1 MEMORANDUM

Date: June 24, 2015

Subject: Costs and Emission Reductions for the Final Wool Fiberglass Manufacturing

NESHAP - Residual Risk and Technology Review (RTR) Amendm ents

From: Susan Fairchild

OAQPS/SPPD/NRG (D243-02) U.S. Environmental Protection Agency Research Triangle Park, NC 27711

To: Docket EPA-HQ-OAR-2010-1042

This memorandum presents the estimated costs for the woo l fiberglass manufacturing industry to comply with the final RTR amendments.

I. BACKGROUND

Based on the information provided by the wool fiberglass m anufacturing industry and their primary trade association, North American Insulation Manufacturers Association (NAIMA), there are currently 30 facilities in the U.S. producing wool fiber glass. A letter from NAIMA dated June 8, 2011, stated “non-formaldehyde binder products represent the v ast majority of the industry” and “all major sources have already converted or have announc ed plans to convert to non-phenol formaldehyde binders.” After conducting a review of the curr ent permit status of all sources and recent information provided by industry, 10 facilities are maj or sources (subject to the existing MACT rule, subpart NNN) and 20 facilities are area source facilities. The 10 major source facilities will have to comply with the RTR amendmen ts to the NESHAP (subpart NNN) requirements. These sources operate 8 gas-fired glass-me lting furnaces, 13 flame attenuation (FA) manufacturing lines, and 5 RS lines. Based on our current e missions data, two of the major source facilities, operating a total of two gas-fired glass-melt ing furnaces will be required by the final rule to reduce chromium compound emissions.

Industry comments on the proposed major source rule amen dments (76 FR 72770) stated that some of the major source facilities have already swit ched some or most of their lines to non-HAP binders and would no longer be subject to subpart NNN. With t he phase-out of phenolformaldehyde binders, those sources will become area sour ces. While industry sources also predicted before proposal of the RTR amendments that n o major sources would exist by the end of 2012, we now believe this to be inaccurate. The following cos t impacts are based on the estimated 10 facilities that were identified as major sources in t he most recent industry information provided

in December 2012.2

II. GLASS-MELTING FURNACES

We estimate that there are currently 8 gas-fired furnace s located at five facilities designated as major sources. We also estimate that there are curren tly two gas-fired furnaces located at two facilities that emit chromium compounds above the fina l chromium emission limit (2.5E-04 lb/ton of glass pulled). We have estimated the cost impact fo r those facilities based on the assumption that those furnaces will have a shortened operational l ife cycle and will be rebuilt (or replaced) earlier than they might have been otherwise before de gradation of the refractory causes elevated chromium emissions. Based on comments received in respo nse to the November 13, 2014 supplemental proposal, we changed from using the net presen t value (NPV) approach to using a replacement cost method for estimating the annualized co st of rebuilding a furnace. The replacement cost method is described in section 2.5.5.6 of the EPA Air Pollution Control Cost Manual (EPA/452/B-02-001), January 2002.

The furnace age and chromium emissions data show that f urnaces may operate into their 10 th year and still emit chromium at levels below the final chr omium emission limit. The data also show that all furnaces older than 10 years emitted chromium a t levels exceeding the proposed final emission limit. We considered basing the replacement co st method on an expected 12-year furnace life and an early rebuild at 10 years. While supported by the available data and resulting in a lower cost estimate, we decided to use a more conservative appr oach (e.g., more likely to overstate control costs) and based our costs on an expected 10-year furnace life 1 and an early rebuild at 7 years, an analysis supported by industry comments and which i s described in the following analyses.

For this cost analyses, the replacement cost method use s the following assumptions: 1) furnace rebuild cost = $10.7 million; 2) normal furnace life cycle = 10 years; 3) Cr compliant furnace life cycle = 7 years; and 4) industry interest rate = 7%. 2

The replacement cost method determines the incremental capital recovery cost as the difference between the annualized capital recovery cost (CRC) of r ebuilding the furnace in 7 years versus 10 years. The CRC is calculated by multiplying the total cap ital cost ($10.7 million) by the capital recovery factor (CRF):

CRC = Total Capital Cost x CRF

Where CRF is defined according to the formula:

1 Letter dated August 6, 2014 from A. Crane, NAIMA to S. Fa irchild, EPA states “Please note that a typical life span of an oxy-fuel furnace is 6 to 10 years.”

2 7% interest rate is in accordance with OMB guidance under Circular A-4.3 

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= 1 1 1

n n

i i i CRF

Using the 10- and 7-year furnace lives and a 7% int erest (discount) rate, the CRF values 3 are 0.1424 (for 10 years) and 0.1856 (for 7 years). The table below shows the calculations used to determine the incremental capital recovery cost.

Description Furnace Rebuild

10 Years 7 Years Furnace rebuild cost (total capital

cost) $10,700,000 $10,700,000

Furnace life with rebuild (yr) 10 7
Interest rate 0.07 0.07 Capital recovery factor 0.1424 0.1856 Annualized capital recovery cost of furnace rebuild $1,523,680 $1,985,920

Incremental capital recovery costs (CRC 7yr – CRC 10yr ) $462,240

Total annual cost for furnace rebuild ($/yr) $462,240

It should be noted that the calculation using the r eplacement cost method does not include any improvements in productivity and energy efficiency, among other factors, resulting from rebuilding a furnace, factors that would typically come into play when a wool fiberglass company assesses the need for a furnace rebuild using this approach.

III. FLAME ATTENUATION MANUFACTURING LINES

As noted previously, several facilities have alread y switched all or most of their rotary spin (RS) manufacturing lines to non-PF binders. Based on th e most recent information provided by industry, we estimate that two facilities have 13 b onded flame attenuation (FA) manufacturing lines and all of the FA lines are in compliance wit h the emission limits in the final rule. Therefore, additional controls are not needed for existing FA lines. However, the two facilities will incur additional testing costs to demonstrate compliance with the new emission limits for FA lines.

IV. COMPLIANCE TESTING COSTS

The annual cost estimates for compliance testing is estimated below in Table 1:

3 Table A-2: Capital Recovery Factors (from EPA Air Po llution Cost Manual, EPA/452/B-02-001, January 2002).4 Table 1. Summary of Compliance Testing Costs (2013 Dollars)
Emission Source HAP EPA Test Method Test

Costs 4 (in 2013 $) Test

Frequency Annualized Test Costs (in 2013 $) Comment

Gas-Fired
Furnace Chromium

Compounds 29 $10,000 Annual $10,000 PM testing part of current requirements.

Collection/ Curing (combined) Phenol and

Methanol (already testing formaldehyde) 318

(part of M318 FTIR) $4,000

(combined phenol & methanol) Every

5 years $800 Current rule specifies Method 316 or 318 for formaldehyde.

V. EMISSION REDUCTIONS

Based on the recent test data provided by the facil ities, the 8 gas-fired furnaces emit approximately 588 pounds of chromium compounds annually. We ident ified two gas-fired furnaces with

emission rates above the final emission limit and t heir associated annual emissions of 12 and 555 pounds of chromium compounds, respectively. With th e assumption that the reduced operational life for the two furnaces will reduce chromium comp ound emissions to a level that would meet the final emission limit, approximately 524 pounds of c hromium compounds would be reduced annually at major sources, which is a 89 percent re duction compared to baseline emissions.

The annualized control costs for rebuilding the two gas-fired furnaces and compliance testing ($944,000) divided by the emission reduction (524 p ounds of chromium compounds) results in a cost effectiveness of $1,800 per pound of chromium compounds reduced (2013 dollars).

4 Personal communication with Mr. Steffan Johnson, US E PA, Measurement Policy Group, March 2014.5Table 2. Summary of Costs for Wool Fiberglass MfgFacilities to Comply with Final RTR Amendments (2013 dollars)CompanyFacilityLocationSourceTypeGas-Fired FurnacesFlame Attenuation (FA)Manufacturing LinesTotalFacilityCost($)AnnualizedCapitalCost*AnnualO&MCostNo. ofFurnacesCrTestingCostCost Effectiveness($/lb Crreduced)No. ofLinesTestingCostCost Effectiveness($/ton HAPreduced)***1 CertainTeed Kansas City, KS Major462,000 0 2 20,000 850 0 0 NA 482,0002 Guardian Albion, MI Major0 0 0 0 - 0 0 NA 03 Guardian Inwood, WV Major0 0 0 0 - 0 0 NA 04 Guardian Mineral Wells, MS Major0 0 0 0 - 0 0 NA 05 Guardian Winnsboro, SC Major0 0 0 0 - 0 0 NA 06 Johns Manville Cleburne, TX Major0 0 1 10,000 NA 2 1,600 NA 11,6007 Johns Manville Defiance, OH Major0 0 2 20,000 NA 11 8,800 NA 28,8008 Knauf Shelbyville, IN Major0 0 0 0 - 0 0 NA 09 Owens-Corning Newark, OH Major462,000 0** 2 20,000 39,700 0 0 NA 482,00010 Owens-Corning Waxahachie, TX Major0 0 1 10,000 NA 0 0 NA 10,000$924,000 $0 8 $80,000 $1,700 13 $10,400 NA $1,014,400Table 2 notes:*Capital cost = $10.7M per furnace (using replacement cost approach); annualized capital cost based on7% interest rate and a reduced equipment (furnace)life from 10 to 7 years.** One (high-emitting) furnace already scheduled for replacement.*** The EPA is not promulgating RTR standards for RS lines at this time. The EPA has issued a Clean Air Act section 114 information collection request towool fiberglassmanufacturing facilities to obtain process and emissions data for RS manufacturing lines. The EPA willanalyze ICR data and evaluate RTR limits for RS lines at a future date.