### MEMORANDUM

TO: Steam Electric Rulemaking Record

FROM: TJ Finseth, ERG Danielle Lewis, ERG Elizabeth Sabol, ERG

DATE: April 15, 2013

SUBJECT: Methodologies for Estimating Costs and Pollutant Removals for Steam Electric ELG Regulatory Option 4a

ERG is providing technical support to the U.S. Environmental Protection Agency’s Office of Water, Engineering and Analysis Division (E AD) for development of effluent limitations guidelines and standards (ELG) for the Steam El ectric Power Generating Industry. EPA, with the support of ERG, collected da ta through survey responses, site visits, sampling episodes, and from individual power plants and equipment vendors to estimate compliance costs, pollutant loadings, and corresponding pollutant removals associated with installing and operating the various technologies and practices that make up the regulatory op tions considered by EPA. EPA used these data to develop computerized costs an d loadings models, which EPA used to calculate plant-specific compliance costs for all power plan ts that the data suggests would incur costs to comply with one or more of the proposed require ments associated with the regulatory options.

The data and the methodologies used to estimate the compliance costs and pollutant loadings for
each wastestream are described in EPA’s Incremental Costs and Pollutant Removals for Proposed Effluent Limitation Guidelines and Sta ndards for the Steam Electric Generating Point Source Category (DCN SE01957). Additionally, the report in cludes the plant-specific costs and loadings output. As described in the report, EPA used the cost and loadings models estimate plant specific costs and loadings for each wastestr eam and five of the eight regulatory options (Options 1, 2, 3, 4, and 5). EPA then used the cost s and loadings output from these five options to estimate the costs and pollutant loadings asso ciated with Options 3a, 3b, and 4a. The purpose
of this memorandum is to describe the met hodology and calculations EPA used to estimate compliance costs and pollutant loadings and co rresponding pollutant removals associated with Regulatory Option 4a.

1.0 S UMMARY OF R EGULATORY O PTION 4 A

One of the eight regulatory options considered by EPA is referre d to as Option 4a. Under Option 4a, the proposed rule would establish BAT for the following wastestreams for all generating units except oil-fired generating units and small generating units (i.e., 50 MW or smaller) that
include: 1

1 The proposed BAT limitations for nonchemical metal cleani ng wastes apply to all generating units, including oilfired generating units and small generating units (i.e., 50 MW or smaller).Memorandum April 19, 2013 Page 2

 “Zero discharge” effluent limit for all pol lutants in fly ash transport water and wastewater from flue gas mercury control systems;

 Numeric effluent limits for mercury, arseni c, selenium and TDS in discharges of wastewater from gasi fication processes;

 Numeric effluent limits for copper and ir on in discharges of nonchemical metal cleaning wastes 2 ; and

 Numeric effluent limits for mercury, arse nic, selenium, and nitrate-nitrite in discharges of FGD wastewater.

Option 4a would also establish “zero discharge” e ffluent limits for all pollutants in bottom ash transport water, with the exception of all gene rating units with a nameplate capacity of 400 MW or less (for those generating units that are less than or equal to 400 MW, the proposed rule would set BAT equal to BPT for discharges of polluta nts found in the bottom ash transport water).

As described in Section 9.2 of the Technical Development Document for the Proposed Effluent Limitations Guidelines and Standards for th e Steam Electric Power Generating Point Source Category (DCN SE01964), there are no incremental compliance costs asso ciated with the proposed ELGs for gasification wastewater, flue gas mercury control wastewater, and nonchemical metal cleaning wastes because the technology bases ar e already current industry practice or because the industry is already meeting the limits or will be exempt from meeting the limits. Additionally, because the proposed require ments under Option 4a are identical to Option 3 plus the additional requirements for bottom ash transport water, the compliance costs, pollutant removals, and NWQI associated with Option 4a are equal to Option 3 plus the associated compliance costs, pollutant removals, and NWQI for all generating units with a nameplate capacity of greater than 400 MW to convert to dry or closed loop bottom ash handling systems. Because EPA already estimated the Option 3 comp liance costs, pollutant removals, and NWQI, costs and pollutant removals are described in EPA’s Incremental Costs and Pollutant Removals for Proposed Effluent Limitation Guidelines and Standards for the Steam Electric Generating Point Source Category and the NWQI are described in the Technical Development Document for the Proposed Effluent Limitations Guidelines and Standards for the Steam Electric Power Generating Point Source Category , the remainder of this memorandum focuses on the costs pollutant removals and NWQI a ssociated with the bottom ash transport water portion of Option

4a.

2.0 C ALCULATION OF B OTTOM A SH A DJUSTMENT F ACTOR

As described in EPA’s Incremental Costs and Pollutant Removals for the Proposed Effluent Limitations Guidelines and Standards for th e Steam Electric Power Generating Point Source Category , EPA developed plant-level cost estimates and pollutant removals for all generating units discharging bottom ash trans port water to convert to a dry ha ndling or closed loop system. Because these cost estimates and pollutant remova ls were calculated on a plant level (i.e., not a

2 As described in Section 8 of the Technical Development Document for the Proposed Effluent Limitations Guidelines and Standards for the Steam Electric Power Generating Point Source Category , EPA is proposing to exempt from new copper and iron BAT limitations any existing discharges of nonchemical metal cleaning wastes that are currently authorized without iron and copper lim its. For these discharges, BAT limits would be set equal to BPT limits applicable to low volume wastes.Memorandum April 19, 2013 Page 3

generating unit level), EPA developed a methodology to distribute these cost s to each individual generating unit discharging bottom ash based on the percentage of wet bottom ash tonnage produced by each unit expected to incur complia nce costs for bottom ash transport water for Regulatory Option 4. The sum of these percentage s for all units incurring bottom ash costs under Option 4a (i.e., all generating units with a capacity greater than 400 MW) wa s used to adjust the plant-level values costs and pollutant removals to reflect the portion asso ciated with only those units regulated by Option 4a. These plant-level va lues used to adjust the costs and pollutant
removals are hereafter referred to as the “adjustment factors.”

To calculate these adjustment factors, EPA star ted with the list of ge nerating units incurring a bottom ash cost as identified by the cost i nput table for bottom ash (see DCN SE01957.A1, Table A-3); however, EPA excluded all oil-fired units a nd those with a capacity of 50 MW or less.
EPA then calculated the total we t produced bottom ash tonnage pe r year for the plant for all remaining units in the list. Next, EPA calculated the percentage of the total wet produced bottom ash tonnage per year for each unit identified as incurring a cost (using the total wet produced bottom ash tonnage calculated in the previous step as the denominator). These percentages represent the percent of plant-le vel cost or pollutant removal associated with each generating
unit.

EPA then summed the percentages for all units with a capacity greater than 400 MW on a plantlevel to calculate the total per centage of wet bottom ash tonnage that will still receive a cost under Option 4a. For example, if a plant operate s two units, one with a nameplate capacity of 250 MW that generates 10,000 tpy of bottom ash a nd the other with a nameplate capacity of 750 MW that generates 30,000 tpy of bottom ash, thei r individual percentage s would be 25 percent (10,000 tpy/40,000 tpy) for the 250 MW unit and 75 percent (30,000 tpy/40,000 tpy) for the 750 MW unit. In this example, because 250 MW is less than 400 MW, only the 750 MW unit would be required to comply with the “zero discharge” st andard and therefore, the adjustment factor for this plant is 75 percent. In a case where all units discharging bottom ash transport water at a plant have a nameplate capacity greater than 400 MW, the adjustment factor is 100 percent. Conversely, in a case where all uni ts discharging bottom ash trans port water at a plant have a nameplate capacity less than or equal to 400 MW, th e adjustment factor is 0 percent. This plantlevel adjustment factor represents the percenta ge of plant-level costs and pollutant removals associated with all units above 400 MW, or all bo ttom ash units that will be required to comply with the proposed “zero disc harge” standard for bottom ash transport water under Option 4a. After calculating the plant-level adjustment factors, EPA then conducted a further evaluation of the plants that incur bottom ash management co sts. Because the bottom ash management costs are calculated at the plant level and are independ ent of the number of ge nerating units incurring costs, EPA determined that the bottom ash manage ment costs should either be included in its entirety or removed completely. Therefore, EPA evaluated each plant incurring a bottom ash management cost and whether a ll units generating bottom ash tran sport water have a capacity
less than 400 MW. If all units generating bottom ash transport wa ter have a capacity less than 400 MW, then the bottom ash adjustment factor was set equal to zero percent. Conversely, if any unit generating bottom ash transport water has a capacity greater than 400 MW, the bottom ash adjustment factor was set equal to 100 percent.

Table A-1, included as an attachment to this memorandum, lists the pl ant-level adjustment factors used to convert plant-level bottom ash da ta (i.e., costs, pollutant removals, NWQI) for the group of generating units excluding oil-fired units and those with a capacity of 50 MW or lessMemorandum April 19, 2013 Page 4

(Bottom Ash Option 4) to the group of generating un its excluding oil-fired units and those with a capacity of 400 MW or less (Bottom Ash Option 4a).

3.0 C OMPLIANCE C OSTS

EPA used the adjustment factors along with th e plant-level compliance costs calculated for bottom ash for Option 4 to estimate the complian ce costs associated with bottom ash for Option 4a. EPA multiplied each individual component of the plant-level complianc e costs to convert to dry or closed-loop bottom ash handling system s (DCN SE01957.A1, Table A-23) by the plantspecific adjustment factor to estimate the compliance costs for plants to only convert those generating units with a capacity greater than 400 MW. EPA us ed the following equation to estimate plant-level Option 4a compliance costs,

Option 4a Plant-Level Bottom Ash Cost Component = Option 4 Plant-Level Bottom Ash Cost * Adjustment Factor

Where: Option 4 Plant-Level
Bottom Ash Cost Component = Plant-level cost component to convert to dry or closedloop bottom ash handling system (from DCN SE01957.A1 Table A-23), and Adjustment Factor = Percentage of plan t-level cost or pollutant removals
associated with all units above 400 MW.

To estimate industry-level costs associated with Option 4a, EPA added the Option 3 costs (i.e.,
costs for FGD wastewater treated with chemi cal precipitation followed by biological treatment and costs for fly ash dry handling conversion) to the costs calculated for bottom ash Option 4a. Table 1 presents the total cost s for Option 4a by wastestream.

Table 1. Estimated Industry-Level Complia nce Costs by Wastestream for Option 4a [In millions of 2010 dollars]

Wastestream Technology Option Number
of

Plants Capital
Cost Annual
O&M
Cost One
Time
Costs Recurring Costs

3-year 5-year 6-year 10-year a

FGD

Wastewater Biological Treatment (Based on Oil-Fired
Units and Units 50
MW or less Not Installing Technology Basis) 116 $2,500 $257 $0 $0 $0 $9.90 ($33.0)

Fly Ash Zero Discharge (Based on Oil-Fired
Units and Units 50
MW or less Not Installing Technology Basis) 66 $398 $177 $0 $0 $0 $0 ($20.7)Memorandum April 19, 2013 Page 5

Table 1. Estimated Industry-Level Complia nce Costs by Wastestream for Option 4a [In millions of 2010 dollars]

Wastestream Technology Option Number
of

Plants Capital
Cost Annual
O&M
Cost One
Time
Costs Recurring Costs

3-year 5-year 6-year 10-year a Bottom Ash Zero Discharge (Based on Oil-Fired
Units and Units 400
MW or less Not Installing Technology Basis) 115 $2,580 $255 $0.31 $1.12 $37.8 $0 ($35.6)

Option 4a Total 200 b $5,478 $689 $0.3 $1 $38 $10 ($90) Note: Costs are rounded to three significant figures. Note: All costs are indexed to 2010 dollars using RSMeans Historical Cost Indices. a – The values in this column are nega tive because they represent cost savings. b – The total number of plants incurring costs under Option 4a is not additive by wastestream as some plants incur costs for multiple wastestreams.

4.0 P OLLUTANT L OADINGS

EPA used the adjustment factors along with plan t-level pollutant removals calculated for bottom ash for Option 4 to estimate the pollutant remova ls and post compliance pollutant loadings for Option 4a. For each plant discharging bottom ash transport water, EPA calculated the Option 4 bottom ash pollutant removals by subtracting th e Option 4 bottom ash post-compliance loadings based on oil-fired units and units with a capacity of 50 MW or less not installing the technology basis (DCN SE01957.A1 Table A-41) from the bo ttom ash baseline loadings (DCN SE01957.A1 Table A-39). EPA then multiplied the plant-le vel bottom ash pollutant removals by the plantspecific adjustment factor to estimate the polluta nt removals associated with plants converting only those generating units with a capacity greater than 400 MW. EPA used the following equations to estimate plant-level pollutant removals for Option 4a:

Plant-Level Option 4 Bottom Ash Pollutant Remo vals = Bottom Ash Baseline Loadings – Option 4 Bottom Ash Post-Compliance Loadings

Plant-Level Option 4a Bottom Ash Pollutant Removals = Plant-Level Option 4 Bottom Ash Pollutant Removals * Adjustment Factor

Where:
Bottom Ash Baseline Loadings = Plant-level baseline loadings for bottom ash transport water (from DCN SE01957.A1 Table A-39),Option 4 Bottom Ash PostCompliance Loadings = Plant-level technology option loadings for bottom ash transport water based on oil-fired units and units 50 MW or less not installing the technology basis (from DCN SE01957.A1 Table A-41), and Adjustment Factor = Percentage of plant-level bottom ash costs and pollutant removals associated with units with a capacity greater than 400 MW.Memorandum April 19, 2013 Page 6

EPA then used the plant-level Option 4a botto m ash pollutant removals along with the plantlevel baseline loadings to calculate the Option 4a bottom ash post-compliance loadings using the following equation,

Plant-Level Option 4a Bottom Ash Post-Complia nce Loadings = Bottom Ash Baseline Loadings – Plant-Level Option 4a Bottom Ash Pollutant Removals

Where:
Bottom Ash Baseline Loadings = Plant-level baseline loadings for bottom ash transport water (from DCN SE01957.A1 Table A-39), and Plant-Level Option 4a Bottom Ash Loadings = Plant-level technology option loadings for bottom ash transport water based on oil-fired units and units 400
MW or less not installin g the technology basis (calculated value).

To estimate the industry-level lo adings and pollutant removals associated with Option 4a, EPA added the Option 3 post-compliance loadings fo r FGD wastewater trea ted with chemical precipitation followed by biological treatment and fly ash dry hand ling conversions to the Option 4 bottom ash post-compliance loadings. Option 4a post-compliance loadings also include the baseline loadings for landfill leachate, as this wastestream is not regulated under the proposed Option 4a. Table 2 presents the total loadi ngs and pollutant removals for Option 4a by

wastestream.

Table 2. Estimated Pollutant Loadings a nd Pollutant Removals by Wastestream for Regulatory Option 4a

Wastestream Technology Option Total Industry Loading Total Industry Pollutant Removals a

Pounds/Year TWPE/Year Pounds/Year TWPE/Year

FGD

Wastewater Biological Treatment (Based on Oil-Fired Units
and Units 50 MW or less Not Installing Technology Basis) 2,080,000,000 411,000 1,160,000,000 2,620,000

Fly Ash Zero Discharge (Based on Oil-Fired Units
and Units 50 MW or less Not Installing Technology Basis) 6,750,000 33,500 471,000,000 2,490,000

Bottom Ash Zero Discharge (Based on Oil-Fired Units
and Units 400 MW or less Not Installing Technology Basis) 710,000,000 1,140,000 991,000,000 1,550,000

Landfill
Leachate Baseline 89,800,000 56,500 0 0

Option 4a Total 2,870,000,000 1,640,000 2,620,000,000 6,680,000
a - Compared to baseline. Note: Excludes loadings for BOD, COD, TDS, and TSS. Note: Removals are rounded to three significant figures. The removals may not equal the sum of the removals presented in the tables in this section from the various wastestreams due to rounding.Memorandum April 19, 2013 Page 7

5.0 O PTION 4 A N ON -W ATER Q UALITY E NVIRONMENTAL I MPACTS

Option 4a non-water quality environmental impact s (NWQI) are equal to the values associated with Option 3 plus the NWQI associated with bottom ash handling convers ions for all generating units with a capacity greater th an 400 MW that discharge botto m ash transport water estimated using EPA’s methodology described in the memora ndum “Steam Electric Effluent Guidelines Non-Water Quality Impacts” (DCN SE02025). Th ese fly ash, bottom ash, and FGD chemical precipitation followed by biological treatment NW QI values are the same values used to calculate Option 4 NWQI for the following NWQI categories:

 Energy requirements (measured as electrical energy usage (MWh));

 Fuel consumption (in gallons per year);

 Air emissions associated with tr ansportation (in tons per year);

 Sludge production (in tons per year); and

 Water intake reductions (in million gallons per year).

To account for the 400 MW threshold for bottom ash proposed for Option 4a, EPA multiplied the plant-level NWQI associated with the ca tegories identified above by the bottom ash adjustment factors calculated in Section 2.0. The resulting plant-level values were summed to the industry level and added to the Option 3 NWQI outputs for categories above to calculate the Option 4a NWQI. Because only FGD biological tr eatment contributes to sludge production, the value estimated for Option 4a is equal to Op tion 3. See DCN SE02957 for th e plant-level fly ash NWQI estimates associated w ith energy, sludge production, and tr ansportation air emissions for fly ash dry handling conversions, bottom as h handling conversions, and FGD chemical precipitation followed by biological treatment. S ee DCN SE02980 for plant-level water intake reductions associated with fly ash and bottom ash dry handling conversions and FGD recycle.

Additionally, EPA estimated air emissions associat ed with increased auxi liary energy required to operate the systems needed to comply with the new ELGs. For Regulatory Option 1, 2, 3, 4, and 5, EPA estimated auxiliary energy air emissions for each option at a plant-level (i.e., not specifically by wastestream) (see DCN SE02896). B ecause these air emissions are at the option level, EPA had to estimate the portion of Option 4 air emissions associated with bottom ash only; therefore, EPA estimated the percent of electrical energy usage (in MWh), which is estimated at the waste stream level, associated only with th e conversion to dry bottom ash handling out of the entire Option 4 electrical energy usage (in MWh) . EPA selected electrical energy usage because
it is the variable used to estim ate air emissions associated with increased air emissions. EPA determined that 47.8 percent of the electri cal energy usage for Option 4 (673,780 MWh) is associated only with the conversion to dr y bottom ash handling (321,780 MWh). EPA multiplied the plant-level Option 4 air emissions by 47.8 percen t to obtain an estimate of the air emissions associated with increased auxiliary energy for dry bottom ash conversions.. After performing this calculation, EPA applied the bottom ash adjustment factors described in Section 2.0 to estimate the bottom ash auxiliary energy air emissions a ssociated with Option 4a. EPA then summed the plant-level bottom ash air emissions to calculate the air emissions for the industry and added that value to the calculated Option 3 auxiliary ener gy emissions to estimate total auxiliary air emissions for Option 4a.Memorandum April 19, 2013 Page 8

EPA also estimated air emissions associated w ith the change in indus try profile projected by

IPM 3 , which were only calculated for Options 3 and 4. To estimate the total emissions for Option 4a (transportation, auxiliary energy, and change in industry profile projected by IPM), EPA added the changes to air emissions projected by IPM for Option 3 because they are more conservative (i.e., they overestimate the emi ssions). The contribution of NOx is unchanged compared to Option 3 and 4; therefore, EPA a ssumed this would also be the contribution for Option 4a. For SOx and CO 2 , the contribution associated with Option 4 are lower (i.e., more negative); therefore, because EPA used the Option 3 values, the values presented in Table 3 are maximum values. Table 3 presents a summary of the industry-level NWQI estimated for Option

4a.

Table 3. Industry-Level Non-Water Quality Impacts Estimates for Option 4a

Energy
Electrical Energy Usag e 472,369 MWh/year
Fuel Consumption 4,617,848 gal/year

Air Emissions

NO X 1,320 tons/year

SO X < -2,580 tons/year

CO 2 < -1,002,9 metric tons/year

CH 4 7.9 tons/year

Sludge Production
Sludge 1,218,691 tons/year

Water Intake Water Reductions
Water Reduction 103,000 million gal/year

6.0 R ETIREMENTS

As part of evaluating the population of steam el ectric generating units a ffected by the proposed effluent limitation guidelines (ELGs), EPA gathered information on an ongoing basis from public sources, including company press releas es and information from technology vendors to account for the following changes to the industry:

 Plants retiring units;

 Plants converting fuel types to elim inate fossil fuel combustion residuals, especially residuals from coal or petroleum coke;

 Plants upgrading a flue gas desulfuriz ation (FGD) or leac hate wastewater treatment system; and

 Plants converting one or more units to a dry fly ash or bottom ash handling
system.

The memorandum entitled, “Changes to Industry Prof ile for Steam Electric Generating Units for the Steam Electric Effluent Guidelines Propos ed Rule” (DCN SE02033), describes the process

3 It does not include an estimate for methane.Memorandum April 19, 2013 Page 9

EPA used to identify and verify the changes in the industry and documents those retirements or fuel conversions that were expected to occur before 2014. These changes were incorporated in the proposed ELGs. A second memorandum , “Additional Announced Retirements Not Accounted for in the Proposed ELGs” (DCN SE0 2133) describes additional retirements and fuel
conversions identified after all analyses for the proposed ELGs we re completed and evaluates the effect of including all changes that will occur before 2022.

EPA evaluated how these retirements and fuel co nversions would affect the subset of plants incurring costs for bottom ash under Option 4a a nd determined that over 90% of the units planning to retire by 2022 currently wet sluice their bottom ash and are under 400 MW. Because these units have already announced plans to retire , they will not incur costs under the final ELGs. Table A-2, included as an attachment to this memorandum, lists all generating units that have announced plans to retire by 2022. This table al so includes the capacity of each unit and an
indicator for whether or not the un it currently wet sluices bottom ash.