### MEMORANDUM

April 10, 2015

SUBJECT: Corrections to the Regulatory Impact Anal ysis for the Coal Combustion Residuals Final Rule

TO: EPA Docket EPA-HQ-RCRA-2009-0640

FROM: Cynthia Manson Vadim Spirt Claire Schlemme Industrial Economics, Inc.

This memorandum to the record is submitted on beha lf of EPA and contains three corrections to the Regulatory Impact Analysis (RIA) for the Coal Combustion Residua ls (CCR) Final Rule.

 First, this memorandum corrects the duplicate ex hibit lettering in Chapter 9 of the RIA. Prior to this correction, ther e are two exhibits labeled Exhibit 9-Q and two exhibits labeled Exhibit 9-R , but no exhibits labeled Exhibit 9-O or 9-P

.

 Additionally, this memorandum details a minor change to the release capacity factor for CCR surface impoundments used in the benefits estimation calculation for the CCR Final Rule. This memorandum discusses the rationale for this correction and provides updated charts and tables (including a replacement of illegible Exhibit 9-D ) corresponding to the Executive Summary and Chapter 9 of the RIA th at display updated benefits and benefitto-cost ratios (BCRs) under vari ous discount rates. Where ot her exhibits in the RIA would change to a small degree as a result of these corrections, this memorandum also describes the extent of that change.

 Finally, this memorandum provides a correcti on to Appendix X of the RIA. Prior to correction, Exhibits ES-F

, B-11 and B-24 incorrectly label the units associated with electricity prices. This memorandum provides additional context and the corrected language for these exhibits.

### (1) Corrections to Chapter 9 Exhibit Lettering

EPA inadvertently labelled the exhi bits in section 9.4.4 of the RIA Exhibit 9-Q (page 9-49) and 9-R (pg 9-50). Instead, these exhibits should be labeled Exhibit 9-O and 9-P as seen below. In contrast, the first two exhibits of section 9.5 are properly labeled Exhibit 9-Q and 9-R

.

$- $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000

2015 2025 2035 2045 2055 2065 2075 2085 2095 2105Total Incremental Costs ($millions)

Year Exhibit 9-O Total Incremental Costs by Year: All Ac tive & Inactive CCR Management Units

Original RIA Estimates (Chapters 3 and 4)
Revised Estimates (Chapter 9)

$

‐ $20 $40 $60 $80 $100 $120 $140 $160 $180 $200

2015 2025 2035 2045 2055 2065 2075 2085 2095 2105UndiscountedBenefits(Millions2013$)

Year Exhibit 9-P Undiscounted Benefits by Year

Avoided Structural Failure

Avoided Groundwater Costs

Avoided Total Costs

### (2) Corrections to the Release Capacity Factor for CCR Surface Impoundments

For the benefits analysis in the RIA for the CCR Fi nal Rule, EPA used a hist orical release dataset to calculate release rates (the frequency of releases from CCR surface impoundments) and capacity factors (the quantity of released CCR, on a proportion basi s relative to the total storage capacity of a given surface impoundment). This da taset contained 39 distin ct historical release events that were classified as “other releases” (i.e., they we re non-wall breach events) from surface impoundments; these 39 events consists of wall seepage, overtopping, miscellaneous

causes 1 

### , or unknown causes.

However, comments on this methodology indicated th at seepage events are small in volume and do not result in substantial cleanup, NRD, or transaction costs. Subsequently, EPA removed seepage events from the release rate calculati ons but did not remove them from the capacity factor calculations for “other releases.” EPA did not intend to retain seepage events in the capacity factor calcu lation. This error resulted in a low es timate of 2.65 percent for the capacity factor for “other releases” at large impoundments in the formerly illegible Exhibit 9-D . As seen in Revised Exhibit 9-D on the following page, the correct capacity factor is 2.91 percent.

The corrected average capacity fa ctor affects the benef its calculations asso ciated with avoided releases due to structural failu re in the RIA for the CCR Final Rule. A slightly larger capacity factor entails more costly releases, and thus slig htly greater benefits for avoiding these releases.

Revised Exhibits 9-N and 9-Q on the following pages are analogous to RIA Exhibits ES-B and ES-C . These exhibits show updated benefits, net benefits, and BCRs (highlighted in yellow) after the correction is made to th e underlying calculations. Note that benefits increase slightly as a result of this correction, as indicated above. Th is correction results in le ss than a five percent increase in benefits associated with the prev ention of impoundment releases, and approximately a two percent increase in total benefits.

A number of other exhibits in Chapter 9 would change to a small degree as a result of these corrections. Specifically:

 The undiscounted year-by-year struct ural failure costs portrayed in Exhibit 9-P will decrease slightly, but this ch ange does not affect the ti me trend displayed therein;

 The annualized benefits, net benefits, and bene fit-cost ratio displayed in Column C of Exhibit 9-R will change to reflect the analogous figures from Revised Exhibit 9-Q (under a seven percent discount rate); and

 The benefit displayed in Row 1 of Exhibit 9-T will increase in the Main Analysis column to reflect the analogous figure from Revised Exhibit 9-N , with a similar increase for the Sensitivity columns.

1 Miscellaneous causes may refer to sink holes, stack failure s, pump failures, hydraulic dredging pipe failures, liner perforations, internal dike breaches, seal failures, discharge structures disturbed during maintenance, and/or embankment sloughing.Revised Exhibit 9-DPre-Rule Probabilities of Failure and Associated Capacity Factors at Different Types of Impoundments.Revised Exhibit 9-N Expected Future Benefits for the CCR Final Rule ( millions of 2013$ ) Row Benefit Category 3% discount rate 7% discount rate

Annualized Present value Annualized Present value Monetized Benefits 1 Reduction in CCR impoundment releases $156 $4,910 $143 $2,040 2 Reduction in CCR contamination of groundwater $12.8 $405 $9.86 $141

Closures $1.6 0 $50. 7 $1.4 6 $20.9 Bottom liners $6.5 6 $20 7 $5.0 6 $72.2 Groundwater monitoring $4.65 $14 7 $3.34 $47. 7 3 Induced future increase in CCR beneficial uses* $117 $3,130 $79.0 $1,120 Avoided air pollution & resource consumption $32.5 $459 $21.9 $164 CCR rule “ cost offset ” (alternatively could be subtracted from row 19 of Exhibit 9-M ) $84.5 $2,670 $57.1 $956

4 Reduced incidence of cancer $0.00546 $0.173 $0.00273 $0.0390 5 Avoided IQ losses from mercury $0.279 $8.80 $0.0246 $0.351 6 Avoided IQ losses from lead $0.186 $5.87 $0.0164 $0.234 7 Reduced need for specialized education from IQ losses $0.00273 $0.0863 $0.000 $0.000 8 Non-market surface water quality benefits

$2.26 $71.4 $1.89 $27.0

Improved aquatic and wildlife habitat Enhanced wate r

- b ased recreation Aesthetic improvements of surface wate r Increased non-use ecosystem value Reduced risks to aquatic wildlife 9 Protection of threatened & endangered species in vicinity of CCR landfills and impoundments $0.909 $28.7 $0.759 $10.8
10 Improved air quality from reduced air pollution emissions from power plants $4.66 $147 $2.04 $29.1 Reduced air emissions of NOx, SO2 Reduced air emissions of CO2 11 Reduced groundwater withdrawals by power plants (reduced water sluicing of CCR from induced conversions to dry CCR handling) $0.00273 $0.0863 $0.00273 $0.0390

Column Totals = $294 $8,710 $236 $3,360 Non-Monetized Benefits 12 Financial benefit . Reduced investment risk and information asymmetry in financial markets for the electric utility industry. 13 Dread reduction benefit . Reduced fear, stress, and anxiety (i.e., hazard dread) of citizens residing near CCR impoundments. 14 Dust nuisance benefit . Reduced community nuisance from fugitive CCR dust. This is a separate benefit from the human health benefit from reduction in CCR dus t inhalation, which is estimated in Chapter 5

. 15 Non-cancer human health benefit. Reduced non-cancer health effects resulting fro m fish consumption. This is a separate b enefit from the avoided cancer risks monetized in Chapter 5

. 16 Cancer and non-cancer human health benefit . Reduced cancer and non-cancer health effects resulting from recreational water use. This is a separate benefit from the human health be nefit from reduction in fish consum ption, which is estimated in Chapter 5

. 17 Avoided sediment contamination. Reduced sediment contamination from r educed deposition of toxic pollutants. 18 Water quality benefit. Reduced water treatment costs for drinking and irrigation water. 19 Commercial fisheries benefit. Improved commercial fishing yields and harves t quality due to aquatic habitat improvements. 20 Tourism benefit. Increased participation in wate r

- b ased recreation due to wa ter quality improvements. 21 Avoided impingement and entrainment mortality. Reduced fish impingement and entr ainment mortality from CCR handling surface water intake. 22 Increased property values : Improvement of aesthetic conditions of the local landscape stemming from the induced closure of CCR impoundments and the associated de-w atering, capping, and re-vegetation requirement of the CCR final rule. Notes: * The beneficial use benefit in th is RIA consists of two components. The sub-rows below display an approximate breakdown of the r elative contribution to the total beneficial use benefit across these two components, cognizan t of the downscaling factor applied to th ese benefits in this chapter, as described in Section 9.2.4

. Figures are rounded to three significant di gits; totals may not add due to rounding.Revised Exhibit 9-Q Incremental Costs and Benefits: Alternate Discount Rates (millions of 2013$) 3% Discount Rate 7% Discount Rate Present values: Costs $23,200 $7,260 Benefits $8,710 $3,360 Net Benefits ($14,490) ($3,900) Benefit Cost Ratio (BCR) 0.38 0.46 Annualized: Costs $735 $509 Benefits $294 $236 Net Benefits ($441) ($273) Benefit Cost Ratio (BCR) 0.40 0.46 Figures rounded to three significant digits. Totals may not sum due to rounding.



### Note that this memorandum does not address an y changes resulting from this correction to exhibits in Chapters 1 through 8 of the RIA, as th e analyses and costs/benefits displayed in these chapters are superseded by the analyses and fi gures in Chapter 9, as noted throughout the RIA.

Lastly, Exhibit ES-F (p. X-10), Exhibit B-16 (p. X-36), and Exhibit B-17 (p. X-37) in Appendix X of the RIA would also have minor cha nges as a result of th is correction. Given the increase in total benefits estimated in Appendix X, the overall impact of this correction is to increase the total benefits in Appendix X by appr oximately 1.5 percent. The changes in Row 1 of Exhibit B-16 are analogous to those shown in Revised Exhibit 9-N above.

(3) Corrections to Electricity Price Labelin g in Appendix X of CCR Final Rule RIA

Exhibits B-11 and B-24 of Appendix X to the RIA for the CCR Final Rule contain projected electricity prices throughout the United States from 2020 through 2030 across National Energy Modeling System (NEMS) regions. Both of th ese exhibits are labeled as though the data displayed within are in cents per kilowatt-hour (k Wh). However, this description is mislabeled; in reality the data in these exhibits are in mills per kWh, where a “mill” refers to one onethousandth of a dollar, or, alternately, a tenth of a cent. Correspondingly, a mill is an order of magnitude smaller than a cent.

Exhibits B-11 and B-24 of Appendix X should instead read that they display electricity prices in mills per kWh, rather than cents per kWh. Alternatel y, if expressing electricity prices in cents per kWh is desired, the values in thes e exhibits can simply be reduced by a factor of ten (i.e., moving the decimal place one digit over to the left ).