P.1 

OAR Box 1865 

Prepped by Charmelle Mathews 

Document Number: 

111) IV-K-(B)-6 

Docket Number: 

A-83-27 

Printed 12/3/2008 3:22:17 PM Sheet 111 of 198 
P.2 

* 

ENERGY AND ENVIRONMENTAL ANALYSIS, INC. IV-K-(B)-6 

1655 NORTH FORT MYER DRIVE ARLINGTON, VIRGINIA 22209 703/528-1900 

September 30, 1986 

Mr. Robert Pahel-Short 

Economic Analysis Branch (MD-12) 

U.S. Environmental Protection Agency 

Research Triangle Park, N.C. 27711 

Subject: EPA Contract No. 68-02-4202, Work Assignment No. 15 

IFCAM Runs 

Dear Robert: 

EEA has run IFCAM this month with four regulatory scenarios and two 

new sets of industrial fuel price forecasts. The four regulatory 

scenarios are summarized in Tables 1 and 2; it was also your assumptions 

that: 

• The current NSPS for oil-fired boilers is not applicable 

because there are not large (>250 MMBtu/hr) fired erected new 

oil-fired boilers in IFCAM 

• N0X SIP's, the current N0X NSPS and the proposed N0X NSPS 

have all been ignored. 

The two new industrial fuel price forecasts are: 

• The new 1986 EEA high oil prices, non-carriage market 

natural gas prices and revised 1986 ICF industrial coal 

price projections 

• The new 1986 EEA low oil prices, non-carriage rigid market 

natural gas prices and revised 1986 ICF industrial coal 

price projections. 

There is no demand for coal in new large industrial boilers in any 

of these eight September 1986 IFCAM runs. A few of the changes in 

assumptions have made residual fuel oil a relatively less expensive 

option than coal. For example: 

• Coal became more expensive when we added mechanical collector 

costs to the sodium scrubber costs 

• Residual fuel oil costs for the large boiler sizes dropped 

when we replaced the current NSPS with standards for smallersized units (which have higher emissions limits) 

r\>iAMAnPiv/iFi\rr / prnianMira / PMnflMRPBTMn 
P.3 

Letter to R. Pahel-Short 

September 30, 1986 

Page Two 

• Ve dropped the requirement for staged combustion air on new 

pulverized coal and high sulfur residual fuel oil boilers. 

Since SCA costs more for high sulfur residual fuel oil N0X 

emissions control than it does for pulverized coal, residual 

fuel oil has a relative cost advantage. 

Table 3 presents a comparison of 1984 IFCAM results with these new 

September 1986 IFCAM results. These new IFCAM results are only roughly 

comparable to the 1984 IFCAM results because there have been several 

changes in assumptions (reference my letter to you dated September 11, 

1986). 

The 1986 Low Oil cost increases and SO2 emissions reductions are 

larger than the 1986 High Oil estimates because the 1986 Low Oil baseline 

IFCAM run includes a larger number of residual fuel oil boilers than 

does the 1986 High Oil baseline IFCAM run. This difference in the 

baseline fuel mix occurs because the natural gas prices are lower 

relative to the residual fuel oil prices for the High Oil non-carriage 

market gas prices versus the Low Oil non-carriage rigid market gas 

prices. 

The incremental C-E ratio for the Baseline v. 0.8 for the 1986 Low 

Oil scenarios ($212/short ton) is lower than the comparable estimate for 

the 1986 High Oil cases ($456/short ton) because there is much more fuel 

switching to natural gas in the 1986 Low Oil scenarios and because the 

residual fuel oil sulfur premiums are smaller for the Low Oil prices 

than they are for the High Oil prices. For 0.8 v. 0.3, the 1986 Low Oil 

incremental C-E ratio ($612/short ton) is smaller than the 1986 High Oil 

incremental C-E ratio ($702/short ton) because the Low Oil residual fuel 

oil sulfur premiums are smaller than the High Oil residual fuel oil 

sulfur premiums. The incremental C-E ratios, 0.8 v. 0.3, for the 1986 

Low and High Oil cases ($612 and $702/short ton) are smaller than the 

1984 Reference estimate ($l,164/short ton) because the residual fuel oil 

sulfur premiums are smaller in the 1986 Low and High Oil cases in 

comparison with the 1984 Reference estimates (primarily because the 1984 

Reference crude oil prices are much higher than the 1986 Low and High 

Oil crude oil prices). 
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Letter to R. Pahel-Short 

September 30, 1986 

Page Four 

emissions reduction from a 3.0 percent sulfur residual 

fuel oil. In the 1986 Low Oil cases, the SO2 emission 

reduction (13,000 short tons) is larger than the 1986 

High Oil SO2 emission reduction (6,000 short tons) because 

there is more fuel switching to natural gas in the 1986 

Low Oil cases in comparison with the 1986 High Oil cases. 

Please call me if you have any questions. 

Sincerelyj 

Tim Hogan 

TH:dss 

Enclosures 

cc: Dr. A. Wehe 
P.6 

TABLE 1. REGULATORY BASELINE ASSUMPTIONS 

(Ib/MMBtu) 

Fuel type 

Natural gas 

Distillate fuel oil 

Residual fuel oil 

Coal 

Boiler Size 

(MMBtu/hr) 

100-250 

100-250 

100-250 

100-250 

>250 

so2 

m m. 

SIP 

SIP 

1.2C 

PM 

— — 

--

SIP 

0.05a»

b 

0.05a 

a Proposed NSPS (49 FR 25103). 

b 0.2 lb/MMBtu if the annual capacity utilization rate is less than 30 

percent. Coal is never selected in IFCAM as a new industrial boiler fuel 

type if the annual capacity utilization rate is less than 20 percent. 

c 30-day rolling average. Current NSPS. 
P.7 

TABLE 2. ALTERNATIVE S02 EMISSIONS NSPS 

STANDARDS FOR NEW INDUSTRIAL BOILERS 

Residual Fuel Oil Coal 

Alternative Required Required 

Control Boiler Size Ceiling Percentage Ceiling Percentage 

Level (MMBtu/hr) (lb/MMBtu) Reduction (lb/MMBtu) Reduction 

line 

1 

2 

3 

100-250 

>250 

>100 

>100 

>100 

: : 

0.8 

0.3 

0.8 9 0b 

1.2 

1.2 

1.2 

1.2 

--

--

90a 

90a 

a Scrubbing is required for all coal types in IFCAM. 

b Scrubbing is requred for all residual fuel oil types in IFCAM. 

Scrubbing is not required for distillate fuel oil. 
P.8 

TABLE 3. COMPARISON OF IFCAM PROJECTIONS* 

Fuel Price Scenario 

1984 1986 1986 

Reference15 High Oilc Low Oild 

Baseline v. 0.8 

SO? emission red. (IO3 short tons) 

Total ann. cost increase ($1985 IO6) 

Incremental C-E ($1985/short ton) 

0.8 v. 0.3 

SO? emission red. (IO3 short tons) 

Total ann. cost increase ($1985 IO6) 

Incremental C-E ($1985/short ton) 

0.3 v. all scrub 

SO? emission red. (IO3 short tons) 

Total ann. cost increase ($1985 IO6) 

Incremental C-E ($1985/short ton) 

Baseline v. all scrub 

SO? emission red. (IO3 short tons) 

Total ann. cost increase ($1985 IO6) 

Average C-E ($1985/short ton) 

173 

63 

364 

67 

78 

1,164 

22 

6 

273 

263 

148 

563 

120 

55 

456 

50 

35 

702 

6 

19 

3,220 

176 

109 

618 

282 

60 

212 

60 

37 

612 

13 

76 

5,953 

355 

172 

485 

a New industrial fossil fuel-fired boilers lager than 100 MMBtu/hr and 

installed between 1985 and 1990. 

D "High oil demand" scenario. Projected Impacts of Alternative Sulfur Dioxide 

New Source Performance Standards for Industrial Fossil Fuel-Fired Boilers. 

EEA. March 1985. Baseline and alternative control levels II, IV and VI. 

c Non-carriage market natural gas prices (EEA) and revised 1986 ICF industrial 

coal prices. Run in September 1986. 

d Non-carriage rigid market natural gas prices (EEA) and revised 1986 ICF 

industrial coal prices. Run in September 1986.