### Department of Environmental
Conservation

DIVISION OF A IR QUALITY

D ir ector ’ s Office

410 Willoughby Avenue, Suite 303
PO Box 111800

Juneau , Alaska 99811

- 1800
Main: 907

- 465

- 5100
Toll Free: 866

- 241

- 2805
Fax : 907

- 465

- 5129

www. dec .alaska.gov

March 2 , 2015

Melanie King U.S. Environmental Protection Agency
109 T.W. Alexander Drive
Mail Code D243

- 01 Research Triangle Park, NC 277 09

Subject: Reasons to Align 40 C.F.R. 60 and 40 C.F.R. 63 Exemptions for Rural Alaska

Dear Ms. King :

The Alaska Department of Environmental Conservation (ADEC) and the Alaska Energy Authority (AEA) appreciate this opportunity to respond to EPA’s January 6, 2015, letter to ADEC, in which you addressed ADEC’s November 28, 2014, request to align the New Sour ce Performance Standards (NSPS) definition of rural Alaska in 40 CFR 60.4201(f), 60.4202(g), and 60.4216 with the Reciprocating Internal Combustion Engine National Emissions Standards for Hazardous Air Pollutants (RICE

- NESHAP) definition of rural Alaska in 40 CFR 63.6603(b)(2). In the January 6, 2015, letter, EPA requested additional information regarding how the affected communities are similar to communities that currently meet the NSPS definition of rural Alaska, even though they are
on the Federal Aid Highway System (FAHS). The information in this letter provides the additional support EPA may require to align the exemption language for sources in rural areas of Alaska that are subject to 40 C.F.R. 60 Subpart IIII.

Inaccessibility. The inaccessibil ity of the affected communities, by necessity, allows them to be
classified as rural areas of Alaska. Alaska is a huge land mass with very limited access due to long distances or limited accessibility by only boat or plane. Travel distances are often mea sured in days not hours. The affected communities are remote, isolated, and many have small populations. Although the affected communities are on the FAHS, none of them, with the exception of Juneau, have local access to factory service technicians. Th e technicians are based in Anchorage , Juneau,
and Seattle.

Therefore, factory service technicians would require extensive travel time in addition to the time needed to service the engines. Service intervals are typically 2,000

- 3,000 hours for the NSPS

e ngines. Technicians charge $125

- 135/hour, so it would not be economic to drive six hours one way from Anchorage to Tok or to take the ferry nine hours one way from Juneau to Pelican. In addition, technicians would need to fly from Anchorage or Juneau bef ore being able to travel on to the smaller Southeast Alaska communities. Some communities, such as Eagle, are only accessible by road for four months of the year due to roads that are not passable in the winter. Others, such as



### Clean AirMelanie King March 2 , 2015

U .S. Environmental Protection Agency

Tenakee Springs, only have ferry service once a week, weather permitting, and the alternative travel method is by floatplane. In addition, weather in Alaska is often less than ideal for flying; therefore, it is standard practice to include the expense of weather delays when budget ing for travel by air. A
routine maintenance call to one of these remote communities on the FAHS would cost a minimum of several thousand dollars. The rates and rate payers in these communities would be required to pay for this significant increased cost

.

Urea Storage and Transport Expense. Existing powerhouses in the affected communities are unlikely to have interior space readily available which could accommodate a urea tank of several thousand gallons. Urea freezes at approximately 12°F, so the ta nks would have to be in a heated space or be individually heated, which would require utilities to burn additional fuel, increasing both costs and emissions from space heating equipment. In some cases, the tanks could be heated with
recovered heat from th e diesel generators. However, most communities have implemented energy efficient measures and routinely use recovered heat for space heating, so diverting the heat required for the urea tanks would result in additional stove oil usage and expense at build ings heated using
recovered heat.

The delivery of the urea poses additional storage and expense issues. Most of these communities receive diesel fuel seasonally by barge and would receive urea the same way. Since urea is corrosive to steel, it would mo st likely be transported in 330 gallon plastic totes. These might be transported as deck cargo on the fuel barge at significantly a higher freight cost per gallon than the diesel fuel in the barge’s tanks.

Risk . The most significant risk associated with the urea requirement is the added complexity of operation and maintenance for sources. Some of the small remote communities face extreme winter conditions. As an example, three of the remote communities on the FAHS (Tok, Eagle, and Manley Hot Springs) h ave reported temperatures as low as

- 70°F. If a genset fails or has to operate at low output due to a shortage of urea at extreme low temperatures, it may be life

- threatening. Seniors, children, and residents with disabilities would be at greatest risk i f utilities are unable to provide sufficient power to heat and light the community. There are also safety considerations for poorly trained operators who would be at risk of skin and eye exposure to the urea.

Shortage of T rained O perators. Affected communities routinely experience difficulty in finding qualified operators and experience high turnover rates of staff. This is in part due to the low pay
scale that results from the challenge of operating an electric utility with a very small number of rate

paying customers as well as high overhead and fuel costs. Additionally, these jobs are often part

time, which makes it difficult to retain staff in rural communities with few other job opportunities.
AEA offers training classes ( http://www.akenergyauthority.org/Programs/Training ) to assist rural communities in improving the skills of operators but regularly finds that recently

- trained operators
have left the communities for better

- pay ing jobs. The increased responsibility, training, and requirements for the urea control systems that part

- time, inexperience d operators will have to take on will only increase the costs and associated risks to remote communities.

Limited Availability and High Capital Cost of Final Tier 4 Engines. John Deere, Detroit
Diesel

, and Caterpillar furnish the majority of prime power diesel engines under 750 HP used in rural Alaska power plants. In general terms, most rural Alaska power p lants with electric loads up to 200 kWe use John Deere gensets ; between 200 kWe and 350 kWe use Detroit Diesel gensets ; and over 350 kWe use Caterpillar gensets. In an effort to better understand the effect of the final Tier 4 requirements on rural Alaska electric utilities, local distributors of all three manufacturers were

Page 2 of 5Melanie King March 2 , 2015

U .S. Environmental Protection Agency

contacted February 20, 2015

, for updated information on costs, literature

, and technical specifications for Final Tier 4 engines. What was learned is disconcerting:

• A vailability of F inal Tier 4 engines for use in stationary Prime Power, constant speed applications is poor.

• T echnical data and specifications for Final Tier 4 engines are incomplete.

• A ccess to maintenance and service bulletins specific to stationary, constant speed Fina l Tier 4 engines is limited

.

• T here is limited information available on maintenance costs for Final Tier 4 engines and emissions devices, but the capital costs are high.

Availability:

• Marsh Creek, an Anchorage John Deere distributor, reports that it can p rovide Final Tier 4 gensets, but they are a special order with an engine lead time of 140 days.

• Pacific Power Products, an Anchorage MTU/Detroit Diesel distributor, responded that MTU has not announced the anticipated availability of its Final Tier 4 engi nes, and it is unlikely to occur prior to 2016.

• NC Power Systems, an Anchorage Caterpillar distributor, responded that a CAT marine Tier 3 engine with added Active DPF and SCR to comply with Final Tier 4 emissions requirements is available

.

Capital Cost: The updated capital cost data provided by John Deere and NC Power Systems for their Final Tier 4 solutions are staggering.

The capital cost of a CAT C18 Tier 3 certified genset is $220,650. The capital cost of the CAT C18 Tier 3 genset with Active DPF and SCR to comply with Final Tier 4 is $383,833. This is an increase of nearly 74% and over $163,000.

Marsh Creek estimated in 2011 that the capital costs of Tier 4 engines would increase between 50% and 60% compared to equivalent sized Tier 3 engines. 2015 pricing for a Final Tier 4 engine is more than double the cost of an existing equivalent horsepower Tier 3 marine engine. The current Tier 3 JD 4045 marine engine cost is $25,000. The Final Tier 4 JD 4045HFG09 engine cost is $53,000.

The current Ti er 3 JD 6068 engine cost is $30,000, whereas the Final Tier 4 JD 6068HFG08 engine cost is $66,000.

Maintenance and Operating Cost: Each engine manufacturer has its own specific emissions equipment maintenance and operating requirements. Since MTU has not announced its Final Tier 4 solution, these costs are unknown. March Creek has responded that Urea Diesel Exhaust Fluid (DEF) consumption is estimated at 5% of fuel consumption. NC Power Supply has not provided estimates of DEF consumpt ion for its C18, but information provided by Miratech shows DEF consumption between 5% and 12% for an
aftermarket SCR.

The cost of DEF in 330

- gallons portable shipping containers is currently $3.30/gallon in Anchorage. The delivery cost to rural Alaska is highly variable

, but regardless of whether a community is road connected or not, operating costs will increase between 5% and 10% just for the DEF fluid use.

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U .S. Environmental Protection Agency

Marsh Creek estimates the John Deer e emissions equipment in a prime power application will

re quire maintenance by a qualified service technician 2 to 3 times per year. The material cost for each service interval is $2000. The hourly rate of a s ervice t echnician is at least $125/hour, and the time to perform the actual service is 4 to 6 hours. T ravel logistics are described below.

EPA acknowledged in the final NSPS rule that the ongoing annual maintenance cost of Final Tier 4 emission equipment cannot be sustained by small rural electric utilities, but EPA then limited the regulatory relief to o nly those rural electric utilities not accessible to the FAHS.

However, the remoteness of a rural Alaska community is not defined by whether or not it is accessible to the road system (FAHS). For example, the communities of Central, Minto

, and Northway are all on the road system. Central uses John Deere gensets, Minto has Detroit Diesel

gensets

, and Northway uses Caterpillar gensets. The vendors who provide equipment and repair services for these gensets are based in Anchorage. Following are descripti ons of travel required to
reach these communities:

Central:

• D riving distance is 479 miles (analogous to Washington D.C. to Montreal)

.

• Driving time is 9 hours in good weather. It snows nine months of the year along this route.

• The road is two lane, with 80 miles of gravel surface

.

• In poor driving conditions, the technician would fly to Fairbanks by jet and transfer to a small plane, which flies to Central once daily

.

Minto:

• D riving distance is 483 miles (analogous to Washington D.C. to Montreal)

• Driving time is 9

- 1/2 hours in good weather. It snows nine months of the year along this

route.

• The road is two lane, with 90 miles of gravel surface

.

• In poor driving conditions, the technician would fly to Fairbanks by jet and transfer to a small plane, which f lies to Minto on a charter basis

.

Northway:

• D riving distance is 373 miles (analogous to Washington D.C. to Detroit)

.

• Driving time is 7 hours, 20 minutes in good weather. It snows nine months of the year along this route.

• The road is two lane, with 11 miles of gravel surface

.

• In poor driving conditions, the technician might charter a small plane out of Anchorage

.

D ifference s B etween F ull NSPS C ompliance for M obile S ources and S tationary S ources. The maintenance interval for NSPS engines that require a factory

- trained technician is approximately 2,000

- 3,000 hours. On

- road vehicles average approximately 30 mph, so this maintenance happens at

4

- 6 year intervals under typical usage. In rural Alask a, where roads are limited or non

- existent, the interval may be significantly longer. Contractors working in remote villages generally bring heavy equipment with them because the local equipment is either not appropriate or not reliable. In

contrast, an NSPS engine in a powerhouse runs continuously, so an electric utility could require a factory

- trained technician three or four times a year. The annual NSPS engine maintenance cost for a community like Manley Hot Springs could exceed $ 16,000, an enormous burden on a community

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