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Regulatory Impact Analysis (RIA) for Existing
Stationary Compression Ignition Engines
NESHAP
Final Draft
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EP A 452/R-10-002
February 2010
Regulatory Impact Analysis (RIA) for Existing Stationary Compression Ignition Engines
NESHAP
By:
Paramita Sinha, Brooks Depro, and Fern Braun
RTI International
Research Triangle Park, North Carolina
Prepared for:
Larry Sorrels
Contract No. EP-D-06-003
U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards
Health and Environmental Impacts Division
Air Benefits and Costs Group
Research Triangle Park, NC
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RTI Project Number
0209897.003.061
Regulatory Impact Analysis (RIA)
for Existing Stationary
Compression Ignition Engines
NESHAP
Final Report
February 2010
Prepared for
Larry Sorrels
U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards (OAQPS)
Air Benefit and Cost Group (ABCG)
(MD-C439-02)
Research Triangle Park, NC 27711
Prepared by
Paramita Sinha
Brooks Depro
Fern Braun
RTI International
3040 Cornwallis Road
Research Triangle Park, NC 27709
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CONTENTS
Section Page
1 Executive Summary 1-1
2 Introduction 2-1
2.1 Organization of this Report 2-1
3 Industry Profile 3-1
3.1 Electric Power Generation, Transmission, and Distribution 3-1
3.1.1 Overview 3-1
3.1.2 Goods and Services Used 3-3
3.1.3 Business Statistics 3-4
3.2 Oil and Gas Extraction 3-6
3.2.1 Overview 3-6
3.2.2 Goods and Services Used 3-9
3.2.3 Business Statistics 3-9
3.2.4 Case Study: Marginal Wells 3-14
3.3 Pipeline Transportation of Natural Gas 3-16
3.3.1 Overview 3-16
3.3.2 Goods and Services Used 3-16
3.3.3 Business Statistics 3-19
3.4 General Medical and Surgical Hospitals 3-22
3.4.1 Overview 3-22
3.4.2 Goods and Services Used 3-22
3.4.3 Business Statistics 3-24
3.5 Irrigation Sets and Welding Equipment 3-28
3.5.1 Overview 3-28
3.5.2 Irrigation and Welding Services 3-28
3.5.3 Business Statistics 3-33
in
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4 Regulatory Alternatives, Costs, and Emission Impacts 4-1
4.1 Background 4-1
4.2 Summary of the Proposed Rule 4-2
4.2.1 What Is the Source Category Regulated by this Proposed Rule? 4-2
4.2.2 What Are the Pollutants Regulated by this Proposed Rule? 4-5
4.2.3 What Are the Final Requirements? 4-6
4.2.4 What Are the Requirements for Demonstrating Compliance? 4-12
4.2.5 What Are the Reporting and Recordkeeping Requirements? 4-14
4.3 Summary of Significant Changes Since Proposal 4-16
4.3.1 Applicability 4-16
4.3.2 Final Emission Limits 4-17
4.3.3 Management Practices 4-19
4.4 Cost Impacts 4-22
4.4.1 Introduction 4-22
4.4.2 Major Sources 4-26
4.4.3 Area Sources 4-28
4.5 Emissions and Emission Reductions 4-38
5 Economic Impact Analysis, Energy Impacts, and Social Costs 5-1
5.1 Compliance Costs of the Final Rule 5-1
5.2 How Might People and Firms Respond? A Partial Equilibrium Analysis 5-5
5.2.1 Changes in Market Prices and Quantities 5-5
5.2.2 Regulated Markets: The Electric Power Generation, Transmission,
and Distribution Sector 5-7
5.2.3 Partial Equilibrium Measures of Social Cost: Changes Consumer
and Producer Surplus 5-8
5.3 Social Cost Estimate 5-9
5.4 Energy Impacts 5-10
5.5 Unfunded Mandates 5-10
5.5.1 Future and Disproportionate Costs 5-12
IV
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5.5.2 Effects on the National Economy 5-12
5.6 Environmental Justice 5-11
6 Small Entity Screening Analysis 6-1
6.1 Small Entity Data Set 6-1
6.2 Small Entity Economic Impact Measures 6-2
6.2.1 Model Establishment Receipts and Annual Compliance Costs 6-2
6.3 Small Government Entities 6-12
7 Human Health Benefits of Emissions Reductions 7-1
7.1 Synopsis 7-1
7.2 Calculation of Human Health Co-benefits 7-1
7.3 Unquantified Benefits 7-11
7.4 Characterization of Uncertainty in the Monetized Co-benefits 7-21
7.5 Comparison of Benefits and Costs 7-23
8 References 8-1
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LIST OF FIGURES
Number Page
3-1. Industrial Production Index (NAICS 2211) 3-2
3-2. Internal Combustion Generators by State: 2006 3-3
3-3. 2002 Regional Distribution of Establishments: Electric Power Generation,
Transmission, and Distribution Industry (NAICS 2211) 3-5
3-4. Industrial Production Index (NAICS 211) 3-11
3-5. 2002 Regional Distribution of Establishments: Crude Petroleum and Natural
Gas Extraction Industry (NAICS 211111) 3-13
3-6. 2002 Regional Distribution of Establishments: Natural Gas Liquid Extraction
Industry (NAICS 211112) 3-14
3-7. Trends in Marginal Oil and Gas Production: 1997 to 2006 3-17
3-8. Distribution of Establishments within Pipeline Transportation (NAICS 486) 3-18
3-9. Distribution of Revenue within Pipeline Transportation (NAICS 486) 3-18
3-10. 2002 Regional Distribution of Establishments: Pipeline Transportation (NAICS
486) 3-20
3-11. Share of Establishments by Legal Form of Organization in the Pipeline
Transportation of Natural Gas Industry (NAICS 48621): 2002 3-21
3-12. 2002 Regional Distribution of Establishments: General Medical and Surgical
Hospital Industry (NAICS 6221) 3-25
3-13. Share of Establishments by Legal Form of Organization in the General Medical
and Surgical Hospitals Industry (NAICS 6221): 2002 3-26
3-14. Industrial Production Index (NAICS 333111) 3-30
3-15. 2003 Regional Distribution of Irrigated Acres 3-33
3-16. 2002 Regional Distribution of Establishments: Heavy and Civil Engineering
Construction (NAICS 237) 3-34
5-1. Distribution of Annualized Direct Compliance Costs by Industry: 2013 5-2
5-2. Distribution of Engine Population by Horsepower Group: 2013 5-3
5-3. Average Annualized Cost per Engine by Horsepower Group: 2013 ($2007) 5-3
5-4. Market Demand and Supply Model: With and Without Regulation 5-6
5-5. Electricity Restructuring by State 5-9
7-1. Breakdown of Monetized PM2.5 Health Co-benefits using Mortality Function
from Pope et al. (2002) 7-7
7-2. Total Monetized PM2.5 Co-Benefits of RICE NESHAP in 2013 7-10
7-3. Breakdown of Monetized Co-benefits for RICE NESHAP by PM2.s Precursor
Pollutant and Source 7-10
VI
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7-4. Net Benefits for RICE NESHAP at 3% Discount Rate 7-24
7-5. Net Benefits for RICE NESHAP at 7% Discount Rate 7-25
vn
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LIST OF TABLES
Number Page
3-1. Key Statistics: Electric Power Generation, Transmission, and Distribution
(NAICS 2211) ($2007) 3-2
3-2. Direct Requirements for Electric Power Generation, Transmission, and
Distribution (NAICS 2211): 2002 3-4
3-3. Firm Concentration for Electric Power Generation, Transmission, and
Distribution (NAICS 2211): 2002 3-6
3-4. United States Retail Electricity Sales Statistics: 2006 3-8
3-5. FY 2007 Financial Data for 70 U.S. Shareholder-Owned Electric Utilities 3-9
3-6. Aggregate Tax Data for Accounting Period 7/05-6/06: NAICS 2211 3-9
3-7. Key Enterprise Statistics by Receipt Size for Electric Power Generation,
Transmission, and Distribution (NAICS 2211): 2002 3-10
3-8. Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111):
($2007) 3-11
3-9. Key Statistics: Natural Gas Liquid Extraction (NAICS 211112) ($2007) 3-12
3-10. Direct Requirements for Oil and Gas Extraction (NAICS 211): 2002 3-12
3-11. Key Enterprise Statistics by Employment Size for Crude Petroleum and
Natural Gas Extraction (NAICS 211111): 2002 3-14
3-12. Key Enterprise Statistics by Employment Size for Crude Natural Gas Liquid
Extraction (NAICS 211112): 2002 3-15
3-13. Aggregate Tax Data for Accounting Period 7/05-6/06: NAICS 211 3-15
3-14. Reported Gross Revenue Estimates from Marginal Wells: 2006 3-16
3-15. Key Statistics: Pipeline Transportation of Natural Gas (NAICS 48621) ($2007) .... 3-17
3-16. Direct Requirements for Pipeline Transportation (NAICS 486): 2002 3-19
3-17. Firm Concentration for Pipeline Transportation of Natural Gas (NAICS
48621): 2002 3-21
3-18. Aggregate Tax Data for Accounting Period 7/05-6/06: NAICS 486 3-22
3-19. Key Enterprise Statistics by Receipt Size for Pipeline Transportation of Natural
Gas (NAICS 48621): 2002 3-23
3-20. Key Statistics: General Medical and Surgical Hospitals (NAICS 6221) ($2007).... 3-24
3-21. Direct Requirements for Hospitals (NAICS 622): 2002 3-24
3-22. Firm Concentration for General Medical and Surgical Hospitals (NAICS
6221): 2002 3-26
3-23. Government Control and Ownership for General Medical and Surgical
Hospitals (NAICS 6221): 2002 3-27
3-24. Hospital Statistics: 2006 3-27
3-25. Aggregate Tax Data for Accounting Period 7/05-6/06: NAICS 622-4 3-27
Vlll
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3-26. Key Enterprise Statistics by Receipt Size for General Medical and Surgical
Hospitals (NAICS 6221): 2002 ($2007) 3-29
3-27. Key Statistics: Farm Machinery and Equipment Manufacturing (NAICS
333111) ($2007) 3-30
3-28. Key Statistics: Welding and Soldering Equipment Manufacturing (NAICS
333992) ($2007) 3-31
3-29. Expenses per Acre by Type of Energy: 2003 3-32
3-30. Number of On-Farm Pumps of Irrigation Water by Type of Energy: 1998 and
2003 3-32
3-31. Distribution of Farm Statistics by Market Value of Agricultural Products Sold:
2003 3-34
3-32. Aggregate Tax Data for Accounting Period 7/05-6/06: NAICS 3331,9 3-35
3-33. Key Enterprise Statistics by Receipt Size for Heavy Construction: 2002 3-36
4-1. Requirements for Existing Stationary CI RICE Located at Major Sources 4-7
4-2. Requirements for Existing Stationary RICE Located at Area Sources 4-9
4-3. CI RICE Control Technologies and Costs 4-9
4-4. Summary of Major Source and Area Source Costs for the CI RICE NESHAP 4-30
4-5. Summary of Major Source and Area Source NAICS Costs for the CI RICE
NESHAP 4-31
4-6. Summary of Major Source and Area Source NAICS Costs for the CI RICE
NESHAP - by Size 4-32
4-7. Summary of Major Source and Area Source NAICS Costs for the CI RICE
NESHAP-by Number of Engines 4-35
4-8. Summary of Major Source and Area Source Emission Reductions for the CI RICE
NESHAP - by 2013 4-36
5-1. Selected Industry-Level Annualized Compliance Costs as a Fraction of Total
Industry Revenue: 2008 5-4
5-2. Hypothetical Price Increases for a 1% Increase in Unit Costs 5-7
5-3. Hypothetical Consumption Decreases for a 1% Increase in Unit Costs 5-8
5-4. U.S. Electric Powera Sector Energy Consumption (Quadrillion BTUs): 2013 5-12
6-1. Final NESHAP for Existing Stationary Reciprocating Internal Combustion
Engines (RICE): Affected Sectors and SB A Small Business Size Standards 6-3
6-2. Average Receipts for Affected Industry by Enterprise: 2002 ($2008
Million/establishment) 6-6
6-3. Average Receipts for Affected Industry by Enterprise Receipt Range: 2002
($2008/establishment) 6-7
6-4. Representative Establishment Costs Used for Small Entity Analysis ($2008) 6-9
7-1. Human Health and Welfare Effects of PM2.5 7-2
IX
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7-2. Summary of Monetized Co-benefits Estimates for RICE NESHAP for
Compression Ignition in 2013 (2008$) 7-8
7-3. Summary of Reductions in Health Incidences from PM2.5 Co-benefits for RICE
NESHAP in 2013 7-8
7-4 All PM2.5 Co-benefits Estimates for the RICE NESHAP at discount rates of 3%
and 7% in 2013 (in millions of 2008$) 7-9
7-5. Sensitivity Analyses for Monetized Health Co-benefits (millions of 2008$) 7-22
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SECTION 1
EXECUTIVE SUMMARY
EPA estimates that complying with the final RICE rule will have an annualized cost of
approximately $373 million per year (2008 dollars) in the year of full implementation of the rule
(2013). Using these costs, EPA estimates in its economic impact analysis that the NESHAP will
have limited impacts on the industries affected and their consumers. Using sales data obtained
for affected small entities in an analysis of the impacts of this proposal on small entities, EPA
expects that the NESHAP will not result in a SISNOSE (significant economic impacts for a
substantial number of small entities). EPA also does not expect significant adverse energy
impacts based on Executive Order 13211, an Executive Order that requires analysis of energy
impacts for rules such as this one that are economically significant under Executive Order 12866.
The RICE rule is also considered subject to the requirements of the Office of
Management and Budget's (OMB's) Circular A-4 because EPA expects that either the benefits
or the costs are potentially $1 billion or higher. EPA, estimates the total monetized co-benefits of
the NESHAP to be $940 million to $2.3 billion (2008$) at a 3% discount rate and $850 million
to $2.1 billion at a 7% discount rate in the year of full implementation of the rule (2013). EPA
believes that the benefits are likely to exceed the annualized costs of $373 million by a
substantial margin under this rulemaking even when taking into account uncertainties in the cost
and benefit estimates These estimates are "snapshots" of benefits and costs at year 2013.
1-1
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SECTION 2
INTRODUCTION
EPA is promulgating national emission standards for hazardous air pollutants for existing
stationary compression ignition reciprocating internal combustion engines that either are located
at area sources of hazardous air pollutant emissions or that have a site rating of less than or equal
to 500 brake horsepower and are located at major sources of hazardous air pollutant emissions.
In addition, EPA is promulgating national emission standards for hazardous air pollutants for
existing nonemergency stationary compression ignition engines greater than 500 brake
horsepower that are located at major sources of hazardous air pollutant emissions.
The rule is economically significant according to Executive Order 12866. As part of the
regulatory process of preparing these standards, EPA has prepared a regulatory impact analysis
(RIA). This analysis includes an analysis of impacts to small entities as part of compliance with
the Small Business Regulatory Enforcement Fairness Act (SBREFA) and an analysis of impacts
on energy consumption and production to comply with Executive Order 13211 (Statement of
Energy Effects).
2.1 Organization of this Report
The remainder of this report supports and details the methodology and the results of the
EIA:
• Section 3 presents a profile of the affected industries.
• Section 4 presents a summary of regulatory alternatives considered in the proposed
rule, and provides the compliance costs of the rule.
Section 5 describes the estimated costs of the regulation and describes the EIA
methodology and reports market, welfare, and energy impacts.
• Section 6 presents estimated impacts on small entities.
Section 7 presents the benefits estimates.
2-1
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SECTION 3
INDUSTRY PROFILE
Compression-ignition (CI) engines CI units almost always operate as lean burn engines.
They can be configured as either two-stroke lean burn (2SLB) or 4-stroke lean burn (4SLB); the
distinction is that CI engines are fueled by distillate fuel oil (diesel oil), not by natural gas.
Industries in which CI engines are found are:
• electric power generation, transmission, and distribution (NAICS 2211)
• oil and gas extraction (including marginal wells) (NAICS 211111)
• pipeline transportation of natural gas (NAICS 211112),
• general medical and surgical hospitals (NAICS 622110)
• irrigation sets and welding equipment (NAICS 335312 and 333992).
This section provides an introduction to the industries affected by the rule. The purpose is
to give the reader a general understanding of the economic aspects of the industry; their relative
size, relationships with other sectors in the economy, trends for the industries, and financial
statistics. The sectors discussed are
3.1 Electric Power Generation, Transmission, and Distribution
3.1.1 Overview
Electric power generation, transmission, and distribution (NAICS 2211) is an industry
group within the utilities sector (NAICS 22). It includes establishments that produce electrical
energy or facilitate its transmission to the final consumer.
From 1997 to 2002, revenues from electric power grew about 10% to over $373 billion
($2007) (Table 3-1). At the same time, payroll rose about 6.5% and the number of employees
decreased by over 5%. The number of establishments rose by over 15%, resulting in a decrease
in average establishment revenue of almost 7%. Industrial production within NAICS 2211 has
increased 25% since 1997 (Figure 3-1).
Electric utility companies have traditionally been tightly regulated monopolies. Since
1978, several laws and orders have been passed to encourage competition within the electricity
market. In the late 1990s, many states began the process of restructuring their utility regulatory
framework to support a competitive market. Following market manipulation in the early 2000s,
however, several states have suspended their restructuring efforts. The majority (58%) of diesel
3-1
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power generators controlled by combined heat and power (CHP) or independent power
producers are located in states undergoing active restructuring (Figure 3-2).
Table 3-1. Key Statistics: Electric Power Generation, Transmission, and Distribution
(NAICS 2211) ($2007)
1997
2002
Revenue ($106)
Payroll ($106)
Employees
Establishments
337,490
38,176
564,525
7,935
373,309
40,842
535,675
9,394
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 22: Utilities:
Geographic Area Series: Summary Statistics: 2002 and 1997." ; (November 26,
2008).
130
120
— 110
100
Figure 3-1. Industrial Production Index (NAICS 2211)
Source: The Federal Reserve Board. "Industrial Production and Capacity Utilization: Industrial Production" Series
ID: G17/IP_MINING_AND_UTILITY_DETAIL/IP.G221 l.S .
(15 December, 2008)
3-2
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3.1.2 Goods and Services Used
In Table 3-2, we use the latest detailed benchmark input-output data report by the Bureau
of Economic Analysis (BEA) (2002) to identify the goods and services used in electric power
generation. As shown, labor and tax requirements represent a significant share of the value of
Diesel and Natural Gas Internal
Combustion Generators By State
_] No Restructuring
^\ Suspended Restructuring
H Active Restructuring
Figure 3-2. Internal Combustion Generators by State: 2006
Source: U.S. Department of Energy, Energy Information Administration. 2007. "2006 EIA-906/920 Monthly Time
Series."
power generation. Extraction, transportation, refining, and equipment requirements potentially
associated with reciprocating internal combustion engines (oil and gas extraction, pipeline
transportation, petroleum refineries, and turbine manufacturing) represent around 10% of the
value of services.
3-3
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3.1.3 Business Statistics
The U.S. Economic Census and Statistics of U.S. Businesses (SUSB) programs provide
national information on the distribution of economic variables by industry, location, and size of
business. Throughout this section and report, we use the following definitions:
• Establishment An establishment is a single physical location where business is
conducted or where services or industrial operations are performed.
Table 3-2. Direct Requirements for Electric Power Generation, Transmission, and
Distribution (NAICS 2211): 2002
Commodity
V00100
V00200
211000
212100
482000
230301
486000
722000
52AOOO
541100
Commodity Description
Compensation of employees
Taxes on production and imports, less subsidies
Oil and gas extraction
Coal mining
Rail transportation
Nonresidential maintenance and repair
Pipeline transportation
Food services and drinking places
Monetary authorities and depository credit intermediation
Legal services
Direct Requirements
Coefficients"
20.52%
13.71%
6.16%
5.86%
3.01%
2.83%
1.70%
1.40%
1.39%
1.13%
a These values show the amount of the commodity required to produce $1.00 of the industry's output. The values
are expressed in percentage terms (coefficient *100).
Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table,
Use Table and Direct Requirements Table. Tables 4 and 5.
• Receipts: Receipts (net of taxes) are defined as the revenue for goods produced,
distributed, or services provided, including revenue earned from premiums,
commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all
revenue collected for local, state, and federal taxes.
• Firm: A firm is a business organization consisting of one or more domestic
establishments in the same state and industry that were specified under common
ownership or control. The firm and the establishment are the same for single-
establishment firms. For each multiestablishment firm, establishments in the same
industry within a state are counted as one firm; the firm employment and annual
payroll are summed from the associated establishments.
• Enterprise: An enterprise is a business organization consisting of one or more
domestic establishments that were specified under common ownership or control. The
3-4
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enterprise and the establishment are the same for single-establishment firms. Each
multiestablishment company forms one enterprise; the enterprise employment and
annual payroll are summed from the associated establishments. Enterprise size
designations are determined by the summed employment of all associated
establishments.
In 2002, Texas had almost 1,000 power establishments, while California, Georgia, and
Ohio all had between 400 and 500 (Figure 3-3). Hawaii, Nebraska, and Rhode Island all had
fewer than 20 establishments in their states.
o
Establishments by State
| | Less than 100
| 100-199
f 200 - 349
^^| 350 - 500
• More than 500
Figure 3-3. 2002 Regional Distribution of Establishments: Electric Power Generation,
Transmission, and Distribution Industry (NAICS 2211)
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 22: Utilities:
Geographic Area Series: Summary Statistics: 2002." ; (November 10, 2008).
As shown in Table 3-3, the four largest firms owned over 1,200 establishments and
accounted for about 16% of total industry receipts/revenue. The 50 largest firms accounted for
almost 6,000 establishments and about 78% of total receipts/revenue.
Investor-owned energy providers accounted for 67.5% of retail electricity sold in the
United States in 2006 (Table 3-4). In 2007, less regulated investor-owned electric utility
companies were on average more profitable than companies with greater regulation (Table 3-5).
In 2006, enterprises within NAICS 2211 had a pre-tax profit margin of only 0.9% (Table 3-6).
3-5
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In 2002, about 82% of firms generating, transmitting, or distributing electric power had
receipts of under $50 million (Table 3-7). However, these firms accounted for only 11% of
employment, with 89% of employees working for firms with revenues in excess of $100 million.
3.2 Oil and Gas Extraction
3.2.1 Overview
Oil and gas extraction (NAICS 211) is an industry group within the mining sector
(NAICS 21). It includes establishments that operate or develop oil and gas field properties
Table 3-3. Firm Concentration for Electric Power Generation, Transmission, and
Distribution (NAICS 2211): 2002
Receipts/Revenue
Commodity
All firms
4 largest firms
8 largest firms
20 largest firms
50 largest firms
Establishments
9,394
1,260
2,566
3,942
5,887
Amount ($106)
$325,028
$52,349
$95,223
$173,207
$253,015
Percentage
of Total
100.0%
16.1%
29.3%
53.3%
77.8%
Number of
Employees
535,675
68,432
151,575
271,393
408,021
Employees per
Establishment
57
54
59
69
69
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 22: Utilities:
Subject Series—Estab & Firm Size: Concentration by Largest Firms for the United States: 2002."
; (November 21, 2008).
through such activities as exploring for oil and gas, drilling and equipping wells, operating on-
site equipment, and conducting other activities up to the point of shipment from the property.
Oil and gas extraction consists of two industries: crude petroleum and natural gas
extraction (NAICS 211111) and natural gas liquid extraction (NAICS 211112). Crude petroleum
and natural gas extraction is the larger industry; in 2002, it accounted for 93% of establishments
and 75% of oil and gas extraction revenues.
Industrial production in this industry is particularly sensitive to hurricanes in the Gulf
Coast. In September of both 2005 and 2008, production dropped 14% from the previous month.
Production is currently 6% lower than it was in 1997 (Figure 3-4).
From 1997 to 2002, revenues from crude petroleum and natural gas extraction (NAICS
211111) grew less than 1% to almost $100 billion ($2007) (Table 3-8). At the same time, payroll
3-6
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dropped almost 8% and the number of employees dropped by almost 6%. The number of
establishments dropped by over 8%; as a result, the average establishment revenue increased by
2.5%. Materials costs were approximately 25% of revenue over the period.
From 1997 to 2002, revenue from natural gas liquid extraction (NAICS 211112) grew
over 7% to about $34 billion (Table 3-9). At the same time, payroll dropped 12% and the number
of employees dropped by almost 9%. The number of establishments dropped by over 3%,
resulting in an increase of revenue per establishment of about 10%.
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Table 3-4. United States Retail Electricity Sales Statistics: 2006
Full-Service Providers
Item
Number of entities
Number of retail customers
Retail Sales (103 megawatthours)
Percentage of retail sales
Revenue from retail sales ($106)
Percentage of revenue
Average retail price (cents/kWh)
Investor-Owned
215
100,245,547
2,476,445
67.48
224,637
68.8
9.06
Public
2,010
20,345,236
549,124
14.96
44,271
13.56
8.06
Federal
9
39,430
42,359
1.15
1,494
0.46
3.53
Cooperative
882
17,465,423
370,410
10.09
31,411
9.62
8.48
Facility
49
2,166
12,397
0.34
868
0.27
7
Other Providers
Energy
150
2,306,163
219,185
5.97
16,784
5.14
7.66
Delivery
64
NA
NA
NA
7,040
2.16
3.21
Total
3,379
140,403,965
3,669,919
100
326,506
100
8.9
oo
oo
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Table 3-5. FY 2007 Financial Data for 70 U.S. Shareholder-Owned Electric Utilities
Investor-Owned Utilities
Regulated3
Mostly regulatedb
Diversified0
Profit Margin
8.36%
7.12%
8.89%
9.93%
Net Income
$33,933
$12,078
$13,776
$8,078
Operating Revenues
$405,938
$169,699
$154,916
$81,323
a 80%+ of total assets are regulated.
b 50% to 80% of total assets are regulated.
0 Less than 50% of total assets are regulated.
Source: Edison Electric Institute. "Income Statement: Q4 2007 Financial Update. Quarterly Report of the U.S.
Shareholder-Owned Electric Utility Industry." .
Table 3-6. Aggregate Tax Data for Accounting Period 7/05-6/06: NAICS 2211
Number of enterprises3 836
Total receipts (103) $308,702,953
Net sales(103) $289,887,930
Profit margin before tax 0.9%
Profit margin after tax —
a Includes corporations with and without net income.
Source: Troy, Leo. 2008. "Almanac of Business and Industrial Financial Ratios: 2009 Edition." CCH.
3.2.2 Goods and Services Used
The oil and gas extraction industry has similar labor and tax requirements as the electric
power generation sector. Extraction, support, power, and equipment requirements potentially
associated with reciprocating internal combustion engines (oil and gas extraction, support
activities, electric power generation, machinery and equipment rental and leasing, and pipeline
transportation) represent around 8% of the value of services (Table 3-10).
3.2.3 Business Statistics
The U.S. Economic Census and SUSB programs provide national information on the
distribution of economic variables by industry, location, and size of business. Throughout this
section and report, we use the following definitions:
• Establishment: An establishment is a single physical location where business is
conducted or where services or industrial operations are performed.
3-9
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Table 3-7. Key Enterprise Statistics by Receipt Size for Electric Power Generation, Transmission, and Distribution (NAICS
2211): 2002
Owned by Enterprises with
Variable
Firms
Establishments
Employment
Receipts ($103)
Receipts/firm ($103)
Receipts/establishment
($103)
Receipts/employment
($)
All
Enterprises
1,756
9,493
515,769
$320,502,670
$182,519
$33,762
$621,407
0-99K
Receipts
129
129
429
$5,596
$43
$43
$13,044
100-
499.9K
Receipts
250
250
834
$63,339
$253
$253
$75,946
500-
999.9K
Receipts
80
85
3,139
$57,363
$717
$675
$18,274
1,000-
4,999.9K
Receipts
232
245
2,712
$627,414
$2,704
$2,561
$231,347
5,000,000-
9,999,999K
Receipts
205
262
5,620
$1,472,405
$7,182
$5,620
$261,994
<10,OOOK
Receipts
896
971
12,734
$2,226,117
$2,485
$2,293
$174,817
10,000-
49,999K
Receipts
538
978
31,573
$12,171,098
$22,623
$12,445
$385,491
50,000-
99,999K
Receipts
112
403
14,858
$7,607,166
$67,921
$18,876
$511,991
100,OOOK+
Receipts
210
7,141
456,604
$298,498,289
$1,421,420
$41,801
$653,736
Source: U.S. Small Business Administration (SBA). 2008. "Firm Size Data from the Statistics of U.S. Businesses: U.S. All Industries Tabulated by Receipt Size:
2002." .
-------
Figure 3-4. Industrial Production Index (NAICS 211)
Source: The Federal Reserve Board. "Industrial Production and Capacity Utilization: Industrial Production" Series
ID: G17/IP_MINING_AND_UTILITY_DETAIL/IP.G21 l.S .
(December 15, 2008).
Table 3-8. Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111):
($2007)
1997
2002
Revenue ($106)
Payroll ($106)
Employees
Establishments
97,832
6,232
100,333
7,784
98,667
5,785
94,886
7,178
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 21: Mining:
Industry Series: Historical Statistics for the Industry: 2002 and 1997." ; (November
26, 2008).
• Receipts: Receipts (net of taxes) are defined as the revenue for goods produced,
distributed, or services provided, including revenue earned from premiums,
commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all
revenue collected for local, state, and federal taxes.
• Firm: A firm is a business organization consisting of one or more domestic
establishments in the same state and industry that were specified under common
ownership or control. The firm and the establishment are the same for single-
3-11
-------
Table 3-9. Key Statistics: Natural Gas Liquid Extraction (NAICS 211112) ($2007)
1997 2002
Revenue ($106) 31,139 33,579
Payroll ($106) 679 607
Employees 10,548 9,693
Establishments 528 511
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 21: Mining:
Industry Series: Historical Statistics for the Industry: 2002 and 1997." ; (November
26, 2008).
Table 3-10. Direct Requirements for Oil and Gas Extraction (NAICS 211): 2002
Commodity
V00200
V00100
230301
211000
213112
221100
541300
532400
33291A
541511
Direct Requirements
Commodity Description Coefficients"
Taxes on production and imports, less subsidies
Compensation of employees
Nonresidential maintenance and repair
Oil and gas extraction
Support activities for oil and gas operations
Electric power generation, transmission, and distribution
Architectural, engineering, and related services
Commercial and industrial machinery and equipment rental and leasing
Valve and fittings other than plumbing
Custom computer programming services
8.93%
6.67%
6.36%
1.91%
1.51%
1.47%
1.24%
1.20%
1.10%
0.99%
a These values show the amount of the commodity required to produce $1.00 of the industry's output. The values
are expressed in percentage terms (coefficient *100).
Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table,
Use Table and Direct Requirements Table. Tables 4 and 5.
establishment firms. For each multiestablishment firm, establishments in the same
industry within a state are counted as one firm; the firm employment and annual
payroll are summed from the associated establishments.
• Enterprise: An enterprise is a business organization consisting of one or more
domestic establishments that were specified under common ownership or control. The
enterprise and the establishment are the same for single-establishment firms. Each
multiestablishment company forms one enterprise; the enterprise employment and
annual payroll are summed from the associated establishments. Enterprise size
designations are determined by the summed employment of all associated
establishments.
3-12
-------
In 2002, Texas had almost 3,000 crude petroleum and natural gas extraction
establishments, Oklahoma had about 1,000, and every other state had under 450 (Figure 3-5).
Twenty states had fewer than 10 establishments. Similarly, Texas had 180 natural gas liquid
extraction establishments, Louisiana had 76, and every other state had under 40 (Figure 3-6).
Only nine states had 10 or more establishments, and 17 had no establishments.
Establishments by State
| | Less than 100
^J 100-249
| 249-499
^^| 500-1,000
^H More than 1,000
Figure 3-5. 2002 Regional Distribution of Establishments: Crude Petroleum and Natural
Gas Extraction Industry (NAICS 211111)
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 21: Mining:
Geographic Area Series: Industry Statistics for the State or Offshore Areas: 2002." ;
(November 10, 2008).
According to the SUSB, 89% of crude petroleum and natural gas extraction firms had
fewer than 500 employees in 2002 (Table 3-11). Sixty-three percent of natural gas liquid
extraction firms had fewer than 500 employees in 2002 (Table 3-12).
Enterprises within this industry generated $165 billion in total receipts in 2006. Including
those enterprises without net income, the industry averaged an after-tax profit margin of 18.3%
(Table 3-13).
3-13
-------
o
Establishments by State
^\ Less than 5
EH--"
| | 20-49
^^| 50-75
^B More than 75
Figure 3-6. 2002 Regional Distribution of Establishments: Natural Gas Liquid
Extraction Industry (NAICS 211112)
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 21: Mining:
Geographic Area Series: Industry Statistics for the State or Offshore Areas: 2002." ;
(November 10, 2008).
Table 3-11. Key Enterprise Statistics by Employment Size for Crude Petroleum and
Natural Gas Extraction (NAICS 211111): 2002
Variable
Firms
Establishments
Employment
Receipts ($103)
Receipts/firm ($103)
Receipts/establishment
($103)
Receipts/employment ($)
All
Enterprises
6,238
7,135
76,794
$88,388,300
$14,169
$12,388
$1,150,979
1-20
Employees
5,130
5,185
5,825
$2,353,181
$459
$454
$403,980
20-99
Employees
348
449
5,171
$2,559,239
$7,354
$5,700
$494,921
Owned by
100-499
Employees
85
254
2,757
$2,051,860
$24,140
$8,078
$744,236
Enterprises with
500-749
Employees
11
37
Not disclosed
Not disclosed
Not disclosed
Not disclosed
Not disclosed
750-999
Employees
11
63
Not disclosed
Not disclosed
Not disclosed
Not disclosed
Not disclosed
1,000-1,499
Employees
5
25
Not disclosed
Not disclosed
Not disclosed
Not disclosed
Not disclosed
Source: U.S. Census Bureau. 2008a. Firm Size Data from the
Sizes: 2002. .
3.2.4 Case Study: Marginal Wells
To provide additional context for understanding energy sectors that use reciprocating
internal combustion engines, we examine one segment of the oil and gas sector: marginal wells.
3-14
-------
Table 3-12. Key Enterprise Statistics by Employment Size for Crude Natural Gas Liquid
Extraction (NAICS 211112): 2002
Owned by Enterprises with
Variable
Firms
Establishments
Employment
Receipts ($103)
Receipts/firm ($103)
Receipts/establishment
($103)
Receipts/employment ($)
All
Enterprises
113
494
11,486
$72,490,930
$641,513
$146,743
$6,311,242
1-20
Employees
54
54
65
$13,862
$257
$257
$213,262
20-99
Employees
7
7
Not disclosed
Not disclosed
Not disclosed
Not disclosed
Not disclosed
100-499
Employees
10
38
241
$383,496
$38,350
$10,092
$1,591,270
500-749
Employees
2
23
Not disclosed
Not disclosed
Not disclosed
Not disclosed
Not disclosed
750-999
Employees
1
1
Not disclosed
Not disclosed
Not disclosed
Not disclosed
Not disclosed
1,000-1,499
Employees
2
6
Not disclosed
Not disclosed
Not disclosed
Not disclosed
Not disclosed
Source: U.S. Census Bureau. 2008a. Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment
Sizes: 2002. .
Table 3-13. Aggregate Tax Data for Accounting Period 7/05-6/06: NAICS 211
Number of enterprises3
Total receipts (103)
Net sales(103)
Profit margin before tax
Profit margin after tax
17,097
$164,841,432
$142,424,188
24.6%
18.3%
a Includes corporations with and without net income.
Source: Troy, Leo. 2008. "Almanac of Business and Industrial Financial Ratios: 2009 Edition." CCH.
This industry includes small-volume wells that are mature in age, are more difficult to extract oil
or natural gas from than other types of wells, and generally operate at very low levels of
profitability. As a result, well operations can be quite responsive to small changes in the benefits
and costs of their operation.
In 2006, there were approximately 420,000 marginal oil wells and 300,000 marginal gas
wells (Interstate Oil and Gas Compact Commission [IOGCC], 2007). These wells provide the
United States with 18% of oil and 9% of natural gas production (IOGCC, 2007). Data for 2006
show that revenue from the over 700,000 wells was approximately $31.3 billion (Table 3-14).
Historical data show marginal oil production fluctuated between 1997 and 2006,
reflecting the industry's sensitivity to changes in economic conditions of fuel markets (see
3-15
-------
Table 3-14. Reported Gross Revenue Estimates from Marginal Wells: 2006
Well Type
Oil
Natural gas
Total
Number of Wells
422,255
296,721
718,976
Production from
Marginal Wells
335.3 12467 MMbbls
1708.407584 MCF
Estimated Gross
Revenue (S109)
$20.1
$11.1
$31.3
Source: Interstate Oil & Gas Compact Commission. 2007. "Marginal Wells: Fuel for Economic Growth." Table 3.B.
Available at .
Figure 3-7). In contrast, the number of marginal gas wells has continually increased during the
past decade; the IOGCC estimates that daily production levels from these wells reached a
10-year high in 2005. Although we have been unable to find data on what fraction of these
marginal wells are operated by small businesses, the IOGCC states that many are run by "mom
and pop operators" (IOGCC, 2007).
3.3 Pipeline Transportation of Natural Gas
3.3.1 Overview
Pipeline transportation of natural gas (NAICS 48621) is an industry group within the
transportation and warehousing sector (NAICS 48-49), but more specifically in the pipeline
transportation subsector (486). It includes the transmission of natural gas as well as the
distribution of the gas through a local network to participating businesses.
From 1997 to 2002, natural gas transportation revenues fell by 7% to just under $23
billion ($2007) (Table 3-15). At the same time, payroll decreased by 7%, while the number of
paid employees decreased by nearly 9%. However, the number of establishments increased by
17% from 1,450 establishments in 1997 to 1,701 in 2002.
3.3.2 Goods and Services Used
The BEA reports pipeline transportation of natural gas only for total pipeline
transportation (3-digit NAICS 486). In addition to pipeline transportation of natural gas (NAICS
4862), this industry includes pipeline transportation of crude oil (NAICS 4861) and other
pipeline transportation (NAICS 4869). However, the BEA data are likely representative of the
affected sector since pipeline transportation of natural gas accounts for 68% of NAICS 486
establishments and 72% of revenues (Figures 3-8 and 3-9).
3-16
-------
340
335
330
03
00
8
LL.
O
D
O
o
m
305
300
295
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Year
• Marginal Oil Production
• Marginal Gas Production
Figure 3-7. Trends in Marginal Oil and Gas Production: 1997 to 2006
Source: Interstate Oil & Gas Compact Commission. 2007. "Marginal Wells: Fuel for Economic Growth." Pages 3
and 11. Available at < http://iogcc.myshopify.com/collections/frontpage/products/2007-marginal-well-report-
2007.pdf>.
Table 3-15. Key Statistics: Pipeline Transportation of Natural Gas (NAICS 48621) ($2007)
Year
1997
2002
Revenue ($106)
Payroll ($106)
Employees
Establishments
24,646
2,662
35,789
1,450
22,964
2,438
32,542
1,701
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 48:
Transportation and Warehousing: Industry Series: Comparative Statistics for the United States (1997 NAICS
Basis): 2002 and 1997" ; (December 12, 2008).
In Table 3-16, we use the latest detailed benchmark input-output data report by the BEA
(2002) to identify the goods and services used by pipeline transportation (NAICS 486). As
shown, labor, refineries, and maintenance requirements represent significant share of the cost
associated with pipeline transportation. Power and equipment requirements potentially associated
with reciprocating internal combustion engines (electric power generation and commercial and
industrial machinery and equipment repair and maintenance) represent less than 2% of the value
of services.
3-17
-------
100%
90% -
80% -
70% -
60% -
50% -
40% -
30% -
20% -
10% -
0%
68%
21%
11%
4862 Pipeline
Transportation of Natural
Gas
4869 Other Pipeline
Transportation
4861 Pipeline
Transportation of Crude Oil
Figure 3-8. Distribution of Establishments within Pipeline Transportation (NAICS 486)
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 48:
Transportation and Warehousing: Industry Series: Summary Statistics for the United States: 2002"
; (December 12, 2008).
4862 Pipeline
Transportation of Natural
Gas
4869 Other Pipeline
Transportation
4861 Pipeline
Transportation of Crude Oil
Figure 3-9. Distribution of Revenue within Pipeline Transportation (NAICS 486)
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 48:
Transportation and Warehousing: Industry Series: Summary Statistics for the United States: 2002"
; (December 12, 2008).
3-18
-------
Table 3-16. Direct Requirements for Pipeline Transportation (NAICS 486): 2002
Commodity
V00100
324110
230301
211000
333415
561300
5416AO
541300
420000
332310
5419AO
524100
531000
52AOOO
V00200
541100
221100
Commodity Description
Compensation of employees
Petroleum refineries
Nonresidential maintenance and repair
Oil and gas extraction
Air conditioning, refrigeration, and warm air heating equipment
manufacturing
Employment services
Environmental and other technical consulting services
Architectural, engineering, and related services
Wholesale trade
Plate work and fabricated structural product manufacturing
All other miscellaneous professional, scientific, and technical services
Insurance carriers
Real estate
Monetary authorities and depository credit intermediation
Taxes on production and imports, less subsidies
Legal services
Electric power generation, transmission, and distribution
Direct
Requirements
Coefficients"
14.78%
13.55%
6.07%
4.94%
4.40%
4.26%
3.04%
3.04%
2.79%
2.72%
2.48%
2.38%
2.33%
1.76%
1.41%
1.19%
1.13%
a These values show the amount of the commodity required to produce $1.00 of the industry's output. The values
are expressed in percentage terms (coefficient *100).
Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table,
Use Table and Direct Requirements Table. Tables 4 and 5.
3.3.3 Business Statistics
The pipeline transportation of natural gas is clearly concentrated in the two states closest
to the refineries in the Gulf of Mexico. In 2002, Texas and Louisiana contributed to 31% of all
pipeline transportation establishments in the United States (Figure 3-10) and 41% of all U.S.
revenues. Other larger contributors with over 50 establishments in their states include Oklahoma,
Pennsylvania, Kansas, Mississippi, and West Virginia.
3-19
-------
o
Establishments by State
| | Less than 15
I \1S-U
| 40 - 79
| 80- 149
I Morethan15C
Figure 3-10. 2002 Regional Distribution of Establishments: Pipeline Transportation
(NAICS 486)
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 48-49:
Geographic Distribution—Pipeline transportation of natural gas: 2002." ;
(November 10, 2008).
According to 2002 U.S. Census data, about 86% of transportation of natural gas
establishments were owned by corporations and about 8% were owned by individual
proprietorships. About 6% were owned by partnerships (Figure 3-11). As shown in Table 3-17,
the four largest firms accounted for nearly half of the establishments with 698, and just over half,
51%, of total revenue. The 50 largest firms accounted for over 1,354 establishments and about
99% of total revenue. The average number of employees per establishment was approximately
17 across all groups of firms.
Enterprises within pipeline transportation (NAICS 486) generated $6.6 billion in total
receipts in 2006. Including those enterprises without net income, the industry averaged an after-
tax profit margin of 7.9% (Table 3-18).
The 2002 SUSB shows that 47% of all firms in this industry made under $5 million in
revenue. Enterprises with revenue over $100 million provided an overwhelming share of
employment in this industry (98%) (Table 3-19).
3-20
-------
100%
90% -
80% -
70% -
60% -
50% -
40% -
30% -
20% -
10% -
0%
86%
Corporations
8%
Individual Proprietorships
6%
Partnerships
Figure 3-11. Share of Establishments by Legal Form of Organization in the Pipeline
Transportation of Natural Gas Industry (NAICS 48621): 2002
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 48-49:
Transportation and Warehousing: Subject Series—Estab & Firm Size: Legal Form of Organization for the United
States: 2002" ; (December 12, 2008).
Table 3-17. Firm Concentration for Pipeline Transportation of Natural Gas (NAICS
48621): 2002
Receipts/Revenue
Commodity
All firms
4 largest firms
8 largest firms
20 largest firms
50 largest firms
Establishments
1,431
698
912
1,283
1,354
Amount ($106)
$14,797
$7,551
$10,059
$13,730
$14,718
Percentage of
Total
100%
51%
68%
93%
99%
Number of
Employees
23,677
11,814
15,296
21,792
23,346
Employees per
Establishment
16.5
16.9
16.8
17.0
17.2
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 48:
Transportation and Warehousing: Subject Series—Estab & Firm Size: Concentration by Largest Firms for the
United States: 2002" ; (December 12, 2008).
3-21
-------
Table 3-18. Aggregate Tax Data for Accounting Period 7/05-6/06: NAICS 486
Number of enterprises3 4^0
Total receipts (103) $6,606,472
Netsales(103) $6,118,827
Profit margin before tax ^2 9%
Profit margin after tax 7 go/o
a Includes corporations with and without net income.
Source: Troy, Leo. 2008. "Almanac of Business and Industrial Financial Ratios: 2009 Edition." CCH.
3.4 General Medical and Surgical Hospitals
3.4.1 Overview
General medical and surgical hospitals (NAICS 6221) is an industry group within the
health care and social assistance sector (NAICS 62). It includes hospitals engaged in diagnostic
and medical treatment (both surgical and nonsurgical) for inpatients with a broad range of
medical conditions. They usually provide other services as well, including outpatient care,
anatomical pathology, diagnostic X-rays, clinical laboratory work, and pharmacy services.
From 1997 to 2002, hospital revenues grew about 18% to over $500 billion ($2007)
(Table 3-20). At the same time, payroll rose about 14%, while the number of employees
increased by only 5%. The number of establishments declined during this period by almost 6%,
resulting in an increase in revenue per establishment of almost 22%.
3.4.2 Goods and Services Used
The BEA reports hospital expenditures only for hospitals (3-digit NAICS 622). In
addition to general hospitals (NAICS 6221), this industry includes psychiatric and substance
abuse hospitals (NAICS 6222) and specialty hospitals (NAICS 6223). However, these data
should be representative of the affected sector since in 2002, general medical and surgical
hospitals accounted for 92% of NAICS 622 establishments and 94% of revenues.
In Table 3-21, we use the latest detailed benchmark input-output data report by the BEA
(2002) to identify the goods and services used by hospitals (NAICS 622). As shown, labor and
land requirements represent a significant share of the value of hospital services. Power and
equipment requirements potentially associated with reciprocating internal combustion engines
(electric power generation and commercial and industrial machinery and equipment repair and
maintenance) represent less than 2% of the value of services.
3-22
-------
Table 3-19. Key Enterprise Statistics by Receipt Size for Pipeline Transportation of Natural Gas (NAICS 48621): 2002
Variable
Firms
Establishments
Employment
Receipts ($103)
Receipts/firm ($103)
Receipts/establishment
($103)
Receipts/employment
V° ($)
All
Enterprises
154
1,936
37,450
$35,896,535
$233,094
$18,542
$958,519
0-99K
Receipts
8
8
15
$524
$66
$66
$34,933
100-
499.9K
Receipts
32
32
58
$8,681
$271
$271
$149,672
500-999.9K
Receipts
10
10
69
$7,451
$745
$745
$107,986
Owned
1,000-
4,999.9K
Receipts
22
22
138
$46,429
$2,110
$2,110
$336,442
by Enterprises with
5,000,000-
9,999,999K
Receipts
6
7
88
$40,967
$6,828
$5,852
$465,534
<10,OOOK
Receipts
78
79
368
$104,052
$1,334
$1,317
$282,750
10,000-
49,999K
Receipts
11
21
216
$188,424
$17,129
$8,973
$872,333
50,000-
99,999K
Receipts
4
4
274
$154,384
$38,596
$38,596
$563,445
100,OOOK+
Receipts
61
1,832
36,592
$35,449,675
$581,142
$19,350
$968,782
Source: U.S. Census Bureau. 2008b. Firm Size Data from the Statistics of U.S. Businesses, U.S. All Industries Tabulated by Receipt Size: 2002.
http://www2.census.gov/csd/susb/2002/usalli_r02.xls.
-------
Table 3-20. Key Statistics: General Medical and Surgical Hospitals (NAICS 6221) ($2007)
1997 2002
Revenue ($106) 444,141 539,502
Payroll ($106) 178,874 209,063
Employees 4,526,591 4,772,422
Establishments 5,487 5,193
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 62: Hearth Care
and Social Assistance: Geographic Area Series: 2002 and 1997." ; (November 10,
2008).
Table 3-21. Direct Requirements for Hospitals (NAICS 622): 2002
Commodity
V00100
531000
550000
621BOO
561300
325412
325413
524100
420000
221100
Commodity Description
Compensation of employees
Real estate
Management of companies and enterprises
Medical and diagnostic labs and outpatient and other ambulatory care
services
Employment services
Pharmaceutical preparation manufacturing
In-vitro diagnostic substance manufacturing
Insurance carriers
Wholesale trade
Electric power generation, transmission, and distribution
Direct Requirements
Coefficients"
51.90%
10.76%
4.02%
2.22%
1.90%
1.86%
1.66%
1.66%
1.62%
1.14%
a These values show the amount of the commodity required to produce $1.00 of the industry's output. The values
are expressed in percentage terms (coefficient *100).
Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table,
Use Table and Direct Requirements Table. Tables 4 and 5.
3.4.3 Business Statistics
In 2002, California and Texas each had around 400 hospitals, and New York,
Pennsylvania, Florida, and Illinois all had more than 200 (Figure 3-12). Vermont, Rhode Island,
Delaware, and the District of Columbia all had fewer than 20 hospital establishments in their
states.
3-24
-------
o
Establishments by State
^] Less than 50
I 1 50-99
| 100- 149
f 150-249
• Above 250
Figure 3-12. 2002 Regional Distribution of Establishments: General Medical and Surgical
Hospital Industry (NAICS 6221)
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 62: Health Care
and Social Assistance: Geographic Area Series: Summary Statistics: 2002." ;
(November 10, 2008).
According to 2002 Census data, 79.6% of general hospitals were owned by corporations,
19.5% were individual proprietorships, and about 0.7% were partnerships (Figure 3-13). As
shown in Table 3-22, the four largest firms accounted for almost 400 establishments and about
10% of total revenue. The 50 largest firms accounted for over 1,100 establishments and about
30% of total revenue. In addition, about 27% of all general hospitals are owned or controlled by
the government, with most of those at the local level (Table 3-23).
In 2006, the United States had 4,927 community hospitals (Table 3-24);
nongovernmental not-for-profit hospitals accounted for 59% of these hospitals, and 75% of the
expenses of all community hospitals.
Enterprises including hospitals, nursing and residential care facilities, and social
assistance (NAICS 622-4) generated $108 billion in total receipts in 2006. Including those
enterprises without net income, the industry averaged an after-tax profit margin of 3.1% (Table
3-25).
3-25
-------
100%
90% -
80% -
70% -
60% -
50% -
40% -
30% -
20% -
10% -
0%
79.6%
19.5%
0.7%
0.1%
Corporations Partnerships Individual Other Legal Forms
Proprietorships of Organization
Figure 3-13. Share of Establishments by Legal Form of Organization in the General
Medical and Surgical Hospitals Industry (NAICS 6221): 2002
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 62: Health Care
and Social Assistance: Subject Series—Estab & Firm Size: Legal Form of Organization for the United States:
2002" ; (November 21, 2008).
Table 3-22. Firm Concentration for General Medical and Surgical Hospitals (NAICS
6221): 2002
Receipts/Revenue
Commodity
All firms
4 largest firms
8 largest firms
20 largest firms
50 largest firms
Establishments
5,193
391
507
777
1,138
Amount ($106)
$469,727
$44,124
$60,708
$92,466
$139,501
Percentage of
Total
100.0%
9.4%
12.9%
19.7%
29.7%
Number of
Employees
4,772,422
389,152
537,695
831,988
1,279,444
Employees per
Establishment
919
995
1,061
1,071
1,124
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 62: Health Care
and Social Assistance: Subject Series—Estab & Firm Size: Concentration by Largest Firms for the United States:
2002" ; (November 21, 2008).
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Table 3-23. Government Control and Ownership for General Medical and Surgical
Hospitals (NAICS 6221): 2002
Receipts/Revenue
Commodity
All firms
All government owned
and controlled hospitals
Federal government
State government
Local government
Establishments
5,193
1,408
258
98
1,052
Percentage
of Total
100.0%
27.1%
5.0%
1.9%
20.3%
Amount
($106)
$469,727
$91,956
$25,993
$19,029
$46,934
Percentage
of Total
100.0%
19.6%
5.5%
4.1%
10.0%
Number of
Employees
4,772,422
962,772
257,766
176,754
528,252
Employees per
Establishment
919
684
999
1,804
502
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 62: Health Care
and Social Assistance: Subject Series—Estab & Firm Size: Concentration by Largest Firms for the United States:
2002" ; (November 21, 2008).
Table 3-24. Hospital Statistics: 2006
Community Hospitals
Total
Nongovernment not-for-profit
Investor-owned
State and local government
Number
4,927
2,919
889
1,119
Total Expenses (103)
$551,835,328
$412,867,575
$54,994,199
$83,973,554
Total Net
Revenue (103)
$587,050,914
NA
NA
NA
NA = Not available
Source: American Hospital Association. 2007. "AHA Hospital Statistics: 2008 Edition." Health Forum.
Table 3-25. Aggregate Tax Data for Accounting Period 7/05-6/06: NAICS 622-4
Number of enterprises3
Total receipts (103)
Net sales(103)
Profit margin before tax
Profit margin after tax
18,263
$108,074,793
$102,300,229
4.4%
3.1%
a Includes corporations with and without net income.
Source: Troy, Leo. 2008. "Almanac of Business and Industrial Financial Ratios: 2009 Edition." CCH.
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The SUSB reports 27% of general hospitals have receipts of less than $10 million and
41% report receipts above $50 million (Table 3-26). Large hospitals employ a significant share
of the people working in this industry.
3.5 Irrigation Sets and Welding Equipment
3.5.1 Overview
The U.S. Economic Census classifies irrigation equipment under the farm machinery and
equipment manufacturing industry group (NAICS 333111). This U.S. industry comprises
establishments primarily engaged in manufacturing agricultural and farm machinery and
equipment and other turf and grounds care equipment, including planting, harvesting, and grass-
mowing equipment (except lawn and garden type).
From 1997 to 2002, farm machinery and equipment manufacturing revenues fell by $3
billion from $18 billion to $15 billion (Table 3-27). At the same time, payroll decreased by 19%
and the number of paid employees decreased by nearly 19%. The number of establishments
dropped by 9% from 1,339 establishments in 1997 to 1,214 in 2002. Industrial production in the
industry is currently 13% lower than in 1997 (Figure 3-14).
The U.S. Economic Census classifies welding equipment under the welding and
soldering equipment manufacturing industry group (NAICS 333992). This U.S. industry
comprises establishments primarily engaged in manufacturing welding and soldering equipment
and accessories (except transformers), such as welding electrodes, welding wire, and soldering
equipment (except handheld).
From 1997 to 2002 welding and soldering equipment manufacturing revenue fell by
about 22% to $1 billion (Table 3-28). At the same time, payroll decreased by 21% and the
number of paid employees decreased by nearly 28%. The number of establishments dropped by
8% from 250 establishments in 1997 to 231 in 2002.
3.5.2 Irrigation and Welding Services
The demand for equipment is derived from the demand for the services the equipment
provides. We describe uses and industrial consumers of this equipment.
3.5.2.1 Irrigation
Demand for irrigation equipment is driven by farm operation decisions, optimal
replacement considerations, and climate and weather conditions. The National Agriculture
Statistics Service (NASS) 2003 Farm and Ranch Irrigation Survey (USDA-NASS, 2004) shows
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Table 3-26. Key Enterprise Statistics by Receipt Size for General Medical and Surgical Hospitals (NAICS 6221): 2002 ($2007)
to
VO
Owned by Enterprises with
Variable
Firms
Establishments
Employment
Receipts ($103)
Receipts/firm ($103)
Receipts/establishment
($103)
Receipts/employment
($)
All
Enterprises
3,581
5,971
4,713,450
$468,007,640
$130,692
$78,380
$99,292
0-99K
Receipts
64
64
2,500-4999
Not disclosed
Not disclosed
Not disclosed
Not disclosed
100-499.9K
Receipts
77
77
250-499
Not disclosed
Not disclosed
Not disclosed
Not disclosed
500-
999.9K
Receipts
59
59
730
$42,017
$712
$712
$57,558
1,000-
4,999.9K
Receipts
344
356
18,675
$1,084,945
$3,154
$3,048
$58,096
5,000,000-
9,999,999K
Receipts
437
454
56,296
$3,165,513
$7,244
$6,972
$56,230
<10,OOOK
Receipts
981
1,010
78,980
$4,317,321
$4,401
$4,275
$54,663
10,000-
49,999K
Receipts
1,116
1,203
347,613
$26,036,570
$23,330
$21,643
$74,901
50,000-
99,999K
Receipts
438
519
337,885
$29,039,799
$66,301
$55,953
$85,946
100,OOOK+
Receipts
1,046
3,239
3,948,972
$408,613,950
$390,644
$126,154
$103,473
Source: U.S. Small Business Administration (SBA). 2008. "Firm Size Data from the Statistics of U.S. Businesses: U.S. All Industries Tabulated by Receipt Size:
2002." .
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Table 3-27. Key Statistics: Farm Machinery and Equipment Manufacturing (NAICS
333111)($2007)
1997
2002
Revenue ($106)
Payroll ($106)
Employees
Establishments
$17,838
$2,644
66,370
1,339
$15,006
$2,132
53,817
1,214
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 31:
Manufacturing: Industry Series: Historical Statistics for the Industry: 2002 and Earlier Years"
; (November 25, 2008).
Industrial Production Index (NAICS 333111)
130
120
<$ & # Jt> # J? j? vjŁ 0N vpN & .& 3> ^ & jj" 5? V$J> 5^ vj? jŁ
^ ^ ^ ^ ^ ^ /^ ^ ^ >,* ^ ^ ^ ^
-------
Table 3-28. Key Statistics: Welding and Soldering Equipment Manufacturing (NAICS
333992)($2007)
1997 2002
Revenue ($106) $4,957 $3,880
Payroll ($106) $1,024 $811
Employees 22,505 16,128
Establishments 250 231
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 31:
Manufacturing: Industry Series: Historical Statistics for the Industry: 2002 and Earlier Years."
; (November 25, 2008).
that the top five states ranked by total acres irrigated are California, Nebraska, Texas, Arkansas,
and Idaho. Approximately 32 million of the 53 million, or 68%, of U.S. irrigated acres are used
to support oilseed and grain farming and other crop farming (tobacco, cotton, sugar cane, and
other). Virtually all of these irrigated areas are west of the Mississippi River.
The survey reported that approximately 500,000 pumps were used on U.S. farms in 2003
with energy expenses totaling $1.6 billion. Electricity is the dominant form of energy expense for
irrigation pumps, accounting for 60% of total energy expenses. Diesel fuel is second (18%),
followed by natural gas (18%) and other forms of energy such as gasoline (4%).
Per-acre operating costs for these irrigation systems vary by fuel type, and natural gas
was the most expensive in 2003 ($57 per acre for well systems and $34 per acre for surface water
systems) (Table 3-29). Systems using diesel fuel were operated at approximately half of these
per-acre costs ($25 per acre for well systems and $16 per acre for surface water systems).
Gasoline- and gasohol-powered systems offered the least expensive operating costs ($12 per acre
for well systems and $18 per acre for surface water systems).
As shown in Table 3-30, the number of on-farm pumps fell from 508,727 to 497,443
(2%) between 1998 and 2003. However, the use of electric- and diesel-powered pumps increased
during this period (3% and 4%, respectively), while other fuel sources such as gasoline declined
significantly. Pumps powered by gasoline and gasohol, for example, declined from 8,965 to
6,178, a 31% change during this period. Pumps powered by natural gas, LP gas, propane, and
butane also declined by 26% to 29%. Although 1998 operating cost data are not available, the
change in relative costs of operation across fuels between 1998 and 2003 may partly explain
3-31
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Table 3-29. Expenses per Acre by Type of Energy: 2003
Fuel Type
Electricity
Natural gas
LP gas, propane, butane
Diesel fuel
Gasoline and gasohol
Total
Irrigated by Water from Wells
$42.64
$57.25
$27.21
$25.09
$11.60
$39.50
Irrigated by Surface Water
$29.84
$33.67
$22.68
$16.27
$18.05
$26.39
Source: U.S. Department of Agriculture, National Agricultural Statistics Service. 2004. "2003 Farm and Ranch
Irrigation Survey." Washington, DC: USDA-NASS. Table 20.
Table 3-30. Number of On-Farm Pumps of Irrigation Water by Type of Energy: 1998 and
2003
Fuel Type
Electricity
Natural gas
LP gas, propane, butane
Diesel fuel
Gasoline and gasohol
Total
1998
308,579
58,880
23,964
108,339
8,965
508,727
2003
319,102
41,771
17,792
112,600
6,178
497,443
Percentage Change
3%
-29%
-26%
4%
-31%
-2%
Source: U.S. Department of Agriculture, National Agricultural Statistics Service. 2004. "2003 Farm and Ranch
Irrigation Survey." Washington, DC: USDA-NASS. Table 20.
these patterns. Although no information is available on the use and construction of on-farm
pumps specifically, their use is tied to the amount of agricultural land in production. USDA
reports that planted acres of the eight major crops hit a 5-year high of 252 million acres in 2008
but will fall and level off to around 244 million acres over the next 2 to 4 years (USDA, 2008).
3.5.2.2 Welding
Welding is used in a wide variety of applications. One of the biggest manufacturers of
welding products identifies the following key end-user segments:
• general metal fabrication;
• infrastructure including oil and gas pipelines and platforms, buildings, bridges, and
power generation;
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• transportation and defense industries (automotive, trucks, rail, ships, and aerospace);
• equipment manufacturers in construction, farming, and mining;
• retail resellers; and
• rental market (Lincoln Electric Holdings, 2006).
Lincoln Electric further describes the following key applications: power generation and process
industries, offshore production of oil and gas, pipelines/pipemills, and heavy fabrication
(earthmoving and construction equipment and agricultural and farm equipment.
3.5.3 Business Statistics
In 2003, California and Texas each had more than 5 million irrigated acres (Figure 3-15).
Midwest states like Arkansas and Nebraska had more than 2.5 million irrigated acres. Heavy and
civil engineering construction establishments are spread throughout the United States,
particularly in areas such as California, Texas, North Carolina, and Florida (Figure 3-16). Each
of these states has more than 2,000 establishments.
o
Irrigated Acres by State
| | Less than 625,000
^| 625,000- 1,249,999
| | 1,250,000-2,499,999
^^| 2,500,000-4,999,999
^B More than 5,000,000
r\
Figure 3-15. 2003 Regional Distribution of Irrigated Acres
3-33
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o
Establishments by State
| | Less than 250
| | 250-499
| 500-999
f 1,000-1,999
• More than 2,000
Figure 3-16. 2002 Regional Distribution of Establishments: Heavy and Civil Engineering
Construction (NAICS 237)
As shown in Table 3-31, the market value of agriculture products sold was less than
$25,000 per year on almost half the irrigated farms in the 2003 Farm and Ranch Irrigation
Survey. Over 90% of the irrigated farms had agricultural product revenue below $750,000. It is
not clear what fraction of these farms use stationary diesel engines or are owned by corporate
farming operations. Thus, there is uncertainly about how many of these irrigated farms have
stationary diesel engines that will be impacted by this rule. In addition, there is uncertainty about
what fraction of these farms are small businesses. However, SUSB data also suggest 65% of
firms in NAICS 11 have receipts less than $500,000 per year.
Table 3-31. Distribution of Farm Statistics by Market Value of Agricultural Products
Sold: 2003
Variable
Farms
Land in farms
(acres)
Acres irrigated
Irrigate cropland
harvest (acres)
All Farms
220,163
196,515,390
52,583,431
48,626,955
<$25K
48%
8%
5%
4%
$25-
$49K
10%
6%
4%
3%
$50-
$99K
11%
9%
7%
7%
$100-
$250K
13%
21%
18%
18%
$250-
$500K
8%
17%
18%
19%
$500-
$999K
5%
16%
19%
20%
$1,OOOK
or More
4%
23%
29%
30%
3-34
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Source: U.S. Department of Agriculture (USDA), National Agricultural Statistics Service (NASS). 2004. "2003
Farm and Ranch Irrigation Survey." Washington, DC: USDA-NASS. Table 34.
Enterprises within agriculture, construction, and mining machinery manufacturing
(NAICS 3331) generated $118 billion of total receipts in 2006, while those in other general
purpose machinery manufacturing (NAICS 3339) generated $69.8 billion. The average after-tax
profit margin in these two industries was 6.9% and 4.7%, respectively (Table 3-32).
Table 3-32. Aggregate Tax Data for Accounting Period 7/05-6/06: NAICS 3331,9
Agriculture, Construction, & Mining Other General Purpose Machinery
Machinery Manufacturing Manufacturing
Number of enterprises3 2,485 7,288
Total receipts (103) $118,369,636 $69,813,244
Net sales(103) $108,210,188 $65,256,901
Profit margin before tax 9.1% 6.1 %
Profit Margin after tax 6.9% 4.7%
a Includes corporations with and without net income.
Source: Troy, Leo. 2008. "Almanac of Business and Industrial Financial Ratios: 2009 Edition." CCH.
As noted earlier, welding equipment is used in heavy fabrication such as earthmoving and
construction equipment. We focus on the size distribution for a representative sector in this
section (NAICS 327, Heavy and Civil Engineering Construction); other subsections in Section 2
cover other sectors that potentially use equipment powered by diesel engines (e.g., power
generation and offshore gas distribution). As shown in Table 3-33, SUSB data suggest 60% of
firms in this industry have receipts less than $1 million per year; 90% are below the Small
Business Administration (SB A) threshold on $50 million per year. However, it is not clear what
fraction of these firms use stationary diesel engines.
3-35
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Table 3-33. Key Enterprise Statistics by Receipt Size for Heavy Construction: 2002"
Owned by Enterprises with
Variable
Firms
Establishments
Employment
Receipts ($103)
Receipts/firm ($103)
Receipts/establishment
($103)
Receipts/employment
($)
All
Enterprises
38
39
856
$174,384
$4
$4
$203
,610
,949
,312
,008
,517
,365
,645
0-99K
Receipts
4,570
4,570
5,219
$237,458
$52
$52
$45,499
100-
499.9K
Receipts
12,733
12,733
35,592
$3,346,936
$263
$263
$94,036
500-
999.9K
Receipts
5,882
5,883
37,498
$4,191,113
$713
$712
$111,769
1,000-
4,999.9K
Receipts
9,994
10,025
156,941
$22,641,664
$2,266
$2,259
$144,269
5,000,000-
9,999,999K
Receipts
2,398
2,427
87,858
$16,573,417
$6,911
$6,829
$188,639
<10,OOOK
Receipts
35,577
35,638
323,108
$46,990,588
$1,321
$1,319
$145,433
10,000-
49,999K
Receipts
2,395
2,561
199,532
$46,244,065
$19,309
$18,057
$231,763
50,000-
99,999K
Receipts
294
405
64,681
$16,728,737
$56,900
$41,306
$258,634
100,OOOK+
Receipts
344
1,345
268,991
$64,420,618
$187,269
$47,896
$239,490
a 2002 SUSB NAICS 224. The most comparable 2002 NAICS code for this industry is 237.
Source: U.S. Census Bureau. 2008b. Firm Size Data from the Statistics of U.S. Businesses, U.S. All Industries Tabulated by Receipt Size: 2002.
http://www2.census.gov/csd/susb/2002/usalli_r02.xls.
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SECTION 4
REGULATORY ALTERNATIVES, COSTS, AND EMISSION IMPACTS
4.1 Background
This section of the RIA includes a discussion of the regulatory alternatives considered for
the final rule, the costs associated with these regulatory alternatives, and the impacts on affected
emissions (both HAP and non-HAP). All impacts presented are for the year of full
implementation, 2013. Although the estimates presented are annualized, they should be
understood as a "snapshot" in analyzing costs.
This action promulgates NESHAP for existing stationary CI RICE with a site rating of
less than or equal to 500 hp located at major sources, existing non-emergency CI engines with a
site rating greater than 500 hp at major sources, and existing stationary CI RICE of any power
rating located at area sources. EPA is finalizing these requirements to meet its statutory
obligation to address HAP emissions from these sources under sections 112(d), 112(c)(3) and
112(k) of the CAA. The final NESHAP for stationary CI RICE will be promulgated under 40
CFR part 63, subpart ZZZZ, which already contains standards applicable to new stationary RICE
and some existing stationary RICE.
EPA promulgated NESHAP for existing, new, and reconstructed stationary RICE greater
than 500 hp located at major sources on June 15, 2004 (69 FR 33474). EPA promulgated
NESHAP for new and reconstructed stationary RICE that are located at area sources of HAP
emissions and for new and reconstructed stationary RICE that have a site rating of less than or
equal to 500 hp that are located at major sources of HAP emissions on January 18, 2008 (73 FR
3568). At that time, EPA did not promulgate final requirements for existing stationary RICE that
are located at area sources of HAP emissions or for existing stationary RICE that have a site
rating of less than or equal to 500 hp that are located at major sources of HAP emissions.
Although EPA proposed requirements for these sources, EPA did not finalize these requirements
due to comments received indicating that the proposed Maximum Achievable Control
Technology (MACT) determinations for existing sources were inappropriate and because of a
decision by the U.S. Court of Appeals for the District of Columbia Circuit on March 13, 2007,
which vacated EPA's MACT standards for the Brick and Structural Clay Products
Manufacturing source category (40 CFR part 63, subpart JJJJJ). Sierra Club v. EPA, 479 F.3d
875 (DC Cir 2007). Among other things, the D.C. Circuit found that EPA's no emission
reduction MACT determination in the challenged rule was unlawful. Because in the proposed
stationary RICE rule, EPA had used a MACT floor methodology similar to the methodology
4-1
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used in the Brick MACT, EPA decided to re-evaluate the MACT floors for existing major
sources that have a site rating of less than or equal to 500 brake hp consistent with the Court's
decision in the Brick MACT case. EPA has also re-evaluated the standards for existing area
sources in light of the comments received on the proposed rule.
In addition, stakeholders have encouraged the Agency to review whether there are further
ways to reduce emissions of pollutants from existing stationary diesel engines. In its comments
on EPA's 2005 proposed rule for new stationary diesel engines (70 FR 39870), the
Environmental Defense Fund (EDF) suggested several possible avenues for the regulation of
existing stationary diesel engines, including use of diesel oxidation catalysts or catalyzed diesel
particulate filters (CDPF), as well as the use of ultra low sulfur diesel (ULSD) fuel. EDF
suggested that such controls can provide significant pollution reductions at reasonable cost. EPA
issued an advance notice of proposed rulemaking (ANPRM) in January 2008, where it solicited
comment on several issues concerning options to regulate emissions of pollutants from existing
stationary diesel engines, generally, and specifically from larger, older stationary diesel engines.
EPA solicited comment and collected information to aid decision-making related to the reduction
of HAP emissions from existing stationary diesel engines and specifically from larger, older
engines under Clean Air Act (CAA) section 112 authorities. The Agency sought comment on the
larger, older engines because available data indicate that those engines emit the majority of
particulate matter (PM) and toxic emissions from nonemergency stationary engines as a whole.
A summary of comments and responses that were received on the ANPRM is included in docket
EPA-HQ-O AR-2007-0995.
EPA has taken several actions over the past several years to reduce exhaust pollutants
from stationary diesel engines, but believes that further reducing exhaust pollutants from
stationary diesel engines, particularly existing stationary diesel engines that have not been
subject to Federal standards, is justified. Therefore, EPA is finalizing emissions reductions from
existing stationary diesel engines.
4.2 Summary of the Proposed Rule
4.2.1 What Is the Source Category Regulated by this Proposed Rule?
This final rule addresses emissions from existing stationary CI engines less than or equal
to 500 hp located at major sources and all existing stationary CI engines located at area sources.
This final rule also addresses emissions from existing stationary nonemergency CI engines
greater than 500 hp at major sources. A major source of HAP emissions is a stationary source
that emits or has the potential to emit any single HAP at a rate of 10 tons (9.07 megagrams) or
4-2
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more per year or any combination of HAP at a rate of 25 tons (22.68 megagrams) or more per
year, except that for oil and gas production facilities, a major source of HAP emissions is
determined for each surface site. An area source of HAP emissions is a source that is not a major
source.
This action revises the regulations at 40 CFR part 63, subpart ZZZZ, currently applicable
to new and reconstructed stationary RICE and to existing stationary RICE greater than 500 hp
located at major sources. Through this action, we are adding to subpart ZZZZ requirements for:
existing CI stationary RICE less than or equal to 500 HP located at major sources and existing CI
stationary RICE located at area sources. When the subpart ZZZZ regulations were promulgated
(see 69 FR 33474, June 15, 2004), EPA deferred promulgating regulations with respect to
stationary engines 500 hp or less at major sources until further information on the engines could
be obtained and analyzed. EPA decided to regulate these smaller engines at the same time that it
regulated engines located at area sources. EPA issued regulations for new stationary engines
located at area sources of HAP emissions and new stationary engines located at major sources
with a site rating of 500 hp or less in the rulemaking issued on January 18, 2008 (73 FR 3568),
but did not promulgate a final regulation for existing stationary engines.
4.2.1.1 Stationary CI RICE <500 hp at Major Sources
This action revises 40 CFR part 63, subpart ZZZZ, to address HAP emissions from
existing stationary CI RICE less than or equal to 500 hp located at major sources. For stationary
engines less than or equal to 500 hp at major sources, EPA must determine what is the
appropriate MACT for those engines under section 112(d) (2) and (d)(3) of the CAA.
EPA has divided stationary CI RICE into emergency and nonemergency engines in order
to capture the unique differences between these types of engines.
4.2.1.2 Stationary CI RICE at Area Sources
This action revises 40 CFR part 63, subpart ZZZZ, in order to address HAP emissions
from existing stationary RICE located at area sources. Section 112(d) of the Clean Air Act
(CAA) requires EPA to establish national emission standards for hazardous air pollutants
(NESHAP) for both major and area sources of HAP that are listed for regulation under CAA
section 112(c).
Section 112(k)(3)(B) of the CAA calls for EPA to identify at least 30 HAP that, as a
result of emissions of area sources, pose the greatest threat to public health in the largest number
of urban areas. EPA implemented this provision in 1999 in the Integrated Urban Air Toxics
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Strategy (64 FR 38715, July 19, 1999). Specifically, in the Strategy, EPA identified 30 HAP that
pose the greatest potential health threat in urban areas, and these HAP are referred to as the "30
urban HAP." Section 112(c)(3) requires EPA to list sufficient categories or subcategories of area
sources to ensure that area sources representing 90 percent of the emissions of the 30 urban HAP
are subject to regulation. EPA implemented these requirements through the Integrated Urban Air
Toxics Strategy (64 FR 38715, July 19, 1999). The area source stationary engine source category
was one of the listed categories. A primary goal of the Strategy is to achieve a 75 percent
reduction in cancer incidence attributable to HAP emitted from stationary sources.
Under CAA section 112(d)(5), EPA may elect to promulgate standards or requirements
for area sources "which provide for the use of generally available control technologies or
management practices by such sources to reduce emissions of hazardous air pollutants."
Additional information on generally available control technologies (GACT)- or management
practices is found in the Senate report on the legislation (Senate report Number 101-228,
December 20, 1989), which describes GACT as:
. . . methods, practices and techniques which are commercially available and appropriate
for application by the sources in the category considering economic impacts and the
technical capabilities of the firms to operate and maintain the emissions control systems.
Consistent with the legislative history, EPA can consider costs and economic impacts in
determining GACT, which is particularly important when developing regulations for source
categories, like this one, that have many small businesses.
Determining what constitutes GACT involves considering the control technologies and
management practices that are generally available to the area sources in the source category.
EPA also considers the standards applicable to major sources in the same industrial sector to
determine if the control technologies and management practices are transferable and generally
available to area sources. In appropriate circumstances, EPA may also consider technologies and
practices at area and major sources in similar categories to determine whether such technologies
and practices could be considered generally available for the area source category at issue.
Finally, as EPA has already noted, in determining GACT for a particular area source category,
EPA considers the costs and economic impacts of available control technologies and
management practices on that category.
The urban HAP that must be regulated at stationary RICE to achieve the section
112(c)(3) requirement to regulate categories accounting for 90 percent of the urban HAP are: 7
PAH, formaldehyde, acetaldehyde, arsenic, benzene, beryllium compounds, and cadmium
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compounds. As explained below, EPA chose to select formaldehyde to serve as a surrogate for
HAP emissions. Formaldehyde is the hazardous air pollutant present in the highest concentration
from stationary engines. In addition, emissions data show that formaldehyde emission levels are
related to other HAP emission levels. EPA has previously demonstrated that CO is an
appropriate surrogate for formaldehyde from stationary CI engines and is consequently finalizing
emission standards in terms of CO for existing stationary CI RICE at area sources.
Consistent with stationary CI RICE at major sources, EPA has also divided the stationary
CI RICE at area sources into emergency and nonemergency engines in order to properly take
into account the differences between these engines.
4.2.1.3 Stationary Non-Emergency CI RICE >500 hp at Major Sources
In addition, EPA is finalizing emission standards for non-emergency stationary CI
engines greater than 500 hp at major sources under its authority to review and revise emission
standards as necessary under section 112(d) of the CAA.
4.2.2 What Are the Pollutants Regulated by this Proposed Rule ?
The final rule regulates emissions of HAP. Available emissions data show that several
HAP, which are formed during the combustion process or which are contained within the fuel
burned, are emitted from stationary engines. The HAP which have been measured in emission
tests conducted on diesel fired RICE include: 1,3-butadiene, acetaldehyde, acrolein, benzene,
ethylbenzene, formaldehyde, n-hexane, naphthalene, polycyclic aromatic hydrocarbons,
polycyclic organic matter, styrene, toluene, and xylene. Metallic HAP from diesel fired
stationary RICE that have been measured are: cadmium, chromium, lead, manganese, mercury,
nickel, and selenium.
EPA described the health effects of these HAP and other HAP emitted from the operation
of stationary RICE in the preamble to 40 CFR part 63, subpart ZZZZ, published on June 15,
2004 (69 FR 33474). These HAP emissions are known to cause, or contribute significantly to air
pollution, which may reasonably be anticipated to endanger public health or welfare. More
details on the health effects of these HAP and other HAP emitted from operation of stationary
RICE can be found in Section 7 of this RIA.
The final rule will limit emissions of HAP through emissions standards for CO for
existing stationary CI RICE. Carbon monoxide has been shown to be an appropriate surrogate
for HAP emissions from CI engines. For the NESHAP promulgated in 2004, EPA found that
there is a relationship between CO emissions reductions and HAP emissions reductions from CI
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stationary engines. Therefore, because testing for CO emissions has many advantages over
testing for HAP emissions, CO emissions were chosen as a surrogate for HAP emissions
reductions for CI stationary engines.
For the standards being finalized in this action, EPA believes that previous decisions
regarding the appropriateness of using CO in concentration (ppm) levels as has been done for
stationary sources before as surrogates for HAP are still valid.1 Consequently, EPA is finalizing
emission standards for CO for CI engines in order to regulate HAP emissions. In addition, EPA
is promulgating separate provisions relevant to emissions of metallic HAP from existing diesel
engines, as discussed in section III.C. of the preamble.
In addition to reducing HAP and CO, the final rule will result in the reduction of PM
emissions from existing diesel engines. The aftertreatment technologies expected to be used to
reduce HAP and CO emissions also reduce emissions of PM from diesel engines. Also, the final
rule requires the use of ULSD for diesel-fueled stationary nonemergency CI engines greater than
300 hp with a displacement of less than 30 liters per cylinder. This will result in lower emissions
of sulfur oxides (SOX) and sulfate particulate from these engines by reducing the sulfur content in
the fuel.
4.2.3 What Are the Final Requirements ?
4.2.3.1 Existing Stationary RICE at Major Sources
The emission requirements that are being finalized in this action for stationary CI RICE
less than or equal to 500 hp located at major sources and stationary nonemergency CI RICE
greater than 500 hp located at major sources are shown in Table 4-1. The numerical emission
standards are in units of ppm by volume, dry basis (ppmvd) or percent reduction.
In addition, certain existing stationary RICE located at major sources are subject to fuel
requirements. Owners and operators of existing stationary nonemergency diesel-fueled CI
engines greater than 300 hp with a displacement of less than 30 liters per cylinder located at
major sources that use diesel fuel must use only diesel fuel meeting the requirements of 40 CFR
80.510(b). This section requires that diesel fuel have a maximum sulfur content of 15 parts per
million (ppm) and either a minimum cetane index of 40 or a maximum aromatic content of 35
volume percent. These fuel requirements are being finalized in order to reduce the potential
formation of sulfate compounds that are emitted when high sulfur diesel fuel is used in
JIn contrast, mobile source emission standards for diesel engines (both nonroad and on-highway) are promulgated
on a mass basis rather than concentration.
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combination with oxidation catalysts and to assist in the efficient operation of the oxidation
catalysts.
EPA is also including work practices in the final rule that will capture and collect
metallic HAP emissions. Owners and operators of existing stationary nonemergency CI engines
greater than 300 hp located at major sources must do one of the following if the engine is not
already equipped with a closed crankcase ventilation system: 1) install a closed crankcase
ventilation system that prevents crankcase emissions from being emitted to the atmosphere, or 2)
install an open crankcase filtration emission control system that reduces emissions from the
crankcase by filtering the exhaust stream to remove oil mist, particulates, and metals.
Table 4-1. Requirements for Existing Stationary CI RICE Located at Major Sources
Subcategory
Except during Periods of Startup
During Periods of Startup
Emergency CI
Nonemergency CI
<100hp
Nonemergency CI
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Nonemergency CI 49 ppmvd CO at 15% O2
300500 hp or
70% CO reduction
a Sources have the option to utilize an oil analysis program in order to extend the specified oil change requirement
in Table 4-2..
b Sources have the option to petition the Administrator for approval of alternative maintenance practices. The
alternative maintenance practices must be at least as stringent as those specified in this Table 4-1.
0 Sources have the option to petition the Administrator for a longer period of time for engine startup. Any petition
must be based on specific factual information indicating the reason that a longer period is necessary for that
engine.
Sources also have the option to use an oil change analysis program to extend the oil change
frequencies specified above. The analysis program must at a minimum analyze the following
three parameters: Total Base Number, viscosity, and percent water content. The analysis must
be conducted at the same frequencies specified for changing the engine oil. If the condemning
limits provided below are not exceeded, the engine owner or operator is not required to change
the oil. If any of the condemning limits are exceeded, the engine owner or operator must change
the oil before continuing to use the engine. The condemning limits are as follows:
• Total Base Number is less than 30 percent of the Total Base Number of the oil when
new; or
• viscosity of the oil has changed by more than 20 percent from the viscosity of the oil
when new; or
• percent water content (by volume) is greater than 0.5.
Pursuant to the provisions of 40 CFR 63.6(g), sources can also request that the Administrator
approve alternative work practices.
4.2.3.2 Existing Stationary RICE at Area Sources
The emission requirements that are being finalized in this action for existing stationary CI
RICE located at area sources are shown in Table 4-2. Existing stationary emergency engines at
area sources located at residential, commercial, or institutional facilities are not part of the source
category and therefore are not subject to any requirements under this final rule.
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Existing stationary nonemergency CI RICE greater than 300 hp located at area sources in
Alaska not accessible by the Federal Aid Highway System (FAHS) do not have to meet the CO
emission standards specified in Table 4-2. Existing stationary nonemergency CI RICE greater
than 300 hp located at area sources in Alaska not accessible by the FAHS must meet the
maintenance practices that are shown for stationary nonemergency CI RICE less than or equal to
300 hp in Table 4-2.
Also, owners and operators of existing stationary nonemergency diesel-fueled CI engines
greater than 300 hp with a displacement of less than 30 liters per cylinder located at area sources
that use diesel fuel must use only diesel fuel meeting the requirements of 40 CFR 80.510(b). This
section requires that diesel fuel have a maximum sulfur content of 15 ppm and either a minimum
cetane index of 40 or a maximum aromatic content of 35 volume percent. Finally, in order to
reduce metallic HAP emissions, existing stationary nonemergency CI engines greater than 300
hp located at area sources must do one of the following if the engine is not already equipped with
a closed crankcase ventilation system: 1) install a closed crankcase ventilation system that
prevents crankcase emissions from being emitted to the atmosphere, or 2) install an open
crankcase filtration emission control system that reduces emissions from the crankcase by
filtering the exhaust stream to remove oil mist, particulates, and metals.
Table 4-2. Requirements for Existing Stationary RICE Located at Area Sources
Subcategory
Except during Periods of Startup
During Periods of Startup
Nonemergency CI
<300 hp
Change oil and filter every 1000
hours of operation or annually,
whichever comes first3; inspect air
cleaner every 1000 hours of
operation or annually, whichever
comes first; and inspect all hoses
and belts every 500 hours or
annually, whichever comes first,
and replace as necessaryb
Nonemergency CI
300500 hp
23ppmvdCOatl5%O2
or
70% CO reduction
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Emergency CI Change oil and filter every 500
hours of operation or annually,
whichever comes first3; inspect air
cleaner every 1000 hours of
operation or annually, whichever
comes first; and inspect all hoses
and belts every 500 hours of
operation or annually, whichever
comes first, and replace as
necessaryb
a Sources have the option to utilize an oil analysis program in order to extend the specified oil change requirement.
b Sources have the option to petition the Administrator for approval of alternative maintenance practices. The
alternative maintenance practices must be at least as stringent as those specified in this Table 4-2.
0 Sources have the option to petition the Administrator for a longer period of time for engine startup. Any petition
must be based on specific factual information indicating the reason that a longer period is necessary for that
engine.
4.2.3.3 Operating Limitations for Nonemergency CI Engines >500 hp
In addition to the standards discussed above, EPA is finalizing operating limitations for
stationary nonemergency CI RICE that are greater than 500 hp. Owners and operators of engines
that are equipped with oxidation catalyst must maintain the catalyst so that the pressure drop
across the catalyst does not change by more than 2 inches of water from the pressure drop across
the catalyst that was measured during the initial performance test. Owners and operators of these
engines must also maintain the temperature of the stationary RICE exhaust so that the catalyst
inlet temperature is between 450 and 1350 degrees Fahrenheit (°F) for engines with an oxidation
catalyst. Owners and operators of engines that are not using oxidation catalyst must comply with
any operating limitations approved by the Administrator.
4.2.3.4 Startup Requirements
As shown in Tables 4-1 and 4-2, the following stationary engines are subject to specific
operational standards, during engine startup:
• Existing CI RICE less than or equal to 500 hp located at major sources,
• Existing nonemergency CI RICE greater than 500 hp located at major sources,
• Existing CI RICE located at area sources,
• New or reconstructed nonemergency 2SLB >500 hp located at a major source of HAP
emissions,
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• New or reconstructed nonemergency 4SLB >500 hp located at a major source of HAP
emissions,
• Existing nonemergency 4SRB >500 hp located at a major source of HAP emissions,
• New or reconstructed nonemergency 4SRB >500 hp located at a major source of
HAP emissions, and
• New or reconstructed nonemergency CI >500 hp located at a major source of HAP
emissions.
Engine startup is defined as the time from initial start until applied load and engine and
associated equipment reaches steady state or normal operation. For stationary engine with
catalytic controls, engine startup means the time from initial start until applied load and engine
and associated equipment reaches steady state, or normal operation, including the catalyst.
Owners and operators must minimize the engine's time spent at idle and limit startup time to 30
minutes. These requirements will limit the HAP emissions during periods of engine startup.
Pursuant to the provisions of 40 CFR 63.6(g), engines at major sources may petition the
Administrator for an alternative work practice. An owner or operator of an engine at an area
source can work with its state permitting authority pursuant to EPA's regulations at 40 CFR
subpart E for approval of an alternative management practice. See 40 C.F.R. Subpart E (setting
forth requirements for, among other things, equivalency by permit, rule substitution).
What Are the Operating Limitations?
In addition to the standards discussed above, EPA is finalizing operating limitations for
stationary non-emergency CI RICE that are greater than 500 HP. Owners and operators of
engines that are equipped with oxidation catalyst must maintain the catalyst so that the pressure
drop across the catalyst does not change by more than 2 inches of water from the pressure drop
across the catalyst that was measured during the initial performance test. Owners and operators
of these engines must also maintain the temperature of the stationary RICE exhaust so that the
catalyst inlet temperature is between 450 and 1350 degrees Fahrenheit (°F). Owners and
operators may petition for a different temperature range; the petition must demonstrate why it is
operationally necessary and appropriate to operate below the temperature range specified in the
rule (see 40 CFR 63.8(f)). Owners and operators of engines that are not using oxidation catalyst
must comply with any operating limitations approved by the Administrator.
Owners and operators of existing stationary non-emergency CI engines greater than 300
HP meeting the requirement to use open or closed crankcases must follow the manufacturer's
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specified maintenance requirements for operating and maintaining the open or closed crankcase
ventilation systems and replacing the crankcase filters, or can request the Administrator to
approve different maintenance requirements that are as protective as manufacturer requirements.
4.2.3.5 Fuel Requirements
In addition to emission standards and management practices, certain stationary CI RICE
located at existing area sources are subject to fuel requirements. These fuel requirements are
being finalized in order to reduce the potential formation of sulfate compounds that are emitted
when high sulfur diesel fuel is used in combination with oxidation catalysts and to assist in the
efficient operation of the oxidation catalysts. Thus, owners and operators of stationary
nonemergency diesel-fueled CI engines greater than 300 hp with a displacement of less than 30
liters per cylinder located at existing area sources must only use diesel fuel meeting the
requirements of 40 CFR 80.510(b), which requires that diesel fuel have a maximum sulfur
content of 15 ppm and either a minimum cetane index of 40 or a maximum aromatic content of
35 volume percent.
4.2.4 What Are the Requirements for Demonstrating Compliance?
The following sections describe the requirements for demonstrating compliance under the
final rule.
4.2.4.1 Existing Stationary CI RICE at Major Sources
Owners and operators of existing stationary nonemergency CI RICE located at major
sources that are less than 100 hp and stationary emergency CI RICE located at major sources
must operate and maintain their stationary RICE and after-treatment control device (if any)
according to the manufacturer's emission-related written instructions or develop their own
maintenance plan. Owners and operators of existing stationary nonemergency CI RICE located
at major sources that are less than 100 hp and existing stationary emergency CI RICE located at
major sources do not have to conduct any performance testing because they are not subject to
numerical emission standards.
Owners and operators of existing stationary nonemergency CI RICE located at major
sources that are greater than or equal to 100 hp and less than or equal to 500 hp must conduct an
initial performance test to demonstrate that they are achieving the required emission standards.
Owners and operators of existing stationary nonemergency CI RICE greater than 500 hp
located at major sources must conduct an initial performance test and must test every 8,760 hours
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of operation or 3 years, whichever comes first, to demonstrate that they are achieving the
required emission standards.
Owners and operators of stationary nonemergency CI RICE that are greater than 500 hp
and are located at a major source must continuously monitor and record the catalyst inlet
temperature if an oxidation catalyst is being used on the engine. The pressure drop across the
catalyst must also be measured monthly. If an oxidation catalyst is not being used on the engine,
the owner or operator must continuously monitor and record the operating parameters (if any)
approved by the Administrator.
4.2.4.2 Existing Stationary RICE at Area Sources
Owners and operators of existing stationary RICE located at area sources that are subject
to management practices, as shown in Table 4-2, must develop a maintenance plan that specifies
how the management practices will be met. Owners and operators of existing stationary RICE
that are subject to management practices do not have to conduct any performance testing.
Owners and operators of existing stationary nonemergency CI RICE greater than 300 hp
that are located at area sources must conduct an initial performance test to demonstrate that they
are achieving the required emission standards.
Owners and operators of existing stationary nonemergency RICE that are greater than
500 hp and located at area sources must conduct an initial performance test and must test every
8,760 hours of operation or 3 years, whichever comes first, to demonstrate that they are
achieving the required emission standards.
Owners and operators of existing stationary nonemergency CI RICE that are greater than
500 hp and are located at an area source must continuously monitor and record the catalyst inlet
temperature if an oxidation catalyst is being used on the engine. The pressure drop across the
catalyst must also be measured monthly. If an oxidation catalyst is not being used on the engine,
the owner or operator must continuously monitor and record the operating parameters (if any)
approved by the Administrator.
On October 9, 2008 (73 FR 59956), EPA proposed performance specification
requirements for continuous parametric monitoring systems (CPMS). Currently there are no
performance specifications for the CPMS that are required for continuously monitoring the
catalyst inlet temperature. The timetable for finalizing the proposed performance specification
requirements is uncertain; therefore, EPA plans to finalize performance specification
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requirements in 40 CFR part 63, subpart ZZZZ for the CPMS systems used for continuous
catalyst inlet temperature monitoring when the final requirements are promulgated for existing SI
engines in August 2010.
2. Existing Stationary RICE at Area Sources
Owners and operators of existing stationary RICE located at area sources that are subject
to management practices, as shown in Table 4-2, must develop a maintenance plan that specifies
how the management practices will be met. Owners and operators of existing stationary RICE
that are subject to management practices do not have to conduct any performance testing.
Owners and operators of existing stationary non-emergency CI RICE that are greater than
300 HP and located at area sources and are not limited use stationary RICE must conduct an
initial performance test to demonstrate that they are achieving the required emission standards.
Owners and operators of existing stationary non-emergency CI RICE that are greater than 500
HP and located at area sources and are limited use stationary RICE must conduct an initial
performance test and must test every 8,760 hours of operation or 5 years, whichever comes first,
to demonstrate that they are achieving the required emission standards.
Owners and operators of existing stationary non-emergency RICE that are greater than
500 HP and located at area sources must conduct an initial performance test and must test every
8,760 hours of operation or 3 years, whichever comes first, to demonstrate that they are
achieving the required emission standards.
Owners and operators of existing stationary non-emergency CI RICE that are greater than
500 HP and are located at an area source must continuously monitor and record the catalyst inlet
temperature if an oxidation catalyst is being used on the engine. The pressure drop across the
catalyst must also be measured monthly. If an oxidation catalyst is not being used on the engine,
the owner or operator must continuously monitor and record the operating parameters (if any)
approved by the Administrator.
4.2.5 What Are the Reporting and Recordkeeping Requirements ?
The following sections describe the reporting and recordkeeping requirements that are
required under the final rule.
Owners and operators of existing stationary emergency RICE that do not meet the
requirements for nonemergency engines are required to keep records of their hours of operation.
Owners and operators of existing stationary emergency RICE must install a non-resettable hour
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meter on their engines to record the necessary information. The information must include how
many hours are spent for emergency operation, including what classified the operation as
emergency and how many hours are spent for nonemergency operation.
Emergency stationary RICE may be operated for the purpose of maintenance checks and
readiness testing, provided that the tests are recommended by the Federal, State or local
government, the manufacturer, the vendor, or the insurance company associated with the engine.
Maintenance checks and readiness testing of such units are limited to 100 hours per year. Owners
and operators can petition the Administrator for additional hours, beyond the allowed 100 hours
per year, if such additional hours should prove to be necessary for maintenance and testing
reasons. A petition is not required if the engine is mandated by regulation such as State or local
requirements to run more than 100 hours per year for maintenance and testing purposes. There is
no time limit on the use of emergency stationary engines in emergency situations; however, the
owner or operator is required to record the length of operation and the reason the engine was in
operation during that time. Records must be maintained documenting why the engine was
operating to ensure the 100 hours per year limit for maintenance and testing operation is not
exceeded. In addition, owners and operators are allowed to operate their stationary emergency
RICE for nonemergency purposes for 50 hours per year, but those 50 hours are counted towards
the total 100 hours provided for operation other than for true emergencies and owners and
operators may not engage in income-generating activities during those 50 hours. The 50 hours
per year for nonemergency purposes cannot be used to generate income for a facility, for
example, to supply power to an electric grid or otherwise supply power as part of a financial
arrangement with another entity. However, owners and operators may operate the emergency
engine for a maximum of 15 hours per year as part of an emergency demand response program if
the utility distribution company has determined that a blackout is imminent. The engine
operation must be terminated immediately after the utility distribution company advises that a
blackout is no longer imminent. The 15 hours per year of emergency demand response operation
are counted as part of the 50 hours of operation per year provided for nonemergency situations.
Owners and operators must keep records showing how they were notified of the emergency
condition and by whom, and the time that the engine was operated as part of demand response.
Owners and operators of existing stationary RICE located at area sources that are subject
to management practices as shown in Table 4-2, are required to keep records that show that
management practices that are required are being met. These records must include, at a
minimum: oil and filter change dates, oil amounts added and corresponding hour on the hour
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meter, fuel consumption rates, air filter (if applicable) change dates, records of repairs and other
maintenance performed.
Owners and operators of existing non-emergency stationary CI RICE greater than 300 HP
must keep records of the manufacturer's recommended maintenance procedures for the closed
crankcase ventilation system or open crankcase filtration system and records of the maintenance
performed on the system.
In terms of reporting requirements, owners and operators of existing stationary RICE,
except stationary RICE that are less than 100 hp, existing emergency stationary RICE, and
existing stationary RICE that are not subject to numerical emission standards, must submit all of
the applicable notifications as listed in the NESHAP General Provisions (40 CFR part 63,
subpart A), including an initial notification, notification of performance test, and a notification of
compliance for each stationary RICE which must comply with the specified emission limitations.
4.3 Summary of Significant Changes Since Proposal
Most of the rationale used to develop the proposed rule remains the same for the final
rule. Therefore, the rationale previously provided in the preamble to the proposed rule is not
repeated in the final rule, and the rationale sections of the rule, as proposed, should be referred
to. Major changes that have been made to the rule since proposal are discussed in this section
with rationale following in the Summary of Responses to Comments report that is in the docket
for this rulemaking.
4.3.1 Applicability
EPA proposed to regulate HAP emissions from existing stationary engines less than or
equal to 500 hp located at major sources and all existing stationary engines located at area
sources. EPA also proposed NESHAP for existing stationary CI engines greater than 500 hp that
are located at major sources.
In the final rule, EPA is only regulating HAP emissions from existing stationary CI
engines. EPA will address HAP emissions from existing stationary SI engines in a separate
rulemaking later this year.
Another change from the proposal is that the final rule is not applicable to existing
stationary emergency engines at area sources that are located at residential, commercial, or
institutional facilities. These engines are not subject to any requirements under the final rule
because they are not part of the regulated source category. EPA has found that existing
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emergency engines located at residential, commercial, and institutional facilities were not
included in the original Urban Air Toxics Strategy inventory and were not included in the listing
of urban area sources. More information on this issue can be found in the memorandum entitled
"Analysis of the Types of Engines Used to Estimate the CAA Section 112(k) Area Source
Inventory for Stationary Reciprocating Internal Combustion Engines," available from the
rulemaking docket.
4.3.2 Final Emission Limits
4.3.2.1 Existing Stationary CI Engines <100 hp Located at Major Sources
For the proposed rule, EPA required existing stationary engines less than 50 hp that are
located at major sources to meet a formaldehyde emission standard that was based on the levels
achievable without aftertreatment. Based on comments received including the feasibility of being
able to achieve the proposed emission standard and being able to measure formaldehyde
emissions of that magnitude, EPA is not finalizing a formaldehyde emission standard for this
group of engines. In addition, in light of several comments asserting that the cutoff for requiring
emission standards for engines less than 50 hp at major sources was inappropriate, EPA is
finalizing a threshold of 100 hp.
In the proposed rule, existing stationary CI engines less than 100 HP located at major
sources were required to meet a 40 ppmvd CO at 15 percent oxygen (02) standard. In the final
rule, all existing stationary CI engines less than 100 HP located at major sources must meet work
practices. These work practices are described in section III.C. of the preamble. EPA believes
that work practices are appropriate and justified for this group of stationary engines because the
application of measurement methodology is not practicable due to technological and economic
limitations. Further information on EPA's decision can be found in the memorandum entitled
"MACT Floor Determination for Existing Stationary Non-Emergency CI RICE Less Than 100
HP and Existing Stationary Emergency CI RICE Located at Major Sources and GACT for
Existing Stationary CI RICE Located at Area Sources," which is available from the rulemaking
docket.
4.3.2.2 Existing Stationary Nonemergency CI Engines 100
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the proposal, which led to a reevaluation of the MACT floor for these engines. A discussion of
the final MACT floor determination can be found in the memo entitled "Subcategorization and
MACT Floor Determination for Existing Stationary CI Reciprocating Internal Combustion
Engines at Major Sources," which is available from the rulemaking docket. All existing
stationary CI engines less than or equal to 300 hp located at area sources, both emergency and
nonemergency, are subject to management practice standards under the final rule, as was
proposed.
4.3.2.3 Existing Stationary Nonemergency CI Engines >300 hp
EPA proposed that existing stationary nonemergency CI engines greater than 300 hp
meet a 4 ppmvd at 15 percent 62 CO standard or a 90 percent CO reduction standard. Numerous
commenters indicated that EPA's dataset was insufficient and urged EPA to gather more data to
obtain a more complete representation of emissions from existing stationary CI engines.
Commenters also questioned the emission standard setting approach that EPA used at proposal
and claimed that the proposed standards did not take into account emissions variability and may
not be achievable. For the final rule EPA has obtained additional test data for existing stationary
CI engines and has included this additional in the MACT floor analysis. EPA is also using an
approach that better considers emissions variability as well.
In the final rule, EPA is providing owners and operators the option of meeting either a
CO concentration or a CO percent reduction standard. Owners and operators of existing
stationary non-emergency CI engines greater than 300 HP and less than or equal to 500 HP
located at major and area sources must either reduce CO emissions by at least 70 percent or limit
the concentration of CO in the engine exhaust to 49 ppmvd, at 15 percent Q^ Owners and
operators of existing stationary non-emergency CI engines greater than 500 HP located at major
and area sources must either reduce CO emissions by at least 70 percent or limit the
concentration of CO in the engine exhaust to 23 ppmvd, at 15 percent O2. EPA's review of the
data indicate that it is appropriate to base the MACT standard on a reduction level of 70 percent,
which takes into account the variability of the emission reduction efficiency of aftertreatment
under various operational conditions.
4.3.2.4 Existing Stationary Emergency CI Engines 100
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in section III.C. of the preamble. EPA believes that work practices are appropriate and justified
for this group of stationary engines because the application of measurement methodology is not
practicable due to technological and economic limitations. Further information on EPA's
decision can be found in the memorandum entitled "MACT Floor Determination for Existing
Stationary Non-Emergency CI RICE Less Than 100 FTP and Existing Stationary Emergency CI
RICE Located at Major Sources and GACT for Existing Stationary CI RICE Located at Area
Sources," which is available from the rulemaking docket.
4.3.2.5 Existing Stationary Emergency CI Engines >500 hp Located at Area Sources
For existing stationary emergency engines located at area sources, EPA reevaluated the
information available for emergency engines and considered extensive input received from
industry and other groups who asserted that the proposed standards were not GACT for
emergency engines at area sources.
In the final rule, all existing stationary emergency CI engines located at area sources must
meet management practice standards.
4.3.3 Management Practices
EPA proposed management practices for several subcategories of engines located at area
sources. EPA explained that the proposed management practices would be expected to ensure
that emission control systems are working properly and would help minimize HAP emissions
from the engines. EPA proposed specific maintenance practices and asked for comments on the
need and appropriateness for those procedures. Based on feedback received during the public
comment period, which included information submitted in comment letters and additional
information EPA specifically asked for following the close of the comment period from different
industry groups, EPA is finalizing management practices for existing stationary nonemergency
CI engines less than or equal to 300 hp located at area sources and all existing emergency
stationary CI engines located at area sources.
Existing stationary nonemergency CI engines less than or equal to 300 hp located at area
sources are required to change the oil and filter every 1,000 hours of operation or annually,
whichever comes first, inspect air cleaner every 1,000 hours of operation or annually, whichever
comes first, and inspect all hoses and belts every 500 hours of operation or annually, whichever
comes first, and replace as necessary. EPA is adding an option for sources to use an oil change
analysis program to extend the oil change frequencies specified above. The analysis program
must at a minimum analyze the following three parameters: Total Base Number, viscosity, and
percent water content. If any of the limits below are exceeded, the engine owner or operator
4-19
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must change the oil before continuing to operate the engine. The condemning limits are as
follows:
• Total Base Number is less than 30 percent of the Total Base Number of the oil when
new; or
• viscosity of the oil has changed by more than 20 percent from the viscosity of the oil
when new; or
• percent water content (by volume) is greater than 0.5.
Owners and operators of all engines subject to management practices also have the option work
with state permitting authorities pursuant to EPA's regulations at 40 CFR subpart E for
alternative maintenance practices to be used instead of the specific maintenance practices
promulgated in this rule. The maintenance practices must be at least as stringent as those
specified in the final rule.
The final rule specifies that in situations where an emergency engine is operating during
an emergency and it is not possible to shut down the engine in order to perform the work or
management practice requirements on the schedule required in the final rule, or if performing the
work or management practice on the required schedule would otherwise pose an unacceptable
risk under federal, state, or local law, the maintenance activity can be delayed until the
emergency is over or the unacceptable risk under federal, state, or local law has abated. The
maintenance should be performed as soon as practicable after the emergency has ended or the
unacceptable risk under federal, state, or local law has abated. Sources must report any failure to
perform the work practice on the schedule required and the federal, state or local law under
which the risk was deemed unacceptable.
4.3.3.1 Startup, Shutdown and Malfunction
EPA proposed formaldehyde and CO emission standards for existing stationary engines
at major sources to apply during periods of startup and malfunction. EPA also proposed certain
standards for existing stationary engines at area sources that would apply during startup and
malfunction. Based on various comments and concerns with the proposed emission standards for
periods of startup, EPA has determined that it is not feasible to finalize numerical emission
standards that would apply during startup because the application of measurement methodology
to this operation is not practicable due to technological and economic limitations. As a result,
EPA is promulgating operational standards during startup that specify that owners and operators
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must limit the engine startup time to no more than 30 minutes and must minimize the engine's
time spent at idle during startup. Based on information reviewed by EPA, engine startup
typically requires no more than 30 minutes. We received comments indicating that there are
conditions where it may take more than 30 minutes to startup the engine, for example for cold
starts or where the ambient conditions are very cold. However, commenters did not provide
enough specificity in their comments, nor did commenters provide data, to determine whether
any scenarios were appropriate to allow a longer startup period. Owners and operators of
engines at major sources have the option to petition the Administrator pursuant to 40 CFR
63.6(g) for alternative work practices. Any petition must be based on specific factual
information indicating the reason the alternative work practice is necessary for that engine and is
no less stringent than start-up requirements in the rule. An owner or operator of an engine at an
area source can work with its state permitting authority pursuant to EPA's regulations at 40 CFR
subpart E for approval of an alternative management practice, based on specific factual
information indicating the reason that a longer period is necessary for that engine. Such
alternative management practice must be demonstrated to be no less stringent than EPA
promulgated standards.
As discussed further below, EPA is not setting separate standards for malfunctions in this
rule. Therefore, the standards that apply during normal operation also apply during malfunction.
EPA believes that any emissions occurring during a malfunction would be of such a short
duration compared to the emissions averaged during overall testing time (three one-hour runs)
that the engine would still be able to comply with the emission standard. In addition, EPA does
not view malfunction as a distinct operating mode and, therefore, any emissions that occur at
such times do not need to be taken into account in setting CAA section 112(d) standards.
Further, as is explained in more detail in Section V.D. of the preamble, even if malfunctions
were considered a distinct operating mode, we believe it would be impracticable to take into
account malfunctions in setting CAA section 112(d) standards.
4.3.3.2 Other
EPA is including an additional requirement in the final rule that will reduce metallic HAP
emissions. Owners and operators of existing stationary non-emergency CI engines greater than
300 HP must do one of the following if the engine is not already equipped with a closed
crankcase ventilation system: 1) install a closed crankcase ventilation system that prevents
crankcase emissions from being emitted to the atmosphere, or 2) install an open crankcase
filtration emission control system that reduces the crankcase emissions by filtering the exhaust
stream to remove oil mist, particulates, and metals. Owners and operators must follow the
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manufacturer's specified maintenance requirements for operating and maintaining the open or
closed crankcase ventilation systems and replacing the crankcase filters, or can request the
Administrator to approve different maintenance requirements that are as protective as
manufacturer requirements.
EPA is including special provisions in the final rule for existing stationary non-
emergency CI RICE greater than 300 HP located at area sources in Alaska not accessible by the
FAHS. Owners and operators of these engines do not have to meet the CO emission standards
specified in Table 4-2, but must instead meet the management practices that are described for
stationary non-emergency CI RICE less than or equal to 300 HP in section III.C. of the
preamble.
The final rule specifies that stationary CI engines that are used to startup combustion
turbines should meet the same requirements as stationary emergency CI engines.
4.4 Cost Impacts
4.4.1 Introduction
The cost impacts associated with the final rule consist of different types of costs, which
include the annual and capital costs of controls, costs associated with keeping records of
information necessary to demonstrate compliance, costs associated with reporting requirements
under the General Provisions of 40 CFR part 63, subpart A, costs of purchasing and operating
equipment associated with continuous parametric monitoring, and the cost of conducting
performance testing to demonstrate compliance with the emission standards. The capital and
annual costs presented in this section are calculated based on the control cost methodology
presented in the EPA (2002) Air Pollution Control Cost Manual prepared by the U.S.
Environmental Protection Agency.2 This methodology sets out a procedure by which capital and
annualized costs are defined and estimated, and this procedure is often used to estimate the costs
of rulemakings such as this one. The capital costs presented in this section are annualized using a
7% interest rate, a rate that is consistent with the guidance provided in the Office of Management
and Budget's (OMB's) (2003) Circular A-4.3 The following sections describe how the various
cost elements were estimated.
2 Available on the Internet at http://epa.gov/ttn/catc/products.htmMcccinfo.
3 Available on the Internet at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf.
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4.4.1.1 Control Costs
For engines that will need to add control technology to meet the emission standards, the
following equations were used to estimate capital and annual control costs as shown in Table 4-
3:
Table 4-3: CI RICE Control Technologies and Costs
Technology Capital Cost ($2008) Annual Cost ($2008)
Diesel oxidation catalyst (DOC) $27.4 x hp - $939 $4.99 x hp + $480
Open crankcase ventilation (OCV) $0.26 x hp + $997 $0.065 x hp + $254
The control costs for DOC were calculated using cost data obtained from a California Air
Resources Board (CARB) study.4 The study provided cost ranges for diesel engines ranging from
40 hp to 1400 hp. The average cost from the range was selected and was adjusted to 2008
dollars. The capital and annual cost were calculated using maintenance data from the CARB
study and cost assumptions from the EPA Air Pollution Control Cost Manual. The control costs
for the OCV system were calculated using 2008 cost data obtained from a diesel engine
equipment vendor. An equipment life of 10 years was used to calculate the capital recovery
factor (CRF) for developing the annual cost for each of the control devices. A linear regression
equation was developed for the capital cost of the DOC and OCV using the capital cost data and
the engine size in horsepower (hp). This approach was used to develop a linear regression
equation for annual cost.
4.4.1.2 Recordkeeping
No recordkeeping costs were attributed to the requirement of following 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 minimal to no additional burden is
expected. Labor costs associated with recording the hours of operation of emergency engines are
based on a technical labor rate of $68 per hour which was obtained from the Department of
Labor Statistics web site.5 The final total wage rate was based on the 2005 compensation rates
for professional staff and adjusted by an overhead and profit rate of 167 percent. The year 2005
was used for consistency in order to have the same basis for all costs. All costs were later
converted to 2008 dollars for purposes of presenting costs associated with the rule in present day
4Diesel PM Control Technologies, Appendix IX, California Air Resource Board, October 2000.
http://www.arb.ca.gov/diesel/documents/rrpapp9.pdf
5U.S. Department of Labor, Employer Costs for Employee Compensation,
http://www.bls.gov/news.release/ecec.toc.htm
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terms. One hour per year is expected to be sufficient to record hours of operation for stationary
emergency engines. No cost is attributed to purchasing and installing an hour-meter since the
majority of stationary engines already come equipped with such equipment. For owner/operators
of nonemergency CI engines, EPA assumed that one hour per year was sufficient for
recordkeeping for these engines.
4.4.1.3 Reporting
Most engines affected by this rule will be subject to reporting requirements such as
reading instructions, training personnel, submitting an initial notification, submitting a
notification of performance test(s), and submitting a compliance report. . However, owners and
operators of engines less than 100 HP, existing stationary emergency engines, and existing
stationary engines less than 300 HP located at area sources are not subject to any specific
reporting requirements. . For stationary non-emergency limited use CI engines that operate less
than 100 hours per year, EPA is finalizing less burdensome reporting requirements by requiring
these engines to submit compliance reports on an annual basis, as opposed to semiannually as is
required for other engines subject to numerical emission limitations. The reporting requirements
are based on $68 per hour for technical labor to comply with the reporting requirements. It is
estimated that a total of 14 hours will be needed, and 13 hours for limited use engines.
4.4.1.4 Monitoring
The cost of monitoring includes the purchase of a continuous parametric monitoring
system (CPMS). Nonemergency engines greater than 500 hp that have add-on controls are
required to use a CPMS to monitor the catalyst inlet temperature and pressure drop across the
catalyst to ensure those parameters do not exceed the operating limitations. The cost of
purchasing and operating a CPMS was obtained from vendor quotes received for previous
rulemaking and adjusted to 2008 dollars.6 The capital cost of a CPMS for a large engine facility
is $531. It is estimated that 30 hours per year is necessary to operate and maintain the CPMS and
that 6 hours per year (or 0.5 hours per month) is needed to record information from the CPMS. It
is assumed that all engines subject to continuous monitoring would be located at large engine
facilities.
4.4.1.5 Performance Testing
Initial performance testing is required for nonemergency engines greater than 100 hp at
major sources and nonemergency engines greater than 300 hp located at area sources. The cost of
6Part A of the Supporting Statement for Standard Form 83 Stationary Reciprocating Internal Combustion Engines,
November 17, 2003.
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conducting a performance test on a CI engine is based on cost information gathered for previous
rulemakings.7 The performance testing cost is based the use of a portable analyzer and was
estimated to cost $1,000 per day of testing. This daily performance test cost was adjusted to 2008
dollars and was estimated to be $1,165. Because the regulation requires three-1 hour runs, EPA
assumed that two engines could be tested at each facility in one day. Therefore, the estimated
impacts performance testing cost will be assumed to be $583 per engine (or half of the $1,165
daily cost) using a portable analyzer.
4.4.1.6 Work Practices
The costs for performing work practices for CI engines less than 100 hp located at a
major source was assumed to be negligible and were not included in these impact calculations.
The work practices are based on engine maintenance procedures that the owner/operators
perform regardless of the regulation. These work practices include:
• Changing the oil and filter;
• Inspecting the air cleaner;
• Inspecting all hoses and belts, and replacing as necessary.
EPA believes that these work practices will limit HAP emissions from these engines,
because these work practices ensure that the engine is operating efficiently. Owner/operators of
these engines regularly perform these work practices as part of the preventive maintenance
schedule for the engine. Therefore, EPA believes that it is appropriate to not include these work
practice costs in the impacts determination.
4.4.1.7 Management Practices
The costs for performing management practices for nonemergency CI engines less than
or equal to 300 hp located at area sources and all emergency engines located at area sources was
assumed to be negligible and were not included in these impact calculations. The management
practices are based on engine maintenance procedures that the owner/operators perform
regardless of the regulation. These management practices include:
• Changing the oil and filter;
• Inspecting the air cleaner; and
• Inspecting all hoses and belts, and replacing as necessary.
'Memorandum from Bradley Nelson, Alpha-Gamma Technologies, Inc. to Sims Roy,
EPA/OAQPS/ESD/Combustion Group, Portable Emissions Analyzer Cost Information, August 31, 2005.
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EPA believes that these work practices will limit HAP emissions from these engines,
because these work practices ensure that the engine is operating efficiently. Owner/operators of
these engines regularly perform these work practices as part of the preventive maintenance
schedule for the engine. Therefore, EPA believes that it is appropriate to not include these work
practice costs in the impacts determination.
4.4.2 Major Sources
The cost impacts for stationary RICE vary depending on the engine type and size. The
following sections describe the specific costs that apply to each subcategory of CI engines
located at major sources.
4.4.2.1 All CI Engines hp < 100
The costs associated with CI engines less than 100 hp include minimal requirements.
Owners and operators of engines less than 100 hp are required to follow the manufacturer's
emission-related O&M requirements or must develop their own maintenance plan to follow.
Emergency engines must record the hours of operation, which is estimated at one hour per year
at $72 per hour.
4.4.2.2 Nonemergency CI Engines 100
-------
fuel by 0.2 cents per gallon,9 which EPA believes is negligible. In addition, there are no
additional maintenance requirements for owner/operators using ULSD in existing diesel engines.
Many owner/operators have found that time between oil changes can be extended for engines
using ULSD fuel, which would decrease the overall cost of switching to ULSD fuel. Therefore,
EPA believes that it is appropriate to not include any costs for switching to ULSD in the impacts
for this NESHAP.
4.4.2.2 Nonemergency CIEngines > 300 hp
The costs associated with nonemergency CI engines above 300 hp include the cost of
installing and operating an oxidation catalyst for reducing HAP, as well as the cost of installing
an open crankcase ventilation system. Nonemergency CI engines greater than 500 hp are also
subject to continuous monitoring requirements. In addition, owners and operators must conduct
an initial performance test to demonstrate compliance with the emission limitation. Owners and
operators of engines above 500 hp must conduct subsequent performance testing every 8,760
hours or 3 years, whichever comes first to demonstrate compliance. The cost estimates for this
subcategory of engines do not account for possible fuel price increases that may result from
using ultra-low sulfur diesel (ULSD). EPA estimated the cost of lubricity additives to ULSD
would increase the cost of the fuel by 0.2 cents per gallon,10 which EPA believes is negligible. In
addition, there are no additional maintenance requirements for owner/operators using ULSD in
existing diesel engines. Many owner/operators have found that time between oil changes can be
extended for engines using ULSD fuel, which would decrease the overall cost of switching to
ULSD fuel. Therefore, EPA believes that it is appropriate to not include any costs for switching
to ULSD in the impacts for this NESHAP.
4.4.2.3 Emergency CI Engines
The costs associated with emergency CI engines greater than 300 hp and less than or
equal to 500 hp (emergency CI engines above 500 hp were subject to an earlier rule and are not
subject to further regulation in this rule) include minimal recordkeeping requirements. The
owners and operators must follow the manufacturer's emission-related operating and
maintenance (O&M) requirements or must develop their own maintenance plan to follow and
must also keep records of the hours of operation. It is estimated that one hour per year at $68 per
hour would be sufficient to record the hours of operation. No costs were included in the impacts
'Memorandum from Melanie Taylor and Brad Nelson, AGTI to Sims Roy, EPA OAQPS BSD Combustion Group,
Lubricity of Ultra Low Sulfur Diesel Fuel, June 2, 2004.
1 "Memorandum from Melanie Taylor and Brad Nelson, AGTI to Sims Roy, EPA OAQPS BSD Combustion Group,
Lubricity of Ultra Low Sulfur Diesel Fuel, June 2, 2004.
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for following the manufacturer's emission-related O&M plan, because it is expected that
owner/operators will follow this plan regardless of the regulation.
4.4.3 Area Sources
4.4.3.1 All Emergency CI Engines
The costs associated with emergency CI engines include recordkeeping requirements for
tracking the hours of operation, but these engines are not subject to any performance testing. The
owners and operators must follow the manufacturer's emission-related O&M requirements or
must develop their own maintenance plan to follow. It is estimated that one hour per year at $68
per hour would be sufficient to record the hours of operation. Emergency CI engines at areas
sources will be subject to management practices, rather numerical emission limits. The
management practices do not require aftertreatment controls. Therefore, no control costs have
been estimated for these engines. These engines will be subject to management practices which
are not included in the costs, because it is assumed that these management practices are
performed regardless of the regulation.
4.4.3.2 Nonemergency CI Engines < 300 hp
The costs associated with nonemergency CI engines less than or equal to 300 hp are
minimal and only include following the manufacturer's emission-related O&M requirements or
the owner or operator's own maintenance plan. These engines are not subject to any numerical
emission limitations, therefore no control costs apply and no performance testing is required.
These engines will be subject to management practices which are not included in the costs,
because it is assumed that these management practices are done regardless of the regulation.
4.4.3.3 Nonemergency CI Engines > 300 hp
The costs associated with nonemergency CI engines above 300 hp include the cost of
installing and operating an oxidation catalyst for reducing HAP, as well as the cost of installing
an open crankcase ventilation system. Nonemergency CI engines greater than 500 hp are also
subject to continuous monitoring requirements. In addition, owners and operators must conduct
an initial performance test to demonstrate compliance with the emission limitation and engines
above 500 hp must conduct subsequent performance testing every 8,760 hours or 3 years,
whichever comes first. The cost estimates for this subcategory of engines do not account for
possible fuel price increases that may result from using ultra-low sulfur diesel. The cost
estimates for this subcategory of engines do not account for possible fuel price increases that
may result from using ultra-low sulfur diesel (ULSD). EPA estimated the cost of lubricity
additives to ULSD would increase the cost of the fuel by 0.2 cents per gallon, which EPA
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believes is negligible. In addition, there are no additional maintenance requirements for
owner/operators using ULSD in existing diesel engines. Many owner/operators have found that
time between oil changes can be extended for engines using ULSD fuel, which would decrease
the overall cost of switching to ULSD fuel. Therefore, EPA believes that it is appropriate to not
include any costs for switching to ULSD in the impacts for this NESHAP.
A summary of the total costs associated with the rule by major source and area source
categories is found in Table 4-4. A summary of the costs by NAICS codes is found in Table 4-5.
Table 4-6 provides a summary of costs by engine size, and a presentation of the number of
engines by engine size is in Table 4-7. All cost estimates are from "Impacts Associated with
NESHAP for Existing Stationary CI RICE," prepared by Bradley Nelson, Ec/R, Inc. for Melanie
King, U.S. EPA, Office of Air Quality Planning and Standards, February 17, 2010.
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Table 4-4. Summary of Major Source and Area Source Costs for the CI RICE NESHAP"
Size Non-Emergency
Range CI Capital
(hp) Control Cost
Non-Emergency
CI Annual
Control Cost
Initial Test
Recordkeeping
Reporting
Monitoring -
Capital Cost
Monitoring -
Annual Cost
Total Annual
Costs
Total Capital
Costs
Major Sources
50-100
100-175
175-300
300-500
500-600
600-750
>750
Total
$0
$24,057,778
$35,917,270
$107,841,136
$13,126,952
$8,240,540
$26,903,091
$216,086,768
$0
$9,918,465
$10,740,189
$26,722,727
$3,020,849
$1,824,295
$5,618,803
$57,845,329
$0
$14,150,269
$10,730,759
$5,645,923
$500,530
$256,204
$565,163
$31,848,848
$6,654,888
$8,719,731
$6,612,548
$3,479,152
$61,688
$31,576
$69,653
$25,629,236
$0
$6,103,812
$4,628,784
$2,435,406
$215,907
$110,515
$243,787
$13,738,210
$0
$0
$0
$0
$481,765
$246,599
$543,975
$1,272,338
$0
$0
$0
$0
$2,220,755
$1,136,729
$2,507,521
$5,865,005
$6,654,888
$38,892,276
$32,712,281
$38,283,208
$6,019,729
$3,359,319
$9,004,927
$134,926,628
$0
$24,057,778
$35,917,270
$107,841,136
$13,608,716
$8,487,139
$27,447,066
$217,359,106
-j^ Area Sources
o 50-100
100-175
175-300
300-600
600-750
>750
Total
Grand Total
Total
$0
$0
$0
$272,814,082
$68,490,125
$179,573,835
$520,878,041
$736,964,809
$0
$0
$0
$65,640,094
$15,162,379
$37,504,615
$118,307,088
$176,152,417
$0
$0
$0
$12,703,298
$2,129,405
$3,772,372
$18,605,076
$50,453,924
$9,183,746
$12,033,196
$9,125,316
$7,201,827
$1,207,215
$2,138,655
$40,889,956
$66,519,191
$0
$9,155,692
$6,943,176
$5,362,230
$898,850
$1,592,368
$17,052,802
$30,496,622
$0
$0
$0
$4,075,682
$683,191
$1,210,315
$5,969,187
$7,241,526
$0
$0
$0
$18,787,376
$8,952,336
$15,859,613
$43,599,324
$49,464,330
$9,183,746
$17,265,000
$13,092,845
$109,694,825
$28,350,186
$60,867,624
$238,454,245
$373,086,483
$0
$0
$0
$276,889,764
$69,173,315
$180,784,150
$526,847,229
$744,206,335
Costs are presented in 2008 dollars.
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Table 4-5. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP"
NAICS
Electric Power Generation
(2211)
Hospitals (622 110)
Crude Petroleum & NG
Production (21 1111)
Natural Gas Liquid Producers
(211112)
National Security (92811)
Hydro Power Units (335312)
Irrigation Sets (3353 12)
Welders (333992)
Total
Major
Capital Cost
$161,766,376
$20,220,797
$2,374,401
$2,374,401
$20,220,797
$0
$10,294,073
$108,260
$217,359,106
Source
Annual Cost
$90,982,105
$11,372,763
$3,807,478
$3,807,478
$11,372,763
$16,637
$11,791,567
$1,481,447
$134,632,238
Area
Capital Cost
$471,230,478
$0
$1,611,601
$1,611,601
$52,358,942
$0
$34,606
$0
$526,847,229
Source
Annual Cost
$203,529,267
$0
$2,599,033
$2,599,033
$22,614,363
$22,959
$5,208,210
$1,881,380
$238,454,245
Total (Major + Area)
Capital Cost
$632,996,854
$20,220,797
$3,986,003
$3,986,003
$72,579,739
$0
$10,328,679
$108,260
$744,206,335
Annual Cost
$294,511,373
$11,372,763
$6,406,510
$6,406,510
$33,987,126
$39,597
$16,999,777
$3,362,827
$373,086,483
Costs are presented in 2008 dollars.
-------
Table 4-6. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP - by Size"
NAICS
Electric Power Generation (2211)
50-100 hp
100-175 hp
175-300 hp
300-600 hp
600-750 hp
>750 hp
Total 2211
Hospitals (622110)
50-100 hp
^ 100-175 hp
u> 175-300 hp
300-600 hp
600-750 hp
>750 hp
Total 622110
Crude Petroleum & NG Production
50-100 hp
100-175 hp
175-300 hp
300-600 hp
600-750 hp
>750 hp
Total 211111
Major Source
Capital Cost
$0
$13,406,919
$23,012,914
$96,907,266
$6,789,032
$21,650,245
$161,766,376
$0
$1,675,865
$2,876,614
$12,113,408
$848,629
$2,706,281
$20,220,797
(211111)
$0
$2,026,868
$3,592
$151,812
$0
$192,129
$2,374,401
Annual Cost
$3,396,123
$21,600,998
$20,895,861
$35,304,866
$2,685,292
$7,098,966
$90,982,105
$424,515
$2,709,236
$2,619,927
$4,418,775
$335,898
$887,886
$11,396,237
$420,256
$3,265,655
$3,261
$55,308
$0
$62,998
$3,807,478
Area
Capital Cost
$0
$0
$0
$248,552,865
$62,249,758
$160,427,854
$471,230,478
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$346,112
$0
$1,265,489
$1,611,601
Source
Annual Cost
$5,272,480
$10,824,132
$9,437,454
$98,468,656
$25,512,616
$54,013,930
$203,529,267
$0
$0
$0
$0
$0
$0
$0
$579,954
$1,454,578
$1,309
$137,119
0
$426,073
$2,599,033
Total (Major + Area)
Capital Cost
$0
$13,406,919
$23,012,914
$345,460,132
$69,038,790
$182,078,100
$632,996,854
$0
$1,675,865
$2,876,614
$12,113,408
$848,629
$2,706,281
$20,220,797
$0
$2,026,868
$3,592
$497,925
$0
$1,457,619
$3,986,003
Annual Cost
$8,668,603
$32,425,129
$30,333,314
$133,773,522
$28,197,908
$61,112,896
$294,511,373
$424,515
$2,700,125
$2,611,983
$4,413,108
$335,662
$887,371
$11,372,763
$1,000,210
$4,720,233
$4,571
$192,426
$0
$489,071
$6,406,510
(continued)
-------
Table 4-6. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP - by Size" (continued)
NAICS
Natural Gas Liquid Producers
50-100 hp
100-175 hp
175-300 hp
300-600 hp
600-750 hp
>750 hp
Total 211112
National Security (92811)
50-100 hp
^ 100-175 hp
u> 175-300 hp
00 ^
300-600 hp
600-750 hp
>750 hp
Total 92811
Hydro Power Units (335312)
50-100 hp
100-175 hp
175-300 hp
300-600 hp
600-750 hp
>750 hp
Total 335312
Major Source
Capital Cost Annual Cost
(211112)
$0 $420,256
$2,026,868 $3,265,655
$3,592 $3,261
$151,812 $55,308
0 0
$192,129 $62,998
$2,374,401 $3,807,478
$0 $424,515
$1,675,865 $2,700,125
$2,876,614 $2,611,983
$12,113,408 $4,413,108
$848,629 $335,662
$2,706,281 $887,371
$20,220,797 $11,372,763
$0 $16,637
$0 $0
$0 $0
$0 $0
$0 $0
$0 $0
$0 $16,637
Area Source
Capital Cost Annual Cost
$0 $579,954
$0 $1,454,578
$0 $1,309
$346,112 $137,119
0 0
$1,265,489 $426,073
$1,611,601 $2,599,033
$0 $585,831
$0 $1,202,681
$0 $1,048,606
$27,616,985 $10,940,962
$6,916,640 $2,834,735
$17,825,317 $6,001,548
$52,358,942 $22,614,363
$0 $22,959
$0 $0
$0 $0
$0 $0
$0 $0
$0 $0
$0 $22,959
Total (Major + Area)
Capital Cost
$0
$2,026,868
$3,592
$497,925
$0
$1,457,619
$3,986,003
$0
$1,675,865
$2,876,614
$39,730,393
$7,765,269
$20,531,598
$72,579,739
$0
$0
$0
$0
$0
$0
$0
Annual Cost
$1,000,210
$4,720,233
$4,571
$192,426
$0
$489,071
$6,406,510
$1,010,346
$3,902,806
$3,660,589
$15,354,070
$3,170,397
$6,888,919
$33,987,126
$39,597
$0
$0
$0
$0
$0
$39,597
(continued)
-------
Table 4-6. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP - by Size" (continued)
Major Source
NAICS
Irrigation Sets (335312)
50-100 hp
100-175 hp
175-300 hp
300-600 hp
600-750 hp
>750 hp
Total 335312
Welders (333992)
50-100 hp
100-175 hp
175-300 hp
300-600 hp
600-750 hp
>750 hp
Total 333992
Grand Total
Total
Capital Cost
$0
$3,137,134
$7,143,945
$12,145
$849
$0
$10,294,073
$0
$108,260
$0
$0
$0
$0
$108,260
$217,359,106
Annual Cost
$245,565
$5,054,497
$6,486,744
$4,425
$336
$0
$11,791,567
$1,307,020
$174,427
$0
$0
$0
$0
$1,481,447
$134,632,238
Area
Capital Cost
$0
$0
$0
$27,689
$6,917
$0
$34,606
$0
$0
$0
$0
$0
$0
$0
$526,847,229
Source
Annual Cost
$338,880
$2,251,359
$2,604,167
$10,969
$2,835
$0
$5,208,210
$1,803,688
$77,693
$0
$0
$0
$0
$1,881,380
$238,454,245
Total (Major + Area)
Capital Cost
$0
$3,137,134
$7,143,945
$39,834
$7,766
$0
$10,328,679
$0
$108,260
$0
$0
$0
$0
$108,260
$744,206,335
Annual Cost
$584,446
$7,305,856
$9,090,911
$15,394
$3,171
$0
$16,999,777
$3,110,708
$252,119
$0
$0
$0
$0
$3,362,827
$373,086,483$
a Costs are presented in 2008 dollars.
-------
Table 4-7. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP - by Number of Engines"
Number of Engines
NAICS
Electric Power Generation (2211)
50-100 hp
100-175 hp
175-300 hp
300-600 hp
600-750 hp
>750 hp
Total 2211
Hospitals (622110)
50-100 hp
100-175 hp
175-300 hp
300-600 hp
600-750 hp
>750 hp
Total 622110
Crude Petroleum & NG Production (211111)
50-100 hp
100-175 hp
175-300 hp
300-600 hp
600-750 hp
>750 hp
Total 211111
Major
47,324
67,713
59,039
42,113
1,760
3,828
221,777
5,916
8,464
7,380
5,264
220
479
27,722
5,856
10,237
9
66
0
34
16,202
Area
79,859
114,266
99,627
97,919
16,455
28,746
436,872
0
0
0
0
0
0
0
8,784
15,355
14
136
0
227
24,517
Total
Total (Major + Area)
Capital Cost
127,183
181,980
158,666
140,032
18,215
32,574
658,649
$0
$13,406,919
$23,012,914
$345,460,132
$69,038,790
$182,078,100
$632,996,854
5,916
8,464
7,380
5,264
220
479
27,722
$0
$1,675,865
$2,876,614
$12,113,408
$848,629
$2,706,281
$20,220,797
14,640
25,592
23
202
0
261
$0
$2,026,868
$3,592
$497,925
$0
$1,457,619
40,719 $3,986,003
Annual Cost
$8,668,603
$32,498,019
$30,396,866
$133,924,260
$28,217,515
$61,147,960
$294,853,223
$424,515
$2,709,236
$2,619,927
$4,418,775
$335,898
$887,886
$11,396,237
$1,000,210
$4,731,252
$4,581
$192,644
$0
$489,352
$6,418,038
(continued)
-------
Table 4-7. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP - by Number of Engines"
(continued)
NAICS
Natural Gas Liquid Producers (211112)
50-100 hp
100-175 hp
175-300 hp
300-600 hp
600-750 hp
>750 hp
Total 211112
National Security (92811)
50-100 hp
100-175 hp
175-300 hp
300-600 hp
600-750 hp
>750 hp
Total 92811
Hydro Power Units (335312)
50-100 hp
100-175 hp
175-300 hp
300-600 hp
600-750 hp
>750 hp
Total 335312
Major
5,856
10,237
9
66
0
34
16,202
5,916
8,464
7,380
5,264
220
479
27,722
232
0
0
0
0
0
232
Number of Engines
Area
8,784
15,355
14
136
0
227
24,517
8,873
12,696
11,070
10,880
1,828
3,194
48,541
348
0
0
0
0
0
348
Total
Total (Major + Area)
Capital Cost
14,640
25,592
23
202
0
261
40,719
$0
$2,026,868
$3,592
$497,925
$0
$1,457,619
$3,986,003
14,789
21,160
18,450
16,144
2,048
3,672
76,263
$0
$1,675,865
$2,876,614
$39,730,393
$7,765,269
$20,531,598
$72,579,739
580
0
0
0
0
0
580
$0
$0
$0
$0
$0
$0
$0
Annual Cost
$1,000,210
$4,720,233
$4,571
$192,426
$0
$489,071
$6,406,510
$1,010,346
$3,902,806
$3,660,589
$15,354,070
$3,170,397
$6,888,919
$33,987,126
$39,597
$0
$0
$0
$0
$0
$39,597
(continued)
-------
Table 4-7. Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP - by Number of Engines"
(continued)
NAICS
Irrigation Sets (335312)
50-100 hp
100-175 hp
175-300 hp
300-600 hp
600-750 hp
>750 hp
Total 335312
Welders (333992)
50-100 hp
100-175 hp
175-300 hp
300-600 hp
600-750 hp
>750 hp
Total 333992
Grand Total
Total
Major
3,422
15,845
18,327
5
0
0
37,599
18,213
547
0
0
0
0
18,760
366,217
Number of Engines
Area
5,133
23,767
27,491
11
2
0
56,403
27,319
820
0
0
0
0
28,140
619,337
Total
Total (Major + Area)
Capital Cost
8,555
39,611
45,819
16
2
0
94,003
$0
$3,137,134
$7,143,945
$39,834
$7,766
$0
$10,328,679
45,532
1,367
0
0
0
0
46,899
$0
$108,260
$0
$0
$0
$0
$108,260
957,832
$744,206,335
Annual Cost
$584,446
$7,305,856
$9,090,911
$15,394
$3,171
$0
$16,999,777
$3,110,708
$252,119
$0
$0
$0
$0
$3,362,827
$373,086,483
Costs are presented in 2008 dollars.
-------
4.5 Emissions and Emission Reductions
The emissions reductions associated with the final rule are based on requiring emission
standards that are based on applying add-on controls to non-emergency CI engines greater than
300 HP. Baseline emissions from the current population of stationary RICE less than or equal to
500 HP at major sources and existing stationary RICE at area sources were calculated based on
non-emergency CI engines operating 1,000 hrs/yr, and emergency CI engines operating 50
hrs/yr. The following additional assumptions were used:
Emission Factors:
Engine HAP CO PM
(Ib/hp-hr) (Ib/hr) (Ib/hp-hr) (Ib/hp-hr)
CI _ l.OTxlO' 6.96X10' T.OOxlO' 0.00809xSi
*Obtained from AP-42, section 3.4 where Si is sulfur content.
Control Efficiencies:
Technology HAP CO PM
Oxidation catalyst 70% 70% 30%
Based on the above assumptions and the existing population of engines shown earlier in
this section, the HAP, CO, and PM baseline emissions and reductions were calculated. In
addition to the final rule reducing HAP, CO, and PM, the rule will also lead to reductions in
sulfur dioxide (802) emissions by requiring existing non-emergency CI engines greater than 300
HP that use diesel fuel to use diesel fuel containing no more than 15 parts per million (ppm) of
sulfur. We have not quantified the SOX reductions that would occur as a result of engines
switching to ULSD because we are unable to estimate the number of engines that already use
ULSD and therefore we are unable to estimate the percentage of engines that may switch to
ULSD due to this rule. If none of the affected engines would use ULSD without this rule, then
we estimate the SOX reductions are 31,000 tpy in the year 2013. If all of the affected engines
would use ULSD regardless of the rule, then the additional SOX reductions would be zero.
The estimated reductions in tons per year (tpy) as a result of the final rule are shown in
Table 4-8. In addition, it is expected that additional PM reductions will be achieved by the
requirement to use ULSD for CI engines that install a DOC. The use of ULSD reduces the
formation of sulfates in the exhaust gas, therefore reducing the emission of these sulfate PM
emissions from the exhaust. EPA has estimated that the use of ULSD can reduce PM emissions
-------
by 5-30 percent depending on the sulfur concentration of the diesel fuel that is being replaced.
Because EPA has no information on the type of fuel that CI engines are currently using, the PM
reductions from switching to ULSD were not quantified and included in this summary.
The work practice requirement of using an open crankcase ventilation system to control
metallic HAP emissions is expected to achieve additional HAP reductions from CI engines.
However, the metallic HAP emission reduction cannot be quantified because of the difficulty of
measuring metallic HAP from the crankcase exhaust. Therefore, the metallic HAP reductions
are not included in the total emission reductions.
Table 4-8. Summary of Major Source and Area Source Emissions Reductions for
the CI RICE NESHAP in 2013
-^
VO
Size Range
(HP)
50-100
100-175
175-300
300-500
500-600
600-750
>750
Total
50-100
100-175
175-300
300-600
600-750
>750
Total
Grand Total
HAP
0
44
57
145
18
11
36
312
0
0
0
368
92
243
703
1,014
Emission
Reductions
(tpy)
CO
0
2,072
1,571
2,362
209
107
236
6,558
0
0
0
5,314
891
1,578
7,784
14,342
PM
0
123
161
407
50
31
102
874
0
0
0
1,031
259
680
1,970
2,844
VOC
0
1,183
1,549
3,923
478
300
982
8,416
0
0
0
9,930
2,497
6,553
18,980
27,395
Note: All emission reduction estimates are from "Impacts Associated with NESHAP for Existing
Stationary CI RICE," prepared by Bradley Nelson, Ec/R, Inc. for Melanie King, U.S. EPA, Office of Air
Quality Planning and Standards, February 17, 2010.
-------
SECTION 5
ECONOMIC IMPACT ANALYSIS, ENERGY IMPACTS, AND SOCIAL COSTS
The EIA provides decision makers with social cost estimates and enhances understanding
of how the costs may be distributed across stakeholders (EPA, 2000). Although several
economic frameworks can be used to estimate social costs for regulations of this size and sector
scope, OAQPS has typically used partial equilibrium market models. However, the current data
do not provide sufficient details to develop a market model; the data that are available have little
or no sector/firm detail and are reported at the national level. In addition, some sectors have
unique market characteristics (e.g., hospitals) that make developing partial equilibrium models
difficult. Given these constraints, we believed the direct compliance costs as a reasonable
approximation of total social costs. In addition, we also provide a qualitative analysis of the final
rule's economic impact on stakeholder decisions, a qualitative discussion on if unfunded
mandates occur as a result of this final rule, and a qualitative discussion of the potential
distribution of social costs between consumers and producers.
5.1 Compliance Costs of the Final Rule
For the year 2013, EPA's engineering cost analysis estimates the total annualized costs of
the final rule are $373 million (in 2008 dollars) (Nelson, 2010).
As shown in Figure 5-1, the majority of the costs fall on the electric power sector (79%),
followed by national security (9%). The remaining industries each account for 5% or less of the
total annualized cost. The industrial classification for each engine is taken from the Power
Systems Research (PSR) database, which is the major source of data for the engines affected by
the final rule. The PSR database used as a basis for the analyses in this RIA contains
information on both mobile and stationary onroad and nonroad engines, among other data, and
does so not only for the U.S. but worldwide. PSR has collected such data for more than 30
years. The Office of Transportation and Air Quality (OTAQ) uses this database frequently in the
development of their mobile source rules.
The annualized compliance costs per engine vary by the engine size (see Figure 5-2). For
300 hp engines or less, the annualized per-engine costs are below $215 per engine. Per-engine
costs for higher horsepower (hp) engines range between $950 and $1,900.
The final rule will affect approximately one million existing stationary diesel engines. As
shown in Figure 5-3, most of the affected engines fall within the 100 to 175 hp category (31%).
5-1
-------
The next highest categories are 50 to 100 hp (24%) and 175 to 300 hp (23%). The remaining
engines are concentrated in the 300 to 600 hp category (16%).
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
yu/o
3''0 2% 2%
1 o «„ | P
I t if ! !
CD ~ w vd. Q- -Ł"
as ™ B§ 1^ 3
> CM Q. CDii=; rr^ CD
0- » D. 0 5- CO
5%
0% 1%
rsi fsT csi
CO CO CO
G- G- G-
Ł Ł B
•= OJ OJ
•^ CO T3
"Z c i>
o
m
Figure 5-1. Distribution of Annualized Direct Compliance Costs by Industry: 2013
5-2
-------
$2,000
$1,800
$1,600
$1,400
$1,200
$1,000
$400
$200
$1,877
$1,549
$952
$212
50-100 hp
100-175 hp
175-300 hp
300-600 hp
600-750 hp
>750 hp
Figure 5-2. Average Annualized Cost per Engine by Horsepower Group: 2013 ($2008)
100%
90%
70%
60%
50%
40%
30%
20%
10%
0%
31%
16%
50-100 hp
100-175 hp
175-300 hp
300-600 hp
600-750 hp
>750 hp
Figure 5-3. Distribution of Engine Population by Horsepower Group: 2013
5-3
-------
To assess the size of the compliance cost relative to the value of the goods and services
for industries using affected engines, we collected Census data for selected industries. At the
industry level, the annualized costs represent a very small fraction of revenue (less than 0.07%)
(Table 5-1). These industry level cost-to-sales ratios can be interpreted as an average impact on
potentially affected firms in these industries. Based on the cost-to-sales ratios, we can conclude
that the annualized cost of this rule should be no higher than 1% of the sales on average for a
firm in each of these industries.
Table 5-1. Selected Industry-Level Annualized Compliance Costs as a Fraction of Total
Industry Revenue: 2008
Industry
(NAICS)
2211
622110
211111
Industry Name
Electric Power Generation
Hospitals
Crude Petroleum & NG
Total Annualized
Costs
($ million)3
$299.5
$11.4
$6.7
Sales, Shipments, Receipt, or
Revenue (SBillion)
($2007) ($2008)
$440.4 $449.8
$663.6 $677.8
$214.2 $218.8
Cost-to-Sales
Ratio
0.07%
0.00%
0.00%
Production
211112 Natural Gas Liquid
Producers
$6.7
$42.4
$43.3
0.02%
92811
333992
111 and 112
National Security
Welders
Agriculture using irrigation
systems3
$34.5
$3.4
$18.1
#N/A
$5.2
$27.9
#N/A
$5.3
$28.5
#N/A
0.06%
0.06%
a Irrigation engine costs assumed to be passed on to agricultural sectors that use irrigation systems.
N/A: receipts are Not Available for National Security
Sources: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 00: All sectors:
Geographic Area Series: Economy-Wide Key Statistics: 2007" ; (January 4th,
2010).
U.S. Department of Agriculture (USDA), National Agricultural Statistics Service (NASS). 2009. "2008 Farm and
Ranch Irrigation Survey." Washington, DC: USDA-NASS.
Nelson, B., EC/R Inc. January 7, 2010. Memorandum to Melanie King, U.S. Environmental Protection Agency.
Impacts Associated with NESHAP for Existing Stationary CI RICE.
5-4
-------
5.2 How Might People and Firms Respond? A Partial Equilibrium Analysis
Markets are composed of people as consumers and producers trying to maximize utility
(consumers) and maximize profits (producers) they can given their economic circumstances. One
way economists illustrate behavioral responses to pollution control costs is by using market
supply and demand diagrams. The market supply curve describes how much of a good or service
firms are willing and able to sell to people at a particular price; this curve is typically upward
sloping because some production resources are fixed. As a result, the cost of producing an
additional unit typically rises as more units are made. The market demand curve describes how
much of a good or service consumers are willing and able to buy at some price. Holding other
factors constant, the quantity demand is assumed to fall when prices rise. In a perfectly
competitive market, equilibrium price (Po) and quantity (Qo) is determined by the intersection of
the supply and demand curves (see Figure 5-4).
5.2.1 Changes in Market Prices and Quantities
To qualitatively assess how the regulation may influence the equilibrium price and
quantity in the affected markets, we assumed the market supply function shifts up by the
additional cost of producing the good or service; the unit cost increase is typically calculated by
dividing the annual compliance cost estimate by the baseline quantity (Qo) (see Figure 5-4). As
shown, this model makes two predictions: the price of the affected goods and services are likely
to rise and the consumption/production levels are likely to fall.
5-5
-------
Price
Increase
Si: With Regulation
Unit Cost Increase
S0: Without Regulation
Output
consumer surplus = -[fghd + dhc]
producer surplus = [fghd - aehb] - bdc
total surplus = consumer surplus + producer surplus
-[aehb + dhc + bdc]
Figure 5-4. Market Demand and Supply Model: With and Without Regulation
The size of these changes depends on two factors: the size of the unit production cost
increase (supply shift) and differences in how each side of the market (supply and demand)
responds to changes in price. Economists measure responses using the concept of price elasticity,
which represents the percentage change in quantity divided by the percentage change in price.
This dependence has been expressed in the following formula:1
Share ofper-unit productioncost =
Price Elasticity of Supply
(Price Elasticity of Supply - Price Elasticity of Demand))
As a general rule, a higher share of the per-unit cost increases will be passed on to
consumers in markets where
• goods and services are necessities and people do not have good substitutes that they
can switch to easily (demand is inelastic) and
JFor examples of similar mathematical models in the public finance literature, see Nicholson (1998), pages 444-447,
or Fullerton and Metcalf (2002).
5-6
-------
• suppliers have excess capacity and can easily adjust production levels at minimal
costs, or the time period of analysis is long enough that suppliers can change their
fixed resources; supply is more elastic over longer periods.
Short-run demand elasticities for energy goods (electricity and natural gas), agricultural
products, and construction are often inelastic. Specific estimates of short-run demand elasticities
for these products can be obtained from existing literature. For the short-run demand of energy
products, the National Energy Modeling System (NEMS) buildings module uses values between
0.1 and 0.3; a 1% increase in price leads to a 0.1 to 0.3% decrease in energy demand (Wade,
2003). For the short-run demand of agriculture and construction, the EPA has estimated
elasticities to be 0.2 for agriculture and approximately 1 for construction (EPA, 2004). As a
result, a 1% increase in the prices of agriculture products would lead to a 0.2% decrease in
demand for those products, while a 1% increase in construction prices would lead to
approximately a 1% decrease in demand for construction. Given these demand elasticity
scenarios (shaded in gray), approximately a 1% increase unit costs would result in a price
increase of 0.1 to 1% (Table 5-2). As a result, 10 to 100% of the unit cost increase could be
passed on to consumers in the form of higher goods/services prices. This price increase would
correspond to a 0.1 to 0.8% decline in consumption in these markets (Table 5-3).
Table 5-2. Hypothetical Price Increases for a 1% Increase in Unit Costs
Market Demand
Elasticity
-0.1
-0.3
-0.5
-0.7
-1.0
-1.5
-3.0
Market Supply Elasticity
0.1
0.5%
0.3%
0.2%
0.1%
0.1%
0.1%
0.0%
0.3
0.8%
0.5%
0.4%
0.3%
0.2%
0.2%
0.1%
0.5
0.8%
0.6%
0.5%
0.4%
0.3%
0.3%
0.1%
0.7
0.9%
0.7%
0.6%
0.5%
0.4%
0.3%
0.2%
1
0.9%
0.8%
0.7%
0.6%
0.5%
0.4%
0.3%
1.5
0.9%
0.8%
0.8%
0.7%
0.6%
0.5%
0.3%
3
1.0%
0.9%
0.9%
0.8%
0.8%
0.7%
0.5%
5.2.2 Regulated Markets: The Electric Power Generation, Transmission, and Distribution
Sector
Given that the electric power sector bears majority of the estimated compliance costs
(Figure 5-1) and the industry is also among the last major regulated energy industries in the
United States (EIA, 2000), the competitive model is not necessarily applicable for this industry.
5-7
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Table 5-3. Hypothetical Consumption Decreases for a 1% Increase in Unit Costs
Market Demand
Elasticity
-0.1
-0.3
-0.5
-0.7
-1.0
-1.5
-3.0
Market Supply Elasticity
0.1
-0.1%
-0.1%
-0.1%
-0.1%
-0.1%
-0.1%
-0.1%
0.3
-0.1%
-0.2%
-0.2%
-0.2%
-0.2%
-0.3%
-0.3%
0.5
-0.1%
-0.2%
-0.3%
-0.3%
-0.3%
-0.4%
-0.4%
0.7
-0.1%
-0.2%
-0.3%
-0.4%
-0.4%
-0.5%
-0.6%
1
-0.1%
-0.2%
-0.3%
-0.4%
-0.5%
-0.6%
-0.8%
1.5
-0.1%
-0.3%
-0.4%
-0.5%
-0.6%
-0.8%
-1.0%
3
-0.1%
-0.3%
-0.4%
-0.6%
-0.8%
-1.0%
-1.5%
Although the electricity industry continues to go through a process of restructuring, whereby the
industry is moving toward a more competitive framework (see Figure 5-5 for the status of
restructuring by state),2 in many states, electricity prices continue to be fully regulated by Public
Service Commissions. As a result, the rules and processes outlined by these agencies would
ultimately determine how these additional regulatory costs would be recovered by affected
entities.
5.2.3 Partial Equilibrium Measures of Social Cost: Changes Consumer and Producer
Surplus
In partial equilibrium analysis, the social costs are estimated by measuring the changes in
consumer and producer surplus, and these values can be determined using the market supply and
demand model (Figure 5-4). The change in consumer surplus is measured as follows:
ACS = -[AQ] x zip]+ [0.5 xAQxAp]. (5.1)
Higher market prices and lower quantities lead to consumer welfare losses. Similarly, the change
in producer surplus is measured as follows:
APS = [AQ} x Ap] - [AQ} x t] - [0.5 x AQ x (Ap - f}}. (5.2)
Higher unit costs and lower production level reduce producer surplus because the net
price change (Ap -1) is negative. However, these losses are mitigated because market prices tend
to rise.
2http://tonto.eia.doe.gov/energy_in_brief/print_pages/electricity.pdf.
5-8
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Electricity Restructuring by State
Figure 5-5. Electricity Restructuring by State
Source. U.S. Energy Information Administration. 2008a.
. Last updated September
2008.
5.3 Social Cost Estimate
As shown in Table 5-1 the compliance costs are only a small fraction of the affected
product value; this suggests that shift of the supply curve may also be small and result in small
changes in market prices and consumption. EPA believes the national annualized compliance
cost estimates provide a reasonable approximation of the social cost of this final rule. EPA
believes this approximation is better for industries whose markets are well characterized as
perfectly competitive. This approximation is less well understood for industries where the
characterization of markets is not always perfectly competitive such as electric power generation
.whose legal incidence of this rule is approximately 80 percent of the annualized compliance
cost. However, given the data limitation noted earlier, EPA believes the accounting for
compliance cost is a reasonable approximation to inform policy discussion in this rulemaking.
To shed more light on this issue, EPA ran hypothetical analyses and the results are in Tables 5-2
and 5-3.
5-9
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5.4 Energy Impacts
Executive Order 13211 (66 FR 28355, May 22, 2001) provides that agencies will prepare
and submit to the Administrator of the Office of Information and Regulatory Affairs, Office of
Management and Budget, a Statement of Energy Effects for certain actions identified as
"significant energy actions." Section 4(b) of Executive Order 13211 defines "significant energy
actions" as any action by an agency (normally published in the Federal Register) that
promulgates or is expected to lead to the promulgation of a final rule or regulation, including
notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking:
(1) (i) that is a significant regulatory action under Executive Order 12866 or any successor order,
and (ii) is likely to have a significant adverse effect on the supply, distribution, or use of energy;
or (2) that is designated by the Administrator of the Office of Information and Regulatory Affairs
as a significant energy action.
This rule is not a significant energy action as designated by the Administrator of the
Office of Information and Regulatory Affairs because it is not likely to have a significant adverse
impact on the supply, distribution, or use of energy. EPA has prepared an analysis of energy
impacts that explains this conclusion as follows below.
With respect to energy supply and prices, the analysis in Table 5-1 suggests at the
industry level, the annualized costs represent a very small fraction of revenue (less than 0.7%).
As a result, we can conclude supply and price impacts should be small.
To enhance understanding regarding the regulation's influence on energy consumption,
we examined publicly available data describing energy consumption for the electric power sector
that will be affected by this rule. The Annual Energy Outlook 2010 (EIA, 2009) provides energy
consumption data. As shown in Table 5-4, this industry account for less than 0.5% of the U.S.
total liquid fuels and less than 5.2% of natural gas. As a result, any energy consumption changes
attributable to the regulatory program should not significantly influence the supply, distribution,
or use of energy.
5.5 Unfunded Mandates
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1531-1538,
requires Federal agencies, unless otherwise prohibited by law, to assess the effects of their
regulatory actions on State, local, and tribal governments and the private sector. This rule
contains a Federal mandate that may result in expenditures of $100 million or more for State,
local, and tribal governments, in the aggregate, or the private sector in any one year.
5-10
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Accordingly, EPA has prepared under section 202 of the UMRA a written statement which is
summarized below in this section.
5-11
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Table 5-4. U.S. Electric Power" Sector Energy Consumption (Quadrillion BTUs): 2013
Quantity Share of Total Energy Use
Distillate fuel oil
Residual fuel oil
Liquid fuels subtotal
Natural gas
Steam coal
Nuclear power
Renewable energyb
Electricity Imports
Total Electric Power Energy Consumption0
Delivered Energy Use
Total Energy Use
0.12
0.34
0.45
5.17
20.69
8.59
6.06
0.09
41.18
72.41
100.59
0.1%
0.3%
0.5%
5.1%
20.6%
8.5%
6.0%
0.1%
40.9%
72.0%
100.0%
Includes consumption of energy by electricity-only and combined heat and power plants whose primary business is
to sell electricity, or electricity and heat, to the public. Includes small power producers and exempt wholesale
generators.
blncludes conventional hydroelectric, geothermal, wood and wood waste, biogenic municipal solid waste, other
biomass, petroleum coke, wind, photovoltaic and solar thermal sources. Excludes net electricity imports.
Includes non-biogenic municipal waste not included above.
Source: U.S. Energy Information Administration. 2009a. Supplemental Tables to the Annual Energy Outlook 2010.
Table 2. Available at: .
5.5.1 Future and Disproportionate Costs
The UMRA requires that we estimate, where accurate estimation is reasonably feasible,
future compliance costs imposed by the rule and any disproportionate budgetary effects. Our
estimates of the future compliance costs of the final rule are discussed previously in Section 4 of
this RIA. We do not believe that there will be any disproportionate budgetary effects of the final
rule on any particular areas of the country, State or local governments, types of communities
(e.g., urban, rural), or particular industry segments.
5.5.2 Effects on the National Economy
The UMRA requires that we estimate the effect of the final rule on the national economy.
To the extent feasible, we must estimate the effect on productivity, economic growth, full
employment, creation of productive jobs, and international competitiveness of the U.S. goods
and services if we determine that accurate estimates are reasonably feasible and that such effect
is relevant and material. The nationwide economic impact of the final rule is presented earlier in
this RIA chapter. This analysis provides estimates of the effect of the final rule on most of the
5-12
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categories mentioned above, and these estimates are presented earlier in this RIA chapter. In
addition, we have determined that the final rule contains no regulatory requirements that might
significantly or uniquely affect small governments. Therefore, today's rule is not subject to the
requirements of section 203 of the UMRA.
5.6 Environmental Justice
Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes federal executive
policy on environmental justice. Its main provision directs federal agencies, to the greatest
extent practicable and permitted by law, to make environmental justice part of their mission by
identifying and addressing, as appropriate, disproportionately high and adverse human health or
environmental effects of their programs, policies, and activities on minority populations and low-
income populations in the United States.
EPA has determined that this final rule will not have disproportionately high and adverse
human health or environmental effects on minority or low-income populations because it
increases the level of environmental protection for all affected populations without having any
disproportionately high and adverse human health or environmental effects on any population,
including any minority or low-income population. This rule is a nationwide standard that
reduces air toxics emissions from existing stationary CI engines, thus decreasing the amount of
such emissions to which all affected populations are exposed.
5-13
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SECTION 6
SMALL ENTITY SCREENING ANALYSIS
The Regulatory Flexibility Act as amended by the Small Business Regulatory
Enforcement Fairness Act (SBREFA) generally requires an agency to prepare a regulatory
flexibility analysis of any rule subject to notice and comment rulemaking requirements under the
Administrative Procedure Act or any other statute, unless the agency certifies that the rule will
not have a significant economic impact on a substantial number of small entities. Small entities
as defined by the Small Business Administration (SBA) include small businesses, small
governmental jurisdictions, and small not-for-profit enterprises.
After considering the economic impact of the final rule on small entities, the screening
analysis indicates that this final rule will not have a significant economic impact on a substantial
number of small entities (or "SISNOSE"). Under the primary cost analyses EPA considered,
sales and revenue tests for establishments owned by model small entities are less than 3% and
only one group of establishments (irrigated farms with receipts less than $25,000) has a ratio
exceeding 1%.
6.1 Small Entity Data Set
The industry sectors covered by the final rule were identified during the development of
the cost analysis (Nelson, 2009). The SUSB provides national information on the distribution of
economic variables by industry and enterprise size (U.S. Census, 2006a, b).1 The Census Bureau
and the Office of Advocacy of the SB A supported and developed these files for use in a broad
range of economic analyses.2 Statistics include the total number of establishments and receipts
for all entities in an industry; however, many of these entities may not necessarily be covered by
the final rule. SUSB also provides statistics by enterprise employment and receipt size.
The Census Bureau's definitions used in the SUSB, which are stated in Section 3 and
restated here for clarity of presentation, are as follows:
• Establishment: An establishment is a single physical location where business is
conducted or where services or industrial operations are performed.
• Receipts: Receipts (net of taxes) are defined as the revenue for goods produced,
distributed, or services provided, including revenue earned from premiums,
lrThe SUSB data do not provide establishment information for the national security NAICS code (92811) or irrigated
farms. Since most national security installations are owned by the federal government (e.g., military bases), EPA
assumes these entities would not be considered small. For irrigated farms, we relied on receipt data provided in
the 2008 Farm and Irrigation Survey (USDA, 2009).
2See http://www.census.gov/csd/susb/ and http://www.sba.gov/advo/research/data.html for additional details.
6-1
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commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all
revenue collected for local, state, and federal taxes.
• Enterprise: An enterprise is a business organization consisting of one or more
domestic establishments that were specified under common ownership or control. The
enterprise and the establishment are the same for single-establishment firms. Each
multiestablishment company forms one enterprise—the enterprise employment and
annual payroll are summed from the associated establishments. Enterprise size
designations are determined by the summed employment of all associated
establishments.
Because the SBA's business size definitions (SBA, 2008) apply to an establishment's
"ultimate parent company," we assumed in this analysis that the "enterprise" definition above is
consistent with the concept of ultimate parent company that is typically used for SBREFA
screening analyses and the terms are used interchangeably.
6.2 Small Entity Economic Impact Measures
The analysis generated a set of establishment sales tests (represented as cost-to-receipt
ratios)3 for NAICS codes associated with sectors listed in Table 6-1. Although the appropriate
SBA size definition should be applied at the parent company (enterprise) level, we can only
compute and compare ratios for a model establishment owned by an enterprise within an SUSB
size range (employment or receipts). Using the SUSB size range helps us account for receipt
differences between establishments owned by large and small enterprises and also allows us to
consider the variation in small business definitions across affected industries. Using
establishment receipts is also a conservative approach, because an establishment's parent
company (the "enterprise") may have other economic resources that could be used to cover the
costs of the final rule.
6.2.1 Model Establishment Receipts and Annual Compliance Costs
The sales test compares a representative establishment's total annual engine costs to the
average establishment receipts for enterprises in several size categories.4 For industries with SBA
3The following metrics for other small entity economic impact measures (if applicable) would potentially include
small governments (if applicable): "revenue" test; annualized compliance cost as a percentage of annual
government revenues and
small nonprofits (if applicable): "expenditure" test; annualized compliance cost as a percentage of annual
operating expenses,
4For the 1 to 20 employee category, we excluded SUSB data for enterprises with zero employees. These enterprises
did not operate the entire year.
6-2
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employment size standards, we calculated average establishment receipts for each enterprise
employment range (Table 6-2).5 For industries with SBA receipt size standards, we calculated
Table 6-1. Final NESHAP for Existing Stationary CI Reciprocating Internal Combustion
Engines (RICE): Affected Sectors and SBA Small Business Size Standards
Industry Description
Corresponding
NAICS
SBA Size Standard for
Businesses (effective March
11,2008)
Type of Small Entity
Electric power generation
General medical &
surgical hospitals
Crude petroleum and
natural gas production
Natural gas liquid
producers
National security
Hydro power units
Irrigation sets
Welders
2211
622110
211111
211112
92811
See NAICS 2211
Affects NAICS 111
and 112
a Business and government
$34.5 million in annual receipts Business and government
500 employees
500 employees
NA
1,000 employees
Generally $750,000 or less in
annual receipts
Affects industries that Varies by 6-digit NAICS code;
use heavy equipment Example industry:
NAICS 238 = $14 million in
annual receipts
Business
Business
Government
Business and government
Business
Business
such as construction,
mining, farming
"NAICS codes 221111, 221112, 221113, 221119, 221121, 221122: A firm is small if, including its affiliates, it is
primarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total
electric output for the preceding fiscal year did not exceed 4 million megawatt hours.
Source: U.S. Small Business Administration (SBA). 2008. "Table of Small Business Size Standards Matched to
North American Industry Classification System Codes." Effective August 22nd, 2008. Downloaded 1/11/10.
average establishment receipts for each enterprise receipt range (Table 6-3). We included the
utility sector in the second group, although the SBA size standard for this industry is defined in
terms of physical units (megawatt hours) versus receipts. Crop and animal production (NAICS
111 and 112) also have an SBA receipt size standard that defines a small business as receiving
$750,000 or less in receipts per year. However, SUSB data were not available for these
industries. Therefore, we conducted the sales test using the following range of establishment
receipts: farms with annual receipts of $25,000 or less, farms with annual receipts of $100,000 or
5 We use 2002 Economic Census data in estimating number of establishments by industry instead of using 2007
Economic Census since this data was not available in time for use in our analysis. The release schedules for
different types of 2007 Economic Census data are at
http://www.census.gov/econ/census07/pdf/EconCensusScheduleByDate.pdf.
6-3
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less, farms with annual receipts of $500,000 or less, and farms with annual receipts of $750,000
or less.
6-4
-------
-------
Table 6-2. Average Receipts for Affected Industry by Enterprise: 2002 ($2008 Million/establishment)
NAICS
211111
211112
335312
333992
NAICS Description
Grade petroleum &
natural gas extraction
Natural gas liquid
extraction
Motor & generator mfg
Welding & soldering
equipment mfg
SBA Size
Standard
for Businesses
(effective August
22, 2008)
500 employees
500 employees
1,000 employees
500 employees
Owned By Enterprises
All
Enterprises
$14.59
$172.81
$18.58
$18.51
1-20
Employees
$0.53
$0.30
$1.37
$1.56
20-99
Employees
$6.71
NA
$6.14
$6.60
100-499
Employees
$9.51
$11.88
$15.96
$33.25
with Employee Range:
500-749
Employees
NA
NA
$29.47
NA
750-999
Employees
NA
NA
NA
NA
1,000-1,499
Employees
NA
NA
NA
$114.55
71 NA = Not available.
Source: U.S. Census Bureau. 2006a. "Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 2002:
. Downloaded 1/11/10.
-------
Table 6-3. Average Receipts for Affected Industry by Enterprise Receipt Range: 2002 ($2008 /establishment)
Owned By Enterprises with Receipt Range:
NAICS
2211
622110
234110
234120
234910
234920
234930
234990
92811
NAICS Description
Electric Power
Generation
Hospitals
Highway & street
construction
Bridge & tunnel
construction
Water, sewer, &
pipeline construction
Power &
communication
transmission line
construction
Industrial nonbuilding
structure construction
All other heavy
construction
National Security
SBA Size Standard
for Businesses
(effective August All
22nd, 2008) Enterprises
a
$34.5 million in annual
receipts
$33.5 million in
Annual Receipts
$33.5 million in
Annual Receipts
$33.5 million in
Annual Receipts
$33.5 million in
Annual Receipts
$33.5 million in
Annual Receipts
$33.5 million in
Annual Receipts
NA
$39.8
$92.30
$7.74
$14.09
$3.89
$3.39
$35.93
$2.66
NA
100-
0-99K 499.9K
Receipts Receipts
$0.1 $0.3
NA NA
$0.06 $0.32
$0.05 $0.30
$0.06 $0.32
$0.06 $0.31
$0.05 $0.30
$0.06 $0.30
NA NA
500-
999.9K
Receipts
$0.8
$0.84
$0.84
$0.89
$0.85
$0.83
$0.85
$0.83
NA
1,000-
4,999.9K
Receipts
$3.0
$3.59
$2.74
$2.90
$2.73
$2.52
$2.71
$2.48
NA
5,000,000-
9,999,999K
Receipts
$6.6
$8.21
$8.11
$8.08
$8.17
$7.75
$8.38
$7.76
NA
<10,OOOK
Receipts
$2.7
$5.03
$2.00
$2.53
$1.84
$1.32
$1.73
$0.99
NA
10,000-
49,999K
Receipts
$14.7
$25.49
$22.62
$25.25
$20.62
$16.84
$22.34
$18.72
NA
50,000-
99,999K
Receipts
$22.2
$65.89
$56.48
$57.00
$45.05
$34.50
$30.90
$40.53
NA
100,OOOK+
Receipts
$49.2
$148.57
$56.81
$79.62
$47.27
$23.86
$174.38
$42.35
NA
Notes: Note: Industries in green were included for consistency with the analysis done for proposed rule (Under direction from EPA - to investigate if rule affects
downstream users of engines).
National Security is included in this table but does not have size standards.
a NAICS codes 221111, 221112, 221113, 221119, 221121, 221122: A firm in these industries is defined as small by SBA if, including its affiliates, it is
primarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the preceding fiscal year did not
exceed 4 million megawatt hours.
NA = Not available. SUSB did not report this data for disclosure or other reasons.
Source: U.S. Census Bureau. 2006a. "Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 2002."
.
-------
Annual entity compliance costs vary depending on the size of the diesel engines used at
the affected establishment. Absent facility-specific information, we computed per-entity
compliance costs based for three different cases based on representative establishments—Cases
1, 2, and 3 (see Table 6-4). Each representative establishment differs based on the size and
number of diesel engines being used. Compliance costs are calculated by summing the total
annualized compliance costs for the relevant engine categories, dividing the sum by the total
existing population of those engines, and multiplying the average engine cost by the number of
engines assumed to be at the establishment. Since NAICS 2211 and 622110 are fundamentally
different than other industries considered in this analysis, we used different assumptions about
what constitutes the representative establishment and report these assumptions separately.
• Case 1: The representative establishment for all industries uses three 750+ hp engines
with an average compliance cost of $1,877 per engine, resulting in a total annualized
compliance cost of approximately $5,631 for this representative establishment.
• Case 2: The representative establishment in NACIS 2211 and 622110 uses two 50 to
750+ hp engines with an average compliance cost of $437 per engine, resulting in a
total annualized compliance cost of $874 for this representative establishment. For all
other industries, the representative establishment uses two 50 to 300 hp engines with
an average compliance cost of $155 per engine, resulting in a total compliance cost of
$310 for this representative establishment.
• Case 3: The representative establishment for all industries uses two 50 to 100 hp
engines with an average compliance cost of $68 per engine, resulting in a total
compliance cost of $137 for this representative establishment.
EPA believes that small entities are most likely to face costs similar to Case 2 (columns
shaded in gray in Table 6-4) because most of the engines to be affected by this proposal in
NAICS 335312, 333992, 211111, and 211112 are under 300 hp capacity, and most small entities
in these industries will own engines of this size or smaller. This is corroborated by Figure 6-1
and 6-2 which shows the distribution of engine population and compliance costs by engine size
for all industries. However, it is difficult to make a similar claim for NAICS 2211 and 622110
based on the existing distribution of engines in these industries.6 As noted earlier in the RIA,
only 20 percent of the existing distribution of engines is expected to be classified as non-
emergency.
6This claim also cannot be made for NAICS 92811: National Security. However, since most national security
installations are owned by the federal government (e.g., military bases), EPA assumes these entities would not be
considered small.
6-8
-------
For the sales test, we divided the representative establishment compliance costs reported
in Table 6-4 by the representative establishment receipts reported in Tables 6-2 and 6-3. This is
known as the cost-to-receipt (i.e., sales) ratio, or the "sales test." The "sales test" is the impact
Table 6-4. Representative Establishment Costs Used for Small Entity Analysis ($2008)
Total Annualized Costs ($)
Engine Population
Average Engine Cost
($/engine)
Assumed Engines Per
Establishment
Total Annualized Costs per
Establishment
Case
NAICS 2211,
622110
(+750 hp
only)
$62,035,845
33,052
$1,877
3
$5,631
1
All Other
NAICS
(+750 hp
only)
$7,871,576
4,194
$1,877
3
$5,631
Case
NAICS 2211,
622110
(50-750+ hp)
$317,603,287
727,090
$437
2
$874
2
All Other
NAICS
(50-300 hp)
$42,778,499
276,374
$155
2
$310
Case 3
NAICS 2211,
622110
(50-100 hp
only)
$9,093,118
133,099
$68
2
$137
All Other
NAICS
(50-100 hp
only)
$6,745,516
98,736
$68
2
$137
* Engine population estimates taken from "Impacts Associated with NESHAP for Existing Stationary CI RICE,"
prepared by Bradley Nelson, Ec/R, Inc. for Melanie King, U.S. EPA, Office of Air Quality Planning and
Standards, February 10, 2010.
6-9
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60%
50%
40%
30%
20%
>750hp
600-750 hp
1300-600 hp
175-300 hp
1100-175 hp
150-100 hp
Electric Power Hospitals Crude Petroleum Natural Gas National Security Hydro Power Irrigation Sets Welders
Generation (622110) &NG Production Liquid Producers (92811) Units (335312) (335312) (333992)
(2211) (211111) (211112)
Figure 6-1. Distribution of Engine Population by Size for All Industries
6-10
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70%
60%
50%
40%
>750hp
600-750 hp
1300-600 hp
175-300 hp
1100-175 hp
150-100 hp
Electric Power Hospitals Crude Petroleum Natural Gas National Security Hydro Power Irrigation Sets Welders
Generation (622110) &NG Production Liquid Producers (92811) Units (335312) (335312) (333992)
(2211) (211111) (211112)
Figure 6-2. Distribution of Compliance Costs by Engine Size for All Industries
methodology EPA employs in analyzing small entity impacts as opposed to a "profits test," in
which annualized compliance costs are calculated as a share of profits.
This is because revenues or sales data are commonly available data for entities normally
impacted by EPA regulations and profits data normally made available are often not the true
profit earned by firms because of accounting and tax considerations. Revenues as typically
published are usually correct figures and are more reliably reported when compared to profit
data. The use of a "sales test" for estimating small business impacts for a rulemaking such as this
one is consistent with guidance offered by EPA on compliance with SBREFA7 and is consistent
with guidance published by the U.S. SBA's Office of Advocacy that suggests that cost as a
7The SBREFA compliance guidance to EPA rulewriters regarding the types of small business analysis that should be
considered can be found at http://www.epa.gov/sbrefa/documents/rfafinalguidance06.pdf, pp. 24-25.
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percentage of total revenues is a metric for evaluating cost increases on small entities in relation
to increases on large entities.8
If the cost-to-receipt ratio is less than 1%, then we consider the final rule to not have a
significant impact on the establishment company in question. We summarize the industries with
cost-to-receipt ratios exceeding 1% below:
Primary Analysis:
* Case 2: NAICS 2211 with receipts less than $100,000 per year
• Case 3: No industries
Sensitivity Analysis (unlikely):
- Case 1: NAICS 211111,211112, with less than 20 employees, NAICS 2211 with
receipts less than $500,000 per year, NAICS 234 with receipts less than $500,000 per
year, and irrigated farms with receipts of $500,000 or less per year
In the Case 2 primary analysis, only establishments in NAICS 2211 with receipts less
than $100,000 per year have cost-to-receipt ratios above 1%. These establishments represent less
than 5 percent of affected small establishments. However, establishments earning this level of
receipts are likely to be using smaller engines than those assumed in Case 2, such as 50 to 100 hp
engines. The results of our Case 3 analysis demonstrate that these establishments are not
significantly impacted when taking this engine size into account.
6.3 Small Government Entities
The rule also covers sectors that include entities owned by small and large governments.
However, given the uncertainty and data limitations associated with identifying and
appropriately classifying these entities, we computed a "revenue" test for a model small
government, where the annualized compliance cost is a percentage of annual government
revenues (U.S. Census, 2005a, b). The use of a "revenue test" for estimating impacts to small
governments for a rulemaking such as this one is consistent with guidance offered by EPA on
compliance with SBREFA,9 and is consistent with guidance published by the US SBA's Office
of Advocacy.10 For example, from the 2002 Census (in 2008 dollars), the average revenue for
8U.S. SBA, Office of Advocacy. A Guide for Government Agencies, How to Comply with the Regulatory
Flexibility Act, Implementing the President's Small Business Agenda and Executive Order 13272, May 2003.
9The SBREFA compliance guidance to EPA rule writers regarding the types of small business analysis that should
be considered can be found at http://www.epa.gov/sbrefa/documents/rfafinalguidance06.pdf. pp. 24-25.
10U.S. SBA, Office of Advocacy. A Guide for Government Agencies, How to Comply with the Regulatory
Flexibility Act, Implementing the President's Small Business Agenda and Executive Order 13272, May 2003.
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small governments (counties and municipalities) with populations fewer than 10,000 are $3
million per entity, and the average revenue for local governments with populations fewer than
50,000 is $8 million per entity. For the smallest group of local governments (<10,000 people),
the cost-to-revenue ratio would be 0.2% or less under each case. For the larger group of
governments (<50,000 people), the cost-to-revenue ratio is 0.1% or less under all cases.
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SECTION 7
HUMAN HEALTH BENEFITS OF EMISSIONS REDUCTIONS
7.1 Synopsis
In this section, we provide an estimate of the particulate matter (PM) co-benefits for the
final NESHAP for existing stationary compression ignition (RICE). Specifically, we calculated
the benefits of this rule in terms of the co-benefits associated with reducing PM rather than
calculating the benefits associated with reducing hazardous air pollutants (HAPs). These PM
reductions are a consequence of the technologies installed to reduce HAP emissions from RICE.
These estimates reflect the monetized human health co-benefits of reducing cases of morbidity
and premature mortality associated with reducing exposure to the PM2.5 precursors from the
current RICE technology. We estimate the total monetized PM2.5 co-benefits to be $940 million
to $2.3 billion (2008$) at a 3% discount rate and $850 million to $2.1 billion at a 7% discount
rate in the year of full implementation (2013). Data, resource, and methodological limitations
prevented EPA from quantifying or monetizing the benefits from several important benefit
categories, including benefits from reducing carbon monoxide (CO) and HAPs, ecosystem
effects, and visibility impairment. The benefits from reducing 1,014 tons of hazardous air
pollutants each year have not been monetized in this analysis.
These estimates of the reduction in parti culate matter-related health effects reflect EPA's
most current interpretation of the scientific literature and include four key updates: (1) a no-
threshold model for PM2.5 that calculates incremental co-benefits down to the lowest modeled air
quality levels; (2) a revised Value of a Statistical Life (VSL); (3) two technical updates to the
population dataset and aggregation method; (4) presentation of results derived from Pope et al.
(2002) and Laden et al. (2006) instead of using the extremes of EPA's Expert Elicitation on PM
Mortality (Roman et al., 2008). Higher or lower estimates of co-benefits are possible using other
assumptions; examples of this are provided in Figure 7-2.
7.2 Calculation of PM2.5 Human Health Co-benefits
This rulemaking would reduce emissions of PM2.5, SO2, and VOCs. Because SOx and
VOCs are also precursors to PM2.5, reducing these emissions would also reduce PM2.5 formation,
human exposure and the incidence of PM2.s-related health effects. In this analysis, we estimated
the co-benefits of reducing PM2.5 exposure for the alternative standards. Due to analytical
limitations, it was not possible to provide a comprehensive estimate of PM2.s-related co-benefits.
Instead, we used the "benefit-per-ton" method to estimate these co-benefits (Fann et al., 2009).
The PM2.5 benefit-per-ton methodology incorporates key assumptions described in detail below.
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These PM2.5 benefit-per-ton estimates provide the total monetized human health co-benefits (the
sum of premature mortality and premature morbidity) of reducing one ton of PM2.5 from a
specified source. EPA has used the benefit per-ton technique in previous RIAs, including the
recent SO2 NAAQS RIA (U.S. EPA, 2009b). Table 7-1 shows the quantified and unquantified
co-benefits captured in those benefit-per-ton estimates.
Table 7-1. Human Health and Welfare Effects of PM2.5
Pollutant /
Effect
Quantified and Monetized
in Primary Estimates
Unquantified Effects
Changes in:
Adult premature mortality
Bronchitis: chronic and acute
Hospital admissions: respiratory and
cardiovascular
Emergency room visits for asthma
Nonfatal heart attacks (myocardial infarction)
Lower and upper respiratory illness
Minor restricted-activity days
Work loss days
Asthma exacerbations (asthmatic population)
Infant mortality
Subchronic bronchitis cases
Low birth weight
Pulmonary function
Chronic respiratory diseases other than chronic
bronchitis
Non-asthma respiratory emergency room visits
Visibility
Household soiling
Consistent with the Portland Cement NESHAP (U.S. EPA, 2009a), the co-benefits
estimates utilize the concentration-response functions as reported in the epidemiology literature,
as well as the 12 functions obtained in EPA's expert elicitation study as a sensitivity analysis.
• One estimate is based on the concentration-response (C-R) function developed from
the extended analysis of American Cancer Society (ACS) cohort, as reported in Pope
et al. (2002), a study that EPA has previously used to generate its primary PM co-
benefits estimate. When calculating the estimate, EPA applied the effect coefficient
as reported in the study without an adjustment for assumed concentration threshold of
10 |ig/m3 as was done in recent (post-2006) Office of Air and Radiation RIAs.
• One estimate is based on the C-R function developed from the extended analysis of
the Harvard Six Cities cohort, as reported by Laden et al (2006). This study,
published after the completion of the Staff Paper for the 2006 PM2.5 NAAQS, has
been used as an alternative estimate in the PM2.5 NAAQS RIA and PM2.5 co-
benefits estimates in RIAs completed since the PM2.5 NAAQS. When calculating the
estimate, EPA applied the effect coefficient as reported in the study without an
adjustment for assumed concentration threshold of 10 |ig/m3 as was done in recent
(post 2006) RIAs.
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• Twelve estimates are based on the C-R functions from EPA's expert elicitation study
(Roman et al., 2008) on the PM2.5 -mortality relationship and interpreted for PM co-
benefits analysis in EPA's final RIA for the PM2.5 NAAQS. For that study, twelve
experts (labeled A through L) provided independent estimates of the PM2.5-mortality
concentration-response function. EPA practice has been to develop independent
estimates of PM2.5-mortality estimates corresponding to the concentration-response
function provided by each of the twelve experts, to better characterize the degree of
variability in the expert responses.
The effect coefficients are drawn from epidemiology studies examining two large
population cohorts: the American Cancer Society cohort (Pope et al., 2002) and the Harvard Six
Cities cohort (Laden et al., 2006).l These are logical choices for anchor points in our presentation
because, while both studies are well designed and peer reviewed, there are strengths and
weaknesses inherent in each, which we believe argues for using both studies to generate co-
benefits estimates. Previously, EPA had calculated co-benefits based on these two empirical
studies, but derived the range of co-benefits, including the minimum and maximum results, from
an expert elicitation of the relationship between exposure to PM2.5 and premature mortality
(Roman et al., 2008).2 Within this assessment, we include the co-benefits estimates derived from
the concentration-response function provided by each of the twelve experts to better characterize
the uncertainty in the concentration-response function for mortality and the degree of variability
in the expert responses. Because the experts used these cohort studies to inform their
concentration-response functions, co-benefits estimates using these functions generally fall
between results using these epidemiology studies (see Figure 7-2). In general, the expert
elicitation results support the conclusion that the co-benefits of PM2.5 control are very likely to be
substantial.
Readers interested in reviewing the methodology for creating the benefit-per-ton
estimates used in this analysis should consult Fann et al. (2009). As described in the
documentation for the benefit per-ton estimates cited above, national per-ton estimates are
developed for selected pollutant/source category combinations. The per-ton values calculated
therefore apply only to tons reduced from those specific pollutant/source combinations (e.g.,
NC>2 emitted from electric generating units; NC>2 emitted from mobile sources). Our estimate of
PM2.5 co-control benefits is therefore based on the total PM2.5 emissions controlled by sector and
multiplied by this per-ton value.
1 These two studies specify multi-pollutant models that control for SO2, among other co-pollutants.
2 Please see the Section 5.2 of the Portland Cement RIA in Appendix 5 A for more information regarding the change
in the presentation of benefits estimates.
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The underlying emissions modeling and air quality modeling account for the current
distribution of emissions sources, including both urban and rural sources. In addition, the air
quality modeling included 14 vertical layers to simulate the differences between ground-level
emissions and higher stack emissions (U.S. EPA, 2006a). The distance that particles travel
primarily depends on the size of the particle, the amount and release height of emissions, terrain,
and meteorological conditions, such as wind speed and precipitation. Fine particles can have an
atmospheric half-life of days to weeks and travel hundreds to thousands of kilometers, whereas
ultrafme and coarse particles travel less than ten kilometers (U.S. EPA, 2009c). Because we have
not undertaken a study specific to emissions at ground level from RICE, with regard to transport
issues and to size fraction of PM2.5 emissions (e.g., ultrafmes and near ultrafines), there is
uncertainty as to how far such emissions will travel and thus with regard to populations affected.
Evidence from recent air quality modeling for mobile source rules with similar engines (U.S.
EPA, 1999; U.S. EPA, 2000; U.S. EPA, 2004; U.S. EPA, 2008e; U.S. EPA, 2010c) shows that
some fine particles can travel long distances in the atmosphere, but the proportion of such
emissions from RICE that travel more than short distances is not yet definitively known.
The benefit-per-ton coefficients in this analysis were derived using modified versions of
the health impact functions used in the PM NAAQS Regulatory Impact Analysis (U.S. EPA,
2006b). Specifically, this analysis uses the benefit-per-ton method first applied in the Portland
Cement NESHAP RIA (U.S. EPA, 2009a), which incorporated three updates: a new population
dataset, an expanded geographic scope of the benefit-per-ton calculation, and the functions
directly from the epidemiology studies without an adjustment for an assumed threshold.3
Removing the threshold assumption is a key difference between the method used in this analysis
of PM co-benefits and the methods used in RIAs prior to that for the Portland Cement NESHAP,
and we now calculate incremental co-benefits down to the lowest modeled PM2.5 air quality
levels.
EPA strives to use the best available science to support our benefits analyses, and we
recognize that interpretation of the science regarding air pollution and health is dynamic and
evolving. Based on our review of the body of scientific literature, EPA applied the no-threshold
model in this analysis. EPA's Integrated Science Assessment for Particulate Matter (U.S. EPA,
2009c), which was recently reviewed by EPA's Clean Air Scientific Advisory Committee (U.S.
EPA-SAB, 2009a; U.S. EPA-SAB, 2009b), concluded that the scientific literature consistently
finds that a no-threshold log-linear model most adequately portrays the PM-mortality
3 The benefit-per-ton estimates have also been updated since the Cement RIA to incorporate a revised VSL, as
discussed on the next page.
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concentration-response relationship while recognizing potential uncertainty about the exact
shape of the concentration-response function.4 Although this document does not necessarily
represent agency policy, it provides a basis for reconsidering the application of thresholds in
PM2.5 concentration-response functions used in EPA's RIAs.5
Because the co-benefits are sensitive to the assumption of a threshold, we also provide a
sensitivity analysis using the previous methodology (i.e., a threshold model at 10 |ig/m3 without
the two technical updates) as a historical reference. Table 7-5 shows the sensitivity of an
assumed threshold on the monetized results, with and without an assumed threshold at 10 |ig/m3.
As is the nature of Regulatory Impact Analyses (RIAs), the assumptions and methods
used to estimate air quality benefits evolve over time to reflect the Agency's most current
interpretation of the scientific and economic literature. For a period of time (2004-2008), the
Office of Air and Radiation (OAR) valued mortality risk reductions using a value of statistical
life (VSL) estimate derived from a limited analysis of some of the available studies. OAR arrived
at a VSL using a range of $1 million to $10 million (2000$) consistent with two meta-analyses of
the wage-risk literature. The $1 million value represented the lower end of the interquartile range
from the Mrozek and Taylor (2002) meta-analysis of 33 studies. The $10 million value
represented the upper end of the interquartile range from the Viscusi and Aldy (2003) meta-
analysis of 43 studies. The mean estimate of $5.5 million (2000$)6 was also consistent with the
mean VSL of $5.4 million estimated in the Kochi et al. (2006) meta-analysis. However, the
Agency neither changed its official guidance on the use of VSL in rule-makings nor subjected
the interim estimate to a scientific peer-review process through the Science Advisory Board
(SAB) or other peer-review group.
During this time, the Agency continued work to update its guidance on valuing mortality
risk reductions, including commissioning a report from meta-analytic experts to evaluate
methodological questions raised by EPA and the SAB on combining estimates from the various
data sources. In addition, the Agency consulted several times with the Science Advisory Board
Environmental Economics Advisory Committee (SAB-EEAC) on the issue. With input from the
4 It is important to note that uncertainty regarding the shape of the concentration-response function is conceptually
distinct from an assumed threshold. An assumed threshold (below which there are no health effects) is a
discontinuity, which is a specific example of non-linearity.
5 In the Portland Cement RIA (U.S. EPA, 2009a), EPA solicited comment on the use of the no-threshold model for
benefits analysis within the preamble of that proposed rule. The comment period for the Portland Cement
proposed NESHAP closed on September 4, 2009 (Docket ID No. EPA-HQ-OAR-2002-0051 available at
http://www.regulations.gov). EPA is currently reviewing those comments.
6 In this analysis, we adjust the VSL to account for a different currency year (2008$) and to account for income
growth to 2015. After applying these adjustments to the $5.5 million value, the VSL is $7.9 million.
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meta-analytic experts, the SAB-EEAC advised the Agency to update its guidance using specific,
appropriate meta-analytic techniques to combine estimates from unique data sources and
different studies, including those using different methodologies (i.e., wage-risk and stated
preference) (U.S. EPA-SAB, 2007).
Until updated guidance is available, the Agency determined that a single, peer-reviewed
estimate applied consistently best reflects the SAB-EEAC advice it has received. Therefore, the
Agency has decided to apply the VSL that was vetted and endorsed by the SAB in the Guidelines
for Preparing Economic Analyses (U.S. EPA, 2000)7 while the Agency continues its efforts to
update its guidance on this issue. This approach calculates a mean value across VSL estimates
derived from 26 labor market and contingent valuation studies published between 1974 and
1991. The mean VSL across these studies is $6.3 million (2000$).8 The Agency is committed to
using scientifically sound, appropriately reviewed evidence in valuing mortality risk reductions
and has made significant progress in responding to the SAB-EEAC's specific recommendations.
The Agency anticipates presenting results from this effort to the SAB-EEAC in Spring 2010 and
that draft guidance will be available shortly thereafter.
Figure 7-1 illustrates the relative breakdown of the monetized PM2.5 health co-benefits.
7 In the (draft) update of the Economic Guidelines (U.S. EPA, 2008), EPA retained the VSL endorsed by the SAB
with the understanding that further updates to the mortality risk valuation guidance would be forthcoming in the
near future. Therefore, this report does not represent final agency policy.
8 In this analysis, we adjust the VSL to account for a different currency year (2008$) and to account for income
growth to 2015. After applying these adjustments to the $6.3 million value, the VSL is $9.1m.
7-6
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Adult Mortality - Pope et
al.93%
Hospital Admissions, Resp
0.04%
Asthma Exacerbation 0.01%
Acute Bronchitis 0.01%
Upper Resp Symp 0.00%
Lower Resp Symp 0.00%
ER Visits, Resp 0.00%
Figure 7-1.
Breakdown of Monetized PM2.5 Health Co-benefits using Mortality
Function from Pope et al. (2002)a
a This pie chart breakdown is illustrative, using the results based on Pope et al. (2002) as an example. Using the
Laden et al. (2006) function for premature mortality, the percentage of total monetized PM25 co-benefits due to
adult premature mortality would be 97%. This chart shows the breakdown using a 3% discount rate, and the
results would be similar if a 7% discount rate was used.
Table 7-2 provides a general summary of the results by pollutant, including the emission
reductions and monetized benefits-per-ton at discount rates of 3% and 7%.9. Table 7-3 provides a
summary of the reductions in health incidences as a result of the pollution reductions. In Table 7-
4, we provide the co-benefits using our anchor points of Pope et al. and Laden et al. as well as
the results from the expert elicitation on PM2 5-related premature mortality. Figures 7-2 and 7-3
provide a visual representation of the range of co-benefits estimates and the pollutant breakdown
of the monetized co-benefits.
9 To comply with Circular A-4, EPA provides monetized benefits using discount rates of 3% and 7% (OMB, 2003).
These benefits are estimated for a specific analysis year (i.e., 2013), and most of the PM co-benefits occur within
that year with two exceptions: acute myocardial infarctions (AMIs) and premature mortality. For AMIs, we
assume 5 years of follow-up medical costs and lost wages. For premature mortality, we assume that there is a
"cessation" lag between PM exposures and the total realization of changes in health effects. Although the
structure of the lag is uncertain, EPA follows the advice of the SAB-HES to assume a segmented lag structure
characterized by 30% of mortality reductions in the first year, 50% over years 2 to 5, and 20% over the years 6 to
20 after the reduction in PM2 5 (U.S. EPA-SAB, 2004). Changes in the lag assumptions do not change the total
number of estimated deaths but rather the timing of those deaths. Therefore, discounting only affects the AMI
costs after the analysis year and the valuation of premature mortalities that occur after the analysis year. As
such, the monetized benefits using a 7% discount rate are only approximately 10% less than the monetized
benefits using a 3% discount rate.
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Table 7-2. Summary of Monetized PM2.5-related Co-benefits Estimates for RICE
NESHAP for Compression Ignition in 2013 (2008$)a
Pollutant
Direct PM2 5 Major
Direct PM25 Area
PM2 5 Precursors
voc
Benefit Benefit Benefit Benefit Total Monetized
Emissions per ton per ton per ton per ton Co-benefits
Reduction (Pope, (Laden, (Pope, (Laden, (millions 2008$ at
s(tons) 3%) 3%) 7%) 7%) 3%)
874 $230,000 $560,000 $210,000 $500,000
1,970 $360,000 $880,000 $330,000 $790,000
27,395 $1,200 $3,000 $1,100 $2,700
Total
$200 to
$710 to
$33 to
$940 to
$490
$1,700
$82
$2,300
Total Monetized
Co-benefits
(millions 2008$ at
7%)
$180 to
$640 to
$30 to
$850 to
$440
$1,600
$74
$2,100
a All estimates are for the analysis year (year of implementation, 2013), and are rounded to two significant figures
so numbers may not sum across columns. All fine particles are assumed to have equivalent health effects, but the
benefit per ton estimates vary because each ton of precursor reduced has a different propensity to become PM25.
The monetized co-benefits incorporate the conversion from precursor emissions to ambient fine particles.
Table 7-3. Summary of Reductions in Health Incidences from PMi.s Co-benefits for RICE
NESHAP in 2013a
Avoided Premature Mortality
Pope et al. 110
Laden et al. 270
Avoided Morbidity
Chronic Bronchitis 75
Acute Myocardial Infarction 170
Hospital Admissions, Respiratory 25
Hospital Admissions, Cardiovascular 53
Emergency Room Visits, Respiratory 84
Acute Bronchitis 180
Work Loss Days 15,000
Asthma Exacerbation 1,900
Acute Respiratory Symptoms 87,000
Lower Respiratory Symptoms 2,100
Upper Respiratory Symptoms 1,600
a All estimates are for the analysis year (2013) and are rounded to whole numbers with two significant figures. All
fine particles are assumed to have equivalent health effects, but each PM2 5 precursor pollutant has a different
propensity to form PM25. Confidence intervals are unavailable for this analysis because of the benefit-per-ton
methodology.
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Table 7-4. All PM2.5 Co-benefits Estimates for the RICE NESHAP at discount rates of 3%
and 7% in 2013 (in millions of 2008$)a
3% 7%
Benefit-per-ton Coefficients Derived from Epidemiology Literature
Pope et al. $940 $850
Laden etal. $2,300 $2,100
Benefit-per-ton Coefficients Derived from Expert Elicitation
Expert A $2,400 $2,200
Expert B $1,900 $1,700
Expert C $1,900 $1,700
Expert D $1,300 $1,200
Expert E $3,000 $2,700
Expert F $1,700 $1,500
Expert G $1,100 $1,000
Expert H $1,400 $1,300
Expert I $1,800 $1,700
Expert J $1,500 $1,400
Expert K $380 $350
Expert L $1,400 $1,200
a All estimates are rounded to two significant figures. Estimates do not include confidence intervals because they
were derived through the benefit-per-ton technique described above. The co-benefits estimates from the Expert
Elicitation are provided as a reasonable characterization of the uncertainty in the mortality estimates associated
with the concentration-response function. Confidence intervals are unavailable for this analysis because of the
benefit-per-ton methodology.
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$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
Popeet al.
I I
Benefits estimates derived from 2 epidemiology functions and 12 expert functions
Figure 7-2. Total Monetized PM2.5 Co-Benefits of RICE NESHAP in 2013a
a This graph shows the estimated co-benefits at discount rates of 3% and 7% using effect coefficients derived from
the Pope et al. study and the Laden et al. study, as well as 12 effect coefficients derived from EPA's expert
elicitation on PM mortality. The results shown are not the direct results from the studies or expert elicitation;
rather, the estimates are based in part on the concentration-response function provided in those studies.
Figure 7-3.
Breakdown of Monetized Co-benefits for RICE NESHAP by PM2.5 Precursor
Pollutant and Source
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7.3 Unqualified Benefits
The monetized co-benefits estimated in this RIA only reflect the portion of benefits
attributable to the health effect reductions associated with ambient fine particles. Data, resource,
and methodological limitations prevented EPA from quantifying or monetizing the benefits from
several important benefit categories, including benefits from reducing carbon monoxide and
hazardous air pollutants, ecosystem effects, and visibility impairment. The health benefits from
reducing 1,014 tons of hazardous air pollutants (HAPs) and the 14,000 tons of carbon monoxide
each year have not been monetized in this analysis.
In this analysis, we have not quantified the benefits attributable to the SC>2 reductions that
would occur as a result of these engines switching to ultra-low sulfur diesel (ULSD). Although
we are confident that some SC>2 reductions would occur as a result of this rule, we are unable to
estimate the percentage of engines that may switch to ULSD in the absence of this rule or the
number of engines that already use ULSD. As a PM2.5 precursor, these SC>2 emission reductions
would lead to fewer PM2.5-related health effects. Because of uncertainty in the magnitude of the
attributable SC>2 reductions and to avoid the appearance of double-counting, we have chosen to
not include these estimates in any of the results tables or graphics in this RIA. If none of the
affected engines would use ULSD without this rule, then we estimate the additional monetized
PM2.5-related health co-benefits would be $720 million to $1.8 billion in 2013 (2008$, 3%
discount rate). This is based on reductions of 31,000 tons of SC>2 emission reductions in the year
2013 that will take place if all affected engines would switch to ULSD for higher-sulfur diesel
fuel (3000 ppm sulfur content) as mentioned in Section 4. If all of the affected engines would
use ULSD regardless of the rule, then the monetized co-benefits from 862 reductions would be
zero. In addition to being a PM2.5 precursor, SC>2 emissions also contribute to adverse effects
from acidic deposition in aquatic and terrestrial ecosystems as well as visibility impairment.
HAP benefits
Due to data, resource, and methodology limitations, we were unable to estimate the
benefits associated with the 1,014 tons of hazardous air pollutants that would be reduced as a
result of this rule. Available emissions data show that several different HAPs are emitted from
stationary engines, either contained within the fuel burned or formed during the combustion
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process.10 Although numerous HAPs may be emitted from diesel stationary RICE, a few HAPs
account for 80% of the total mass of HAPs emissions emitted. These HAPs are formaldehyde
(25%), acetaldehyde (19%), poly cyclic aromatic hydrocarbons (PAHs) (18%), naphthalene (9%),
and acrolein (9%). Other HAPs from diesel stationary RICE represent less than 5% each of the
total mass of HAP emissions, including 1,3-butadiene (4.4%), toluene (3.8%), styrene (3.5%) ,
benzene (2.8%), xylene (2.7%), hexane (1.8%), and ethylbenzene (0.3%). Metallic HAPs from
diesel fired stationary RICE represent less than 0.3% each of total mass of HAP emissions,
including cadmium, lead, nickel, chromium, selenium, and mercury. Below we describe the
health effects associated with the top 5 HAPs by mass emitted from RICE.
Formaldehyde
Since 1987, EPA has classified formaldehyde as a probable human carcinogen based on
evidence in humans and in rats, mice, hamsters, and monkeys.11 EPA is currently reviewing
recently published epidemiological data. For instance, research conducted by the National
Cancer Institute (NCI) found an increased risk of nasopharyngeal cancer and
lymphohematopoietic malignancies such as leukemia among workers exposed to
formaldehyde.12'13 In an analysis of the lymphohematopoietic cancer mortality from an extended
follow-up of these workers, NCI confirmed an association between lymphohematopoietic cancer
risk and peak exposures.14 A recent National Institute of Occupational Safety and Health
(NIOSH) study of garment workers also found increased risk of death due to leukemia among
workers exposed to formaldehyde.15 Extended follow-up of a cohort of British chemical workers
did not find evidence of an increase in nasopharyngeal or lymphohematopoietic cancers, but a
continuing statistically significant excess in lung cancers was reported.16
10 Alpha-Gamma Technologies, Inc. 2004. Memo to U.S. EPA: Development of HAP Emission Factors for Small
(<500 HP) Stationary Reciprocating Internal Combustion Engines (RICE). Attachment A. April 13. Available in
the docket at EPA-HQ-OAR-2005-0030-0009 at www.regulations.gov.
11 U.S. EPA. 1987. Assessment of Health Risks to Garment Workers and CertainHome Residents fromExposure to
Formaldehyde, Office of Pesticides and Toxic Substances, April 1987.
12Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Blair, A. 2003. Mortality from lymphohematopoetic
malignancies among workers in formaldehyde industries. Journal of the National Cancer Institute 95: 1615-
1623.
13Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Blair, A. 2004. Mortality from solid cancers among
workers in formaldehyde industries. American Journal of Epidemiology 159: 1117-1130.
14 Beane Freeman, L. E.; Blair, A.; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Hoover, R. N.; Hauptmann, M. 2009.
Mortality from lymphohematopoietic malignancies among workers in formaldehyde industries: The National
Cancer Institute cohort. J. National Cancer Inst. 101: 751-761.
15 Pinkerton, L. E. 2004. Mortality among a cohort of garment workers exposed to formaldehyde: an update.
Occup. Environ. Med. 61: 193-200.
16 Coggon, D, EC Harris, J Poole, KT Palmer. 2003. Extended follow-up of a cohort of British chemical workers
exposed to formaldehyde. J National Cancer Inst. 95:1608-1615.
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In the past 15 years there has been substantial research on the inhalation dosimetry for
formaldehyde in rodents and primates by the CUT Centers for Health Research (formerly the
Chemical Industry Institute of Toxicology), with a focus on use of rodent data for refinement of
the quantitative cancer dose-response assessment.17'18'19 CIIT's risk assessment of formaldehyde
incorporated mechanistic and dosimetric information on formaldehyde. However, it should be
noted that recent research published by EPA indicates that when two-stage modeling
assumptions are varied, resulting dose-response estimates can vary by several orders of
magnitude.20'21'22'23 These findings are not supportive of interpreting the CUT model results as
providing a conservative (health protective) estimate of human risk.24 EPA research also
examined the contribution of the two-stage modeling for formaldehyde towards characterizing
the relative weights of key events in the mode-of-action of a carcinogen. For example, the
model-based inference in the published CUT study that formaldehyde's direct mutagenic action
is not relevant to the compound's tumorigenicity was found not to hold under variations of
modeling assumptions.25
Based on the developments of the last decade, in 2004, the working group of the IARC
concluded that formaldehyde is carcinogenic to humans (Group 1), on the basis of sufficient
evidence in humans and sufficient evidence in experimental animals - a higher classification than
previous IARC evaluations. After reviewing the currently available epidemiological evidence,
the IARC (2006) characterized the human evidence for formaldehyde carcinogenicity as
"sufficient," based upon the data on nasopharyngeal cancers; the epidemiologic evidence on
17 Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D Kalisak, J Preston, and FJ Miller. 2003. Biologically
motivated computational modeling of formaldehyde carcinogenicity in the F344 rat. Tox Sci 75: 432-447.
18 Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D Kalisak, J Preston, and FJ Miller. 2004. Human respiratory
tract cancer risks of inhaled formaldehyde: Dose-response predictions derived from biologically-motivated
computational modeling of a combined rodent and human dataset. Tox Sci 82: 279-296.
19 Chemical Industry Institute of Toxicology (CUT). 1999. Formaldehyde: Hazard characterization and dose-response
assessment for carcinogenicity by the route of inhalation. CUT, September 28, 1999. Research Triangle Park,
NC.
20 U.S. EPA. Analysis of the Sensitivity and Uncertainty in 2-Stage Clonal Growth Models for Formaldehyde with
Relevance to Other Biologically-Based Dose Response (BBDR) Models. U.S. Environmental Protection Agency,
Washington, D.C., EPA/600/R-08/103, 2008
21 Subramaniam, R; Chen, C; Crump, K; .et .al. (2008) Uncertainties in biologically-based modeling of
formaldehyde-induced cancer risk: identification of key issues. Risk Anal 28(4):907-923.
22 Subramaniam, R; Chen, C; Crump, K; .et .al. (2007). Uncertainties in the CUT 2-stage model for formaldehyde-
induced nasal cancer in the F344 rat: a limited sensitivity analysis-I. Risk Anal 27:1237
23 Crump, K; Chen, C; Fox, J; .et .al. (2008) Sensitivity analysis of biologically motivated model for formaldehyde-
induced respiratory cancer in humans. Ann Occup Hyg 52:481-495.
24 Crump, K; Chen, C; Fox, J; .et .al. (2008) Sensitivity analysis of biologically motivated model for formaldehyde-
induced respiratory cancer in humans. Ann Occup Hyg 52:481-495.
25 Subramaniam, R; Chen, C; Crump, K; .et .al. (2007). Uncertainties in the CUT 2-stage model for formaldehyde-
induced nasal cancer in the F344 rat: a limited sensitivity analysis-I. Risk Anal 27:1237
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leukemia was characterized as "strong."26 EPA is reviewing the recent work cited above from the
NCI and NIOSH, as well as the analysis by the CUT Centers for Health Research and other
studies, as part of a reassessment of the human hazard and dose-response associated with
formaldehyde.
Formaldehyde exposure also causes a range of noncancer health effects, including
irritation of the eyes (burning and watering of the eyes), nose and throat. Effects from repeated
exposure in humans include respiratory tract irritation, chronic bronchitis and nasal epithelial
lesions such as metaplasia and loss of cilia. Animal studies suggest that formaldehyde may also
cause airway inflammation - including eosinophil infiltration into the airways. There are several
studies that suggest that formaldehyde may increase the risk of asthma - particularly in the
young.27'28
Acetaldehyde
Acetaldehyde is classified in EPA's IRIS database as a probable human carcinogen,
based on nasal tumors in rats, and is considered toxic by the inhalation, oral, and intravenous
routes.29 Acetaldehyde is reasonably anticipated to be a human carcinogen by the U.S. DHHS in
the 11th Report on Carcinogens and is classified as possibly carcinogenic to humans (Group 2B)
by the IARC.30'31 EPA is currently conducting a reassessment of cancer risk from inhalation
exposure to acetaldehyde.
The primary noncancer effects of exposure to acetaldehyde vapors include irritation of
the eyes, skin, and respiratory tract.32 In short-term (4 week) rat studies, degeneration of
26 International Agency for Research on Cancer (2006) Formaldehyde, 2-Butoxyethanol and l-tert-Butoxypropan-2-
ol. Monographs Volume 88. World Health Organization, Lyon, France.
27 Agency for Toxic Substances and Disease Registry (ATSDR). 1999. Toxicological profile for Formaldehyde.
Atlanta, GA: U.S. Department of Health and Human Services, Public Health Service.
http://www.atsdr.cdc.gov/toxprofiles/tpl 1 l.html
28 WHO (2002) Concise International Chemical Assessment Document 40: Formaldehyde. Published under the joint
sponsorship of the United Nations Environment Programme, the International Labour Organization, and the
World Health Organization, and produced within the framework of the Inter-Organization Programme for the
Sound Management of Chemicals. Geneva.
29U.S. EPA (1988). Integrated Risk Information System File of Acetaldehyde. Research and Development,
National Center for Environmental Assessment, Washington, DC. This material is available electronically at
http://www.epa.gov/iris/subst/0290.htm.
30 U.S. Department of Health and Human Services National Toxicology Program 11th Report on Carcinogens
available at: http://ntp.niehs.nih.gov/go/16183.
31 International Agency for Research on Cancer (IARC). 1999. Re-evaluation of some organic chemicals, hydrazine,
and hydrogen peroxide. IARC Monographs on the Evaluation of Carcinogenic Risk of Chemical to Humans,
Vol 71. Lyon, France.
32 U.S. EPA (1988). Integrated Risk Information System File of Acetaldehyde. This material is available
electronically at http://www.epa.gov/iris/subst/0290.htm.
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olfactory epithelium was observed at various concentration levels of acetaldehyde exposure.33'34
Data from these studies were used by EPA to develop an inhalation reference concentration.
Some asthmatics have been shown to be a sensitive subpopulation to decrements in functional
expiratory volume (FEV1 test) and bronchoconstriction upon acetaldehyde inhalation.35 The
agency is currently conducting a reassessment of the health hazards from inhalation exposure to
acetaldehyde.
Polycyclic Aromatic Hydrocarbons (PAHs) At least eight PAH compounds are classified
by EPA as probable human carcinogens based on animal data, including acenaphthene36,
benzo(a)anthracene37, benzo(b)fluoranthene38, benzo(k)fluoranthene39, benzo(a)pyrene40,
chrysene41, dibenz(a,h)anthracene42, and indeno(l,2,3-cd)pyrene43. Recent studies have found
that maternal exposures to PAHs in a population of pregnant women were associated with
33 U.S. EPA. 2003. Integrated Risk Information SystemFile of Acrolein. Research and Development, National
Center for Environmental Assessment, Washington, DC. This material is available electronically at
http://www.epa.gov/iris/subst/0364.htm.
34 Appleman, L.M., R.A. Woutersen, and V.J. Feron. (1982). Inhalation toxicity of acetaldehyde in rats. I. Acute and
subacute studies. Toxicology. 23: 293-297.
35 Myou, S.; Fujimura, M; Nishi K.; Ohka, T.; and Matsuda, T. (1993) Aerosolized acetaldehyde induces
histamine-mediated bronchoconstriction in asthmatics. Am. Rev. Respir.Dis. 148(4 Pt 1): 940-943.
36 U.S. EPA (1997). Integrated Risk Information System File of acenaphthene. Research and Development,
National Center for Environmental Assessment, Washington, DC. This material is available electronically at
http://www.epa.gov/ncea/iris/subst/0442.htm.
37 U.S. EPA (1997). Integrated Risk Information System File of benzo(a)anthracene. Research and Development,
National Center for Environmental Assessment, Washington, DC. This material is available electronically at
http://www.epa.gov/ncea/iris/subst/0454.htm.
38 U.S. EPA (1997). Integrated Risk Information System File of benzo(b)fluoranthene. Research and Development,
National Center for Environmental Assessment, Washington, DC. This material is available electronically at
http://www.epa.gov/ncea/iris/subst/0452.htm
39 U.S. EPA (1997). Integrated Risk Information System File of benzo(k)fluoranthene. Research and Development,
National Center for Environmental Assessment, Washington, DC. This material is available electronically at
http://www.epa.gov/ncea/iris/subst/0452.htm.
40 U.S. EPA (1998). Integrated Risk Information System File of benzo(a)pyrene. Research and Development,
National Center for Environmental Assessment, Washington, DC. This material is available electronically at
http://www.epa.gov/ncea/iris/subst/0136.htm.
41U.S. EPA (1997). Integrated Risk Information System File of chrysene. Research and Development, National
Center for Environmental Assessment, Washington, DC. This material is available electronically at
http://www.epa.gov/ncea/iris/subst/0455.htm
42 U.S. EPA (1997). Integrated Risk Information System File of dibenz(a,h)anthracene. Research and
Development, National Center for Environmental Assessment, Washington, DC. This material is available
electronically at http://www.epa.gov/ncea/iris/subst/0456.htm.
43 U.S. EPA (1997). Integrated Risk Information System File of indeno(l,2,3-cd)pyrene. Research and
Development, National Center for Environmental Assessment, Washington, DC. This material is available
electronically at http://www.epa.gov/ncea/iris/subst/0457.htm.
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several adverse birth outcomes, including low birth weight and reduced length at birth, as well as
impaired cognitive development at age three.44'45 EPA has not yet evaluated these recent studies.
Naphthalene
Naphthalene is found in small quantities in gasoline and diesel fuels. Naphthalene
emissions have been measured in larger quantities in both gasoline and diesel exhaust compared
with evaporative emissions from mobile sources, indicating it is primarily a product of
combustion. EPA released an external review draft of a reassessment of the inhalation
carcinogenicity of naphthalene based on a number of recent animal carcinogenicity studies.46
The draft reassessment completed external peer review.47 Based on external peer review
comments received, additional analyses are being undertaken. This external review draft does
not represent official agency opinion and was released solely for the purposes of external peer
review and public comment. The National Toxicology Program listed naphthalene as
"reasonably anticipated to be a human carcinogen" in 2004 on the basis of bioassays reporting
clear evidence of carcinogenicity in rats and some evidence of carcinogenicity in mice.48
California EPA has released a new risk assessment for naphthalene, and the IARC has
reevaluated naphthalene and re-classified it as Group 2B: possibly carcinogenic to humans.49
Naphthalene also causes a number of chronic non-cancer effects in animals, including abnormal
cell changes and growth in respiratory and nasal tissues.50
44 Perera, P.P.; Rauh, V.; Tsai, W-Y.; et al. (2002) Effect of transplacental exposure to environmental pollutants on
birth outcomes in a multiethnic population. Environ Health Perspect. 111: 201 -205.
45 Perera, P.P.; Rauh, V.; Whyatt, R.M.; Tsai, W.Y.; Tang, D.; Diaz, D.; Hoepner, L.; Barr, D.; Tu, Y.H.; Camann,
D.; Kinney, P. (2006) Effect of prenatal exposure to airborne polycyclic aromatic hydrocarbons on
neurodevelopment in the first 3 years of life among inner-city children. Environ Health Perspect 114: 1287-
1292.
46 U. S. EPA. 2004. Toxicological Review of Naphthalene (Reassessment of the Inhalation Cancer Risk),
Environmental Protection Agency, Integrated Risk Information System, Research and Development, National
Center for Environmental Assessment, Washington, DC. This material is available electronically at
http://www.epa.gov/iris/subst/0436.htm.
47 Oak Ridge Institute for Science and Education. (2004). External Peer Review for the IRIS Reassessment of the
Inhalation Carcinogenicity of Naphthalene. August 2004.
http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=84403
48 National Toxicology Program (NTP). (2004). 11th Report on Carcinogens. Public Health Service, U.S.
Department of Health and Human Services, Research Triangle Park, NC. Available from: http://ntp-
server.niehs.nih.gov.
49 International Agency for Research on Cancer (IARC). (2002). Monographs on the Evaluation of the
Carcinogenic Risk of Chemicals for Humans. Vol.82. Lyon, France.
50U. S. EPA. 1998. Toxicological Review of Naphthalene, Environmental Protection Agency, Integrated Risk
Information System, Research and Development, National Center for Environmental Assessment, Washington,
DC. This material is available electronically at http://www.epa.gov/iris/subst/0436.htm
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Acrolein
EPA determined in 2003 that the human carcinogenic potential of acrolein could not be
determined because the available data were inadequate. No information was available on the
carcinogenic effects of acrolein in humans and the animal data provided inadequate evidence of
carcinogen!city.51 The IARC determined in 1995 that acrolein was not classifiable as to its
carcinogenicity in humans.52
Acrolein is extremely acrid and irritating to humans when inhaled, with acute exposure
resulting in upper respiratory tract irritation, mucus hypersecretion and congestion. The intense
irritancy of this carbonyl has been demonstrated during controlled tests in human subjects, who
suffer intolerable eye and nasal mucosal sensory reactions within minutes of exposure.53 These
data and additional studies regarding acute effects of human exposure to acrolein are
summarized in EPA's 2003 IRIS Human Health Assessment for acrolein.54 Evidence available
from studies in humans indicate that levels as low as 0.09 ppm (0.21 mg/m3) for five minutes
may elicit subjective complaints of eye irritation with increasing concentrations leading to more
extensive eye, nose and respiratory symptoms.55 Lesions to the lungs and upper respiratory tract
of rats, rabbits, and hamsters have been observed after subchronic exposure to acrolein.56 Acute
exposure effects in animal studies report bronchial hyper-responsiveness.57 In a recent study, the
acute respiratory irritant effects of exposure to 1.1 ppm acrolein were more pronounced in mice
with allergic airway disease by comparison to non-diseased mice which also showed decreases in
respiratory rate.58 Based on these animal data and demonstration of similar effects in humans
(i.e., reduction in respiratory rate), individuals with compromised respiratory function (e.g.,
emphysema, asthma) are expected to be at increased risk of developing adverse responses to
51 Integrated Risk Information System File of Acrolein. Research and Development, National Center for
Environmental Assessment, Washington, DC. This material is available at http://www.epa.gov/iris/subst/0364.htm
52 International Agency for Research on Cancer (IARC). 1995. Monographs on the evaluation of carcinogenic risk
of chemicals to humans, Volume 63, Dry cleaning, some chlorinated solvents and other industrial chemicals,
World Health Organization, Lyon, France.
53 Sim VM, Pattle RE. Effect of possible smog irritants on human subjects JAMA165: 1980-2010, 1957.
54 U.S. EPA (U.S. Environmental Protection Agency). (2003) Toxicological review of acrolein in support of
summary information on Integrated Risk Information System (IRIS) National Center for Environmental
Assessment, Washington, DC. EPA/635/R-03/003. Available online at: http://www.epa.gov/ncea/iris.
55 Weber-Tschopp, A; Fischer, T; Gierer, R; et al. (1977) Experimented reizwirkungen von Acrolein auf den
Menschen. Int Arch Occup Environ Hlth 40(2): 117-130. In German
56 Integrated Risk Information System File of Acrolein. Office of Research and Development, National Center for
Environmental Assessment, Washington, DC. This material is available at http://www.epa.gov/iris/subst/0364.htm
57 U.S. EPA (U.S. Environmental Protection Agency). (2003) Toxicological review of acrolein in support of summary
information on Integrated Risk Information System (IRIS) National Center for Environmental Assessment,
Washington, DC. EPA/635/R-03/003. Available online at: http://www.epa.gov/ncea/iris.
58 Morris JB, Symanowicz PT, Olsen JE, et al. 2003. Immediate sensory nerve-mediated respiratory responses to
irritants in healthy and allergic airway-diseased mice. J Appl Physiol 94(4):1563-1571.
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strong respiratory irritants such as acrolein.
Other Air Toxics
In addition to the compounds described above, other compounds in gaseous hydrocarbon
and PM emissions from RICE engines would be affected by this rule. Information regarding the
health effects of these compounds can be found in EPA's IRIS database.59
The distance that these HAPs travel away from the emission source depends on several
factors. HAPs such as formaldehyde, acetaldehyde, PAHs, and acrolein are emitted as gases.
Regional photochemical model simulations, examining particular scenarios, have shown that
gaseous HAPs like formaldehyde and acetaldehyde can be transported hundreds of kilometers
from their emissions source in distinct plumes (U.S. EPA, 2010b). Further, these emissions can
contribute to regional airmasses with elevated concentrations of gaseous HAPs. These polluted
airmasses can be transported thousands of kilometers and affect locations well distant from the
original emissions source. Some gaseous HAPs with higher molecular weight, such as toluene,
can transform into particles in the atmosphere. For engines examined in this rule, EPA does not
have enough information to determine the extent of transport specific to the HAPs. In general,
for HAPs emitted as particles, such as metals, the travel distance primarily depends on the size of
the particle and meteorological conditions, such as wind speed and precipitation. Fine particles
can have an atmospheric half-life of days to weeks and travel hundreds to thousands of
kilometers, whereas ultrafine and coarse particles travel less than ten kilometers (U.S. EPA,
2009c).
Carbon monoxide co-benefits
Carbon monoxide (CO) exposure is associated with a variety of health effects. Without
knowing the location of the emission reductions and the resulting ambient concentrations using
fine-scale air quality modeling, we were unable to estimate the exposure to CO for nearby
populations. Due to data limitations, we were unable to estimate the benefits associated with the
14,000 tons reductions in CO emissions that would occur as a result of this rule.
Carbon monoxide in ambient air is formed primarily by the incomplete combustion of
carbon-containing fuels and photochemical reactions in the atmosphere. The amount of CO
emitted from these reactions, relative to carbon dioxide (CO2), is sensitive to conditions in the
combustion zone, such as fuel oxygen content, burn temperature, or mixing time. Upon
59 U.S. EPA Integrated Risk Information System (IRIS) database is available at: http://www.epa.gov/iris
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inhalation, CO diffuses through the respiratory system to the blood, which can cause hypoxia
(reduced oxygen availability). Carbon monoxide can elicit a broad range of effects in multiple
tissues and organ systems that are dependent upon concentration and duration of exposure.
The Integrated Science Assessment for Carbon Monoxide (U.S. EPA, 2010a) concluded
that short-term exposure to CO is "likely to have a causal relationship" with cardiovascular
morbidity, particularly in individuals with coronary heart disease. Epidemiologic studies
associate short-term CO exposure with increased risk of emergency department visits and
hospital admissions. Coronary heart disease includes those who have angina pectoris (cardiac
chest pain), as well as those who have experienced a heart attack. Other subpopulations
potentially at risk include individuals with diseases such as chronic obstructive pulmonary
disease (COPD), anemia, or diabetes, and individuals in very early or late life stages, such as
older adults or the developing young. The evidence is suggestive of a causal relationship from
short-term exposure to CO with respiratory morbidity and mortality, from long-term exposure to
CO with adverse birth outcomes and developmental effects, and from short- and long-term
exposure to CO with central nervous system effects.
Other SO2CO-benefits
In addition to being a precursor to PM2.5, SO2 emissions are also associated with a variety
of respiratory health effects. Unfortunately, we were unable to estimate the health benefits
associated with reduced SO2 exposure in this analysis because we do not have air quality
modeling data available. Without knowing the location of the 31,000 tons of SO2 emission
reductions and the resulting ambient concentrations, we were unable to estimate the exposure to
SO2 for nearby populations. Therefore, this analysis only quantifies and monetizes the PM2.5 co-
benefits associated with those SO2 emissions reductions.
Following an extensive evaluation of health evidence from epidemiologic and laboratory
studies, the U.S. EPA has concluded that there is a causal relationship between respiratory health
effects and short-term exposure to SO2 (U.S. EPA, 2008b). The immediate effect of SO2 on the
respiratory system in humans is bronchoconstriction. Asthmatics are more sensitive to the
effects of SO2 likely resulting from preexisting inflammation associated with this disease. A
clear concentration-response relationship has been demonstrated in laboratory studies following
exposures to SO2 at concentrations between 20 and 100 ppb, both in terms of increasing severity
of effect and percentage of asthmatics adversely affected. The SO2 ISA identified four short-term
morbidity endpoints with a "causal relationship": asthma exacerbation, respiratory-related
emergency department visits, and respiratory-related hospitalizations. The SO2 ISA also
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concluded that the relationship between short-term 862 exposure and premature mortality was
"suggestive of a causal relationship" because it is difficult to attribute the mortality risk effects to
SC>2 alone. Although the 862 ISA stated that studies are generally consistent in reporting a
relationship between SC>2 exposure and mortality, there was a lack of robustness of the observed
associations to adjustment for co-pollutants. The differing evidence and associated strength of
the evidence for these different effects is described in detail in the SC>2 ISA.
SC>2 emissions also contribute to adverse welfare effects from acidic deposition, mercury
methylation, and visibility impairment. Sulfur deposition causes acidification, leading to a loss of
biodiversity of fishes, zooplankton, and macro invertebrates in aquatic ecosystems, as well as a
decline in sensitive tree species, such as red spruce (Picea rubens) and sugar maple (Acer
saccharum) in terrestrial ecosystems. In the northeastern United States, the surface waters
affected by acidification are a source of food for some recreational and subsistence fishermen
and support several cultural services, including aesthetic and educational services and
recreational fishing. Biological effects of acidification in terrestrial ecosystems are generally
linked to aluminum toxicity, which can reduce root growth and restrict the ability of the plant to
take up water and nutrients. These direct effects increase the sensitivity of these plants to
stresses, such as droughts, cold temperatures, insect pests, and disease leading to increased
mortality of canopy trees. Terrestrial acidification affects several important ecological services,
including declines in forest productivity (provisioning), declines in habitat for threatened and
endangered species (cultural), declines in forest aesthetics (cultural), and increases in forest soil
erosion and reductions in water retention (cultural and regulating). (U.S. EPA, 2008c)
Mercury is a highly neurotoxic contaminant that enters the food web as a methylated
compound, methylmercury (U.S. EPA, 2008c). The contaminant is concentrated in higher
trophic levels, including fish eaten by humans. Experimental evidence has established that only
inconsequential amounts of methylmercury can be produced in the absence of sulfate. Current
evidence indicates that in watersheds where mercury is present, increased SOX deposition very
likely results in methylmercury accumulation in fish (Drevnick et al., 2007; Munthe et al, 2007).
The SC>2 ISA concluded that evidence is sufficient to infer a casual relationship between sulfur
deposition and increased mercury methylation in wetlands and aquatic environments.
Reducing SC>2 emissions and the secondary formation of PM2.5 would improve the level
of visibility throughout the United States. Fine particles with significant light-extinction
efficiencies include sulfates, nitrates, organic carbon, elemental carbon, and soil. These
suspended particles and gases degrade visibility by scattering and absorbing light. Higher
visibility impairment levels in the East are due to generally higher concentrations of fine
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particles, particularly sulfates, and higher average relative humidity levels. In fact, paniculate
sulfate is the largest contributor to regional haze in the eastern U.S. (i.e., 40% or more annually
and 75% during summer). In the western U.S., particulate sulfate contributes to 20-50% of
regional haze. Visibility has direct significance to people's enjoyment of daily activities and
their overall sense of wellbeing. Good visibility increases the quality of life where individuals
live and work, and where they engage in recreational activities. (U.S. EPA, 2009c)
7.4 Characterization of Uncertainty in the Monetized Co-benefits
In any complex analysis, there are likely to be many sources of uncertainty. Many inputs
are used to derive the final estimate of economic benefits, including emission inventories, air
quality models (with their associated parameters and inputs), epidemiological estimates of
concentration-response (C-R) functions, estimates of values, population estimates, income
estimates, and estimates of the future state of the world (i.e., regulations, technology, and human
behavior). For some parameters or inputs it may be possible to provide a statistical representation
of the underlying uncertainty distribution. For other parameters or inputs, the necessary
information is not available.
The annual benefit estimates presented in this analysis are also inherently variable due to
the processes that govern pollutant emissions and ambient air quality in a given year. Factors
such as hours of equipment use and weather are constantly variable, regardless of our ability to
measure them accurately. As discussed in the PM2.5 NAAQS RIA (Table 5.5) (U.S. EPA, 2006),
there are a variety of uncertainties associated with these PM co-benefits. Therefore, the estimates
of annual co-benefits should be viewed as representative of the magnitude of co-benefits
expected, rather than the actual benefits that would occur every year.
We performed a couple of sensitivity analyses on the benefits results to assess the
sensitivity of the primary results to various data inputs and assumptions. We then changed each
default input one at a time and recalculated the total monetized co-benefits to assess the percent
change from the default. We present the results of this sensitivity analysis in Table 7-5. We
indicated each input parameter, the value used as the default, and the values for the sensitivity
analyses, and then we provide the total monetary co-benefits for each input and the percent
change from the default value.
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Table 7-5. Sensitivity Analyses for Monetized PM2.s-related Co-benefits (millions of
2008$)
Threshold Assumption (with
Epidemiology Study)
Discount Rate (with
Epidemiology Study)
No Threshold (Pope)
No Threshold (Laden)
Threshold (Pope)
Threshold (Laden)
3% (Pope)
3% (Laden)
7% (Pope)
7% (Laden)
Total PM2 5 Co-
benefits
$1,100
$2,600
$860
$1,900
$1,100
$2,600
$1,000
$2,300
% Change from Default
N/A
N/A
28%
37%
N/A
N/A
10%
11%
Above we present the estimates of the total monetized co-benefits, based on our
interpretation of the best available scientific literature and methods and supported by the SAB-
HES and the NAS (NRC, 2002). The co-benefits estimates are subject to a number of
assumptions and uncertainties. For example, for key assumptions underlying the estimates for
premature mortality, which typically account for at least 90% of the total monetized benefits, we
were able to quantify include the following:
1. PM2.5 co-benefits were derived through benefit per-ton estimates, which do not reflect
local variability in population density, meteorology, exposure, baseline health
incidence rates, or other local factors that might lead to an over-estimate or under-
estimate of the actual benefits of controlling directly emitted fine particulates.
2. We assume that all fine particles, regardless of their chemical composition, are
equally potent in causing premature mortality. This is an important assumption,
because PM2 5 produced via transported precursors emitted from EGUs may differ
significantly from direct PM2.5 released from diesel engines and other industrial
sources, but no clear scientific grounds exist for supporting differential effects
estimates by particle type.
3. We assume that the health impact function for fine particles is linear down to the
lowest air quality levels modeled in this analysis. Thus, the estimates include health
benefits from reducing fine particles in areas with varied concentrations of PM2.5;
including both regions that are in attainment with fine particle standard and those that
do not meet the standard down to the lowest modeled concentrations.
4. To characterize the uncertainty in the relationship between PM2.5 and premature
mortality (which typically accounts for 85% to 95% of total monetized benefits), we
include a set of twelve estimates based on results of the expert elicitation study in
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addition to our core estimates. Even these multiple characterizations omit the
uncertainty in air quality estimates, baseline incidence rates, populations exposed and
transferability of the effect estimate to diverse locations. As a result, the reported
confidence intervals and range of estimates give an incomplete picture about the
overall uncertainty in the PM2.5 estimates. This information should be interpreted
within the context of the larger uncertainty surrounding the entire analysis. For more
information on the uncertainties associated with PM2.5 co-benefits, please consult the
PM2.5NAAQS RIA (Table 5.5).
This RIA does not include the type of detailed uncertainty assessment found in the PM
NAAQS RIA (U.S. EPA, 2006b) because we lack the necessary air quality input and monitoring
data to run the benefits model. Moreover, it was not possible to develop benefit-per-ton metrics
and associated estimates of uncertainty using the benefits estimates from the PM RIA because of
the significant differences between the sources affected in that rule and those regulated here.
However, the results of the Monte Carlo analyses of the health and welfare benefits presented in
Chapter 5 of the PM RIA can provide some evidence of the uncertainty surrounding the co-
benefits results presented in this analysis.
It is important to note that the monetized benefit-per-ton estimates used here reflect
specific geographic patterns of emissions reductions and specific air quality and benefits
modeling assumptions. For example, these estimates do not reflect local variability in population
density, meteorology, exposure, baseline health incidence rates, or other local factors. Use of
these $/ton values to estimate co-benefits associated with different emission control programs
(e.g., for reducing emissions from large stationary sources like EGUs) may lead to higher or
lower benefit estimates than if co-benefits were calculated based on direct air quality modeling.
Great care should be taken in applying these estimates to emission reductions occurring in any
specific location, as these are all based on national or broad regional emission reduction
programs and therefore represent average benefits-per-ton over the entire United States. The
benefits- per-ton for emission reductions in specific locations may be very different than the
estimates presented here.
7.5 Comparison of Benefits and Costs
EPA estimates the range of co-benefits of this final rule to be $940 million to $2.3 billion
(2008$) at a 3% discount rate and $850 million to $2.1 billion at a 7% discount rate in the year of
implementation (2013). The annualized costs are $373 million (2008$) at a 7% interest rate.60
Thus, net benefits are $570 million to $1.9 billion at a 3% discount rate for the benefits and $480
million to $1.7 billion at a 7% discount rate. Figures 7-4 and 7-5 show the full range of net
3°For more information on the annualized costs, please refer to Section 4 of this RIA.
7-23
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benefits estimates (i.e., annual co-benefits minus annualized costs) utilizing the 14 different
PM2.5 mortality functions at discount rates of 3% and 7%. In addition, the benefits from reducing
1,014 tons of hazardous air pollutants each year have not been included in these estimates. EPA
believes that the benefits are likely to exceed the costs under this rulemaking even when taking
into account uncertainties in the cost and benefit estimates.
$2,500
Laden etal.
$2,000
$1,500
$1,000
Popeet al.
$500
$0
I
Cost estimate combined with total monetized benefits estimates derived from 2
epidemiology functions and 12 expert functions
Figure 7-4. Net Benefits for RICE NESHAP at 3% Discount Rate
a Net benefits are quantified in terms of PM2 5 co-benefits for the year of implementation. This graph shows 14 co-
benefits estimates combined with the cost estimate. All combinations are treated as independent and equally
probable. All fine particles are assumed to have equivalent health effects, but the benefit per ton estimates vary
because each ton of precursor reduced has a different propensity to become PM25. The monetized co-benefits
incorporate the conversion from precursor emissions to ambient fine particles.
7-24
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$2,500
$2,000
$1,500
$1,000
$500
$0
-$500
Cost estimate combined with total monetized benefits estimates derived from 2
epidemiology functions and 12 expert functions
Figure 7-5. Net Benefits for RICE NESHAP at 7% Discount Rate"
a Net benefits are quantified in terms of PM2 5 co-benefits for the year of implementation.. This graph shows 14 co-
benefits estimates combined with the cost estimate. All combinations are treated as independent and equally
probable. All fine particles are assumed to have equivalent health effects, but the benefit per ton estimates vary
because each ton of precursor reduced has a different propensity to become PM25. The monetized co-benefits
incorporate the conversion from precursor emissions to ambient fine particles.
7-25
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SECTION 8
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Division
Research Triangle Park, NC
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