E

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/R Incorporated Providing Environmental Technical Support Since 1989

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MEMORANDUM

DATE: May 10, 2012

SUBJECT: RICE 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 rules (75 FR 9648 and 75 FR 51570) that addressed 

existing stationary RICE less than or equal to 500 horsepower (HP) located at major sources and existing 

stationary RICE located at area sources. This memorandum will also discuss proposed amendments that will 

affect other engines subject to the RICE NESHAP and the effect on impacts for those engines.

The proposed amendments include alternative compliance options for certain stationary engines, 

management practices for a subset of existing stationary engines in sparsely populated areas, and alternative 

monitoring and compliance options for the same engines in populated areas. In addition, the EPA is 

proposing to increase the demand response allowance for stationary emergency RICE and proposing to 

include a limited allowance for existing stationary emergency area source RICE 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 Located at Area Sources

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 subject 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) length 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 the 
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engine. Under the proposed amendments, these engines would 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 engines 

would decrease substantially from those estimated for the 2010 final rule because owners and operators 

would not have to purchase, operate and maintain a catalyst, 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 expected that the majority of owners and operators are 

already following some type of O&M requirements and little additional burden is expected. Therefore, 

minimal recordkeeping costs were estimated at 1 hour per year for each engine at a technical labor rate of 

$72 per hour. Owners and operators of 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 nonemergency 4-stroke SI engines greater than 500 HP at area sources are predominantly located in sparsely 

populated areas; more specifically, 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 catalyst. Under the proposed amendments, existing stationary non-emergency

4SLB SI engines would not have to meet numeric emission limits, but would have to demonstrate by testing 

that the catalyst 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 nonemergency 4SRB engines would be required to demonstrate via testing that the catalyst is reducing CO by 75 

percent or more, or alternatively that total hydrocarbons (THC) emissions are being reduced by 30 percent or 

more.

Given that owners and operators would still have to use add-on controls on their engines and the 

same catalyst performance is expected as previously estimated, and because pollutant reductions estimated 

for the 2010 rule are conservatively 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 reductions estimated for the 2010 rule are expected under the proposed amendments for 

existing 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 RICE” 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 proposed amendments, owners and operators would no longer have to perform monthly measurements of

the pressure drop across the catalyst. Owners and operators would still be required to monitor the catalyst 

inlet temperature or use a high temperature shutdown device to protect the catalyst, but they would not have 

to continuously record the catalyst 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 on their units. 
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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. It is 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 currently have the option of either limiting the concentration of formaldehyde 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 limited 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 per year 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 year for any non-emergency purpose, including peak shaving.

To estimate emissions from emergency engines the EPA has previously estimated that these types of 

engines would on average operate for 50 hours per year. The average hours of operation for emergency

engines is not expected to change based on the proposed amendments and 50 hours per year 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 savings 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 is 
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uncertain how 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 EPAbthat presents a summary of emergency

demand response 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 was 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 Agricultural RICE

The EPA is proposing that certified 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 emissions from these engines 

effectively 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 certified Tier 1 and Tier 2 existing stationary CI engines 

greater than 300 HP at area sources that will be replaced within the next few years due to state/local rules 

would be subject to management practices until 2015, after which the numeric emission limits 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 RICE 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 would 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 information on how many engines would be affected. 

 

a Memorandum from Stacy Angel, Synapse Energy Economics, Inc. to Doug Hurley, Synapse Energy

Economics. Sample Revenue for a 1 MW Backup Generation Unit. June 27, 2011.

b Attachment 2 to Letter from Richard H. Counihan, EnerNOC to Melanie King, EPA. February 11, 

2011.EPA-HQ-OAR-2008.0708-0748.2.
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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 by 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, 

respectively, 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 year, if 

management practices 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 RICEc

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

NOx N/A 96,479 N/A 9,648

VOC 27,395 30,907 27,142 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, respectively. 

 

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.
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Table 2. Pollutant Reductions for Existing Stationary SI RICE – by HPb

Size Range (HP) Emission Reductions (tpy) in the year 2013

HAP CO NOx 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
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Table 3. Pollutant Reductions for Existing Stationary CI RICE – by HPb

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 CI and SI engine portion of the rule, respectively, the costs for the proposed 

amendments in Table 2 are also shown in those years in order to be able to compare on a consistent basis. 

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 RICEb

Engine Previous Estimate 

(2010 Final Rule)

RICE Reconsideration 

(2012 Proposed 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)

$737 million 

($2008)

$740 million 

($2010)
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Please refer to the memoranda entitled “Impacts Associated with NESHAP for Existing Stationary CI

RICE” and “Impacts Associated with NESHAP for Existing Stationary SI RICE” 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. 

Specifically, the Marshall & Swift (M&S) Equipment Cost Index for the different years were applied to total 

cost estimates to convert the costs to a specific year. To convert the 2009 costs associated with the existing 

SI engine 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 cost 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 CI engine portion of the rule, the EPA divided the total cost by the M&S Annual Index for 2008 

(1,449.3) and multiplied the resulting cost by the M&S Annual Index for 2010 (1,457.4).
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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 CI 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