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 Deleted: January 2, 2013
Deleted: EO12866CIRICERIAchangeme 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. Si nce 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 RIA 1 . These updates would reduce the monetized ... [1] Deleted: Proposediv This page is intentionally blank.v Janu a r y 201 3

Regulatory Impact Analysis (RIA) for Recons ideration 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 Deleted: M
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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 Deleted: 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) ¶ ... [2]

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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 .......

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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

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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 Contro l 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 PM 2.5 -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

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1-1. Breakdown of Total Monetized PM 2.5 Co-Benefits of CI RICE Reconsideration by Engine Size.............................................................

................................. 1

- 7 1-2. Total Monetized PM 2.5 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 Pi peline 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 Comp liance 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 PM 2.5 Health Co-benefits using Mortality Function from Pope et al. (2002) .............................................................................................. 7-10 7-2. Total Monetized PM 2.5 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 PM 2.5 Exposure in the Baseline..............................................................................

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...................... 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..................................................................

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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 Generatio n, 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. Shar eholder-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 Deleted: ¶ ¶ ¶
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............................................. ......1-5¶ <#>Summary of Estimated Reductions in Health Incidences from PM 2.5 for the CI RICE Reconsideration Proposal in 2013....................................... ....................1-6¶
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– 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 ........................................................................

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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 Power a Sector Energy Consumption (Quadrillion BTUs): 2013 ............. 11 5-5 Labor-based Employment Estimates for Reporting and Recordkeeping and Installing, Operating, and Maintaining Cont rol Equipment Requirements for the Final Reconsideration CI RICE NESHAP......................................................

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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 Deleted: 4-25

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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 sa les data obtained for affected small entities in an analysis of the impacts on small entities, EP A 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 $1 00 m illion or higher. EPA estimates the total
monetized co-benefits of the NESHAP to be $770 million to $1.9 b illion (2010$) 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) includingupdated epidemiology studies, health endpoints, and population data. Although we have not reestimated the benefits for this rule to apply th is 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. Deleted: Proposal

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Moved (insertion) [1]1- 7 Deleted: 9 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 Benefits 2 $770 to $1,900 $690 to $1,700 Total Compliance Costs 3 $373 $373

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

Non-monetized Benefits Health effects from HAP exposure

Health effects from PM 2.5 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 heal th benefits associated with reducing exposure to PM 2.5 through

reductions of PM 2.5 precursors such as directly emitted fine particle s. Human health benefits are shown as a range from Pope et al. (2002) to Laden et al. (2006). These mode ls assume that all fine particles, regardless of their chemical composition, are equally potent in causing prematur e 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 r ounded 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 annu alized using a 7 percent disc ount 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 RI CE, which are fully descri bed later in this RIA Deleted: proposed

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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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.
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Deleted: proposed1- 7 Deleted: 9 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 th e 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 finaliz ed ICI boilers and CISWI NESHAP rulemakings. Monetized benefits are the co-benefits of this rule from reductions in directly emitted PM 2.5 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% di scount rate and are from reductions in PM 2.5 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 the se 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 calcu lated for the final CI RICE rule. This outcome is also due to the overall minor changes in compliance costs. All of the se 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 Deleted: proposed

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Deleted: p Deleted: roposed
Deleted: proposed1- 7 Deleted: 9 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 per cent discount rate. The range for this rule is $770 million (2010$) to $1.9 billion (2010$) at 3 percent discount rate. The ra nge for the 2010 final SI RICE RIA was $850 million (2008$) to $2.1 billion ( 2008$) at 7 percent discount rate. The range for
th is 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 bill ion at 3 percent (in 2010 dollars).

Table 1- 3

. Summary of the Monetized Benefits, Comp liance 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 PM 2.5 emissions, a co-benefits of this rule . The annualized compliance costs are $373 million in 2010$ as noted earlier in this RIA, and ar e 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 RI A (U.S. EPA, 2012b), these updates generally offset each other, and we anticipate that the rounded benefits estimate d for this rule are unlikely to be different than those provided here. Deleted: proposal
Deleted: proposal
Deleted: e proposal
Deleted: 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 PM 2.5 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 thispreamble 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 been updated from th eir original currency ... [13]

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Deleted:3-7 SECTION 2
INTRODUCTION

EPA has reconsidered national emission standards for hazardous air pollutants (NESHAP) for existing stationary compression ign ition (CI) reciprocating internal combustion engines (RICE) that either are located at area sources of hazardous air po llutant (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 NESH AP 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. Finall y, 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. Deleted: is proposing
Deleted: reconsideration of

Deleted: proposed

Deleted: proposed3-7 SECTION 3
INDUSTRY PROFILE

Stationary CI engines almost always oper ate 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 o il (diesel fuel), not by natural gas or any other gaseous fuel. Industries in which st ationary CI engines are found are:

 electric power generation, transmissi on, 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, a nd distribution (NAICS 2211) is an industry group within the utilities sector (NAICS 22). It includes establishments that produce electrical energy or facilitate its transmi ssion 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. Foll owing market manipulati on in the early 2000s, Deleted: proposed3-7 however, several states have suspended their restru cturing efforts. The majority (58%) of diesel power generators controlled by combined heat and power (CHP) or independent power producers are located in states undergoi ng active restructuring (Figure 3-2).
Table 3-1. Key Statistics: Electric Power Generation, Transmission, and Distribution (NAICS 2211) ($2007)

2002 2007 Revenue ($10 6 ) 373,309 440,342 Payroll ($10 6 ) 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 Indust ries: 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 Producti on 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 1151997‐011997‐061997‐111998‐041998‐091999‐021999‐071999‐122000‐052000‐102001‐032001‐082002‐012002‐062002‐112003‐042003‐092004‐022004‐072004‐122005‐052005‐102006‐032006‐082007‐012007‐062007‐112008‐042008‐092009‐022009‐072009‐12IndexValue(Jan2002=100)3-7 Figure 3-2. Internal Combustion Generators by State: 2006
Source: U.S. Department of Energy, Energy Informati on 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 turb ine 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 repo rt, we use the following definitions:

 Establishmen t: An establishment is a single physical location where business is conducted or where services or in dustrial operations are performed. Diesel and Natural Gas Internal Combustion Generators By State

No Restructuring Suspended Restructuring Active Restructuring
100

50

10
13-7 Table 3-2. Direct Requirements for Electri c Power Generation, Transmission, and Distribution (NAICS 2211): 2002

Commodity Commodity Description Direct Requirements Coefficients a
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 a nd 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 Accoun ts: 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, in cluding revenue earned from premiums, commissions and fees, rents, interest, divi dends, 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 commonownership 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 Internati onal; 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, le ss 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 5003-7 Table 3-3. Firm Concentration for Electric Power Generation, Transmission, and Distribution (NAICS 2211): 2002

Commodity Establishments Receipts/Revenue

Number of Employees Employees per Establishment Amount ($10 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 Internati onal; 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 explor ing 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 in dustries: 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 partic ularly 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 th e 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- 9Table 3-4. United States Retail Electricity Sales Statistics: 2008Full-Service Providers Other ProvidersItem Investor-Owned Public Federal Cooperative Facility Energy Delivery TotalNumber of entities 3 62 1 25 1 NA NA 92Number of retail customers 46,985 2,160,220 36 940,697 1 NA NA 3,147,939Retail sales (103megawatthours) 2,257 70,303 9,625 21,868 117 NA NA 104,170Percentage of retail sales 2 67 9 21 0 — — 100Revenue from retail sales ($106) 113 5,934 473 1,994 6 NA NA 8,520Percentage of revenue 1.33 69.65 5.55 23.41 0.07 — — 100Average retail price (cents/kWh) 5.01 8.44 4.91 9.12 5.25 NA NA 8.18Source: 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

Regulated a 6.80% $12,341 $158,657
Mostly regulated b 8.50% $17,815 $175,218

Diversified c -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 enterprises a 1,187
Total receipts (10 3 ) $323,522,443
Net sales(10 3 ) $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 in dustrial operations are performed.

### 3- 12Table 3-7. Key Enterprise Statistics byEmployee Size for Electric Power Generation, Transmission, and Distribution (NAICS2211): 2007Variable All Enterprises<20Employees20–99Employee s100–499Employees500+EmployeesFirms 1,687 630 670 251 136Establishments 9,611 687 1,110 999 6,815Employment 503,134 3,622 31,455 42,527 425,530Receipts ($103) $440,342,284 $8,364,773 $21,825,969 $41,370,375 $368,781,167Receipts/firm ($103) $261,021 $13,277 $32,576 $164,822 $2,711,626Receipts/establishment($103)$45,817 $12,176 $19,663 $41,412 $54,113Receipts/employment($) $875 $2,309 $694 $973 $867Source: 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 Producti on and Capacity Utilization: Industrial Production” Series

ID: G17/IP_MINING_AND_UTILITY_DETAIL/IP.G211.S <h ttp://www.federalreserve.gov/datadownload/>. (January 27, 2010).
Table 3-8. Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111): ($2007)

2002 2007
Revenue ($10 6 ) 98,667 194,107
Payroll ($10 6 ) 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, in cluding revenue earned from premiums, commissions and fees, rents, interest, divi dends, and royalties. Receipts exclude all revenue collected for local, state, and federal taxes. 75 80 85 90 95 100 105 1101997‐011997‐061997‐111998‐041998‐091999‐021999‐071999‐122000‐052000‐102001‐032001‐082002‐012002‐062002‐112003‐042003‐092004‐022004‐072004‐122005‐052005‐102006‐032006‐082007‐012007‐062007‐112008‐042008‐092009‐022009‐072009‐12IndexValue(Jan2002=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 commonownership 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 ($10 6 ) 33,579 39,978 Payroll ($10 6 ) 607 617 Employees 9,693 8,523

Establishments 511 321

Source: U.S. Census Bureau; 2002 and 2007.” <h ttp://factfinder.census.gov>; (February 23, 2012).
Table 3-10. Direct Requirements for Oil and Gas Extraction (NAICS 211): 2002

Commodity Commodity Description Direct Requirements Coefficients a
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 Accoun ts: 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 size3- 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 generate d $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 Si ze 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-discl osure requirements faced by the U.S. Census Bureau. Source: U.S. Census Bureau. 2010. “Number of Firms, Nu mber 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 Em p lo y ment b y 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 Si ze 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-discl osure requirements faced by the U.S. Census Bureau. Source: U.S. Census Bureau. 2010. “Number of Firms, Nu mber 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 enterprises a 19,441
Total receipts (10 3 ) $193,230,241
Net sales(10 3 ) $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 pipeline3- 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 transporta tion 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 ($10 6 ) 22,964 20,797 Payroll ($10 6 ) 2,438 2,064 Employees 32,542 24,683

Establishments 1,701 1,479

Source: U.S. Census Bureau; generated by RTI Interna tional; 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 require ments represent significant share of the cost associated with pipeline transportation. Power a nd equipment requirements potentially associated with reciprocating internal combustion engines (electric power generation and commercial and industrial machinery and equipment repair and main tenance) 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 Oil3- 19 Table 3-15. Direct Requirements for Pipeline Transportation (NAICS 486): 2002

Commodity Commodity Description Direct Requirements Coefficients a
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 Accoun ts: 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 totalreceipts 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>; (D ecember 12, 2008).

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

Number of enterprises a 321

Total receipts (10 3 ) $11,062,608

Net sales (10 3 ) $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 Partnerships3- 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 ($10 3 ) $20,796,681 N/A $518,341 $1,448,020 $18,498,143 Receipts/firm ($10 3 ) $165,053 N/A $43,195 $160,891 $440,432 Receipts/establishment ($10 3 ) $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 s ector (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, clini cal 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 ro se 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), th is industry includes psychiatric and substance abuse hospitals (NAICS 6222) and specialty hospitals (NAICS 6223). However, these data Deleted: 3.4.1

Deleted: 3.4.23- 22 should be representative of the affected sect or 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 ($10 6 ) 539,502 651,639
Payroll ($10 6 ) 209,063 240,638
Employees 4,772,422 5,042
Establishments 5,193 5,404

Source: U.S. Census Bureau; generated by RTI Internati onal; 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 Coefficients a
V00100 Compensation of employees 51.90%

531000 Real estate 10.76%
550000 Management of companies and enterprises 4.02%
621B00 Medical and diagnostic labs a nd 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 Accoun ts: 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: 3.4.33- 24 General medical and surgical hospitals (NAICS 6221) generated $652 billion in totalreceipts in 2007. Including those enterprises without net income, the industry averaged an aftertax profit margin of 3.1% (Table 3-22). Also, eac h 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 Internati onal; 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 ($10 6 ) 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

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Formatted Table3- 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 Ho spital Statistics: 2010 Edition.” Health Forum.

Table 3-22. Aggregate Tax Data for Accounting Period 7/05

– 6/06: NAICS 622-4

Number of enterprises a 18,263
Total receipts (10 3 ) $108,074,793
Net sales(10 3 ) $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 ($10 3 ) $651,639,328 346.216 1,553,004 $27,889,532 $621,850,576 Receipts/firm ($10 3 ) $202,059 2,037 5,607 $22,730 $400,935 Receipts/establishment ($10 3 ) $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. “F irm 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: ¶ ¶

Deleted: ¶ ... [15] Formatted Table3- 26 3.5 Irrigation Sets and Welding Equipment

3.5.1 Overview
The U.S. Economic Census classifies irriga tion 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 andequipment 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 indust rial 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 ($10 6 ) $15,006 $23,009
Payroll ($10 6 ) $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 130Index 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 ($10 6 ) $3,880 $5,935
Payroll ($10 6 ) $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 ir rigated 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 sy stems 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 sy stems 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 peri od (21% and 3%, respectively), while other fuel sources such as liquid petroleum (LP) gas, propane, and butane declined significantly (31%). Itshould 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 Agri cultural Statistics Service. 2010. “2008 Farm and Ranch

Irrigation Survey.” Washington, DC: USDA-NA SS. Table 20. Found on the Internet at http://www.agcensus.usda.gov/Publications/2007/Onlin e_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 Agricu ltural Statistics Service. 2010. “2008 Farm and Ranch

Irrigation Survey.” Washington, DC: USDA-NA SS. Table 20. Found on the Internet at http://www.agcensus.usda.gov/Publications/2007/On line_Highlights/Farm_and_Ra nch_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: 3.5.2.23- 30  infrastructure including oil and gas pipelines and platforms, buildings, bridges, and power generation;

 transportation and defense industries (autom otive, 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, construc tion, and mining machinery manufacturing (NAICS 3331) generated $88 billion of total receipts in 2007, while those in other general purpose machinery manufacturing (NAICS 3339) ge nerated $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 Account ing Period 7/05–6/06: NAICS 3331 and 3339

Agriculture, Construction, & Mining Machinery Manufacturing Other General Purpose Machinery Manufacturing
Number of enterprises a 3,064 6,231
Total receipts (10 3 ) $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 di stribution 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 show n in Table 3-29, SUSB data suggest that more than 80% of firms are below the Small Business Administration (SBA) small business size3- 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: 2007 a

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 ($10 3 ) $263,941,774 $46,766,241 $68,078,765 $69,190,739 $79,906,029 Receipts/firm ($10 3 ) $5,362 $1,150 $10,022 $48,657 $222,579 Receipts/establishment ($10 3 ) $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 th e 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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Formatted Table4-1 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 final reconsidered rule, the costs associated w ith 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 “snaps hot” 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 finaliz ing 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 applicabilit y 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 limitati ons 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 emergenc y demand response programs and will assist in stabilizing the Deleted: proposed

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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 enginesto 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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Formatted: Font: (Default) Times New Roman4-2 grid during periods of instability, preventing elec trical blackouts and su pporting lo cal electric system reliability. The final rule also limits oper ation of certain emergency engines used to avert potential voltage collapse or line overloads that c ould lead to the interrupt ion 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 requi rements 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 Formatted: Font: (Default) Times New Roman4-3 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 isolat ed 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 operato rs 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; insp ect 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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4.2.1.. 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 authori zed entity as determined by the ReliabilityCoordinator, 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 appropr iate 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 forc e 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 reli ability 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?¶
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Formatted: Font: (Default) Times New Roman4-5 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 mark ets 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 fo r 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 emission s 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 engi nes 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 alternat ive emission sources is not clear. Concerns aboutcontribution 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 oblig ated 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 Formatted: Indent: First line: 0.5", Space After: 12 pt, Line spacing: At least 18 pt

Formatted: Space After: 12 pt, Line spacing: At least 18 pt4-6 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 emer gency 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 adjustment s 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 requir ement 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 thes e 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 re sponse. This information will be used by the EPA, as well as state and local air pollution cont rol 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 Na tional 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 th e local balancing authority or transmission operator for the local electric syst em 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 i ndicated 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, el ectricity 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 a nother 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 guide lines 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. Formatted: Indent: First line: 0.5", Space After: 12 pt, Line spacing: At least 18 pt
Formatted: Font: (Default) Times New Roman4-8 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 engineslocated 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 wh ile 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 th e 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 thes e engines, which have heretofore not been regulated, may have taken actions based on the June 7, 2012, proposal that would now leave Formatted: Space After: 12 pt, Line spacing: At least 18 pt

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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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Formatted: Space After: 12 pt, Line spacing: At least 18 pt4-9 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 te sting 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 Contro l 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, w ould not be able to comp ly with the applicable RICE NESHAP emission standards for existing e ngines 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 th e Tier 3 standards in 40 CFR part 89. However, an identical engine certified to the Tier 3 sta ndards (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. St ationary 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 believe s it is unnecessary to require further regulation Deleted: ¶
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Deleted:4-10 of engines meeting these standards. In order to address this concern, the EPA is finaliz ing 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
finaliz ing 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 regul ated 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 e ngines 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 simila r situation (i.e., required to be replaced shortly after the compliance date for existing engines), bu t 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 re quire 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, reco rdkeeping 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

Deleted: propos4-11 would not be reasonable to require the engine owne r 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 finaliz ing amendments to existing stationary CI engines located
at area sources of HAP emissions to address this concern. The EPA is finaliz ing to amend the requirements for existing stationary Tier 1 and Ti er 2 certified CI engines located at area sources that are greater than 300 HP that are subject to a st ate or local rule that requires the engine to be replaced. The EPA is allow ing 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 requir ing 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 th e 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 pract ices 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 Deleted: propos Deleted: proposing to
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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 thecurrent 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 publicati on 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] Formatted: Indent: First line: 0.5", Space After: 12 pt, Line spacing: At least 18 pt
Deleted: The EPA is proposing to expanding the current definition of remote areas of Alaska to extend beyond areas ... [21] Deleted: ¶
Formatted: Font: (Default) Times New Roman4-12 After considering the public comments received on the proposed criteria, the EPA is finalizing the first two criteria as proposed, but fi nalizing 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 electri city 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 so urces 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 s ection 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 maintena nce 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 signi ficant 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, wh ether the numerical standards applicable to other CI engines located at area sources (marine vessels located in the OCS are generally located at area sources) Formatted: Font: (Default) Times New Roman

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Formatted: Space After: 12 pt, Line spacing: At least 18 pt4-13 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 m eet 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 engine s. 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 contro ls 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 rati onale for these changes can be f ound 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 ha ve 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: ¶
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Deleted: proposed4-14 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 oper ation 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 emissi ons 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: ¶
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Deleted: proposed4-15 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 af tertreatment technologies expected to be used
to reduce HAP and CO emissions also reduce emi ssions 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 (SO x ) 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 parame tric monitoring, and the cost of conducting performance testing to demonstrate compliance w ith 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 t echnology to meet the emission standards, the following equations were used to estimate capital and annual cont rol 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/o mb/circulars/a004/a-4.pdf

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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 calc ulated 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 requiremen ts 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 operati on 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 Formatted: Font: 10 pt
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Formatted: Space Before: 3 pt, After: 3 pt4-17 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, subm itting an initial notification, submitting a notification of performance test(s), and submittin g 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 engi ne is operating efficien tly. Owner/operators of these engines regularly perform these work practices as part of the preventive maintenance schedule for the engine. Therefore, EPA believes th at 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 pr ocedures 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 engi ne is operating efficiently. Owner/operators of these engines regularly perform these work practices as part of the preventive maintenance4-19 schedule for the engine. Therefore, EPA believes th at 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 th e 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 operat ion, 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 num ber 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 negligib le. In addition, there are no

9 Exhaust and Crankcase Emission Factors for Nonroad Engi ne Modeling--Compression-Ignition, U.S. EPA, Office of Transportation and Air Quality, Assessment and Stan dards Division, EPA420-P-04-009, Revised April 2004. http://www.epa.gov/oms/models/nonrdmdl/nonrdmdl2004/420p04009.pdf
10 Memorandum 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: 4.3.2.14-20 additional maintenance requirements for owner/oper ators 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 includ e 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 re ducing HAP, as well as the cost of installing an open crankcase ventilation system. Non-emer gency 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 complia nce 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 negligib le. In addition, there are no additional maintenance requirements for owner/oper ators 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 includ e 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-relat ed O&M plan, because it is expected that owner/operators will follow this plan regardless of the regulation.

11 Memorandum 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 practi ces, 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 re ducing 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/oper ators using ULSD in existing diesel engines. Many owner/operators have found that time between oil changes can be extended for engines4-22 using ULSD fuel, which would decrease the overall cost of switching to ULSD fuel. Therefore, EPA believes that it is appropriate to not includ e 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.

### 23Table 4-2. Summary of Major Source and Area Source Costs for the CI RICE NESHAPaSizeRange(hp)Non-EmergencyCI CapitalControl CostNon-EmergencyCI AnnualControl Cost Initial Test Recordkeeping ReportingMonitoring –Capital CostMonitoring –Annual CostTotal AnnualCostsTotal CapitalCostsMajor Sources50–100 $0 $0 $0 $6,654,888 $0 $0 $0 $6,654,888 $0100–175 $24,057,778 $9,918,465 $14,150,269 $8,719,731 $5,973, 016 $0 $0 $38,761,480 $24,057,778175–300 $35,917,270 $10,740,189 $10,730,759 $6,612,548 $4,529,595 $0 $0 $32,613,092 $35,917,270300–500 $107,841,136 $26,722,727 $5,645,923 $3,479,152 $2,383,219 $0 $0 $38,231,021 $107,841,136500–600 $13,126,952 $3,020,849 $500,530 $61,688 $211,280 $481,765 $2,220,755 $6,015,102 $13,608,716600–750 $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 $27,447,066Total $216,086,768 $57,845,329 $31,848,848 $25,629,236 $13,443,820 $1,272,338 $5,865,005 $134,632,238 $217,359,106Area Sources50–100 $0 $0 $0 $9,183,746 $0 $0 $0 $9,183,746 $0100–175 $0 $0 $0 $12,033,196 5,231,824 $0 $0 $17,265,000 $0175–300 $0 $0 $0 $9,125,316 $3,967,529 $0 $0 $13,092,845 $0300–600 269, 176, 789 $64,764,947 $12,533,931 $7,180,954$5,290,738 $4,021,343 $18,536,893 $108,307,463$273,198,131600–750 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$178,373,845Total 513,933,435 $116,729,759 $18,357,024 $40,859,384$16,948, 096 $5,889,603 $44,372,851 $237,267,114$519,823,039Grand TotalTotal $730,020,203 $174,575,088 $50,205,872 $66,480,620 $30,391,916 $7,161,941 $50,237,856 $371,899,352 $737,182,145aCosts are presented in 2008 dollars.

### 24Table 4-3. Summary of Major Source and AreaSource NAICS Costs for the CI RICE NESHAPaNAICSMajor Source Area Source Total (Major + Area)Capital Cost Annual Cost Capital CostAnnual Cost Capital Cost Annual CostElectric Power Generation(2211)$161,766,376 $90,982,105 $464,947,798 $202,463,116 $626,714,174 $293,445,222Hospitals (622110) $20,220,797 $11,372,763 $0 $0 $20,220,797 $11,372,763Crude Petroleum & NGProduction (211111)$2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314Natural Gas Liquid Producers(211112)$2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314National Security (92811) $20,220,797 $11,372,763 $51,660,866 $22,495,902 $71,881,663 $33,868,665Hydro Power Units (335312) $0 $16,637 $0 $22,959 $0 $39,597Irrigation Sets (335312) $10,294,073 $11,791,567 $34,145 $5,208,084 $10,328218 $16,999,651Welders (333992) $108,260 $1,481,447 $0 $1,881,380 $108,260 $3,362,827Total $217,359,106 $134,632,238 $519,823,039 $237,267,114 $737,182,145 $371,899,352aCosts are presented in 2008 dollars.

### 25Table 4-4. Summary of Major Source and Area SourceNAICS Costs for the CI RICE NESHAP – by SizeaNAICSMajor Source Area Source Total (Major + Area)Capital Cost Annual Cost Capital CostAnnual Cost Capital Cost Annual CostElectric Power Generation (2211)50–100 hp $0 $3,396,123 $0 $5,272,480 $0 $8,668,603100–175 hp $13,406,919 $21,600,998 $0 $10,824,132 $13,406,919 $32,425,129175–300 hp $23,012,914 $20,895,861 $0 $9,437,454 $23,012,914 $30,333,314300–600 hp $96,907,266 $35,304,866 $245,239,035 $97,223,277 $342,146,301 $132,528,144600–750 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 $61,181,035Total 2211 $161,766,376 $90,982,105 $464,947,798 $202,463,116 $626,717,174 $293,445,222Hospitals (622110)50–100 hp $0 $424,515 $0 $0 $0 $424,515100–175 hp $1,675,865 $2,700,125 $0 $0 $1,675,865 $2,700,125175–300 hp $2,876,614 $2,611,983 $0 $0 $2,876,614 $2,611,983300–600 hp $12,113,408 $4,413,108 $0 $0 $12,113,408 $4,413,108600–750 hp $848,629 $335,662 $0 $0 $848,629 $335,662>750 hp $2,706,281 $887,371 $0 $0 $2,706,281 $887,371Total 622110 $20,220,797 $11,372,763 $0 $0 $20,220,797 $11,372,763Crude Petroleum & NG Production (211111)50–100 hp $0 $420,256 $0 $579,954 $0 $1,000,210100–175 hp $2,026,868 $3,265,655 $0 $1,454,578 $2,026,868 $4,720,233175–300 hp $3,592 $3,261 $0 $1,309 $3,592 $4,571300–600 hp $151,812 $55,308 $341,498 $135,384 $493,310 $190,692600–750 hp $0 $0 $0 0 $0 $0>750 hp $192,129 $62,998 $1,248,617 $426,611 $1,440,746 $489,609Total 211111 $2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314(continued)

### 26Table 4-4. Summary of Major Source and Area SourceNAICS Costs for the CI RICE NESHAP – by Sizea(continued)NAICSMajor Source Area Source Total (Major + Area)Capital Cost Annual Cost Capital CostAnnual Cost Capital Cost Annual CostNatural Gas Liquid Producers (211112)50–100 hp $0 $420,256 $0 $579,954 $0 $1,000,210100–175 hp $2,026,868 $3,265,655 $0 $1,454,578 $2,026,868 $4,720,233175–300 hp $3,592 $3,261 $0 $1,309 $3,592 $4,571300–600 hp $151,812 $55,308 $341,498 $135,384 $493,310 $190,692600–750 hp 0 0 0 0 $0 $0>750 hp $192,129 $62,998 $1,248,617 $426,611 $1,440,746 $489,609Total 211112 $2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314National Security (92811)50–100 hp $0 $424,515 $0 $585,831 $0 $1,010,346100–175 hp $1,675,865 $2,700,125 $0 $1,202,681 $1,675,865 $3,902,806175–300 hp $2,876,614 $2,611,983 $0 $1,048,606 $2,876,614 $3,660,589300–600 hp $12,113,408 $4,413,108 $27,248,782 $10,802,586 $39,362,190 $15,215,695600–750 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 $6,896,489Total 92811 $20,220,797 $11,372,763 $51,660,866 $22,495,902 $71,881,663 $33,86,665Hydro Power Units (335312)50–100 hp $0 $16,637 $0 $22,959 $0 $39,597100–175 hp $0 $0 $0 $0 $0 $0175–300 hp $0 $0 $0 $0 $0 $0300–600 hp $0 $0 $0 $0 $0 $0600–750 hp $0 $0 $0 $0 $0 $0>750 hp $0 $0 $0 $0 $0 $0Total 335312 $0 $16,637 $0 $22,959 $0 $39,597(continued)

### 27Table 4-4. Summary of Major Source and Area SourceNAICS Costs for the CI RICE NESHAP – by Sizea(continued)NAICSMajor Source Area Source Total (Major + Area)Capital Cost Annual Cost Capital CostAnnual Cost Capital Cost Annual CostIrrigation Sets (335312)50–100 hp $0 $245,565 $0 $338,880 $0 $584,446100–175 hp $3,137,134 $5,054,497 $0 $2,251,359 $3,137,134 $7,305,856175–300 hp $7,143,945 $6,486,744 $0 $2,604,167 $7,143,945 $9,090,911300–600 hp $12,145 $4,425 $27,320 $10,831 $39,465 $15,255600–750 hp $849 $336 $6,825 $2,847 $7,674 $3,183>750 hp $0 $0 $0 $0 $0 $0Total 335312 $10,294,073 $11,791,567 $34,145 $5,208,984 $10,328,218 $16,999,651Welders (333992)50–100 hp $0 $1,307,020 $0 $1,803,688 $0 $3,110,708100–175 hp $108,260 $174,427 $0 $77,693 $108,260 $252,119175–300 hp $0 $0 $0 $0 $0 $0300–600 hp $0 $0 $0 $0 $0 $0600–750 hp $0 $0 $0 $0 $0 $0>750 hp $0 $0 $0 $0 $0 $0Total 333992 $108,260 $1,481,447 $0 $1,881,380 $108,260 $3,362,827Grand TotalTotal $217,359,106 $134,632,238 $519,823,039 $237, 267,114 $737,182,145 $371,899,352aCosts are presented in 2008 dollars.

### 28Table 4-5. Summary of Major Source and Area Source NAICSCosts for the CI RICE NESHAP – by Number of EnginesaNAICSNumber of Engines Total (Major + Area)Major Area Total Capital Cost Annual CostElectric Power Generation (2211)50–100 hp 47,324 79,859 127,183 $0 $8,668,603100–175 hp 67,713 114,266 181,980 $13,406,919 $32,425,129175–300 hp 59,039 99,627 158,666 $23,012,914 $30,333,314300–600 hp 42,113 97,919 140,032 $342,146,301 $132,528,144600–750 hp 1,760 16,455 18,215 $68,208,846 $28,308,997>750 hp 3,828 28,746 32,574 $179,939,195 $61,181,035Total 2211 221,777 436,872 658,649 $626,717,174 $293,445,222Hospitals (622110)50–100 hp 5,916 0 5,916 $0 $424,515100–175 hp 8,464 0 8,464 $1,675,865 $2,700,125175–300 hp 7,380 0 7,380 $2,876,614 $2,611,983300–600 hp 5,264 0 5,264 $12,113,408 $4,413,108600–750 hp 220 0 220 $848,629 $335,662>750 hp 479 0 479 $2,706,281 $887,371Total 622110 27,722 0 27,722 $20,220,797 $11,372,763Crude Petroleum & NG Production (211111)50–100 hp 5,856 8,784 14,640 $0 $1,000,210100–175 hp 10,237 15,355 25,592 $2,026,868 $4,720,233175–300 hp 9 14 23 $3,592 $4,571300–600 hp 66 136 202 $493,310 $190,692600–750 hp 0 0 0 $0 $0>750 hp 34 227 261 $1,440,746 $489,609Total 211111 16,202 24,517 40,719 $3,964,516 $6,405,314(continued)

### 29Table 4-5. Summary of Major Source and Area Source NAICSCosts for the CI RICE NESHAP – by Number of Enginesa(continued)NAICSNumber of Engines Total (Major + Area)Major Area Total Capital Cost Annual CostNatural Gas Liquid Producers (211112)50–100 hp 5,856 8,784 14,640 $0 $1,000,210100–175 hp 10,237 15,355 25,592 $2,026,868 $4,720,233175–300 hp 9 14 23 $3,592 $4,571300–600 hp 66 136 202 $493,310 $190,692600–750 hp 0 0 0 $0 $0>750 hp 34 227 261 $1,440,746 $489,609Total 211112 16,202 24,517 40,719 $3,964,516 $6,405,314National Security (92811)50–100 hp 5,916 8,873 14,789 $0 $1,010,346100–175 hp 8,464 12,696 21,160 $1,675,865 $3,902,806175–300 hp 7,380 11,070 18,450 $2,876,614 $3,660,589300–600 hp 5,264 10,880 16,144 $39,362,190 $15,215,695600–750 hp 220 1,828 2,048 $7,673,053 $3,182,740>750 hp 479 3,194 3,672 $20,293,942 $6,896,489Total 92811 27,722 48,541 76,263 $71,881,663 $33,868,665Hydro Power Units (335312)50–100 hp 232 348 580 $0 $39,597100–175 hp 0 0 0 $0 $0175–300 hp 0 0 0 $0 $0300–600 hp 0 0 0 $0 $0600–750 hp 0 0 0 $0 $0>750 hp 0 0 0 $0 $0Total 335312 232 348 580 $0 $39,597(continued)

### 30Table 4-5. Summary of Major Source and Area Source NAICSCosts for the CI RICE NESHAP – by Number of Enginesa(continued)NAICSNumber of Engines Total (Major + Area)Major Area Total Capital Cost Annual CostIrrigation Sets (335312)50–100 hp 3,422 5,133 8,555 $0 $584,446100–175 hp 15,845 23,767 39,611 $3,137,134 $7,305,856175–300 hp 18,327 27,491 45,819 $7,143,945 $9,090,911300–600 hp 5 11 16 $39,465 $15,255600–750 hp 0 2 2 $7,674 $3,183>750 hp 0 0 0 $0 $0Total 335312 37,599 56,403 94,003 $10,328,218 $16,999,651Welders (333992)50–100 hp 18,213 27,319 45,532 $0 $3,110,708100–175 hp 547 820 1,367 $108,260 $252,119175–300 hp 0 0 0 $0 $0300–600 hp 0 0 0 $0 $0600–750 hp 0 0 0 $0 $0>750 hp 0 0 0 $0 $0Total 333992 18,760 28,140 46,899 $108,260 $3,362,827Grand TotalTotal 366,217 619,337 957,832 $737,182,145$371,899,352aCosts are presented in 2008 dollars.31 4. 5 Baseline Emissions and Emission Reductions

Baseline emissions are estimated for 2013 us ing 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 reconsideredrule 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 finaliz ing for stationary emergency engines incr eases the time allowed for par ticipation in emergency demandresponse programs and for certain engines to operate for peak shaving or other incomegenerating activities, the EPA believes that 50 hours per year is still repr esentative 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 assump tion 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) SO 2 (lb/hp-hr)

CI 1.07x10 -4 6.96x10 -1 7.00x10 -4 0.00809xS 1 * *Obtained from AP-42, section 3.4 where S 1 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 Deleted: 4

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Deleted: ¶32 Table 4-7. In addition, it is expected that additional PM redu ctions 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, ther efore 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 concentr ation 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 requir ing 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 EP A 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 specify ing 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 lo cated 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 do es not know if there are additional engines in
other areas that in a similar situation and the EPA has no information in dicating 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 op en 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; th us all emissions and PM emission reductions are assumed to be
PM 2.5
. Deleted: propos

Deleted: proposed

Deleted: proposing to

Deleted: propose Deleted: d33 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 NO x PM SO 2 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 Deleted: ¶
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Summary of Major Source and Area Source Emis sion 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. Deleted: ¶ ¶ ¶ ¶ ¶
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Formatted ... [35]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 mark et model; the data that are available have little or no sector/firm detail and are reported at the na tional 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 qu alitative 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 m illion 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: proposed5-2 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 & NGProduction (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 hp5-4 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 Ratio ($2007) ($2008)
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 systems a $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 Internationa l; 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 Agri cultural 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 NES HAP 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 indus tries whose markets are well characterized as Deleted: proposed5-5 perfectly competitive. This approximation is less well understood for industries where the characterization of markets is not always perfect ly 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 consum ers 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 servi ce 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 (P 0 ) and quantity (Q 0 ) 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 (Q 0 ) (see Figure 5-4). As shown, this model makes two predictions: the pri ce 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 f actors: 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 measur e 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



##   Demand) of Elasticity Price

- Supply of Elasticity Price Supply of Elasticity Price

 cost production unit er- Share of p

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. Sp ecific 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 Po wer 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 competitiv e 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 an d 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 = – [  Q 1 ×  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 = [  Q 1 ×  p ] – [  Q 1 × 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. Deleted:5-9 Figure 5-5. Electricity Restructuring by State
Source. U.S. Energy Information Administration. 2010a.

<http://www.eia.doe.gov/cneaf/electricity/page/restruct uring/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 prom ulgation 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 en ergy. 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 in dustry 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 prohib ited 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 expe nditures 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 Power a 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 energy b 4.63 4.8% Electricity Imports 0.12 0.1%

Total Electric Power Energy Consumption c 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 co mbined heat and power plants whose primary business is

to sell electricity, or electricity and heat, to the pu blic. 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 sola r 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 an y 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 th e 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 Deleted: proposed

Deleted: proposed5-12 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 orenvironmental 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. Deleted: proposed

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Deleted: proposed5-13 This employment impact analysis includes es timates of certain short-term and on-going labor requirements (increase in labor demand) as sociated 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 he lp 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, th e 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 wi ll cause a short-run aggregat e supply curve to shift to the left, and businesses will produce le ss, all other things being equal.5-14 EPA is interested in public comments on the me rits 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 res ponse 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 in crease 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 refl ect 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 e nvironmental 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. Deleted: proposed

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Deleted: ¶5-15 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 requ ired 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 ne w 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 seemingl y 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. Deleted: propose d

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Deleted: propose d5-16 Table 5-5. Labor-based Employment Estimates for Reporting and Recordkeeping and Installing, Operating, and Maintaining Control Equipment Requirements for Reconsider ed CI RICE NESHAP

Source Emission Control Measure Projected No. of Affected

Units Per-UnitOneTime 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 8NonEmergency 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 RecordkeepingNonEmergency 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 Deleted: Proposed
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Formatted: Font: 9 pt5-17 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 ch allenging due to competing effects. Complying with the new or more stringent regulation requ ires 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. Sa tisfying 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, regula ted 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.” Howe ver, 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 pos itive 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 effect s, 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 po llution 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 expenditure s 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 regula ted 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. Unfo rtunately, 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 utili ze their quantitative estimates to estimate the employment impacts from this reconsideration. The differences between the underlying Deleted: proposal5-19 regulations motivating the abatement expenditures studied in Morgenstern et al. are potentially too many to allow for the direct transfer of thei r 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 employme nt impacts within the regulated sector for this regulation. Deleted: proposed

Deleted: proposed6-1 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 prov ides 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:

 Establishmen t: 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 fo r the national security NAICS code (92811) or irrigated farms. Since most national security installations are owne d 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 Irrigati on 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: proposed6-2  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, divi dends, 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 anal ysis 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 pare nt 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 de finitions 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 impa ct measures (if applicable) would potentially include

• small governments (if applicable): “revenue” test; a nnualized compliance cost as a percentage of annual government revenues and

• small nonprofits (if applicable): “expenditure” test; a nnualized 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 , 201 3 ) 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 $3 5 .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 fo r 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 stan dard 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
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Deleted: 0

Deleted: 46-4 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.

### 5Table 6-2. Average Receipts for Affected Industryby Enterprise: 2009 ($2008 Million/establishment)SBA SizeStandardfor Businesses(effectiveNovember 5,2010)Owned By Enterprises with Employee Range:NAICS NAICS DescriptionAllEnterprises1–20Employees20–99Employees100–499Employees500+Employees211111 Crude petroleum &natural gas extraction500 employees $30.22 $2.15 $33.02 $151,76 1,570211112 Natural gas liquidextraction500 employees $172.81 $0.30 NA $11.88 NA335312 Motor & generator mfg 1,000 employees $18.58 $1.37 $6.14 $15.96 $29.47333992 Welding & solderingequipment mfg500 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.

### 6Table 6-3. Average Receipts for Affected Industry byEnterprise Receipt Range: 2007 ($2008 /establishment)SBA Size Standardfor Businesses(effective November5, 2010)Owned By Enterprises with Receipt Range:NAICS NAICS DescriptionAllEnterprises0–99KReceipts100–499.9KReceipts500–999.9KReceipts1,000–4,999.9KReceipts5,000,000–9,999,999KReceipts<10,000KReceipts10,000–49,999KReceipts50,000–99,999KReceipts100,000K+Receipts2211 Electric PowerGenerationa$261.0 $31.2 $272.5 $724.9 $2,399.5 $7,330.5 $2,617.7 $24,786.9$67,706.8$1,394,051.0622110 Hospitals$34.5 million in annualreceipts$202,058.7 NA $23.82 NA $3,255.0 $7,291.0 $4,692.1$23,481.9$67,545,6$508,705.8237310Highway , street, andbride construction$33.5 million inAnnual Receipts$7.74$0.06$0.32$0.84$2.74$8.11$2.00$22.62$56.48$56.81237110Water and sewer lineand related structures,construction$33.5 million inAnnual Receipts$3.89$0.06$0.32$0.85$2.73$8.17$1.84$20.62$45.05$47.27237130Power andcommunication lineand related structuresconstruction$33.5 million inAnnual Receipts$3.39$0.06$0.31$0.83$2.52$7.75$1.32$16.84$34.50$23.86237990Other heavy and civilengineeringconstruction$33.5 million inAnnual Receipts$2.66$0.06$0.30$0.83$2.48$7.76$0.99$18.72$40.53$42.3592811 National Security NA NA NA NA NA NA NA NA NA NA NANotes: . National Security is included in this table but does not have size standards.aNAICS codes 221111, 221112, 221113, 221119, 221121, 221122: A firm in these industries is defined as small by SBA if, including its affiliates, it isprimarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the preceding fiscal year did notexceed 4 million megawatt hours.NA = Not available. SUSB did not report thisdata 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 dies el 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 establishmen t 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 establishm ent 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 fo r 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, 21 1111, 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: Natio nal 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 represen tative 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 “sal es 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 Associ ated 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 Po pulation 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 hp6- 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 offe red by EPA on compliance with SBREFA 7 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 ru lewriters regarding the types of small business analysis that should be considered can be found at http://www.epa.gov/sbre fa/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 hp6- 11 percentage of total revenues is a metric for eval uating cost increases on small entities in relation to increases on large entities. 8

If the cost-to-receipt ratio is less than 1%, th en 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 imp act 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 re duce 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 c onducted several meetings with industry trade

8 U.S. SBA, Office of Advocacy. A Guide for Governme nt 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: proposed6- 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
reduc ing 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 li mitations associated with identifying and appropriately classifying these entities, we co mputed 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 rega rding the types of small business analysis that should be considered can be found at http://www.epa.gov/sbrefa/docum ents/rfafinalguidance06.pdf , pp. 24-25.
10 U.S. SBA, Office of Advocacy. A Guide for Governme nt Agencies, How to Comply with the Regulatory Flexibility Act, Implementing the President’s Small Busi ness 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 ai r pollutants (HAP) and have ancillary co-benefits
that would lower ambient concentrations of PM 2.5 and ozone. In this section, we quantify the monetized co-benefits for this rule associated with reducing exposure to ambient fine particulate matter (PM 2.5 ) 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 PM 2.5 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 th e 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 PM 2.5 -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
PM 2.5, reducing these emissions would also reduce PM 2.5 formation, human exposure and the
incidence of PM 2.5 -related health effects. Due to analytical limitations, it was not possible to provide a comprehensive estimate of PM 2.5 -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 methodol ogy 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 PM 2.5 -related health benefits for emissions reductions in specific sectors. The key assumptions are described in detail below. These PM 2.5 benefit-per-ton estimates provide the total mo netized human health benefits (the sum of premature mortality and premature morbidity) of reducing one ton of PM 2.5 from a specified Deleted: proposed

Deleted: proposed7-2 source. EPA has used the benefit per-ton technique in several previous RIAs, including the
recent SO 2 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 PM 2.5, 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 unquantif ied 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 PM 2.5

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 PM 2.5 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 PM 2.5 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 cerebrovasc ular disease (age 50-79) -- -- Section 5.4 Other cardiovascular effects (e.g., other ages) -- -- PM ISA 2
Other respiratory effects (e.g., pulmonaryfunction, non-asthma ER visits, nonbronchitis chronic diseases, other ages and populations) -- -- PM ISA 2

Reproductive and developmental effects (e.g., low birth weight, pre-term births, etc) -- -- PM ISA 2,3

Cancer, mutagenicity, and genotoxicity effects -- -- PM ISA 2,3

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 ev idence 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 repor ted 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/m 3 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 PM 2.5 NAAQS, has
been used as an alternative estimate in the PM 2.5 NAAQS RIA and PM 2.5 benefits estimates in RIAs completed since the PM 2.5 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/m 3 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 PM 2.5 -mortality relationship and interpreted for benefits analysis in EPA’s final RIA for the PM 2.5 NAAQS. For that study, twelve experts (labeled A through L) provided independent estimates of the PM 2.5 -mortality concentration-response function. EPA pr actice has been to develop independent
estimates of PM 2.5 -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 rela tionship between exposure to PM 2.5 and premature mortality (Roman

1 These two studies specify multi-pollutant models that control for SO 2 , 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 estima tes 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 PM 2.5 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 consu lt the draft Technical Support Document (TSD) on estimating the benefits per ton of reducing PM 2.5 and its precursors in the “Other Non-EGU Point” category (U.S. EPA, 2012 c ). 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 da ta 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 si milar limitations as all national-average benefitper-ton estimates in that they reflect the geogra phic 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, e xposure, baseline health incidence rates, or other local factors for any specific location. In this analysis, we apply thes e 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 pa rticle type. Directly emitted particles are the primary PM 2.5 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 PM 2.5 levels, which drive population exposure. The sector-specific modeling does not provide estimates of the PM 2.5 -related benefits associated with reducing VOC emissions, but these unquantified benefits are generally small compared to
other PM 2.5 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 PM 2.5 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 consiste ntly 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 PM 2.5 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 coho rt studies that estimate PM-related mortality. While an LML assessment provides some insight in to the level of uncertainty in the estimatedPM mortality benefits, EPA does not view the LML as a threshold and continues to quantify PMrelated mortality impacts using a full range of mode led air quality concentrations. It is important to emphasize that we have high confidence in PM 2.5 -related effects down to the lowest LML of the major cohort studies, which is 5.8 μg/m 3 . 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 PM 2.5 -mortality relationship, see the T echnical Support Document (TSD)
entitled Summary of Expert Opinions on the Existe nce of a Threshold in the ConcentrationResponse Function for PM 2.5 -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 PM 2.5 level. However, we believe that it is still important to characterize the distri bution of exposure to baseline air quality levels. As a surrogate measure of mortality impacts, we provide the percentage of the population exposed at each PM 2.5 level using the source apportionmen t modeling used to calculate the benefit-per-ton estimates for this sector. It is im portant to note that baseline exposure is only one parameter in the health impact function, alon g 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 (200 4-2008), 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 studi es. OAR arrived at a VSL using a range of $1 million to $10 million (2000$) consistent with tw o 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-analy sis. 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 Scie nce 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 repo rt 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 differe nt 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 thes e 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 PM 2.5 below the National Ambient Air Quality Standards (NAAQS) for PM in some areas and assist other areas with attaining the PM NAAQS. Be cause 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 potentia l 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 pr edict, the control strategies that States may choose to enact when implementing a NAAQS. Th e 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 va luation guidance would be forthcoming in the near future. Therefore, this report does not re present 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 inco me 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 PM 2.5 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 rule s 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 forwar d 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 SO 2 NAAQS RIA (U.S. EPA, 2010a).7-10 Figure 7.1 illustrates the relative breakdown of the monetized PM 2.5 health benefits.

Figure 7-1: Breakdown of Monetized PM 2.5 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 us ing 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 PM 2.5 -related benefits estimates using

8 To comply with Circular A-4, EPA provides monetized be nefits 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 infa rctions (AMIs) and premature mortality. For AMIs, we assume 5 years of follow-up medical costs and lost wage s. For premature mortality, we assume that there is a “cessation” lag between PM exposures and the total rea lization 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 PM 2.5 (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 va luation of premature mortalities that o ccur after the analys is year. As such, the monetized benefits using a 7% discount rate are onl y approximately 10% less than the monetized benefits using a 3% discount rate.

Adult Mortality ‐ Pope et al. 93% Chronic Bronchitis 4%

AMI 2% Acute Respiratory Symptoms 0.5%

Infant Mortality 0.4%

Work Loss Days 0.2%

Hospital Admissions, Cardio 0.2% Hospital Admissions, Resp 0.04% Asthma Exacerbation 0.01%
Acute Bronchitis 0.01% Upper Resp Symp 0.00% Lower Resp Symp 0.00%
ER Visits, Resp 0.00% Other 1%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 fo r two reasons. First, these estimates are basedon 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 ru le 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 PM 2.5 -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%)

PM 2.5 Precursors
Direct PM 2.5 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 NO 2 , ozone exposure, ecosystem effects, or visibility im pairment. All fine partic les are assumed to have equivalent health effects, but the benefit per ton estimate s vary because each ton of precu rsor reduced has a different propensity to form PM 2.5 . 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 generall y 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: Proposed7-12 Table 7-3: Summary of Reductions in Health Incidences from PM 2.5- 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 effect s 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: Proposed7-13 Table 7-4: All PM 2.5 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 be nefits estimates from the Expert Elicitation are provided as a reasonable characterization of the uncertainty in th e mortality estimates associated with the concentrationresponse function. Confidence intervals are unavailable fo r this analysis because of the benefit-per-ton methodology Deleted: Proposed7-14 Figure 7-2: Total Monetized PM 2.5 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 fr om EPA’s expert elicitation on PM mortality. The results shown are not the direct results fro m 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$)

PM 2.5 mortality benefits estimates derived from 2 epidemiology functions and 12 expert functions 3% DR
7% DR

Deleted: Proposed7-15 Figure 7-3: Breakdown of Total Monetized PM 2.5 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 Toxi cs 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: Proposed7-16 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 ke y 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 acute 14 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 uncertaintie s 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-moni tor ratios) and qualitative (e.g., quality of data, review of emission inventories) judgments can be found at ht tp://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 th e 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 or al, 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 concentr ation (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 Trac t Carcinogenic Risk from HAP exposure from outdoor sources (2005 NATA) Deleted: Figure
Deleted: Figure7-18 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 di stribution 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

15 The unit risk factor is a quantitative estimate of the car cinogenic potency of a pollutant, often expressed as the probability of contracting cancer from a 70-year lifetime continuous expo sure to a concentration of one μg/m 3 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 anal yzing 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 pr ogress 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 re ducing 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 estimate s 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 associat ed 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 unders tanding of the health effects associated with exposure to formaldehyde. These include recently published research conducted by the National Cancer Institute (NCI) which found an incr eased 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 wo rkers 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 Ch emical 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 Garm ent 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 amongworkers 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. Exte nded 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 carci nogenicity 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 Ka lisak, J Preston, and FJ Miller. 2004. Human respiratory tract cancer risks of inhaled formaldehyde: Dose-respo nse predictions derived from biologically-motivated computational modeling of a combined rodent and huma n 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 un der 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 th e eyes), nose and throat. Effects from repeated

24 Chemical Industry Institute of Toxi cology (CIIT).1999. Formaldehyde: H azard characterization and dose-response assessment for carcinogenicity by the r oute of inhalation. CIIT, Septembe r 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: id entification of key issues. Risk An al 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 limi ted 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 limi ted sensitivity analysis–I. Risk Anal, 27: 1237–1254. Docket EPA-HQ-OAR-2010-0162.
31 International Agency for Research on Cancer (2006) Fo rmaldehyde, 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 irri tation, chronic bronchitis and nasal epithelial lesions such as metaplasia and loss of cilia. An imal 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 20 10 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 11 th 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 (A TSDR). 1999. Toxicological profile for Formaldehyde. Atlanta, GA: U.S. Department of Health a nd 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 Do cument 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 Ce nter 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 Eval uation 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 Ce nter for Environmental Assessment, Washington, DC. This material is available electronically at http://www.epa.gov/iris/subst/0290.htm

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Formatted: Font: 10 pt7-23 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/m 3 ) 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 Environm ental 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 chlo rinated 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. In tegrated 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 E nvironmental 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 E nvironmental 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 E nvironmental Assessment, Washington, DC. EPA/635/R03/003. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf

. Formatted: Hyperlink

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Formatted: Hyperlink7-24 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 da ta 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 chemic als 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 granul ocyte/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 carcinogenici ty of benzene. Environ. Health Perspect. 82: 193-197.
52 Goldstein, B.D. (1988). Benzene toxicity. Occupati onal medicine. State of the Art Reviews. 3: 541-554.7-25 Methanol

Exposure of humans to methanol by inhalatio n 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 high ly 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 stud ies 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 inha lation levels in rats. Toxicol Sci, 5: 727-736.
56 Rogers, JM; Barbee, BD; Rehnberg, BF. 1993. Critical pe riods 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. Reproducti ve and offspring developmental effects following maternal inhalation e xposure 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 e xposure to methanol in nonhuman primates Part I: methanol disposition and reproductive toxicity in a dult 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 fasc icularis): reproductive performance and birth outcome. Neurotoxicol Teratol, 26: 639-650.
60 Burbacher, TM; Shen, DD; Lalovic, B; Gr ant, 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 Sy stem (IRIS) database is available at: www.epa.gov/iris7-26 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 ambien t 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 epidemiol ogical 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 (CO 2 ), 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 li nked to short- and long-term exposure to CO.

7.2.4 Visibility Impairment Co-Benefits

Reducing secondary formation of PM 2.5 would improve visibility throughout the U.S. Fine particles with significant light-extinction efficiencies include sulf ates, nitrates, organic carbon, elemental carbon, and soil (Sisler, 1996). Suspended particles and gases degrade visibility by scattering and abso rbing light. Higher visibility impairment levels in the East are due to generally higher concentrations of fine particles, particularly sulfates, and higher average7-27 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 visi bility 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 paramete rs and inputs), epidemiological estimates of concentration-response (C-R) functions, estima tes 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 PM 2.5 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 redu ctions and specific air quality and benefits modeling assumptions. For example, these estimates do not reflect local variability in population density, meteorology, exposure, baseline health in cidence 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 Unite d 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 calcula tion of the new benefit-per-ton estimates (U.S. EPA, 2012).7-28 PM 2.5 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 PM 2.5 , 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 pe rcentage of premature mortality associated with this specific rule’s emission reductions at each PM 2.5 level. As a surrogate measure of mortality impacts, we provide the percentage of the population exposed at each PM 2.5 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 populati on exposed to various ai r 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 PM 2.5 levels at or above the LML. Using the Pope et al. (2002) study, the 77% of the population is exposed to annual mean
PM 2.5 levels at or above the LML of 7.5 μg/m 3 . Using the Laden et al. (2006) study, 25% of the population is exposed above the LML of 10 μg/m 3

. As we model avoided premature deaths among populations exposed to levels of PM 2.5 , we have lower confidence in levels below the LML for each study. It is important to emphasize that we have high confidence in PM 2.5 -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 o ccurs below the level of the National Ambient Air Quality Standard (NAAQS) for annual PM 2.5 at 15 μg/m 3 , which was set 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, taki ng 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 PM 2.5 Exposure in the Baseline7-30 Figure 7-7. Cumulative Distribution of Adult Population by Annual Mean PM 2.5 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 we re able to quantify include the following:

1. PM 2.5 benefits were derived through benefit per-ton estimates, which do not reflect local variability in population density, meteorology, exposure, baseline healthincidence rates, or other local factors that might lead to an over-estimate or underestimate of the actual be nefits of controlling directly em itted 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 es timate the proportion of benefits occurring in different locations, such as designated nonattainment areas. In addition, the benefit-per-ton estimates are based on emissi ons from existing sources. To the extent7-31 that the geographic distribution of the emissi ons reductions for this rule are different than the modeled emissions, the benefits ma y be underestimated or overestimated. In general, there is inherently more uncer tainty for new sources, which may not be included in the emissions inventory, than existing sources.

2. We assume that all fine particles, rega rdless of their chemical composition, are equally potent in causing premature mortality. This is an important assumption, because PM 2.5 produced via transported precursors emitted from EGUs may differ significantly from direct PM 2.5 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 an alysis. Thus, the estimates include health benefits from reducing fine particles in areas with varied concentrations of PM 2.5, 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 PM 2.5 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 th ese 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 PM 2.5 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 PM 2.5 benefits, please consult the PM 2.5 NAAQS RIA (Table 5.5).

This RIA does not include the type of deta iled 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 millio n 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 an d 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 $1.3 billion at a 7% disc ount rate. All of these estimates are in 2010$ 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 mi nus annualized costs) utilizing the 14 different
PM 2.5 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 C I RICE have
not been included in these estimates. EPA believe s that the co-benefits are likely to exceed the costs under this rulemaking even when taking in to 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. Deleted: proposal

Deleted: proposal

Deleted: proposed

Deleted: proposed

Deleted: S7-33 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 Benefits 2 $770 to $1,900 $690 to $1,700 Total Compliance Costs 3 $373 $373 Net Benefits $400 to $1,500 $320 to $1,300

Non-monetized Benefits Health effects from HAP exposure

Health effects from PM 2.5 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 heal th benefits associated with reducing exposure to PM 2.5 through

reductions of PM 2.5 precursors such as directly emitted fine particle s. Human health benefits are shown as a range from Pope et al. (2002) to Laden et al. (2006). These mode ls assume that all fine particles, regardless of their chemical composition, are equally potent in causing prematur e 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 method s in the PM NAAQS RIA (U.S. EPA, 2012b), these updates generally offset each other, and we anticipate that the r ounded 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 PM 2.5 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 PM 2.5 . 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 combined with total monetized benefits estimates derived from 2 epidemiology functions and 12 expert functions

Deleted: Proposed7-35 Figure 7-9. Net Benefits for CI RICE NE SHAP Reconsideration at 7% discount rate* *Net Benefits are quantified in terms of PM 2.5 benefits at a 7% discount rate at a 7% discount rate for 2013 and are in 2010$. This graph shows 14 benefits estimates combined wi th 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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‐ $500

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Deleted: Pro p osed

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U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 48-49: Geographic Distribution—Pipeline tran sportation of natural gas: 2002.” http://factfinder.census.gov ; (November 10, 2008).
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Deleted: >8-4 U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 00: All sectors: Geographic Area Series: Ec onomy-Wide Key Statistics: 2007” http://factfinder.census.gov ; ( February 23, 2012).
U.S. Department of Agriculture (USDA), Nationa l Agricultural Statistics Service (NASS). 2004. “2003 Farm and Ranch Irrigation Survey.” Washington, DC: USDA-NASS.
U.S. Department of Agriculture (USDA), Nationa l Agricultural Statistics Service (NASS). 2009. “2008 Farm and Ranch Irrigation Survey.” Washington, DC: USDA-NASS.
U.S. Department of Agriculture (USDA). 20 08. “Agricultural Projections to 2017.” http://www.ers.usda.gov/Publi cations/OCE081/OCE20081c.pdf

. U.S. Department of Agriculture (USDA). 20 08. “Agricultural Projections to 2017.” http://www.ers.usda.gov/Pub lications/OCE081/OCE20081c.pdf

. U.S. Department of Energy, Energy Informa tion Administration. 2007. “2006 EIA-906/920 Monthly Time Series.”
U.S. Energy Information Administration. 2008a. http://www.eia.doe.gov/cneaf/electricity/page/ restructuring/restructure_elect.html . Last updated September 2008.
U.S. Energy Information Administration. 2009. Supplemental Tables to the Annual Energy Outlook 2010. Table 2. Available at: http://www.eia.doe.gov/oiaf/aeo/aeoref_tab.html

. U.S. Environmental Protection Agency (U.S. EPA). 2010. Guidelines for Preparing Economic Analyses. EPA 240-R-10-003. National Center for Environmental Economics, Office of Policy. Washington, DC. September. Available on the Internet at < http://yosemite.epa.gov/ee/epa/eed.nsf/pages/Guidelines.html

. U.S. Environmental Protection Agency (EPA). May 2004. Final Regulatory Analysis: Control of Emissions from Nonroad Diesel Engines. EPA420-R-04-007. Washington, DC: EPA. < http://www.epa.gov/nonroad-d iesel/2004fr/420r04007.pdf >

. U.S. Environmental Protection Agency. 2006. Regulatory Impact Analysis, 2006 National Ambient Air Quality Standards for Particulate Matter, Chapter 5. Available at

< http://www.epa.gov/ttn/ecas/regdata /RIAs/Chapter%205--Benefits.pdf >.
U.S. Environmental Protection Agency (U.S. EPA). 2008. Guidelines for Preparing Economic Analyses: External Review Draft. National Center for Environmental Economics, Office of Policy Economics and Innovation. Washin gton, DC. September. Available on the Internet at < http://yosemite.epa.gov/ee/epa/eermfile.nsf/vwAN/EE-0516- 01.pdf/$File/EE-0516-01.pdf >.
U.S. Environmental Protection Agency. 2008. Regulatory Impact Analysis, 2008 National Ambient Air Quality Standards for Ground-level Ozone, Chapter 6. Available at http://www.epa.gov/ttn/ecas/regdata/RIAs/6-ozoneriachapter6.pdf

. Deleted: Februray8-5 U.S. Environmental Protection Agency. 2008. Technical Support Document: Calculating Benefit Per-Ton estimates, Ozone NAAQS Dock et #EPA-HQ-OAR-2007-0225-0284.
U.S. Environmental Protection Agency. 2008. Integrated Science Assessment for Particulate Matter (External Review Draft). Washington, DC, EPA/600/R-08/139. Available on the Internet at http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=201805

. U.S. Environmental Protection Agency (U.S. EPA). 2009a. Regulatory Impact Analysis: National Emission Standards for Hazardous Air Pollutants from the Portland Cement Manufacturing Industry. Office of Air Quality Planning and Standards, Research Triangle Park, NC. April. Available on the Internet at

< http://www.epa.gov/ttn/ecas/regdata /RIAs/portlandcementria_4-20-09.pdf >.
U.S. Environmental Protection Agency (U.S. EPA). 2009b. Proposed SO 2 NAAQS Regulatory Impact Analysis (RIA). Office of Air Qualit y Planning and Standards, Research Triangle Park, NC. November. Available on the Internet at

< http://www.epa.gov/ttn/ecas/regda ta/RIAs/pso2full11-16-09.pdf >.
U.S. Environmental Protection Agency (U.S. EPA). 2009c. Integrated Science Assessment for Particulate Matter (Final Report). EPA-600-R-08-139F. National Center for Environmental Assessment – RTP Division. D ecember. Available on the Internet at

< http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=216546 >.
U.S. Environmental Protection Agency - Science Advisory Board (U.S. EPA-SAB). 2007. SAB Advisory on EPA’s Issues in Valuing Mort ality Risk Reduction. EPA-SAB-08-001. October. Available on the Internet at

< http://yosemite.epa.gov/sab/sabproduct.nsf/4128007E7876B8F0852573760058A978/$F ile/sab-08-001.pdf >.
U.S. Environmental Protection Agency (U.S. EPA). 2012a. Regulatory Impact Analysis for the Proposed Revisions to the National Ambien t 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 Ai r 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 Assessmen t 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/73ACCA834AB44A10852575BD0064 346B/$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). 2 008. “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/analysis paper/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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## EO12866CIRICERI Achangememofi nal_2060-AQ48_20121101.docx November 1, 2012

MEMORANDUM

SUBJECT: Regulatory Impact Results for the R econsideration Proposal for National Emission Standards for Hazardous Air Po llutants for Compre ssion Ignition (CI) Reciprocating Internal Co mbustion 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 rulema king 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 employ ment 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 bene fits 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 RIA 1 

## . These updates would reduce the monetized benefits estimated for the final RICE am endments by less than 4 percent. More information on these updates can be f ound in the PM NAAQ S 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 St andards 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/regda ta/RIAs/PMRIACombinedFile_Bookmarked.pdf.

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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 us ing a methodology de scribed in the 2010 final CI RICE RIA, using the re vised emission reductions estimate d 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 HAP s, ecosystem impairment, and visibility impairment, incl uding reducing 14,000 tons of carb on monoxide and 1,000 tons of
HAPs. Please refer to the full de scription later in this RIA of the unquantified benefits as well as technical details of the analysis and its limitations and uncertain ties. These monetized benefits are approximately 21% lower than the 2010 final CI RICE rule due to the decrease in direct

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## PM 2.5 

## 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 an alysis for the 2010 final rules a pplied out-dated benefit-per-ton estimates compared to the updated estimates described in this pr eamble and reflected monetized co-benefits for VOC emissions, which limits direct comparability with the monetized co-benefits estimated for these proposed ru les. In addition, these estimate s have been updated from their original currency years to 2010$, so the rounded es timates for the 2010 fina l rules may not match the original RIAs.

Table 1-3: Summary of Monetized Co-Benefit s 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 PM 2.5 

### 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 NO 2 

### , ozone exposure, ecosystem effects, or visibility impairment. All fine particles are assumed to have equivalent health effects, but the bene fit per ton estimates vary b ecause each ton of precursor reduced has a different propensity to form PM 2.5 

### . Confidence intervals are unavaila ble for this anal ysis because of the benefit-per-ton methodology.

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## Table 1-4: Summary of Es timated Reductions in Health Incidences from PM 2.5 

## 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 effect s because the scientif ic evidence is not yet sufficient to

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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 tota l monetized co-benefits from reductions of
PM 2.5 

## emissions by engine size associated with the reconsideration ruleproposal. Figure 1-2 provides a visual represen tation of the range of PM 2.5 

## -related benefits estimates using concentration-response functions supplied by experts.

Figure 1-1: Breakdown of Total Monetized PM 2.5 

## Co-Benefits of Pr oposed CI RICE Reconsideration by Engine Size

Major <500 HP 25%

Major >500 HP 6%

Area <600 HP 36% Area >600 HP 33%

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## Figure 1-2: Total Monetized PM 2.5 

## Co-Benefits Estimates for th e 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$)

PM 2.5 mortality benefits estimates derived from 2 epidemiology functions and 12 expert functions 3% DR
7% DR

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## This action proposes to amends provisions in the RICE NESHAP that currently allow owners

and operators to operate stationa ry emergency engines for up to 15 hours per year as part of a

demand response program if the RTO or equiva lent balancing authority and transmission

operator have determined there are emergency condi tions that could lead to a potential electrical

blackout, such as unusually low frequency, equipm ent overload, capacity or energy deficiency,

or unacceptable voltage level. Th e 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 finali zed on March 3, 2010 (75 FR 9648). Following the

completion of that portion of th e rule, the EPA received three main petitions for reconsideration.

One petition was from CPower, Inc., EnergyC onnect, 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 Res ources 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 electri c generation industry.

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## 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 de mand response program. By contrast, the DE DNREC petition asked EPA to reconsider the em ergency demand response provision because of
the adverse effects that it believes would result from increased emissi ons from these engines. The petition from NRECA requested that the EP A eliminate the restri ction on the use of stationary emergency engines for demand res ponse 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 emergenc y RICE participating in emerge ncy 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 de mand response program, which has a tariff requirement of 24 hours per year; the Pennsylva nia 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 Engla nd (“ISO-NE”), which forecasts that backup resources would be expected for 55 hours over a 12-month period. Tari ff 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. Convers ely, some commenters urged the EPA to allow stationary emergency engines to only operat e 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 prop ose to amend the current rule to increase the allowance for stationary emergency engine pa rticipation 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 main tain their emergency e ngines. The EPA believes that the emergency demand response programs th at exist across the country are important programs that protect the reliabili ty and stability of the national electric servi ce grid. Allowing stationary emergency engines to operate as part of emerge ncy demand response programs can help prevent grid failur e or blackouts, by allowing these engine s to be used in circumstances of grid instability prior to the occurrence of blac kouts. Preventing stationa ry emergency engines

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## 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 reliab ility of their systems. The EPA does not wish to potentially jeopa rdize electrical reliability or cr eate a disincentive for stationary emergency engines to participate in these pr ograms. The circumstances during which the EPA would allow stationary emergency engines to operate for emergency de mand response purposes include periods during which the regional tran smission authority or equivalent balancing authority and transmission opera tor has declared an Energy Emergency Alert Level 2 (EEA Level 2) as defined in the Nort h American Electric Re liability Corporation Reliability Standard EOP-002-3, Capacity and Energy Em ergency, plus during periods wh ere there is a deviation of voltage or frequency of 5 percent or more be low standard voltage or frequency. During EEA Level 2 alerts there is insufficient energy s upply and a true potential for electrical blackouts. System operators must call on al l available resources during EEA Level 2 alerts in order to stabilize the grid to prevent fa ilure. Therefore, this situati on is a good indicator of severe instability on the system. Consistent normal voltag e 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 provi ded at a normal expected vo ltage. The American National
Standards Institute standard C84.1-1989 defines the ma ximum 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 relia bility. This situation
would be indicative of severe instability on the system.

Emergency demand response program s rely on agreements under wh ich owners of engine agree to make their engines available to be calle d upon for a specific number of hours per year, as required by the relevant ISO or RTO tariff, under specified circum stances 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 e ngines 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 e ngine may not be called at all or may run for fewer hours than the program requires it to be available in a particul ar 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 cu rrently 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.

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## For these reasons, the EPA believes it is appropr iate 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 opera tion to 100 hours per year for stationary emergency engines. It is expect ed that owners and operators of stationary emergency engines that seek to qualify their units as demand re sources would with the proposed increase to 100 hours per year be able to meet the operationa l and qualification requirements of the different ISOs and RTOs in the country.

As stated, stationary emergenc y 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 progr am. The purpose of the limited allowance for demand response is to respond to emergencies, and the EPA is persua ded 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 determin ed 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 majo rity 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 em ergency/standby oper ation (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 th at in most cases to qualify for demand response programs. For instan ce, PJM requires a minim um ISO tariff of 60 hours per year of engine availabili ty for program participation. C onsequently, in order to ensure that a sufficient amount of opera ting time is available for mainte nance and readiness testing, and for demand response operation, th e EPA is allowing proposing 100 hours of operation. A number of commenters requested that an allowance of 1 00 hours per year be allowed in order to provide adequate hours consistent with minimum required hours that cust omers must be available to operate and to address local di stribution system emergencies. For instance, in Hawaii, the

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## emergency demand response program operated by the Hawaiian Electric Co mpany 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 su fficient amount of time to cover annual maintenance and testing, wh ich 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 re sponse 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 m onth and accounting for other emergency demand response programs that require more than 60 hour s 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 pe r year for emergency demand re sponse operation as part of the 100 hours already permitted for main tenance and readiness testing wh ile 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-emer gency demand response, the EPA is proposing to include a temporary limited allowance for peak shaving and other type s of non-emergency use as part of a financial arrangeme nt for existing stationary emerge ncy 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 po wer 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 af tertreatment that could be prohibitively costly for these sources in the near term. Th e EPA is finalizing proposing that the 50-hour allowance for peak shaving for emergency engi nes 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 progra m) 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 thos e 50 hours could no longer be used for peak

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## shaving. The temporary allowance for peak sh aving would give sources time to address reliability issues and develop solutions to reliab ility issues while facilities are coming into compliance with the National Emission Standards for Hazardous Air Pollut ants From Coal and Oil-Fired Electric Utility Steam Generating Un its, 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 minimiz e 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-Fire d Electric Ut ility 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 ag reements with owners of sma ll emergency engines and rely on the engines to reduce demand on the central power supply during pe riods of high demand

,, which reduces the cost of power during peri ods of high demand for the members of the cooperative. Commenters promo ting the continued use of peak shaving programs said that maintaining the cost of power as low as po ssible is important acro ss the country, but is particularly of significant im portance to rural electric coope ratives that, according to the commenter, service customers in the most economically depresse d areas of the country, where options are the most limited. Th e commenters argued that if sm all 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 passe d along to the customers. Commenters also maintained that keeping peak shaving programs w ould not lead to additional public health risks or emissions because the operation for peak shavi ng is minimal. If peak shaving is not allowed under the rule, commenters said th at this would lead to an in crease in central power station capacity and possibly more transmission and di stribution 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 e ssential for many smaller faci lities and operations. Providing a limited allowance for peak shaving and non- emergency demand response could generate sufficient income to preven t small facilities and owners from ceasing operation where these engines are in service. In order to further limit the ope ration of these engines to small, remote

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## 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 appropria te to continue the program beyond that time. Generators receive consid erable compensation for their availability in peak shaving programs and the EPA believes that it is not appropriate to allow these engines to continue receiving compensati on for this non-emerg ency 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-emergenc y use or to reduce the emissions from their engines. The EPA also encourages engine owne rs and operators, as well as larger system planners, to consider the use of alternative peak shaving options, su ch 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 engi nes 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 conserva tive, the EPA believes that 50 hours per year is still representative and consequently the e nvironmental impact the EPA has calculated previously remains appropriate. In consideratio n 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 sp ecific amendments the EPA is finalizing proposing ar e discussed below.

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## 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, subpar t ZZZZ. Currently, §63.6640(f)(1)(iii) allows a maximum of 15 hours per year to be spent towards dema nd response operation under certain qualifying conditions. Also, §63.6640(f)(1)(ii ) currently includes an allowance of 100 hours per year for purposes of ma intenance checks and readiness testing. The EPA is requiring proposing that owners and operators of stationary emergency RI CE be permitted to operate their engines as part of an emergenc y demand response program within the 100 hours per year that is permitted for maintenan ce 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

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## regional transmission authority or equivalent balancing authorit y and transmission operator has
declared an EEA Level 2 as defined in the No rth American Electric Re liability Corporation Reliability Standard EOP-002-3, Capacity and Energy Emerge ncy 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 dema nd response operation are added to the hours spent for maintenance and testi ng purposes and counted toward s the 100 hours per year. If the total time spent for demand re sponse operation and maintenan ce 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 suppor t the local power systems.

For stationary emergency e ngines above 500 HP that were installed prior to June 12, 2006, there is currently no emergency demand re sponse allowance and there is no time limit on the use of emergency engines for routine tes ting and maintenance in §63.6640(f)(2)(ii). Those engines were not the focus of the 2010 RICE NE SHAP amendments; therefore, the EPA did not make any changes to the requirements for thos e engines as part of the 2010 amendments. For consistency, the EPA is now also requiring propo sing 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 tota l of 100 hours per year, including time spent for maintenance and testing.

The EPA is also proposing to amending the NS PS 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 regu lations currently do not include su ch an allowance for emergency demand response operation. For the reasons discusse d as to why the EPA fi nds it appropriate to allow stationary emergency engi nes to participate in emergency demand response programs and remain being considered emergency units, and for consistency across en gine regulations, the EPA is is proposing to adding an emergenc y demand response allowance under the NSPS regulations. Consequently, the EPA is propos ing to revisinge the existing language in §§60.4211(f) and 60.4219 of 40 CFR part 60, subp art IIII, and §§60.4243(d) and 60.4248 of 40 CFR part 60, subpart JJJJ, to specify that emerge ncy engines may participate in demand response programs for up to 100 hours per y ear, including hours spent toward s maintenance and testing of the emergency engines.

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## In addition to the changes the EPA is fi nalizproposing 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 e ngine for 50 hours per year in non-emergency situations. As cu rrently written, the 50 hours per year for nonemergency situations cannot be used for peak shav ing or to generate inco me for a facility to supply power to an electric grid or otherwise s upply power as part of a financial arrangement with another entity; except that owners and ope rators 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 allowa nce for emergency engines to participate in emergency demand response programs is being in creased to 100 hours per year, but will also include hours spent towards main taining and conducting readiness testing of the emergency engines. However, additionally, the EPA is al so allowproposing that stationary emergency engines located at area sources be permitted to apply the 50 hours per y ear that is currently allowed under §63.6640(f) for non-eme rgency operation towards any non-emergency operation, including operation as part of a financial agre ement with another entity. The peak shaving allowance would expire in 2017. The EPA is specify ing that the power can only be used at the facility or towards the local syst em, and the engine can only be operated for peak shaving as part of a program with the local dist ribution system operator. The EP A is also clarifying that an engine that exceeds the calendar year limi tations on non-emergency operation, including emergency demand response or peak shaving, w ill be considered a non-emergency engine and subject to the requirements for non-emergency engi nes for the remaining li fe of the engine.

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## 4.2.1.5.1 Background for FinalP roposed Amendments

The RICE NESHAP currently specifies le ss stringent requireme nts for existing nonemergency CI engines at area s ources located in remote areas of Alaska. Remote areas are defined as those not accessible by the FAHS. Th e FAHS includes areas with year-round ferry service that are not on the contiguous road syst em. Under the current re gulation, stationary nonemergency CI engines at area sources in areas of Alaska that are not accessible by the FAHS are subject to management practices as oppos ed 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 th at facilities in areas that are

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## 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 Railbe lt Grid refers to the
service areas of the six regulated public utilities that extend from Fairbanks to Anchorage and the
Kenai Peninsula. These utilitie s are the Golden Valley Electri c Association, Chugach Electric Association, Matanuska Electric Association, Homer Electric Asso ciation, Anchorage Municipal Light & Power, and the City of Seward Electri c System. According to the stakeholders, one reason for broadening the definiti on of remote areas in Alaska is high energy costs, which provide a natural incentive to run CI engines as little as possible. Th e cost of energy is utilities’ greatest concern in Alaska. Also, the stakeholders indicated that extrem e weather conditions in
certain areas of Alaska is anothe r reason for including additional ar eas in the definition of remote areas of Alaska. The climate issue is unique to re mote areas of Alaska that experience some of the most extreme temperatures in the c ountry. Heavy snowfall a nd high winds are not
uncommon in several areas that are accessibl e by the FAHS. For instance, Copper Valley Electric Association (CVE A) is a utility accessible by the FAHS, but it includes areas that face the same challenges as other co mmunities not accessible by the FA HS. The utility operates on an isolated grid and relies on diesel power generatio n. In one of CVEA’s terr itories, Valdez, Alaska,
CVEA indicated that this area e xperiences brutal conditions and st ated that Valdez is considered to have the greatest snowfall (326 inches per winter ) in any city of the Un ited States. Also, winds at more than 100 miles per hour are not uncom mon for Valdez, Alaska, according to CVEA. Temperatures between 40 and 50 below zero ar e also not abnormal, which emphasizes the extreme reliance on power, CVEA as serted. Travel times and accessib ility 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, ev en if a site is on the F AHS, 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 partic ular remote areas of Alaska and the problems are unique to Alaska because of the infrastructure and environment. For example, communities made the case that sour ces along the AMHS that are only accessible by the AMHS should be treated the same way as communities not accessi ble by the FAHS. The AMHS primarily serves passenge rs and vehicles, and is not intended for tran sporting goods. Therefore, the same methods us ed to bring in goods to comm unities not on the FAHS are the same as those Alaskan villages served only by the AMHS. Goods are ty pically brought in to remote communities by barg e 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 populat ion density in many other remote areas although accessible by the FAHS, and the fact that many of these areas are not connected to the

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## electric grid and rely on back up diesel gene ration to support fluctua ting renewable energy systems. The energy supply system is another ar ea that is particularly different in Alaska compared to the rest of the country whose majo rity of customers are connected to the grid. Lastly, if sources were to comply with requi rements under the RICE NE SHAP necessitating addon controls and associated mo nitoring, testing, and administra tive requirements, compliance costs would be high and funds needed for sustaina ble 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 FinalP roposed Amendments?

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## The EPA is proposing to expanding the current definition of remote areas of Alaska to extend beyond areas that are not accessi ble by the FAHS. Specifically, the EPA is requiringproposing
that areas of Alaska that are accessible by the FAHS and that me et 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 a nd is used less than 500 hours per year on a 10-year rolling

average.

The EPA is proposing limiting the re mote classification to engines th at are used at least partially for residential purposes, where th e impact of higher energy cost s 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 cap acity facilities, which are genera lly in more sparsely populated

areas.

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Summary of Major Source a nd Area Source Baseline Emissi ons for the RICE NESHAP
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## Space Before: 3 pt, After: 3 pt_________________________________ RTI International is a trade name of Research Triangle Institute. 

### Janu a r y 201 3



# Regulatory Impact Analysis (RIA) for Reconsideration Existi ng Stationary Spark Ignition RICE NESHAP

Final Report

Prepared for

Larry Sorrels U.S. Environmental Protection Agency Office of Air Quality Plann ing 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 Deleted: 1-1

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Deleted: Proposed
Deleted: /Peak Shaving
Deleted: 5iv 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- 4 6

5 Economic Impact Analysis, Energy Impact s, 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 a nd 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 Deleted: Proposed Final Amendment -
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Deleted: Proposedv 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 PM 2.5 Human Health Co-Benefits ................................................ 7-1

7.2 Unquantified Benefits ........................................................................................ 7-13
7.2.1 HAP Benefits ......................................................................................... 7-13
7.2.2 Additional NO 2 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 PM 2.5 Co-Benefits ............... 7-25

7.4 Comparison of Co-Benefits and Costs ............................................................... 7-30

8 References for RIA ........................................................................................................... 1 Deleted: 6-1

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Deleted: 8-1vi LIST OF FIGURES

Number Page

1-1. Breakdown of Total Monetized PM 2.5 Co-Benefits of SI RICE Reconsideration by Engine Size............................................................1

- 8 1-2. Total Monetized PM 2.5 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 Establis hments: Crude Petroleum and Natural Gas Extraction Industry (NAICS 211111) ...................................................................... 15 3-6 2002 Regional Distribution of Establis hments: Natural Gas Liquid Extraction Industry (NAICS 211112) .............................................................................................. 16 3-7 Distribution of Establishments within Pi peline Transportation (NAICS 486) ............... 19 3-8 Distribution of Revenue within Pipeline Transportation (NAICS 486) ......................... 20 3-9 2002 Regional Distribution of Establishm ents: 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 Engi ne Size for All Industries ............................... 9

7-1. Breakdown of Monetized PM 2.5 Health Co-Benefits using Mortality Function from Pope et al. (2002) ................................................................................................. 7-7 7-2. Total Monetized PM 2.5 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 ............................................................................................................ 7-1 3 7-4. Estimated Chronic Census Tract Carcinogenic Risk from HAP exposure from outdoor sources (2005 NATA) ................................................................................... 7-18 Deleted: Proposed

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Deleted: e Deleted: lvii 7-5. Estimated Chronic Census Tract Noncancer (Respiratory) Risk from HAP exposure from outdoor sources (2005 NATA) ........................................................... 7-18 7-6. Percentage of Adult Popu lation by Annual Mean PM 2.5 Exposure in the Baseline ..................................................................................................................... . 7-28 7-7. Cumulative Distribution of Adul t Population at Annual Mean PM 2.5 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 Deleted:

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Deleted: Proposedviii 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 20 13 (millions of 2010$) .................................... 1-3 1-2. Summary of the Monetized Co-Benefits, Compliance Costs, and Net benefits for the 2010 Rule with the Amendments to the St ationary SI RICE Engine NESHAP in 2013 (millions of 2010$)............

.............................................................. ... ............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 Genera tion, 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 Sa les 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 Na tural 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 Employme nt Size for Crude Petroleum and Natural Gas Extraction (NAICS 211111): 2007 .......................................................................... 17 3-12 Key Enterprise Statistics by Employme nt 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 Si ze for Pipeline Transportation of Natural Gas (NAICS 48621): 2007 .............................................................................................. 24 Deleted: Proposed

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Deleted:

............... Deleted: <#>Summary of Monetized Co-Benefits Estimates for SI RICE Reconsideration Proposal in 2013.......................................

............................................. ......1-5¶ <#>Summary of Estimated Reductions in Health Incidences from PM 2.5 for the SI RICE Reconsideration Proposal in 2013....................................... ....................1-7¶
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..... 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 Power a Sector Energy Consumption (Quadrillion BTUs): 2013 ............ 5-9 5-5 Labor-based Employment Estimates for Reporting and Recordkeeping and Installing, Operating, and Maintaining Control Equipm ent Requirements for Reconsideration SI RICE NESHAP........................................................5-16

6-1 NESHAP for Existing Sta tionary 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 PM 2.5 .................................................................................... 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$) ........................ 7-9 7-3. Summary of Reductions in Health Incidences from PM 2.5 Co-Benefits for the SI RICE Reconsidered NESHAP in 2013 .................................................................. 7-10 7-4. All Monetized PM 2.5 Co-Benefits from PM 2.5 Benefits for the SI RICE Reconsidered NESHAP in 2013 ................................................................................. 7-11 7-5. Summary of the Annualized Monetized Benefits, Social Costs, and Net Benefits for the SI RICE Reconsidered NESHAP in 2013 (millions of 2010$) ...................... 7-31 Deleted: 4-18
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EXECUTIVE SUMMARY

ES.1 Summary of Impacts for the Reconsideration

This final action is a reconsideration of the prom ulgated 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 industr ies 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 al so 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), EP A 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 re duce hazardous air pollutants (HAPs) required under this reconsideration. Using alternate relationships between PM 2.5 and premature mortality supplied by experts, higher and lower benefits es timates are plausible, but most of the expertbased estimates fall between these estimates. Th e 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) includingupdated epidemiology studies, health endpoints, and population data. Although we have not reDeleted: Proposed

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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 Benefits 2 $62 to $150 $55 to $140 Total Compliance Costs 3 $115 $115

Net Benefits $-53 to $35 $-60 to $25

Non-monetized Benefits Health effects from HAP exposure

Health effects from CO

, NO 2 , 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 wi th reducing exposure to PM 2.5

through reductions of PM 2.5 precursors such as NOx and VOC. It is important to note that the monetized cobenefits include many but not all health effects associated with PM 2.5 exposure. It is important to note that the monetized benefits include many but not all health effects associated with PM 2.5 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 method s in the PM NAAQS RIA (U.S. EPA, 2012b), these updates generally offset each other, and we anticipate that the r ounded 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 RI CE final rule promulgated in October, 2010. Therefore, all changes to the costs, benefits, and economic impacts for this rule are due to Formatted: bullets,bu, Indent: First line: 0.5", Space Before: 0 pt, After: 0 pt, Line spacing: At least 18 pt
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Deleted: 1 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 f act 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 PM 2.5 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% di scount rate and are from reductions in PM 2.5 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 re duction in compliance costs associated with the
amendments to the 2010 SI final rule in this rulemaking . All of the se results for this rule are
found in Section 5 in this RIA.

The results for sales tests (i.e. annual cost/sal es 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 resu lts for this rule are f ound 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, an d testing. We estimate that 200 full-time Deleted: or propose d
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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 th is rule i s $55 million (2010$) to $140 million (2010$) at 7 percent discount rate.

T able 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 R ule 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 PM 2.5 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 anticipa te 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. Deleted: proposed
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INTRODUCTION

EPA is finaliz ing 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 imp acts, along with an analysis of impacts on employment, is also included in this RIA. Finall y, 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 co nsidered 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.

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INDUSTRY PROFILE

This section provides an introduction to the indu stries 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 bur n, and 4-stroke rich burn. Each of these have design differences that affect both baseline em issions as well as the potential for emissions
control.

These industries include the following:

 electric power generation, transmissi on, 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 rulemaki ng 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, Tr ansmission, and Distribution

3.1.1 Overview
Electric power generation, transmission, a nd distribution (NAICS 2211) is an industry group within the utilities sector (NAICS 22). It includes establishments that produce electrical energy or facilitate its transmi ssion 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. Deleted: proposed3-2 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. Foll owing market manipulati on 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 ($10 6 ) 373,309 440,355 Payroll ($10 6 ) 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 St ates (2002 NAICS Basis): 2007 and 2002.” http://factfinder.census.gov3-3 Figure 3-1. Industrial Production Index (NAICS 2211)

Source: The Federal Reserve Board. “Industrial Production and Capacity Utilization: I ndustrial 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 1151997‐011997‐061997‐111998‐041998‐091999‐021999‐071999‐122000‐052000‐102001‐032001‐082002‐012002‐062002‐112003‐042003‐092004‐022004‐072004‐122005‐052005‐102006‐032006‐082007‐012007‐062007‐112008‐042008‐092009‐022009‐072009‐12IndexValue(Jan2002=100)3-4 Figure 3-2. Internal Combustion Generators by State: 2006
Source: U.S. Department of Energy, Energy Informati on Administration. 2007. “2006 EIA-906/920 Monthly Time

Series.”

associated with reciprocating internal combustion engines (oil and gas extraction, pipeline transportation, petroleum refineries, and turb ine 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 re port, we use the following definitions:

 Establishmen t: An establishment is a single physical location where business is conducted or where services or in dustrial operations are performed. Diesel and Natural Gas Internal Combustion Generators By State

No Restructuring Suspended Restructuring Active Restructuring
100

50

10
13-5 Table 3-2. Direct Requirements for Electri c Power Generation, Transmission, and Distribution (NAICS 2211): 2002

Commodity Commodity Description Direct Requirements Coefficients a
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 a nd 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 Be nchmark Input-Output Account s: 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, in cluding revenue earned from premiums, commissions and fees, rents, interest, divi dends, 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 commonownership 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; generate d 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, inve stor-owned energy provider companies with less than 50% of their assets regulated were unprof itable 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, tran smitting, 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 fi rms with revenues in excess of $100 million. Establishments by State

Less than 100

100 - 199

200 - 349

350 - 500

More than 5003-7 Table 3-3. Firm Concentration for Electric Power Generation, Transmission, and Distribution (NAICS 2211): 2002

Commodity Establishments Receipts/Revenue

Number of Employees Employees per Establishment Amount ($10 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 Internat ional; 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).

### 8Table 3-4. United States Retail Electricity Sales Statistics: 2008Full-Service Providers Other ProvidersItem Investor-Owned Public Federal Cooperative Facility Energy Delivery TotalNumber of entities 3 62 1 25 1 NA NA 92Number of retail customers 46,985 2,160,220 36 940,697 1 NA NA 3,147,939Retail sales (103megawatthours) 2,257 70,303 9,625 21,868 117 NA NA 104,170Percentage of retail sales 2 67 9 21 0 — — 100Revenue from retail sales ($106) 113 5,934 473 1,994 6 NA NA 8,520Percentage of revenue 1.33 69.65 5.55 23.41 0.07 — — 100Average retail price (cents/kWh) 5.01 8.44 4.91 9.12 5.25 NA NA 8.18Source: 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>.3-9 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

Regulated a 7.25% $12,341 $158,657
Mostly regulated b 8.50% $17,815 $175,218

Diversified c -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 enterprises a 1,187
Total receipts (10 3 ) $323,522,443
Net sales(10 3 ) $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).

### 10Table 3-7. Key Enterprise Statistics by Employee Size for Electric Power Generation, Transmission, and Distribution(NAICS 2211): 2007Variable All Enterprises<20Employees20–99Employees100–499Employees500+EmployeesFirms 1,687 630 670 251 136Establishments 9,611 687 1,110 999 6,815Employment 503,134 3,622 31,455 42,527 425,530Receipts ($103) $440,342,284 $8,364,773 $21,825,969 $41,370,375 $368,781,167Receipts/firm ($103) $261,021 $13,277 $32,576 $164,822 $2,711,626Receipts/establishment($103)$45,817 $12,176 $19,663 $41,412 $54,113Receipts/employment($) $875 $2,309 $694 $973 $867Source: 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 explor ing 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 in dustries: 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 partic ularly 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: I ndustrial Production” Series

ID: G17/IP_MINING_AND_UTILITY_DETAIL/IP.G211.S <h ttp://www.federalreserve.gov/datadownload/>. (January 27, 2010).
Table 3-8. Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111): ($2007)

2002 2007
Revenue ($10 6 ) $98,667 $214,198
Payroll ($10 6 ) $5,785 $8,980
Employees 94,886 140,160
Establishments 7,178 5,956

Sources: U.S. Census Bureau; generated by RTI Interna tional; 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; us ing American FactFinder; “Sector 21: EC0721I1: Mining:

Industry Series: Detailed Statistics by Industry for th e United States: 2007 ” <http://factfinder.census.gov>; (April 27, 2010). 75 80 85 90 95 100 105 1101997‐011997‐061997‐111998‐041998‐091999‐021999‐071999‐122000‐052000‐102001‐032001‐082002‐012002‐062002‐112003‐042003‐092004‐022004‐072004‐122005‐052005‐102006‐032006‐082007‐012007‐062007‐112008‐042008‐092009‐022009‐072009‐12IndexValue(Jan2002=100)3-13 Table 3-9. Key Statistics: Natural Gas Liquid Extraction (NAICS 211112) ($2007)

2002 2007 Revenue ($10 6 ) $33,579 $42,363 Payroll ($10 6 ) $607 $501 Employees 9,693 7,343

Establishments 511 291

Sources: U.S. Census Bureau; generated by RTI Interna tional; 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; us ing American FactFinder; “Sector 21: EC0721I1: Mining:

Industry Series: Detailed Statistics by Industry for th e 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 Coefficients a
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 Accoun ts: 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 in dustrial operations are performed.3-14  Receipts : Receipts (net of taxes) are defined as the revenue for goods produced, distributed, or services provided, in cluding revenue earned from premiums, commissions and fees, rents, interest, divi dends, 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 commonownership 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 Internat ional; 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 1,0003-16 Figure 3-6. 2002 Regional Distribution of Establishments: Natural Gas Liquid Extraction Industry (NAICS 211112) Source: U.S. Census Bureau; generated by RTI Internat ional; 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 403-17 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 Si ze 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-discl osure requirements faced by the U.S. Census Bureau. Source: U.S. Census Bureau. 2010. “Number of Firms, Nu mber 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 Si ze 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-discl osure 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 enterprises a 19,441
Total receipts (10 3 ) $193,230,241
Net sales(10 3 ) $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 transporta tion 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 ($10 6 ) 16,368 20,797 Payroll ($10 6 ) 2,086 2,064 Employees 24,519 24,683
Establishments 1,560 1,479
Source: U.S. Census Bureau; generated by RTI Interna tional; 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 require ments represent significant share of the cost associated with pipeline transportation. Power a nd equipment requirements potentially associated with reciprocating internal combustion engine s (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 Oil3-20 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 cl early concentrated in the two states closest
to the refineries in the Gulf of Mexico. In 2 002, Texas and Louisiana contributed to 31% of all pipeline transportation establishments in the Un ited States (Figure 3-10) and 41% of all U.S. revenues. Other larger contributors with over 50 es tablishments 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 totalreceipts 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 Oil3-21 Table 3-15. Direct Requirements for Pipeline Transportation (NAICS 486): 2002

Commodity Commodity Description Direct Requirements Coefficients a
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 Accoun ts: 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 natura l 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 Partnerships3-23 Table 3-16. Firm Concentration for Pipeline Transportation of Natural Gas (NAICS 48621): 2002

Commodity Establishments Receipts/Revenue

Number of Employees Employees per Establishment Amount ($10 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 A ccounting Period 7/07–6/08: NAICS 486

Number of enterprises a 321

Total receipts (10 3 ) $11,062,608

Net sales (10 3 ) $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).

### 24Table 3-18. Key Enterprise Statistics by Employee Size for Pipeline Transportation ofNatural Gas (NAICS 48621): 2007Variable All Enterprises<20Employees20–99Employees100–499Employees 500+ EmployeesFirms 126 63 12 9 42Establishments 1.479 66 26 70 1,317Employment 24,683 241 382 1,479 22,581Receipts ($103) $20,796,681 N/A $518,341 $1,448,020 $18,498,143Receipts/firm ($103) $165,053 N/A $43,195 $160,891 $440,432Receipts/establishment($103)$14,061 N/A $19,936 $20,686 $14,046Receipts/employment($)$843 N/A $1,357 $979 $819Source: 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 implem entability, and certain f actual information that had not been brought to the EPA’s attention during the rulemaking. The EPA has considered this
information and believes that amen dments 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 reciprocat ing 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, subpar ts 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 remain s the same and is not cha nged 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/r ice/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-emergencydemand 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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Formatted: Space After: 12 pt, Line spacing: At least 18 pt4-2 reduction requirement. Owners an d operators of 4SRB engines will be permitted to demonstrate compliance with the 76 percent formaldehyde re duction 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 effec tive, method for demonstrati ng 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 th at 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 location 2 , 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 in tended for human occupancy. The EPA determined that a 0.25 mile radius was appropr iate because it is similar to the area used for the DOT Class 1 pipeline location. This final ru le 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 demonstr ate compliance initially, perform catalyst activity check-ups and either monitor the catalyst inlet temperature cont inuously 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 cl ass location unit that has 10 or fewer buildings intended for human occupancy. Deleted: The proposed final amendmentsalso 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: 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] Formatted: Font: (Default) Times New Roman, 10 pt4-3 The EPA is adding an alternative method of demonstrating compliance with the NESHAP for existing and new stationary 4SRB no n-emergency engines greater than 500 HP that are located at major sources of HAP emission s. 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 (O 2 ). 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 re duction 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 re ductions 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. Owner s 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 O 2 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] Formatted: Font: (Default) Times New Roman, 12 pt, Not Superscript/ Subscript
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Formatted: Font: (Default) Times New Roman4-4 Owners and operators opting to use the THC compliance demonstration method must demonstrate compliance by showing that the aver age 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 O 2 or equivalent carbon dioxide content. To correct to 15 percent O 2 , 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 ra nge 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
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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 rece ived in response to the prop osal, 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 Formatted: Font: (Default) Times New Roman, 12 pt, Not Superscript/ Subscript
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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] Deleted: ¶
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Formatted: Font: (Default) Times New Roman, 12 pt, Not Superscript/ Subscript4-5 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 Formatted: Font: (Default) Times New Roman

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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 entit y 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) Reliabil ity 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. Du ring 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 re sources 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 a nd 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 sy stem 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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Formatted: Font: (Default) Times New Roman4-7 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 pr oposed 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 aut horized entity as determined by the ReliabilityCoordinator, 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 gr eater 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 guide lines 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 Formatted: Font: (Default) Times New Roman, 12 pt, Not Superscript/ Subscript
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Formatted: Font: (Default) Times New Roman, 12 pt, Not Superscript/ Subscript4-8 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 en gine will not be considered an em ergency 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 re sidual fuel oil or non-ULSD distillate fuel, the most recent U.S. Energy Information Administrati on data available for sales of distillate and
residual fuel oil to end users 4 show that significant amounts of non-ULSD are still being purchased by end users that typically operate st ationary 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 emis sions of regulated air pollutants emitted from these engines, further protecting public health and the environment. Information provided to

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Formatted: Font: (Default) Times New Roman, 10 pt4-9 EPA by commenters 5 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 exis ting 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 faciliti es like tanks or other containment structures, as well as any needed adjustments to contracts and other business activities, that may be necessitated by thes e 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 provid e 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 cu rrently 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.

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Formatted: Font: (Default) Times New Roman, 10 pt4-10 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 engi nes 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 specifyi ng in the final rule that existing emergency engines at area sources of HAP that are residen tial, commercial, or institutional facilities are subject to the applicable requirements for stati onary 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 dist ribution 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 Janua ry 1, 2015, however, if the engine operates or is contractually obligated to be available fo r 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 Formatted: Font: (Default) Times New Roman, 12 pt, Not Superscript/ Subscript

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Formatted: Font: (Default) Times New Roman, 12 pt, Not Superscript/ Subscript4-11 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 5 00 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 en gines 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 ot her 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 Formatted: Font: (Default) Times New Roman
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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] Deleted: ¶
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Formatted: Space After: 12 pt, Line spacing: At least 18 pt4-12 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 e ngine 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 sour ces 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 ope ration 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 po tassium hydroxide per gr am from Total Acid Number of the oil when new; viscosity of the o il has changed by more th an 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) acco rding to the manufacturer's emission-related written instructions or develop their own mainte nance plan, which must provide to the extent Formatted: Font: (Default) Times New Roman

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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 y ear comply with the emission stan dards 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 th at are located on DOT Class 2 through Class 4 pipeline segments or, for engines not associated wi th 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 emissi ons. 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 demonstr ate that the engine achieves at least a 93 percent
reduction in CO emissions or a CO concen tration level of 47 ppmvd at 15 percent O 2 , 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 O 2 if the engine is a 4SRB engine. The initial test must consist of th ree 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 cy cle 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 temperatur e is too high, or, alternatively, the owner or operator can monitor the catalyst inlet temperatur e continuously and maintain the temperature within the range specified in the rule. For 4S LB 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. Formatted: Font: (Default) Times New Roman

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Formatted: Font: (Default) Times New Roman4-14 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 O 2 . 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 O 2, 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 statio nary 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 testin g that the emissions do not exceed the levels specified.

4.2 4 3 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 ha ve 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 th at are affected by the reconsideration and that Formatted: Font: (Default) Times New Roman, 12 pt, Not Superscript/ Subscript

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. Deleted: 3.

Deleted: proposed

Deleted: b eing propose d4-15 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 emission s 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, EP A 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 cont rol technologies that will be installed on stationary RICE to reduce HAP will also redu ce 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-sel ective catalytic reduction (NSCR) for four-stroke rich burn (4SRB) engines are applicable contro ls 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 groups 6 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” EmissionControls for Natural Gas-Fired RICE, Innovative Environmental Solutions Inc., October 2009. (EPA-HQ-OAR2008-0708-0279). Deleted: ¶
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Deleted: proposed

Deleted: ¶4-16 annual cost components for each of the retrofit op tions. 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 breakdo wn 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 includ es 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 contro l 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 in terest 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 wa s 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 to tal 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 (CO 2 ) 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 584-20 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 CO 2 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 used4-21 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 Appe ndix 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 CO 2 and water and converts CO to CO 2 . 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 + $13,1184-23 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 NESHAPaSize Range (HP)CapitalControl CostAnnualControl CostInitial TestRecordkeepingReportingMonitoring—Capital CostMonitoring—AnnualCostTotal AnnualCostsTotal CapitalCostsMajor Sources25–50 $0 $0 $0 $4,060,795 $0 $0 $0 $4,060,795 $050–100 $0 $0 $0 $1,087,540 $0 $0 $0 $1,087,540 $0100–175 $48,502,361 $37,071,061 $15,971,384 $1,721,899 $5,725,314 $0 $0 $60,489,657 $48,502,361175–300 $13,225,919 $8,382,568 $3,442,648 $371,157 $1,234,097 $0 $0 $13,430,470 $13,225,919300–500 $10,934,795 $5,562,872 $2,123,326 $228,919 $761,155 $0 $0 $8,676,262 $10,934,795500–600 $0 $0 $0 $0 $0 $0 $0 $0 $0600–750 $0 $0 $0 $0 $0 $0 $0 $0 $0>750 $0 $0 $0 $0 $0 $0 $0 $0 $0Total $72,663,076 $51,016,500 $21,537,358 $7,470,310 $7,720,566 $0 $0 $87,744,734 $72,663,076Area Sources25–50 $0 $0 $0 $6,668,944 $0 $0 $0 $6,668,944 $050–100 $0 $0 $0 $2,868,511 $0 $0 $0 $2,868,511 $0100–175 $0 $0 $0 $3,529,711 $0 $0 $0 $3,529,711 $0175–300 $0 $0 $0 $1,264,799 $0 $0 $0 $1,264,799 $0300–500 $0 $0 $0 $908,913 $0 $0 $0 $908,913 $0500–600 $7,547,433 $2,662,805 $248,366 $454,493 $1,26,426 0 0 $3,492,090 $7,547,433600–750 $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 $21,075,418Total $30,145,088 $9,382,423 $764,933 $16,603,048 $389,375 0 0 $27,139,780 $30,145,088Grand TotalTotal $102.808,163 $60,398,923 $22,302,292 $24,073,358 $8,106,972 0 0 $114,884,514 $102,808.163aCosts are presented in 2009 dollars.

### 25Table 4-3. Summary of Major Source and AreaSource NAICS Costs for the SI RICE NESHAPaMajor Source Area Source Total (Major + Area)NAICS Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual Cost2211 Electric Power Generation $52,905,258 $63,062,494 $11,698,144 $12,138,277 $64,603,403 $75,200,77248621 Natural Gas Transmission $1,484,494 $1,462,530 $13,718,381 $6,142,839 $15,202,876 $7,605,369211111 Crude Petroleum & NGProduction $4,561,236 $6,138,383$71,439 $951,462$4,632,675 $7,089,844211112 Natural Gas Liquid Producers $4,561,236 $6,138,383 $71,439 $951,462 $4,632,675 $7,089,84492811 National Security $5,878,362 $7,006,944 $1, 299,794 $1,348,697 $7,178,1566 $8,355,641335312 Hydro Power Units $0 $25,248 $0 $37,872 $0 $63,120335312 Irrigation Sets $3,025,050 $3,230,856 $3,285,990 $4,999,041 $6,310,940 $8,229,896333992 Welders $247,440 $679,896 $0 $570,130 $247,440 $1,250,027Total $72,663,076 $87,744,734 $30,145,088 $27,139,780$102,808,163$114,884,514aCosts are presented in 2009 dollars.

### 26Table 4-4. Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by SizeaMajor Source Area Source Total (Major + Area)NAICS Capital Cost Annual Cost Capital Cost Annual Cost Capital Cost Annual CostElectric Power Generation (2211)25–50 hp $0 $2,758,459 $0 $4,137,688 $0 $6,896,14750–100 hp $0 $606,144 $0 $909,215 $0 $1,515,359100–175 hp $33,868,173 $42,238,648 $0 $1,803,548 $33,868,173 $44,042,196175–300 hp $10,603,849 $10,767,847 $0 $446,361 $10,603,849 $11,214,209300–500 hp $8,433,236 $6,691,397 $0 $264,820 $8,433,236 $6,956,217500–600 hp $0 $0 $2,543,944 $1,177,047 $2,543,944 $1,177,047600–750 hp $0 $0 $515,514 $220,122 $515,514 $220,122>750 hp $0 $0 $8,638,687 $3,179,475 $8,638,687 $3,179,475Total Electric Power Generation 2211 $52,905,258 $63,062,494 $11,698,144 $12,138,277 $64,603,403 $75,200,772Natural Gas Transmission (48621)25–50 hp $0 $102 $0 $1,934 $0 $2,03650–100 hp $0 $4,872 $0 $92,571 $0 $97,443100–175 hp $301,721 $376,291 $0 $203,518 $301,721 $579,809175–300 hp $643,157 $653,104 $0 $342,928 $643,157 $996,032300–500 hp $539,617 $428,162 $0 $214,637 $539,617 $642,799500–600 hp $0 $0 $1,925,560 $890,929 $1,925,560 $890,929600–750 hp $0 $0 $949,443 $405,408 $949,443 $405,408>750 hp $0 $0 $10,843,377 $3,990,913 $10,843,377 $3,990,913Total Natural Gas Transmission (48621) $1,484,494 $1,462,530 $13,781,381 $6,142,839 $15,202,876 $7,605,369Crude Petroleum & NG Production (211111)25–50 hp $0 $388,115 $0 $582,173 $0 $970,28850–100 hp $0 $66,698 $0 $100,047 $0 $166,744100–175 hp $4,549,775 $5,674,246 $0 $242,285 $4,549,775 $5,916,531(continued)

### 27Table 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 Cost175–300 hp $1,037 $1,053 $0 $44 $1,037 $1,096300–500 hp $10,424 $8,271 $0 $327 $10,424 $8,598500–600 hp $0 $0 $3,102 $1,435 $3.102 $1,435600–750 hp $0 $0 $0 $0 $0 $0>750 hp $0 $0 $68,337 $25,151 $68,337 $25,151Total Crude Petroleum & NG Production(211111) $4,561,236 $6,138,383 $71,439 $951,462 $4,632,675 $7,089,844Natural Gas LiquidProducers (211112)25–50 hp $0 $388,115 $0 $582,173 $0 $970,28850–100 hp $0 $66,698 $0 $100,047 $0 $166,744100–175 hp $4,549,775 $5,674,246 $0 $242,285 $4,549,775 $5,916,531175–300 hp $1,037 $1,053 $0 $44 $1,037 $1,096300–500 hp $10,424 $8,271 $0 $327 $10,424 $8,598500–600 hp $0 $0 $3,102 $1,435 $3,102 $1,435600–750 hp $0 $0 $0 $0 $0 $0>750 hp $0 $0 $68,337 $25,151 $68,337 $25,151Total Natural Gas Liquid Producers (211112) $4,561,236 $6,138,383 $71,439 $951,462 $4,632,675 $7,089,844National Security (92811)25–50 hp $0 $306,495 $0 $459,743 $0 $766,23950–100 hp $0 $67,349 $0 $101,024 $0 $168,373100–175 hp $3,763,130 $4,693,183 $0 $200,394 $3,763,130 $4,893,577175–300 hp $1,178,205 $1,196,427 $0 $49,596 $1,178,205 $1,246,023300–500 hp $937,026 $743,489 $0 $29,424 $937,026 $772,913500–600 hp $0 $0 $282,660 $130,783 $282,660 $130,783(continued)

### 28Table 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 Cost600–750 hp $0 $0 $57,279 $24,458 $57,279 $24,458>750 hp $0 $0 $959,854 $353,275 $959,854 $353,275Total National Security (92811) $5,878,362 $7,006,944 $1,299,794, $1,348,697 $7,178,156 $8,355,641Hydro Power Units (335312)25–50 hp $0 $22,688 $0 $34,032 $0 $56,72150–100 hp $0 $2,560 $0 $3,840 $0 $6,399100–175 hp $0 $0 $0 $0 $0 $0175–300 hp $0 $0 $0 $0 $0 $0300–500 hp $0 $0 $0 $0 $0 $0500–600 hp $0 $0 $0 $0 $0 $0600–750 hp $0 $0 $0 $0 $0 $0>750 hp $0 $0 $0 $0 $0 $0Total Hydro Power Units (335312) $0 $25,248 $0 $37,872 $0 $63,120Irrigation Sets (335312)25–50 hp $0 $32,913 $0 $625,338 $0 $658,25150–100 hp $0 $65,825 $0 $1,250,677 $0 $1,316,502100–175 hp $1,222,348 $1,524,449 $0 $824,505 $1,222,348 $2,348,954175–300 hp $798,634 $810,986 $0 $425,827 $798,634 $1,236,813300–500 hp $1,004,068 $796,683 $0 $399,376 $1,004,068 $1,196,060500–600 hp $0 $0 $2,789,064 $1,290,460 $2,789,064 $1,290,460600–750 hp $0 $0 $0 $0 $0 $0>750 hp $0 $0 $496,827 $182,857 $496,827 $182,857Total Irrigation Sets (335312) $3,025,050 $3,230,856 $3,285,890 $4,999,041 $6,310,940 $8,229,896(continued)

### 29Table 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 CostWelders (333992)25–50 hp $0 $163,908 $0 $245,862 $0 $409,77150–100 hp $0 $207,394 $0 $311,091 $0 $518,485100–175 hp $247,440 $308,594 $0 $13,177 $247,440 $321,771175–300 hp $0 $0 $0 $0 $0 $0300–500 hp $0 $0 $0 $0 $0 $0500–600 hp $0 $0 $0 $0 $0 $0600–750 hp $0 $0 $0 $0 $0 $0>750 hp $0 $0 $0 $0 $0 $0Total Welders (333992) $247,440 $679,896 $0 $570,130 $247,440 $1,250,027Total$72,663,076 $87,744,734 $30,145,088 $27,139,780 $102,808,163 $114,884,514aCosts are presented in 2009 dollars.

### 30Table 4-5. Summary of Major Source and Area Source NAICSCosts for the SI RICE NESHAP, by Number of EnginesaNumber of Engines Total (Major + Area)NAICS Major Area Total Capital Cost Annual CostElectric Power Generation (2211)25–50 hp 37,933 56,900 94,833 $0 $6,896,14750–100 hp 8,336 12,503 20,839 $0 $1,515,359100–175 hp 16,534 24,802 41,336 $33,868,173 $44,042,196175–300 hp 4,092 6,138 10,230 $10,603,849 $11,214,209300–500 hp 2,428 3,642 6,070 $8,433,236 $6,956,217500–600 hp 0 2,107 2,107 $2,543,944 $1,177,047600–750 hp 0 363 363 $515,944 $220,122>750 hp 0 4,677 4,677 $8,638,687 $3,179,475Total Electric Power Generation (2211) 69,323 111,132 180,455 $64,603,403 $75,200,772Natural Gas Transmission (48621)25–50 hp 1 27 28 $0 $2,03650–100 hp 67 1,273 1,340 $0 $97,443100–175 hp 147 2,799 2,946 $301,721 $579,809175–300 hp 248 4,716 4,964 $643,157 $996,032300–500 hp 155 2,952 3,107 $539,617 $642,799500–600 hp 0 1,595 1,595 $1,925,560 $890,929600–750 hp 0 668 668 $949,443 $405,408>750 hp 0 5,871 5,871 $10,843,377 $3,990,913Total Natural Gas Transmission (48621) 619 19,899 20,519 $15,202,876 $7,605,369Crude Petroleum & NG Production (211111)25–50 hp 5,337 8,006 13,343 $0 $970,28850–100 hp 917 1,376 2,293 $0 $166,744100–175 hp 2,221 3,332 5,553 $4,549,775 $5,916,531(continued)

### 31Table 4-5. Summary of Major Source and Area Source NAICSCosts for the SI RICE NESHAP, by Number of Enginesa(continued)Number of Engines Total (Major + Area)NAICS Major Area Total Capital Cost Annual Cost175–300 hp 0 1 1 $1,037 $1,096300–500 hp 3 5 8 $10,424 $8,598500–600 hp 0 3 3 $3,102 $1,435600–750 hp 0 0 0 $0 $0>750 hp 0 37 37 $68,337 $25,151Total Crude Petroleum & NG Production (211111) 8,479 12,758 21,237 $4,632,675 $7,089,844Natural Gas LiquidProducers (211112)25–50 hp 5,337 8,006 13,343 $0 $970,28850–100 hp 917 1,376 2,293 $0 $166,744100–175 hp 2,221 3,332 5,553 $4,549,775 $5,916,531175–300 hp 0 1 1 $1,037 $1,096300–500 hp 3 5 8 $10,424 $8,598500–600 hp 0 3 3 $3,102 $1,435600–750 hp 0 0 0 $0 $0>750 hp 0 37 37 $68,337 $25,151Total Natural Gas Liquid Producers (211112) 8,479 12,758 21,237 $4,632,675 $7,089,844National Security (92811)25–50 hp 4,215 6,322 10,537 $0 $766,23950–100 hp 926 1,389 2,315 $0 $168,373100–175 hp 1,837 2,756 4,593 $3,763,130 $4,893,577175–300 hp 455 682 1,137 $1,178,205 $1,246,023300–500 hp 270 404 674 $937,026 $772,913500–600 hp 0 234 234 $282,660 $130,783(continued)

### 32Table 4-5. Summary of Major Source and Area Source NAICSCosts for the SI RICE NESHAP, by Number of Enginesa(continued)Number of Engines Total (Major + Area)NAICS Major Area Total Capital Cost Annual Cost600–750 hp 0 40 40 $57,279 $24,458>750 hp 0 520 520 $959.854 $353,275Total Natural Gas Liquid Producers (211112) 7,702 12,347 20,050 $7,178,156 $8,355,641Hydro Power Units (335312)25–50 hp 312 468 780 $0 $56,72150–100 hp 35 53 88 $0 $6,399100–175 hp 0 0 0 $0 $0175–300 hp 0 0 0 $0 $0300–500 hp 0 0 0 $0 $0500–600 hp 0 0 0 $0 $0600–750 hp 0 0 0 $0 $0>750 hp 0 0 0 $0 $0Total Hydro Power Units (335312) 347 521 868 $0 $63,120Irrigation Sets (335312)25–50 hp 453 8,599 9,052 $0 $658,25150–100 hp 905 17,199 18,104 $0 $1,316,502100–175 hp 597 11,338 11,935 $1,222,348 $2,348,954175–300 hp 308 5,856 6,164 $798,634 $1,236,813300–500 hp 289 5,492 5,781 $1,004,068 $1,196,060500–600 hp 0 2,310 2,310 $2,789,064 $1,290,460600–750 hp 0 0 0 $0 $0>750 hp 0 269 269 $496,827 $182857Total Irrigation Sets (335312) 2,552 51,063 53,615 $6,310,940 $8,229,896(continued)

### 33Table 4-5. Summary of Major Source and Area Source NAICSCosts for the SI RICE NESHAP, by Number of Enginesa(continued)Number of Engines Total (Major + Area)NAICS Major Area Total Capital Cost Annual CostWelders (333992)25–50 hp 2,254 3,381 5,635 $0 $409,77150–100 hp 2,852 4,278 7,130 $0 $518,485100–175 hp 121 181 302 $247,440 $321,771175–300 hp 0 0 0 $0 $0300–500 hp 0 0 0 $0 $0500–600 hp 0 0 0 $0 $0600–750 hp 0 0 0 $0 $0>750 hp 0 0 0 $0 $0Total Welders (333992) 5,227 7,840 13,067 $247,440 $1,250,027Total102,729 228,319 331,047 $382,802,298 $253,374,9391Costs 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 estimate s 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 th e 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: proposed4-36 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 9,1475-1 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 mark et model; the data that are available have little or no sector/firm detail and are reported at the na tional level. In addition, some sectors have unique market characteristics that make developi ng 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 ma ndates occur as a result of this reconsidered rule, and the potential distribution of so cial costs between consumers and producers.

5.1 Compliance Costs of the Reconsidered Rule
EPA’s engineering cost analysis estimates th e 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 approximate ly 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: propose d

Deleted: proposed

Deleted: Proposed

Deleted: proposed

Deleted: proposed5-2 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 hp5-3 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 indus tries whose markets are well characterized as perfectly competitive. This approximation is less well understood for industries where the characterization of markets is not always perfect ly 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 eco nomists 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 systems a $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 Internationa l; 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 (P 0 ) and quantity (Q 0 ) 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 (Q 0 ) (see Figure 5-4). As shown, this model makes two predictions: the pri ce 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



##   Demand) of Elasticity Price

- Supply of Elasticity Price Supply of Elasticity Price

 cost unit er- Share of p

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. Sp ecific 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 approxim ately 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 Ge neration, 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 regulate d energy industries in the United States (EIA, 2010), the competitive model is not nece ssarily 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 competitiv e 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 an d 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 = – [  Q 1 ×  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 = [  Q 1 ×  p ] – [  Q 1 × 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.

10 http://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/restruct uring/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 prom ulgation 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 en ergy. 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 ve ry 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 in dustry 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 Power a 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 energy b 4.63 4.8% Electricity Imports 0.12 0.1%

Total Electric Power Energy Consumption c 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 co mbined heat and power plants whose primary business is

to sell electricity, or electricity and heat, to the pu blic. 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 sola r 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 th e 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 orenvironmental effects of their programs, policies, and activities on minority populations and lowincome populations in the United States. Deleted: proposed

Deleted: proposed

Deleted: proposed

Deleted: proposed

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Deleted: proposed5-11 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) as sociated with reporting and recordkeeping, and the installation, operating and maintenance of cont rol 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 perm anent basis. EPA also provides a qualitative discussion of other potential employment eff ects, 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. Deleted: proposed

Deleted: proposed5-12 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 regulate d 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, th e 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 me rits 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 res ponse 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 produc tivity will cause a short-run aggregate supply curve to shift to the left, and businesses will produ ce less, all other things being equal. Deleted: proposed5-13 the gross size of the labor pool does not refl ect 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 en vironmental 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 s ector. 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 es timates 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 an d 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 requ irements 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. Formatted: Space After: 12 pt

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Deleted: proposed Comment [AL2]: delete?5-14 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 ne w 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 seemingl y 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. Deleted: propose d

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Deleted: proposed5-15 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
146,515 N/A 70 -Testing 8 -Reporting 3.5
4SLB SI RICE 100-500 HP Oxidation Catalyst 14,257 21 300,255 15
163,956 144 34 -Testing 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 mult iplying 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 Deleted: Proposed
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Formatted ... [56] Formatted ... [57]5-16 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 regu lations within the regulated industry. (See, for example, the Regulatory Impact Analyses for the recent final MATS and final CSAPR regulations). Determining the direction of employ ment effects in the regulated industry is also challenging due to competing effects. Complying with the new or more stringent regulation requires additional inputs, includ ing labor, and may alter the re lative proportions of labor and capital used by regulated firms in their produc tion 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 rela tive 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, regula ted 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. Formatted: Indent: Left: 0"5-17  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.” Howe ver, 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 pos itive 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 effect s, 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 po llution 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 expenditure s 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 regula ted 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. Unfort unately, 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 utili ze 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 thei r quantitative estimates for use in analysis of the
final rule. There are also important differences between the industries affected by this final rule Deleted: proposal

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Deleted: proposed5-18 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. Deleted: proposed6-3 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 juri sdictions, 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 prom ulgated 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 econo mic 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 al l 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:

 Establishmen t: 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 fo r the national security NAICS code (92811) or irrigated farms. Since most national security installations are owne d 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 Irrigati on 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

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Deleted: proposed6-3  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, divi dends, 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 anal ysis 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 pare nt 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 de finitions 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 impa ct measures (if applicable) would potentially include

• small governments (if applicable): “revenue” test; a nnualized compliance cost as a percentage of annual government revenues and

• small nonprofits (if applicable): “expenditure” test; a nnualized 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 Statio nary Reciprocating Internal Combustion Engines (RICE): Affected Sectors and SBA Small Business Size Standards

Industry Description Corresponding NAICS SBA Size Standard for Businesses ( January 7 , 201 3 ) Type of Small Entity
Electric Power Generation 2211 a Business and government Natural Gas Transmission 48621 $7.0 mi llion in annual receipts Business Crude Petroleum & NG Production 211111 500 employees Business

Natural Gas Liquid Producers 211112 500 employees Business National Security 9 2811 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). 201 3 . “Table of Small Business Size Standards Matched to North American Industry Classification System Codes.” Effective January 7th , 201 3 . Downloaded 1 / 7 /1 3

.

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 fo r 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 stan dard 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/. Deleted: November
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### 4Table 6-2. Average Receipts for Affected Industry by Enterprise: 2009 ($2009 Million/Establishment)SBA SizeStandardfor Businesses(effectiveJanuary7, 2013)Owned By Enterprises with Employee Range:NAICS NAICS DescriptionAllEnterprises1–20Employees20–99Employees100–499Employees500+Employees211111 Crude petroleum &natural gas extraction500 employees $30.22 $2.15 $33.02 $151,76 1,570211112 Natural gas liquidextraction500 employees $172.81 $0.30 NA $11.88 NA335312 Motor & generator mfg 1,000 employees $18.58 $1.37 $6.14 $15.96 $29.47333992 Welding & solderingequipment mfg500 employees $18.51 $1.56 $6.60 $33.25 NASource: 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.Deleted:NovemberDeleted:5Deleted:0

### 5Table 6-3. Average Receipts for Affected Industry byEnterprise Receipt Range: 2007 ($2008 /establishment)SBA Size Standardfor Businesses(effectiveJanuary7,2013)Owned By Enterprises with Receipt Range:NAICS NAICS DescriptionAllEnterprises0–99KReceipts100–499.9KReceipts500–999.9KReceipts1,000–4,999.9KReceipts5,000,000–9,999,999KReceipts<10,000KReceipts10,000–49,999KReceipts50,000–99,999KReceipts100,000K+Receipts2211 Electric PowerGenerationa$261.0 $31.2 $272.5 $724.9 $2,399.5 $7,330.5 $2,617.7 $24,786.9$67,706.8$1,394,051.0622110General Medical andSurgicalHospitals$35.5 million in annualreceipts$202,058.7 NA $23.82 NA $3,255.0 $7,291.0 $4,692.1$23,481.9$67,545,6$508,705.8237310Highway , street, andbride construction$33.5 million inAnnual Receipts$7.74$0.06$0.32$0.84$2.74$8.11$2.00$22.62$56.48$56.81237110Water and sewer lineand related structures,construction$33.5 million inAnnual Receipts$3.89$0.06$0.32$0.85$2.73$8.17$1.84$20.62$45.05$47.27237130Power andcommunication lineand related structuresconstruction$33.5 million inAnnual Receipts$3.39$0.06$0.31$0.83$2.52$7.75$1.32$16.84$34.50$23.86237990Other heavy and civilengineeringconstruction$33.5 million inAnnual Receipts$2.66$0.06$0.30$0.83$2.48$7.76$0.99$18.72$40.53$42.3592811 National Security NA NA NA NA NA NA NA NA NA NA NANotes: Industries in green were included for consistency with the analysis done for finalrule. National Security is included in this table but does not have sizestandards.aNAICS codes 221111, 221112, 221113, 221119, 221121, 221122: A firm in these industries is defined as small by SBA if, including its affiliates, it isprimarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the preceding fiscal year did notexceed 4 million megawatt hours.NA = Not available. SUSB did not report thisdata 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/Deleted:NovemberDeleted:5Deleted:0Deleted:4Deleted:Deleted:zDeleted:Note: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 categor ies, 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 establishm ent 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, 21 1111, 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: Natio nal 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: proposed6-13 For the sales test, we divided the represen tative 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 Cost s 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 $1456-13 Figure 6-1. Distribution of Engine Po pulation 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 hp6-13 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 offe red by EPA on compliance with SBREFA 7 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 eval uating cost increases on small entities in relation to increases on large entities. 8

7 The SBREFA compliance guidance to EPA ru lewriters regarding the types of small business analysis that should be considered can be found at http://www.epa.gov/sbre fa/documents/rfafinalguidance06.pdf, pp. 24-25.
8 U.S. SBA, Office of Advocacy. A Guide for Governme nt 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 hp6-13 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 establishm ents 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 re duce the impact of the rule on small entities. When developing the re considered standards, EPA took special steps to ensure that the burdens imposed on small entities were minimal. EPA c onducted 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 reduce s regulatory requirements for a variety of ar ea 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 li mitations associated with identifying and appropriately classifying these entities, we co mputed 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 rega rding the types of small business analysis that should be considered can be found at http://www.epa.gov/sbrefa/docum ents/rfafinalguidance06.pdf , pp. 24-25.
10 U.S. SBA, Office of Advocacy. A Guide for Governme nt 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 NO 2 , PM 2.5 and ozone. In this section, we quantify the monetized co-benefits for th is rule associated with reducing exposure to ambient fine particulate matter (PM 2.5 ) 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 PM 2.5 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, NO 2 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 PM 2.5 -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 NO X , and VOCs. Because these emissions are precursors to PM 2.5, reducing these emissions
would also reduce PM 2.5 formation, human exposure and the incidence of PM 2.5 -related health effects. Due to analytical limitations, it was not possible to provide a comprehensive estimate of
PM 2.5 -related benefits or provide estimates of the health benefits associated with exposure to HAP, CO, NO 2 or ozone. Instead, we used the “benefit-per-ton” approach to estimate these benefits. The methodology employed in this analys is 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 PM 2.5 -related health benefits for emissions reductions in specific sectors. The key assumptions are described in detail below. These PM 2.5 benefit-per-ton estimates provide the total monetized human health benefits (the sum of premature mortality and Deleted: proposed

Deleted: proposed7-32 premature morbidity) of reducing one ton of PM 2.5 from a specified source. EPA has used the benefit per-ton technique in several previous RIAs, including the recent SO 2 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 PM 2.5, 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 unquan tified health effects associated with exposure to
ozone and NO 2 nor welfare effects such as ecosystem e ffects 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 PM 2.5

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 PM 2.5 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 PM 2.5 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 cerebrovasc ular disease (age 50-79) -- -- Section 5.4 Other cardiovascular effects (e.g., other ages) -- -- PM ISA 2
Other respiratory effects (e.g., pulmonaryfunction, non-asthma ER visits, nonbronchitis chronic diseases, other ages and populations) -- -- PM ISA 2

Reproductive and developmental effects (e.g., low birth weight, pre-term births, etc) -- -- PM ISA 2,3

Cancer, mutagenicity, and genotoxicity effects -- -- PM ISA 2,3

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 ev idence 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 repor ted 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/m 3 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 PM 2.5 NAAQS, has
been used as an alternative estimate in the PM 2.5 NAAQS RIA and PM 2.5 benefits estimates in RIAs completed since the PM 2.5 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/m 3 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 PM 2.5 -mortality relationship and interpreted for benefits analysis in EPA’s final RIA for the PM 2.5 NAAQS. For that study, twelve experts (labeled A through L) provided independent estimates of the PM 2.5 -mortality concentration-response function. EPA pr actice has been to develop independent
estimates of PM 2.5 -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 rela tionship between exposure to PM 2.5 and premature mortality (Roman

1 These two studies specify multi-pollutant models that control for SO 2 , 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 estima tes 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 PM 2.5 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 consu lt the draft Technical Support Document (TSD) on estimating the benefits per ton of reducing PM 2.5 and its precursors from in the “Other Non-EGU Point” sector(U.S. EPA, 2012 c ). 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 da ta 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 si milar limitations as all national-average benefitper-ton estimates in that they reflect the geogra phic 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, e xposure, 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 cat egory. 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 PM 2.5 improvements achieved by the 2010 final rule would have been located in areas with lower average population density compar ed to the areas with engines regulat ed under these amendments, there is a potential for the estimated loss in benefits to be ove rstated 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: engines7-32 estimates calculated for this category for NOx an d 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 PM 2.5 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 PM 2.5 levels, which drive population exposure. The sector-specific modeling does not provide estimates of the PM 2.5 -related benefits associated with reducing VOC emissions, but these unquantified benefits are generally small compared to other PM 2.5 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 PM 2.5 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 consis tently 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 PM 2.5 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 coho rt studies that estimate PM-related mortality. While an LML assessment provides some insight in to the level of uncertainty in the estimatedPM mortality benefits, EPA does not view the LML as a threshold and continues to quantify PMrelated mortality impacts using a full range of mode led air quality concentrations. It is important to emphasize that we have high confidence in PM 2.5 -related effects down to the lowest LML of the major cohort studies, which is 5.8 μg/m 3 . 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 PM 2.5 -mortality relationship, see the T echnical Support Document (TSD)
entitled Summary of Expert Opinions on the Existe nce of a Threshold in the ConcentrationResponse Function for PM 2.5 -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 PM 2.5 level. However, we believe that it is still important to characterize the dist ribution of exposure to baseline air quality levels. As a surrogate measure of mortality impacts, we provide the percentage of the population exposed at each PM 2.5 level using the source apportionmen t modeling used to calculate the benefit-per-ton estimates for this sector. It is im portant to note that baseline exposure is only one parameter in the health impact function, alon g 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 studi es. OAR arrived at a VSL using a range of $1 million to $10 million (2000$) consistent with tw o 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 of7-32 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-analy sis. 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 Scie nce 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 repo rt 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 differe nt 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 thes e 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 PM 2.5 below the National Ambient Air Quality Standards (NAAQS) for PM in some areas and assist other areas with attaining the PM NAAQS. Be cause 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 potentia l 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 pr edict, the control strategies that States may choose to enact when implementing a NAAQS. Th e 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 PM 2.5 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 rule s 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 forwar d looking towards the next iteration of the 5-year review cycle for th e 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 SO 2 NAAQS RIA (U.S. EPA, 2010a).7-32 Figure 7.1 illustrates the relative breakdown of the monetized PM 2.5 health benefits.

Figure 7-1: Breakdown of Monetized PM 2.5 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 us ing 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 PM 2.5 -related benefits estimates using

9 To comply with Circular A-4, EPA provides monetized be nefits 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 infa rctions (AMIs) and premature mortality. For AMIs, we assume 5 years of follow-up medical costs and lost wage s. For premature mortality, we assume that there is a “cessation” lag between PM exposures and the total rea lization 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 PM 2.5 (U.S. EPA-SAB, 2004). Changes in the lag assumptions do not change the total number of estimated deaths but rather the timing of t hose deaths. Therefore, discounting only affects the AMI costs after the analysis year and the va luation of premature mortalities that o ccur after the analys is year. As such, the monetized benefits using a 7% discount rate are onl y approximately 10% less than the monetized benefits using a 3% discount rate.

Adult Mortality ‐ Pope et al. 93% Chronic Bronchitis 4%

AMI 2% Acute Respiratory Symptoms 0.5%

Infant Mortality 0.4%

Work Loss Days 0.2%

Hospital Admissions, Cardio 0.2% Hospital Admissions, Resp 0.04% Asthma Exacerbation 0.01%
Acute Bronchitis 0.01% Upper Resp Symp 0.00% Lower Resp Symp 0.00%
ER Visits, Resp 0.00% Other 1%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 fo r two reasons. First, these estimates are basedon 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 ru le 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 PM 2.5 -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%)

PM 2.5 Precursors

NO X 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 NO 2 , ozone exposure, ecosystem effects, or visibility im pairment. All fine partic les are assumed to have equivalent health effects, but the benefit per ton estimate s vary because each ton of precu rsor reduced has a different propensity to form PM 2.5 . 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 generall y offset each other, and we anticipate that the rounded benefits estimated for this rule are unlikely to be different than those provided here. Deleted: Proposed7-32 Table 7-3: Summary of Reductions in Health Incidences from PM 2.5- 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 effect s 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: Proposed7-32 Table 7-4: All PM 2.5 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 be nefits estimates from the Expert Elicitation are provided as a reasonable characterization of the uncertainty in th e mortality estimates associated with the concentrationresponse function. Confidence intervals are unavailable fo r this analysis because of the benefit-per-ton methodology Deleted: Proposed7-32 Figure 7-2: Total Monetized PM 2.5 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 fr om EPA’s expert elicitation on PM mortality. The results shown are not the direct results fro m 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$)

PM 2.5 mortality benefits estimates derived from 2 epidemiology functions and 12 expert functions 3% DR
7% DR

Deleted: Proposed7-32 Figure 7-3: Breakdown of Total Monetized PM 2.5 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,
NO 2 , 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 Toxi cs 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: 7.2.17-32 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 ke y 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 acute 15 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 uncertaintie s 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 ranki ng of the individual pieces of NATA assessments including both quantitative (e.g., model-to-moni tor 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 or al, 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 concentr ation (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 7-57-32 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 di stribution 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

16 The unit risk factor is a quantitative estimate of the car cinogenic potency of a pollutant, often expressed as the probability of contracting cancer from a 70-year lifetime continuous expo sure to a concentration of one μg/m 3 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 anal yzing 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 pr ogress 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 re ducing 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 estimate s 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 associat ed 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, th is 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/ Subscript7-32 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 unders tanding of the health effects associated with exposure to formaldehyde. These include recently published research conducted by the National Cancer Institute (NCI) which found an incr eased 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 wo rkers 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 Ch emical 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 Garm ent 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 amongworkers 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 carci nogenicity 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 Ka lisak, J Preston, and FJ Miller. 2004. Human respiratory tract cancer risks of inhaled formaldehyde: Dose-respo nse predictions derived from biologically-motivated computational modeling of a combined rodent and huma n 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 mutage nic action is not relevant to the compound’s tumorigenicity was found not to hold un der 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 th e eyes), nose and throat. Effects from repeated

25 Chemical Industry Institute of Toxicology (CIIT).199 9. Formaldehyde: Hazard charact erization and dose-response assessment for carcinogenicity by the r oute of inhalation. CIIT, Septembe r 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: id entification of key issues. Risk An al 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 limi ted 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 limi ted 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 irri tation, chronic bronchitis and nasal epithelial lesions such as metaplasia and loss of cilia. An imal 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 20 10 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 11 th 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 (A TSDR). 1999. Toxicological profile for Formaldehyde. Atlanta, GA: U.S. Department of Health a nd 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 Do cument 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 Ce nter 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 Eval uation 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 Ce nter for Environmental Assessment, Washington, DC. This material is available electronically at http://www.epa.gov/iris/subst/0290.htm

. Formatted: Font: 10 pt Field Code Changed
Formatted: Hyperlink, Font: 10 pt7-32 Acrolein

EPA determined in 2003 that the human carci nogenic 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/m 3 ) 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 Environm ental 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 chlo rinated 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. In tegrated 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 E nvironmental 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 E nvironmental 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 da ta 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 Environm ental 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 chemic als 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 granul ocyte/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 carcinogenici ty of benzene. Environ. Health Perspect. 82: 193-197.
53 Goldstein, B.D. (1988). Benzene toxicity. Occupati onal medicine. State of the Art Reviews. 3: 541-554.7-32 Methanol

Exposure of humans to methanol by inhalati on 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 high ly 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 stud ies 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 inha lation levels in rats. Toxicol Sci, 5: 727-736.
57 Rogers, JM; Barbee, BD; Rehnberg, BF. 1993. Critical pe riods 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. Reproducti ve and offspring developmental effects following maternal inhalation e xposure 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 e xposure to methanol in nonhuman primates Part I: methanol disposition and reproductive toxicity in a dult 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 fasc icularis): reproductive performance and birth outcome. Neurotoxicol Teratol, 26: 639-650.
61 Burbacher, TM; Shen, DD; Lalovic, B; Gr ant, 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 Sy stem (IRIS) database is available at: www.epa.gov/iris

. Field Code Changed7-32 7.2.2 Additional NO 2 Co-Benefits
In addition to being a precursor to PM 2.5 , NO x emissions are also associated with a variety of respiratory health effects. Unfortunately, we were unable to estimate the health
benefits associated with reduced NO 2 or ozone exposure in this analysis because we do not have air quality modeling data available. Therefore, this analysis only quantifies and monetizes the
PM 2.5 benefits associated with the reductions in NO 2 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 NO 2 (U.S. EPA, 2008c). Persons with preexisting respiratory disease, children, and older adults may be more susceptible to the effects of NO 2 exposure. Based on our review of this information, we identified four short-term morbidity endpoints that the NO 2 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 NO 2 ISA. The NO 2 ISA also concluded that the relationship between short-term NO 2 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 NO 2 alone. Although the NO 2 ISA stated that studies consistently reported a relationship between NO 2 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, nutrie nt 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 educatio nal 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, a nd disease leading to increased mortality of canopy trees. Terrestrial acidification affects several impo rtant ecological services, including declines in habitat for threatened and endangered species (cultu ral), declines in forest aesthetics (cultural),7-32 declines in forest productivity (provisioning), a nd 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 enrichme nt is associated with changes in the types and number of species and biodiversity in terrestria l 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 frequ ent 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 ambien t 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 epidemiol ogical 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 reactio ns in the atmosphere. The amount of CO emitted from these reactions, relative to carbon di oxide (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). Ca rbon monoxide can elicit a broad range of effects in multiple tissues and organ systems that are dependent upon concentration and duration of exposure. TheIntegrated Science Assessment for Carbon Monoxide (U.S. EPA, 2010a) concluded that shortterm exposure to CO is “likely to have a cau sal 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 an gina pectoris (cardiac chest pain), as well as Formatted: Font: 12 pt, Not Superscript/ Subscript7-32 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 evid ence 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 PM 2.5 would improve visibility throughout the U.S. Fine particles with significant light-extinction efficiencies include sulf ates, nitrates, organic carbon, elemental carbon, and soil (Sisler, 1996). Suspended particles and gases degrade visibility by scattering and abso rbing light. Higher visibility impa irment 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 economi c benefits, including emission inventories, air quality models (with their associated paramete rs and inputs), epidemiological estimates of concentration-response (C-R) functions, estima tes 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 PM 2.5 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 redu ctions and specific air quality and benefits modeling assumptions. For example, these estimates do not reflect local variability in population density, meteorology, exposure, baseline health in cidence 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 Unite d 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 calcula tion of the new benefit-per-ton estimates (U.S. EPA, 2012).

PM 2.5 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 PM 2.5 , 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 pe rcentage of premature mortality associated with this specific rule’s emission reductions at each PM 2.5 level. As a surrogate measure of mortality impacts, we provide the percentage of the population exposed at each PM 2.5 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 populati on exposed to various ai r 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 PM 2.5 levels at or above the LML. Using the Pope et al. (2002) study, the 77% of the population is exposed to annual mean
PM 2.5 levels at or above the LML of 7.5 μg/m 3 . Using the Laden et al. (2006) study, 25% of the population is exposed above the LML of 10 μg/m 3

. As we model avoided premature deaths among populations exposed to levels of PM 2.5 , we have lower confidence in levels below the LML for each study. It is important to emphasize that we have high confidence in PM 2.5 -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 PM 2.5 at 15 μg/m 3 , which was set 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 protectiv e of public health within an adequate margin of safety, taki ng 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 PM 2.5 Exposure in the Baseline7-32 Figure 7-7. Cumulative Distribution of Adult Population by Annual Mean PM 2.5 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 we re able to quantify include the following:

1. PM 2.5 benefits were derived through benefit per-ton estimates, which do not reflect local variability in population density, meteorology, exposure, baseline healthincidence 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 pr oportion 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 reduc tions for this rule are different than the7-32 modeled emissions, the benefits may be unde restimated 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, rega rdless of their chemical composition, are equally potent in causing premature mortality. This is an important assumption, because PM 2.5 produced via transported precursors emitted from EGUs may differ significantly from direct PM 2.5 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 an alysis. Thus, the estimates include health benefits from reducing fine particles in areas with varied concentrations of PM 2.5, 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 PM 2.5 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 th ese 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 PM 2.5 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 PM 2.5 benefits, please consult the PM 2.5 NAAQS RIA (Table 5.5).

This RIA does not include the type of deta iled 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 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 , respectiv ely. Figures 7-8 and 7-9 show the full range of net benefits estimates (i.e., annual co-benefits mi nus annualized costs) utilizing the 14 different
PM 2.5 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: proposal7-32 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 Benefits 2 $62 to $150 $55 to $140 Total Compliance Costs 3 $115 $115

Net Benefits $-53 to $35 $-60 to $25

Non-monetized Benefits Health effects from HAP exposure

Health effects from CO

, NO 2 , 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 heal th benefits associated with reducing exposure to PM 2.5 through

reductions of PM 2.5 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 mo rtality because the scientific eviden ce 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 th is rule are unlikely to be different than those provided here. 3 The annual compliance costs serve as a pr oxy 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 PM 2.5 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: Proposed7-32 Figure 7-9. Net Benefits for SI RICE NESHAP Reconsideration at 7% discount rate* *Net Benefits are quantified in terms of PM 2.5 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

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Deleted: >8-7 U.S. Environmental Protection Agency (U.S. EPA). 2009b. Integrated Science Assessment for Particulate Matter (Final Report). EPA-600-R-08-139F. National Center for Environmental Assessment—RTP Divi sion. December. Available at http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=216546

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. Deleted: >8-9

### Page 4: [1] Deleted Alamson 1/7/2013 2:05:00 PM 

## benefits were calculated using a methodolog y 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 th is RIA of the unquantified benefits as well as technical details of the analysis and its limitations and uncertain ties. 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 PM 2.5 

## -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%)

NO x 

### 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 NO 2 

### , ozone exposure, ecosystem effects, or visibility impairment. All fine particles are assumed to have equivalent health effects, but the bene fit per ton estimates vary b ecause each ton of precursor reduced has a different propensity to form PM 2.5 

### . Confidence intervals are unavaila ble for this anal ysis because of the benefit-per-ton methodology.

## Table 1-4: Summary of Es timated Reductions in Health Incidences from PM 2.5 

## for the SI RICE Reconsiderati on 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

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## * All estimates are for the an alysis year (2013) and are r ounded 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 allo w differentiation of effects estimates by particle type. Confidence intervals are unavailable for th is analysis because of the benefit-per-ton methodology.

Figure 1-1 provides a breakdown of th e total monetized co-benefits from reductions of PM2.5 emissions by engine size associated with th e reconsideration ruleproposal. Figure 1-2 provides a visual repr esentation of the range of PM 2.5-related benefits estimates using concentration-response func tions supplied by experts.

Figure 1-1: Breakdow n of Total Monetized PM2.5 Co-Ben efits 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-B enefits 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 mortalit y. 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 functi on provided in those studies.

Page Break 

## T

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## 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 per cent 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 Stat e University (CSU) of stationary lean burn engines, the EPA was able to establish CO as a surrogate for HAP for l ean burn engines. Rich $0 $50 $100 $150 $200 $250

Pope et al. Laden et al.Millions(2010$)

PM 2.5 mortality 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 engine s 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 fo r rich burn engines and the e mission 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 ac knowledged that it is significantly more expensive and difficult to test for formaldehy de than for CO, but has been unable in the past to support including the same flexibility for rich burn engine s 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 bu rn engines may become available in the future for the EPA to review and reassess possible surr ogates 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 stati onary existing engines at area sources in 2009 (74 FR 9698). Specifically, the EPA solicited comment on whethe r it would be appropriate to include an
alternative standard in terms of VOC and as ked that commenters submit data supporting the relationship between HAP and VO C. 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 appropr iate to adopt an alternative standard in terms of THC (or VOC ) for rich burn engi nes and discussed the reasons why in the 2010 responses to comments. Compliance with th e formaldehyde standard in the rule is, therefore, currently demonstrated by in itial and continuous performance testing for formaldehyde.

On October 19, 2010, engine manufacturer Dr esser-Waukesha submit ted a petition for
reconsideration of the form aldehyde requirements. The EPA granted the petition for reconsideration on January 5, 2011. (In a ddition, on November 3, 2010, the Engine Manufacturers Association submitted a petition for j udicial review of thes e requirements.) In the petition for reconsideration, Dre sser-Waukesha argued that formalde hyde is difficult and costly to measure. The petition requested that the HAP surrogate for 4SRB engines should be THC rather than formaldehyde. Dresser-Waukesh a submitted data fro m testing it conducted illustrating that THC reduction across the catalyst is an appropriate surro gate for HAP reduction across the catalyst. According to the petitioner, testing for THC is eas ier 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 estima tes that replacing formal dehyde testing with THC testing would result in substantial compli ance cost savings annually while achieving the
same reduction in HAP emissions.

The EPA has reviewed the data submitted by Dresser-Waukesha. The data provide d indicate that a strong relationship exists between percentage re ductions of THC and per centage reductions of formaldehyde (the surrogate fo r HAP emissions in the NESHAP ) on rich burn engines using non-selective catalytic reduction (NSCR). Data analy zed by the EPA indicate that if the NSCR is reducing THC by at least 30 percent from 4SRB e ngines, formaldehyde emissions are guaranteed to be reduced by at least 76 percent, which is the percentage reduction re quired for the relevant engines. Indeed, the percentage reduction of formaldehyde is invariably well above the 76 percent level, and is usually above 90 percent. Th erefore, the EPA agrees with the petitioner that for SI 4SRB engines using NSCR and meeting the NE SHAP by showing a percentage reduction of HAP, it would be appropriate to allow sources to demonstrate compli ance with the NESHAP by showing a THC reduction of at least 30 pe rcent. 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 requiremen t) to show compliance with an optional THC compliance demonstration option. The specific amendments the EPA is finalizproposing are presented
below.

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## The EPA is proposing to adding an alternative method of dem onstrating 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 exis ting stationary 4SRB non-emergency engines greater than 500 HP that are locat ed at area sources of HAP emi ssions that choose to meet the formaldehyde percent reduction requir ement of 76 percent or more.

Based on the arguments and evidence presente d in the petition discussed above, the EPA is proposing to adding a compliance demonstration option for stationary 4S RB engines meeting a 76 percent or more formaldehyde reduction. The compliance demonstration option would be an alternative to the existing method of demonstr ating compliance with the formaldehyde percent reduction standard, which is to test engines fo r formaldehyde. The alte rnative for owners and operators of 4SRB engines meet ing a 76 percent or more formal dehyde reduction would be to

## test their engines for THC showing that the engi ne 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 sour ces would still be required to reduce formaldehyde emissions by 76 percent or more or limit the concentration of formaldehy de in the stationary RICE exhaust to 350 parts per billion by volume, dry basis or less at 15 percent oxygen (O 2 

## ). However, owners and operators choosing to meet the formaldehy de concentration limit would not have the THC demonstration compliance option, because EPA could not verify a clear relationship between
concentrations of THC and con centrations of formaldehyde in exhaust from these SI 4SRB engines. The EPA is requiring is proposing that existing stationa ry 4SRB non-emergency engines greater than 500 HP located at area sources located in popul ated areas be subject to an equipment standard and required to install a catal yst. 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 con centration of formaldehyde in th e stationary RICE exhaust to 10.3 parts per million by volume, dry ba sis (ppmvd) or le ss at 15 percent O 2 

## 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 demons tration method must demonstrate compliance by showing that the aver age reduction of THC is equal to or greater than 30 percent. Owners and operators of 4SRB st ationary RICE complying with the requirement to reduce formaldehyde emissions and demonstr ating 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 Or ganic Concentration Using a Flame Ionization Analyzer. Measurements of THC at the inlet a nd the outlet of the NSCR must be on a dry basis and corrected to 15 percent O2 or equivalent car bon dioxide content. To correct to 15 percent O2, dry basis, owners and operators must meas ure oxygen using Method 3, 3A or 3B of 40 CFR part 60, appendix A, or ASTM Method D6522-00 (2005) and measure mois ture using Method 4 of 40 CFR part 60, appendix A, or Test Met hod 320 of 40 CFR part 63, appendix A, or ASTM D6348-03. Because owners and operators are comp lying 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. Me thod 25A is capable of measur ing emissions down to 5 ppmv and is, therefore, an appropriate method for measuring THC emi ssions 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 th e formaldehyde per cent 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, subpar t ZZZZ. Currently, §63.6640(f)(1)(iii) allows a maximum of 15 hours per year to be spent towards dema nd response operation under certain qualifying conditions. Also, §63.6640(f)(1)(ii ) currently includes an allowance of 100 hours per year for purposes of ma intenance checks and readiness te sting. The EPA is requiring is proposing that owners and operators of stationary emergency RI CE be permitted to operate their engines as part of an emergenc y demand response program within the 100 hours per year that is permitted for maintenan ce 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 authorit y and transmission operator has
declared an EEA Level 2 as defined in the No rth American Electric Re liability Corporation Reliability Standard EOP-002-3, Capacity and Energy Emerge ncy 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 dema nd response operation are added to the hours spent for maintenance and testi ng purposes and counted toward s the 100 hours per year. If the total time spent for demand re sponse operation and maintenan ce 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 suppor t the local power systems.

For stationary emergency e ngines above 500 HP that were installed prior to June 12, 2006, there is currently no emergency demand re sponse allowance and there is no time limit on the use of emergency engines for routine tes ting and maintenance in §63.6640(f)(2)(ii). Those engines were not the focus of the 2010 RICE NE SHAP amendments; therefore, the EPA did not make any changes to the requirements for thos e engines as part of the 2010 amendments. For consistency, the EPA is now also requiring propo sing 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 tota l of 100 hours per year, including time spent for maintenance and testing.

The EPA is also proposing to amending the NS PS 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 regu lations currently do not include su ch an allowance for emergency demand response operation. For the reasons discusse d as to why the EPA fi nds it appropriate to allow stationary emergency engi nes to participate in emergency demand response programs and remain being considered emergency units, and for consistency across en gine regulations, the EPA is proposing to adding an emergency demand response allowance under the NSPS regulations. Consequently, the EPA is propos ing to revisinge the existing language in §§60.4211(f) and 60.4219 of 40 CFR part 60, subp art IIII, and §§60.4243(d) and 60.4248 of 40 CFR part 60, subpart JJJJ, to specify that emerge ncy engines may participate in demand response programs for up to 100 hours per y ear, including hours spent toward s 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 RI CE 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-emerge ncy situations. As currently written, the 50 hours per year for non-emergency situatio ns cannot be used for peak shav ing or to generate income for a facility to supply power to an electric grid or otherwise suppl y power as part of a financial arrangement with another entity; except that ow ners and operators of certain emergency engines may operate the engine for a ma ximum 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 progr ams is being increased to 100 hours per year, but will also include hours spent towards main taining and conducting readiness testing of the emergency engines. However, addi tionally, the EPA is also allo wing proposing that stationary emergency engines located at area sources be perm itted to apply the 50 h ours per year that is currently allowed under §63.6640(f) for non-emergency operati on towards any non-emergency operation, including operation as part of a financial agreement w ith another entity. The peak shaving allowance would expire in 201417. The EPA is specifyi ng that the power can only be used at the facility or towards the local syst em, 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 cal endar year limitations on non-emergency operation, including emergency demand response or peak sh aving, will be consid ered a non-emergency engine and subject to the require ments for non-emergency engines for the remaining life of the engine.

To estimate emissions from emergency engi nes 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 emer gency engine operation. Therefore, the emissions previ ously calculated remain appropri ate. In terms of any revenue generated from participation in demand respons e 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 genera ted 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 th e annual revenue from demand response programs (which varies), are also uncerta in making it problematic to estim ate the economic benefit of such programs. As such, the EPA has not estimated an y 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 requir ements 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 concentratio n 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 aftertreatme nt; oxidation catalysts for 4SLB engines and NSCR for 4SRB engines. In addition to these emission requirements, ow ners and operators of existing stationary 4-stroke e ngines greater than 500 HP at ar ea sources are also subject to monitoring, testing, recordkeepi ng and reporting requirements.

## After the final requirements for existing stationary SI engine s 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 Petroleu m Institute (EPA-HQ-OAR2008-0708-0582), the Interstate Natural Gas As sociation of Amer ica (EPA-HQ-OAR-2008- 0708-0584), and the Gas Processors Associ ation (EPA-HQ-OAR- 2008-0708-0587) requesting that the EPA reconsider the requirements of th e final rule. The petiti oners expressed many
similar concerns. As relevant to th is 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 heavil y 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 requi ring less stringent standards for owners and operators of stationa ry engines in remote areas.

While the EPA does not share all of the view s of the petitioners regarding the difference between engines based on their location, the EPA doe s believe that it is reasonable to create a subcategory of existing stationa ry 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 en gines are in sparsely populated areas. The EPA believes that establishing a subcategory for SI en gines 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 sub categorizinge sparsely populated engines using the existing DOT pipeline classification system. This system cla ssifies locations based on their distance to pipelines covered by the Pipeline and Hazardous Materials Safety Administration safety regulations. The DOT system de fines a class location unit as an onshore area that extends 220 yards or 200 meters on either side of the cente rline of any continuous 1-mile (1.6 kilometers) length of pipeline. The DOT approa ch further classifies pipeline locations into Class 1 through
Class 4 locations based on the number of build ings intended for human occupancy. A Class 1 location is defined as an offshore area or any class location unit that ha s 10 or fewer buildings intended for human occupancy. Th e DOT classification sy stem also has special provisions for locations that lie within 100 ya rds (91 meters) of either a bu ilding or a small, well-defined outside area (such as a playgr ound, recreation area, outdoor theater , or other place of public assembly) that is occupied by 20 or more persons on at least 5 days a we ek 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 ov erlap between engines affected by the rule and covered by the DOT pipeline classification syst em. 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 fo r those engines that are associat ed with natural gas pipelines. For those engines not associated with pipelines , the EPA is using simila r 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 fo r human occupancy. EPA requests comment on
whether the use of these DOT cla ssifications are appropriate for ai rborne 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 mete rs) of either a building or a sm all, well-defined outside area (such as a playground, recreation ar ea, outdoor theater, or other place of public assembly) that is occupied by 20 or more persons on at least 5 da ys a week for 10 weeks in any 12-month period.

The EPA is proposing finalizing management practices as generally available control technologies for existing stati onary SI 4SLB and 4SRB ar ea source non-emergency engines located in sparsely populated areas. Given th e remote location of the engines from human activity, the EPA believes that it is appropriate not to include re quirements that would necessitate
aftertreatment and extensive te sting 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, re spectively. The capital and annual costs of
the RICE NESHAP for ex isting 4SLB and 4SRB engines above 500 HP at area sources would be $30 million and $12 million, respectiv ely, if these proposed amendm ents are incorporated into the rule. Creating a subcategory of these engines for the ones located in sparsely populated areas and not mandating emission contro ls would significantly reduce the cost of the rule for such engines.

For existing stationary SI 4SLB and 4SRB area source non-emergency engine s that are located in populated areas, the EPA is finali zproposing an equipment standard that requires the installation

## and operation of a catalyst that will have to be te sted 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 engi ne if the catalyst is exposed to dangerous temperatures or have continuous monitoring eq uipment installed to record catalyst inlet temperatures. The EPA is finali zproposing 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 sparse ly 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 criter ia for a sparsely populated area the owner and operator must w ithin 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 annuall y, whichever comes first;

•Inspect spark plugs every 1,440 hours of operati on or annually, whichever comes first, and replace as necessary; and

•Inspect all hoses and belts ev ery 1,440 hours of operati on or annually, whichever comes first, and replace as necessary.

Sources have the option to use an oil analysis pr ogram as described in §6 3.6625(i) of the rule in order to extend the specified oil change requireme nt. The oil analysis must be performed at the same frequency specified for changi ng the oil in Table 2d of the ru le. The analysis program must at a minimum analyze the following three paramete rs: Total Acid Number, viscosity, and percent water content. The condemning limits for these pa rameters are as follows: Total Acid Number increases by more than 3.0 mi lligrams 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 gr eater 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 engi ne owner or operator must change the oil within 2 days of receiving the resu lts of the analysis; if the engine is not in operation when the results of the analysis are received, the engine owner or ope rator must change the oil within 2 days or before commencing operation, whic hever is later. The owner or operator must keep records of the parameters that are analyzed as part of th e program, the results of the analysis, and the oil changes for the engine. The anal ysis program must be part of the maintenance plan for the engine.

Owners and operators of existing stationa ry 4SLB and 4SRB area source engines above 500 HP in sparsely populated areas would also have to operate a nd maintain the st ationary RICE
and aftertreatment control devi ce (if any) according to the manu facturer's emi ssion-related written instructions or develop their own maintenance plan whic h 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., existi ng stationary 4SLB a nd 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. Ow ners and operators of existing area source 4SRB non-emergency engines great er than 500 HP in populated area s would be required to install NSCR. Owners and operators must conduct an initial test to demons trate that the engine achieves at least a 93 percent reduction in CO emissions or a CO concen tration 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 en gine 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 meth od 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 a ppendix A to 40 CFR part 63, subpart ZZZZ. The THC testing must be conduc ted using EPA Method 25A.

## The owner or operator of both engine type s must also use a hi gh temperature shutdown
device that detects if th e catalyst inlet temperature is too hi gh, 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 4S LB 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 in itial performance test conduct annual checks of the catalyst to ensure proper catalyst activity. The annual check of th e 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 leas t 2 minutes of test data phase measurement. Owners and operato rs of 4SLB engines must de monstrate 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 th an 47 ppmvd at 15 percent O2. Owners and operators of 4SRB engines must demonstrate that thei r catalyst is reducing CO emissions by 75 percent or more, or alternatively, that THC em issions are being reduced by at least 30 percent during the catalyst activity check.

If the emissions from the engine do not exceed the le vels required for the initial test or annual checks of the catalyst, then the catalyst is cons idered to be working properly. If the emissions exceed the specified pollutant levels in the ru le, the exceedance(s) is/are not considered a violation, but the owner or ope rator would be required to sh ut 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 da ys of the engine bei ng 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 stati onary 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 testin g that the emissions do not exceed the levels specified.

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## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [53] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt
Page 15: [54] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [56] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [57] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt
Page 15: [58] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [59] Formatted Al amson 1/8/2013 2:12:00 PM

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [59] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [60] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [61] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt
Page 15: [62] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [63] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [63] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [64] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [65] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt
Page 15: [66] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [67] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [68] Formatted Al amson 1/8/2013 2:13:00 PM 

## Space Before: 1 pt, After: 1 pt
Page 15: [69] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [70] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [70] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [71] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [72] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript

### Page 15: [73] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [77] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [78] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, Space Be fore: 1 pt, After: 1 pt
Page 15: [79] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [80] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [81] Formatted Al amson 1/8/2013 2:13:00 PM 

## Space Before: 1 pt, After: 1 pt
Page 15: [82] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [83] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [83] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [84] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [84] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [85] Formatted Al amson 1/8/2013 2:12:00 PM

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [85] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [86] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [86] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [87] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [87] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [88] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [88] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [89] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [89] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [90] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [91] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt
Page 15: [92] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [93] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [93] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [94] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [95] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt
Page 15: [96] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [97] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript

### Page 15: [97] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [98] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [99] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, Space Be fore: 1 pt, After: 1 pt
Page 15: [100] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [101] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [102] Formatted Al amson 1/8/2013 2:13:00 PM 

## Space Before: 1 pt, After: 1 pt
Page 15: [103] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [104] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [104] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [105] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [105] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [106] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [106] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [107] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [107] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [108] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [108] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [109] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [109] Formatted Al amson 1/8/2013 2:12:00 PM

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [110] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [110] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [111] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [112] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt
Page 15: [113] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [114] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [114] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [115] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [116] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt
Page 15: [117] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [118] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [118] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [119] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [120] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, Space Be fore: 1 pt, After: 1 pt
Page 15: [121] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [122] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [123] Formatted Al amson 1/8/2013 2:13:00 PM 

## Space Before: 1 pt, After: 1 pt
Page 15: [124] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt

### Page 15: [125] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [125] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [126] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [126] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [127] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [127] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [128] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [128] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [129] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [129] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [130] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [130] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [131] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [131] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [132] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [133] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, Space Be fore: 1 pt, After: 1 pt
Page 15: [134] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [135] Formatted Al amson 1/8/2013 2:13:00 PM 

## Space Before: 1 pt, After: 1 pt
Page 15: [136] Formatted Al amson 1/8/2013 2:12:00 PM

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [136] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [137] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [138] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt
Page 15: [139] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [140] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [141] Formatted Al amson 1/8/2013 2:13:00 PM 

## Space Before: 1 pt, After: 1 pt
Page 15: [142] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [143] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [143] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [144] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [144] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [145] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [145] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [146] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [146] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [147] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [147] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [148] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript

### Page 15: [148] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [149] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [149] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [150] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [151] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt
Page 15: [152] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [153] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [154] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt
Page 15: [155] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [156] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [157] Formatted Al amson 1/8/2013 2:13:00 PM 

## Space Before: 1 pt, After: 1 pt
Page 15: [158] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [159] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [159] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [160] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [160] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [161] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [161] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [162] Formatted Al amson 1/8/2013 2:12:00 PM

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [162] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [163] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [163] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [164] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [164] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [165] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [165] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [166] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [167] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt
Page 15: [168] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [169] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [169] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [170] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [171] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt
Page 15: [172] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [173] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [173] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [174] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript

### Page 15: [175] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt
Page 15: [176] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [177] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [178] Formatted Al amson 1/8/2013 2:13:00 PM 

## Space Before: 1 pt, After: 1 pt
Page 15: [179] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [180] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [180] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [181] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [181] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [182] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [182] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [183] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [183] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [184] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [184] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [185] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [185] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [186] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [186] Formatted Al amson 1/8/2013 2:12:00 PM

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [187] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [188] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt
Page 15: [189] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [190] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [190] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [191] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [192] Formatted Al amson 1/8/2013 2:14:00 PM 

## Indent: Left -0.01 ch, First line: 0 ch, Space Before: 1 pt, After: 1 pt
Page 15: [193] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt Page 15: [194] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
Page 15: [194] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Space Before: 1 pt, After: 1 pt
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## Font: 8 pt Page 15: [198] Formatted Al amson 1/8/2013 2:12:00 PM 

## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript

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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript
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## Font: 8 pt, Not Supe rscript/ Subscript