Document ID: EPA-HQ-OAR-2002-0068-2154
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2003-08-27T04:00Z

For
other
industrial
sectors,
we
do
not
anticipate
that
emissions
increases
will
result
from
equipment
replacement
activities
that
qualify
as
RMRR
under
today's
rule.
While
some
efficiency
improvements
may
result,
the
overall
effect
of
these
improvements
will
not
be
to
induce
greater
demand
and
greater
emissions,
as
was
shown
by
the
modeling
for
utilities
(
i.
e.,
demand
depends
on
independent
factors).
Indeed,
without
increased
demand,
efficiency
improvements
that
lower
emissions
per
unit
of
output
would
result
in
a
decrease
in
emissions.
A
series
of
case
studies
were
analyzed
by
an
EPA
contractor
to
estimate
the
overall
impact
of
the
final
rule
on
6
different
industrial
sectors
(
automobile
manufacturing,
carbon
black
manufacturing,
natural
gas
transmission,
paper
and
pulp
mills,
petroleum
refining
and
pharmaceutical
manufacturing).
These
studies
attempted
to
long
at
both
the
impact
of
the
final
changes
to
the
NSR
program
that
were
published
in
December
31,
2002
and
possible
options
under
an
ERP.
The
contractor's
analysis
of
the
December
31,
2002
final
changes
poses
a
number
of
problems.
First,
the
option
of
obtaining
a
plant­
wide
applicability
limit
(
PAL),
being
designated
as
a
clean
unit
or
initiating
a
pollution
control
project
are
all
voluntary
activities
which
no
source
select
to
do.
Therefore,
using
them
as
a
baseline
to
judge
the
effects
of
possible
ERP
would
tend
to
understate
the
impact
of
an
ERP
both
positively
and
negatively.
Second,
not
all
of
the
contractors
conclusions
on
the
applicability
of
these
types
of
voluntary
options
are
an
accurate
representation
of
EPA's
understanding
of
their
usefulness
for
particular
industries.
Third,
there
are
nuances
to
some
of
these
provisions
that
are
not
well
understood
by
the
contractor
and
that
cause
some
of
the
conclusions
related
to
them
to
be
incorrect.
It
is
also
important
to
note
that
the
case
studies
were
performed
prior
to
decisions
on
the
exact
form
and
content
of
the
final
rule.
As
a
result
the
selection
of
process
units
for
each
of
the
industries
also
may
not
be
an
accurate
depiction
concerning
how
a
particular
industry's
operations
should
be
separated
into
process
units.
None
of
these
characterizations
should
be
taken
as
EPA's
position
on
appropriate
process
units
for
a
given
industry.
Information
on
that
subject
can
be
found
in
Section
III.
F
of
the
preamble
and
in
the
final
rule
for
selected
industries.
In
addition,
in
costing
out
replacement
activities
in
the
different
industries,
the
contractor
made
assumptions
of
which
costs
needed
to
be
included
and
how
multiple
replacement
activities
should
be
grouped
that
may
not
be
consistent
with
the
final
rule.
These
assumptions
on
the
part
of
the
contractor
should
not
be
interpreted
as
EPA's
conclusions
of
how
their
rules
should
be
applied
to
such
replacement
activities
in
these
industries.
Even
with
these
caveats,
the
case
studies
provide
useful
insight
into
the
potential
effects
of
the
final
ERP.
The
six
industries
are
significant
sources
of
air
pollution
emissions
and
are
very
diverse
in
terms
of
their
types
of
operations,
their
existing
maintenance,
repair
and
replacement
strategies,
and
the
range
of
potential
replacement
costs
at
some
of
their
process
units.
This
diversity
is
important
because
the
final
rule
will
impact
a
great
many
industrial
sectors
and
individual
process
units
which
are
extremely
varied
in
terms
of
their
maintenance,
repair
and
replacement
strategies.
For
example,
issues
related
to
safety,
reliability
and
availability
will
vary
greatly
across
these
industries.
A
small
hole
developing
in
a
pipe
at
a
chemical
plant
that
is
used
to
transport
highly
toxic
gas
posing
immediate
concerns
about
the
safety
of
workers
and
the
local
community
that
will
lead
to
a
much
greater
level
of
monitoring
for
such
situations
and
much
faster
response
when
they
occur.
Similarly,
the
need
to
assure
that
the
electricity
and
natural
gas
supply
is
reliable
and
available
is
critical
to
ensuring
the
safety
of
the
public
in
the
hottest
and
coldest
times
of
the
year.
Strategies
related
to
maintenance,
repair
and
replacement
at
existing
facilities
are
critical
to
ensure
that
electric
utilities
and
natural
gas
transmission
continue
uninterrupted.
The
case
studies
conclude
that
equipment
replacement
activities
vary
widely
within
these
industries
for
the
process
units
selected.
For
example,
for
fluid
catalytic
cracking
units
(
FCCU)
at
petroleum
refineries
the
estimated
costs
of
replacement
activities
ranged
from
9
to
32
percent
of
the
replacement
cost
of
the
FCCU
while
for
a
power
boiler
at
a
paper
and
pulp
mill
replacement
activities
were
estimated
to
range
from
3
to
22
percent.
These
types
of
ranges
show
the
need
to
differentiate
as
the
final
rule
does
between
those
projects
that
should
automatically
qualify
under
the
ERP
and
those
that
should
be
subject
to
a
case­
bycase
determination.
As
discussed
earlier
for
a
number
of
reasons,
20
percent
of
the
replacement
cost
was
selected
as
the
appropriate
threshold
for
such
differentiation.
The
data
from
the
case
studies
clearly
indicate
that
such
a
threshold
is
necessary
and
that
20
percent
should
function
well
as
an
appropriate
threshold.
The
case
studies
also
indicate
that
replacement
activities
in
these
industries
should
not
lead
to
increased
emissions
at
the
sources.
Assuming
replacements
with
identical
equipment
with
no
change
in
operating
levels
at
the
facilities,
emissions
should
remain
the
same.
If
you
assume
that
the
replacements
are
made
with
functionally
equivalent
equipment,
the
emissions
will
either
remain
the
same
or
decrease
if
there
is
no
change
in
operating
levels.
The
decrease
in
emissions
would
result
from
efficiency
improvements
that
reduce
the
amount
of
air
pollution
emitted
per
product
produced
in
the
process
unit.
Therefore,
if
operating
levels
do
not
change
then
total
emissions
will
decrease
with
such
functionally
equivalent
equipment
replacements.
The
case
studies
looked
at
a
wide
range
of
projects
and
it
can
be
concluded
based
on
this
analysis
that
replacement
activities
do
not
generally
cause
changes
in
operating
levels
at
the
process
unit.
Other
factors
like
economic
downturns
or
increased
demand
for
the
product
of
the
process
unit
will
cause
operating
levels
to
fluctuate.
An
exception
to
this
conclusion
is
when
the
replacement
activity
increases
the
capacity
of
the
process
unit
and
makes
it
possible
for
the
process
unit
to
take
in
additional
raw
material
and
produce
greater
numbers
of
outputs.
This
can
lead
to
significant
increases
in
capacity
at
the
source.
It
is
for
this
reason
that
the
basic
design
parameters
were
included
in
the
final
rule.
They
are
a
safeguard
which
ensure
the
process
unit
is
not
undergoing
fundamental
change
that
should
be
subject
to
a
case­
by­
case
determination
under
the
RMRR
exclusion.
However,
efficiency
changes,
even
when
they
lead
to
increases
in
product
output
from
the
same
raw
material
input
will
not
lead
to
increases
in
emissions
unless
an
independent
factor
like
increased
demand
for
the
product
also
occurs.
We
strongly
support
efficiency
improvements
where
they
can
occur
with
an
appropriate
safeguard
like
the
basic
design
parameters.
Finally,
EPA
has
supported
efforts
to
analyze
empirically
the
effects
of
this
rule
(
Abt
Associates
2003
add
ICF
citation).
Even
the
experts
involved
in
this
analysis
emphasize
that
empirical
assessments
of
the
costs,
emissions,
and
other
economic
and
environmental
effects
of
this
rule
are
extremely
difficult
to
perform,
particularly
when
generalizing
beyond
the
sector
facility
involved.
The
analysis
would
have
to
simulate
a
great
many
decisions
made
by
each
plant
involving
routine
maintenance
under
a
variety
of
policy
scenarios.
There
is
simply
no
credible
way
to
make
these
assessments
for
the
entire
economy
or
for
an
entire
sector.
Hence,
with
the
exception
of
the
electric
utility
industry
model,
we
relied
on
a
case
study
approach
to
gain
insights
as
to
how
this
rule
affects
particular
industrial
sectors.
Our
inability
to
model
economy­
wide
impacts
however,
does
not
mean
we
cannot
characterize
the
effects
of
this
rule.
Even
without
the
case
studies,
there
is
a
great
deal
of
research
and
experience
that
allows
for
some
robust
findings.
Enhanced
efficiency
and
less
pollution
in
the
short
1
By
efficiency,
we
mean
unit
of
input
per
unit
of
output,
for
example,
amount
of
energy
needed
to
produce
a
specific
amount
of
output.
Another
example
would
be
the
amount
of
raw
material
to
produce
a
specific
amount
of
output.
2
A
common
example
illustrates
the
point
well.
When
one
"
tunes­
up"
a
car,
the
automobile
gets
more
miles
per
gallon,
is
cleaner
burning,
and
is
cheaper
to
operate.
3
For
example,
energy
efficiency
is
not
a
design
parameter
to
determine
functional
equivalency
for
defining
routine
maintenance.
Accordingly,
a
firm
could
adopt
a
more
efficient
"
functionally
equivalent"
technology
without
fear
of
triggering
NSR
provisions.
run.
Holding
every
else
constant,
when
a
plant's
efficiency
increases,
pollution
must
go
down.
This
nation's
growing
experience
with
pollution
prevention,
efficiency
enhancements,
voluntary
environmental
programs,
and
Environmental
Management
Systems
adoption
all
reinforce
the
notion
that
enhanced
plant
efficiency
translates
into
less
environmental
pollution1.
Further,
there
is
an
economic
incentive
to
keep
plant
efficiency
high.
Proper
maintenance
and
the
resulting
efficiency
enhancements
and
pollution
prevention
reduce
resource
needs
and
therefore
reduce
costs.
2
By
providing
the
policy
environment
certainty
needed
to
plan
and
undertake
efficiency
investments
(
economically
efficient
maintenance)
this
rule
will
achieve
lower
pollution.
The
rule
will
allow
firms
to
take
advantage
of
pollution
prevention
opportunities
and
new
pollutionreducing
technologies.
As
technology
advances,
plants
will
be
able
to
adopt
innovative
solutions
that
enhance
energy
efficiency
(
and
reduce
pollution).
3
Existing
firms
will
be
able
to
cost­
effectively
comply
with
the
pollution
reduction
requirements
of
EPA
and
state
programs.
We
note
that
data
regarding
the
emissions
reductions
that
are
achieved
under
other
CAA
programs
further
illustrate
the
relative
limits
of
the
major
NSR
program
as
a
tool
for
achieving
significant
emissions
reductions.
For
example,
the
title
IV
Acid
Rain
Program
has
reduced
SO2
emissions
from
the
electric
utility
industry
by
more
than
7
million
tpy
and
will
ultimately
result
in
reductions
of
approximately
10
million
tpy.
The
Tier
2
motor
vehicle
emissions
standards
and
gasoline
sulfur
control
requirements
will
ultimately
achieve
NOx
reductions
of
2.8
million
tpy.
Standards
for
highway
heavy­
duty
vehicles
and
engines
will
reduce
NOx
emissions
by
2.6
million
tpy.
Standards
for
non­
road
diesel
engines
are
anticipated
to
reduce
NOx
emissions
by
about
1.5
million
tpy.
The
NOx
"
SIP
call"
will
reduce
NOx
emissions
by
over
1
million
tpy.
Altogether,
these
and
other
similar
programs
achieve
emissions
reductions
that
far
exceed
those
attributable
to
the
major
NSR
program
and
dwarf
any
possible
emissions
consequences
attributable
to
today's
rule.
While
firms
can
operate
existing
plants
efficiently,
the
rule
preserves
powerful
incentives
to
adopt
"
leap­
frog"
technologies
and
production
processes
that
further
reduce
costs,
increase
efficiencies
and
reduce
pollution.
If
better,
cleaner,
cost­
effective
production
technologies
arrive;
producers
still
have
an
incentive
to
invest
in
these
clean
technologies
to
replace
older
facilities.