### MEMORANDUM

**TO:** Steam Electric Rulemaking Record **FROM:** TJ Finseth and Danielle Lewis , ERG **DATE:** January 29 , 201 3 **SUBJECT: Flue Gas Desulfurization Future Profile**  **Sensitivity Analysis** ERG is providing technical support to the U.S. Environmental Protection Agency ’s Office of Water, Engineering and Analysis Division (EAD) for development of effluent limitations guidelines and standards ( ELGs ) for the Steam Electric Power Generating Industry . As part of this technical support, EPA, with support from ERG, estimated compliance costs and baseline and post
- compliance loadings for all plants identified as currentl y discharging FGD wastewater
. The anal ys es and the conclusions that EPA presented in the proposed rule (e.g., compliance costs, pollutant loadings , economic achievability) reflect wastestream s generated b y air pollution controls that will likely

be in operation at plants at the time EP A takes final action on this rulemaking 1

. However, EPA recognizes that some recentl y promulgated Clean Air Act requirements may

lead to additional air pollution controls (and resulting wastestream s) at existing plants beyond this date
. In an effort to take these potential changes into account , EPA conducted a sensitivity

analysis that forecasts future installations of air pollution controls through 2020 2 and estimated the associated costs of complyingwith the proposed regulatory requirements for the wastew ater that may result from the forecasted air pollution control installations
. This memorandum discusses the sensitivity anal ys is EPA performed to assess how the forecasted future installations of FGD s ys tems may affect the estimated costs and pollutant rem oval s for the proposed ELG s . EPA has two primary

data sources upon which to predict future air pollution control installations: 1) Integrated Planning Model projections for the final Mercury and Air Toxics Standards (MATS ) rule 3 ; and 2) responses to EPA’s Questionnaire for the Steam Electric Power Generating Effluent Guidelines ( Steam Electric Survey)
. At the time EPA promulgated the MATS rule in 2011, it projected air pollution control retrofits using Integrated Planning Model (IPM) modeling (which also in cluded projected retrofits associated with the Cross
- State Air Pollution Rule ( CSAPR) and other state and federal requirements )
. To support the ELG rulemaking, EPA ’s Steam Electric Survey asked the industry to report plans for installing certain new air po llution controls at facilities through the year 2020
. EPA has no reason to conclude that

1 EPA expects to promulgate the final rule in calendar year 2014. 2 EPA considers that by forecasting future installations of controls out to the year 2020, the sensitivity analyses for this rulemaking reasonably reflect full implementation of air pollution controls to comply with existing federal and state requirements. 3 EPA IPM v.4.10 predictions for units based on compliance with CSAPR, MATS, state rules, and enforcement actions including consent decrees.Memorandum

January 29, 2013 Page 2 either the IPM FGD projections or the survey responses are more accurate than the other
. In fact, b oth of these sources may overstate actual installations
. Prior to MA TS becoming final, many plant owners and operators assumed that wet scrubbers would be the onl y t echnology available to meet emissions limits for acid gases. However, as EPA gathered and published additional data on facility

emission rates (which informed how the Agency set the standards), and as stakeholders researched and published additional information on the performance of less capital
intensive control technologies such as dry sorbent injection, it has become clear that many facilities will find it mo re cost - effective to forgo wet scrubbers in favor of other emission reduction strategies
. Furthermore, m ajor economic variables such as electricity demand and natural gas prices have changed substantially since the market conditions prevalent when respondents were answering the survey in 2010. For example, it is possible that a facility originall y indicating an expectation in the Steam Electric Survey to install a wet scrubber b y 2020 may now find itself no longer competitive in the updated marketplace with substantially lower natural gas prices and lower electricity demand growth than previously expected
. Consequently , the facility may elect to retire and thereby neutralize the previously reported intent to install a wet FGD s ys tem . Nevertheless, these two sources remain the best available information EPA has with which to estimate future predictions. As a first step in conducting the sensitivity anal ys is, EPA compared the projections from the two sources . This comparison demonstrate d that the IPM projection s for the MATS Policy Case and the Steam Electric Survey responses are consistent at the aggregate level
. Furthermore, in a very large part, both the survey and IPM identify

the same generating units as being wet
- scrubbed, either currentl y or in the future (the two sources are in agreement for approximately 94 percent of the wet scrubbed units)
. The two sources also predict similar wet
- scrubbed generating capacities on an industry

level . In the very

few cases where there are differences between the two sources, the difference is primarily due to the expected variation at a unit
- level (e.g., IPM model predicts wet FGD at unit A and dry FGD at unit B, but instead the survey responses report wet FGD at unit B and dry

FGD at unit A)
. Another difference between the MATS IPM estimates and the industry

survey estimates is that, in a very few cases , the IPM results predict that certain plants would retire (and therefore would not install wet scrubbers)
. In conducting the anal ys es for the ELG s , EPA made the conservative assumption (i.e., one that would tend to overestimate cost s , if anything) that a plant would still be in operation in 2020 unless the plant has formall y announced that it would close by then. The comparison of the IPM FGD projections and the Steam Electric Survey

are included in document titled “Comparison of Current Industry Profile of IPM Projections” (DCN SE00818 )
. EPA developed a conservative upper
-bound estimate of future FGD installation s by combining the information from both sources to develop its “future steam profile.” By this, EPA means it combined any source that reported or projected a wet FGD into one “future steam profile
. ” Clearly , this “future steam profile” is conservative bec ause it reflects more wet FGDs than are anticipated to actuall y be installed

– by aggregating the IPM projections and the Steam Electric S urvey responses it results in a total number of wet FGD s ys tems and wet
- scrubbed capacity that is greater than predict ed by either of those individual sources
. EPA identified twenty- one “future steam profile” plants based on only the IP M forecast estimates . Using both IPM projections and the Steam Electric Survey , EPA identified a complete “future steam profile” of twenty- nine plants that may

install a wet FGD s ys tem after EPA promulgates the final EL Gs
.Memorandum

January 29, 2013 Page 3 For each plant identified as having a future wet FGD sy stem in the “future steam profile,” EPA estimated the costs for these plants to install the FGD treatment technology options considered for the proposed rule
. To estimate the costs, EPA first determine d the wastewater flow rate associated with the new wet FGD s ys tem . EPA determined the flow rate by either using projected flow rates provided in the Steam Electric Survey , or by using the methodology

EPA developed for planned FGD systems that did not report FGD wastewater flow rate, described in EPA’s Incremental Costs and Pollutant Removals for Proposed Effluent Limitations Guidelines and Standards for the Steam Electric Power Generating Point Source Category
. EPA also evaluated the level of FGD wastewater treatment that would be installed at each plant in the “future steam profile.” The Steam Electric Survey requested each plant to describe the treatment technology that they

planned to use to treat the wastewater from the planned FGD s ys tem . EPA categorized these proposed treatment s ys tems as either a settling pond or chemical precipitation system based on the survey responses . For the planned FGD s ys tems identified by only the IP M projection (i.e., no survey data available regarding the future installation) , EPA categorized the system as a settling pond unless the plant already has a currentl y operating FGD s ys tem . For these IP M
- identified plants that already operate at l east one wet FGD s ys tem , EPA assumed that the new wastewater treatment system would be similar to the FGD treatment system already operating at the plant
. EPA used the FGD wastewater flow and treatment
- in
-place data for each plant in the “future steam prof ile” to estimate the pre - tax engineering compliance cost for each technology

option for the proposed rule. These costs are presented in Table 1
. EPA compared the compl iance costs for the “future steam profile” to the costs for the current profile. 4 EPA determined that even under this conservative anal ys is that would overestimate costs, incorporating the “future steam profile” into the ELG anal ys es would increase the costs of the proposed rule b y no more than 10 to 15 percent
. Table 2 present s the total annualized c osts of compliance to society for Regulatory Options 3 and 4, for both the “current steam profile” and the “future steam profile.” Even assuming these higher costs, EPA finds that these additional costs are economicall y achievable
. EPA also estimated the pollutant loadings associated with the projected wastewater discharges from the “future steam profile” plants
. EPA used the FGD wastewater flow and treatment
- in
place data described above to evaluate baseline loadings and post
- compliance loadings for each FGD treatment technology option
. Table 3 presents the estimated baseline and post
- compliance loadings for the “future steam profile.” Loadings from the “ future steam profile ” plants would increase the total industry baseline loadings by approximately seven percent . E PA calculated the pollutant removals that would be realized b y these “ future steam profile ” plants complying with each of the FGD treatment technology options
. Pollutant removals are presented in Table 4
. Accounting for pollutant removals from the “ future steam profile ” plants would increase total industry pollutant removals by seven percent for the preferred regulatory options
. See DCN SE01756 for the complete plant
- level loadings output , including baseline and post - compliance loadings. Using the baseline loadings discussed above, EPA conducted an environmental assessment (EA) anal ys is to determine if the additional baseline loading s from “future steam profile” plants would

4 The “current steam profile,” referred to as the current profile, includes all plants currently discharging FGD wa stewater or planning to discharge FGD wastewater by January 1, 2014.Memorandum

January 29, 2013 Page 4 result in additional water quality exceed ances . The EA anal ys is showed that water quality exceedan c es would increase for the evaluated criteria by between zero and ten percent
. The freshwater national recommended water quality criteria are most affected by the increased pollutant loadings with exceedances increasing b y ten percent . Other evaluated criteria for cancer risks, ecological health, and other national recommended water quality criteria would increase zero to five percent
. While the “future steam profile” increase s the number of baseline exceedances (i.e., those exceedances prior to implementation of revised ELGs) , EPA expects most of these additional exceedances would go away under the preferred option s for the proposed rule , which would also result in increased benefits associated with the proposed rule. EPA notes that subsequent to its analy sis, the CSAPR was vacated by the D.C. Circuit Court of Appeals . EPA will continue to assess the potential impact s that changes to air pollution regulations may

have on future installations of wet FGD s ys tems. For the purpose of FGD wastewater analyses for this rulemaking, EPA has made a conservative assumption that all of the previously

projected wet scrubber additi ons in the CSAPR
- inclusive baseline (which also included MATS, state rules, consent decrees, etc.) would continue to be built, and that discharges from those additional wet scrubbers would therefore be subject to the proposed revisions to the ELGs. **Table 1**  **. Estimated Compliance Cost for the “Current Steam Profile” and**  **“ Future**  **Steam Profile**  **”**

**Cost Element “Current Steam** **Profile” “**  **Future Steam Profile**  **”**

**– Based on**  **IPM Projection “**  **Future Steam Profile**  **”**

**– Based on Com** **bined IPM and Steam**  **Electric Survey Projection**  **One -**  **Stage Chem ical Precipitation Costs**  Total Capital Cost $1,450,000,000 $1 ,600 ,000,000 $ 1,650 , 000 , 000 Total O&M Cost $194,000,000 $2 15 , 0 00,000 $2 21 , 0 00 , 000 **One -**  **Stage Chem ical Precipitation with Biological Treatment Costs**  Total Capital Cost $2,500,000,000 $2 ,7 7 0 ,000,000 $ 2,850 ,00 0 , 000 Total O&M Cost $257,000,000 $2 85 , 0 00,000 $ 29 3, 0 00 , 000 **One -**  **Stage Chem ical Precipitation with Vapor**  **- Compression Evaporation Costs**  Total Capital Cost $6,240,000,000 $ 6,9 7 0 ,000,000 $ 7, 1 60 , 000 , 000 Total O&M Cost $1,030,000,000 $ 1,120 , 0 00,000 $1 , 1 50 , 000 , 000 Note: Values rounded to three significant figures. Note: Values presented in the “Future Steam Profile” columns represent the entire industry in the future, including the “current steam profile.” To obtain values associated with just the future profile generating units (i.e., excluding the currently operating units), subtract the “Current Steam Profile” from the “Future Steam Profile.” **Table 2**  **. Total**  **Annualized Social**  **Cost s**  **for the “Current Steam Profile” and** 

**“ Future**  **Steam Profile**  **” for Regulatory Options 3 and 4 Regulatory**  **Option “Current Steam** **Profile” “**  **Future Steam Profile**  **”**

**– Based on**  **IPM Projection “**  **Future Steam Profile**  **”**

**– Based**  **on Com bined IPM and Steam**  **Electric Survey Projection** 3 $5 72 ,000,000 $ 613 ,000,000 $ 625 ,000,000 4 $1,3 8 0,000,000 $1, 42 0,000,000 $1, 43 0,000,000Memorandum

January 29, 2013 Page 5 Note: Assumes a 3 percent discount rate. Note: Values presented in the “Future Steam Profile” columns represent the entire industry in the future, including the “current steam profile.” To obtain values associated with just the future profile generating units (i.e., excluding the currently operating units), subtract the “Current Steam Profile” from the “Future Steam Profile.” **Table 3**  **. Estimated Pollutant Loadings for the “Current Steam Profile” and**  **“ Future**  **Steam Profile**  **”**

**Technology Option**  **“Current Steam Profile”**  **“ Future Steam** **Profile ”** 

**– Based on**  **IPM Projection “**  **Future Steam Profile**  **”**

**– Based on**  **Com bined**  **IPM and Steam** **Electric Survey Projection**  **Pounds/Year TWPE/Year**  **Pounds/Year TWPE/Year**  **Pounds/Year TWPE/Year**  Baseline 3,2 40 , 000 , 000 3,030,000 3, 4 20 ,000,000 3,200 ,000 3,470 ,000,000 3,260 ,000 Chemical Precipitation Option 3,65 0 , 000 , 000 a 1,49 0 , 000 3,890 ,000,000 a 1,590 , 0 00 3,9 6 0 ,000,000 1 ,6 2 0 ,000 Chemical Precipitation with Biological Treatment Option 2,0 80 , 00 0 , 000 41 1 , 000 2, 2 20 ,000,000 438 , 0 00 2,250 ,000,000 444 , 0 00
Chemical Precipitation with Vapor
Com pression Evaporation Option 13,5 00 , 000 36,4 00 14,200 ,000 38 , 60 0 1 4 , 4 00,000 39 , 1 00 Note: Values rounded to three significant figures. Note: Values presented in the “Future Steam Profile” columns represent the entire industry in the future, including the “current steam profile.” To obtain values associated with just the future profile generating units (i.e., excluding the currently operating units), subtract the “Current Steam Profile” from the “Future Steam Profile.” a
– Characterization data used to estimate pollutant concentrations for baseline FGD surface impoundments does not include concentration data for ammonia, hex avalent chromium, and TKN
. These pollutants are included in the post
compliance loadings and as a result appear to increase in concentration from baseline to technology option.

**Table 4**  **. Estimated Loadings Re moval**  **s for the “**  **Future Steam Profile ”** 

**Technology Option**  **“Current Steam Profile”**  **“ Future Steam** **Profile ”** 

**– Based on**  **IPM Projection “**  **Future Steam Profile**  **”**

**– Based on**  **Com bined**  **IPM and Steam** **Electric Survey Projection**  **Pounds/Year TWPE/Year**  **Pounds/Year TWPE/Yea**  **r Pounds/Year**  **TWPE/Year** Reduction: Baseline
- > Chemical Precipitation Option - 417, 000 , 000 a 1,53 0 , 000
- 472 , 000 ,000 a 1,610 , 0 00
- 492 , 0 00,000 1 ,6 4 0 ,000
Reduction: Baseline
- > 1,1 60 , 000 , 000 2,6 20 , 000 1, 21 0 ,000,000 2,760 ,000 1, 22 0 ,000,000 2,8 1 0 ,000Memorandum

January 29, 2013 Page 6 Chemical Precipitation with Biological Treatment Option Reduction: Baseline
- > Chemical Precipitation with Vapor
Com pression Evaporation Option 3,22 0 , 000 , 000 2,9 90 , 000 3,410 ,000,000 3, 1 60 ,000 3, 4 50 ,000,000 3, 22 0 ,000
Note: Values rounded to three significant figures. Note: Values presented in the “Future Steam Profile” columns represent the entire industry in the future, including the “current steam profile.” To obtain values associated with just the future profile generating units (i.e., excluding the currently operating units), subtract the “Current Steam Profile” from the “Future Steam Profile.” a
– Characterization data used to estimate pollutant concentrations for b aseline FGD surface impoundments does not include concentration data for ammonia, hex avalent chromium, and TKN
. These pollutants are included in the post
compliance loadings and as a result appear to increase in concentration from baseline to technology op tion.