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MEMORANDUM DATE: November 9 , 2010 TO: Melanie King, EPA OAQPS/SPPD/ESG FROM: Tanya Parise , EC/R, Inc. SUBJECT: Summary

of the October 26 , 2010 Meeting with the Gas Compressor Association Regarding the Proposed Amendments to the SI NSPS for Stationary Engines

INTRODUCTION The Gas Compressor Association (GCA) requested this meeting with EPA to discuss the proposed amendments to the new source performance standards (NSPS) for stationary spark ignition (SI) engines . T he proposed NSPS amendments were published in the Federal Register on June 8, 2010 (75 FR 32612 ). ATTENDEES Melanie King, EPA John Dutton, J

- W Power Company Bob Wayland, EPA David O’Leary , Compressor Sy stems Inc. Michael Horowitz, EPA (by phone) Mike Wasson , Exterran John Dupree, EPA (by

phone) Kyle Jantzen, Exterran Tanya Parise, EC/R Inc. John Peck, Cameron Compression Sy stems Levent Caglar, C ompressor Sy stems Inc. S UMMARY OF MEETING GCA had previousl y submitted written comments on the proposed NSPS amendments (EPA

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. GCA requested this mee ting to discuss and clarify those comments , and express to EPA the challenges the natural gas compression industry would face if the NSPS amendments are finalized as proposed. Specificall y, GCA wanted to address issues related to the definition of reconstruction and the date of manufacture. An agenda was provided by GCA , which follows this meeting summary

. EPA’s Perspective GCA asked what prompted EPA to propose changes to the SI NSPS and what EPA’s goals were with the proposed amendments. EPA expressed that with respec t to reconstruction, it intended to clarify

how to conduct the reconstruction analy sis and to streamline the process. H owever, GCA said that the proposed changes represent a deviation from the historical 

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interpretation of reconstruction . GCA indicated th at it has concerns with the proposed changes because they significantly impact the natural gas compression market and asked if any additional groups or other industries had expressed similar concerns. Other groups have noted concern, but not necessaril y concerns associated with any particular industry , EPA said. It has been brought to EPA’s attention that some manufacturers are acquiring old engines, stripping them down and selling them as old engines . S o EPA indicated that with the proposed amendments, it was also attempting to close this loophole where these engines should reall y be regulated under the NSPS , but are currentl y circumventing regulations . In addition, EPA Regions and States have been confused about the reconstruction determination and as ked for clarification on the NSPS regulations. EPA added that while it s intent is not to forc e the retirement of engines, engines do have a specific useful life and after a certain point engines that are rebuilt should not be able to avoid regulations

. E PA indicated that it is attempting to clearl y define those constraints. GCA indicated that it does not oppose EPA’s objective and stressed that circumventing the regulation is not what its members do. Technological Differences of Natural Gas Engines GCA discussed the importance of differentiating between lean burn and rich burn engines in terms of nitrogen oxides (NO x ) and carbon monoxide (CO) emissions. According to GCA, it becomes incrementall y harder to control these pollutants the lower the exhau st emissions standards ( in terms of grams per horsepower

- hour (g/HP

- hr)) get. It is not that costly to control NO x and CO for rich burn engines, specifically in order to go from 3.0 g/HP

- hr to 2.0 g/HP

- hr. However, for lean burn engines, the magnitude of emissions is set by combustion and no catal ys t is available for lean burn engines to reduce NO x because the ox ygen level is too high, GCA said. The cost to go from 2.0 g/HP

- hr to 1.0 g/HP

- hr on a lean burn engine approaches the cost of a new engine , acco rding to GCA. (Beginning in model year 2011, the rule requires a 1.0 g/HP

- hr NO x standard for certain new engines.) N on - selective catal ytic reduction, the applicable control t echnology

for rich burn engines , does not ap proach the cost of a new engine , GC A added

. Due to the date of manufacture definition in the proposed rule , GCA indicated that it could have lean burn engines emitting 2.0 g/HP

- hr of NO x that become obsolete. EPA asked about the viability of using selective cataly

tic reduction (SCR) on lean burn engines , but GCA said that SCR is ty picall y not cost effective. GCA said that it c osts $50,000 to $60,000 per ye ar to operate SCR. Also, according to GCA, SCR works well for steady- state applications, but not with engines with varying load. The injector technology associated with SCR is not able to keep up with the variable load, GCA said. EPA explained that with the date of manufacture definition in the proposal it wanted to capture owners and operators of “new” engines where the engine s hould be treated as such. GCA noted that it operates many rich burn engines, particularly

smaller rich burn engines some that emit down to 0.25 g/HP

- hr of NO x . According to GCA, SCR technology is reserved as a last resort for lean burn engines and it see ms that SCR is applied more in a project

- like fashion. EPA questioned why SCR is not feasible for the natural gas engines GCA members operate because the technology is relied upon for nonroad diesel engines. GCA replied that the technology is not fully

d eveloped for the natural gas engine business.3

GCA argued that lean burn engines use less fuel and emit less greenhouse gas emissions , and if lean burn technology becomes obsolete because of the high cost to meet the NO x standard for new engines, the trend might be to go back to using rich burn engines. GCA added that once the operator dials in on lean burn engine settings, the engine operates and emits emissions consistently , as opposed to rich burn engines that are not that sophisticated and do not hav e as consistent emissions. The outcome of the regulation might be that people may not purchase lean burn engines, GCA said. EPA emphasized that it is not promoting any particular technology or engine ty pe . Comments on Reconstruction Concepts In term s of the reconstruction process, GCA indicated that it inspects and evaluates the entire engine and tries to reuse as many components as possible. This is the most economical approach and parts that normally wear are replaced

. EPA asked if GCA could identify the particular areas of the date of manufacture definition that could lead to triggering reconstruction. GCA said that the crankshaft language is problematic because this component is ty picall y remove d for inspection and maintenance. Also, the 75 percent threshold is a problem and the denominator of the cost of the facility , e.g., changing the camshaft can substantially increase the costs, but GCA indicated that this is mostly a problem on smaller engi nes. GCA is concerned that lesser quality parts (e.g., parts that are not original engine manufacturer parts) may be used. GCA also indicated that there are various overhaul “standards” basicall y all the way down to 0 hours, which is like a new engine. GCA said the regulatory language , as proposed, w ould trigger reconstruction and a new date of manufacture for many engines

. Also, the serial number criteri a is an issue, GCA said. The serial number could inadvertentl y get knocked off and GCA does not b elieve this should force an engine to go from 2.0 g/HP

- hr to 1.0 g/HP

- hr. In terms of the crankshaft, it has to be pulled in order to access o ther parts for maintenance , GCA explained . GCA added that it is important to include in the reconstruction anal y sis components that are necessary to run the engine, even if the components are not connected to the engine. EPA said that it is trying to clarify that the costs are for the engine and cited to the recent boiler rule where associated components necessary for boiler operation are included in the cost assessment for reconstruction. GCA indicated that in its anal ys is it onl y counts components that are necessary for the engine, but that might include components that are not connected to the engine. C onsequently , GCA suggested that EPA define that as a bright line, i.e., components that are nece ssary for the engine to operate

. GCA asked that EPA clarify if the applicability would be retroactive and noted that most engines have a 5 year overhaul interval. E PA said that it did not believe that anything would apply until the rule is final. GCA also asked that EPA clarify what components could be included, e.g., the compressor obviously would not be included GCA said, but asked about components such as the coo ler that is also used for other things. GCA suggested that a percentage of the cooler cost could be included. GCA also questioned whether the structural piece/skid could be included because it could not have an engine that is not supported; however, the skid also holds the compressor, which is not counted. Essentially , the skid and cooler are the biggest prorate concern GCA has . There is also the control panel, which includes the engine and compressor, but it is process related and only a minor portion of the panel is related to the4

engine. There are other things that are not shared ; for example , the lubrication sy stem. EPA indicated that it needs to discuss this with the Office of Enforcement and Compliance Assurance

. GCA said that as described during this meeting, historically this is how industry has done the reconstruction anal ys is and that there are some standard cookie cutters numbers or engineering estimates that are consistently used. This process may

be different for diesel engines GCA s aid, but asked that EPA at least define that for example the cooling s ys tem is needed to operate the engine even though it is not attached to the engine. EPA asked if GCA had any information on proration. GCA indicated that there is a guidance document t hat it uses for the natural gas compression industry that it could send to EPA, but that there is also substantive information on this in the comments that GCA submitted (EPA

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not be translatable to o ther industries. Following the meeting, GCA submitted a reconstruction guidance document to EPA, which is available in the docket as EPA

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- 0055. Comments on Proposed Date of Manufacture Concept GCA said that it may

have to take lean burn engines that currently emit between 2.0 g/HP

- hr and 3.0 g/HP

- hr of NO x down to 1.0 g/HP

- hr and again stressed the significantl y high cost per ton of achieving such reduction. GCA said that if EPA uses the traditional definition for costs to include in th e denominator it is not so much an issue, but more an issue of the components to include rather than the specific percentage. Regarding the serial number issue, GCA said that it is still possible to identify an engine without it, e.g., b y the make and m odel information, maintenance records, etc. However, there may be cases where an engine is acquired and it has no tag and GCA said it does not want to trigger a new date of manufacture based on a technicality . When engines are bought and moved all the ti me records do not always stay with the engine. EPA indicated that this is not what it is trying to get at and it is not EPA’ s intention to penalize owners in cases where maintenance folks may have accidentall y knocked the serial number off. In situations where there is no information on the engine, GCA asked if it could call the engine subject to 40 CFR part 60, subpart JJJJ. Comments on Confusion with Other R ules GCA said that it noticed a gap between 40 CFR part 60, subpart JJJJ and 40 CFR part 63, subpart ZZZZ, where th ere is a time window of about 1 1⁄2 years where it appears there are no requirements . GCA asked if this is accurate. EPA confirmed that this is the case. Further, GCA asked if EPA could make the two engine regulations consistent in t erms of the reconstruction assessment and argued that since the definitions were different, this is a problem. EPA indicated that it did not intend for the reconstruction anal ys is to be different under the two subparts and that it will consider this issue. The anal ys is under 40 CFR part 60, subpart JJJJ and 40 CFR part 63, subpart ZZZZ should be the same, EPA said.5

Closing Discussion Regarding Future Regulation In closing, GCA indicated that it would like to continue the dialogue with EPA and asked when the final rule would come out. EPA indicated that it has a settlement to finalize the rule by May 22, 2011, and additionally pointed out that with the proposed notice it was not intending on officiall y opening up 40 CFR part 60, s ubpart JJJJ.6 

## AGENDA Gas Compressor Association (GCA)

And Environmental Protection Agency (EPA)

10/26/10

I Introductions II EPA’s Perspective III Technological Differences of Natural Gas Engines IV Comments on Reconstruction Concepts V Comments on Propo sed Date of Manufacture Concept VI Comments on Confusion with other Rules VII Closing discussion regarding future regulation