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- 0122 **MEMORANDUM**
DATE: January 14 , 2013 SUBJECT: RI CE NESHAP Reconsideration Final Amendments

- Cost and Environmental Impacts FROM: Tanya Parise , EC/R, Inc. TO: Melanie King , EPA OAQPS/SPPD/ESG
The EPA is finalizing amendments to the national emission standards for hazardous air pollutants (NESHAP) for stationary reciprocating internal combustion engines (RICE) in 40 CFR part 63, subpart ZZZZ. The purpose o f this memorandum is to present the estimated impacts associated 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 RI CE located at area sources . This memorandum will also discuss amendments that will affect other engines subject to the RI CE NESHAP and the effect on impacts for those engines

. The amendments include alternative co mpliance options for certain stationary engines, management practices for a subset of existing stationary engines in sparsel y populated areas, and alternative monitoring and compliance options for the same engines in populated areas. In addition, the EPA i s increasing the demand response (DR) allowance for stationary emergency RI CE

. The specific amendments being finalized and how these changes will affect emission reduction estimates and the total costs of the rule are discussed in the paragraphs that follow. Itshould be noted that these impacts are identical to those estimated for the amendments proposed to the RI CE NESHAP in June 2012. Non
- Emergency Stationary SI RICE > 500 HP L ocated at Area Sources Engines in Sparsely Populated Areas Existing s tationary

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 sparsely populated (remote) areas w ill 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 coast of the United States that is in direct contact with the open seas and beyond the line marking the seaward limit of inland waters ; (2) a pipeline segment with 10 or fewer buildings intended 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 kil ometers) length of pipeline and that does not lie within 100 yards (91 meters) of either a building or a small, well

- defined outside area (such as a playground, recreation area, outdoor theater, or other place of public assembly) that is occupied by 20 or more persons on at least 5 day s a week for 10 weeks in any 12

- month period; or (3) engines not located on pipelines that have 5 or fewer buildings intended for human occupancy within a 0.25 mile radius around the engine

. Under the amendments, these2 engines are no longer subject to emission standards necessitating the use of aftertreatment , but subject to management practices instead ; no emission reductions have been estimated from meeting the management practices. The capital and annual costs for these engines would decrease substantially from those estimated for the 2010 final rule because owners and operators would not have to purchase, operate and maintain a catal ys t , plus owners and operators would not be required to monitor the cataly st in let temperature continuously

or record the pressure drop monthly

. The only costs attributed to engines subject to management practices are for maintain ing records of the maintenance conducted on the engine in order to demonstrate that the engine is ope rated and maintained according to the manufacturer’s emission

- related operation and maintenance ( O&M) requirements or the owner or operator’s own maintenance plan. It is expe cted that the majority of owners and operators are already following some ty pe of O&M requirements and little additional burden is expected. Therefore, minimal recordkeeping costs were estimated at 1 hour per ye ar for each engine at a technical labor rate of $7 2 per hour

. Owners and operators of SI engines that are subject to management practices are not subject to any reporting requi rements and therefore no reporting costs were estimated for these engines. Existing non

emergency

4

- stroke SI engines greater than 500 HP at area sources are predominantly located in sparsel y popul ated areas ; more specificall y , according to industry information , about 90 percent of these engines are in Class 1 areas. Engines in Populated Areas Existing stationary

non - emergency

4SLB and 4SRB SI engines greater than 500 HP at area sources that are not in remote areas are subject to an equipment standard under the amendments that would require the use of a catal ys t
. Under the amendments, e xisting stationary non

- emergency 4SLB SI engines do not have to meet numeric emission limits, but have to demonstrate by testing that the catal ys t is achieving a 93 percent carbon monoxide ( CO ) reduction or that CO emissions at the engine exhaust do not exceed 47 parts per million by

volume, dry

basis (ppmvd). Existing stationary non - emergency

4S RB engines are required to demonstrate via testing that the catal ys t is reducing CO b y 75 percent or more, or alternativel y that total hydrocarbons ( THC ) emissions are being reduced by 30 percent or more. Alternatively , 4SRB engines can demonstrate compliance with a CO concentration level of 270 ppmvd at 15 percent O 2 . Given that owners and operators would still have to use add

- on controls on their engines and the same catal ys t performance is expected as previously estimate d , and because pollutant reductions estimated for the 2010 rule are conservative ly based on the average control efficiencies observed during EPA’s testing program at Colorado State University (CSU) for 4SLB engines and industry testing for 4SRB engines , the same emissions re ductions estimate d for the 2010 rule are expected under the amendments for e xisting 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

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- 0542, The changes are expected to lower costs in terms of monitoring and testing expenses . Under the amendments, owners and operators no longer have to perform monthly measurements of the pressure drop across the catal ys t . Owners and operators are still required to monitor the cataly st inlet temperature or use a high temperature shutdown devic e to protect the catal ys t , but they do not have to continuously record the catal ys t inlet temperature . High temperature shutdown devices are typical on engines and the EPA has assumed that all the engines will already have such a device installed on their units. Therefore, no cost has3 been estimated for this requirement. The costs would be further reduced for 4SRB SIengines because the rule will allow less expensive CO and THC testing in place of formaldehyd e testing , which is more expensive

. Non
- emergency

engines in populated areas will continue to be subject 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 compl iance 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

. Existing non

- emergency 4

- stroke engines greater than 500 HP at area sources in populated areas account for 10 percent of the total population of 4

- stroke engines above 500 HP at area sources, according to industry estimates. THC Compliance Demonstration Option In addition to a reduction in testing costs discussed for existing 4

- stroke engines at area sources and the estimated cost impacts presented in Table 2, additional savings are expected for owners and operators of existing and new stationary 4SRB engines above 500 HP located at major sources. Owners and operators of these engines currentl y have the option of either limiting the concentration of formaldehyd e or reducing formaldeh yde emissions , a requirement that was promulgated as part of the original 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 formaldeh yde is unknown. Therefore, the specific cost savings associated with this amendment has not been calculated, however, it is expected that the testing burden will be substantially reduced. The cost of formaldeh yde stack testing used to estimate testing 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 savi ngs related to performance testing could be as high as 80 percent. Emergency DR The EPA is increasing the limit on operation for DR for stationary emergency

engines

. The amendments would increase the limit on operation for DR for emergency engines from 15 hours per year (hrs/y r) to 100 hrs/yr that would include operation for maintenance and testing purposes and DR operation. Engines greater than 300 HP that operate or agree to be available for more than 15 hrs /yrfor emergency 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 previousl y estimated that these ty pes of engines would on average operate for 50 hrs/y r . The average hours of operation for emergency engines is not expected to change based on the amendments and 50 hrs/y r 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 programs, 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 emergency DR programs, but the EPA has not accounted for any potential revenue in estimating the costs and benefits of the amendments. It is uncertain how many engines participate in these programs and how frequently stationary

emergency

engines would operate if they are called upon. According to d ata from DR programs in I SO

-NE and PJM territories backup generation4 was dispatched for less than 30 hours during the summers of 2008, 2009 and 2010. a Another example of emergency

engines o perating infrequently for DR programs can be found in Table 1 of a 2010 letter from EnerNOC to EPAb that presents a summary of emergency DR events in New England. According to EnerNOC, emergency

engines have onl y been called upon three times in New England , where the duration of the events w as 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 1 00 HP exceed or agree to be available for more than 15 hrs/y r for emergency

DR that the owners/operators use UL SD fuel and report annually the dates and times the engines operated for emergency DR purposes. The rule requires owners/operators to being using ULSD on January 1, 2015. O wners and operators would have to beg in tracking engine operation for the 2015 calendar ye ar and submit the f irst annual report earl y in 2016 that would cover 2015 . The costs associated with other requirements of the rule discussed in this memorandum have been assessed for 2013, the year owners and operators will have to start complying with the rule. However, the costs associated with UL SD fuel and annual reporting would not be incurred in 2013, but will start later in 2015/2016 , which for NESHAP is outside the ty pical time period the EPA presents estimates for. With that said, c onducting a complete estimate of the total impact of the ULSD requirement associated with operating for more than 15 hrs/y r for emergency

DR in any ye ar is still not possible because the number of engine s that would be affected b y 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 or agree to be available for more than 15 hrs/yr. The EPA believes the ULSD cost would be balanced out b y the reduced engine maintenance that is expected from using this fuel. Also, the cost difference between UL SD fuel and higher sulfur fuel is small, especiall y considering that the yearl y operation fo r emergency DR would be limited to no more than 100 hours per ye ar , and subsequently also the fuel consumption. 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 characteristics. The difference in fuel costs could therefore range from 1.4 to 25 cents per gallon between ULSD and various No. 2 diesel fuels. At the end of July 2012, the cost of residual f uel oil was $2.406, which compared to the cost of UL SD is about 60 cents per gallon higher. This cost difference may not reflect the potential for segregating fuels. Based on the amount of and heating value of the fuel currently used b y these engines, switching to UL SD fuel would have a small cost impact because the engines are used so infrequentl y. 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/y

r. Therefore, the fuel cost differential of switching from No. 2 diesel

a Memorandum from Stacy Angel, Synapse Energy Economics, Inc. to Doug Hurley, Synapse Energy Economics. Sample Revenue for a 1 MW Backup Generation Unit. June 27, 2011. b Attachment 2 to Letter from Richard H. Counihan, EnerNOC to Melanie King, EPA. Februa ry 11, 2011.EPA

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- 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/Lower_and_Higher_Heating_Values_of_Gas_Liquid_and_Solid_Fuels.pdf.5 fuel to UL SD may

cost between $22 and $391 on an annual basis for each engine , as a rough estimate

. Based on the lower heating value, s witching from residual fuel oil t o UL SD may cost $860 per year , depending on the residual fuel oil quality , hours of operation, and size of the engine. Regarding the impact of the requirement to report emergency DR operation, the EPA anticipates that in most cases, the entity

that disp atches the engines to operate, such as the curtailment service provider or utility, will report the information to EPA on behalf of the facility that owns the engine. Thus, the burden of the reporting requirement will likely be on the entities that dispatc h the engines. The number of entities is uncertain, but the EPA was able to obtain estimates from the National Rural Electric Cooperative Association of the number of cooperatives that have engines participating in demand response. The NRECA estimated that approximately 446 local utilities would engage in the reporting requirement. The EPA estimates that each utility would spend approximately 16 hours per year reporting the information to the EPA. As of June 2012, the total compensation for management/profe ssional staff was $51.23 per hour. Adjusting this compensation rate b y appl yi ng an overhead rate of 167 percent yields a total wage rate of $85.60 per hour. e This results in an estimated burden of 7, 136 hours at a cost of $ 611 ,000 per ye ar, beginning in the year 2015. The EPA also received information from one curtailment service provider, EnerNOC, who estimated the burden of the requirement to be 1 ,000 hours at a cost of $60,000 in the first year of implementation, 2015, and 2 50 hours at a cost of $15,000 in subsequent years (using a wage rate of $60 per hour) . Using an estimated number of 70 curtailment service providers nationwide that are operating engines for emergency

demand response, the burden for curtailment service pro viders would be 70,000 hours at a cost of $4.2 million in the first year of implementation, 2015, and 17,500 hours at a cost of $1 million in subsequent years. Summing the totals for the cooperatives and curtailment service providers yields a total of 77, 1 36 labor hours at a cost of $4.8 million ($2012) in the first year that reporting is required, 2015, and 24, 6 36 labor hours at a cost of $1.7 million ($2012) in subsequent years. Stationary

Agricultural RICE The EPA is specifying that c ertified Tier 3 e xisting 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 standards. This means that these engines will not be required to install add

- on controls and subsequentl y no emission reduction has been estimated for this group of engines. The EPA is no longer accounting for a reduction in emissions from these engines effectively lowering the estimate of emissions reductions previously estimated for the 2010 rule. 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 e stimate the impacts of this amendment. In addition, the EPA is specifying that c ertified 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 sub ject to management practices until 2015 , after which the numeric emission limit s 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 impac ts 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 RI CE in Alaska

e http://www.bls.gov/news.release/ecec.t05.htm.6

The EPA is also broaden ing the definition of remote area sources of Alaska in the RI CE NESHAP. Currently , remote areas are those that are not on the Federal Aid Highway Sy stem (FAHS). This change permit s 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 would be able to qualify for this provision. Therefore, it was not possib le to assess the environmental and economic impacts associated with 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. While the EPA does not have suffi cient information to quantify the total impact of this change, the EPA can provide an example of the impact for an individual facility . For instance, the Bailey Power Plant operated b y 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 these four engines would be subject to management practices instead 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 , respectivel y, in total from these four engines. Under the amendments, the facility would avoid total capital costs associated with required aftertreatment of over $960,000 . The facility would avoid annual expenditures related to aftertreatment operating and maintenance costs of more than $176,000 per year , if management practices onl y are required for these engines. A summary

of the emission reductions associated w ith 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 2 7,142 9,147 Tables 2 and 3 present the pollutant reductions by HP and by

area/major sources for the SI and CI portion of the rule, respectivel y.

f The estimates presented in Tables 1 through 6 are for existing stationary RICE less than or equal to 500 HP located at maj or sources and existing stationary RICE located at area sources.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**  **9,147**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 amendments and those estimated for the 2010 final rule are presented in Table 4

. All costs were converted to 2010 dollars for purposes of presenting costs associated with the rule in present day terms. However, because the costs estimated for the 2010 rule were in 2008 and 2009 dollars for the CI and SIengine portion of the rule, respectivel y, the costs for the amen dments in Table 2 are also shown in those ye ars 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, respectivel y. **Table 4**  **. Summary of Cost Impacts 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) $7 37 million ($2008) $7 40 million

($2010)9

Please refer to the memoranda entitled “ Impacts Associated with NESHAP for Existing Stationary CI RI CE ” and “ Impacts Associated with NESHAP for Existing Stationary SI RI CE ” available from www.regulations.gov as Document ID Numbers EPA

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- 0542 for additional assumptions and further information on the 2010 rule estimates. The EPA used cost indicies in order to convert 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 ye ar. To convert the 2009 costs associated with the existing SI engine portion of the rule to 2010 dollars, the EPA divided 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 costs were previousl y presented for the existing CI engine portion of the rule, the EPA divided the total 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).10 **Table 5**  **. Summary of Cost Impacts for Existing Stationary SI RICE**

**– by NAICS**  **(2009 Dollars)**
**NAICS Major Source**  **Area Source Total (Major + Area)**  **Capital Cost Annual Cost**  **Capital Cost Annual Cost**  **Capital Cost Annual Cost**  Electric Power Generation (2211) $52,905,258 $63,062,494 $11,698,144 $12,138,277 $64,603,403 $75,200,772 Natural Gas Transmission (48621) $1,484,494 $1,462,530 $13,718,381 $6,142,839 $15,202,876 $7,605,369 Crude Petroleum & NG Production (211111) $4,561,236 $6,138,383 $71,439 $951,462 $4,632,675 $7,089,844 Natural Gas Liquid Producers (211112) $4,561,236 $6,138,383 $71,439 $951,462 $4,632,675 $7,089,844 National Security (92811) $5,878,362 $7,006,944 $1,299,794 $1,348,697 $7,178,156 $8,355,641 Hydro Power Units (335312) $0 $25,248 $0 $37,872 $0 $63,120 Irrigation Sets (335312) $3,025,050 $3,230,856 $3,285,890 $4,999,041 $6,310,940 $8,229,896 Welders (333992) $247,440 $679,896 $0 $570,130 $247,440 $1,250,027 **Total $72,663,076**  **$87,744,734 $30,145,088**  **$27,139,780 $102,808,163**  **$114,884,514 Table**  **6 . Summary of Cost Impacts for Existing Stationary**  **C I RICE** 

**– by NAICS**  **(2008 Dollars)**
**NAICS Major Source**  **Area Source Total (Major + Area)**  **Capital Cost Annual Cost**  **Capital Cost Annual Cost**  **Capital Cost Annual**  **Cost** Electric Power Generation (2211) $161,766,376 $90,982,105 $464,947,798 $202,463,116 $626,714,174 $293,445,222 Hospitals (622110) $20,220,797 $11,372,763 $0 $0 $20,220,797 $11,372,763 Crude Petroleum & NG Production (211111) $2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314 Natural Gas Liquid Producers (211112) $2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314 National Security (92811) $20,220,797 $11,372,763 $51,660,866 $22,495,902 $71,881,663 $33,868,665 Hydro Power Units (335312) $0 $16,637 $0 $22,959 $0 $39,597 Irrigation Sets (335312) $10,294,073 $11,791,567 $34,145 $5,208,084 $10,328,218 $16,999,651 Welders (333992) $108,260 $1,481,447 $0 $1,881,380 $108,260 $3,362,827 **Total $217,359,106**  **$134,632,238 $519,823,039**  **$237,267,114 $737,182,145**  **$371,899,352**11

Stationary

Diesel RI CE on OCS Vessels In the original assessment of affected sources that would be covered b y the amendments, the EPA did not consider that there could be circumstances during which stationary CI RI CE on Outer Continental Shelf (OCS) vessels could 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

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- 0857) . The engines in question would often be larger than 3 00 HP and would be considered area sources when they become stationary

sources during drilling in the OCS. Consequently , under the propo sed rule, these engines would have been subject to emission standards outlined in Table 2d of the proposal. Meeting the emission standards under the proposal would likely have required the use of add

- on controls, namely oxidation cataly st, in this case. C omments received on the June 7, 2012, proposed rule argued that there are feasibility issues with complying with the RI CE NESHAP for stationary diesel engines on offshore vessels. Specifically , according to commenters , OCS facilities face strict weight and space constraints for instance, which limit control and testing options. To comply with the requirements of the RICE NESHAP would not be cost effective , according to commenters

. Instead, commenters with sources on the OCS affected b y the RI CE NESHAP reque sted that stationary engines in these locations be permitted to comply with the rule by following maintenance practices, similar to those required for smaller (less than 300 HP) existing stationary diesel engines. Based on information obtained from EPA Re gional Offices , the EPA has identified that in 2013 there are expected to be up to 5 drilling vessels operating on the OCS that would be subject to the RICE NESHAP as existing sources. Specificall y, based on available information obtained from EPA Regions 4 and 10, there would be o ne drill ing vessel in the Chukchi Sea on the Alaska OCS and four drilling vessels on the OCS of the Gulf of Mexico. The EPA estimated baseline HAP emissions from these units according to information available in their permits. To be conservative and to estimate the worst

- case scenario, HAP emissions were estimated 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 engines on OCS drilling vessels are low and represent a small amount of total emissions (less than 0.06 percent) from all stationary diesel engines in the U.S. It is unlikel y that in the event that the final rule did not allow these engines to comply with the rule by following maintenan ce 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 actual emissions from these sources.12

More than likel y, owners and operators of these engines would have sought a technical infeasibility exemption under 40 CFR 55.7 , and if granted, these engines 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 RI CE NESHAP requirements, which may

have involved measures to offset the emissions 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 requiring maintenance practice for these engines. Also, accordi ng to Region 4, because the only criteria pollutants the RI CE NESHAP requires limits to be met for are CO and formaldehyde as VOC, it is possible that under the exemption only offsets for these pollutants would be required. Also, the EPA has the discretion to set the offset ratio to ensure onshore standards and increments are met. Therefore, it is not possibl e to quantify the potential offsets that would be required, if the engines were to seek a technical infeasibility exemption under 40 CFR part 55.