1 

# Reconsideration of the 2008 Ozone NAAQS July 28, 20111220 L Street, NW • Washington, DC 20005 -4070 • www.api.org 2 

# Goals To present: 1) NERA review of the benefits estimation contained in the RIA; 2) alternative cost & attainment data



## – NERA

– Manufacturers Alliance 3) Implications of the proposed standards for non - attainment3



# RIA indicates that Benefits May Not Exceed The Costs Wide ranges of uncertainty in EPA estimates of benefits, costs and net benefits • We believe that the Benefits are overestimated • We believe that the Costs are underestimated EPA's Estimated Annual Benefits and Costs for Ozone Primary NAAQS Alternatives* (in billions of 2006$ per year in 2020)



### Alternative Standards 0.075 ppm 0.070 ppm

Proposed - Hi 0.065 ppm 0.060 ppm Proposed - Lo 0.055 ppm Benefits $6.4 to $15 $11 to $31 $19 to $53 $30 to $87 $45 to $140 Costs $7.6 to $8.8 $19 to $25 $32 to $44 $52 to $90 $78 to $130 Net Benefits $ -2.4 to $7.4 $ - 14 to $12 $ -25 to $20 $ -60 to $35 $ -85 to $62 * At 7%/yr discount rate. Benefits range reflects 6 ozone mortality studies and 2 for PM 2.5 . Cost range reflects 2 approaches.4



# EPA Costs Underestimated Use of “all known controls” will reduce precursor emissions by 820,000 TPY

– 1.4 million additional TPY needed for 0.070; 4.2 million TPY needed for 0.060 EPA assumes controls will be developed, cost - effective and deployed by 2020
- “Fixed cost” method assumes unlimited new controls at $15,000 per ton
- “Hybrid” method assumes marginal costs increase slowly above $15,000/ton NERA/Sierra identified additional controls ranging from $4,000 to $300,000+ per ton
- Total costs 5 to 10 times EPA estimates via “fixed cost” and “hybrid” methods Cost of NOx offsets has often been $15,000 - $150,000/ton in Houston/LA
- Suggests EPA has significantly underestimated costs for additional controls in other areas 0.075 ppm 0.070 ppm Proposed - Hi 0.065 ppm 0.060 ppm Proposed - Lo 0.055 ppm 1. Modeled costs for known controls $2.5 $3.3 $4.5 $4.5 $5.1 2. Extrapolated costs for unknown controls $5.1 to $6.3 $16 to $22 $27 to $39 $47 to $85 $73 to $122 Total National Costs (excluding So CA)* $7.6 to $8.8 $19 to $25 $32 to $44 $52 to $90 $78 to $130 * Southern California will not attain any of these alternative NAAQS by 2020 and is omitted from EPA's analysis (In billions of 2006$ per year in 2020) Alternative Standards

# Lower NAAQS are Broadly Unattainable

Illinois Ohio Pennsylvania West Virginia Source: NERA analysis of EPA data in Docket No. EPA -HQ - OAR- 2007 - 0225 

### • EPA made optimistic assumptions in estimating 2020 baseline emissions • EPA then applied “all known controls” across wide geographic areas 

### • EPA’s results are still broad nonattainment in 2020 for any tighter NAAQS. Of 661 counties with monitors: 99 would not attain 0.070 ppm and 451 would not attain 0.060. • Many major metropolitan areas will require an “Extreme” classification to avoid economic and business sanctions for failure to submit an approvable SIP to EPA • Attainment will require reductions far beyond “all known controls”6



# Significant Negative Economic Impacts NERA/Sierra performed economic analyses for 11 States for 0.060 ozone NAAQS


### - Used EPA’s 2020 baseline, reductions needed to attain, costs for known controls Three key differences from RIA methodology: 1) Additional “known controls” were identified and applied in simulating attainment 2) More realistic approach used for estimating the costs of as -yet - unknown controls 3) Attainment costs used as input to REMI model to estimate economic effects7



# Significant Negative Economic Impacts Manufacturers Alliance extrapolated the 11 state results 

# nationally

– 7.3 million jobs lost by 2020

– $1 trillion impact annually from 2020 - 20308



# Areas Affected by a Lower NAAQS EPA CASTNET DATA 1

1VValues are three -Year Average of Fourth Highest Daily Maximum 8 - Hour Average Ozone Concentrations (ppb) in various National Parks for 2006–2008 Yosemite Yellowstone Rocky Mt. Acadia Blackwater Great Smokey Kane National Forest

Mammoth Cave Big Bend Lassen Volcano
Petrified Forest

Grand Canyon Sequoia Joshua Tree Konza Prairie9 

## CBSA 1 

## and Rural Counties that Violate an

Ozone Standard of 70 ppb based on 2008 -2010 Data 2

1 Core Based Statistical Area (CBSA) refers collectively to both metropolitan statistical areas (MSA) and micropolitan areas 2 1053 counties violate a 70 ppb standard (three times the number of counties that violate the 2008 (75 ppb) standard) 210 10 

## CBSA 1 

## and Rural Counties that Violate an Ozone Standard of 65 ppb based on 2008 -2010 Data 2

1 Core Based Statistical Area (CBSA) refers collectively to both metropolitan statistical areas (MSA) and micropolitan areas 2 2217 counties violate a 65 ppb standard (six times the number of counties that violate the 2008 (75 ppb) standard) 211 11 

## CBSA 1 

## and Rural Counties that Violate an 

## Ozone Standard of 60 ppb based on 2008 -2010 Data 2

1 Core Based Statistical Area (CBSA) refers collectively to both metropolitan statistical areas (MSA) and micropolitan areas 2 2795 counties violate a 65 ppb standard (eight times the number of counties that violate the 2008 (75 ppb) standard) 2