Regulatory Impact Analysis (RIA) for
Reconsideration of Existing Stationary Spark
Ignition (SI) RICE NESHAP
                                 Final Report

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                                                                    EPA-452/R-13-002
                                                                         January 2013
Regulatory Impact Analysis for Reconsideration of Existing Stationary Spark Ignition (SI) RICE
                                      NESHAP
                         U.S. Environmental Protection Agency
                      Office of Air Quality Planning and Standards
                       Health and Environmental Impact Division
                    Air Economics Group and Risk and Benefits Group
                              Research Triangle Park, NC
                                         IV

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                                    CONTENTS

Section                                                                         Page

   1    Executive Summary	1-1
       ES. 1  Summary of Impacts for SI RICE NESHAP Reconsideration	1-1
       ES.2  Comparison of Impacts for 2010 Final SI RICE NESHAP and SI RICE NESHAP
       Reconsideration	1-3


   2    Introduction	2-7
        2.1   Organization of this Report	2-7

   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	3-11
             3.2.1   Overview	3-11
             3.2.2   Goods and Services Used	3-11

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          3.2.3   Business Statistics	3-13
          3.2.4   Case Study: Marginal Wells	3-17
     3.3   Pipeline Transportation of Natural Gas	3-18
          3.3.1   Overview	3-18
          3.3.2   Goods and Services Used	3-18
          3.3.3   Business Statistics	3-20

4    Regulatory Alternatives, Costs, and Emission Impacts	4-1
     4.1   Background	4-1
     4.2   Proposed Amendments to SI RICE NESHAP	4-3
          4.2.1   Total Hydrocarbon Compliance (THC) Demonstration Option	4-3
          4.2.2   Emergency Demand Response and Reliability	4-8
          4.2.3   Non-Emergency Stationary SI RICE Greater than 500 HP Located
                 at Area Sources	4-17
          4.2.4   Compliance Date	4-26

     4.3   What Are the Pollutants Regulated by the Rule?	4-26

     4.4   Cost Impacts	4-27
          4.4.1   Introduction	4-27
          4.4.2   Control Cost Methodology	4-28
          4.4.3   Control Cost Equations	4-30
          4.4.4   Summary	4-34
          4.4.5   Caveats and Limitations for Cost Estimates	4-45

     4.5   Baseline Emissions and Emission Reductions	4-46

5    Economic Impact Analysis, Energy Impacts, and Social Costs	5-1
     5.1   Compliance Costs of the Reconsidered Rule	5-1
     5.2   Social Cost Estimate	5-3
     5.3   How Might People and Firms Respond? A Partial Equilibrium Analysis	5-3
          5.3.1   Changes in Market Prices and Quantities	5-4
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          5.3.2  Regulated Markets: The Electric Power Generation, Transmission,
                and Distribution Sector	5-6
          5.3.3  Partial Equilibrium Measures of Social Cost: Changes Consumer
                and Producer Surplus	5-7
     5.4  Energy Impacts	5-8
     5.5  Unfunded Mandates	5-10
          5.5.1  Future and Disproportionate Costs	5-10
          5.5.2  Effects on the National Economy	5-10
     5.6  Environmental Justice	5-11
     5.7  Employment Impact Analysis	5-10
          5.7.1  Employment Impacts from Pollution Control Requirements	5-12
          5.7.2  Employment Impacts within the Regulated Industry	5-16
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    Benefits of Emissions Reductions	7-1
     7.1   Calculation of PM2.5 Human Health Co-Benefits	7-1
     7.2   Unquantified Benefits	7-15
          7.2.1   HAP Benefits	7-15
          7.2.2   Additional NO2 Co-Benefits	7-26
          7.2.3   Ozone Co-Benefits	7-27
          7.2.4   Carbon Monoxide Co-Benefits	7-28
          7.2.5   Visibility Impairment Co-Benefits	7-28

     7.3   Characterization of Uncertainty in the Monetized PM2.5 Co-Benefits	7-28
     7.4   Comparison of Co-Benefits and Costs	7-33
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8    References for RIA	8-1
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                                 LIST OF FIGURES
Number                                                                         Page

   3-1   Industrial Product!on Index (NAICS 2211)	3-3
   3-2   Internal Combustion Generators by State: 2006	3-4
   3-3   2002 Regional Distribution of Establishments: Electric Power Generation,
         Transmission, and Distribution Industry (NAICS 2211)	3-6
   3-4   Industrial Product!on Index (NAICS 211)	3-12
   3-5   2002 Regional Distribution of Establishments: Crude Petroleum and Natural
         Gas Extract!on Industry (NAICS 211111)	3-15
   3-6   2002 Regional Distribution of Establishments: Natural Gas Liquid Extraction
         Industry (NAICS 211112)	3-16
   3-7   Distribution of Establishments within Pipeline Transportation (NAICS 486)	3-19
   3-8   Distribution of Revenue within Pipeline Transportation (NAICS 486)	3-20
   3-9   2002 Regional Distribution of Establishments: Pipeline Transportation (NAICS
         486)	3-22
   3-10  Share of Establishments by Legal Form of Organization in the Pipeline
         Transportation of Natural Gas Industry (NAICS 48621): 2002	3-22

   5-1   Distribution of Engine Population by Horsepower Group	5-2
   5-2   Market Demand and Supply Model: With and Without Regulation	5-5
   5-3   Electricity Restructuring by State	5-8

   6-1   Distribution of Engine Population by Size for All Industries	6-9
   6-2   Distribution of Compliance Costs by Engine Size for All Industries	6-10

   7-1.   Breakdown of Monetized PM2.5 Health Co-Benefits using Mortality Function
         from Pope et al. (2002)	7-10
   7-2.   Total Monetized PM2.5 Co-Benefits for the SI RICE Reconsidered NESHAP in
         2013	7-14
   7-3.   Breakdown of Monetized Co-Benefits for the SI RICE Reconsidered
         NESHAP by Engine Sizee	7-15
   7-4.   Estimated Chronic Census Tract Carcinogenic Risk from HAP exposure from
         outdoor sources (2005 NATA)	7-17
   7-5.   Estimated Chronic Census Tract Noncancer (Respiratory) Risk from HAP
         exposure from outdoor sources (2005 NATA)	7-18
   7-6.   Percentage of Adult Population by Annual Mean PM2.5 Exposure in the
         Baseline  	7-30
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7-7.   Cumulative Distribution of Adult Population at Annual Mean PM2.5 Exposure
      in the Baseline 	7-31
7-8.   Net Benefits for the  SI RICE Reconsidered NESHAP at 3% Discount Rate	7-35
7-9.   Net Benefits for the SI RICE Reconsidered NESHAP at 7% Discount Rate	7-36

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                                   LIST OF TABLES
Number                                                                         Page

   1-1   Summary of the Monetized Co-Benefits, Social Costs, and Net benefits for the
         SI RICE Reconsidered NESHAP in 2013 (millions of 2010$)	1-3
  1-2.   Summary of the Monetized Co-Benefits, Compliance Costs, and Net benefits for the
        2010  Rule with the Amendments to the Stationary SI RICE Engine NESHAP in 2013
        (millions of
        2010$)	1-4
        	1-7
  1-3.   Summary of Estimated Monetized Benefits, Compliance Costs and Net Benefits for the
        2010 Rule with the Amendments to the Stationary SI Engine NESHAP in 2013
        Reconsideration (millions of 2010 dollars)	1-10

   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	3-5
   3-3   Firm Concentration for Electric Power Generation, Transmission, and
         Distribution (NAICS 2211): 2002	3-7
   3-4   United States Retail Electricity Sales Statistics: 2008	3-8
   3-5   FY 2010 Financial Data for 70 U.S. Shareholder-Owned Electric Utilities	3-9
   3-6   Aggregate Tax Data for Accounting Period 7/07-6/08: NAICS 2211 	3-9
   3-7   Key Enterprise Statistics by Receipt Size for Electric Power Generation,
         Transmission, and Distribution (NAICS 2211): 2007	3-10
   3-8   Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111):
         (2007)	3-12
   3-9   Key Statistics: Natural Gas Liquid Extraction (NAICS 211112) (2007)	3-13
   3-10  Direct Requirements for Oil and Gas Extraction (NAICS 211): 2002	3-13
   3-11  Key Enterprise Statistics by Employment Size for Crude Petroleum and
         Natural Gas Extraction (NAICS 211111): 2007	3-17
   3-12  Key Enterprise Statistics by Employment Size for Crude Natural Gas Liquid
         Extraction (NAICS 211112): 2007	3-17
   3-13  Aggregate Tax Data for Accounting Period 7/07-6/08: NAICS 211	3-18
   3-14  Key Statistics: Pipeline Transportation of Natural Gas (NAICS 48621) (2007)	3-19
   3-15  Direct Requirements for Pipeline Transportation (NAICS 486): 2002	3-21
   3-16  Firm Concentration for Pipeline Transportation of Natural Gas (NAICS
         48621): 2002	3-23
   3-17  Aggregate Tax Data for Accounting Period 7/07-6/08: NAIC S 486	3-23
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3-18  Key Enterprise Statistics by Receipt Size for Pipeline Transportation of Natural
      Gas (NAICS 48621): 2007	3-24

4-1   Summary of Annual and Capital Costs Equations for Existing Stationary SI
      Engines	4-34
4-2   Summary of Maj or Source and Area Source Costs for the SI RICE NESHAP	4-35
4-3   Summary of Major Source and Area Source NAICS Costs for the SI RICE
      NESHAP	4-36
4-4   Summary of Major Source and Area Source NAICS Costs for the SI RICE
      NESHAP, by Size	4-37
4-5   Summary of Major Source and Area Source NAICS Costs for the SI RICE
      NESHAP, by Number of Engines	4-41
4-6   Summary of Major Source and Area Source Baseline Emissions for the SI
      RICE NESHAP	4-46
4-7   Emissions Factors	4-47
4-8   Summary of Major Source and Area Source Emissions Reductions for the SI
      RICE NESHAP by 2013	4-47

5-1   Selected Industry-Level Annualized Compliance Costs as a Fraction of Total
      Industry Revenue: 2009	5-3
5-2   Hypothetical Price Increases for a 1% Increase in Unit Costs	5-6
5-3   Hypothetical Consumption Decreases for a 1% Increase in Unit Costs	5-7
5-4   U.S. Electric Power3 Sector Energy Consumption (Quadrillion BTUs): 2013	5-9
5-5   Labor-based Employment Estimates for Reporting and Recordkeeping and Installing,
      Operating, and Maintaining Control Equipment Requirements for Reconsideration SI
      RICE NESHAP	5-15
6-1   NESHAP for Existing Stationary Reciprocating Internal Combustion Engines
      (RICE): Affected Sectors and SBA Small Business Size Standards	6-3
6-2   Average Receipts for Affected Industry by Enterprise: 2007 ($2009
      Million/Establishment)	6-5
6-3   Average Receipts for Affected Industry by Enterprise Receipt Range: 2007
      ($2009/Establishment)	6-6
6-4   Representative Establishment Costs Used for Small Entity Analysis ($2009)	6-8

7-1   Human Health Effects of PM2.5	7-3
7-2.   General Summary of Monetized PM 2.5 -Related Health Co-Benefits Estimates
      for the SI RICE Reconsidered NESHAP in 2013 (millions of 2010$)	7-11
7-3.   Summary of Reductions in Health Incidences from PM2.5 Co-Benefits for the
      SI RICE Reconsidered NESHAP in 2013	7-12
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 7-4.   All Monetized PM2.5 Co-Benefits from PM2.5 Benefits for the SI RICE
       Reconsidered NESHAP in 2013	7-13
7-5.    Summary of the Monetized Benefits, Compliance Costs and Net benefits for the 2010
      Rule with the Amendments to the Stationary CI Engine NESHAP in 2013 (millions of
          2010 dollars)	7-33
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                                      Section 1
                               EXECUTIVE SUMMARY

       ES. 1   Summary of Impacts for the Reconsideration

       This action is a reconsideration of the promulgated NESHAP for existing stationary SI
RICE with a site rating of less than or equal to 500 HP located at major sources, and existing
stationary SI RICE of any site rating located at area sources.

       EPA estimates that complying with the reconsidered  national emission standards for
hazardous air pollutants (NESHAP) for stationary spark-ignition (SI) reciprocating internal
combustion engines  (RICE) will have an annualized cost of approximately $115 million per year
(2009 or 2010 dollars) in the year of full implementation of the rule (2013).  The total annualized
costs of the reconsidered rule are 55% less than those for the final SI RICE NESHAP
promulgated in 2010. 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 rule on small
entities, EPA expects that the NESHAP will not result in a SISNOSE (significant economic
impacts for a  substantial number of small entities), a result consistent with the conclusion for the
final SI RICE NESHAP issued in 2010. 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.

       In the year of full implementation (2013), EPA estimates that the total monetized benefits
of the reconsidered NESHAP are $62 million to $150 million and $55 million to $140 million, at
3% and 7% discount rates, respectively (Table 1-1). All estimates are in 2010 dollars for the year
2013. These estimates reflect the co-benefits from 9,600 tons of NOx emission reductions
associated with implementing the controls to reduce hazardous air pollutants (HAPs) required
under this reconsideration. Using alternate relationships between PM2.5 and premature mortality
supplied by experts,  higher and lower benefits estimates are plausible, but most of the expert-
based estimates fall between these estimates. The benefits from reducing other air pollutants
have not been monetized in this analysis, including reducing  22,200 tons of carbon monoxide
(CO) and 1,800 tons of hazardous air pollutants (HAPs) each year. In addition, ecosystem
benefits and visibility benefits have not been monetized in this analysis. Since the
reconsideration proposal, we have made several updates to the approach we use to estimate
mortality and morbidity benefits in the PM NAAQS RIAs (U.S. EPA, 2012a,b) including
updated epidemiology studies, health endpoints, and population data. Although we have not re-
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estimated the benefits for this rule to apply this new approach, these updates generally offset
each other, and we anticipate that the rounded benefits estimated for this rule are unlikely to be
different than those provided below.

       In the year of full implementation (2013), EPA estimates the net benefits of the NESHAP
are $-53 million to $35 million and $-60 million to $25 million at 3% and 7% discount rates,
respectively (Table 1-1). These estimates are "snapshots" of benefits and costs at year 2013 and
are in 2010 dollars.
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Table 1-1.   Summary of the Annualized Monetized Co-Benefits, Social Costs, and Net
             benefits for the Reconsideration SI RICE NESHAP in 2013 (millions of 2010S)1
                                         3% Discount Rate                7% Discount Rate
Total Monetized Benefits2                $62       to       $150        $55       to        $140
Total Compliance Costs3                           $ 115                           $ 115
Net Benefits                           $-53       to        $35         $-60      to         $25

                                   Health effects from HAP exposure
                                   Health effects from CO NO2, and ozone exposure
Non-monetized Benefits
                                   Ecosystem effects
                                   Visibility impairment
:A11 estimates are for the implementation year (2013), and are rounded to two significant figures.
2 The total monetized co-benefits reflect the human health co-benefits associated with reducing exposure to PM2 5
  through reductions of PM25 precursors such as NOx and VOC. It is important to note that the monetized co-
  benefits include many but not all health effects associated with PM2 5 exposure. It is important to note that the
  monetized benefits include many but not all health effects associated with PM2 5 exposure. Benefits are shown as a range
  from Pope et al. (2002) to Laden et al. (2006). These models assume that all fine particles, regardless of their chemical
  composition, are equally potent in causing premature mortality because there is no clear scientific evidence that would
  support the development of differential effects estimates by particle type. Although we have not re-estimated the
  benefits for this rule to apply the updated methods in the PM NAAQS RIA (U.S. EPA, 2012b), these updates
  generally offset each other, and we anticipate that the rounded benefits estimated for this rule are unlikely to be
  different than those provided here.

3 The annual compliance costs serve as a proxy for the annual social costs of this rule given the lack of difference
  between the two.  The annual compliance costs are calculated using a 7  percent discount rate.
  ES.2 Comparison of Impacts for Final 2010 SI RICE Final Rule and SI RICE NESHAP
  Reconsideration

       The EPA analyzed the costs, economic impacts and benefits of this rule using the
identical methodology as the RIA for the SI RICE final rule promulgated in October, 2010.
Therefore, all changes to the costs, benefits, and economic impacts for this rule are due to
changes (amendments) to this rule for SI RICE, which are fully described  later in this RIA and
the preamble for the rule.  Our baseline does not assume compliance with the 2010 SI RICE final
rule.  This assumption is based on the  fact that full implementation of the final SI RICE rule has
not taken place as of yet (it will take place by October, 2013).  In addition, this assumption is
consistent with the baseline definition applied in the recently finalized ICI boilers and CISWI
NESHAP rulemakings.  Monetized benefits are the co-benefits of this rule from reductions in
directly emitted PM2.5 emissions.
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       The following table shows an approximation of the changes in monetized benefits and
engineering costs due to changes to the SI RICE rule included in the SI RICE reconsideration,
and includes values that show a comparison based on the 2010 final rule emissions inventory.
All values in this table are in 2010 dollars.
Table 1-2. Comparison of Benefits and Costs for 2012 SI RICE Final Rule and 2012
Reconsideration SI RICE Rule

SI RICE Final Rule (May 2010)
Changes due to the amendments to the
final SI RICE rule
Final SI RICE reconsideration rule
(2012)
Monetized Benefits in 2013
$5 10 to $1,200 million
-$448 to $1,050 million
+$62 to $150 million
Annual Engineering Costs in
2013
$253 million
-$138 million
$115 million
* Monetized benefits are shown at a 3% discount rate and are from reductions in PM2 5 emissions.  These benefits do
not include benefits associated with reduced exposure to HAP, visibility impairment, or ecosystem effects.
Monetary estimates are in 2010 dollars.
       The results for the economic impacts fall by more than half from those for the SI final
rule. This outcome is due to the significant reduction in compliance costs associated with the
amendments to the 2010 SI final rule in this rulemaking.  All of these results for this rule are
found in Section 5 in this RIA.

       The results for sales tests (i.e. annual cost/sales analysis) for small businesses also fall
from those calculated for the final SI RICE rule. This outcome is also due to the overall large
reductions in compliance costs.  All of the results for this rule are found in Section 6 in this RIA.

       We estimate changes in employment for this SI RICE rule.  These estimates reflect the
employment impacts associated with installation and operation of monitoring equipment, and
also activities for recordkeeping, reporting, and testing.  We estimate that 200 full-time
equivalents (FTEs) will be required as one-time labor for installation of equipment, and 400
FTEs will be required as ongoing labor for compliance with the rule. The results are presented
and explained in detail in Section 5 of this RIA.  We did not estimate changes in employment
for the 2010 final SI RICE rule.
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       The benefits estimates decreased significantly from those estimated for the 2010 final SI
RICE rule. The range for the 2010 final SI RICE RIA was $510 million (2009$) to $1,200
million (2009$) at 3 percent discount rate. The range for this rule is $62 million (2010$) to $150
million (2010$) at 3 percent discount rate. The range for the 2010 final SI RICE RIA was $460
million (2009$) to $1,100 million (2009$) at 7 percent discount rate.  The range for this rule was
$55 million (2010$) to $140 million (2010$) at 7 percent discount rate.
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       Table 1-5 shows the estimated costs and benefits for the 2010 final SI RICE Rule and the
reconsideration rule. The estimated net benefits for the reconsideration rule are considerably
smaller than the range for the 2010 final SI RICE rule RIA, which was $210  million to $860
million at a 7 percent discount rate and was $250 million to $980 billion at 3  percent.
 Table 1-3. Summary of the Monetized Benefits, Compliance Costs and Net benefits for the
2010 Rule with the Amendments to the Stationary SI Engine NESHAP in 2013 (millions of
                                        2010 dollars)3


Total Monetized Benefits
Total Social Costs
Net Benefits
3%
2010 Final
$510

$250
Discount Rate 7% Discount
Rate
SI RICE NESHAP
to
$253
to
Final Reconsideration SI
Total Monetized Benefits
Total Social Costs
Net Benefits
$62

$-53
to
$115
to
$1,200 $460

$980 $210
RICE NESHAP
$150 $55

$35 $-60
to
$253
to

to
$115
to
$1,100

$860

$140

$25
 All estimates are for the implementation year (2013), and are rounded to two significant figures. All monetized
  benefits are from reductions of PM25 emissions, a co-benefit of thisfinal rule .  Although we have not re-estimated
  the benefits for this rule to apply the updated methods in the PM NAAQS RIA (U.S. EPA, 2012b), these updates
  generally offset each other, and we anticipate that the rounded benefits estimated for this rule are unlikely to be
  different than those provided here.The annual ized compliance costs are $115 million in 2010$ as noted earlier in
  this RIA, and are annualized using a 7% interest rate. Compliance costs are used as an approximation for social
  costs in this RIA.
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                                       Section 2
                                   INTRODUCTION

       EPA is finalizing NESHAP for existing stationary SI RICE 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
horsepower and are located at major sources of hazardous air pollutant emissions. The final
amendments to the SI RICE NESHAP are provided in detail in Section 4 of this RIA.

       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). An analysis of economic impacts, along with an analysis of impacts on
employment, is also included in this RIA. Finally, an analysis of the benefits of the rule is
included in this RIA. It should be noted that the data that supports the analyses listed above have
been updated where possible and appropriate from the data used in the RIA for the SI RICE
NESHAP promulgated in 2010.
2.1    Organization of this Report
       The remainder of this report supports and details the methodology and the results of the
RIA:
          Section 3 presents a profile of the affected industries.
       •   Section 4 presents a summary of regulatory alternatives considered in the final rule,
          and provides the compliance costs of the rule.
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Section 5 describes the estimated costs of the regulation and describes the economic
impact analysis (EIA) methodology and reports market, welfare, energy, and
employment impacts.

Section 6 presents estimated impacts on small entities.

Section 7 presents the benefits and net benefits (benefits- costs) estimates.
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                                         Section 3
                                  INDUSTRY PROFILE

       This section provides an introduction to the industries affected by the rule, i.e., industries
in which the spark-ignition (SI) RICE being regulated are found. SI RICE generate electric
power, pump gas or other fluids, or compress air for machinery. The primary non-utility
application of internal combustion (1C) engines is in the natural gas industry to power
compressors used for pipeline transportation,  field gathering (collecting gas from wells),
underground storage tanks, and in-gas processing plants. RICEs are separated into three design
classes: 2 cycle (stroke) lean burn, 4-stroke lean burn, and 4-stroke rich burn. Each of these has
design differences that affect both baseline emissions as well as the potential for emissions
control.

       These industries include the following:
       •   electric power generation, transmission, and distribution (NAICS 2211),
       •   oil and gas extraction (including marginal wells) (NAICS 211), and
       •   pipeline transportation of natural gas (NAICS 48621).

       While this is not an exhaustive list of the industries affected by this final reconsideration
rule, these three industries incur about 83 percent of the annualized costs of the rule. A full
listing of all industries affected in this rulemaking can be found in Chapter 4. The purpose of this
profile chapter 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.
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 2002 to 2007, revenues from electric power generation grew about 18% to over
$440 billion ($2007) (Table 3-1).1 At the same time, payroll rose about 7% and the number of
1 We provide revenues from electric power generation for the years 2002 and 2007 for these are years of the
   Economic Census. We reference data from these Economic Censuses frequently in this industry profile and
   show revenues from this industry over this time frame due to availability of such data.

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employees decreased by around 4%. The number of establishments rose by about 3%. Industrial
production within NAICS 2211 has increased 26% 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 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)

                                           2002                           2007
 Revenue ($106)                             373,309                        440,355
 Payroll ($106)                              40,842                          43,792
 Employees                                535,675                        515,335
 Establishments                               9,394                          9,642
Source: U.S. Census Bureau; AmericanFactFinder; "Sector 22: EC0722I2: Utilities: Industry Series: Preliminary
  Comparative Statistics for the United States (2002 NAICS Basis): 2007 and 2002." http://factfinder.census.gov
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       115
           cncncncncncncncnoooooooooooooooooooooooo
           cncncncncncncncnoooooooooooooooooooooooo
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 .
  (January 27, 2010).
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
power generation. Extraction, transportation, refining, and equipment requirements potentially
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  Diesel and Natural Gas Internal
  Combustion Generators By State
      ^ No Restructuring
      ^_\ Suspended Restructuring
      | Active Restructurim

               50
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."

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.
3.1.3  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.
                                             3-4

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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
          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.
                                           3-5

-------
       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.
 Establishments by State
      ^ Less than 100
      f 100-199
      | 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 only 2% of retail electricity sold in the
United States in 2008 (Table 3-4). In 2008, investor-owned energy provider companies with less
than 50% of their assets regulated were unprofitable overall, while other companies in this
category were profitable. (Table 3-5). In 2008, enterprises within NAICS 2211 had a pre-tax
profit margin of 8.1% (Table 3-6).

       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.
                                           3-6

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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).
                                              3-7

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       Table 3-4.   United States Retail Electricity Sales Statistics: 2008
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
3
46,985
2,257
2
113
1.33
5.01
Public
62
2,160,220
70,303
67
5,934
69.65
8.44
Federal
1
36
9,625
9
473
5.55
4.91
Cooperative
25
940,697
21,868
21
1,994
23.41
9.12
Facility
1
1
117
0
6
0.07
5.25
Other Providers
Energy
NA
NA
NA
—
NA
—
NA
Delivery
NA
NA
NA
—
NA
—
NA
Total
92
3,147,939
104,170
100
8,520
100
8.18
oo
       Source: U.S. Department of Energy, Energy Information Administration. 2009. "State Electricity Profiles 2008." DOE/EIA-0348(01)/2. p. 260. <
         http://www.eia. doe.gov/cneaf/electricity/st_profiles/sep2008.pdf>.

-------
Table 3-5.  FY 2010 Financial Data for 70 U.S. Shareholder-Owned Electric Utilities

Investor-Owned Utilities
Regulated3
Mostly regulatedb
Diversified0
Profit Margin
4.81%
7.25%
8.50%
-16.78%
Net Income
$27,728
$12,341
$17,815
-$2,429
Operating Revenues
$371,545
$158,657
$175,218
$37,671
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 2010 Financial Update. Quarterly Report of the U.S.
  Shareholder-Owned Electric Utility Industry." .

Table 3-6.   Aggregate Tax Data for Accounting Period 2009: NAICS 2211


 Number of enterprises3                                                     1,187

 Total receipts (103)                                                 $323,522,443

 Net sales(103)                                                     $328,017,143

 Profit margin before tax                                                    3.1 %

 Profit margin after tax                                                      2.0%

a Includes corporations with and without net income.

Source: Internal Revenue Service, U.S. Department of Treasury. 2010. "Corporation Source Book: Data Files 2000-
  2009." ; (May 2, 2010).
                                                3-9

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Table 3-7.   Key Enterprise Statistics by Employee Size for Electric Power Generation, Transmission, and Distribution
             (NAICS 2211): 2007
Variable
Firms
Establishments
Employment
Receipts ($103)
Receipts/firm ($103)
Receipts/establishment
($103)
oo
^ Receipts/employment
0 ($)
<20
All Enterprises Employees
1,687
9,611
503,134
$440,342,284 !
$261,021
$45,817
$875
630
687
3,622
£8,364,773
$13,277
$12,176
$2,309
20-99
Employees
670
1,110
31,455
$21,825,969
$32,576
$19,663
$694
100-499
Employees
251
999
42,527
$41,370,375
$164,822
$41,412
$973
500+
Employees
136
6,815
425,530
$368,781,167
$2,711,626
$54,113
$867
Source: U.S. Census Bureau. 2010. "Firm Size Data from the Statistics of U.S. Businesses: U.S. All Industries Tabulated by Receipt Size: 2007."
  .

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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
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.
(Figure 3-4).

       From 2002 to 2007, revenues from crude petroleum and natural gas extraction (NAICS
211111) grew over 117% to almost $215 billion ($2007) (Table 3-8). At the same time, payroll
grew 55% and the number of employees grew by 48%.  The number of establishments dropped
by over 17%; as a result, the average establishment revenue increased by 162%. Materials costs
were approximately 18% of revenue over the period.

       From 2002 to 2007, revenue from natural gas liquid extraction (NAICS 211112) grew
over 26% to about $42 billion (Table 3-9). At the same time, payroll dropped 18% and the
number of employees dropped by 24%. The number of establishments dropped by 43%, resulting
in an increase of revenue per establishment of about 122%.
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 RICE (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).
                                         3-11

-------
       110
           r--  r--  r-- oo oo  01  01
           0*1  0*1  0*1 0*1 0*1  en  en
           CTl  CT1  CT1 CT1 CT1  CT1  CT1  CT1
                                 fNfNfNfNfNfNfNfNfNfNfNfNfNfNfNfNfNfNfNfNfNfNfNfN
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 .
  (January 27, 2010).

Table 3-8.   Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111):
              ($2007)
                                               2002
                                    2007
 Revenue ($106)

 Payroll ($106)

 Employees

 Establishments
$98,667

 $5,785

 94,886

  7,178
$214,198

  $8,980

 140,160

   5,956
Sources: 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).

U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector21: EC0721I1: Mining:
  Industry Series: Detailed Statistics by Industry for the United States: 2007 " ;
  (April 27, 2010).
                                                3-12

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Table 3-9.   Key Statistics: Natural Gas Liquid Extraction (NAICS 211112) ($2007)
                                             2002                            2007
 Revenue ($106)                             $33,579                          $42,363
 Payroll ($106)                                 $607                            $501
 Employees                                   9,693                           7,343
 Establishments                                 511                             291
Sources: 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).
U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector21: EC0721I1: Mining:
  Industry Series: Detailed Statistics by Industry for the United States: 2007 " ;
  (April 27, 2010).
Table 3-10. Direct Requirements for Oil and Gas Extraction (NAICS 211): 2002
Commodity
V00200
V00100
230301
211000
213112
221100
541300
532400
33291A
541511
Commodity Description
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
Direct Requirements
Coefficients"
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.
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.
                                             3-13

-------
       •   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
          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.

       As of 2007, there were 6,563 firms within the NAICS 211111 code, of which 6427 (98
percent) were considered small businesses (Table 3-11). Within NAICS 211111, large firms
compose about 2 percent of the firms, but account for 59 percent  of employment and generate
about 80 percent of estimated receipts listed under the NAICS. Within NAICS 211112, there
are 139 firms, of which 95 (71 percent) were considered small businesses (Table 3-12).  As
shown in this table, large firms compose 29 percent of the firms, but account for 78 percent of
employment and generate about 95 percent of estimated receipts.

       Enterprises within this  industry generated $193 billion in total receipts in 2008. Including
those enterprises without net income, the industry averaged an after-tax profit margin of 8.5%
(Table 3-13).
                                          3-14

-------
         o
 Establishments by State
       J Less than 100

       ] 100-249

       ] 250-499

       | 500- 1,000

       I 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: 2007." ;
  (January 27, 2010).
                                               3-15

-------
 Establishments by State

     ^^ Less than 5

     ^^D 5"9
     I   h°-"
     ^^| 20 - 40
       • More than 40
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: 2007." ;
  (January 27, 2010).
                                               3-16

-------
Table 3-11. Key Statistics for Crude Petroleum and Natural Gas Extraction (NAICS
             211111): 2007
NAICS
NAICS Description
SBA Size
Standard
Small
Firms
Large Firms   Total Firms
Number of Firms by Firm Size
         Crude Petroleum and Natural Gas Extraction
Total Employment by Firm Size

Estimated Receipts by Firm Size ($1000)
                                  500           6,329            95        6,424

                                               55,622        77,664      133,286

                                           44,965,936   149,141,316   194,107,252
Note: *The counts of small and large firms in NAICS 486210 is based upon firms with less than $7.5 million in
receipts, rather than the $7 million required by the SBA Size Standard.  We used this value because U.S. Census
reports firm counts for firms with receipts less than $7.5 million.  **Employment and receipts could not be split
between small and large businesses because of non-disclosure requirements faced by the U.S. Census Bureau.
Source: U.S. Census Bureau. 2010. "Number of Firms, Number of Establishments, Employment, Annual Payroll,
and Estimated Receipts by Enterprise Receipt Size for the United States, All Industries:  2007."

Table 3-12. Key Statistics for Crude Natural Gas Liquid Extraction (NAICS 211112): 2007
                    NAICS Description
                               SBA Size
                               Standard
              Small
              Firms
          Large Firms   Total Firms
Number of Firms by Firm Size
         Natural Gas Liquid Extraction

Total Employment by Firm Size
                                  500
                   98
                                                                    1,875
                   41
                                                             6,648
                     139
Estimated Receipts by Firm Size ($1000)
                                                                2,164,328    37,813,413    39,977,741
Note: *The counts of small and large firms in NAICS 486210 is based upon firms with less than $7.5 million in
receipts, rather than the $7 million required by the SBA Size Standard.  We used this value because U.S. Census
reports firm counts for firms with receipts less than $7.5 million. **Employment and receipts could not be split
between small and large businesses because of non-disclosure requirements faced by the U.S. Census Bureau.
Source: U.S. Census Bureau. 2010. "Number of Firms, Number of Establishments, Employment, Annual Payroll,
and Estimated Receipts by Enterprise Receipt Size for the United States, All Industries:  2007."

                                               3-17

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Table 3-13. Aggregate Tax Data for Accounting Period 7/07-6/08: NAICS 211

 Number of enterprises3                                               19,441
 Total receipts (103)                                             $193,230,241
 Net sales(103)                                                 $166,989,539
 Profit margin before tax                                              12.9%
 Profit margin after tax                                                8.5%
a Includes corporations with and without net income.
Source: Internal Revenue Service, U.S. Department of Treasury. 2010. "Corporation Source Book: Data Files 2004-
  2007." ; (May 2, 2010).
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  2002 to 2007, natural gas transportation revenues fell by 29% to just over $16
billion ($2007) (Table 3-14). At the same time, payroll decreased by 14%, while the number of
paid employees decreased by nearly 25%. The number of establishments also fell by 8% from
1,701 establishments in 2002 to 1,560 in 2007.
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 60% of NAICS 486
establishments and 66% of revenues (Figures 3-8 and 3-9).
                                          3-18

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Table 3-14.  Key Statistics: Pipeline Transportation of Natural Gas (NAICS 48621) ($2007)
 Year
              2002
 2007
 Revenue ($106)
 Payroll ($106)
 Employees
 Establishments
             16,368
              2,086
             24,519
              1,560
20,797
 2,064
24,683
 1,479
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 48: EC0748I1:
  Transportation and Warehousing: Industry Series: Preliminary Summary Statistics for the United States: 2002 and
  2007." http://factfinder.census.gov (January 27, 2010).
                   4862 Pipeline
                  Transportation of
                     Natural Gas
4869 Other Pipeline         4861 Pipeline
  Transportation      Transportation of Crude
                                Oil
Figure 3-7.   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
  ; (January 27, 2010).
       In Table 3-15, 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 distribution)
represent less than 2% of the value of services.
                                             3-19

-------
                   4862 Pipeline
                 Transportation of
                    Natural Gas
4869 Other Pipeline        4861 Pipeline
  Transportation      Transportation of Crude
                               Oil
Figure 3-8.   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"
  ; (January 27, 2010).
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.

       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 3-16,
the four largest firms accounted for nearly half of the establishments, 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 $11.1 billion in total
receipts in 2008. Including those enterprises without net income, the industry averaged an after-
tax profit margin of 9.6% (Table 3-17).
                                           3-20

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Table 3-15. 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.


       The 2007 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 3-18).
                                           3-21

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        o
 Establishments by State

     |   | Less than 15

     II 15-39

      ^\ 40-79
       | 80- 149

       I More than 150
Figure 3-.     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).
UUVO
cino/
yu /o
ono/
oU/o
vno/
f\J70
cno/
bU/o
cno/
OU/o
Af\0/
4Uyo
ono/
oU/o
ono/
ZUvo
1 0%













86%




















8% ROA

I I
                   Corporations
Individual Proprietorships
Partnerships
Figure 3-10.  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).
                                              3-22

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Table 3-16. 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).

Table 3-17. Aggregate Tax Data for Accounting Period 7/07-6/08: NAICS 486
 Number of enterprises3

 Total receipts (103)

 Net sales (103)

 Profit margin before tax

 Profit margin after tax
       321

$11,062,608

$10,210,083


     13.2%

      9.6%
a Includes corporations with and without net income.

Source: Internal Revenue Service, U.S. Department of Treasury. 2010. "Corporation Source Book: Data Files 2004-
  2007." ; (May 2, 2010).
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Table 3-18.  Key Enterprise Statistics by Employee Size for Pipeline Transportation of Natural Gas (NAICS 48621): 2007
<20
Variable All Enterprises Employees
Firms
Establishments
Employment
Receipts ($103)
Receipts/firm ($103)
Receipts/establishment
($103)
Receipts/employment
($)
126
1.479
24,683
$20,796,681
$165,053
$14,061
$843
63
66
241
N/A
N/A
N/A
N/A
20-99
Employees
12
26
382
$518,341
$43,195
$19,936
$1,357
100-499
Employees
9
70
1,479
$1,448,020
$160,891
$20,686
$979
500+ Employees
42
1,317
22,581
$18,498,143
$440,432
$14,046
$819
Source: U.S. Census Bureau. 2011. Firm Size Data from the Statistics of U.S. Businesses, U.S. All Industries Tabulated by Employee Size: 2007.
  http://www2.census.gov/csd/susb/2007/usalli_r07.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 reconsidered 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.  Costs in this section are in 2009$. Costs in 2010$ presented elsewhere
in the RIA are updated values based on the 2009$ costs presented in this section. Although the
estimates presented are annualized, they should be understood as a "snapshot" in analyzing costs.
Annualized costs are estimated as equal for each year that control equipment is operated.

       This final rule was developed to address certain issues that have been raised by different
stakeholders through lawsuits, several petitions for reconsideration of the 2010 RICE NESHAP
amendments and other communications. After promulgation of the 2010 RICE NESHAP
amendments, the EPA received several petitions for reconsideration, legal challenges, and other
communications raising issues of practical implementability, and certain factual information that
had not been brought to the EPA's attention during the rulemaking. The EPA has considered this
information and believes that amendments to the rule to address certain of these issues are
appropriate. Therefore,  the EPA is finalizing amendments to the national emission standards for
hazardous air pollutants for stationary reciprocating internal combustion engines under section
112 of the Clean Air Act. The final amendments include alternative testing options for certain
large spark  ignition (generally natural gas-fueled) stationary reciprocating internal combustion
engines, management practices for a subset of existing spark ignition stationary reciprocating
internal combustion engines in sparsely populated areas, and alternative and less burdensome
monitoring  and compliance options for the same engines in populated areas. The EPA is also
finalizing revisions to 40 CFR part 60, subparts IIII and JJJJ for consistency with the RICE
NESHAP and to make minor corrections and clarifications. The current regulation applies to
owners and operators of existing and new stationary RICE at major and area sources of HAP
emissions. The applicability of the CI rule remains the same and is not changed by this final rule.
The EPA is also finalizing amendments to the NSPS for stationary engines to conform with
certain amendments finalized for the RICE NESHAP. The full preamble for the final SI RICE
NESHAP and this rule itself can  be reviewed at http://www.epa.gov/ttn/atw/rice/fr20au 10.pdf.

       The EPA is adding an alternative compliance demonstration option for stationary 4-
stroke rich burn (4SRB) spark ignition (SI) engines subject to a 76 percent or more formaldehyde
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reduction requirement. Owners and operators of 4SRB engines will be permitted to demonstrate
compliance with the 76 percent formaldehyde reduction emission standard by testing emissions
of total hydrocarbons (THC) and showing that the engine is achieving at least a 30 percent
reduction of THC emissions. The alternative compliance option provides a less expensive and
less complex, but equally effective, method for demonstrating compliance than testing for
formaldehyde.

       The EPA is finalizing management practices for owners and operators of existing
stationary 4-stroke SI engines above 500 HP that are area sources of HAP emissions and where
the engines are remote from human activity. A remote area is defined as either a Department of
Transportation (DOT) Class 1 pipeline location2, or, if the engine is not on a pipeline, if within a
0.25 mile radius of the facility there are 5 or fewer buildings intended for human occupancy. The
EPA determined that a 0.25 mile radius was appropriate because it is similar to the area used for
the DOT Class 1 pipeline location. This final rule establishes management practices for these
sources rather than numeric emission limits and associated testing and monitoring. This
provision and the division of remote and non-remote engines into two separate subcategories
addresses reasonable concerns with accessibility, infrastructure and staffing that stem from the
remoteness of the engines and higher costs that would be associated with compliance with the
existing requirements. Existing stationary 4-stroke SI engines above 500 HP at area sources that
are in populated areas (defined as not in DOT pipeline Class 1 areas, or if not on a pipeline, if
within a 0.25 mile radius of the engine there are more than 5 buildings intended for human
occupancy) are  subject to an equipment standard that requires the installation of HAP-reducing
aftertreatment. The EPA has the discretion to set an equipment standard as generally available
control technology (GACT) for engines located at area sources of HAP. Sources are required to
test their engines to demonstrate compliance initially, perform catalyst activity check-ups and
either monitor the catalyst inlet temperature continuously or employ high temperature shutdown
devices to protect the catalyst

4.2 Final Amendments to SI RICE NESHAP

4.2.1. Total Hydrocarbon Compliance (THC) Demonstration Option

       Currently, SI 4SRB non-emergency engines greater than 500 HP and located at major
sources and existing SI 4SRB non-emergency engines greater than 500 HP located at area
sources have the option of meeting either a  formaldehyde percent reduction or a formaldehyde
 A Class 1 location is defined as an offshore area or any class location unit that has 10 or fewer buildings intended
   for human occupancy.

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concentration standard. Formaldehyde was established in the original 2004 RICE NESHAP as an
appropriate surrogate for HAP emissions from 4SRB engines based on industry test data
available at that time. Based on testing conducted at Colorado State University (CSU) of
stationary lean burn engines, the EPA was able to establish CO as a surrogate for HAP for lean
burn engines. Rich burn engines were not tested at CSU and the data the EPA had available at
the time that were used to set the standards for rich burn engines did not support the same
relationship between CO and HAP reductions for rich burn engines. Therefore, the EPA was
unable to establish CO as a surrogate for HAP emissions for rich burn engines and the emission
standard for rich burn engines was specified in terms of formaldehyde, the hazardous air
pollutant emitted in the largest quantity from stationary engines.

      The EPA is adding an alternative method of demonstrating compliance with the
NESHAP for existing and new stationary 4SRB non-emergency engines greater than  500 HP that
are located at major sources of HAP emissions. Under these final amendments, the emission
standard remains the same,  that is, existing and new stationary 4SRB  engines greater  than 500
HP and located at major sources are still required to  reduce formaldehyde emissions by 76
percent or more or limit the concentration of formaldehyde in the stationary RICE exhaust to 350
parts per billion by volume, dry basis or less at 15 percent oxygen (02). This final rule adds an
alternative compliance demonstration option to the existing method of demonstrating compliance
with the formaldehyde percent reduction standard. The current method is to test engines for
formaldehyde. The alternative for owners and operators of 4SRB engines meeting a 76 percent
or more formaldehyde reduction is to test their engines for THC showing that the engine is
achieving at least a 30 percent reduction of THC emissions. Including this optional THC
compliance demonstration option reduces the cost of compliance significantly while continuing
to achieve the same level of HAP emission reduction because the emission standards  would
remain the same.

      As discussed in the  June 7, 2012 proposal, data provided to EPA indicate that a strong
relationship exists between percentage reductions of THC and percentage reductions  of
formaldehyde (the surrogate for HAP emissions in the NESHAP) on rich burn engines using
non-selective catalytic reduction (NSCR). Data analyzed by the EPA  indicate that if the NSCR is
reducing THC by at least 30 percent from 4SRB  engines, formaldehyde emissions are guaranteed
to be reduced by at least 76 percent, which is the percentage reduction required for the relevant
engines. Indeed, the percentage reduction of formaldehyde is invariably well above the 76
percent level, and is usually above 90 percent. Therefore, the EPA concluded that for SI 4SRB
engines using NSCR and meeting the NESHAP by showing a percentage reduction of HAP, it
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would be appropriate to allow sources to demonstrate compliance with the NESHAP by showing
a THC reduction of at least 30 percent. Owners and operators of existing stationary 4SRB
engines less than or equal to 500 HP that are required to limit the concentration of formaldehyde
in the stationary RICE exhaust to 10.3 parts per million by volume, dry basis (ppmvd) or less at
15 percent C>2 do not have the option to demonstrate compliance using THC and must continue to
demonstrate compliance by testing for formaldehyde following the methods and procedures
specified in the rule because the EPA could not verify a clear relationship between
concentrations of THC and concentrations of formaldehyde in the exhaust from these SI 4SRB
engines.

      Owners and operators opting to use the THC compliance demonstration method must
demonstrate compliance by showing that the average reduction of THC is equal to or greater
than 30 percent. Owners and operators of 4SRB stationary RICE complying with the requirement
to reduce formaldehyde emissions and demonstrating compliance by using the THC compliance
demonstration option must conduct performance testing using Method 25 A of 40 CFR part 60,
appendix A - Determination of Total Gaseous Organic Concentration Using a Flame lonization
Analyzer. Measurements of THC at the inlet and the outlet of the NSCR must be on a dry basis
and corrected to 15 percent O2 or equivalent carbon dioxide content. To correct to 15 percent O2,
dry basis, owners and  operators must measure oxygen using Method 3, 3 A or 3B of 40  CFR part
60, appendix A, or ASTM Method D6522-00 (2005) and measure moisture using Method 4 of 40
CFR part 60, appendix A, or Test Method 320 of 40 CFR part 63, appendix A, or ASTM D6348-
03. Because owners and operators are complying with a percent reduction requirement, the
method used must be suitable for the  entire range of emissions since pre and post-catalyst
emissions must be  measured. Method 25 A is capable of measuring emissions  down to 5 ppmv
and is, therefore, an appropriate method for measuring THC emissions for compliance
demonstration purposes. The EPA is allowing sources the option to meet a minimum THC
percent reduction of 30 percent by using Method 25A of 40 CFR part 60, appendix A to
demonstrate compliance with the formaldehyde percent reduction in 40 CFR part 63, subpart
zzzz.
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4.2.2. Emergency Demand Response and Reliability
       The EPA is finalizing certain revisions to the proposal regarding use of existing engines
for emergency demand response and system reliability. Following is a summary of the prior
requirements for these engines, including those in the 2010 regulation, a discussion of the
information and input the EPA received in response to the proposal, and a description of the
provisions being finalized in this action.

       Existing emergency engines less than or equal to 500 HP located at major sources of
HAP and existing emergency engines located at area sources of HAP were not regulated under
the RICE NESHAP rulemakings finalized in 2004 and 2008. They could operate uncontrolled for
an unlimited amount of time. The 2010 RICE NESHAP rulemaking for the first time established
requirements for these existing emergency engines, requiring affected engines to comply by May
3, 2013, for stationary CI RICE and October 19, 2013, for stationary SI RICE. Under the RICE
NESHAP requirements originally finalized in 2010, these existing emergency stationary engines
must limit operation to situations like blackouts and floods and to a maximum of 100 hours per
year for other specified operations beginning with the applicable compliance date in 2013 for the
engine. The limitation of 100 hours per year included maintenance checks and readiness testing
of the engine, as well as a limit of 15 hours per year for use as part of a demand response
program if the regional transmission organization or equivalent balancing authority and
transmission operator has determined there are emergency conditions that could lead to a
potential electrical blackout, such as unusually low frequency, equipment overload, capacity or
energy deficiency, or unacceptable voltage level. Under the 2010 regulation, existing emergency
engines were required to meet management practice standards based on proper operation and
maintenance of the engine; meeting these standards would not require installation of
aftertreatment to control  emissions.

       Soon after the 2010 rule was final, the EPA received petitions for reconsideration of the
15-hour limitation for emergency demand response that was finalized in the 2010 rule.
According to one petition, the 15-hour limit, while usually adequate to cover the limited hours in
which these engines are expected to be called upon, would not be sufficient to allow these
emergency engines to participate in emergency demand response programs since some regional
transmission organizations and independent system operators require engines be available for
more than 15 hours in order to meet emergency demand response situations. For example, PJM's
Emergency Load Response Program requires that emergency engines guarantee that they will be
available for 60 hours per year. By contrast, another petition  asked EPA to eliminate the
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emergency demand response provision because of the adverse effects that the petitioner believes
would result from increased emissions from these engines. The EPA received other comments
that addressed the types of situations in which engines are called upon for emergency demand
response and system reliability.

       The EPA believes that the emergency demand response programs that exist across the
country are important programs that protect the reliability and stability of the national electric
service grid. The use of stationary emergency engines as part of emergency demand response
programs can help prevent grid failure or blackouts, by allowing these engines to be used for
limited hours in specific circumstances of grid instability prior to the occurrence of blackouts. A
standard that requires owners and operators of stationary emergency engines that participate in
emergency demand response programs to apply aftertreatment could make it economically
infeasible for these engines to participate in these programs, impairing the ability of regional
transmission organizations and independent system operators to use these relatively small, quick-
starting and reliable sources of energy to protect the reliability of their systems in times of
critical need. Information provided by commenters on the proposal indicates that these
emergency demand response events are rarely called.3

       The limited circumstances specified in the final rule for operation of stationary
emergency engines for emergency demand response purposes include periods during which the
Reliability  Coordinator, or other authorized entity as determined by the Reliability Coordinator,
has declared an Energy Emergency Alert (EEA) Level 2 as defined in the North American
Electric Reliability Corporation (NERC) Reliability Standard EOP-002-3, Capacity and Energy
Emergency, and during periods where there is a deviation of voltage or frequency of 5 percent or
more below standard voltage or frequency. During EEA Level 2 alerts there is insufficient
energy supply and a true potential for electrical blackouts. System operators must call on all
available resources during EEA Level 2 alerts in order to stabilize the grid to prevent failure.
Therefore, this situation is a good indicator of severe instability on the system, which the EPA
believes is  appropriately considered an emergency situation. Consistent normal voltage provided
by the utility is often called power quality and is an important factor in local electric system
reliability. Reliability of the system requires electricity being provided at a normal expected
voltage. The American National Standards Institute standard C84.1-1989 defines the maximum
allowable voltage sag at below 5 percent. On the local distribution level local voltage levels are
therefore important and a 5 percent or more change in the normal voltage or frequency is
1 See document number EPA-HQ-OAR-2008-0708-1142 in the rulemaking docket.

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substantial and an indication that additional resources are needed to ensure local distribution
system reliability.

       In addition to the circumstances described above, the EPA also received comments on
other situations where the local transmission and distribution system operator has determined
that there are conditions that could lead to a blackout for the local area where the ready
availability of emergency engines is critical to system reliability. These include situations where:

   •  The engine is dispatched by the local balancing authority or local transmission and
       distribution system operator.

   •  The dispatch is intended to mitigate local transmission and/or distribution limitations so
       as to avert potential voltage collapse or line overloads that could lead to the interruption
       of power supply in a local area or region.
   •  The dispatch follows reliability, emergency operation or similar protocols that follow
       specific NERC, regional, state, public utility commission or local standards or guidelines.

The EPA believes the operation of emergency engines in these situations should be addressed in
the final rule as well.

       Therefore, based on the EPA's review of the petitions and comments that the EPA has
received  with respect to emergency demand response and system reliability, the EPA has
concluded that it is appropriate to revise the proposed provisions for stationary engines used in
these limited circumstances. The provisions the EPA is amending are in §§63.6640(f) and
63.6675 of 40 CFR part 63, subpart ZZZZ. The final amendments to those sections specify that
owners and operators of stationary emergency RICE can operate their engines as part of an
emergency demand response program within  the 100 hours provided in the proposed rule for
non-emergency operation. Owners and operators of stationary emergency  engines can operate for
up to 100 hours per year for emergency demand response and system reliability during periods in
which the Reliability Coordinator, or other authorized entity as determined by the Reliability
Coordinator, has declared an EEA Level 2 as  defined in the NERC Reliability Standard EOP-
002-3, Capacity and Energy Emergency, and  during periods where there is a deviation of voltage
or frequency of 5 percent or greater below standard voltage or frequency. In addition, existing
emergency stationary RICE at area sources of HAP can operate for up to 50 hours per year if all
of the following conditions are met:

   •  The engine is dispatched by the local balancing authority or local transmission and
       distribution system operator.

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The dispatch is intended to mitigate local transmission and/or distribution limitations so
as to avert potential voltage collapse or line overloads that could lead to the interruption
of power supply in a local area or region.
The dispatch follows reliability, emergency operation or similar protocols that follow
specific NERC, regional, state, public utility commission or local standards or guidelines.
The owner or operator has a pre-existing plan that contemplates the engine's operation
under the circumstances described above; and
The owner or operator identifies and records the specific NERC, regional, state, public
utility commission or local standards or guidelines that are being followed for dispatching
the engine. The local balancing authority or local transmission and distribution system
operator may keep these records on behalf of the engine owner or operator.
For all engines operating to satisfy emergency demand response or system reliability
under the circumstances described above, the hours spent for emergency demand
response operation and local system reliability are added to the hours spent for
maintenance and testing purposes and are counted towards the limit of 100 hours per
year. If the total time spent for maintenance and testing, emergency demand response,
and system reliability operation exceeds 100 hours per year, the engine will not be
considered an emergency engine under this subpart and will need to meet all
requirements for non-emergency engines.

       As noted  above, the  EPA received comments  expressing concerns about the
emissions from emergency engines, noting that the engines are likely to be dispatched on
days when energy demand is high, which often coincides with days when air quality is
poor. While  the EPA is sensitive to these concerns, the availability of these engines for a
more tailored response to emergencies may be preferable in terms of air quality impacts
than relying  on other generation, including coal-fired spinning reserve generation. After
consideration of the concerns raised in the comments, the EPA is finalizing  provisions
that require stationary  emergency CI RICE with a site rating of more than 100 brake HP
and a displacement of less than 30 liters per cylinder that operate or are contractually
obligated to  be available for more than 15 hours per year (up to a maximum of 100 hours
per year) for emergency demand response, or that operate for local system reliability, to
use diesel fuel meeting the specifications of 40 CFR 80.510(b) beginning January 1,
2015, except that any existing diesel fuel purchased (or otherwise obtained) prior to
January 1, 2015,  may be used until depleted. The specifications of 40 CFR 80.510(b)
require 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; this fuel is
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       referred to as "ultra low sulfur diesel fuel" (ULSD). This emission reduction requirement
       was not part of the original 2010 rulemaking. Although the EPA does not have
       information specifying the percentage of existing stationary emergency CI engines
       currently using residual fuel oil or non-ULSD distillate fuel, the most recent U.S. Energy
       Information Administration data available for sales of distillate and residual fuel oil to
       end users4 show that significant amounts of non-ULSD are still being purchased by end
       users that typically operate stationary combustion sources, including stationary
       emergency CI  engines. For example, in the category of Commercial End Use, sales data
       for the year 2010 show that only 45 percent of the total distillate and residual fuel oil sold
       was ULSD. The data provided for Electric Power End Use show that 68 percent of total
       fuel sold was residual fuel oil. For Industrial End Use, the percentage of total fuel that
       was residual fuel oil was 20 percent. The EPA believes that requiring cleaner fuel for
       these stationary emergency CI engines will significantly limit or reduce the emissions of
       regulated air pollutants emitted from these engines, further protecting public health and
       the environment. Information provided to EPA by commenters5 showed that the use of
       ULSD will significantly reduce emissions of air toxics, including metallic HAP (e.g.,
       nickel, zinc, lead) and benzene.

       In addition to the fuel requirement, owners and operators of stationary emergency CI
RICE larger than 100 HP that operate or are contractually obligated to be available for more than
15 hours per year (up to a maximum of 100 hours per year) for emergency demand response
must report the dates and times the engines operate for emergency demand response annually to
the EPA, beginning with operation during the 2015 calendar year. Owners and operators of these
engines are also required to report the dates, times and situations that the engines operate to
mitigate local transmission and/or distribution limitations annually to the EPA, beginning with
operation during the 2015  calendar year. This information is necessary to determine whether
these engines are operating in compliance with the regulations  and will assist the EPA in
assessing the impacts of the emissions from these engines.

       The EPA is adding these requirements beginning in January, 2015, rather than upon
initial implementation of the NESHAP for existing engines in May or October of 2013, to
provide sources with appropriate lead time to institute these new requirements and make any
physical adjustments to engines and other facilities like tanks or other containment structures, as
4
 U.S. Energy Information Administration. Distillate Fuel Oil and Kerosene Sales by End Use. Available at
   http://www.eia. gov/dnav/pet/pet_cons_821use_dcu_nus_a. htm.
5 See document number EPA-HQ-OAR-2008-0708-1459 in the rulemaking docket.
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well as any needed adjustments to contracts and other business activities, that may be
necessitated by these new requirements.

       The EPA is also amending the NSPS for stationary CI and SI engines in 40 CFR part 60,
subparts IIII and JJJJ, respectively, to provide the same limitation for stationary emergency
engines for emergency demand response and system reliability operation as for engines subject
to the RICE NESHAP. The NSPS regulations currently do not include such a provision for
emergency demand response or system reliability operation; the issue was not raised during the
original promulgation of the NSPS. The EPA is adding an emergency demand response and
system reliability provision under the NSPS regulations in these final amendments. The EPA is
revising the existing language in  §§60.421 l(f) and 60.4219 of 40 CFR part 60, subpart IIII, and
§§60.4243(d) and 60.4248 of 40  CFR part 60, subpart JJJJ, to specify that emergency engines
must limit operation for engine maintenance and testing and emergency demand response to a
maximum of 100 hours per year; 50 of the 100 hours may be used to operate to mitigate local
reliability issues, as discussed previously for the RICE NESHAP.

       The EPA is also finalizing amendments to the NSPS regulations that require owners and
operators of stationary emergency engines larger than 100 HP that operate or are contractually
obligated to be available for more than 15 hours per year (up to a maximum of 100 hours per
year) for emergency demand response to report the dates and times the engines operated for
emergency demand response annually to the EPA, beginning with operation during the 2015
calendar year. Owners and operators of these engines are also required to report the dates, times
and situations that the engines  operate to mitigate local  transmission and/or distribution
limitations annually to the EPA, beginning with operation during the 2015 calendar year.
Emergency engines subject to 40 CFR part 60, subpart IIII are already required by subpart IIII to
use diesel fuel that meets the requirements of 40 CFR 80.510(b).

       The 2010 regulation specified that existing emergency engines at area sources of HAP
that are residential, commercial, or institutional facilities were not subject to the RICE NESHAP
requirements as long as the engines were limited to no more than 15 hours per year for
emergency demand response. The EPA is specifying in the final rule that existing emergency
engines at area sources of HAP that are residential, commercial, or institutional facilities are
subject to the  applicable requirements  for stationary emergency engines in the RICE NESHAP if
they operate or are contractually  obligated to be available for more than 15 hours per year (up to
a maximum of 100 hours per year) for emergency demand response, or they operate to mitigate
local transmission and/or distribution limitations. Information provided by commenters on the
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2010 regulation and the amendments proposed in June 2012 indicates that these engines typically
operate less than 15 hours per year for emergency demand response.

      For stationary emergency engines above 500 HP at major sources of HAP that were
installed before June 12, 2006, prior to these final amendments, there was no emergency demand
response provision and there was no time limit on the use of emergency engines for routine
testing and maintenance in §63.6640(f)(2)(ii). Those engines were not the focus of the 2010
RICE NESHAP amendments; therefore, the EPA did not make any changes to the requirements
for those engines as part of the 2010 amendments. For consistency, the EPA is now also revising
40 CFR part 63, subpart ZZZZ to require owners and operators of stationary emergency engines
above 500 HP at major sources of HAP installed prior to June 12, 2006, to limit operation of
their engines for maintenance and testing and emergency demand response program to a total of
100 hours  per year. These engines would also be required to use diesel  fuel meeting the
specifications of 40 CFR 80.510(b) beginning January 1, 2015, however,  if the engine operates
or is contractually obligated to be available for more than 15 hours per  year. Any  existing diesel
fuel purchased  (or otherwise obtained) prior to January 1, 2015 may be used until depleted. In
addition to the  fuel requirement, owners and operators of these engines must report  the dates and
times the engines operate for emergency demand response annually to the EPA, beginning with
operation during the 2015 calendar year.

      More detail regarding the public comments regarding emergency demand  response and
the EPA's responses can be found in the Response to Public Comments document available in
the rulemaking docket.
4.2.3  Amendment - Non-Emergency Stationary SI RICE Greater than 500 HP Located at Area
Sources
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       The EPA is finalizing amendments to the requirements that apply to existing stationary
non-emergency 4-stroke SI RICE greater than 500 HP located at area sources of HAP emissions,
which are generally natural gas fired engines.

       The EPA is creating a subcategory for existing spark ignition engines located in sparsely
populated areas. Engines located in remote areas that are not close to significant human activity
may be difficult to access,  may not have electricity or communications, and may be unmanned
most of the time. The costs of the emission controls, testing, and continuous monitoring
requirements may be unreasonable when compared to the HAP emission reductions that would
be achieved, considering that the engines are in sparsely populated areas. Moreover, the location
of these engines is such that there would be limited public exposure to the emissions. The EPA
believes that establishing a subcategory for SI engines at area sources of HAP located in sparsely
populated areas accomplishes the agency's goals and is adequate in protecting public health. The
EPA is creating this subcategory using criteria based on the existing DOT classification system
for natural gas pipelines. This system classifies  locations based on their distance to natural gas
pipelines covered by the Pipeline and Hazardous Materials Safety Administration regulations.
The DOT system defines a class location unit as an onshore area that extends 220 yards or 200
meters on either side of the centerline of any continuous 1-mile (1.6 kilometers) length of natural
gas pipeline. The DOT approach further classifies pipeline locations into Class  1 through Class 4
locations based on the number of buildings intended for human occupancy. A Class 1 location is
defined as an offshore area or any  class location unit that has 10 or fewer buildings intended for
human occupancy. The DOT classification system also has special provisions for locations
where buildings with four or more stories above ground are prevalent and locations that lie
within 100 yards (91 meters) of either a building or a small, well-defined outside area (such as a
playground, recreation area, outdoor theater, or other place of public assembly)  that is occupied
by 20 or more  persons on at least 5 days a week for 10 weeks in any 12-month period. To be
considered remote under this final rule, a source on a pipeline could not fall under these special
provisions and, in addition, must be in a Class 1 location.  For those engines not associated with
pipelines, the EPA is using similar criteria. An engine would be considered to be in sparsely
populated areas if within 0.25 mile radius of the engine there are 5 or fewer buildings intended
for human occupancy.

       Owners and operators of existing  stationary non-emergency 4-stroke lean burn (4SLB)
and 4SRB RICE greater than 500 HP at area sources that are in sparsely populated areas as
described above would be required to perform the following:

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    •   Change oil and filter every 2,160 hours of operation or annually, whichever comes first;
    •   Inspect spark plugs every 2,160 hours of operation or annually, whichever comes first,
       and replace as necessary; and
    •   Inspect all hoses and belts every 2,160 hours of operation or annually, whichever comes
       first, and replace as necessary.

Sources have the option to use an oil analysis program as described in §63.6625(i) of the rule in
order to extend the specified oil change requirement. The oil analysis must be performed at the
same frequency specified for changing the oil in Table 2d of the rule. The analysis program must
at a minimum analyze the following three parameters: Total Acid Number, viscosity, and percent
water content. The  condemning limits for these parameters are as follows: Total Acid Number
increases by more than  3.0 milligrams of potassium hydroxide per gram from Total Acid
Number of the oil when new; 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. If none of
these condemning limits are exceeded, the engine owner or operator is not required to change the
oil. If any of the limits are exceeded, the engine owner or operator must change the oil within 2
business days of receiving the results of the analysis; if the engine is not in operation when the
results of the analysis are received, the engine owner or operator must change the oil within 2
business days or before commencing operation, whichever is later.  The owner or operator must
keep records of the parameters that are analyzed as part of the program, the results of the
analysis, and the oil changes for the engine. The analysis program must be part of the
maintenance plan for the engine.

       Owners and operators of existing stationary 4SLB and 4SRB area source engines above
500 HP in sparsely populated areas would also have to operate and maintain the stationary RICE
and aftertreatment control device (if any) according to the manufacturer's emission-related
written instructions or develop their own maintenance plan, which must provide to the extent
practicable for the maintenance and operation of the engine in a manner consistent with good air
pollution control practice for minimizing emissions.

       Owners and operators of engines in sparsely populated areas would have to conduct a
review of the surrounding area every 12 months to determine if the nearby population has
changed. If the engine no longer meets the criteria for a sparsely populated area, the owner and
operator must within 1 year comply with the emission standards specified below for populated
areas.
                                          4-13

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       For engines in populated areas, i.e., existing stationary 4SLB and 4SRB non-emergency
engines greater than 500 HP at area sources that are located on DOT Class 2 through Class 4
pipeline segments or, for engines not associated with pipelines, that do not meet the 0.25 mile
radius with 5 or less buildings criteria, the EPA is adopting an equipment standard requiring the
installation of a catalyst to reduce HAP emissions. Owners and operators of existing area source
4SLB non-emergency engines greater than 500 HP in populated areas would be required to
install an oxidation catalyst. Owners and operators of existing area source 4SRB non-emergency
engines greater than 500 HP in populated areas would be required to install NSCR. Owners and
operators must conduct an initial test to demonstrate that the engine achieves at least a 93 percent
reduction in CO emissions or a CO concentration level of 47 ppmvd at 15 percent ©2, if the
engine is a 4SLB engine. Similarly, owners and operators must conduct  an initial performance
test to demonstrate that the engine achieves at least either a 75 percent CO reduction, a 30
percent THC reduction, or a CO concentration level of 270 ppmvd at 15 percent ©2 if the engine
is a 4SRB engine. The initial test must consist of three test runs. Each test run must be of at least
15 minute duration, except that each test run conducted using appendix A to 40 CFR part 63,
subpart ZZZZ must consist of one measurement cycle as defined by the method and include at
least 2 minutes of test data phase measurement. To measure CO, emission sources must use the
CO methods already specified in subpart ZZZZ, or appendix A to 40 CFR part 63, subpart
ZZZZ. The THC testing must be conducted using EPA Method 25A.

       The owner or operator of both engine types must also use a high  temperature shutdown
device that detects if the catalyst inlet temperature is too high, or, alternatively, the owner or
operator can monitor the catalyst inlet temperature continuously and maintain the temperature
within the range specified in the rule. For 4SLB engines the catalyst inlet temperature must
remain at or above 450°F and at or below 1,350°F. For 4SRB engines the temperature must be
greater than or equal to 750°F and less than or equal to 1,250°F at the catalyst inlet.

       Owners and operators must in addition to the initial performance test conduct annual
checks of the catalyst to ensure proper catalyst activity.  The annual check of the catalyst must at
a minimum consist of one 15-minute run using the methods discussed above, except that each
test run conducted using appendix A to 40 CFR part 63,  subpart ZZZZ must consist of one
measurement cycle as defined by the method and  include at least 2 minutes of test data phase
measurement. Owners and operators of 4SLB engines must demonstrate during the catalyst
activity test that the catalyst achieves at least a 93 percent reduction in CO emissions or that the
engine exhaust CO emissions are no more than 47 ppmvd at 15 percent ©2. Owners and
operators of 4SRB engines must demonstrate during the catalyst activity check that their catalyst
                                         4-14

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is reducing CO emissions by 75 percent or more, the CO concentration level at the engine
exhaust is less than or equal to 270 ppmvd at 15 percent 62, or THC emissions are being reduced
by at least 30 percent.

       If the emissions from the engine do not exceed the levels required for the initial test or
annual checks of the catalyst, then the catalyst is considered to be working properly. If the
emissions exceed the specified pollutant levels in the rule, the exceedance(s) is/are not
considered a violation, but the owner or operator would be required to shut down the engine and
take appropriate corrective action (e.g., repairs, clean or replace the catalyst, as appropriate). A
follow-up test must be conducted within 7 days of the engine being started up again to
demonstrate that the emission levels are being met. If the retest shows that the emissions
continue to exceed the specified levels, the stationary RICE must again be shut down as soon as
safely possible, and the engine may not operate, except for purposes of start-up and testing, until
the owner/operator demonstrates through testing that the emissions do not exceed the levels
specified.
       4.2.4   Compliance Date

       The EPA has received some questions regarding whether the compliance dates for
engines impacted by the 2010 amendments and this reconsideration will be extended. Affected
sources that may be impacted by this action have expressed concern about having sufficient time
to comply with the rule by the compliance date, which is May 3, 2013, for existing stationary CI
RICE and October 19, 2013, for existing stationary SI RICE. Sources impacted by this
reconsideration are particularly concerned with compliance in the event that the EPA does not
finalize changes that are substantially similar to the changes included in this action.  The EPA
does not intend to extend the May 3, 2013, and October 19, 2013, compliance dates, because
there are many engines that must  meet those compliance dates that are not impacted by this
reconsideration. However, we note that sources that are affected by the reconsideration and that
may need  additional time to install controls to comply with the applicable requirements can
request up to an additional year to install controls, as specified in 40 CFR 63.6(i).
                                          4-15

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4.3    What Are the Pollutants Regulated by the Rule?
       The reconsideration 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 SI stationary RICE include: formaldehyde, acetaldehyde,
acrolein, methanol, benzene, toluene, 1,3-butadiene, 2,2,4-trimethylpentane, hexane, xylene,
naphthalene, PAH, methylene chloride, and ethylbenzene. 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.

       For the standards included in this action, EPA believes that previous determinations
regarding the appropriateness of using formaldehyde and carbon monoxide (CO) both in
concentration (parts per million (ppm)) levels as surrogates for HAP for stationary RICE are still
valid. Consequently, EPA is promulgating CO or formaldehyde standards in order to regulate
HAP emissions.

       In  addition to reducing HAP, the emission control technologies that will be installed on
stationary RICE to reduce HAP will also reduce CO and VOC, and for rich burn engines will
also reduce NOx.
4.4     Cost Impacts
4.4.1   Introduction
       EPA has determined that oxidation catalysts for two-stroke lean burn (2SLB) and four-
stroke lean burn (4SLB) engines, and non-selective catalytic reduction (NSCR) for four-stroke
rich burn (4SRB) engines are applicable controls for HAP reduction from existing stationary SI
RICE. To  determine the capital and annual  costs for these control technologies, equipment cost
information was obtained from industry groups6 and vendors and manufacturers of SI engine
control technology.  In some cases, the industry groups provided a  breakdown of the capital  and
annual cost components for each of the retrofit options. Using this cost data, annualized  cost and
capital cost equations for oxidation catalysts and NSCR were developed.
6 Reciprocating Internal Combustion Engine National Emission Standards for Hazardous Air Pollutants (RICE
   NESHAP) Proposed Revisions - Emission Control Costs Analysis Background for "Above the Floor" Emission
   Controls for Natural Gas-Fired RICE, Innovative Environmental Solutions Inc., October 2009. (EPA-HQ-OAR-
   2008-0708-0279).

                                          4-16

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4.4.2   Control Cost Methodology
       The following sections describe the methodology used to derive the total capital and total
annual costs for each of the control technology options. These methodologies were used to
calculate total capital and total annual costs when only purchased equipment costs were available
(e.g., vendor equipment costs). The methodologies were not used for cost data provided by
industry groups because they included a breakdown of the actual total capital and total annual
costs. A summary of the methodologies, equations, and assumptions used to estimate the total
capital and total annual costs for some of the cost data are described in the following sections.
4.4.2.1 Total Capital Costs
       The total capital cost includes the direct and indirect costs of purchasing and installing
the control equipment. The direct cost includes the cost of purchasing the equipment and
instrumentation, cost of shipping, and the cost of installing the control equipment. The indirect
cost includes the costs for engineering, contractor fees, testing costs, and also includes costs for
contingencies,  such as additional modifications, or delays in startup. The total capital cost
equation can be summarized as follows:

              Total Capital Cost (TCC) = Direct Costs (DC) + Indirect Costs (1C)

The direct costs include the costs of purchasing and installing the control equipment and can be
summarized using the following equation;

          DC = Purchased Equipment Cost (PEC) + Direct Installation Costs (DIC).

       A summary of the cost assumptions for PEC includes the following:
       •   Control Device and Auxiliary Equipment (EC);
       •   Instrumentation (10% of EC);
       •   Sales Tax (3% of EC);
       •   Freight (5% of EC);

and can be summarized as:

                                    PEC= 118% EC.

A summary of the cost assumptions for DIC includes the following:
       •   Foundations and Supports (8% of PEC);
                                         4-17

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       •   Handling and Erection (14% of PEC);
       •   Electrical (4% of PEC);
       •   Piping (2% of PEC);
       •   Insulation for Ductwork (1% of PEC);
       •   Painting (1% of PEC);

and can be summarized as:

                              DIC = 30% PEC = 0.3 PEC.

Therefore, the direct costs can be simplified using the following equation:

                           DC = PEC + 0.3 PEC = 1.3 PEC.

The indirect costs include the costs of engineering and contractor fees and contingencies and can
be summarized using the following equation:

                 1C = Indirect Installation Costs (ICC) + Contingencies (C).

A summary of the cost assumptions for ICC includes the following:
       •   Engineering (10% of PEC);
       •   Construction and Field Expenses (5% of PEC);
       •   Contractor Fees (10% of PEC);
       •   Startup (2% of PEC);
       •   Performance Test (1 % of PEC);

and can be summarized as:

                              IIC = 28% PEC = 0.28 PEC.

       A summary of the cost assumptions for C includes the following:
       •   Equipment Redesign and Modifications;
       •   Cost Escalations;
       •   Delays in Startup;

                                        4-18

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and is assumed to be:

                                C = 3% PEC = 0.03 PEC.

Therefore, the 1C can be summarized using the following equation:

                         1C = 0.28 PEC + 0.03 PEC = 0.31 PEC,

and the simplified TCC equation can be expressed as:

             TCC = 1.3 PEC+ 0.31 PEC = 1.61 PEC = 1.61  (1.18 EC) = 1.9 EC
4.4.2.2 Total Annual Costs
       The total annual cost includes the direct and indirect annual costs of operating and
maintaining the control equipment. The direct annual cost includes the cost of the utilities,
operating labor, and control device cleaning and maintenance.  The indirect annual cost includes
the overhead costs such as spare parts for the control equipment, administrative charges, and the
capital recovery of the  control technology. The total annual cost equation can be summarized as
follows:

    Total Annual Cost (TAC) = Direct Annual Costs (DAC) + Indirect Annual Costs (IAC).

The DAC includes the  following parameters:
       •   Utilities;
       •   Operating Labor;
       •   Maintenance;
       •   Annual Compliance Test;
       •   Catalyst Cleaning;
       •   Catalyst Replacement;
       •   Catalyst Disposal.

The IAC includes the following parameters:
       •   Overhead;
       •   Fuel Penalty;
                                         4-19

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       •   Property Tax;
       •   Insurance;
       •   Administrative Charges;
       •   Capital Recovery = {I(l+I)n/((l+I)n-l)*TCC} where I is the interest rate, and n is the
          equipment life.

       To calculate DAC, the costs were broken up into three separate costs: operation and
maintenance materials cost, operation and maintenance labor cost, and the cost for annual
performance testing or downtime or allowance for catalyst washing. Actual annual cost data
from the industry groups were used to estimate the DAC for each of the control technologies.
The IAC was broken up into three separate costs: administrative, fuel penalty, and capital
recovery. Again, cost data from the industry groups was used to estimate these costs for each of
the control technologies. No fuel penalty was estimated for the oxidation catalyst control
technologies, because this control technology does not increase the fuel usage of the SI engine.
4.4.3   Control Cost Equations
       Control cost equations were developed for 2SLB oxidation catalyst, 4SLB oxidation
catalyst, and a NSCR for 4SRB engines using the total capital cost and total annual cost data for
each control technology. Control cost equations  for 2SLB and 4SLB oxidation catalysts were
developed separately because the 2SLB oxidation catalyst requires a premium catalyst to reduce
the HAP compounds because of the low exhaust temperature of 2SLB engines.
4.4.3.1 2SLB Oxidation Catalyst
       The 2SLB oxidation catalyst is an effective control technology that reduces HAP
emissions from  a 2SLB SI engine by oxidizing organic compounds using a catalyst. The
oxidation catalyst unit contains a honeycomb-like structure or substrate with a large surface area
that is coated with a premium active catalyst layer such as platinum or palladium. The oxidation
catalyst works by oxidizing carbon monoxide (CO) and gaseous hydrocarbons (HAP) in the
exhaust gas to carbon dioxide (CO2) and water. The reduction of CO and HAP varies depending
on the type of catalyst used and the exhaust temperature of the pollutant stream.

       The cost of retrofitting an oxidation catalyst to an existing 2SLB engine was estimated
using cost data obtained from vendors and industry groups covering engines ranging from  58
horsepower (HP) to 4,670 HP. An equipment life of 10 years and an interest rate of 7 percent
were used to estimate the capital recovery of the control technology and the fuel penalty was
assumed to be negligible. The cost equations are presented in 2009 dollars.
                                          4-20

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       The total annualized cost equation for retrofitting an oxidation catalyst on a 2SLB engine
was estimated to be:

             2SLB Oxidation Catalyst Total Annual Cost = $11.4 x HP + $13,928

where

       HP = engine size in HP.

The linear equation has a correlation coefficient of 0.8046, which shows the data fits the
equation closely. Therefore, this equation was used to estimate annualized cost for an oxidation
catalyst on a 2SLB engine.

The total capital cost equation for retrofitting an oxidation catalyst on a 2SLB engine was
estimated to be:

             2SLB Oxidation Catalyst Total Capital Cost = $47.1 x HP + $41,603

where

       HP = engine size in HP.
4.4.3.2 4SLB Oxidation Catalyst
       The 4SLB oxidation catalyst is an effective control technology that reduces HAP
emissions from a 4SLB SI engine by oxidizing organic compounds using a catalyst. The
oxidation catalyst unit contains a honeycomb-like structure or substrate with a large surface area
that is coated with a premium active catalyst layer such as platinum or palladium. The oxidation
catalyst works by  oxidizing CO and gaseous hydrocarbons (HAP) in the exhaust gas to CO2 and
water. The reductions of CO and HAP vary depending on the type of catalyst used and the
exhaust temperature of the pollutant stream.

       The cost of retrofitting an oxidation catalyst to an existing 4SLB engine was estimated
using cost data obtained from vendors and industry groups covering engines ranging from 400
HP to 8,000 HP. Again, an equipment life of 10 years and an interest rate of 7 percent were used
to estimate the capital recovery of the control technology and the fuel penalty was assumed to be
negligible. The cost equations are presented in 2009 dollars.

       The total annualized cost equation for retrofitting an oxidation catalyst on a 4SLB engine
was estimated to be:
                                          4-21

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             4SLB Oxidation Catalyst Total Annual Cost = $1.81 x HP + $3,442

where

       HP = engine size in HP.

The linear equation has a correlation coefficient of 0.9779, which shows the data fits the
equation very closely. Therefore, this equation was used to estimate annualized cost for an
oxidation catalyst on a 4SLB engine.

The total capital cost equation for retrofitting an oxidation catalyst on a 4SLB SI engine was
estimated to be:

             4SLB Oxidation Catalyst Total Capital Cost = $12.8 x HP + $3,069

where

       HP = engine size in HP.

A summary of the cost calculations, regression analyses, and graphical representations of the
annual and capital cost data are presented in Appendix A of the cost memo that is the basis for
the cost data presented in this RIA.7
4.4.3.3 Non-Selective Catalytic Reduction
       The NSCR or three-way catalyst is used to control HAP emissions from 4SRB engines.
In addition to HAP reductions, NSCR also reduces the emissions of nitrogen oxides (NOx), CO,
and other hydrocarbons (HC). The reduction of HAP and CO takes place through an  oxidation
reaction that converts HAP to CO2 and water and converts CO to CO2. The conversion of NOx
takes place through a reduction of the NOx to nitrogen gas and oxygen.

       The cost of retrofitting an NSCR on an existing 4SRB engine was estimated based on
cost data received from vendors and industry groups. A linear regression analysis was done on
the data set and the linear equation for annualized cost was;

                        NSCR Annual Cost = $4.77 x HP + $5,679

where
7  Memorandum from Bradley Nelson, EC/R to Melanie King, EPA. OAQPS/SPPD/ESG. Impacts Associated with
   NESHAP for Existing Stationary SI RICE. June 29, 2010.
                                          4-22

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       HP = engine size in HP.

The linear equation has a correlation coefficient of 0.7987, which shows an acceptable
representation of the cost data. Therefore, this equation was used to estimate annualized cost for
retrofitting the NSCR control technology on 4SRB engines.

The capital cost equation for retrofitting an air-to-fuel ratio (APR) controller and NSCR on a
4SRB engine was estimated to be:
                        NSCR Capital Cost = $24.9 x HP + $13,118
where
       HP = engine size in HP.
4.4.4  Summary
       Table 4-1 presents a summary of the annual and capital control costs as a function of
engine size for the control technologies applicable to existing stationary SI engines, as discussed
in this memorandum.
Table 4-1.  Summary of Annual and Capital Costs Equations for Existing Stationary SI
            Engines
         HAP Control Device
    Annual Cost ($2009)
     Capital Cost ($2009)
2SLB Oxidation Catalyst
4SLB Oxidation Catalyst
NSCR
$11.4 xHP +$13,928
$1.Six HP+ $3,442
$4.77 x HP+ $5,679
$47.1 x HP+ $41,603
$12.8 x HP+ $3,069
$24.9xHP + $13,118
       A summary of the annual and capital costs associated with the rule and obtained using the
methodology described above are presented in Tables 4-2 to 4-5 below.8 These costs are used as
input to the economic impact as well as the small entity analysis.
8 Memorandum from Bradley Nelson, EC/R to Melanie King, EPA. OAQPS/SPPD/ESG. Impacts Associated with
   NESHAP for Existing Stationary SI RICE. June 29, 2010.
                                          4-23

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Table 4-2.  Summary of Major Source and Area Source Costs for the SI RICE NESHAP"
Size Range (HP)
Major Sources
25-50
50-100
100-175
175-300
300-500
500-600
600-750
>750
Total
Area Sources
25-50
50-100
100-175
175-300
300-500
500-600
600-750
>750
Total
Grand Total
Total
Capital
Control Cost

$0
$0
$48,502,361
$13,225,919
$10,934,795
$0
$0
$0
$72,663,076

$0
$0
$0
$0
$0
$7,547,433
$1,522,236
$21,075,418
$30,145,088

$102.808,163
Annual
Control Cost

$0
$0
$37,071,061
$8,382,568
$5,562,872
$0
$0
$0
$51,016,500

$0
$0
$0
$0
$0
$2,662,805
$505,221
$6,214,397
$9,382,423

$60,398,923
Initial Test

$0
$0
$15,971,384
$3,442,648
$2,123,326
$0
$0
$0
$21,537,358

$0
$0
$0
$0
$0
$248,366
$44,323
$472,244
$764,933

$22,302,292
Record-
keeping

$4,060,795
$1,087,540
$1,721,899
$371,157
$228,919
$0
$0
$0
$7,470,310

$6,668,944
$2,868,511
$3,529,711
$1,264,799
$908,913
$454,493
$77,882
$829,795
$16,603,048

$24,073,358
Monitoring
Monitoring — — Annual
Reporting Capital Cost Cost

$0
$0
$5,725,314
$1,234,097
$761,155
$0
$0
$0
$7,720,566

$0
$0
$0
$0
$0
$1,26,426
$22,562
$240,387
$389,375

$8,106,972

$0
$0
$0
$0
$0
$0
$0
$0
$0

$0
$0
$0
$0
$0
0
0
0
0

0

$0
$0
$0
$0
$0
$0
$0
$0
$0

$0
$0
$0
$0
$0
0
0
0
0

0
Total Annual
Costs

$4,060,795
$1,087,540
$60,489,657
$13,430,470
$8,676,262
$0
$0
$0
$87,744,734

$6,668,944
$2,868,511
$3,529,711
$1,264,799
$908,913
$3,492,090
$649,988
$7,756,823
$27,139,780

$114,884,514
Total Capital
Costs

$0
$0
$48,502,361
$13,225,919
$10,934,795
$0
$0
$0
$72,663,076

$0
$0
$0
$0
$0
$7,547,433
$1,522,236
$21,075,418
$30,145,088

$102,808.163
  Costs are presented in 2009 dollars.

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       Table 4-3.   Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP"
to
Major Source
NAICS
2211
48621
211111
211112
92811
335312
335312
333992


Electric Power Generation
Natural Gas Transmission
Crude Petroleum & NG
Production
Natural Gas Liquid Producers
National Security
Hydro Power Units
Irrigation Sets
Welders
Total
Capital Cost
$52,905,258
$1,484,494
$4,561,236
$4,561,236
$5,878,362
$0
$3,025,050
$247,440
$72,663,076
Annual Cost
$63,062,494
$1,462,530
$6,138,383
$6,138,383
$7,006,944
$25,248
$3,230,856
$679,896
$87,744,734
Area Source
Capital Cost
$11,698,144
$13,718,381
$71,439
$71,439
$1, 299,794
$0
$3,285,990
$0
$30,145,088
Annual Cost
$12,138,277
$6,142,839
$951,462
$951,462
$1,348,697
$37,872
$4,999,041
$570,130
$27,139,780
Total (Major + Area)
Capital Cost Annual Cost
$64,603,403
$15,202,876
$4,632,675
$4,632,675
$7,178,1566
$0
$6,310,940
$247,440
$102,808,163
$75,200,772
$7,605,369
$7,089,844
$7,089,844
$8,355,641
$63,120
$8,229,896
$1,250,027
$114,884,514
       a Costs are presented in 2009 dollars.

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      Table 4-4.  Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Size3
to
Major Source
NAICS
Electric Power Generation (2211)
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total Electric Power Generation 221 1
Natural Gas Transmission (48621)
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total Natural Gas Transmission (48621)
Crude Petroleum & NG Production (211111)
25-50 hp
50-100 hp
100-175 hp
Capital Cost

$0
$0
$33,868,173
$10,603,849
$8,433,236
$0
$0
$0
$52,905,258

$0
$0
$301,721
$643,157
$539,617
$0
$0
$0
$1,484,494

$0
$0
$4,549,775
Annual Cost

$2,758,459
$606,144
$42,238,648
$10,767,847
$6,691,397
$0
$0
$0
$63,062,494

$102
$4,872
$376,291
$653,104
$428,162
$0
$0
$0
$1,462,530

$388,115
$66,698
$5,674,246
Area Source
Capital Cost

$0
$0
$0
$0
$0
$2,543,944
$515,514
$8,638,687
$11,698,144

$0
$0
$0
$0
$0
$1,925,560
$949,443
$10,843,377
$13,781,381

$0
$0
$0
Annual Cost

$4,137,688
$909,215
$1,803,548
$446,361
$264,820
$1,177,047
$220,122
$3,179,475
$12,138,277

$1,934
$92,571
$203,518
$342,928
$214,637
$890,929
$405,408
$3,990,913
$6,142,839

$582,173
$100,047
$242,285
Total (Major + Area)
Capital Cost

$0
$0
$33,868,173
$10,603,849
$8,433,236
$2,543,944
$515,514
$8,638,687
$64,603,403

$0
$0
$301,721
$643,157
$539,617
$1,925,560
$949,443
$10,843,377
$15,202,876

$0
$0
$4,549,775
Annual Cost

$6,896,147
$1,515,359
$44,042,196
$11,214,209
$6,956,217
$1,177,047
$220,122
$3,179,475
$75,200,772

$2,036
$97,443
$579,809
$996,032
$642,799
$890,929
$405,408
$3,990,913
$7,605,369

$970,288
$166,744
$5,916,531
(continued)

-------
      Table 4-4.  Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Size" (continued)
to
Major Source
NAICS
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total Grade Petroleum & NG Production
(211111)
Natural Gas Liquid Producers (211112)
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total Natural Gas Liquid Producers (211112)
National Security (92811)
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
Capital Cost
$1,037
$10,424
$0
$0
$0

$4,561,236

$0
$0
$4,549,775
$1,037
$10,424
$0
$0
$0
$4,561,236

$0
$0
$3,763,130
$1,178,205
$937,026
$0
Area Source
Annual Cost Capital Cost Annual Cost
$1,053
$8,271
$0
$0
$0

$6,138,383

$388,115
$66,698
$5,674,246
$1,053
$8,271
$0
$0
$0
$6,138,383

$306,495
$67,349
$4,693,183
$1,196,427
$743,489
$0
$0
$0
$3,102
$0
$68,337

$71,439

$0
$0
$0
$0
$0
$3,102
$0
$68,337
$71,439

$0
$0
$0
$0
$0
$282,660
$44
$327
$1,435
$0
$25,151

$951,462

$582,173
$100,047
$242,285
$44
$327
$1,435
$0
$25,151
$951,462

$459,743
$101,024
$200,394
$49,596
$29,424
$130,783
Total (Major + Area)
Capital Cost
$1,037
$10,424
$3.102
$0
$68,337

$4,632,675

$0
$0
$4,549,775
$1,037
$10,424
$3,102
$0
$68,337
$4,632,675

$0
$0
$3,763,130
$1,178,205
$937,026
$282,660
Annual Cost
$1,096
$8,598
$1,435
$0
$25,151

$7,089,844

$970,288
$166,744
$5,916,531
$1,096
$8,598
$1,435
$0
$25,151
$7,089,844

$766,239
$168,373
$4,893,577
$1,246,023
$772,913
$130,783
(continued)

-------
      Table 4-4.  Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Size" (continued)
to
oo
Major Source
NAICS
600-750 hp
>750 hp
Total National Security (92811)
Hydro Power Units (335312)
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total Hydro Power Units (335312)
Irrigation Sets (335312)
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total Irrigation Sets (335312)
Capital Cost
$0
$0
$5,878,362

$0
$0
$0
$0
$0
$0
$0
$0
$0

$0
$0
$1,222,348
$798,634
$1,004,068
$0
$0
$0
$3,025,050
Annual Cost
$0
$0
$7,006,944

$22,688
$2,560
$0
$0
$0
$0
$0
$0
$25,248

$32,913
$65,825
$1,524,449
$810,986
$796,683
$0
$0
$0
$3,230,856
Area Source
Capital Cost
$57,279
$959,854
$1,299,794,

$0
$0
$0
$0
$0
$0
$0
$0
$0

$0
$0
$0
$0
$0
$2,789,064
$0
$496,827
$3,285,890
Annual Cost
$24,458
$353,275
$1,348,697

$34,032
$3,840
$0
$0
$0
$0
$0
$0
$37,872

$625,338
$1,250,677
$824,505
$425,827
$399,376
$1,290,460
$0
$182,857
$4,999,041
Total (Major + Area)
Capital Cost
$57,279
$959,854
$7,178,156

$0
$0
$0
$0
$0
$0
$0
$0
$0

$0
$0
$1,222,348
$798,634
$1,004,068
$2,789,064
$0
$496,827
$6,310,940
Annual Cost
$24,458
$353,275
$8,355,641

$56,721
$6,399
$0
$0
$0
$0
$0
$0
$63,120

$658,251
$1,316,502
$2,348,954
$1,236,813
$1,196,060
$1,290,460
$0
$182,857
$8,229,896
(continued)

-------
       Table 4-4.  Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Size" (continued)
to
VO
Major Source
NAICS
Welders (333992)
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total Welders (333992)
Total
Capital Cost

$0
$0
$247,440
$0
$0
$0
$0
$0
$247,440
$72,663,076
Annual Cost

$163,908
$207,394
$308,594
$0
$0
$0
$0
$0
$679,896
$87,744,734
Area Source
Capital Cost

$0
$0
$0
$0
$0
$0
$0
$0
$0
$30,145,088
Annual Cost

$245,862
$311,091
$13,177
$0
$0
$0
$0
$0
$570,130
$27,139,780
Total (Major + Area)
Capital Cost

$0
$0
$247,440
$0
$0
$0
$0
$0
$247,440
$102,808,163
Annual Cost

$409,771
$518,485
$321,771
$0
$0
$0
$0
$0
$1,250,027
$114,884,514
        Costs are presented in 2009 dollars.

-------
      Table 4-5.  Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Number of Engines"
-^
o
Number of Engines
NAICS
Electric Power Generation (2211)
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total Electric Power Generation (221 1)
Natural Gas Transmission (48621)
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total Natural Gas Transmission (48621)
Crude Petroleum & NG Production (211111)
25-50 hp
50-100 hp
100-175 hp
Major

37,933
8,336
16,534
4,092
2,428
0
0
0
69,323

1
67
147
248
155
0
0
0
619

5,337
917
2,221
Area

56,900
12,503
24,802
6,138
3,642
2,107
363
4,677
111,132

27
1,273
2,799
4,716
2,952
1,595
668
5,871
19,899

8,006
1,376
3,332
Total

94,833
20,839
41,336
10,230
6,070
2,107
363
4,677
180,455

28
1,340
2,946
4,964
3,107
1,595
668
5,871
20,519

13,343
2,293
5,553
Total (Major + Area)
Capital Cost

$0
$0
$33,868,173
$10,603,849
$8,433,236
$2,543,944
$515,944
$8,638,687
$64,603,403

$0
$0
$301,721
$643,157
$539,617
$1,925,560
$949,443
$10,843,377
$15,202,876

$0
$0
$4,549,775
Annual Cost

$6,896,147
$1,515,359
$44,042,196
$11,214,209
$6,956,217
$1,177,047
$220,122
$3,179,475
$75,200,772

$2,036
$97,443
$579,809
$996,032
$642,799
$890,929
$405,408
$3,990,913
$7,605,369

$970,288
$166,744
$5,916,531
(continued)

-------
Table 4-5.  Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Number of Engines"
          (continued)
Number of Engines
NAICS
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total Grade Petroleum & NG Production (211111)
Natural Gas Liquid Producers (211112)
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total Natural Gas Liquid Producers (211112)
National Security (92811)
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
Major
0
3
0
0
0
8,479

5,337
917
2,221
0
3
0
0
0
8,479

4,215
926
1,837
455
270
0
Area
1
5
3
0
37
12,758

8,006
1,376
3,332
1
5
3
0
37
12,758

6,322
1,389
2,756
682
404
234
Total
1
8
3
0
37
21,237

13,343
2,293
5,553
1
8
o
6
0
37
21,237

10,537
2,315
4,593
1,137
674
234
Total (Major + Area)
Capital Cost
$1,037
$10,424
$3,102
$0
$68,337
$4,632,675

$0
$0
$4,549,775
$1,037
$10,424
$3,102
$0
$68,337
$4,632,675

$0
$0
$3,763,130
$1,178,205
$937,026
$282,660
Annual Cost
$1,096
$8,598
$1,435
$0
$25,151
$7,089,844

$970,288
$166,744
$5,916,531
$1,096
$8,598
$1,435
$0
$25,151
$7,089,844

$766,239
$168,373
$4,893,577
$1,246,023
$772,913
$130,783
(continued)

-------
      Table 4-5.  Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Number of Engines"
                 (continued)
-^
to
Number of Engines
NAICS
600-750 hp
>750 hp
Total Natural Gas Liquid Producers (211112)
Hydro Power Units (335312)
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total Hydro Power Units (3353 12)
Irrigation Sets (335312)
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total Irrigation Sets (335312)
Major
0
0
7,702

312
35
0
0
0
0
0
0
347

453
905
597
308
289
0
0
0
2,552
Area
40
520
12,347

468
53
0
0
0
0
0
0
521

8,599
17,199
11,338
5,856
5,492
2,310
0
269
51,063
Total
40
520
20,050

780
88
0
0
0
0
0
0
868

9,052
18,104
11,935
6,164
5,781
2,310
0
269
53,615
Total (Major + Area)
Capital Cost
$57,279
$959.854
$7,178,156

$0
$0
$0
$0
$0
$0
$0
$0
$0

$0
$0
$1,222,348
$798,634
$1,004,068
$2,789,064
$0
$496,827
$6,310,940
Annual Cost
$24,458
$353,275
$8,355,641

$56,721
$6,399
$0
$0
$0
$0
$0
$0
$63,120

$658,251
$1,316,502
$2,348,954
$1,236,813
$1,196,060
$1,290,460
$0
$182857
$8,229,896
(continued)

-------
Table 4-5.  Summary of Major Source and Area Source NAICS Costs for the SI RICE NESHAP, by Number of Engines"
           (continued)
Number of Engines
NAICS
Welders (333992)
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total Welders (333992)
Total
Major

2,254
2,852
121
0
0
0
0
0
5,227
102,729
Area

3,381
4,278
181
0
0
0
0
0
7,840
228,319
Total

5,635
7,130
302
0
0
0
0
0
13,067
331,047
Total (Major + Area)
Capital Cost

$0
$0
$247,440
$0
$0
$0
$0
$0
$247,440
$382,802,298
Annual Cost

$409,771
$518,485
$321,771
$0
$0
$0
$0
$0
$1,250,027
$253,374,939
1  Costs are presented in 2009 dollars.

-------
       4.4.5   Caveats and Uncertainties in the Cost Estimates
*      Current knowledge about NOx control techniques and costs is applied in this
study. Advances such as alternative catalyst formulations may occur between
now and when sources comply with this rulemaking that may lower costs. Scale
economies can also lower per unit production costs as the market for these NOx
control techniques expands.

*       The alternative control techniques and corresponding emission reductions and
costs may not apply to every unit within the source category. Many factors
influence the performance and  cost of any control technique. Because control
technology references typically evaluate average retrofit situations, costs may
be underestimated for the fraction of the source population with difficult to
retrofit conditions. Difficult to  retrofit conditions may be less of an issue for
RICEs than for other point sources, however.

*      NOx control efficiency and cost estimates associated with source category-control
strategy combinations are represented as point estimates. In practice, control
effectiveness and costs will vary by engine.

-------
4.5    Baseline Emissions and Emission Reductions
       The baseline emissions, emissions factors and emissions reductions associated with the
reconsideration rule are provided in the tables below.  Baseline emissions are estimated for 2013
using the emissions dataset generated for the final SI RICE rule in 2010. The baseline emissions
estimates thus assume the final SI RICE rule has not been implemented. Emissions are in tons
per year.
Table 4-6.   Summary of Major Source and Area Source Baseline Emissions for the SI
            RICE NESHAP in 2013
Baseline Emissions (TPY)
Size Range (HP)
Major Sources
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total
Area Sources
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total
Major + Area
Total
HAP

1,107
593
1,721
641
666
0
0
0
4,728

1,818
1,564
3,529
2,184
2,643
1,830
383
6,041
19,993
24,722

CO

28,557
15,296
44,399
16,530
17,171
0
0
0
121,953

46,898
40,344
91,013
56,331
68,178
47,273
9,876
155,890
515,803
637,756

NOx

41,751
22,363
64,913
24,168
25,105
0
0
0
178,301

68,566
58,985
133,065
82,359
99,679
69,094
14,438
227,890
754,077
932,377

voc

5,696
3,051
8,855
3,297
3,425
0
0
0
24,323

9,354
8,047
18,153
11,235
13,598
9,415
1,969
31,076
102,846
127,169

                                        4-35

-------
Table 4-7.    Emissions Factors
Engine
2SLB
4SLB
4SRB
HAP
(Ib/hp-hr)
5.96xlO"4
5.41xlO'4
2.43xlO'4
CO
(Ib/hp-hr)
1.06xlO"2
3.92xlO'3
1.93xlO'2
NOx
(Ib/hp-hr)
4.18xlO"2
LlSxlO'2
1.47xlO'2
voc
(Ib/hp-hr)
3.07xlO"3
2.78xlO'3
1.25xlO'3
Formaldehyde
(Ib/hp-hr)
4.29xlO"4
3.96xlO'4
1.75xlO'4
Table 4-8.   Summary of Major Source and Area Source Emissions Reductions for the SI
           RICE NESHAP in 2013
Emission Reductions (TPY)
Size Range (HP)
Major Sources
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total
Area Sources
25-50 hp
50-100 hp
100-175 hp
175-300 hp
300-500 hp
500-600 hp
600-750 hp
>750 hp
Total
Major + Area Total
HAP

0
0
744
277
288
N/A
N/A
N/A
1,308

0
0
0
0
0
101
22
347
470
1,778
CO

0
0
7,124
2,653
2,755
N/A
N/A
N/A
12,532

0
0
0
0
0
2,070
453
7,156
9,679
22,211
NOx

0
0
0
0
0
N/A
N/A
N/A
0

0
0
0
0
0
2,,063
452
7,133
9,648
9,648
VOC

0
0
3,826
1,424
1,480
0
0
0
6,730

0
0
0
0
0
517
113
1,787
2,418
9,147
                                     4-36

-------
                                       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, 2010). 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 that make developing partial equilibrium models difficult. Given
these constraints, we used the direct compliance costs as a measure of total social costs. In
addition, we also provide a qualitative analysis of the reconsidered rule's impact on stakeholder
decisions, a qualitative discussion on if unfunded mandates occur as a result of this reconsidered
rule, and the potential distribution of social costs between consumers and producers.
5.1     Compliance Costs of the Reconsidered Rule
       EPA's engineering cost analysis estimates the total annualized costs of the reconsidered
rule are $115 million (in 2010 dollars) (EC/R, 2012).

       The majority of the costs are incurred by the electric power sector (65%). The remaining
industries each account for less than 8% 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 this rule.  The PSR database used as a basis for the
analyses in this RIA contains information on both mobile and stationary 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. For 500  hp engines
or less, the annualized per-engine costs are below $371 per engine. Per-engine annualized
compliance costs for higher horsepower (hp) engines range up to $2,800.

       The reconsidered rule will affect approximately 331,000 existing stationary SI engines.
As shown in Figure 5-1,  most of the affected engines fall within the 25 to 50 hp category (45%).
The next highest categories are 100 to 175 hp (22%) and 50 to 100 hp (16%).
                                          5-1

-------
  100%
  90%
  80%
  70%
  60%
  50%
  40%
  30%
  20%
  10%
   0%
          45%
         25-50 hp     50-100 hp     100-175 hp    175-300 hp    300-500 hp    500-600 hp    600-750 hp     >750 hp
Figure 5-1.   Distribution of Engine Population by Horsepower Group


       To assess the size of the compliance 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 1%), for
all affected industries. Results for affected industries can be found in 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, excluding natural  gas transmission and natural gas liquid producers, which face
slightly higher costs to sales ratios.
                                             5-2

-------
5.2    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 reconsidered 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 65 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 later
in this RIA.
5.3    How Might People and Firms Respond? A Partial Equilibrium Analysis
       Markets are composed of people as consumers and producers trying to do the best 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
Table 5-1.   Selected Industry-Level Annualized Compliance Costs as a Fraction of Total
            Industry Revenue: 2009

Industry
(NAICS)
2211
48621
211111
211112
92811
333992
111 and 112

Industry Name
Electric Power Generation
Natural Gas Transmission
Crude Petroleum & NG Production
Natural Gas Liquid Producers
National Security
Welders
Agriculture using irrigation systems3
Total
Annualized
Costs
($ million)3
$128.4
$68.9
$7.4
$7.4
$14.3
$1.3
$25.7
Sales, Shipments, Receipt,
or Revenue (SBillion)
($2007)
$440.4
$16.4
$214.2
$42.4
#N/A
$5.2
$27.9
($2009)
$453.7
$16.9
$220.5
$43.6
#N/A
$5.5
$28.8
Cost-to-
Sales Ratio
0.004%
0.41%
0.001%
0.005%
#N/A
0.025%
0.09%
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
                                          5-3

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Sources: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 00: All sectors:
       Geographic Area Series: Economy-Wide Key Statistics: 2007" ; (July 7th,
       2010).
       U.S. Department of Agriculture (USDA), National Agricultural Statistics Service (NASS). 2009. "2008
       Farm and Ranch Irrigation Survey." Washington, DC: USDA-NASS.
       Costs from Existing SI RICE NESHAP Impacts received from EPA 1/26/12

particular price; we often draw this curve as 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).
5.3.1   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.
                                            5-4

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     Price
    Increase
                                                                   Si: With Regulation

                                                            Unit Cost Increase
                                                                   S0: Without Regulation
                                           Qi         Qo                Output
                                  consumer surplus = -[fghd + dhc]
                                  producer surplus = [fghd - aehb] - bdc
                                  total surplus = consumer surplus + producer surplus
                                  -[aehb + dhc + bdc]
Figure 5-2.   Market Demand and Supply Model: With and Without Regulation
       The size of these changes depends on two factors: the size of the unit 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:9
       Share ofper-unit cost =
                                            Price Elasticity of Supply
                              (rice 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
9For examples of similar mathematical models in the public finance literature, see Nicholson (1998), pages 444-447,
   or Fullerton and Metcalf (2002).
                                           5-5

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       •   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 (U.S. 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%
53.2   Regulated Markets: The Electric Power Generation, Transmission, and Distribution
       Sector
       Given that the electric power sector bears majority of the estimated compliance costs and
the industry is also among the last major regulated energy industries in the United States (EIA,
2010), the competitive model is not necessarily applicable for this industry.
                                           5-6

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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 5-3 for the status of
restructuring by state),10 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.
5.3.3   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 5-2). The change in consumer surplus is measured as follows:

                          ACS = -[AQj x 47]+ [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 = [AQj x Ap] - [AQj x t] - [0.5 x AQ x (Ap - t)].                (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.
10http://tonto.eia.doe.gov/energy_in_brief/print_pages/electricity.pdf.
                                           5-7

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                                 Electricity Restructuring by State
Figure 5-3.   Electricity Restructuring by State
Source. U.S. Energy Information Administration. 2010b.
  . Last updated September
  2010.
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;
                                            5-8

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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 5-4 suggests at the
industry level, the annualized costs represent a very small fraction of revenue (all industries are
impacted under 1%). 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 2011 (EIA, 2011) provides energy
consumption data. As shown in Table 5-4, this industry account for less than 0.3% of the U.S.
total liquid fuels and less than 8.0% 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.
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
0.09
0.22
0.31
7.63
17.37
8.50
4.63
0.12
38.77
70.56
96.66
0.1%
0.2%
0.3%
7.9%
18.0%
8.8%
4.8%
0.1%
40.1%
73.2%
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.

                                            5-9

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Includes non-biogenic municipal waste not included above.
Source: U.S. Energy Information Administration. 201 la. Supplemental Tables to the Annual Energy Outlook 2011.
  Table 2. Available at: .
5.5    Unfunded Mandates
       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.
5.5.1   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 Chapter 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
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
                                           5-10

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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.

       Assuming that our baseline for this RIA does not include implementation of the final
2010 SI RICE rule, as we state earlier in this document, 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  SI engines, thus decreasing the amount of such emissions to which all affected
populations are exposed.

5.7 Employment Impact Analysis

       In addition to addressing the costs and benefits of the reconsideration rule, EPA has
analyzed the impacts of this rulemaking on employment, which are presented in this section.
While a standalone analysis of employment impacts is not included in a standard cost-benefit
analysis, such an analysis is of particular concern in the current economic climate of sustained
high unemployment. Executive Order 13563, states, "Our regulatory system must  protect public
health, welfare, safety, and our environment while promoting economic growth, innovation,
competitiveness, and job creation" (emphasis added). Therefore, and consistent with recent
efforts to characterize the employment effects of economically significant rules, the Agency has
provided this analysis to inform the discussion of labor demand and employment impacts.

       This employment impact analysis includes estimates of certain short-term and on-going
labor requirements (increase in labor demand) associated with reporting and recordkeeping, and
the installation, operating and maintenance of control devices.   EPA estimates that about 200
full-time equivalents (FTE) will be created or supported in the short-term and about 400 FTEs
will be created or supported annually on a permanent basis.  EPA also provides a qualitative
discussion of other potential employment effects, including both increases and decreases.
Because of the uncertainties involved, these sets of estimates should not be added in an attempt
to characterize the overall employment effect.

       We have not quantified the rule's net effects on the overall labor market, or the potential
changes to workers' incomes. EPA continues to explore the relevant theoretical and empirical
                                          5-11

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literature and to seek public comments in order to ensure that such estimates are as accurate,
useful and informative as possible.

       From an economic perspective, labor is an input into producing goods and services; if
regulation requires that more labor be used to produce a given amount of output, that additional
labor is reflected in an increase in the cost of production.11 When an increase in employment
occurs as  a result of a regulation, it is a cost to firms. Moreover, when the economy is at full
employment, we would not expect an environmental regulation to have an impact on overall
employment because labor is being shifted from one sector to another. On the other hand, in
periods of high unemployment, an increase in labor demand due to regulation may result in a
short-term net increase in overall employment due to the potential hiring of previously
unemployed workers by the regulated sector to help meet new requirements (e.g., to install new
equipment) or by the environmental protection sector to produce new abatement capital. When
significant numbers of workers are unemployed, the opportunity costs associated with displacing
jobs in other sectors are likely to be smaller. To provide a partial picture of the employment
consequences of this final rule, EPA takes two approaches. First,  EPA uses information such as
monitoring, recordkeeping, and reporting estimates  derived from  its cost analysis documentation
to generate estimates of employment impacts.  Second, the analysis considers the results of
Morgenstern, Pizer, and Shih (2002) in estimating the effects of the regulation on the regulated
industry. This approach has been used by EPA previously in recent Regulatory Impact Analyses.
EPA is interested in public comments on the merits  of including information derived in this
fashion for assessing the employment consequences of regulations.

 5.7.1 Employment Impacts from Pollution Control Requirements

       Regulations set in motion new orders for pollution control equipment and services. When
a new regulation is promulgated, one typical response of industry is to order pollution control
equipment and services in order to comply with the  regulation when it becomes effective, while
closure of plants that choose not to comply is assumed to occur after the compliance date. With
such a response by industry as a basis, this section presents estimates for short term labor
requirement needed associated with the monitoring, recordkeeping, and reporting requirements
for this final rule.  Environmental regulation may increase revenue and employment in the
environmental technology industry. While these increases represent gains for that industry, they
1: It should be noted that if more labor must be used to produce a given amount of output, then this implies a
   decrease in labor productivity.  A decrease in labor productivity will cause a short-run aggregate supply curve to
   shift to the left, and businesses will produce less, all other things being equal.

                                           5-12

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are costs to the regulated industries required to install the equipment. As with any pool of labor,
the gross size of the labor pool does not reflect the net impact on overall employment after
adjusting for shifts in other sectors.

       Regulated firms may hire workers to design and build pollution controls.  Once the
equipment is installed, regulated firms may hire workers to operate and maintain the pollution
control equipment - much like they may hire workers to produce more output. Of course, these
firms may also reassign existing employees to do these activities. A study including an analysis
of environmental protection employment in six U.S. states in 2003 by Bezdek, Wendling, and
DiPernab (2008) found that "investments in environmental protection create jobs and displace
jobs, but the net effect on employment is  positive."12

       Once the equipment is installed, regulated firms may hire workers to operate and
maintain the pollution control equipment - much like they may hire workers to produce more
output.

       The focus of this part of the analysis is on labor requirements related to the compliance

actions of the affected entities within the  affected sector. The employment analysis uses a
bottom-up engineering-based methodology to estimate employment impacts. The engineering
cost analysis summarized in Section 4 of this RIA includes estimates of the labor requirements
associated with implementing the proposed regulations. Each of these labor changes may either
be required as part of an initial effort to comply with the new regulation or required as a
continuous or annual effort to maintain compliance.  We estimate up-front and continual, annual
labor requirements by estimating hours of labor required and converting this number to full-time
equivalents (FTEs) by dividing by 2,080 (40 hours per week multiplied by 52 weeks). We note
that this type of FTE estimate cannot be used to make assumptions about the specific number of
people involved or whether new jobs are  created for new employees.

       The results of this employment estimate are presented in Table 5-5 for the final
NESHAP. The tables breaks down the installation, operation, and maintenance estimates by type
of pollution control evaluated in the RIA  and present both the estimated hours required and the
conversion of this estimate to FTE. For the final NESHAP, reporting and recordkeeping
requirements were estimated requirements were estimated for the entire rule rather than by
12 Environmental protection, the economy, and jobs: National and regional analyses, Roger H. Bezdek, Robert M.
   Wendling and Paula DiPerna, Journal of Environmental Management Volume 86. Issue 1, January 2008, Pages
   63-79.
                                          5-13

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anticipated control requirements; the reporting and recordkeeping estimates are consistent with
estimates EPA submitted as part of its Information Collection Request (ICR) that is in the
Supporting Statement for the reconsideration rule.

       The up-front labor requirement is estimated at 200 FTEs for the final reconsidered
NESHAP. These up-front FTE labor requirements can be viewed as short-term labor
requirements required for affected entities to comply with the new regulation. Ongoing
requirements are estimated at about 400 FTEs for the final reconsidered NESHAP. These
ongoing FTE labor requirements can be viewed as sustained labor requirements required for
affected entities to continuously comply with the new regulation. All of this data is found in the
cost memorandum for this reconsidered rule, and can be found in the docket for the rulemaking.
It is important to recognize that these seemingly precise estimates are not to be assumed to be
exact measures of the employment impacts of this rulemaking. They represent a rough
approximation of the small positive impacts that this rule may have on employment.
                                         5-14

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Table 5-5.  Labor-based Employment Estimates for Reporting and Recordkeeping and
Installing, Operating, and Maintaining Control Equipment Requirements for the Final
Reconsideration SI RICE NESHAP
Source
Major Sources
SI RICE <1 00 HP
-O&M/Recordkeeping
2SLB RICE 100-500 HP
-O&M/Recordkeeping

-Testing
-Reporting
Emergency 4SRB SI
RICE 100-500 HP
Non-Emergency 4SRB SI
RICE 100-500 HP
-Testing
-Reporting
4SLB SI RICE 100-500 HP
-Testing
-Reporting
Area Sources
All SI RICE

-O&M/Recordkeeping
Non-Emergency 4 SLB SI
RICE >500 HP in Populated
Areas
-Testing
-Reporting
Non-Emergency 4SRB SI
RICE >500 HP in Populated
Areas
-Testing
-Reporting
Total

„, . . _ Per-Unit Total
T-. • • T> TT -A. f^ Total One- , , , ,
Emission n . , , _T , Per-Unit One- „,. T , Annual Annual ^ „,. _, „ „,.
„ , , Projected No. of _. T , Time Labor T , T , One-Time Full-Time
Control . * , TT . Time Labor _ . Labor Labor _ . ,
_ _. Affected Units _ , . , ^_T . Estimate _ ,. _ , . Equivalent
Measure Estimate (Hours) _T , Estimate Estimate
(Hours) ^^ ^^


N/A 70,798 N/A N/A 1 70,798 N/A
N/A
1
N/A 7,398 N/A N/A 92,480 N/A
8
3.5
N/A 1,597 N/A N/A 1 1,597 N/A
N/A

N/A 12,740 N/A N/A 8 146,515 N/A
3.5
15
Oxidation Catalyst 14,257 21 300,255 8 163,956 144
3.5


228 31
N/A ' N/A N/A 1 228,318 N/A
8

15

Oxidation Catalyst 768 37 28,117 15,734 14
3.5

33

NSCR 578 86 49,918 22,236 24
3.5

144 378,290 113 741,633 182
Note: Full-time equivalents (FTE) are estimated by first multiplying the projected number of affected units by the
per unit labor requirements and then dividing by 2,080 (40 hours multiplied by 52 weeks). Totals may not sum due
to independent rounding.
HP = horsepower
N/A = Not Applicable.
O&M = Operating and Maintenance
                                           5-15

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              5.7.2  Employment Impacts within the Regulated Industry

              In recent RIAs we have applied estimates from a study by Morgenstern, Pizer and
       Shih (2002)1 to derive the employment effects of new regulations within the regulated
       industry. (See, for example, the Regulatory Impact Analyses for the recent final MATS
       and final CSAPR regulations).  Determining the direction of employment effects in the
       regulated industry is also challenging due to competing effects. Complying with the new
       or more stringent regulation requires additional inputs, including labor, and may alter the
       relative proportions of labor and capital used by regulated firms in their production
       processes. Morgenstern, et al. (2002) demonstrate that environmental regulations can be
       understood as requiring regulated firms to add a new output (environmental quality) to
       their product mixes.  Although legally compelled to satisfy this new  demand, regulated
       firms have to finance this additional production with the proceeds of sales of their other
       (market) products. Satisfying this new demand requires additional inputs, including labor,
       and may alter the relative proportions of labor and capital used by regulated firms in their
       production processes.

       More specifically, Morgenstern, Pizer,  and  Shih (2002) decompose the effect of
regulation on net employment in the regulated sector into the following three  subcomponents:
       •   The Demand Effect: higher production costs from complying with the regulation will
          raise market prices, reducing consumption (and production), thereby reducing
          demand for labor within the regulated industry.  The "extent of this effect depends on
          the cost increase passed on to  consumers as well as the demand elasticity of industry
          output." (p. 416)
          The Cost Effect: Assuming that the capital/labor ratio in the production process is
          held fixed, as "production costs rise, more inputs, including labor,  are used to produce
          the same amount of output," (p. 416). For example, to reduce pollutant emissions
          while holding output levels constant, regulated firms may require additional labor.
1 Morgenstern, R. D., W. A. Pizer, and J. S. Shih. 2002. Jobs versus the Environment: An Industry-Level
       Perspective. || Journal of Environmental Economics and Management 43(3):412-436.
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       •  The Factor-Shift Effect: Regulated firms' production technologies may be more or
          less labor intensive after complying with the regulation (i.e., more/less labor is
          required relative to capital per dollar of output). "Environmental activities may be
          more labor intensive than conventional production," meaning that "the amount of
          labor per dollar of output will rise." However, activities may, instead, be less labor
          intensive because "cleaner operations could involve automation and less employment,
          for example." (p. 416)

       The demand effect is expected to have an unambiguously negative effect on employment,
the cost effect to have an unambiguously positive effect on employment, and the factor-shift
effect to have an ambiguous effect on employment.  Without more information with respect to
the magnitudes of these three competing effects, it is not possible to predict the net
environmental employment effect in the regulated sector.

       Using plant-level Census information between the years  1979 and 1991, Morgenstern et
al. estimate the effects of pollution abatement expenditures on net employment in four highly
polluting/regulated sectors (pulp and paper, plastics, steel, and petroleum refining).  They
conclude that increased abatement expenditures generally have not caused a significant change in
net employment in those sectors. More specifically, their results show that, on average across the
industries studied, each additional $1 million (in 1987$)  spent on pollution abatement results in a
(statistically insignificant) net increase of 1.55 (+/- 2.24) jobs. As a result, the authors conclude
that increases in pollution abatement expenditures can have positive effects on employment and
do not necessarily cause economically significant employment changes. The conclusion is
similar to Berman and Bui (2001), who found that increased air quality regulation in Los
Angeles did not cause large employment changes.

       Ideally, the EPA would first apply the methodology of Morgenstern et al. to current
pollution expenditure and market data for the regulated firms to identify the relationship between
abatement costs and employment, then use this relationship to extrapolate the effect of new
projected abatement costs on these firms. Unfortunately, current firm-level abatement cost and
market characteristics are not available.  In addition, there are important differences in the
markets and regulatory settings analyzed in their study and the setting presented here that lead us
to conclude that it is inappropriate to utilize their quantitative estimates to estimate the
employment impacts from this reconsideration rule.  The differences between the underlying
regulations motivating the abatement expenditures studied in Morgenstern et al. are potentially
too many to allow for the direct transfer of their quantitative estimates  for use in analysis of the
final rule. There are also important differences between  the industries  affected by this final  rule

                                          5-17

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and the four manufacturing industries studied by Morgenstern et al. For these reasons, we
conclude there are too many uncertainties as to the comparability of the Morgenstern et al. study
to apply their estimates to quantify the employment impacts within the regulated sector for this
regulation.
                                           5-18

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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
include small businesses, small governmental jurisdictions, and small not-for-profit enterprises.

       After considering the economic impact of the rule on small entities, the screening
analysis indicates that this rule will not have a significant economic impact on a substantial
number of small entities (or "SISNOSE"). Under the analyses EPA considered,  sales and
revenue tests for establishments owned by model small entities are less than  1% except electric
power generation (NAICS 2211 with receipts less than $100,000 per year) and crop and animal
production (NAICS 111 and 112 with receipts less than $25,000 per year). These findings are
similar to  those for the final SI RICE rule promulgated in August 2010, though the impacts are
lower due to the reduction in the cost estimates for these industries.
6.1    Small Entity Data Set
       The industry sectors covered by the final rule were identified during the  development of
the cost analysis (EC/R, 2012). The Statistics of United States Business (SUSB) provides
national information on the distribution of economic variables by industry and enterprise size
(U.S. Census, 2012a, 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 are as follows:
       •  Establishment.  An establishment is a single physical location where business is
          conducted or where services or industrial operations are performed.
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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       •  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.
       •  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, 2013) 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.   SI NESHAP for Existing Stationary Reciprocating Internal Combustion
             Engines (RICE): Affected Sectors and SBA Small Business Size Standards
Industry Description
Electric Power Generation

Natural Gas Transmission
Crude Petroleum & NG Production
Natural Gas Liquid Producers
National Security
Hydro Power Units

Irrigation Sets
Corresponding
NAICS
2211

48621
211111
211112
92811
See NAICS 22 11

Affects NAICS 111 and
SBA Size Standard for
Businesses (January 7th,
2013)
a

$7.0 million in annual receipts
500 employees
500 employees
NA
1,000 employees

Generally $750,000 or less in
Type of Small
Entity
Business and
government
Business
Business
Business
Government
Business and
government
Business
Welders
       112
Affects industries that
use heavy equipment
such as construction,
  mining, farming
      annual receipts
Varies by 6-digit NAICS code;
     Example industry:
 NAICS 238 = $14 million in
      annual receipts
Business
"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). 2013. "Table of Small Business Size Standards Matched to North American
  Industry Classification System Codes." Effective January 7th, 2013. Downloaded 1/7/13.
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
less, farms with annual receipts of $500,000 or less, and farms with annual receipts of $750,000
or less.
1 2007 Economic Census data are at http://www.census.gov/econ/census07/.
                                             6-3

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        Table 6-2.   Average Receipts for Affected Industry by Enterprise: 2009 ($2009 Million/Establishment)
ON




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
January 7, 2013)
500 employees

500 employees

1,000 employees
500 employees

Owned By Enterprises with Employee Range:


All
Enterprises
$30.22

$172.81

$18.58
$18.51



1-20
Employees
$2.15

$0.30

$1.37
$1.56



20-99
Employees
$33.02

NA

$6.14
$6.60



100-499
Employees
$151,76

$11.88

$15.96
$33.25



500+
Employees
1,570

NA

$29.47
NA

        Source: U.S. Census Bureau. 2012a. "Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 2009.:
          
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Table 6-3.   Average Receipts for Affected Industry by Enterprise Receipt Range: 2007 ($2008 /establishment)
                                                                                             Owned By Enterprises with Receipt Range:
 NAICS   NAICS Description
 SBA Size Standard
    for Businesses                             100-     500-     1,000-   5,000,000-             10,000-  50,000-
 (effective January 7,      All      0-99K    499.9K   999.9K   4,999.9K  9,999,999K <10,OOOK  49,999K  99,999K  100,OOOK+
       2013)         Enterprises   Receipts  Receipts  Receipts  Receipts   Receipts    Receipts   Receipts  Receipts   Receipts
  2211   Electric Power                  a             $261.0
         Generation
 622110  General Medical and    $35.5 million in annual $202,058.7
         Surgical Hospitals      receipts
 237310  Highway , street, and    $33.5 million in            $7.74
         bride construction      Annual Receipts
 237110  Water and sewer line    $33.5 million in            $3.89
         and related structures,   Annual Receipts
         construction
                                  $31.2    $272.5    $724.9   $2,399.5    $7,330.5    $2,617.7    $24,786.  $67,706.  $1,394,051
                                                                                                 98           .0
                                    NA
 237130  Power                $33.5 million in
         andcommunication     Annual Receipts
         line and related
         structures construction
 237990  zOther heavy and
         civil engineering
         construction
 92811   National Security
$33.5 million in
Annual Receipts

        NA
                         $3.39
$2.66
NA
$0.06     $0.32

$0.06     $0.32


$0.06     $0.31
                   $23.82    NA

                             $0.84
                          $3,255.0    $7,291.0    $4,692.1   $23,481.   $67,545,  $508,705.5
                                                              9         6
$0.06
 NA
          3.30
          NA
                                                      $0.85
                             $0.83
 3.83
NA
$2.74

$2.73


$2.52



$2.48


 NA
$8.11

$8.17


$7.75



$7.76


 NA
                                                  $2.00    $22.62    $56.48

                                                  $1.84    $20.62    $45.05


                                                  $1.32    $16.84    $34.50
 3.99
NA
$18.72   $40.53
 NA
NA
$56.81

$47.27


$23.86



$42.35


NA
Note: Industries in green were included for consistency with the analysis done for the final rule. 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. 2009a. "Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 2009."
  
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       Annual entity compliance costs vary depending on the size of the SI 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 SI
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 48621 are fundamentally different
than other industries considered in this analysis due to the number of engines affected and
amount of cost incurred resulting from this final  rule, 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 $680 to $730 per engine, resulting in a total
          annualized compliance cost of approximately $2,040 to $2,200 for this representative
          establishment.
       •   Case 2: The representative establishment in NACIS 2211 and 48621  uses two 25 to
          750+ hp engines with an average compliance cost of $412 per engine, resulting in a
          total annualized compliance cost of $824 for this representative establishment. For all
          other industries, the representative establishment uses two 25 to 300 hp engines with
          an average compliance cost of $246 per engine,  resulting in a total compliance cost of
          $492 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 $73 per engine, resulting in a total
          compliance cost of $145  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 final rule 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 48621
based on the existing distribution of engines in these industries.6
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.
                                           6-6

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       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 ($2009)

Total Annualized Costs ($)
Engine Population
Average Engine Cost
($/engine)
Assumed Engines Per
Establishment
Total Annualized Costs per
Establishment
Case
NAICS
2211,48621
(+750 hp
only)
$7,710,388
10,548
$731
o
J
$2,193
1
All Other
NAICS
(+750 hp
only)
$586,434
863
$680
o
J
$2,040
Case
NAICS
2211,48621
(25-750+
hp)
$82,806,141
200,974
$412
2
$824
2
All Other
NAICS
(25-300
hp)
$28,057,798
114,517
$246
2
$492
Case 3
NAICS
2211,
48621
(25-100
hp only)
$8,510,985
117,040
$73
2
$145
All Other
NAICS
(25-100
hp only)
$6,174,805
84,913
$73
2
$145
                                           6-7

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  100%
   90%
   70%
   60%
   40%
   10%
  >750hp

  600-750 hp

  500-600 hp

  300-500 hp

• 175-300 hp

  100-175 hp

• 50-100 hp

• 25-50 hp
         Electric Power   Natural Gas  Crude Petroleum  Natural Gas   National Security  Hydro Power   Irrigation Sets     Welders
          Generation    Transmission  & NG Production Liquid Producers   (92811)    Units (335312)    (335312)      (333992)
            (2211)        (48621)       (211111)      (211112)
Figure 6-1.     Distribution of Engine Population by Size for All Industries
                                                           6-8

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  100%
   70%
   60%
   30%
   20%
>750hp
600-750 hp
500-600 hp
300-500 hp
175-300 hp
100-175 hp
50-100 hp
25-50 hp
       Electric Power   Natural Gas  Crude Petroleum  Natural Gas National Security Hydro Power   Irrigation Sets    Welders
        Generation   Transmission  & NG Production Liquid Producers   (92811)    Units (335312)   (335312)     (333992)
         (2211)      (48621)     (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
percentage of total revenues is a metric for evaluating cost increases on small entities in relation
to increases on large entities.8
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.
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.
                                              6-9

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       If the cost-to-receipt ratio is less than 1%, then we consider the 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 and NAICS 111 and
          112 with receipts less than $25,000 per year
       •   Case 3: No industries

       Sensitivity Analysis (unlikely):
       -   Case 1: NAICS 2211 with receipts less than $100,000 per year

       In the Case 2 primary analysis, only establishments in NAICS  2211 with receipts less
than $100,000 per year (less than 5 percent of the total), and establishments in NAICS 111 and
112 with receipts less than $25,000 per year (around 30 percent of the total) have cost-to-receipt
ratios above 1%. However, establishments earning this level of receipts are likely to be using
smaller engines than those assumed in Case 2,  such as 25 to 300 hp engines. The results of our
Case 3 analysis demonstrate that these establishments are not significantly impacted when taking
this engine size into account.

       After considering the economic impacts of this rule on small entities, we certify that this
action will not have a significant economic impact on a substantial number of small entities.
This certification is based on the economic impact of this final action to all affected small entities
across all industries affected. The percentage of small entities impacted by this  having
annualized costs greater than 1 percent of sales is less than 2 percent according to this analysis.
We thus conclude that there is no significant economic impact on a substantial number of small
entities (SISNOSE) for this final rule.

       Although the final rule would not have a significant economic  impact on a substantial
number of small entities, EPA nonetheless tried to reduce the impact of the rule on small entities.
When developing the reconsidered standards, EPA took special steps to ensure that the burdens
imposed on small entities were minimal.  EPA conducted several meetings with industry trade
associations to discuss regulatory options and the corresponding burden on industry, such as
recordkeeping and  reporting. In addition, as mentioned earlier in this preamble,  EPA's final
action reduces regulatory  requirements for a variety of area sources affected under this RICE rule
with amendments to the final RICE rules promulgated in 2010.
                                          6-10

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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 2007 Census (in 2008 dollars), the average revenue for
small governments (counties and municipalities) with populations fewer than 10,000 is $4
million per entity, and the average revenue for local governments with populations fewer than
50,000 is $9 million per entity (U.S. Census Bureau, 2009a; U.S. Census Bureau, 2009b). 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.
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.
                                          6-11

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                                       Section 7
            HUMAN HEALTH BENEFITS OF EMISSIONS REDUCTIONS

Synopsis

       Implementation of emissions controls required by the final SI RICE NESHAP
reconsideration is expected to reduce emissions of hazardous air pollutants (HAP) and have
ancillary co-benefits that would lower ambient concentrations of NC>2, PM2.5 and ozone. In this
section, we quantify the monetized co-benefits for this rule associated with reducing exposure to
ambient fine particulate matter (PM^.s) by reducing emissions of precursors. We estimate the
total monetized co-benefits to be $62 million to $150 million at a  3% discount rate and $55
million to $140 million at a 7% discount rate in 2013. All estimates are in 2010$.  These
estimates reflect the monetized human health benefits of reducing cases of morbidity and
premature mortality among populations exposed to PM2.5 reduced by this rule.  These estimates
reflect EPA's most current interpretation of the scientific literature. Higher or lower estimates of
benefits are possible using other assumptions; examples of this are provided in Figure 7-2. Data,
resource, and methodological limitations prevented EPA from monetizing the benefits from
several important benefit categories, including benefits from reducing exposure to HAP, carbon
monoxide, NC>2 and ozone, as well as ecosystem effects and visibility impairment. In addition to
reducing emissions of PM precursors such as NOx, this rule would reduce 1,800 tons of HAP and
22,000 tons of carbon monoxide each year.
7.1    Calculation of PM2.5-Related Human Health Co-Benefits

       Assuming that our baseline does not include implementation of the 2010 final SI RICE
rule, as we state earlier in this RIA, this final reconsideration NESHAP would reduce emissions
of NOx, and VOCs. Because these emissions are  precursors to PM2.5, reducing these emissions
would also reduce PM2.5 formation, human exposure and the incidence of PM2.5-related health
effects.  Due to analytical limitations, it was not possible to provide a comprehensive estimate of
PM2.5-related benefits or provide estimates of the health benefits associated with exposure to
HAP, CO, NO2 or ozone. Instead, we used the "benefit-per-ton" approach to estimate these
benefits. The methodology employed in this analysis is similar to the work described in Fann,
Fulcher, and Hubbell (2009), but represents an improvement that EPA believes would provide
more reliable estimates of PM2.5-related health benefits for emissions reductions in specific
sectors. The key assumptions are described in detail below. These PM2.5 benefit-per-ton
estimates provide the total monetized human health benefits (the sum of premature mortality and
                                          7-1

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premature morbidity) of reducing one ton of PM2.5 from a specified source. EPA has used the
benefit per-ton technique in several previous RIAs, including the recent 862 NAAQS RIA (U.S.
EPA, 2010).

       The Integrated Science Assessment (ISA) for Paniculate Matter (U.S. EPA, 2009b)
identified the human health effects associated with ambient PM2.5, which include premature
morality and a variety of morbidity effects associated with acute and chronic exposures. Table 7-
1 shows the quantified and unquantified benefits captured in those benefit-per-ton estimates, but
this table does not include entries for the unquantified health effects associated with exposure to
ozone and NO2 nor welfare effects such as ecosystem effects and visibility impairment that are
described in section 7.2. It is important to emphasize that the list of unquantified benefit
categories is not exhaustive, nor is quantification of each effect complete.
                                           7-2

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Table 7-1:  Human Health Effects of PM2.5
Category
Specific Effect
Effect Has
Been
Quantified
Effect Has
Been
Monetized
More
Information
(refers to
CSAPR RIA)
Improved Human Health
Reduced incidence of
premature mortality
from exposure to PM2 5
Reduced incidence of
morbidity from
exposure to PM2 5
Adult premature mortality based on cohort
study estimates and expert elicitation
estimates (age >25 or age >30)
Infant mortality (age <1)
Non-fatal heart attacks (age > 18)
Hospital admissions — respiratory (all
ages)
Hospital admissions — cardiovascular (age
>20)
Emergency room visits for asthma (all
ages)
Acute bronchitis (age 8-12)
Lower respiratory symptoms (age 7-14)
Upper respiratory symptoms (asthmatics
age 9-11)
Asthma exacerbation (asthmatics age 6-
18)
Lost work days (age 18-65)
Minor restricted-activity days (age 18-65)
Chronic Bronchitis (age >26)
Emergency room visits for cardiovascular
effects (all ages)
Strokes and cerebrovascular disease (age
50-79)
Other cardiovascular effects (e.g., other
ages)
Other respiratory effects (e.g., pulmonary
function, non-asthma ER visits, non-
bronchitis chronic diseases, other ages and
populations)
Reproductive and developmental effects
(e.g., low birth weight, pre-term births,
etc)
Cancer, mutagenicity, and genotoxicity
effects

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          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 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 (2006-2009) 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 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
          (2006-2009) RIAs.
          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 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
benefits estimates. Previously, EPA had calculated benefits based on these two empirical
studies, but derived the range of benefits, including the minimum and maximum results, from an
expert elicitation of the relationship between exposure to PM2 5 and premature mortality (Roman
 These two studies specify multi-pollutant models that control for SO2, among other co-pollutants.

                                          7-4

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et al., 2008).  Within this assessment, we include the 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, 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 benefits of PM2.5 control are very likely to be substantial.

       Readers interested in reviewing the general methodology for creating the benefit-per-ton
estimates used in this analysis should consult the draft Technical Support Document (TSD) on
estimating the benefits per ton of reducing PM2.5 and its precursors from in the "Other Non-EGU
Point" sector(U.S. EPA, 2012).3 The primary difference between the estimates used in this
analysis and the estimates reported in Fann, Fulcher, and Hubbell (2009) is the air quality
modeling data utilized. The air quality modeling data used in this analysis use more narrow
sectors. In addition, the updated air quality modeling data reflects more recent emissions data
(2005 rather than 2001) and has a higher spatial resolution (12km rather than 36 km grid cells).
The benefits methodology, such as health endpoints assessed, risk estimates applied, and
valuation techniques applied did not change. As noted below in the characterization of
uncertainty, these updated estimates still have similar limitations as all national-average benefit-
per-ton estimates in that they reflect the geographic distribution of the modeled emissions, which
may not exactly match the emission reductions in this rulemaking, and they may not reflect local
variability in population density, meteorology, exposure, baseline health incidence rates, or other
local factors for any specific location.4 In this analysis, we apply these national benefit-per-ton
 Please see the Section 5.2 of the Portland Cement PJA in Appendix 5A for more information regarding the change
   in the presentation of benefits estimates.
3 Stationary RICE are included in the other non-EGU point source category.  If the affected stationary engines are
   more rural than the average of the non-EGU sources modeled, then it is possible that the benefits may be
   somewhat less than we have estimated here. The TSD provides the geographic distribution of the air quality
   changes associated with this sector. It is important to emphasize that this modeling represents the best available
   information on the air quality impact on a per ton basis for these sources.
4 To the extent that the PM2 5 improvements achieved by the 2010 final rule would have been located in areas with
   lower average population density compared to the areas with engines regulated under these amendments, there is
   a potential for the estimated loss in benefits to be overstated by the use of national-average benefit-per-ton
   estimates. For example, if only engines in areas with higher population density are regulated, this scenario should
   result in higher benefit-per-ton estimates than a scenario only regulating engines in areas with lower population
   density. It is important to note that the benefit-per-ton estimates that EPA applied in this assessment reflect
   pollution transport as well as a variety of emission source locations, including areas with high and low
   population density. Without information regarding the specific location of the engines affected by the 2010 final
   rule and the amendments, it is not possible to be more precise regarding the true magnitude of the loss in
   benefits.
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estimates calculated for this category for NOx and multiply them by the corresponding emission
reductions.

       These models assume that all fine particles, regardless of their chemical composition, are
equally potent in causing premature mortality because the scientific evidence is not yet sufficient
to allow differentiation of effects estimates by particle type. NOx is the primary PM2.5 precursors
affected by this rule. Even though we assume that all fine particles have equivalent health
effects, the benefit-per-ton estimates vary between precursors depending on the location and
magnitude of their impact on PM2.5 levels, which drive population exposure.  The sector-specific
modeling does not provide estimates of the PM2.s-related benefits associated with reducing VOC
emissions, but these unqualified benefits are generally small compared to other PM2.5 precursors
(U.S. EPA, 2012).

       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,
2006).  Specifically, this analysis uses the method first applied in the Portland Cement NESHAP
RIA (U.S. EPA, 2009a), which applied the functions directly from the epidemiology studies
without an adjustment for an assumed threshold. Removing the threshold assumption is a key
difference between the method used in this analysis of PM benefits and the methods used in
RIAs prior to the Portland Cement proposal NESHAP, and we now calculate  incremental
benefits down to the lowest modeled PM2.5 air quality levels.5

       Based on our review of the current body of scientific literature, EPA now estimates PM-
related mortality without applying an assumed concentration threshold.  EPA's Integrated
Science Assessment for P articulate Matter (U.S. EPA, 2009b), which was 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 concentration-response relationship while
recognizing potential uncertainty about the exact shape of the concentration-response function.

       Consistent with this finding, we have conformed the previous threshold sensitivity
analysis to the current state of the PM science by incorporating a "Lowest Measured Level"
(LML) assessment, which is a method EPA has employed in several recent RIAs including the
Cross-State Air Pollution Rule (U.S. EPA, 201 Ib).  This information allows readers to determine
the portion of population exposed to annual mean PM2.5 levels at or above the LML  of each
1 Additional updates since the Portland Cement RIA include a revised VSL and updated baseline incidence rates.

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study; in general, our confidence in the estimated PM mortality decreases as we consider air
quality levels further below the LML in major cohort studies that estimate PM-related mortality.
While an LML assessment provides some insight into the level of uncertainty in the estimated
PM mortality benefits, EPA does not view the LML as  a threshold and continues to quantify PM-
related mortality impacts using a full range of modeled air quality concentrations.  It is important
to emphasize that we have high confidence in PM2.s-related effects down to the lowest LML of
the major cohort studies, which is 5.8 |ig/m3. Just because we have greater confidence in the
benefits above the LML, this does not mean that we have no confidence that benefits occur
below the LML.  For a summary of the scientific review statements regarding the lack of a
threshold in the PM2.5-mortality relationship, see the Technical Support Document (TSD)
entitled Summary of Expert Opinions on the Existence of a Threshold in the Concentration-
Response Function for PM2.5-related Mortality (U.S. EPA, 201 Ob).

       For this analysis, policy-specific air quality data is not available due to time or resource
limitations. For these rules, we are unable to estimate the percentage of premature mortality
associated with this specific rule's emission reductions at each PM2.5 level. However, we believe
that it is still important to characterize the distribution of exposure to baseline air quality levels.
As a surrogate measure of mortality impacts, we provide the percentage of the population
exposed at each PM2.s level using the source apportionment modeling used to calculate the
benefit-per-ton estimates for this sector.  It is important to note that baseline exposure is only one
parameter in the health impact function, along with baseline incidence rates population, and
change in air quality. In other words, the percentage of the population exposed to air pollution
below the LML is not the same as the percentage of the population experiencing health impacts
as a result of a specific emission reduction policy. The most important aspect, which we are
unable to quantify for rules without rule-specific air quality modeling, is the shift in exposure
associated with this specific rule.  Therefore, caution is warranted when interpreting the LML
assessment for this rule.  The results of this analysis are provided in Section 7.3.

       As is the nature of 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
                                           7-7

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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 rulemakings 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
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.

       In implementing these rules, emission controls may lead to reductions in ambient PM2.5
below the National Ambient Air Quality Standards (NAAQS) for PM in some areas and assist
other  areas with attaining the PM NAAQS. Because the PM NAAQS RIAs also calculate PM
6 After adjusting the VSL for a different currency year (2010$) and to account for income growth to 2015 of the $5.5
  million value, the VSL is $8.0 million.
7 In the revised Economic Guidelines (U.S. EPA, 2010c), 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 This value is $4.8 million in 1990$. In this analysis, we adjust the VSL to account for a different currency year
($2010) and to account for income growth to 2015. After applying these adjustments to the $6.3 million value, the
VSL is $9.2 million.
                                           7-8

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benefits, there are important differences worth noting in the design and analytical objectives of
each RIA. The NAAQS RIAs illustrate the potential costs and benefits of attaining a new air
quality standard nationwide based on an array of emission control strategies for different sources.
In short, NAAQS RIAs hypothesize, but do not predict, the control strategies that States may
choose to enact when implementing a NAAQS. The setting of a NAAQS does not directly result
in costs or benefits, and as such, the NAAQS RIAs are merely illustrative and are not intended to
be added to the costs and benefits of other regulations that result in specific costs of control and
emission reductions. However,  some costs and benefits estimated in this RIA account for the
same air quality improvements  as estimated in the illustrative PM2.5 NAAQS RIA.

       By contrast, the emission reductions for implementation rules are from a specific class of
well-characterized sources. In general, EPA is more confident in the magnitude and location of
the emission reductions for implementation rules rather than illustrative NAAQS analyses.
Emission reductions achieved under these and other promulgated rules will ultimately be
reflected in the baseline of future NAAQS analyses, which would reduce the incremental costs
and benefits associated with attaining the NAAQS. EPA remains forward looking towards the
next iteration of the 5-year review cycle for the NAAQS, and as a result  does not issue updated
RIAs for existing NAAQS that  retroactively update the baseline for NAAQS implementation.
For more information on the relationship between  the NAAQS and rules such as analyzed here,
please see Section 1.2.4 of the SO2 NAAQS RIA (U.S. EPA, 2010a).
                                          7-9

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        Figure 7.1 illustrates the relative breakdown of the monetized PM2.5 health benefits.
      dult Mortality - Pope et
            al. 93%
                                                  /
                                                  K              Infant Mnrtalitx/n 4%
                                                                 Infant Mortality 0.4%


                                                                 Work Loss Days 0.2%

                                                                Iospital Admissions, Cardio
                                                                      0.2%
                                                                              jHospitalAdmissions, Resp
                                                                                      0.04%
                                                                                Asthma Exacerbation 0.01%
                                                                                Acute Bronchitis0.01%
                                                                                Upper Resp Symp 0.00%
                                                                                Lower Resp Symp 0.00%
                                                                                ERVisits, RespO.00%


Figure 7-1:   Breakdown of Monetized PMi.s Health Benefits using Mortality Function
               from Pope et al. (2002)*
*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 benefits due to adult
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 monetized PM-related health benefits by

precursor, including the emission reductions and benefit-per-ton estimates 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 benefits using our anchor points of Pope

et al. and Laden et al. as well as the results from the expert elicitation on PM mortality. Figure

7-2 provides a visual representation of the range of PM2.s-related benefits estimates using
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 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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concentration-response functions supplied by experts.  Figure 7-3 shows a breakdown of
monetized benefits by engine size.

       The benefit-per-ton estimates shown in this RIA are different than the benefit-per-ton
estimates cited in the 2010 final SI RICE RIA for two reasons. First, these estimates are based
on updated air quality modeling, which results in slightly higher benefits per ton for other non-
EGU point sources than the previous modeling.  Second, these estimates have been inflated to
2010$. Third, the new air quality modeling did not provide estimates associated with reducing
VOCs.   Since the reconsideration proposal, EPA  has made several updates to the approach we
use to estimate mortality and morbidity benefits in the PM NAAQS RIAs (U.S. EPA, 2012a,b)
including updated epidemiology studies, health endpoints, and population  data. Although we
have not re-estimated the benefits for this rule to apply this new approach, these updates
generally offset each other, and we anticipate that  the rounded benefits estimated for this rule are
unlikely to be different than those provided below.
Table 7-2:   General Summary of Monetized PM2.5-Related Health Co-Benefits Estimates
             for the SI RICE NESHAP Reconsideration (millions of 2010$)*
Pollutant
Emissions
Reductions
(tons)
Benefit
per ton
(Pope,
3%)
Benefit
per ton
(Laden,
3%)
Benefit
per ton
(Pope,
7%)
Benefit
per ton
(Laden,
7%)
Total Monetized
Benefits (millions
of 2010$ at 3%)
Total Monetized
Benefits (millions
of 2010$ at 7%)
PM2.5 Precursors
NOX

9,648

$6,400

$16,000

$5,700

$14,000
Total
$62 to $150
$62 to $150
$55 to $140
$55 to $140
 All estimates are for the analysis year (2013), and are rounded to two significant figures so numbers may not sum
across columns.  It is important to note that the monetized benefits do not include reduced health effects from direct
exposure to NO2, ozone exposure, ecosystem effects, or visibility impairment. 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 form PM2 5. The monetized benefits incorporate the conversion from precursor emissions to ambient
fine particles. Confidence intervals are unavailable for this analysis because of the benefit-per-ton methodology.
Although we have not re-estimated the benefits for this rule to apply the updated methods in the PM NAAQS PJA
(U.S. EPA, 2012b), these updates generally offset each other, and we anticipate that the rounded benefits estimated
for this rule are unlikely to be different than those provided here.
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Table 7-3:   Summary of Reductions in Health Incidences from PMi.s-Related Co-Benefits
              for the SI RICE NESHAP Reconsideration*

Avoided Premature Mortality
  Pope et al.                                                                7
  Laden etal.                                                               18
Avoided Morbidity
  Chronic Bronchitis                                                         5
  Emergency Department Visits, Respiratory                                    5
  Hospital Admissions, Respiratory                                            1
  Hospital Admissions, Cardiovascular                                         3
  Acute Bronchitis                                                          11
  Lower Respiratory                                                        140
  Upper Respiratory                                                        110
  Minor Restricted Activity Days                                            5,600
  Work Loss Days                                                         950
  Asthma Exacerbation                                                     230
  Acute Myocardial Infarction                                                8
* 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 because the scientific evidence is not yet sufficient to
allow differentiation of effects estimates by particle type. 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 SI RICE NESHAP Reconsideration at
             discount rates of 3% and 7% in 2013 (in millions of 2010$)*

Benefit-per-ton
Pope et al.
Laden et al.
Benefit-per-ton
Expert A
Expert B
Expert C
Expert D
Expert E
Expert F
Expert G
Expert H
Expert I
Expert J
Expert K
Expert L
3%
Coefficients Derived from Epidemiology Literature
$62
$150
Coefficients Derived from Expert Elicitation
$160
$120
$120
$87
$200
$110
$74
$93
$120
$100
$24
$82
7%

$55
$140

$150
$110
$110
$78
$180
$100
$66
$83
$110
$89
$21
$73
 All estimates are rounded to two significant figures. The 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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        $250
                    3% DR

                    7% DR
        $200
  —    $150
        $100
         $50
          $0
                PM2.5 mortality benefits estimates derived from 2 epidemiology functions and 12 expert functions
Figure 7-2:    Total Monetized PM2.5 Co-Benefits of SI RICE NESHAP Reconsideration in
                2013
*This graph shows the estimated 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.
                                                7-14

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                                                                      Area 600-750 HP
                                                                            5%
Figure 7-3:   Breakdown of Total Monetized PM2.5 Co-Benefits of SI RICE NESHAP
              Reconsideration by Engine Size

7.2    Unquantified Benefits

       The monetized benefits estimated in this RIA only reflect a subset of benefits attributable
to the health effect reductions associated with ambient fine particles. Data, time, and resource
limitations prevented EPA from quantifying the impacts to, or monetizing the benefits from
several important benefit categories, including benefits from reducing exposure to HAP, CO,
NC>2, and ozone exposure,  as well as ecosystem effects, and visibility impairment. This does not
imply that there are no benefits associated with these emission reductions. These benefits are
described qualitatively in this section.

7.2.1 HAP Benefits

     Even though emissions of air toxics from all sources in the U.S. declined by approximately
42% since 1990, the 2005 National-Scale Air Toxics Assessment (NAT A) predicts that most
Americans are exposed to ambient concentrations of air toxics at levels that have the potential to
cause adverse health effects (U.S. EPA, 201 lc).10 The levels of air toxics to which people are
exposed vary depending on where people live and work and the kinds of activities in which they
engage. In order to identify and prioritize air toxics, emission source types and locations that are
 ' The 2005 NATA is available on the Internet at http://www.epa.gov/ttn/atw/nata2005/.
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of greatest potential concern, U.S. EPA conducts the NATA.11  The most recent NATA was
conducted for calendar year 2005 and was released in March 2011. NATA includes four steps:

        1) Compiling a national emissions inventory of air toxics emissions from outdoor sources

        2) Estimating ambient and exposure concentrations of air toxics across the United States

        3) Estimating population exposures across the United States

        4) Characterizing potential public health risk due to inhalation of air toxics including both
        cancer and noncancer effects

        Based on the 2005 NATA, EPA estimates that about 5% of census tracts nationwide have
increased cancer risks greater than 100 in a million.  The average national cancer risk is about 50
in a million. Nationwide, the key pollutants that contribute most to the overall  cancer risks are
formaldehyde and benzene.12  Secondary formation (e.g., formaldehyde forming from other
emitted pollutants) was the largest contributor to cancer risks, while stationary, mobile and
background sources contribute almost equal portions of the remaining cancer risk.

        Noncancer health effects can result from chronic,13 subchronic,14 or acute15 inhalation
exposures to air toxics, and include neurological, cardiovascular, liver, kidney,  and respiratory
effects  as well as effects on the immune and reproductive systems. According to the 2005
NATA, about three-fourths of the U.S. population was exposed to an average chronic
concentration of air toxics that has the potential for adverse noncancer respiratory health effects.
Results from the 2005 NATA indicate that acrolein is the primary driver for noncancer
respiratory  risk.
11 The NATA modeling framework has a number of limitations that prevent its use as the sole basis for setting
   regulatory standards. These limitations and uncertainties are discussed on the 2005 NATA website. Even so,
   this modeling framework is very useful in identifying air toxic pollutants and sources of greatest concern, setting
   regulatory priorities, and informing the decision making process.  U.S. EPA.(2011). 2005 National-Scale Air
   Toxics Assessment, http://www.epa.gov/ttn/atw/nata2005/
12 Details about the overall confidence of certainty ranking of the individual pieces of NATA assessments including
   both quantitative (e.g., model-to-monitor ratios) and qualitative (e.g., quality of data, review of emission
   inventories) judgments can be found at http://www.epa.gov/ttn/atw/nata/roy/pagel6.html.
13 Chronic exposure is defined in the glossary of the Integrated Risk Information (IRIS) database
   (http://www.epa.gov/iris) as repeated exposure by the oral, dermal, or inhalation route for more than
   approximately 10% of the life span in humans (more than approximately 90 days to 2 years in typically used
   laboratory animal species).
14Defined in the IRIS database as repeated exposure by the oral, dermal, or inhalation route for more than 30 days,
   up to approximately 10% of the life span in humans (more than 30 days up to approximately 90 days in typically
   used laboratory animal species).
15 Defined in the IRIS database as exposure by the oral, dermal, or inhalation route for 24 hours or less.


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       Figure 7-4 and Figure depict the estimated census tract-level carcinogenic risk and
noncancer respiratory hazard from the assessment. It is important to note that large reductions in
HAP emissions may not necessarily translate into significant reductions in health risk because
toxicity varies by pollutant, and exposures may or may not exceed levels of concern.  For
example, acetaldehyde mass emissions are more than double acrolein emissions on a national
basis, according to EPA's 2005 National Emissions Inventory (NEI).  However, the Integrated
Risk Information System (IRIS) reference concentration (RfC) for acrolein is considerably lower
than that for acetaldehyde, suggesting that acrolein could be potentially more toxic than
acetaldehyde. Thus, it is important to account for the toxicity and exposure, as well as the mass
of the targeted emissions.
Figure 7-4   Estimated Chronic Census Tract Carcinogenic Risk from HAP exposure
from outdoor sources (2005 NATA)
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   Total Respiratory
   Hazard Index
      o-1
      1-5
   •1 5-10
   ^B 10-15
   ^H 15-20
   ^H >20
      Zero Population Tracts
Figure 7-5    Estimated Chronic Census Tract Noncancer (Respiratory) Risk from HAP
exposure from outdoor sources (2005 NATA)

       Due to methodology and time limitations under the court-ordered schedule, we were
unable to estimate the benefits associated with the hazardous air pollutants that would be reduced
as a result of these rules. In a few previous analyses of the benefits of reductions in HAP, EPA
has quantified the benefits of potential reductions in the incidences of cancer and non-cancer risk
(e.g., U.S. EPA, 1995). In those analyses, EPA relied on unit risk factors (URF) developed
through risk assessment procedures.16 These URFs are designed to be conservative, and as such,
are more likely to represent the high end of the distribution of risk rather than a best or most
likely estimate of risk. As the purpose of a benefit analysis is to describe the benefits most likely
to occur from a reduction in pollution, use of high-end, conservative risk estimates would
overestimate the benefits of the regulation. While we used high-end risk estimates in past
analyses, advice from the EPA's Science Advisory Board (SAB) recommended that we avoid
16The unit risk factor is a quantitative estimate of the carcinogenic potency of a pollutant, often expressed as the
   probability of contracting cancer from a 70-year lifetime continuous exposure to a concentration of one ug/m3 of
   a pollutant.
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using high-end estimates in benefit analyses (U.S. EPA-SAB, 2002). Since this time, EPA has
continued to develop better methods for analyzing the benefits of reductions in HAP.

       As part of the second prospective analysis of the benefits and costs of the Clean Air Act
(U.S. EPA, 201 la), EPA conducted a case study analysis of the health effects associated with
reducing exposure to benzene in Houston from implementation of the Clean Air Act (ffic, 2009).
While reviewing the draft report, EPA's Advisory Council on Clean Air Compliance Analysis
concluded that "the challenges for assessing progress in health improvement as a result of
reductions in emissions of hazardous air pollutants (HAPs) are daunting... due to a lack of
exposure-response functions, uncertainties in emissions inventories and background levels, the
difficulty of extrapolating risk estimates to low doses and the challenges of tracking health
progress for diseases, such as cancer, that have long latency periods" (U.S. EPA-SAB, 2008).

       In 2009, EPA convened a workshop to address the inherent complexities, limitations, and
uncertainties in current methods to quantify the benefits of reducing HAP. Recommendations
from this workshop included identifying research priorities, focusing on susceptible and
vulnerable populations, and  improving dose-response relationships (Gwinn et al., 2011).

       In summary, monetization of the benefits  of reductions in cancer incidences requires
several important inputs, including central estimates of cancer risks, estimates  of exposure to
carcinogenic HAP, and estimates of the value of an avoided case of cancer (fatal and non-fatal).
Due to methodology and time limitations under the court-ordered schedule, we did not attempt to
monetize the health benefits of reductions in HAP in this analysis. Instead, we provide a
qualitative analysis of the health effects associated with the HAP anticipated to be reduced by
these rules.EPA remains committed to improving methods for estimating HAP benefits by
continuing to explore additional concepts of benefits, including changes in the distribution of
risk.

       Although numerous HAPs may be emitted from SI RICE, a few HAPs account for over 90%
of the total mass of HAPs emissions emitted. These HAPs are formaldehyde (72%), acetaldehyde
(8%), acrolein (7%), methanol (3%), and benzene (3%). Although we do not have estimates of
emission reductions for each HAP,  this rule is anticipated to reduce 1,800 tons of HAPs each year.
Below we describe the health effects associated with the top 5 HAPs by mass emitted from SI RICE.
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Formaldehyde

       Since  1987, EPA has classified formaldehyde as a probable human carcinogen based on
evidence in humans and in rats, mice, hamsters, and monkeys.17  Substantial additional research
since that time informs current scientific understanding of the health effects associated with
exposure to formaldehyde. These include recently published research conducted by the National
Cancer Institute (NCI) which found an increased risk of nasopharyngeal cancer and
lymphohematopoietic malignancies such as leukemia among workers exposed to
formaldehyde.18'19 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  formaldehyde exposures.20 A recent NIOSH study of garment workers also found
                                                                              91
increased risk of death due to leukemia among workers exposed to formaldehyde.   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.22

       In the  past 15 years there has been substantial research on the inhalation dosimetry for
formaldehyde in rodents and primates by the Chemical Industry Institute of Toxicology (CUT,
now renamed the Hamner Institutes for Health Sciences), with a focus on use of rodent data for
refinement of the quantitative cancer dose-response assessment.23'24'25 CIIT's risk assessment of
17 U.S. EPA. 1987. Assessment of Health Risks to Garment Workers and Certain Home Residents from Exposure to
   Formaldehyde, Office of Pesticides and Toxic Substances, April 1987. Docket EPA-HQ-OAR-2010-0162.
18Hauptmann, 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. Docket EPA-HQ-OAR-2010-0162.
19Hauptmann, 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. Docket EPA-HQ-
   OAR-2010-0162.
20Beane 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. Docket EPA-HQ-OAR-2010-0162.
21 Pinkerton, L. E. 2004. Mortality among a cohort of garment workers exposed to formaldehyde: an update.
   Occup. Environ. Med. 61: 193-200. Docket EPA-HQ-OAR-2010-0162.
22 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. Docket EPA-HQ-OAR-2010-0162.
23 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.
   Docket EPA-HQ-OAR-2010-0162.
24 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. Docket EPA-HQ-OAR-
   2010-0162.
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formaldehyde incorporated mechanistic and dosimetric information on formaldehyde. These data
were modeled using a biologically-motivated two-stage clonal growth model for cancer and also
a point of departure based on a Benchmark Dose approach.  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.26'27'28'29 These
findings are not supportive of interpreting the CUT model results as providing a conservative
(health protective) estimate of human risk.30 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.31

       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
leukemia was characterized as "strong."32

       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

25 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. Docket EPA-HQ-OAR-2010-0162.
26 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. Docket EPA-HQ-OAR-2010-0162.
27 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. Docket EPA-HQ-
   OAR-2010-0162.
28 Subramaniam RP; Crump KS; Van Landingham C; et. al. (2007) Uncertainties in the CUT model for
   formaldehyde-induced carcinogenicity in the rat: A limited sensitivity analysis-I. Risk Anal, 27: 1237-1254.
   Docket EPA-HQ-OAR-2010-0162.
29 Crump, K; Chen, C; Fox, J;  .et .al. (2008) Sensitivity analysis of biologically motivated model forformaldehyde-
   induced respiratory cancer in humans. Ann Occup Hyg 52:481-495. Docket EPA-HQ-OAR-2010-0162.
30 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. Docket EPA-HQ-OAR-2010-0162.
31 Subramaniam RP; Crump KS; Van Landingham C; et. al. (2007) Uncertainties in the CUT model for
   formaldehyde-induced carcinogenicity in the rat: A limited sensitivity analysis-I. Risk Anal, 27: 1237-1254.
   Docket EPA-HQ-OAR-2010-0162.
32 International Agency for Research on Cancer (2006) Formaldehyde, 2-Butoxyethanol and l-tert-Butoxypropan-2-
   ol. Monographs Volume 88. World Health Organization, Lyon, France. Docket EPA-HQ-OAR-2010-0162.

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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.33'34

        The above-mentioned rodent and human studies, as well  as mechanistic information and
their analyses, were evaluated in EPA's recent Draft Toxicological Review of Formaldehyde -
Inhalation Assessment through the Integrated Risk Information System (IRIS) program. This
draft IRIS assessment was released in June 2010 for public review and comment and external
peer review by the National Research Council (NRC).  The NRC released their review report in
April 2011 (http://www.nap.edu/catalog.php7record_id=l3142).  The EPA is currently revising
the draft assessment in response to this review.

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.35

Acetaldehyde is reasonably anticipated to be a human carcinogen by the U.S. Department of

Health and Human Services (DHHS) in the 11*  Report on Carcinogens and is classified as

possibly carcinogenic to humans (Group 2B) by the IARC.36'37 The primary noncancer effects of
                                                                                    TO
exposure to acetaldehyde vapors include irritation of the eyes,  skin, and respiratory tract.
33 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 11.html. Docket EPA-HQ-OAR-2010-0162.
34 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. Docket EPA-HQ-OAR-2010-0162.
35 U.S. Environmental Protection Agency (U.S. EPA). 1991. 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.
36 U.S. Department of Health and Human Services National Toxicology Program 11th Report on Carcinogens
   available at: http://ntp.niehs.nih.gov/go/16183.
37 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.
38 U.S. Environmental Protection Agency (U.S. EPA). 1991. 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.


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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.39  The IARC determined in 1995 that acrolein was not classifiable as to its
carcinogenicity in humans.40

        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.41  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.42  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.43 Lesions to the lungs and upper respiratory tract
of rats, rabbits, and hamsters have been observed after subchronic exposure to acrolein.44 Acute
exposure effects in animal studies report bronchial hyper-responsiveness.45  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
39 U.S. Environmental Protection Agency (U.S. EPA). 2003. 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/toxreviews/0364tr.pdf.
40 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.
41U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein.
   EPA/635/R-03/003. p. 10. Research and Development, National Center for Environmental Assessment,
   Washington, DC. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf
42U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein.
   2003. Research and Development, National Center for Environmental Assessment, Washington, DC.
   EPA/635/R-03/003. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf.
43 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein.
   Research and Development, National Center for Environmental Assessment, Washington, DC. EPA/635/R-
   03/003. p. 11. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf.
44 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein.
   Research and Development, National Center for Environmental Assessment, Washington, DC. EPA/635/R-
   03/003. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf.
45 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File of Acrolein.
   Research and Development, National Center for Environmental Assessment, Washington, DC. EPA/635/R-
   03/003. This material is available at http://www.epa.gov/iris/toxreviews/0364tr.pdf.


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respiratory rate.46 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
strong respiratory irritants such as acrolein.

Benzene

        The EPA's IRIS database lists benzene as a known human carcinogen (causing leukemia)
by all routes of exposure, and concludes that exposure is associated with additional health effects,
including genetic changes in both humans and animals and increased proliferation of bone marrow
cells in mice.47'48'49 EPA states in its IRIS  database that data indicate a causal relationship between
benzene exposure and acute lymphocytic leukemia and suggest a relationship between benzene
exposure and chronic non-lymphocytic leukemia and chronic lymphocytic leukemia. The IARC
has determined that benzene is a human carcinogen and the DHHS has characterized benzene as a
known human carcinogen.50'51 A number of adverse noncancer health effects including blood
disorders, such as preleukemia and aplastic anemia, have also been associated with long-term
exposure to benzene.52'53
46Morris 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.
47 U.S. Environmental Protection Agency (U.S. EPA). 2000. Integrated Risk Information System File for Benzene.
   Research and Development, National Center for Environmental Assessment, Washington, DC.  This material is
   available electronically at: http://www.epa.gov/iris/subst/0276.htm.
48 International Agency for Research on Cancer, IARC monographs on the evaluation of carcinogenic risk of
   chemicals to humans, Volume 29, Some industrial chemicals and dyestuffs, International Agency for Research
   on Cancer, World Health Organization, Lyon, France, p. 345-389, 1982.
49 Irons, R.D.; Stillman, W.S.; Colagiovanni, D.B.; Henry, V.A. (1992) Synergistic action of the benzene metabolite
   hydroquinone on myelopoietic stimulating activity of granulocyte/macrophage colony-stimulating factor in vitro,
   Proc. Natl. Acad. Sci.  89:3691-3695.
50 International Agency for Research on Cancer (IARC). 1987. Monographs on the evaluation of carcinogenic risk
   of chemicals to humans,  Volume 29, Supplement 7, Some industrial chemicals and dyestuffs, World Health
   Organization, Lyon, France.
51 U.S. Department of Health and Human Services National Toxicology Program 11th Report on Carcinogens
   available at: http://ntp.niehs.nih.gov/go/16183.
52 Aksoy, M. (1989). Hematotoxicity and carcinogenicity of benzene. Environ. Health Perspect.  82:193-197.
53 Goldstein, B.D. (1988). Benzene toxicity. Occupational medicine. State of the Art Reviews. 3:541-554.


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Methanol

        Exposure of humans to methanol by inhalation or ingestion may result in central nervous
system depression and degenerative changes in the brain and visual systems. After inhaled or
ingested, methanol is converted to formate, a highly toxic metabolite that within the course of a
few hours can cause narcosis, metabolic acidosis, headaches, severe abdominal and leg pain and
visual degeneration that can lead to blindness.54

        Methanol has been demonstrated to cause developmental toxicity in rats and mice, and
reproductive and developmental toxicity in monkeys.  A number of studies have reported adverse
effects in the offspring of rats and mice exposed to methanol by inhalation including reduced
weight of brain pituitary gland, thymus, thyroid, reduced overall fetal body weight and increased
incidence of extra ribs and cleft palate.55'56'57 Methanol inhalation studies using rhesus monkeys
have  reported a decrease in the length of pregnancy, and limited evidence of impaired learning
ability in offspring.58'59'60'61  EPA has not classified methanol with respect to its carcinogenicity.

Other Air Toxics

        In addition to the compounds described above, other toxic compounds might be affected
by these rules. Information regarding the health effects  of those compounds can be found in
EPA's IRIS database.62
54Rowe, VK and McCollister, SB. 1981. Alcohols. In: Patty's Industrial Hygiene and Toxicology, 3rd ed. Vol. 2C,
   GD Clayton, FE Clayton, Eds. John Wiley & Sons, New York, pp. 4528-4541.
55 New Energy Development Organization (NEDO).  1987. Toxicological research of methanol as a fuel for power
   station: summary report on tests with monkeys, rats and mice. Tokyo, Japan.
56Nelson, BK; Brightwell, WS; MacKenzie, DR; Khan, A; Burg, JR; Weigel, WW; Goad, PT. 1985. Teratological
   assessment of methanol and ethanol at high inhalation levels in rats. Toxicol Sci, 5: 727-736.
57 Rogers, JM; Barbee, BD; Rehnberg, BF. 1993. Critical periods of sensitivity for the developmental toxicity of
   inhaled methanol. Teratology, 47: 395.
58 Burbacher, T; Grant, K; Shen, D; Damian, D; Ellis, S; Liberate, N. 1999. Reproductive and offspring
   developmental effects following maternal inhalation exposure to methanol in nonhuman primates Part II:
   developmental effects in infants exposed prenatally to methanol. Health Effects Institute. Cambridge, MA.
59Burbacher, T; Shen, D; Grant, K; Sheppard, L; Damian, D; Ellis,  S; Liberate, N. 1999. Reproductive and offspring
   developmental effects following maternal inhalation exposure to methanol in nonhuman primates Part I:
   methanol disposition and reproductive toxicity in adult females. Health Effects Institute. Cambridge, MA.
60Burbacher, TM; Grant, KS; Shen, DD; Sheppard, L; Damian, D; Ellis, S; Liberate, N. 2004. Chronic maternal
   methanol inhalation in nonhuman primates (Macaca fascicularis): reproductive performance and birth outcome.
   Neurotoxicol Teratol, 26: 639-650.
61 Burbacher, TM; Shen, DD; Lalovic, B; Grant, KS; Sheppard, L; Damian, D; Ellis, S; Liberate, N. 2004.  Chronic
   maternal methanol inhalation in nonhuman primates (Macaca fascicularis): exposure and toxicokinetics prior to
   and during pregnancy. Neurotoxicol Teratol, 26: 201-221.
62U.S. EPA Integrated Risk Information System (IRIS) database is available at: www.epa.gov/iris


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7.2.2  Additional NO2 Co-Benefits
       In addition to being a precursor to PM2.5, NOX emissions are also associated with a
variety of respiratory health effects. Unfortunately, we were unable to estimate the health
benefits associated with reduced NO2 or ozone exposure in this analysis because we do not have
air quality modeling data available. Therefore, this analysis only quantifies and monetizes the
PM2.5 benefits associated with the reductions in NO2 emissions.

       Following an extensive evaluation of health evidence from epidemiologic and laboratory
studies, the Integrated Science Assessment (ISA) for Nitrogen Dioxide concluded that there is a
likely causal relationship between respiratory health effects and short-term exposure to NO2
(U.S. EPA, 2008c). Persons with preexisting respiratory disease, children, and older adults may
be more susceptible to the effects of NO2 exposure. Based on our review of this information, we
identified four short-term morbidity endpoints that the NC>2 ISA identified as a "likely causal
relationship": asthma exacerbation, respiratory-related emergency department visits, and
respiratory-related hospitalizations. The differing evidence and associated strength of the
evidence for these different effects is described in detail in the NO2 ISA. The NO2 ISA also
concluded that the relationship between short-term NO2 exposure and premature mortality was
"suggestive but not sufficient to infer a causal  relationship" because it is difficult to attribute the
mortality risk effects to NC>2 alone. Although the NC>2 ISA stated that studies consistently
reported a relationship between NO2 exposure and mortality, the effect was generally smaller
than that for other pollutants such as PM.

       NOx emissions also contribute to a variety of adverse welfare effects, including acidic
deposition, visibility impairment, nutrient enrichment. Deposition of nitrogen causes
acidification, which can cause 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 for other consumers 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 cause reduced root growth, which restricts the ability of the plant to take up water and
nutrients.  These direct effects can,  in turn, 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
habitat for threatened and endangered species  (cultural), declines in forest aesthetics (cultural),
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declines in forest productivity (provisioning), and increases in forest soil erosion and reductions
in water retention (cultural and regulating). (U.S. EPA, 2008d)

       Deposition of nitrogen is also associated with aquatic and terrestrial nutrient enrichment.
In estuarine waters, excess nutrient enrichment can lead to eutrophication.  Eutrophication of
estuaries can disrupt an important source of food production, particularly fish and shellfish
production, and a variety of cultural ecosystem services, including water-based recreational and
aesthetic services.  Terrestrial nutrient enrichment is associated with changes in the types and
number of species and biodiversity in terrestrial systems. Excessive nitrogen deposition upsets
the balance between native and nonnative plants, changing the ability of an area to support
biodiversity. When the composition of species changes, then fire frequency and intensity can
also change, as nonnative grasses fuel more frequent and more intense wildfires.  (U.S. EPA,
2008d)
7.2.3   Ozone Co-Benefits
       In the presence of sunlight, NOx and  VOCs can undergo a chemical reaction in the
atmosphere to form ozone.  Reducing ambient ozone concentrations is associated with
significant human health benefits, including mortality and respiratory morbidity (U.S. EPA,
2008a). Epidemiological researchers have associated ozone exposure with adverse health effects
in numerous lexicological, clinical and epidemiological studies (U.S. EPA, 2006c).  These health
effects include respiratory morbidity such as  fewer asthma attacks, hospital and ER visits, school
loss days, as well as premature mortality.
7.2.4   Carbon Monoxide Co-Benefits
       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 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
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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 between
short-term exposure to CO and respiratory morbidity and mortality. The evidence is also suggestive
of a causal relationship for birth outcomes and developmental effects following long-term exposure
to CO, and for central nervous system effects linked to short- and long-term exposure to CO.

7.2.5  Visibility Impairment Co-Benefits

       Reducing secondary formation of PM2.5 would improve visibility throughout the U.S.
Fine particles with significant light-extinction efficiencies include sulfates, nitrates, organic
carbon, elemental carbon, and soil (Sisler,  1996). 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 particles, particularly sulfates, and higher average
relative humidity levels. 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. Previous analyses
(U.S. EPA, 2006; U.S. EPA, 201 la; U.S. EPA, 201 Ib) show that visibility benefits are a
significant welfare benefit category. Without air quality modeling, we are unable to estimate
visibility related benefits, nor are we able to determine whether VOC emission reductions would
be likely to have a significant impact on visibility in urban areas or Class I areas.
7.3    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. As discussed in the PM2.s NAAQS RIA (Table 5.5) (U.S.
EPA, 2006), there are a variety of uncertainties associated with these PM benefits.  Therefore,
the estimates of annual benefits should be viewed as representative of the magnitude of benefits
expected, rather than the actual benefits that would occur every year.

       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

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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 benefits may lead to higher or lower benefit estimates than if
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. For more
information, see the TSD  describing the calculation of the new benefit-per-ton estimates (U.S.
EPA, 2012).

       PM2.5 mortality benefits are the largest benefit category that we monetized in this
analysis. To better characterize the uncertainty associated with mortality impacts that are
estimated to occur in areas with low baseline levels of PM2.5, we included the LML assessment.
For this analysis, policy-specific air quality data is not available due to time or resource
limitations, thus we are unable to estimate the percentage of premature mortality associated with
this specific rule's emission reductions at each PM2.5 level. As a surrogate measure of mortality
impacts, we provide the percentage of the population exposed at each PM2.5 level using the
source apportionment  modeling used to calculate the benefit-per-ton estimates for this sector.   A
very large proportion of the population is exposed at or above the lowest LML of the cohort
studies (Figures 7-6 and 7-7), increasing  our confidence in the PM mortality analysis. Figure 7-6
shows a bar chart of the percentage of the population exposed to various air quality levels in the
pre- and post-policy policy. Figure 7-7 shows a cumulative distribution function of the same
data. Both figures identify the LML for each of the major cohort studies.  As the policy shifts
the distribution of air quality levels, fewer people are exposed to PM25 levels at or above the
LML.  Using the Pope et al. (2002) study, the 77% of the population is exposed to annual mean
PM2.5 levels at or above the LML of 7.5 |ig/m3. Using the Laden et al. (2006) study, 25% of the
population is exposed  above the LML of 10  |ig/m3.  As we model avoided premature deaths
among populations exposed to levels of PM2 5, we have lower confidence in levels below the
LML for each study.  It is important to emphasize that we have high confidence in PM2 s-related
effects down to the lowest LML of the major cohort studies. Just because we have greater
confidence in the benefits above the LML, this does not mean that we have no confidence that
benefits occur below the LML.

       A large fraction of the baseline exposure occurs below the level of the National Ambient
Air Quality Standard (NAAQS) for annual PM2.5 at 15 |ig/m3, which was set in 2006. It is
                                          7-29

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important to emphasize that NAAQS are not set at a level of zero risk. Instead, the NAAQS
reflect the level determined by the Administrator to be protective of public health within an
adequate margin of safety, taking into consideration effects on susceptible populations. While
benefits occurring below the standard may be less certain than those occurring above the
standard, EPA considers them to be legitimate components of the total benefits estimate.
        25%
        20%
               LML of Pope et al. 2002 study
        15%
     1
        10%
        5°.
        0%

                                                                  LML of Laden et al. 2006 study

                                   6    7    7.5    8    9   10
                                     Baseline annual mean PM2-S leve
                                                              12   14
                                                                           18    20
                                                                                    22
 Among the populations exposed to PM25 in the baseline:
           77% are exposed to PM,5 levels at or above the LML of the Pope et al. (2002) study
           25% are exposed to PM25 levels at or above the LML of the Laden et al. (2006) study

Figure 7-6.   Percentage of Adult Population by Annual Mean PMi.s Exposure in the
              Baseline
                                             7-30

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       100%
       90°,
       so;
       70%
    "5  60%
       50°-i
       40%
    JS  30%
       20%
       10%
        0% r-
                LML of Pope et al. 2002 study
                                             7
LML of Laden et al. 2006 study
            I    2    3    4   5    6    7   7.5   8    9    10   12    14   16   18   20    22
                                   Baseline annual mean PM2.s level (|jg/m3)

Among the populations exposed to PM25 in the baseline:
          77% are exposed to PM2s levels at or above the LML of the Pope et al. (2002) study
          25% are exposed to PM25 levels at or above the LML of the Laden et al. (2006) study
Figure 7-7.   Cumulative Distribution of Adult Population by Annual Mean
              Exposure in the Baseline
       Above we present the estimates of the total 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 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 more than 90% of the total benefits, we were able to quantify include the
following:

       1 .   PM2.5 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 PM precursors. We do not have data on
           the specific location of the air quality changes associated with this rulemaking; as
           such, it is not feasible to estimate the proportion of benefits occurring in different
           locations, such as designated nonattainment areas. In addition, the benefit-per-ton
           estimates are based  on emissions  from  existing sources. To the extent that the
           geographic distribution of the emissions reductions for this rule are different than the
                                            7-31

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          modeled emissions, the benefits may be underestimated or overestimated. In general,
          there is inherently more uncertainty for new sources, which may not be included in
          the emissions inventory, than existing sources.
       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 PM^^
          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
          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 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 because we lack the necessary air quality input and monitoring data to run the
benefits model.  In addition, we have not conducted any air quality modeling for this rule.
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 benefits results presented in this
analysis.
                                           7-32

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7.4    Comparison of Co-Benefits and Costs
       Using a 3% discount rate, we estimate the total combined monetized co-benefits of the
reconsidered SI RICE NESHAP to be $62 million to $150 million in the implementation year
(2013). Using a 7%  discount rate, we estimate the total monetized co-benefits of the final rule to
be $55 million to $140 million. The annualized social costs of the reconsidered SI RICE
NESHAP are $115 million at a 7% interest rate.63 Thus, the net benefits are $-53 million to $35
million at a 3% discount rate and $-60 million to $ 25 million at a 7% discount rate. All estimates
are in 2010$ for the  year 2013.

       Table 7-5 shows a summary of the monetized co-benefits, social costs, and net benefits
for the reconsidered SI RICE NESHAP, respectively. Figures 7-8 and 7-9 show the full range of
net 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
22,000 tons of carbon monoxide and 1,800 tons of HAPs each year from SI RICE have not been
included in these estimates.

 Table 7-5.    Summary of the Monetized Benefits, Compliance Costs and Net benefits for
the 2010 Rule with the Amendments to the Stationary SI Engine NESHAP in 2013 (millions
                                      of 2010 dollars)3

3% Discount
Rate
7% Discount
Rate

Total Monetized Benefits2
Total Compliance Costs3
Net Benefits
$62 to
$115
$-53 to
$150

$35
$55 to
$115
$-60 to
$140

$25
Non-monetized Benefits
                                  Ecosystem effects
                                  Visibility impairment
                                  Health effects from HAP exposure
                                  Health effects from CO  NO2, and ozone exposure
 All estimates are for the implementation year (2013), and are rounded to two significant figures.
2 The total monetized benefits reflect the human health benefits associated with reducing exposure to PM2 5 through
  reductions of PM2 5 precursors such as NOx. Human health benefits are shown as a range from Pope et al. (2002)
  to Laden et al. (2006). These models assume that all fine particles, regardless of their chemical composition, are
  equally potent in causing premature mortality because the scientific evidence is not yet sufficient to allow
  differentiation of effects estimates by particle  type Although we have not re-estimated the benefits for this rule to
  apply the updated methods in the PM NAAQS RIA (U.S. EPA, 2012b), these updates generally offset each other,
  and we anticipate that the rounded benefits estimated for this rule are unlikely to be different than those provided
  here.
63 For more information on the annualized social costs, please refer to Section 5 of this RIA.

                                            7-33

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  The annual compliance costs serve as a proxy for the annual social costs of this rule given the lack of difference
between the two. The engineering compliance costs are annualized using a 7 percent discount rate.
                                                  7-34

-------
       $100


        $80


        $60


        $40


    f  $20
    "3T   $o
    _g
    1  -$20
        -$40
        -$60
        -$80
       -$100

                Cost estimate combined with total monetized benefits estimates derived from 2
                              epidemiology functions and 12 expert functions
Figure 7-8.    Net Benefits for SI RICE NESHAP Reconsideration at 3% discount rate*
*Net Benefits are quantified in terms of PM25 at a 3% discount rate for 2013 and are in 2010$.  This graph shows 14
benefits estimates combined with the cost estimate. All fine particles are assumed to have equivalent health effects.
The monetized benefits incorporate the conversion from precursor emissions to ambient fine particles.
                                              7-35

-------
    •IO-
    CS
    o
    fM
        $80
        $60
        $40
        $20
         $0
             ,
    J   -$20
        -$40
        -$60
        -$80
                  Pope et al.
       -$100

                Cost estimate combined with total monetized benefits estimates derived from 2
                              epidemiology functions and 12 expert functions

Figure 7-9.    Net Benefits for SI RICE NESHAP Reconsideration at 7% discount rate*
*Net Benefits are quantified in terms of PM25 benefits at a 7% discount rate at a 3% discount rate for 2013 and are
in 2010$. This graph shows 14 benefits estimates combined with the cost estimate. The monetized benefits
incorporate the conversion from precursor emissions to ambient fine particles.
                                              7-36

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7.5  References
Fann, N., C.M. Fulcher, BJ. Hubbell.  2009. "The influence of location, source, and emission
   type in estimates of the human health benefits of reducing a ton of air pollution." Air Qual
   Atmos Health 2:169-11'6.

Gwinn, M.R., J. Craig, D.A. Axelrad, R. Cook, C. Dockins, N. Fann, R. Fegley, D.E. Guinnup,
       G. Helfand, B. Hubbell, S.L. Mazur, T. Palma, R.L. Smith, J. Vandenberg, and
       B. Sonawane. 2011. "Meeting report: Estimating the benefits of reducing hazardous air
       pollutants—summary of 2009 workshop and future considerations." Environ Health
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Kochi, I, B. Hubbell, and R. Kramer.  2006. "An Empirical Bayes Approach to Combining
   Estimates of the Value of Statistical Life for Environmental Policy Analysis. "
   Environmental and Resource Economics.  34: 385-406.

Krewski D, Jerrett M, Burnett RT, Ma R, Hughes E, Shi, Y, et al. 2009. Extended follow-up and
   spatial analysis of the American Cancer Society study linking particulate air pollution and
   mortality. HEI Research Report, 140, Health Effects Institute, Boston, MA.

Laden, F., J. Schwartz, F.E. Speizer, and D.W. Dockery. 2006. Reduction in Fine Particulate Air
   Pollution and Mortality. American Journal of Respiratory and Critical Care Medicine. 173:
   667-672.

Mrozek, J.R., and L.O. Taylor.  2002.  "What Determines the Value of Life?  A Meta-Analysis."
   Journal  of Policy Analysis and Management 21(2):253-270.

National Research Council (NRC). 2002. Estimating the Public Health  Benefits of Proposed Air
   Pollution Regulations. Washington, DC: The National Academies Press.

National Research Council (NRC). 2009. Hidden Costs of Energy: Unpriced Consequences of
   Energy Production and Use. National  Academies Press. Washington, DC.

Office of Management and Budget (OMB). 2003. Circular A-4: Regulatory Analysis.
   Washington, DC. Available on the Internet at
   http://www.whitehouse.gov/omb/circulars/a004/a-4.html.

Pope, C.A., III, R.T. Burnett, M.J. Thun, E.E. Calle, D. Krewski, K. Ito, and G.D. Thurston.
   2002. "Lung Cancer, Cardiopulmonary Mortality, and Long-term Exposure to Fine
   Particulate Air Pollution." Journal of the American Medical Association 287:1132-1141.

Roman, Henry A., Katherine D. Walker, Tyra L. Walsh, Lisa Conner, Harvey M.  Richmond,
   Bryan J. Hubbell, and Patrick L. Kinney. 2008. "Expert Judgment Assessment of the
   Mortality Impact of Changes in Ambient Fine Particulate Matter in  the U. S." Environ. Sci.
   Technol., 42(7):2268-2274.
                                         7-37

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Sisler, J.F. 1996. Spatial and seasonal patterns and long-term variability of the composition of
   the haze in the United States: an analysis of data from the IMPROVE network. CIRA Report,
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U.S. Environmental Protection Agency - Science Advisory Board (U.S. EPA-SAB). 2007. SAB
   Advisory on EPA's Issues in Valuing Mortality Risk Reduction.  EPA-SAB-08-001. October.
   Available on the Internet at
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U.S. Environmental Protection Agency - Science Advisory Board (U.S. EPA-SAB). 2009a.
   Review of EPA 's Integrated Science Assessment for Paniculate Matter (First External
   Review Draft, December 2008). EPA-COUNCIL-09-008.  May. Available on the Internet at
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U.S. Environmental Protection Agency - Science Advisory Board (U.S. EPA-SAB). 2009b.
   Consultation on EPA 's Paniculate Matter National Ambient Air Quality Standards: Scope
   and Methods Plan for Health Risk and Exposure Assessment. EPA-COUNCIL-09-009.
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U.S. Environmental Protection Agency - Science Advisory Board (U.S. EPA-SAB). 2010.
   Review of EPA 's DRAFT Health Benefits of the Second Section 812 Prospective Study of the
   Clean Air Act. EPA-COUNCIL-10-001. June. Available on the Internet at
   http://vosemite.epa.gOv/sab/sabproduct.nsf/0/72D4EF A39E48CDB28525774500738776/$Fil
   e/EP A-COUNCIL-10-001-unsigned.pdf.

U.S. Environmental Protection Agency - Science Advisory Board (U.S. EPA-SAB). 2002.
      Workshop on the Benefits of Reductions in Exposure to Hazardous Air Pollutants:
      Developing Best Estimates of Dose-Response Functions An SAB Workshop Report of an
      EPA/SAB Workshop (Final Report). EPA-SAB-EC-WKSHP-02-001. January. Available
      on the Internet at
      http://vosemite.epa.gov/sab%5CSABPRODUCT.NSF/34355712EC011A358525719AOO
      5BF6F6/$File/ecwkshp02001%2Bappa-g.pdf.

U.S. Environmental Protection Agency - Science Advisory Board (U.S. EPA-SAB). 2008.
      Benefits of Reducing Benzene Emissions in Houston, 1990-2020. EPA-COUNCIL-08-
      001. July. Available at
      http://vosemite.epa.gov/sab/sabproduct.nsf/D4D7EC9DAEDA8A548525748600728A83/
      SFil e/EP A-COUNCIL-08-001-unsigned.pdf.

U.S. Environmental Protection Agency (U.S. EPA). 1995. Regulatory Impact Analysis for the
      Petroleum Refinery NESHAP. Revised Draft for Promulgation. Office of Air Quality
      Planning and Standards, Research Triangle Park, N.C. Available on the Internet at
      http://www.reg-markets.org/admin/authorpdfs/page.php?id=705 .
                                       7-38

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U.S. Environmental Protection Agency (U.S. EPA). 2000. Guidelines for Preparing Economic
   Analyses.  EPA 240-R-00-003.  National Center for Environmental Economics, Office of
   Policy Economics and Innovation.  Washington, DC.  September.  Available on the Internet
   at.

U.S. Environmental Protection Agency (U.S. EPA). 2006. Regulatory Impact Analysis, 2006
   National Ambient Air Quality Standards for Par ticulate Matter, Chapter 5. Available at
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U.S. Environmental Protection Agency (U.S. EPA). 2008a.  Regulatory Impact Analysis, 2008
   National Ambient Air Quality Standards for Ground-level Ozone, Chapter 6. Available at
   .

U.S. Environmental Protection Agency (U.S. EPA). 2008c. Integrated Science Assessment for
   Oxides of Nitrogen - Health Criteria (Final Report). National Center for Environmental
   Assessment, Research Triangle Park, NC. July. Available at at
   .

U.S. Environmental Protection Agency (U.S. EPA). 2009b. Integrated Science Assessment for
   Paniculate Matter (FinalReport).  EPA-600-R-08-139F. National Center for Environmental
   Assessment - RTF Division. December.  Available on the Internet at
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U.S. Environmental Protection Agency (U.S. EPA). 2010a. Final Regulatory Impact Analysis
   (RIA)for the SO2 National Ambient Air Quality Standards (NAAQS).  Office of Air Quality
   Planning and Standards, Research Triangle Park, NC.  June.  Available at
   http://www.epa.gov/ttn/ecas/ria.html .

U.S. Environmental Protection Agency (U.S. EPA). 2010b.  Technical Support Document:
   Summary of Expert Opinions on the Existence of a Threshold in the Concentration-Response
   Function for PM2.s-related Mortality. Research Triangle Park, NC. June. Available on the
   Internet at www.epa.gov/ttn/ecas/regdata/Benefits/thresholdstsd.pdf.

U.S. Environmental Protection Agency (U.S. EPA). 2010c. Guidelines for Preparing Economic
   Analyses. EPA 240-R-10-001. National Center for Environmental Economics, Office of
   Policy Economics and Innovation.  Washington, DC. December. Available on the Internet at
   .
                                         7-39

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U.S. Environmental Protection Agency (U.S. EPA).  201 la. The Benefits and Costs of the Clean
   Air Act from 1990 to 2020. Office of Air and Radiation, Washington, DC. March.
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U.S. Environmental Protection Agency (U.S. EPA).  201 Ib. Regulatory Impact Analysis for the
   Final Transport Rule.  Office of Air Quality Planning and Standards, Research Triangle
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U.S. Environmental Protection Agency (U.S. EPA).  201 Ic. 2005 National-Scale Air Toxics
       Assessment. Office of Air Quality Planning and Standards, Research Triangle Park, NC.
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U.S. Environmental Protection Agency (U.S. EPA).  2012. Technical Support Document:
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   Sources Sector. Office of Air Quality Planning and Standards, Research Triangle Park, NC.
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Viscusi, V.K., and I.E. Aldy. 2003. "The Value of a Statistical Life: A Critical Review of
   Market Estimates throughout the World." Journal of Risk and Uncertainty 27(l):5-76.
                                          7-40

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                                      Section 8
                              REFERENCES FOR RIA

Anadarko Petroleum Corporation Comments on the Proposed Revisions to the National
      Emission Standard for Hazardous Air Pollutants for Reciprocating Internal Combustion
      Engines, June 2, 2009, Case Study (EPA-HQ-OAR-2008-0708-0186).

Edison Electric Institute. "Income Statement: Q4 2008 Financial Update. Quarterly Report of the
      U.S. Shareholder-Owned Electric Utility Industry." http://www.eei.org .

Email from Nick Huff, Miratech to Jennifer Synder, AGTI, SCR Questions for RICE MACT,
      October 23, 2003 (EPA-HQ-OAR-2005-0029-0038).

Email from Mike Leonard, Miratech to Brad Nelson, AGTI, Information Request, July 21, 2005
      (EPA-HQ-OAR-2005-0030-0087).

Email from Bruce Chrisman, Cameron's Compression Systems to Tanya Parise,  EC/R, Subject:
      Existing RICE NESHAP - Information for EPA for 2SLB Engines, October 16, 2009.

Email from James Harrison, Exterran to Melanie King, EPA, Subject: 2SLB - Cameron
      oxidation catalyst pricing, October 20, 2009.

Email from Mike Leonard, Miratech Corporation to Brenda Riddle, AGTI, RE: Clarification of
      SCR Cost Information for EPA, July 20, 2005. (EPA-HQ-OAR-2005-0030-0086).

Email from Antonio  Santos, MECA to Tanya Parise, EC/R, Subject: EPA Proposed Existing
      RICE NESHAP - Cost of Aftertreatment, October 2, 2009. Response #2.

Fann, N., C.M. Fulcher, B.J. Hubbell. 2009. The influence of location, source, and emission type
      in estimates of the human health benefits of reducing a ton of air pollution. Air Qual
      Atmos Health 2:169-176.

Federal Reserve Board. "Industrial Production and Capacity Utilization: Industrial Production"
      Series ID: G17/IP_MINING_AND_UTILITY_DETAIL/IP.G2211.S
      http://www.federalreserve.gov/datadownload/. (January 27, 2010).

Four Corners Air Quality Task Force Report of Mitigation Options, November 1, 2007.
      Mitigation Option: Use of NSCR/3-Way Catalysts and Air/Fuel Ratio Controllers on
      Rich Burn Stoichiometric Engines (EPA-HQ-OAR-2008-0708-0009).

Fullerton, D., and G. Metcalf. 2002. "Tax Incidence." In A. Auerbach and M. Feldstein, eds.,
      Handbook of Public Economics., Vol.4, Amsterdam: Elsevier.

Internal Revenue Service, U.S. Department of Treasury. 2010. "Corporation Source Book: Data
      Files 2004-2007." http://www.irs.gOv/taxstats/article/0 Jd=167415.00.html ; (May 2,
      2010).
                                         8-1

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Interstate Oil & Gas Compact Commission. 2007. "Marginal Wells: Fuel for Economic Growth."
       Table 3.B. .

Interstate Oil & Gas Compact Commission (IOGCC). 2008. "Marginal Wells: Fuel for Economic
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       Marginal-Well-Report.pdf> .

Kochi, I, B. Hubbell, and R. Kramer. 2006. "An Empirical Bayes Approach to Combining
       Estimates of the Value of Statistical Life for Environmental Policy Analysis."
       Environmental and Resource Economics 34:385-406.

Laden, F., J. Schwartz, F.E. Speizer, and D.W. Dockery. 2006. "Reduction in Fine Particulate
       Air Pollution and Mortality." American Journal of Respiratory and Critical Care
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Lincoln Electric Holdings. 2006. Form 10-K. Filed February 24, 2006.

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Mrozek, J.R., and L.O. Taylor. 2002. "What Determines the Value of Life? A Meta-Analysis."
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Nelson, B., EC/R Inc.. June 29, 2010. Memorandum to Melanie King, U.S. Environmental
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Nicholson, Walter.  \99%.Microeconomic Theory. Orlando: The Dryden Press.

Office of Management and Budget (OMB), 2003. Circular A-4: Regulatory Analysis.
       Washington, DC. Available on the internet at
       .

Pope, C.A., III, R.T. Burnett, MJ. Thun, E.E. Calle, D. Krewski, K. Ito, and G.D. Thurston.
       2002. "Lung Cancer, Cardiopulmonary Mortality, and Long-term Exposure to Fine
       Particulate Air Pollution." Journal of the American Medical Association 287:1132-1141.

Price quote from Charles Ball, Emissions &  Silencer Technology for an oxidation catalyst for a
       500 HP 4SLB engine.

Roman, H.A., K.D. Walker, T.L. Walsh, L. Conner, H.M. Richmond, J. Hubbell, and P.L.
       Kinney. 2008. "Expert Judgment Assessment of the Mortality Impact of Changes in
       Ambient Fine Particulate Matter in the U.S." Environ. Sci. Technol. 42(7):2268-2274.
                                          8-2

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Technical Report: RICE NESHAP Control Costs Background for "Above the Floor Analysis",
       October 2009, Attachment N (EPA-HQ-OAR-2008-0708-0279).

Technical Report: RICE NESHAP Control Costs Background for "Above the Floor Analysis",
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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.

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U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 21:
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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:
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U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 22:
       Utilities: Geographic Area Series: Summary Statistics: 2002." http://factfinder.census.gov
       ; (November 10, 2008).

U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 22:
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United States                             Office of Air Quality Planning and Standards             Publication No. EPA-452/R-13-002
Environmental Protection                   Health and Environmental Impacts Division                                  January 2013
Agency                                          Research Triangle Park, NC
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