# E **C** 

# / **R Incorporated Providing Environmental Technical Support Since 1989** 

501 Eastowne Drive, Suite 325  Chapel Hill, North Carolina 27514 Telephone: (919) 484
- 0222  Fax: (919) 484
- 0122 **MEMORANDUM**
DATE: May

10 , 201 2 SUBJECT: RI CE NESHAP Reconsideration Amendments
- Cost and Environmental Impacts FROM: Tanya Parise , EC/R, Inc. TO: Melanie King , EPA OAQPS/SPPD/ESG The EPA is proposing amendments to the national emission standards for hazardous air pollutants (NESHAP) for stationary reciprocating internal combustion engines (RICE) in 40 CFR part 63, subpart ZZZZ. The main purpose of this memorandum is to present the estimated impacts associated with the proposed amendments compared to the 2010 final rule s (75 FR 9648 and 75 FR 51570) that addressed existing stationary

RICE less than or equal to 500 horsepower (HP) located at major so urces and existing stationary RICE located at area sources . This memorandum will also discuss proposed amendments that will affect other engines subject to the RI CE NESHAP and the effect on impacts for those engines
. The proposed amendments include altern ative compliance options for certain stationary engines, management practices for a subset of existing stationary engines in sparsel y populated areas, and alternative monitoring and compliance options for the same engines in populated areas. Inaddition, the EPA is proposing to increase the demand response allowance for stationary emergency RI CE and proposing to include a limited allowance for existing stationary emergency area source RI CE to be used for peak shaving
. The specific amendments the EPA is proposing and how the proposed changes will affect emission reduction estimates and the total costs of the rule are discussed in the paragraphs that follow. Non
- Emergency Stationary SI RICE > 500 HP L ocated at Area Source s Engines in Sparsely Populated Areas Existing stationary

non - emergency

4
- stroke lean burn (4SLB) and 4
- stroke rich burn (4SRB) spark ignition (SI) engines greater than 500 HP at area sources that are in sparsely populated (remote) areas would be subje ct to management practices under the proposed amendments
. A remote area is defined as either : (1) an offshore area that is beyond the line of ordinary low water along that portion of the coast of the United States that is in direct contact with the open seas and beyond the line marking the seaward limit of inland waters ; (2) a pipeline segment with 10 or fewer buildings intended for human occupancy within 220 yards (200 meters) on either side of the centerline of any continuous 1
- mile (1.6 kilometers) len gth of pipeline and that does not lie within 100 yards (91 meters) of either a building or a small, well
- defined outside area (such as a playground, recreation area, outdoor theater, or other place of public assembly) that is occupied by 20 or more persons on at least 5 days a week for 10 weeks in any 12
- month period; or (3) engines not located on pipelines that have 5 or fewer buildings intended for human occupancy within a 0.25 mile radius around the2 engine
. Under the proposed amendments, these engines wo uld no longer be subject to emission standards necessitating the use of aftertreatment , but subject to management practices instead ; no emission reductions have been estimated from meeting the management practices. The capital and annual costs for these en gines would decrease substantially from those estimated for the 2010 final rule because owners and operators would not have to purchase, operate and maintain a catal ys t , plus owners and operators would not be required to monitor the catalyst inlet temperature continuously or record the pressure drop monthly
. The only costs attributed to engines subject to management practices are for maintaining records of the maintenance conducted on the engine in order to demonstrate that the engine is operated and maintained according to the manufacturer’s emission
- related operation and maintenance ( O&M) requirements or the owner or operator’s own maintenance plan. It is expe cted that the majority of owners and op erators are already following some ty pe of O&M requirements and little additional burden is expected. Therefore, minimal recordkeeping costs were estimated at 1 hour per ye ar for each engine at a technical labor rate of $7 2 per hour
. Owners and operators o f SI engines that are subject to management practices are not subject to any reporting requirements and therefore no reporting costs were estimated for these engines. Existing non
emergency

4
- stroke SI engines greater than 500 HP at area sources are predom inantly located in sparsel y populated areas ; more specificall y , according to industry information , about 90 percent of these engines are in Class 1 areas. Engines in Populated Areas Existing stationary

non - emergency

4SLB and 4SRB SI engines greater than 500 HP at area sources that are not in remote areas would be subject to an equipment standard under the proposed amendments that would require the use of a catal ys t . Under the proposed amendments, existing stationary non - emergency 4SLB SIengines would not have to meet numeric emission limits, but would have to demonstrate by testing that the catal ys t is achieving a 93 percent carbon monoxide ( CO ) reduction or that CO emissions at the engine exhaust do not exceed 47 parts per million by volume, dry basis (ppmvd). Existing stationary non
emergency

4S RB engines would be required to demonstrate via testing that the catal ys t is reducing CO by 75 percent or more, or alternatively that total hydrocarbons ( THC ) emissions are being reduced b y 30 percent or more. Given that owners and operators would still have to use add
- on controls on their engines and the same catal ys t performance is expected as previously estimate d , and because pollutant reductions estimated for the 2010 rule are conservative ly based on the average control efficiencies observed during EPA’s testing program at Colorado State University (CSU) for 4SLB engines and industry testing for 4SRB engines , the same emissions re ductions estimated for the 2010 rule are expected under the proposed amendments for e xisting stationary

non - emergency

4SLB and 4SRB SI engines greater than 500 HP at area sources in populated areas . The control efficiencies are documented in the memorandum “ Impacts Associated with NESHAP for Existing Stationary SI RI CE ” available from www.regulations.gov as Document ID Numbers EPA
- HQ
- OAR
- 2008
- 0708
- 0542, The proposed changes are expected to lower costs in terms of monitoring and testing expenses . Under the propose d amendments, owners and operators would no longer have to perform monthly measurements of the pressure drop across the catal ys t . Owners and operators would still be required to monitor the catalyst inlet temperature or use a high temperature shutdown device to protect the catal ys t , but they would not have to continuously record the catal ys t inlet temperature . High temperature shutdown devices are typical on engines and the EPA has assumed that all the engines will already have such a device installed o n their units.3 Therefore, no cost has been estimated for this requirement. The costs would be further reduced for 4SRB SI engines because of the proposal to allow less expensive CO and THC testing in place of formaldehyde testing , which is more expensive
. Non
- emergency

engines in populated areas would continue to be subject to the same recordkeeping and reporting requirements as required in 2010 rule, such as reading instructions, training personnel, submitting an initial notification, and submitting semi
- annual compliance reports
. Itis estimated that a total of 14 hours will be needed, including 4 hours for reading the rule, 4 hours for training, and 6 hours for preparing and submitting notifications and compliance reports
. Existing non
- emergency 4
- stroke engines greater than 500 HP at area sources in populated areas account for 10 percent of the total population of 4
- stroke engines above 500 HP at area sources, according to industry estimates. THC Compliance Demonstration Option In addition to a reduction in testing costs discussed for existing 4
- stroke engines at area sources and the estimated cost impacts presented in Table 2, additional savings are expected for owners and operators of existing and new stationary 4SRB engines above 500 HP located at major sources. Owners and operators of these engines currentl y have the option of either limiting the concentration of formaldehyd e or reducing formaldehyde emissions , a requirement that was promulgated as part of the original 2004 RICE NESHAP rulemaking . The proposed amendments will provide these owners and operators an alternative THC compliance demonstration option. It is expected that owners and operators will take advantage of the THC testing option as opposed to testing for formaldehyde, but the number of engines that will be tested for THC instead of formaldehyde is unknown. Therefore, the specific cost savings associated with this proposed amendment has not been calculated, however, it is expected that the testing burden will be substantially reduced. The cost of formaldehyde stack testing used to estimate testing costs for the 2004 rule was close to $6,000. Estimates available today indicate that CO or THC testing can be performed for around $1,000. Subsequently , it is possible that cost savings related to performance testing could be as high as 80 percent. Emergency

Demand Response/Peak Shaving The EPA is proposing to increase the demand response allowance for stationary emergency

engines and proposing to include a l imited allowance for existing stationary emergency

engines located at area sources to be used for peak shaving. The proposed amendments would increase the demand response allowance for emergency engines from 15 hours per year to an allowance of 100 hours p er ye ar that would include operation for maintenance and testing purposes and demand response operation. A temporary limited allowance that will expire on April 16, 2017, is being proposed for stationary emergency

engines located at area sources to be used for up to 50 hours per ye ar for any non - emergency purpose, including peak shaving. To estimate emissions from emergency engines the EPA has previousl y estimated that these ty pes of engines would on average operate for 50 hours per year. The average hour s of operation for emergency engines is not expected to change based on the proposed amendments and 50 hours per ye ar is still believed to be representative of average emergency engine operation . Therefore, the emissions previously calculated remain appropriate. In terms of any revenue generated from participation in demand response and peak shaving programs, the EPA expects owners and operators will benefit financially , however, the EPA does not know to what extent
. The EPA expects there will be sav ings and/or income generated through participation in emergency demand response programs and peak shaving operation, but the EPA has not accounted for any potential revenue in estimating the costs and benefits of the proposed amendments. It is4 uncertain ho w many engines participate in these programs and how frequently stationary

emergency

engines would operate if they

are called upon. According to data from demand response programs in ISO
-NE and PJM territories backup generation was dispatched for less than 30 hours during the summers of 2008, 2009 and 2010. a Another example of emergency engines operating infrequently for demand response programs can be found in Table 1 of a 2010 letter from EnerNOC to EPAb that presents a summary of emergency demand respons e events in New England. According to EnerNOC, emergency engines have only

been called upon three times in New England, where the duration of the events w as 3.75, 5.95 and 16.5 hours in 2006, 2005, and 2003, respectively
. Other factors , such as the annual revenue from demand response programs (which varies), are also uncertain making it problematic to estimate the economic benefit of such programs. As such, the EPA has not estimated any costs associated with the emergency engine amendments. Stationary

Agri cultural RICE The EPA is proposing that c ertified Tier 3 existing stationary compression ignition (CI) engines at area sources that were installed before June 12, 2006 , would automatically be in compliance with the NESHAP and would not be subject to aftertreatment
- forcing standards. This means that these engines will not be required to install add
- on controls and subsequently no emission reduction has been estimated for this group of engines. The EPA is no longer accounting for a reduction in emission s from these engines effectivel y lowering the estimate of emissions reductions previously estimated for the 2010 rule. In California, San Joaquin Valley has identified 17 Tier 3 CI engines installed between January 1 and June 12, 2006 , which is the number of engines that EPA has used to estimate the impacts of this proposed amendment. In addition, the EPA is proposing that c ertified Tier 1 and Tier 2 existing stationary CI engines greater than 300 HP at area sources that will be replaced within the next f ew years due to state/local rules would be subject to management practices until 2015 , after which the numeric emission limit s of the NESHAP apply
. In California there are 49 of these Tier 1 engines and 360 of these Tier 2 engines, which are the number of engines the EPA has used to estimate the impacts of this proposed amendment. The EPA has not estimated any

emissions reductions or control costs under the RICE NESHAP for these 409 stationary Tier 1 and Tier 2 certified CI engines in the year 2013. Remote Stationary RI CE in Alaska The EPA is also proposing to broaden the definition of remote area sources of Alaska in the RICE NESHAP. Currently , remote areas are those that are not on the Federal Aid Highway System (FAHS). This change would permit existing stationary CI engines at other remote area sources in Alaska to meet management practices as opposed to emission standards likely necessitating aftertreatment. However, the EPA is unable to quantify the number of engines in remote areas of Alaska that woul d be able to qualify for this provision. Therefore, it was not possible to assess the environmental and economic impacts associated with this proposed amendment. The EPA does not know how many facilities would be considered remote and does not have any inf ormation on how many engines would be affected.

a Memorandum from Stacy Angel, Sy napse Energy Economics, Inc. to Doug Hurley , Sy napse Energy Economics. Sample Revenue for a 1 MW Backup Generation Unit. June 27, 2011. b Attachment 2 to L etter from Richard H. Counihan, EnerNOC to Melanie King, EPA. February 11, 2011.EPA
- HQ
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- 2008.0708
- 0748.2.5

While the EPA does not have sufficient information to quantify the total impact of this change, the EPA can provide an example of the impact for an individual facility . For instance, the Bailey Power Plant operated b y the Ketchikan Public Utilities has four (4) stationary diesel engines
. Two (2) rated at 4,500 kilowatt ( KW ) , one (1) rated at 6,450 KW and one (1) rated at 10,500 KW. If these four engines would be subject to management practices instead of aftertreatment, the lost HAP reductions is estimated to be 1.3 tpy total from the four engines. The lost CO, PM, and VOC emissions are estimated at 1 tpy , 3.7 tpy , and 35 tpy , respectivel y, in total from these four engines. Under the proposed amendments, the facility would avoid total capital costs associated with required aftertreatment of over $960,000 . The facility would avoid annual expenditures related to aftertreatment operating and maintenance costs of more than $176,000 per ye ar , if management practice s only are required for these engines. A summary

of the emission reductions associated with the proposed amendments and those estimated for the 2010 final rule are presented in Table 1.

**Table 1. Summary of Pollutant Reductions for Existing Stationary RICE**  **c**
**Pollutant Emission Reductions (tpy) in the year 2013**  **Previous Estimate (2010 Final Rule)**  **RICE Reconsideration (2012 Proposed Amendments)**  **CI SI**  **CI SI**  **HAP** 1,014 6,008 1,005 1,778 **CO** 14,342 109,321 14, 238 22,211 **PM** 2,844 N/A 2, 818 N/A **NO x**  N/A 96,479 N/A 9,648 **VOC** 27,395 30,907 2 7,142 9,147 Tables 2 and 3 present the pollutant reductions by HP and by

area/major sources for the SI and CI portion of the rule, respectivel y.

c The estimates presented in Tables 1 through 6 are for existing stationary RICE less than or equal to 500 HP located at major sources and existing stationary RICE located at area sources.6 **Table 2. Pollutant Reductions for Existing Stationary**  **SI RICE** 

**– by HP**  **b Size Range (HP)**  **Emission Reductions (tpy) in the year 2013 HAP**  **CO NO**  **x VOC**  **Major Sources**

25
- 50 0 0 0 0 50
- 100 0 0 0 0 100
- 175 744 7,124 0 3,826 175
- 300 277 2,653 0 1,424 300
- 500 288 2,755 0 1,480 500
- 600 N/A N/A N/A N/A 600
- 750 N/A N/A N/A N/A >750 N/A N/A N/A N/A Total Major 1,308 12,532 0 6,730 **Area Sources**

25
- 50 0 0 0 0 50
- 100 0 0 0 0 100
- 175 0 0 0 0 175
- 300 0 0 0 0 300
- 500 0 0 0 0 500
- 600 101 2,070 2,063 517 600
- 750 22 453 452 113 >750 347 7,156 7,133 1,787 Total Area 470 9,679 9,648 2,418

**Total 1,778**  **22,211 9,648**  **9,147**7 **Table 3. Pollutant Reductions for Existing Stationary**  **CI RICE** 

**– by HP**  **b Size Range (HP)**  **Emission Reductions (tpy) in the year 2013 HAP**  **CO PM**  **VOC Major Sources**  50
- 100 0 0 0 0 100
- 175 44 2,072 123 1,183 175
- 300 57 1,571 161 1,549 300
- 500 145 2,362 407 3,923 500
- 600 18 209 50 478 600
- 750 11 107 31 300 >750 36 236 102 982 Total Major 312 6,558 874 8,416 **Area Sources** 50
- 100 0 0 0 0 100
- 175 0 0 0 0 175
- 300 0 0 0 0 300
- 600 363 5,244 1,017 9,798 600
- 750 91 879 256 2,463 >750 239 1,557 671 6,466 Total Area 693 7,680 1,944 18,727

**Total 1,005**  **14,238 2,818**  **27,142** A summary

of the costs associated with the proposed amendments and those estimated for the 2010 final rule are presented in Table 4
. All costs were converted to 2010 dollars for purposes of presenting costs associated with the rule in present day terms. However, because the costs estimated for the 2010 rule were in 2008 and 2009 dollars for the CIand SI engine portion of the rule, respectively , the costs for the proposed amendments in Table 2 are also shown in those ye ars in order to be able to compare on a consistent b asis. Tables 5 and 6 present the cost impacts by NAICS code for the SI and CI portion of the rule, respectively
. **Table 4**  **. Summary of Cost Impacts for Existing Stationary RICE b**  **Engine Previous Estimate**  **(2010 Final Rule) RICE Reconsideration**  **(2012 Propos ed Amendments)**  **Total Annual Cost SI**  $253 million

($2009) $251 million ($2010) $115 million ($2009) $115 million

($2010) **CI** $373 million

($2008) $375 million ($2010) $ 372 million ($2008) $ 373 million

($2010) **Total Capital Cost SI**  $383 million

($2009) $380 million ($2010) $103 million ($2009) $103 million

($2010) **CI** $744 million

($2008) $748 million ($2010) $7 37 million ($2008) $7 40 million

($2010)8

Please refer to the memoranda entitled “ Impacts Associated with NESHAP for Existing Stationary CI RI CE ” and “ Impacts Associated with NESHAP for Existing Stationary SI RI CE ” available from www.regulations.gov as Document ID Numbers EPA
- HQ
- OAR
- 2008
- 0708
- 0329 and EPA
- HQ
- OAR
- 2008
- 0708
- 0542 for additional assumptions and further information on the 2010 rule estimates. The EPA used economic indicators in order to convert between 2008, 2009, and 2010 dollars. Specificall y, the Marshall & Swift (M&S) Equipment Cost Index for the different ye ars were applied to total cost e stimates to convert the costs to a specific ye ar. To convert the 2009 costs associated with the existing SIengine portion of the rule to 2010 dollars, the EPA divided the total cost by the M&S Annual Index for 2009 (1,468.6) and multiplied the resulting c ost by the M&S Equipment Cost Index for 2010 (1,457.4). Similarly, to convert from 2008 dollars, which was the year the costs were previously presented for the existing CIengine portion of the rule, the EPA divided the total cost by the M&S Annual Index f or 2008 (1,449.3) and multiplied the resulting cost by the M&S Annual Index for 2010 (1,457.4).9 **Table 5**  **. Summary of Cost Impacts for Existing Stationary SI RICE**

**– by NAICS**  **(2009 Dollars)**
**NAICS Major Source**  **Area Source Total (Major + Area)**  **Capital Cost Annual Cost**  **Capital Cost Annual Cost**  **Capital Cost Annual Cost**  Electric Power Generation (2211) $52,905,258 $63,062,494 $11,698,144 $12,138,277 $64,603,403 $75,200,772 Natural Gas Transmission (48621) $1,484,494 $1,462,530 $13,718,381 $6,142,839 $15,202,876 $7,605,369 Crude Petroleum & NG Production (211111) $4,561,236 $6,138,383 $71,439 $951,462 $4,632,675 $7,089,844 Natural Gas Liquid Producers (211112) $4,561,236 $6,138,383 $71,439 $951,462 $4,632,675 $7,089,844 National Security (92811) $5,878,362 $7,006,944 $1,299,794 $1,348,697 $7,178,156 $8,355,641 Hydro Power Units (335312) $0 $25,248 $0 $37,872 $0 $63,120 Irrigation Sets (335312) $3,025,050 $3,230,856 $3,285,890 $4,999,041 $6,310,940 $8,229,896 Welders (333992) $247,440 $679,896 $0 $570,130 $247,440 $1,250,027 **Total $72,663,076**  **$87,744,734 $30,145,088**  **$27,139,780 $102,808,163**  **$114,884,514 Table**  **6 . Summary of Cost Impacts for Existing Stationary**  **C I RICE** 

**– by NAICS**  **(2008 Dollars)**
**NAICS Major Source**  **Area Source Total (Major + Area)**  **Capital Cost Annual Cost**  **Capital Cost Annual Cost**  **Capital Cost Annual Cost**  Electric Power Generation (2211) $161,766,376 $90,982,105 $464,947,798 $202,463,116 $626,714,174 $293,445,222 Hospitals (622110) $20,220,797 $11,372,763 $0 $0 $20,220,797 $11,372,763 Crude Petroleum & NG Production (211111) $2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314 Natural Gas Liquid Producers (211112) $2,374,401 $3,807,478 $1,590,115 $2,597,836 $3,964,516 $6,405,314 National Security (92811) $20,220,797 $11,372,763 $51,660,866 $22,495,902 $71,881,663 $33,868,665 Hydro Power Units (335312) $0 $16,637 $0 $22,959 $0 $39,597 Irrigation Sets (335312) $10,294,073 $11,791,567 $34,145 $5,208,084 $10,328,218 $16,999,651 Welders (333992) $108,260 $1,481,447 $0 $1,881,380 $108,260 $3,362,827 **Total $217,359,106**  **$134,632,238 $519,823,039**  **$237,267,114 $737,182,145**  **$371,899,352**