### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 1 CHAPTER 10 : QUALITATIVE DISCUS SION OF EMPLOYMENT I MPACTS OF AIR QUALITY

Overview
Executive Order 13563 directs federal agencies to consider regulatory impacts on job
creation and employment: “our regulatory system must protect public health, welfare, safety, and our environment while promoting economic growth, innovation, competitiveness, and job creation. It must be based on the best available science”. Although benefit

- cost analy ses do not typically include a separate analysis of regulation

- induced employment impacts, 1 during periods of sustained high unemployment, such impacts are of particular concern and questions may arise about their existence and magnitude. This chapter disc usses some, but not all, possible types of labor impacts that may result from measures to decrease NOx emissions.

Section 10 .1 describes the theoretical framework used to analyze regulation

- induced employment impacts, discussing how economic theory alone cannot predict whether such impacts are positive or negative. Section 10 .2 presents an overview of the peer

- reviewed literature relevant to evaluating the effect of environmental regulation on employment. Section
10 .3 discusses employment related to instal lation of NOx controls on coal and gas

- fired electric generating units, industrial boilers, and cement kilns.

10 .1 Economic Theory and Employment
Regulatory employment impacts are difficult to disentangle from other economic changes affecting employment d ecisions over time and across regions and industries. Labor market responses to regulation are complex. They depend on labor demand and supply elasticities and possible labor market imperfections (e.g., wage stickiness, long

- term unemployment, etc). The

un it of measurement (e.g., number of jobs, types of job hours worked, and earnings) may affect observability of that response. Net employment impacts are composed of a mix of potential declines and gains in different areas of the economy (the directly regula ted sector, upstream and

1 Labor expenses do, however, contribute toward total costs in the EPA’s standard benefit

- cost analyses.

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 2 downstream sectors, etc.) over time. In light of these difficulties, economic theory provides a constructive framework for analysis.
Microeconomic theory describes how firms adjust input use in response to changes in
economic condi tions. 2 Labor is one of many inputs to production, along with capital, energy, and materials. In competitive markets, firms choose inputs and outputs to maximize profit as a function of market prices and technological constraints. 3 , 4
Berman and Bui (2001) and Morgenstern, Pizer, and Shih (2002), adapt this model to analyze how environmental regulations affect labor demand. 5 They model environmental regulation as effectively requiring certain factors of production, such as pollution abatement capital, at lev els that firms would not otherwise choose.
Berman and Bui (2001, pp. 274

- 75) model two components that drive changes in firm

level labor demand: output effects and substitution effects. 6 Regulation affects the profit

maximizing quantity of output by changi ng the marginal cost of production. If regulation causes marginal cost to increase, it will place upward pressure on output prices, leading to a decrease in demand, and resulting in a decrease in production. The output effect describes how, holding
labor i ntensity constant, a decrease in production causes a decrease in labor demand. As noted by Berman and Bui, although many assume that regulation increases marginal cost, it need not be the case. A regulation could induce a firm to upgrade to less polluting
, and more efficient equipment that lowers marginal production costs. In such a case, output could increase for facilities that do not exit the industry. For example, improving the heat rate of a utility boiler increases fuel efficiency, lowering marginal p roduction costs, and thereby potentially increasing

2 See Layard and Walters (1978), a standard microeconomic theory textbook, for a discussion , in Chapter 9

.
3 See Hamermesh (1993), Ch. 2, for a derivat ion of the firm’s labor demand function from cost

- minimization.

4 In this framework, labor demand is a function of quantity of output and prices (of both outputs and inputs )

. 5 Berman and Bui (2001) and Morgenstern, Pizer, and Shih (2002) use a cost

- minimization framework, which is a special case of profit

- maximization with fixed output quantities.

6 The authors also discuss a third component, the impact of regulation on factor prices, but conclude that this effect is unlikely to be important for large competitive factor markets, such as labor and capital. Morgenstern, Pizer and Shih (2002) use a very similar model, but they break the employment effect into three parts: 1) a demand effect; 2) a cost effect; and 3) a factor

- shift effect.

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 3 the boiler’s generation. An unregulated profit

- maximizing firm may not have chosen to install such an efficiency

- improving technology if the investment cost were too high.

The substitution effect describe s how, holding output constant, regulation affects labor

intensity of production. Although stricter environmental regulation may increase use of pollution control equipment and energy to operate that equipment, the impact on labor demand is ambiguous. Equi pment inspection requirements, specialized waste handling, or pollution technologies that alter the production process may affect the number of workers necessary to produce a unit of output. Berman and Bui (2001) model the substitution effect as the effect of regulation on pollution control equipment and expenditures required by the regulation and the corresponding change in labor

- intensity of production.
In summary, as output and substitution effects may be positive or negative, theory cannot predict the direction of the net effect of regulation on labor demand at the level of the regulated firm. Operating within the bounds of standard economic theory, however, empirical estimation of net employment effects on regulated firms is possible when data and meth ods of sufficient detail and quality are available. The literature, however, illustrates difficulties with empirical estimation. For example, studies sometimes rely on confidential plant

- level employment data from the U.S. Census Bureau, possibly combined with pollution abatement expenditure data that are too dated to be reliably informative. In addition, the most commonly used empirical methods do not permit estimation of net national effects.
The conceptual framework described thus far focused on regulato ry effects on plant

- level decisions within a regulated industry. Employment impacts at an individual plant do not necessarily represent impacts for the sector as a whole. The approach must be modified when applied at the industry level.
At the industry

- lev el, labor demand is more responsive if: (1) the price elasticity of demand for the product is high, (2) other factors of production can be easily substituted for labor, (3) the supply of other factors is highly elastic, or (4) labor costs are a large share of total

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 4 production costs. 7 For example, if all firms in an industry are faced with the same regulatory compliance costs and product demand is inelastic, then industry output may not change much, and output of individual firms may change slightly. 8 In thi s case the output effect may be small, while the substitution effect depends on input substitutability. Suppose, for example, that new equipment for heat rate improvements requires labor to install and operate. In this case the substitution effect may be p ositive, and with a small output effect, the total effect may be positive. As with potential effects for an individual firm, theory cannot determine the sign or magnitude of industry

- level regulatory effects on labor demand. Determining these signs and

mag nitudes requires additional sector

- specific empirical study. For environmental rules, much of the data needed for these empirical studies are not publicly available, would require significant
time and resources in order to access confidential U.S. Census d ata for research, and also would not be necessary for other components of a typical RIA.
In addition to changes to labor demand in the regulated industry, net employment impacts encompass changes in other related sectors. For example, the proposed guideli nes may increase demand for pollution control equipment and services. This increased demand may increase revenue and employment in the firms supporting this technology. At the same time, the regulated industry is purchasing the equipment and these costs ma y impact labor demand at regulated firms. Therefore, it is important to consider the net effect of compliance actions on employment across multiple sectors or industries.
If the U.S. economy is at full employment, even a large

- scale environmental regulatio n is unlikely to have a noticeable impact on aggregate net national employment. 9 Instead, labor would primarily be reallocated from one productive use to another (e.g., from producing electricity or steel to producing high efficiency equipment), and net na tional employment effects

7 See Ehre nberg & Smith, p. 108.

8 This discussion draws from Berman and Bui (2001), p p. 293.

9 Full employment is a conceptual target for the economy where everyone who wants to work and is available to do so at prevailing wages is actively employed. The unemploy ment rate at full employment is not zero

.

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 5 from environmental regulation would be small and transitory (e.g., as workers move from one job to another). 10
Affected sectors may experience transitory effects as workers change jobs. Some workers may retrain or relocate in anti cipation of new requirements or require time to search for new jobs, while shortages in some sectors or regions could bid up wages to attract workers. These adjustment costs can lead to local labor disruptions. Although the net change in the national
workf orce is expected to be small, localized reductions in employment may adversely impact individuals and communities just as localized increases may have positive impacts.
If the economy is operating at less than full employment, economic theory does not
clea rly indicate the direction or magnitude of the net impact of environmental regulation on employment; it could cause either a short

- run net increase or short

- run net decrease (Schmalansee and Stavins, 2011). An important research question is how to accommod ate unemployment as a structural feature in economic models. This feature may be important in assessing large

- scale regulatory impacts on employment (Smith 2012).
Environmental regulation may also affect labor supply. In particular, pollution and other

env ironmental risks may impact labor productivity or employees’ ability to work. 11 While the theoretical framework for analyzing labor supply effects is analogous to that for labor demand, it is more difficult to study empirically. There is a small emerging li terature, described in the next section that uses detailed labor and environmental data to assess these impacts.
To summarize, economic theory provides a framework for analyzing the impacts of environmental regulation on employment. The net employment effect incorporates expected employment changes (both positive and negative) in the regulated sector and elsewhere. L abor demand impacts for regulated firms, and also for the regulated industry, can be decomposed into output and substitution effects which may be either negative or positive. Estimation of net employment effects for regulated sectors is possible when data of sufficient detail and quality are

10 Arrow et. al. 1996; see discussion on bottom of p. 8. In practice, distributional impacts on individual workers can be important, as discussed in later paragraphs of this section.

11 E.g. Graff Zivin and Neidell (2012).

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 6 available. Finally, economic theory suggests that labor supply effects are also possible. In the next section, we discuss the empirical literature.

10 .2 Current State of Knowledge Based on the Peer

- Reviewed Literature

T he labor economics literature contains an extensive body of peer

- reviewed empirical work analyzing various aspects of labor demand, relying on the theoretical framework discussed in the preceding section. 12 This work focuses primarily on effects of employme nt policies such as labor taxes and minimum wages. 13 In contrast, the peer

- reviewed empirical literature specifically estimating employment effects of environmental regulations is more limited.
Empirical studies, such as Berman and Bui (2001), suggest that net employment impacts were not statistically different from zero in the regulated sector. Other research suggests that more highly regulated counties may generate fewer jobs than less regulated ones (Greenstone 2002). Environmental regulations may affect sectors that support pollution reduction earlier than the regulated industry. Rules are usually announced well in advance of their effective dates and then typically provide a period of time for firms to invest in technologies and process changes to

meet the new requirements. When a regulation is promulgated, the initial response of firms is often to order pollution control equipment and services to enable compliance when the regulation
becomes effective. Estimates of short

- term increases in demand for spe cialized labor within the environmental protection sector have been prepared for several EPA regulations in the past, including the Mercury and Air Toxics Standards (MATS). 14 Overall, the peer

- reviewed literature
does not contain evidence that environmental regulation has a large impact on net employment (either negative or positive) in the long run across the whole economy.

10 .2.1 Regulated Sectors
Berman and Bui (2001) examine how an increase in local air quality regulation affects manufacturing employme nt in the South Coast Air Quality Management District (SCAQMD),

12 Again, see Hamermesh (1993) for a detailed treatment.

13 See Ehrenberg & Smith (2000 ), Chapter 4: “Employment Effects: Empirical Estimates” for a concise overview.

14 U.S. EPA (2011b)

.

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 7 which includes Los Angeles and its suburbs. From 1979 to 1992 the SCAQMD enacted some of the country’s most stringent air quality regulations. Using SCAQMD’s local air quality regulations, Ber man and Bui identify the effect of environmental regulations on net employment in regulated manufacturing industries relative to other plants in the same 4

- digit SIC industries but in regions not subject to local regulations. 15 The authors find that “while regulations do impose large costs, they have a limited effect on employment” (Berman and Bui, 2001, p. 269). Their conclusion is that local air quality regulation “probably increased labor demand slightly” but that “the employment effects of both complianc e and increased stringency are fairly precisely
estimated zeros , even when exit and dissuaded entry effects are included” (Berman and Bui, 2001, p. 269). 16
A small literature examines impacts of environmental regulations on manufacturing employment. Kahn and Mansur (2013) study environmental regulatory impacts on geographic distribution of manufacturing employment, controlling for electricity prices and labor regulation (right to work laws). Their methodology identifies employment impacts by focusing on

ne ighboring counties with different ozone regulations. They find limited evidence that environmental regulations may cause employment to be lower within “county

- border

- pairs.” This result suggests that regulation may cause an effective relocation of labor ac ross a county border, but since one county’s loss may be another’s gain
, such shifts cannot be transformed into an estimate of a national net effect on employment. Moreover this result is sensitive to model specification choices.

10 .2.2 Labor Supply Impact s
The empirical literature on environmental regulatory employment impacts focuses primarily on labor demand. However, there is a nascent literature focusing on regulation

- induced effects on labor supply. 17 Although this literature is limited by empirical ch allenges, researchers

15 Berman and Bui include over 40 4

- digit SIC industries in their sample. They do not estimate the number of jobs created in the environmental protection sector

. 16 Including the employment effect of exi s ting plants and plants dissuaded from opening will incr ease the estimated impact of regulation on employment.

17 For a recent review see Graff

- Zivin and Neidell (2013).

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 8 have found that air quality improvements lead to reductions in lost work days (e.g., Ostro 1987). Limited evidence suggests worker productivity may also improve when pollution is reduced. Graff Zivin and Neidell (2012) used detailed w orker

- level productivity data from 2009 and 2010, paired with local ozone air quality monitoring data for one large California farm growing multiple crops, with a piece

- rate payment structure. Their quasi

- experimental structure identifies
an effect of dail y variation in monitored ozone levels on productivity. They find “ozone levels well below federal air quality standards have a significant impact on productivity: a 10 parts per billion (ppb) decreases in ozone concentrations increases worker productivity by 5.5 percent.” (Graff Zivin and Neidell, 2012, p. 3654). 18
This section has outlined the challenges associated with estimating regulatory effects on both labor demand and supply for specific sectors. These challenges make it difficult to estimate
net nati onal employment estimates that would appropriately capture the way in which costs, compliance spending, and environmental benefits propagate through the economy. Quantitative estimates are further complicated by the fact that macroeconomic models often hav e little sectoral detail and usually assume that the economy is at full employment. The EPA is currently seeking input from an independent expert panel on modeling economy

- wide regulatory impacts, including employment effects. 19

10.3 Employment Related to I nstallation and Maintenance of NOx Control Equipment
This section discusses employment related to installation of NOx controls on coal and

gas

- fired electric generating units, industrial boilers, and cement kilns, which are among the highest NOx

- emitting source categories in EPA’s emissions inventory (see chapter 3 for more detail on emissions). Sections 10 .3.1 and 10 .3.2 below contain estimates of the number of direct
short

- term and long

- term jobs that would be created by addition of NOx controls at these three categories of emissions sources, for various size units. Because the apportionment of emissions

18 The EPA is not quantifying productivity impacts of reduced pollution in this rulemaking using this study. In light of this recent research, h owever, the EPA is considering how best to incorporate possible productivity effects in the future.

19 For further information see: < https://www.federalregister.gov/articles/2014/02/05/2014

- 02471/draft

- supporting

materials

- for

- the

- science

- advisory

- board

- panel

- on

- the

- role

- of

- economy

- wide

- modeling >.

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 9 control across emissions sources in this RIA analysis is illustrative and not necessarily representative of the controls that will be required in individ ual state SIPs, EPA did not estimate
short

- term or long

- term employment that would result from addition of NOx controls at these three source categories at the national level.

10.3.1 Employment R esulting from A ddition of NOx C ontrols at EGUs

Coal

- fired EG Us are likely to apply additional NOx controls in response to State Implementation Plans (SIPs) approved pursuant to a revised ozone standard. While many EGUs have already installed and operate various NOx control devices, there are additio nal existing

co al

- fired EGU s that could decrease NOx emissions by installing or upgrading their NOx reducing systems. While all existing coa l

- fired EGUs already have low NO x burners, there are EGUs that could have a selective catalytic reduction (SCR) system installed, or could improve
their NO x emissions by replacing an existing selective non

- catalytic reduction (SNCR) system
with an SC R system. The EPA identified 145 existing coal

- fired EGUs, with a total of 51.0 GW of capacity, that (1) are in areas anticipated to need additional NOx reductions under an alternative oz one standard of 65 ppb , and (b) do not already have an SCR emission control system. (For an alternative ozone standard of 70 ppb, there are 15 EGUs so identified, with a total of 7.4 GW of capacity.) While there are currently SNCR systems in use that could be upgraded to an SCR system, the EPA’s 2025 baseline analysis 20 estimates that the remaining SNCR systems will already be upgraded by 2025 in resp onse to existing emission control

programs.
The EPA used a bottom up engineering analysis using data on labor productivity, engineering estimates of the types of labor needed to manufacture, construct and operate SCRs on EGUs. The EPA’s labor estimates inc lude not only labor directly involved with installing
SCRs on EGUs and on

- site labor used to operate the SCRs once they become operational, but also include the labor requirements in selected major upstream sectors directly involved

20 The 2025 baseline used in this i llustrative an alysis incorporates the “state only” implementation option used in the proposed carbon pollution guidelines for existing power plants and emission standards for modified and reconstructed power plants (a

. k

. a

. the proposed Clean Power Plan, Ju ne, 2013).

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 10 manufacturing the mater ials used in SCR systems (steel), as well as the chemicals used to operate an SCR system (ammonia and the catalyst used to in the construction and operation of SCR systems, including such as steel, concrete, or chemicals used to manufacture NOx controls.

T his section presents an illustrative analysis of the direct labor needs to install and operate SCRs at 3 common sizes of coal

- fired EGUs: 300 MW, 500 MW and 1000 MW. As discussed below, the illustrative analysis is for a “model plant” of each size, using consistent assumptions about the plant’s operation that impact the material and labor needs of an representative plant such as the capacity factor, heat rate, and type of coal. The analysis does not include an estimate of the aggregate total of the labor needed for installing and running SCRs in any particular level of the revised ozone standard, nor does it reflect plant

- specific variations in labor needs due to regional differences in prices and labor availability, existing control technology at the plan t, etc.
The analysis draws on information from four primary sources:

 Documentation for EPA Base Case v.5.13 Using the Integrated Planning Model. November, 2013

 “ENGINEERING AND ECONOMIC FACTORS AFFECTING THE INSTALLATION OF CONTROL TECHNOLOGIES: An Update” . By James E. Staudt, Andover Technology Partners. December, 2011

.

 “Regulatory Impact Analysis (RIA) for the final Transport Rule”. June 2011

 “Regulatory Impact Analysis for the Proposed Carbon Pollution Guidelines for Existing
Power Plants and Emission St andards for Modified and Reconstructed Power Plants”.
June 2013

10.3.1.1 Existing EGUs Without SCR Systems

The EPA identified 145 existing coal

- fired EGU units that are estimated to continue to be in operation in 2025 in the baseline that are located in ar eas considered likely to be affected by State Impleme ntation Plans developed for a 65 ppb alternative ozone standard. The size
distribution of the 145 units is shown in Figure 10

- 1. The 145 units have a t otal generating capacity of 51.0 GW and are anticipated to generate 282 ,000 GWh of electricity in 20 25. With

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 11 the current level of NO x controls installed (or anticipated to be installed by 2025 to meet existing environmental reg ulations), these 145 units are es timated to emit 290.7 tons of NO x i n 2025.
The following key assumptions are used to estimate the amount of labor needed to install and operate individual SCR systems of various sizes.

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 12 Figure 10

- 1

. Size Distribution of 145 Existing Coal

- Fired EGU Units without SCR NOx

Controls

10.3.1 .2 Labor Estimates for Installing and Operating Individual SCR Systems
All labor estimates in this illustrative analysis are in terms of person

- years (i.e., f ull time equivalents, or FTEs).

0 5 10 15 20 25 30 35 40 # of Units 

### Size Distribution of 145 Existing Coal

- Fired EGU Units Without SCR NOx Controls

0 5 10 15 20 25 30 35 40 # of Units 

### Size Distribution of 145 Existing Coal

- Fired EGU 

### Units Without SCR NOx Controls

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 13 The labor involved with manufacturing a nd installing the SCRs is a one

- time labor need, and occurs over a 2 to 3 year construction period; the estimated FTEs during the construction phase are presented as the cumulative amount of labor over the multi

- year period. The construction phase labor includes both labor directl y involved with installing the SCR on site (including boiler makers, general labor and engineering.
There are three types of annual labor estimated to operate an SCR, and will be needed each year the EGU is in operation. The largest category is on

- site la bor at the EGU. The other two labor categories are needed in the manufacturing of two chemicals used as inputs to the operation of an SCR: ammonia and the catalyst. The estimated amounts of direct labor involved with installing SCR systems is shown in Table 10

- 1.

Table 10

- 1. Summary of Dire ct Labor Impacts for SCR I nstallation at EGUs Plant Size

300 MW 500 MW 1000 MW

Construction Phase (One time, Total Labor over 2

- 3 Year Period)
Direct Construction

- related E mployment 158.7 264.4 528.8 Operation Phase (Annual Operations)

5.5

0.8 Operation and Maintenance 1.9 2.8 4.6 Ammonia Supply 0.2 0.4 0.8 Catalyst Supply 1.2 1.9 3.8 Total 3.4 5 .1 9.2

The key assumptions used in the labor analysis are presented in Table 10

- 2.

Table 10

- 2. Key Assumptions in Labor Analysis for EGUs
Assumptions Key Factor Source 300 MW 500 MW 1000 MW

Capital Investment to Install SCR Utility

- owned Capital

Recovery Rate for Environmental Retrofits (12.1%) IPM 5/13 Base Case Documentation $86.1

million $133 million $244 million

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 14 Assumptions Key Factor Source 300 MW 500 MW 1000 MW

Result: FTEs to Install an SCR 1,100 hours/MW Staudt, 2011 158.65 264.42 528.85

Labor Cost (fixed O&M) per Year IPM analysis of CPP baseline $218,000 $310,500 $513,000

Result: FTEs per Year 8.9 FTEs per $1

million of Fixed O&M CSAPR RIA 1.95 2.76 4.57

Ammonia Used per Year 0.39 lbs NH 3 per lbs

NOx reduced; cost = $150/ton; 90% NOx control CSAPR RIA $87,925 $208,745 $398,505

Result: FTEs to Manufacture Ammonia 2.1 FTE per $1 million

NH 3 0.18 0.44 0.84

Catalyst Used per Year 0.00002 m 3 per MW

generated; cost = $8,475 per m 3 ; 90% Capacity Factor CSAPR RIA $382,684 $603,697 $1,180,711

Result: FTEs to Manufacture Catalyst 3.2 FTE per $1 million

catalyst CSAPR RIA 1.22 1.93 3.78

Result: Total FTES to Operate an SCR Annually 3.36 1.95 5.13 2.76 9.18 4.57

10.3.2 Assessment of Employment Impacts for Individual Industrial, Commercial, and Institutional (ICI) Boilers and Cement Kilns
Facilities other than electric power generators are likely to apply NOx controls in response to State Implementation Plans (SIPs) approved pursuant to a revised ozone standard. In addition to EGUs, the EPA estimated the amount and types of direct labor th at might be used to apply and operate NOX controls for ICI boilers and for cement kilns. As with EGUs, the EPA used a bottom up engineering analysis using data on labor productivity, engineering estimates of the types of labor needed to manufacture, const ruct and operate NOx controls on ICI boilers and

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 15 cement kilns. No estimates were made for labor requirements in upstream sectors such as steel, concrete, or chemicals used to manufacture or search as inputs to NOx controls. In addition, the numbers present ed in this section are only indicative of the relative number and types of labor that might be used at these two categories of plants, without calculating an estimate of the labor that would be req uired by them in the aggregate (SC&A, 2014)

.
10.3.2.1 ICI Boilers
There are a number of control technologies available to reduce NOx emissions from ICI boilers. The EPA anticipates that the most commonly applied control technology for ICI boilers that could require NOx reductions as part of an ozone SIP will be selective catalytic reduction (SCR). The analysis calculates s labor requirements to fabricate, install, and operate different sizes of SCR for coal, oil and natural gas ICI boilers. Estimated total labor costs are a function of total capital costs and b oiler size in EPA’s Coal Utility Environmental Cost (CUECost) model. Total SCR capital costs of ICI boilers was estimated using the EPA’s Control Strategy tool (CoST) model. Labor is estimated to be about 50% of the total capital costs of an SCR. (SC&A, 2 014).
Just over 24% of total capital costs are for labor used in SCR fabrication. This percentage was multiplied by the total capital cost, and the resulting dollar amount was converted into full time equivalents (FTE) based on the average annual salary o f workers (as outlined in IEC, 2011). The annual compensation came from the Bureau of Labor Statistics (BLS). This salary number was adjusted to account for benefits also based on BLS data. The total fabrication expenditures were divided by the average fabrication labor compensation to estimate the number of full time equivalent workers in SCR fabrication.
The calculation of construction or installation labor is based on previous research on labor required for SCR installation at utility boilers. (Stau dt 2011). Based on that, we estimate that 27% of SCR capital costs are spent on installation labor. We applied that percentage to the estimates of the capital costs of SCR for ICI boilers to give us the total labor expenditures, which
we then converted to FTE based on average annual compensation provided by BLS.

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 16 Operation and Maintenance labor was estimated using the CUECost model. Maintenance
and administrative labor for SCR is estimated to be small in relation to fabrication and construction, with th e caveat that available information on which to base an estimate is sparse. According to the approach used in the CUECost model, most utility boilers require a full time worker to operate and maintain the equipment. ICI boilers are much smaller and so ar e likely to require less than one FTE. Table 10

- 3 below provides summary labor estimates for SCR at varying sized ICI boilers.

Table 10

- 3. Summary of Direct Labor Impacts for Individual ICI Boilers

Plant Type Boiler Size (MMBtu/hr) One

- Time Employment Impacts 1 (Annual FTEs) Recurring Annual Employment Impacts 2 (FTEs per year)

Coal

- fired 750 19.5 1.2 500 15.2 1.1 400 13.6 1.0 250 10.7 0.9 Oil

- fired 250 9.8 0.9 150 7.3 0.9 100 5.5 0.8 50 3.2 0.8 Natural Gas

- fired 250 10.5 0.9 150 11.0 0.9 100 8.4 0.9 50 6.5 0.8
1. Includes Fabrication and Installation Labor

2. Includes Operations, Maintenance, and Administrative Support

10.3.2.2 Cement Kilns
There are a number of technologies that can be used to control NOx emissions at cement kilns. The analysis focused on synthetic non

- catalytic reduction (SNCR) as the most likely choice for future NOx controls at cement kilns affected by requirements in ozone SIPs. Although SNCR is not considered an appropriate technology for wet and long d ry kilns, most new or recently constructed kilns will likely be preheater and precalciner kilns, and these kilns will likely operate using SNCR as a control technology

.

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 17 Fabrication capital cost was estimated for an SNCR system for a mid

- sized preheater an d precalciner kiln (125 to 208 tons of clinker per hour). The percent of capital cost of these systems attributable to labor is 44% based on vendor supplied estimates. (Wojichowski, 2014). This labor cost was converted to FTE using BLS data. A similar methodology was used to estimate installation labor. Labor costs for SNCR installation was estimated by the vendor to be 17% of the capital cost. That was converted to FTE using BLS data. This information is
summarized in Table 10

- 4.

Table 10

- 4. Estimated Direct Labor Impacts for Individual SNCR Applied to a Mid

Sized Cement Kiln (125

- 208 tons clinker/hr) Kiln Type Preheater / Precalciner Manufacturing FTE 1.5 Installation FTE 0.9 O&M Annual Recurring FTE 13

10 .4 References
Bureau of Labor Statistics, 2011. “National Compensation Survey: Occupational Earnings in the United States, 2010.” Located online at: http://www.bls.gov/ncs/ncswage2010.htm#Wage_Tables
Bureau of Labor Statistics, 2014. “Employer Costs for Employee Com pensation”. Released September 10, 2014. Located online at: http://www.bls.gov/news.release/ecec.toc.htm
U.S. Environmental Protection Agency (U.S. EPA), 2002: USEPA Office of Air Quality Planning and Standards, EPA Air Pollution Control Cost Manual, Sixth Edition, EPA/452/B

- 02

- 001, Research Triangle Park, NC, January 2002.
U.S. Environmental Protection Agency (U.S. EPA), 2007: Alternative Control Techniques Document Update

– NOx Emissions from New Cement Kilns, EPA

- 453/R

- 07

- 006, prepared by EPA and Research Triangle Institute for EPA Office of Air Quality Planning and Standards, Sector Policies and Programs Division, November 2007.
U.S. Environmental Protection Agency (U.S. EPA). 2011. Regulatory Impact Assessment for the Cross State Air Pollution Ru le. Office of Air Quality Planning and Standards, Research Triangle Park, NC . Available at http://www.epa.gov/airtransport/pdfs/FinalRIA.pdf.
U.S. Environmental Protection Agency (U.S. EPA). 2014. Regulatory Impact Analysis for the Clean Power Plan. Office of Air and Radiation, Washington, D.C. Available at: http://www.epa.gov/ttn/ecas/regdata/RIAs/111dproposalRIAfinal0602.pdf
SC&A,2014:, Assessment of Employment Impacts o f NOx Controls. Memorandum prepared to Jason Price, IEc and Ellen Kurlansky, US EPA., prepared by J. Wilson; M Mullen; and j Schreiber, SC&A, Inc. September 2014

### Summary of Interagency Working Comments on Draft Language under

EO12866/13563 Interagency Review. Subject to Further Policy Review.

10

- 18 Staudt, 2011: Staudt, James E., Engineering and Economic Factors Affecting the Installation of Control Technologies

— An Update, Andover Technology Partners, North Andover, MA, December 15, 2011.
Wojichowski, 2014: David Wojichowski, De

- Nox Technologies, LLC, SNCR cost estimates provided to Maureen Mullen, SC&A via email, September 25, 2014.