### MEMORANDUM

TO: Record

FROM: Mr. Brian D’Amico, USEPA/EAD

DATE: February 8, 2012

SUBJECT: Final Rule Barrier to Entry Anal ysis for New Source Performance Standards for Airport Deicing

Introduction

Under section 306(b) of the Clean Water Act, EPA sets New Source Performance Standards (NSPS). NSPS reflect effluent reductions that are achievable based on the “best available demonstrated control technology.” New facilities ha ve the opportunity to install the best and most efficient processes and wastewater treatment technolo gies. As a result, NSPS should represent the controls attainable through the a pplication of the best available demonstrated control technology.

In setting NSPS, EPA does an economic analysis to ensure that these standards do not create a “barrier to entry.” A barrier to entry prevents or discourages the entry of new firms into a market, in this case, the constr uction of new airports. Barriers to entry might allow existing airports to constrain competition. It should be note d that some barriers to entry naturally exist in air transportation services; in de nsely populated regions such as the New York metropolitan area, for example, it would be cost prohibitive to purc hase sufficient land to build a major new airport that could compete with New York’s existing airpor ts. Thus, in this case, the goal of EPA is to
ensure that it does not create new or additional barriers to en try through NSPS. EPA examines potential barriers to entry by determining if the NSPS requirements significantly increase the costs of constructing a new facility. This memo randum summarizes EPA’s assessment that the NSPS requirements of the final rule for airport deic ing do not create a “barri er to entry” for new sources subject to these requirements.

The final ELGs for the airport deicing category esta blish NSPS. All new in scope airports must comply with requirements based on substitution of less toxic pavement deicers that do not
contain urea. The rule also esta blishes NSPS for wastewater discha rges associated with aircraft deicing for a subset of new airports. 1 New source airports within the scope of this rule are required to collect spent aircraft deicing fluid (ADF) and, if they direct discharge collected ADF wastewaters, to meet numerical discharge limits. The technology basis for the collection requirement is centralized deicing pads (CDP s) and the technology basis for the Chemical Oxygen Demand (COD) standards is an anaerobi c fluidized bed (AFB) treatment system.

1 EPA is making NSPS collection requirements for ADF applicable based on whether the new airport is located within specific colder climatic zone s (called a “heating degree day [HDD] cat egory”) as documented by the National Oceanic and Atmospheric Administration (N OAA). Airports in scope of the final rule for NSPS are located in areas with a HDD category of 3,000 HDD or hi gher. These climate zones are associated with the use of larger volumes of

ADF.Memorandum 8 February 2012 Page 2

CDP and Treatment Costs Relative to New Airport Construction Costs

Our information is that Denver International (DIA ), the only new airport to open in the last 25 years that meets the applicability of the ELG, in stalled and uses deicing pads for all of their flights 2 . Denver’s deicing handling system also include s a glycol recycling pl ant for treatment of collected ADF wastewaters. The plant storage ta nks feed five mechanical vapor recompression units (MVRs). The MVRs concentrate the stor age tank influent, which ranges from 1 to 12 percent propylene glycol (PG), to a final concentration of 50 to 55 percent. The effluent from the MVRs goes to a storage tank until 150,000 gallons is stockpiled. The stockpiled effluent is sent to a distillation system, which increases the gl ycol concentration to 98 to 99 percent PG. The distillation system runs 24 hours a day for a three-week cycle and processes about 225,000 gallons of PG before the system is halted for cleaning and maintenance. The distillate from both the MVRs and the distillation column are discharg ed to the airport’s WADS storage ponds and is then indirectly discharged to a POTW. The dist illate is monitored for biological oxygen demand prior to discharging to the st orage ponds. The distil lation column bottoms are classified as specialized non-hazardous waste an d are sent to a landfill (operated by BFI Waste Systems). The 98 to 99 percent PG from the dist illation column is pumped to a pol isher where it is concentrated to greater than 99.3 percent PG . The WADS pond has three cells, where two cells receive and
hold stormwater and the third cel l is mixed and provides an e qualized flow for metering and discharge to the POTW. Denver’s current POTW discharge perm it requires it to comply with monthly COD discharge load limits. (See DCN AD00779)

The estimated costs for the design and construc tion of DIA are publicly available and are $4.82 billion (GAO, 1995). EPA also received CDP a nd recycling plant cost information for DIA during its site visit to Denver. (See DCN AD0077 9) Deicing infrastructu re construction costs accounted for $126 million (in 1995$) at the time the airport was completed, approximately 2.6 percent of the total cost of constructing the ai rport. (USEPA, 2011) The deicing infrastructure costs included four pads (with 22 slots), and all necessary piping and other related infrastructure. The airport also spent $14 million (in 1995$) cons tructing the recycling plant described above, representing 0.3 percent of the total cost of constructing the airport. (ERG, 2007; USEPA, 2011)

In 2005, DIA added the “Whiskey Alpha” deic ing pad covering 18 acres and providing 6 additional aircraft deicing slots at a cost of $43 million (in 2005$). These costs include 4 type I ADF load stations, one 10,000 gallon type IV ADF tank and load station, a control building, piping, and an 800,000 gallon storag e tank for collected ADF.

Using the ENR Construction Cost Index to value a ll construction costs in th e same year’s dollars (2006) 3 , DIA has spent:

2 DIA is operated by the City and County of Denver De partment of Aviation and is a municipal airport facility serving the Denver, Colorado metropolitan area. The airport opened on February 28, 1995 and includes 4 northsouth and 2 east-west runways, for a total of 6 runways. The airport has 89 gates and associated taxiways, aircraft parking aprons; three airside concourses; and passenger and cargo terminals. The ai rport was designed with a centralized deicing system comprised of four CDPs that are used for passenger aircraft, and the airport has since added a fifth pad. The airport also has general aviation and cargo ramps and a CDP which is occasionally used by cargo aircraft. Each of the passenger ai rcraft CDPs feed high concentration AD F stormwater (greater than 1 percent glycol) to on-site storage tanks located at the ai rport’s glycol recycling plant. (See DCN AD00779)

3 ENR Construction Cost Index (CCI) for 1995 = 5471, for 2005 = 7446 , and for 2006 = 7751; CCI_2006/CCI_1995 = 7751/5471 = 1.41674 ; CCI_2006/CCI_2005 = 7751/7446 = 1.04096Memorandum 8 February 2012 Page 3

 $180.6 million on the original 4 CDPs a nd associated infrastructure;

 $20.1 million on the ADF trea tment facility; and

 $44.8 million on the Whiskey Alpha pad and associated infrastructure.

Therefore, the total amount spent for deicing controls at Denver was $245.5 million. CDPs and associated costs represent 92 percent of these co sts while the recycle plant represents 8 percent
of these costs.

In addition, when original ai rport construction capital cost s are inflated to 2006 dollars:

 DIA initial capital cost totaled $6.91 billion.

Thus, about 3.6 percent of the cost of constructing DIA is attribut able to deicing infrastructure, including 5 CDPs and collect ed ADF recycle facilities. 4 DIA chose to construct CDPs as an integral component of the airport’s initial layout . Furthermore, DIA chose to build additional
CDPs to increase ADF wastewater collection ca pacity about 10 years after the airport was completed. Thus, as exhibited by its decision-ma king, DIA’s management considers CDPs to be economically viable. EPA therefore does not cons ider this percentage of airport construction cost to be a barrier to entry.

AFB Treatment Costs Compared to DIA’s Recycle Plant Costs

The NSPS effluent limits on COD would apply to ne w in-scope airports th at directly discharge
collected and treated ADF wastewat er to waters of the U.S. As explained above, the technology
basis for the NSPS COD standard is AFB. Since DIA is the only new airpor t to open within the past 25 years that would be subject to the fina l rule and since Denver di d not install an AFB,
EPA does not have cost informati on on installing AFB at a new ai rport. Since DIA is not a direct discharger and employs glycol recycling technology ra ther than on-site AFB, EPA evaluated the impact of ALB treatment costs on the barrier to entry analysis. EPA looked to costs of installing AFB at existing airports. EPA collected AFB capital treatment system costs during the proposed rule for the system retrofitte d at Albany International Airport (ALB), the model facility for the COD standards. ALB reported AFB construction costs of $3.2 million (1998$). (Albany Airport, 2005; Albany airport, 2007) Using the ENR Construction Cost Index to value the AFB construction costs to 2006$, ALB spent $4.2 million on the AFB treatment facility. 5

To compare DIA’s new construction recycle plant costs to ALB’s AFB retrofit treatment facility costs, EPA developed a normalized scaling f actor based on the number of jet departures 6 at each airport. This scaling factor is then used to estimate what treatment facility costs might have been at DIA had it also built an AFB treatment system . EPA selected jet departures as the normalizing

4 This percentage should be an overes timate because EPA did not add the cost of additional capital investment to the original total airport capital costs.

5 ENR Construction Cost Index (CCI) for 1998 = 5920 and for 2006 = 7751; CCI_2006/CCI_1998 = 7751/5920 =
1.30929

6 Based on Bureau of Transportation Statistics (BTS)Memorandum 8 February 2012 Page 4

factor since both ALB and DIA are located in cold weather climates and would be expected to deice jet aircraft on a regular basis during the wi nter months. EPA calculated normalized costs using: 2006 jet departures, a three-year aver age of jet departures (2005 through 2007), and a five-year average of jet depa rtures (2004 through 2008). The cal culation of the normalized scaling factor and DIA’s proj ected treatment system costs are presented in Table 1.

Table 1. Calculation of Normalized Treatment System Costs and Projected DIA Treatment System Cost (2006 $)

Calculation Component Basis for Estimate [a]

2006 3-Year Average 5-Year Average

DIA Treatment System Costs $20,100,000 Jet Departures 243,697 241,943 240,767 Cost per Jet Departure $82.34 $82.93 $83.34

ALB Treatment System Costs $4,200,000 Jet Departures 22,447 22,884 22,361 Cost per Jet Departure $186.65 $183.09 $187.37

Ratio of ALB to DIA Cost per Jet Departure 2.3 2.2 2.2 Projected DIA Treatment Cost $45,500,000 $44,300,000 $45,100,000 [a] The three year average consists of the years 2005 through 2007, while the five year average includes the 2004 through 2008 period.

Thus, Albany’s AFB treatment system cost 2.2 to 2.3 times more than Denver’s treatment system when costs are normalized using jet departures. EP A then re-evaluated the percentage of airport construction costs for DIA assuming its treatment system costs were 2.2 to 2.3 times larger than its actual treatment system costs, about $44.3 to 45.6 million (in 2006$), and used these revised

cost values to recalculate collec tion and treatment costs as a percent of initial airport costs. Adding the scaled treatment costs to the cost of construc ting the CDPs and related infrastructure, DIA’s adjusted collection and treatment system would represent approximately 3.9 percent of the total DIA airport constructi on costs and would not present a barrier to entry. Further, the AFB treatment system costs for ALB represent a re trofitted system into an existing airport. EPA would not expect a new treatment system cost to exceed a retrofitted treatment system cost when applied to systems of similar size.

CDP and Treatment Costs Extrapolated to Smaller New Airports

The construction of a major new airport, however, is a relatively rare event. It seems much more probable that any construction of a new airport in the foreseeable future will be a smaller airport. To determine likely airport construction scenar ios, EPA examined FAA’s National Plan of Integrated Airport Systems (NPIAS) repor ts published between 2002 and 2010 and found:Memorandum 8 February 2012 Page 5

 In 2002, FAA expected 125 airports to open with in the next five years, none of which were commercial service airports 7 (therefore these airports would all be out of scope of the final rule).

 In May 2010, a new primary commercial service airport 8 opened in Panama City, FL.

 In January 2011, a new primary commercial se rvice airport opened in St. George, UT.

The NPIAS also reported at least four othe r communities have examined the possibility of developing new commercial serv ice airports since 2008, including Peotone, IL, Bowling Green, KY, Hazleton, PA, and Las Vegas, NV. Some of these communities have been undertaking needs assessment and feasibility studies sin ce before 2002, but as of 2010 no solid plans have emerged. No other potential commercial service airports were under cons ideration during this period. Therefore, based on data presented in NPIA S that reviewed more than a decade’s worth of airport planning and construc tion activity, EPA concludes that a new airport is much more likely to be a smaller commercial serv ice airport than a major airport.

Although a primary commercial service airport, EPA determined that the new Panama City airport is not in-scope of NSPS due to its geographic location. The St. George airport averaged more than 3,000 annual heating degree days from 1961 through 1990, and thus is potentially subject to NSPS. However, because these two ai rports provide the only source of recent data available on the cost of constructing a small primary commercial serv ice airport, EPA will consider them to be representative of airpor ts that will be subject to NSPS and use their
construction cost data as th e basis for this analysis.

The NPIAS indicates that the Panama City ai rport had a planned service level of 225,000 annual enplanements and cost $318 million (Airpor t Technology, 2011; approximately $297 million in 2006 dollars). The St. George airport had a plan ned service level of 55,000 annual enplanements and cost about $159 million (Airport Improveme nt Magazine, 2011; approximately $148 million in 2006 dollars).

The NPIAS only provides data on pl anned enplanements, not expect ed operations. Therefore, EPA estimated the number of departures that might be expected at the Pa nama City airport to support the planned 225,000 annual enplanements. EPA used BTS data to estimate average annual enplanements per departure at existi ng commercial service ai rports with annual enplanements between 200,000 and 300,000 to repr esent Panama City airport, and annual enplanements between 30,000 and 100,000 for St. Ge orge. Average passengers per departure were then multiplied by the expected annual enpl anements at each airport to estimate annual commercial airliner departures. EPA estimates th at the new Panama City airport might average 7,600 to 7,900 annual departures, while St. George might average 7,500 to 6,600 annual departures (see Table 2). 9

7 Commercial service airports are public ly owned airports that have at leas t 2,500 passenger bo ardings each calendar year and receive scheduled passenger service.

8 Primary commercial service airports have more than 10,000 passenger boardings each year.

9 EPA excluded airports from Alaska’s Rural Airport System from the calculation b ecause operating patterns at these airports differ significantly from operations at airports in the 48 contiguous states.Memorandum 8 February 2012 Page 6

Table 2. Estimated Average Annual Departures at New St. George, UT and Panama City, FL Airports

Calculation Component Basis for Estimate [a]

2006 3-Year Average 5-Year Average
Panama City, FL Airport
Average Passengers per Departure at Existing Airports 28.44 29.37 29.45

Expected average enplanements [b] 225,000

Estimated departures 7,912 7,661 7,641

St George, UT Airport
Average Passengers per Departure at Existing Airports 8.51 9.60 10.39

Expected average enplanements [b] 55,000

Estimated departures 6,462 5,728 5,295
[a] The three year average consists of the years 2005 through 2007, while the five year average includes the 2004 through 2008 period. [b] NPIAS.

To estimate potential costs associated with the ADF collection and treatment requirements at new airports, EPA estimated that the average cost of constructing CDPs and treatment at DIA is in the $949 to $954 per departure ra nge (2006 dollars; see Table 3).

Table 3. Estimated Cost of Centralized Deicing Pads and Treatment System, per Departure, Denver International Airport (2006 $)

Calculation Component Basis for Estimate [a]

2006 3-Year Average 5-Year Average Original deicing infrastructure ($ mil.) $180.6 $180.6 $180.6 Projected treatment system($ mil.) $45.5 $44.3 $45.1 Whiskey Alpha pad ($ m il.) $44.8 $44.8 $44.8 Total ($ mil.) $270.8 $269.6 $270.5

Annual Departures 285,399 283,340 283,454 CDP and Treatment Cost per Departure $948.97 $951.67 $954.17
[a] The three year average consists of the years 2005 through 2007, while the five year average includes the 2004 through 2008 period.

Using estimated departures to scale the costs of the CDP and treatment system to these smaller airports, EPA estimates that should an airpor t the size of Panama C ity build a CDP and ADF treatment system, then the capital cost will be about $7.3 to $7.5 million, or about 2.5 percent of

the initial cost of the ai rport. An airport the si ze of St. George might incur capital costs of $5.1 to $6.1 million for a CDP and ADF treatment system, or about 3.4 to 4.1 percent of the initial construction cost of the airport. These calculations are presented in Table 4.Memorandum 8 February 2012 Page 7

Table 4. Estimated Cost of Centralized Deicin g Pads and Treatment System as Percent of Total Airport Construction Costs at New St. George, UT and Panama City, FL Airports (2006 $)

Component Basis for Estimate [a]

2006 3-Year Average 5-Year Average
Panama City, FL Airport

Estimated departures 7,912 7,661 7,641
CDP & treatment cost per departure (DIA) $948.97 $951.67 $954.17
Estimated CDP & treatment cost ($ mil.) $7.51 $7.29 $7.29 Airport construction cost ($ mil.) $296.6

CPD & treatment cost / Airport cost 2.5% 2.5% 2.5%

St George, UT Airport

Estimated departures 6,462 5,728 5,295
CDP & treatment cost per departure (DIA) $949 $952 $954

Estimated CDP & treatment cost ($ mil.) $6.13 $5.45 $5.05
Airport construction cost ($ mil.) $148.3

CPD & treatment cost / Airport cost 4.1% 3.7% 3.4%
[a] The three year average consists of the years 2005 through 2007, while the five year average includes the 2004 through 2008 period.

DIA’s management found CDPs a nd ADF wastewater treatment to be economically viable. The projected cost of constructing CDPs and ADF wast ewater treatment at the Panama City and St. George airports composes a similar or smalle r percentage of initial capital costs than was incurred by DIA. EPA therefore concludes th at requiring smaller, new primary commercial service airports to build CDPs and ADF wastewater treatment sy stems would not create a barrier to entry for new airport construction.

Product Substitution Costs

New airports subject to NSPS will also be requir ed to use pavement deicers that do not contain urea. Alternatively, the airport can collect and treat airfield pave ment stormwaters to meet NSPS ammonia as nitrogen limits. EPA identified ammoni a as the primary pollutant of concern from airfield deicing since ammonia discharges result from using pavement deicers containing urea. EPA identified product substitution (i.e., disconti nuing the use of pavement deicers containing urea) as one means of eliminati ng pollutant discharges from thes e deicers. Currently only about 10 percent of chemical pavement deicers ap plied nationwide contai n urea. The NSPS do not require an airport to use a specific alternate pavement deicer, however, for the purposes of estimating costs to the industry, EPA assumed th at airports would use potassium acetate, the most widely used pavement deicer in the industry.

EPA has determined that the need to do produc t substitution at a new airport to meet NSPS requirements will not create a barrier to entry. Fi rst, only a small minority of airports, 37 of 198 in-scope airports (18.7 percent) used a pavement deicer cont aining urea based on the airport questionnaire. Thus, it cannot be as sumed that a new airport would ha ve used urea in the absenceMemorandum 8 February 2012 Page 8

of the effluent guideline. If the management of a new airport intended to follow industry trends and use a pavement deicer that doe s not contain urea, then this e ffluent guideline adds nothing to the cost of constructing a new airport and cannot create a barrier to entry.

Second, if EPA assumes the airport would have us ed a deicer containing urea in the absence of this effluent guideline, the incremental capital costs associated with product substitution are likely to be small. Pavement deicing requires capita l costs to store, handle and spread the deicing product. During airport construction, management would be required to purchase equipment for the storage, handling, and spreading of the subs titute product instead of the product containing urea. Therefore the incremental capit al cost attributable to the e ffluent guideline is the difference between what the airport would have spent on th is equipment for the product containing urea and what it does spend on the equipment for the urea-fr ee product. When compared to the costs of a new airport, such costs are negligible.

To test the above assumption, using informati on for existing airports of similar size, EPA estimated costs for the two smaller airports disc ussed above, Panama City and St. George, to use a non-urea pavement deicer. EP A’s record contains informati on on 6 existing airports with 140,000 to 300,000 annual enplanements that will incu r capital costs as a result of the product substitution requirement. On average, these ai rports are projected to incur $224,000 in initial capital costs (2006 dollars), with a net presen t value (NPV) of $328,000 (7 percent real rate) when accounting for equipment replacement over th e 20-year analytic period. If these capital costs are entirely incremental, th at is if they represent additiona l capital costs resulting from the effluent guideline, then the capita l cost of the Panama City ai rport would increase by about 0.11 percent , while the cost of the St. George airport described above would increase by 0.23
percent. 10 However, the capital costs evaluated here ar e an overestimate of the true incremental capital costs because they make no account for the storage, handling, and spreading equipment associated with the product containing urea that the airport does not purch ase. After subtracting those capital costs from the estimated $328,000 in average NPV of capital costs, the Agency believes the net capital costs will be substantially smaller, perhaps even zero, and the percent increase in the capital cost of constructing a ne w airport will also be substantially smaller.

Summary

EPA has conducted an analysis of the costs of CDPs and ADF wastewater treatment in relation to airport design and construction costs showi ng that the NSPS technolog ies represent a small percentage of total airport construction costs and should not present a barrier to entry for new airports. The projected costs estimated for two small, recently built, primary commercial service airports compose a similar (or smaller) proportion of initial construction costs than those
incurred at DIA.

EPA also found that if capital costs projected for existing ai rports for pavement deicer substitution are applied to the new smaller airpor ts evaluated in this memorandum, it would have a negligible increase on total airport construction costs. Furthermore, the true incremental

10 Combined with the CDP and ADF wast ewater treatment costs, Panama City airport costs would increase by 2.3 percent and St. George airport costs would increase by 3.5 percent.Memorandum 8 February 2012 Page 9

capital costs incurred by a new ai rport resulting from product subs titution should be significantly
smaller and less burdensome than thos e projected for existing airports.

Therefore, EPA finds there is no barrier to entry for new airports to inst all the technology basis for the NSPS aircraft deicing requirements, airfield deicing requirements, or both.

References

Airport Improvement Magazine. 2011. New Repl acement Airport Opens in St. George, UT. http://www.airportimprovement.c om/content/story.php?article=00263 . Accessed January 6,

2012.

Airport Technology. 2011. Panama City-Bay County In ternational Airport, United States of
America. http://www.airport-technology.com /projects/panama_city_bay/ . Accessed January 6,

2012.

Albany Airport. 2007. Albany Cost Data Submittal. (June 27). DCN AD00866.

Albany Airport. 2005. Presentation: Award Winning Water Quality Management at Albany International Airport Regulatory Challenge and Biological Solutions. (February 10). DCN
AD00256.

ERG. 2007. Personnel Communication (email) be tween Keith Pass (DIA) and Mary Willett (ERG). (July 12). DCN AD00868.

GAO. 1995. Denver International Airport: Inform ation on Selected Financial Issues. General Accounting Office. (Letter Report, 09/18/95, GAO/AIMD-95-230). DCN AD00802. www.colorado.edu/libraries/govpub/dia.htm

USEPA. 2011. Personnel Communi cation (telephone contact) be tween Keith Pass (DIA) and Brian D’Amico (USEPA). (September 29).

USEPA. 2008a. Airline Detailed Questionnaire Database. U.S. Environmental Protection Agency/Office of Water. Wa shington, D.C. DCN AD00938.

USEPA. 2008b. Airport Questionnaire Database. U.S. Environmental Protection Agency/Office of Water. Washington, D.C. DCN AD00927.

USEPA. 2007. Final Engineering Site Visit Report for Denver International Airport . U.S. Environmental Protection Agen cy/Office of Water. Washington, D.C. (November 4). DCN
AD00779.