### MEMORANDUM

DATE: October 28, 2010

SUBJECT: Affordability of Add-on Controls for Shipbuilding and Ship Repair Source Category

FROM: Kaye Whitfield, EPA/OAQPS/SPPD/NRCG

TO: Docket No.: EPA-HQ-OAR-2010-0786

Section 112(f)(2) of the Clean Ai r Act (CAA) directs EPA to assess the risk remaining (residual risk) after the appli cation of maximum achievable contro l technology (MACT) standards under section 112(d). EPA is to promulgate more stri ngent standards for a category or subcategory of sources subject to MACT standa rds under section 112(d) if promul gation of such standards is necessary to protect public health with an ample margin of safety or to prevent (taking into consideration various factors) adverse environmental effects.

In an effort to streamline the process of maki ng residual risk decisions, EPA plans to address residual risk and perform a t echnology review simultaneously fo r the shipbuilding and ship repair (surface coating) source category. Th e EPA evaluated developments in practices, processes, and control technologies potentially applicable to this source category. This included a search of the RBLC Clearinghouse, the Calif ornia BACT Clearinghouse, the internet, and correspondence with state agencies and industry. The EPA identified a ship construction facility that installed coating booths e quipped with an add-on concentrat or and a regenerative thermal oxidizer (RTO). The purpose of this memo is to document the affordability of a coating booth system equipped with a concentrator/R TO for ship coating operations.

The use of spray booths at a facility is generally on ly applicable to large fa cilities that coat ship parts indoors (usually during new ship construction as smaller co mponents are put together into larger modules and spray painted) and not durin g shipside coating operations. Spray booths can vary significantly in size, numb er, and exhaust rates. Some spray booths are partially enclosed, so emissions may not be fully captured by the enclos ure. In general, faci lities that use compliant coatings do not have add-on c ontrols on spray booths.

Nationwide, based on recently awar ded contracts for new ship construction, it is estimated that fewer than 20 facilities have significant new ship construction business and are large enough to build or retrofit large spray boot hs. The estimated annualized co st of installing booths equipped

### with concentrator/RTO is $731,000 with an esti mated cost-effectiveness of $305,000 per ton of HAP (if installed at the approximately 20 f acilities large enough to use the technology). 1



### Six large shipyards with availabl e revenue data were chosen for the affordability analysis. The cost of the concentrator/RTO option, as a per centage of revenue, is a rough indicator of affordability. The reported revenues of the 6 faci lities were based on revenue data from the 2003 information request sent to shi pbuilding facilities and online databa ses. Using the cost of the concentrator booth/RTO option, the co st-to-sales ratio for the 6 fac ilities averaged 7 percent. The results of these analyses are shown in Table 1.

Based on the facility-level cost-to-sales ratio, it wa s determined that the add-on controls option is not affordable for at least some shipyard facili ties, and additional information would be needed for a more complete economic/cost impact analys is. Additionally, the large add-on controls would require a substantial amount of fuel, which produces NO X 

### emissions, a byproduct of

combustion. The extra fuel use and associated NO X 

### emissions would be negative consequences of the use of such add-on controls. Moreover, we believe the costs of these controls would be disproportionate to the emission re duction that would be achieved.

1 See detailed cost analyses in Add-on Controls for Surf ace Coating Operations at Sh ipbuilding and Ship Repair Facilities memo dated September 2, 2010. Based on 20 facilities capable of installing spray booths. Estimated annualized cost $731,000 is based on cost of installing 3 booths at a facility and includes O&M costs.

### Table 1. Shipyard RTO Control Cost-to-Sales Assessment

Facility City State Annual Sales

per Facility Cost of RTO

per Facility Cost

‐ to

‐ Sales

Ratio

JEFFBOAT LLC 1 Jeffersonville IN $192,888,000 $731,000 <1%

GENERAL DYNAMICS (NASSCO) 2 San Diego CA $450,130,435 $731,000 <1%

BATH IRON WORKS 2 Bath ME $1,000,000,000 $731,000 <1%

ATLANTIC MARINE

FLORIDA LLC 3 Jacksonville FL $5,000,000 $731,000 15%

ATLANTIC MARINE

ALABAMA LLC 3 Mobile AL $2,500,000 $731,000 29%

NEWPORT NEWS

SHIPYARD (Northrop Grumman) 1 Newport

News VA $6,200,000,000 $1,462,000 4 <1%

AVERAGE 7%



### 1. Data source: http://phx.corporate-ir.net/phoe nix.zhtml?c=192936&p=irol-sec

2. 2003 ICR – Shipyard Database Summary. Updated to 2010 dollars: http://data.bls.gov/cgibin/dsrv

3. Data source: Manta.com

4. Cost of booth/RTO doubled due to larg e size of Newport News Shipyard.