# E cono mi c Im pact of P e nd i ng A i r R e gu l a t i ons on

t he U .S

. P u l p and P aper I ndus t r y

- U pda t e d

P r e p a r e d b y Fi s h e r In t e rn a t ion a l, I n c

.

September 201 12

In t rodu c t ion

T h is re po r t is a n up d a t e d v e r si o n o f a re po r t o f si m il a r n a m e r e l e a s e d in Au g u st 20 1 0. It

describes the potential impact of a series of rules issued by the Environmental Protection

Agency (EPA) i n March 2011 establishing Maximum Achievable Control Technology for

industrial boilers, commonly referred to as the Boiler and Incinerator MACT rule s 1

. Several other unrelated air regulations also are pending. They include but are not limited

to the Cluster MACT reopening, Pulp and Paper Residual Risk, and several National

Ambient Air Quality Standard (NAAQS) revisions that directly or indirectly dr ive more

stringent standards

.

T h is u pd a te u s e s t h e s a m e a ss u m p ti on s a s t h e o r i g i na l r e p o r t w ith t h e f o ll o w i ng

e x c ep ti on s:

 Pu lp a n d p a pe r m ill assets and c o sts

- o f

- p r odu c ti o n w e r e t a k e n f ro m

Fis he r S o lv

e TM ’s Q 1_ 2 01 1 r e l ea s e ;

 Capital and operating costs of compliance to regulations were updated by the

consulting firm URS based on the latest available information.

T h e A m e r ic a n F o r e st & P a pe r A ss o ci a ti on ( A F &PA ) en g a g e d URS to up d a te e st i m a t e s o f

t h e lik e ly c o sts o f c o m p l y i n g w ith t he se pe n d i n g r e g u l a ti o n c h a n g e s an d Fis he r

I n t e rn a ti o n a l I n c. to a ss e ss t h e i m pa ct o f t he s e c o m p li a n ce c o sts o n t h e e c o n o m ic v i ab ility

o f U. S

. pu l p a n d pa p e r m i lls.

T h e URS f i n d i n g s a r e p r e s en t e d i n d e t a il in a r epo r t entitled, “ C u m u l a ti v e C o st Bu rd e n

A na l y sis o f A ir R e g u l a ti o n s P o t e n ti a lly I m pa ct i n g t h e F o r e st P ro du cts I n d u st r y ,” da t e d

August 20 1 1

. A r e g u l a ti on

- s pe ci f ic s u m m a r y o f t h e URS c o st e sti m a t e s a p p e a r s in

Ap p e n d ix A o f t h is r epo r t and i n d ic a t es w h ich r u l e s w e r e i n cl ud e d in t h is a ss e s s m e n t a nd

w h ich w e r e no t.

In s um m a r y

, t h is up d a t e s ho w s potentially s e v e r e i m pa cts o n t h e pu lp an d p a per i ndu st r y

f ro m EP A r e g u l a ti on s a ff e cti n g i n d u s t r y bo il e r s ( e

. g

. Bo il e r M A CT a n d C I S W I) an d o t h e r

u p c o m i n g Cl ea n A ir r u l e s f o r w h ich t h e c o sts c ou ld b e e sti m a t e d

, a s f o ll o w s:

 The Bo il e r MACT r u l e s

, a f t e r accounting for the impact on jobs of proposed

g ene r a l pu lp a n d p a p e r m a n u f a ct u r i n g Clean Air r e g u l a ti on s , put at serious risk an

incremental :

o 20

, 541 j ob s in p u lp a n d p a p e r m ills a l o n e

o 8 7

, 299 j ob s c o n si de r i n g bo th j o b l o s s e s in pu lp an d p a pe r m ills a n d j o b s

l o st a l on g t h e ir s upp ly c ha in a n d in t h e s u rr ound i n g c om m u n i ty

. 2

1 On March 21, EPA published the Boiler MACT rule and three related rules

-- the Commercial and Industrial

Solid Waste Incinerator (CISWI) rule (setting emissions limits for non

- hazardous solid waste incinerators);

the definition of Non

- Hazardous Secondary Materials (a Resource Conservation Recovery Act rule

determining which materials are wastes and thus covered under the CISWI rule when burned); and Boiler

GACT (Generally Achievable Control Technology for boilers at smaller sites). These four rules often are collectively referred to as the “Boiler MACT rules.”

2 Note t h at t he s e e s t i m ates do n ot i n c l u de j ob l o ss es i n the wood p r o d u c ts m anu f a c tu r i ng s e c tor of the

f o r e s t p r odu c ts i n du s t r y f r o m an e s t i m ated $2 b i l l i on i n ne w M A CT c o s t s.3

 The Bo il e r MACT r u l e s and o t he r up c o m i n g Cl e a n A ir reg u l a ti on s put at serious

risk a total of :

o 3 8

, 06 0 j o b s in pu lp an d p a pe r m a nu f a c t u r i n g a l o n e

o 16 1

, 755 j ob s c on si de r i n g b o th t h e l o s s e s in pu lp a n d pa p er m ills an d t h e

j ob s l o st a l on g t h e s u p p ly c ha in an d i n t h e s u rr o u nd i ng c o m m u n it y

. 3

M e t hodolo g y

Fis he r I n t e r na ti o na l w a s a sk e d to qu an t i f y t h e lik e ly i m pa ct o f ne w a ir po ll u ti o n c on t r o l

r e g u l a ti o n s o n e m p l o y m en t i n U. S

. p u lp a n d p a pe r m ills b y e sti m a ti n g h o w m any m ills

w ou ld b e in j eo par d y o f cl o si n g i f t he y h a d to c o m p ly with t h e r e l e v an t ne w a ir r e g u l a ti on s.

T o m a ke t h e e s ti m a t e

, w e u s e d t w o m a j o r re s ou r c e s : Fis he r So lv e TM, a p r op r i e t a r y

i ndu st r y da t aba s e de sc r i b i n g t h e a ss e ts a n d c o sts

- o f

- p ro du cti o n o f ea c h m ill, an d

de sc r i p ti o n s p r o v i de d b y URS o f h o w d iff e r en t t y pe s o f m ills w ou ld n ee d to r e s p o nd to

e a ch po t en ti a l ne w r e g u l a ti o n an d t h e c o s t s o f t ha t c o m p li an c e

.

W e p r o j e ct e d t h e c o sts o f c o m p li a n ce f o r e a c h m ill a n d c a lc u l a t e d t h e m a s a pe r c e n t a g e

o f c o sts o f p r o d u cti o n

. W he n c o m p li a n ce w o u ld i n c r ea se a m ill’s c o s t

- o f

- p r odu c ti o n by

m o r e t h a n a s u st a i nab l e a m o u n t, w e list e d t h a t m ill an d its a ss o c i a t e d e m p l o y m en t as

be i n g “ a t

- r isk.” N o t e t h a t t h e c o sts p r o j e c t e d in t h is r epo r t f o r e a ch m ill’s c o m p li a n ce d o

no t i n cl ud e t h e c o sts a ss o ci a t e d w ith a n u m be r o f reg u l a ti on s f o r w h ich URS w a s unab le

to qu an t i f y a m ill

- s pe c i f ic c o m p li an c e i m pa c t

. 4 Moreover, t he r e is a n o t h er s e t o f

r e g u l a ti on s t h a t t r i g g e r a c o st t o a m ill o n ly w he n t h e m ill m a k e s a p h y sic a l c han g e in t h e

f u t u r e

, s u ch a s r ebu il d i n g a bo i l e r

. A s w e d o no t k no w w h ich m ills m ay m a ke c h a n g e s in

t h e f u t u r e

, t he s e i m pa cts a l so a r e no t i n cl u d e d in t h is a n a l y sis. For this reason, t he

ana l y sis m a y unde r st a t e t h e i m pa c t o f r e g u l a t i on s o n m ill c o sts and jobs

.

W e a ss u m e d t h a t t h e “ s u st a i n ab le a m ou n t” o f i n c r e m en t a l c o st a g iv e n m ill can ab s o r b is

e q ua l to t h e a m o u n t o f c a s h t ha t t h e a v e r a g e m ill p ro du c e s f o r its o w ner a f t e r v a r i ab le

c o s ts an d c ap i t a l e x pe n d it u r e s. In o t he r w o r d s, w he n a m ill g e ts t o a c a sh b r ea k

- e v e n

l e v e l, it be c o m e s a s e r i ou s r isk f o r cl o s u r e

. It w ou ld b e f a ir t o a rg ue t ha t this is a

conservative assumption because m a n y o w ne r s w ou l d p re f e r to s hu t t e r a m i ll w e l l b e f o r e it

r ea c h e d a c a s h c o st b r ea k e v e n l e v e l t o r ed e p l o y m a n a g e m en t t i m e a n d m a i n t e nan c e

c ap it a l t o o t he r

, m o r e p ro f it a b le f a ciliti e s. T h e a v e r a g e s u s t a i nab le a m o u n t o f c o s t

i n c r ea se f o r t he i ndu st r y ba s e d o n t h is ana l y sis is 12

. 5 % o f c o st o f p r odu c ti on

. ( Se e be l o w

f o r a m o r e de t a il e d e x p l a n a ti o n o f ho w t h is f i g u r e w a s d er i v ed .)

3 Note the s e e s t i m ates do n ot i n c l u d e j ob l o ss es i n t h e wood p r o d u c ts m anu f a c tu r i ng s e c tor of the f o r e s t

p r odu c ts i ndu s t r y

.

4 Roughly $2 billion in new capital costs for pulp and paper mills meeting various National Ambient Air Quality

Standards (NAAQS)

, changes to the New Source Review (NSR) requirements

, New Source Performance

Standards (NSPS)

, and the Clean Air Interstate Rule (CAIR) were not factored into the mill closure/job loss

calculations because they could not be allocated to specific mills.4

F o r m o st r e g u l a ti on s

, c o m p li a n ce r e q u i r e s bo t h c ap i t a l a n d o pe ra ti n g c o sts. W e t r an sl a t e d

c a p it a l c o sts i n to ope ra ti n g c o sts b y u si n g a n i n t e r e st r a te o f 1 1 %, r ep r e s e n ti n g t h e

i ndu st r y’s w e i g h t e d a v e r a g e c o st o f c ap i t a l ( W A CC )

, a n d a t e r m o f f i v e y ea r s. W e b a s e d

t h e W A CC o n a s u r v e y o f i n v e st m e n t b an k e r s a n d i n d u st r y ana l y sts. T h e f i v e

- y ea r t e r m

w a s a rr i v e d a t b y no ti n g t h a t :

 t h e i n du st r y ’s c ap it a l s t r u ct u r e is a pp r o x i m a t e ly 50 % de b t a n d 50 % eq u it y

,

 t h e a v e r a g e i ndu st r y t er m o f d e b t is a bo u t t e n y ea r s, and

 f und i n g w ith e q u ity is e q u i v a l en t to a t e r m o f “ z e r o ” y ea r s ( be c au s e s ha r e s a r e

d il u t e d i m m ed i a t e l y w he n a c o m p an y r a is e s c a sh b y s e lli n g e q u it y )

.

T h e re f o re

, t h e a v e r a g e pa y ba ck t e r m w e u s e d to c a lc u l a t e t h e c o s t o f f u nd i ng c o m p li a n ce

is f i v e y ea r s (( 1 0 y ea r s + 0 y ea r s) d i v i de d b y 2 = 5 y ea r s )

.

T h e t a b le be l o w s u mm a r i z e s ho w w e a rr i v e d a t t h e f i n an ci a l “a t

- r isk” r a te o f s p end i n g on

c o m p li a n ce t h a t w ou ld pu t a m ill in j eo p a r d y o f c l o si n g

. I d ea ll y

, w e w ou ld ha v e c o m p a r e d

t h e c o st i m p a ct o f c o m p li an c e t o m i ll m a rg i n s. H o w e v e r

, s i n ce w e d id n ot ha v e da t a o n

e a ch m ill’s p ro f it m a rg i n

, w e a s s u m e d a n i n du st r y a v e r a g e m a rg i n

, a d d ed a n i n du st r y

a v e r a g e f a ct o r f o r c a s h s p en t o n c ap it a l an d a p p li e d t h e m t o c o st

- o f

- p r odu ct i o n da t a t h a t

w e d o ha v e

. T h is a ll o w e d u s t o c r e a te a n i n du s t r y a v e r a g e “ a t

- r isk” r a te t h a t w e c ou l d

c om pa r e t o t h e c o s ts o f c o m p li an c e

. 5

W e e sti m a t e d t h e i n d u st r y a v e r a g e “ a t

- r isk” r a te u si n g da t a d r a w n f r o m t h e f i n a n ci al

st a t e m e n ts o f a gr o u p o f p ub lic U. S

. pu lp a n d pa p e r c o m p a n i e s. W e f o u n d t h e i ndu st r y ’s

a v e r a g e gr o ss m a rg in o v e r a 10

- y ea r pe r i o d

, w h ich is r e v enu e l e ss t h e c o s t o f g oods s o ld

(m a i n ly m a t e r i a ls an d l abo r ) a s a p e r c e n t a g e o f r e v e n ue

. W e t h e n d edu c t ed a v e r a g e

c ap it a l e x pe n d it u r e s p e r do ll a r o f s a l e s a n d a n a v e r a g e c o s t

- o f

- s a l e s ( s u ch a s b r o k e r

c om m issi on s a n d e a r ly pa y m en t d is c oun ts ).

I t e m Pe r c e nt

10

- y ea r a v e r a g e i ndu s t r y gr o ss m a rg in 19

. 7%

Le ss 1 0

- y ea r a v e r a g e c ap it a l e x pend it u r e s p e r $ o f s a l es 7

. 6%

Le ss f a ct o r f o r c o st o f s a l es 2

. 0%

E q ua ls a t

- r isk r a te a s p e r c en t o f s a l es 10

. 1%

A t

- r isk r a te a s pe r c e n t o f c o s t

- o f

- p r o d u cti o n 12

. 5%

5 While the method olo gy is the same, t h is de sc r i p ti o n is d i f f e re n t f ro m t h e on e s u p p li e d in t h e o r i g i na l r epo r t

in a n a t t e m p t to cl a r i f y t h e m e t ho d o l o g y u s ed

.5

These c a lc u l a ti o n s r e s u lt e d i n a n a v e r a g e “ a t

- r isk” r a te ( t h e m a x i m u m a m o un t o f c a sh

c o st i n c r ea s e t h e t y p i c a l m ill c ou l d a b s o r b ) o f 10

. 1 % o f s a l e s

. Gi v e n t h e i ndu s t r y ’s

a v e r a g e m a rg i n s, t h is i s e q u i v a l en t to 12

. 5 % o f c a s h c o st

- o f

- p r o d u c t i on

. H e n c e

, i f a ir

r e g u l a ti on

- r e l a t e d i n c re m e n t a l o pe r a t i n g c o sts an d a n nua li z e d c o s ts a ss o ci a t e d w ith

c ap it a l e x pend it u r e s to c o m p ly w ith t h e r e g u l a ti on s a m o un t to m o r e t ha n 12

. 5 % o f a m ill’s

c a sh c o s ts, t h e m ill is cl a ssi f i e d a s a t r isk o f cl o si n g

.



### The i n c re a se in c o sts o f c o m p li a n ce w ith n e w a ir r e g u l a ti on s w i ll a ff e ct m ills in d i ff e r ent

w a y s. In s o m e c a s e s, m ills w i l l s u ff e r i n c r ea s e s in c o s ts gr ea t e r t h a n t h e ir d o m e stic

c o m p e tit o r s, t h u s l o si n g c o m p e titi v ene ss in t h e ir h o m e m a r k e ts a n d be c o m i n g r isks f or

cl o s u r e

. I n o t he r c a s e s

, e v e n i f a ll m ills in a p r odu ct c a t e g o r y e x pe r i e n ce si m il a r c o st

i n c r ea s e s, m a n y U. S

. m ills be c o m e “ a t

- r isk” f o r cl o s u r e b e c a u se i n t e r na ti o nal c o m p e tit o r s

g a in a c o s t ad v an t a g e and prevent prices from rising

.

A s o f t h is d a t e

, t h e r e s t ill is s o m e un c e r t a i n ty a r ou n d h o w c e r t a in r u l e s w ill b e w r itt en.

T h e re f o re

, t h is r epo r t c on t a i n s t h e r e s u lts o f t w o sc ena r i o s, e a ch re p r e s en t i n g one

po ssi b le ou t c o m e

. T h e r e s u lts f o r S c e nar io 1 a r e p r e s en t e d in t h is re po r t. The results for

Scenario 2 are summarized at the end. T h e t w o sc ena r i o s a r e:

 S c ena r io 1

– many types of b i o m a ss t ha t is bu r n e d are t re a t e d a s solid w a ste

, an d

t h e re f o r e, a r e s ub j e ct to the So lid W a s t e I n c i n e r a t o r r u l e s instead of the Industrial

Boiler MACT rule

.

 S c ena r io 2

- many types of b i o m a ss t ha t is bu r n e d are t re a t e d a s f ue l

, a n d

t he re f o r e

, a r e s ub j e c t to the I n d u st r i a l Bo il e r MACT r u l e and not the Solid Waste

Incinerator rule

.

Scenario 1 R es ul t s

Ana l y sis o f m ill

- s pe c i f i c i n c r ea s e s i n a nn u a liz e d a ir r e g u l a ti o n c o m p l i an ce c o sts s u gg e st

t ha t the Bo il e r M A C T r e g u l a ti on s, i f t h e y a r e i n c re m e n t a l t o t h e p e n d i n g m a nu f a c t u r i n g

r e l a t e d a ir r e g u l a ti on s, c ou ld r e s u lt in t h e c l o s u r e o f 3 6 m ills e m p l o y i n g 20,541 pe o p le or

18 % o f t h e p r i m a r y pu lp a n d p ape r s e ct o r ’s w o r kf o r c e

. ( T h e p r i m a r y pu lp an d p a per s e ct o r

e n c o m pa s s e s o n ly pu lp a n d p ape r m ill j ob s; the r isk to l o gg i n g j ob s a n d c o n v e r ti ng

ope r a t i on s a r e n o t i n c l ud e d in t he se f i g u r e s.)

T h e c a lc u l a ti on s s u gg e st t h a t 7 9 p u lp a n d pa p e r m ills w ou ld b e a t si g n i f i c an t r isk o f

cl o si n g if the larger suite of ne w air r e g u l a ti on s for which we have data w e r e

i m p l em en t e d

. T he se m ills em p l o y 3 8

, 06 0 p e o p l e

, o r 33 % o f t h e p r i m a r y pu lp an d p a pe r

s e c t o r ’s w o r k f o r c e

. T h e f o ll o wi n g t ab le s h o w s po t e n ti a l m ill s hu t do w n s an d j o b l o s s e s:6 M ills a t S igni f i ca nt R i s k of Clo s ure

In c r e m e n ta l f rom A d ding

Boil e r M A CT P &P Mf g R e gs On l y To t a l of Boil e r M A CT

a nd P &P Mf g R e gul a t ions

J obs A t Ri sk # of M ills J obs A t

Ri s k # of M ills J obs A t

Ri s k # of M ills

20,541 3 6 17

, 5 19 43 3 8,060 7 9

B ase 113

, 858 349

Pe r c e nt c h a nge 33% 2 3 %

Ripple E ff ect

Pu lp a n d p a pe r m ill j o b s s up p o r t j ob s in o t he r i ndu st r i e s t ha t s u p p ly t h e p u lp a n d p a per

i ndu st r y in l o c a l c omm un iti e s an d t h ro u g hou t t h e U n i t e d S t a t e s. A s c ho l a r ly paper

p r epa re d b y t h e E c o n o m ic Po licy I n stit u te

- - “ U pda t e d E m p l o y m en t M u lti p li e r s f o r t h e US

E c o n o m y

, 2 003 ”

- - w a s p r o v i de d to Fis he r b y A F &PA

. T ab le 9 o f t h e pa p e r i nd ic a t es t ha t

f o r e v e r y 10 0 j ob s in t h e p a pe r i n du st r y

, t he r e a r e a n a d d iti o n a l 32 5 j ob s s u s t a i n ed in

o t h e r i n d u st r i e s d u e to t h e p u r c ha s e o f s u p p li e s a n d t h e r e

- s p end i n g o f w o r k er i n c o m e s.

H e n c e

, t h e p u lp a n d p a p e r i ndu s t r y ’ s m u lti p li e r is 4

. 2 5

.

App l y i n g t h e 4

. 2 5 m u lt i p li e r in t h e p r e v i ou s t a b le s u gg e sts t h a t 8 7

, 299 j ob s c a n be l o st b y

i m po s i n g Bo il e r M A CT r e g u l a ti o n s o n t o p o f t h e p ro po s e d n e w pu lp an d p a per

m a nu f a c t u r i n g

- r e l a t e d a ir r e g u l a ti on s ( 20,541 X 4

. 2 5 = 8 7

, 299 ) . A t o t a l o f 161,755 j ob s

–

i n si d e an d ou tsi d e t h e pu lp a n d p ape r i ndu s t r y

- - c o u ld b e l o st a s a r e s u lt o f t h e e n ti r e

s u i t e o f p r o p o s e d a ir r e g u l a ti on s (3 8

, 06 0 X 4

. 2 5 = 1 61,755 ).

M ill & Communi t y J o bs a t Ri s k a t 4

. 2 5 M ul t ipli e r

In c r e m e n ta l f rom A d ding

Boil e r P &P Mf g On l y T o t a l of Boil e r M A CT a nd P & P

Mf g R e gul a t ions

Sce n a r io 87,299 74

, 4 56 161,755

Fis he r I n t e r na ti o na l a lso c a lc u l a t e d pu lp a n d pa p e r j ob s l o s s e s a s s o ci a t e d w ith t h e

p r opo s e d r e g u l a t i on s b y r eg i on

. R e g i ona l f i gur e s d o no t i n cl u d e t h e m u lti p li e r e ff e ct s

.7 J ob lo s s e s f or R e gi o ns ( No M ul t ipli e r)

In c r e m e n t a l A t Ri sk

J obs f rom A dding

Boil e r R e gul a t ions A t Ri s k J obs f or P &P

Mf g. R e gul a t ions

On l y A t Ri s k J obs f or Boil e r

a nd P &P Mf g

R e gul a t ions

US

-

Nor t h east 2

, 1 7 7 2

, 8 7 7 5

, 0 5 4

US

-

M i d w e s t 5

, 5 0 5 3

, 8 7 8 9

, 3 8 3

US

- S ou t h eas t 11

, 92 4 7

, 5 2 9 19,453

US

- W est 935 3

, 2 3 5 4

, 1 7 0

T o t a l US 20,541 17

, 5 19 38,060

Scenario 2 Results

Under Scenario 2, many types of b i o m a ss t ha t are bu r n e d are t re a t e d a s f ue l, a n d

t he re f o r e

, m o st p l a n ts a r e s ub j e c t to the I n d u st r i a l Bo il e r MACT r u l e and not the Solid

Waste Incinerator rule.

The calculations for this scenario suggest that the Bo il e r M A C T r e g u l a ti on s, i f t h e y a r e

i n c re m e n t a l t o t h e p e n d i n g m a nu f a c t u r i n g

- r e l a t e d a ir r e g u l a ti on s, c ou ld r e s u lt in t h e

c l o s u r e o f 3 5 m ills e m p l o y i n g 19,921 pe o p le, or 17.5 % o f t h e p r i m a r y pu lp a n d p ape r

s e ct o r ’s w o r kf o r c e

. If jobs in supplier industries and local communities are factored in, the

number of jobs in jeopardy rise s to 84,664. The impact of the pending manufacturing

related air regulations on employment and mill closings is the same as under Scenario 1.

Comparison of Findings: This Report vs. August 2010 Report

In August 2010, Fisher prepared a study on EPA’s propos ed Boiler MACT regulations and

other pending air regulation s

. The August 2010 study found that 43,666 pulp and paper

mill jobs would be placed at risk due to a broad suite of pending air regulations.

Of the 43,666 at

- risk paper industry jobs identified i n the 2010 study, 26,778 were

associated with the “other” pending air regulations and 16,888 with Boiler MACT

- related

compliance spending that is incremental to spending on the other air rules.

This new study examin ing the final Boiler MACT rules found that 38,060 paper industry

jobs would be placed at risk due to the entire suite of air regulations. Among those8

38,060 jobs, 20,541 job losses could result from the final Boiler MACT/CISWI

- related

costs that are incremen tal to spending needed to comply with the other air regulations,

and 17,519 jobs are placed at risk by the costs of non

- Boiler MACT air regulations.

The decline in the number of jobs placed in jeopardy by non

- Boiler MACT air regulations

between the origi nal and updated study reflects several factors:

 Between the first and second studies, the number of mills operating in the U.S.

declined by 7, and the employee base declined by 5,302 jobs. Of the 5,302 fewer

jobs, 2,600 were lost due to mill closures after the completion of the first report, and

the remainder reflected headcount reductions at mills that remained operational.

 A verage cost

- of

- production increased between the two study periods. Because we

measured compliance costs as a percentage of cash cost s, higher cash costs

appeared to raise the threshold for compliance costs that would put mills at risk. In

actuality

, higher costs might put more U.S. mills at risk rather than fewer because

foreign mills gain a cost advantage vis

- a

- vis U.S.mills.

The in crease in the number of jobs put at risk by Boiler MACT rules reflects the underlying

fact that the regulations as a whole still threaten a significant number of mills and jobs:

 While fewer mills were placed in jeopardy of closing by the “other” air rules, the total

number of jobs at risk declined by a smaller number. The Boiler MACT/Incinerator

MACT rules , therefore, account for a larger incremental impact.

 In the 2010 study, capital s pending was estimated by URS at $5 billion for the

proposed Boiler MACT/CISWI rules and $13.7 billion for the larger suite of pending

air rules, including the Boiler MACT/CISWI rules. However, not all of the costs

could be allocated to specific mills, so capital spending

- related compliance costs

used by Fisher came to $4.6 billion for Boiler MACT and $10.3 billion for the entire

suite of air regulations.

 Capital spending for the 2011 study was estimated by URS at $4 billion for the final

Boiler MACT/CISWI and $12.6 billion for all of the pending air rules, including Boiler

MACT/CISWI. However, not all of the costs could be allocated to specific mills, so

capital spending

- related compliance costs used by Fisher came to about $3.8 billion

for Boiler MACT/CI SWI and $10.1 billion for the entire suite of air regulations.

 The Boiler Rules changed betw een proposal and promulgation. In particular, more

fuels were classified as solid wastes and therefore, many plants are subject to the

CISWI rule instead of the Boiler MACT rule. In addition, costs were added for NOx

emissions reduction requirements to mills in close proximity to projec ted non

attainment areas

.9

In sum, this study, like the preceding study, shows that the EPA’s Boiler MACT r ules would

have a major impact on the economic viability of many pulp and paper mills and place at risk

tens of thousands of pulp and paper mill jo bs as well as jobs in surrounding communities and

supplier industries.10 

## A pp e nd ix A

UR S Est i mates o f P u l p a n d Pa p e r M i ll s Co sts o f Co m p l y i n g W i th

P r opo sed A i r R e gu l at i on s:

How Co s t

s W e re D e t e rmin e d:

URS C o r po r a ti o n ( UR S ) w o r k e d w ith t h e A m e r ic a n F o r e st a n d P a p e r A ss o ci a ti o n

( A F &PA ) a n d its m e m b e r s to d e v e l o p a r ou g h o r de r o f m a g n it u d e e st i m a t e o f t h e c o sts

o f c o m p l y i n g with v a r i o u s a ir r e g u l a ti on s t h a t c ou ld i m pa c t t h e f o r e st p r odu c ts i n d u st r y

. T h e c o st e st i m a t e s w e r e c o m p il e d in a M ic ro s o f t E x c e l w o r k boo k; w e r e ba s e d on

pub lis h e d i n f o rm a ti o n o r si m il a r p r o j e ct c o sts; ha v e b e e n r e v i e w e d b y m e m b e r c o m p a ny

r ep r e s e n t a ti v e s; a n d h a v e bee n m a d e a v a il ab le to t h e US E P A an d o t h e r s f o r r e v i e w

. T h e B o il e r M A CT an d CI S W I e sti m a t e d c o s ts a r e in l a rg e p a r t b a s e d o n i n f o r m a ti o n in

EPA ’s M a r ch 20 1 1 s u r

v e y an d e m issi on s d a t aba s e s.

C ap it a l a n d ope ra ti n g c o sts e st i m a t e s a r e n o t i n t e nd e d t o r ep r e s en t a w o r st c a se

ana l y sis. R a t he r

, t h e y r ep r e s e n t m ed i a n c o st s f o r t h e v a r i ou s sc e nar i o s ba s e d o n

pub lis h e d re po r ts, i n d u st r y i n f o rm a ti o n o n s p e ci f ic p r o j e ct c o s ts, E P A r epo r ts o r c on t r ol

de v ice f a ct s he e ts, o r a ct ua l Best Achievable Control Technology (BACT) o r Best

Achievable Retrofit Technology (BART) ana l y s e s s u b m it t e d t o pe r m itt i n g a g en ci e s. A

p r i m a r y r e s ou r ce w a s t h e do c u m en t entitled, “ E v a l u a ti o n o f A ir P o ll u ti o n C on t r o l C o sts

f o r t he Pu lp a n d Pa p e r I n du st r y ,” p r epa r e d b y N a ti on a l E c o no m ic R e s ea r ch A ss o ci a t e s

( N E R A ) in M a y 2003

. A ll c o sts w e r e d isc u ss e d w ith a c o r e t ea m o f A F & P A m e m b e r s

a n d r e v i e w e d b y URS en g i nee r s f a m ili a r w ith bo i l e r an d o t he r p u lp a n d pa p e r m ill

o p e r a ti o ns an d c on t r o ls p r i o r to f i n a li z i n g t h e st u d y

.

Boil e r M A CT Co s t s :

T h e B o il e r M A CT w ill r e q u i r e e m issi o n s c o n t r o ls f o r p a r tic u l a te m a t t e r

, h y d r o g en

c h l o r i de

, m e r c u r y

, c a rb o n m o n o x i de

, a n d d i o x i n / f u r a n

. T h e c o n t r o l t e c h n o l o g i e s t h a t

EP A h a s i d en t i f i e d a s ne c e s s a r y to c o m p ly with t h e Bo il e r M A C T a r e a f ab r ic f ilt e r f o r

c on t r o l o f p a r tic u l a te m a tt e r

, c a r b o n i n j e cti o n f o r c on t r o l o f m e r c u r y a n d d i o x i n / f u r an

, a

sc r ubbe r f o r c o n t r o l o f h y d r o g e n c h l o r i de

, a n d c o m bu sti o n i m p r o v e m en ts o r a n o x i da ti on

c a t a l y st f o r c o n t r o l o f c a r bo n m ono x i de

. In s om e c a s e s, t h e e m issi o n li m its w i ll b e v e r y

d if f ic u lt to a c h i e v e o v e r a ll ope r a t i n g c ond iti on s

, but t h e c o s t ana l y sis a ss u m e s t ha t f o r

e a ch bo il e r

, f a c iliti e s c a n a pp ly e m iss i on s c o n t r o ls t o a c h i e v e t h e Bo il e r M A C T li m its w ith

a c o m f o r t a b l e m a rg in o f c o m p li a n c e

. I n s o m e c a s e s, e x isti n g e q u i p m e nt c o n f i g u r a ti on s

m a y p r o v e i m po ssi b le to up gr ade

, an d bo il e r s an d p ro c e ss h e a t e r s m ay ne e d to b e

r ep l a c ed

, w h ich is a c o st t ha t is n o t re f l e ct e d in t h e a n a l y sis. N o te a lso t hat m an y

f a ciliti e s m a y c h oo se f ue l s w itc h i n g a s a c o m p li an c e o p ti o n ; h o w e v e r

, a s t h e c o st o f f u e l

s w itc h i n g is h i gh ly depe n de n t o n site s pe c i f ic f a c t o r s ( e

. g

., w he t h e r t h e b o il e r c an bu r n

t h e a lt e r n a te f ue l, w ha t up gr ade s m u s t b e m ad e to t h e f u e l s u p p ly s y st e m ) a n d t he p r ice

o f f ue l w ill c han g e o v e r ti m e d u e to f a ct o r s like s u p p ly an d de m a n d

, URS d id n ot a tt e m p t

to q uan t i f y c o s ts f o r f ue l s w itc h i n g

.11

T h e E P A c o ll e c t e d i n f or m a ti o n d u r i n g Pha se 1 o f t h e Bo il e r M A C T i n f o rm a ti o n c o ll e cti o n

r e q ue st ( ICR) o n t hou s and s o f bo il e r s a n d p ro c e ss h e a t e r s a t h u n d re d s o f f a ciliti e s. A

de t a il e d s p re ad s h ee t w a s de v e l ope d t o e st i m a t e c o sts f o r B o il e r M A CT f o r i nd i v i dual

bo il e r s a n d p r o c e ss he a t e r s, b a s e d o n E P A ’s m a j o r s ou r ce bo il e r i n v en t o r y da t aba s e

t ab le an d t h e e m issi o n s da t a i n cl u d e d i n E PA ’s bo il e r M A CT da t a ba s e

. URS e x t r a ct ed

i n f o rm a ti o n f r o m E P A ’s m a j o r s ou r ce bo il e r i n v en t o r y da t aba s e i n cl u d i n g bo il e r ID, si z e,

f ue l c a t e g o r y

, e m issi o n s, a n d c u rr e n t a ir p o ll u t i o n c o n t r o l e q u i p m e n t. Ba s e d o n t h e

i n f o rm a ti o n i n E P A ’s d a t a b a se an d t h e b a s e l i n e e m issi o n f a c t o r s d e v e l ope d b y EP A b y

bo il e r t y p e a n d c on t r o l de v ic e

, URS de t e r m i n e d w he t he r ea c h u n it w ou ld r e q u i r e

add iti o na l a ir po ll u ti o n c on t r o ls t o m e e t t h e B o il e r M A CT li m it s

. N o t e t h a t w e d id not

pe r f o r m an y q ua lity a ss u r an ce o n t h e i n f o r m a ti o n in EPA ’s da t aba s e

, bu t w he r e w e had

k no w l ed g e t ha t a b o il e r ha d be e n m is

- c a t e gor i z e d ( e

. g

., a b i o m a ss bo il e r w a s list e d as a

li q u id bo il e r ) w e d id m a ke t h o se c han g e s i n ou r s p r ead s h e e t.

A s p r e a d s h e e t w a s d e v e l ope d t h a t re p r e s e n t s on ly t h e un its t o b e r e g u l a t e d b y t h e r u l e

( e x cl ude s na t u r a l g a s bo il e r s, p r o c e ss h ea t e r s, bo il e r s a n d p r o c e ss hea t e r s l e ss t ha n 10

MM B t u / h r h ea t i npu t

, a n d li m i t e d u se un its )

. Ba s e d o n t h e i n f o r m a ti o n in t h e EP A

e m issi on s d a t a b a s e

, we e st i m a t e d c o sts o f c o n t r o ls t h a t w ou ld lik e ly b e n e c e ss a r y to

c o m p ly w ith t h e B o il e r M A CT f o r c oa l, b i o m a s s, li q u i d

, an d G a s 2 b o i l e r s 1 0 MM B t u / h r

an d gr ea t e r ( no t e t ha t f o r t h e f i na l r u l e

, E P A m o v e d a ll g a s

- f i r e d bo i l e r s to t h e G a s 1

s ub c a t e g o r y un l e ss t h e y w e r e bu r n i n g an y a m o u n t o f c o k e o v e n ga s o r b l a st f u rn a ce

g a s )

. A s s o m e f o r e st p r odu cts bo il e r s a t m a j o r s ou r c e s d id n o t r e c e i v e a n ICR f r om EP A

in 2 0 08

, w e a dd e d i n f o r m a ti o n f o r t h o se bo il e r s to t h e d e t a il e d s p r ead s he e t b a s ed o n

i n f o rm a ti o n f r o m A F &PA /National Council for Air and Steam Improvement (NCASI).

T he r e a r e lik e ly o t he r un its t ha t ar e no t i n cl u d e d in t h e s t ud y

, a s o t h e r t r a d e gr oup s h a v e

s u b m it t e d c om m e n ts i nd i c a ti n g t ha t E P A h as lik e ly unde r e sti m a t e d t h e u n i v e r se o f

a ff e c t e d un its ( e

. g

., American Chemistry Council ( A CC) a n d American Petroleum

Institute ( A P I)/ National Petrochemical and Refiners Association (N P R A )

.

I n f o r m a ti o n f ro m v a r i ou s s ou r c e s w a s u s e d t o d e t e r m i n e a ba s e c a p it a l c o st f o r a 25 0

MM B t u / h r bo il e r f o r ea ch P M

, CO, a n d H Cl c on t r o l t e c h n o l o g y op ti o n an d t h en sc a l e d

u si n g a n 0 .6 p o w e r f un cti o n b a s e d o n t h e si z e o f ea c h bo il e r i n t h e i n v en t o r y . F o r

e x a m p l e

, t h e c a p i t a l c o st o f a w e t sc r ub b e r o n a 1 0 0 MM B t u / h r bo il e r is c a lc u l a t ed a s t h e

b a se c o st t i m e s ( 100 / 2 50 ) 0

. 6

. A f i x e d c o st o f $ 1 m illi o n w a s a ss u m e d f or i n st a ll a ti o n o f a

c a r bo n ad s o rp ti o n s y st e m f o r Hg and / o r d i o x in c on t r o l, a s t he s e s y st e m s d o n o t v a r y

m u ch in c o st b y bo il e r si z e

. Ba se c o st a s s u m p ti o n s a r e p r e s en t e d be l o w

.

Base Control Size, MMBtu 250

Fabric Filter $7,000,000

Scrubber $8,000,000

Scrubber/FF/ESP upgrade $4

, 0 00

, 000

Carbon Injection for Hg/dioxin $1

, 0 00

, 000

Combustion Improvements or Catalyst for CO $3

, 0 00

, 00012

C on t r o ls w e r e e v a l ua t e d s e p a r a t e l y

, f i r st f o r p a r tic u l a te m a tt e r

, t h e n f o r h y d r o g en

c h l o r i de

, t h e n f o r m e r c u r y an d d i o x i n / f u ra n

, a n d l a st f o r c a r bo n m o n o x i de

. To e s ti m a te

Bo il e r M A CT c on t r o ls an d c o sts f o r ea c h u n i t

, if t h e r e w a s n o e m iss i on s i n f o r m a ti on

a v a il ab le f o r a pa r tic u l a r bo il e r

, w e u se t h e b a s e li n e e m issi o n f a c t o r s de v e l op e d b y EP A

f o r t he ir ana l y sis. In t h e ir bo il e r i n v en t o r y t ab l e

, E P A p u t t h e bo il e r p o ll u ti o n c on t r o ls i n to

c a t e g o r i e s. T h e c a t e g o r i e s a r e e x p l a i ne d in gr ea t e r de t a il in E P A ’s ba s e li n e e m issi on

f a ct o r m e m o

, b u t b a sic a lly a r e a s f o ll o w s: f o r P M c on t r o l c od e

, 1

= F F

, 2

= E F B / E SP

, 3

= v en t u r i sc r ubbe r

, 4

= w e t sc r ubbe r

, 5

= m u lti c l one

, 6

= no n e / m ist e l i m i na t o r / u n k n o w n

. I f a

un it d id no t a l r e a d y ha v e a FF o r E S P a n d t he r e w a s i n f o r m a ti o n t ha t i n d ic a t e d t he un it

c a nn o t m e e t t h e l i m it, w e a ss u m e d a n e w FF. If t h e un it a l r ea d y ha d a FF o r ES P an d

t he r e w a s i n f o rm a t i o n t h a t i n d ic a t e d t h e u n it c a n no t m ee t t h e li m it w e a ss u m e d a n

up gr ad e t o t h e e x isti n g c on t r o l e q u i p m en t. F o r HCl c on t r o l c o d e

, 1 =w e t sc r ubbe r or

s p r a y d r y e r

, 2

= d r y sc r ub b e r

, 3

= s o r b e n t i n j e c t i on

, 4

= v en t u r i sc r u b be r

, 5

= n o ne / d r y P M

on l y

. T o e st i m a t e c o n t r o l c o sts f o r HCl, i f t he r e w a s i n f o r m a ti o n t h a t i nd ic a t e d t h e u n it

c an n o t m e e t t h e li m it, w e a ss u m e d e i t he r a s c r ubbe r up gr ad e o r n e w sc r ubber

de p end i n g o n w he t h e r t h e un it c u rr en tly ha d a sc r ubbe r

. F o r Hg c on t r o l c ode

, 1

= c a r b o n

i n j e cti on

, 2

= FF p l u s s or ben t i n j e cti o n o r s p r a y d r y e r

, 3

= FF on l y

, 4

= w e t sc r u b be r

, 5

= v en t u r i sc r ubbe r

, 6

= no n e / m u lticl o n e / E F B / m ist e l i m i na t o r

. F o r H g an d d i o x i n

, i f t he r e

w a s i n f o r m a ti o n t h a t i n d ic a t e d t h e u n it c a nn o t m e e t t h e l i m it, w e ad d e d c a rb o n i n j e cti o n

. F o r CO, i f t h e r e w a s i n f o r m a ti o n t h a t i nd ic a t e d t h e u n it c a nno t m ee t t h e li m i t

, t h e n w e

a ss u m e d t h a t c a p it a l w ou ld b e n e c e s s a r y to e it he r pe r f o r m c o m bu st i on / f ue l f eed

i m p r o v e m e n ts o r o t h e r bo il e r i m p r o v e m e n t p r o j e cts t o r e d u ce CO o r i n st a ll a CO

c a t a l y st.

A lt hou g h EPA ’s e sti ma t e s i nd i c a te t h a t t h e t o t a l c ap i t a l c o st o f t h e f i n a l r u le w ill be $ 5

b illi on

, URS ha s e s t i m a t e d t ha t t h e t o t a l c a p it a l c o st o f t h e r u le w i l l b e o v e r $ 1 4 b illi o n f o r

a ll i n d u st r y ( $2.85 to 3 .2 b i l li o n f o r p u lp an d p a pe r m ills, depending on whether more

materials are waste or fuel )

. It is e v i de n t m a j o r c ap it al i n v e st m en ts in a dd

- o n c on t r o l

t e c h n o l o g y w ill b e r e q u i r e d f o r c o n ti n u e d o pe r a t i o n o f s o lid a n d li q u id f u e l e d bo il e r s a n d

p r o c e ss he a t e r s.

URS c ap it a l c o st e s ti m a t e s d i f f e r f ro m EPA ’s c o st e st i m a t e s a s f o ll o w s:

 EP A h a s u s e d t h e o u t d a t e d C on t r o l C o st M a n ua l a n d URS ba s e d c o st e sti m a t es

o n m o r e r e c en t i n f o r m a ti on

, i n cl ud i n g a c t ua l v endo r c o st e sti m a t e s, a ct u a l p r o j e ct

c o sts, B A CT a n d BA R T ana l y s e s, i n d u st r y c on t r o l c o st s t ud i e s, e tc.

 URS used a CO catalyst cost 4 times higher than EPA’s. The URS cost is based

on a recent quote from BASF and EPA’s is based on the 1998 Control Cost

Manual section on catalytic oxidizers for VOC control.

 EP A h a s e s ti m a t e d t ha t a t une

- u p o r bu rn e r r ep l a c e m e n t w ill b e a deq ua te f or

m an y un its to a c h i e v e t h e CO li m it s

. URS d o e s n o t a gr e e w ith t h is a ss u m p ti o n

be c a u se s om e o f t h e CO li m its a r e f a i r ly l o w an d m u s t b e m e t o v e r a ll ope ra ti ng

c ond iti o n s e x c ep t s t a r t u p a n d s hu t do w n

, so w e ha v e e s ti m a t e d h i gh e r c o sts t o

i m p l e m e n t c o m b u sti o n c on t r o ls, bu rn e r r ep l a c e m e n ts, f ue l f e e d s y st em

i m p r o v e m e n ts, o r CO c a t a l y st.13  URS CO c on t r o l c ap it a l c o sts a r e h i g he r t h a n EPA ’s, m o stly be c au se EP A

a ss u m e d t h a t t u ne

- u p s an d r ep l a c e m en t bu rn e r s w i l l b e a d e q ua te f o r t h e v a st

m a j o r ity o f b o il e r s to c o m p l y

, a n d URS d oe s no t a gr e e w ith t ha t a s s u m p ti on.

 EP A h a s e s ti m a t e d t ha t a cti v a t e d c a r b o n i n j e c ti o n w ill b e r e q u i r e d o n on ly 120

e x isti n g un its be c a u se i n st a ll a ti o n o f a f ab r ic f i lt e r is e x pe ct e d to a c h i e v e t he

m e r c u r y e m issi o n li m i t s, e x c ep t in c a s e s w h er e a u n it a l r e a d y ha s a f ab r ic

f ilt er an d doe s n o t m e e t t h e li m its. URS d oe s no t agr e e t ha t f ab r ic f ilt e r s w i ll

be s u f f ici en t to re du c e mer c u r y e m issi on s to t h e u lt r a

- l o w l e v e ls in t h is r u l e

. T h e r e is a f l a w in t h e l o g ic t ha t f ab r ic f il t e r s a r e e x pe c t e d t o a c h i e v e m e r c u r y

e m issi o n li m i t s w he n t he r e a r e m a n y bo il e r s in t h e da t a b a s e t h a t a r e e q u i ppe d

w ith f ab r ic f il t e r s an d ha v e m ea s u re d m e r c u r y e m issi on s h i g he r t han t h e

app lic a b le li m it. E PA ’s e st i m a t e d i n du st r y

- wi d e c ap it a l c o st f o r a cti v a t ed

c a r bo n i n j e cti o n p r e s e n t e d in t h e E RG c o st a n d e m issi on s i m p a cts m e m o is

e x t r e m e ly l o w

, a t on ly $6 .2 m illi o n (o n ly $52

, 00 0 pe r u n it a v e r a g e )

. T h is c o st

be t t e r r ep r e s e n ts 1 2 u n its t h a n 12 0 affected un its.

 EP A h a s e s ti m a t e d c o sts to i n s t a ll p a ck e d b e d sc r ub b e r s f o r HCl c o n t r o l.

I ndu s t r i a l bo il e r s d o no t u se pa c k e d be d sc r u bbe r s f o r a cid g a s c on t r o l, a s t h e

li m it a ti on s o f t he s e d e v ic e s m a k e t h e m i m p ra ctic a l f o r u s e o n a pp li c a ti on s w ith

h i g h f l o w r a t e s, h i g h P M l oad i n g

, a n d h i g h i n l e t p o ll u t a n t c o n c e n t r a t i on

. EPA ’s

o w n f a c t s h ee t o n t he s e de v ic e s, l o c a t e d at

h tt p : //ww w

. epa

. g o v

/tt n / c a tc/ d i r 1 /

f pa ck

. p d f, lis t s t he s e li m it a ti on s o f t h e se

d e v ic es an d i nd ic a t e s t h a t t he y a r e o n ly u s e d in a p p lic a ti on s u p to 75

, 0 0 0

s cf m

, w h ich li m its t he ir u se t o s m a ll un its on ly ( EP A r e s po nd e d to t h is

c o m m e n t b y app l y i ng m u lti p le pa c k e d be d s c r ubbe r s t o u n its w ith h i g he r f l o w

r a t e s )

. F a ciliti e s w ill i n st e a d i n st a ll w e t sc ru bbe r s, d r y sc r ubbe r s, o r s e m i

- d r y

sc r ubbe r s to c on t r o l a cid g a s e m issi on s f ro m i n d u st r i a l bo il e r s. EP A h a s

e sti m a t e d HCl c on t ro l c o sts f or e q u i p m e n t t ha t i n d u st r y is no t lik e ly to i n st a ll.

 EP A h a s a s s u m e d t h a t f a ciliti e s w ill no t i n c u r c o sts to c o m p ly w ith t he

d i o x i n /f u r a n s t a n da r d s be c a u se t he y w i l l t e st f o r d i o x i n /f u r a n a n d b e be l ow

de t e c ti o n l e v e ls. T h is l o g ic doe s n o t m a k e s e n s e

, e s pe ci a lly w he n t he r e a r e

bo il e r s in t h e E P A e m i ssi on s d a t a b a se w ith d i o x i n / f u ra n e m issi on s t ha t a r e

n on

- de t e c t b u t a c t ua lly m e a s u r e d e m issi on s h i gh e r t h a n t h e a pp lic a b le l i m it

a n d t he r e a r e bo il e r s w he r e E PA ’ s ba s e li n e e m issi o n f a ct o r f o r d i o x i n /f u r a n is

abo v e t h e app lic ab l e li m it. W e h a v e e sti m a t e d c a r b o n i n j e cti o n a s t h e c on t r o l

m ea s u r e f or d i o x i n /f u r a n e m issi o n s, a ss u m i n g t h a t it w ill b e e ff e cti v e a t t he s e

l o w l e v e ls.14

T h e f o ll o w i n g c ap it a l c o sts f o r c on t r o l add it i o n s/ up gr a d e s w e r e e st i m a t e d b y URS f o r

pu lp an d p a pe r c o a l, b i o m a s s

, a n d li q u i d un its ha v i n g n u m e r ic a l e m issi o n li m its

un d e r Bo il e r M A C T ( a s s u m i n g many materials burned are solid waste and not fuel ).

This is Scenario I :

T h e f o ll o w i n g c ap it a l c o sts f o r c on t r o l add it i o n s/ up gr a d e s w e r e e st i m a t e d b y URS f o r

pu lp an d p a pe r c o a l, b i o m a s s

, a n d li q u i d un its ha v i n g n u m e r ic a l e m issi o n li m its

un d e r Bo il e r M A C T ( a s s u m i n g many materials burned are fuels and not solid waste ).

This is Scenario II :

T h e se e sti m a t e d c o sts d i f f e r f ro m t h e c o sts o f t h e p r o p o s e d r u le a s f o ll o w s:

 T h e f i n a l e m issi o n li m i t s an d t h e c o m b i n a ti o n o f b i o m a ss a n d c o a l b o il e r s i n to

a s o lid f u e l s ub c a t e g o r y f o r t h e f ue l

- b a s e d H A P (PM, HCl, and Hg) r e s u lt e d i n

a re du ct i o n in c on t r ol c o st f o r m a n y un its.

 F o r t h e p r o p o s e d r u l e

, si n ce m an y o f t h e l i m i t s w e r e so l o w a s to b e

una c h i e v ab l e

, w e e st i m a t e d t ha t c o n t r o ls w ou ld b e r e q u i r e d o n b o il e r s w he r e

no e m issi on s i n f o r m a t i o n w a s a v a il ab l e

. F o r t h e f i na l r u le c o sts, i f n o b o il e r

s pe ci f ic e m issi on s i n f o r m a t i o n w a s a v a il ab le w e u s e d EPA ’s b a s e li n e

e m issi o n f a ct o r s by bo il e r t y p e a n d c on t r o l t y p e to d e t e r m i n e i f c o n t r o ls w ou ld

b e r e q u i r ed.

 C o sts f o r c om p li an ce w ith t h e CO li m its w e r e ad j u s t e d ba s e d o n i n f o r m a t i on

r e c e i v e d f ro m c o m p a n i e s t h a t h a d do n e p r e li m i na r y en g i nee r i n g a n d c o st

e sti m a t e s. W e u s e d a ba se c o st o f $ 3 m illi o n an d s c a l e d u si n g t h e 0 .6 f a c t o r

by bo il e r si z e f o r t h e f i na l r u l e

, v e r s u s a f i x e d c o s t o f $ 2 m illi o n f o r t h e

p r opo s e d r u l e

. PM

Upgrade Cost HCI

Upgrade Cost Hg/Dioxin

Upgrade Cost CO

Upgrade Cost Total

Capital Cost

$1.1 Billion $918 Million $232 Million $578 Million $2.85 Billion

PM

Upgrade Cost HCI

Upgrade Cost Hg/Dioxin

Upgrade Cost CO

Upgrade Cost Total

Capital Cost

$1.3 Billion $1 Billion $270 Million $660 Million $3.2 Billion15  Costs for mercury and dioxin are captured in the same column because it is

assumed that carbon injection will be needed to meet both, based on the use

of carbon injection to meet dioxin standards for higher emitting source

categories such as municipal waste incinerators. However, the costs to

achieve the dioxin limits for industrial boil ers are uncertain and are likely

underestimated because most of the dioxin limits are 100

- 1000 times lower

than any previous MACT and it is unclear what emission reduction strategies

could be implemented to meet the standards. The dioxin limits are essenti ally

unachievable for most boilers.

CI SW I Ru l e :

C o sts f o r t h e C I S W I R u le w e r e de v e l op e d in a si m il a r m a n ne r a s c o sts f o r t h e B o il er

M A CT r u l e

. E P A ’s C I S W I ICR da t aba s e w a s u s e d to de t e r m i n e w h ich u n its w ou ld

be s ub j e ct to t h e C I S W I r u le a n d w ha t c o n t r o ls w ou ld b e n ee d ed . Units were also

identified that were in EPA’s Boiler MACT database, but burn NHSM such as

wastewater treatment residuals, recycling process residuals, TDF, resinated wood,

creosote treated wood/rail ties. C o s ts w e r e a ssi g ne d f or P M / m e t a ls, NO x

, a cid g a s,

an d m e r c u r y

/ d i o x i n c o n t r o ls. T h e e s ti m a t e d c ap it a l c o st o f c on t r o ls f o r boilers at

large pu lp a n d p ape r m ills, a ss u m i n g the current NHSM rule, which classifies many

existing biomass fuels as solid wastes, is app r o x i m a t e ly $ 9 5 0 m illi o n. Smaller mills

that would otherwise be regulated under the Boiler GACT rule but are burning

secondary materials could also face costs under CISWI, but those costs were not

modeled in this study. If changes are affected to the NHSM rule that allow more

mate rials to be classified as fuels, the cost for CISWI controls for large pulp and

paper mill boilers could be reduced to $470 million.

Scenario Solid Waste

Determination Capital Cost for Boilers at

Large Pulp and Paper

Mills

One Many materials wastes $950 M

Two Few materials wastes $470 M

O t h e r Pe nding Air R e

gul a t ions W h e re Co st

s Could Be A ss ig n e d t o M ill s 6

 Cl u st e r M A CT I/III R e

- do a nd R e s i dual Risk

o $7 8 0 m illi o n

– > 9 5 % o f c o sts d u e to M A C T o r g an ic H A P (M e t h a no l)

c on t r o ls o n p a p e r m a c h i ne s; $3 6 0 m illi o n in O & M is e s p e ci a lly h i g h du e

to ene rg y i n t en si v e na t u r e o f c on t r o ls w h ich a l s o p r o d u ce o v e r 2 m illi o n

m e t r ic t on s o f CO 2

6 F i s her w as un a b l e to a l l o c ate about $2 b i l l i o n of the s e c o s ts to s pe c i f i c m ill s

, s o the t ot a l c a p i t a l c o s t

u s ed w as $6.3 b i l l i o n.16 o N e w Cl u st e r M A CT c o u ld s e t li m its o n a dd iti o na l p i e c e s o f e q u i p m e n t

( like pa p e r m a c h i ne s) f o r o r g an ic H AP s; E P A h a s d isc r e ti o n no t to

un d e r t a ke d e n o v o r e v i e w o f M A C T s

o R e si dua l r isk r e v i e w li k e ly to s ho w f e w r isks r e m a i n

o EP A sc h e d u l e d to c o m p l e te i n June 2 0 1 2 w ith c o n t r o ls b y mid

- 2015

 Cl u st e r M A CT II R e

- d

o an d R e si d u a l Risk

o $3.3 billion: >95% of cost due to MACT; $300 million in O&M plus 1.5

million metric tons of new CO2 emissions

o New MACT II could lead to addition of mercury, and HCl controls and

more stringent PM controls on recovery furnaces, lime kilns, and smelt

tanks. Again, EPA has discretion whether to revisit MACTs;

o Residua l risks from these sources also small

o EPA is likely to complete in 2013 with controls by 2016

 Hydrogen Sulfide HAP Listing

o $2.7 billion in capital, plus $180 million in operating costs

o Assumes H2S listed as HAP and MACT establishes limits for pulping

operations and wastewater treatment ponds

o EPA has discretion to deny petition or conclude not an issue for pulp

mills based on careful risk assessment

o Possible final rule in 2015 (maybe sooner), with 2018 implementation

 NOx Controls due to Tighter NAAQS

o Assumed NOx controls (either low

- NOx burners, SNCR, or SCR)

needed on boilers at facilities in or near projected non

- attainment

areas.

o $600 million in capital, plus $140 million in operating costs.

o Final 1

- hour NOx standard was published in 2010, ozone sta ndard

expected to be lowered in 2011 (reductions will be driven by NOx in

many areas), implementation in 2013.

o Facilities have had problems meeting new 1

- hour NOx standard when

modeling for projects

O t h e r Pe nding Air R e

gul a t ions W h e re Co st

s Could NOT Be A s s ign e d t o M ill s

 Boiler Area Source/GACT

o Rule sets HAP emission requirements for smaller biomass and liquid

boilers at so called “area sources” such as box plants; rule does not

apply to gas

- fired boilers.

o Impact of rule is minimal since EPA adopted work practices (tune

- ups)

rather than numeric limits for CO for existing biomass and liquid

boilers.

o Final rule March 2011, compliance within 3 years17  CAIR 3/Cross

- State Rule for Industrial Boilers and Recovery Furnaces

o $870 million in capital; tot al O&M would be $220 million

o Assumes next phase of rule requires medium and large boilers burning

majority coal or oil to significantly reduce SO2 and NOx

o Possible promulgation in 2012 with compliance over the next five

years

 Start

- up, Shutdown & Malfunct ions (SSM) Provisions Removed from MACT

o $100 million, plus $3 million in O&M

o If EPA compelled to eliminate SSM exemptions and venting

allowances then installation of redundant controls or suffer periods of

shutdown with no production would drive costs even higher. EPA has

discretion to develop reasonable work practices to replace current

SSM exemptions

o EPA linking schedule with pulp and paper MACT rules, so complete by

2012

 Ozone NAAQS revisit

o $400 million in capital and $30 million in O&M

o Tighter standard will drive more VOC and NOx controls than other

rules require for smaller contributors in or near more numerous non

attainment areas

o EPA plans to reset NAAQS in 2011; impacts would occur 4 to 5 years

after finalization

 PM fine NAAQS Implementation

o $284 m illion in capital and $40 million in O&M

o Assume tighter annual standard will drive further SO2 and NOx

controls. As in all the above NAAQS, EPA has the discretion to

determine “ample margin of safety” necessary to protect public health.

o Final in 2012 with controls needed for attainment 5 or so years out

 Revised NAAQS for SO2

o $40 million in capital and $7.5 million in operating costs

o Final in June 2010 with controls on select sources in five years (2015)

o Significant uncertainty in ability to meet increments modeling for

projects

 Kraft Pulp NSPS Revisions

o $83 million in capital through 2020 and $56 million six years after

effective date given more mills trigger retrofit requirements

o EPA can defer action on NSPS or set equivalent to MACT to avoid

new costs

o EP A linking schedule with pulp and paper MACT rules so complete by

April 2012