## 1 MEMORANDUM

Date: September 8

, 201 4

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

NESHAP

- Residual Risk and Technology Review (RTR) Amendments

Wool Fiberglass Manufacturing RTR

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 RTR amendments

.

I. BACKGROUND

Based on the information provided by the wool fiberglass manufacturing 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 prod ucts 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.” After conducting a review of the current permit status of all sources and

recent inform ation provided by industry

, 10 facilities are major sources (subject to the existing

MACT rule, subpart NNN) and 20 facilities are area source facilities. These 30 facilities operate a

total of 54 glass

- melting furnace and 3 1 manufactu r ing lines that will have to comply with the

RTR amendments to the NESHAP (subpart NNN) requirements

. Based on our current emissions

data, two of the major source facilities, operating a total of three gas

- fired glass

- melting furnaces

will be required by the rule to reduce chr omium compound emissions.

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

some 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, those sources will become area sources. While industry sources also

predicted before proposal of the RTR amendments that no major sources would exist by the end of

2012, we now believe this to be inaccurate. The following cost impacts are based on the estimated

10 facilities that were identified as major sources in the most recent industry information provided

in December 2012.

## 2

II. GLASS

- MELTING FURNACES

We estimate that there are currently eight gas

- fired furnaces located at five facilities designated as

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

- fired furnaces located at two

facilities that emit chromium compounds above the propos ed 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 associ ated costing of this scenario is referred to as the net 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 ope rate into their 10 th 

## year

and still emit chromium at levels 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

rebuild 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 overstate control costs) and

based our costs on an expected 10

- year furnace life 1 

## and an early rebuild at 7 years , an analysis

supported by industry comments and 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 ($10M ) ;

2) normal furnace life cycle = 10 years;

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

4) industry interest rate = 7 %. 2



## The following example is provide d to illustrate the net present value approach. A company

expects 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 where 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 

## ]

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

to install the lining additional 3 years yields the following calculation:

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.”

2 

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

- 4.

## 3

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, 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 12K (per furnace)

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

in productivity and energy efficiency, among other factors, resulting from rebuilding a furnace,

factors that woul d typically come i nto play when a wool fiberglass company assesses the need for

a furnace rebuild using this approach.

III. ROTARY SPIN AND FLAME ATTENUATION MANUFACTURING LINES

As noted previously, several facilities have already switched all or most of th eir rotary spin (RS)

manufacturing lines to non

- PF binders . Based on the most recent information provided by

industry, w e estimate that the re will be 10 facilities subject to the proposed rule requirements with

1 8 RS manufacturing lines making bonded prod uct. Two of those facilities also have 1 3 bonded

flame attenuation (FA) lines producing heavy density products and /or pipe insulation

. Based on

facility information collected in the survey responses, most facilities currently have thermal

oxidizers and we assumed that the estimated 6 facilities currently not meeting the proposed

emission limits have thermal oxidizers (or scrubbers) on their bonded product lines. Therefore,

there are no additional capital costs to comply with the new RS emission limit s and we estimated

operation and maintenance (O & M) costs for a thermal oxidizer at each facility to be $125,000

annually. All 10 major source facilities with bonded lines will incur additional testing cost s to

demonstrate compliance with the new phenol a nd methanol emission limits for forming and curing

operations

.

3 

### Table A

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

- 02

- 001, January 2002).

## 4

IV. COMPLIANCE TESTING COSTS

The annual cost estimates 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



## (in 201 3 $) Test

Freq

u ency Annualized

Test Costs

(in 201 3 $) Comment

G as

- Fired

Furnace Chromium

Compounds 29 $ 10 ,000 Annual $ 10 ,000 PM testing part

of current

requirements

.

Collection/

Curing

(combined) Phenol and

Methanol

(already testing

formaldehyde) 318

(part of

M318

FTIR) $ 4 ,000

(combined

p henol &

m ethanol) 

## Every

5 years $ 8 00 Current rule

specifies

Method 316 or

318 for

formaldehyde.

V. EMISSION REDUCTIONS

A. Gas

- Fired Glass

- Melting Furnaces

Based on the recent test data provided by the facilities, the eight gas

- fired furnaces emit

approximately 5 88 pounds of chromium compounds annually. We identified three gas

- fired

furnaces with emission rates above the proposed emission limit and their asso ciated annual

emissions of 1 2 , 1 6 , and 555 pounds of chromium compounds , respectively . With the assumption

that the reduced operational life for the three furnaces will reduce chromium compound emissions

to a level that would meet the proposed emission lim it, approximately 567 pounds of chromium

compounds would be reduced annually at major sources

– which represents a 9 6 percent reduction

compared to baseline emissions.

The annualized control costs for the gas

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

reduction ( 567 pounds of chromium compounds) results in a cost effectiveness of $ 1, 3 00 per

pound of chromium compounds reduced (201 3 dollars).

B. Combined Collection/Curing Operations

Based on the recent test data provided by the facilities, the 31 manuf acturing lines located at the

10 major source facilities emit approximately 6 00 tons of organic HAP (i.e., formaldehyde,

phenol, and methanol) annually. We identified eight manufacturing lines with emission rates

above the proposed emission limit s . With the assumption that additional controls on the eight

rotary spin (RS) manufacturing lines will reduce organic HAP emissions to a level that would

meet the proposed emission limit s , approximately 123 tons of organic HAP would be reduced

4 

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

## 5

annually at m ajor sources . That represents a 2 0 percent reduction compared to current baseline

emissions.

The annualized control costs for the RS manufacturing lines ($ 774,800 ) divided by the total

emission reduction (123 tons of organic HAP) results in a cost effecti veness of $ 6, 300 per ton of

organic HAP reduced (2013 dollars)

. On an individual facility basis, the cost effectiveness for the

RS and FA manufacturing lines ranged from $1,1 32 to $14, 000 per ton of organic HAP reduced.

The total annualized costs to the in dustry for this proposed rule are $ 1. 49 million (201 3 dollars).

Table 2 summarizes the above information and associated cost impacts.

## 6

Table 2 . Summary of Costs for Wool Fiberglass Mfg Facilities to Comply with Proposed RTR Amendments (201 3 dollars)

Source

Type Gas

- Fired Furnaces Rotary Spin (RS) and Flame Attenuation (FA) Lines

Total

Facility

Cost

($) Annual

ized

Capital

Cost* Annual

O&M

Cost # Gas

Fired

Furn

aces Cr

Testing

Cost Cost

Effec

tiveness

($ /lb Cr

reduced) RS

Mfg

Bonded

Lines Addt’l RS

Control

(O & M)

Costs*** Flame Atten.

(FA) Mfg

Bonded

Lines RS and

FA Mfg

Line

Testing

Cost Cost Effec

tiveness

($/ton HAP

reduced) Company Facility

Location

1 CertainTeed Kansas City, KS Major 424 ,000 0 2 20,000 8 00 1 0 0 800 NA 444,800

2 Guardian Albion, MI Major 0 0 0 0

- 2 0 0 1,6 00 NA 1,600

3 Guardian Inwood, WV Major 0 0 0 0

- 2 125,000 0 1,6 00 8, 440 126,600

4 Guardian Mineral Wells , MS Major 0 0 0 0

- 1 0 0 8 00 NA 800

5 Guardian Winnsboro, SC Major 0 0 0 0

- 1 125,000 0 8 00 2, 567 125,800

6 Johns Manville Cleburn e, TX Major 0 0 1 10,000 NA 1 125,000 2 2,400 14, 020 137,400

7 Johns Manville Defiance, OH Major 0 0 2 20,000 NA 4 125,000 11 12,000 2,803 157,000

8 Knauf Shelbyville, IN Maj or 0 0 0 0

- 4 0 0 3 ,200 NA 3 ,200

9 Owens

- Corning Newark, OH Major 2 12,000 0** 2 20,000 10

, 5 00 1 125,000 0 8 00 1,50 0 357,800

10 Owens

- Corning Waxahachie , TX Major 0 0 1 10,000 NA 1 125,000 0 8 00 1,1 32 135,800

11 Guardian Kingman, AZ Syn Mnr 0

12 CertainTeed Chowchilla, CA Area 0

13 CertainTeed Athens, GA Area 0

14 Johns Manville McPherson, KS Area 0

15 Johns Manville Penbryn, NJ Area 0

16 Johns Manvil le Richmond, IN Area 0

17 Johns Manvil le Waterville, OH Area 0

18 Johns Manville Willows, CA Area 0

19 Johns Manvil le Winder, GA Area 0

20 Knauf Lanett , AL Area 0

21 Knauf Shasta Lake, CA Area 0

22 Owens

- Cornin g Delmar, NY Area 0

23 Owens

- Cornin g Eloy, AZ Area 0

24 Owens

- Corning Fairburn, GA Area 0

25 Owens

- Corning Kansas City, KS Area 0

26 Owens

- Corning Mount Vernon, OH Area 0

27 Owens

- Corning Salt Lake City, UT SynMnr 0

28 Owens

- Corning Santa Clara, CA Area 0

29 Owens

- Corning Nephi, UT SynMnr 0

30 Owens

- Corning Lakeland, FL Area 0

636

, 0 00 $0 8 $80,000 $ 1, 3 00 18 $750,000 13 $ 24,8 00 $6 ,300 $1, 490,800

Table 2 notes: * Capital cost = $1.144M per furnace (using NPV); a nnualized capital cost based on 7% interest rate and a reduced equipment (furnace) life from 10 to 7 years

.

** One (high

- emitting) f urnace already scheduled for replacement.

** * The re are no HF/HCl testing costs since the proposed rule requires work practice standards

.