed
5-2 

Figure 5-1. Distribution of Engine Population by Horsepower Group 

To assess the size of the compliance relative to the value of the goods and services for 

industries using affected engines, we collected Census data for selected industries. At the 

industry level, the annualized costs represent a very small fraction of revenue (less than 1%), for 

all affected industries. Results for affected industries can be found in Table 5-1. These industry 

level cost-to-sales ratios can be interpreted as an average impact on potentially affected firms in 

these industries. Based on the cost-to-sales ratios, we can conclude that the annualized cost of 

this rule should be no higher than 1% of the sales on average for a firm in each of these 

industries, excluding natural gas transmission and natural gas liquid producers, which face 

slightly higher costs to sales ratios. 

45%

16%

22%

7% 5%

2% 0%

3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

25-50 hp 50-100 hp 100-175 hp 175-300 hp 300-500 hp 500-600 hp 600-750 hp >750 hp
5-3 

5.2 Social Cost Estimate 

As shown in Table 5-1, the compliance costs are only a small fraction of the affected 

product value; this suggests that shift of the supply curve may also be small and result in small 

changes in market prices and consumption. EPA believes the national annualized compliance 

cost estimates provide a reasonable approximation of the social cost of this reconsidered rule. 

EPA believes this approximation is better for industries whose markets are well characterized as 

perfectly competitive. This approximation is less well understood for industries where the 

characterization of markets is not always perfectly competitive such as electric power generation 

whose legal incidence of this rule is approximately 65 percent of the annualized compliance cost. 

However, given the data limitation noted earlier, EPA believes the accounting for compliance 

cost is a reasonable approximation to inform policy discussion in this rulemaking. To shed more 

light on this issue, EPA ran hypothetical analyses and the results are in Tables 5-2 and 5-3 later 

in this RIA. 

5.3 How Might People and Firms Respond? A Partial Equilibrium Analysis 

Markets are composed of people as consumers and producers trying to do the best they 

can given their economic circumstances. One way economists illustrate behavioral responses to 

pollution control costs is by using market supply and demand diagrams. The market supply curve 

describes how much of a good or service firms are willing and able to sell to people at a 

Table 5-1. Selected Industry-Level Annualized Compliance Costs as a Fraction of Total 

Industry Revenue: 2009 

 

Total 

Annualized 

Costs 

Sales, Shipments, Receipt, 

or Revenue ($Billion) 

Industry 

(NAICS) Industry Name ($ million)a

 ($2007) ($2009) 

Cost-toSales Ratio 

2211 Electric Power Generation $128.4 $440.4 $453.7 0.004% 

48621 Natural Gas Transmission $68.9 $16.4 $16.9 0.41% 

211111 Crude Petroleum & NG Production $7.4 $214.2 $220.5 0.001% 

211112 Natural Gas Liquid Producers $7.4 $42.4 $43.6 0.005% 

92811 National Security $14.3 #N/A #N/A #N/A 

333992 Welders $1.3 $5.2 $5.5 0.025% 

111 and 112 Agriculture using irrigation systemsa $25.7 $27.9 $28.8 0.09% 

a Irrigation engine costs assumed to be passed on to agricultural sectors that use irrigation systems. 

N/A: receipts are Not Available for National Security 

Field Code Changed

Deleted: proposed

Deleted: ¶
5-4 

Sources: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 00: All sectors: 

Geographic Area Series: Economy-Wide Key Statistics: 2007” <http://factfinder.census.gov>; (July 7th , 

2010). 

 U.S. Department of Agriculture (USDA), National Agricultural Statistics Service (NASS). 2009. “2008 

Farm and Ranch Irrigation Survey.” Washington, DC: USDA-NASS. 

 Costs from Existing SI RICE NESHAP Impacts received from EPA 1/26/12 

particular price; we often draw this curve as upward sloping because some production resources 

are fixed. As a result, the cost of producing an additional unit typically rises as more units are 

made. The market demand curve describes how much of a good or service consumers are willing 

and able to buy at some price. Holding other factors constant, the quantity demand is assumed to 

fall when prices rise. In a perfectly competitive market, equilibrium price (P0) and quantity (Q0) 

is determined by the intersection of the supply and demand curves (see Figure 5-4). 

5.3.1 Changes in Market Prices and Quantities 

To qualitatively assess how the regulation may influence the equilibrium price and 

quantity in the affected markets, we assumed the market supply function shifts up by the 

additional cost of producing the good or service; the unit cost increase is typically calculated by 

dividing the annual compliance cost estimate by the baseline quantity (Q0) (see Figure 5-4). As 

shown, this model makes two predictions: the price of the affected goods and services are likely 

to rise and the consumption/production levels are likely to fall. 
5-5 

consumer surplus = –[fghd + dhc] 

producer surplus = [fghd – aehb] – bdc 

total surplus = consumer surplus + producer surplus = 

–[aehb + dhc + bdc] 

Figure 5-2. Market Demand and Supply Model: With and Without Regulation 

The size of these changes depends on two factors: the size of the unit cost increase 

(supply shift) and differences in how each side of the market (supply and demand) responds to 

changes in price. Economists measure responses using the concept of price elasticity, which 

represents the percentage change in quantity divided by the percentage change in price. This 

dependence has been expressed in the following formula:9

  Price Elasticity of Supply - Price Elasticity of Demand)

Price Elasticity of Supply Share of per-unit cost 

As a general rule, a higher share of the per-unit cost increases will be passed on to 

consumers in markets where 

 goods and services are necessities and people do not have good substitutes that they 

can switch to easily (demand is inelastic) and 

 

9

For examples of similar mathematical models in the public finance literature, see Nicholson (1998), pages 444–447, 

or Fullerton and Metcalf (2002). 
5-6 

 suppliers have excess capacity and can easily adjust production levels at minimal 

costs, or the time period of analysis is long enough that suppliers can change their 

fixed resources; supply is more elastic over longer periods. 

Short-run demand elasticities for energy goods (electricity and natural gas), agricultural 

products, and construction are often inelastic. Specific estimates of short-run demand elasticities 

for these products can be obtained from existing literature. For the short-run demand of energy 

products, the National Energy Modeling System (NEMS) buildings module uses values between 

0.1 and 0.3; a 1% increase in price leads to a 0.1 to 0.3% decrease in energy demand (Wade, 

2003). For the short-run demand of agriculture and construction, the EPA has estimated 

elasticities to be 0.2 for agriculture and approximately 1 for construction (U.S. EPA, 2004). As a 

result, a 1% increase in the prices of agriculture products would lead to a 0.2% decrease in 

demand for those products, while a 1% increase in construction prices would lead to 

approximately a 1% decrease in demand for construction. Given these demand elasticity 

scenarios (shaded in gray), approximately a 1% increase unit costs would result in a price 

increase of 0.1 to 1% (Table 5-2). As a result, 10 to 100% of the unit cost increase could be 

passed on to consumers in the form of higher goods/services prices. This price increase would 

correspond to a 0.1 to 0.8% decline in consumption in these markets (Table 5-3). 

Table 5-2. Hypothetical Price Increases for a 1% Increase in Unit Costs 

Market Demand 

Elasticity 

Market Supply Elasticity 

0.1 0.3 0.5 0.7 1 1.5 3 

−0.1 0.5% 0.8% 0.8% 0.9% 0.9% 0.9% 1.0% 

−0.3 0.3% 0.5% 0.6% 0.7% 0.8% 0.8% 0.9% 

−0.5 0.2% 0.4% 0.5% 0.6% 0.7% 0.8% 0.9% 

−0.7 0.1% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% 

−1.0 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.8% 

−1.5 0.1% 0.2% 0.3% 0.3% 0.4% 0.5% 0.7% 

−3.0 0.0% 0.1% 0.1% 0.2% 0.3% 0.3% 0.5% 

5.3.2 Regulated Markets: The Electric Power Generation, Transmission, and Distribution 

Sector 

Given that the electric power sector bears majority of the estimated compliance costs and 

the industry is also among the last major regulated energy industries in the United States (EIA, 

2010), the competitive model is not necessarily applicable for this industry. 

Deleted: 
5-7 

Table 5-3. Hypothetical Consumption Decreases for a 1% Increase in Unit Costs 

Market Demand 

Elasticity 

Market Supply Elasticity 

0.1 0.3 0.5 0.7 1 1.5 3 

−0.1 −0.1% −0.1% −0.1% −0.1% −0.1% −0.1% −0.1% 

−0.3 −0.1% −0.2% −0.2% −0.2% −0.2% −0.3% −0.3% 

−0.5 −0.1% −0.2% −0.3% −0.3% −0.3% −0.4% −0.4% 

−0.7 −0.1% −0.2% −0.3% −0.4% −0.4% −0.5% −0.6% 

−1.0 −0.1% −0.2% −0.3% −0.4% −0.5% −0.6% −0.8% 

−1.5 −0.1% −0.3% −0.4% −0.5% −0.6% −0.8% −1.0% 

−3.0 −0.1% −0.3% −0.4% −0.6% −0.8% −1.0% −1.5% 

Although the electricity industry continues to go through a process of restructuring, whereby the 

industry is moving toward a more competitive framework (see Figure 5-3 for the status of 

restructuring by state),10 in many states, electricity prices continue to be fully regulated by Public 

Service Commissions. As a result, the rules and processes outlined by these agencies would 

ultimately determine how these additional regulatory costs would be recovered by affected 

entities. 

5.3.3 Partial Equilibrium Measures of Social Cost: Changes Consumer and Producer 

Surplus 

In partial equilibrium analysis, the social costs are estimated by measuring the changes in 

consumer and producer surplus, and these values can be determined using the market supply and 

demand model (Figure 5-2). The change in consumer surplus is measured as follows: 

CS = – [Q1 × p] + [0.5 × Q × p]. (5.1) 

Higher market prices and lower quantities lead to consumer welfare losses. Similarly, the change 

in producer surplus is measured as follows: 

PS = [Q1 × p] – [Q1 × t] – [0.5 × Q × (p – t)]. (5.2) 

Higher unit costs and lower production level reduce producer surplus because the net 

price change (p – t) is negative. However, these losses are mitigated because market prices tend 

to rise. 

 

10http://tonto.eia.doe.gov/energy_in_brief/print_pages/electricity.pdf. 
5-8 

Figure 5-3. Electricity Restructuring by State 

Source. U.S. Energy Information Administration. 2010b. 

<http://www.eia.doe.gov/cneaf/electricity/page/restructuring/restructure_elect.html>. Last updated September 

2010. 

5.4 Energy Impacts 

Executive Order 13211 (66 FR 28355, May 22, 2001) provides that agencies will prepare 

and submit to the Administrator of the Office of Information and Regulatory Affairs, Office of 

Management and Budget, a Statement of Energy Effects for certain actions identified as 

“significant energy actions.” Section 4(b) of Executive Order 13211 defines “significant energy 

actions” as any action by an agency (normally published in the Federal Register) that 

promulgates or is expected to lead to the promulgation of a final rule or regulation, including 

notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking: 

(1) (i) that is a significant regulatory action under Executive Order 12866 or any successor order, 

and (ii) is likely to have a significant adverse effect on the supply, distribution, or use of energy; 

or (2) that is designated by the Administrator of the Office of Information and Regulatory Affairs 

as a significant energy action. 

Deleted: ¶

¶
5-9 

This rule is not a significant energy action as designated by the Administrator of the 

Office of Information and Regulatory Affairs because it is not likely to have a significant adverse 

impact on the supply, distribution, or use of energy. EPA has prepared an analysis of energy 

impacts that explains this conclusion as follows below. 

With respect to energy supply and prices, the analysis in Table 5-4 suggests at the 

industry level, the annualized costs represent a very small fraction of revenue (all industries are 

impacted under 1%). As a result, we can conclude supply and price impacts should be small. 

To enhance understanding regarding the regulation’s influence on energy consumption, 

we examined publicly available data describing energy consumption for the electric power sector 

that will be affected by this rule. The Annual Energy Outlook 2011 (EIA, 2011) provides energy 

consumption data. As shown in Table 5-4, this industry account for less than 0.3% of the U.S. 

total liquid fuels and less than 8.0% of natural gas. As a result, any energy consumption changes 

attributable to the regulatory program should not significantly influence the supply, distribution, 

or use of energy.

Table 5-4. U.S. Electric Powera

 Sector Energy Consumption (Quadrillion BTUs): 2013 

Quantity Share of Total Energy Use 

Distillate fuel oil 0.09 0.1% 

Residual fuel oil 0.22 0.2% 

Liquid fuels subtotal 0.31 0.3% 

Natural gas 7.63 7.9% 

Steam coal 17.37 18.0% 

Nuclear power 8.50 8.8% 

Renewable energyb

 4.63 4.8% 

Electricity Imports 0.12 0.1% 

Total Electric Power Energy Consumptionc

 38.77 40.1% 

Delivered Energy Use 70.56 73.2% 

Total Energy Use 96.66 100.0% 

a

Includes consumption of energy by electricity-only and combined heat and power plants whose primary business is 

to sell electricity, or electricity and heat, to the public. Includes small power producers and exempt wholesale 

generators. 

b

Includes conventional hydroelectric, geothermal, wood and wood waste, biogenic municipal solid waste, other 

biomass, petroleum coke, wind, photovoltaic and solar thermal sources. Excludes net electricity imports. c

Includes non-biogenic municipal waste not included above. 

Source: U.S. Energy Information Administration. 2011a. Supplemental Tables to the Annual Energy Outlook 2011. 

Table 2. Available at: <http://www.eia.doe.gov/oiaf/aeo/aeoref_tab.html>. 
5-10 

5.5 Unfunded Mandates 

The UMRA requires that we estimate, where accurate estimation is reasonably feasible, 

future compliance costs imposed by the rule and any disproportionate budgetary effects. Our 

estimates of the future compliance costs of the final rule are discussed previously in Section 4 of 

this RIA. We do not believe that there will be any disproportionate budgetary effects of the final

rule on any particular areas of the country, State or local governments, types of communities 

(e.g., urban, rural), or particular industry segments. 

5.5.1 Future and Disproportionate Costs 

The UMRA requires that we estimate, where accurate estimation is reasonably feasible, 

future compliance costs imposed by the rule and any disproportionate budgetary effects. Our 

estimates of the future compliance costs of the final rule are discussed previously in Chapter 4 

of this RIA. We do not believe that there will be any disproportionate budgetary effects of the 

final rule on any particular areas of the country, State or local governments, types of 

communities (e.g., urban, rural), or particular industry segments. 

5.5.2 Effects on the National Economy 

The UMRA requires that we estimate the effect of the final rule on the national economy. 

To the extent feasible, we must estimate the effect on productivity, economic growth, full 

employment, creation of productive jobs, and international competitiveness of the U.S. goods 

and services if we determine that accurate estimates are reasonably feasible and that such effect 

is relevant and material. The nationwide economic impact of the final rule is presented earlier in 

this RIA chapter. This analysis provides estimates of the effect of the final rule on most of the 

categories mentioned above, and these estimates are presented earlier in this RIA chapter. In 

addition, we have determined that the final rule contains no regulatory requirements that might 

significantly or uniquely affect small governments. Therefore, today’s rule is not subject to the 

requirements of section 203 of the UMRA. 

5.6 Environmental Justice 

Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes federal executive 

policy on environmental justice. Its main provision directs federal agencies, to the greatest 

extent practicable and permitted by law, to make environmental justice part of their mission by 

identifying and addressing, as appropriate, disproportionately high and adverse human health or 

environmental effects of their programs, policies, and activities on minority populations and lowincome populations in the United States. 

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Assuming that our baseline for this RIA does not include implementation of the final 

2010 SI RICE rule, as we state earlier in this document, EPA has determined that this final rule 

will not have disproportionately high and adverse human health or environmental effects on 

minority or low-income populations because it increases the level of environmental protection 

for all affected populations without having any disproportionately high and adverse human 

health or environmental effects on any population, including any minority or low-income 

population. This rule is a nationwide standard that reduces air toxics emissions from existing 

stationary SI engines, thus decreasing the amount of such emissions to which all affected 

populations are exposed. 

5.7 Employment Impact Analysis 

In addition to addressing the costs and benefits of the reconsideration rule, EPA has 

analyzed the impacts of this rulemaking on employment, which are presented in this section. 

While a standalone analysis of employment impacts is not included in a standard cost-benefit 

analysis, such an analysis is of particular concern in the current economic climate of sustained 

high unemployment. Executive Order 13563, states, “Our regulatory system must protect public 

health, welfare, safety, and our environment while promoting economic growth, innovation, 

competitiveness, and job creation” (emphasis added). Therefore, and consistent with recent 

efforts to characterize the employment effects of economically significant rules, the Agency has 

provided this analysis to inform the discussion of labor demand and employment impacts. 

This employment impact analysis includes estimates of certain short-term and on-going 

labor requirements (increase in labor demand) associated with reporting and recordkeeping, and 

the installation, operating and maintenance of control devices. EPA estimates that about 200 

full-time equivalents (FTE) will be created or supported in the short-term and about 400 FTEs 

will be created or supported annually on a permanent basis. EPA also provides a qualitative 

discussion of other potential employment effects, including both increases and decreases. 

Because of the uncertainties involved, these sets of estimates should not be added in an attempt 

to characterize the overall employment effect.

We have not quantified the rule’s net effects on the overall labor market, or the potential 

changes to workers’ incomes. EPA continues to explore the relevant theoretical and empirical 

literature and to seek public comments in order to ensure that such estimates are as accurate, 

useful and informative as possible. 

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From an economic perspective, labor is an input into producing goods and services; if 

regulation requires that more labor be used to produce a given amount of output, that additional 

labor is reflected in an increase in the cost of production.11 When an increase in employment 

occurs as a result of a regulation, it is a cost to firms. Moreover, when the economy is at full 

employment, we would not expect an environmental regulation to have an impact on overall 

employment because labor is being shifted from one sector to another. On the other hand, in 

periods of high unemployment, an increase in labor demand due to regulation may result in a 

short-term net increase in overall employment due to the potential hiring of previously 

unemployed workers by the regulated sector to help meet new requirements (e.g., to install new 

equipment) or by the environmental protection sector to produce new abatement capital. When 

significant numbers of workers are unemployed, the opportunity costs associated with displacing 

jobs in other sectors are likely to be smaller. To provide a partial picture of the employment 

consequences of this final rule, EPA takes two approaches. First, EPA uses information such as 

monitoring, recordkeeping, and reporting estimates derived from its cost analysis documentation 

to generate estimates of employment impacts. Second, the analysis considers the results of 

Morgenstern, Pizer, and Shih (2002) in estimating the effects of the regulation on the regulated 

industry. This approach has been used by EPA previously in recent Regulatory Impact Analyses. 

EPA is interested in public comments on the merits of including information derived in this 

fashion for assessing the employment consequences of regulations. 

 5.7.1 Employment Impacts from Pollution Control Requirements 

Regulations set in motion new orders for pollution control equipment and services. When 

a new regulation is promulgated, one typical response of industry is to order pollution control 

equipment and services in order to comply with the regulation when it becomes effective, while 

closure of plants that choose not to comply is assumed to occur after the compliance date. With 

such a response by industry as a basis, this section presents estimates for short term labor 

requirement needed associated with the monitoring, recordkeeping, and reporting requirements 

for this rule. Environmental regulation may increase revenue and employment in the 

environmental technology industry. While these increases represent gains for that industry, they 

are costs to the regulated industries required to install the equipment. As with any pool of labor, 

 

11 It should be noted that if more labor must be used to produce a given amount of output, then this implies a 

decrease in labor productivity. A decrease in labor productivity will cause a short-run aggregate supply curve to 

shift to the left, and businesses will produce less, all other things being equal. 

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the gross size of the labor pool does not reflect the net impact on overall employment after 

adjusting for shifts in other sectors. 

Regulated firms may hire workers to design and build pollution controls. Once the 

equipment is installed, regulated firms may hire workers to operate and maintain the pollution 

control equipment – much like they may hire workers to produce more output. Of course, these 

firms may also reassign existing employees to do these activities. A study including an analysis 

of environmental protection employment in six U.S. states in 2003 by Bezdek, Wendling, and 

DiPernab (2008) found that “investments in environmental protection create jobs and displace 

jobs, but the net effect on employment is positive.”12 

Once the equipment is installed, regulated firms may hire workers to operate and maintain the 

pollution control equipment – much like they may hire workers to produce more output. The 

focus of this part of the analysis is on labor requirements related to the compliance actions of the 

affected entities within the affected sector. The employment analysis uses a bottom-up 

engineering-based methodology to estimate employment impacts. The engineering cost analysis 

summarized in Section 4 of this RIA includes estimates of the labor requirements associated with 

implementing the regulations. Each of these labor changes may either be required as part of an 

initial effort to comply with the new regulation or required as a continuous or annual effort to 

maintain compliance. We estimate up-front and continual, annual labor requirements by 

estimating hours of labor required and converting this number to full-time equivalents (FTEs) by 

dividing by 2,080 (40 hours per week multiplied by 52 weeks). We note that this type of FTE 

estimate cannot be used to make assumptions about the specific number of people involved or 

whether new jobs are created for new employees. 

The results of this employment estimate are presented in Table 5-5 for the final 

reconsideration NESHAP. The tables breaks down the installation, operation, and maintenance 

estimates by type of pollution control evaluated in the RIA and present both the estimated hours 

required and the conversion of this estimate to FTE. For the final NESHAP, reporting and 

recordkeeping requirements were estimated requirements were estimated for the entire rule 

rather than by anticipated control requirements; the reporting and recordkeeping estimates are 

consistent with estimates EPA submitted as part of its Information Collection Request (ICR) that 

is in the Supporting Statement for the reconsideration rule. 

 

12 Environmental protection, the economy, and jobs: National and regional analyses, Roger H. Bezdek, Robert M. 

Wendling and Paula DiPerna, Journal of Environmental Management Volume 86, Issue 1, January 2008, Pages 

63-79. 

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The up-front labor requirement is estimated at 200 FTEs for the final reconsidered 

NESHAP. These up-front FTE labor requirements can be viewed as short-term labor 

requirements required for affected entities to comply with the new regulation. Ongoing 

requirements are estimated at about 400 FTEs for the final reconsidered NESHAP. These 

ongoing FTE labor requirements can be viewed as sustained labor requirements required for 

affected entities to continuously comply with the new regulation. All of this data is found in the 

cost memorandum for this reconsidered rule, and can be found in the docket for the rulemaking. 

It is important to recognize that these seemingly precise estimates are not to be assumed to be 

exact measures of the employment impacts of this rulemaking. They represent a rough 

approximation of the small positive impacts that this rule may have on employment. 

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Table 5-5. Labor-based Employment Estimates for Reporting and Recordkeeping and 

Installing, Operating, and Maintaining Control Equipment Requirements for the Final 

Reconsideration SI RICE NESHAP 

Source 

Emission 

Control 

Measure 

Projected 

No. of 

Affected 

Units 

Per-Unit 

One-Time 

Labor 

Estimate 

(Hours) 

Total OneTime 

Labor 

Estimate 

(Hours) 

Per-Unit 

Annual 

Labor 

Estimate 

(Hours) 

Total 

Annual 

Labor 

Estimate 

(Hours) 

One-Time 

Full-Time 

Equivalent 

Annual 

Full-Time 

Equivalent 

Major Sources 

SI RICE <100 HP 

N/A 70,798 N/A N/A 1 70,798 N/A 34 -O&M/ Recordkeeping 

2SLB RICE 100-500 HP 

N/A 7,398 N/A N/A 

N/A 

92,480 N/A 34 

-O&M/ Recordkeeping 1 

-Testing 8 

-Reporting 3.5 

Emergency 4SRB SI 

RICE 100-500 HP N/A 1,597 N/A N/A 1 1,597 N/A 0.77 

Non-Emergency 4SRB 

SI RICE 100-500 HP 

N/A 12,740 N/A N/A 

N/A 

-Testing 146,515 N/A 70 8 

-Reporting 3.5 

4SLB SI RICE 100-500 

HP Oxidation 

Catalyst 14,257 21 300,255 

15 

-Testing 163,956 144 34 8 

-Reporting 3.5 

 

Area Sources 

All SI RICE 

N/A 228,318 N/A N/A 1 228,318 N/A 110 -O&M/Recordkeeping 

Non-Emergency 4SLB 

SI RICE >500 HP in 

Populated Areas Oxidation 

Catalyst 768 37 28,117 

15 

15,734 14 7.56 -Testing 2 

-Reporting 3.5 

Non-Emergency 4SRB 

SI RICE >500 HP in 

Populated Areas NSCR 578 86 49,918 

33 

22,236 24 10.69 -Testing 2 

-Reporting 3.5 

Total 144 378,290 113 741,633 182 357 

Note: Full-time equivalents (FTE) are estimated by first multiplying the projected number of affected units by the 

per unit labor requirements and then dividing by 2,080 (40 hours multiplied by 52 weeks). Totals may not sum due 

to independent rounding. 

HP = horsepower 

N/A = Not Applicable. 

O&M = Operating and Maintenance 

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5.7.2 Employment Impacts within the Regulated Industry 

In recent RIAs we have applied estimates from a study by Morgenstern, Pizer and Shih 

(2002)1 to derive the employment effects of new regulations within the regulated industry. (See, 

for example, the Regulatory Impact Analyses for the recent final MATS and final CSAPR 

regulations). Determining the direction of employment effects in the regulated industry is also 

challenging due to competing effects. Complying with the new or more stringent regulation 

requires additional inputs, including labor, and may alter the relative proportions of labor and 

capital used by regulated firms in their production processes. Morgenstern, et al. (2002) 

demonstrate that environmental regulations can be understood as requiring regulated firms to add 

a new output (environmental quality) to their product mixes. Although legally compelled to 

satisfy this new demand, regulated firms have to finance this additional production with the 

proceeds of sales of their other (market) products. Satisfying this new demand requires additional 

inputs, including labor, and may alter the relative proportions of labor and capital used by 

regulated firms in their production processes. 

More specifically, Morgenstern, Pizer, and Shih (2002) decompose the effect of 

regulation on net employment in the regulated sector into the following three subcomponents:

 The Demand Effect: higher production costs from complying with the regulation will 

raise market prices, reducing consumption (and production), thereby reducing 

demand for labor within the regulated industry. The “extent of this effect depends on 

the cost increase passed on to consumers as well as the demand elasticity of industry 

output.” (p. 416) 

 The Cost Effect: Assuming that the capital/labor ratio in the production process is 

held fixed, as “production costs rise, more inputs, including labor, are used to produce 

the same amount of output,” (p. 416). For example, to reduce pollutant emissions 

while holding output levels constant, regulated firms may require additional labor. 

 

1 Morgenstern, R. D., W. A. Pizer, and J. S. Shih. 2002. Jobs versus the Environment: An Industry-Level 

Perspective.‖ Journal of Environmental Economics and Management 43(3):412-436. 

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 The Factor-Shift Effect: Regulated firms’ production technologies may be more or 

less labor intensive after complying with the regulation (i.e., more/less labor is 

required relative to capital per dollar of output). “Environmental activities may be 

more labor intensive than conventional production,” meaning that “the amount of 

labor per dollar of output will rise.” However, activities may, instead, be less labor 

intensive because “cleaner operations could involve automation and less employment, 

for example.” (p. 416) 

The demand effect is expected to have an unambiguously negative effect on employment, 

the cost effect to have an unambiguously positive effect on employment, and the factor-shift 

effect to have an ambiguous effect on employment. Without more information with respect to 

the magnitudes of these three competing effects, it is not possible to predict the net 

environmental employment effect in the regulated sector. 

Using plant-level Census information between the years 1979 and 1991, Morgenstern et 

al. estimate the effects of pollution abatement expenditures on net employment in four highly 

polluting/regulated sectors (pulp and paper, plastics, steel, and petroleum refining). They 

conclude that increased abatement expenditures generally have not caused a significant change in 

net employment in those sectors. More specifically, their results show that, on average across the 

industries studied, each additional $1 million (in 1987$) spent on pollution abatement results in a 

(statistically insignificant) net increase of 1.55 (+/- 2.24) jobs. As a result, the authors conclude 

that increases in pollution abatement expenditures can have positive effects on employment and 

do not necessarily cause economically significant employment changes. The conclusion is 

similar to Berman and Bui (2001), who found that increased air quality regulation in Los 

Angeles did not cause large employment changes. 

Ideally, the EPA would first apply the methodology of Morgenstern et al. to current 

pollution expenditure and market data for the regulated firms to identify the relationship between 

abatement costs and employment, then use this relationship to extrapolate the effect of new 

projected abatement costs on these firms. Unfortunately, current firm-level abatement cost and 

market characteristics are not available. In addition, there are important differences in the 

markets and regulatory settings analyzed in their study and the setting presented here that lead us 

to conclude that it is inappropriate to utilize their quantitative estimates to estimate the 

employment impacts from this reconsideration rule. The differences between the underlying 

regulations motivating the abatement expenditures studied in Morgenstern et al. are potentially 

too many to allow for the direct transfer of their quantitative estimates for use in analysis of the 

final rule. There are also important differences between the industries affected by this final rule 

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and the four manufacturing industries studied by Morgenstern et al. For these reasons, we 

conclude there are too many uncertainties as to the comparability of the Morgenstern et al. study 

to apply their estimates to quantify the employment impacts within the regulated sector for this 

regulation. 

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Section 6

SMALL ENTITY SCREENING ANALYSIS 

The Regulatory Flexibility Act as amended by the Small Business Regulatory 

Enforcement Fairness Act (SBREFA) 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 agency certifies that the rule will 

not have a significant economic impact on a substantial number of small entities. Small entities 

include small businesses, small governmental jurisdictions, and small not-for-profit enterprises. 

After considering the economic impact of the rule on small entities, the screening 

analysis indicates that this rule will not have a significant economic impact on a substantial 

number of small entities (or “SISNOSE”). Under the analyses EPA considered, sales and 

revenue tests for establishments owned by model small entities are less than 1% except electric 

power generation (NAICS 2211 with receipts less than $100,000 per year) and crop and animal 

production (NAICS 111 and 112 with receipts less than $25,000 per year). These findings are 

similar to those for the final SI RICE rule promulgated in August 2010, though the impacts are 

lower due to the reduction in the cost estimates for these industries. 

6.1 Small Entity Data Set 

The industry sectors covered by the final rule were identified during the development of 

the cost analysis (EC/R, 2012). The Statistics of United States Business (SUSB) provides 

national information on the distribution of economic variables by industry and enterprise size 

(U.S. Census, 2012a, b).1

 The Census Bureau and the Office of Advocacy of the SBA supported 

and developed these files for use in a broad range of economic analyses.2 Statistics include the 

total number of establishments and receipts for all entities in an industry; however, many of these 

entities may not necessarily be covered by the final rule. SUSB also provides statistics by 

enterprise employment and receipt size. 

The Census Bureau’s definitions used in the SUSB are as follows: 

 Establishment: An establishment is a single physical location where business is 

conducted or where services or industrial operations are performed. 

 

1

The SUSB data do not provide establishment information for the national security NAICS code (92811) or irrigated 

farms. Since most national security installations are owned by the federal government (e.g., military bases), EPA 

assumes these entities would not be considered small. For irrigated farms, we relied on receipt data provided in 

the 2008 Farm and Irrigation Survey (USDA, 2009). 2

See http://www.census.gov/csd/susb/ and http://www.sba.gov/advo/research/data.html for additional details. 

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 Receipts: Receipts (net of taxes) are defined as the revenue for goods produced, 

distributed, or services provided, including revenue earned from premiums, 

commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all 

revenue collected for local, state, and federal taxes. 

 Enterprise: An enterprise is a business organization consisting of one or more 

domestic establishments that were specified under common ownership or control. The 

enterprise and the establishment are the same for single-establishment firms. Each 

multiestablishment company forms one enterprise—the enterprise employment and 

annual payroll are summed from the associated establishments. Enterprise size 

designations are determined by the summed employment of all associated 

establishments. 

Because the SBA’s business size definitions (SBA, 2010) apply to an establishment’s 

“ultimate parent company,” we assumed in this analysis that the “enterprise” definition above is 

consistent with the concept of ultimate parent company that is typically used for SBREFA 

screening analyses and the terms are used interchangeably. 

6.2 Small Entity Economic Impact Measures 

The analysis generated a set of establishment sales tests (represented as cost-to-receipt 

ratios)3

 for NAICS codes associated with sectors listed in Table 6-1. Although the appropriate 

SBA size definition should be applied at the parent company (enterprise) level, we can only 

compute and compare ratios for a model establishment owned by an enterprise within an SUSB 

size range (employment or receipts). Using the SUSB size range helps us account for receipt 

differences between establishments owned by large and small enterprises and also allows us to 

consider the variation in small business definitions across affected industries. Using 

establishment receipts is also a conservative approach, because an establishment’s parent 

company (the “enterprise”) may have other economic resources that could be used to cover the 

costs of the final rule. 

6.2.1 Model Establishment Receipts and Annual Compliance Costs 

The sales test compares a representative establishment’s total annual engine costs to the 

average establishment receipts for enterprises in several size categories.4

 For industries with SBA 

 

3

The following metrics for other small entity economic impact measures (if applicable) would potentially include 

• small governments (if applicable): “revenue” test; annualized compliance cost as a percentage of annual 

government revenues and 

• small nonprofits (if applicable): “expenditure” test; annualized compliance cost as a percentage of annual 

operating expenses, 4

For the 1 to 20 employee category, we excluded SUSB data for enterprises with zero employees. These enterprises 

did not operate the entire year. 
6-3 

employment size standards, we calculated average establishment receipts for each enterprise 

employment range (Table 6-2).5

 For industries with SBA receipt size standards, we calculated 

Table 6-1. SI NESHAP for Existing Stationary Reciprocating Internal Combustion 

Engines (RICE): Affected Sectors and SBA Small Business Size Standards 

Industry Description 

Corresponding 

NAICS 

SBA Size Standard for 

Businesses (January 7, 2013) 

Type of Small 

Entity 

Electric Power Generation 2211 a Business and 

government 

Natural Gas Transmission 48621 $7.0 million in annual receipts Business 

Crude Petroleum & NG Production 211111 500 employees Business 

Natural Gas Liquid Producers 211112 500 employees Business 

National Security 92811 NA Government 

Hydro Power Units See NAICS 2211 1,000 employees Business and 

government 

Irrigation Sets Affects NAICS 111 and 

112 

Generally $750,000 or less in 

annual receipts 

Business 

Welders Affects industries that 

use heavy equipment 

such as construction, 

mining, farming 

Varies by 6-digit NAICS code; Business 

Example industry: 

NAICS 238 = $14 million in 

annual receipts 

a

NAICS codes 221111, 221112, 221113, 221119, 221121, 221122: 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 output for the preceding fiscal year did not exceed 4 million megawatt hours. Source: U.S. Small 

Business Administration (SBA). 2013. “Table of Small Business Size Standards Matched to North American 

Industry Classification System Codes.” Effective January 7th, 2013. Downloaded 1/7/13. 

average establishment receipts for each enterprise receipt range (Table 6-3). We included the 

utility sector in the second group, although the SBA size standard for this industry is defined in 

terms of physical units (megawatt hours) versus receipts. Crop and animal production (NAICS 

111 and 112) also have an SBA receipt size standard that defines a small business as receiving 

$750,000 or less in receipts per year. However, SUSB data were not available for these 

industries. Therefore, we conducted the sales test using the following range of establishment 

receipts: farms with annual receipts of $25,000 or less, farms with annual receipts of $100,000 or 

less, farms with annual receipts of $500,000 or less, and farms with annual receipts of $750,000 

or less. 

 

5

 2007 Economic Census data are at http://www.census.gov/econ/census07/. 

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Table 6-2. Average Receipts for Affected Industry by Enterprise: 2009 ($2009 Million/Establishment) 

SBA Size 

Standard 

for Businesses 

(effective 

January 7, 2013)

Owned By Enterprises with Employee Range: 

NAICS NAICS Description 

All 

Enterprises 

1–20 

Employees 

20–99 

Employees 

100–499 

Employees 

500+ 

Employees 

211111 Crude petroleum & 

natural gas extraction 

500 employees $30.22 $2.15 $33.02 $151,76 1,570 

211112 Natural gas liquid 

extraction 

500 employees $172.81 $0.30 NA $11.88 NA 

335312 Motor & generator mfg 1,000 employees $18.58 $1.37 $6.14 $15.96 $29.47 333992 Welding & soldering 

equipment mfg 

500 employees $18.51 $1.56 $6.60 $33.25 NA 

Source: U.S. Census Bureau. 2012a. “Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 2009.”

<http://www.census.gov/csd/susb/ Downloaded 2/22/12. 

NA = Not available. 
5

Table 6-3. Average Receipts for Affected Industry by Enterprise Receipt Range: 2007 ($2008 /establishment) 

SBA Size Standard 

for Businesses 

(effective January 7, 

2013)

Owned By Enterprises with Receipt Range: 

NAICS NAICS Description 

All 

Enterprises 

0–99K 

Receipts

100–

499.9K 

Receipts

500–

999.9K

Receipts

1,000–

4,999.9K 

Receipts 

5,000,000–

9,999,999K 

Receipts 

<10,000K 

Receipts 

10,000–

49,999K 

Receipts

50,000–

99,999K 

Receipts

100,000K+ 

Receipts 

2211 Electric Power 

Generation 

a $261.0 $31.2 $272.5 $724.9 $2,399.5 $7,330.5 $2,617.7 $24,786.

9 

$67,706.

8 

$1,394,051

.0 

622110 General Medical and 

Surgical Hospitals 

$35.5 million in annual receipts 

$202,058.7 NA $23.82 NA $3,255.0 $7,291.0 $4,692.1 $23,481.

9 

$67,545,

6 

$508,705.8

237310 Highway , street, and 

bride construction 

$33.5 million in Annual Receipts 

$7.74 $0.06 $0.32 $0.84 $2.74 $8.11 $2.00 $22.62 $56.48 $56.81 

237110 Water and sewer line 

and related structures, construction 

$33.5 million in Annual Receipts 

$3.89 $0.06 $0.32 $0.85 $2.73 $8.17 $1.84 $20.62 $45.05 $47.27 

237130 Power and

communication line and related structures construction 

$33.5 million in Annual Receipts 

$3.39 $0.06 $0.31 $0.83 $2.52 $7.75 $1.32 $16.84 $34.50 $23.86 

237990 Other heavy and civil 

engineering construction 

$33.5 million in Annual Receipts 

$2.66 $0.06 $0.30 $0.83 $2.48 $7.76 $0.99 $18.72 $40.53 $42.35 

92811 National Security NA NA NA NA NA NA NA NA NA NA NA 

Notes: Industries in green were included for consistency with the analysis done for final rule. National Security is included in this table but does not have size 

standards. 

a NAICS codes 221111, 221112, 221113, 221119, 221121, 221122: A firm in these industries is defined as small by SBA if, including its affiliates, it is 

primarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the preceding fiscal year did not exceed 4 million megawatt hours. 

NA = Not available. SUSB did not report this data for disclosure or other reasons. 

Source: U.S. Census Bureau. 2009a. “Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 2009.”

<http://www.census.gov/csd/susb/ 
6-13 

Annual entity compliance costs vary depending on the size of the SI engines used at the 

affected establishment. Absent facility-specific information, we computed per-entity compliance 

costs based for three different cases based on representative establishments—Cases 1, 2, and 3 

(see Table 6-4). Each representative establishment differs based on the size and number of SI 

engines being used. Compliance costs are calculated by summing the total annualized 

compliance costs for the relevant engine categories, dividing the sum by the total existing 

population of those engines, and multiplying the average engine cost by the number of engines 

assumed to be at the establishment. Since NAICS 2211 and 48621 are fundamentally different 

than other industries considered in this analysis due to the number of engines affected and 

amount of cost incurred resulting from this final rule, we used different assumptions about what 

constitutes the representative establishment and report these assumptions separately. 

 Case 1: The representative establishment for all industries uses three 750+ hp engines 

with an average compliance cost of $680 to $730 per engine, resulting in a total 

annualized compliance cost of approximately $2,040 to $2,200 for this representative 

establishment. 

 Case 2: The representative establishment in NACIS 2211 and 48621 uses two 25 to 

750+ hp engines with an average compliance cost of $412 per engine, resulting in a 

total annualized compliance cost of $824 for this representative establishment. For all 

other industries, the representative establishment uses two 25 to 300 hp engines with 

an average compliance cost of $246 per engine, resulting in a total compliance cost of 

$492 for this representative establishment. 

 Case 3: The representative establishment for all industries uses two 50 to 100 hp 

engines with an average compliance cost of $73 per engine, resulting in a total 

compliance cost of $145 for this representative establishment. 

EPA believes that small entities are most likely to face costs similar to Case 2 (columns 

shaded in gray in Table 6-4) because most of the engines to be affected by this final rule in 

NAICS 335312, 333992, 211111, and 211112 are under 300 hp capacity, and most small entities 

in these industries will own engines of this size or smaller. This is corroborated by Figure 6-1 

and 6-2 which shows the distribution of engine population and compliance costs by engine size 

for all industries. However, it is difficult to make a similar claim for NAICS 2211 and 48621 

based on the existing distribution of engines in these industries.6

 

6

This claim also cannot be made for NAICS 92811: National Security. However, since most national security 

installations are owned by the federal government (e.g., military bases), EPA assumes these entities would not be 

considered small. 

Deleted: proposed

Deleted: proposed
6-13 

For the sales test, we divided the representative establishment compliance costs reported 

in Table 6-4 by the representative establishment receipts reported in Tables 6-2 and 6-3. This is 

known as the cost-to-receipt (i.e., sales) ratio, or the “sales test.” The “sales test” is the impact 

Table 6-4. Representative Establishment Costs Used for Small Entity Analysis ($2009) 

 Case 1 Case 2 Case 3 

 

NAICS 

2211, 48621 

(+750 hp 

only) 

All Other 

NAICS 

(+750 hp 

only) 

NAICS 

2211,48621 

(25-750+ 

hp) 

All Other 

NAICS 

(25–300 

hp) 

NAICS 

2211, 

48621 

(25–100 

hp only) 

All Other 

NAICS 

(25–100 

hp only) 

Total Annualized Costs ($) $7,710,388 $586,434 $82,806,141 $28,057,798 $8,510,985 $6,174,805 

Engine Population 10,548 863 200,974 114,517 117,040 84,913 

Average Engine Cost 

($/engine) $731 $680 $412 $246 $73 $73 

Assumed Engines Per 

Establishment 3 3 2 2 2 2 

Total Annualized Costs per 

Establishment $2,193 $2,040 $824 $492 $145 $145 
6-13 

Figure 6-1. Distribution of Engine Population by Size for All Industries 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Electric Power

Generation

(2211)

Natural Gas

Transmission

(48621)

Crude Petroleum

&NG Production

(211111)

Natural Gas

Liquid Producers

(211112)

National Security

(92811)

Hydro Power

Units (335312)

Irrigation Sets

(335312)

Welders

(333992)

>750 hp

600‐750 hp

500‐600 hp

300‐500 hp

175‐300 hp

100‐175 hp

50‐100 hp

25‐50 hp
6-13 

Figure 6-2. Distribution of Compliance Costs by Engine Size for All Industries 

methodology EPA employs in analyzing small entity impacts as opposed to a “profits test,” in 

which annualized compliance costs are calculated as a share of profits. 

This is because revenues or sales data are commonly available data for entities normally 

impacted by EPA regulations and profits data normally made available are often not the true 

profit earned by firms because of accounting and tax considerations. Revenues as typically 

published are usually correct figures and are more reliably reported when compared to profit 

data. The use of a “sales test” for estimating small business impacts for a rulemaking such as this 

one is consistent with guidance offered by EPA on compliance with SBREFA7

 and is consistent 

with guidance published by the U.S. SBA’s Office of Advocacy that suggests that cost as a 

percentage of total revenues is a metric for evaluating cost increases on small entities in relation 

to increases on large entities.8

 

7

The SBREFA compliance guidance to EPA rulewriters regarding the types of small business analysis that should be 

considered can be found at http://www.epa.gov/sbrefa/documents/rfafinalguidance06.pdf, pp. 24-25. 8

U.S. SBA, Office of Advocacy. A Guide for Government Agencies, How to Comply with the Regulatory 

Flexibility Act, Implementing the President’s Small Business Agenda and Executive Order 13272, May 2003. 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Electric Power

Generation

(2211)

Natural Gas

Transmission

(48621)

Crude Petroleum

&NG Production

(211111)

Natural Gas

Liquid Producers

(211112)

National Security

(92811)

Hydro Power

Units (335312)

Irrigation Sets

(335312)

Welders

(333992)

>750 hp

600‐750 hp

500‐600 hp

300‐500 hp

175‐300 hp

100‐175 hp

50‐100 hp

25‐50 hp
6-13 

If the cost-to-receipt ratio is less than 1%, then we consider the rule to not have a 

significant impact on the establishment company in question. We summarize the industries with 

cost-to-receipt ratios exceeding 1% below: 

Primary Analysis: 

 Case 2: NAICS 2211 with receipts less than $100,000 per year and NAICS 111 and 

112 with receipts less than $25,000 per year 

 Case 3: No industries 

Sensitivity Analysis (unlikely): 

 Case 1: NAICS 2211 with receipts less than $100,000 per year 

In the Case 2 primary analysis, only establishments in NAICS 2211 with receipts less 

than $100,000 per year (less than 5 percent of the total), and establishments in NAICS 111 and 

112 with receipts less than $25,000 per year (around 30 percent of the total) have cost-to-receipt 

ratios above 1%. However, establishments earning this level of receipts are likely to be using 

smaller engines than those assumed in Case 2, such as 25 to 300 hp engines. The results of our 

Case 3 analysis demonstrate that these establishments are not significantly impacted when taking 

this engine size into account. 

After considering the economic impacts of this rule on small entities, we certify that this 

action will not have a significant economic impact on a substantial number of small entities. 

This certification is based on the economic impact of this final action to all affected small entities 

across all industries affected. The percentage of small entities impacted by this final rule having 

annualized costs greater than 1 percent of sales is less than 2 percent according to this analysis. 

We thus conclude that there is no significant economic impact on a substantial number of small 

entities (SISNOSE) for this final rule. 

Although the final rule would not have a significant economic impact on a substantial 

number of small entities, EPA nonetheless tried to reduce the impact of the rule on small entities. 

When developing the reconsidered standards, EPA took special steps to ensure that the burdens 

imposed on small entities were minimal. EPA conducted several meetings with industry trade 

associations to discuss regulatory options and the corresponding burden on industry, such as 

recordkeeping and reporting. In addition, as mentioned earlier in this preamble, EPA’s final 

action reduces regulatory requirements for a variety of area sources affected under this RICE rule 

with amendments to the final RICE rules promulgated in 2010. 

Deleted: proposed 

Deleted: proposed

Deleted: proposal

Deleted: proposal

Deleted: proposed

Deleted: proposed

Deleted: vised

Deleted: proposes to

Deleted: We continue to be interested in 

the potential impacts of this proposed rule 

on small entities and welcome comments 

on issues related to such impacts.
6-13 

6.3 Small Government Entities 

The rule also covers sectors that include entities owned by small and large governments. 

However, given the uncertainty and data limitations associated with identifying and 

appropriately classifying these entities, we computed a “revenue” test for a model small 

government, where the annualized compliance cost is a percentage of annual government 

revenues (U.S. Census, 2005a, b). The use of a “revenue test” for estimating impacts to small 

governments for a rulemaking such as this one is consistent with guidance offered by EPA on 

compliance with SBREFA,9

 and is consistent with guidance published by the US SBA’s Office 

of Advocacy.10 For example, from the 2007 Census (in 2008 dollars), the average revenue for 

small governments (counties and municipalities) with populations fewer than 10,000 is $4 

million per entity, and the average revenue for local governments with populations fewer than 

50,000 is $9 million per entity (U.S. Census Bureau, 2009a; U.S. Census Bureau, 2009b). For the 

smallest group of local governments (<10,000 people), the cost-to-revenue ratio would be 0.2% 

or less under each case. For the larger group of governments (<50,000 people), the cost-torevenue ratio is 0.1% or less under all cases. 

 

9

The SBREFA compliance guidance to EPA rule writers regarding the types of small business analysis that should 

be considered can be found at http://www.epa.gov/sbrefa/documents/rfafinalguidance06.pdf, pp. 24-25. 10U.S. SBA, Office of Advocacy. A Guide for Government Agencies, How to Comply with the Regulatory 

Flexibility Act, Implementing the President’s Small Business Agenda and Executive Order 13272, May 2003. 

7-32 

Section 7

HUMAN HEALTH BENEFITS OF EMISSIONS REDUCTIONS 

Synopsis 

Implementation of emissions controls required by the final SI RICE NESHAP 

reconsideration is expected to reduce emissions of hazardous air pollutants (HAP) and have 

ancillary co-benefits that would lower ambient concentrations of NO2, PM2.5 and ozone. In this 

section, we quantify the monetized co-benefits for this rule associated with reducing exposure to 

ambient fine particulate matter (PM2.5) by reducing emissions of precursors. We estimate the 

total monetized co-benefits to be $62 million to $150 million at a 3% discount rate and $55 

million to $140 million at a 7% discount rate in 2013. All estimates are in 2010$. These 

estimates reflect the monetized human health benefits of reducing cases of morbidity and 

premature mortality among populations exposed to PM2.5 reduced by this rule. These estimates 

reflect EPA’s most current interpretation of the scientific literature. Higher or lower estimates of 

benefits are possible using other assumptions; examples of this are provided in Figure 7-2. Data, 

resource, and methodological limitations prevented EPA from monetizing the benefits from 

several important benefit categories, including benefits from reducing exposure to HAP, carbon 

monoxide, NO2 and ozone, as well as ecosystem effects and visibility impairment. In addition to 

reducing emissions of PM precursors such as NOx, this rule would reduce 1,800 tons of HAP and 

22,000 tons of carbon monoxide each year.

7.1 Calculation of PM2.5-Related Human Health Co-Benefits 

Assuming that our baseline does not include implementation of the 2010 final SI RICE 

rule, as we state earlier in this RIA, this final reconsideration NESHAP would reduce emissions 

of NOX, and VOCs. Because these emissions are precursors to PM2.5, reducing these emissions 

would also reduce PM2.5 formation, human exposure and the incidence of PM2.5-related health 

effects. Due to analytical limitations, it was not possible to provide a comprehensive estimate of 

PM2.5-related benefits or provide estimates of the health benefits associated with exposure to 

HAP, CO, NO2 or ozone. Instead, we used the “benefit-per-ton” approach to estimate these 

benefits. The methodology employed in this analysis is similar to the work described in Fann, 

Fulcher, and Hubbell (2009), but represents an improvement that EPA believes would provide 

more reliable estimates of PM2.5-related health benefits for emissions reductions in specific 

sectors. The key assumptions are described in detail below. These PM2.5 benefit-per-ton 

estimates provide the total monetized human health benefits (the sum of premature mortality and 

Deleted: proposed 

Deleted: proposed
7-32 

premature morbidity) of reducing one ton of PM2.5 from a specified source. EPA has used the 

benefit per-ton technique in several previous RIAs, including the recent SO2 NAAQS RIA (U.S. 

EPA, 2010). 

The Integrated Science Assessment (ISA) for Particulate Matter (U.S. EPA, 2009b) 

identified the human health effects associated with ambient PM2.5, which include premature 

morality and a variety of morbidity effects associated with acute and chronic exposures. Table 7-

1 shows the quantified and unquantified benefits captured in those benefit-per-ton estimates, but 

this table does not include entries for the unquantified health effects associated with exposure to 

ozone and NO2 nor welfare effects such as ecosystem effects and visibility impairment that are 

described in section 7.2. It is important to emphasize that the list of unquantified benefit 

categories is not exhaustive, nor is quantification of each effect complete. 
7-32 

Table 7-1: Human Health Effects of PM2.5 

Category Specific Effect 

Effect Has 

Been 

Quantified 

Effect Has 

Been 

Monetized 

More 

Information 

(refers to 

CSAPR RIA) 

Improved Human Health 

Reduced incidence of 

premature mortality 

from exposure to PM2.5

Adult premature mortality based on cohort 

study estimates and expert elicitation 

estimates (age >25 or age >30) 

  Section 5.4 

Infant mortality (age <1)   Section 5.4 

Reduced incidence of 

morbidity from 

exposure to PM2.5

Non-fatal heart attacks (age > 18)   Section 5.4 

Hospital admissions—respiratory (all 

ages)   Section 5.4 

Hospital admissions—cardiovascular (age 

>20)   Section 5.4 

Emergency room visits for asthma (all 

ages)   Section 5.4 

Acute bronchitis (age 8-12)   Section 5.4 

Lower respiratory symptoms (age 7-14)   Section 5.4 

Upper respiratory symptoms (asthmatics 

age 9-11)   Section 5.4 

Asthma exacerbation (asthmatics age 6-

18)   Section 5.4 

Lost work days (age 18-65)   Section 5.4 

Minor restricted-activity days (age 18-65)   Section 5.4 

Chronic Bronchitis (age >26)   Section 5.4 

Emergency room visits for cardiovascular 

effects (all ages) -- -- Section 5.4 

Strokes and cerebrovascular disease (age 

50-79) -- -- Section 5.4 

Other cardiovascular effects (e.g., other 

ages) -- -- PM ISA2

Other respiratory effects (e.g., pulmonary 

function, non-asthma ER visits, nonbronchitis chronic diseases, other ages and 

populations) 

-- -- PM ISA2

Reproductive and developmental effects 

(e.g., low birth weight, pre-term births, 

etc) 

-- -- PM ISA2,3

Cancer, mutagenicity, and genotoxicity 

effects -- -- PM ISA2,3

1 We assess these benefits qualitatively due to time and resource limitations for this analysis. 2

 We assess these benefits qualitatively because we do not have sufficient confidence in available data or methods. 3

 We assess these benefits qualitatively because current evidence is only suggestive of causality or there are other 

significant concerns over the strength of the association. 

Consistent with the Portland Cement NESHAP (U.S. EPA, 2009a), the benefits estimates 

utilize the concentration-response functions as reported in the epidemiology literature, as well as 

the 12 functions obtained in EPA’s expert elicitation study as a sensitivity analysis. 
7-32 

 One estimate is based on the concentration-response (C-R) function developed from 

the extended analysis of American Cancer Society (ACS) cohort, as reported in Pope 

et al. (2002), a study that EPA has previously used to generate its primary benefits 

estimate. When calculating the estimate, EPA applied the effect coefficient as 

reported in the study without an adjustment for assumed concentration threshold of 10 

μg/m3

 as was done in recent (2006-2009) Office of Air and Radiation RIAs. 

 One estimate is based on the C-R function developed from the extended analysis of 

the Harvard Six Cities cohort, as reported by Laden et al (2006). This study, 

published after the completion of the Staff Paper for the 2006 PM2.5 NAAQS, has 

been used as an alternative estimate in the PM2.5 NAAQS RIA and PM2.5 benefits 

estimates in RIAs completed since the PM2.5 NAAQS. When calculating the 

estimate, EPA applied the effect coefficient as reported in the study without an 

adjustment for assumed concentration threshold of 10 μg/m3

 as was done in recent 

(2006-2009) RIAs. 

 Twelve estimates are based on the C-R functions from EPA’s expert elicitation study 

(Roman et al., 2008) on the PM2.5 -mortality relationship and interpreted for benefits 

analysis in EPA’s final RIA for the PM2.5 NAAQS. For that study, twelve experts 

(labeled A through L) provided independent estimates of the PM2.5 -mortality 

concentration-response function. EPA practice has been to develop independent 

estimates of PM2.5 -mortality estimates corresponding to the concentration-response 

function provided by each of the twelve experts, to better characterize the degree of 

variability in the expert responses. 

The effect coefficients are drawn from epidemiology studies examining two large 

population cohorts: the American Cancer Society cohort (Pope et al., 2002) and the Harvard Six 

Cities cohort (Laden et al., 2006).1

 These are logical choices for anchor points in our 

presentation because, while both studies are well designed and peer reviewed, there are strengths 

and weaknesses inherent in each, which we believe argues for using both studies to generate 

benefits estimates. Previously, EPA had calculated benefits based on these two empirical 

studies, but derived the range of benefits, including the minimum and maximum results, from an 

expert elicitation of the relationship between exposure to PM2.5 and premature mortality (Roman 

 

1

 These two studies specify multi-pollutant models that control for SO2, among other co-pollutants. 
7-32 

et al., 2008).2

 Within this assessment, we include the benefits estimates derived from the 

concentration-response function provided by each of the twelve experts to better characterize the 

uncertainty in the concentration-response function for mortality and the degree of variability in 

the expert responses. Because the experts used these cohort studies to inform their 

concentration-response functions, benefits estimates using these functions generally fall between 

results using these epidemiology studies (see Figure 7-2). In general, the expert elicitation 

results support the conclusion that the benefits of PM2.5 control are very likely to be substantial. 

Readers interested in reviewing the general methodology for creating the benefit-per-ton 

estimates used in this analysis should consult the draft Technical Support Document (TSD) on 

estimating the benefits per ton of reducing PM2.5 and its precursors from in the “Other Non-EGU 

Point” sector(U.S. EPA, 2012c).3

 The primary difference between the estimates used in this 

analysis and the estimates reported in Fann, Fulcher, and Hubbell (2009) is the air quality 

modeling data utilized. The air quality modeling data used in this analysis use more narrow 

sectors. In addition, the updated air quality modeling data reflects more recent emissions data 

(2005 rather than 2001) and has a higher spatial resolution (12km rather than 36 km grid cells). 

The benefits methodology, such as health endpoints assessed, risk estimates applied, and 

valuation techniques applied did not change. As noted below in the characterization of 

uncertainty, these updated estimates still have similar limitations as all national-average benefitper-ton estimates in that they reflect the geographic distribution of the modeled emissions, which 

may not exactly match the emission reductions in this rulemaking, and they may not reflect local 

variability in population density, meteorology, exposure, baseline health incidence rates, or other 

local factors for any specific location. 4 In this analysis, we apply these national benefit-per-ton 

 

2

 Please see the Section 5.2 of the Portland Cement RIA in Appendix 5A for more information regarding the change 

in the presentation of benefits estimates. 3

 Stationary RICE are included in the other non-EGU point source category. If the affected stationary engines are 

more rural than the average of the non-EGU sources modeled, then it is possible that the benefits may be 

somewhat less than we have estimated here. The TSD provides the geographic distribution of the air quality 

changes associated with this sector. It is important to emphasize that this modeling represents the best available 

information on the air quality impact on a per ton basis for these sources. 4

 To the extent that the PM2.5 improvements achieved by the 2010 final rule would have been located in areas with 

lower average population density compared to the areas with engines regulated under these amendments, there is 

a potential for the estimated loss in benefits to be overstated by the use of national-average benefit-per-ton 

estimates. For example, if only engines in areas with higher population density are regulated, this scenario should 

result in higher benefit-per-ton estimates than a scenario only regulating engines in areas with lower population 

density. It is important to note that the benefit-per-ton estimates that EPA applied in this assessment reflect 

pollution transport as well as a variety of emission source locations, including areas with high and low 

population density. Without information regarding the specific location of the engines affected by the 2010 final 

rule and the amendments, it is not possible to be more precise regarding the true magnitude of the loss in 

benefits.

Deleted: engines
7-32 

estimates calculated for this category for NOx and multiply them by the corresponding emission 

reductions. 

These models assume that all fine particles, regardless of their chemical composition, are 

equally potent in causing premature mortality because the scientific evidence is not yet sufficient 

to allow differentiation of effects estimates by particle type. NOx is the primary PM2.5 precursors 

affected by this rule. Even though we assume that all fine particles have equivalent health 

effects, the benefit-per-ton estimates vary between precursors depending on the location and 

magnitude of their impact on PM2.5 levels, which drive population exposure. The sector-specific 

modeling does not provide estimates of the PM2.5-related benefits associated with reducing VOC 

emissions, but these unquantified benefits are generally small compared to other PM2.5 precursors 

(U.S. EPA, 2012). 

The benefit-per-ton coefficients in this analysis were derived using modified versions of 

the health impact functions used in the PM NAAQS Regulatory Impact Analysis (U.S. EPA, 

2006). Specifically, this analysis uses the method first applied in the Portland Cement NESHAP 

RIA (U.S. EPA, 2009a), which applied the functions directly from the epidemiology studies 

without an adjustment for an assumed threshold. Removing the threshold assumption is a key 

difference between the method used in this analysis of PM benefits and the methods used in 

RIAs prior to the Portland Cement proposal NESHAP, and we now calculate incremental 

benefits down to the lowest modeled PM2.5 air quality levels.5 

Based on our review of the current body of scientific literature, EPA now estimates PMrelated mortality without applying an assumed concentration threshold. EPA’s Integrated 

Science Assessment for Particulate Matter (U.S. EPA, 2009b), which was reviewed by EPA’s 

Clean Air Scientific Advisory Committee (U.S. EPA-SAB, 2009a; U.S. EPA-SAB, 2009b), 

concluded that the scientific literature consistently finds that a no-threshold log-linear model 

most adequately portrays the PM-mortality concentration-response relationship while 

recognizing potential uncertainty about the exact shape of the concentration-response function. 

Consistent with this finding, we have conformed the previous threshold sensitivity 

analysis to the current state of the PM science by incorporating a “Lowest Measured Level” 

(LML) assessment, which is a method EPA has employed in several recent RIAs including the 

Cross-State Air Pollution Rule (U.S. EPA, 2011b). This information allows readers to determine 

the portion of population exposed to annual mean PM2.5 levels at or above the LML of each 

 

5

 Additional updates since the Portland Cement RIA include a revised VSL and updated baseline incidence rates. 
7-32 

study; in general, our confidence in the estimated PM mortality decreases as we consider air 

quality levels further below the LML in major cohort studies that estimate PM-related mortality. 

While an LML assessment provides some insight into the level of uncertainty in the estimated 

PM mortality benefits, EPA does not view the LML as a threshold and continues to quantify PMrelated mortality impacts using a full range of modeled air quality concentrations. It is important 

to emphasize that we have high confidence in PM2.5-related effects down to the lowest LML of 

the major cohort studies, which is 5.8 μg/m3

. Just because we have greater confidence in the 

benefits above the LML, this does not mean that we have no confidence that benefits occur 

below the LML. For a summary of the scientific review statements regarding the lack of a 

threshold in the PM2.5-mortality relationship, see the Technical Support Document (TSD) 

entitled Summary of Expert Opinions on the Existence of a Threshold in the ConcentrationResponse Function for PM2.5-related Mortality (U.S. EPA, 2010b). 

For this analysis, policy-specific air quality data is not available due to time or resource 

limitations. For these rules, we are unable to estimate the percentage of premature mortality 

associated with this specific rule’s emission reductions at each PM2.5 level. However, we believe 

that it is still important to characterize the distribution of exposure to baseline air quality levels. 

As a surrogate measure of mortality impacts, we provide the percentage of the population 

exposed at each PM2.5 level using the source apportionment modeling used to calculate the 

benefit-per-ton estimates for this sector. It is important to note that baseline exposure is only one 

parameter in the health impact function, along with baseline incidence rates population, and 

change in air quality. In other words, the percentage of the population exposed to air pollution 

below the LML is not the same as the percentage of the population experiencing health impacts 

as a result of a specific emission reduction policy. The most important aspect, which we are 

unable to quantify for rules without rule-specific air quality modeling, is the shift in exposure 

associated with this specific rule. Therefore, caution is warranted when interpreting the LML 

assessment for this rule. The results of this analysis are provided in Section 7.3. 

As is the nature of RIAs, the assumptions and methods used to estimate air quality 

benefits evolve over time to reflect the Agency’s most current interpretation of the scientific and 

economic literature. For a period of time (2004-2008), the Office of Air and Radiation (OAR) 

valued mortality risk reductions using a value of statistical life (VSL) estimate derived from a 

limited analysis of some of the available studies. OAR arrived at a VSL using a range of $1 

million to $10 million (2000$) consistent with two meta-analyses of the wage-risk literature. 

The $1 million value represented the lower end of the interquartile range from the Mrozek and 

Taylor (2002) meta-analysis of 33 studies. The $10 million value represented the upper end of 
7-32 

the interquartile range from the Viscusi and Aldy (2003) meta-analysis of 43 studies. The mean 

estimate of $5.5 million (2000$)6

 was also consistent with the mean VSL of $5.4 million 

estimated in the Kochi et al. (2006) meta-analysis. However, the Agency neither changed its 

official guidance on the use of VSL in rulemakings nor subjected the interim estimate to a 

scientific peer-review process through the Science Advisory Board (SAB) or other peer-review 

group. 

During this time, the Agency continued work to update its guidance on valuing mortality 

risk reductions, including commissioning a report from meta-analytic experts to evaluate 

methodological questions raised by EPA and the SAB on combining estimates from the various 

data sources. In addition, the Agency consulted several times with the Science Advisory Board 

Environmental Economics Advisory Committee (SAB-EEAC) on the issue. With input from the 

meta-analytic experts, the SAB-EEAC advised the Agency to update its guidance using specific, 

appropriate meta-analytic techniques to combine estimates from unique data sources and 

different studies, including those using different methodologies (i.e., wage-risk and stated 

preference) (U.S. EPA-SAB, 2007). 

 

Until updated guidance is available, the Agency determined that a single, peer-reviewed 

estimate applied consistently best reflects the SAB-EEAC advice it has received. Therefore, the 

Agency has decided to apply the VSL that was vetted and endorsed by the SAB in the Guidelines 

for Preparing Economic Analyses (U.S. EPA, 2000)7

 while the Agency continues its efforts to 

update its guidance on this issue. This approach calculates a mean value across VSL estimates 

derived from 26 labor market and contingent valuation studies published between 1974 and 

1991. The mean VSL across these studies is $6.3 million (2000$).8

 The Agency is committed to 

using scientifically sound, appropriately reviewed evidence in valuing mortality risk reductions 

and has made significant progress in responding to the SAB-EEAC’s specific recommendations. 

In implementing these rules, emission controls may lead to reductions in ambient PM2.5 

below the National Ambient Air Quality Standards (NAAQS) for PM in some areas and assist 

other areas with attaining the PM NAAQS. Because the PM NAAQS RIAs also calculate PM 

 

6

 After adjusting the VSL for a different currency year (2010$) and to account for income growth to 2015 of the $5.5 

million value, the VSL is $8.0 million. 7

 In the revised Economic Guidelines (U.S. EPA, 2010c), EPA retained the VSL endorsed by the SAB with the 

understanding that further updates to the mortality risk valuation guidance would be forthcoming in the near 

future. Therefore, this report does not represent final agency policy. 8

 This value is $4.8 million in 1990$. In this analysis, we adjust the VSL to account for a different currency year 

($2010) and to account for income growth to 2015. After applying these adjustments to the $6.3 million value, 

the VSL is $9.2 million. 

Formatted: Indent: Left: 0", Hanging: 

0.13"

Deleted: 

Deleted: 
7-32 

benefits, there are important differences worth noting in the design and analytical objectives of 

each RIA. The NAAQS RIAs illustrate the potential costs and benefits of attaining a new air 

quality standard nationwide based on an array of emission control strategies for different sources. 

In short, NAAQS RIAs hypothesize, but do not predict, the control strategies that States may 

choose to enact when implementing a NAAQS. The setting of a NAAQS does not directly result 

in costs or benefits, and as such, the NAAQS RIAs are merely illustrative and are not intended to 

be added to the costs and benefits of other regulations that result in specific costs of control and 

emission reductions. However, some costs and benefits estimated in this RIA account for the 

same air quality improvements as estimated in the illustrative PM2.5 NAAQS RIA. 

By contrast, the emission reductions for implementation rules are from a specific class of 

well-characterized sources. In general, EPA is more confident in the magnitude and location of 

the emission reductions for implementation rules rather than illustrative NAAQS analyses. 

Emission reductions achieved under these and other promulgated rules will ultimately be 

reflected in the baseline of future NAAQS analyses, which would reduce the incremental costs 

and benefits associated with attaining the NAAQS. EPA remains forward looking towards the 

next iteration of the 5-year review cycle for the NAAQS, and as a result does not issue updated 

RIAs for existing NAAQS that retroactively update the baseline for NAAQS implementation. 

For more information on the relationship between the NAAQS and rules such as analyzed here, 

please see Section 1.2.4 of the SO2 NAAQS RIA (U.S. EPA, 2010a). 

 
7-32 

Figure 7.1 illustrates the relative breakdown of the monetized PM2.5 health benefits. 

Figure 7-1: Breakdown of Monetized PM2.5 Health Benefits using Mortality Function 

from Pope et al. (2002)* 

*This pie chart breakdown is illustrative, using the results based on Pope et al. (2002) as an example. Using the 

Laden et al. (2006) function for premature mortality, the percentage of total monetized benefits due to adult 

mortality would be 97%. This chart shows the breakdown using a 3% discount rate, and the results would be similar 

if a 7% discount rate was used. 

 Table 7-2 provides a general summary of the monetized PM-related health benefits by 

precursor, including the emission reductions and benefit-per-ton estimates at discount rates of 

3% and 7%.9

 Table 7-3 provides a summary of the reductions in health incidences as a result of 

the pollution reductions. In Table 7-4, we provide the benefits using our anchor points of Pope 

et al. and Laden et al. as well as the results from the expert elicitation on PM mortality. Figure 

7-2 provides a visual representation of the range of PM2.5-related benefits estimates using 

 

9

 To comply with Circular A-4, EPA provides monetized benefits using discount rates of 3% and 7% (OMB, 2003). 

These benefits are estimated for a specific analysis year (i.e., 2013), and most of the PM benefits occur within 

that year with two exceptions: acute myocardial infarctions (AMIs) and premature mortality. For AMIs, we 

assume 5 years of follow-up medical costs and lost wages. For premature mortality, we assume that there is a 

“cessation” lag between PM exposures and the total realization of changes in health effects. Although the 

structure of the lag is uncertain, EPA follows the advice of the SAB-HES to assume a segmented lag structure 

characterized by 30% of mortality reductions in the first year, 50% over years 2 to 5, and 20% over the years 6 to 

20 after the reduction in PM2.5 (U.S. EPA-SAB, 2004). Changes in the lag assumptions do not change the total 

number of estimated deaths but rather the timing of those deaths. Therefore, discounting only affects the AMI 

costs after the analysis year and the valuation of premature mortalities that occur after the analysis year. As such, 

the monetized benefits using a 7% discount rate are only approximately 10% less than the monetized benefits 

using a 3% discount rate. 

Adult Mortality ‐ Pope et

al. 93%

ChronicBronchitis 4%

AMI 2%

Acute Respiratory Symptoms

0.5%

InfantMortality 0.4%

Work Loss Days 0.2%

HospitalAdmissions, Cardio

0.2% HospitalAdmissions, Resp

0.04%

Asthma Exacerbation 0.01%

Acute Bronchitis 0.01%

UpperResp Symp 0.00%

LowerResp Symp 0.00%

ERVisits, Resp 0.00%

Other1%
7-32 

concentration-response functions supplied by experts. Figure 7-3 shows a breakdown of 

monetized benefits by engine size. 

 The benefit-per-ton estimates shown in this RIA are different than the benefit-per-ton 

estimates cited in the 2010 final SI RICE RIA for two reasons. First, these estimates are based 

on updated air quality modeling, which results in slightly higher benefits per ton for other nonEGU point sources than the previous modeling. Second, these estimates have been inflated to 

2010$. Third, the new air quality modeling did not provide estimates associated with reducing 

VOCs. Since the reconsideration proposal, EPA has made several updates to the approach we 

use to estimate mortality and morbidity benefits in the PM NAAQS RIAs (U.S. EPA, 2012a,b) 

including updated epidemiology studies, health endpoints, and population data. Although we 

have not re-estimated the benefits for this rule to apply this new approach, these updates 

generally offset each other, and we anticipate that the rounded benefits estimated for this rule are 

unlikely to be different than those provided below.

Table 7-2: General Summary of Monetized PM2.5-Related Health Co-Benefits Estimates 

for the SI RICE NESHAP Reconsideration (millions of 2010$)*

Pollutant 

Emissions 

Reductions 

(tons) 

Benefit 

per ton 

(Pope, 

3%) 

Benefit 

per ton 

(Laden, 

3%) 

Benefit 

per ton 

(Pope, 

7%) 

Benefit 

per ton 

(Laden, 

7%) 

Total Monetized 

Benefits (millions 

of 2010$ at 3%) 

Total Monetized 

Benefits (millions 

of 2010$ at 7%) 

PM2.5 Precursors 

 NOX 9,648 $6,400 $16,000 $5,700 $14,000 $62 to $150 $55 to $140 

 Total $62 to $150 $55 to $140 

*

 All estimates are for the analysis year (2013), and are rounded to two significant figures so numbers may not sum 

across columns. It is important to note that the monetized benefits do not include reduced health effects from direct 

exposure to NO2, ozone exposure, ecosystem effects, or visibility impairment. All fine particles are assumed to have 

equivalent health effects, but the benefit per ton estimates vary because each ton of precursor reduced has a different 

propensity to form PM2.5. The monetized benefits incorporate the conversion from precursor emissions to ambient 

fine particles. Confidence intervals are unavailable for this analysis because of the benefit-per-ton methodology.

Although we have not re-estimated the benefits for this rule to apply the updated methods in the PM NAAQS RIA 

(U.S. EPA, 2012b), these updates generally offset each other, and we anticipate that the rounded benefits estimated 

for this rule are unlikely to be different than those provided here.

 

Deleted: Proposed
7-32 

Table 7-3: Summary of Reductions in Health Incidences from PM2.5-Related Co-Benefits 

for the SI RICE NESHAP Reconsideration* 

Avoided Premature Mortality

Pope et al. 7 

Laden et al. 18 

Avoided Morbidity 

Chronic Bronchitis 5 

Emergency Department Visits, Respiratory 5 

Hospital Admissions, Respiratory 1 

Hospital Admissions, Cardiovascular 3 

Acute Bronchitis 11 

Lower Respiratory 140 

Upper Respiratory 110 

Minor Restricted Activity Days 5,600 

Work Loss Days 950 

Asthma Exacerbation 230 

Acute Myocardial Infarction 8 

* All estimates are for the analysis year (2013) and are rounded to whole numbers with two significant figures. All 

fine particles are assumed to have equivalent health effects because the scientific evidence is not yet sufficient to 

allow differentiation of effects estimates by particle type. Confidence intervals are unavailable for this analysis 

because of the benefit-per-ton methodology. 

Deleted: Proposed
7-32 

Table 7-4: All PM2.5 Co-Benefits Estimates for the SI RICE NESHAP Reconsideration at 

discount rates of 3% and 7% in 2013 (in millions of 2010$)* 

 3% 7% 

Benefit-per-ton Coefficients Derived from Epidemiology Literature

Pope et al. $62 $55 

Laden et al. $150 $140 

Benefit-per-ton Coefficients Derived from Expert Elicitation 

Expert A $160 $150 

Expert B $120 $110 

Expert C $120 $110 

Expert D $87 $78 

Expert E $200 $180 

Expert F $110 $100 

Expert G $74 $66 

Expert H $93 $83 

Expert I $120 $110 

Expert J $100 $89 

Expert K $24 $21 

Expert L $82 $73 

*

All estimates are rounded to two significant figures. The benefits estimates from the Expert Elicitation are provided 

as a reasonable characterization of the uncertainty in the mortality estimates associated with the concentrationresponse function. Confidence intervals are unavailable for this analysis because of the benefit-per-ton methodology 

Deleted: Proposed
7-32 

 

Figure 7-2: Total Monetized PM2.5 Co-Benefits of SI RICE NESHAP Reconsideration in 

2013 

*This graph shows the estimated benefits at discount rates of 3% and 7% using effect coefficients derived from the 

Pope et al. study and the Laden et al study, as well as 12 effect coefficients derived from EPA’s expert elicitation on 

PM mortality. The results shown are not the direct results from the studies or expert elicitation; rather, the estimates 

are based in part on the concentration-response function provided in those studies. 

$0

$50

$100

$150

$200

$250

Pope et al.

Laden et al.

Millions(2010$)

PM2.5mortality benefits estimates derived from 2 epidemiology functions and 12 expert functions

3% DR

7% DR

Deleted: Proposed
7-32 

Figure 7-3: Breakdown of Total Monetized PM2.5 Co-Benefits of SI RICE NESHAP 

Reconsideration by Engine Size 

7.2 Unquantified Benefits 

The monetized benefits estimated in this RIA only reflect a subset of benefits attributable 

to the health effect reductions associated with ambient fine particles. Data, time, and resource 

limitations prevented EPA from quantifying the impacts to, or monetizing the benefits from 

several important benefit categories, including benefits from reducing exposure to HAP, CO, 

NO2, and ozone exposure, as well as ecosystem effects, and visibility impairment. This does not 

imply that there are no benefits associated with these emission reductions. These benefits are 

described qualitatively in this section. 

7.2.1 HAP Benefits 

Even though emissions of air toxics from all sources in the U.S. declined by approximately 

42% since 1990, the 2005 National-Scale Air Toxics Assessment (NATA) predicts that most 

Americans are exposed to ambient concentrations of air toxics at levels that have the potential to 

cause adverse health effects (U.S. EPA, 2011c).10 The levels of air toxics to which people are 

exposed vary depending on where people live and work and the kinds of activities in which they 

engage. In order to identify and prioritize air toxics, emission source types and locations that are 

 

10 The 2005 NATA is available on the Internet at http://www.epa.gov/ttn/atw/nata2005 /. 

Area 500‐600 HP

21%

Area 600‐750 HP

5%

Area >750 HP

74%

Deleted: Proposed

Deleted: 7.2.1
7-32 

of greatest potential concern, U.S. EPA conducts the NATA.11 The most recent NATA was 

conducted for calendar year 2005 and was released in March 2011. NATA includes four steps: 

1) Compiling a national emissions inventory of air toxics emissions from outdoor sources 

2) Estimating ambient and exposure concentrations of air toxics across the United States 

3) Estimating population exposures across the United States 

4) Characterizing potential public health risk due to inhalation of air toxics including both 

cancer and noncancer effects 

Based on the 2005 NATA, EPA estimates that about 5% of census tracts nationwide have 

increased cancer risks greater than 100 in a million. The average national cancer risk is about 50 

in a million. Nationwide, the key pollutants that contribute most to the overall cancer risks are 

formaldehyde and benzene.12 Secondary formation (e.g., formaldehyde forming from other 

emitted pollutants) was the largest contributor to cancer risks, while stationary, mobile and 

background sources contribute almost equal portions of the remaining cancer risk. 

Noncancer health effects can result from chronic,13 subchronic,14 or acute15 inhalation 

exposures to air toxics, and include neurological, cardiovascular, liver, kidney, and respiratory 

effects as well as effects on the immune and reproductive systems. According to the 2005 

NATA, about three-fourths of the U.S. population was exposed to an average chronic 

concentration of air toxics that has the potential for adverse noncancer respiratory health effects.

Results from the 2005 NATA indicate that acrolein is the primary driver for noncancer 

respiratory risk. 

 

11 The NATA modeling framework has a number of limitations that prevent its use as the sole basis for setting 

regulatory standards. These limitations and uncertainties are discussed on the 2005 NATA website. Even so, 

this modeling framework is very useful in identifying air toxic pollutants and sources of greatest concern, setting 

regulatory priorities, and informing the decision making process. U.S. EPA.(2011). 2005 National-Scale Air 

Toxics Assessment. http://www.epa.gov/ttn/atw/nata2005/ 12 Details about the overall confidence of certainty ranking of the individual pieces of NATA assessments including 

both quantitative (e.g., model-to-monitor ratios) and qualitative (e.g., quality of data, review of emission 

inventories) judgments can be found at http://www.epa.gov/ttn/atw/nata/roy/page16.html . 13 Chronic exposure is defined in the glossary of the Integrated Risk Information (IRIS) database 

(http://www.epa.gov/iris ) as repeated exposure by the oral, dermal, or inhalation route for more than 

approximately 10% of the life span in humans (more than approximately 90 days to 2 years in typically used 

laboratory animal species). 14 Defined in the IRIS database as repeated exposure by the oral, dermal, or inhalation route for more than 30 days, 

up to approximately 10% of the life span in humans (more than 30 days up to approximately 90 days in typically 

used laboratory animal species). 15 Defined in the IRIS database as exposure by the oral, dermal, or inhalation route for 24 hours or less. 
7-32 

Figure 7-4 and Figure depict the estimated census tract-level carcinogenic risk and 

noncancer respiratory hazard from the assessment. It is important to note that large reductions in 

HAP emissions may not necessarily translate into significant reductions in health risk because 

toxicity varies by pollutant, and exposures may or may not exceed levels of concern. For 

example, acetaldehyde mass emissions are more than double acrolein emissions on a national 

basis, according to EPA’s 2005 National Emissions Inventory (NEI). However, the Integrated 

Risk Information System (IRIS) reference concentration (RfC) for acrolein is considerably lower 

than that for acetaldehyde, suggesting that acrolein could be potentially more toxic than 

acetaldehyde. Thus, it is important to account for the toxicity and exposure, as well as the mass 

of the targeted emissions. 

Figure 7-4 Estimated Chronic Census Tract Carcinogenic Risk from HAP exposure 

from outdoor sources (2005 NATA) 

Deleted: Figure 

Deleted: Figure 7-5 
7-32 

Figure 7-5 Estimated Chronic Census Tract Noncancer (Respiratory) Risk from HAP 

exposure from outdoor sources (2005 NATA) 

Due to methodology and time limitations under the court-ordered schedule, we were 

unable to estimate the benefits associated with the hazardous air pollutants that would be reduced 

as a result of these rules. In a few previous analyses of the benefits of reductions in HAP, EPA 

has quantified the benefits of potential reductions in the incidences of cancer and non-cancer risk 

(e.g., U.S. EPA, 1995). In those analyses, EPA relied on unit risk factors (URF) developed 

through risk assessment procedures.16 These URFs are designed to be conservative, and as such, 

are more likely to represent the high end of the distribution of risk rather than a best or most 

likely estimate of risk. As the purpose of a benefit analysis is to describe the benefits most likely 

to occur from a reduction in pollution, use of high-end, conservative risk estimates would 

overestimate the benefits of the regulation. While we used high-end risk estimates in past 

analyses, advice from the EPA’s Science Advisory Board (SAB) recommended that we avoid 

 

16The unit risk factor is a quantitative estimate of the carcinogenic potency of a pollutant, often expressed as the 

probability of contracting cancer from a 70-year lifetime continuous exposure to a concentration of one μg/m3

 of 

a pollutant. 
7-32 

using high-end estimates in benefit analyses (U.S. EPA-SAB, 2002). Since this time, EPA has 

continued to develop better methods for analyzing the benefits of reductions in HAP. 

As part of the second prospective analysis of the benefits and costs of the Clean Air Act 

(U.S. EPA, 2011a), EPA conducted a case study analysis of the health effects associated with 

reducing exposure to benzene in Houston from implementation of the Clean Air Act (IEc, 2009). 

While reviewing the draft report, EPA’s Advisory Council on Clean Air Compliance Analysis 

concluded that “the challenges for assessing progress in health improvement as a result of 

reductions in emissions of hazardous air pollutants (HAPs) are daunting...due to a lack of 

exposure-response functions, uncertainties in emissions inventories and background levels, the 

difficulty of extrapolating risk estimates to low doses and the challenges of tracking health 

progress for diseases, such as cancer, that have long latency periods” (U.S. EPA-SAB, 2008). 

In 2009, EPA convened a workshop to address the inherent complexities, limitations, and 

uncertainties in current methods to quantify the benefits of reducing HAP. Recommendations 

from this workshop included identifying research priorities, focusing on susceptible and 

vulnerable populations, and improving dose-response relationships (Gwinn et al., 2011). 

In summary, monetization of the benefits of reductions in cancer incidences requires 

several important inputs, including central estimates of cancer risks, estimates of exposure to 

carcinogenic HAP, and estimates of the value of an avoided case of cancer (fatal and non-fatal). 

Due to methodology and time limitations under the court-ordered schedule, we did not attempt to 

monetize the health benefits of reductions in HAP in this analysis. Instead, we provide a 

qualitative analysis of the health effects associated with the HAP anticipated to be reduced by 

these rules. EPA remains committed to improving methods for estimating HAP benefits by 

continuing to explore additional concepts of benefits, including changes in the distribution of 

risk. 

Although numerous HAPs may be emitted from SI RICE, a few HAPs account for over 

90% of the total mass of HAPs emissions emitted. These HAPs are formaldehyde (72%), 

acetaldehyde (8%), acrolein (7%), methanol (3%), and benzene (3%). Although we do not have 

estimates of emission reductions for each HAP, this rule is anticipated to reduce 1,800 tons of 

HAPs each year. Below we describe the health effects associated with the top 5 HAPs by mass 

emitted from SI RICE. 

Formatted: Font: 12 pt, Not

Superscript/ Subscript
7-32 

Formaldehyde 

Since 1987, EPA has classified formaldehyde as a probable human carcinogen based on 

evidence in humans and in rats, mice, hamsters, and monkeys.17 Substantial additional research 

since that time informs current scientific understanding of the health effects associated with 

exposure to formaldehyde. These include recently published research conducted by the National 

Cancer Institute (NCI) which found an increased risk of nasopharyngeal cancer and 

lymphohematopoietic malignancies such as leukemia among workers exposed to 

formaldehyde.18,19 In an analysis of the lymphohematopoietic cancer mortality from an extended 

follow-up of these workers, NCI confirmed an association between lymphohematopoietic cancer 

risk and peak formaldehyde exposures.20 A recent NIOSH study of garment workers also found 

increased risk of death due to leukemia among workers exposed to formaldehyde.21 Extended 

follow-up of a cohort of British chemical workers did not find evidence of an increase in 

nasopharyngeal or lymphohematopoietic cancers, but a continuing statistically significant excess 

in lung cancers was reported.22

In the past 15 years there has been substantial research on the inhalation dosimetry for 

formaldehyde in rodents and primates by the Chemical Industry Institute of Toxicology (CIIT, 

now renamed the Hamner Institutes for Health Sciences), with a focus on use of rodent data for 

refinement of the quantitative cancer dose-response assessment.23,24,25 CIIT’s risk assessment of 

 

17 U.S. EPA. 1987. Assessment of Health Risks to Garment Workers and Certain Home Residents from Exposure to 

Formaldehyde, Office of Pesticides and Toxic Substances, April 1987. Docket EPA-HQ-OAR-2010-0162. 18 Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Blair, A. 2003. Mortality from lymphohematopoetic 

malignancies among workers in formaldehyde industries. Journal of the National Cancer Institute 95: 1615-

1623. Docket EPA-HQ-OAR-2010-0162. 19 Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Blair, A. 2004. Mortality from solid cancers among 

workers in formaldehyde industries. American Journal of Epidemiology 159: 1117-1130. Docket EPA-HQOAR-2010-0162. 20 Beane Freeman, L. E.; Blair, A.; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Hoover, R. N.; Hauptmann, M. 2009. 

Mortality from lymphohematopoietic malignancies among workers in formaldehyde industries: The National 

Cancer Institute cohort. J. National Cancer Inst. 101: 751-761. Docket EPA-HQ-OAR-2010-0162. 21 Pinkerton, L. E. 2004. Mortality among a cohort of garment workers exposed to formaldehyde: an update. 

Occup. Environ. Med. 61: 193-200. Docket EPA-HQ-OAR-2010-0162. 22 Coggon, D, EC Harris, J Poole, KT Palmer. 2003. Extended follow-up of a cohort of British chemical workers 

exposed to formaldehyde. J National Cancer Inst. 95:1608-1615. Docket EPA-HQ-OAR-2010-0162. 23 Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D Kalisak, J Preston, and FJ Miller. 2003. Biologically 

motivated computational modeling of formaldehyde carcinogenicity in the F344 rat. Tox Sci 75: 432-447. 

Docket EPA-HQ-OAR-2010-0162. 24 Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D Kalisak, J Preston, and FJ Miller. 2004. Human respiratory 

tract cancer risks of inhaled formaldehyde: Dose-response predictions derived from biologically-motivated 

computational modeling of a combined rodent and human dataset. Tox Sci 82: 279-296. Docket EPA-HQ-OAR2010-0162. 
7-32 

formaldehyde incorporated mechanistic and dosimetric information on formaldehyde. These data 

were modeled using a biologically-motivated two-stage clonal growth model for cancer and also 

a point of departure based on a Benchmark Dose approach. However, it should be noted that 

recent research published by EPA indicates that when two-stage modeling assumptions are 

varied, resulting dose-response estimates can vary by several orders of magnitude.26,27,28,29 These 

findings are not supportive of interpreting the CIIT model results as providing a conservative 

(health protective) estimate of human risk.30 EPA research also examined the contribution of the 

two-stage modeling for formaldehyde towards characterizing the relative weights of key events 

in the mode-of-action of a carcinogen. For example, the model-based inference in the published 

CIIT study that formaldehyde’s direct mutagenic action is not relevant to the compound’s 

tumorigenicity was found not to hold under variations of modeling assumptions.31

Based on the developments of the last decade, in 2004, the working group of the IARC 

concluded that formaldehyde is carcinogenic to humans (Group 1), on the basis of sufficient 

evidence in humans and sufficient evidence in experimental animals - a higher classification than 

previous IARC evaluations. After reviewing the currently available epidemiological evidence, 

the IARC (2006) characterized the human evidence for formaldehyde carcinogenicity as 

“sufficient,” based upon the data on nasopharyngeal cancers; the epidemiologic evidence on 

leukemia was characterized as “strong.”32

Formaldehyde exposure also causes a range of noncancer health effects, including 

irritation of the eyes (burning and watering of the eyes), nose and throat. Effects from repeated 

 25 Chemical Industry Institute of Toxicology (CIIT).1999. Formaldehyde: Hazard characterization and dose-response 

assessment for carcinogenicity by the route of inhalation. CIIT, September 28, 1999. Research Triangle Park, 

NC. Docket EPA-HQ-OAR-2010-0162. 26 U.S. EPA. Analysis of the Sensitivity and Uncertainty in 2-Stage Clonal Growth Models for Formaldehyde with 

Relevance to Other Biologically-Based Dose Response (BBDR) Models. U.S. Environmental Protection Agency, 

Washington, D.C., EPA/600/R-08/103, 2008. Docket EPA-HQ-OAR-2010-0162. 27 Subramaniam, R; Chen, C; Crump, K; .et .al. (2008) Uncertainties in biologically-based modeling of 

formaldehyde-induced cancer risk: identification of key issues. Risk Anal 28(4):907-923. Docket EPA-HQOAR-2010-0162. 28 Subramaniam RP; Crump KS; Van Landingham C; et. al. (2007) Uncertainties in the CIIT model for 

formaldehyde-induced carcinogenicity in the rat: A limited sensitivity analysis–I. Risk Anal, 27: 1237–1254. 

Docket EPA-HQ-OAR-2010-0162. 29 Crump, K; Chen, C; Fox, J; .et .al. (2008) Sensitivity analysis of biologically motivated model for formaldehydeinduced respiratory cancer in humans. Ann Occup Hyg 52:481-495. Docket EPA-HQ-OAR-2010-0162. 30 Crump, K; Chen, C; Fox, J; .et .al. (2008) Sensitivity analysis of biologically motivated model for formaldehydeinduced respiratory cancer in humans. Ann Occup Hyg 52:481-495. Docket EPA-HQ-OAR-2010-0162. 31 Subramaniam RP; Crump KS; Van Landingham C; et. al. (2007) Uncertainties in the CIIT model for 

formaldehyde-induced carcinogenicity in the rat: A limited sensitivity analysis–I. Risk Anal, 27: 1237–1254. 

Docket EPA-HQ-OAR-2010-0162. 32 International Agency for Research on Cancer (2006) Formaldehyde, 2-Butoxyethanol and 1-tert-Butoxypropan-2-

ol. Monographs Volume 88. World Health Organization, Lyon, France. Docket EPA-HQ-OAR-2010-0162. 
7-32 

exposure in humans include respiratory tract irritation, chronic bronchitis and nasal epithelial 

lesions such as metaplasia and loss of cilia. Animal studies suggest that formaldehyde may also 

cause airway inflammation – including eosinophil infiltration into the airways. There are several 

studies that suggest that formaldehyde may increase the risk of asthma – particularly in the 

young.33,34

 The above-mentioned rodent and human studies, as well as mechanistic information and 

their analyses, were evaluated in EPA’s recent Draft Toxicological Review of Formaldehyde – 

Inhalation Assessment through the Integrated Risk Information System (IRIS) program. This 

draft IRIS assessment was released in June 2010 for public review and comment and external 

peer review by the National Research Council (NRC). The NRC released their review report in 

April 2011 (http://www.nap.edu/catalog.php?record_id=13142). The EPA is currently revising 

the draft assessment in response to this review. 

Acetaldehyde 

Acetaldehyde is classified in EPA’s IRIS database as a probable human carcinogen, based 

on nasal tumors in rats, and is considered toxic by the inhalation, oral, and intravenous routes.35 

Acetaldehyde is reasonably anticipated to be a human carcinogen by the U.S. Department of 

Health and Human Services (DHHS) in the 11th Report on Carcinogens and is classified as 

possibly carcinogenic to humans (Group 2B) by the IARC.36,37 The primary noncancer effects of 

exposure to acetaldehyde vapors include irritation of the eyes, skin, and respiratory tract.38 

 

33 Agency for Toxic Substances and Disease Registry (ATSDR). 1999. Toxicological profile for Formaldehyde. 

Atlanta, GA: U.S. Department of Health and Human Services, Public Health Service. 

http://www.atsdr.cdc.gov/toxprofiles/tp111.html. Docket EPA-HQ-OAR-2010-0162. 34 WHO (2002) Concise International Chemical Assessment Document 40: Formaldehyde. Published under the joint 

sponsorship of the United Nations Environment Programme, the International Labour Organization, and the 

World Health Organization, and produced within the framework of the Inter-Organization Programme for the 

Sound Management of Chemicals. Geneva. Docket EPA-HQ-OAR-2010-0162. 35 U.S. Environmental Protection Agency (U.S. EPA). 1991. Integrated Risk Information System File of 

Acetaldehyde. Research and Development, National Center for Environmental Assessment, Washington, DC. 

This material is available electronically at http://www.epa.gov/iris/subst/0290.htm . 36 U.S. Department of Health and Human Services National Toxicology Program 11th Report on Carcinogens 

available at: http://ntp.niehs.nih.gov/go/16183 . 37 International Agency for Research on Cancer (IARC). 1999. Re-evaluation of some organic chemicals, hydrazine, 

and hydrogen peroxide. IARC Monographs on the Evaluation of Carcinogenic Risk of Chemical to Humans, 

Vol 71. Lyon, France. 38 U.S. Environmental Protection Agency (U.S. EPA). 1991. Integrated Risk Information System File of 

Acetaldehyde. Research and Development, National Center for Environmental Assessment, Washington, DC. 

This material is available electronically at http://www.epa.gov/iris/subst/0290.htm . 

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Acrolein 

 EPA determined in 2003 that the human carcinogenic potential of acrolein could not be 

determined because the available data were inadequate. No information was available on the 

carcinogenic effects of acrolein in humans and the animal data provided inadequate evidence of 

carcinogenicity.39 The IARC determined in 1995 that acrolein was not classifiable as to its 

carcinogenicity in humans.40

Acrolein is extremely acrid and irritating to humans when inhaled, with acute exposure 

resulting in upper respiratory tract irritation, mucus hypersecretion and congestion. The intense 

irritancy of this carbonyl has been demonstrated during controlled tests in human subjects, who 

suffer intolerable eye and nasal mucosal sensory reactions within minutes of exposure.41 These 

data and additional studies regarding acute effects of human exposure to acrolein are 

summarized in EPA’s 2003 IRIS Human Health Assessment for acrolein.42 Evidence available 

from studies in humans indicate that levels as low as 0.09 ppm (0.21 mg/m3

) for five minutes 

may elicit subjective complaints of eye irritation with increasing concentrations leading to more 

extensive eye, nose and respiratory symptoms.43 Lesions to the lungs and upper respiratory tract 

of rats, rabbits, and hamsters have been observed after subchronic exposure to acrolein.44 Acute 

exposure effects in animal studies report bronchial hyper-responsiveness.45 In a recent study, the 

acute respiratory irritant effects of exposure to 1.1 ppm acrolein were more pronounced in mice 

with allergic airway disease by comparison to non-diseased mice which also showed decreases in 

 

39 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

Research and Development, National Center for Environmental Assessment, Washington, DC. This material is 

available at http://www.epa.gov/iris/toxreviews/0364tr.pdf . 40 International Agency for Research on Cancer (IARC). 1995. Monographs on the evaluation of carcinogenic risk of 

chemicals to humans, Volume 63, Dry cleaning, some chlorinated solvents and other industrial chemicals, World 

Health Organization, Lyon, France. 41 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

EPA/635/R-03/003. p. 10. Research and Development, National Center for Environmental Assessment, 

Washington, DC. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf . 42 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

2003. Research and Development, National Center for Environmental Assessment, Washington, DC. 

EPA/635/R-03/003. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf . 43 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

Research and Development, National Center for Environmental Assessment, Washington, DC. EPA/635/R03/003. p. 11. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf . 44 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

Research and Development, National Center for Environmental Assessment, Washington, DC. EPA/635/R03/003. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf . 45 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein. 

Research and Development, National Center for Environmental Assessment, Washington, DC. EPA/635/R03/003. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf . 
7-32 

respiratory rate.46 Based on these animal data and demonstration of similar effects in humans 

(i.e., reduction in respiratory rate), individuals with compromised respiratory function (e.g., 

emphysema, asthma) are expected to be at increased risk of developing adverse responses to 

strong respiratory irritants such as acrolein. 

Benzene 

The EPA’s IRIS database lists benzene as a known human carcinogen (causing leukemia) 

by all routes of exposure, and concludes that exposure is associated with additional health effects, 

including genetic changes in both humans and animals and increased proliferation of bone marrow 

cells in mice.47,48,49 EPA states in its IRIS database that data indicate a causal relationship between 

benzene exposure and acute lymphocytic leukemia and suggest a relationship between benzene 

exposure and chronic non-lymphocytic leukemia and chronic lymphocytic leukemia. The IARC 

has determined that benzene is a human carcinogen and the DHHS has characterized benzene as a 

known human carcinogen.50,51 A number of adverse noncancer health effects including blood 

disorders, such as preleukemia and aplastic anemia, have also been associated with long-term 

exposure to benzene.52,53 

 

46 Morris JB, Symanowicz PT, Olsen JE, et al. 2003. Immediate sensory nerve-mediated respiratory responses to 

irritants in healthy and allergic airway-diseased mice. J Appl Physiol 94(4):1563-1571. 47 U.S. Environmental Protection Agency (U.S. EPA). 2000. Integrated Risk Information System File for Benzene. 

Research and Development, National Center for Environmental Assessment, Washington, DC. This material is 

available electronically at: http://www.epa.gov/iris/subst/0276.htm. 48 International Agency for Research on Cancer, IARC monographs on the evaluation of carcinogenic risk of 

chemicals to humans, Volume 29, Some industrial chemicals and dyestuffs, International Agency for Research 

on Cancer, World Health Organization, Lyon, France, p. 345-389, 1982. 49 Irons, R.D.; Stillman, W.S.; Colagiovanni, D.B.; Henry, V.A. (1992) Synergistic action of the benzene metabolite 

hydroquinone on myelopoietic stimulating activity of granulocyte/macrophage colony-stimulating factor in vitro, 

Proc. Natl. Acad. Sci. 89:3691-3695. 50 International Agency for Research on Cancer (IARC). 1987. Monographs on the evaluation of carcinogenic risk 

of chemicals to humans, Volume 29, Supplement 7, Some industrial chemicals and dyestuffs, World Health 

Organization, Lyon, France. 51 U.S. Department of Health and Human Services National Toxicology Program 11th Report on Carcinogens 

available at: http://ntp.niehs.nih.gov/go/16183. 52 Aksoy, M. (1989). Hematotoxicity and carcinogenicity of benzene. Environ. Health Perspect. 82: 193-197. 53 Goldstein, B.D. (1988). Benzene toxicity. Occupational medicine. State of the Art Reviews. 3: 541-554.
7-32 

Methanol 

Exposure of humans to methanol by inhalation or ingestion may result in central nervous 

system depression and degenerative changes in the brain and visual systems. After inhaled or 

ingested, methanol is converted to formate, a highly toxic metabolite that within the course of a 

few hours can cause narcosis, metabolic acidosis, headaches, severe abdominal and leg pain and 

visual degeneration that can lead to blindness.54

Methanol has been demonstrated to cause developmental toxicity in rats and mice, and 

reproductive and developmental toxicity in monkeys. A number of studies have reported adverse 

effects in the offspring of rats and mice exposed to methanol by inhalation including reduced 

weight of brain pituitary gland, thymus, thyroid, reduced overall fetal body weight and increased 

incidence of extra ribs and cleft palate.55,56,57 Methanol inhalation studies using rhesus monkeys 

have reported a decrease in the length of pregnancy, and limited evidence of impaired learning 

ability in offspring.58,59,60,61 EPA has not classified methanol with respect to its carcinogenicity. 

Other Air Toxics 

In addition to the compounds described above, other toxic compounds might be affected 

by these rules. Information regarding the health effects of those compounds can be found in 

EPA’s IRIS database.62

 

54 Rowe, VK and McCollister, SB. 1981. Alcohols. In: Patty's Industrial Hygiene and Toxicology, 3rd ed. Vol. 2C, 

GD Clayton, FE Clayton, Eds. John Wiley & Sons, New York, pp. 4528-4541. 55 New Energy Development Organization (NEDO). 1987. Toxicological research of methanol as a fuel for power 

station: summary report on tests with monkeys, rats and mice. Tokyo, Japan. 56 Nelson, BK; Brightwell, WS; MacKenzie, DR; Khan, A; Burg, JR; Weigel, WW; Goad, PT. 1985. Teratological 

assessment of methanol and ethanol at high inhalation levels in rats. Toxicol Sci, 5: 727-736. 57 Rogers, JM; Barbee, BD; Rehnberg, BF. 1993. Critical periods of sensitivity for the developmental toxicity of 

inhaled methanol. Teratology, 47: 395. 58 Burbacher, T; Grant, K; Shen, D; Damian, D; Ellis, S; Liberato, N. 1999. Reproductive and offspring 

developmental effects following maternal inhalation exposure to methanol in nonhuman primates Part II: 

developmental effects in infants exposed prenatally to methanol. Health Effects Institute. Cambridge, MA. 59 Burbacher, T; Shen, D; Grant, K; Sheppard, L; Damian, D; Ellis, S; Liberato, N. 1999. Reproductive and offspring 

developmental effects following maternal inhalation exposure to methanol in nonhuman primates Part I: 

methanol disposition and reproductive toxicity in adult females. Health Effects Institute. Cambridge, MA. 60 Burbacher, TM; Grant, KS; Shen, DD; Sheppard, L; Damian, D; Ellis, S; Liberato, N. 2004. Chronic maternal 

methanol inhalation in nonhuman primates (Macaca fascicularis): reproductive performance and birth outcome. 

Neurotoxicol Teratol, 26: 639-650. 61 Burbacher, TM; Shen, DD; Lalovic, B; Grant, KS; Sheppard, L; Damian, D; Ellis, S; Liberato, N. 2004. Chronic 

maternal methanol inhalation in nonhuman primates (Macaca fascicularis): exposure and toxicokinetics prior to 

and during pregnancy. Neurotoxicol Teratol, 26: 201-221. 62 U.S. EPA Integrated Risk Information System (IRIS) database is available at: www.epa.gov/iris.

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7.2.2 Additional NO2 Co-Benefits 

In addition to being a precursor to PM2.5, NOx emissions are also associated with a 

variety of respiratory health effects. Unfortunately, we were unable to estimate the health 

benefits associated with reduced NO2 or ozone exposure in this analysis because we do not have 

air quality modeling data available. Therefore, this analysis only quantifies and monetizes the 

PM2.5 benefits associated with the reductions in NO2 emissions. 

Following an extensive evaluation of health evidence from epidemiologic and laboratory 

studies, the Integrated Science Assessment (ISA) for Nitrogen Dioxide concluded that there is a 

likely causal relationship between respiratory health effects and short-term exposure to NO2 

(U.S. EPA, 2008c). Persons with preexisting respiratory disease, children, and older adults may 

be more susceptible to the effects of NO2 exposure. Based on our review of this information, we 

identified four short-term morbidity endpoints that the NO2 ISA identified as a “likely causal 

relationship”: asthma exacerbation, respiratory-related emergency department visits, and 

respiratory-related hospitalizations. The differing evidence and associated strength of the 

evidence for these different effects is described in detail in the NO2 ISA. The NO2 ISA also 

concluded that the relationship between short-term NO2 exposure and premature mortality was 

“suggestive but not sufficient to infer a causal relationship” because it is difficult to attribute the 

mortality risk effects to NO2 alone. Although the NO2 ISA stated that studies consistently 

reported a relationship between NO2 exposure and mortality, the effect was generally smaller 

than that for other pollutants such as PM. 

NOx emissions also contribute to a variety of adverse welfare effects, including acidic 

deposition, visibility impairment, nutrient enrichment. Deposition of nitrogen causes 

acidification, which can cause a loss of biodiversity of fishes, zooplankton, and macro 

invertebrates in aquatic ecosystems, as well as a decline in sensitive tree species, such as red 

spruce (Picea rubens) and sugar maple (Acer saccharum) in terrestrial ecosystems. In the 

northeastern United States, the surface waters affected by acidification are a source of food for 

some recreational and subsistence fishermen and for other consumers and support several 

cultural services, including aesthetic and educational services and recreational fishing. Biological 

effects of acidification in terrestrial ecosystems are generally linked to aluminum toxicity, which 

can cause reduced root growth, which restricts the ability of the plant to take up water and 

nutrients. These direct effects can, in turn, increase the sensitivity of these plants to stresses, such 

as droughts, cold temperatures, insect pests, and disease leading to increased mortality of canopy 

trees. Terrestrial acidification affects several important ecological services, including declines in 

habitat for threatened and endangered species (cultural), declines in forest aesthetics (cultural), 
7-32 

declines in forest productivity (provisioning), and increases in forest soil erosion and reductions 

in water retention (cultural and regulating). (U.S. EPA, 2008d) 

Deposition of nitrogen is also associated with aquatic and terrestrial nutrient enrichment. 

In estuarine waters, excess nutrient enrichment can lead to eutrophication. Eutrophication of 

estuaries can disrupt an important source of food production, particularly fish and shellfish 

production, and a variety of cultural ecosystem services, including water-based recreational and 

aesthetic services. Terrestrial nutrient enrichment is associated with changes in the types and 

number of species and biodiversity in terrestrial systems. Excessive nitrogen deposition upsets 

the balance between native and nonnative plants, changing the ability of an area to support 

biodiversity. When the composition of species changes, then fire frequency and intensity can 

also change, as nonnative grasses fuel more frequent and more intense wildfires. (U.S. EPA, 

2008d) 

7.2.3 Ozone Co-Benefits 

In the presence of sunlight, NOx and VOCs can undergo a chemical reaction in the 

atmosphere to form ozone. Reducing ambient ozone concentrations is associated with 

significant human health benefits, including mortality and respiratory morbidity (U.S. EPA, 

2008a). Epidemiological researchers have associated ozone exposure with adverse health effects 

in numerous toxicological, clinical and epidemiological studies (U.S. EPA, 2006c). These health 

effects include respiratory morbidity such as fewer asthma attacks, hospital and ER visits, school 

loss days, as well as premature mortality. 

7.2.4 Carbon Monoxide Co-Benefits 

Carbon monoxide in ambient air is formed primarily by the incomplete combustion of 

carbon-containing fuels and photochemical reactions in the atmosphere. The amount of CO 

emitted from these reactions, relative to carbon dioxide (CO2), is sensitive to conditions in the 

combustion zone, such as fuel oxygen content, burn temperature, or mixing time. Upon 

inhalation, CO diffuses through the respiratory system to the blood, which can cause hypoxia 

(reduced oxygen availability). Carbon monoxide can elicit a broad range of effects in multiple 

tissues and organ systems that are dependent upon concentration and duration of exposure. The 

Integrated Science Assessment for Carbon Monoxide (U.S. EPA, 2010a) concluded that shortterm exposure to CO is “likely to have a causal relationship” with cardiovascular morbidity, 

particularly in individuals with coronary heart disease. Epidemiologic studies associate shortterm CO exposure with increased risk of emergency department visits and hospital admissions. 

Coronary heart disease includes those who have angina pectoris (cardiac chest pain), as well as 

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those who have experienced a heart attack. Other subpopulations potentially at risk include 

individuals with diseases such as chronic obstructive pulmonary disease (COPD), anemia, or 

diabetes, and individuals in very early or late life stages, such as older adults or the developing 

young. The evidence is suggestive of a causal relationship between short-term exposure to CO 

and respiratory morbidity and mortality. The evidence is also suggestive of a causal relationship 

for birth outcomes and developmental effects following long-term exposure to CO, and for 

central nervous system effects linked to short- and long-term exposure to CO. 

7.2.5 Visibility Impairment Co-Benefits 

Reducing secondary formation of PM2.5 would improve visibility throughout the U.S. 

Fine particles with significant light-extinction efficiencies include sulfates, nitrates, organic 

carbon, elemental carbon, and soil (Sisler, 1996). Suspended particles and gases degrade 

visibility by scattering and absorbing light. Higher visibility impairment levels in the East are 

due to generally higher concentrations of fine particles, particularly sulfates, and higher average 

relative humidity levels. Visibility has direct significance to people’s enjoyment of daily 

activities and their overall sense of wellbeing. Good visibility increases the quality of life where 

individuals live and work, and where they engage in recreational activities. Previous analyses 

(U.S. EPA, 2006; U.S. EPA, 2011a; U.S. EPA, 2011b) show that visibility benefits are a 

significant welfare benefit category. Without air quality modeling, we are unable to estimate 

visibility related benefits, nor are we able to determine whether VOC emission reductions would 

be likely to have a significant impact on visibility in urban areas or Class I areas. 

7.3 Characterization of Uncertainty in the Monetized Co-Benefits 

In any complex analysis, there are likely to be many sources of uncertainty. Many inputs 

are used to derive the final estimate of economic benefits, including emission inventories, air 

quality models (with their associated parameters and inputs), epidemiological estimates of 

concentration-response (C-R) functions, estimates of values, population estimates, income 

estimates, and estimates of the future state of the world (i.e., regulations, technology, and human 

behavior). For some parameters or inputs it may be possible to provide a statistical 

representation of the underlying uncertainty distribution. For other parameters or inputs, the 

necessary information is not available. As discussed in the PM2.5 NAAQS RIA (Table 5.5) (U.S. 

EPA, 2006), there are a variety of uncertainties associated with these PM benefits. Therefore, 

the estimates of annual benefits should be viewed as representative of the magnitude of benefits 

expected, rather than the actual benefits that would occur every year. 
7-32 

It is important to note that the monetized benefit-per-ton estimates used here reflect 

specific geographic patterns of emissions reductions and specific air quality and benefits 

modeling assumptions. For example, these estimates do not reflect local variability in population 

density, meteorology, exposure, baseline health incidence rates, or other local factors. Use of 

these $/ton values to estimate benefits may lead to higher or lower benefit estimates than if 

benefits were calculated based on direct air quality modeling. Great care should be taken in 

applying these estimates to emission reductions occurring in any specific location, as these are 

all based on national or broad regional emission reduction programs and therefore represent 

average benefits-per-ton over the entire United States. The benefits-per-ton for emission 

reductions in specific locations may be very different than the estimates presented here. For more 

information, see the TSD describing the calculation of the new benefit-per-ton estimates (U.S. 

EPA, 2012). 

PM2.5 mortality benefits are the largest benefit category that we monetized in this 

analysis. To better characterize the uncertainty associated with mortality impacts that are 

estimated to occur in areas with low baseline levels of PM2.5, we included the LML assessment. 

For this analysis, policy-specific air quality data is not available due to time or resource 

limitations, thus we are unable to estimate the percentage of premature mortality associated with 

this specific rule’s emission reductions at each PM2.5 level. As a surrogate measure of mortality 

impacts, we provide the percentage of the population exposed at each PM2.5 level using the 

source apportionment modeling used to calculate the benefit-per-ton estimates for this sector. A 

very large proportion of the population is exposed at or above the lowest LML of the cohort 

studies (Figures 7-6 and 7-7), increasing our confidence in the PM mortality analysis. Figure 7-6 

shows a bar chart of the percentage of the population exposed to various air quality levels in the 

pre- and post-policy policy. Figure 7-7 shows a cumulative distribution function of the same 

data. Both figures identify the LML for each of the major cohort studies. As the policy shifts 

the distribution of air quality levels, fewer people are exposed to PM2.5 levels at or above the 

LML. Using the Pope et al. (2002) study, the 77% of the population is exposed to annual mean 

PM2.5 levels at or above the LML of 7.5 μg/m3

. Using the Laden et al. (2006) study, 25% of the 

population is exposed above the LML of 10 μg/m3

.

 As we model avoided premature deaths 

among populations exposed to levels of PM2.5, we have lower confidence in levels below the 

LML for each study. It is important to emphasize that we have high confidence in PM2.5-related 

effects down to the lowest LML of the major cohort studies. Just because we have greater 

confidence in the benefits above the LML, this does not mean that we have no confidence that 

benefits occur below the LML. 
7-32 

A large fraction of the baseline exposure occurs below the level of the National Ambient 

Air Quality Standard (NAAQS) for annual PM2.5 at 15 μg/m3

, which wasset in 2006. It is 

important to emphasize that NAAQS are not set at a level of zero risk. Instead, the NAAQS 

reflect the level determined by the Administrator to be protective of public health within an 

adequate margin of safety, taking into consideration effects on susceptible populations. While 

benefits occurring below the standard may be less certain than those occurring above the 

standard, EPA considers them to be legitimate components of the total benefits estimate. 

Figure 7-6. Percentage of Adult Population by Annual Mean PM2.5 Exposure in the 

Baseline 

 
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Figure 7-7. Cumulative Distribution of Adult Population by Annual Mean PM2.5 

Exposure in the Baseline 

Above we present the estimates of the total benefits, based on our interpretation of the 

best available scientific literature and methods and supported by the SAB-HES and the NAS 

(NRC, 2002). The benefits estimates are subject to a number of assumptions and uncertainties. 

For example, for key assumptions underlying the estimates for premature mortality, which 

typically account for more than 90% of the total benefits, we were able to quantify include the 

following: 

1. PM2.5 benefits were derived through benefit per-ton estimates, which do not reflect 

local variability in population density, meteorology, exposure, baseline health 

incidence rates, or other local factors that might lead to an over-estimate or underestimate of the actual benefits of controlling PM precursors. We do not have data on 

the specific location of the air quality changes associated with this rulemaking; as 

such, it is not feasible to estimate the proportion of benefits occurring in different 

locations, such as designated nonattainment areas. In addition, the benefit-per-ton 

estimates are based on emissions from existing sources. To the extent that the 

geographic distribution of the emissions reductions for this rule are different than the 
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modeled emissions, the benefits may be underestimated or overestimated. In general, 

there is inherently more uncertainty for new sources, which may not be included in 

the emissions inventory, than existing sources. 

2. We assume that all fine particles, regardless of their chemical composition, are 

equally potent in causing premature mortality. This is an important assumption, 

because PM2.5 produced via transported precursors emitted from EGUs may differ 

significantly from direct PM2.5 released from diesel engines and other industrial 

sources, but no clear scientific grounds exist for supporting differential effects 

estimates by particle type. 

3. We assume that the health impact function for fine particles is linear down to the 

lowest air quality levels modeled in this analysis. Thus, the estimates include health 

benefits from reducing fine particles in areas with varied concentrations of PM2.5,

including both regions that are in attainment with fine particle standard and those that 

do not meet the standard down to the lowest modeled concentrations. 

4. To characterize the uncertainty in the relationship between PM2.5 and premature 

mortality (which typically accounts for 85% to 95% of total monetized benefits), we 

include a set of twelve estimates based on results of the expert elicitation study in 

addition to our core estimates. Even these multiple characterizations omit the 

uncertainty in air quality estimates, baseline incidence rates, populations exposed and 

transferability of the effect estimate to diverse locations. As a result, the reported 

confidence intervals and range of estimates give an incomplete picture about the 

overall uncertainty in the PM2.5 estimates. This information should be interpreted 

within the context of the larger uncertainty surrounding the entire analysis. For more 

information on the uncertainties associated with PM2.5 benefits, please consult the 

PM2.5 NAAQS RIA (Table 5.5). 

This RIA does not include the type of detailed uncertainty assessment found in the PM 

NAAQS RIA because we lack the necessary air quality input and monitoring data to run the 

benefits model. In addition, we have not conducted any air quality modeling for this rule. 

Moreover, it was not possible to develop benefit-per-ton metrics and associated estimates of 

uncertainty using the benefits estimates from the PM RIA because of the significant differences 

between the sources affected in that rule and those regulated here. However, the results of the 

Monte Carlo analyses of the health and welfare benefits presented in Chapter 5 of the PM RIA 

can provide some evidence of the uncertainty surrounding the benefits results presented in this 

analysis. 
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7.4 Comparison of Co-Benefits and Costs 

Using a 3% discount rate, we estimate the total combined monetized co-benefits of the 

reconsidered SI RICE NESHAP to be $62 million to $150 million in the implementation year 

(2013). Using a 7% discount rate, we estimate the total monetized co-benefits of the final rule to 

be $55 million to $140 million. The annualized social costs of the reconsidered SI RICE 

NESHAP are $115 million at a 7% interest rate.63 Thus, the net benefits are $-53 million to $35 

million at a 3% discount rate and $-60 million to $ 25 million at a 7% discount rate. All estimates 

are in 2010$ for the year 2013. 

Table 7-5 shows a summary of the monetized co-benefits, social costs, and net benefits 

for the reconsidered SI RICE NESHAP , respectively. Figures 7-8 and 7-9 show the full range of 

net benefits estimates (i.e., annual co-benefits minus annualized costs) utilizing the 14 different 

PM2.5 mortality functions at discount rates of 3% and 7%. In addition, the benefits from reducing 

22,000 tons of carbon monoxide and 1,800 tons of HAPs each year from SI RICE have not been 

included in these estimates. 

 

 

63 For more information on the annualized social costs, please refer to Section 5 of this RIA. 

Deleted: proposal

Deleted: proposal

Deleted: proposal
7-32 

Table 7-5. Summary of the Annualized Monetized Benefits, Social Costs, and Net 

Benefits for the SI RICE NESHAP Reconsideration in 2013 (millions of 2010$)1

 3% Discount Rate 7% Discount Rate 

Total Monetized Benefits2 $62 to $150 $55 to $140 

Total Compliance Costs3 $115 $115 

Net Benefits $-53 to $35 $-60 to $25 

Non-monetized Benefits 

Health effects from HAP exposure 

Health effects from CO, NO2, and ozone exposure 

Ecosystem effects 

Visibility impairment 

1

All estimates are for the implementation year (2013), and are rounded to two significant figures. 

2

 The total monetized benefits reflect the human health benefits associated with reducing exposure to PM2.5 through 

reductions of PM2.5 precursors such as NOx. Human health benefits are shown as a range from Pope et al. (2002) 

to Laden et al. (2006). These models assume that all fine particles, regardless of their chemical composition, are 

equally potent in causing premature mortality because the scientific evidence is not yet sufficient to allow 

differentiation of effects estimates by particle type. Although we have not re-estimated the benefits for this rule to 

apply the updated methods in the PM NAAQS RIA (U.S. EPA, 2012b), these updates generally offset each other, 

and we anticipate that the rounded benefits estimated for this rule are unlikely to be different than those provided 

here. 3 The annual compliance costs serve as a proxy for the annual social costs of this rule given the lack of difference 

between the two. The engineering compliance costs are annualized using a 7 percent discount rate. 

 

Deleted: Proposed

Formatted Table

Deleted: Because these estimates were 

generated using benefit-per-ton estimates, 

we do not break down the total monetized 

benefits into specific components here. 

See Figure 7-1 for an illustration of the 

breakdown, or the RIA for the final 

Cross-States Air Pollution Rule (EPA, 

2011) for more information. 
7-32 

Figure 7-8. Net Benefits for SI RICE NESHAP Reconsideration at 3% discount rate* 

*Net Benefits are quantified in terms of PM2.5 at a 3% discount rate for 2013 and are in 2010$. This graph shows 14 

benefits estimates combined with the cost estimate. All fine particles are assumed to have equivalent health effects. 

The monetized benefits incorporate the conversion from precursor emissions to ambient fine particles. 

‐$100

‐$80

‐$60

‐$40

‐$20

$0

$20

$40

$60

$80

$100

Pope et al.

Laden et al.

Millions (2010$)

Cost estimate combined with total monetized benefits estimates derived from 2

epidemiology functions and 12 expert functions

Deleted: Proposed 
7-32 

Figure 7-9. Net Benefits for SI RICE NESHAP Reconsideration at 7% discount rate* 

*Net Benefits are quantified in terms of PM2.5 benefits at a 7% discount rate at a 3% discount rate for 2013 and are 

in 2010$. This graph shows 14 benefits estimates combined with the cost estimate. The monetized benefits 

incorporate the conversion from precursor emissions to ambient fine particles. 

‐$100

‐$80

‐$60

‐$40

‐$20

$0

$20

$40

$60

$80

Pope et al.

Laden et al.

Millions (2010$)

Cost estimate combined with total monetized benefits estimates derived from 2

epidemiology functions and 12 expert functions

Deleted: Proposed 
7-32 

7.5 References 

Fann, N., C.M. Fulcher, B.J. Hubbell. 2009. “The influence of location, source, and emission 

type in estimates of the human health benefits of reducing a ton of air pollution.” Air Qual 

Atmos Health 2:169–176. 

Gwinn, M.R., J. Craig, D.A. Axelrad, R. Cook, C. Dockins, N. Fann, R. Fegley, D.E. Guinnup, 

G. Helfand, B. Hubbell, S.L. Mazur, T. Palma, R.L. Smith, J. Vandenberg, and B. Sonawane. 

2011. “Meeting report: Estimating the benefits of reducing hazardous air pollutants—

summary of 2009 workshop and future considerations.” Environ Health Perspect. Jan; 

119(1): p. 125-30. 

Kochi, I., B. Hubbell, and R. Kramer. 2006. “An Empirical Bayes Approach to Combining 

Estimates of the Value of Statistical Life for Environmental Policy Analysis.” 

Environmental and Resource Economics. 34: 385-406. 

Krewski D, Jerrett M, Burnett RT, Ma R, Hughes E, Shi, Y, et al. 2009. Extended follow-up and 

spatial analysis of the American Cancer Society study linking particulate air pollution and 

mortality. HEI Research Report, 140, Health Effects Institute, Boston, MA. 

Laden, F., J. Schwartz, F.E. Speizer, and D.W. Dockery. 2006. Reduction in Fine Particulate Air 

Pollution and Mortality. American Journal of Respiratory and Critical Care Medicine. 173: 

667-672. 

Mrozek, J.R., and L.O. Taylor. 2002. “What Determines the Value of Life? A Meta-Analysis.” 

Journal of Policy Analysis and Management 21(2):253-270. 

National Research Council (NRC). 2002. Estimating the Public Health Benefits of Proposed Air 

Pollution Regulations. Washington, DC: The National Academies Press. 

National Research Council (NRC). 2009. Hidden Costs of Energy: Unpriced Consequences of 

Energy Production and Use. National Academies Press. Washington, DC. 

Office of Management and Budget (OMB). 2003. Circular A-4: Regulatory Analysis. 

Washington, DC. Available on the Internet at 

http://www.whitehouse.gov/omb/circulars/a004/a-4.html. 

Pope, C.A., III, R.T. Burnett, M.J. Thun, E.E. Calle, D. Krewski, K. Ito, and G.D. Thurston. 

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Bryan J. Hubbell, and Patrick L. Kinney. 2008. “Expert Judgment Assessment of the 

Mortality Impact of Changes in Ambient Fine Particulate Matter in the U.S.” Environ. Sci. 

Technol., 42(7):2268-2274. 

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0.25"
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Section 8

REFERENCES FOR RIA 

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8-2 

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Deleted: >
8-3 

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8-4 

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8-5 

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8-6 

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Deleted: >

Deleted: >
8-7 

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Environmental Impacts Division. June. Available at 

http://www.epa.gov/ttnecas1/regdata/RIAs/PMRIACombinedFile_Bookmarked.pdf.

U.S. Environmental Protection Agency (U.S. EPA). 2012b. Regulatory Impact Analysis for the 

Final Revisions to the National Ambient Air Quality Standards for Particulate Matter. 

EPA-452/R-12-003. Office of Air Quality Planning and Standards, Health and 

Environmental Impacts Division. December. Available at 

http://www.epa.gov/pm/2012/finalria.pdf.

Deleted: >
8-8 

U.S. Environmental Protection Agency - Science Advisory Board (U.S. EPA-SAB). 2004. 

Advisory on Plans for Health Effects Analysis in the Analytical Plan for EPA’s Second 

Prospective Analysis – Benefits and Costs of the Clean Air Act, 1990-2020. Advisory by 

the Health Effects Subcommittee of the Advisory Council on Clean Air Compliance 

Analysis. EPA-SAB-COUNCIL-ADV-04-002. March. Available at at 

http://yosemite.epa.gov/sab%5CSABPRODUCT.NSF/08E1155AD24F871C85256E5400

433D5D/$File/council_adv_04002.pdf . 

U.S. Environmental Protection Agency—Science Advisory Board (U.S. EPA-SAB). 2007. SAB 

Advisory on EPA’s Issues in Valuing Mortality Risk Reduction. EPA-SAB-08-001. 

October. Available at 

<http://yosemite.epa.gov/sab/sabproduct.nsf/4128007E7876B8F0852573760058A978/$F

ile/sab-08-001.pdf . 

U.S. Environmental Protection Agency—Science Advisory Board (U.S. EPA-SAB). 2009a. 

Review of EPA’s Integrated Science Assessment for Particulate Matter (First External 

Review Draft, December 2008). EPA-COUNCIL-09-008. May. Available at 

<http://yosemite.epa.gov/sab/SABPRODUCT.NSF/81e39f4c09954fcb85256ead006be86

e/73ACCA834AB44A10852575BD0064346B/$File/EPA-CASAC-09-008-

unsigned.pdf>. 

U.S. Environmental Protection Agency—Science Advisory Board (U.S. EPA-SAB). 2009b. 

Consultation on EPA’s Particulate Matter National Ambient Air Quality Standards: 

Scope and Methods Plan for Health Risk and Exposure Assessment. EPA-COUNCIL-09-

009. May. Available at at 

<http://yosemite.epa.gov/sab/SABPRODUCT.NSF/81e39f4c09954fcb85256ead006be86

e/723FE644C5D758DF852575BD00763A32/$File/EPA-CASAC-09-009-unsigned.pdf>. 

U.S. Small Business Administration (SBA). 2008. “Table of Small Business Size Standards 

Matched to North American Industry Classification System Codes.” Effective August 22, 

2008. http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_

tablepdf.pdf . 

Viscusi, V.K., and J.E. Aldy. 2003. “The Value of a Statistical Life: A Critical Review of Market 

Estimates throughout the World.” Journal of Risk and Uncertainty 27(1):5-76. 

Wade, S.H. 2003. “Price Responsiveness in the AEO2003 NEMS Residential and Commercial 

Buildings Sector Models.” 

http://www.eia.doe.gov/oiaf/analysispaper/elasticity/pdf/buildings.pdf . 

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 benefits were calculated using a methodology described in the 2010 final SI RICE RIA, 

using the revised emission reductions estimated for the reconsideration proposal and accounting 

for other changes discussed in detail in Section 7 of this RIA. We were unable to estimate the 

benefits from reducing exposure to HAPs, ecosystem impairment, and visibility impairment, 

including reducing 22,000 tons of carbon monoxide, 9,000 tons of VOC and 1,800 tons of HAPs. 

Please refer to the full description later in this RIA of the unquantified benefits as well as 

technical details of the analysis and its limitations and uncertainties. These monetized benefits 

are approximately 90% lower than the 2010 final SI RICE rule due to the estimated decrease in 

NOx emission reductions. These benefit-per-ton estimates were calculated for a 2013 analysis 

year (i.e., using population and income growth for 2013). See Tables 1-2 and 1-3 for the updated 

benefits results. 

Table 1-3: Summary of Monetized PM2.5-Related Co-Benefits Estimates for SI RICE 

Reconsideration Proposal in 2013 

Pollutant 

Emissions 

Reductions 

(tons) 

Benefit 

per ton 

(Pope, 

3%) 

Benefit 

per ton 

(Laden, 

3%) 

Benefit 

per ton 

(Pope, 

7%) 

Benefit 

per ton 

(Laden, 

7%) 

Total 

Monetized 

Benefits 

(millions 2010$ 

at 3%) 

Total Monetized 

Benefits 

(millions 2010$ 

at 7%) 

 NOx 9,648 $6,400 $16,000 $5,700 $14,000 $62 to $150 $55 to $140 

 Total $62 to $150 $55 to $140 

*All estimates are for the implementation year (2013), and are rounded to two significant figures so numbers may 

not sum across columns. It is important to note that the monetized benefits do not include reduced health effects 

from direct exposure to NO2, ozone exposure, ecosystem effects, or visibility impairment. All fine particles are 

assumed to have equivalent health effects, but the benefit per ton estimates vary because each ton of precursor 

reduced has a different propensity to form PM2.5. Confidence intervals are unavailable for this analysis because of 

the benefit-per-ton methodology. 

 
Table 1-4: Summary of Estimated Reductions in Health Incidences from PM2.5 for the 

SI RICE Reconsideration Proposal in 2013 

 Final Proposed Reconsideration Option 

Avoided Premature Mortality 

Pope et al. 7 

 Laden et al. 18 

Avoided Morbidity 

Chronic Bronchitis 5 

 Emergency Room Visits, Respiratory 5 

Hospital Admissions, Respiratory 1 

Hospital Admissions, Cardiovascular 3 

 Acute Bronchitis 11 

 Lower Respiratory 140 

Upper Respiratory 110 

 Minor Restricted Activity Days 5,600 

Work Loss Days 950 

Asthma Exacerbation 230 

Acute Myocardial Infarction 8 

Page 4: [2] Deleted Alamson 1/7/2013 1:46:00 PM 
* All estimates are for the analysis year (2013) and are rounded to whole numbers with 

two significant figures. All fine particles are assumed to have equivalent health effects because 

the scientific evidence is not yet sufficient to allow differentiation of effects estimates by particle 

type. Confidence intervals are unavailable for this analysis because of the benefit-per-ton 

methodology. 

 Figure 1-1 provides a breakdown of the total monetized co-benefits from 

reductions of PM2.5 emissions by engine size associated with the reconsideration ruleproposal. 

Figure 1-2 provides a visual representation of the range of PM2.5-related benefits estimates 

using concentration-response functions supplied by experts. 

Figure 1-1: Breakdown of Total Monetized PM2.5 Co-Benefits of the Proposed SI RICE 

Reconsideration by Engine Size 

Area 500‐600 HP

21%

Area 600‐750 HP

5%

Area >750 HP

74%
Figure 1-2: Total Monetized PM2.5 Co-Benefits Estimates for the SI RICE 

Reconsideration Proposal in 2013 
*This graph shows the estimated benefits at discount rates of 3% and 7% using effect 

coefficients derived from the Pope et al. study and the Laden et al study, as well as 12 effect 

coefficients derived from EPA’s expert elicitation on PM mortality. The results shown are not 

the direct results from the studies or expert elicitation; rather, the estimates are based in part on 

the concentration-response function provided in those studies. 

Page Break

T 

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Page 2: [4] Deleted EPA 1/8/2013 10:06:00 AM 

Currently, SI 4SRB non-emergency engines greater than 500 HP and located at major sources 

and existing SI 4SRB non-emergency engines greater than 500 HP located at area sources have 

the option of meeting either a formaldehyde percent reduction or a formaldehyde concentration 

standard. Formaldehyde was established in the original 2004 RICE NESHAP as an appropriate 

surrogate for HAP emissions from 4SRB engines based on industry test data available at that 

time. Based on testing conducted at Colorado State University (CSU) of stationary lean burn 

engines, the EPA was able to establish CO as a surrogate for HAP for lean burn engines. Rich 

$0

$50

$100

$150

$200

$250

Pope et al.

Laden et al.

Millions(2010$)

PM2.5mortality benefits estimates derived from 2 epidemiology functions and 12 expert functions

3% DR

7% DR
burn engines were not tested at CSU and the data the EPA had available at the time that were 

used to set the standards for rich burn engines did not support the same relationship between CO 

and HAP reductions for rich burn engines. Therefore, the EPA was unable to establish CO as a 

surrogate for HAP emissions for rich burn engines and the emission standard for rich burn 

engines was specified in terms of formaldehyde, the hazardous air pollutant emitted in the largest 

quantity from stationary engines. 

 The EPA has previously acknowledged that it is significantly more expensive and 

difficult to test for formaldehyde than for CO, but has been unable in the past to support 

including the same flexibility for rich burn engines as is currently in the rule for lean burn 

engines with the option to meet the standards in terms of either formaldehyde or CO. For these 

reasons, and expecting that new data for rich burn engines may become available in the future 

for the EPA to review and reassess possible surrogates for HAP, the EPA requested comment on 

this issue when proposing NESHAP for stationary existing engines less than or equal to 500 HP 

at major sources and all stationary existing engines at area sources in 2009 (74 FR 9698). 

Specifically, the EPA solicited comment on whether it would be appropriate to include an 

alternative standard in terms of VOC and asked that commenters submit data supporting the 

relationship between HAP and VOC. Comments the EPA received back on the proposed rule 

asked that the formaldehyde standards for rich burn engines be replaced with emission standards 

for THC. The EPA determined at the time that it was not appropriate to adopt an alternative 

standard in terms of THC (or VOC) for rich burn engines and discussed the reasons why in the 

2010 responses to comments. Compliance with the formaldehyde standard in the rule is, 

therefore, currently demonstrated by initial and continuous performance testing for 

formaldehyde. 

 On October 19, 2010, engine manufacturer Dresser-Waukesha submitted a petition for 

reconsideration of the formaldehyde requirements. The EPA granted the petition for 

reconsideration on January 5, 2011. (In addition, on November 3, 2010, the Engine 

Manufacturers Association submitted a petition for judicial review of these requirements.) In the 

petition for reconsideration, Dresser-Waukesha argued that formaldehyde is difficult and costly 

to measure. The petition requested that the HAP surrogate for 4SRB engines should be THC 

rather than formaldehyde. Dresser-Waukesha submitted data from testing it conducted 

illustrating that THC reduction across the catalyst is an appropriate surrogate for HAP reduction 

across the catalyst. According to the petitioner, testing for THC is easier and less costly and 

would substantially reduce the burden of the rule for owners and operators of these engines. 

Testing for formaldehyde emissions could cost more than double that of testing for THC 
emissions and on a nationwide basis the EPA estimates that replacing formaldehyde testing with 

THC testing would result in substantial compliance cost savings annually while achieving the 

same reduction in HAP emissions. 

The EPA has reviewed the data submitted by Dresser-Waukesha. The data provided indicate that 

a strong relationship exists between percentage reductions of THC and percentage reductions of 

formaldehyde (the surrogate for HAP emissions in the NESHAP) on rich burn engines using 

non-selective catalytic reduction (NSCR). Data analyzed by the EPA indicate that if the NSCR is 

reducing THC by at least 30 percent from 4SRB engines, formaldehyde emissions are guaranteed 

to be reduced by at least 76 percent, which is the percentage reduction required for the relevant 

engines. Indeed, the percentage reduction of formaldehyde is invariably well above the 76 

percent level, and is usually above 90 percent. Therefore, the EPA agrees with the petitioner that 

for SI 4SRB engines using NSCR and meeting the NESHAP by showing a percentage reduction 

of HAP, it would be appropriate to allow sources to demonstrate compliance with the NESHAP 

by showing a THC reduction of at least 30 percent. Including an optional THC compliance 

demonstration option would reduce the burden of compliance significantly while continuing to 

achieve the same level of HAP emission reduction because the emission standards would remain 

the same. Consequently, the EPA is finalizing proposing amendments to allow owners and 

operators of certain stationary 4SRB engines (i.e., the ones currently subject to a formaldehyde 

percent reduction requirement) to show compliance with an optional THC compliance 

demonstration option. The specific amendments the EPA is finalizproposing are presented 

below. 

Page 3: [5] Deleted EPA 1/8/2013 10:09:00 AM 

The EPA is proposing to adding an alternative method of demonstrating compliance with the 

NESHAP for stationary 4SRB non-emergency engines greater than 500 HP that are located at 

major sources of HAP emissions and for existing stationary 4SRB non-emergency engines 

greater than 500 HP that are located at area sources of HAP emissions that choose to meet the 

formaldehyde percent reduction requirement of 76 percent or more. 

 Based on the arguments and evidence presented in the petition discussed above, the EPA 

is proposing to adding a compliance demonstration option for stationary 4SRB engines meeting a 

76 percent or more formaldehyde reduction. The compliance demonstration option would be an 

alternative to the existing method of demonstrating compliance with the formaldehyde percent 

reduction standard, which is to test engines for formaldehyde. The alternative for owners and 

operators of 4SRB engines meeting a 76 percent or more formaldehyde reduction would be to 
test their engines for THC showing that the engine is achieving at least a 30 percent reduction of 

THC emissions. 

 Under the proposed amendments, existing and new stationary 4SRB engines greater than 

500 HP and located at major sources would still be required to reduce formaldehyde emissions 

by 76 percent or more or limit the concentration of formaldehyde in the stationary RICE exhaust 

to 350 parts per billion by volume, dry basis or less at 15 percent oxygen (O2). However, owners 

and operators choosing to meet the formaldehyde concentration limit would not have the THC 

demonstration compliance option, because EPA could not verify a clear relationship between 

concentrations of THC and concentrations of formaldehyde in exhaust from these SI 4SRB 

engines. The EPA is requiring is proposing that existing stationary 4SRB non-emergency 

engines greater than 500 HP located at area sources located in populated areas be subject to an 

equipment standard and required to install a catalyst. These engines would be subject to testing 

to demonstrate initially and on an ongoing basis that the catalyst is reducing CO by 75 percent or 

more, or alternatively that THC emissions are being reduced by 30 percent or more. 

 Owners and operators of existing stationary 4SRB engines less than or equal to 500 HP 

who are required to limit the concentration of formaldehyde in the stationary RICE exhaust to 

10.3 parts per million by volume, dry basis (ppmvd) or less at 15 percent O2 do not have the 

option to demonstrate compliance using THC and must continue to demonstrate compliance by 

testing for formaldehyde following the methods and procedures specified in the rule. 

 Owners and operators opting to use the THC compliance demonstration method must 

demonstrate compliance by showing that the average reduction of THC is equal to or greater 

than 30 percent. Owners and operators of 4SRB stationary RICE complying with the requirement 

to reduce formaldehyde emissions and demonstrating compliance by using the THC compliance 

demonstration option must conduct performance testing using Method 25A of 40 CFR part 60, 

appendix A – Determination of Total Gaseous Organic Concentration Using a Flame Ionization 

Analyzer. Measurements of THC at the inlet and the outlet of the NSCR must be on a dry basis 

and corrected to 15 percent O2 or equivalent carbon dioxide content. To correct to 15 percent 

O2, dry basis, owners and operators must measure oxygen using Method 3, 3A or 3B of 40 CFR 

part 60, appendix A, or ASTM Method D6522-00 (2005) and measure moisture using Method 4 

of 40 CFR part 60, appendix A, or Test Method 320 of 40 CFR part 63, appendix A, or ASTM 

D6348-03. Because owners and operators are complying with a percent reduction requirement, 

the method used must be suitable for the entire range of emissions since pre and post-catalyst 

emissions must be measured. Method 25A is capable of measuring emissions down to 5 ppmv 

and is, therefore, an appropriate method for measuring THC emissions for compliance 
demonstration purposes. The EPA is allowing sources the option to meet a minimum THC 

percent reduction of 30 percent by using Method 25A of 40 CFR part 60, appendix A to 

demonstrate compliance with the formaldehyde percent reduction in 40 CFR part 63, subpart 

ZZZZ. 

Page 4: [6] Deleted EPA 1/8/2013 10:11:00 AM 

The EPA is proposing to revisinge the current provisions for stationary engines used for 

emergency demand response operation. The provisions the EPA is proposing to amending are in 

§§63.6640(f) and 63.6675 of 40 CFR part 63, subpart ZZZZ. Currently, §63.6640(f)(1)(iii) 

allows a maximum of 15 hours per year to be spent towards demand response operation under 

certain qualifying conditions. Also, §63.6640(f)(1)(ii) currently includes an allowance of 100 

hours per year for purposes of maintenance checks and readiness testing. The EPA is requiring is 

proposing that owners and operators of stationary emergency RICE be permitted to operate their 

engines as part of an emergency demand response program within the 100 hours per year that is 

permitted for maintenance and testing in §63.6640(f)(1)(ii). Owners and operators of stationary 

emergency engines can operate for emergency demand response during periods in which the 

regional transmission authority or equivalent balancing authority and transmission operator has 

declared an EEA Level 2 as defined in the North American Electric Reliability Corporation 

Reliability Standard EOP-002-3, Capacity and Energy Emergency and during periods where 

there is a deviation of voltage or frequency of 5 percent or greater below standard voltage or 

frequency. The hours spent for emergency demand response operation are added to the hours 

spent for maintenance and testing purposes and counted towards the 100 hours per year. If the 

total time spent for demand response operation and maintenance and testing exceeds 100 hours 

per year the engine will not be considered an emergency engine under this subpart and will need 

to meet all requirements for non-emergency engines. The EPA is recognizing that these engines 

may be called to operate not only by the regional transmission operator or equivalent to maintain 

the reliability of the bulk power system, but also by the local transmission and distribution 

system operators to support the local power systems. 

 For stationary emergency engines above 500 HP that were installed prior to June 12, 

2006, there is currently no emergency demand response allowance and there is no time limit on 

the use of emergency engines for routine testing and maintenance in §63.6640(f)(2)(ii). Those 

engines were not the focus of the 2010 RICE NESHAP amendments; therefore, the EPA did not 

make any changes to the requirements for those engines as part of the 2010 amendments. For 

consistency, the EPA is now also requiring proposing that owners and operators of stationary 
emergency engines installed prior to June 12, 2006, be permitted to operate their engines as part 

of a demand response program as well for a total of 100 hours per year, including time spent for 

maintenance and testing. 

 The EPA is also proposing to amending the NSPS for stationary CI and SI engines in 40 

CFR part 60, subparts IIII and JJJJ, respectively, to provide the same allowance for stationary 

emergency engines for emergency demand response operation as for engines subject to the RICE 

NESHAP. The NSPS regulations currently do not include such an allowance for emergency 

demand response operation. For the reasons discussed as to why the EPA finds it appropriate to 

allow stationary emergency engines to participate in emergency demand response programs and 

remain being considered emergency units, and for consistency across engine regulations, the 

EPA is proposing to adding an emergency demand response allowance under the NSPS 

regulations. Consequently, the EPA is proposing to revisinge the existing language in 

§§60.4211(f) and 60.4219 of 40 CFR part 60, subpart IIII, and §§60.4243(d) and 60.4248 of 40 

CFR part 60, subpart JJJJ, to specify that emergency engines may participate in demand response 

programs for up to 100 hours per year, including hours spent towards maintenance and testing of 

the emergency engines. 

 In addition to the changes the EPA is makproposing related to emergency demand 

response operation, the EPA is also including a further provision for owners and operators of 

existing stationary emergency RICE located at area sources for the reasons discussed. Paragraph 

§63.6640(f) currently allows owners and operators of emergency stationary RICE to operate 

their engine for 50 hours per year in non-emergency situations. As currently written, the 50 hours 

per year for non-emergency situations cannot be used for peak shaving or to generate income for 

a facility to supply power to an electric grid or otherwise supply power as part of a financial 

arrangement with another entity; except that owners and operators of certain emergency engines 

may operate the engine for a maximum of 15 hours per year as part of an emergency demand 

response program. As discussed, the 15 hours per year allowance for emergency engines to 

participate in emergency demand response programs is being increased to 100 hours per year, 

but will also include hours spent towards maintaining and conducting readiness testing of the 

emergency engines. However, additionally, the EPA is also allowing proposing that stationary 

emergency engines located at area sources be permitted to apply the 50 hours per year that is 

currently allowed under §63.6640(f) for non-emergency operation towards any non-emergency 

operation, including operation as part of a financial agreement with another entity. The peak 

shaving allowance would expire in 201417. The EPA is specifying that the power can only be 

used at the facility or towards the local system, and the engine can only be operated for peak 
shaving as part of a program with the local distribution system operator. The EPA is also 

clarifying that an engine that exceeds the calendar year limitations on non-emergency operation, 

including emergency demand response or peak shaving, will be considered a non-emergency 

engine and subject to the requirements for non-emergency engines for the remaining life of the 

engine. 

 To estimate emissions from emergency engines the EPA has previously estimated that 

these types of engines would on average operate for 50 hours per year. The average hours of 

operation for emergency engines is not expected to change based on the proposed amendments 

and 50 hours per year is still believed to be representative of emergency engine operation. 

Therefore, the emissions previously calculated remain appropriate. In terms of any revenue 

generated from participation in demand response and peak shaving 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 

emergency demand response programs and peak shaving operation, but the EPA has not 

accounted for any potential revenue in estimating the costs and benefits of the final proposed 

amendments. It is uncertain how frequently stationary emergency engines would operate if they 

are called upon. Other factors, such as the annual revenue from demand response programs 

(which varies), are also uncertain making it problematic to estimate the economic benefit of such 

programs. As such, the EPA has not estimated any costs associated with the final emergency 

engine amendments. 

Page 11: [7] Deleted EPA 1/8/2013 10:20:00 AM 

The EPA is also proposing to amending the requirements that apply to existing stationary nonemergency 4 stroke SI RICE greater than 500 HP located at area sources of HAP emissions, 

which are generally natural gas fired engines. Currently, the RICE NESHAP requires owners and 

operators of such engines to 1) either meet a CO concentration limit of 47 parts ppmvd at 15 

percent O2 or reduce emissions of CO by 93 percent or more, if the engines are 4SLB; and 2) to 

meet a formaldehyde concentration limit of 2.7 ppmvd at 15 percent O2 or reduce formaldehyde 

emissions by 76 percent or more, if the engines are 4SRB. In both cases, the EPA expects that 

the standards would be met using aftertreatment; oxidation catalysts for 4SLB engines and 

NSCR for 4SRB engines. In addition to these emission requirements, owners and operators of 

existing stationary 4-stroke engines greater than 500 HP at area sources are also subject to 

monitoring, testing, recordkeeping and reporting requirements. 
After the final requirements for existing stationary SI engines greater than 500 HP at area 

sources were published on August 20, 2010 (75 FR 51570), the EPA received petitions from 

Exterran (EPA-HQ-OAR-2008-0708-0581), the American Petroleum Institute (EPA-HQ-OAR2008-0708-0582), the Interstate Natural Gas Association of America (EPA-HQ-OAR-2008-

0708-0584), and the Gas Processors Association (EPA-HQ-OAR-2008-0708-0587) requesting 

that the EPA reconsider the requirements of the final rule. The petitioners expressed many 

similar concerns. As relevant to this rulemaking, petitioners stated that the EPA did not take into 

account the difference in population density and subsequently did not consider the difference in 

health impacts in remote versus more heavily populated locations. In the petitioner’s opinion, 

there should be less concern about engines that are located farther away from people; the 

petitioners believed that the EPA has substantial latitude in requiring less stringent standards for 

owners and operators of stationary engines in remote areas. 

 While the EPA does not share all of the views of the petitioners regarding the difference 

between engines based on their location, the EPA does believe that it is reasonable to create a 

subcategory of existing stationary SI 4SLB and 4SRB engines above 500 HP located in areas 

remote from human activity. Engines located in remote areas that are not close to significant 

human activity may be difficult to access, may not have electricity or communications, and may 

be unmanned most of the time. The costs of the emission controls, testing, and continuous 

monitoring requirements may be unreasonable when compared to the HAP emission reductions 

that would be achieved, considering that the engines are in sparsely populated areas. The EPA 

believes that establishing a subcategory for SI engines at area sources of HAP located in sparsely 

populated areas accomplishes the agency’s goals and is adequate in protecting public health. 

 The EPA is proposing to subcategorizinge sparsely populated engines using the existing 

DOT pipeline classification system. This system classifies locations based on their distance to 

pipelines covered by the Pipeline and Hazardous Materials Safety Administration safety 

regulations. The DOT system defines a class location unit as an onshore area that extends 220 

yards or 200 meters on either side of the centerline of any continuous 1-mile (1.6 kilometers) 

length of pipeline. The DOT approach further classifies pipeline locations into Class 1 through 

Class 4 locations based on the number of buildings intended for human occupancy. A Class 1 

location is defined as an offshore area or any class location unit that has 10 or fewer buildings 

intended for human occupancy. The DOT classification system also has special provisions for 

locations that lie within 100 yards (91 meters) of either a building or a small, well-defined 

outside area (such as a playground, recreation area, outdoor theater, or other place of public 

assembly) that is occupied by 20 or more persons on at least 5 days a week for 10 weeks in any 
12-month period, and for class location units where buildings with four or more stories above 

ground are prevalent. To be considered remote, a source could not fall under one of these special 

provisions. 

Stakeholders from the oil and gas industry have indicated to the EPA that the DOT system is 

well-established and there would be substantial overlap between engines affected by the rule and 

covered by the DOT pipeline classification system. Incorporating this approach would also 

create harmonization between the EPA and DOT and would reduce the implementation and 

enforcement burden for states. Implementation for affected sources would also be less 

burdensome because the system is already in place and used by industry and covers the majority 

of these engines. Stakeholders have indicated they are required to review the class location status 

of pipeline segments annually. The EPA believes this approach is reasonable for defining the 

subcategory of remote engines for those engines that are associated with natural gas pipelines. 

For those engines not associated with pipelines, the EPA is using similar criteria. An engine 

would be considered to be in sparsely populated areas if within 0.25 mile radius of the engine 

there are 5 or fewer buildings intended for human occupancy. EPA requests comment on 

whether the use of these DOT classifications are appropriate for airborne emissions and whether, 

to be considered remote, an engine not associated with a natural gas pipeline should also need to 

be farther than 100 yards (91 meters) of either a building or a small, well-defined outside area 

(such as a playground, recreation area, outdoor theater, or other place of public assembly) that is 

occupied by 20 or more persons on at least 5 days a week for 10 weeks in any 12-month period. 

The EPA is proposing finalizing management practices as generally available control 

technologies for existing stationary SI 4SLB and 4SRB area source non-emergency engines 

located in sparsely populated areas. Given the remote location of the engines from human 

activity, the EPA believes that it is appropriate not to include requirements that would necessitate 

aftertreatment and extensive testing and monitoring. The EPA has previously estimated that the 

costs of oxidation catalyst for existing 4SLB and 4SRB engines above 500 HP at area sources are 

$310 and $150 million, for capital and annual costs, respectively. The capital and annual costs of 

the RICE NESHAP for existing 4SLB and 4SRB engines above 500 HP at area sources would be 

$30 million and $12 million, respectively, if these proposed amendments are incorporated into 

the rule. Creating a subcategory of these engines for the ones located in sparsely populated areas 

and not mandating emission controls would significantly reduce the cost of the rule for such 

engines. 

For existing stationary SI 4SLB and 4SRB area source non-emergency engines that are located in 

populated areas, the EPA is finalizproposing an equipment standard that requires the installation 
and operation of a catalyst that will have to be tested initially and annually to ensure that the 

catalyst is working properly and reducing emissions as required. In addition, these units will be 

required to have devices to shut down the engine if the catalyst is exposed to dangerous 

temperatures or have continuous monitoring equipment installed to record catalyst inlet 

temperatures. The EPA is finalizproposing shorter test duration and less rigorous methods than 

currently required while still ensuring that HAP reductions remain at expected levels for these 

engines located in populated areas. The specific amendments the EPA is finalizingproposing are 

discussed below. 

4.2.3.2. What are the Proposed Final Amendments? 

 Owners and operators of engines in sparsely populated areas would have to conduct a 

review of the surrounding area every 12 months to determine if the nearby population has 

changed. If the engine no longer meets the criteria for a sparsely populated area the owner and 

operator must within 1 year comply with the emission standards specified below for populated 

areas. The EPA requests comment on whether engines that are not associated with pipelines 

should be required to conduct the review less frequently than every 12 months. 

Owners and operators of existing stationary 4SLB and 4SRB greater than 500 HP at area sources 

that are in sparsely populated areas as described above would be required to perform the 

following: 

•Change oil and filter every 1,440 hours of operation or annually, whichever comes first; 

•Inspect spark plugs every 1,440 hours of operation or annually, whichever comes first, and 

replace as necessary; and 

•Inspect all hoses and belts every 1,440 hours of operation or annually, whichever comes first, 

and replace as necessary. 

Sources have the option to use an oil analysis program as described in §63.6625(i) of the rule in 

order to extend the specified oil change requirement. The oil analysis must be performed at the 

same frequency specified for changing the oil in Table 2d of the rule. The analysis program must 

at a minimum analyze the following three parameters: Total Acid Number, viscosity, and percent 

water content. The condemning limits for these parameters are as follows: Total Acid Number 

increases by more than 3.0 milligrams of potassium hydroxide per gram from Total Acid 

Number of the oil when new; viscosity of the oil has changed by more than 20 percent from the 

viscosity of the oil when new; or percent water content (by volume) is greater than 0.5. If all of 
these condemning limits are not exceeded, the engine owner or operator is not required to change 

the oil. If any of the limits are exceeded, the engine owner or operator must change the oil within 

2 days of receiving the results of the analysis; if the engine is not in operation when the results of 

the analysis are received, the engine owner or operator must change the oil within 2 days or 

before commencing operation, whichever is later. The owner or operator must keep records of 

the parameters that are analyzed as part of the program, the results of the analysis, and the oil 

changes for the engine. The analysis program must be part of the maintenance plan for the 

engine. 

 Owners and operators of existing stationary 4SLB and 4SRB area source engines above 

500 HP in sparsely populated areas would also have to operate and maintain the stationary RICE 

and aftertreatment control device (if any) according to the manufacturer's emission-related 

written instructions or develop their own maintenance plan which must provide to the extent 

practicable for the maintenance and operation of the engine in a manner consistent with good air 

pollution control practice for minimizing emissions. 

 For engines in populated areas, i.e., existing stationary 4SLB and 4SRB non-emergency 

engines greater than 500 HP at area sources that are located on DOT Class 2 through Class 4 

pipeline segments or, for engines not associated with pipelines, that do not meet the 0.25 mile 

radius with 5 or less buildings criteria, the EPA is proposing to adopting an equipment standard 

requiring the installation of a catalyst to reduce HAP emissions. Owners and operators of 

existing area source 4SLB non-emergency engines greater than 500 HP in populated areas would 

be required to install an oxidation catalyst. Owners and operators of existing area source 4SRB 

non-emergency engines greater than 500 HP in populated areas would be required to install 

NSCR. Owners and operators must conduct an initial test to demonstrate that the engine achieves 

at least a 93 percent reduction in CO emissions or a CO concentration level of 47 ppmvd at 15 

percent O2, if the engine is a 4SLB engine. Similarly, owners and operators must conduct an 

initial performance test to demonstrate that the engine achieves at least a 75 percent CO 

reduction or a 30 percent THC reduction, if the engine is a 4SRB engine. The initial test must 

consist of three test runs. Each test run must be of at least 15 minute duration, except that each 

test run conducted using the proposed appendix A to 40 CFR part 63, subpart ZZZZ must consist 

of one measurement cycle as defined by the method and include at least 2 minutes of test data 

phase measurement. To measure CO, emission sources must use the CO methods already 

specified in subpart ZZZZ, or the proposed appendix A to 40 CFR part 63, subpart ZZZZ. The 

THC testing must be conducted using EPA Method 25A. 
 The owner or operator of both engine types must also use a high temperature shutdown 

device that detects if the catalyst inlet temperature is too high, or, alternatively, the owner or 

operator can monitor the catalyst inlet temperature continuously and maintain the temperature 

within the range specified in the rule. For 4SLB engines the catalyst inlet temperature must 

remain at or above 450°F and at or below 1,350°F. For 4SRB engines the temperature range 

must be greater than or equal to 750°F and less than or equal to 1,250°F at the catalyst inlet. 

Owners and operators must in addition to the initial performance test conduct annual checks of 

the catalyst to ensure proper catalyst activity. The annual check of the catalyst must at a 

minimum consist of one 15-minute run using the methods discussed above, except that each test 

run conducted using the proposed appendix A to 40 CFR part 63, subpart ZZZZ must consist of 

one measurement cycle as defined by the method and include at least 2 minutes of test data phase 

measurement. Owners and operators of 4SLB engines must demonstrate during the catalyst 

activity test that the catalyst achieves at least a 93 percent reduction in CO emissions or that the 

engine exhaust CO emissions are no more than 47 ppmvd at 15 percent O2. Owners and 

operators of 4SRB engines must demonstrate that their catalyst is reducing CO emissions by 75 

percent or more, or alternatively, that THC emissions are being reduced by at least 30 percent 

during the catalyst activity check. 

If the emissions from the engine do not exceed the levels required for the initial test or annual 

checks of the catalyst, then the catalyst is considered to be working properly. If the emissions 

exceed the specified pollutant levels in the rule, the exceedance(s) is/are not considered a 

violation, but the owner or operator would be required to shut down the engine and take 

appropriate corrective action (e.g., repairs, clean or replace the catalyst, as appropriate). A 

follow-up test must be conducted within 7 days of the engine being started up again to 

demonstrate that the emission levels are being met. If the retest shows that the emissions 

continue to exceed the specified levels, the stationary RICE must again be shut down as soon as 

safely possible, and the engine may not operate, except for purposes of start-up and testing, until 

the owner/operator demonstrates through testing that the emissions do not exceed the levels 

specified. 

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Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt 

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Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt 

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