AEPA
United States
Environmental Protection
Agency
Office of Air Quality
Planning and Standards
Research Triangle Park NC 27711
EPA-450/3-89-18
May 1989
Air
Projected Impacts of
Alternative Particulate
Matter New Source
Performance Standards
for Industrial-Commercial
Institutional Nonfossil
Fuel-Fired Steam
Generating Units
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EPA-450/3-89-18
PROJECTED IMPACTS OF
ALTERNATIVE PARTICULATE MATTER
NEW SOURCE PERFORMANCE STANDARDS FOR
INDUSTRIAL-COMMERCIAL-INSTITUTIONAL
NONFOSSIL FUEL-FIRED STEAM GENERATING UNITS
Emission Standards Division
U.S. Environmental Protection Agency
Office of Air and Radiation
Office of Air Quality Planning and Standards
Research Triangle Park, N.C. 27711
May 1989
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This report has been reviewed by the Emission Standards Division of the
Office of Air Quality Planning and Standards, EPA, and approved for
publication. Mention of trade names or commercial products is not intended
to constitute endorsement or recommendation of use. Copies of the report are
available through the Library Service Office (MD-35), U.S. Environmental
Protection Agency, Research Triangle Park, N.C. 27711, or from National
Technical Information Services, 5285 Port Royal Road, Springfield,
Virginia 22161.
ii
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TABLE OF CONTENTS
SECTION PAGE
1.0 INTRODUCTION 1
2.0 SUMMARY 2
3.0 PROJECTIONS OF NEW WOOD-FIRED SMALL BOILERS 5
4.0 NATIONAL IMPACTS 8
4.1 ENVIRONMENTAL IMPACTS 8
4.2 COST IMPACTS 11
4.3 ENERGY IMPACTS 12
5.0 REFERENCES 13
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LIST OF TABLES
TABLE PAGE
2-1 NATIONAL IMPACTS OF REGULATORY ALTERNATIVES FOR PM
CONTROLS ON SMALL WOOD-FIRED BOILERS IN 1993 3
3-1 PROJECTIONS OF NEW WOOD-FIRED SMALL BOILERS BASED
ON ABMA SALES DATA (1985 AND 1986)
4-1 ALTERNATIVE PM CONTROL LEVELS FOR NONFOSSIL FUEL-FIRED . .
BOILERS 9
4-2 NATIONAL IMPACTS OF REGULATORY ALTERNATIVES FOR PM
CONTROLS ON SMALL WOOD-FIRED BOILERS IN 1993 10
1v
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1.0 INTRODUCTION
This report presents projected environmental, cost, and energy impacts
of alternative new source performance standards (NSPS) for small nonfossil
fuel-fired steam generating units (i.e., boilers). Small boilers are defined
as industrial-commercial-institutional units having a heat input capacity of
29 MW (100 million Btu/hour) or less.
The two categories of nonfossil fuels burned in small boilers are wood
and solid waste. Solid waste that meets the definition of municipal solid
waste (MSW) will be addressed under a separate NSPS. Wood is the most
commonly used nonfossil fuel among small boilers, as discussed in the
memorandum "Population Projection for Small Mixed Fuel-Fired Steam Generating
Units." Since wood will be the only nonfossil fuel covered by standards
developed for this source category, the impacts of alternative standards are
evaluated for small wood-fired boilers. In addition, since wood contains
negligible amounts of sulfur, alternative sulfur dioxide (S02) emission
standards will not be developed for wood combustion. Therefore, this report
focuses on alternative particulate matter (PM) emission standards.
This analysis estimates the potential environmental, cost, and energy
impacts associated with alternative PM emission regulations. These impacts
are measured in terms of the projected changes that would occur under
alternative PM emission standards versus existing regulations. The analysis
of environmental impacts focuses on changes in levels of air emissions as
well as changes in the amount of solid and liquid wastes generated. Cost
impacts are evaluated in terms of incremental changes in the total annualized
costs for boiler and pollution control equipment capital, operating, and fuel
costs. Energy impacts are evaluated in terms of potential increases in
energy consumption as a result of added PM control equipment.
This analysis examines projected impacts in the fifth year following
proposal of standards. It was assumed that the recommended standards would
be proposed in 1989 and that the impact analysis should, therefore, focus on
projected results for new small nonfossil fuel-fired boilers installed in the
5-year period between 1989 and 1993. The emissions and energy demand
projections presented in this report represent annual estimates for calendar
year 1993.
1
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This report addresses only nonfossil fuel consumption in new small
boilers. It does not analyze fossil fuel-fired steam generating units (i.e.,
coal, oil, and natural gas). The potential national impacts for fossil
fuel-fired small boilers are presented in a separate report.
A summary of the national impacts analysis is presented in Section 2.0.
Projections of the number of new wood-fired small boilers are presented in
Section 3.0. The results of the national impacts analysis are presented in
Section 4.0.
2.0 SUMMARY
To analyze the potential national impacts of PM control, the number of
small wood-fired boilers projected for both industrial and commercial -
institutional uses was estimated for the 5-year period from 1989 to 1993.
Based on recent sales data and the assumption of level sales over this
period, a total of 105 new wood-fired boilers was projected. A discussion of
the bases for the costs used in this analysis is found in Reference 2.
Four boiler sizes were examined representing small commercial -
institutional units, large commercial-institutional units, small industrial
units, and large industrial units. However, only high capacity factor (0.55)
units were examined because, according to a National Council for Air and
Stream Improvement report, most of the wood-fired boilers in these size
3
ranges operate at this, or higher, levels.
National Impacts
The national impacts of the PM control alternatives were estimated by
aggregating the model boiler impacts over the projected national 5-year
population of 105 new wood-fired boilers.
As shown in Table 2-1, the primary national environmental impact would
be the reduction in PM emissions from new, modified, and reconstructed small
wood-fired boilers resulting from the promulgation of NSPS. Under the
regulatory baseline, total national PM emissions from small wood-fired
boilers are estimated at 2,700 Mg/yr (2,970 tons/yr) for 1993. Under
standards based on Regulatory Alternative Level I, total national PM
emissions in 1993 are estimated at 1,650 Mg/yr (1,810 tons/yr), a 39 percent
reduction from baseline PM emission levels. Under Regulatory Alternative
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TABLE 2-1. RATIONAL IMPACTS OP REGULATORY ALTERNATIVES FOR PM CONTROLS ON SMALL WOOD-FIRED BOILERS IN 1993
Regulatory
alternative
Baseline
Level I
Level II
Level III
Annual PM
emissions
Mg/yr (tons/yr)
2,700
1.650
1,020
680
(2
(1
(1
(
,9W)
,810)
,130)
750)
Total
annual I ted
76
costs
($l,000/yr)
103,750
105,140
109,900
113,150
Annual 1. zed
cost of
control
($l,000/yr)
-
1,390
6,150
9,400
Cost effectiveness
Average
$/M« ($/ton)
-
1,383 (1,257)
3,671 (3,337)
4,653 (4,230)
Incrac
$/Hg
-
1,383
7,103
9,423
nental
($/ton)
-
(1,257)
(6,457)
(8,566)
Solid
waste
production
rate
Hg/yr (tons/yr)
36,600 (*0
37,600 (41
38,300 (42
38,600 (42
,350)
,400)
,200)
,600)
Incremental
solid waste
production
rate
Mg/yr (tona/yr)
-
1,000 (1,100)
1,700 (1,900)
2,000 (2,300)
*B*sed on model boilers vith a capacity utilization factor of 0.55 and zero wood price.
Includes the costs for bolters.
CDiffer*nee In the total annualized costs associated with the regulatory baseline and alternative control levels.
Cooyared to Regulatory Baseline.
Compared to a less stringent alternative.
Solid waste production associated with PM control.
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Level II, total national PM emissions in 1993 are estimated at 1,020 Mg/yr
(1,130 tons/yr), a 62 percent reduction from baseline PM emission levels.
Under Regulatory Alternative Level III, total national PM emissions in 1993
are estimated at 680 Mg/yr (750 tons/yr), a 75 percent decrease from baseline
PM emission levels.
The control of PM emissions from small wood-fired boilers would also
increase the amount of solid waste produced as a by-product of pollution
control, a secondary environmental impact. The amount of solid waste
generated under the baseline by pollution control devices and small
wood-fired boilers is 36,600 Mg/yr (40,350 tons/yr). The incremental amount
of solid waste generated as a result of additional PM control would range
from 3 percent of baseline rates for Regulatory Alternative Level I to
6 percent of baseline rates for Regulatory Alternative Level III. Such
wastes are nonhazardous; environmentally acceptable methods for their
disposal are readily available.
As with national environmental impacts, projected national cost impacts
vary according to the stringency of the various regulatory alternatives.
Under the baseline, total national before-tax annualized costs for small
wood-fired boilers and PM controls in 1993 are estimated to be $103,750,000.
Under standards based on Regulatory Alternative Level I, total national
annualized PM control costs are estimated to be $105,140,000/yr, which
represents a 1 percent increase over baseline costs. Under standards based
on Regulatory Alternative Level II, total national annualized PM control
costs are estimated to be $109,900,000/yr, which represents a 6 percent
increase over baseline costs. Under standards based on Regulatory
Alternative Level III, total national annualized PM control costs are
estimated to be $113,150,000/yr, which represents an 9 percent increase over
baseline costs.
The projected national incremental cost effectiveness of the various
regulatory alternatives varies as a function of cost and emission reductions.
The estimated national incremental cost effectiveness of standards based on
Regulatory Alternative Level I over the regulatory baseline is $l,383/Mg
($l,257/ton) of PM removed. The estimated national incremental cost
effectiveness of standards based on Regulatory Alternative Level II over
Regulatory Alternative Level I is $7,103/Mg ($6,457/ton) of PM removed. The
estimated national incremental cost effectiveness of standards based on
4
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Regulatory Alternative Level III over Regulatory Alternative Level II is
$9,423/Mg ($8,566/ton) of PM removed.
Energy consumed to operate the PM control equipment is estimated to
increase only slightly under the various regulatory alternatives compared to
the baseline.
3.0 PROJECTIONS OF NEW WOOD-FIRED SMALL BOILERS
Projections of the number of new boilers expected to be built over the
5-year period from 1989 to 1993 were made using annual sales data available
for the years 1985 and 1986 from the American Boiler Manufacturers
Association (ABMA). Based on historical sales trends, it was assumed that
boiler sales would remain level over the 5-year period. The number of new
boilers expected to be built over this 5-year period was estimated for four
boiler size ranges: 0.8 to 2.9 MW (3 to 10 mill ion^Btu/hour); 2.9 to 8.7 MW
(10 to 30 million Btu/hour); 8.7 to 15 MW (30 to 50 million Btu/hour); and 15
to 29 MW (50 to 100 million Btu/hour). These size ranges were selected based
on boiler type and the sector (i.e., industrial, commercial, or
institutional) in which the unit is found.
In the 0.8 to 2.9 MW (3 to 10 million Btu/hour) size range, only
commercial-institutional (including watertube, firetube, and firebox) units
are found. Commercial-institutional units dominate the 2.9 to 8.7 MW (10 to
30 million Btu/hour) size range, although a few industrial units are also
found. In the upper size ranges [8.7 to 15 MW (30 to 50 million Btu/hour)
and 15 to 29 MW (50 to 100 million Btu/hour)], industrial (watertube) units
predominate.
As presented in Table 3-1, new wood-fired small boilers were projected
for each of the four size ranges using an average of the 1985 and 1986 sales
data. Using the 1986 sales data for illustration, the following discussion
describes the method used to disaggregate the number of wood-fired boilers in
each of the four size ranges.
Based on the ABMA 1986 sales data for commercial-institutional units,
6,054 boilers were sold in 1986. However, this number includes boilers
firing all types of fuels. The total number of wood-fired units sold for all
size ranges, including boilers larger than 29 MW (100 million Btu/hour), was
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TABLE 3-1. PROJECTIONS OF NEW WOOD-FIRED SHALL BOILERS
BASED ON ABMA SALES DATA (1983 AND 1986)
Boiler sice range
MU
(million Btu/hour)
0.8-2.9 (3-10)
2.9-8.7 (10-30)
8.7-15 (30-50)
15-29 (50-100)
TOTAL
Number of
boilers
8'
4b
5d
2d
19
1985
Average
sice
MU
(million Btu/hour)
1.5 (5)
5.0 (17)
10.3 (36)
22 (75)
Number of
boilers
11*
5C
2d
ld
12
1986
Average
sice
MU
(million Btu/hour)
1.5 (5)
5.3 (18)
13.2 (45)
22 (75)
Average
Number of
boilers
10
5
4
2
21
Average
sice
MU
(million Btu/hour)
1.5 (5)
5.3 (18)
11.4 (39)
22 (75)
5-Year
Number of
boilers
50
25
20
10
105
Protection
Average
sice
MU
(million Btu/hour)
1.5 (5)
5.3 (18)
11.4 (39)
22 (75)
All coonerclal-lnstltutlonal boilers.
irclal-lnstltutlonal and 1 Industrial boilers.
irclal-lnstltutlonal and 1 Industrial boilers.
All Industrial boilers.
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35. To estimate how many of these 35 wood-fired boilers were in the 2.9 to
8.7 MW (10 to 30 million Btu/hour) size range, it was assumed that the
wood-fired boilers were distributed among the various size ranges in the same
percentages as the total number of boilers sold. For example, 671 boilers in
the 2.9 to 8.7 MW (10 to 30 million Btu/hour) size range were sold. This
number is about 10 percent of the 6,054 total boilers (all sizes) sold.
Thus, the percentage of wood-fired boilers between 2.9 and 8.7 MW (10 and
30 million Btu/hour) was estimated to be about 10 percent, or four new
boilers projected per year. Applying this same methodology to the 8.7 to
15 MW (30 to 50 million Btu/hour) size range, the projected number of new
boilers is less than one per year.
The average boiler size of the four wood-fired boilers in the 2.9 to
8.7 MW (10 to 30 million Btu/hour) size range was estimated by assuming that
the average boiler size for wood-fired boilers would be the same as that for
boilers of all fuel types. Based on this assumption, the average size of a
wood-fired boiler within the 2.9 to 8.7 MW (10 to 30 million Btu/hour) size
range is about 4.2 MW (15 million Btu/hour).
The same methodology was used to estimate the number of wood-fired
boilers in the 0.8 to 2.9 MW (3 to 10 million Btu/hour) size range. As a
result, it was calculated that 11 wood-fired boilers were sold in the 0.8 to
2.9 MW (3 to 10 million Btu/hour) size range. The average boiler size was
estimated to be 1.5 MW (5 million Btu/hour).
In the ABMA 1986 sales data for large industrial boilers, boiler sales
were presented by fuel and size range. In the 2.9 to 8.7 MW (10 to
30 million Btu/hour) size range, 1 wood-fired unit was sold with a heat input
capacity of 8.7 MW (30 million Btu/hour); in the 8.7 to 15 MW (30 to
50 million Btu/hour size) range, 2 wood-fired units were sold with an average
heat input capacity size of 13 MW (45 million Btu/hour); in the 15 to 29 MW
(50 to 100 million Btu/hour) size range, 1 wood-fired unit was sold with a
heat input capacity of 22 MW (75 million Btu/hour).
The average number of industrial and commercial-institutional boilers
for 1985 and 1986 estimated in each size range is shown in Table 3-1. Sales
of both new industrial and commercial-institutional wood-fired small boilers
are projected to remain at these average levels during the 5-year period from
1989 to 1993. Therefore, 50 (10 x 5 years) small commercial-institutional
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boilers with a total heat input capacity of 860 MW (250 million Btu/hour)
are projected for the 0.8 to 2.9 MW (3 to 10 million Btu/hour) size range;
25 (5 x 5 years) industrial and commercial-institutional boilers with a total
heat input capacity of 1550 MW (450 million Btu/hour) are projected for the
10 to 30 million Btu/hour size range; 20 (4 x 5 years) industrial boilers
with a total heat input capacity of 2690 MW (780 million Btu/hour) are
projected for the 30 to 50 million Btu/hour size range; and 10 (2 x 5 years)
industrial boilers with a total heat input capacity of 2590 MW (750 million
Btu/hour) are projected for the 15 to 29 MW (50 to 100 million Btu/hour) size
range.
4.0 NATIONAL IMPACTS
This section presents the results of the national impacts analysis of
various regulatory alternatives limiting PM emissions from small wood-fired
boilers. Because wood is the most commonly used nonfossil fuel among small
boilers, it will be the only nonfossil fuel covered by standards developed
for this source category. Hence, the national impact analysis is based on
the impacts of regulatory alternatives for small wood-fired boilers. The
projected population of 105 new wood-fired boilers, all operating at a
55 percent capacity factor, will be used to analyze each of the regulatory
alternatives presented in Table 4-1.
4.1 ENVIRONMENTAL IMPACTS
The primary national environmental impact would be the reduction in PM
emissions from new, modified, and reconstructed small wood-fired boilers
resulting from the promulgation of NSPS. A range of PM emission reductions,
reflecting the varying degree of stringency of the regulatory alternatives
evaluated, is presented in Table 4-2.
Under the regulatory baseline, which is based on existing State and
local regulations in the absence of an NSPS, total national PM emissions from
small wood-fired boilers are estimated at 2,700 Mg/yr (2,970 tons/yr) for
1993. Regulatory Alternative Level I is an emission limit of 130 ng/J
(0.30 Ib/million Btu) based on the use of a double mechanical collection
8
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TABLE 4-1. ALTERNATIVE PM CONTROL LEVELS FOR NONFOSSIL FUEL-FIRED BOILERS4
Alternative
control
level
Baseline
A
B
C
Control
technology basis
Single mechanical collector
Double mechanical collector
Wet scrubber or electrostatic
precipitator
Wet scrubber or electrostatic
precipitator
PM emission rate
ng/J (Ib/m1llion Btu)
a
130 (0.30)
40 (0.10)
40 (0.10)
Cutoff
MW (million
Btu/hour)
8.7 (30)
8.7 (30)
2.9 (10)
260 ng/J (0.60 Ib/m1ll1on Btu) for boilers larger than or equal to 8.7 MW
(30 million Btu/hour) heat input; 190 ng/J (0.45 Ib/mllllon Btu) for
boilers smaller than 8.7 MW (30 million Btu/hour) heat Input.
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TABLE 4-2. NATIONAL IMPACTS OF REGULATORY ALTERNATIVES FOR PM CONTROLS ON SMALL WOOD-FIRED BOILERS IN 1993
Regulatory
alternative
Basel In*
Level I
Level II
Level III
Solid Incremental
Total Annual 1 zed waste solid waste
>., .,..! nu ..,., .ii...i JlJui. Jur Cost exxectlveness ...
emissions costs ' control Average Incremental* rate rate
Mg/yr (tona/yz) ($l,000/yr) ($1.000/yr) $/Mg ($/ton) $/Mg ($/ton) Mg/yr (tons/yr) Hg/yr (tons/yr)
2,700 (2.970) 103.750 .... . 36.600 (40,350)
1,650 (1.810) 105,140 1,390 1.383 (1,257) 1,383 (1,257) 37,600 (41,400) 1.000 (1,100)
1,020 (1,130) 109,900 6,150 3.671 (3,337) 7,103 (6,457) 38,300 (42,200) 1,700 (1,900)
680 ( 750) 113,150 9,400 4,653 (4,230) 9,423 (8,566) 38,600 (42,600) 2,000 (2,300)
*Based on model boilers with a capacity utilisation factor of 0.55 and zero wood price.
b
Includes the costs for boilers.
Difference in the total annuallced costs associated with the regulatory baseline and alternative control levels.
4
Compared to Regulatory Baseline.
Compared to a less stringent alternative.
Solid waste production associated with PM control.
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(DMC) and a size cutoff of 8.7 MW (30 million Btu/hour). Total national PM
emissions in 1993 under this alternative are estimated at 1,650 Mg/yr
(1,810 tons/yr), a 39 percent reduction from baseline PM emission levels.
Regulatory Alternative Level II is an emission limit of 43 ng/J
(0.10 Ib/million Btu) based on the use of an electrostatic precipitator (ESP)
and a size cutoff of 8.7 MVI (30 million Btu/hour). Total national PM
emissions in 1993 under this alternative are estimated at 1,020 Mg/yr
(1,130 tons/yr), a 62 percent reduction from baseline PM emission levels.
Regulatory Alternative Level III is an emission limit of 43 ng/J
(0.10 Ib/million Btu) based on the use of an ESP and a size cutoff of 2.9 MW
(10 million Btu/hour). Total national PM emissions in 1993 under this
alternative are estimated at 680 Mg/yr (750 tons/yr), a 75 percent decrease
from baseline PM emission levels.
The control of PM emissions from small wood-fired boilers would increase
the amount of solid waste produced as a by-product of pollution control. The
amount of solid waste generated under the baseline by pollution control
devices and small wood-fired boilers 1s 36,600 Mg/yr (40,350 tons/yr). The
amount of solid waste generated under standards based on Regulatory
Alternative Level I is estimated to be approximately 37,600 Mg/yr
(41,400 tons/yr) in 1993. This amount represents a 3 percent increase over
baseline rates. The amount of solid waste generated under Regulatory
Alternative Level II is estimated to be approximately 38,300 Mg/yr
(42,200 tons/yr) in 1993, which represents a 5 percent increase over baseline
rates. The amount of solid waste generated under Regulatory Alternative
Level III is estimated to be approximately 38,600 Mg/yr (42,600 tons/yr) in
1993, which represents a 6 percent increase over baseline rates. Such wastes
are nonhazardous; environmentally acceptable methods for their disposal are
readily available.
4.2 COST IMPACTS
As with national environmental Impacts, projected national cost Impacts
vary according to the stringency of the various regulatory alternatives. The
costs used in this analysis are based on Information in Reference 5. Under
the baseline, total national annual 1 zed PM control costs for small wood-fired
11
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boilers and PH controls in 1993 are estimated to be $103,750,000. Under
Regulatory Alternative Level I, total national annual1zed PM control costs
are estimated to be $105,140,000/yr, which represents a 1 percent Increase
over baseline costs. Under Regulatory Alternative Level II, total national
annual1zed PM control costs are estimated to be $109,900,000/yr, which
represents a 6 percent Increase over baseline costs. Under Regulatory
Alternative Level III, total national annual 1 zed PM control costs are
estimated to be $113,150,000/yr, which represents an 9 percent Increase over
baseline costs.
The projected national Incremental cost effectiveness of the various
regulatory alternatives varies as a function of cost and emission reductions.
The estimated national incremental cost effectiveness of standards based on
Regulatory Alternative Level I over the regulatory baseline is $l,383/Mg
($l,257/ton) of PM removed. The estimated national incremental cost
effectiveness of standards based on Regulatory Alternative Level II over
Regulatory Alternative Level I is $7,103/Mg ($6,457/ton) of PM removed. The
estimated national Incremental cost effectiveness of standards based on
Regulatory Alternative III over Regulatory Alternative Level II 1s $9,423/Mg
($8,566/ton) of PM removed.
4.3 ENERGY IMPACTS
Energy consumed to operate the PM control equipment is estimated to
increase only slightly under the various regulatory alternatives compared to
the baseline.
12
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5.0 REFERENCES
1. Memorandum from Aul, Jr., E. P., Radian Corporation, to Maxwell, W. H.
EPA/ISB. September 22, 1987. Population Projection for Small Mixed
Fuel-Fired Steam Generating Units.
2. Model Boiler Cost Analysis for Controlling Particulate Matter (PM)
Emissions from Small Steam Generating Units. U.S. Environmental
Protection Agency, Research Triangle Park, N.C. EPA Publication No.
EPA-450/3-89-15. May 1989.
3. Reference 1.
4. Overview of the Regulatory Baseline, Technical Basis, and Alternative
Control Levels for Particulate Matter (PM) Emission Standards for Small
Steam Generating Units. U.S. Environmental Protection Agency, Research
Triangle Park, N.C. EPA Publication No. EPA-450/3-89-11. May 1989.
5. Reference 2.
13
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TECHNICAL REPORT DATA
(Please read Instructions on the reverse before completing)
REPORT NO.
EPA-450/3-89-18
2.
3. RECIPIENT'S ACCESSION NO.
TITLE AND SUBTITLE Pr0jected Impacts of Alternative
'articulate Matter New Source Performance Standards for
Industrial-Commercial-Institutional Nonfossil Fuel-
:ired Steam Generating Units
5. REPORT DATE
May 1989
6. PERFORMING ORGANIZATION CODE
AUTHOR(S)
8. PERFORMING ORGANIZATION REPORT NO.
PERFORMING ORGANIZATION NAME AND ADDRESS
Emission Standards Division
Office of Air Quality Planning and Standards
U.S. Environmental Protection Agency
Research Triangle Park, North Carolina 27711
10. PROGRAM ELEMENT NO.
11. CONTRACT/GRANT NO.
68-02-4378
2. SPONSORING AGENCY NAME AND ADDRESS
Office of Air Quality Planning and Standards
Office of Air and Radiation
U.S. Environmental Protection Agency
Research Triangle Park, North Carolina 27711
13. TYPE OF REPORT AND PERIOD COVERED
Final
1
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3. ECONOMIC IMPACTS: COMMERCIAL/INSTITUTIONAL SECTOR
3.1 INTRODUCTION
The assessment of the potential economic impact of a NSPS on commer-
cial/institutional (C/I) boilers was organized two ways. One set of analyses
focused on the impact of new regulations on "generic" buildings where boilers
are used only for space and hot water heating -- the predominant use of
boilers in commercial/institutional buildings. Here the impacts of potential
regulatory costs are related to the operating budgets and rental rates of
commercial buildings. A second set of analyses focused on selected commercial
sectors where economic impacts might be more severe than for "generic" build-
ings. For example, applications such as laundries or hospitals, where steam
is used for specialized purposes other than space heating, could lead to more
significant economic impacts for those sectors.
This analysis is focused on the impacts of "model plants" intended to be
representative of various situations where boilers are used in the C/I sector.
In most instances, the model plant is actually one building where boilers
provide various energy services, depending on the activities of the building
occupants. An example of this situation is a building where boilers are used
exclusively for space and hot water heating. In some commercial sector
applications, such as hotel chains or large commercial laundries, one firm may
own several buildings or "model plants." In these cases, we have tried to
focus on the specific building or boiler installation as our model unit for
analysis. We have done so because a business with multiple plants will
consider the economic viability of each of its plants.
An important aspect of the economic analysis for C/I boilers is that it
should be viewed as a "worst case" analysis intended to identify the limits of
possible adverse consequences of a NSPS. The reasons why this should be
viewed as a "worst case" analysis are:
Only very stringent regulatory scenarios are considered such as
very low sulfur residual oil or installation of flue gas desul-
furization equipment.
These stringent regulations are applied to all boiler sizes in the
model building analyses, ignoring the effect of a boiler size cut-
off; the proposed NSPS may not be applicable to all of these
boiler sizes.
3-1
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In buildings with more than one boiler installed, we have assumed
that all boilers in the building would be subject to the NSPS. In
factj most new boilers would be replacements in existing build-
Ings and not all of the existing boilers would necessarily be
replaced at the same time.
t We have made no allowance for the fact that several urban areas
already have regulations. In effect, the baseline for considering
impacts of the NSPS implies no (or very lax) regulatory controls
are currently 1n place.
The analysis assumes that the boilers are firing a dirty fuel
(e.g. residual oil) rather than natural gas. The impacts pre-
sented here would be applicable only when such dirty fuels are
fired. In fact, natural gas is currently the predominant fuel
choice in C/I boilers.*
All of these considerations tend to overstate the likely economic impacts of
any NSPS, emphasizing that this is a "worst case" type of analysis.
3.2 SELECTED SECTORS
3.2.1 Approach
The goals in this phase of the study are threefold: 1) identify those
boiler applications which would likely incur economic impacts from a New
Source Performance Standard for small boilers used in commercial/institutional
buildings; 2) select from each sector several "example" firms for which suf-
ficient data on boiler use and establishment sales could be obtained; and 3)
examine pollution control cost impacts for each selected firm/sector.
Several factors were considered in selecting specific end uses. One
factor was to try to identify applications which use boilers for other
purposes beside space heating, such as cooking, baking, sterilization. To the
extent that energy usage is more intensive (Btus per dollar of sales),
economic impacts would tend to be greater. Another consideration might be an
application which tends to have a low ratio of business sales/revenue per
square foot of building space. In such instances, increases of building
operating costs would tend to have a more significant effect on price
increases needed to sustain profitability. Motels or hotels and some labor
service activities could be examples where building operating costs are a more
See Appendix A
3-2
-------
significant element in the total costs of the firm. Still another factor
would be to consider public entities, such as schools, which are widespread
and where the economic impacts take the form of increases in local government
budgets.
Important examples of commercial/institutional establishments that use
boilers for applications other than space heating include laundries, hospitals
and some hotels. These three groups have been included in this analysis
because they have daily special steam demand requirements that are distinct
from the seasonal space heating requirements in generic buildings.
Colleges and universities have also been included in this selected
sectors analysis. This group uses relatively large boilers in central heating
facilities and sends steam or hot water through underground pipes to most or
all of the numerous buildings on campus. This group is distinct from the
generic buildings discussed in Section 3.3 because the typical college/uni-
versity boiler sizes are substantially larger than the typical boilers in
commercial "generic" buildings.
Elementary and secondary schools are another "selected sector." Elemen-
tary and secondary schools use boilers for seasonal space heating purposes
like generic buildings. They are analyzed in this section (as opposed to
Generic Buildings, Section 3.3) because comparing pollution control costs to
building rental rates is not appropriate for this group.
3.2.2 Data Sources and Descriptions of Selected Sectors
Data on the boiler configuration and total annual costs/revenues per
establishment for large and small firms within each selected sector have been
gathered through telephone contacts and reviews of published company financial
statements. (In performing this part of the analysis, effort has focused on
publicly-owned companies due to government rules limiting contacts with
individual ftrms^. Specifically, the following information has been obtained:
Number and size of boilers per establishment
Annual hours of operation per boiler
Boiler fuel type
Annual boiler fuel use and expenditures
3-3
-------
Building (or establishment) size (sq. feet)
Annual total revenues (or total expenditures) per establishment
In some Instances data on annual boiler fuel use, annual boiler fuel
expenditures and/or establishment-specific total annual revenues were unavail-
able. Therefore, estimates of these data were made using the following pro-
cedures:
Annual Boiler Fuel Consumption
Data are collected on: 1) boiler heat input (in MMBtu/hr), 2)
average daily number of hours of boiler operation, and 3) average
number of days per year of boiler use for establishments in each
selected sector. The product of these three variables yields an
estimate of total boiler fuel consumption for an establishment.
Annual Boiler Fuel Expenditures
Where data on total annual boiler fuel expenditures are not
forthcoming, information has been obtained on the average mix of
fuels used in the boiler and average annual fuel prices per MMBtu.
These data have been used in conjunction with the boiler fuel use
estimates to calculate total fuel expenditures.
Annual Total Revenues (or Expenditures) per Establishment
As noted earlier, information on establishment-specific total
sales (or total costs) is a key requirement for evaluating
economic impact. This also is the information most difficult to
obtain from individual companies and institutions. Therefore,
estimates have been made using a variety of approaches and other
data as follows:
Elementary and Secondary Schools;
Total Cost per School - (pupils/school) * (cost/pupil)
Hospitals
Total Cost per Hospital - (beds/hospital) * (cost/bed)
Hotels
Total Sales - (rooms/hotel) * (average occupancy rate)
* (average daily room rate) * 365 days/year
Laundries Total Sales per facility »
- (total company sales) * (facility sq. ft)/
-. (total sq. ft of all company facilities)
Elementary and Secondary Schools
Boiler configuration data for 100 boilers in elementary and secondary
schools in Illinois, provided by the Illinois Environmental Protection Agency,
show that all of the boiler sizes are smaller than 4 MW (15 MMBtu/hr) and most
of these boilers are smaller than 3 MW (10 MMBtu/hr).
3-4
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Table 3-1 presents a range of data on the boiler configurations of four
typical elementary and four secondary schools located in urban mid-Atlantic
cities. The boilers range from 125 hp to 150 hp and are used primarily for
space heating during the winter. As shown in Table 3-1, the boilers provide
heat for buildings ranging in size from about 47,000 to 200,000 square feet.
The fuel used to fire the boilers constitutes a relatively small percentage of
the total school budget -- 0.4-1.7 percent.
Hospitals
Generally, boilers used in hospitals provide steam for the preheat coils
in air handling units, and for heat exchangers which provide hot water for
perimeter heating (fan coils and convectors), zone control heating, domestic
hot water, humidiflcation and sterilization. Boiler configuration data for 73
boilers in hospitals in Illinois (provided by the Illinois Environmental
Protection Agency), 76 boilers in hospitals in Minnesota (provided by the
Minnesota Pollution Control Agency) and 92 boilers in hospitals in Boston
(provided by the Commonwealth of Massachusetts, Department of Environmental
Quality Engineering, Division of Air Quality Control) indicate that most of
the boilers are smaller than 9 MW (30 MMBtu/hr).
Table 3-2 provides statistics on the boiler configurations of three
hospitals ranging in size from 365,000 square feet to 760,000 square feet.
All of these hospitals are equipped with multiple boilers. Typically, one
boiler is used only as a back-up. The others are used for various lengths of
time throughout the year depending on need. As shown in Table 3-2, the
boilers are sized between 5 and 14.2 MW (17 MMBtu/hr and 48.5 MMBtu/hr).
Depending on the extent to which the boilers are operated, annual fuel
consumption ranges from 44.3 TJ (42,000 MMBtu) to 180.4 TJ (171,000 MMBtu).
Although hospitals are more energy-intensive, the annual cost of fueling a
boiler is a relatively insignificant portion of the total annual costs of
operating a hospital: 0.3 -1.4 percent. The relatively low share of fuel
costs in hospital budgets is due to the high costs of highly-trained doctors
and auxiliary personnel plus increasingly expensive medical equipment.
3-5
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TABLE 3-1. ELEMENTARY AND SECONDARY SCHOOLS
Junior High
School8
Elementary
School8
Boiler
Configuration
Building Size
Annual Fossil Fuel
Use (MMBtu)
Boiler Fuel Costs
(x 1000)
Enrollment
(No. of pupils)
Annual Building
Operating Costs6
(xl.OOO)
Boiler Fuel as
% of Total Costs
3 steam boilers
125 hp each
(5 MMBtu/hr each)
125,000 -
185,000 sq. ft.
5,606 - 7,984
$22.9 - 32.6
455 - 1,450
$1,727 - 5,504
0.4 - 1.7
2 steam boilers
150 hp each
(6 MMBtu/hr each)
47,000 -
104,000 sq. ft.
3,177 - 5,872
$13.0 - 35.9
460-670
$1,746 - 2,543
0.5 - 1.7
8 Range for four schools.
b $3,796/pupil times the total number of pupils,
3-6
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TABLE 3-2. HOSPITALS
Hospital
A
Hospital
B
Hospital
C
Boiler
Configuration
Bl: 29.1 MMBtu/hr
B2: 29.1 MMBtu/hr
Bl: 16.7 MMBtu/hr
B2: 25.1 MMBtu/hr
B3: 25.1 MMBtu/hr
Bl: 48.5 MMBtu/hr
B2: 48.5 MMBtu/hr
B3: 29.1 MMBtu/hr
Building Size 460,000 sq. ft
365,000 sq. ft
760,000 sq. ft
Annual Fossil 42,048
Fuel Use
(MMBtu)
170,820
121,300
Boiler Fuel $204
Costs (x 1000)
$827
$642
Annual
Building
Operating
Costs (xl.OOO)
$76,303
$59,818
$136,696
Boiler Fuel
as % of
Total Costs
0.3
1.4
, 0.5
3-7
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Laundries
Commercial laundries require substantial quantities of steam for
washing, drying and finishing operations. Wash water heating is probably the
major source of boiler load in a commercial laundry. Boiler configuration
data for 15 boilers in laundries in Illinois, 4 boilers in laundries in
Minnesota and 18 boilers in laundries in Boston show that all of the boiler
sizes are smaller than 15 MW (50 MMBtu/hr) and most are smaller than 6 MW (20
MMBtu/hr). Commercial laundry boilers are characterized by relatively high
capacity utilization rates: about 55 percent.
The boilers in Table 3-3 range in size from 2.9 - 7.3 MW (10.0 to 25.1
MMBtu/hr). Many laundry establishments are equipped with at least one back-up
boiler although, as noted in the table, some are only single-boiler opera-
tions.
Since boilers are used relatively intensively in laundry operations, one
would expect that the cost of fueling a boiler might be a significant fraction
of total establishment sales. Given the estimates of total annual boiler fuel
expenditures obtained from three laundry plants (shown in Table 3-3), this
appears not to be the case. Using these data, boiler fuel costs range from
1.8 to 2.7 percent of total plant revenues. However, the total boiler fuel
expenditures reported by the laundry plants listed in Table 3-3 imply fuel
prices which were only 50 percent of the national average price for natural
gas in 1986. Using the latter price, as more representative of most laun-
dries, and the estimates of annual boiler fuel use in Table 3-3, boiler fuel
costs range from 4.2 percent to 8.3 percent of total plant revenues.
Hotels
Boiler applications in hotels vary broadly. In some hotels boilers are
used to provide steam for general space and hot water heating in guest rooms
as well as driving turbines for summer cooling, running water pumps, laundry,
heated swimming pool and restaurant facilities on the premises. In other
hotels, boilers are used only for very specific applications and are therefore
very small. For example, a medium-sized hotel in Washington, D.C. relies on a
80 kW (0.3 MMBtu/hr) boiler to provide Steam for an on-site laundry facility
that is operated 14 hours/day and 6 days per week. Boiler configuration data
3-8
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TABLE 3-3. LAUNDRIES
Plant
1
Laundrv A
Plant
2
Laundry
B
Boiler
Configuration
Bl: 23.4 MMBtu/hr
B2: 16.7 MM8tu/hr
Bl: 10.0 MMBtu/hr
B2: 10.0 MMBtu/hr
Bl: 25.1 MMBtu/hr
Building Size 75,000 sq. ft
65,000 sq. ft
N.A.
Annual Fossil 109,500
Fuel Use
(MMBtu)
47,400
125,750
Annual Plant $11,100
Sales (xl.OOO)
$5,600
$7,500
Boiler Fuel
as % of
Total Sales
2.7 - 4.9
2.7 - 4.2
1.8 - 8.3
3-9
-------
for 21 boilers 1n hotels In Boston Indicate that all boilers are smaller than
7 MW (25 MMBtu/hr).
Boiler configuration data for a large and a small hotel are presented in
Table 3-4. Both hotels rely on boilers primarily to supply space and hot
water heating for guest rooms, laundry and kitchen facilities particularly
during the winter. As shown in the table, the annual boiler fuel consumption
varies widely between the two hotels -- a reflection of different building and
boiler sizes and different degrees of boiler usage. Despite the difference in
the absolute values for boiler fuel consumption and hotel revenues, boiler
fuel costs are roughly the same percentage of total sales (1.6-2.0 percent)
for both the large and the small hotel.
Colleges and Universities
Boiler configuration data for 72 boilers in colleges/universities in
Illinois, 90 boilers in colleges/universities in Minnesota and 86 boilers in
colleges/universities in Boston show that boiler sizes range from very small
(<1 MW, 29 MW, >100 MMBtu/hr).
Boiler configuration data for a large university and a small college are
presented in Table 3-5. In both cases, boilers are used to provide steam for
hot water and space heating for a number of buildings at various times
throughout the year. Generally, the boilers are operated one at a time except
during peak periods (i.e., winter) when additional capacity is needed.
With respect to the large university shown in Table 3-5, two of the
boilers are sized above the 29 MW (100 MMBtu/hr) level (currently defined as
the cut-off for "small" boilers). The other two boilers are only slightly
below the cut-off point. For this reason, this example has not been included
in the cost Impact analysis presented below. However, it is interesting to
note that the proportion of total operating costs contributed by annual boiler
fuel expenditures 1s very low (1.4 percent) and essentially similar to that of
the small college listed in Table 3-5.
3.2.3 Worst Case Economic Impacts
Boiler fuel expenditures as a percentage of total revenues per
establishment provide an indication of the overall importance of steam in
relation to total sales (or budgets) for selected commercial/institutional
3-10
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TABLE 3-4. HOTELS
Large
Hotel
Small
Hotel
Boiler
Configuration
Bl: 8.35 MMBtu/hr
B2: 11.70 MMBtu/hr
5 steam boilers
0.7 MMBtu/hr each
Building Size
685 rooms
227 rooms
Annual Fossil
Fuel Use (MMBtu)
72,010
8,486
Boiler Fuel
Costs (x 1000)
$294
$53
Annual Building
Revenues (xl,000)
$14,883
$3,430
Boiler Fuel as %
of Total Revenues
2.0
1.6
3-11
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TABLE 3-5. COLLEGES AND UNIVERSITIES
Large
University
Small
College
Boiler
Configuration
Bl: 145 MMBtu/hr
B2: 121 MMBtu/hr
B3: 97 MMBtu/hr
84: 85 MMBtu/hr
Bl: 24 MMBtu/hr
B2: 29 MMBtu/hr
83: 10 MMBtu/hr
Annual Fossil
Fuel Use (MMBtu)
922,000
107,383
Boiler Fuel
Costs (x 1000)
$4,000
$444
Annual Building
Operating Costs
(xl.OOO)
$293,291
$29,585
Boiler Fuel as %
of Total Costs
1.4
1.5
3-12
-------
sectors. To evaluate the economic impacts of a NSPS, it also is essential to
examine the ability of a firm to pay for the costs of pollution control. In
this respect, a useful measure is the annualized cost of pollution control as
a percentage of total annual revenues per establishment.
The objective is to use relatively high (not necessarily the most
likely) compliance costs estimates in order to delimit the magnitude of
possible adverse economic impacts. The "worst case" cost impact is calculated
by assuming full pass-through of compliance costs. Most commercial/insti-
tutional buildings do not use boilers (see Tables A-l and A-2) and, therefore,
will not be subject to any economic impacts due to a NSPS.
A "worst case" cost estimate for coal combustion would be patterned
after the promulgated PM and NOX NSPS for large (>29 MW, >100 MMBtu/hr)
industrial-commercial-institutional boilers (51 FR 42768) and the promulgated
S02 NSPS for large industrial-commercial-institutional boilers (52 FR 47827).
It would include a sodium scrubber (other feasible and demonstrated, but more
expensive alternatives are dual alkali and lime spray drying FGO systems), a
S02 monitor at the FGD inlet, a S02 monitor at the FGD outlet, a PM emissions
control device (an electrostatic precipitator or a fabric filterbecause the
wet FGD system may not, in and of itself, remove enough of the PM emissions),
an opacity monitor, a low excess air system to control NOX emissions, a NOX
monitor, and an O^COj outlet diluent monitor. However, relatively few coal-
fired boilers smaller than 29 MM (100 MMBtu/hr) have been used in the commer-
cial/institutional sector. Even fewer coal-fired boilers may be ordered in
the next five years because of the drop in oil prices since early 1986.
Most of the boilers in the commercial/institutional sector fire natural
gas (see Table A-l). Natural gas is not subject to the proposed S02 and PM
emissions standards. Therefore, adverse economic impacts are not expected for
new small package boilers firing natural gas.
Given that coal is not a representative new small boiler fuel type in
the commercial-institutional sector and that adverse economic impacts are not
expected from new small boilers firing natural gas, this analysis has focused
on distillate and residual fuel oil combustion compliance options.
3-13
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An expensive control compliance option would be to require a scrubber
for fuel oil combustion In new small boilers. EPA has determined that sodium
scrubbing systems, a conventional wet flue gas desulfurlzatlon (FGD) system,
have been widely applied to small oil-fired steam-generating units and are
considered demonstrated for purposes of developing NSPS.1
EPA has prepared estimates of the annual 1 zed capital and operating costs
for various sizes of scrubbers.2 In applying these costs, some assumptions
concerning boiler operation In multiple boiler establishments are necessary.
Specifically, in sizing the scrubbers it 1s assumed that multiple boiler
establishments: 1) operate boilers one at a time; 2) use the largest boiler
most of the time; and 3) employ the other boilers as back-up units. These
assumptions reflect the standard boiler operating procedures stated by most of
the respondents who provided data for this analysis. The assumption of single
boiler operation 1n multiple boiler establishments also is verified by the
relatively low boiler capacity utilization rates characteristic of most of the
selected sectors.
Table 3-6 Incorporates the selected sector data from Section 3.2.2 with
information on the annualized capital and operating costs for various sizes of
scrubbers. Boiler fuel expenditures account for from 0.5 percent to as much
as 8 percent of the total annual revenues of a commercial/Institutional
establishment. The incremental costs of pollution control are under 5 percent
of total annual revenues for each of the selected sectors. The results
suggest that this very stringent control requirement could lead to potential
increases of 2-4 percent in the prices of (or budgets for) some laundries,
hotels and schools.
The Impacts of this very stringent control scenario did not include the
costs of monitoring and testing, which can be a significant expense.3 Table
3-7 summarizes EPA estimates for these parameters. The cost estimates in
Table 3-7 do not necessarily reflect the average expenses associated with the
proposed standards. Table 3-8 shows the Impacts of including monitoring and
testing costs. The result indicates potential price increases (or budget
increases for schools) of from 3 to 8 percent for some laundries, hotels and
schools.
3-14
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TABLE 3-6. SELECTED SECTORS ECONOMIC IMPACTS: FGD
(Without Monitoring and Testing Costs)
Sector
Laundry A:
Plant 1
Plant 2
Laundry B
Hospital A
Hospital B
Hospital C
Large Hotel
Small Hotel
Small College
Jr. High
Elem. School
Annual
Revenues
(x 1,000 $)
11,100
5,600
7,500
76,303
59,818
136,696
14,883
3,430
29,585
1,727-5,504
1,746-2,543
Scrubber
Size
(MMBtu/hr)
23.4
10.0
25.2
29.1
50d
100d
20d
5e
53d
5
6
Annual i zed
Scrubber
Cost8
(x 1,000 $)
120.4
93.1
120.4
140
200
285
120.4
70
200
70
70
Boiler
Fuel
Cost
Percent6
2.7-4.9
2.7-4.2
1.8-8.3
0.3
1.4
0.5
2.0
1.6
1.5
0.4-1.7
0.5-1.7
Pollution
Control
Percent0
1.1
1.7
1.6
0.2
0.3
0.2
0.8
2.0
0.7
1.3-4.1
2.8-4.0
8 Rough extrapolation of estimates in Reference 1 converted to 1985 dollars;
assumes low annual capacity utilization rate and a 0.13147 capital recovery
factor (10 percent interest and 15 years); excludes monitoring and testing.
6 Boiler fuel costs divided by annual revenues (see Tables 3-1 through 3-5).
c Annualized scrubber cost divided by annual revenues.
d Two largest boilers
e Sum of all five boilers
3-15
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TABLE 3-7. MONITORING AND TESTING
COST ESTIMATES*
(000$)
Capital Annual O&M Annual1zedb
Opacity monitor 59 8 16
S02/diluent monitor 55 46 53
PM/S02 test 8
Total 122 54 70
a Reference 3.
b Annual O&M plus (0.13147 times capital cost); this capital recovery factor
is based on a 10 percent interest rate and 15 years.
3-16
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TABLE 3-8, SELECTED SECTORS ECONOMIC IMPACTS: F60
(With Monitoring and Tasting Costs)
Sector
Laundry A:
Plant 1
Plant 2
Laundry B
Hospital A
Hospital B
Hospital C
Large Hotel
Small Hotel
Small College
Jr. High
El em. School
Annual
Revenues
(x 1,000 $)
11,100
5,600
7,500
76,303
59,818
136,696
14,883
3,430
29,585
1,727-5,504
1,746-2,543
Scrubber
Size
(MMBtu/hr)
23.4
10.0
25.2
29.1
50d
100d
20d
5e
53d
5
6
Annual 1 zed
Scrubber and
Monitoring
Cost"
(x 1,000 $)
190.4
163.1
190.4
210
270
35S
190.4
140
270
140
140
Boiler
Fuel
Cost
Percent"
2.7-4.9
2.7-4.2
1.8-8.3
0.3
1.4
0.5
2.1
1.6
1.5
0.4-1.7
0.5-1.8
Pollu-
tion
Control
Percent0
1.7
2.9
2.5
0.3
0.5
0.3
1.3
4.1
0.9
2.5-8.1
5.5-8.0
a Includes annual 1 zed scrubber costs from Table 3-6 and annualized monitoring
and testing costs from Table 3-7.
b Boiler fuel costs divided by annual revenues (see Tables 3-1 through
3-5).
c Annualized scrubber and monitoring and testing costs divided by annual
revenues.
d Two largest boilers
e Sum of all five boilers
3-17
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The significant Impacts due to this stringent control scenario requiring
scrubbers and Monitoring requirements occur due to the very high capital costs
assumed for scrubbers on these smaller sized boilers, and expensive monitoring
requirements which significantly Increase the costs of using boilers. The
most severe impact would be experienced 1n places like schools which utilize
very small boilers only for space heating purposes.
A less expensive but still stringent S02 emissions control standard
would be a very low sulfur fuel regulation. This regulation may require fuel
sampling and/or initial PM/S02 tests. This 1s assumed to cost $1,000 per
year. The fuel price Increase is estimated to be no larger than S0.73/GJ or
$0.77/MMBtu (1985 dollars). This estimate is based on the projected dif-
ference in commercial residual fuel oil prices between high (3.0 percent)
sulfur and very low (0.3 percent) sulfur.4'5 Table 3-9 summarizes the poten-
tial price impacts of a very low sulfur fuel requirement (0.3 percent sulfur)
on boilers firing residual fuel oil. In this regulatory scenario (with
monitoring and testing costs), some laundries could experience price (or
budget) increases of about 1 percent.
3.3 GENERIC BUILDINGS
3.3.1 Scope
The generic buildings analysis addresses the potential impact of a
revised NSPS in buildings where the primary use of the boiler is space
heating. Representational boiler configurations for five different building
size ranges were developed from a small sample of actual configurations in
different cities. In order to capture the effects of regional (climatic)
differences, the data collection and analysis were performed separately for an
area in the northern and an area 1n the southern United States.
Generic buildings use boilers primarily for space heating, although a
small portion of boiler energy use may be for.water heating. The 11st of
generic buildings excludes buildings with a significant additional process
requirement for steam. Offices, assembly halls, religious institutions and
3-18
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TABLE 3-9. SELECTED SECTORS ECONOMIC IMPACTS:
VERY LOU SULFUR REGULATION
(With Monitoring and Testing Costs)
Sector
Laundry A:
Plant 1
Plant 2
Laundry B
Hospital A
Hospital B
Hospital C
Large Hotel
Small Hotel
Small College
Jr. High
Elem. School
Annual
Revenues
(x 1,000 $)
11,100
5,600
7,500
76,303
59,818
136,696
14,883
3,430
29,585
1,727-5,504
1,746-2,543
Annual Fossil
Fuel Consumption
(MMBtu/yr)
109,500
47,400
125,750
42,048
170,820
121,300
72,010
8,486
107,383
5,606-7,984
3,177-5,872
Annual
Pollution
Control Cost"
(x 1,000 $)
85
37
98
33
133
94
56
8
84
5-7
3-6
Pollution
Control
Percent"
0.8
0.7
1.3
0.1
0.2
0.1
0.4
0.2
0.3
0.1-0.4
0.1-0.3
a (Annual fossil fuel consumption times $0.77/MMBtu) plus $1,000.
b Annual pollution control costs divided by annual revenues.
3-19
-------
retail space use boilers primarily for space heating and are included in this
analysis.*
Data from two regional areas are studied separately in order to under-
stand how boiler configurations vary with climatic area. Boston, Massa-
chusetts was selected as the northern study area. Boiler use in a southern
area is represented in this study by data from Washington, D.C. The generic
buildings economic Impact analysis provides estimates of potential cost
impacts of specific alternative air emissions standards for new commercial/
institutional boilers in five building size classes and two regions. The cost
impacts are measured by comparing the annualized pollution control costs of
regulatory scenarios to estimates of the annual building operating budget.
The annual building operating budget is estimated to be the building size (in
square feet) times the rental rate (dollars per square foot). This analysis
assumes full cost pass-through of the total annualized pollution control
costs.
This approach measures the potential increase in building rental rates
to tenants as a consequence of worst case NSPS control scenarios. The
economic impact on the tenant would obviously depend on the nature of the
business activity of each tenant. Tenants whose business Implies a very high
ratio of sales per square foot of floor space rented (grocery store, Wall
Street brokers) would tend to see very little impact on profit margins since
building control costs would be such a small percentage of sales. Other
tenants with a relatively low ratio of sales per square foot of space would
tend to experience relatively greater impacts on their cost structure.
Essentially, the objective in focusing on the impact of the NSPS on building
rental rates is intended to provide an indicator which any building tenant can
relate to in assessing whether they might be significantly affected by a NSPS.
3.3.2 Approach
A different data collection strategy is necessary for each city because
data availability in Boston is different from data availability in Washington,
D.C. The Boston data on boiler use were provided by the Division of Air
Quality Control, Department of Environmental Quality Engineering of the
Schools were included in the selected sectors analysis in Section 3.2.
3-20
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Commonwealth of Massachusetts. This office tracks the generation of air
pollution by source, frequency of use, and fuel type. Information is avail-
able on the number, size, frequency of use, address and purpose of establish-
ment for boilers within the Boston city limits. Building size data were not
available from this data source. In addition, data were acquired on commer-
cial building vacancies, rental rates and building sizes from three real
estate agencies.6'7'8 These rental data were matched with the boiler informa-
tion to develop a data set on boiler use in generic buildings in Boston.
In Washington, D.C. data were collected from the D.C. Boiler Inspector's
Office. From these records of boiler registration and safety inspection, data
on address, number of boilers and boiler size were gathered. From the D.C.
Tax Assessor's Office information was collected on building address, type of
occupant, and building size. These two data sources were matched by building
address to create a data set on boiler use 1n generic buildings in Washington,
D.C.
Boston Data
Collection and compilation of data on boiler use in Boston, Massa-
chusetts resulted in the set of 21 data points shown in Table 3-10. These are
all office buildings. From these data we see that boiler size ranges from 1-4
MW (3 to 13 MMBtu/hr) in generic buildings and that there is only one building
with a boiler larger than 3 MW (10 MMBtu/hr). Small buildings tend to have
fewer boilers than larger buildirqs. In most Boston buildings with multiple
boilers, the average annual capacity utilization rate is low. This suggests
that the additional boilers serve as backup and not as primary boilers.
Based on these data, the typical configurations shown in Table 3-11 were
developed. In these configurations, all additional boilers in a building are
considered to be the same size as the first. The number and size of these
boilers were calculated from the average number and size in each building size
range.
Washington. D.C. Data
Collection and compilation of data on boiler use in Washington, D.C.
resulted in the set of 12 data points shown in Table 3-12. These are mostly
office and apartment buildings; there are a few churches and small retail
3-21
-------
TABLE 3-10. GENERIC BUILDINGS BOILER CONFIGURATION DATA
FOR BOSTON, MASSACHUSETTS
Building
Size
(1000 sq.ft.)
22
30
32
50
60
64
66
72
72
82
90
100
110
110
120
150
196
200
280
333
580
Boiler 1
(MMBtu/hr)
3
3
3
6
6
4
6
8
6
4
9
4
5
3
6
4
13
9
10
7
7
Boiler 2 Boiler 3 Boiler 4
(MMBtu/hr) (MMBtu/hr) (MMBtu/hr)
10 10
4 4
6
4
4
5
6
4 44
12
9
7
7
7
3-22
-------
TABLE 3-11. GENERIC BUILDINGS TYPICAL BOILER CONFIGURATIONS
FOR BOSTON, MASSACHUSETTS"
Building Size
Range
(1000 sq.ft.)
1-25
26-50
51-100
101-200
201+
Total Number
of Boilers
1
1
2
2
2
Boiler Size
of Each
(MMBtu/hr)
3
5
5
6
7
Derived from Table 3-10.
3-23
-------
TABLE 3-12. GENERIC BUILDINGS BOILER CONFIGURATION DATA
FOR WASHINGTON, D.C.
Building
Size
(1000 sq.ft.)
22
34
81
129
139
186
202
245
285
287
345
875
Boiler 1
(MMBtu/hr)
1
3
2
3
5
5
6
6
6
7
12
13
Boiler 2 Boiler 3 Boiler 4
(MMBtu/hr) (MMBtu/hr) (MMBtu/hr)
2
3
4
6
6
6 6
4
8 8
13
3-24
-------
stores. Specific average capacity utilization rates for each building are
unavailable. These data show that boiler size ranges from 0.3 to 4 MW (1 to
13 MMBtu/hr). Only two buildings have boilers larger than 3 MW (10 MMBtu/hr)
and these buildings are both over 300,000 square feet. As with the Boston
data, small buildings tend to have smaller and fewer boilers than large
buildings.
Table 3-13 shows the typical boiler configurations drawn from the
Washington data. It was assumed that all boilers in any given building are
the same size. The original data are subdivided into the defined building
size ranges. Typical configurations are drawn from simple averages of the
number and size of boilers in each building size range.
Boston and Washington Configurations Compared
Boston and Washington show similar boiler use patterns. Both Boston and
Washington have an identical number of boilers in each building size range.
The Washington buildings, in general, tend to have slightly smaller boilers
than the Boston buildings (see Table 3-14). This assumption is consistent
with Washington's relatively warmer climate.
Table 3-15 presents estimates of annual fossil fuel consumption in
boilers in generic buildings. Actually, there is considerable variability in
energy consumption per square foot in commercial buildings due to building
design characteristics, HVAC equipment differences and energy conservation
measures. In general, there are economies of scale - energy consumption per
square foot decreases as building size increases.
Table 3-16 summarizes other comparable estimates of annual fossil fuel
consumption in commercial buildings which include a boiler.9 The average
values in Table 3-16 show that the estimates in Table 3-15 for small buildings
are reasonable.
Office Building Rental Rates
Office building annual rental rates vary over a wide range, from $10-
60/square foot. Typical rental rates may be $15-30/square foot.6'7'8 For this
analysis, the selection of a relatively high rental rate will bias the
economic analysis toward minimizing the cost impacts of pollution control
costs. Therefore, a relatively low rental rate, $15/square foot, has been
3-25
-------
TABLE 3-13. GENERIC BUILDINGS TYPICAL BOILER CONFIGURATIONS
FOR WASHINGTON, O.C."
Building Size
Range
(1000 sq.ft.)
1-25
26-50
51-100
101-200
201 +
Total Number
of Boilers
1
1
2
2
2
Boiler Size
of Each
(MMBtu/hr)
1
3
2
4
8
8 Derived from Table 3-12.
3-26
-------
TABLE 3-14. GENERIC BUILDINGS BOILER CONFIGURATIONS"
Building
Size Range
(1000 sq.ft.)
<25
25-50
51-100
101-200
>200
Washinaton.
Number
of
Boilers
1
1
2
2
2
D.C.
Boiler
Size
of Each
(MMBtu/hr)
1
3
2
4
8
Boston.
Number
of
Boilers
1
1
2
2
2
Massachusetts
Boiler
Size
of Each
(MMBtu/hr)
3
5
5
6
7
a See Tables 3-11 and 3-13.
3-27
-------
TABLE 3-15. ESTIMATES OF GENERIC BUILDINGS
ANNUAL FOSSIL FUEL CONSUMPTION IN BOILERS
Building
Size Range Washington. D.C. Boston. Massachusetts
(1,000 sq. ft.)
<25
25-50
51-100
101-200
>200
GJ/yr
1,160
2,560
2,954
3,480
6,330
(MMBtu/yr)
(1,100)
(2,300)
(2,800)
(3,300)
(6,000)
GJ/yr
1,320
3,340
4,220
5,275
8,440
(MMBtu/yr)
(1,250)
(3,000)
(4,000)
(5,000)
(8,000)
3-28
-------
TABLE 3-16. ENERGY CONSUMPTION IN CONNERCIAL BUILDINGS IN 1983
Fuel Type
Natural Gas'
No. of Buildings"
Avg. Building Size (sq. ft.)b
Northeast
113,000
15,700
North Central
212,000
22,500
Avg. Annual Gas Consumption
per Building (MMBtu)c 1,168 2,055
Fuel Oild
No. of Buildings"
Avg. Building Size (sq. ft.)e
Avg. Annual Fuel Oil Consumption
per Building (MMBtu)9
101,000
23,800
1,389
Qf
Q
Q
a Reference 9, p. 106, 109.
b Buildings which use natural gas to fire boilers.
c Includes natural gas consumption in boilers and other equipment.
d Reference 9, p. 119, 122.
e Buildings which use fuel oil only to fire boilers.
f Data withheld because the relative standard error was greater than 50% or
fewer than 20 buildings were sampled.
9 Includes fuel oil consumption in boilers and other equipment.
3-29
-------
chosen 1n order that the cost impacts will not be understated for most office
building tenants. The annual building rental cost estimates are summarized in
Table 3-17.
3.3.3 Results of the Regulatory Analysis
Scope
The generic buildings economic impact analysis provides estimates of
potential cost impacts of specific alternative air emissions standards for new
commercial/institutional boilers in the five building size classes and two
regions. The cost impacts are measured by comparing the annualized pollution
control costs to estimates of the annual building rental costs.
The baseline is assumed to be high (3.0 percent) sulfur residual fuel
oil. This is not an appropriate baseline assumption for many municipal areas,
For example, New York City, Philadelphia and Boston require very low sulfur
fuel oil. Therefore, this analysis overstates the potential cost impacts for
buildings in these communities. This economic analysis also tends to be a
"worst case" analysis of specific alternative air emissions standards. It is
using a relatively low building rental rate which overstates the economic
Impacts of Increased pollution control costs for many tenants. In addition,
there is no significant cost impact for most generic buildings because most
these buildings do not use boilers and many of the rest use natural gas (which
is not subject to the cost impacts presented in this section).* Furthermore,
this analysis assumes that there will be no boiler size cutoff; the altern-
ative air emissions standards are assumed to be applicable to new boilers as
small as 0.3 MW (1 MMBtu/hr). Finally, this analysis includes monitoring and
testing costs which may not necessarily be part of the alternative air
emission standard.
Cost Estimates
Two regulatory scenarios have been evaluated:
a very low sulfur fuel standard, 129 ng Styj (0.3 Ib SO^MMBtu),
with a $1,000 per year per boiler monitoring and testing cost
assumption
See Appendix A.
3-30
-------
TABLE 3-17. GENERIC BUILDINGS ANNUAL RENTAL COSTS
Building
Size Range
(1000 sq.ft.)
Representative
Building Size
(1000 sq.ft.)
Annual
Rental
Costs8
<25 12 $ 180,000
25-50 37 555,000
51-100 75 . 1,125,000
101-200 150 2,250,000
>200 380b 5,700,000
a Representative building size times $15/sq.ft.
b In 1983, there were 7,000 office buildings which were larger than 200,000
square feet with a total area of 2,671 million square feet; or an average
of 2,671,000,000/7,000 or 380,000 square feet. Nonresidential Buildings
Energy Consumption Survey: Characteristics of Commercial Buildings 1983.
U.S. Department of Energy, Energy Information Administration. DOE/EIA-
0246(83). July 1986. p.55,57.
3-31
-------
i flue gas desulfurizatlon (FGO) or scrubber requirement with a
$70,000 per year per boiler (see Table 3-7) monitoring and testing
cost assumption
Table 3-18 shows the estimates of the total annualIzed pollution control
costs for the very low sulfur fuel requirement. The sulfur premium is
estimated to be $0.73/60 or $0.77/MMBtu (1985 dollars) for 3.0 to 0.3 percent
sulfur.5'6
Table 3-19 presents estimates of the total annual 1 zed pollution control
costs for scrubbers. The monitoring and testing cost estimates are larger
than the estimates used in Table 3-18. These total annualized pollution
control cost estimates are summarized in Table 3-20.
Impacts on Building Rental Rates
The Impacts of total annualized pollution control costs on building
rental rates are summarized In Table 3-21. The range 1s large, 1-67 percent.
Table 3-21 suggests significant economies of scale - the cost Impacts are
small for large buildings.
The cost impacts in Table 3-21 are relatively large for buildings
smaller than 50,000 square feet for the scrubber scenario. It is important to
note that the overwhelming share (88 percent)* of commercial buildings which
have boiler installations were less than 50,000 square feet in size.
Table 3-22 presents estimates of the projected impacts of annualized
pollution control costs (without monitoring and testing costs) on building
rental rates. The impacts are negligible for the very low sulfur fuel
standard.
See Table A-l 1n Appendix A.
3-32
-------
TABLE 3-18. DERIVATION OF ESTIMATES OF TOTAL
ANNUALIZED POLLUTION CONTROL COSTS PER BUILDING
FOR THE VERY LOW SULFUR FUEL STANDARD8
(000$)
Building
Size Range
(000 sq. ft.)
<25
25-50
51-100
101-200
>200
Monitoring
and
Testing
1
1
1
1
1
Washington
. D.C.
Fuel Cost
Increase6 Total6
0.8
1.8
2.2
2.5
4.6
1.8
2.8
3.2
3.5
5.6
Boston.
Fuel Cost
Increase6
1.0
2.3
3.0
3.9
6.2
MA
Total6
2.0
3.3
4.0
4.9
7.2
a 129 ng S(VJ (0.3 Ib S(VMMBtu).
b Annual fuel consumption from Table 3-14 times $0.73/GJ or $0.77/MMBtu
($1985).
6 Monitoring and testing costs plus fuel cost increase.
3-33
-------
TABLE 3-19. DERIVATION OF ESTIMATES OF TOTAL ANNUALIZED
POLLUTION CONTROL COSTS PER BUILDING
FOR THE SCRUBBER REQUIREMENT"
(000$)
Washington. O.C.
Building
Size Range
(000 sq. ft.)
<25
25-50
51-100
101-200
>200
Monitoring
and
Testing6
70
70
70
70
70
Scrubber
Cost6
40
50
50
70
80
Totald
110
120
120
140
150
Boston.
Scrubber
Cost6
50
70
70
70
75
MA
Totald
120
140
140
140
145
a Scrubber is required.
b See Table 3-7.
c Estimates extrapolated from Reference 1 converted to 1985 dollars; assumes
low capacity utilization rate and a 0.13147 capital recovery factor (10
percent interest and 15 years).
d Monitoring and testing plus scrubber costs.
3-34
-------
TABLE 3-20. COMPARISON OF ESTIMATES OF TOTAL ANNUALIZEO
POLLUTION CONTROL COSTS PER BUILDING8
(000$)
Building
Size Range
(1000 sq. ft.)
<25
25-50
51-100
101-200
>200
Washington . D.C.
Very Low
Sulfur
1.8
2.8
3.2
3.5
5.6
Scrubber
110.0
120.0
120.0
140.0
150.0
Boston, Massachusetts
Very Low
Sulfur Scrubber
2.0
3.3
4.0
4.9
7.2
120.0
140.0
140.0
140.0
145.0
See Tables 3-18 and 3-19. Includes monitoring and testing costs.
3-35
-------
TABLE 3-21. IMPACTS OF TOTAL ANNUALIZED POLLUTION CONTROL COSTS
ON RENTAL RATES (WITH MONITORING AND TESTING COSTS)"
(percent Increases)6
Building
Size Range
(1000 sq. ft.)
<25
25-50
51-100
101-200
>200
Washington. D.C.
Very Low
Sulfur
1
c
C
C
C
Scrubber
61
22
11
6
3
Boston.
Very Low
Sulfur
1
1
c
c
c
Massachusetts
Scrubber
67
25
12
6
3
8 Total annualized pollution control cost estimates from Table 3-20 divided
by annual building rental costs in Table 3-17.
b Total annualized pollution control costs as a percent of annual building
rental costs.
c Less than 0.5 percent.
3-36
-------
TABLE 3-22. IMPACTS OF TOTAL ANNUALIZED POLLUTION CONTROL COSTS
ON RENTAL RATES (WITHOUT MONITORING AND TESTING COSTS)8
(percent Increases)6
Building
Size Range
(1000 sq. ft.)
Washington. D.C.
Very Low
Sulfur Scrubber
Boston. Massachusetts
Very Low
Sulfur Scrubber
<25
25-50
51-100
101-200
>200
22
9
4
3
1
28
13
6
3
1
a Annualized pollution control cost estimates (excluding monitoring and
testing) from Table 3-20 divided by annual building rental costs in Table
3-17.
b Annualized pollution control costs as a percent of annual building rental
costs.
c Less than 0.5 percent,
3-37
-------
REFERENCES
1. 51 FR 22402, 22412.
Summary of Regulatory Analysis for New Source Performance Standards:
Industrial-Commercial-Institutional Steam Generating Units of Greater
than 100 Million Btu/hr Heat Input. Radian Corporation, Research
Triangle Park, North Carolina. EPA-450/3-86-005. Prepared for the U.S.
Environmental Protection Agency, Office of Air Quality Planning and
Standards. June 1986. p. 5-50, 5-51, 5-55, 5-56 and 5-57.
2. Model Boiler Cost Analysis for Controlling Sulfur Dioxide (S0?)
Emissions from Small Steam Generating Units. U.S. Environmental
Protection Agency, Research Triangle Park, N.C.
EPA Publication No. EPA-450/3-89-14. May 1989.
3. Memorandum and attachments from Copland, R. (EPA/SOB) to Link, T.
(EPA/EAB). Revised Regulatory Alternatives for Small Boiler Impacts
Analysis. July 2, 1987.
4. Letter and enclosure from Hogan, T. (EEA) to Link, T. (EPA/EAB).
Regional Commercial Oil and Gas Price Forecasts. July 16, 1987.
5. Letter and attachments from Hogan, T. (EEA) to Link, T. (EPA/EAB).
Annualized Commercial Oil and Gas Prices. July 28, 1987.
6. Boston Trend. Cushman and Wakefield, Boston. 1986.
7. Hunneman Office Market Survey. Hunneman, Boston. 1986.
8. The Spaulding & Sly Report. Spaulding & Sly, Boston. 1986.
9. Nonresidential Buildings Energy Consumption Survey: Commercial Build-
ings Consumption and Expenditures 1983. U.S. Department of Energy,
Energy Information Administration. DOE/EIA-0318(83). September 1986.
3-38
-------
4. ECONOMIC IMPACTS: INDUSTRIAL SECTOR
This section summarizes the economic impact analyses for the industrial
sector. Because the number of industries affected by the proposed standards
1s large, a two-fold approach has been used. The first component focuses on
major steam using industries and the second component addresses smaller
industrial groups.
4.1 MAJOR STEAM USERS
Boilers are used in all manufacturing groups. This section discusses
trends in the financial and economic characteristics of a subset of manufac-
turing industries labeled "major steam users."
The major steam users consist of the following manufacturing groups:
Food (SIC 20)
Textiles (SIC 22)
Paper (SIC 26)
t Chemicals (SIC 28)
t Petroleum (SIC 29)
t Primary metals (SIC 33)
These industries have been selected because:
t as a group, they account for most of the total number of
industrial boilers and industrial boiler annual fuel consumption;
and
t individually, they represent those industrial classes with the
greatest number of boilers.
Table 4-1 shows that this group of major steam users accounted for 79 percent
of the total number of large (greater than 14.7 MW or 50 MMBtu/hr) boilers, 90
percent of the total annual fuel consumption in large boilers, and 71 percent
of the total number of boilers between 14.7 and 29.3 MW (50-99 MMBtu/hr) in
the manufacturing sector in 1979.' Data are not available for boilers smaller
than 14.7 MW (50 MMBtu/hr) by industry group.
This section also summarizes the projected short-term economic impacts
on each of these major steam user groups of the alternative air emissions
4-1
-------
TABLE 4-1. AN OVERVIEW OF THE USE OF BOILERS IN
MANUFACTURING INDUSTRIES IN 1979"
Manufacturing Group
(SIC Code)
>14.7 MW (>50 MMBtu/hrlb
Number of 1979 Fuel Consumption
Boilers PJ (1012 Btu)
14.7-29.3 MW
(50-99 MMBtu/hr)c
Number of Boilers
Food and kindred
products (20)
Textile mill
products (22)
Paper and allied
products (26)
Chemicals (28)
Petroleum (29)
Primary metals (33)
Subtotal for major
steam users
Total manufacturing
Subtotal/total
1,122
382
1,239
1,783
653
647
5,826
7,408
79%
338.7
74.8
1,661.9
1,290.4
493.1
596.3
4,455.3
4,928.4
90%
(321.0)
(70.9)
(1,575.2)
(1,223.1)
(467.4)
(565.2)
(4,222.8)
(4,671.2)
90%
593
286
331
618
241
207
2,276
3,203
71%
a Unweighted data: includes only establishments which responded to the
survey (Form EIA-463); does not include estimates for establishments which
did not respond to the survey. Includes natural gas, coal, fuel oil,
pulping liquor, blast furnace gas, coke oven gas, refinery off-gas, wood
and miscellaneous other fuels.
b Reference 1, p. 5.
c Reference 1, p. 28.
4-2
-------
standards for new small industrial fossil fuel-fired boilers. A "worst case"
analysis has been conducted in order to delimit the magnitude of possible
adverse economic impacts.
Economic Profiles
Overview. The six aforementioned major steam users accounted for 40
percent of total product shipments by the manufacturing sector in 1986. 3 They
represent a collection of manufacturing industries which have experienced
sharply different trends in output, profitability and general economic perfor-
mance to date.
Figure 4-1 and Table 4-2 compare, for example, the growth in output for
each of the six industries since 1977. 4 In general, output in the food,
chemicals and paper industries grew relatively consistently at or above the
industrial annual average of 2.6 percent over the past ten years. In 1987 the
quantity of goods produced in these three sectors was up 38-44 percent over
1977 levels and 20-35 percent over the levels experienced during the 1982 eco-
nomic recession. Output in the food sector, in particular, appeared to be
relatively insensitive to economic recession.
In contrast, production in the textile, petroleum and primary metals in-
dustries fell 10-35 percent below 1977 levels during the recession of 1982.
Although output for these three industries recovered in the post-1982 period,
this group has lagged behind the food, chemicals and paper industries and has
continued to experience problems. For instance, primary metal production
dropped between 1984 and 1986 due to continued competition from steel imports
and steel substitutes.
Figures 4-2 through 4-4 and Tables 4-3 through 4-5 review the profit-
ability and the financial performance of each of the six major steam using
sectors. Figure 4-2 measures trends in the after-tax rate of return which
accrued to Investors 1n each of the six industries during the eight quarters
of 1985 and 1986. Investments in the food and kindred products (SIC 20)
industry yielded the highest after-tax rates of return over these eight
quarters -- a reflection of the strong growth in food production observed
earlier in Figure 4-1. Rates of return on equity in the paper (SIC 26),
chemicals (SIC 28) and textile (SIC 22) industries also exceeded the all man-
ufacturing average in 1985 and 1986. In contrast, the primary metals (SIC 33)
4-3
-------
FIGURE 4-1
Federal Reserve Board Index Of
Industrial Production
INDEX BY MANUFACTURING GROUP
1977 = 100
160
140
120
100
80
60
40
20
I I
I I I I
J I
1977 1978 1979 1980 1981 1982 1983 . 1984 1985 1986 1987
4-4
-------
TABLE 4-2. FEDERAL RESERVE BOARD
INDEX OF INDUSTRIAL PRODUCTION*
(1977 - 100)
Year
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
Food
137.8
134.4
130.2
126.9
120.4
114.9
113.7
111.4
106.7
104.3
Textiles
115.9
109.2
103.2
104.2
100.9
89.2
98.1
100.8
104.4
102.8
Paper
144.4
136.5
127.6
127.2
119.8
109.4
112.4
110.6
110.8
106.8
Chemicals
140.2
132.0
127.1
121.6
114.0
103.8
112.6
106.4
111.4
106.8
Petroleum
93.5
92.7
86.8
87.4
84.0
84.2
89.4
94.0
101.7
102.5
Primary
Metals
81.3
75.1
80.5
82.3
73.0
65.8
95.0
90.4
108.5
107.0
Total
Industrial
129.8
125.1
123.8
121.4
109.2
103.1
111.0
108.6
110.7
106.5
a Reference 4. Also see Figure 4-1.
4-5
-------
FIGURE 4-2
25
-30
Rates Of After-Tax Profit On
Stockholders' Equity
PERCENT IY INDUSTRY GROUP
1965.1
1985.2 1985.3 1985.4 1986.1 19065 1986.3 1986.4
YEAR. QTR
4-6
-------
RGURE 4-3
Rates Of After-Tax Profit On Total Assets
PERCENT BY INDUSTRY GROUP
Percent
10
8
-2-
8
10
-12
1966.1 19662 1965.3 1965.4 1966.1 19662 1966.3 1966.4
YEAR.QTR
4-7
-------
FIGURE 4-4
After-Tax Profits Per Dollar Of Sales
CENTS BY INDUSTRY GROUP
CENTS
8-
4-
10-
1965.1 19862 1985.3 1985.4 1986.1 19662 1966.3 1966.4
YEAR. QTR
4-8
-------
TABLE 4-3. AVERAGE RATES OF AFTER-TAX PROFIT ON
STOCKHOLDERS' EQUITY BY INDUSTRY GROUP8
(Percent)
4Q 1986
3Q 1986
2Q 1986
1Q 1986
4Q 1985
3Q 1985
2Q 1985
1Q 1985
Food &
Kindred
Products
19.6
15.5
15.7
12.9
16.9
16.5
15.0
12.8
Textile
Mill
Products
17.0
14.3
14.6
12.0
13.5
7.8
7.4
5.7
Paper
& Allied
Products
12.3
10.6
12.1
7.9
9.4
8.1
11.7
9.8
Chemicals Petroleum Primary
& Allied & Coal Metals
Products Products
8.2
15.4
14.9
12.8
3.1
8.7
13.4
12.5
4.5
1.0
11.5
7.4
8.8
9.3
5.2
10.5
- 4.0
- 30.7
- 2.0
- 2.6
- 13.3
- 7.3
- 8.1
- 3.0
All
Manuf .
8.6
8.5
12.2
9.0
9.3
9.9
10.9
10.5
8 Quarterly Financial Report for Manufacturing, Mining and Trade Corpora-
tions. U.S. Department of Commerce, Bureau of the Census. Various issues.
4-9
-------
TABLE 4-4. AVERAGE RATES OF AFTER-TAX PROFIT ON TOTAL ASSETS
BY INDUSTRY GROUP8
(Percent)
Food &
Kindred
Products
4Q 1986
3Q 1986
2Q 1986
1Q 1986
4Q 1985
3Q 1985
2Q 1985
1Q 1985
7.5
6.0
6.5
5.3
7.1
7.3
6.6
5.6
Textile
Mill
Products
7.9
6.6
6.7
5.4
6.1
3.5
3.5
2.7
Paper
& Allied
Products
5.5
4.8
5.6
3.7
4.5
3.8
5.7
4.7
Chemicals
& Allied
Products
3.8
7.2
7.0
5.9
1.5
4.4
7.0
6.4
Petroleum Primary
& Coal Metals
Products
1.9
0.4
4.9
3.1
3.7
3.9
2.2
4.6
- 1.4
- 10.3
- 0.7
- 0.9
- 4.9
- 2.7
- 3.0
- 1.1
All
Manuf.
3.8
3.8
5.5
4.0
4.2
4.5
5.0
4.8
Quarterly Financial Report for Manufacturing, Mining and Trade Corpora-
tions. U.S. Department of Commerce, Bureau of the Census. Various issues.
4-10
-------
TABLE 4-5. AVERAGE AFTER-TAX PROFITS PER DOLLAR OF
SALES BY INDUSTRY GROUP8
(Cents)
Food & Textile Paper Chemicals Petroleum Primary All
Kindred Mill & Allied & Allied & Coal Metals Manuf.
Products Products Products Products Products
4Q 1986
3Q 1986
2Q 1986
1Q 1986
4Q 1985
3Q 1985
2Q 1985
1Q 1985
5.2
4.0
4.1
3.6
4.6
4.6
3.9
3.4
4.6
3.9
4.0
3.3
3.5
2.2
2.1
1.7
4.8
4.4
5.0
3.4
3.9
3.3
4.8
4.0
4.1
7.6
7.0
6.1
1.5
4.4
6.5
6.3
3.0
0.7
7.3
4.0
4.0
4.3
2.4
5.2
-1.2
-9.4
-0.6
-0.8
-4.3
-2.4
-2.6
-1.0
3.3
3.4
4.7
3.5
3.4
3.7
4.0
4.0
8 Quarterly Financial Report for Manufacturing, Mining and Trade Corpora-
tions. U.S. Department of Commerce, Bureau of the Census. Various issues
4-11
-------
industry continued to be a poor investment with losses reported during each of
the eight quarters 1n 1985/1986. Investments in the petroleum industry (SIC
29) also have suffered recently as a consequence of the slide in crude oil
prices. The after-tax rate of profit on stockholders' equity in the petroleum
sector fell from 11.5 percent in the second quarter of 1986 to 1.0 percent in
the following quarter and then rose slightly to 4.5 percent by the end of the
year.
Figure 4-3 illustrates trends in the productivity of assets in terms of
producing income in each of the six major steam using sectors. As of the
fourth quarter of 1986, both the textile mill products and the food and
kindred products industries were the most productive in the use of assets.
Rates of return in the two industries averaged 7.9 percent and 7.5 percent,
respectively. Asset productivity also has remained strong in the paper and
chemicals industries (except for a weak fourth quarter performance in the
latter). Neither the petroleum nor the primary metals industries has performed
well in relation to the other four. As shown in Figure 4-3, the after-tax
profit rate on total assets in the petroleum industry fell to 0.4 percent in
the third quarter of 1986 and the primary metals sector suffered a 10.3
percent loss during that same time period.
Data on the after-tax profits per dollar of sales paint a similar
picture to that provided in the earlier figures. Figure 4-4 shows that,
except for the fourth quarters, the chemicals industry has turned in the
highest level of after-tax profits per dollar of sales (6-8 cents) in
1985/1986. Generally, the after-tax profits per dollar of sales have been
roughly similar (3-5 cents) for the food, textile and paper industries
especially during 1986.
In 1983 the food and kindred products industry employed the largest
number of workers (1,635,000 laborers) and the petroleum and coal products
sector employed the fewest (192,000) of the s.ix manufacturing groups
considered in this study. As shown in.Table 4-6, this distribution is
expected to continue through the mid-1990s with one exception: the number of
jobs in the paper and allied products industry will exceed that in the textile
industry in 1995 as the latter declines in importance. In addition, the
4-12
-------
TABLE 4-6. EMPLOYMENT BY INDUSTRY GROUP0
(Thousands of Jobs)
1983 1990 1995
Food and kindred products 1,635 1,663 1,646
Textile mill products 753 725 680
Paper and allied products 663 699 705
Chemicals and allied products 1,051 1,098 1,115
Petroleum and coal products 192 191 192
Primary metals industries 834 950 975
a Reference 5.
4-13
-------
number of jobs in the food and kindred products industry also is projected to
reach a peak in 1990 and then decline by 17,000 through 1995.5
In the remainder of this section, U.S. Department of Commerce data are
summarized for the last ten years for each of the major steam users.3<6>7 Data
items of interest include trends in:
t value of shipments
employment
significance of imports and exports
new plant and equipment expenditures
Food. The Food and Kindred Products industry (SIC 20) is a relatively
large and diverse sector consisting of about 25 major sub-industries which
process food and beverages for human and animal consumption. In 1986 this
industry accounted for the second highest level of product shipments among 14
manufacturing industries classified by 2-digit SIC.3
As shown in Table 4-7, the real (1985 $) value of total shipments by the
food industry stayed relatively constant in the late 1970s and then dropped
about 11 percent to S301.6 billion in 1985 before picking up slightly in the
following year.
Total employment in this sector also has been declining. From 1979 to
1985 the labor force dropped from 1,733,000 to 1,602,000 and then rose to
1,617,000 in 1986. Despite this drop in employment, labor productivity in the
Food and Kindred Products industry has grown faster than the rest of the
manufacturing industries due largely to significant technological improvements
in food processing machinery.8
In recent years the U.S. has maintained a deficit in the balance of
trade for food and kindred products. Nevertheless, this deficit has been
declining. In 1986, U.S. exports of processed food and beverages rose over 5
percent to $10.8 billion while imports rose only 2.5 percent to $16.4 billion.
As shown 1n Table 4-7, imports in recent years accounted for about 4 percent
of the total volume of shipments of food and kindred products. The U.S. also
has exported about 4 percent of the total supplies of food and kindred
products.
4-14
-------
TABLE 4-7. HISTORICAL TRENDS: FOOD AND KINDRED PRODUCTS (SIC 20)
Value of Shipments ($109)
(1985 $109)
Total Employment (000)
Import/new supply ratio8
Export/shipment ratiob
New plant and
equipment ($109)
(1985 $109)
1977
192.9
319.6
1,711
.03
.04
n/a
n/a
1978
216.0
333.6
1,724
.04
.04
4.8
7.4
1979
236.0
334.8
1,733
.04
.04
5.0
7.1
1980
256.2
333.3
1,708
.04
.05
5.8
7.5
1981
272.1
322.8
1,671
.04
.05
6.0
7.1
1982
280.5
312.8
1,636
.03
.04
6.7
7.5
1983
287.1
308.1
1,615
.03
.04
5.8
6.2
1984
300.0
310.0
1,619
.04
.04
6.4
6.6
1985
301.6
301.6
1,602
.04
.03
7.0
7.0
1986
314.5
306.3
1,617
.04
.04
N.A.
N.A.
8 Value of imports/(value of imports plus domestic shipments).
b Value of exports divided by value of domestic shipments.
-------
According to a recent study, the continuation of favorable consumer
purchasing habits, increases in disposable income and changing demographics
all point towards increased industry shipments in the future. In addition,
the recent wave of mergers and acquisitions will provide benefits in terms of
increased economies of scale and improved efficiency in this industry. These
factors, in conjunction with favorable outcomes on food and agricultural
issuesin multilateral trade negotiations, indicate continued economic health
in the Food and Kindred Products industry.9
Textiles. Shipments by the textile mill industry (SIC 22) rose 2.4 per-
cent between 1985 and 1986 after having dropped 4.0 percent below the pre-
ceding year. Despite the recent expansion in demand, domestic textile product
shipments have tended towards a pattern of long term decline in real terms.
Between 1977 and 1985, textile mill product shipments (measured in constant
dollars) fell 21 percent. This was largely attributable to the intense
competitive atmosphere generated by a rising volume of imports in recent
years.10 As shown in Table 4-8, the ratio of imports to the total new supply
of textile products doubled over the 1977-1986 time frame. During the same
time period, the ratio of textile exports to total shipments generally
declined.
Industry restructuring, plant closings and consolidations in the wake of
increased import competition made an impact on employment. As shown in Table
4-8, textile mill employment dropped 22 percent from 910,000 in 1977 to
705,000 workers in 1986.
Investments in new plant and equipment in the textile industry
averaged $2.0 billion a year (in 1985 $) in the late 1970s. These capital
expenditures dropped to $1.6-1.8 billion per year (in 1985 $) in the mid-1980s
due to a downturn in profits.
Paper and Allied Products. The Paper and Allied Products industry (SIC
26) produces pulp, paper, paperboard and converted paper products. Primary
paper products (pulp, paper and paper board) account for about 44 percent of
the total output of this industry. Some of the primary product output is sent
directly to end-users. However, most of it is sold to firms in the allied
conversion sector for further processing into paper products. These firms,
4-16
-------
TABLE 4-8. HISTORICAL TRENDS: TEXTILE MILL PRODUCTS (SIC 22)
I
-4
Value of Shipments ($109)
(1985 $109)
Total Employment (000)
Import/new supply ratio"
Export/shipment ratio6
New plant and
equipment ($109)
(1985 $109)
1977
40.6
67.4
910
.04
.04
1.2
2.0
1978
42.3
65.4
899
.04
,04
1.3
2.0
1979
45.1
64.1
885
.04
.05
1.4
2.0
1980
47.2
61.6
848
.04
.06
1.5
2.0
1981
50.1
59.8
823
.05
.05
1.7
2.0
1982
47.5
52.7
749
.05
.04
1.6
1.7
1983
53.4
56.2
741
.05
.03
1.6
1.7
1984
55.5
56.9
746
.06
.03
1.9
2.0
1985
53.3
53.3
702
.07
.03
1.8
1.8
1986
54.6
53.2
705
.08
.03
1.6
1.6
* Value of imports/lvalue of imports plus domestic shipments).
b Value of exports divided by value of domestic shipments.
-------
and those in the primary products sector, collectively operate more than 6,500
establishments nationwide. Establishments involved largely in the relatively
capital-intensive primary products sector have increasingly concentrated in
the South close to abundant timber reserves. Establishments in the more
labor-intensive allied conversion industries have tended to be more widespread
and closer to end-users.11
Except for the recession of 1982, the total value of shipments by the
Paper and Allied Products sector increased steadily over the past 10 years.
The total value of shipments more than doubled between 1977 and 1986 at an
average annual rate of 8.0 percent. In real terms, the total value of ship-
ments grew 1.7 percent per year over the 1977-1986 time period (see Table
4-9).
During this time period, total industry employment reached a peak of
707,000 workers in 1979 and then declined to 661,000 by 1983 as a result of
economic recession in 1982 and the restructuring of firms through increased
merger and acquisition activity. Total employment in this industry rose from
1983 to 1986 as a result of increased output and profitability. By 1986
employment stood at 674,000 workers or 1.8 percent above the level of 1983.
Imports of pulp (primarily from Canada) constituted a major, albeit
declining, source of supply for this sector during the past 9 years. The
import share of new pulp shipments held steady at about 31 percent in the late
1970s and then declined to 24 percent in 1986. Imports of paper and board
also held steady at about 10 percent of total supply throughout the late 1970s
and early 1980s and then jumped to 13 percent by 1985. The decline in the
strength of the dollar has since caused imports of paper and board to drop
back to 12 percent of total new supply.
Annual expenditures for new plant and equipment (measured in 1985 $)
rose almost 47 percent between 1977 and 1979 and then fell 26 percent to $6.3
billion during the 1982 economic recession. Coincident with the growth in
output and profits since the recession, annual new capital expenditures also
rose and stood at $8.7 billion (in 1985 $) in 1986.
Chemicals and Allied Products. Firms in this manufacturing group
produce basic materials and chemical feedstocks for use by other industries;
4-18
-------
TABLE 4-9. HISTORICAL TRENDS: PAPER AND ALLIED PRODUCTS (SIC 26)
Value of Shipments ($109)
(1985 $109)
Total Employment (000)
Pulp mills (SIC 2611)
Import/new supply ratio*
Export/shipments ratiob
Paper and board
(SIC 262,263,266)
Import/new supply ratio8
Export/shipments ratiob
New plant and
equipment ($109)
(1985 $109)
1977
52.1
86.5
692
0.33
0.38
0.10
0.05
3.5
5.8
1978
57.0
88.2
699
0.31
0.35
0.11
0.05
3.8
5.9
1979
65.2
92.6
707
0.33
0.38
0.11
0.05
5.2
7.4
1980
72.8
94.8
693
0.31
0.45
0.10
0.08
6.5
8.5
1981
80.2
95.3
689
0.31
0.44
0.10
0.07
6.1
7.2
1982
79.0
88.2
662
0.29
0.41
0.10
0.06
5.6
6.3
1983
85.1
91.6
661
0.29
0.40
0.10
0.05
5.9
6.3
1984
95.9
99.1
681
0.31
0.38
0.11
0.05
7.2
7.4
198S
93.4
93.4
677
0.27
0.36
0.13
0.04
8.6
8.6
1986
103.8
101.1
674
0.24
0.37
0.12
0.04
8.9
8.7
8 Value of imports/(value of imports plus domestic shipments).
b Value of exports divided by value of domestic shipments.
-------
they also manufacture consumer goods such as cosmetics, perfumes and drugs.
The chemical Industry ranks fifth in contribution to GNP among manufacturing
industries. It Is extremely diverse both in terms of the large number of
chemical products and in terms of the firms producing the chemicals.12
Like the paper industry, the chemicals industry is its own best
customer. Only 13 percent of industrial chemical shipments go to final
customers; 46 percent go to other sectors of the chemical industry; and 41
percent go to the manufacturing industry.13
Measured in 1985 dollars, the total value of shipments by the chemicals
industry increased at a 2.2 percent annual rate between 1977 and 1981. The
1982 economic recession took a toll on the chemicals industry as the real
value of shipments dropped 10 percent in one year to 193.0 billion dollars --
a level lower than that of 1977 (see Table 4-10). The real value of shipments
peaked again in 1984 at 218.8 billion dollars and then dropped to 193.1 bil-
lion dollars in 1986.
Total employment in the chemical and allied products sector reached a
peak of 1,109,000 laborers in 1981. As a result of the 1982 economic reces-
sion, subsequent mergers and industry restructuring, the number of workers in
the chemicals industry fell 7.8 percent below the 1981 peak to 1,022,000 by
1986.
The chemical and allied products industry has been a net exporter of
chemicals to the rest of the world. As shown in Table 4-10, imports averaged
about 5 percent of the total supply of chemicals in the late 1970s and early
1980s. Recently, however, the import share edged up to 7 percent in 1986.
The export share of total shipments has dropped from 14 percent in 1980 to 11
percent in 1986.
Petroleu» Refining. As shown in Table 4-11, the real value of petroleum
and coal products shipments in the U.S. grew 13.2 percent per year between
1977 and 1981 --largely a reflection of the doubling in real crude oil prices
which occurred in that time period. Between 1981 and 1985, the real value of
shipments dropped 9.4 percent per year as a result of slackening demand.
Shipments tumbled a further 30 percent from 1985 to 1986 due to the collapse
in crude oil prices in that time frame.14
4-20
-------
TABLE 4-10. HISTORICAL TRENDS: CHEMICALS AND ALLIED PRODUCTS (SIC 28)
Value of Shipments ($109)
(1985 $109)
Total Employment (000)
Import/new supply ratio"
Export/shipment ratio6
New plant and
equipment ($109)
(1985 $109)
1977
118.2
196.2
1,074
.04
0.10
7.4
12.3
1978
129.4
200.2
1,096
.05
0.10
7.8
12.1
1979
147.7
209.9
1,109
.05
0.13
9.8
13.9
1980
162.5
211.7
1,107
.05
0.14
11.6
15.1
1981
180.5
214.4
1,109
.05
0.13
13.1
15.5
1982
170.7
193.0
1,075
.05
0.12
12.7
14.2
1983
183.2
204.7
1,043
.05
0.10
13.0
14.0
1984
198.2
218.8
1,049
.06
0.11
15.3
15.8
1985
197.3
197.3
1,044
.06
0.10
16.4
16.4
1986
198.3
193.1
1,022
.07
0.11
17.1
16.7
a Value of imports/lvalue of imports plus domestic shipments).
b Value of exports divided by value of domestic shipments.
-------
TABLE 4-11. HISTORICAL TRENDS: PETROLEUM AND COAL PRODUCTS (SIC 29)
Value of Shipments ($109)
(1985 $109)
Total Employment (000)
Petroleum refining
(SIC 2911)
Import/new supply ratio8
Export/shipment ratio6
New plant and
equipment ($109)
(1985 $109)
1977
97.5
161.9
202
0.09
0.01
11.8
19.6
1978
103.9
160.7
208
0.07
0.01
13.2
20.4
1979
148.4
210.0
210
0.07
0.01
15.2
21.6
1980
198.7
258.9
198
0.07
0.01
19.6
25.5
1981
224.1
266.2
214
0.07
0.02
26.0
30.9
1982
206.4
230.5
201
0.07
0.03
26.4
29.5
1983
191.6
206.2
196
0.09
0.03
23.1
24.9
1984
200.6
207.2
189
0.11
0.03
25.5
26.3
1985
179.1
179.1
179
--
26.7
26.7
1986
129.3
125.9
168
--
18.7
18.2
8 Value of imports/(value of imports plus domestic shipments).
b Value of exports divided by value of domestic shipments.
-------
Employment trends in the petroleum and coal products sector (SIC 29)
have essentially mirrored the changes in shipments. Employment peaked in 1981
at 214,000 workers and then declined to 179,000 in 1985 at a compound annual
rate decline of 4.5 percent. This rate of decline Increased to 6.1 percent
between 1985 and 1986 as a result of: 1) curtailments in oil and gas explora-
tion brought on by the sharp decline in crude oil prices; and 2) industry
retrenchment due to increased corporate merger and acquisition activity.
The drop in crude oil prices in 1985/1986 had a significant impact on
new plant and equipment expenditures for the petroleum and coal products
industry. Between 1981 and 1985, new plant and equipment expenditures (in
$1985) generally dropped $3-5 billion below the 1981 peak of $30.9 billion.
In 1986, capital expenditures plummeted 32 percent to $18.2 billion.
Iron and Steel. Since 1982, the iron and steel industry has been
embedded in a long term slump due to slow growth in domestic demand coupled
with world-wide market saturation and low productivity improvements.15 Steel
shipments in 1986 were $46.2 billion (in 1985$) or 44.5 percent below the 1981
level of $83.2 billion (see Table 4-12). Pig iron production in 1986 also was
down 40 percent below 1981 levels.
Structural shifts in the pattern of steel consumption, aging capital
stock and high labor costs have, in large part, been responsible for the steel
industry plight. Even though the quantity of steel mill product shipments
generally rose from 1982 through 1985, the industry permanently cut 12
percent of domestic steel making capacity and 20 percent of domestic iron
making capacity over this time period. Despite these cuts, the industry still
operated at less than two-thirds capacity in the mid 1980s.16
Higher levels of steel mill product imports also contributed to the in-
dustry's problems. Imports soared from 15 percent of total steel mill
products supplied 1n 1979 to 26 percent in 1984 before falling slightly in
1985/1986 as a result of the President's Steel Import Restraint program.
The iron and steel industry slashed its work force by nearly 25 percent
or 102,000 workers during the 1981/1982 economic recession. The labor force
has continued to decline since that time period. In 1986 a total of 175,000
4-23
-------
TABLE 4-12. HISTORICAL TRENDS: IRON AND STEEL INDUSTRY"
1977 1978 1979 1980 1981 1982 1983 1984 1985 1986
Value of Shipments ($109) 50.6 59.1 67.3 61.5 70.1 47.3 48.2 53.8 52.5 47.4
(1985 $109) 83.8 91.3 95.5 80.0 83.2 52.7 51.7 55.6 52.5 46.2
Pig iron production
(106 short tons) 81.3 87.7 87.0 68.7 73.6 43.3 48.7 51.9 50.4 44.0
Raw steel production
(106 short tons) 125.3 137.0 136.3 111.8 120.8 74.6 84.6 92.5 88.3 81.6
Raw steel production
capability
utilization rate (%)b 78 87 88 73 78 48 56 68 66 64
Total steel mill
products shipments
(106 short tons) 91.1 97.9 100.3 83.9 88.5 61.6 67.6 73.7 73.0 70.3
Total Employment (000) 452 449 453 399 391 289 243 236 208 175
Market penetration of
imported steel mill
products (%)c 18 18 15 16 19 22 21 26 25 23
a American Iron and Steel Institute and U.S. Department of Commerce.
b Tonnage capability to produce raw steel for a full order book based on the current availability of raw
materials, fuels and supplies, and of the industry's coke, iron, steelmaking, rolling and finishing
facilities.2
c Imports/(imports plus domestic production); in terms of short tons.
-------
*»
I
en
TABLE 4-12. HISTORICAL TRENDS: IRON AND STEEL INDUSTRY"
(continued)
Capital expenditures
($10 )
(1985 $109)
Net income ($109)
1977
n/a
n/a
n/a
1978
n/a
n/a
n/a
1979
2.5
3.6
0.8
1980
2.7
3.5
0.7
1981
2.4
2.9
1.7
1982
2.3
2.6
-3.4
1983
1.9
2.0
-2.2
1984
1.2
1.2
0
1985
1
1
-1
.6
.6
.8
1986
0.9
0.9
-4.1
American Iron and Steel Institute and U.S. Department of Commerce.
-------
laborers were employed in the iron and steel industry--down 61 percent from a
1979 high of 453,000 workers.
Operating losses have further frustrated the industry's attempt to
modernize aging plant and equipment. As shown in Table 4-12, new capital
expenditures (in 1985 $) averaged $1.2-1.7 billion in 1984-1985 and were
concentrated largely on productivity and quality enhancing equipment such as
continuous casters. Although these expenditures (in 1984/1985) were made in
the face of continuing operating losses, they were nevertheless down more than
50 percent below the amounts expended in the late 1970s and early 1980s.
After five consecutive years of losses, total net income in 1987 was
$1.0 billion. Production of raw steel and steel mill products increased in
1987 over 1986 levels and total employment declined in 1987. Raw steel
production capability utilization rate rose to 80 percent in 1987.17
4.1.2 Projected Impacts on Product Prices
The economic impact analysis for the major steam user groups in the
industrial sector focuses on presenting aggregate incremental annualized
pollution control costs as a percent of 1985 average product prices. This
analysis assumes full passthrough of pollution control costs.
The effect of a regulatory option on 1985 average product prices is
calculated by finding the product of the change in the cost of new steam, the
share of steam affected by the regulatory option and the amount of steam
consumed per dollar of 1985 output (see Figure 4-5). The cost impacts are
stated in real terms. The only real cost increase is assumed to be due to new
boiler, pollution control and fuel costs. All other production costs are held
constant in real terms at 1985 levels.
When regulatory options are applied, the first component of the product
price calculation (the change in the cost of new steam) is affected. The cost
of new steam changes due to an option's effect upon annualized boiler and
pollution control capital costs, annualized non-fuel operating and maintenance
(O&M) costs, and annualized fuel costs. When this new steam cost change is
multiplied by the ratio of annual steam consumed (per unit of output) to
annual dollar value of shipment (per unit output) a gross change in product
price is derived. Because a certain percentage of the product is produced
4-26
-------
FIGURE 4-5
Derivation Of Estimated Increase
In National Average Industrial Product Prices
Due To Pollution Control Costs
A Product
Price
Steam
Intensity X
Ratio
%
Steam Affected By y
Alterna^Control A
Where...
Steam Intensity Ratio
% Of Total Steam
Affected By Alternative
Control Level
\
Industrial Boiler
Total Fuel Consumption in 1985
1985 Value Of Shipments
New Small Industrial Boiler
Total Fossil Fuel Consumption
\
Total Fuel Consumption
From All Boilers /
X100
Maximum Cost Impact s:
Increase In Total
Annualized Costs
Total Fossil Fuel Consumption
From New Small Industrial Boilers
(%) = (GJ/$) x (%) x ($/GJ)
4-27
-------
with steam generated from existing boilers, the cost estimate is reduced by
the proportion of new boiler steam to total steam used within each industry
group, which results in an average steam cost for the industry.
The ratio of annual total industrial boiler fuel consumed to annual
dollar value of shipment by industry is assumed to remain constant over time.
Ratios employed in this analysis are listed in Table 4-13. This table shows
that the paper industry is a relatively steam-intensive group.
An analysis of average cost impacts would involve allocating the
projected increases in total annualized costs in Section 2 by industry group
(which is not available) and dividing by the consumption of all fuels in new
small industrial boilers. This assumes full cost pass-through. Next,
multiply by a small fraction which represents the amount of total steam
requirements met by new small boilers. This type of analysis was conducted
for the large (>29 MW, >100 MMBtu/hr) industrial boiler NSPS analysis and the
average change in product price was estimated to be less than 0.1 percent for
each of the major steam user groups.2
This analysis for small boilers focuses on the marginal. not average,
costs. The marginal costs are the maximum, worst case annualized cost
increases per unit of annual boiler fuel demand. The maximum, worst case
annualized cost increase per unit of annual boiler fuel demand is derived from
the national impacts analysis in Section 2. Table 4-14 presents the deriva-
tion of this parameter for coal and residual fuel oil. Because of the fabric
filter requirement for PM emissions control, coal is expected to have a
relatively larger average annualized cost impact per unit of annual fuel
demand than residual fuel oil.
The "% of total steam affected by the alternative control level" is 100%
if all of the boilers at the industrial facility are new, smaller than 29 MW
(100 MMBtu/hr) and burn coal or residual fuel oil. Otherwise (and usually),
this parameter 1s less than 100 percent because some portion of the total
steam demand is met by larger and/or older boilers.
The worst case marginal cost impact analysis assumes the industry group
with the largest steam intensity ratio in Table 4-13 (paper), the fuel type is
coal and all of the boilers are new coal-fired units <29 MW (<100 MMBtu/hr) -
4-28
-------
TABLE 4-13. STEAK-INTENSITY RATIOS
1985
Industrial boiler
Industry
Food
Textiles
Paper
Chemicals
Petroleum Ref.
Iron and Steel
total fuel
consumption"
PJ (1012 Btu)
716
176
2,027
1,382
589
398
(679)
(167)
(1,921)
(1,310)
(558)
(377)
1985
Value of
shipments6
($109)
301.6
53.3
93.4
197.3
179.1
52.5
Industrial boiler
total fuel
consumption per $ of
value of shipments
GJ (106 Btu)
0.0024
0.0033
0.0217
0.0070
0.0033
0.0076
(0.0023)
(0.0031)
(0.0206)
(0.0066)
(0.0031)
(0.0072)
" Includes natural gas, distillate and residual fuel oil, coal, wood, black
liquor, LPG, refinery gas, blast furnace gas and coke oven gas. EEA
estimates.
b U.S. Department of Commerce; reference Tables 4-7 through 4-12.
4-29
-------
TABLE 4-14. NATIONAL IMPACTS'
Annual
Fuel Demand
Average Annual 1 zed Cost
Annual 1 zed Increase Per Unit of
Cost Increase Annual Fuel Demand
Fuel Type
Coal
Residual
fuel oil
PJ
8.65
27.993
(10* Btu)
(8.20)6
(26.532)b
106 $1985
18.245C
29.248d
1985 $/GJ
2.11
1.04
(1985 $/MM8tu)
(2.23)
(1.10)
Boiler size 3-29 MW (10-100 MMBtu/hr) in the fifth year following proposal
of NSPS.
Assumes a 26 percent average annual capacity utilization rate. A larger
average annual capacity utilization rate would result in smaller marginal
annual ized cost impacts per unit of fuel demand.
From Table 2-21, with monitoring and testing costs, $5.935 (4.113 + 1.822)
million for S02 emissions control and $12.31 (8.67 + 3.64) million for
complying with the 21 ng PM/J (0.05 Ib PM/MMBtu) control level.
From Table 2-29, with monitoring and testing costs for the 129 ng
(0.3 Ib SO,/MMBtu) control level, $29.921 (7.255 + 22.666) million less
$0.673 million for distillate fuel oil monitoring and testing costs, or
$29.248 million.
4-30
-------
so that 100X of the total steam demand 1s affected by the alternative control
level. In this case, the expected change in product price 1s (0.0206
MMBtu/dollar) * 100% * ($2.23/MMBtu) - 4.6% (as outlined 1n Figure 4-5).
This 1s a worst case analysis for several reasons:
The coal annualized cost impacts in Table 4-14 Include the
estimates for fabric filters for new boilers 3-9 MW (10-30
MMBtu/hr) and this 1s not required by the proposed coal PM NSPS.
A steam plant composed of only small new coal-fired boilers
(without any older and/or larger boilers) 1s not typical; less
than 100 percent of total steam requirements is affected by the
NSPS is more typical.
t The cost impacts in Table 4-14 may be overstated if local air
emissions standards are more stringent than the baseline assump-
tions presented in Section 2.
t The cost impacts in Table 4-14 may include monitoring and testing
costs which are not required by the proposed standards.
t The average annualized cost increase per unit of annual fuel
demand is overstated for new boilers with average annual capacity
utilization rates larger than 26 percent.
t Small coal boiler sales are much lower than oil or gas boiler
sales (see Table 2-9); therefore, the pertinent marginal cost
impacts for most affected facilities will be much smaller than
S2.11/GJ ($2.23/MMBtu).
The marginal impact on product prices is smaller than 4.6% for other
industry groups, other fuel types (residual fuel oil, distillate fuel oil,
natural gas), and situations where less than 100 % of the total steam demand
is affected by the alternative control level. For example, if the food
industry is selected with residual fuel oil as the fuel type and only 20% of
the total steam requirements at the plant are met by new units <29 MW (<100
MMBtu/hr), then the expected marginal product price impact is (0.0023
MMBtu/dollar) * 20% * ($1.10/MMBtu) - 0.05% (obviously much smaller than
4.6%).
Therefore, the marginal annual costs of compliance with the proposed
standard are expected to Increase product costs by less than five percent for
each of the major steam user groups.
4-31
-------
4.2 SELECTED INDUSTRIES
4.2.1 Introduction
The major steam users analysis focuses on aggregate two-digit SIC code
industries (i.e., SIC 28, Chemicals). The selected industries analysis
addresses several smaller groups at the four-digit SIC code18 level.
Industries most likely to experience cost-related impacts are those with
a high steam cost to production cost ratio. A high ratio usually stems from
one of two factors: 1) the production process is steam-intensive or 2) the
firm or industry has cyclic steam requirements, resulting in a low capacity
utilization of the boiler equipment. Low capacity utilization causes the
capital cost component of steam costs to rise, yielding high annualized costs
per unit of steam.
Capital availability constraints occur when the cost of acquiring funds
is so high that a firm considers a project to be uneconomic or financially
unattractive. Capital availability is most often a problem for relatively
small firms. Although some large firms may have excessive debt burdens, lack
of access to organized capital markets is more often characteristic of small
firms.
Three four-digit SIC code industries were evaluated:
rubber reclaiming (SIC 3031)
automobile manufacturing (SICs 3711, 3713 and 3714)
liquor distilling (SIC 2085)
The economic analysis of selected industries focused on cost impacts, capital
availability and profitability indicators.
4.2.2 Methodology
4.2.2.1 Cost and profitability Impacts. The following three steps are used
to estimate the cost impact of regulatory options on a selected industry:
Step One -- Define a model plant for the selected industry.
Step Two -- Evaluate the cost impacts for the model plant,
assuming full cost absorption.
Step Three -- Evaluate the impacts on the profitability of the
model plant.
4-32
-------
Each step 1s described below.
The selected Industries analysis focuses on model plants to measure the
economic Impact of regulatory options on each Industry. The model plant
represents a typical plant for the segment of each Industry that might be
considering a boiler investment either as boiler expansion or replacement. A
model plant is used since it is difficult to obtain precise details about the
expansion and replacement plans of actual firms.
The following production characteristics for the model plant are
estimated:
Plant Output/Year -- average product output per year in those
plants more likely to invest in new boilers.
Price (Cost)/Unit of Output -- the historic, average selling price
per unit
Plant Sales/Year -- plant output per year multiplied by price per
unit of output.
Plant Earnings/Year -- plant sales per year multiplied by a
derived profit margin (percent return on sales). The figure
estimates the profitability of the model plant.
The effect of regulatory options on product cost is calculated by
finding the product of the change in the cost of new steam, the share of steam
affected by the new regulation, and the amount of steam consumed per dollar of
output. The cost impacts are stated in real terms. The only real cost
increase is due to new boiler and fuel costs; all other real production costs
are held constant.
The additional costs due to a regulatory option will affect the profita-
bility of an industry. This Impact will be assessed by examining the follow-
ing two financial indicators for the model plant:
Net Profit After Taxes (Net Income). Profit after all costs and
taxes have been deducted.
Return on Assets. Net income divided by total assets, converted
to a percent form.
The change in indicators due to regulatory options is a measure of the
ability of the model plant to absorb the additional costs of a regulatory
option.
4-33
-------
Net Income 1s calculated by subtracting expenses from total sales to
derive gross profit and then taxes are subtracted from gross profit to equal
net Income. Regulatory options could affect the amount of expenses, which
would alter net Income. Return on assets Is derived by dividing net income by
total assets for the model plant and converting to a percent form. Altern-
ative regulatory options could affect net income, resulting in a change in
return on assets.
4.2.2.2 Capital avail ability. Capital availability constraints may result if
regulatory options create a need for financing additional pollution control
investments. The following two steps are used to evaluate whether capital
availability will be a constraint on a selected Industry:
Step One -- Define financial indicators for a model firm.
Step Two -- Evaluate the ability of a firm to finance pollution
control investments.
The firm 1s the focus of the capital availability analysis because
decisions involving large capital expenditures are made at the corporate
level. Depending upon the state of corporate cash reserves and the relative
costs of various financing tools, a firm will choose a combination of internal
and external financing instruments to meet the additional investments required
to comply with regulatory options.
The capital availability analysis focuses on the following two financial
indicators, which measure each industry's financing ability:
Coverage Ratio -- the number of times operating income (earnings
before taxes and interest expenses) covers fixed obligations
(annual interest on debt instruments and long-term leases).
Debt/Equity Ratio -- a measure of the relative proportions of two
types of external financing.
These two indicators are analyzed for both the base case and the
regulatory options. The change in indicators due to regulatory options is
analyzed to determine how difficult 1t will be for the firm to meet financial
requirements for the pollution control equipment investment.
The cash flow coverage ratio is calculated by dividing operating income
by fixed obligations, both of which could change as a result of alternative
regulatory options. If the coverage ratio remains above the 3.0 standard
4-34
-------
benchmark, the cost of capital can be assumed to be above "acceptable" levels.
However, as the coverage ratio falls, the cost of obtaining capital will rise.
The debt/equity ratio is calculated by dividing total debt by total
equity of the firm (book values). The incremental debt incurred from financ-
ing the pollution control required by the regulatory options is added to the
base debt; the incremental equity issued to finance the remainder of the
investment is added to the base case equity. A new debt/equity ratio then is
calculated and the change is analyzed to assess the effect of the regulatory
options on the firm's capital structure.
To determine the coverage and debt/equity ratios under alternative
regulatory options, five financing strategies, which differ by the percentages
of the investment financed by debt versus equity, are considered. (Note that
for the changes in coverage ratios and debt/equity ratios, 100 percent
external financing is assumed.) The external financing scenarios are:
t zero percent new debt, 100 percent new equity
t 25 percent new debt, 75 percent new equity
50 percent new debt, 50 percent new equity
t 75 percent new debt, 25 percent new equity
t 100 percent new debt, zero percent new equity.
4.2.3 Model Plant Descriptions19
The typical rubber reclaiming industry plant has an annual output of
18,000 metric tons (20,000 short tons). The typical plant's boiler house
contains three boilers that have a combined capacity of 62 MW (211 MMBtu/hr)
and all boilers are assumed to operate at 45 percent of rated capacity. One
26 MW (87 MMBtu/hr) coal-fired boiler was assumed to be replaced.
The model automobile manufacturing plant is assumed to be part of a 26-
plant firm. Total annual firm production is 2.3 million vehicles. The model
plant boiler house consists of four coal-fired boilers with a total capacity
of 102 MW (348 MMBtu/hr). It was assumed that a 26 MW (87 MMBtu/hr) boiler
operated at a 25 percent average annual capacity utilization rate would be
replaced.
The typical liquor distilling plant produces 17 million liters (4.5
million gallons) of distilled liquor annually. It was assumed that two older
4-35
-------
boilers would be replaced by a 26 MW (87 MMBtu/hr) coal-fired boiler and a 18
MW (62 MMBtu/hr) boiler, both operated at an average annual capacity utiliza-
tion rate of 45 percent.
4.2.4 Regulatory Option
The three selected industry analyses all Involve new coal-fired boilers
18-26 MW (60-90 MMBtu/hr). The regulatory option examined is a scrubber.
4.2.5 Summary of the Economic Impacts20
The change in product cost was estimated to be less than one percent for
each of these three selected industries (assuming full cost pass-through).
The expected change 1n return on assets is summarized 1n Table 4-15.
The analysis of capital availability examines the ability of the model
firm to finance the new boiler investment. The coverage ratios and
debt/equity ratios did not vary significantly due to the pollution control
costs. It was concluded that these industries should be able to absorb
additional financing of new boiler investments without undue weakening of the
solvency position of the industries.
4-36
-------
TABLE 4-15. ESTIMATED RETURN ON ASSETS
FOR MODEL PLANTS"
(percent)
Selected Industry
Base Case
Scrubber Requirement
Rubber reclaiming
Automobile manufacturing
Liquor distilling
4.1
8.1
1.3
1.0
8.0
0.5
a Reference 19, p. 9-33.
4-37
-------
REFERENCES
1, Report on the 1980 Manufacturing Industries Energy Consumption Study and
Survey of Large Combustors. U.S. Department of Energy, Energy Informa-
tion Administration. DOE/EIA-0358. January 1983.
2. Projected Impacts of Alternative Sulfur Dioxide New Source Performance
Standards for Industrial Fossil Fuel-Fired Boilers. Energy and Environ-
mental Analysis, Inc., Arlington, Virginia. Prepared for the U.S.
Environmental Protection Agency, Office of Air Quality Planning and
Standards. Harch 1985. p. 4-12.
3. U.S. Department of Commerce, Bureau of Economic Analysis. Survey of
Current Business. Volume 67, No. 6, June 1987, p. S-3.
4. Federal Reserve Board, Statistical Release. Industrial Production.
January 16, 1987; U.S. Department of Commerce, Bureau of Economic
Analysis. Survey ofCurrent Business. Volume 68, No. 12, December 1988,
p. S-2.
5. 1985 OBERS BEA Regional Projections, Volume 1: State Projections to
2035. U.S. Department of Commerce, Bureau of Economic Analysis. 1985.
p. 3.
6. 1987 U.S. Industrial Outlook. U.S. Department of Commerce, Inter-
national Trade Administration. January 1987.
7. Business Statistics: 1984. U.S. Department of Commerce, Bureau of
Economic Analysis. September 1985.
8. Prospects for U.S. Basic Industries, 1986-2000: Implications for Elec-
tricity Demand. Electric Power Research Institute, Palo Alto,
California. EPRI P/EM-4I02-SR. March 1986. p. 6-8.
9. Reference 6, p. 39-1.
10. Reference 6, p. 41-1.
11. Reference 6, p. 5-1; Reference 8, p. 4-1 through 4-16.
12. Reference 6, p. 11-1.
13. Reference 8, p. 3-1 through 3-28.
14. Reference 6, p. 10-1.
15. Reference 8, p. 1-1 through 1-20.
16. 1985 Annual Statistical Report. American Iron and Steel Institute,
Washington, D.C.
4-38
-------
17. 1987 Annual Statistical Report. American Iron and Steel Institute,
Washington, D.C.
18. Standard Industrial Classification Manual 1987. Executive Office of the
President, Office of Management and Budget.
19. Fossil Fuel Fired Industrial Boilers - Background Information Volume 1:
Chapters 1-9. EPA-450/3-82-006a. U.S. Environmental Protection Agency,
Office of Air Quality Planning and Standards. March 1982. Chapter 9.
20. Reference 19, p. 9-31.
4-39
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APPENDIX A.
PROFILE OF BOILERS IN COMMERCIAL BUILDINGS
This appendix summarizes information on the number and location of
boilers in commercial buildings. This information is significant because most
commercial buildings in the United States do not include a boiler and,
therefore, will not be subject to an economic impact due to a NSPS.
The U.S. Department of Energy/Energy Information Administration (Office
of Energy Markets and End Use) has conducted the Nonresidential Buildings
Energy Consumption Survey (NBECS) three times. The 1979 NBECS collected data
during 1979 and 1980 from a statistical sample of 6,222 buildings. The 1983
NBECS collected data during 1983 for a statistical sample of 7,140 buildings:
5,845 from the 1979 NBECS and 1,295 new buildings constructed between 1979 and
1982. The 1986 NBECS collected data during 1987 for 9,189 buildings. The
1986 NBECS excluded buildings smaller than 1,000 square feet and those whose
primary use is residential (the 1979 and 1983 NBECS did not). Commercial
buildings in the 1979, 1983 and 1986 NBECS exclude buildings on military
installations and exclude buildings in which industrial or agricultural
activities occupied more of the total floor space than any other type of
activity.
The 1983 NBECS estimated that 73,000 (plus or minus 21,000*) commercial
buildings constructed before 1980 had new (replacement) boilers installed
between January 1980 and July 1983.1 The 1983 NBECS also estimated that there
were an average of 1.38 boilers per building which included a boiler.2
Therefore, about 100,000 (plus or minus 30,000) new (replacement) boilers were
installed between January 1980 and July 1983 in commercial buildings con-
structed before 1980. The 1983 NBECS also estimated that 26,000 new boilers
were installed in new commercial buildings constructed in the four-year period
between 1980 and 1983.2 The total average annual commercial/institutional new
boiler sales level estimate is 100,000/3.5 years (or 28,600 annual replace-
ments) plus 26,000/4 years (or 6,500 boilers per year in new buildings), or a
total of about 35,000 new boilers per year for the 1980-1983 period.
This represents DOE/EIA's estimate of the 95 percent confidence interval
A-l
-------
The 1983 NBECS estimated that there were more than 1 million boilers in
commercial buildings 1n 1983.* Less than 20 percent of the commercial build-
ings in the U.S. in 1983 had boilers (reference Table A-l). Natural gas is
the primary commercial boiler fuel type in the North Central, South and West
Census regions (see Figure A-l). However, fuel oil and natural gas have equal
market shares in the Northeast Census region.
Larger commercial buildings are more likely to use a boiler for space
heating in comparison with small buildings. Only 10 percent of the commercial
buildings less than 5,000 square feet each include boilers. However, at least
40 percent of the commercial buildings larger than 25,000 square feet include
boilers in 1983.
The average number of boilers per building is related to the building
size. There is an average of three boilers per building for buildings larger
than 200,000 square feet which use boilers (see Table A-l: 45,000 boilers in
14,000 buildings). The average number of boilers per building is less than
1.2 for buildings smaller than 10,000 square feet which use boilers (see Table
A-l: 450,000 boilers in 385,000 buildings).
The categories with the largest total number of boilers in 1983 were
mercantile/sales/personal services, offices, educational and assembly. The
area with the largest number of boilers in commercial buildings in 1983 was
the Northeast Census region (374,000 boilers), followed closely by the North
Central region (325,000 boilers). Table A-l also shows that 39 percent of the
commercial buildings in the Northeast in 1983 used boilers versus 21 percent
for the North Central, 14 percent for the West and 9 percent for the South.
Table A-2 summarizes estimates for 1986. The total number of buildings
with boilers in 1986 (627,000) is smaller than the estimate for 1983 (733,000)
because the 1986 estimates exclude residential buildings and buildings smaller
than 1,000 square feet.
Table A-2 shows that very few new buildings use boilers. Less than 10
percent of the commercial buildings constructed after 1970 use boilers.
For comparison, PEDCo estimated that there were 1,295,130 commercial
boilers in the U.S. in 1977.3
A-2
-------
In 1986, 11 percent of the commercial buildings were not heated. Warm
air furnaces were used in three times as many buildings as those with boilers.
Individual space heaters or electric baseboards were used in more commercial
buildings than were boilers. Other alternatives to boilers were packaged
heating units, heat pumps and district heating.4
A-3
-------
FIGURE A-1
U.S. Census Regions And Divisions
*Q tum\
A-4
-------
TABLE A-l. COMMERCIAL BUILDINGS IN 1983a
Characteristic
All
bldgs.
do3)
Bldgs.
w/boilers
(103)
Bldgs.
w/boilers
All
bldgs.
(%)
No. of
buildings (103)
that fire
boilers with
Nat. Fuel
Gasb Oilb Other6
Total
no. of
boilers
(io3)
All Buildings 3,948 733
Square Footage
<5,000 2,248 227
5,001-10,000 725 158
10,001-25,000 567 169
25,001-50,000 222 90
50,001-100,000 107 49
100,001-200,000 50 27
>200,000 29 14
Principal Activity
Assembly 457 116
Educational 177 83
Food sales/service 380 42
Health care 61 15
Lodging 106 31
Mercantile/personal 1,071 133
Office 575 128
Residential41 236 87
Warehouse 425 53
Other 179 25
Vacant 281 19
19
10
22
30
41
46
54
48
25
47
11
25
29
12
22
37
12
14
7
497 216
48 1,015
159
105
109
62
32
19
11
85
60
27
10
23
83
88
59
33
16
13
50
56
56
22
17
10
5
34
26
Q
6
8
49
32
26
15
7
4
Qc
Q
15
7
5
3
1
Q
8
Q
Q
Q
Q
8
Q
Q
Q
q
267
183
242
133
86
58
45
146
157
54
29
50
175
161
102
74
40
26
Census Region
Northeast
North Central
South
West
670
1,211
1,493
574
263
251
138
82
39
21
9
14
132
222
79
64
132
23
46
Q
Q
8
17
Q
374
325
213
103
a Reference 2.
b The sum of natural gas, fuel oil and other is larger than column 2,
"buildings with boilers," because some buildings use more than one fuel
type.
c Data withheld by DOE/EIA because the relative standard error was greater
than 50 percent or because fewer than 20 buildings were sampled.
d Primarily residential, but with some evidence of a commercial establishment
on-site.
A-5
-------
TABLE A-2. COMMERCIAL BUILDINGS IN 1986'
All buildings
Square footage
1,001-5,000
5,001-10,000
10,001-25,000
25,001-50,000
50,001-100,000
100,001-200,000
200,001-500,000
>500,000
Census region
Northeast
Midwest"
South
West
Principal building activity
Assembly
Education
Food sales
Food services
Health care
Lodging
Mercantile and service
Office
Public order and safety
Warehouse
Other
Vacant
All
buildings
(103)
4,154
2,220
931
557
242
123
52
23
6
663
1,096
1,570
825
575
241
102
201
52
137
1,287
614
55
549
103
238
Buildings
with boilers
(10s)
627
151
173
133
91
40
22
12
3
253
184
115
75
118
87
Qc
19
12
33
170
98
14
33
13
18
Buildings
with boilers
as % of all
buildings
15
7
19
24
38
33
42
52
50
38
17
7
9
21
36
--
9
23
24
13
16
25
6
13
8
a Reference 4.
b Same as North Central in Table A-l and Figure A-l.
e Data withheld because the relative standard error was greater than 50
percent, or fewer than 20 buildings were sampled.
A-6
-------
TABLE A-2. COMMERCIAL BUILDINGS IN 19868
(continued)
Buildings
All Buildings with boilers
buildings with boilers as % of all
(103) (103) buildings
Year constructed
1900 or before 188 62 33
1901-1920 255 71 28
1921-1945 629 120 19
1946-1960 878 147 17
1961-1970 730 115 16
1971-1973 243 22 9
1974-1979 572 41 7
1980-1983 350 28 8
1984-1986 309 20 6
a Reference 4.
A-7
-------
REFERENCES
1. Nonresidential Buildings Energy Consumption Survey: Characteristics of
Commercial Buildings 1983. U.S. Department of Energy, Energy Informa-
tion Administration. DOE/EIA-0246(83). July 1985. p. 36-37.
2. Reference 1, p. 113.
3. Devitt, T. et al. Population and Characteristics of Industrial/Commer-
cial Boilers in the U.S. PEOCo Environmental, Inc. Cincinnati, Ohio.
Prepared for the Industrial Environmental Research Laboratory, U.S.
Environmental Protection Agency. EPA-600/7-79-178a. August 1979.
4. Nonresidential Buildings Energy Consumption Survey: Characteristics of
Commercial Buildings 1986. U.S. Department of Energy, Energy Informa-
tion Administration. DOE/EIA-0246(86). September 1988. p. 164-166.
A-8
-------
APPENDIX B.
HISTORICAL NEW BOILER SALES DATA
This appendix presents historical new boiler sales data for units
smaller than 29.3 MW (100 MMBtu/hr).
There are three major types of boilers: cast iron, firetube, and water-
tube. Cast iron boilers produce hot water or low pressure steam. They are
fired by gas or oil. Most of these units have firing rates which are smaller
than 59 kW (200,000 Btu/hr). Table B-l summarizes annual cast iron boiler
sales data (provided to EPA by the Hydronics Institute, Berkeley Heights, New
Jersey). Annual boiler sales have fluctuated over a wide range, from 155,400
units in 1975 to 347,900 units in 1980.
Cast iron boilers are used in houses, apartment buildings and com-
mercial/institutional buildings. It was assumed that all boilers smaller than
59 kW (200,000 Btu/hr) were residential.1 It was further assumed that about
75 percent of the boilers larger than 59 kW (200,000 Btu/hr) were in the
commercial/institutional sector (see Table B-2).
Firetube boilers produce hot water and low and high pressure steam and
are larger than cast iron boilers. They are fired primarily by gas or oil;
however, a small number of coal and wood units have been sold. Firetube
boiler sales data (provided to EPA by the American Boiler Manufacturers
Association, Arlington, Virginia) are summarized in Table B-3. In the ten-
year period presented in Table B-3, annual sales levels have ranged from a low
of 5,878 units in 1982 to a high of 8,739 units in 1977.
Watertube boilers are available in many sizes (including units larger
than 29.3 MW or 100 MMBtu/hr) and are fired by many fuel types. Table B-4
summarizes watertube boiler sales data for boilers smaller than 100,000 pounds
of steam per hour capacity (provided to EPA by the American Boiler Manufac-
turers Association, Arlington, Virginia). Recent watertube boiler sales
levels are less than half of the 1970's sales levels.
B-l
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TABLE B-l. HISTORICAL CAST IRON BOILER SALES8
(Thousands of Units)
Year
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
<59
(<200)
128.5
160.7
174.1
184.5
251.5
297.4
186.8
174.4
169.6
205.7
kU fthnu
59-73
(200-250)
11.0
14.5
15.8
16.4
19.6
21.3
15.0
13.5
12.4
13.5
sand Btu/hr
73-132
(250-450)
8.0
10.1
11.2
11.1
11.2
19.2
10.4
10.1
10.0
10.3
132-220
(450-950)
4.2
5.4
5.7
5.1
5.4
5.3
4.6
3.9
3.9
4.0
>220
(>950)
3.7
4.0
4.3
4.2
4.3
4.7
4.5
4.3
4.0
4.4
Total
155.4
194.6
211.1
221.3
292.0
347.9
221.4
206.0
200.0
237.9
Hydronics Institute. Includes residential, commercial/institutional and
industrial boilers.
B-2
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TABLE B-2. HISTORICAL RES1DENTIAL/COMHERC1AL/1NSTITUTIONAL
CAST IRON BOILER SALES ESTIMATES
(Thousands of Units)
197S
1976
1977
1978
1979
1980
1981
1982
1983
1984
Residential"
135.2
169.2
183.3
193.7
261.6
310.0
195.4
182.3
169.6
213.7
Commerci al/Insti tuti onal
kW (thousand Btu/hr)
59-220" >220a
(200-950) (>950)
17.4
22.4
24.6
24.4
27.2
34.4
22.6
20.5
27.4
20.9
2.8
3.0
3.2
3.2
3.2
3.5
3.4
3.2
3.0
3.3
Total
155.4
194.6
211.1
221.3
292.0
347.9
221.4
206.0
200.0
237.9
8 Estimates derived from Table B-l. Includes 75 percent of the boilers
larger than 59 kW (200,000 Btu/hr).
b Estimates for single-family homes and apartment buildings. Derived from
data presented in Table B-l. (Includes all boilers less than 59 kW
[200,000 Btu/hr capacity] plus 25 percent of the boilers larger than 59 kW
[200,000 Btu/hr capacity].)
B-3
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TABLE B-3. HISTORICAL FIRETUBE BOILER SALES*
(Number of Units)
Year
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
Dn
<0.3
1,533
2,031
2,062
2,054
2,112
1,902
1,377
1,261
1,470
1,483
iler Size MW(MMBtuy
0.3-1
(1-3)
2,317
2,607
2,798
2,634
2,860
2,600
2,408
2,068
2,165
2,298
»k..\
1-12
(3-40)
3,360
3,620
3,879
3,753
3,729
3,131
2,922
2,549
2,755
2,902
Total
7,210
8,258
8,739
8,441
8,701
7,633
6,707
5,878
6,390
6,683
8 American Boiler Manufacturers Association. Includes residential, commer-
cial/institutional and industrial boilers. Includes firebox boilers.
Includes hot water, low pressure steam and high pressure steam boilers.
B-4
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TABLE B-4. HISTORICAL WATERTUBE BOILER SALES8
_D
10-25
Year
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
Units
107
93
110
76
67
57
64
42
37
37
KPPH
2,033
1,793
2,101
1,525
1,264
1,051
1,159
740
663
664
oiler Size (KPPH)fc
25-50
Units
150
119
140
138
153
128
98
60
55
56
KPPH
5,691
4,415
5,144
5,001
5,811
4,915
3,660
2,179
2,121
2,259
1
50-100
Units
102
71
100
115
95
76
72
61
47
41
KPPH
7,716
5,331
7,435
8,599
6,595
5,477
5,081
4,467
3,620
3,070
Total
Units
359
283
350
329
315
261
234
163
139
134
KPPH
15,440
11,539
14,680
15,125
13,670
11,443
9,900
7,386
6,404
5,993
a American Boiler Manufacturers Association; stationary, industrial-type.
Includes commercial/institutional and industrial boilers smaller than
100,000 pounds of steam per hour capacity.
b Thousand pounds of steam per hour capacity.
B-5
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REFERENCES
1. Devitt, T. et al. Population and Characteristics of Industrial/Com-
mercial Boilers in the U.S. PEOCo Environmental, Inc. Cincinnati,
Ohio. EPA-600/7-79-178a. Prepared for the Industrial Environmental
Research Laboratory, U.S. Environmental Protection Agency. August 1979,
B-6
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TECHNICAL REPORT DATA
(Please read Instructions on the reverse before completing)
REPORT NO.
EPA-450/3-89-17
2.
3. RECIPIENT'S ACCESSION NO.
TITLE AND SUBTITLE
5. REPORT DATE
Projected Impacts of Alternative New Source Performance] May 1989
Standards for Small Industrial -Commercial -institutionalP6RFORMINGORGAN12AT10NCODE
Fossil Fuel-Fired Boilers
AUTHOR(S)
8. PERFORMING ORGANIZATION REPORT NO.
PERFORMING ORGANIZATION NAME AND ADDRESS
Emission Standards Division
Office of Air Quality Planning and Standards
U.S. Environmental Protection Agency
Research Triangle Park, North Carolina 27711
10. PROGRAM ELEMENT NO.
11. CONTRACT/GRANT NO.
68-02-4384
2. SPONSORING AGENCY NAME AND ADDRESS
Office of Air Quality Planning and Standards
Office of Air and Radiation
U.S. Environmental Protection Agency
Research Triangle Park, North Carolina
13. TYPE OF REPORT AND PERIOD COVERED
Final
14. SPONSORING AGENCY CODE
EPA/200/04
5. SUPPLEMENTARY NOTES
6. ABSTRACT
This report presents projected national environmental cost and energy impacts
of alternative sulfur dioxide (S02) and particulate matter (PM) air emission
standards for new small industrial-commercial-institutional steam generating units
(small boilers) firing coal, oil, and natural gas. The analysis examines projected
impacts in the fifth year following proposal of the standards. The report was
prepared during development of proposed new source performance standards (NSPS)
for small boilers.
KEY WORDS AND DOCUMENT ANALYSIS
DESCRIPTORS
b.IDENTIFIERS/OPEN ENDED TERMS
COSATl Field/Croup
Air Pollution
Pollution Control
Standards of Performance
Steam Generating Units
Industrial Boilers
Small Boilers
Air Pollution Control
18. DISTRIBUTION STATEMENT
Release unlimited
19. SECURITY CLASS (ThisReport)
Unclassified
20. SECURITY CLASS (This page)
Unclassified
22. PRICE
EPA Form 2220-1 (R«v. 4-77) PREVIOUS EDITION is OBSOLETE
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