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# OAR Box 

# 1828 Prepped by Ollie Stewart



### Document

Number: 

# 304 ) IV-B- 8
Docket Number: 

# A-83-2 7

Printed 11/12/2008 11:12:59 AM Sheet 304 of 325P. 2 

# A-83-2 7 IV-B- 8 

## ^'°> , UNITE D STATE S ENVIRONMENTA L PROTECTIO N AGENC Y Offic e o f Ai rQualit yPlannin g an d Standard s / Researc h Triangl e Park , Nort h Carolin a 2771 1
Apri l 23 , 198 7

MEMORANDU

M SUBJECT : Industria l Boile r NSP S RI A - Calculatio no f Visibilit y Benefit s FROM : Jane t Scheid L ,y 7 . c^^c-/d. r\( L EAB , SAS D (MD-12 ) " ' ' TO : Wal t Stevenso n

SDB , ESE D (MD-13 )
Th e purpos e o f thi s mem o i s t o detai l th e calculatio nprocedure s tha t wer e use di n analyzin g th e benefit s o f visibilit y improvemen t du e t o th e Industria l Boile r Ne w Sourc e Performanc e Standard . A stud y b y Tolley , et . a l (1986 ) wa s originall y use di n th e draf t Regulator y Impac t Analysi s a s th e basi s fo r th e visibilit y calculation . Som e concern s wer e raise d withi nand outsid e th e EP A regardin g th e Tolle y stud y an d therefor e I reexamine dth e decisio nt o rel y sole y o n thi s study . Upo nfurthe r analysis , I hav e decide dt o us e a grou po f fiv e studies , rathe r tha nrelyin g full y on jus t on e study

t o calculat e loca l visibilit y benefits . Nonloca l visibilit y benefit s hav e no t bee ncalculated . Th e studie s b

y Brookshir e e t al. 1 , Rae 2 , Row e e t al. 3 , Loehman ne t al. 4 , an d

1 Brookshire , D. , d'Arge , R. , Schulze , W. , an d Thayer , M. , (1979) . Method s Developmen t fo r Assessin g Ai r Pollutio nContro l Benefits . Vol . 2 : Experiment s i n Valuin g Non-Marke t Goods : A Cas e Study

o f Alternativ e Benefi t Measure s o f Ai r Pollultio ni n th e Sout hCoas t Ai r Basi no f Souther nCalifornia , EPA-600/6-79-0016 . 2 Rae , D. , (1983) . Benefit s o f Visua l Ai r Qualit y i n Cincinnati : Result s o f a Contingen t Rankin g Survey . Presente da t th e America nEconomi c Associatio nMeetings , Washington , DC . 3 Rowe , R.D. , d'Arge , R. , an d Brookshire , D. , (1980) . A n experimen t o

n th e economi c valu e o f visibility . Journa l o f Environmenta l Economic s an d Management . March : 1-19 . 4 Loehman , E. , Boldt , D . an d Chaikin , K. , (1981) . Measurin g th e Benefit s o f Ai r Qualit y

Improvement s i n th e Sa n Francisc o Ba y Area , SR I 8962 .P. 3

Tolle y e t al. 5 ar e chose nfo r thi s analysis . The y cove r te ncitie s an dal l us e contingent'valuatio nsurveys . Th e te ncitie s are : Chicago ; Atlanta ; Boston ; Cincinnat i (analyze db y Tolle y an dRae) ; Miami ; Mobile ; Washington , DC ; Lo s Angeles ; Sa nFrancisco ; an dFarmington , New

Mexico . Th e averag e annua l househol dvalue s fro m eac ho f th e fiv e studies , fo r eac hhypothesize d chang e invisua l rang e du e t o th e alternativ e standard s analyzed , wer e compile dt o estimat e Equatio n1 . Benefit s = [(b/a)(VR2-VRl)+(c/a)(VR2 2 -VRl 2 ] f(x ) 1 Thi s equatio nsuggest s tha t th e bid s fro m th e survey s canb e expecte dt o b e a functio no f th e chang e i nvisua l rang e considere dan do f th e bas e leve l (VR1 ) an dnew leve l (VR2 ) o f visua l rang e hypothesized . Th e functio nf(x ) wa s presume dt o b e hel dconstan t acros s th e differen t studies . Th e variable s use di nthi s analysi s ar e define di nTabl e 1 andth e entir e dat a se t use d i s presente dinTabl e 2 . Fou r dumm

y variable s wer e define dfo r stud y characteristic s tha t migh t influenc e th e valu e estimate . Thes e ar e RANK , DIST , PRETEST , andWES T and ar e define dinTabl e 1 . Tabl e 3 show s th e OL S estimate s o f Equatio n1 . Bot hDV RandDIFS Q ar e significant . Th e negativ e coefficien t fo r DIFS Q combine dwit hth e positiv e coefficien t fo r DV

Rindicate s tha t ove r th e rang e o f visibilit y considere d i nthes e studies , th e valu e increase s wit hbigge r change s i nvisua l range , bu t a t a decreasin g rate . T o tes t th e sensitivit y o f thes e result s t o th e Tolle y e t al . estimates , th e equatio nwa s estimate dwithou t th e Tolle y e t al . estimates . Th e result s ar e show ni nTabl e 4 . Estimate dwithou t th e Tolle y result s th e coefficient s ar e practicall y

identical . Wit hth e smalle r sampl e siz e andth e chang e i n th e grou po f studies , th e dumm y variable s wer e no t expecte dt o b e stabl e an dwer e therefor e lef t ou t o f bot hestimations . Thi s i s stron g suppor t tha t th e Tolle y et . al . result s ar e generall y consisten t wit hthos e o f th e othe r contingen t valuatio nstudie s tha t hav e bee nconducted . Th e SO 4 loca l visibilit y an dP M morbidit y

an dsoilin g benefi t result s ar e presente di nTabl e 5 . Tw o regulator y alternative s ar e presented , lo

w sulfu r fue l andpercen t reduction . Eac halternativ e ha s a rang e o f benefit s whic hreflect s sensitivit y analysi s o

nth e ai r qualit y modelin g andeconomi c valuatio ninputs . Th e ASTRA P ai r qualit y mode l i n compariso nt o th e Mont e Carl o model , yield s lo w absolut e sulfat e concentratio n change s bu t hig hpercentag e sulfat e concentratio nchange s betwee nth e baselin e andregulator y alternativ e ai r qualit y levels . Fo r thes e reason s

Tolley , G. , Randall , A. , Bloomquist , G. , Fabian , R. , Fishelson , G. , Frankel , A. , Hoehn , J. , Krumm , R. , Mensah , E. , andSmit hT. , (1986) . Establishin g andValuin g th e Effect s o f Improve dVisibilit y i nEaster n Unite dStates , Offic e o f Researc handDevelopment , Environmenta l Protectio n Agency .P. 4

ASTRA P i s th e mode l use dt o calculat e th e low PM estimat e andth e hig h visibilit y

estimat e i nTabl e 5 . Mont e Carl o yield s hig hsulfat e concentratio n change s ye t lo

w percentag e change s andi s therefor e use dt o calculat e th e hig hPM estimat e an

dth e lo

w visibilit y

estimat e show

ni nTabl e 5 . Th e two model s ar e average dt o obtai nth e middl e estimates . Th e study

use dt o calculat e P M morbidit y

estimate s presente dinTabl e 5 i s Ostr o 19866 . Th e morbidit y measur e use db

y Ostr o i nhi s 198 6 stud y i s limite dt o onl y

acut e respirator y

condition s an

donl y use s fin e particulate s (FP ) a s th e measur e o f exposure . FP , rathe r tha nTSP , i s probabl y th e mos t appropriat e indicato r o f PM exposur e sinc e smal l particle s ar e mos t damagin g t o health . Th e Ostr o analysi s ha s foun dconsisten t association s betwee nPM andmorbidit y

measure s fo r adult s tha t ar e reasonabl y consisten t betwee n andwithi nAmerica ncities . cc : Alle nBasal a Fre dPorte r

6 Ostro , B . D . (1987) . Ai r Pollutio nandMorbidit y Revisited : A Specificatio nTest . Journa l o f Environmenta l Economic s andManagement , March .P. 5

TABL E 1 VARIABLE S USED I

N ANALYSI S O

F RESULT S FRO

M CONTINGEN

T VALUATIO

N STUDIE S

Variabl e Descriptio n Mea n CIT Y



### BI D

VR 1

VR 2

DV R
PERHIL E DIFS Q PERCEN T LOGRA T RAN K DIS T

PRETES T VES T Citie s vher e th e mean s ver e estiaated—entere d separatel y

i f aor e tha

n on e city covere d i n one study . Valu e code s a s follovs (dat e o f survey) : 1 - Chicag o - Tolle y et al . (1981 ) 2 - Atlant a - Tolle y et al . (1982 ) 3 - Bosto

n - Tolle

y et al . (1982 ) 4 - Cincinnat i - Tolle y et al . (1982 ) 5 - Hiaa i - Tolle

y e t al . (1982 ) 6 - Mobil e - Tolle

y et al . (1982 ) 7 - Washington DC - Tolle y e t al . (1982 ) 8 • Lo s Angele s - Brookshir e e t al . (1978 ) 9 > Sa n Francisc o - Loehoa n e t al . (1980 ) 1 0 « Cincinnat i - Ra e et al . (1982 ) 1 1 - Faraington , Ne v Mexic o - Rov

e et al . (1977 ) Annua l villingnes s t o pa y per househol d i

n 198 4 100.4 7 dollars . Mi d point s o f range s ver e use d fo r Ra e study . Foroa t C 2 (payment car d vit hprivat e an

d publi c goods ) va s use d fo r Tolle y et al . pretest . Visua l range i n mile s tha t vas , th

e presume

d 14.9 8 startin g poin t for th

e hypothesized change Visua l rang e i n mile s tha t va s th

e hypothesize

d ne v 19.4 8 leve l Chang e in visua l rang e hypothesized (VR 2 - VR1 ) 4.5 0 BID/DV R 29.6 4 [(VR2) 2 - (VR1) 2 ] -4.7 4 DVR/V R .8 2 L0G(VR2/VR1 ) .3 4 1 • contingen t rankin g metho d va s used . .1 7 1 • visua l rang e va s presente d a s a distributio n o f .1 7 severa l levels * no t a singl e averag e value . 1 • stud

y ya s a pretes t fo

r a large r effort . .1 9 1 a stud

y conducted i

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### TABL E 3 REGRESSIO NESTIMATE S O F EQUATIO N1 FO R AL L CONTINGEN T VALUATIO NSTUDIE S

WIT H DUMM Y VARIABLE S FOR DIFFERENCE S INSTUDIE S

Variabl e Coefficien t t-statisti c
DV R 19.7 4 5.6 2 DIFS Q -.1 7 -3.1 1 RAN K258.1 5 3.2 8 DIS T -91.4 1 -1.1 4 PRETES T -5.2 3 -.1 0 WES T -6.3 9 -.0 9
H 2 

### - 3 6 R- .7 7 F - 16.3 3P. 8

Tabl e 4 Regressio n Estimate s o f Equatio n 1 fo rAl l C V Studie s

N 2 = 1 5 R = .5 0 F = 6.4 6 Al l Studie s

Variabl e Coefficien t t-statisti c

DV R22.3 1 6.7 5 DIFS Q -.1 9 -4.2 0

N 2 = 3 6 R = .6 4 F = 29. 9

Al l Studie s Excep t Tolle y e t al

Variabl e Coefficien t t-statisti c

DV R22.3 7 3.2 0 DIFS Q -.1 9 -2.4 2P. 9

Tabl e 5
Annualize dBenefits 1 (thousand s o f 198 3 dollars) 2

Regulator y

Alternative s 3 Industria l Boiler s SO 2

Benefi t Categor y
S 0 4 Visibilit y P M Morbidit y

& Soilin g 

### 1

19,00 0 22,00 0 Lo

w Sulfu r 2 26,00 0 25,00 0 Fue l 3

36,00 0 27,00 0 Percen t Reductio n

1 2 3 29,00 0 34,00 0 38,00 0

37,00 0 52,00 0

40,00 0

1 Th e benefi t assessmen t onl y include s a subse t o f potentia l benefits . 2 Benefit s ar e fo r th e yea r 1990 , i n198 3 dollars . 3 A rang e o f benefit s (1,2,3 ) i s presente dt o reflec t sensitivit y analysi s o

n th e ai r qualit y

modelin g and economi c valuatio ninputs .