From: Lydia Wegman/RTP/USEPA/US

To: "Frey, Nathan J." <Nathan_J._Frey@omb.eop.gov>, "Lee, Amanda I."

<Amanda_I._Lee@omb.eop.gov> Cc: Joseph

- J Dougherty/DC/USEPA/US@EPA, Darryl Weatherhead/RTP/USEPA/US@EPA, Bryan

Hubbell/RTP/USEPA/US@EPA, Lillian Bradley/RTP/USEPA/US@EPA, Robin Langdon/RTP/USEPA/US@EPA Date: 12/13/2012 11:38 AM Subject: Part I of response to your comments on the RIA

N athan and Amanda,

Attached is an explanation which clarifies the way in which we performed the analysis for the final RIA and hopefully answers your questions about this analysis. By this afternoon we expect to send to you a fuller description of how mo nitor values changed between proposal and final.

Please let us know if you have any questions.

Lydia

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2 Date: December 12, 2012

Re: EO12866/13563 Interagency Review

This memorandum follows the December 11, 2012 discussion on the PM 2.5 National Ambient Air Quality Standards (NAAQS) final Regulatory Impact Analysis (RIA). Specifically, this memorandum provides additional detail and
clarification on (i) some of the analytical methods applied in the final RIA and (ii) differences between t he PM 2.5 NAAQS proposal RIA and the final RIA. The memorandum is divided into the following sections ( 1 ) Section 1 outlines and provides details on the analyses conducted to illustrate attainment with the revised standard of 12 μg/m 3 ; and ( 2 ) Section 2 wa lks through example s of analyses conducted from the proposal and final RIAs.

Analyses Conducted to Illustrate Attainment

The flowchart below outlines the analytical steps taken to illustrate attainment with the revised standard of 12 μg/m 3

, and the following discussion, by primary flowchart section, describes each of the steps taken.

1. Flowchart Section 1

-- Establishing the Analytical Baseline

– This section of the flowchart reflects analytical steps taken to account for rules and programs currently underway, as well as to reflect attainment of the current annual and daily standards of 15/35 μg/m 3

. Detailed discussions of the elements of this section of the flowchart are in Chapters 1 and 3 of the final RIA.

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3 a. Adjusted 20 2 0 Base Case with “On the Books” Federal and State Rules and Programs

-- The adjusted 2020 base case includes reductions expected prior to 2020 from exis ting (i.e., “on

the

- books”) state and federal control programs. In addition, we made adjust ments to reflect

PM 2.5 reduct ions expected from the implementation of existing burn ban programs in certain counties and to remove the effects of atypical events such as wildfires and fireworks displays

. (See Map below for illustration.)



### Annual NAAQS Exceedances * 

### in “Adjusted 2020 Ba se Case” Scenario

* 24

- hr PM 2.5 NAAQS Exceedances as Follows :

• San Joaquin Valley (6 counties); South Coast (2 counties); Imperial, CA; Allegheny, PA; Salt Lake, UT; Lake, OR; and Sacramento, CA

b. Analytical Baseline

-- The analytical baseline includes reductions from additional controls that the EPA estimates are needed to attain the current standard (15/35μg/m 3 )

. In determining the level of reductions needed to meet both the current annual and daily
standard s , it is necessary to determine which of the standards will be “controlling”, e.g. which standard will require the most reductions to reach attainment. This is important for establishing the analytical baseline because when the daily standard is controlling (as is the case in much of California), t he emissions reductions required to meet the daily standard will result in reductions in the annual design value to below the annual standard of 15 μg/m 3 . As a result, the annual PM 2.5 increment needed to attain alternative standards will not be
relative to an annual design value of 15 μg/m 3 , rather, the increment will vary by county based on the annual design value in that county that resulted from applying emissions controls to meet the 35 μg/m 3 daily standard. For example , in the map below, for counties labeled as exceeding the 12 μg/m 3 annual standard, the baseline design values can be any value between 12 and 15 μg/m 3 . Similarly, exceedances of the 11 μg/m 3 and 13 μg/m 3

standard s can be anywhere between 11 or 13 and 15 μg/m 3

.

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4 The analytical baseli ne reflects attainment of 15/35 μg/m 3 in 2020. We also modified the analytical baseline in the South Coast Air Quality Management District and the San Joaquin Valley Air Pollution Control District to reflect reductions in NOx emissions that th e se areas

ar e expected to achieve between 2020 and 2025. These reductions in NOx emissions are not attributable to attainment of the current or revised PM standards, but reflect the impacts of other programs. (See Map below for illustration.)



### Annual NAAQS Exceedances in “Analytical Baseline” Scenario

• 13 Level: 2 Counties (Tulare, CA and Riverside, CA)

• 12 Level: 7 Counties (All in CA)

• 11 Level: 23 Counties

2. Flowchart Section 2

-- Control Strategies

– This section of the flowchart reflects analytical steps
taken to analyze controls and emissions reductions needed beyond the current standard ( 15/35 μg/m 3 ) and other existing major rules to achieve the revised standard ( 1 2 μg/m 3 ). We apply control options that might be available to states for application by 2020. Detailed discussion of the elements of this section of
the flowchart is in Chapter 4 of the final RIA.

a. Select Controls by Emissions Sector and Pollutant

-- Non

- EGU point and nonpoint control measures were appli ed for the revised and alternative standards ’ control strategies. These controls were identified using the U.S. EPA’s Control Strategy Tool. Additional control measures were not applied to EGUs because of the extensive nature of controls resulting
from the inclusion of MATS.

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5 b. Adjust 2020 Control Scenario to Meet Alternate Standards

- - After identifying the known controls in the control scenario that were needed to meet the analytical baseline, additional
known controls needed to meet the revised and alterna tive standards were identified. The EPA used air quality modeling results to determine whether the control scenario was sufficient to meet the revised and alternative standards for each geographic area. Where the control scenario modeling resulted in desig n value reductions below the level needed for the revised or alternative standards for specific geographic areas, county

- specific ratios of air quality response to emission reductions were used to determine the subset of controls that
were needed to attain the standard. Where it was determined that the control scenario was not sufficient in attaining the standard, these same response factors were used to calculate the amount of additional emission reductions beyond known controls needed to meet the
standard . For the revised and alternative control strategy analysis, known controls for two
sectors were used: non

- EGU point and area sources. Onroad mobile source controls were not used in the revised and alternative standards analysis because they were applied

p reviously in the analytical baseline analysis where they were deemed to be most cost
effective.

3. Flowchart Section 3

-- Analysis of Costs

– This section of the flowchart reflects analytical steps taken to
estimate the costs of both known and unknown controls. Detailed discussion of the elements of this
section of the flowchart is in Chapter 7 of the final RIA.

a. Estimate Known Controls Engineering Costs, Estimate Extrapolated Costs

-- We provide engineering cost estimates for the control strategies identified in Chapter 4 that include control technologies on non

- EGU point sources and area sources. Engineering costs generally refer to the capital equipment expense, the site preparation costs for the applicatio n, and annual operating and maintenance costs. For this analysis, we included known controls for all of the geographic areas likely to exceed the revised and/or alternative standards. We also provide estimates for the engineering costs of the additional em issions reductions that are needed beyond the application of known controls to reach full attainment of the alternative standards analyzed; the cost estimates derived from this approach are referred to as “extrapolated” costs. By definition, no
cost data c urrently exists for the additional emissions reductions needed beyond known controls. We employ two methodologies for estimating the costs of unidentified future controls, and both approaches assume that innovative strategies and new control options make possible the emissions reductions needed for attainment by 2020.

4. Flowchart Section 4

-- Full Attainment

– This section of the flowchart reflects analytical steps taken to
estimate the costs of attainment, the benefits of attainment and the net benefits for the revised standard
of 1 2 μg/m 3

. Detailed discussion s of the elements of this section of the flowchart are in Chapter 5, Chapter 7

, and Chapter 8 of the final RIA.

a. Calculate Full Attainment Costs

– In Chapter 7 we present a summary of the total national costs of attaining the revised annual standard of 12 μg/m 3 and the alternative annual standards of 13 μg/m 3 and 11 μg/m 3 in 2020. This summary includes the known and extrapolated costs. The total cost estimates are $53 million (2010$) and $350 million (201 0$) for the revised annual standard of 12 μg/m 3 ; $11 million and $100 million for the alternative annual standard of 13 μg/m 3 ; and $320 million and $1,700 million for the alternative annual standard of 11 μg/m 3

.

b. Calculate Full Attainment Benefits

– C hapter 5 presents the estimated human health benefits for the revised NAAQS. W e quantify the health

- related benefits of the fine particulate matter (PM 2.5 )

- related air quality improvements resulting from the illustrative emission s control
scenarios that r educe emissions of directl y emitted particles and precursor pollutants including

SO 2 and NO
x to reach alternative PM 2.5 NAAQS levels in 2020. These benefits are relative to an

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6 analytical baseline reflecting nationwide attainment of the current primary PM 2. 5 standards (i.e., annual standard of 15 μg/m 3 and 24

- hour standard of 35 μg/m 3 ) that includes promulgated national regulations and illustrative emission s controls to simulate attainment with 15/35 as well

as a NO x emission adjustment to reflect expected reductions in mobile NO
x emissions between
2020 and 2025.

The estimated benefits for the revised and alternative standards are in addition to the substantial benefits estimated for several recent implementation rul es. Rules such as the Mercury and Air Toxics Standard (MATS) and other emission reductions will have substantially
reduced ambient PM 2.5 concentrations by 2020 in the East, such that no additional controls
would be needed in the East for the revised annual standard of 12 μg/m 3 . Thus, all of the estimated benefits occur in California because this is the only state that needs additional air quality improvement beyond the analytical baseline after accounting for air quality improvements from recent rules.

c. Net Benefits

-- Chapter 8 compares estimates of the benefits with costs and summarizes the net benefits of revised annual standard of 12 μg/m 3 and the alternative annual standards of 13 μg/m 3 and 11 μg/m 3 relative to the analytical baseline that includes rec ently promulgated national regulations and additional emissions reductions needed to attain the existing 15/35 μg/m 3 standards, as well as adjustments to NOx emissions in the San Joaquin and South Coast

areas.

Example s of Analyses Conducted to Illustrate Attainment

-- Proposal RIA and Final RIA



### Additional text and information forthcoming