## 1 MEMORANDUM

Date: September 8 , 201 4

Subject: Cost s and Emission Reductions for the Wool Fiberglass Manufacturing NESHAP

-

Area Source s

RTI Project No. 021 3199

. 00 2

. 0 0 9

From: Dave Reeves, RTI International

To: Susan Fairchild

OAQPS/SPPD/NRG (D243

- 02)

U.S. Environmental Protection Agency

Research Triangle Park, NC 27711

The purpose of this memorandum is to present the estimated costs for the wool fiberglass

manufacturing industry to comply with the proposed area source rule requirements

. Major sources

are regulated under Part 63 Subpart NNN; area sources will be regulated under Part 63, Subpart

NN.

I. BACKGROUND

Based on the information provided by the wool fiberglass man ufacturing industry and their

primary trade association , North American Insulation Manufacturers Association (NAIMA)

, there

are currently 30 facilities in the U.S. producing wool fiberglass

. A letter from NAIMA dated June

8, 2011, stated “non

- formaldehyde binder products represent the vast majority of the industry” and

“all major sources have already converted or have announced plans to convert to non

- phenol

formaldehyde binders.” B ased on a review of the current permit status of all sources and recent

inf ormation provided by industry

, 1 0 facilities are major sources (subject to the existing MACT

rule, subpart NNN) and 2 0 facilities are area source facilities . These 30 facilities operate a total of

5 4 glass

- melting furnaces

. F ive of the area source faciliti es operate eight furnaces which meet the

applicability requirements in t he proposed area source NESHAP (subpart NN)

. Based on our

current emissions data, t wo of the area source facilities , operating a total of three furnaces will be

required by the rule to reduce chromium compound emissions

.

Industry comments on the proposed major source rule amendments (76 FR 72770) stated that

s ome of the major source facilities have already switched some or most of their lines to non

- HAP

binders and would no longer be subject to subpart NNN

. With the phase

- out of phenol

formaldehyde binders, these sources will also be redesignated as area sources. While industry

sources also predicted before proposal of the RTR amendments to NNN that no major sources

would exist by t he end of 2012, we now believe this to be inaccurate . Table 2 provides further

information on wool fiberglass furnaces by furnace type and whether furnaces would currently be

subject to the area source rule under subpart NN. T he following cost impacts are based on the

## 2

estimated five facilities and eight gas

- fired glass

- melting furnaces that w ould be subject to the

proposed area source rule requirements.

II. GAS

- FIRED GLASS

- MELTING FURNACES

W e estimate that there are currently eight gas

- fired furnaces located at five facilit ies designated as

area sources. We also estimate that there are currently three gas

- fired furnaces located at two

facilities that emit chromium compounds above the proposed chromium emission limit. We have

estimated the cost impact for those facilities based on the assumption that those furnaces will have

a shortened operational life cycle and be rebuilt (or replaced) earlier than they might have been

otherwise. The associated costing of this scenario is referred to as the ne t present value (NPV)

approach which is described in the EPA Air Pollution Control Cost Manual (EPA/452/B

- 02

- 001),

January 2002.

The furnace age and chromium emissions data show that furnaces may operate into their 10 th 

## year

and still emit chromium at l evels below the proposed chromium emission limit. The data also

show that all furnaces older than 10 years emitted chromium at levels exceeding the proposed

emission limit. We considered basing the NPV on an expected 12

- year furnace life and an early

rebui ld at 10 years. While supported by the available data and resulting in a lower cost estimate

(i.e., NPV Incremental Cost = $643,000 and Capital Recovery Cost = $119,000 per furnace ) , we

decided to use a more conservative approach (e.g., more likely to over state control costs) and

based our costs on an expected 10

- year furnace life 1 

## and an early rebuild at 7 years which is

described in the following analyses

.

For this cost analyses, the NPV approach us es the following assumptions:

1) furnace rebuild cost = $10 million ($10 M ) ;

2) normal furnace life cycle = 10 years;

3) Cr compliant furnace life cycle = 7 years; and

4) industry interest rate = 7 %.

The following example is provided to illustrate the net present value approach. A company

ex pects a furnace to last at least 10 years and they consider the cost of replacing the furnace lining

(Cr refractories) in the 10 th 

## year (at a cost of $10 million). The present value (today) of the capital

cost 10 years in the future is $10M / (1+r)^10 whe re r is the interest rate. If the lining would

instead be replaced in 7 th 

## year, the present value (today) of the same capital cost is $10M / (1+r)^7

T he incremental cost today would be computed as :

NPV Incremental Cost = [ $ 10 M

( 1 + r ) 7 

## ]

− [ $ 10 M

( 1 + r ) 10 

## ]

1 

### Letter dated August 6, 2014 from A. Crane, NAIMA to S. Fairchild, EPA states “Please note that a typical life span of an

oxy

- fuel furnace is 6 to 10 years.”

## 3

Assuming an annual interest rate (r) of 7%, the approximate value to the company (today) of

waiting to install the lining additional 3 years.

NPV = [$10M / (1.0 + 0.07) 7 

## ]

– [ $10M / (1.0 + 0.07) 10 

## ] = [$10M / 1.6058 ]

– [ $10M / 1.967151]

NPV = $1

. 144 M

.

The capital recovery cost (CRC) is calculated by multiplying the NPV incremental cost by the

capital recovery factor (CRF):

CRC = NPV x CRF

Where CRF is defined according to the formula:

Using the 7

- year furnace life and a 7% interest (discount) rate 2 

## , CRF = 0.18555 3 

## ; therefore, the

a nnualized capital recovery cost was calculated to be:

Annualized CRC = $1,144,005 x 0.1 8555 = $ 2 12 ,000 (per furnace)

The total cost for the five facilities to comply with the area source rule is estimated to be $ 716 ,000

per year with an overall cost effectiveness of $13,500 per pound of chromium compounds

reduced

.

It should be noted that the calculation using the NPV approach does not include any improvements

in productivity and en ergy 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. Some of the highest chromium compound emittin g furnaces

are located at major source facilities and those cost impacts are attributed to subpart NNN.

2 

### 7% interest rate is in accordance with OMB guidance under Circular A

- 4.

3 

### Table A

- 2: Capital Recovery Factors (from EPA Air Pollution Cost Manual, EPA/452/B

- 02

- 001, January 2002).

## 4

III. COMPLIANCE TESTING COSTS

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

Table 1. Summary of Compliance Testing Costs (201 3 Dollars)

Emission

Source HAP EPA Test

Method Test

Cost s 4 

## Test

Freq

uency Annualized

Test Costs

Gas

- Fired

Glass

Melting

Furnace Chromium

Compounds 29 $10,000 Annual $10,000

IV. EMISSION REDUCTIONS

Based on the 2010 test data provided by all of the facilities, the eight gas

- fired furnaces emit

approximately 7 5 pounds of chromium compounds annually. We identified three gas

- fired

furnaces with emission rates above the emission limit and th eir associated annual emission s of 5,

25, and 35 pounds of chromium compounds , respectively . With the assumption that reduced life

cycle for the three furnaces will reduce chromium compound emissions to a level that would meet

the emission limit, approximately 5 4 pounds of chromium com pounds would be reduced annually

at area sources

– which represents a 7 0 percent reduction compared to baseline emissions.

The annualized control costs for the gas

- fired furnaces ($716,000) divided by the emission

reduction (5 4 pounds of chromium compounds) results in a cost effectiveness of $13, 3 00 per

pound of chromium compounds reduced (201 3 dollars).

Table 2 summarizes the above information and associated cost impacts.

4 

### Personal communication with Mr. Steffan Johnson, US EPA Measurement Policy Group, March 2014.

## 5 Table 2 . Summary of Costs for Wool Fiberglass M anufacturing Facilities to Comply with Proposed Area Source Rule

Glass

- Melting Furnaces Total Facility Cost

Annual

O&M

Costs Cr

Testing

Cost Cost

Effectiv e n e ss ($ / lb Cr

reduced) Company Facility

Location Source

Type* Electric Gas

- Fired Total

# #

subject

to area

rule Annual

ized

Capital

Cost* Total

Annual

Facility

Cost Steel

Shell Cold

Top Air

Gas Oxy

Fuel

1 CertainTeed Athens, GA Area 1 1 2 1 0 0 1 0 ,000 10,000 NA

2 CertainTeed Chowchilla, CA Area 1 1 1 0 0 1 0 ,000 10,000 NA

3 Guardian Kingman, AZ SynMnr 1 1 0 0 0 0 0

-

4 Johns Manville McPherson, KS Area 5 5 0 0 0 0 0

-

5 Johns Manville Penbryn, NJ Area 3 3 0 0 0 0 0

-

6 Johns Manville Richmond, IN Area 1 1 0 0 0 0 0

-

7 Johns Manville Waterville, OH Area 6 6 0 0 0 0 0

-

8 Johns Manville Willows, CA Area 6 6 0 0 0 0 0

-

9 Johns Manville Winder, GA Area 5 5 0 0 0 0 0

-

10 Knauf Lanett, AL Area 2 2 2 424,000 0 2 0,000 444 ,000 10 ,000

11 Knauf Shasta Lake, CA A rea 1 1 0 0 0 0 0

-

12 Owens

- Corning Delmar, NY Area 2 2 2 212,000 0 20 ,000 232

, 0 00 29

, 0 00

13 Owens

- Corning Eloy, AZ Area 2 2 0 0 0 0 0

-

14 Owens

- Corning Fairburn, GA Area 3 3 0 0 0 0 0

-

15 Owens

- Corning Kansas City, KS Area 1 2 3 2 0 0 2 0,000 2 0 ,000 NA

16 Owens

- Corning Mount Vernon, OH Area 3 3 0 0 0 0 0

-

17 Owens

- Corning Salt Lake City, UT SynMnr 2 2 0 0 0 0 0

-

18 Owens

- Corning Santa Clara, CA A rea 2 2 0 0 0 0 0

-

19 Owens

- Corning Nephi, UT SynMnr 2 2 0 0 0 0 0

-

20 Owens

- Corning Lakeland, FL Area 2 2 0 0 0 0 0

-

21 CertainTeed Kansas City, KS Major 2 2 0 0 0 0 0

22 Guardian Albion, MI Major 4 4 0 0 0 0 0

23 Guardian Inwood, WV Major 2 2 0 0 0 0 0

24 Guardian Mineral Wells, MS Major 2 2 0 0 0 0 0

25 Guardian Winnsboro, SC Major 1 1 0 0 0 0 0

26 Johns Manville Cleburne, TX Major 2 1 3 0 0 0 0 0

27 Johns Manville Defiance, OH Major 1 3 2 6 0 0 0 0 0

28 Knauf Shelbyville, IN Major 2 2 0 0 0 0 0

2 9 Owens

- Corning Newark, OH Major 2 2 4 0 0 0 0 0

30 Owens

- Corning Waxahachie, TX Major 2 1 3 0 0 0 0 0

Totals 42 25 4 12 83 8 $ 636

, 0 00 $ 0 $ 80 ,000 $ 716

, 0 00 $ 13

, 3 00

Table 2 notes:

- Major sources will not be subject to the area source rule requir e ments and any associated control/compliance costs are not included.

. - JM Waterville, OH facility also has 40 pot & marble furnaces which are not included in this analysis.

- Capital cost = $1.144M per furnace (using NPV); annualized capital cost based on 7% interest rate and a reduced equipment (f urnace) life from 10 to 7 years.