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Draft for EPA Review – Do not quote or cite 

## ARI Estimate of Burden to Comply with Proposed Chan ges to 40 CFR 98.324(b)(1) June 11, 2015

ARI has developed a cost estimate to comply with th e proposed changes to 98.324(b) which would remove MSHA quarterly inspection reports as an acce ptable data source to report quarterly methane liberation from mine ventilation systems. This woul d leave underground coal mines with two options: grab samples and CEMS. The proposed changes also i nclude increasing the sampling frequency of grab samples. Currently grab samples must be taken at l east once a quarter.

ARI’s estimates of the cost burden to eliminate MSH A quarterly reports and switch to grab samples or CEMS is included in the table below. The cost estim ates include labor, capital and operations and maintenance costs for Year 1 and subsequent years. These are supported by an accompanying spreadsheet with much more detail on the calculatio ns.

Three sampling frequencies are included to compare the cost of quarterly, monthly and weekly grab samples for an individual mine and on a nationwide basis. The table also shows the difference in cost between mines that already take quarterly grab samp les and those that use MSHA data or are new reporting mines. With respect to CEMs, two cost es timates were derived. The first uses the original c ost analysis for the Subpart FF proposed rule in 2009. The second is based on costs quoted for an actual project.

Methodology The basis for the cost analysis was the analysis pr epared for the original 2009 proposed rule which included labor, capital and O&M costs for grab samp les and CEMS for sampling 2 shafts per mine on a quarterly basis. Labor hours were assumed for thre e categories (manager, engineer, administrative). The assumption for the 2009 burden estimate was tha t mine staff had to accompany the inspectors underground, so the mine staff could just take thei r samples at the same time as MSHA. Incremental Cost Burden Year 1 Subsequent
Years Year 1 Subsequent
Years Quarterly Grab Samples Quarterly Grab Samples (already taking grab samples ) $0 $0 $0 $0 Quarterly Grab Samples (using MSHA) $30,646 $15,936 $1,992,000 $1,035,866 Total National Burden Estimate for Quarterly Grab S amples $1,992,000 $1,035,866 Monthly Grab Samples Monthly Grab Samples (already taking grab samples) $21,248 $21,248 $1,274,890 $1,274,890 Monthly Grab Samples (using MSHA) $51,894 $41,867 $3,373,131 $2,721,326 Total National Burden Estimate for Monthly Grab Sam ples $4,648,020 $3,996,216 Weekly Grab Samples Weekly Grab Samples (already taking grab samples) $127,489 $127,489 $7,649,338 $7,649,338 Weekly Grab Samples (using MSHA) $158,135 $143,425 $10,278,783 $9,322,648 Total National Burden Estimate for Weekly Grab Samp les $17,928,120 $16,971,986

CEMS CEMS Option 1 - Based on 2009 Proposed Rule Burden Analysis $145,554 $112,428 $18,194,203 $14,053,508 CEMS Option 2 - Based on Quoted Costs for a Project $262,587 $35,921 $32,823,372 $4,490,134 $51,017,575 $18,543,641 Per Mine Nationwide2

Draft for EPA Review – Do not quote or cite We made several modifications to the 2009 methodolo gy for this analysis:

• Grab Samples

o There are 4 labor cost categories: developing a me thodology, accompanying the inspectors, sending samples, and purchasing the dev ices. We retained the same estimated number of labor hours for developing the sampling methodology and purchasing the devices that were used in the 2009 e stimate to be reasonably conservative.

o However, the number of hours required for sampling (accompanying inspectors) and sending samples were adjusted downward. For the 20 15 proposed rule, we assume 8 hours per sampling event is all that is necessary. This is a very reasonable approach as it should require no more than 1 day in most mines to obtain samples. A few larger mines with many shafts may require more than 1 8-hour shi ft, but this will be offset by other smaller mines where samples can be taken in a half day or less time. This reduced the total labor hours significantly for sampling on a q uarterly basis compared with the 2009 estimate.

o To calculate the labor cost of weekly and monthly s ampling where a mine is already taking grab samples, the labor hours were adjusted to correspond with the additional workload and cost that would be incurred if weekly or monthly samples were required. In other words, we use quarterly labor hours as the base assumption and then calculate weekly and monthly labor hours. Thus, sampling mon thly would require 3x more effort for a mine already taking grab samples which curren tly samples 4 times per year.

o For mines that currently use MSHA data, we assumed that the level of effort to obtain and report MSHA data was $2,000 per year. Therefor e, the annual incremental costs for taking grab samples at such a mine will be the cost of taking the samples less the avoided cost ($2,000) of obtaining, interpreting an d reporting MSHA data.

o The labor categories used for this analysis are the same as for the 2009 proposed rule: Industrial Manager, Industrial Engineer/Technician, and Administrative Support.

o Labor rates used for this analysis are the approved 2014 labor rates sent out for the current ICR exercise. The labor rates increased fo r two labor categories and decreased for 1 category:

 Industrial Manager (+12%)

 Industrial Engineer/Technician (+20%)

 Administrative Support (- 4%)

o The O&M and capital costs in the 2009 analysis were based on 2006$. All CAPEX and O&M costs were inflated to 2014$ using the Consumer Price Index.

o Following a review of Subpart FF data, we determine d that an average of 3 shafts per mine is a more appropriate shaft count compared wit h the 2 shafts per mine used for burden analysis in the 2009 proposed rule. This ha s the impact of increasing the sampling operations and maintenance (O&M) costs by 50% per sampling event over the 2009 proposed rule.

o For mines that already take grab samples, it is ass umed that they have an adequate monitoring plan in place with the necessary equipme nt, thus there are no additional labor hours associated with developing a methodolog y and purchasing equipment and no additional capital costs.3

Draft for EPA Review – Do not quote or cite • CEMS

o 2 CEMS options are presented.

o Option 1 is based on the labor hours and capital co sts from the burden analysis for the proposed rule.

 There has been no adjustment to the labor hours.

 Capital costs are adjusted for inflation.

 The original burden analysis for the 2009 rule did not include O&M costs for CEMS and it is not clear why. CEMS will have neces sary maintenance, repairs and calibration. However, for this analysis, Optio n 1 continues to show now O&M consistent with the 2009 analysis

o Option 2 is based on real price quotes in 2010 for a CEMs system including a methane analyzer, volumetric flow meter, and temperature an d pressure sensors.

 Labor is assumed to be the same as for Option 1.

 Prices are inflated to 2014 $

 Capital and O&M costs are included

All costs presented are in 2014$. A discounted cas h flow analysis has not been prepared for this analysis. To do so would not require much addition al effort, but we would need an approved discount rate, acceptable term for incurring costs (e.g., 10 years), and an approved inflation rate. The cost burden estimate for the 2009 proposal assumed a 7% discount rate but the term is not stated nor is the inflation rate quoted. The discounted cash flow a nalysis would result in a total Net Present Value ( NPV) over the term. The total could then be divided by the term for an annualized cost which is likely to be less than the cost in real (2014) dollars.

Observations In addition to adjustments noted previously, we con sidered the following additional adjustments to the cost estimate:

Potential Adjustment to Analysis Comment Decision

Allow mines to sample at the surface taking grab samples from the fan instead of in the • Considered this option to reduce the cost of sampli ng – much easier and less labor intensive than going undergro und

• But no data available to confirm whether it is as e ffective as underground measurements

• As far as we know, there has been no demand for sur face sampling either Did not include in this analysis

Do not include any labor hours for accompany inspectors • Mine staff will have to accompany the MSHA inspecto r during the MSHA visit, regardless, and the mine sta ff member can take samples when the MSHA inspector takes samples so there is really no additional labo r associated with this task.

• Only potentially valid for quarterly sampling

• Overall cost reduction is minimal – 32 hours or $21 00 per mine
per year. Did not include in this analysis4

Draft for EPA Review – Do not quote or cite Potential Adjustment to Analysis Comment Decision

Net out 5 mines per year that will close. • These mines have the opportunity to reduce their burden and the nationwide burden by avoiding sampli ng for 3-5 years once the mine is abandoned.

• For monthly sampling this could reduce the nationwi de burden by 4% or around $200,000 per year.

• This may overestimate the cost reduction because it does not consider that each year a set of mines is above the reporting threshold for the first time and have to report. Did not include in this analysis

For CEMS option #2

- remove temperature and pressure sensors and airflow meters so CEMS is only used for CH4 • Results in significant cost reduction due to remova l of volumetric air flow meter. Temperature and Pressur e sensor are not very expensive.

• With this change, CEMs is still an expensive option compared to quarterly or monthly sampling but appears to be more cost effective than weekly sampling Have included in the analysis