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RCRA Box 1883 

Prepped by Ollie Stewart 

Document Number: 

105) ll-B-267 

Docket Number, 

A-90-19 

Printed 12/3/2008 10:42:17 AM Sheet 105 of 171 
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A-90-19 

R ll-B-267 

TO: Mr. Leslie B. Evans 

FROM: Andy Blackard, Radian 

DATE: September 14, 1990 EP A AIR DOCKE T 

SUBJECT: Calculation of 50th and 90th Percentile HON Control Costs for CEIS 

The purpose of this memo is to describe our proposed approach for 

determining the 50th and 90th control cost percentiles to include in the HON 

results data files which are to be delivered to CEIS for economic analysis. We 

will describe the contents of the cost data files and the methodology which we 

w ll use to prepare them. 

The February 26, 1990 memo from John Robson (CEIS) to Bob Rosensteel (CPB) 

listed five categories of information that will need to be determined for each 

product-process and delivered in a data set to be used for economic analysis. 

These are summarized as follows: 

1) 1989 annual production in millions of kilograms, 

2) Product price (S/kg) and references, 

3) Fraction of production subject to zero control costs, 

4) Annual control cost (S/kg) summed for all five emission source types 

- total annual cost 

- cost of 50th percentile kilogram of production 

* cost of 90th percentile kilogram of production 

5) Capital control cost ($/kg) summed for all five emission source types 

- total capital cost 

- cost of 50th percentile kilogram of production 

- cost of 90th percentile kilogram of production 

In addition to providing the integrated zero-cost fraction and integrated 

control costs, we recommend breaking down the zero-cost fraction and control 

costs by emission source type. Since the integrated zero-cost fraction (that 

fraction of production unaffected by any of the five emission source type 

regulations) will be different from the individual emission source type zerocost fractions (the fraction unaffected by a single emission source type 

regulation), the integrated 50th/90th percentile control costs will not be the 

sum of the emission source type control costs. 
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Because of this difference, we recommend the additional calculation of 

emission source type zero-cost fractions and control costs. This additional 

information will provided insight into the cost impact of the regulations which 

may shape the direction of the overall economic analysis. Also, it can be gained 

with a small additional effort since the program logic needed to calculate 

integrated and individual costs is nearly identical. 

The costs that will be presented are specific to a product-process --

which includes all of the chemicals which are produced by a given productprocess. Since the EPA needs to allocate the product-process costs to individual 

chemicals. A simple ratio of costs according to stoichiometric relationships may 

be used to disaggregate costs to individual chemicals. However, we recommend 

establishing a minimal level of production for co-products for which costs will 

be estimated. Below this level (e.g. less than 25% of product capacity), it can 

be assumed that additional control costs attributable to the co-product by this 

product-process are minimal. The exception would be when a chemical can only be 

produced as a co-product of a product-process at a yield below this minimum 

level. It should then be included to avoid ignoring the consideration of this 

chemical in the economic analysis. 

In the following paragraphs we discuss how Radian proposes to perform the 

necessary calculations to prepare the two data sets for use by CEIS. The values 

for all five source types combined will be referred to as the 'integrated 

values'. The values for the data set which is broken down by emission source type 

will be referred to as the 'source-type specific values'. 

The 1989 annual production for each product-process will be calculated by 

summing the production across all facilities in the database that have entries 

for that product-process. In order to provide a gauge for the representativeness 

of this estimate, we recommend including the total U.S. production of the product 

(obtained from a separate source of Information) in this data set for side-byside comparison. This number will be the same for both data sets. 

The product price information will be taken directly from the HON database. 

This number will be the same for both data sets. 
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The zero-cost fraction (that fraction subject to zero control cost) will 

be calculated for the integrated data set by summing production for those 

facilities where the control cost for all of the five emission source types is 

equal to zero. Then the zero-cost fraction for each emission source type will 

be calculated individually and stored in the source-type specific data set. 

The integrated total annual and capital costs will be calculated by summing 

these two fields in the HON database main results file for all source types. 

The source-type specific cost values are obtained directly from the main results 

file. The method proposed for the calculation of the 50th and 90th percentiles 

of control cost is illustrated below. 

First, data for all of the facilities which use this product-process, this 

5 facilities in this example, are extracted into a separate working file and 

placed in ascending order (rank-ordered) according to control cost per kilogram 

of production for each facility that uses this product process. 

Facility 

ABC Inc. 

DEF Inc. 

GUI Inc. 

JKL Inc. 

MNO Inc. 

Production 

30 

42 

8 

30 

20 

(kg) 

Rank-ordered 

Control Cost 

(SAg) 

$0 (Z 

$1 

$2 

$5 

$7 

(Zero-Cost Facility) 

The total production for facilities with non-zero control costs 1s calculated 

to be 100 kg (excluding the facilities with zero cost of controls). Therefore, 

the cost of control for the 50th percentile of production 1s the control cost 

associated with the 50th kilogram of production ( 0.5 * 100). Likewise, the cost 

of control for the 90th percentile of production 1s the control cost associated 

with the 90th kilogram of production ( 0.9 * 100). 

Figure 1 shows that the cost of the 50th percentile of production 1s, 1n 

this case, on the borderline between $2/kg and $5/kg. The larger value will be 

used for the sake of consistency, therefore, the 50th percentile of control cost 

is $5/kg. The control cost of the 90th percentile of production 1s $7/kg. 
LP.5 

control cost 5Qtn & gotn ci 

Exclualrq Zmv-Cumi. Pacllltl M 

3 

a I^MMWilil 

FIGURE 1. Rank-Ordered Control Costs 
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CJ 

The computer algorithm for determining the integrated 50th percentile 

(P50) follows. The algorithm for the 90th percentile is identical except P90 is 

used instead of P50. The emission source type specific calculation differs only 

in the use of control costs for that emissions source alone rather than the sum 

of all five emissions sources. 

1) Prepare a rank-ordered work file in ascending order of control cost per 

kilogram of production. 

2) Calculate the total production (kg) of all facilities whose control cost 

are non-zero. 

3) Store the above total in a work variable (TOTAL). Store the 50th 

percentile of this total (P50 - TOTAL * 0.5). Store TOTAL to a work 

variable TEST. 

4) Go to then end of the work file. 

5) Subtract production of current facility (from file.) from TEST. 

6) If the result is less than or equal to P50, then the 50th percentile 

cost (C50) is the control cost of the current facility, 

otherwise, skip to the previous record and go back to 5. 

Example ; 

1) as above 

2) TOTAL - 42 + 8 + 30 + 20 - 100kg (zero-cost 30kg omitted) 

TEST - TOTAL 

3) P50 - TOTAL * 0.5 - 50kg 

4) as above 

5) TEST - 100 - 20 - 80kg 

6) 80 IS NOT <- P50, so skip to prior facility and go back to 5 

5b) TEST - 80 - 30 - 50kg 

6b) 50 IS <- P50, therefore, the control cost of the 50th percentile of 

production 1s equal to the value for JKL Inc., $5/kg production. 
. ' 

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The structures for the 'integrated' and the 'emission source type specific' 

results files are as follows: 

Filename: CEISICST.DBF 

File description: CEIS Integrated Cost Oata file 

FLD FIELD NAME TYPE WIDTH DEC FIELD DESCRIPTION 

1 PRODUCT_P Char 

2 CAP Num 

3 AVG_PRICE Num 

4 SRC_PRICE Char 

5 PCT_0_COST Num 

6 TOT_ANN_50 Num 

7 TOT_ANN_90 Num 

3 CAPITAL_50 Num 

9 CAPITAL 90 Num 

10 Product Process Code (*key*) 

8 2 Production in base year 1989 (kg) 

8 2 Average price of product (S/kg) 

2 Reference Number for Source of Price Info 

5 0 % thruput of prod for which Ctrl cst-0 

8 2 Ann. Cost of 50th percentile kg 

8 2 Ann. Cost of 90th percentile kg 

8 2 Capital Cost of 50th percentile kg 

8 2 Capital Cost of 90th percentile kg 

Filename: 

File description: 

CEISSCST.DBF 

CEIS Source-type Specific Cost Data file 

FLD FIELD NAME TYPE WIDTH DEC FIELD DESCRIPTION 

1 PRODUCT P Char 

2 SOURCE TYP Char 

3 CNTRL OPT Char 

4 CAP Num 

5 AVG PRICE Num 

5 SRC PRICE Char 

7 PCT 0 COST Num 

3 TOT ANN 50 Num 

9 TOT ANN 90 Num 

10 CAPITAL 50 Num 

11 CAPITAL 90 Num 

12 CTRL DEV Char 

13 EMISS RED Num 

10 

2 

10 

8 

8 

2 

5 

8 

8 

8 

8 

20 

5 

2 

2 

0 

2 

2 

2 

2 

0 E 

Product Process Code (*key*) 

Source Type: (EL|PV|ST|TR|WW) 

Regulatory Alternative 

Production in base year 1989 (kg) 

Average price of product (S/kg) 

Reference Number for Source of Price Info 

% thruput of prod for which Ctrl cst-0 

Ann. Cost of 50th percentile kg 

Ann. Cost of 90th percentile kg 

Capital Cost of 50th percentile kg 

Capital Cost of 90th percentile kg 

Principal Ctrl device on which costing 1s based 

Expected emission reduction from install/op device 

We estimate that 120 hours, including management, will be required for 

coding the software required to extract working subsets from the HON database, 

rank-order these working subsets, and calculate both Integrated and source-type 

specific 50th and 90th percentile control costs values for all product-processes. 

This Includes QA of the data and delivery of the data files.