From: Lydia Wegman/RTP/USEPA/US

To: "Frey, Nathan J." <Nathan_J._Frey@omb.eop.gov>, "Lee, Amanda I."

<Amanda_I._Lee@omb.eop.gov> Cc: Joseph

- J Dougherty/DC/USEPA/US@EPA, Darryl Weatherhead/RTP/USEPA/US@EPA, Lillian

Bradley/RTP/USEPA/US@EPA, Bryan Hubbell/RTP/USEPA/US@EPA Date: 12/13/2012 04:25 PM Subject: Additional information on the final RIA analysis

Nathan and Amanda,

Please fi nd attached the additional information on the RIA which was requested during our meeting on the afternoon of December 11.

We plan to include sections 1 of this additional information (Analyses Conducted to Illustrate Attainment) and 2 (Analytical Differen ces between Proposal and Final) in the Executive Summary. We believe that section 3 (Examples of the Analytical Differences between Proposal RIA and Final RIA) is too detailed for discussion in the ES.

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2 Please let us know if you have any additional questi ons. In response to the December 11, 2012 discussion on the PM 2.5 National Ambient Air Quality Standards (NAAQS) final Regulatory Impact Analysis (RIA) with OMB, we’re providing additional detail and clarification on (i) some of the analytical methods applied in the final RIA and (ii) differences between the PM 2.5 NAAQS proposal RIA and the
final RIA. The information is divided into the following sections ( 1 ) Section 1 outlines and provides details on the analyses conducted to illustrate attain ment with the revised standard of 12 μg/m 3 ; and ( 2 ) Section 2 walks through example s of analyses conducted from the proposal and final RIAs.

1. Analyses Conducted to Illustrate Attainment

The flowchart below outlines the analytical steps taken to illustrate a ttainment with the revised standard of 12 μg/m 3 , and the following discussion, by primary flowchart section, describes each of the steps taken.

1. Establishing the Analytical Baseline ( Flowchart Section 1 )

-- This section of the flowchart reflects
the analytical steps taken to account for Federal and state rules and programs currently underway, as well as to reflect attainment of the current annual and daily standards of 15/35 μg/m 3 for the purpose of estimating the incremental costs and benefits of att aining the revised annual standard Detailed discussions of the elements of this section of the flowchart are in Chapters 1 and 3 of the final RIA.

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3 a. Adjusted 20 2 0 Base Case with “On the Books” Federal and State Rules and Programs

-- The adjusted 2020 base case includes reductions expected to occur between 2007 and 2020
from exis ting (i.e., “on

- the

- books”) federal and state control programs. This projection reflects air quality modeling of 2020 that accounts for major federal and state pr ograms along with adjustments to these national

- level modeling results to account for PM 2.5 reduct ions expected, largely in the western US, fro m the implementation of episodic burn ban programs in certain counties and to remove the effects of atypical even ts such as wildfires and fireworks displays

. (See Map below for illustration.)



### Annual NAAQS Exceedances * 

### in “Adjusted 2020 Base Case” Scenario

* 24

- hr PM 2.5 NAAQS Exceedances as Follows :

• San Joaquin Valley (6 counties); South Coast (2 counties); Imperial, CA; Allegheny, PA; Salt Lake, UT; Lake, OR; and Sacramento, CA

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4 b. Analytical Baseline with Attainment of 15/35

-- The analytical baseline includes reductions
from additional controls that the EPA estimates are needed to attain the current standard s (15/35μg/m 3 ) for the purpose of estimating the incremental costs and benefits of attaining
the revised annual standard of 12 μg/m 3 . D etermining the level of emissions reductions needed to meet both the current annual and daily standard s is done through a djusting a county’s projected design value (DV) concentration using the geographic area and pollutant specific air quality ratios (as described in Chapter 3 of the final RIA). In addition, for each

area, it is necessary to determine which of the standards will be “controlling”, i.e., which standard will require the most reductions to reach attainment of current standard . This is important for establishing the analytical baseline because when the daily standard is controlling (as is the case in much of Cal ifornia), the emissions reductions required to meet the daily standard will result in reductions in the annual design value to below the annual standard of 15 μg/m 3 . As a result, the annual PM 2.5 increment needed to attain alternative
standards for each county will not be relative to an annual design value of 15 μg/m 3 , rather, the increment will vary by county based on the annual design value in that county that resulted from applying emissions controls to meet the 35 μg/m 3 daily standard. As sho wn in
the map below, for counties labeled as exceeding the 12 μg/m 3 annual standard, the baseline design values can be any value between 12 and 15 μg/m 3 . Similarly, exceedances of the 11 μg/m 3 and 13 μg/m 3 standard s can be anywhere between 11 or 13 and 15 μg/m 3

.

The analytical baseline reflects attainment of 15/35 μg/m 3 by 2020. We also modified the analytical baseline for counties in the South Coast Air Quality Management District and the San Joaquin Valley Air Pollution Control District to reflect reductions in mobile NOx
emissions that th e se areas are expected to achieve between 2020 and 2025 due to fleet

turnover . These reductions in NOx emissions are not attributable to attainment of the current or revised PM standards, but reflect the impacts of other ”on

- the

- books” mobile programs so that these reductions are not included as either an incremental cost nor benefit to these area’s attaining the revised annual standard

.



### Annual NAAQS Exceedances in “Analytical Baseline” Scenario

• 13 L evel: 2 Counties (Tulare, CA and Riverside, CA)

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5 • 12 Level: 7 Counties (All in CA)

• 11 Level: 23 Counties

2. Control Strategies ( Flowchart Section 2

)

– This section of the flowchart reflects analytical steps
taken to analyze controls and emissions reductions needed beyond the current standard ( 15/35 μg/m 3 ) and other existing major rules to achieve the revised standard ( 1 2 μg/m 3 ). We apply control options that might be available to states for application by 2020. Deta iled discussion of the elements of this section of
the flowchart is in Chapter 4 of the final RIA.

a. Select Controls by Emissions Sector and Pollutant

-- Non

- EGU point and nonpoint control measures were applied for the revised and alternative standards ’ con trol strategies. These controls were identified using the U.S. EPA’s Control Strategy Tool. Additional control measures were not applied to EGUs because of the extensive nature of controls resulting
from the inclusion of MATS.
b. Adjust 2020 Control Scenario to Meet Alternate Standards

- - After identifying the known controls in the control scenario that were needed to meet the analytical baseline, additional
known controls needed to meet the revised and alternative standards were i dentified. The EPA used air quality modeling results to determine whether the control scenario was sufficient to meet the revised and alternative standards for each geographic area. Where the control scenario modeling resulted in design value reductions be low the level needed for the revised or alternative standards for specific geographic areas, county

- specific ratios of air quality response to emission reductions were used to determine the subset of controls that
were needed to attain the standard. Where it was determined that the control scenario was not sufficient in attaining the standard, these same response factors were used to calculate the amount of additional emission reductions beyond known controls needed to meet the
standard. For the revised and alternative control strategy analysis, known controls for two
sectors were used: non

- EGU point and area sources. Onroad mobile source controls were not used in the revised and alternative standards analysis because they were applied previously in the anal ytical baseline analysis where they were deemed to be most cost
effective.

3. Analysis of Costs (

Flowchart Section 3)

– This section of the flowchart reflects analytical steps taken to
estimate the costs of both known and unknown controls. Detailed discussio n of the elements of this
section of the flowchart is in Chapter 7 of the final RIA.

a. Estimate Known Controls Engineering Costs, Estimate Extrapolated Costs

-- We provide engineering cost estimates for the control strategies identified in Chapter 4 that inc lude control technologies on non

- EGU point sources and area sources. Engineering costs generally refer to the capital equipment expense, the site preparation costs for the application, and annual operating and maintenance costs. For this analysis, we inclu ded known controls for all of the geographic areas likely to exceed the revised and/or alternative standards. We also provide estimates for the engineering costs of the additional emissions reductions that are needed beyond the application
of known control s to reach full attainment of the alternative standards analyzed; the cost estimates derived from this approach are referred to as “extrapolated” costs. By definition, no cost data currently exists for the additional emissions reductions needed beyond know n controls. We employ two methodologies for estimating the costs of unidentified future controls, and both approaches assume that innovative strategies and new control options make possible the emissions reductions needed for attainment by 2020.

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6 4. Full Atta inment (

Flowchart Section 4

)

– This section of the flowchart reflects analytical steps taken to
estimate the costs of attainment, the benefits of attainment and the net benefits for the revised standard
of 1 2 μg/m 3

. Detailed discussion s of the elements of this section of the flowchart are in Chapter 5, Chapter 7

, and Chapter 8 of the final RIA.

a. Calculate Full Attainment Costs

– In Chapter 7 we present a summary of the total national costs of attaining the revised annual standard of 12 μg /m 3 and the alternative annual standards of 13 μg/m 3 and 11 μg/m 3 in 2020. This summary includes the known and extrapolated costs. The total cost estimates are $53 million (2010$) and $350 million (2010$) for the revised annual standard of 12 μg/m 3 ; $11 mi llion and $100 million for the alternative annual standard of 13 μg/m 3 ; and $320 million and $1,700 million for the alternative annual standard of 11 μg/m 3

.

b. Calculate Full Attainment Benefits

– C hapter 5 presents the estimated human health benefits for
the revised NAAQS. W e quantify the health

- related benefits of the fine particulate matter (PM 2.5 )

- related air quality improvements resulting from the illustrative emission s control
scenarios that reduce emissions of directl y emitted particles and precursor pollutants including

SO 2 and NO
x to reach alternative PM 2.5 NAAQS levels in 2020. These benefits are relative to an analytical baseline reflecting nationwide attainment of the current primary PM 2.5 standards (i.e.,
annual s tandard of 15 μg/m 3 and 24

- hour standard of 35 μg/m 3 ) that includes promulgated national regulations and illustrative emission s controls to simulate attainment with 15/35 as well

as a NO x emission adjustment to reflect expected reductions in mobile NO
x emi ssions between
2020 and 2025.

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7 The estimated benefits for the revised and alternative standards are in addition to the substantial benefits estimated for several recent implementation rules. Rules such as the Mercury and Air Toxics Standard (MATS) and othe r emission reductions will have substantially
reduced ambient PM 2.5 concentrations by 2020 in the East, such that no additional controls would be needed in the East for the revised annual standard of 12 μg/m 3 . Thus, all of the
estimated benefits occur in C alifornia because this is the only state that needs additional air quality improvement beyond the analytical baseline after accounting for air quality improvements from recent rules.

c. Net Benefits

-- Chapter 8 compares estimates of the benefits with costs a nd summarizes the net benefits of revised annual standard of 12 μg/m 3 and the alternative annual standards of 13 μg/m 3 and 11 μg/m 3 relative to the analytical baseline that includes recently promulgated national regulations and additional emissions reduc tions needed to attain the existing 15/35 μg/m 3 standards, as well as adjustments to NOx emissions in the San Joaquin and South Coast

areas.

2. Analytical Differences between Proposal and Final

Below is a list summarizing some of the analytical changes in the analyses between the proposal RIA and the final RIA. In addition, t he table and examples below step through the major steps of the air quality analyses conducted in the proposal RIA and in the final RIA. Between the proposal RIA and the final RIA, we developed the control strategies based on an improved modeling platform and updated the approach in designing t he control strategies

. The improved modeling platform updated the current and pr ojected air quality levels for each area across the nation and the updated approach allowed for more effective emissions reductions for each area in both attaining the current annual and daily standards for our analytical baseline and in attaining the revi sed annual standard. For example, in the proposal RIA we controlled precursor emissions of NOx and SO 2 over a broader region and these

emissions reductions were not as effective in reducing design value for each area as the direct PM 2.5 emissions
reductio ns targeted in the final RIA. These analytical improvements resulted in different estimates of costs and benefits between the proposal RIA and the final RIA which we have more confidence in reflecting the approaches that states will pursue to attain the c urrent and revised standards.

a. New modeling platform

-- In the new modeling platform we included key updates to the current ambient
data that show improved air quality between the proposal and final, although daily design values (DVs) for
some areas in Cal ifornia increased due largely to wildfires in 2008 . To address the increases in these areas we adjusted the ambient data for these atypical events.

b. Future air quality with “on

- the

- books” controls

– We also project PM 2.5 air quality levels between 2007
and the 2020 base case which were generally lower in the final RIA compared to the proposal RIA largely because the starting values for the ambient data were lower (i.e., final RIA air quality projections showed more improvements than proposa l RIA)

. F or areas in the eastern U.S.

, these lower starting values put their projected annual DV s below 12 μg/m 3 for the final RIA when they were slightly above 12 μg/m 3 for
the proposal RIA

. For an example, see the discussion on Wayne County, Michigan b elow.

c. Analytical baseline with attainment of 15/35

– For the final RIA, EPA’s approach to attaining the existing
standard s of 15/35 μg/m 3 was improved with "air quality adjustment ratios" that were based on more focused sensitivity model runs for (i ) specific areas like California counties; (ii) influential sources like residential wood combustion; and (iii) specific PM emission species like direct ly emitted PM 2.5 . In the proposal RIA, we conducted the analysis using more general air quality ratios that reflected multiple

sources such as point and area and precursor PM emissions like NOx and SO2. As a result, in the final RIA, the daily standard of 35 μg/m 3 was attained more effectively and had less impact on annual DVs because of episodic, direct P M 2.5 reductions , while in the proposal RIA

, the daily standard was attained less effectively because we pursued year

- around NOx and SO2 reductions that necessitated more emissions

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8 reductions and had more impact on the annual DVs. For an example, see the d iscussion on Riverside County, California below.
d. Incremental air quality changes

– In the final RIA, the use of improved air quality adjustment ratios
resulted in more incremental air quality improvement needed to attain the annual standard of 12 μg/m 3

in California. Thus, these larger incremental air quality improvements needed to attain the revised standard resulted in higher estimated health benefits in the final rule compared to the proposal RIA. As described above, this is because t he daily st andar d of 35 μg/m 3 was attained more effectively and had less impact on annual DV s across the counties in California. In addition, the focus on direct PM 2.5 emissions
reductions allowed for more effective controls to attain the revised standard with fewer PM 2.5 emissions
reductions thereby resulting in similar fixed costs estimates

. 1

3. Example s of the Analytical Differences between Proposal RIA and Final RIA

Wayne County, Michigan

2020 Base C ase with “O n
- the

- Books” C ontrols In the proposal RIA, Wayne County, Michigan exceeded the annual standard of 12 μg/m 3 , but not the 24

- hour standard. In the final RIA, Wayne County did not exceed either the annual of 12 μg/m 3 or 24

- hour standard. As such, for the annual standard of 12 μg/ m 3

, Wayne County was relevant for the cost

- benefit analysis in the proposal RIA but not relevant for analysis in the final RIA. See the table below for the annual and 24

- hour DVs for the 2020 base case for the proposal and final RIA analyses.

2020 Base C ase

Proposal (Base case) Final (Adj usted Base case)
Annual

DV 24

- hour

DV Annual

DV 24

- hour

DV

12.35 31.37 11.58 29.70

Analytical Baseline with Attainment of 15/35 No additional controls were needed to attain the current standard of 15/35 μg/m 3 for Wayne County in the baseline in the proposal RIA or final RIA.

2020 Baseline
Proposal (Baseline) Final (Analytical Baseline)
Annual

DV 24

- hour

DV Annual DV 24

- hour DV

12.35 31.37 11.58 29.70

1 The hybrid methodology cost estimates increased between the proposal RIA and the final RIA largely because a large amount of emissions reductions were needed from one county with a low amount of known controls.

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9 Attainment of Standard of 12 ug/m 3
In the proposal RIA, known controls were applied in Wayne County to reduce the annual design value to attain the revised standard. The controls applied reduced emissions

, which resulted in a projected design value of

1 1. 82 ug/m 3 . The DV was reduced to 11.8 2 ug/m 3 and not precisely to 12 ug/m 3 because of the manner in which known controls are applied to emissions sources

-- each specific control technology achieves a specific level of emission reductions. As a result, a control technology may achieve more emission s reductions than the minimum air quality improvement needed to attain the standard. In the final RIA, no known controls were
needed to achieve the standard of 12 ug/m 3 because the projected “on

- the

- books” programs achieved that
level.

Annual Standard of 12 ug/m 3

Proposal DV Final DV

11.82 11.58

Riverside County, CA

2020 Base C ase with “O n
- the

- B ooks” C ontrols In both the proposal RIA and the final RIA, Riverside County, California exceeded the current annual and 24

- hour standards of 15/35 ug/m 3 . The DVs were higher in the proposal RIA than for the final RIA largely because
the 2005

- 2009 ambient data used in the final RIA had lower starting DVs for air quality projection purposes
than the 2003

- 2007 ambient data used in the proposal RIA.

2020 Base Case

Proposal (Base case) Final (Adj usted Base case)
Annual

DV 24

- hour

DV Annual

DV 24

- hour

DV

16.30 46.57 15.55 38.3

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10 Analytical Baseline with Attainment of 15/35 Known controls and emissions reductions beyond known controls were applied to reduce the ambient DVs to attain the current standards of 15/35 ug/m 3 . When reducing emissions to achieve the 24

- hour DV, the annual DV is simultaneously reduced and can be lower than the current annual standard of 15 ug/m 3 . In the case of
Riverside Coun ty, the 24

- hour DV was the controlling DV in attaining the current standards of 15/35 ug/m 3 so that the emissions reductions required to meet the 24

- hour standard will result in reductions in the annual DV to below the annual standard of 15 μg/m 3 . As a re sult, the annual PM 2.5 increment needed to attain
alternative standards will not be relative to an annual DV of 15 μg/m 3 , rather, the increment will vary by county based on the annual DV in that county that resulted from applying emissions controls to meet the 35 μg/m 3 24

- hour standard.

When we analyzed the costs and benefits of the control strategy designed to achieve the selected standard of

12 ug/m 3 , the air quality increment needed was greater in the final RIA than it was in the proposal RIA by 1.5 ug/ m 3 (14.58

– 13.08 ug/m 3 ) . The reasons for this are grounded in the different decisions made in preparing the control strategy design between the proposal RIA and final RIA

. In addition, in the final RIA, the 24

- hour standard was attained more effectively and had less impact on annual DVs because of episodic, direct PM 2.5 reductions on residential wood combustion ; in the proposal RIA, the daily standard was attained less effectively because we pursued year

- around NOx and SO2 reductions that necessitated more emissions reductions and had more impact on the annual DVs (See table below with 13.08 annual DV for proposal RIA

v ersu s 14.58 annual DV for final RIA)

.

2020 Baseline
Proposal (Baseline) Final (Analytical Baseline)
Annual

DV 24

- hour

DV Annual DV 24

- hour DV

13.08 35.4 14.58 35.3

Attainment of 12 ug/m 3 To attain the selected standard of 12ug/m 3 , emissions reductions beyond known controls were applied to reduce the annual DVs, which resulted in ambient DVs that just attained the standard. Note that when applying known controls, a control technology may achieve more emissions reductions than the minimum air quality improvement needed to attain the standard. When applying “unknown” controls, the minimum
emissions reductions needed are those achieved to attain the standard.

Change in Annual DV in Proposal RIA = 13.08 ug/m 3

- 12.04 ug/m 3 = 1.04 ug/ m 3 of air quality change Change in Annual DV in Final RIA = 14.58 ug/m 3

- 12.04 ug/m 3 = 2.54 ug/m 3 of air quality change

The benefits are estimated based on the incremental air quality change between the baseline and attainment
of the selected standard of 12ug/m 3

. The increments of air quality change, noted above, between the proposal RIA and the final RIA result in larger estimated benefits for Riverside County in the final RIA.