From: Beth Havlik

To: Aagenes, Jason D.

Cc: Paul Taylor

Subject: FW: Cost worksheet for United Taconite Bart determination

Date: Friday, April 03, 2009 8:07:34 PM

Jason,

See my responses below. Paul will follow up with the responses to the questions you asked of him. Hope you have a

good weekend. We’ll talk Monday.

Beth T. Havlik, P.E.

Vice President, Barr Engineering

4700 West 77th Street

Minneapolis, MN 55435-4803

800/632-2277 toll free

952/832-2640 phone

952/832-2601 fax

734/255-0269 mobile 

bhavlik@barr.com

-----Original Message-----

From: Aagenes, Jason D.

Sent: Tuesday, March 31, 2009 4:22 PM

To: 'Beth Havlik'; Paul Taylor

Subject: RE: Cost worksheet for United Taconite Bart determination

Importance: High

Paul and Beth

By midday on Friday, could you compare Anne's work with what Barr has

completed? Specifically:

Beth:

1) Generally, how do her costs compare with the Barr analysis – is anything missing?

The main differences appear to be that they have eliminated all of the downtime costs and half of the water treatment costs

and have increased the baseline emissions (after existing controls but before BART controls). The differences I found are

as follows:

A. The APCD tab is unclear, but there are many differences, including incorrect placement of the retrofit factor, use of a

15% contingency, no cost for buildings, and no cost for water treatment. In the APCD cost tab she applies the retrofit factor

of 0.6 to the purchased equipment cost, whereas we followed EPA protocol and applied it to the total capital investment

(TCI, which also includes installation costs). The net impact of all of these changes is an annualized cost of $5.4 million,

where we came up with $16.1 million. But the $5.4 million does not appear to be used further in the analysis.

B. In calculating cost per ton, she bases the future anticipated actual emissions with existing controls on 3900 tons,

whereas we used 2750 tons, which represented the highest annual emissions plus 10% (at the time the highest year was

2004). The rule recommends using the baseline emissions, but it is not required. This number has a big impact on the

cost per ton because it increases the denominator proportionally and diminishes the cost per ton. I can’t find a number in

the spreadsheets that matches the number in the Word document (page 7) for the Total Annualized cost of the polishing

scrubber of $9,166,715 but the closest match is calculation for the secondary scrubber when the downtime cost is

eliminated and the water treatment cost is reduced by half, resulting in annualized cost of $9,228,823.

C. Regarding the secondary scrubber tab, her calculations follow ours very closely, they even apply the retrofit factor to the

TCI as we have and use the same downtime and wastewater treatment costs as our estimates. She includes additional

scenarios that remove half the cost of the water treatment and all of the downtime cost to evaluate the sensitivity of the cost

per ton to these factors. It appears that the 4th scenario (no downtime cost, half of the water treatment cost) and the higher

baseline emissions were used to calculate the annualized cost of $9.2 million and the cost per ton of $3917.

D. Neither Paul nor I have been involved with the fuel blending calculations, so we don’t feel we’re in a position to

comment on the fuel blends tab. We don’t see any documentation of the cost for reduced fuel sulfur.
2) Please check with Doug Poush and review some of our original assumptions on plant down time, water treatment costs,

etc.

Downtime:

The assumption for plant downtime for the Line 1 project was 7-10 days, compared to 8 weeks that we assumed in the

October 2007 BART update. If we changed our downtime to 7 days, our calculated cost per ton removed would go from the

current $9788 to a revised $8443. The impact is less than one might expect because that number is subject to the capital

recovery factor of 0.0944 that is applied to the capital costs.

Water Treatment and associated assumptions:

The water treatment cost calculated for Line 1 was $23/1000 gallons to treat 269 gpm. We had determined for Line 2 the

cost would be $33 per 1000 gallons to treat 552 gallons per minute. The difference is appropriate, because the total capital

cost of equipment would be greater to accommodate the higher throughput capacity required for Line 2. Not everything is

scaled, such as the cost for pilot testing is identical, and the unit costs for project management, labor, etc are also identical,

which also makes sense.

Paul:

1) What was our anticipated BART Baseline?

2) How does that compare with Anne's?

3) How many more tons of NOx/SO2 would be needed to meet MPCA's

baseline?

4) Dave Cartella spoke with Chris Nelson and the Green Production

Project is still anticipated to satisfy BART (MPCA will not try to use

this memo to take away our BART baseline). However, we need to address

the three bullets on page 8 of Anne's memo, specifically, visibility

protection. Please come up with ideas on this.

Thanks,

Jason

-----Original Message-----

From: Beth Havlik [mailto:BHavlik@barr.com]

Sent: Tuesday, March 31, 2009 2:40 PM

To: Aagenes, Jason D.

Subject: RE: Cost worksheet for United Taconite Bart determination

Jason,

Do you want to discuss this and the other document before I review it in

detail, so my review focuses on your specific interests? Or do you want

me to review it in detail before we discuss? I want to spend the right

amount of effort and be sure I focus on your areas of specific interest.

Beth Havlik

Ext. 2640

734/255-0269 mobile

-----Original Message-----

From: Aagenes, Jason D. [mailto:Jason.Aagenes@CliffsNR.com]

Sent: Monday, March 30, 2009 11:29 AM

To: Cartella, David T.; Beth Havlik; Jim Mennell

Cc: George Pruchnofski

Subject: FW: Cost worksheet for United Taconite Bart determination

*** Attorney - Client Privileged Communication ***

Attached is Anne's spreadsheet for the UTAC BART Determination.

Similar to SBP, there is minimal documentation or explanation of

assumptions. By taking a quick 5 minute read-through, it's going to

come down the following items again:

1) SO2 Baseline - She uses the baseline at 3.99 lb/mmbtu.

Historically, It's averaged 3.6 to 3.8.

2) Wastewater Treatment Costs - With the recent work that Doug Poush and

others have done for the Wet ESP vs Dry ESP analysis, the WWTP costs are

higher than even we originally anticipated and Anne's numbers are even

lower than our original estimate.

3) Lost Production - May not be as much as we originally anticipated.

Again Doug Poush's work will be helpful.
4) Last but not least, Fuel Switching.

Jason

-----Original Message-----

From: Jackson, Anne [mailto:Anne.Jackson@state.mn.us]

Sent: Monday, March 30, 2009 11:08 AM

To: Aagenes, Jason D.

Cc: Neuschler, Catherine; Cordes, Richard

Subject: Cost worksheet for United Taconite Bart determination

Enclosed please find the MPCA workbook that reflects our estimate of

cost effectiveness of control alternatives for United Taconite. This

workbook contains the calculations relied on in the MPCA's BART

determination that was sent to you via email on Friday, March 27.

<<UTAC SO2 cost effectiveness MPCA March 09.xls>>

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