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# OAR Box 1787 Prepped byOllie Stewart



### Document

Number: 

# 33 ) II-B-1 8 Docket Number: 

# A-90-3 7

Printed 11/4/200810:22:19AM

Sheet 33 of 147P. 2

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### <f UNITE D STATE S ENVIRONMENTA LPROTECTIO N AGENC Y Offic e o fAi rQualit yPlannin g an d Standard s Researc h Triangl e Park , Nort h Carolin a 2771 1

Decembe r 14 , 198 8

MEMORANDU

M SUBJECT : FROM : 

### TO : Revie wo f Valer o Hydrocarbon s BAC T Analysi s

Alle n C . Basala , Chie f Economi c Analysi s Section , AS B (MD-12 ) Anthon yWayne , Chie f Texas , NewMexic o Enforcemen t Sectio n(6T-ET ) Regio nv i 

# V-B-IZ?

Thi s mem o i s i nrespons e t o you r reques t o f Novembe r 8 . I n ou r judgment , th e Valer o hydrocarbon s BAC T economi c analysi s i s unacceptable . Th e employe d methodologyi s no t supporte d a s vali d fo r purpose s o f projec t budgeting an d cost-effectivenes s assessments . T o remed ythi s deficiency , Valer o shoul d red o thei r analyse s using mor e conventiona l techniques . Also , th e BAC T analysi s fail s t o includ e othe r alternat e contro l option s whic h ar e potentiall ya s effectiv e as , an d les s costl ythan , thos e contro l technique s presented . Frank Bunyard' s detaile d revie wi s attached .

cc : G . McCutche n F . Bunyar d E . Nobl e D . Solomo n

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## /° % UNITE D STATE S ENVIRONMENTA L PROTECTIO NAGENC Y Offic e o f Ai r Qualit yPlannin

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Decembe r 8 , 198 8
MEMORANDU M SUBJECT : Revie wo f Valer o Hydrocarbon s BACT ) Analysi s FROM : Fran k L . Bunyar d ^^V 7 ^"^? )

Economi c Analysi s Section , ASB * (MD-12 ) TO : Alle nC . Basala , Chie f

Economi c Analysi s Section , AS B (MD-12 ) Pe r you r reques t o f Novembe r 8 , I hav e reviewe d th e subjec t documen t an d prepare d th e followin g comment s regardin g my concern s o nth e economi c issue s o f th e BAC T proposal s offere d b y Valero . I hav e als o coordinate d ou r review s wit hEri c Nobl e o f th e Noncriteri a Pollutant s Program s Branc hfo r hi s technica l insight s i npreparin g thes e comments . I naddition , I hav e discusse d thes e thought s a t som e lengt hwit hStanle ySpruiel l an d Ric k Bartle yo f EP ARegio nV I staf f b yphon e earlie r i nthi s week . M ymajo r concern s wit hth e technical , cos t an d economi c issue s ar e summarize d a s follows : (1 ) Inconsisten t annualizatio n method s t o estimat e cost
effectivenes s (2 ) Omissio no f analyse s o f alternatives , suc ha s combine d cycl e stea mgeneratio n fo r ga s turbine s an d retrofittin g dr ycontrol s o ninterna l combustio n engine s (<ICE ) (3 ) Questionabl e incorporatio no f downtim e i nth e operatin g cost s an d unreasonabl e concern s regardin g catalys t regeneratio nand/o r disposal , brin e disposa l an d wate r purificatio ncosts . Th e followin g discussio nwil l explor e eac ho f thes e point s i ndetail . First , mychie f concer ni s th e annualizatio nmetho d use d i nth e derivatio no f th e cost-effectivenes s figure s tha t ar e th e focu s o f th e argument s presente d byValero . Th e method , a s discusse d i n Sectio n3 , pag e 20 , o f th e Valer o BAC T analysis , use s th e sinkin g fund , o r futur e valu e method , t o determin e cost-effectiveness . Standar d cos t estimatin g methodologie s use d byth e Agenc yprogra moffice s ar e base d o npresen t valu e methods . Al l th e criteri a fo r EP AP. 4

.. . M ^

rulemaking , suc ha s NSPS , an d NAAQS/PS D progra

mimplementation , suc ha s RAC T determination s an d BAC T determinations , employthi s presen t valu e method . Thi s philosoph yi s i nagreemen t wit hbot h academician s an

d practitioner s familia r wit hmoder nfinancia l theoryi ncapita l budgeting an d asse t allocatio nactivities . Th e estimat e o f $14,72 4 pe r ton , whic hi s derive d fromth e futur e 10-yea r valu e o f $53,947,000 , i s equivalen t t o a $567 6 pe r to nNO xremove d fo r Selectiv e Catalyti c Reductio n(SCR ) technologypresente d i nTabl e 3 , pag e 25 . Similarly , th e $5,86 5 fo r wate r injectio n i nTabl e 2 i s equivalen t t o $154 5 pe r to nNO x removed ; and , th e $9,29 2 i nTabl e 3 fo r SCRfo r th e IC E engine s i s equivalen t t o $ $3,58 2 pe r ton . I nshort , th e choic e o f a presen t valu e versu s futur e valu e metri c i s a tim e preferenc e issu e tha t shoul d no t b e anargumen t introduce d int o th e tes t o f reasonablenes s o f BAC T determinations . T o repeat , Agenc y standardize d procedure s us e th e presen t valu e method . I concu r wit hValero 7 s concep t fo r normalizing annualize d cost s fo r project s wit hnonuniformcas houtlays , suc ha s replacing catalyst . I als o concu r conceptuall ywit hmos t o f th e remaining line-by-lin e items , wit hth e exceptio no f specifi c items , suc ha s thos e discusse d belo w(e.g. , los t production) . O nth e second point , Valer o exclude s discussio no n alternativ e technica l options , whic hwoul d include : (1 ) operating som e ga s turbine s i nth e combine d cycl e mode , (2 ) retrofitting existing IC E wit hne whead s t o mee t th e 2 gra m NO xpe r horsepower-hou r emissio nlimi t or,(3 ) purchas e o r renta l o f ne w simpl e cycl e ga s turbine s capabl e o f meeting th e NOxlimi t wit h littl e o r n o wate r o r stea minjection . Regarding th e discussio no npag e 3 2 o f th e Valer o analysis , Valer o coul d hav e include d a discussio no nth e viabilit yo f installing on e o r mor e combine d cycl e ga s turbine s rathe r tha n utilizin g al l simpl e cycl e units . Th e additio no f hea t recovery steamgenerator s an d stea mturbine s woul d increas e plan t efficienc yand , a s a sid e benefit , mak e stea mavailabl e fo r injectio nint o th e ga s turbines. " Stea mimprove s th e hea t rat e o f th e ga s turbine s an d reduce s th e maintenanc e impact s associate d wit hwate r injection . I understand tha t Sola r Turbine s wa s promoting thi s concep t a fewyear s ago . Concerning th e technica l discussio no f ICE' s o npag e 47 , Valer o di d no t addres s retrofitting th e ICE' s wit hth e ne whead s tha t woul d woul d achiev e th e desire d emissio nlimi t o f 2 gramNOx pe r hp-h r withou t furthe r control . Thi s woul d b e cheape r an d mor e reliabl e thanSCRtechnolog yo nexisting ICE' s i n achieving th e same environmenta l objective . Alternatively , newe r mode l engine s wit hne wNOxcontro l technolog ycoul d possibl yb e rented .P. 5 

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O nth e thir d issu e regarding inclusio no f specifi c operatin g cos t elements , w e shoul d no t concu r wit hthe philosoph y underlying th e assumption s fo r downtime an d associate d los t production , brin e disposal , an d wate r purificatio nproblems . W e believ e th e cas e fo r maintenanc e problem s an d including los t productio n a s anout-of-pocke t expens e i s overstated . W e believ e tha t expensing a full-time technicia nt o monito r thes e turbine s an d engine s shoul d diminis hpotentia l downtime problems . Accordingly , adding anexpens e fo r los t productio ni s a redundan t item . Furthermore , enoughexperienc e shoul d no wb e availabl e o n bot hwe t control s an d SC Rt o prevent , o r a t leas t b e prepare d for , potentia l maintenanc e problems . I f not , the nth e sourc e shoul d consul t wit hequipmen t manufacturers , users , an d state s fo r documentatio n o f maintenanc e experienc e regarding SCR . A s a minimum , EPAshoul d reques t mor e analyse s o f drycontrol s i n th e Valer o permi t application . A s fo r brin e disposal , thi s requiremen t i s no t uniqu e t o Corpu s Christi . Thi s i s a problemcommo nt o al l facilitie s producing steam , a s wel l a s ga s turbine s wit hwate r injection . Therefore , thi s i s no t a nargumen t fo r unreasonableness . Likewise , catalys t regeneratio ni s a routin e recycling operatio n carrie d ou t byth e catalys t manufacturer . Regarding th e discussio no npag e 28 , th e concern s wit hhandling th e handlin g and dispositio n(recycling ) o f vanadiu mpentoxid e a s a hazardou s wast e i s a legitimat e issue ; however , prope r car e o f thi s materia l i s a norma l cos t o f doin g busines s an d shoul d no t b e considere d a s a neconomi c argument , withou t additiona l documentation . Th e los s i nefficienc yattribute d t o wate r injectio nals o seem s t o b e excessive . Th e permi t presume s (t o mee t a 4 2 ppmNO , limit ) a fue l penalt yo f a t leas t 2.2 % fo r a 0.62: 1 water-to-fue l ratio . Thi s i s abou t 3 1/ 2 time s th e impac t reporte d i nth e background documen t fo r th e ga s turbin e NSPS . Incidently , bot h th e Sola r and Alliso nga s turbine s mayb e abl e t o mee t th e 2 5 ppm limi t wit hwate r injectio na t a water-to-fue l rati o les s tha n 1.0 . I nsummary , Valer o ha s no t presente d sufficien t informatio n t o rende r th e emissio nlimit s o f 2 5 o r 4 2 pp mfo r ga s turbine s an d 2 gram s pe r hp-hr fo r IC E inappropriate .