From: King.Melanie@epamail.epa.gov Sent: Friday, January 04, 2013 7:37 PM To: Cortney Higgins Cc: Wayland.Robertj@epamail.epa.gov; Balserak.Paul@epamail.epa.gov; VanLare.Paula@epamail.epa.gov Subject: draft RICE impacts memo Attachments: RICE NESHAP Reconsideration Impacts - Final Rule 1-4-13 DRAFT.docx

Hi Cortney, Attached is the draft impacts memo for RICE, per our call today.

Melanie

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# E C 

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R Incorporated Providing Environmental Technical Support Since 1989

501 Eastowne Drive, Suite 325  Chapel Hill, North Carolina 27514 Telephone: (919) 484-0222  Fax: (919) 484-0122 MEMORANDUM

DATE: January 4, 2013

SUBJECT: RICE NESHAP Reconsideration Final Am endments - Cost and Environmental Impacts

FROM: Tanya Parise, EC/R, Inc.

TO: Melanie King, EPA OAQPS/SPPD/ESG

The EPA is finalizing amendments to the nationa l emission standards for hazardous air pollutants (NESHAP) for stationary reciprocat ing internal combustion engines (R ICE) in 40 CFR part 63, subpart ZZZZ. The purpose of this memorandum is to present the estimated impacts associat ed with the amendments being promulgated compared to the 2010 final rule s (75 FR 9648 and 75 FR 51570) that addressed existing stationary RICE less than or equal to 500 horsepower (HP) located at major sources and existing stationary

RICE located at area sources. This memorandum will also discuss amendments that will affect other engines subject to the RICE NESHAP and the effect on impacts for those engines.

The amendments include alternative compliance options for certain stationary engines, management practices for a subset of existing st ationary engines in sparsely populat ed areas, and alternative monitoring and compliance options for the same engines in populat ed areas. In addition, the EPA is increasing the demand response (DR) allowance for stationary emerge ncy RICE. The specific amendments being finalized and how these changes will affect emission reduction estimat es and the total costs of the rule are discussed in the paragraphs that follow. It shoul d be noted that these impacts are id entical to those estimated for the amendments proposed to the RICE NESHAP in June 2012.

Non-Emergency Stationary SI RICE >500 HP Located at Area Sources

Engines in Sparsely Populated Areas

Existing stationary non-emergency 4-stroke lean burn (4SLB) and 4-stroke rich burn (4SRB) spark ignition (SI) engines greater than 500 HP at area sources that are in spar sely populated (remote) areas will be subject to management practices under the amendments. A remote area is defined as either: (1) an offshore area that is beyond the line of ordinary low water along that portion of the coas t of the United States that is in direct contact with the open seas and beyond the lin e marking the seaward limit of inland waters; (2) a pipeline segment with 10 or fewer buildings intende d for human occupancy and no buildings intended for human occupancy with four or more stories within 220 yards (200 meters) on either side of the centerline of any continuous 1-mile (1.6 kilometers) length of pipeli ne and that does not lie w ithin 100 yards (91 meters) of either a building or a small, well-defined outsi de area (such as a playgr ound, recreation area, outdoor theater, or other place of public assemb ly) that is occupied by 20 or more persons on at least 5 days a week for 10 weeks in any 12-month period; or (3) engines not located on pipelines that have 5 or fewer buildingsDRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE

2 intended for human occupancy within a 0.25 mile radi us around the engine. Unde r the amendments, these engines are no longer subject to emission standards neces sitating the use of aftertreatment, but subject to management practices instead; no em ission reductions have been estimated from meeting the management practices. The capital and annual costs for these engine s would decrease substantia lly from those estimated for the 2010 final rule because owners and operators w ould not have to purchase, operate and maintain a catalyst, plus owners and operators would not be required to mon itor the catalyst inlet temperature continuously or record th e pressure drop monthly.

The only costs attributed to engi nes subject to management practices are for maintaining records of the maintenance conducted on the engine in order to dem onstrate that the engine is operated and maintained according to the manufacturer’s em ission-related operation and mainte nance (O&M) requirements or the owner or operator’s own ma intenance plan. It is expected that th e majority of owners and operators are already following some type of O&M requirements a nd little additional burden is expected. Therefore, minimal recordkeeping costs were estimated at 1 hour pe r year for each engine at a technical labor rate of $72 per hour. Owners and operators of SI engines that are subject to manage ment practices are not subject to any reporting requirements and theref ore no reporting costs were estimat ed for these engines. Existing nonemergency 4-stroke SI engines grea ter than 500 HP at area sources are predominantly located in sparsely populated areas; more specifically, according to industry information, about 90 percent of th ese engines are

in Class 1 areas.

Engines in Populated Areas

Existing stationary non-emergency 4SLB and 4SRB SI engines greate r than 500 HP at area sources that are not in remote areas are subject to an equi pment standard under the amendments that would require the use of a catalyst. Under the amendments, existing stationary non-emergency 4SLB SI engines do not have to meet numeric emission limits, but have to demonstrate by testing that the catalyst is achieving a 93 percent carbon monoxide (CO) reduction or that CO emissions at th e engine exhaust do not exceed 47 parts per million by volume, dry basis (ppmvd). Existing stat ionary non-emergency 4SRB engines are required to demonstrate via testing that the catal yst is reducing CO by 75 percent or more, or alternatively that total hydrocarbons (THC) emissions are be ing reduced by 30 percent or more . Alternatively, 4SRB engines can demonstrate compliance with a CO concentr ation level of 270 ppmvd at 15 percent O 2

.

Given that owners and operator s would still have to use add-on controls on their engines and the same catalyst performance is expected as previously estimated, and because pollutant reductions estimated for the 2010 rule are conservatively based on the averag e control efficiencies obs erved during EPA’s testing program at Colorado State University (CSU) for 4SLB engines and industry testing for 4SRB engines, the same emissions reductions estimated for the 2010 rule are expected under the amendments for existing stationary non-emergency 4SLB and 4SRB SI engines greater than 500 HP at area sources in populated

areas. The control efficiencies are documented in the memorandum “Impacts Associated with NESHAP for Existing Stationary SI RICE” available from www.regulations.gov as Document ID Numbers EPA-HQOAR-2008-0708-0542,

The changes are expected to lower costs in te rms of monitoring and tes ting expenses. Under the amendments, owners and operators no longer have to perform monthly measurements of the pressure drop across the catalyst. Owners and operators are still be required to monitor th e catalyst inlet temperature or use a high temperature shutdown device to protect the catalyst, but they do no t have to continuously record the catalyst inlet temperature. High temperature shutdow n devices are typical on engines and the EPA hasDRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE

3 assumed that all the engines will already have such a device installed on their units. Therefore, no cost has been estimated for this requirement. The costs would be further reduced for 4SRB SI engines because the rule will allow less expensive CO and THC testing in place of form aldehyde testing, which is more expensive.

Non-emergency engines in populated areas will continue to be subjec t to the same recordkeeping and reporting requirements as required in 2010 rule, such as reading instructions, training personnel, submitting an initial notification, and submitting semi-annual compliance reports. It is estimated that a total of 14 hours will be needed, including 4 hours for reading the rule, 4 hours for training, and 6 hours for preparing and submitting notifications and compliance reports. Existi ng non-emergency 4-stroke engines greater than 500 HP at area sources in populated ar eas account for 10 percent of the total population of 4-stroke engines above 500 HP at area sources, a ccording to indus try estimates.

THC Compliance Demonstration Option

In addition to a reduction in tes ting costs discussed for existing 4-st roke engines at area sources and the estimated cost impacts presented in Table 2, additio nal savings are expected for owners and operators of existing and new stationary 4SRB e ngines above 500 HP located at majo r sources. Owners and operators of these engines currently have the op tion of either limiting the concentr ation of formaldehyde or reducing formaldehyde emissions, a requirement that was promulgated as part of the or iginal 2004 RICE NESHAP rulemaking. The amendments provide these owners and operators an alternative THC compliance demonstration option. It is expected that owners and operators will take advantage of the THC testing option as opposed to testing for formaldehyde, but the number of engines that will be tested for THC instead of formaldehyde is unknown. Therefore, the specific cost sa vings associated with this amendment has not been calculated, however, it is expected that the testing burden will be substantia lly reduced. The cost of formaldehyde stack testing used to estimate testi ng costs for the 2004 rule was close to $6,000. Estimates available today indicate that CO or THC testing can be performed for around $1,000. Subsequently, it is possible that cost savings related to performa nce testing could be as high as 80 percent.

Emergency DR

The EPA is increasing the DR allowance for stat ionary emergency engines. The amendments would increase the DR allowance for emergency engines from 15 hours per year (hrs/y r) to an allowance of 100 hrs/yr that would include operation for maintenance and testing pur poses and DR operation. Engines greater than 300 HP that operate for more than 15 hrs/yr for em ergency DR must use ultra low sulfur diesel (ULSD) and report on an annual basis the dates and times the engines operated for emergency DR purposes.

To estimate emissions from emergency engines the EPA has previously estimated that these types of engines would on average operate for 50 hrs/yr. The aver age hours of operation for emergency engines is not expected to change based on the amendments and 50 hrs/ yr is still believed to be representative of average emergency engine operation. Therefore, the emissions previously calculated remain appropriate. In terms of any revenue generated from participation in DR pr ograms, the EPA expects owners and operators will benefit financially, however, the EPA does not know to what extent. The EPA expects there will be savings and/or income generated through participation in em ergency DR programs, but the EPA has not accounted for any potential revenue in estimati ng the costs and benefits of the am endments. It is uncertain how many engines participate in these program s and how frequently stationary em ergency engines would operate if they are called upon. According to data from DR program s in ISO-NE and PJM territories backup generationDRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE

4 was dispatched for less than 30 hour s during the summers of 2008, 2009 and 2010. a Another example of emergency engines operating infrequently for DR progr ams can be found in Table 1 of a 2010 letter from

EnerNOC to EPA b that presents a summary of emergency DR events in New England. According to EnerNOC, emergency engines have only been called upon three times in New England, where the duration of the events was 3.75, 5.95 and 16.5 hours in 2006, 2005, and 2003, respectively. Other factors, such as the annual revenue from DR programs (which varies), are also uncertain making it problematic to estimate the economic benefit of such programs. As such, the EPA has not estimated any costs associated with the emergency engine amendments.

For the final rule, the EPA is requiring that if engines greater than 300 HP exceed 15 hrs/yr for emergency DR that the owners/operators use ULSD fu el and report annually the da tes and times the engines operated for emergency DR purposes. The rule requires ow ners/operators to being using ULSD on January 1, 2015. Owners and operators would have to begin track ing engine operation for the 2015 calendar year and submit the first annual report earl y in 2016 that would cover 2015. Th e costs associated with other requirements of the rule discussed in this memorandu m have been assessed for 2013, the year owners and operators will have to start complyi ng with the rule. However, the costs associated with ULSD fuel and annual reporting would not be incurred in 2013, but will start later in 2015/2016, which for NESHAPs is outside the typical time period the EPA presents estimates for.

With that said, conducting a complete estimate of the total impact of the ULSD and reporting requirements associated with operating for more than 15 hrs/yr for emergency DR in any year is still not possible because the number of engines that would be affected by this requirement is unknown. The EPA does not know the number of engines that will be operated for emergency DR and the EPA does not know how many of those engines would operate for more than 15 hrs/yr.

The EPA believes the ULSD cost would be balanced out by the reduced engine maintenance that is expected from using this fuel. Also, the cost difference between ULSD fuel and higher sulfur fuel is small, especially considering that the y early operation for emergency DR would be limited to no more than 100 hours per year, and subsequently also the fuel consump tion. As of July 2012, the pre-tax cost of ULSD to the end user was $3.003 per gallon. c The cost of other No. 2 diesel fuels ranged from $2.753 to $2.989 per gallon, depending on the sulfur content and other fuel characte ristics. The difference in fuel costs could therefore range from 1.4 to 25 cents per gallon between ULSD and various N o. 2 diesel fuels. At the end of July 2012, the cost of residual fuel oil was $2.406, which compared to the cost of ULSD is about 60 cents per gallon higher.

Based on the amount of and heati ng value of the fuel currently us ed by these engines, switching to ULSD fuel would have a small cost impact because th e engines are used so infrequently. Based on the lower heating value of U.S. conventional diesel of 128,450 Btu/gal d , a 300 HP engine operating for 100 hrs/yr may use approximately 1,560 gal diesel/yr. Therefore, the fu el cost differential of sw itching from No. 2 diesel fuel to ULSD may cost between $22 and $391 on an annua l basis for each engine, as a rough estimate. Based

a Memorandum from Stacy Angel, Synapse Energy Economics, Inc. to Doug Hurley, Synapse Energy Economics. Sample Revenue for a 1 MW Bac kup Generation Unit. June 27, 2011.

b Attachment 2 to Letter from Richard H. Counihan, EnerNOC to Melanie King, EPA. February 11, 2011.EPA-HQOAR-2008.0708-0748.2.

c Refiner Petroleum Product Prices by Sales Type. Sales to End Users. http://www.eia.gov/dnav/pet/pet_pri_refoth_dcu_nus_m.htm . July 2012.

d http://cta.ornl.gov/bedb/appendix_a/L ower_and_Higher_Heating_Values_of _Gas_Liquid_and_Solid_Fuels.pdf.DRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE

5 on the lower heating value, switching from residual fuel oil to ULSD may cost $860 per year, depending on the residual fuel oil quality, hours of operation, and size of the engine.

The costs associated with the reporting requirements would be minimal since facilities are already required to keep records. Because the number of engines that would be reporting the dates/times of emergency DR operation is not known, a total estimate cannot be generated. In terms of the effort to submit annual reports, it is expected that one hour per year per facility would be sufficient to comply with this requirement. As of June 2012, the total compen sation for management/professional staff was $51.23 e

. Adjusting this compensation rate by applying an overhead rate of 167 percent yields a total wage rate of $85.60, which is expected to cover the reporting requirement.

Finally, as discussed above, the EPA has not esti mated the increased revenue from DR participation by generators with emergency engines, which would likel y offset some of the costs (if not all) associated with the ULSD and reporting requireme nts. Therefore, the EPA believes it is justified in not quantifying these costs that begin to be incurred in 2016, whic h, as discussed, will be difficult to fully estimate.

Stationary Agricultural RICE

The EPA is specifying that certified Tier 3 exis ting stationary compression ignition (CI) engines at area sources that were installed before June 12, 2006, are automatically be in compliance with the NESHAP and are not be subject to aftertreatment-forcing standard s. This means that these engines will not be required

to install add-on controls and s ubsequently no emission reduction has been estimated for this group of engines. The EPA is no longer accounting for a reducti on in emissions from these engines effectively lowering the estimate of emissions reductions previous ly estimated for the 2010 ru le. In California, San Joaquin Valley has identified 17 Tier 3 CI engines installed between January 1 and June 12, 2006, which is the number of engines that EPA has used to estimate the impacts of this amendment.

In addition, the EPA is specifying that certified Tier 1 and Tier 2 existing stationary CI engines greater than 300 HP at area sources that will be replaced within the next few years due to state/local rules are subject to management practices until 2015, after which the numeric em ission limits of the NESHAP apply.

In California there are 49 of these Tier 1 engines and 360 of these Tier 2 engines, which are the number of engines the EPA has used to estimate the impacts of this amendment. The EPA has not estimated any

emissions reductions or control costs under the RICE NESHAP for these 409 stationary Tier 1 and Tier 2 certified CI engines in the year 2013.

Remote Stationary RICE in Alaska

The EPA is also broadening the definition of remo te area sources of Alaska in the RICE NESHAP. Currently, remote areas are those th at are not on the Federal Aid Highw ay System (FAHS). This change permits existing stationary CI engines at other remote area sources in Alaska to meet management practices as opposed to emission standards likel y necessitating aftertreatment. However, the EPA is unable to quantify the number of engines in remote areas of Alaska that w ould be able to qualify for this provision. Therefore, it was not possible to assess the environmental and econom ic impacts associated w ith this amendment. The EPA does not know how many facilities would be considered remote and does not have any information on how many engines are affected.

e http://www.bls.gov/news.release/ecec.t05.htmDRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE

6 While the EPA does not have sufficient information to quantify the total impact of this change, the EPA can provide an example of the impact for an indi vidual facility. For instan ce, the Bailey Power Plant operated by the Ketchikan Public Utilities has four (4 ) stationary diesel engines. Two (2) rated at 4,500 kilowatt (KW), one (1) rated at 6,450 KW and one (1 ) rated at 10,500 KW. If thes e four engines would be subject to management practices inst ead of aftertreatment, the lost HAP reductions is estimated to be 1.3 tpy total from the four engines. The lost CO, PM, and VOC emissions are estimated at 1 tpy, 3.7 tpy, and 35 tpy, respectively, in total from these f our engines. Under the amendments, th e facility would avoid total capital

costs associated with re quired aftertreatment of over $960,000. The f acility would avoid annual expenditures related to aftertreatment operating and maintenance costs of more th an $176,000 per year, if management practices only are requi red for these engines.

A summary of the emission reduction s associated with the amendments and those estimated for the 2010 final rule are presented in Table 1.

Table 1. Summary of Pollutant Reductions for Existing Stationary RICE f

Pollutant Emission Reductions (tpy) in the year 2013

Previous Estimate (2010 Final Rule) RICE Reconsideration (2012 Amendments)

CI SI CI SI

HAP 1,014 6,008 1,005 1,778

CO 14,342 109,321 14,238 22,211

PM 2,844 N/A 2,818 N/A

NO

x N/A 96,479 N/A 9,648

VOC 27,395 30,907 27,142 9,147

Tables 2 and 3 present the pollutant reductions by HP and by area/major s ources for the SI and CI portion of the rule, respectively.

f The estimates presented in Tables 1 through 6 are for existing st ationary RICE less than or equal to 500 HP located at major sources and existing stationary RICE located at area sources.DRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE

7 Table 2. Pollutant Reductions for Existing Stationary SI RICE – by HP b

Size Range (HP) Emission Reductions (tpy) in the year 2013

HAP CO NO

x VOC
Major Sources

25-50 0 0 0 0

50-100 0 0 0 0
100-175 744 7,124 0 3,826
175-300 277 2,653 0 1,424
300-500 288 2,755 0 1,480

500-600 N/A N/A N/A N/A

600-750 N/A N/A N/A N/A

>750 N/A N/A N/A N/A Total Major 1,308 12,532 0 6,730

Area Sources

25-50 0 0 0 0

50-100 0 0 0 0

100-175 0 0 0 0

175-300 0 0 0 0

300-500 0 0 0 0
500-600 101 2,070 2,063 517

600-750 22 453 452 113

>750 347 7,156 7,133 1,787

Total Area 470 9,679 9,648 2,418

Total 1,778 22,211 9,648 9,147DRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE

8 Table 3. Pollutant Reductions for Existing Stationary CI RICE – by HP b

Size Range (HP) Emission Reductions (tpy) in the year 2013

HAP CO PM VOC Major Sources

50-100 0 0 0 0
100-175 44 2,072 123 1,183
175-300 57 1,571 161 1,549
300-500 145 2,362 407 3,923

500-600 18 209 50 478

600-750 11 107 31 300

>750 36 236 102 982 Total Major 312 6,558 874 8,416

Area Sources

50-100 0 0 0 0

100-175 0 0 0 0

175-300 0 0 0 0
300-600 363 5,244 1,017 9,798
600-750 91 879 256 2,463

>750 239 1,557 671 6,466

Total Area 693 7,680 1,944 18,727
Total 1,005 14,238 2,818 27,142

A summary of the costs associated with the ame ndments and those estimated for the 2010 final rule are presented in Table 4. All costs were converted to 2010 dollars for purpos es of presenting costs associated with the rule in present day terms. However, becaus e the costs estimated for the 2010 rule were in 2008 and 2009 dollars for the CI and SI engine portion of the rule, resp ectively, the costs for the amendments in Table 2 are also shown in those years in order to be able to compare on a consistent basis. Tables 5 and 6 present the cost impacts by NAICS code for the SI and CI portion of the rule, respectively.

Table 4. Summary of Cost Impact s for Existing Stationary RICE b

Engine Previous Estimate (2010 Final Rule) RICE Reconsideration (2012 Amendments)

Total Annual Cost

SI $253 million ($2009) $251 million ($2010) $115 million ($2009) $115 million ($2010)

CI $373 million ($2008) $375 million ($2010) $372 million ($2008) $373 million ($2010) Total Capital Cost

SI $383 million ($2009) $380 million ($2010) $103 million ($2009) $103 million ($2010)

CI $744 million ($2008) $748 million ($2010) $737 million ($2008) $740 million ($2010)DRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE

9 Please refer to the memoranda entitled “Impacts Asso ciated with NESHAP for Existing Stationary CI RICE” and “Impacts Associated with NESHAP for Existing Stationary SI RICE” available from www.regulations.gov as Document ID Numbers EP A-HQ-OAR-2008-0708-0329 and EPA-HQ-OAR-2008- 0708-0542 for additional assumptions and further information on the 2010 rule estimates.

The EPA used cost indicies in order to c onvert between 2008, 2009, and 2010 dollars. Specifically, the Marshall & Swift (M&S) Equipment Cost Index for the different years were applied to total cost

estimates to convert the costs to a specific year. To convert the 2009 cost s associated with the existing SI engine portion of the rule to 2010 dollars, the EPA di vided the total cost by the M&S Annual Index for 2009 (1,468.6) and multiplied the resulting cost by the M& S Equipment Cost Index for 2010 (1,457.4). Similarly, to convert from 2008 dollars, which was the year the co sts were previously pres ented for the existing CI engine portion of the rule, the EPA divided the to tal cost by the M&S Annual Index for 2008 (1,449.3) and multiplied the resulting cost by the M&S Annual Index for 2010 (1,457.4).10Table 5. Summary of Cost Impacts for ExistingStationary SI RICE – by NAICS (2009 Dollars)NAICSMajor SourceArea SourceTotal (Major + Area)Capital CostAnnual CostCapital CostAnnual CostCapital CostAnnual CostElectric Power Generation (2211)$52,905,258 $63,062,494 $11,698,144 $12,138,277 $64,603,403 $75,200,772Natural Gas Transmission (48621)$1,484,494 $1,462,530 $13,718,381 $6,142,839 $15,202,876 $7,605,369Crude Petroleum & NG Production (211111) $4,561,236$6,138,383 $71,439 $951,462 $4,632,675 $7,089,844Natural Gas Liquid Producers (211112) $4,561,236 $6,138,383 $71,439 $951,462 $4,632,675 $7,089,844National Security (92811)$5,878,362 $7,006,944 $1,299,794 $1,348,697 $7,178,156 $8,355,641HydroPowerUnits(335312) $0 $25,248 $0 $37,872 $0 $63,120Irrigation Sets (335312)$3,025,050 $3,230,856 $3,285,890 $4,999,041 $6,310,940 $8,229,896Welders (333992)$247,440 $679,896$0$570,130 $247,440 $1,250,027Total$72,663,076 $87,744,734 $30,145,088 $27,139,780 $102,808,163 $114,884,514Table 6. Summary of Cost Impacts for ExistingStationary CI RICE – by NAICS (2008 Dollars)NAICSMajor SourceArea SourceTotal (Major + Area)Capital CostAnnual CostCapital CostAnnual CostCapital CostAnnual CostElectric Power Generation (2211)$161,766,376 $90,982,105 $464,947,798 $202,463,116 $626,714,174 $293,445,222Hospitals (622110)$20,220,797 $11,372,763 $0 $0 $20,220,797 $11,372,763Crude Petroleum & NG Production (211111) $2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314Natural Gas Liquid Producers (211112) $2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314National Security (92811)$20,220,797 $11,372,763 $51,660,866 $22,495,902 $71,881,663 $33,868,665Hydro Power Units (335312)$0 $16,637$0$22,959$0$39,597Irrigation Sets (335312)$10,294,073 $11,791,567 $34,145 $5,208,084 $10,328,218 $16,999,651Welders (333992)$108,260 $1,481,447 $0 $1,881,380 $108,260 $3,362,827Total $217,359,106$134,632,238$519,823,039$237,267,114$737,182,145$371,899,35211 Stationary Diesel RICE on OCS Vessels and Rigs

In the original assessment of affected sources that would be covered by the amendments, the

EPA did not consider that there could be circumstances during whic h stationary CI RICE on Outer Continental Shelf (OCS) vessels coul d be considered stationary and consequently subject to the RICE NESHAP. Therefore, impacts from these units were not assessed in the proposed rule impacts analysis dated May 10, 2012 (EPA-HQ-OAR-2008-0708-0857). The e ngines in question would be larger than

500 HP and would be considered area sources when they become stationary sources during drilling in the OCS. Consequently, under the proposed rule, these engines would have been subject to emission standards outlined in Table 2d of the proposal. Mee ting the emission standards under the proposal would likely have required the use of add-on controls , namely oxidation catalyst, in this case.

Comments received on the June 7, 2012, proposed rule argued that there are feasibility issues with complying with the RICE NESHAP for stat ionary diesel engines on offshore vessels and platforms/rigs. Specifically, according to commenters , OCS facilities face strict weight and space constraints for instance, which limit control and testi ng options. To comply with the requirements of the RICE NESHAP would not be cost effective, acc ording to commenters. Instead, commenters with sources on the OCS affected by the RI CE NESHAP requested that stati onary engines in these locations be permitted to comply with the rule by following ma intenance practices, similar to those required for smaller (less than 300 HP) existi ng stationary diesel engines.

Based on information obtained from EPA Regional Offices, the EPA has identified that in 2013 there are expected to be up to 5 vessels or drilling rigs operating on the OCS that would be subject to the RICE NESHAP as existing sources. Specifically, based on available information obtained from EPA Regions 4 and 10, there would be one drillship in th e Chukchi Sea on the Alaska OCS and four drilling rigs or drillships on the OCS of the Gulf of Mexico. The EPA estimated baseline HAP emissions from these units according to information available in thei r permits. To be conservative and to estimate the worst-case scenario, HAP emissions were estimate d based the maximum allowable amount of operation per drilling season. A summary of the estimated HAP emissions for 2013 are presented in Table 7.

Table 7. Total Baseline HAP Emissions from Stationary Engines on OCS Vessels Based on Projected Activity for 2013

Vessel/Rig g tons/yr lb/yr
Deepwater Nautilus 2.13E-01 426
Discoverer Spirit 4.76E-03 10

Discoverer 1.13E-01 226

Pathfinder 6.85E-01 1,369

DD1 7.34E-01 1,469

Total: 1.75 h 3,500

As indicated in Table 7, baseline emissions from stationary e ngines on OCS sources are low and represent a small amount of total emissions (less than 0.06 percent) from all stati onary diesel engines in the U.S. It is unlikely that in the event that the final rule did not allow these e ngines to comply with the rule by following maintenance practices that these units would be equipped with oxidation catalyst.

g These are known vessels/rigs that are currently permitted, but similar rigs may be used from year to year.

h Note that the HAP emissions are conservative estimates and may be higher than actua l emissions from these sources.DRAFT – DELIBERATIVE – DO NOT CITE OR QUOTE

12 More than likely, owners and opera tors of these engines would have sought a technical infeasibility exemption under 40 CFR 55.7, and if granted, these e ngines would not have been required to use oxidation catalyst or any other HAP-reducing control technology. The exemption would have required the engines to employ a substitute requirement in place of the original RICE NESHAP requirements, which may have involved measures to offset the emi ssions from these engines. However, the amount of

HAP emissions that would have been offset is unknown and the EPA is not able to estimate the magnitude of those emissions in the absence of re quiring maintenance practice for these engines. Also, according to Region 4, because the only criteria po llutants the RICE NESHAP requires are CO and formaldehyde as VOC, it is possible that under the ex emption only offsets for these pollutants would be required. Also, the EPA has the disc retion to set the offset ratio to ensure onshore standards and increments are met. Therefore, it is not possibly to quantify the potential offset s that would be required, if the engines were to seek a technical infeasibility exemption under 40 CFR part 55.