# A \
1^1
PRO^
Regulatory Impact Analysis for the Proposed
Oil and Natural Gas Sector: Emission Standards
for New, Reconstructed, and Modified Sources
Review
-------
ii
-------
EPA-452/R-19-001
August 2019
Regulatory Impact Analysis for the Proposed Oil and Natural Gas Sector: Emission Standards
for New, Reconstructed, and Modified Sources Review
U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards
Health and Environmental Impacts Division
Research Triangle Park, NC
111
-------
CONTACT INFORMATION
This document has been prepared by staff from the Office of Air and Radiation, U.S.
Environmental Protection Agency. Questions related to this document should be addressed to
Alexander Macpherson, U.S. Environmental Protection Agency, Office of Air and Radiation,
Research Triangle Park, North Carolina 27711 (email: macpherson.alex@epa.gov).
ACKNOWLEDGEMENTS
In addition to U.S. EPA staff from the Office of Air and Radiation, personnel from the U.S. EPA
Office of Policy and SC&A contributed data and analysis to this document.
iv
-------
TABLE OF CONTENTS
Table of Contents v
List of Tables vn
List of Figures viii
1 Executive Summary 1-1
1.1 Background 1-1
1.2 Summary of Analytical Updates from the Final 2016 NSPSRIA 1-3
1.2.1 Summary of Updates Presented in the Technical Reconsideration Proposal RIA 1-3
1.2.2 The Alternative Baselines for this RIA 1 -5
1.3 Regulatory Options Analyzed in this RIA 1 -7
1.4 Summary of Results 1-9
1.5 Organization of this Report 1-13
2 Compliance Cost Savings and Emissions Increases 2-1
2.1 Introduction 2-1
2.2 Emissions Points and Pollution Controls assessed in the RIA 2-1
2.3 Compliance Cost Analysis 2-4
2.3.1 Proposed Requirements 2-5
2.3.2 Projection of Affected Facilities 2-6
2.3.3 Emissions Increases 2-9
2.3.4 Forgone Product Recovery 2-10
2.3.5 Compliance Cost Savings 2-12
2.4 Detailed Impacts Tables 2-15
2.5 Sensitivity of Results to Baseline Assuming Annual Fugitive Emissions Monitoring at
Compressor Stations 2-20
2.6 Analysis of the Present Value and Equivalent Annualized Value of Cost Savings 2-21
3 E stimated Forgone Benefits 3-1
3.1 Introduction 3-1
3.2 Forgone Emissions Reductions 3-5
3.3 Methane Climate Effects and Valuation 3-7
3.4 VOC as an Ozone Precursor 3-15
3.4.1 Ozone Health Effects 3-15
3.4.2 Ozone Vegetation Effects 3-16
3.4.3 Ozone Climate Effects 3-16
3.5 VOC as aPM2.5 Precursor 3-17
3.5.1 PM2.5 Health Effects 3-17
3.5.2 Organic PM Welfare Effects 3-18
3.5.3 Visibility Effects 3-19
3.6 Hazardous Air Pollutants (HAP) 3-19
3.6.1 Benzene 3-23
3.6.2 Toluene 3-24
3.6.3 Carbonyl Sulfide 3-25
3.6.4 Ethylbenzene 3-25
3.6.5 Mixed Xylenes 3-26
3.6.6 n-Hexane 3-27
3.6.7 Other Air Toxics 3-27
3.7 References 3-27
4 Economic Impact Analysis and Distributional Assessments 4-1
4.1 Introduction 4-1
v
-------
4.2 Energy Markets Impacts 4-1
4.3 Distributional Impacts 4-2
4.3.1 Distributional Aspects of Compliance Cost Savings 4-2
4.3.2 Distributional Aspects of the Forgone Health Benefits 4-3
4.4 Small Business Impacts 4-4
4.5 Employment Impacts 4-5
4.6 References 4-7
5 Comparison of Benefits and Costs 5-9
5.1 Comparison of Benefits and Costs Across Regulatory Options 5-9
5.2 Uncertainties and Limitations 5-10
vi
-------
LIST OF TABLES
Table 1-1 Projected Impacts of the 2016 NSPS OOOOa Transmission and Storage Requirements: Comparison
of 2016 NSPS RIA and Alternative Baselines for this Analysis 1-7
Table 1-2 Emissions Sources and Controls in the Transmission and Storage Sector 1-9
Table 1 -3 Quantified Costs, Benefits, and Emissions Changes Resulting from the Proposed Removal of
Requirements in Transmission and Storage, 2019 through 2025, relative to the 2018 Proposed
Regulatory Baseline (millions 2016$)* 1-12
Table 2-1 Emissions Sources and Controls in the Transmission and Storage Sector 2-5
Table 2-2 NSPS-affected Source Counts in Transmission and Storage 2-8
Table 2-3 Increase in Emissions Under the Proposed Action, by Year, relative to the 2018 Proposed Regulatory
Baseline 2-10
Table 2-4 Estimated Decrease in Natural Gas Recovery, relative to the 2018 Proposed Regulatory Baseline 2-11
Table 2-5 Compliance Cost Savings Estimates relative to the 2018 Proposed Regulatory Baseline (millions
2016$) 2-13
Table 2-6 Estimated Cost Savings, 2019-2025, using 7 and 3 Percent Discount Rates, relative to the 2018
Proposed Regulatory Baseline (millions 2016$) 2-14
Table 2-7 Incrementally Affected Units, Emissions Increases and Cost Savings, relative to the 2018 Proposed
Regulatory Baseline, 2020 2-16
Table 2-8 Incrementally Affected Units, Emissions Increases and Cost Savings, relative to the 2018 Proposed
Regulatory Baseline, 2025 2-17
Table 2-9 Incrementally Affected Units, Emissions Increases and Cost Savings, relative to the Current
Regulatory Baseline, 2020 2-18
Table 2-10 Incrementally Affected Units, Emissions Increases and Cost Savings, relative to the Current
Regulatory Baseline, 2025 2-19
Table 2-11 Estimated Cost Savings and Increase in Emissions of the Proposed Action relative to a Baseline
Assuming Annual Fugitive Emission Monitoring at Compressor Stations 2-21
Table 2-12 Estimated Cost Savings, 2019-2025, relative to the 2018 Proposed Regulatory Baseline (millions
2016$) 2-22
Table 2-13 Discounted Cost Savings Estimates Using a 7 Percent Discount Rate, relative to the 2018 Proposed
Regulatory Baseline (millions 2016$) 2-23
Table 2-14 Discounted Cost Savings for the Proposed Option using 7 and 3 Percent Discount Rates, relative to
the 2018 Proposed Regulatory Baseline (millions 2016$)* 2-24
Table 3-1 Climate and Human Health Effects of Forgone Emission Reductions from this Proposed Rule 3-3
Table 3-2 Total Direct Increases in Emissions, 2019 through 2025, using Alternative Baselines 3-6
Table 3-3 Annual Direct Increases in Methane, VOC and HAP Emissions, 2019 through 2025, using
Alternative Baselines 3-6
Table 3-4 Interim Domestic Social Cost of CH4, 2019-2025 (in 2016$ per metric ton CH4)* 3-10
Table 3-5 Estimated Forgone Domestic Climate Benefits of the Proposed Action, 2019-2025 (millions, 2016$)
3-10
Table 3-6 Discounted Forgone Domestic Climate Benefits of the Proposed Action, PV and EAV (millions,
2016$) 3-11
Table 3-7 Estimated Forgone Domestic Climate Benefits of the Proposed Action (millions, 2016$) 3-12
Table 5-1 Summary of the Present Value (PV) and Equivalent Annualized Value (EAV) of Forgone Monetized
Benefits, Cost Savings, and Net Benefits for the Proposed Option, 2019 through 2025, relative to the
2018 Proposed Regulatory Baseline (millions, 2016$) 5-9
Table 5-2 Summary of the Present Value (PV) and Equivalent Annualized Value (EAV) of Forgone Monetized
Benefits, Cost Savings, and Net Benefits for the Proposed Option, 2019 through 2025, relative to the
Current Regulatory Baseline (millions, 2016$) 5-10
Table 5-3 Summary of Total Increase in Emissions of the Proposed Action, 2019 through 2025, compared to
Alternative Baselines 5-10
Vll
-------
LIST OF FIGURES
Figure 3-1 2014 NATA Model Estimated Census Tract Carcinogenic Risk from HAP Exposure from All
Outdoor Sources based on the 2014 National Emissions Inventory 3-21
Figure A-l Frequency Distribution of Interim Domestic SC-CH4 Estimates for 2020 (in 2016$ per metric ton
CH4) A-6
viii
-------
1 EXECUTIVE SUMMARY
1.1 Background
The action analyzed in this regulatory impact analysis (RIA) accompanies the proposed
Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources
Review. This action proposes regulatory changes based on a review of the Oil and Natural Gas
Sector: Emission Standards for New, Reconstructed, and Modified Sources published in the
Federal Register on June 3, 2016 ("2016 NSPS OOOOa").
In the 2016 NSPS OOOOa, new source performance standards (NSPS) were established
to reduce greenhouse gas (GHG) emissions and volatile organic compound (VOC) emissions
from the oil and natural gas sector. EPA received petitions to reconsider several provisions of the
2016 NSPS OOOOa. In response to those petitions, EPA has finalized one action and proposed a
second.
First, on March 12, 2018, EPA finalized a package containing amendments to the 2016
NSPS OOOOa ("amendments package") to address immediate concerns regarding
implementation challenges related to the reliability of emission monitoring equipment during
extended periods of extreme cold temperatures on the Alaskan North Slope.1 These amendments
reduce monitoring frequency at NSPS-affected well sites on the Alaskan North Slope from
semiannual to annual.
Second, on October 15, 2018, EPA proposed the Oil and Natural Gas Sector: Emission
Standards for New, Reconstructed, and Modified Sources Reconsideration ("technical
reconsideration").2 The technical reconsideration proposed changes to the 2016 NSPS OOOOa
addressing specific issues raised in petitions, including changes to fugitive emission
requirements, certification requirements and clarifications of definitions, among other issues.
This proposed action is a result of EPA's commitment to review the 2016 NSPS OOOOa
rule in response to Executive Order (E.O.) 13783, "Promoting Energy Independence and
Economic Growth", issued on March 28, 2017. E.O. 13783 directs agencies to review existing
regulations that potentially burden the development of domestic energy resources and
1 83 FR 10628
2 83 FR 52056
1-1
-------
appropriately suspend, revise, or rescind regulations that unduly burden the development of U.S.
energy resources beyond what is necessary to protect the public interest or otherwise comply
with the law.
This proposed action reviews the inclusion of sources in transmission and storage as part
of the source category and the inclusion of greenhouse gases, in the form of methane, as a
regulated pollutant in the 2016 NSPS OOOOa. The proposed option of this action rescinds the
requirements of the 2016 NSPS OOOOa for sources in the transmission and storage segment.
The proposed option also rescinds methane requirements from sources in the production and
processing segments, while leaving VOC regulations in place for the production and processing
sources. As methane control options are redundant with VOC control options, there are no
expected cost or emissions effects from removing the methane requirements in the production
and processing segments. The alternative co-proposed option considered in this action is to
rescind the methane requirements for all affected sources. There are no expected cost or
emissions impacts for the alternative co-proposed option for the same reason as above: methane
control options on all sources are redundant with VOC control options.
In this RIA, we present costs and benefits of the proposed action relative to two
alternative baselines. As there are no expected cost or emissions impacts for the alternative
proposed option, this RIA focuses analysis on the proposed option in which removing sources in
transmission and storage will produce cost and emissions impacts. The first baseline for this
analysis of the proposal includes the March 2018 final Amendments package and the October
2018 proposed technical reconsideration. The second baseline used in this RIA includes the
March 2018 final Amendments package but excludes the potential impacts of the October 2018
proposed technical reconsideration. A more detailed description of the alternative baselines is
presented in Section 1.2.2 below.
This RIA estimates impacts for the analysis years 2019 through 2025. All monetized
impacts of these changes are presented in 2016 dollars. This analysis also includes a presentation
of the impacts in a present value (PV) framework. All sources in the transmission and storage
sector that are affected by the 2016 NSPS OOOOa, starting at the promulgation of the 2016
NSPS OOOOa, are sources that are affected by this proposed action.
1-2
-------
The projected impacts of the proposed action being analyzed in this RIA pertain
specifically to potential new, reconstructed, and modified sources under NSPS OOOOa. EPA
recognizes that by rescinding the applicability of the NSPS, issued under CAA section 111(b), to
methane emissions, existing sources of the same type in the source category will not be subject
to regulation under CAA section I I 1(d). Analysis of potential impacts of removing the
requirement to regulate existing sources under 111(d) is outside the scope of this RIA and would
be speculative.
1.2 Summary of Analytical Updates from the Final 2016 NSPS RIA
1.2.1 Summary of Updates Presented in the Technical Reconsideration Proposal RIA
The updates to data, assumption, source counts, projections, and state and local
regulations that were made for the technical reconsideration proposal apply to this analysis.
These updates were combined with unchanged assumptions and methods from the 2016 NSPS
RIA to estimate an updated baseline for the technical reconsideration proposal. The updates and
revisions included:
• Annual Energy Outlook: In the 2016 NSPS OOOOa, we used the 2015 Annual Energy
Outlook (AEO) from the U.S. Energy Information Administration (EIA). For the
technical reconsideration RIA, we used the 2018 AEO, published February 2018.3 The
estimates of drilling activity published in the AEO are used to estimate projections of
NSPS-affected sources overtime, and the estimates of natural gas prices are used to
estimate the value of product recovery.
• U.S. Greenhouse Gas Inventory updates: Since the promulgation of the 2016 NSPS
OOOOa, the U.S. Greenhouse Gas Inventory (GHGI) has been updated.4 The data from
the updated GHGI was used in the projection of NSPS-affected sources over time.
• Drillinglnfo: The technical reconsideration RIA used a more recent version of the
Drillinglnfo dataset than was used for the 2016 NSPS OOOOa.5 The Drillinglnfo dataset
was used to characterize oil and natural gas wells and completion activity in the base
year. The base year is 2014 in this analysis, updated from 2012 in the 2016 NSPS RIA.
• State and Local Regulations: Since the promulgation of the 2016 NSPS OOOOa,
additional state and local requirements affecting the oil and natural gas sector have been
published, namely regulations in California and general permits in Pennsylvania. For this
3 The 2018 AEO can be found at https ://www. eia. gov/outlooks/archive/aeo 18/
4 The updated GHGI data used is from the April 2018 release. For information on the inventory, visit
https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks.
5 Drillinglnfo is a private company that provides information and analysis to the energy sector. More information is
available at http://info.drillinginfo.com.
1-3
-------
proposed action, EPA reviewed state regulations and permitting requirements. We
attempted to take the requirements from California, Colorado, Ohio, Pennsylvania, and
Utah into account in the RIA. However, with the information we currently have available,
we are unable to determine where newly affected sources in the transmission and storage
segments are expected to locate. Applicable facilities in these states with similar
requirements will still be expected to follow state regulations, and so this analysis likely
overestimates the cost savings from sources in transmission and storage from this
proposed action because it includes estimates of incrementally affected facilities with
similar state-level requirements to those in the 2016 NSPS OOOOa.
• Fugitive Emissions Requirements: Since the promulgation of the 2016 NSPS OOOOa,
EPA has published a final package that amends the fugitive emissions monitoring and
repair requirements for NSPS-affected oil and natural gas well sites on the Alaskan North
Slope. The Amendments package reduces the fugitive emissions monitoring frequency
for NSPS-affected well sites on the Alaskan North Slope from semiannual, as
promulgated in the 2016 NSPS OOOOa, to annual.
• Professional Engineer Certification: The 2016 NSPS OOOOa requires closed vent
systems and pneumatic pump technical infeasibility be certified by a professional
engineer. The cost of this provision was not quantified in the cost analysis of the 2016
NSPS. In the technical reconsideration proposal, we included the cost of the requirement
for professional engineer certifications in the alternative baselines.
• Social Cost of Methane: In the 2016 NSPS OOOOa, EPA used an estimate of the global
social cost of methane to monetize the climate-related benefits associated with reductions
in methane emissions. Since the promulgation of the 2016 NSPS OOOOa, E.O. 13783
has been signed, which directs agencies to ensure that estimates of the social cost of
greenhouse gases used in economic analyses are consistent with the guidance contained
in the Office of Management and Budget (OMB) Circular A-4, "including with respect to
the consideration of domestic versus international impacts and the consideration of
appropriate discount rates" (E.O. 13783, Section 5(c)). Thus, for the technical
reconsideration proposal RIA, we used an interim estimate of the domestic social cost of
methane to estimate the forgone climate benefits resulting from the increase in methane
emissions due to the proposed changes.
• Model Plants: The model plants used to estimate the emissions from a well site, and
emission reductions due to the fugitive emissions monitoring requirements, have been
updated. The update includes the addition of fugitive emissions components, namely
storage vessels. By adding storage vessels to the model plant, base emissions from a
wellsite are estimated to be larger, and the reductions due to the monitoring and repair
requirements have also increased compared to the base emissions and emission reduction
estimates used in the 2016 NSPS RIA.6
• Other: In the 2016 NSPS OOOOa, all costs and benefits were presented in 2012 dollars.
In the technical reconsideration proposal RIA, all estimated costs were presented in 2016
6 For more information on the model plants, see the Technical Support Document.
1-4
-------
dollars per E.O. 13771 implementation guidance.7 In addition, in the 2016 NSPS RIA, we
presented annualized compliance costs and the benefits resulting from emission
reductions occurring in 2020 and 2025. For the technical reconsideration proposal RIA,
we estimated cost savings and forgone benefits resulting from changes in compliance
activities and emissions occurring in each year from 2019 through 2025.8 We also
discounted the annual cost savings and forgone benefits to 2016, and present total PV and
equivalent annualized value (EAV) over the analysis period.
1.2.2 The Alternative Baselines for this RIA
EPA generally only includes final actions in baseline estimates. However, the currently
proposed technical reconsideration will likely be promulgated before this action is finalized and
will become part of the industry landscape before this action is complete. As such, we believe
including the proposed technical reconsideration in the baseline for this action results in a
reasonable approximation of what the state of the industry will be at promulgation of this action.
As a result, the "2018 Proposed Regulatory" baseline for the analysis of this proposed action
assumes the requirements are those that reflect the proposed option of the technical
reconsideration. This RIA also presents potential impacts of this action where the technical
reconsideration proposal is excluded from the baseline, which we term the "Current Regulatory"
baseline.
Compared to the 2016 NSPS RIA analysis, this analysis uses the same projection
methodologies with updated data. Note that, although there are states with similar requirements
to those of the 2016 NSPS OOOOa, we are unable to account for these requirements in this
action.9 Table 1-1 shows the number of NSPS-affected facilities, methane, VOC, and HAP
emission reductions, and the total annualized costs including the value of product recovery in
7 Costs were adjusted to 2016 dollars using the seasonally adjusted annual Gross Domestic Product: Implicit Price
Deflator released by the Federal Reserve on January 26, 2018.
8 In this analysis, the Drillinglnfo base year was updated from 2012 to 2014; therefore, the source projection
estimates are based on reconsideration-affected facilities established starting in 2014 and continuing through
2025.
9 For this proposed action and for the technical reconsideration proposal, EPA projected affected facilities using a
combination of historical data from the U.S. GHG Inventory, DI Desktop, and projected activity levels taken
from the Energy Information Administration Annual Energy Outlook. Because oil and natural gas well locations
are identified in DI Desktop, we can forecast well drilling activities by state. As a result, we can estimate the
effects of state regulations on future affected facilities that draw upon state-specific information in their
projection. However, projections of affected facilities that draw upon the U.S. GHG Inventory, such as sources in
the transmission and storage segment, are national-scale and, hence, we are unable to account for state-level
regulations in our projected impacts in this proposed RIA. More information on data and methods used to project
potentially affected facilities, please see Section 2.3.2.
1-5
-------
2020 and in 2025 for the sources in the transmission and storage sector as estimated in the 2016
NSPS RIA and relative to the alternative baselines for this proposed action. After updating
facility projections for this analysis, there are likely more potentially affected facilities than we
anticipated when performing the analysis for the 2016 NSPS.10 Consequently, for the subset of
2016 NSPS provisions affected by this proposal, compliance cost and emissions impacts of the
2016 NSPS were likely underestimated in the 2016 NSPS-related analysis. Comparing baselines
for this analysis, the Current Regulatory baseline reflects greater emissions reductions and
compliance costs than the 2018 Proposed Regulatory baseline since fugitive monitoring
requirements are more stringent in the former. The emission reductions presented here are the
emission reductions assuming the affected sources were not performing compliance activities
prior to the 2016 NSPS OOOOa.
Table 1-1 shows the number of NSPS-affected facilities, methane, VOC, and HAP
emission reductions, and the total annualized costs including the value of product recovery in
2020 and in 2025 for the sources in the transmission and storage sector as estimated in the 2016
NSPS RIA and relative to the alternative baselines for this proposed action. After updating
facility projections for this analysis, there are likely more potentially affected facilities than we
anticipated when performing the analysis for the 2016 NSPS.11 Consequently, for the subset of
2016 NSPS provisions affected by this proposal, compliance cost and emissions impacts of the
2016 NSPS were likely underestimated in the 2016 NSPS-related analysis. Comparing baselines
for this analysis, the Current Regulatory baseline reflects greater emissions reductions and
compliance costs than the 2018 Proposed Regulatory baseline since fugitive monitoring
requirements are more stringent in the former. The emission reductions presented here are the
10 Results from the 2016 NSPS RIA are generally not comparable to results in this analysis because they rely on
different baselines. The higher count of affected facilities in transmission and storage results from higher growth
in the historical period used to estimate new facilities, compared to the historical data used in 2016, which
showed very little growth in transmission and storage. In general, projection methods such as are used here to
estimate affected facilities in transmission and storage are sensitive to the historical data used. Changes in
transmission and storage-related methane, VOC, and HAP emissions shown in Table 1-1 result from changes in
the projected facilities, while the unit-level emissions characteristics are the same as in the 2016 analysis.
11 Results from the 2016 NSPS RIA are generally not comparable to results in this analysis because they rely on
different baselines. The higher count of affected facilities in transmission and storage results from higher growth
in the historical period used to estimate new facilities, compared to the historical data used in 2016, which
showed very little growth in transmission and storage. In general, projection methods such as are used here to
estimate affected facilities in transmission and storage are sensitive to the historical data used. Changes in
transmission and storage-related methane, VOC, and HAP emissions shown in Table 1-1 result from changes in
the projected facilities, while the unit-level emissions characteristics are the same as in the 2016 analysis.
1-6
-------
emission reductions assuming the affected sources were not performing compliance activities
prior to the 2016 NSPS OOOOa.
Table 1-1 Projected Impacts of the 2016 NSPS OOOOa Transmission and Storage
Requirements: Comparison of 2016 NSPS RIA and Alternative Baselines for this Analysis
Relative to the
Relative to the
2016 NSPS RIA
2018 Proposed
Regulatory
Baseline1
Current
Regulatory
Baseline2
2020
2025
2020
2025
2020
2025
NSPS-affected Sources in Transmission and Storage*
Counts
690
1,400
2,600
4,800
2,600
4,800
Emissions Changes
Methane Emission Reductions (short
tons)
8,900
18,000
37,000
69,000
39,000
72,000
VOC Emission Reductions (tons)
250
490
1,000
1,900
1,100
2,000
HAP Emission Reductions (tons)
7
15
31
56
32
59
Annualized Compliance Costs (millions, 2016$)
Annualized Compliance Cost (7percent)
$2.6
$5.3
$17
$32
$20
$37
Product Recovery (millions, 2016$)
$1.8
$3.6
$3.7
$7.5
$4.1
$8.2
Total Annualized Cost, with Product
Recovery
$0.81
$1.6
$14
$25
$16
$29
1 The 2018 Proposed Regulatory baseline reflects updated assumptions and methods made since 2016, the impacts
of the March 2018 Amendments final rule, and the requirements of the co-proposed option in the October 2018
technical reconsideration proposed rule that assumed semiannual fugitive emissions monitoring at compressor
stations.
2 The Current Regulatory baseline reflects updated assumptions and methods made since 2016 and the impacts of
the March 2018 Amendments final rule.
* For more information on the projection of affected facilities, see Section 2.3.2.
As mentioned above, the 2016 NSPS RIA estimates did not include the cost of
professional engineer certification. To be consistent, the estimates presented in Table 1-1 for the
alternative baselines of this RIA also exclude the cost of certifications. It should be noted,
however, that the assumptions used to estimate the alternative baselines for this analysis have
been updated from those used to estimate the 2016 NSPS RIA values, as explained above. In
addition, the 2016 NSPS OOOOa costs presented here do not match the cost estimates as
presented in the 2016 NSPS RIA. This is because costs in the 2016 NSPS RIA are presented in
2012 dollars, and they have been updated to 2016 dollars in this table.
1.3 Regulatory Options Analyzed in this RIA
In this RIA, we estimate the effect of rescinding requirements on sources in the
transmission and storage sector. We assume that increases in cost savings and emission due to
1-7
-------
rescinding those regulations are equal to what the costs and emission reductions would be if the
requirements remained in place. The universe of affected sources includes all sources in the
transmission and storage sector that are considered new or modified starting in 2019, as well as
sources that were affected by the 2016 NSPS OOOOa before 2019 and would be complying with
the 2016 NSPS OOOOa rule in the absence of this action.
For example, compressor stations in the transmission sector that become NSPS-affected
sources in 2016 are also affected sources under this action because they are expected to cease
activities related to the fugitive emissions monitoring and repair requirements. However,
compressor stations in the gathering and boosting sector are not affected by this action because
they are in the production and processing segment and are still required to comply with the
semiannual fugitive emissions monitoring and repair requirements. As we assume certifications
only happen once, the only affected sources for the purposes of this action are those that are in
the transmission and storage sector and that become affected starting in 2019.
Table 1-2 outlines the sources that are affected by this action under the 2016 NSPS
OOOOa and as they are relative to the alternative baselines for this analysis. The 2018 Proposed
Regulatory baseline includes the sources and controls from the 2016 NSPS OOOOa that have not
changed, as well as the updates to the sources and controls as proposed in the technical
reconsideration. The differences between the 2018 Proposed Regulatory baseline and the Current
Regulatory baseline is related to certifications on closed vent systems on centrifugal and
reciprocating compressors and to fugitive emissions monitoring at transportation and storage
compressor stations not on the Alaskan North Slope. This is because we currently estimate that
there are no affected compressor stations on the Alaskan North Slope.
1-8
-------
Table 1-2
Emissions Sources and Controls in the Transmission and Storage Sector
Relative to the Relative to the
Emissions Point and Control
2018 Proposed Current
Regulatory Regulatory
Baseline Baseline
Fugitive Emissions - Planning, Monitoring and Maintenance
Compressor Stations
Compressor Stations on the Alaskan North Slope2
Semiannual1
Annual
X
X
X
Quarterly
Annual
X
X
X
Pneumatic Controllers - Replace High Bleed with Low Bleed
Reciprocating Compressors - Replace Rod Packing Every ~3 Years3
Centrifugal Compressors - Route to Control
Certifications
Closed Vent Systems on Centrifugal and Reciprocating
Compressors and Storage Vessels4
In-House
Engineer
Professional
Engineer
1 The technical reconsideration co-proposes semiannual and annual fugitive emission monitoring frequency at
compressor stations not on the Alaskan North Slope.
2 We do not currently have the data needed to estimate the effects of the proposed action pertaining to compressors
stations on the Alaskan North Slope.
3 Every 36 months, or 26,000 hours.
4 We currently estimate that there are no affected storage vessels in the transmission and storage sector.
1.4 Summary of Results
A summary of the key results of this proposed action follow. All dollar estimates are in
2016 dollars. Also, all cost savings and emissions increases are estimated relative to the
alternative baselines. These cost savings and emission increases are equal to the total costs and
emission reductions that would be incurred if the requirements were left in place.
• Emissions Analysis: This proposed action is expected to lead to an increase in emissions
compared to the emissions levels in both baselines used in this RIA.
o Relative to the 2018 Proposed Regulatory Baseline: annual methane emissions
are estimated to increase by between 31,000 short tons per year (in 2019) and
69,000 short tons per year (in 2025) for a total of 350,000 short tons over 2019
through 2025. Annual VOC emissions are expected to increase by between 860
tons per year and 1,900 tons per year for a total of 9,700 tons over the same
period. HAP emissions are expected to increase by between 26 tons per year and
56 tons per year, with an estimated total of 290 more tons of HAP emissions over
2019 through 2025 under the proposed changes.
o Relative to the Current Regulatory Baseline: annual methane emissions are
estimated to increase by between 33,000 short tons per year (in 2019) and 72,000
short tons per year (in 2025) for a total of 370,000 short tons over 2019 through
2025. Annual VOC emissions are expected to increase by between 910 tons per
year and 2,000 tons per year for a total of 10,000 tons over the same period. HAP
emissions are expected to increase by between 27 tons per year and 59 tons per
year, with an estimated total of 300 more tons of HAP emissions over 2019
through 2025 under the proposed changes.
1-9
-------
• Benefits Analysis: This proposed action is expected to result in climate-related dis-
benefits relative to both baselines used in this analysis.
o Relative to the 2018 Proposed Regulatory Baseline: The PV of the domestic
share of forgone benefits, using an interim estimate of the domestic social cost of
methane (SC-CH4) discounted at a 7 percent rate is estimated to be $13 million
from 2019 through 2025; the EAV is estimated to be $2.2 million per year. Using
the interim SC-CH4 estimate based on the 3 percent discount rate, the PV of the
forgone domestic climate benefits is estimated to be $49 million; the EAV is
estimated to be $7.7 million per year.
o Relative to the Current Regulatory Baseline: The PV of the domestic share of
forgone benefits, using an interim estimate of the domestic social cost of methane
(SC-CH4) discounted at a 7 percent rate is estimated to be $13 million from 2019
through 2025; the EAV is estimated to be $2.3 million per year. Using the interim
SC-CH4 estimate based on the 3 percent discount rate, the PV of the forgone
domestic climate benefits is estimated to be $52 million; the EAV is estimated to
be $8.1 million per year.
• Compliance Cost Analysis: The proposed action is expected to result in compliance cost
savings to the affected firms relative to the alternative baselines of this RIA.
o Relative to the 2018 Proposed Regulatory Baseline: The PV of these cost
savings, discounted at a 7 percent rate and not including the forgone value of
product recovery, is estimated to be about $104 million dollars. When the forgone
value of product recovery (about $23 million) is included, the PV of the cost
savings is about $81 million. This is associated with an EAV of cost savings of
about $18 million per year without including the forgone value of product
recovery, or $14 million per year when the value of product recovery (about $4
million per year) is included. Under a 3 percent discount rate, the PV of cost
savings, accounting for the forgone value of product recovery (about $29 million)
is $103 million, with an associated EAV of $16 million per year after accounting
for the forgone value of product recovery (about $4.6 million per year).
o Relative to the Current Regulatory Baseline: The PV of these cost savings,
discounted at a 7 percent rate and not including the forgone value of product
recovery, is estimated to be about $122 million dollars. When the forgone value
of product recovery (about $25 million) is included, the PV of the cost savings is
about $97 million. This is associated with an EAV of cost savings of about $21
million per year without including the forgone value of product recovery, or $17
million per year when the value of product recovery (about $4.4 million per year)
is included. Under a 3 percent discount rate, the PV of cost savings, accounting
for the forgone value of product recovery (about $32 million) is $123 million,
with an associated EAV of $19 million per year after accounting for the forgone
value of product recovery (about $5 million per year).
• Energy Markets Impacts Analysis: The 2016 NSPS RIA estimated small (less than one
percent) impacts on energy production and markets as a result of the 2016 NSPS. EPA
expects that this deregulatory action, if finalized, would partially reduce the energy
1-10
-------
market impacts estimated for the final NSPS in the 2016 NSPS RIA. This conclusion is
independent of the choice of baseline used in this RIA.
• Distributional Impacts: The compliance cost savings and forgone benefits presented in
this analysis are not expected to be felt uniformly across the population and may not
accrue to the same individuals or communities. This conclusion is independent of the
choice of baseline used in this RIA. EPA did not conduct a quantitative assessment of the
distributional impacts of the proposed action, but a qualitative discussion of the
distributional aspects of the compliance cost savings and the forgone health benefits of
this deregulatory action are provided in Section 4.3.
• Small Entity Impacts Analysis: EPA expects that this deregulatory action, if finalized
as proposed, would reduce the impacts estimated for the final 2016 NSPS OOOOa in the
2016 NSPS RIA. We have therefore concluded that this action will relieve regulatory
burden for many directly regulated small entities, and that this action, if finalized as
proposed, will not have a Significant Impact on a Substantial Number of Small Entities
(SISNOSE). This conclusion is independent of the choice of baseline used in this
analysis.
• Employment Impacts Analysis: EPA expects reductions in labor associated with
compliance-related activities relating to the proposed fugitive emissions requirements and
the inspections of closed vent systems compared to the 2016 NSPS OOOOa. This
conclusion is independent of the choice of baseline used in this RIA. However, due to
uncertainties associated with how the proposed action will influence the portfolio of
activities associated with fugitive emissions-related requirements, EPA is unable to
provide quantitative estimates of compliance-related labor changes.
The rest of this document details the annual changes estimated under this proposed action
relative to two alternative baselines. Tables 1-3 and 1-4 presents the PV and EAV of the benefits,
costs, and net benefits of this proposed action, estimated using discount rates of 7 and 3 percent.
The tables also present the increase in emissions, estimated as a result of removing requirements
from all affected sources in the transmission and storage sectors.
These cost, emissions, and benefit impacts are estimated for the universe of affected
sources over the 2019 through 2025 analysis period, discounted to 2016, and are presented in
2016 dollars. When discussing net benefits, both here and in Section 5, we modify the
terminology to be more consistent with traditional net benefits analysis. In the following tables,
we refer to the cost savings as presented in Section 2 as the "benefits" of this proposed action
and the forgone benefits as presented in Section 3 as the "costs" of this proposed action. The net
benefits are the benefits (cost savings) minus the costs (forgone benefits).
1-11
-------
Table 1-3 Quantified Costs, Benefits, and Emissions Changes Resulting from the
Proposed Removal of Requirements in Transmission and Storage, 2019 through 2025,
relative to the 2018 Proposed Regulatory Baseline (millions 2016$)*
7 percent
3 percent
Present
Value
Equivalent
Annualized
Value
Present
Value
Equivalent
Annualized
Value
Benefits (Total Cost Savings)
$81
$14
$103
$16
Cost Savings
$104
$18
$133
$21
Forgone Value of Product Recovery
$23
$4.0
$29
$4.6
Costs (Forgone Domestic Climate Benefits)1
$13
$2.2
$49
$7.7
Net Benefits2
$69
$12
$54
$8.4
Emissions Total Change
Methane (short tons) 350,000
VOC 9,700
HAP 290
Methane (million metric tons C02-Eq.) 7.9
1 The forgone benefits estimates are calculated using estimates of the social cost of methane (SC-CH4). SC-CH4
values represent only a partial accounting of domestic climate impacts from methane emissions. See Section 3.3
for more discussion.
2 Estimates may not sum due to independent rounding.
* These results assume semiannual fugitive emissions monitoring at compressors stations in absence of this
action.
Table 1-4 Quantified Costs, Benefits, and Emissions Changes Resulting from the
Proposed Removal of Requirements in Transmission and Storage, 2019 through 2025,
relative to the Current Regulatory Baseline (millions 2016$)*
7 percent
3 percent
Present
Value
Equivalent
Annualized
Value
Present
Value
Equivalent
Annualized
Value
Benefits (Total Cost Savings)
$97
$17
$123
$19
Cost Savings
$122
$21
$155
$24
Forgone Value of Product Recovery
$25
$4.4
$32
$5.0
Costs (Forgone Domestic Climate Benefits)1
$13
$2.3
$52
$8.1
Net Benefits2
$83
$14
$70
$11
Emissions Total Change
Methane (short tons) 370,000
VOC 10,000
HAP 300
Methane (million metric tons C02-Eq.) 8.4
1 The forgone benefits estimates are calculated using estimates of the social cost of methane (SC-CH4). SC-CH4
values represent only a partial accounting of domestic climate impacts from methane emissions. See Section 3.3
for more discussion.
2 Estimates may not sum due to independent rounding.
1-12
-------
1.5 Organization of this Report
This analysis follows many of the same methods used to estimate costs of the 2016 NSPS
OOOOa and the October 2018 proposed technical reconsideration. The remainder of this report
outlines that methodology, with further explanations of where the underlying data, assumptions,
or methods diverge, as well as the results. For details on the methodology that remains
unchanged from the 2016 NSPS OOOOa, please see the 2016 NSPS RIA.12
Section 2 describes the emissions increases and compliance cost savings analysis of the
proposed action. Section 2 also describes the cost savings in a PV framework and presents the
associated EAV. Section 3 describes the forgone benefits of this rule compared to the alternative
baselines for this analysis, including the PV and EAV over the 2019 to 2025 period. Section 4
describes the economic impacts expected from this proposed action. Section 5 presents a
comparison of forgone benefits and cost savings of this proposed action, as well as the net
benefits.
12 Found at: https://www3.epa.gov/ttn/ecas/docs/ria/oilgas_ria_nsps_final_2016-05.pdf.
1-13
-------
2 COMPLIANCE COST SAVINGS AND EMISSIONS INCREASES
2.1 Introduction
This chapter describes the emissions and compliance cost analysis for the proposed
review of the 2016 NSPS OOOOa. We focus this section on estimating the incremental changes
in emissions and costs of this proposed action with respect to the technical reconsideration
proposal, which, as discussed in Section 1.2.2, reflects the current requirements in place, as well
as the requirements of the October 2018 proposed technical reconsideration. Section 2.2
discusses the updates to data and the approach used in this analysis with respect to the RIA
analysis for the 2016 NSPS OOOOa and the technical reconsideration proposal. Section 2.3
describes the steps in the emissions and compliance cost analysis of the requirements that are
being reviewed and presents an overview of results. Section 2.4 presents detailed tables
describing the impacts for each source affected by this proposed action relative to each of the
alternative baselines discussed in Section 1. Section 2.5 illustrates the sensitivity of the results to
an alternative baseline representing the co-proposed option from the technical reconsideration
proposal. Section 2.6 presents the present value and equivalent annualized value of the cost
savings. Please see the memorandum "Control Cost and Emission Changes under the Proposed
Amendments to 40 CFR Part 60, subpart OOOOa Under Executive Order 13783" located at
Docket ID No. EPA-HQ-OAR-2017-0483 for more detail.
2.2 Emissions Points and Pollution Controls assessed in the RIA
This RIA estimates impacts associated with removing the 2016 NSPS OOOOa
requirements from affected sources in the transmission and storage segment. This section
provides a basic description of the emissions sources and controls affected by this proposed
action. For more detailed information on the requirements that are being reviewed, see the 2016
NSPS OOOOa and the 2016 NSPS RIA.13'14 For the other emission sources and controls (those in
the production and processing segments of the oil and natural gas industry) evaluated in the 2016
NSPS OOOOa, see the 2016 NSPS RIA.
13 Found on regulations.gov under Docket ID No. EPA-HQ-OAR-2017-0483.
14 Found under Docket ID No. EPA-HQ-OAR-2010-0505 and at
https://www3.epa.gov/ttn/ecas/docs/ria/oilgas_ria_nsps_final_2016-05.pdf.
2-1
-------
Fugitive Emissions Requirements: Fugitive emissions occur when connection points are not
fitted properly or when seals and gaskets start to deteriorate. Pressure, changes in pressure, or
mechanical stresses can also cause components or equipment to leak. Potential sources of
fugitive emissions include valves, connectors, pressure relief devices, open-ended lines, flanges,
closed vent systems, and thief hatches or other openings on a controlled storage vessel. These
fugitive emissions do not include devices that vent as part of normal operations.
In the 2016 NSPS RIA, EPA estimated costs and emission reductions assuming the use of
a leak monitoring program based on the use of optical gas imaging (OGI) leak detection
combined with leak correction. Under the proposed technical reconsideration, monitoring and
repair frequency for low production well sites is set at biennial (every other year), and
monitoring frequency for non-low production well sites is set at annual. At compressor stations,
located in the gathering and boosting, transmission, and storage segments, the monitoring and
repair frequency is set at semiannual.15 This RIA estimates the impacts of removing the fugitive
emission requirements from the compressor stations located in the transmission and storage
segments.
Pneumatic Controllers: Pneumatic controllers are automated instruments used for maintaining a
process condition such as liquid level, pressure, pressure differential, and temperature. In many
situations across all segments of the oil and natural gas industry, pneumatic controllers make use
of the available high-pressure natural gas to operate or control a valve. In these "gas-driven"
pneumatic controllers, natural gas may be released with every valve movement and/or
continuously from the valve control pilot. Not all pneumatic controllers are gas driven. These
"non-gas driven" pneumatic controllers use sources of power other than pressurized natural gas.
Examples include solar, electric, and instrument air. At oil and gas locations with electrical
service, non-gas-driven controllers are typically used. Continuous bleed pneumatic controllers
can be classified into two types based on their emissions rates: (1) high-bleed controllers and (2)
low-bleed controllers. This RIA evaluates the impact of removing the requirement to replace
high-bleed controllers with low-bleed controllers in the transmission and storage segments.
15 Monitoring frequency for compressor stations on the Alaskan North Slope is set at annual, however, we do not
estimate any compressor stations on the Alaskan North Slope. For all other compressor stations, in the technical
reconsideration proposal, EPA co-proposed to reduce fugitive emissions monitoring to an annual basis.
2-2
-------
Reciprocating and Centrifugal Compressors: Compressors are mechanical devices that
increase the pressure of natural gas and allow the natural gas to be transported from the
production site, through the supply chain, and to the consumer. The types of compressors that are
used by the oil and gas industry as prime movers are reciprocating and centrifugal compressors.
Centrifugal compressors use either wet or dry seals.
Emissions from compressors occur when natural gas leaks around moving parts in the
compressor. In a reciprocating compressor, emissions occur when natural gas leaks around the
piston rod when pressurized natural gas is in the cylinder. Over time, during operation of the
compressor, the rod packing system becomes worn and will need to be replaced to prevent
excessive leaking from the compression cylinder. This RIA estimates the impact of removing the
requirements to replace the rod packing approximately every 3 years (26,000 hours, or 36
months) in reciprocating compressors in the transmission and storage segments.
Emissions from centrifugal compressors depend on the type of seal used: either "wet",
which use oil circulated at high pressure, or "dry", which use a thin gap of high-pressure gas.
The use of dry gas seals substantially reduces emissions. In addition, their use significantly
reduces operating costs and enhances compressor efficiency. Limiting or reducing the emission
from the rotating shaft of a centrifugal compressor using a mechanical dry seal system was
evaluated. For centrifugal compressors equipped with wet seals, a flare was evaluated as an
option for reducing emissions from centrifugal compressors. This RIA estimates the impact of
removing requirements to capture and route emissions from a wet-seal centrifugal compressor to
a control device in the transmission and storage segment.
Professional Engineer Certifications: Closed vent systems can be used to route emissions from
various equipment at oil and natural gas facilities including storage vessels, compressors, and
pneumatic pumps to control devices or processes. Closed vent systems must be designed to
properly handle the configuration and flow rates of different facilities.
For the 2016 NSPS OOOOa, EPA requires closed vent systems be certified by a
professional engineer. In addition, the 2016 NSPS OOOOa requires that facilities claiming
technically infeasibility in routing emissions from well site pneumatic pumps to an existing
control device must get that technical infeasibility certified by a professional engineer. The cost
impact of the professional engineer requirements was not evaluated in the cost analysis for the
2-3
-------
2016 NSPS. In the technical reconsideration proposal RIA, EPA evaluated the impact of
amending the certification requirements to allow facilities to choose either a professional
engineer or an in-house engineer to perform the required certifications. This RIA estimates the
impact of removing the certification requirements from affected sources in the transmission and
storage sectors.
2.3 Compliance Cost Analysis
In this section, we provide an overview of the compliance cost analysis used to estimate
the difference in the private expenditures to the industry when complying with the proposed
action compared to the 2018 Proposed Regulatory baseline. Updates to the data and analysis
approach from the 2016 NSPS RIA that are used in this action are described in Section 1.2 of
this RIA. A detailed discussion of the methodology, data, and assumptions used to estimate the
compliance cost impacts is presented in the cost memo associated with this proposed action.16
The following sections describe each step in the compliance cost analysis. First,
representative facilities are established for each affected source category, including baseline
emissions and the control options for each affected source type. Second, the number of
incrementally affected facilities for each type of equipment or facility are estimated. Unlike the
technical reconsideration, where a subset of the type of equipment or facilities that are affected
under the 2016 NSPS OOOOa are affected under the reconsideration, all NSPS-affected facilities
in the transmission and storage sector are affected by this proposed action. Changes in national
emissions and cost estimates are calculated by multiplying the representative factors from the
first step by the estimated number of affected facilities in each projection year from the second
step. In addition to emissions reductions, some control options result in natural gas recovery,
which can then be combusted for useful processes or sold. The estimates of national cost savings
include the value of the forgone product recovery where applicable.
In this section, we present the costs and emissions impacts of this proposal from 2019
through 2025, under the assumption that 2019 is the first year any changes from this action will
be in effect. We chose to analyze through 2025 due to limited information, as explained in
16 US EPA. 2019. Memorandum: Control Cost and Emission Changes under the Proposed Amendments to 40 CFR
Part 60, subpart OOOOa Under Executive Order 13783. Docket ID No. EPA-HQ-OAR-2017-0483.
2-4
-------
Section 2.3.2. In addition, in this section, we are providing analysis for 2020 and 2025, which
allows the reader to draw comparisons to the 2016 NSPS RIA. Comparing the 2016 NSPS RIA
results to this analysis should be done with caution. The baseline of affected sources has been
updated in this analysis, and results in this RIA are presented in 2016 dollars, while the 2016
NSPS RIA presents results in 2012 dollars.
2.3.1 Proposed Requirements
EPA developed a representative or model plant for each affected emission source, point,
and control option. The characteristics of the model plant include typical equipment, operating
characteristics, and representative factors including baseline emissions and the costs, emissions
reductions, and product recovery resulting from each control option. This source-level cost and
emission information for the requirements affected by this action can be found in the cost memo
associated with this action.
Table 2-1 shows the emissions sources, points, and controls in the transmission and
storage segment for 2016 NSPS OOOOa, and the alternative baselines for this analysis.
Table 2-1 Emissions Sources and Controls in the Transmission and Storage Sector
Emissions Point and Control
Relative to
the 2018
Proposed
Regulatory
Baseline
Relative to
the Current
Regulatory
Baseline
Fugitive Emissions - Planning, Monitoring and Maintenance
Compressor Stations
Compressor Stations on the Alaskan North Slope2
Pneumatic Controllers - Replace High Bleed with Low Bleed
Reciprocating Compressors - Replace Rod Packing Every ~3 Years3
Centrifugal Compressors - Route to Control
Certifications
Closed Vent Systems on Centrifugal and Reciprocating Compressors and
Storage Vessels4
Semiannual1
Annual
X
X
X
In-House
Engineer
Quarterly
Annual
X
X
X
Professional
Engineer
1 The technical reconsideration co-proposes semiannual and annual fugitive emission monitoring frequency at
compressor stations not on the Alaskan North Slope.
2 We do not currently have the data to estimate the effects of the proposal on compressors stations on the Alaskan
North Slope.
3 Every 36 months, or 26,000 hours.
4 We currently estimate that there are no affected storage vessels in the transmission and storage sector.
2-5
-------
In addition to the requirements listed above, the 2016 NSPS OOOOa established
recordkeeping and reporting requirements for the affected sources. This proposed action would
relieve that burden as well, as explained further in Section 2.3.5.
2.3.2 Projection of Affected Facilities
To project the number of NSPS-affected facilities, we first updated the number of NSPS-
affected facilities for this analysis using the GHG Inventory. We assumed that this average
number of new affected sources is constant from 2019 through 2025. Though this may not be the
case, we believe this assumption is our best approximation of the average number of new sources
in each year.
For the purposes of this RIA, "NSPS-affected facilities" include facilities that are
projected to change control activities as a result of this action. Over time, more facilities are
newly established or modified in each year, and to the extent the facilities remain in operation in
future years, the total number of facilities subject to the 2016 NSPS OOOOa accumulates. As in
the final 2016 NSPS RIA, this analysis assumes that all new equipment and facilities established
from 2015 through 2024 are still in operation in 2025.
The facilities affected by this rule are estimated as the subset of the NSPS-affected
facilities that are in the transmission and storage sector. These facilities include sources that
became affected facilities under the 2016 NSPS OOOOa prior to the effective date of this action
and are assumed to still be in operation, as well as those that are projected to become newly
affected sources in the future. For the proposed option, these sources include fugitive emissions
sources at compressor stations, pneumatic controllers, and centrifugal and reciprocating
compressors.17 Affected sources in transmission and storage that require a certification are only
affected under the projection of newly affected sources. Sources that have already completed
professional engineer certifications are not counted as affected sources. EPA derived typical
counts for affected sources in the transmission and storage segment by averaging the year-to-
year changes for each source over the past ten years in the GHG Inventory.
17 We do not quantify any emissions or cost changes associated with new compressor stations on the Alaskan North
Slope. See Volume 2 of the TSD for details.
2-6
-------
This RIA includes more analysis than previous oil and natural gas NSPS RIA analyses by
including year-by-year results over the 2019 to 2025 analysis period and an increased level of
disaggregation of facilities by vintage and production levels. While it would be desirable to
analyze impacts beyond 2025, EPA has chosen not to, largely because of the limited information
available to model long-term dynamics in practices and equipment in the oil and natural gas
industry. For example, EPA has limited information on how practices, equipment, and emissions
at new facilities change as they age or may be shut down. The current analysis assumes that
newly established facilities remain in operation for the entire analysis period, which would be
less realistic for longer-term analysis. In addition, in a dynamic industry like oil and natural gas,
technological progress in control technology is also likely to change significantly over a longer
time horizon. For example, the current analysis does not include potential fugitive emissions
controls utilizing remote sensing technologies currently under development.
Table 2-2 presents the number of NSPS-affected sources for each year of analysis. The
estimates for affected sources are based upon projections of new sources alone, and do not
include replacement or modification of existing sources. While some of these sources are
unlikely to be modified, particularly pneumatic pumps and controllers, the impact estimates may
be underestimated due to the focus on new sources. Newly constructed affected facilities are
estimated based on averaging the year-to-year changes in the past 10 years of activity data in the
GHG Inventory for compressor stations, pneumatic pumps, compressors, and pneumatic
controllers. The approach averages the number of newly constructed units in all years. In years
when the total count of equipment decreased, there were assumed to be no newly constructed
units.
2-7
-------
Table 2-2 NSPS-affected Source Counts in Transmission and Storage
Year Incrementally Affected Sources1 Total Affected Sources2
2019
470
2,200
2020
470
2,700
2021
470
3,100
2022
470
3,500
2023
470
4,000
2024
470
4,400
2025
470
4,900
1 Incrementally-affected sources include sources that are newly affected in each year. The source counts are
equivalent relative to each of the alternative baselines.
2 Total affected sources include the accumulation of sources over time. These include sources that are newly affected
in each year plus the affected sources from previous years.
There have been multiple updates to the GHG Inventory and the data EPA uses to
estimate the number of affected sources since the 2016 NSPS OOOOa was analyzed. One such
update is that the period used to estimate the number of affected sources has been updated. The
2016 NSPS RIA used the ten-year period leading up to 2012, whereas this proposed action
estimates the number of affected sources in the ten-year period leading up to 2014. The number
of affected sources in the transmission and storage segments is sensitive to the year-to-year
changes over the ten-year period used. For example, the 2016 NSPS RIA estimated four new
transmission compressor stations a year, and this proposal estimates 36 new transmission
compressor stations per year. Though the difference in the count of affected sources as estimated
for the 2016 NSPS RIA and this proposed action seems large at first, when compared to the total
number of transmission compressor stations nationally in 2014 (about 1,800), both totals are
small: 0.2 percent and 2.0 percent, respectively.
In addition, since the 2016 NSPS RIA (which used 2015 GHG Inventory data), EPA has
updated the GHG Inventory methodology that is used to develop station counts. This update had
only a small impact on total national counts in the GHG Inventory.18 The update also resulted in
minor changes in year-to-year trends, which have impacted the affected source analysis. National
estimates of other sources (e.g., compressors and pneumatic controllers) in the transmission and
storage segment rely on station counts as an input and are therefore impacted by this change as
well. As annual national counts of transmission and storage stations are not directly available
18 For example, comparing year 2013 station count estimate, the 2018 GHG Inventory estimate is 5 percent lower
for transmission stations and 12 percent lower for storage stations.
2-8
-------
from any national-level data source, EPA applies a methodology to estimate the total national
counts of transmission and storage stations. This method was updated between the 2015 GHG
Inventory and the 2018 GHG Inventory. In the method used in the 2016 NSPS, transmission
station counts were estimated by applying a factor of stations per mile of transmission pipeline to
the total national transmission pipeline mileage. Storage station counts were developed by
applying a factor of stations per unit of gas consumption to total national gas consumption. In the
2018 GHG Inventory, transmission stations are estimated based on scaling up GHGRP reporting
data. Storage stations are estimated by applying a factor to total national storage fields. These
methods were discussed through a stakeholder process and are an improvement over the previous
methods.
2.3.3 Emissions Increases
Table 2-3 summarizes the national increase in emissions associated with the proposed
action relative to the 2018 Proposed Regulatory baseline. This increase in emissions is estimated
by multiplying the unit-level increase in emissions associated with each applicable control and
facility type by the number of incrementally-affected sources of that facility type.19 In this
analysis, closed vent system certification requirements are not associated with any direct
emission reductions.
19 Because it uses updated baselines, results in this analysis are generally not comparable to those in the 2016 NSPS
RIA. As explained in Section 2.3.2, the current baselines project more affected facilities in transmission and
storage than the baseline used in 2016, resulting in higher emissions and cost changes than the previous analysis.
Unit-level emissions characteristics for facilities in transmission and storage are unchanged since the 2016
analysis.
2-9
-------
Table 2-3 Increase in Emissions Under the Proposed Action, by Year, relative to the
2018 Proposed Regulatory Baseline
Emission Changes
Year
Methane
(short tons)
VOC
(short tons)
HAP
(short tons)
ivieinarie
(metric tons CO2
Eq.)
2019
31,000
860
26
710,000
2020
37,000
1,000
31
850,000
2021
44,000
1,200
36
990,000
2022
50,000
1,400
41
1,100,000
2023
56,000
1,600
46
1,300,000
2024
62,000
1,700
51
1,400,000
2025
69,000
1,900
56
1,600,000
Total
350,000
9,700
290
7,900,000
Note: Estimates may not sum due to independent rounding.
The estimated increase in emissions is associated with forgone health and climate
benefits that would have been achieved under the 2016 NSPS OOOOa absent this proposed
action. In the 2016 NSPS OOOOa, EPA predicted climate and ozone benefits from methane
reductions, ozone and fine particulate matter (PM2.5) health benefits from VOC reductions, and
health benefits from ancillary HAP emission reduction. These benefits were expected to occur
because the control techniques to meet the standards simultaneously reduce methane, VOC, and
HAP emissions,20 which are associated with climate, health, and welfare effects. In this
reconsideration the predicted emission reductions and benefits from the 2016 NSPS OOOOa are
considered forgone, including VOC emission reductions and health and welfare benefits
associated with exposure to ozone, PM2.5, and HAP.
2.3.4 Forgone Product Recovery
The estimated cost savings presented below include the forgone revenue from the
reductions in natural gas recovery under the proposed option. Requirements on compressor
stations, reciprocating compressors, and pneumatic controllers are assumed to increase the
capture of methane and VOC emissions that would otherwise be vented to the atmosphere with
20 The control techniques analyzed in the 2016 NSPS OOOOa were also anticipated to have minor disbenefits
resulting from secondary emissions of carbon dioxide (CO2), nitrogen oxides (NOx), PM, carbon monoxide
(CO), and total hydrocarbons (THC)), and emission changes associated with energy markets impacts. The
proposed action is anticipated to reduce these minor secondary emissions.
2-10
-------
no requirements, and we assume that a large proportion of the averted methane emissions can be
directed into natural gas production streams and sold. In the 2016 NSPS OOOOa, we based the
estimated revenues from those averted natural gas emissions on an estimate of the amount of
natural gas that would not be emitted during one year. In this analysis, we estimate the forgone
revenue associated with the decrease in natural gas recovery due to this proposed action.
Error! Reference source not found, summarizes the decrease in natural gas recovery and
the associated forgone revenue included in the cost savings calculations. When including the
decrease in natural gas recovery in the cost savings analysis, we use the projections of natural
gas prices provided in the EIA's 2018 Annual Energy Outlook (AEO) reference case from 2019
through 2025. The AEO projects Henry Hub natural gas prices between $3.40 and $4.07 in
$/MMBtu in 2017 dollars during the 2019 to 2025 period.21 We adjust those prices to be between
$3.09 and $3.70 in $/Mcf (using the conversion of 1 MMBtu = 1.028 Mcf) in 2016 dollars (using
the GDP-Implicit Price Deflator) at the wellhead.22
Table 2-4 Estimated Decrease in Natural Gas Recovery, relative to the 2018 Proposed
Regulatory Baseline
Year
Decrease in Gas Recovery (Mcf)
Forgone Revenue
(millions 2016$)
2019
0.9
$2.8
2020
1.1
$3.7
2021
1.3
$4.3
2022
1.5
$4.9
2023
1.7
$5.8
2024
1.8
$6.6
2025
2.0
$7.5
Operators in the transmission and storage segments of the industry do not typically own
the natural gas they transport; rather, the operators receive payment for the transportation service
they provide. As a result, the unit-level cost and emission reduction analyses supporting best
system of emission reduction (BSER) decisions presented in Volume 1 of the 2016 NSPS
OOOOa TSD, and the technical reconsideration TSD do not include estimates of revenue from
21 Available at https://www.eia.gov/outlooks/archive/aeol8/tables_ref.php.
22 An EIA study indicated that the Henry Hub price is, on average, about 11 percent higher than the wellhead price.
See
https://www.researchgate.net/publication/265155970_US_Natural_Gas_Markets_Relationship_Between_Henry_
Hub_Spot_Prices_and_US_Wellhead_Prices.
2-11
-------
natural gas recovery as offsets to compliance costs. From a social perspective, however, the
increased financial returns from natural gas recovery accrues to entities somewhere along the
natural gas supply chain and should be accounted for in the national impacts analysis. An
economic argument can be made that, in the long run, no single entity is going to bear the entire
burden of the compliance costs or fully receive the financial gain of the additional revenues
associated with natural gas recovery. The change in economic surplus resulting from natural gas
recovery is going to be spread across different agents via price mechanisms. Therefore, the
simplest and most transparent option for allocating these revenues would be to keep the
compliance costs and associated revenues together in a given source category and not add
assumptions regarding the allocation of these revenues across agents. This is the approach
followed in Volume 2 of the 2016 NSPS OOOOa and technical reconsideration TSDs, as well as
in the 2016 NSPS and technical reconsideration RIAs.
2.3.5 Compliance Cost Savings
Table 2-5 summarizes the cost savings and forgone revenue from product recovery for
the evaluated emissions sources and points. Total cost savings consist of capital cost savings,
annual operating and maintenance cost savings, and forgone revenue from product recovery.
Capital cost savings include the capital cost savings from removing the requirements on newly
affected controllers and compressors, the planning cost savings from removing the requirements
on compressor stations to create survey monitoring plans for the fugitives monitoring
requirement, the planning cost savings from removing the requirement to complete certifications
of closed vent systems, as well as the cost savings of sources that would have had to renew
survey monitoring plans or purchase new capital equipment at the end of their useful life. The
annual operating and maintenance cost savings are attributed to the fugitives monitoring
requirement, and the requirements on centrifugal compressors. The cost savings are estimated by
multiplying the unit-level cost savings associated with each applicable control and facility type,
as explained in Section 2.3.2, by the number of incrementally-affected sources of that facility
type. In addition, the cost savings from the streamlining of recordkeeping and reporting are
included in the annualized cost savings totals. These cost savings are described more below.
2-12
-------
Table 2-5 Compliance Cost Savings Estimates relative to the 2018 Proposed Regulatory
Baseline (millions 2016$)
Compliance Cost Savings
Year
Capital Cost
Savings1
Operating and
Maintenance
Cost Savings
Annualized
Cost Savings
(w/o Forgone
Revenue)2
Forgone
Revenue from
Product
Recovery
Nationwide
Annualized Cost
Savings with
Forgone
Revenue
2019
$2.1
$13
$15
$2.8
$12
2020
$2.1
$15
$18
$3.7
$14
2021
$2.1
$18
$21
$4.3
$16
2022
$2.1
$20
$24
$4.9
$19
2023
$2.4
$23
$26
$5.8
$21
2024
$2.4
$25
$29
$6.6
$23
2025
$3.7
$28
$32
$7.5
$25
1 The capital cost savings include the planning cost savings incurred by the newly affected sources for fugitive
emissions monitoring, capital cost savings for newly affected controllers and compressors, and certifications in each
year, as well as the cost savings of sources that renew survey monitoring plans and the purchasing of new capital
requirements at the end of their useful life.
2 These cost savings include the capital cost savings annualized over the requisite equipment lifetimes at an interest
rate of 7 percent, plus the annual operating and maintenance cost savings for every year, plus the cost savings of
certifications in each year, plus the cost savings from streamlined recordkeeping and reporting.
Sums may not total due to independent rounding.
The cost of designing, or redesigning, the fugitive emissions monitoring program occurs
every eight years to comply with the 2016 NSPS OOOOa requirements. Pneumatic controllers
are assumed to have a lifetime of ten years. Rod packing replacement is assumed to happen
about every 3.8 years in the transmission segment and every 4.4 years in the storage segment, as
discussed in Section 2.3.2 and in the cost memo. The lifetime of the sources affected by this
action are unchanged from the assumptions in 2016 NSPS OOOOa. The reduction in capital
costs in each year outlined in Table 2-5 includes the estimated reduction in the costs attributed to
newly affected sources in that year, plus the reduction in the cost attributed to sources affected
previously that have reached the end of their assumed lifetime.
The capital and planning cost savings for reciprocating compressors, centrifugal
compressors, pneumatic controllers and fugitive emissions monitoring program design are
annualized over their requisite expected lifetimes at an interest rate of 7 percent, and are added to
the annual operating and maintenance cost savings of the requirements, the cost savings of the
in-house certifications in each year, and the cost savings from streamlined recordkeeping and
reporting to get the annualized cost savings in each year. The forgone value of product recovery
is then subtracted to estimate the total annualized cost savings in each year.
2-13
-------
Table 2-6 illustrates the sensitivity of the cost savings results of the proposed option to a
given discount rate. We present cost savings using a discount rate of 7 percent and 3 percent
based on the Office of Management and Budget (OMB) Circular A-4.23
Table 2-6 Estimated Cost Savings, 2019-2025, using 7 and 3 Percent Discount Rates,
relative to the 2018 Proposed Regulatory Baseline (millions 2016$)
7 percent
3 percent
Year
Annualized
Cost Savings
(w/o Forgone
Revenue)
Forgone
Revenue from
Product
Recovery
Nationwide
Annualized Cost
Savings with
Forgone
Revenue
Annualized
Cost Savings
(w/o Forgone
Revenue)
Forgone
Revenue
from Product
Recovery
Nationwide
Annualized
Cost Savings
with Forgone
Revenue
2019
$15
$2.8
$12
$15
$2.8
$12
2020
$18
$3.7
$14
$17
$3.7
$14
2021
$21
$4.3
$16
$20
$4.3
$16
2022
$24
$4.9
$19
$23
$4.9
$18
2023
$26
$5.8
$21
$26
$5.8
$20
2024
$29
$6.6
$23
$29
$6.6
$22
2025
$32
$7.5
$25
$32
$7.5
$24
The choice of discount rate has a very small effect on nationwide annualized cost
savings. Discount rate generally affects estimates of annualized costs for controls with high
planning or capital costs relative to annual costs. In this analysis, the planning and capital cost
savings are small relative to the annual operating and maintenance cost savings, so the interest
rate has little impact on total annualized cost savings for these sources.
Reporting and recordkeeping costs were drawn from the information collection
requirements (ICR) that have been submitted for approval to the Office of Management and
Budget (OMB) under the Paperwork Reduction Act (see Preamble for more detail). The
reporting and recordkeeping cost savings in this RIA are estimated to be about $0.28 million
every year. These recordkeeping and recordkeeping cost savings are estimated for the proposed
option for all new and modified affected facilities regardless of whether they are in states with
regulatory requirements similar to the final 2016 NSPS OOOOa.24
23 Found at: https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A4/a-4.pdf.
24 Note that the cost savings associated with reduced reporting and recordkeeping pertain to all sources that would
not be regulated under the proposed option, not just fugitive emissions monitoring requirements.
2-14
-------
2.4 Detailed Impacts Tables
The following tables show the full details of the cost savings and increase in emissions by
emissions sources relative to each of the alternative baselines in 2020 and 2025. The estimates
for compressor stations do not include any impacts from compressor stations on the Alaskan
North Slope because we do not currently have the data to estimate those effects of the proposal.
Two of the affected source types, reciprocating compressors and pneumatic controllers,
have negative total cost savings under the proposal, meaning that the potential capital and annual
cost savings from deregulating the transmission and storage segment may be outweighed by the
forgone revenue from product recovery. This observation may typically lead to an assumption
that operators would continue to perform the emissions abatement activity, regardless of whether
a requirement is in place, because it is in their private self-interest to do so. However, as
discussed in the 2016 RIA, operators in the gathering and boosting and transmission and storage
segments of the industry do not typically own the natural gas they transport; rather, the operators
receive payment for the transportation service they provide. As a result, financial incentives to
reduce emissions may be substantially reduced because of the inability of operators to recoup the
financial value of captured natural gas that may otherwise be emitted. The assumption that the
abatement activities for the transmission and storage emissions sources in question will continue
absent regulation may not hold as readily as it might for other sources where operators own the
natural gas. Based on this reasoning, this RIA includes the full negative cost savings for these
affected source types, despite the estimate that indicates net compliance costs may increase under
this deregulatory proposal.
2-15
-------
Table 2-7 Incrementally Affected Units, Emissions Increases and Cost Savings, relative to the 2018 Proposed Regulatory
Baseline, 2020
Nationwide Emissions Increase National Costs
Source/Emissions Points in
Transmission and Storage
Projected
No. of
Affected
Sources
Methane
(short
tons)
voc
(short
tons)
HAP
(short
tons)
Methane
(metric
tons
C02e)
Capital
Cost
Savings
Operating
and
Maintenance
Savings
Forgone
Product
Recovery
Total
Annualized
Cost Savings
with Forgone
Revenue
Fugitive Emissions - Compressor Stations1
230
6,300
170
5.1
140,000
$0.23
$3.3
$1.1
$2.4
Reciprocating Compressors
460
9,900
270
8.1
220,000
$0.46
$0.0
$1.7
-$0.87
Centrifugal Compressors
110
16,000
440
13
360,000
$1.4
$12
$0.0
$13
Pneumatic Controllers
1,800
5,100
140
4.2
120,000
$0.07
$0.0
$0.9
-$0.85
Certifications on Closed Vent Systems
26
0
0
0
0
$0.01
$0.0
$0.0
$0.01
Reporting and Recordkeeping2
0
0
0
0
0
$0.0
$0.0
$0.0
$0.28
TOTAL
2,700
37,000
1,000
31
850,000
$2.1
$15
$3.7
$14
1 Assumes semiannual fugitive emissions monitoring; includes reporting and recordkeeping pertaining to fugitive emissions monitoring.
2 Applies to reporting and recordkeeping for requirements other than the fugitive emissions monitoring requirements.
2-16
-------
Table 2-8 Incrementally Affected Units, Emissions Increases and Cost Savings, relative to the 2018 Proposed Regulatory
Baseline, 2025
Nationwide Emissions Increase National Costs
Total
Source/Emissions Points in
Transmission and Storage
Projected
No. of
Affected
Sources
Methane
(short
tons)
voc
(short
tons)
HAP
(short
tons)
Methane
(metric
tons
C02e)
Capital
Cost
Savings
Operating
and
Maintenance
Savings
Forgone
Product
Recovery
Annualized
Cost Savings
with Forgone
Revenue
Fugitive Emissions - Compressor Stations1
420
11,000
320
9.4
260,000
$0.45
$6.0
$2.2
$4.2
Reciprocating Compressors
840
18,000
500
15
410,000
$0.46
$0.0
$3.5
-$1.9
Centrifugal Compressors
200
29,000
820
24
670,000
$2.7
$22
$0.0
$24
Pneumatic Controllers
3,400
9,400
260
7.8
210,000
$0.07
$0.0
$1.8
-$1.7
Certifications on Closed Vent Systems
26
0
0
0
0
$0.01
$0.0
$0.0
$0.01
Reporting and Recordkeeping2
0
0
0
0
0
$0.0
$0.0
$0.0
$0.28
TOTAL
4,900
69,000
1,900
56
1,600,000
$3.7
$28
$7.5
$25
1 Assumes semiannual fugitive emissions monitoring; includes reporting and recordkeeping pertaining to fugitive emissions monitoring.
2 Applies to reporting and recordkeeping for requirements other than the fugitive emissions monitoring requirements.
2-17
-------
Table 2-9 Incrementally Affected Units, Emissions Increases and Cost Savings, relative to the Current Regulatory
Baseline, 2020
Nationwide Emissions Increase National Costs
Source/Emissions Points in
Transmission and Storage
Projected
No. of
Affected
Sources
Methane
(short
tons)
voc
(short
tons)
HAP
(short
tons)
Methane
(metric
tons
C02e)
Capital
Cost
Savings
Operating
and
Maintenance
Savings
Forgone
Product
Recovery
Total
Annualized
Cost Savings
with Forgone
Revenue
Fugitive Emissions - Compressor Stations1
230
8,300
230
6.9
190,000
$0.23
$6.1
$1.5
$4.9
Reciprocating Compressors
460
9,900
270
8.1
220,000
$0.46
$0.0
$1.7
-$0.87
Centrifugal Compressors
110
16,000
440
13
360,000
$1.4
$12
$0.0
$13
Pneumatic Controllers
1,800
5,100
140
4.2
120,000
$0.07
$0.0
$0.9
-$0.85
Certifications on Closed Vent Systems
26
0
0
0
0
$0.01
$0.0
$0.0
$0.01
Reporting and Recordkeeping2
0
0
0
0
0
$0.0
$0.0
$0.0
$0.28
TOTAL
2,700
39,000
1,100
32
890,000
$2.1
$18
$4.1
$17
1 Assumes semiannual fugitive emissions monitoring; includes reporting and recordkeeping pertaining to fugitive emissions monitoring.
2 Applies to reporting and recordkeeping for requirements other than the fugitive emissions monitoring requirements.
2-18
-------
Table 2-10 Incrementally Affected Units, Emissions Increases and Cost Savings, relative to the Current Regulatory
Baseline, 2025
Nationwide Emissions Increase National Costs
Source/Emissions Points in
Transmission and Storage
Projected
No. of
Affected
Sources
Methane
(short
tons)
voc
(short
tons)
HAP
(short
tons)
Methane
(metric
tons
C02e)
Capital
Cost
Savings
Operating
and
Maintenance
Savings
Forgone
Product
Recovery
Total
Annualized
Cost Savings
with Forgone
Revenue
Fugitive Emissions - Compressor Stations1
420
15,000
420
13
350,000
$0.45
$11
$2.9
$8.7
Reciprocating Compressors
840
18,000
500
15
410,000
$0.46
$0.0
$3.5
-$1.9
Centrifugal Compressors
200
29,000
820
24
670,000
$2.7
$22
$0.0
$24
Pneumatic Controllers
3,400
9,400
260
7.8
210,000
$0.07
$0.0
$1.8
-$1.7
Certifications on Closed Vent Systems
26
0
0
0
0
$0.01
$0.0
$0.0
$0.01
Reporting and Recordkeeping2
0
0
0
0
0
$0.0
$0.0
$0.0
$0.28
TOTAL
4,900
72,000
2,000
59
1,600,000
$3.7
$33
$8.2
$29
1 Assumes semiannual fugitive emissions monitoring; includes reporting and recordkeeping pertaining to fugitive emissions monitoring.
2 Applies to reporting and recordkeeping for requirements other than the fugitive emissions monitoring requirements.
2-19
-------
2.5 Sensitivity of Results to Baseline Assuming Annual Fugitive Emissions Monitoring at
Compressor Stations
The technical reconsideration preamble co-proposed two alternative options with respect
to the fugitive emissions monitoring frequency at compressor stations. The first option proposed
to reduce monitoring frequency from quarterly to semiannually (twice per year), and the second
option reduced monitoring frequency from quarterly to annually. The analysis presented thus far
using the 2018 Proposed Regulatory baseline assumes the first option (semi-annual monitoring at
compressor stations). Cost savings of this proposed action will be smaller relative to an
alternative baseline that assumes the second option (annual monitoring at compressor stations).
This is because the costs of performing annual fugitive emissions monitoring are less than the
costs of performing semiannual monitoring. Table 2-11 shows the costs and emissions impacts of
this proposed action assuming compressor stations would be performing annual fugitive
emissions monitoring in the absence of this proposed action.
The technical reconsideration preamble co-proposed two alternative options with respect
to the fugitive emissions monitoring frequency at compressor stations. The first option proposed
to reduce monitoring frequency from quarterly to semiannually (twice per year), and the second
option reduced monitoring frequency from quarterly to annually. The analysis presented thus far
relative to the 2018 Proposed Regulatory baseline assumes the first option (semi-annual
monitoring at compressor stations). Cost savings of this proposed action will be smaller relative
to an alternative baseline that assumes the second option (annual monitoring at compressor
stations). This is because the costs of performing annual fugitive emissions monitoring are less
than the costs of performing semiannual monitoring. Table 2-11 shows the costs and emissions
impacts of this proposed action assuming compressor stations would be performing annual
fugitive emissions monitoring in the absence of this proposed action.
2-20
-------
Table 2-11 Estimated Cost Savings and Increase in Emissions of the Proposed Action
relative to a Baseline Assuming Annual Fugitive Emission Monitoring at Compressor
Stations
Total Annualized Cost
F acilities
Methane Emissions
VOC Emissions
Savings with Forgone
Revenue (7 percent,
Year
Affected
(short tons)
(tons)
millions, 2016$)
2020
2,700
35,000
980
$13
2025
4,900
65,000
1,800
$23
2.6 Analysis of the Present Value and Equivalent Annualized Value of Cost Savings
This section presents the economic cost impacts of the proposed action in a present value
(PV) framework in compliance with E.O. 13771, Reducing Regulation and Controlling
Regulatory Costs. The proposed action, if finalized, would be considered a deregulatory action as
it has total costs that are less than zero. The stream of the estimated cost savings for each year
from 2019 through 2025 is discounted back to 2016 using both a 7 and 3 percent discount rate
and summed to estimate the PV of the cost savings. This PV represents the sum of the total
annual cost savings over the 2019 to 2025-time horizon as a result of this proposed action. The
PV is then used to estimate the equivalent annualized value (EAV) of the cost savings. The EAV
is the annualized PV of the cost savings. In other words, the EAV takes the "lumpy" stream of
cost savings and converts them into a single annualized value that, when added together over the
analysis time frame, equals the original stream of values in PV terms.
As above, all cost savings are presented as the costs of the proposed option compared to
the 2018 Proposed Regulatory baseline for this analysis, in 2016 dollars. Section 2.3 above
presents the annualized cost savings of the proposed action, however, the cost savings used to
estimate the PV are the un-annualized cost savings in each year. In the case of this analysis,
using the annualized values would return results very similar to using the unannualized values
because the portion of the total cost savings that is annualized (the capital cost savings) is very
small.
For this RIA, EPA evaluates the cost savings for 2019, the first year we assume
requirements on the NSPS-affected sources in the transmission and storage sector are removed as
a result of this proposed action, through 2025. EPA has chosen not to evaluate impacts beyond
2025 in part due to the limited information available to model long-term dynamics in practices
2-21
-------
and equipment in the oil and gas industry. In addition, the oil and natural gas industry is
dynamic, and technological progress in control technology is likely to change significantly over a
longer time horizon.
Table 2-12 shows the stream of cost savings for each year from 2019 through 2025
relative to the 2018 Proposed Regulatory baseline. Capital cost savings are estimated as the total
capital and planning costs of compliance with the 2016 NSPS OOOOa requirements that will not
be incurred. Total cost savings are the sum of the capital cost savings and annual operating cost
savings. The forgone revenue from the decrease in product recovery is estimated using the AEO
2018 projected natural gas price, as described in Section 2.3.4. Total cost savings with forgone
revenue is the total cost savings minus the forgone revenue. Over time, with the addition of new
affected sources in each year, the capital cost savings, annual operating cost savings and forgone
revenue increase.
Table 2-12 Estimated Cost Savings, 2019-2025, relative to the 2018 Proposed Regulatory
Baseline (millions 2016$)
Year
Capital Cost
Savings
Annual
Operating
Cost Savings
Total Cost
Savings w/o
Forgone
Revenue
Forgone
Revenue
from Product
Recovery
Total Cost Savings
with Forgone
Revenue
2019
$2.1
$13
$15
$2.8
$12
2020
$2.1
$15
$18
$3.7
$14
2021
$2.1
$18
$20
$4.3
$16
2022
$2.1
$20
$23
$4.9
$18
2023
$2.4
$23
$25
$5.8
$20
2024
$2.4
$25
$28
$6.6
$21
2025
$3.7
$28
$32
$7.5
$24
Table 2-13 shows the stream of cost savings discounted to 2016 using a 7 percent
discount rate. The table also shows the PV and the EAV of capital cost savings, annual operating
cost savings, forgone revenue from decreased product recovery and the total cost savings (after
accounting for the forgone product recovery). The PV of total cost savings is $81 million, and
the EAV of total cost savings is about $14 million per year.
2-22
-------
Table 2-13 Discounted Cost Savings Estimates Using a 7 Percent Discount Rate, relative
to the 2018 Proposed Regulatory Baseline (millions 2016$)
Discounted Compliance Cost Savings
. . _ . Forgone Revenue Total Cost Savings
Year Capital Cost Savings n"Ui' P®ra ln" from Product with Forgone
1 b Cost Savings _ _ b
Recovery Revenue
2019
$1.7
$10
$2.3
$10
2020
$1.6
$12
$2.8
$11
2021
$1.5
$13
$3.1
$11
2022
$1.4
$13
$3.3
$12
2023
$1.5
$14
$3.6
$12
2024
$1.4
$15
$3.8
$12
2025
$2.0
$15
$4.1
$13
PV
$11
$92
$23
$81
EAV
$1.9
$16
$4.0
$14
*The forgone domestic climate benefits in each year are discounted to 2016.
Table 2-14 shows how the choice of discount rate affects the PV and EAV estimates. A
lower discount rate results in the higher cost savings in later years having a greater impact on the
PV and EAV than would results under a higher discount rate. The PV and EAV for the cost
savings are higher when using a 3 percent discount rate than when using a 7 percent discount
rate. Using a 3 percent discount rate increases the PV of the cost savings by about 23 percent
from the estimates using a 7 percent discount rate. For the EAV, using a 3 percent discount rate
increases the cost savings by about 14 percent from the estimates using a 7 percent discount rate.
2-23
-------
Table 2-14 Discounted Cost Savings for the Proposed Option using 7 and 3 Percent
Discount Rates, relative to the 2018 Proposed Regulatory Baseline (millions 2016$)*
7 Percent
3 Percent
Year
Total Annual
Cost Savings
(w/o Forgone
Revenue)
Forgone
Revenue
from Product
Recovery
Total Cost
Savings (with
Forgone
Revenue)
Total Annual
Cost Savings
(w/o Forgone
Revenue)
Forgone
Revenue
from Product
Recovery
Total Cost
Savings (with
Forgone
Revenue)
2019
$12
$2.3
$10
$14
$2.6
$11
2020
$13
$2.8
$11
$16
$3.3
$12
2021
$14
$3.1
$11
$17
$3.7
$14
2022
$15
$3.3
$12
$19
$4.1
$15
2023
$16
$3.6
$12
$21
$4.7
$16
2024
$16
$3.8
$12
$22
$5.2
$17
2025
$17
$4.1
$13
$24
$5.7
$19
PV
$100
$23
$81
$130
$29
$100
EAV
$18
$4.0
$14
$21
$4.6
$16
*The cost savings in each year are discounted to 2016.
2-24
-------
3 ESTIMATED FORGONE BENEFITS
3.1 Introduction
The 2016 NSPS OOOOa regulated methane and VOC emissions in the oil and natural gas
sector. For the 2016 NSPS OOOOa, EPA predicted climate and ozone benefits from methane
reductions, ozone and fine particulate matter (PM2.5) health benefits from VOC reductions, and
health benefits from ancillary HAP emission reduction. These benefits were expected to occur
because the control techniques to meet the standards simultaneously reduce methane, VOC, and
HAP emissions.25
Under the updated assumptions and data as described above, the sources that are affected
by this action would have prevented an estimated 37,000 tons of methane and 1,000 tons of VOC
from new sources in 2020 assuming no changes to the regulation. In 2025, the affected sources
would have prevented an estimated 69,000 tons of methane and 2,000 tons of VOC. The
estimated C02-equivalent (CO2 Eq.) methane emission reductions will be about 0.85 million
metric tons in 2020 and 1.6 million metric tons in 2025. As described in the subsequent sections
of this chapter, these pollutants are associated with substantial climate, health, and welfare
effects.
As in the 2016 NSPS RIA and the October 2018 proposed technical reconsideration RIA,
the only estimated forgone benefits monetized in this RIA are methane-related climate impacts.
By proposing to remove sources in the transmission and storage section from NSPS OOOOa,
this proposed action is estimated to increase emissions compared to each of the alternative
baselines. For example, using the 2018 Proposed Regulatory baseline, the total increase in
emissions over 2019 through 2025 under the proposal of this action is estimated to be about
350,000 short tons of methane, 9,700 tons of VOC, and 290 tons of HAP. The associated
increase in CO2 Eq. methane emissions is estimated to be 7.9 million metric tons. The PV of the
forgone methane-related domestic climate benefits are estimated to be $13 million from 2019
through 2025 using an interim estimate of the domestic social cost of methane (SC-CH4)
discounting at a 7 percent rate. The associated EAV of forgone benefits is estimated to be $2.2
25 The specific control techniques for the 2016 NSPS OOOOa were also anticipated to have minor disbenefits
resulting from secondary emissions of carbon dioxide (CO2), nitrogen oxides (NOx), PM, carbon monoxide
(CO), and total hydrocarbons (THC), and emission changes associated with the energy markets impacts. This
proposed action is anticipated to reduce these minor secondary emissions.
3-1
-------
million per year. Using the interim SC-CH4 estimate based on the 3 percent rate, the PV of the
forgone domestic climate benefits is estimated to be $49 million; the EAV is estimated to be $7.7
million per year.
Under the proposal, EPA expects that the forgone VOC emission reductions will degrade
air quality and are likely to adversely affect health and welfare associated with exposure to
ozone, PM2.5, and HAP, but we are unable to quantify these effects at this time. This omission
should not imply that these forgone benefits may not exist, and to the extent that EPA were to
quantify these ozone and PM impacts, it would estimate the number and value of avoided
premature deaths and illnesses using an approach detailed in the Particulate Matter NAAQS and
Ozone NAAQS Regulatory Impact Analyses (U.S. EPA, 2012; U.S. EPA, 2015).
When quantifying the incidence and economic value of the human health impacts of air
quality changes, the Agency sometimes relies upon reduced-form techniques, often reported as
"benefit-per-ton" values that relate air pollution impacts to changes in air pollutant precursor
emissions (U.S. EPA, 2018). A small, but growing, literature characterizes the air quality and
health impacts from the oil and natural gas sector but does not yet supply the information needed
to derive a VOC benefit-per-ton value suitable for a regulatory analysis (Fann et al., 2018;
Litovitz et al., 2013; Loomis and Haefele, 2017).26 Moreover, the Agency is currently comparing
various reduced-form techniques, including benefit-per-ton approaches, to quantifying air quality
benefits. Over the last year and a half, EPA systematically compared the changes in benefits, and
concentrations where available, from its benefit-per-ton technique and other reduced-form
techniques to the changes in benefits and concentration derived from full-form photochemical
model representation of a few different specific emissions scenarios.27 The Agency's goal was to
better understand the suitability of alternative reduced-form air quality modeling techniques for
estimating the health impacts of criteria pollutant emissions changes in EPA's benefit-cost
analysis, including the extent to which reduced form models may over- or underestimate benefits
(compared to full-scale modeling) under different scenarios and air quality concentrations. The
26 Fann, N., et al. (2018). "Assessing Human Health PM2.5 and Ozone Impacts from U.S. Oil and Natural Gas
Sector Emissions in 2025." Environmental Science & Technology 52(15): 8095-8103.
27 This analysis compared the benefits estimated using full-form photochemical air quality modeling simulations
(CMAQ and CAMx) against four reduced-form tools, including: InMAP; AP2/3; EASIUR and EPA's benefit-
per-ton.
3-2
-------
scenario-specific emission inputs developed for this project are currently available online.28 The
study design and methodology will be thoroughly described in the final report summarizing the
results of the project, which is planned to be completed by the end of 2019.
For these reasons, we did not quantify VOC-related health impacts in this RIA. This
omission should not imply that these forgone benefits may not exist; rather, it reflects the
difficulties in modeling the direct and indirect impacts of the reductions in emissions for this
industrial sector with the data currently available. Rather, we qualitatively assess the forgone
health benefits associated with reducing exposure to these pollutants, as well as visibility
impairment and forgone ecosystem benefits. Table 3-1 summarizes the quantified and
unquantified forgone benefits in this analysis.
Table 3-1 Climate and Human Health Effects of Forgone Emission Reductions from
this Proposed Rule
Effect Has
Effect Has
More
Information
Category
Specific Effect
Been
Quantified
Been
Monetized
Improved Environment
Reduced climate
Climate impacts from methane (CH4) and
carbon dioxide (CO2)
1
~
Section 3.3
effects
Other climate impacts (e.g., ozone, black
IPCC, Ozone ISA,
carbon, aerosols, other impacts)
PM ISA2
Improved Human Health
Reduced incidence of
premature mortality
from exposure to
PM2.5
Adult premature mortality based on cohort
study estimates and expert elicitation estimates
(age >25 or age >30)
—
—
PM ISA3
Infant mortality (age <1)
—
—
PM ISA3
Non-fatal heart attacks (age >18)
—
—
PM ISA3
Hospital admissions—respiratory (all ages)
—
—
PM ISA3
Hospital admissions—cardiovascular (age >20)
—
—
PM ISA3
Emergency room visits for asthma (all ages)
—
—
PM ISA3
Acute bronchitis (age 8-12)
—
—
PM ISA3
Lower respiratory symptoms (age 7-14)
—
—
PM ISA3
Reduced incidence of
Upper respiratory symptoms (asthmatics age 9-
PM ISA3
morbidity from
exposure to PM2.5
11)
Asthma exacerbation (asthmatics age 6-18)
—
—
PM ISA3
Lost work days (age 18-65)
—
—
PM ISA3
Minor restricted-activity days (age 18-65)
—
—
PM ISA3
Chronic Bronchitis (age >26)
—
—
PM ISA3
Emergency room visits for cardiovascular
effects (all ages)
—
—
PM ISA3
Strokes and cerebrovascular disease (age 50-
79)
—
—
PM ISA3
28 The scenario-specific emission inputs developed for this project are currently available online at
https://github.com/epa-kpc/RFMEVAL. Upon completion and publication of the final report, the final report and
all associated documentation will be online and available at this URL.
3-3
-------
Category
Specific Effect
Effect Has
Been
Quantified
Effect Has
Been
Monetized
More
Information
Other cardiovascular effects (e.g., other ages)
—
—
PM ISA2
Other respiratory effects (e.g., pulmonary
function, non-asthma ER visits, non-bronchitis
chronic diseases, other ages and populations)
—
—
PM ISA2
Reproductive and developmental effects (e.g.,
low birth weight, pre-term births, etc.)
—
—
PM ISA2-4
Cancer, mutagenicity, and genotoxicity effects
—
—
PM ISA2-4
Reduced incidence of
mortality from
exposure to ozone
Premature mortality based on short-term study
estimates (all ages)
—
—
Ozone ISA3
Premature mortality based on long-term study
estimates (age 30-99)
—
—
Ozone ISA3
Hospital admissions—respiratory causes (age >
65)
—
—
Ozone ISA3
Hospital admissions—respiratory causes (age
<2)
—
—
Ozone ISA3
Emergency department visits for asthma (all
ages)
—
—
Ozone ISA3
Reduced incidence of
Minor restricted-activity days (age 18-65)
—
—
Ozone ISA3
morbidity from
exposure to ozone
School absence days (age 5-17)
—
—
Ozone ISA3
Decreased outdoor worker productivity (age
18-65)
—
—
Ozone ISA3
Other respiratory effects (e.g., premature aging
of lungs)
—
—
Ozone ISA2
Cardiovascular and nervous system effects
—
—
Ozone ISA2
Reproductive and developmental effects
—
—
Ozone ISA2-4
Reduced incidence of
morbidity from
exposure to HAP
Effects associated with exposure to hazardous
air pollutants such as benzene
—
—
ATSDR, IRIS2'3
Improved Environment
Reduced visibility
Visibility in Class 1 areas
—
—
PM ISA3
impairment
Visibility in residential areas
—
—
PM ISA3
Reduced effects from
PM deposition
(organics)
Effects on Individual organisms and
ecosystems
—
—
PM ISA2
Visible foliar injury on vegetation
—
—
Ozone ISA3
Reduced vegetation growth and reproduction
—
—
Ozone ISA3
Yield and quality of commercial forest
products and crops
—
—
Ozone ISA3
Reduced vegetation
and ecosystem effects
Damage to urban ornamental plants
—
—
Ozone ISA2
Carbon sequestration in terrestrial ecosystems
—
—
Ozone ISA3
from exposure to
ozone
Recreational demand associated with forest
aesthetics
—
—
Ozone ISA2
Other non-use effects
Ozone ISA2
Ecosystem functions (e.g., water cycling,
biogeochemical cycles, net primary
productivity, leaf-gas exchange, community
composition)
—
—
Ozone ISA2
1 The climate and related impacts of CO2 and CH4 emissions changes, such as sea level rise, are estimated within each integrated
assessment model as part of the calculation of the domestic SC-CO2 and SC-CH4. The resulting monetized damages, which
are relevant for conducting the benefit-cost analysis, are used in this RIA to estimate the domestic welfare effects of
quantified changes in CH4 emissions.
3-4
-------
2 We assess these benefits qualitatively because we do not have sufficient confidence in available data or methods.
3 We assess these benefits qualitatively due to data limitations for this analysis, but we have quantified them in other analyses.
4 We assess these benefits qualitatively because current evidence is only suggestive of causality or there are other significant
concerns over the strength of the association.
3.2 Forgone Emissions Reductions
Oil and natural gas operations in the U.S. include a variety of emission points for
methane, VOC, and HAP, including wells, well sites, processing plants, compressor stations,
storage equipment, and transmission and distribution lines. These emission points are located
throughout much of the country with significant concentrations in particular geographic regions.
For example, wells and processing plants are largely concentrated in the South Central, Midwest,
and Southern California regions of the U.S., whereas natural gas compressor stations are located
all over the country. Distribution lines to customers are frequently located within areas of high
population density.
Implementing this rule is likely to result in forgone reductions in ambient PM2.5
concentrations and may result in forgone reductions in ozone concentrations in areas attaining
and not attaining the National Ambient Air Quality Standards (NAAQS). Due to the high degree
of variability in the responsiveness of ozone and PM2.5 formation to VOC emission reductions,
we are unable to determine how this rule might affect attainment status without modeling air
quality changes.29 Because the NAAQS RIAs also calculate ozone and PM2.5 benefits, there are
important differences worth noting in the design and analytical objectives of each impact
analysis. The NAAQS RIAs illustrate the potential costs and benefits of attaining new
nationwide air quality standards based on an array of emission control strategies for different
sources.30 By contrast, the emission reductions for implementation rules, including this rule, are
generally from a specific class of well-characterized sources. In general, EPA is more confident
in the magnitude and location of the emission reductions for implementation rules rather than
illustrative NAAQS analyses. Emission changes realized under these and other promulgated
29 The responsiveness of ozone and PM2.5 formation is discussed in greater detail in Sections 3.4 and 3.5 of this RIA.
30 NAAQS RIAs hypothesize, but do not predict, the control strategies states may choose to enact when
implementing a NAAQS. The setting of a NAAQS does not directly result in costs or benefits, and as such, the
NAAQS RIAs are merely illustrative and are not intended to be added to the costs and benefits of other
regulations that result in specific costs of control and emission reductions. However, some costs and benefits
estimated in this RIA may account for the same air quality improvements as estimated in an illustrative NAAQS
RIA.
3-5
-------
rules will ultimately be reflected in the baselines of future NAAQS analyses, which would affect
the incremental costs and benefits associated with attaining future NAAQS.
Table 3-2 shows the total increase in direct emissions, compared to the alternative
baselines used in this RIA anticipated for this proposed rule from 2019 to 2025. It is important to
note that these emissions accrue at different spatial scales. HAP emissions increase exposure to
carcinogens and other toxic pollutants primarily near the emission source. VOC emissions are
precursors to secondary formation of PM2.5 and ozone on a broader regional scale. Climate
effects associated with long-lived greenhouse gases like methane generally do not depend on the
location of the emission of the gas and have global impacts. Methane is also a precursor to global
background concentrations of ozone (Sarofim, 2015).
Table 3-2 Total Direct Increases in Emissions, 2019 through 2025, using Alternative
Baselines
Increase in Emissions
Relative to the 2018
Proposed Regulatory
Baseline
Increase in Emissions
Pollutant
Relative to the Current
Regulatory Baseline
Methane (short tons)
350,000
370,000
VOC (short tons)
9,700
10,000
HAP (short tons)
290
300
Methane (metric tons) 320,000 330,000
Methane (million metric tons CO2 Eq.) 7.9 8.4
Table 3-3 shows the methane, VOC and HAP emissions increases for each year,
compared to the alternative baselines for this analysis.
Table 3-3 Annual Direct Increases in Methane, VOC and HAP Emissions, 2019
through 2025, using Alternative Baselines
Increase in Emissions
Relative to the 2018 Proposed Regulatory
Baseline
Increase in Emissions
Relative to the Current Regulatory Baseline
Year
Methane
(metric tons)
VOC
HAP
Methane
(metric tons)
VOC
HAP
2019
31,000
860
26
33,000
910
27
2020
37,000
1,000
31
39,000
1,100
32
2021
44,000
1,200
36
46,000
1,300
38
2022
50,000
1,400
41
53,000
1,500
43
2023
56,000
1,600
46
59,000
1,600
49
2024
62,000
1,700
51
66,000
1,800
54
2025
69,000
1,900
56
72,000
2,000
59
Total
350,000
9,700
290
370,000
10,000
300
Note: sums may note total due to independent rounding.
3-6
-------
3.3 Methane Climate Effects and Valuation
Methane is the principal component of natural gas. Methane is also a potent greenhouse
gas (GHG) that, once emitted into the atmosphere, absorbs terrestrial infrared radiation, which in
turn contributes to increased global warming and continuing climate change. Methane reacts in
the atmosphere to form ozone, which also impacts global temperatures. Methane, in addition to
other GHG emissions, contributes to warming of the atmosphere, which over time leads to
increased air and ocean temperatures; changes in precipitation patterns; melting and thawing of
global glaciers and ice sheets; increasingly severe weather events, such as hurricanes of greater
intensity; and sea level rise, among other impacts.
According to the Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment
Report (AR5, 2013), changes in methane concentrations since 1750 contributed 0.48 W/m2 of
forcing, which is about 17 percent of all global forcing due to increases in anthropogenic GHG
concentrations, and which makes methane the second leading long-lived climate forcer after
CO2. However, after accounting for changes in other greenhouse substances such as ozone and
stratospheric water vapor due to chemical reactions of methane in the atmosphere, historical
methane emissions were estimated to have contributed to 0.97 W/m2 of forcing today, which is
about 30 percent of the contemporaneous forcing due to historical greenhouse gas emissions.
The oil and natural gas sector emits significant amounts of methane. The public Inventory
of U.S. Greenhouse Gas Emissions and Sinks: 1990-2014 (published 2016) estimates 2014
methane emissions from Petroleum and Natural Gas Systems (not including petroleum refineries
and petroleum transportation) to be 232 MMt CO2 Eq. In 2014, total methane emissions from the
oil and natural gas industry represented 32 percent of the total methane emissions from all
sources and account for about 3 percent of all CO2 Eq. emissions in the U.S., with the combined
petroleum and natural gas systems being the largest contributor to U.S. anthropogenic methane
emissions (U.S. EPA, 2016c).
The 2016 NSPS OOOOa was expected to result in climate-related benefits by reducing
methane emissions. The proposed changes would therefore forgo climate-related benefits
associated with these emissions reductions as discussed above. To give a sense of the magnitude
of the emissions increases presented in Table 2-3, Table 3-2, and Table 3-3, the forgone methane
reductions estimated for 2020 (0.85-0.89 million metric tons CO2 Eq., depending on the
3-7
-------
baseline) are equivalent to about 0.4 percent of the methane emissions for this sector reported in
the U.S. GHGI for 2014 (about 232 million metric tons CO2 Eq. are from petroleum and natural
gas production and gas processing, transmission, and storage). Expected forgone emission
reductions in 2025 (about 1.6 million metric tons CO2 Eq.) are equivalent to around 0.7 percent
of 2014 emissions. As it is expected that emissions from this sector would increase over time, the
estimates compared against the 2014 emissions would likely overestimate the percent of total
emissions in 2020 and 2025.
We estimate the forgone climate benefits for the primary proposal of this action using an
interim measure of the domestic social cost of methane (SC-CH4). The SC-CH4 is an estimate of
the monetary value of impacts associated with marginal changes in CH4 emissions in a given
year. It includes a wide range of anticipated climate impacts, such as net changes in agricultural
productivity and human health, property damage from increased flood risk, and changes in
energy system costs, such as reduced costs for heating and increased costs for air conditioning. It
is typically used to assess the avoided damages as a result of regulatory actions (i.e., benefits of
rulemakings that lead to an incremental reduction in cumulative global CH4 emissions). The SC-
CH4 estimates used in this analysis focus on the direct impacts of climate change that are
anticipated to occur within U.S. borders.
The SC-CH4 estimates presented here are interim values developed under E.O. 13783 for
use in regulatory analyses until an improved estimate of the impacts of climate change to the
U.S. can be developed based on the best available science and economics. E.O. 13783 directed
agencies to ensure that estimates of the social cost of greenhouse gases used in regulatory
analyses "are based on the best available science and economics" and are consistent with the
guidance contained in OMB Circular A-4, "including with respect to the consideration of
domestic versus international impacts and the consideration of appropriate discount rates" (E.O.
13783, Section 5(c)). In addition, E.O. 13783 withdrew the technical support documents (TSDs)
and the August 2016 Addendum to these TSDs describing the global social cost of greenhouse
gas estimates developed under the prior Administration as no longer representative of
government policy. The withdrawn TSDs and Addendum were developed by an interagency
working group (IWG) that included EPA and other executive branch entities and were used in
the 2016 NSPS RIA.
3-8
-------
Regarding the two analytical considerations highlighted in E.O. 13783 - how best to
consider domestic versus international impacts and appropriate discount rates - current guidance
in OMB Circular A-4 is as follows. Circular A-4 states that analysis of economically significant
proposed and final regulations "should focus on benefits and costs that accrue to citizens and
residents of the United States." Because this action is economically significant as defined in E.O.
12866, section 3(f)(1), we follow this guidance by adopting a domestic perspective in our central
analysis. Regarding discount rates, Circular A-4 states that regulatory analyses "should provide
estimates of net benefits using both 3 percent and 7 percent." The 7 percent rate is intended to
represent the average before-tax rate of return to private capital in the U.S. economy. The 3
percent rate is intended to reflect the rate at which society discounts future consumption, which
is particularly relevant if a regulation is expected to affect private consumption directly. EPA
follows this guidance below by presenting estimates based on both 3 and 7 percent discount rates
in the main analysis. See the Appendix for a discussion the modeling steps involved in
estimating the domestic SC-CH4 estimates based on these discount rates.
The SC-CH4 estimates developed under E.O. 13783 will be used in regulatory analysis
until improved domestic estimates can be developed, which will take into consideration the
recent recommendations from the National Academies of Sciences, Engineering, and Medicine31
for a comprehensive update to the current methodology to ensure that the social cost of
greenhouse gas estimates reflect the best available science. While the Academies' review
focused on the methodology to estimate the social cost of carbon (SC-CO2), the
recommendations on how to update many of the underlying modeling assumptions also pertain
to the SC-CH4 estimates since the framework used to estimate SC-CH4 is the same as that used
for SC-CO2.
Table 3-4 presents the average domestic SC-CH4 estimates across all the model runs for
each discount rate for emissions occurring in 2019 to 2025. As with the global SC-CH4
estimates, the domestic SC-CH4 increases over time because future emissions are expected to
produce larger incremental damages as physical and economic systems become more stressed in
31 See National Academies of Sciences, Engineering, and Medicine, Valuing Climate Damages: Updating
Estimation of the Social Cost of Carbon Dioxide, Washington, D.C., January 2017.
http://www.nap.edu/catalog/24651/valuing-climate-changes-updating-estimation-of-the-social-cost-of
3-9
-------
response to greater climatic change, and because GDP is growing over time and many damage
categories are modeled as proportional to gross GDP.
Table 3-4 Interim Domestic Social Cost of CH4,2019-2025 (in 2016$ per metric ton
CH4)*
Discount Rate and Statistic
Year
7 Percent Average
3 Percent Average
2019
$53
$170
2020
55
180
2021
58
180
2022
60
190
2023
63
190
2024
65
200
2025
68
200
* SC-CH4 values are stated in $/metric ton CH4 and rounded to two significant digits. The estimates vary depending
on the year of CH4 emissions and are defined in real terms, i.e., adjusted for inflation using the GDP implicit price
deflator.
The SC-CH4 estimates in Table 3-4 are used to monetize the forgone domestic climate
benefits of the proposed action. Forecasted increases in methane emissions in each year,
expected as a result of the regulatory action, are multiplied by the SC-CH4 estimate for that year.
Under the proposed action and relative to the 2018 Proposed Regulatory baseline, the forgone
climate benefits vary by discount rate and year, and range from about $1.5 million to
approximately $4.2 million under a 7 percent discount rate, and from about $4.8 million to
approximately $13 million under a 3 percent discount rate, as seen in Table 3-5. The forgone
benefits are estimated to be slightly higher when using the Current Regulatory baseline are
slightly larger.
Table 3-5 Estimated Forgone Domestic Climate Benefits of the Proposed Action, 2019-
2025 (millions, 2016$)
Relative to the Relative to the
2018 Proposed Regulatory Baseline Current Regulatory Baseline
Year
7 percent
3 percent
7 percent
3 percent
2019
$1.5
$4.8
$1.6
$5.1
2020
$1.9
$6.0
$2.0
$6.3
2021
$2.3
$7.2
$2.4
$7.6
2022
$2.7
$8.5
$2.9
$8.9
2023
$3.2
$9.8
$3.4
$10
2024
$3.7
$11
$3.9
$12
2025
$4.2
$13
$4.4
$13
Table 3-6 shows the forgone domestic climate benefits in each year discounted to 2016
using a 3 or 7 percent discount rate. The table also shows the PV and the EAV for the 2019
3-10
-------
through 2025-time horizon under each discount rate. The PV of forgone benefits under a 7
percent discount rate is about $13 million, with an EAV of about $2.2 million per year. The PV
of forgone benefits under a 3 percent discount rate of $49 million, with an EAV of about $7.7
million per year. Again, the forgone benefits are estimated to be slightly higher when using the
Current Regulatory baseline are slightly larger.
Table 3-6 Discounted Forgone Domestic Climate Benefits of the Proposed Action, PV
and EAV (millions, 2016$)
Relative to the Relative to the
2018 Proposed Regulatory Baseline Current Regulatory Baseline
Year
7 percent
3 percent
7 percent
3 percent
2019
$1.2
$4.4
$1.3
$4.7
2020
$1.4
$5.3
$1.5
$5.6
2021
$1.6
$6.2
$1.7
$6.5
2022
$1.8
$7.1
$1.9
$7.5
2023
$2.0
$8.0
$2.1
$8.4
2024
$2.1
$8.8
$2.3
$9.3
2025
$2.3
$9.7
$2.4
$10.2
PV
$13
$49
$13
$52
EAV
$2.2
$7.7
$2.3
$8.1
The forgone domestic climate benefits in each year are discounted to 2016.
Table 3-7 shows the total increase in emissions over the 2019 through 2025-time horizon
as well as the PV and EAV of the forgone domestic climate benefits under 3 percent and 7
percent discount rates. This table shows how the different values of the climate benefits, as seen
in Table 3-4, affect the PV and EAV of the proposed action.
3-11
-------
Table 3-7 Estimated Forgone Domestic Climate Benefits of the Proposed Action
(millions, 2016$)
2018 Proposed
Current Regulatory
Regulatory Baseline
Baseline
Total Increase in Emission, 2019-2025
Forgone CH4 reductions (metric tonnes)
320,000
330,000
Forgone CH4 reductions (million metric tonnes of CO2 Eq.)
7.9
8.4
Forgone Domestic Climate Benefits (millions 2016$)
PV
3 percent (average) $49 $52
7 percent (average) $13 $13
EAV
3 percent (average) $7.7 $8.1
7 percent (average) $2.2 $2.3
The SC-CH4 values are dollar-year and emissions-year specific. SC-CH4 values represent only a partial accounting
of climate impacts.
The limitations and uncertainties associated with the global SC-CH4 estimates, which
were discussed in detail in the 2016 NSPS RIA, likewise apply to the forgone domestic SC-CH4
estimates presented in this analysis.32 Some uncertainties are captured within the analysis, as
discussed in detail in the Appendix, while other areas of uncertainty have not yet been quantified
in a way that can be modeled. For example, as with the methodology used to calculate SC-CO2
estimates, limitations include incomplete or inadequate representation in the integrated
assessment models of several important factors: catastrophic and non-catastrophic impacts,
adaptation and technological change, inter-regional and inter-sectoral linkages, uncertainty in the
extrapolation of damages to high temperatures, and the relationship between the discount rate
and uncertainty in economic growth over long time horizons. The science incorporated into these
models understandably lags the most recent research, and the limited amount of research linking
climate impacts to economic damages makes the modeling exercise even more difficult.
32 The SC-CH4 estimates presented in the 2016 NSPS RIA are the same as the SC-CH4 estimates presented in EPA-
HQ-OAR-2015-0827-5886, "Addendum to Technical Support Document on Social Cost of Carbon for
Regulatory Impact Analysis under Executive Order 12866: Application of the Methodology to Estimate the
Social Cost of Methane and the Social Cost of Nitrous Oxide (August 2016)", except the estimates in the 2016
NSPS RIA were adjusted to 2012$. The estimates published in the 2016 NSPS RIA were labeled as "Marten et
al. (2014)" estimates. In addition, EPA-HQ-OAR-2015-0827-5886 provides a detailed discussion of the
limitations and uncertainties associated with the SC-GHG estimates.
3-12
-------
There are several limitations specific to the estimation of SC-CH4. For example, the SC-
CH4 estimates do not reflect updates from the IPCC regarding atmospheric and radiative
efficacy.33 Another limitation is that the SC-CH4 estimates do not account for the direct health
and welfare impacts associated with tropospheric ozone produced by methane (see the 2016
NSPS RIA for further discussion). In addition, the SC-CH4 estimates do not reflect that methane
emissions lead to a reduction in atmospheric oxidants, like hydroxyl radicals, nor do they
account for impacts associated with CO2 produced from methane oxidizing in the atmosphere.
See EPA-HQ-OAR-2015-0827-5886 for more detailed discussion about the limitations specific
to the estimation of SC-CH4. These individual limitations and uncertainties do not all work in the
same direction in terms of their influence on the SC-CH4 estimates. In accordance with guidance
in OMB Circular A-4 on the treatment of uncertainty, the Appendix provides a detailed
discussion of the ways in which the modeling underlying the development of the SC-CH4
estimates used in this analysis addresses quantified sources of uncertainty and presents a
sensitivity analysis to show consideration of the uncertainty surrounding discount rates over long
time horizons.
Recognizing the limitations and uncertainties associated with estimating the social cost of
greenhouse gases, the research community has continued to explore opportunities to improve
estimates of SC-CO2 and other greenhouse gases. Notably, the National Academies of Sciences,
Engineering, and Medicine conducted a multi-discipline, multi-year assessment to examine
potential approaches, along with their relative merits and challenges, for a comprehensive update
to the IWG methodology. The task was to ensure that the SC-CO2 estimates that are used in
Federal analyses reflect the best available science, focusing on issues related to the choice of
models and damage functions, climate science modeling assumptions, socioeconomic and
emissions scenarios, presentation of uncertainty, and discounting. In January 2017, the
Academies released their final report, Valuing Climate Damages: Updating Estimation of the
Social Cost of Carbon Dioxide,34 and recommended specific criteria for future updates to the SC-
33 The SC-CH4 estimates used in the 2016 NSPS RIA served as the starting point to calculate the interim domestic
estimates presented in this RIA. The 2016 NSPS RIA SC-CH4 estimates were calculated in 2014 using
atmospheric and radiative efficacy values that have since been updated by the IPCC.
34 National Academies of Sciences, Engineering, and Medicine. 2017. Valuing Climate Damages: Updating
Estimation of the Social Cost of Carbon Dioxide. National Academies Press. Washington, DC.
.
Accessed April 3, 2019.
3-13
-------
C02 estimates, a modeling framework to satisfy the specified criteria, and both near-term
updates and longer-term research needs pertaining to various components of the estimation
process (National Academies 2017). Since the framework used to estimate SC-CH4 is the same
as that used for SC-CO2, the Academies' recommendations on how to update many of the
underlying modeling assumptions also apply to the SC-CH4 estimates.
The Academies' report also discussed the challenges in developing domestic SC-CO2
estimates, noting that current IAMs do not model all relevant regional interactions—e.g., how
climate change impacts in other regions of the world could affect the United States, through
pathways such as global migration, economic destabilization, and political destabilization. The
Academies concluded that it "is important to consider what constitutes a domestic impact in the
case of a global pollutant that could have international implications that impact the United States.
More thoroughly estimating a domestic SC-CO2 would therefore need to consider the potential
implications of climate impacts on, and actions by, other countries, which also have impacts on
the United States." (National Academies, 2017, pg 12-13). This challenge is equally applicable
to the estimation of a domestic SC-CH4.
In addition to requiring reporting of domestic impacts, Circular A-4 states that when an
agency "evaluate[s] a regulation that is likely to have effects beyond the borders of the United
States, these effects should be reported separately" (page 15). This guidance is relevant to the
valuation of damages from methane and other GHGs, given that GHGs contribute to damages
around the world independent of the country in which they are emitted. Therefore, in accordance
with this guidance in OMB Circular A-4, the Appendix presents the forgone global climate
benefits from the proposal using global SC-CH4 estimates based on both 3 and 7 percent
discount rates. Note that EPA did not quantitatively project the full impact of the 2016 NSPS
OOOOa on international trade and the location of production, so it is not possible to present
analogous estimates of global cost savings resulting from the proposed action. However, to the
extent that affected firms have some foreign ownership, some of the cost savings accruing to
entities outside U.S. borders is captured in the compliance cost savings presented in this RIA.
3-14
-------
3.4 VOC as an Ozone Precursor
This rulemaking is expected to result in forgone emission reductions of VOC, which are a
precursor to ozone. Ozone is not emitted directly into the air but is created when its two primary
components, volatile organic compounds (VOC) and oxides of nitrogen (NOx), react in the
atmosphere in the presence of sunlight. In urban areas, compounds representing all classes of
VOC are important for ozone formation, but biogenic VOC emitted from vegetation tend to be
more important compounds in non-urban vegetated areas (U.S. EPA, 2013). Forgone emission
reductions may increase ozone formation, human exposure to ozone, and the incidence of ozone-
related health effects. However, we have not quantified the ozone-related forgone benefits in this
analysis due to the complex non-linear chemistry of ozone formation, which introduces
uncertainty to the development and application of a benefit-per-ton estimate, particularly for
sectors with substantial new growth. In addition, the impact of forgone VOC emission reductions
is spatially heterogeneous and highly dependent on local air chemistry. Urban areas with a high
population concentration are often VOC-limited, which means that ozone is most effectively
reduced by lowering VOC. Rural areas and downwind suburban areas are often NOx-limited,
which means that ozone concentrations are most effectively reduced by lowering NOx emissions,
rather than lowering emissions of VOC. Between these areas, ozone is relatively insensitive to
marginal changes in both NOx and VOC.
Due to data limitations regarding potential locations of new and modified sources
affected by this rulemaking, we did not perform air quality modeling for this rule needed to
quantify the forgone ozone benefits associated with forgone VOC emission reductions. Due to
the high degree of variability in the responsiveness of ozone formation to VOC emissions and
data limitations regarding the location of new and modified well sites, we are unable to estimate
the effect that forgone VOC emission reductions will have on ambient ozone concentrations
without air quality modeling.
3.4.1 Ozone Health Effects
Human exposure to ambient ozone concentrations is associated with adverse health
effects, including premature mortality and cases of respiratory morbidity (U.S. EPA, 2010a).
Researchers have associated ozone exposure with adverse health effects in numerous
3-15
-------
toxicological, clinical and epidemiological studies (U.S. EPA, 2013). When adequate data and
resources are available, EPA has generally quantified several health effects associated with
exposure to ozone (e.g., U.S. EPA, 2010a; U.S. EPA, 201 la). These health effects include:
respiratory morbidity, such as asthma attacks; hospital and emergency department visits; lost
school days; and premature mortality. The scientific literature is also suggestive that exposure to
ozone is associated with chronic respiratory damage and premature aging of the lungs.
3.4.2 Ozone Vegetation Effects
Exposure to ozone has been found to be associated with a wide array of vegetation and
ecosystem effects in the published literature (U.S. EPA, 2013). Sensitivity to ozone is highly
variable across species, with over 66 vegetation species identified as "ozone-sensitive", many of
which occur in state and national parks and forests. These effects include those that damage to,
or impairment of, the intended use of the plant or ecosystem. Such effects are considered adverse
to public welfare and can include reduced growth and/or biomass production in sensitive trees,
reduced yield and quality of crops, visible foliar injury, changed to species composition, and
changes in ecosystems and associated ecosystem services.
3.4.3 Ozone Climate Effects
Ozone is a well-known short-lived climate forcing greenhouse gas (GHG) (U.S. EPA,
2013). Stratospheric ozone (the upper ozone layer) is beneficial because it protects life on Earth
from the sun's harmful ultraviolet (UV) radiation. In contrast, tropospheric ozone (ozone in the
lower atmosphere) is a harmful air pollutant that adversely affects human health and the
environment and contributes significantly to regional and global climate change. Due to its short
atmospheric lifetime, tropospheric ozone concentrations exhibit large spatial and temporal
variability (U.S. EPA, 2009b). The IPCC AR5 estimated that the contribution to current warming
levels of increased tropospheric ozone concentrations resulting from human methane, NOx, and
VOC emissions was 0.5 W/m2, or about 30 percent as large a warming influence as elevated CO2
concentrations. This quantifiable influence of ground level ozone on climate leads to increases in
global surface temperature and changes in hydrological cycles.
3-16
-------
3.5 VOC as a PM2.5 Precursor
This rulemaking is expected to result in forgone emission reductions of VOC, which are a
precursor to PM2.5, thus increasing human exposure to PM2.5 and the incidence of PIVh.s-related
health effects, although the magnitude of this effect cannot be quantified at this time. Most VOC
emitted are oxidized to CO2 rather than to PM, but a portion of VOC emission contributes to
ambient PM2.5 levels as organic carbon aerosols (U.S. EPA, 2009a). Analysis of organic carbon
measurements suggest only a fraction of secondarily formed organic carbon aerosols are of
anthropogenic origin. The current state of the science of secondary organic carbon aerosol
formation indicates that anthropogenic VOC contribution to secondary organic carbon aerosol is
often lower than the biogenic (natural) contribution and photochemical models typically estimate
secondary organic carbon from anthropogenic VOC emissions to be less than 0.1 |ig/m3 (U.S.
EPA, 2009a). Given that only a small fraction of secondarily formed organic carbon aerosols is
from anthropogenic VOC emissions, it is unlikely that this sector has a large contribution to
ambient secondary organic carbon aerosols. Therefore, we have not quantified the forgone
PM2.5-related benefits in this analysis.
3.5.1 PM2.5 Health Effects
Increasing VOC emissions will increase secondary PM2.5 formation, and, thus, the
incidence of PIVh.s-related health effects. Increasing exposure to PM2.5 is associated with
significant human health detriments, including mortality and respiratory morbidity. Researchers
have associated PM2.5 exposure with adverse health effects in numerous toxicological, clinical
and epidemiological studies (U.S. EPA, 2009a). These health effects include premature death in
people with heart or lung disease, nonfatal heart attacks, irregular heartbeat, aggravated asthma,
decreased lung function, and increased respiratory symptoms, such as irritation of the airways,
coughing, or difficulty breathing. These health effects result in hospital and ER visits, lost work
days, and restricted activity days. When adequate data and resources are available, EPA has
quantified the health effects associated with exposure to PM2.5 (e.g., U.S. EPA (201 lc)).
When EPA quantifies PIVh.s-related benefits, the agency assumes that all fine particles,
regardless of their chemical composition, are equally potent in causing premature mortality
because the scientific evidence is not yet sufficient to allow differentiation of effect estimates by
3-17
-------
particle type (U.S. EPA, 2009a). Based on our review of the current body of scientific literature,
EPA estimates PM-related premature mortality without applying an assumed concentration
threshold. This decision is supported by the data, which are quite consistent in showing effects
down to the lowest measured levels of PM2.5 in the underlying epidemiology studies.
3.5.2 Organic PM Welfare Effects
According to the previous residual risk assessment that EPA performed for this sector
(U.S. EPA, 2012a), persistent and bioaccumulative HAP reported as emissions from oil and
natural gas operations include polycyclic organic matter (POM). POM defines a broad class of
compounds that includes polycyclic aromatic hydrocarbon compounds (PAHs). Several
significant ecological effects are associated with the deposition of organic particles, including
persistent organic pollutants, and PAHs (U.S. EPA, 2009a). This summary is from section 6.6.1
of the 2012 PMNAAQS RIA (U.S. EPA, 2012c).
PAHs can accumulate in sediments and bioaccumulate in freshwater, flora and fauna. The
uptake of organics depends on the plant species, site of deposition, physical and chemical
properties of the organic compound and prevailing environmental conditions (U.S. EPA, 2009a).
PAHs can accumulate to high enough concentrations in some coastal environments to pose an
environmental health threat that includes cancer in fish populations, toxicity to organisms living
in the sediment and risks to those (e.g., migratory birds) that consume these organisms.
Atmospheric deposition of particles is thought to be the major source of PAHs to the sediments
of coastal areas of the U.S. Deposition of PM to surfaces in urban settings increases the metal
and organic component of storm water runoff. This atmospherically-associated pollutant burden
can then be toxic to aquatic biota. The contribution of atmospherically deposited PAHs to
aquatic food webs was demonstrated in high elevation mountain lakes with no other
anthropogenic contaminant sources.
The Western Airborne Contaminants Assessment Project (WACAP) is the most
comprehensive database available on contaminant transport and the effects of PM deposition on
sensitive ecosystems in the Western U.S. (Landers et al., 2008). In this project, the transport,
fate, and ecological impacts of anthropogenic contaminants from atmospheric sources were
assessed from 2002 to 2007 in seven ecosystem components (air, snow, water, sediment, lichen,
3-18
-------
conifer needles, and fish) in eight core national parks. The study concluded that bioaccumulation
of semi-volatile organic compounds occurred throughout park ecosystems, that an elevational
gradient in PM deposition exists with greater accumulation in higher altitude areas, and that
contaminants accumulate in proximity to individual agriculture and industry sources, which is
counter to the original working hypothesis that most of the contaminants would originate from
Eastern Europe and Asia.
3.5.3 Visibility Effects
Increasing secondary formation of PM2.5 from VOC emissions could reduce visibility
throughout the U.S. Fine particles with significant light-extinction efficiencies include sulfates,
nitrates, organic carbon, elemental carbon, and soil (Sisler, 1996). Suspended particles and gases
degrade visibility by scattering and absorbing light. Higher visibility impairment levels in the
East are due to higher concentrations of fine particles, particularly sulfates, and higher average
relative humidity levels. Visibility impairment has a direct impact on people's enjoyment of
daily activities and their overall sense of wellbeing. Good visibility increases the quality of life
where individuals live and work, and where they engage in recreational activities. Previous
analyses (U.S. EPA, 2006b; U.S. EPA, 2011a; U.S. EPA, 2011c; U.S. EPA, 2012c) show that
visibility benefits are a significant welfare benefit category. However, without air quality
modeling, we are unable to estimate forgone visibility related benefits, nor are we able to
determine whether VOC emission would be likely to have a significant impact on visibility in
urban areas or Class I areas.
3.6 Hazardous Air Pollutants (HAP)
When looking at exposures from all air toxic sources of outdoor origin across the U.S., we
see that emissions declined by approximately 60 percent since 1990. However, despite this
decline, the 2014 National-Scale Air Toxics Assessment (NATA) predicts that some Americans
are still exposed to ambient concentrations of air toxics at levels that have the potential to cause
adverse health effects.35 The levels of air toxics to which people are exposed vary depending on
where they live and work and the kinds of activities in which they engage. In order to identify
35 The 2014 NATA is available on the Internet at http://www.epa.gov/nata^
3-19
-------
and prioritize air toxics, emission source types and locations that are of greatest potential
concern, EPA conducts the NATA.36 The most recent NATA was conducted for calendar year
2014 and was released in August 2018. NATA includes four steps:
1) Compiling a national emissions inventory of air toxics emissions from outdoor
sources;
2) Estimating ambient concentrations of air toxics across the U.S. utilizing dispersion
models;
3) Estimating population exposures across the U.S. utilizing exposure models; and
4) Characterizing potential public health risk due to inhalation of air toxics including both
cancer and noncancer effects.
Based on the 2014 NATA, EPA estimates that less than 1 percent of census tracts
nationwide have increased cancer risks greater than 100-in-l million. The average national
cancer risk is about 30-in-l million. Nationwide, the key pollutants that contribute most to the
overall cancer risks are formaldehyde and benzene.37 38 Secondary formation (e.g., formaldehyde
forming from other emitted pollutants) was the largest contributor to cancer risks, while
stationary, mobile, biogenics, and background sources contribute lesser amounts to the remaining
cancer risk.
Noncancer health effects can result from chronic,39 subchronic,40 or acute41 inhalation
exposure to air toxics, and include neurological, cardiovascular, liver, kidney, and respiratory
effects as well as effects on the immune and reproductive systems. According to the 2014
36 The NATA modeling framework has a number of limitations that prevent its use as the sole basis for setting
regulatory standards. These limitations and uncertainties are discussed on the 2014 NATA website. Even so, this
modeling framework is very useful in identifying air toxic pollutants and sources of greatest concern, setting
regulatory priorities, and informing the decision-making process. U.S. EPA. (2018) 2014 National-Scale Air
Toxics Assessment, http://www.epa.gov/nata.
37 Details on EPA's approach to characterization of cancer risks and uncertainties associated with the 2014 NATA
risk estimates can be found at http://www.epa.gov/national-air-toxics-assessment/nata-limitations.
38 Details about the overall confidence of certainty ranking of the individual pieces of NATA assessments including
both quantitative (e.g., model-to-monitor ratios) and qualitative (e.g., quality of data, review of emission
inventories) judgments can be found at http://www.epa.gov/national-air-toxics-assessment/nata-limitations.
39 Chronic exposure is defined in the glossary of the Integrated Risk Information System (IRIS) database
(http://www.epa.gov/iris) as repeated exposure by the oral, dermal, or inhalation route for more than
approximately 10 of the life span in humans (more than approximately 90 days to 2 years in typically used
laboratory animal species).
40 Defined in the IRIS database as repeated exposure by the oral, dermal, or inhalation route for more than 30 days,
up to approximately 10 of the life span in humans (more than 30 days up to approximately 90 days in typically
used laboratory animal species).
41 Defined in the IRIS database as exposure by the oral, dermal, or inhalation route for 24 hours or less.
3-20
-------
NATA, less than 1 percent of the U.S. population was exposed to an average chronic
concentration of air toxics that had the potential for adverse noncancer health effects. Results
from the 2014 NATA indicate that acrolein is the primary respiratory driver for noncancer
respiratory risk.
Figure 3-1 depict the 2014 NATA estimated census tract-level carcinogenic risk from the
assessment. It is important to note that increases in HAP emissions may not necessarily translate
into significant increases in health risk because toxicity varies by pollutant, and exposures may
or may not exceed levels of concern. For example, just a few pounds of some metals (i.e.,
Hexavalent Chromium) is more toxic than a ton of benzene. Flowever, the Integrated Risk
Information System (IRIS) unit risk estimate (URE) for hexavalent chromium is considerably
higher (more toxic) than that for benzene,43 Thus, it is important to account for the toxicity and
exposure, as well as the mass of the targeted emissions.
Figure 3-1 2014 NATA Model Estimated Census Tract Carcinogenic Risk from HAP
Exposure from All Outdoor Sources based on the 2014 National Emissions Inventory
Total Cancer Risk
(in a million)
6-25
25-50
M 50 - 75
75 - 100
H > ioo
Hi Zero Pop Tract
42 Details on the derivation of IRIS values and available supporting documentation for individual chemicals (as well
as chemical values comparisons) can be found at http://www.epa.gov/iris.
3-21
-------
Due to methodology and data limitations, we were unable to estimate the benefits or
disbenefits associated with the hazardous air pollutant emissions changes that could occur as a
result of this rule. In a few previous analyses of the benefits of reductions in HAP, EPA has
quantified the benefits of potential reductions in the incidences of cancer and noncancer risk
(e.g., U.S. EPA, 1995). In those analyses, EPA relied on unit risk estimate (URE) and reference
concentrations (RfC) developed through risk assessment procedures. The URE is a quantitative
estimate of the carcinogenic potency of a pollutant, often expressed as the probability of
contracting cancer from a 70-year lifetime continuous exposure to a concentration of one |ig/m3
of a pollutant. These UREs are designed to be conservative, and as such, are more likely to
represent the high end of the distribution of risk rather than a best or most likely estimate of risk.
An RfC is an estimate (with uncertainty spanning perhaps an order of magnitude) of a
continuous inhalation exposure to the human population (including sensitive subgroups) that is
likely to be without an appreciable risk of deleterious noncancer health effects during a lifetime.
As the purpose of a forgone benefit analysis is to describe the benefits most likely to result from
a forgone reduction in pollution, use of high-end, conservative risk estimates would overestimate
the forgone benefits of the regulation. While we used high-end risk estimates in past analyses,
advice from EPA's Science Advisory Board (SAB) recommended that we avoid using high-end
estimates in benefit analyses (U.S. EPA-SAB, 2002). Since that time, EPA has continued to
develop better methods for analyzing the benefits of reductions in HAP.
As part of the second prospective analysis of the benefits and costs of the Clean Air Act
(U.S. EPA, 201 la), EPA conducted a case study analysis of the health effects associated with
reducing exposure to benzene in Houston from implementation of the Clean Air Act (IEc, 2009).
While reviewing the draft report, EPA's Advisory Council on Clean Air Compliance Analysis
concluded that "the challenges for assessing progress in health improvement as a result of
reductions in emissions of hazardous air pollutants (HAP) are daunting...due to a lack of
exposure-response functions, uncertainties in emissions inventories and background levels, the
difficulty of extrapolating risk estimates to low doses and the challenges of tracking health
progress for diseases, such as cancer, that have long latency periods" (U.S. EPA-SAB, 2008).
In summary, monetization of the forgone benefits of reductions in cancer incidences
requires several important inputs, including central estimates of cancer risks, estimates of
exposure to carcinogenic HAP, and estimates of the value of an avoided case of cancer (fatal and
3-22
-------
non-fatal). Due to methodology and data limitations, we did not attempt to monetize the forgone
health benefits of forgone reductions in HAP in this analysis. Instead, we are providing a
qualitative analysis of the health effects associated with the HAP anticipated to be forgone by
this rule. EPA remains committed to improving methods for estimating HAP benefits by
continuing to explore additional concepts of benefits, including changes in the distribution of
risk.
Available emissions data show that several different HAP are emitted from oil and
natural gas operations, either from equipment leaks, processing, compressing, transmission and
distribution, or storage tanks. Emissions of eight HAP make up a large percentage of the total
HAP emissions by mass from the oil and natural gas sector: toluene, hexane, benzene, xylenes
(mixed), ethylene glycol, methanol, ethyl benzene, and 2,2,4-trimethylpentane (U.S. EPA,
2012a). In the subsequent sections, we describe the health effects associated with the main HAP
of concern from the oil and natural gas sector: benzene, toluene, carbonyl sulfide, ethyl benzene,
mixed xylenes, and n-hexane. This rule is anticipated to result an increase of a total of 3,800 tons
of HAP emissions over 2019 through 2025. With the data available, it was not possible to
estimate the change in emissions of each individual HAP.
3.6.1 Benzene
EPA's IRIS database lists benzene as a known human carcinogen (causing leukemia) by
all routes of exposure, and concludes that exposure is associated with additional health effects,
including genetic changes in both humans and animals and increased proliferation of bone
marrow cells in mice.43'44'45 EPA states in its IRIS database that data indicate a causal
relationship between benzene exposure and acute lymphocytic leukemia and suggest a
relationship between benzene exposure and chronic non-1 ymphocytic leukemia and chronic
43 U.S. Environmental Protection Agency (U.S. EPA). 2000. Integrated Risk Information System File for Benzene.
Research and Development, National Center for Environmental Assessment, Washington, DC. This material is
available electronically at http://www.epa.gov/iris/subst/0276.htm.
44 International Agency for Research on Cancer, IARC monographs on the evaluation of carcinogenic risk of
chemicals to humans, Volume 29, Some industrial chemicals and dyestuffs, International Agency for Research
on Cancer, World Health Organization, Lyon, France, p. 345-389, 1982.
45 Irons, R.D.; Stillman, W.S.; Colagiovanni, D.B.; Henry, V.A. (1992) Synergistic action of the benzene metabolite
hydroquinone on myelopoietic stimulating activity of granulocyte/macrophage colony-stimulating factor in vitro,
Proc. Natl. Acad. Sci. 89:3691-3695.
3-23
-------
lymphocytic leukemia. The International Agency for Research on Carcinogens (IARC) has
determined that benzene is a human carcinogen and the U.S. Department of Health and Human
Services has characterized benzene as a known human carcinogen.46'47 A number of adverse
noncancer health effects including blood disorders, such as preleukemia and aplastic anemia,
have also been associated with long-term exposure to benzene.48'49
3.6.2 Toluene50
Under the 2005 Guidelines for Carcinogen Risk Assessment, there is inadequate
information to assess the carcinogenic potential of toluene because studies of humans chronically
exposed to toluene are inconclusive, toluene was not carcinogenic in adequate inhalation cancer
bioassays of rats and mice exposed for life, and increased incidences of mammary cancer and
leukemia were reported in a lifetime rat oral bioassay.
The central nervous system (CNS) is the primary target for toluene toxicity in both
humans and animals for acute and chronic exposures. CNS dysfunction (which is often
reversible) and narcosis have been frequently observed in humans acutely exposed to low or
moderate levels of toluene by inhalation: symptoms include fatigue, sleepiness, headaches, and
nausea. Central nervous system depression has been reported to occur in chronic abusers exposed
to high levels of toluene. Symptoms include ataxia, tremors, cerebral atrophy, nystagmus
(involuntary eye movements), and impaired speech, hearing, and vision. Chronic inhalation
exposure of humans to toluene also causes irritation of the upper respiratory tract, eye irritation,
dizziness, headaches, and difficulty with sleep.
Human studies have also reported developmental effects, such as CNS dysfunction,
attention deficits, and minor craniofacial and limb anomalies, in the children of women who
46 International Agency for Research on Cancer (IARC). 1987. Monographs on the evaluation of carcinogenic risk
of chemicals to humans, Volume 29, Supplement 7, Some industrial chemicals and dyestuffs, World Health
Organization, Lyon, France.
47 U.S. Department of Health and Human Services National Toxicology Program 11th Report on Carcinogens.
Available at https://www.ncbi.nlm.nih.gov/pubmed/19826456.
48 Aksoy, M. (1989). Hematotoxicity and carcinogenicity of benzene. Environ. Health Perspect. 82: 193-197.
49 Goldstein, B.D. (1988). Benzene toxicity. Occupational medicine. State of the Art Reviews. 3: 541-554.
50 All health effects language for this section came from: U.S. EPA. 2005. "Full IRIS Summary for Toluene
(CASRN 108-88-3)" Environmental Protection Agency, Integrated Risk Information System (IRIS), Office of
Health and Environmental Assessment, Environmental Criteria and Assessment Office, Cincinnati, OH.
Available at http://www.epa.gov/iris/subst/0118.htm.
3-24
-------
abused toluene during pregnancy. A substantial database examining the effects of toluene in
subchronic and chronic occupationally exposed humans exists. The weight of evidence from
these studies indicates neurological effects (i.e., impaired color vision, impaired hearing,
decreased performance in neurobehavioral analysis, changes in motor and sensory nerve
conduction velocity, headache, and dizziness) as the most sensitive endpoint.
3.6.3 Carbonyl Sulfide
Limited information is available on the health effects of carbonyl sulfide. Acute (short-
term) inhalation of high concentrations of carbonyl sulfide may cause narcotic effects and irritate
the eyes and skin in humans.51 No information is available on the chronic (long-term),
reproductive, developmental, or carcinogenic effects of carbonyl sulfide in humans. Carbonyl
sulfide has not undergone a complete evaluation and determination under U.S. EPA's IRIS
program for evidence of human carcinogenic potential.52
3.6.4 Ethylbenzene
Ethylbenzene is a major industrial chemical produced by alkylation of benzene. The pure
chemical is used almost exclusively for styrene production. It is also a constituent of crude
petroleum and is found in gasoline and diesel fuels. Acute (short-term) exposure to ethylbenzene
in humans results in respiratory effects such as throat irritation and chest constriction, and
irritation of the eyes, and neurological effects such as dizziness. Chronic (long-term) exposure of
humans to ethylbenzene may cause eye and lung irritation, with possible adverse effects on the
blood. Animal studies have reported effects on the blood, liver, and kidneys and endocrine
system from chronic inhalation exposure to ethylbenzene. No information is available on the
developmental or reproductive effects of ethylbenzene in humans, but animal studies have
reported developmental effects, including birth defects in animals exposed via inhalation. Studies
in rodents reported increases in the percentage of animals with tumors of the nasal and oral
51 Hazardous Substances Data Bank (HSDB), online database. US National Library of Medicine, Toxicology Data
Network, available online at http://toxnet.nlm.nih.gov/. Carbonyl health effects summary available at
http://toxnet.nlm.nih.gov/cgi-bin/sis/search/r?dbs+hsdb:@term+@rn+@rel+463-58-l.
52 U.S. Environmental Protection Agency (U.S. EPA). 2000. Integrated Risk Information System File for Carbonyl
Sulfide. Research and Development, National Center for Environmental Assessment, Washington, DC. This
material is available electronically at http://www.epa.gov/iris/subst/0617.htm.
3-25
-------
cavities in male and female rats exposed to ethylbenzene via the oral route.53'54 The reports of
these studies lacked detailed information on the incidence of specific tumors, statistical analysis,
survival data, and information on historical controls, thus the results of these studies were
considered inconclusive by the International Agency for Research on Cancer (IARC, 2000) and
the National Toxicology Program (NTP).55'56 The NTP (1999) carried out a chronic inhalation
bioassay in mice and rats and found clear evidence of carcinogenic activity in male rats and some
evidence in female rats, based on increased incidences of renal tubule adenoma or carcinoma in
male rats and renal tubule adenoma in females. NTP (1999) also noted increases in the incidence
of testicular adenoma in male rats. Increased incidences of lung alveolar/bronchiolar adenoma or
carcinoma were observed in male mice and liver hepatocellular adenoma or carcinoma in female
mice, which provided some evidence of carcinogenic activity in male and female mice (NTP,
1999). IARC (2000) classified ethylbenzene as Group 2B, possibly carcinogenic to humans,
based on the NTP studies.
3.6.5 Mixed Xylenes
Short-term inhalation of mixed xylenes (a mixture of three closely-related compounds) in
humans may cause irritation of the nose and throat, nausea, vomiting, gastric irritation, mild
transient eye irritation, and neurological effects.57 Other reported effects include labored
breathing, heart palpitation, impaired function of the lungs, and possible effects in the liver and
kidneys.58 Long-term inhalation exposure to xylenes in humans has been associated with a
53 Maltoni C, Conti B, Giuliano C and Belpoggi F, 1985. Experimental studies on benzene carcinogenicity at the
Bologna Institute of Oncology: Current results and ongoing research. Am J Ind Med 7:415-446.
54 Maltoni C, Ciliberti A, Pinto C, Soffritti M, Belpoggi F and Menarini L, 1997. Results of long-term experimental
carcinogenicity studies of the effects of gasoline, correlated fuels, and major gasoline aromatics on rats. Annals
NY Acad Sci 837:15-52.
55 International Agency for Research on Cancer (IARC), 2000. Monographs on the Evaluation of Carcinogenic
Risks to Humans. Some Industrial Chemicals. Vol. 77, p. 227-266. IARC, Lyon, France.
56 National Toxicology Program (NTP), 1999. Toxicology and Carcinogenesis Studies of Ethylbenzene (CAS No.
100-41-4) in F344/N Rats and in B6C3F1 Mice (Inhalation Studies). Technical Report Series No. 466. NIH
Publication No. 99-3956. U.S. Department of Health and Human Services, Public Health Service, National
Institutes of Health. NTP, Research Triangle Park, NC.
57 U.S. Environmental Protection Agency (U.S. EPA). 2003. Integrated Risk Information System File for Mixed
Xylenes. Research and Development, National Center for Environmental Assessment, Washington, DC. This
material is available at http://www.epa.gov/iris/subst/0270.htm.
58 Agency for Toxic Substances and Disease Registry (AT SDR), 2007. The Toxicological Profile for xylene is
available at http://www.atsdr.cdc.gov/ToxProfiles/TP.asp?id=296&tid=53.
3-26
-------
number of effects in the nervous system including headaches, dizziness, fatigue, tremors, and
impaired motor coordination.59 EPA has classified mixed xylenes in Category D, not classifiable
with respect to human carcinogenicity.
3.6.6 tt-Hexane
The studies available in both humans and animals indicate that the nervous system is the
primary target of toxicity upon exposure of n-hexane via inhalation. There are no data in humans
and very limited information in animals about the potential effects of n-hexane via the oral route.
Acute (short-term) inhalation exposure of humans to high levels of hexane causes mild central
nervous system effects, including dizziness, giddiness, slight nausea, and headache. Chronic
(long-term) exposure to hexane in air causes numbness in the extremities, muscular weakness,
blurred vision, headache, and fatigue. Inhalation studies in rodents have reported behavioral
effects, neurophysiological changes and neuropathological effects upon inhalation exposure to n-
hexane. Under the Guidelines for Carcinogen Risk Assessment (U.S. EPA, 2005), the database
for n-hexane is considered inadequate to assess human carcinogenic potential, therefore EPA has
classified hexane in Group D, not classifiable as to human carcinogenicity.60
3.6.7 Other Air Toxics
In addition to the compounds described above, other toxic compounds might be affected
by this rule, including hydrogen sulfide (H2S). Information regarding the health effects of those
compounds can be found in EPA's IRIS database.61
3.7 References
Anenberg, S.C., et al. 2009. "Intercontinental impacts of ozone pollution on human mortality."
Environmental Science & Technology 43:6482-6487.
59 Agency for Toxic Substances and Disease Registry (AT SDR), 2007. The Toxicological Profile for xylene is
available at http://www.atsdr.cdc.gov/ToxProfiles/TP.asp?id=296&tid=53.
60 U.S. EPA. 2005. Guidelines for Carcinogen Risk Assessment. EPA/630/P-03/00IB. Risk Assessment Forum,
Washington, DC. March. Available at http://www.epa.gov/ttn/atw/cancer_guidelines_final_3-25-05.pdf.
61 U.S. EPA Integrated Risk Information System (IRIS) database is available at www.epa.gov/iris.
3-27
-------
Anenberg S.C., Schwartz J., Shindell D., et al. 2012. "Global air quality and health co-benefits of
mitigating near-term climate change through methane and black carbon emission
controls." Environmental Health Perspectives 120(6):831.
Dentener, F., D. Stevenson, J. Cofala, R. Mechler, M. Amann, P. Bergamaschi, F. Raes, and R.
Derwent. 2005. "The impact of air pollutant and methane emission controls on
tropospheric ozone and radiative forcing: CTM calculations for the period 1990-2030."
Atmospheric Chemistry and Physics 5:1731-1755.
Fankhauser, S. 1994. "The social costs of greenhouse gas emissions: an expected value
approach." Energy Journal 15(2): 157-184.
Fann, N., C.M. Fulcher, and B.J. Hubbell. 2009. "The influence of location, source, and emission
type in estimates of the human health benefits of reducing a ton of air pollution." Air
Quality Atmosphere and Health 2:169-176.
Fann, N, K.R. Baker, E.A.W. Chan, A. Eyth, A. Macpherson, E. Miller, and J. Snyder. 2018.
"Assessing Human Health PM2.5 and Ozone Impacts from U.S. Oil and Natural Gas
Sector Emissions in 2025." Environmental Science and Technology 52(15):8095-8103.
Fiore, A.M., J.J. West, L.W. Horowitz, V. Naik, and M.D. Schwarzkopf. 2008. "Characterizing
the tropospheric ozone response to methane emission controls and the benefits to climate
and air quality." Journal of Geophysical Research 113, D08307.
Gwinn, M.R., J. Craig, D.A. Axelrad, R. Cook, C. Dockins, N. Fann, R. Fegley, D.E. Guinnup,
G. Helfand, B. Hubbell, S.L. Mazur, T. Palma, R.L. Smith, J. Vandenberg, and
B. Sonawane. 2011. "Meeting Report: Estimating the Benefits of Reducing Hazardous
Air Pollutants—Summary of 2009 Workshop and Future Considerations." Environmental
Health Perspectives 119(1): 125-30.
Hope, C. and D. Newbery. 2006. "The Marginal Impacts of CO2, CH4, and SF6 Emissions."
Climate Policy 6(1): p. 19-56.
Industrial Economics, Inc (IEc). 2009. Section 812 Prospective Study of the Benefits and Costs of
the Clean Air Act: Air Toxics Case Study—Health Benefits of Benzene Reductions in
Houston, 1990-2020. Final Report, July 14, 2009.
.
Accessed April 3, 2019.
Interagency Working Group (IWG) on Social Cost of Carbon (SC-CO2). 2016. Technical
Support Document: Technical Update of the Social Cost of Carbon for Regulatory
Impact Analysis Under Executive Order 12866. Docket ID EPA-HQ-OAR-2009-0472-
114577. Participation by Council of Economic Advisers, Council on Environmental
Quality, Department of Agriculture, Department of Commerce, Department of Energy,
Department of Transportation, Environmental Protection Agency, National Economic
Council, Office of Energy and Climate Change, Office of Management and Budget,
Office of Science and Technology Policy, and Department of Treasury. <
3-28
-------
https://www.epa.gov/sites/production/files/2016-
12/documents/sc_co2_tsd_august_2016,pdf> Accessed April 3, 2019.
Interagency Working Group (IWG) on Social Cost of Carbon (SC-CO2). 2013. Technical
Support Document: Social Cost of Carbon for Regulatory Impact Analysis Under
Executive Order 12866. Docket ID EPA-HQ-OAR-2013-0495. Participation by Council
of Economic Advisers, Council on Environmental Quality, Department of Agriculture,
Department of Commerce, Department of Energy, Department of Transportation,
Domestic Policy Council, Environmental Protection Agency, National Economic
Council, Office of Management and Budget, Office of Science and Technology Policy,
and Department of Treasury. . Accessed April
3, 2019.
Intergovernmental Panel on Climate Change (IPCC). 2013. Climate Change 2013: The Physical
Science Basis. Contribution of Working Group I to the Fifth Assessment Report of the
Intergovernmental Panel on Climate Change [Stocker, T.F., D. Qin, G.-K. Plattner, M.
Tignor, S.K. Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex and P.M. Midgley (eds.)].
Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.
Krewski D., M. Jerrett, R.T. Burnett, R. Ma, E. Hughes, Y. Shi, et al. 2009. Extended Follow-Up and
Spatial Analysis of the American Cancer Society Study Linking Particulate Air Pollution and
Mortality. HEI Research Report, 140, Health Effects Institute, Boston, MA. 4-64.
Laden, F., J. Schwartz, F.E. Speizer, and D.W. Dockery. 2006. "Reduction in Fine Particulate
Air Pollution and Mortality." American Journal of Respiratory and Critical Care
Medicine 173:667-672.
Landers D.H., S.L. Simonich, D.A. Jaffe, L.H. Geiser, D.H. Campbell, A.R. Schwindt, C.B.
Schreck, M.L. Kent, W.D. Hafner, H.E. Taylor, K.J. Hageman, S. Usenko, L.K.
Ackerman, J.E. Schrlau, N.L, Rose, T.F. Blett, and M.M. Erway 2008. The Fate,
Transport and Ecological Impacts of Airborne Contaminants in Western National Parks
(USA). EPA/600/R-07/138. U.S. Environmental Protection Agency, Office of Research
and Development, NHEERL, Western Ecology Division. Corvallis, Oregon.
Lepeule, J., F. Laden, D. Dockery, and J. Schwartz. 2012. "Chronic Exposure to Fine Particles and
Mortality: An Extended Follow-Up of the Harvard Six Cities Study from 1974 to 2009."
Environmental Health Perspectives 120(7):965-70.
Litovitz, A., A. Curtright, S. Abramzon, N. Burger, C. Samaras. 2013. "Estimation of regional
air-quality damages from Marcellus Shale natural gas extraction in Pennsylvania."
Environmental Research Letters 2013, 8 (1), 014017.
3-29
-------
Loomis, J. and M. Haefele. 2017. "Quantifying Market and Non-market Benefits and Costs of
Hydraulic Fracturing in the United States: A Summary of the Literature." Ecological
Economics 138:160-167.
Marten, A. and S. Newbold. 2012. "Estimating the Social Cost of Non-CCh GHG Emissions:
Methane and Nitrous Oxide." Energy Policy 51:957-972.
Marten A.L., K.A. Kopits, C.W. Griffiths, S.C. Newbold, and A. Wolverton A. 2015.
"Incremental CH4 and N2O Mitigation Benefits Consistent with the US Government's
SC-CO2 Estimates." Climate Policy 15(2):272-298.
Nolte, C.G., A.B. Gilliland, C. Hogrefe, and L.J. Mickley. 2008. "Linking global to regional
models to assess future climate impacts on surface ozone levels in the United States."
Journal of Geophysical Research, 113, D143 07.
Pope, C.A., III, R.T. Burnett, M.J. Thun, E.E. Calle, D. Krewski, K. Ito, and G.D. Thurston.
2002. "Lung Cancer, Cardiopulmonary Mortality, and Long-term Exposure to Fine
Particulate Air Pollution." Journal of the American Medical Association 287:1132-1141.
Reilly, J. and K. Richards, 1993. "Climate change damage and the trace gas index issue."
Environmental and Resource Economics 3(1): 41-61.
Roman, H.A., K.D. Walker, T.L. Walsh, L. Conner, H.M. Richmond, J. Hubbell, and P.L.
Kinney. 2008. "Expert Judgment Assessment of the Mortality Impact of Changes in
Ambient Fine Particulate Matter in the U.S." Environmental Science & Technology
42(7):2268-2274.
Sarofim, M.C., S.T. Waldhoff, and S.C. Anenberg. 2015. "Valuing the Ozone-Related Health
Benefits of Methane Emission Controls." Environmental and Resource Economics
66(l):45-63.
Schmalensee, R. 1993. "Comparing greenhouse gases for policy purposes." Energy Journal
14(1): 245-256.
Shindell, D., J.C.I. Kuylenstierna, E. Vignati, R. van Dingenen, M. Amann, Z. Klimont, S.C.
Anenberg, N. Muller, G. Janssens-Maenhout, F. Raes, J. Schwartz, G. Faluvegi, L.
Pozzoli, K. Kupiainen, L. Hoglund-Isakson, L. Emberson, D. Streets, V. Ramanathan, K.
Hicks, K. Oanh, G. Milly, M. Williams, V. Demkine, D. Fowler. 2012. "Simultaneously
mitigating near-term climate change and improving human health and food security."
Science, 335:183-189.
Shindell, D.T., G. Faluvegi, N. Bell, and G.A. Schmidt. 2005. "An emissions-based view of
climate forcing by methane and tropospheric ozone." Geophysical Research Letters 32:
L04803.
Sisler, J.F. 1996. Spatial and seasonal patterns and long-term variability of the composition of
the haze in the United States: an analysis of data from the IMPROVE network. OR A
Report, ISSN 0737-5352-32, Colorado State University.
3-30
-------
Task Force on Hemispheric Transport of Air Pollution (HTAP). 2010. Hemispheric Transport of
Air Pollution 2010. Informal Document No. 10. Convention on Long-range
Transboundary Air Pollution Executive Body 28th Session. ECE/EB. AIR/2010/10
(Corrected). Chapter 4, pp. 148-149.
United Nations Environment Programme (UNEP) and World Meteorological Organization
(WMO). 2011 .An Integrated Assessment of Black Carbon and Tropospheric Ozone,
United Nations Environment Programme, Nairobi.
. Accessed April 3, 2019.
United Nations Environment Programme (UNEP). 2011. Near-Term Climate Protection and
Clean Air Benefits: Actions for Controlling Short-Lived Climate Forcers. United Nations
Environment Programme, Nairobi, . Accessed
April 3, 2019.
U.S. Environmental Protection Agency (U.S. EPA). 1995. Regulatory Impact Analysis for the
Petroleum Refinery NESHAP. Revised Draft for Promulgation. Office of Air Quality
Planning and Standards, Research Triangle Park, N.C.
.
Accessed April 3, 2019.
U.S. Environmental Protection Agency (U.S. EPA). 2006b. Regulatory Impact Analysis, 2006
National Ambient Air Quality Standards for Particulate Matter, Chapter 5. Office of Air
Quality Planning and Standards, Research Triangle Park, NC.
. Accessed
April 3, 2019.
U.S. Environmental Protection Agency (U.S. EPA). 2009a. Integrated Science Assessment for
Particulate Matter (Final Report). EPA-600-R-08-139F. National Center for
Environmental Assessment—RTP Division.
. Accessed April 3,
2019.
U.S. Environmental Protection Agency (U.S. EPA). 2009b. Technical Support Document for
Proposed Endangerment and Cause or Contribute Findings for Greenhouse Gases under
Section 202(a) of the Clean Air Act. . Accessed April 3, 2019.
U.S. Environmental Protection Agency (U.S. EPA). 2010a. Summary of the updated Regulatory
Impact Analysis, National Ambient Air Quality Standards for Ozone. Office of Air
Quality Planning and Standards, Research Triangle Park, NC.
.
Accessed April 3, 2019.
U.S. Environmental Protection Agency (U.S. EPA). 201 la. The Benefits and Costs of the Clean
Air Act from 1990 to 2020. Office of Air and Radiation, Washington, DC. March. <
3-31
-------
https://www.epa.gov/sites/production/files/2015-07/documents/fullreport_rev_a.pdf>.
Accessed April 3, 2019.
U.S. Environmental Protection Agency (U.S. EPA). 2011b. Regulatory Impact Analysis:
National Emission Standards for Hazardous Air Pollutants for Industrial, Commercial,
and Institutional Boilers and Process Heaters. Office of Air Quality Planning and
Standards, Research Triangle Park, NC. February.
. Accessed
April 3, 2019.
U.S. Environmental Protection Agency (U.S. EPA). 2011c. Regulatory Impact Analysis for the
Federal Implementation Plans to Reduce Interstate Transport of Fine Particulate Matter
and Ozone in 27 States; Correction of SIP Approvals for 22 States. Office of Air Quality
Planning and Standards, Research Triangle Park, NC. July.
.
Accessed April 3, 2019.
U.S. Environmental Protection Agency (U.S. EPA). 2012a. Residual Risk Assessment for the Oil
and Gas Production and Natural Gas Transmission and Storage Source Categories.
Office of Air Quality Planning and Standards, Research Triangle Park, NC.
U.S. Environmental Protection Agency (U.S. EPA). 2012b. Regulatory Impact Analysis Final
New Source Performance Standards and Amendments to the National Emissions
Standards for Hazardous Air Pollutants for the Oil and Natural Gas Industry. Office of
Air Quality Planning and Standards, Health and Environmental Impacts Division. April.
.
Accessed April 3, 2019.
U.S. Environmental Protection Agency (U.S. EPA). 2012c. Regulatory Impact Analysis for the
Final Revisions to the National Ambient Air Quality Standards for Particulate Matter.
EPA-452/R-12-003. Office of Air Quality Planning and Standards, Health and
Environmental Impacts Division. December. <
https://www3.epa.gov/ttn/ecas/docs/ria/naaqs-pm_ria_final_2012-12.pdf>. Accessed
April 3, 2019.
U.S. Environmental Protection Agency (U.S. EPA). 2012d. Regulatory Impact Analysis: Final
Rulemaking for 2017-2025 Light-Duty Vehicle Greenhouse Gas Emission Standards and
Corporate Average Fuel Economy Standards. EPA-420-R-12-016. Office of
Transportation and Air Quality, Assessment and Standards Division. August.
.
Accessed April 3, 2019.
U.S. Environmental Protection Agency (U.S. EPA). 2013. Integrated Science Assessment of
Ozone and Related Photochemical Oxidants (Final Report). U.S. Environmental
Protection Agency, Washington, DC, EPA/600/R-10/076F. February.
. Accessed
April 3, 2019.
3-32
-------
U.S. Environmental Protection Agency (U.S. EPA). 2014a. Health Risk and Exposure
Assessment for Ozone (Final Report). U.S. Environmental Protection Agency, Research
Triangle Park, NC, EPA-452/R-14-004a. August.
. Accessed
April 3, 2019.
U.S. Environmental Protection Agency (U.S. EPA). 2014b. Regulatory Impact Analysis for the
Proposed Ozone NAAQS. U.S. Environmental Protection Agency, Research Triangle
Park, NC, EPA-452/P-14-006. December.
. Accessed April 3, 2019.
U.S. Environmental Protection Agency (U.S. EPA). 2014c. Inventory of U.S. Greenhouse Gas
Emissions and Sinks: 1990-2012. EPA/430-R-14-003. April.
.
Accessed April 3, 2019.
U.S. Environmental Protection Agency (U.S. EPA). 2018. Technical Support Document:
Estimating the Benefit per Ton of Reducing PM2.5 Precursors from 17 Sectors. February.
. Accessed April 3, 2019.
U.S. Environmental Protection Agency—Science Advisory Board (U.S. EPA-SAB). 2002.
Workshop on the Benefits of Reductions in Exposure to Hazardous Air Pollutants:
Developing Best Estimates of Dose-Response Functions An SAB Workshop Report of an
EPA/SAB Workshop (FinalReport). EPA-SAB-EC-WKSHP-02-001. January.
. Accessed April 3, 2015.
U.S. Environmental Protection Agency—Science Advisory Board (U.S. EPA-SAB). 2008.
Benefits of Reducing Benzene Emissions in Houston, 1990-2020. EPA-COUNCIL-08-
001. July.
.
Accessed April 3, 2019.
Waldhoff, S., D. Anthoff, S. Rose, and R.S.J. Tol. 2014. "The Marginal Damage Costs of
Different Greenhouse Gases: An Application of FUND." The Open-Access, Open
AssessmentE-Journal. 8(31): 1-33. . Accessed April 3, 2019.
West et al. 2006. "Global health benefits of mitigating ozone pollution with methane emission
controls." Proceedings of the National Academy of Sciences 103(11):3988-3993.
West, J.J. and A.M. Fiore. 2005. "Management of tropospheric ozone by reducing methane
emissions." Environmental Science & Technology 39:4685-4691.
3-33
-------
4 ECONOMIC IMPACT ANALYSIS AND DISTRIBUTIONAL ASSESSMENTS
4.1 Introduction
This section includes four points of discussion for the proposed action: energy markets
impacts, distributional impacts, small business impacts, and employment impacts.
4.2 Energy Markets Impacts
As it is implemented, the 2016 NSPS OOOOa may have impacts on energy production
and markets which would be reduced under the proposed action. The 2016 NSPS RIA used the
National Energy Modeling System (NEMS) to estimate the impacts to drilling activity, price, and
quantity changes in the production of crude oil and natural gas, and changes in international trade
of crude oil and natural gas national energy markets as a result of the 2016 NSPS OOOOa.62 In
that analysis, EPA estimated the following impacts under the final 2016 NSPS OOOOa:
• Natural gas and crude oil drilling levels would decline slightly over the 2020 to 2025
period (by about 0.17 percent for natural gas wells and 0.02 percent for crude oil wells);
• Crude oil production would not change appreciably under the rule, while natural gas
production would decline slightly over the 2020 to 2025 period (about 0.03 percent);
• Crude oil wellhead prices for onshore production in the lower 48 states were not
estimated to change appreciably over the 2020 to 2025 period, while wellhead natural gas
prices for onshore production in the lower 48 states were estimated to increase slightly
over the 2020 to 2025 period (about 0.20 percent); and
• Net imports of natural gas were estimated to increase slightly in 2020 (by about 0.12
percent) and in 2025 (by about 0.11 percent), while net imports of crude oil were not
estimated to change appreciably over the 2020 to 2025 period.
As described earlier in this RIA, this proposed action includes removing the
requirements in the 2016 NSPS OOOOa from the sources in the transmission and storage sector.
The proposed option is expected to lead to total cost savings. The EAV of cost savings over the
2019-25 time frame is about $18 million per year without including the forgone value of product
62 See Section 6.2 of the 2016 NSPS RIA
4-1
-------
recovery (about $4 million per year), or $14 million per year when the forgone value of product
recovery is included. As a result, EPA expects that this deregulatory action, if finalized, would
partially ameliorate the impacts estimated for the final NSPS in the 2016 NSPS RIA.
4.3 Distributional Impacts
The compliance cost savings and forgone benefits presented above are not expected to be
felt uniformly across the population and may not accrue to the same individuals or communities.
OMB recommends including a description of distributional effects, as part of a regulatory
analysis, "so that decision makers can properly consider them along with the effects on economic
efficiency [i.e., net benefits], E.O. 12866 authorizes this approach." (U.S. Office of Management
and Budget, 2003). Understanding the distribution of the compliance cost savings and forgone
benefits can aid in understanding community-level impacts associated with this action.63 This
section discusses the general expectations regarding how compliance cost savings and forgone
health benefits might be distributed across the population, relying on a review of recent
literature. EPA did not conduct a quantitative assessment of these distributional impacts for the
proposed action, but the qualitative discussion in this section provides a general overview of the
types of impacts that could result from this action.
4.3.1 Distributional Aspects of Compliance Cost Savings
The compliance costs associated with an environmental action can impact households by
raising the prices of goods and services; the extent of the price increase depends on if and how
producers pass-through those costs to consumers. The literature evaluates the distributional
effects of introducing a new regulation; as the literature relates to the proposed action, which is
deregulatory, these effects can be interpreted in reverse. Expenditures on energy are usually a
larger share of low-income household income than that of other households, and this share falls
as income increases. Therefore, policies that increase energy prices have been found to be
regressive, placing a greater burden on lower income households (e.g., Burtraw et al., 2009;
63 Executive Order 12898, Federal Actions to Address Environmental Justice in Minority Populations and Low-
Income Populations, directs agencies to address impacts on minority and low-income populations, particularly
those that may be considered disproportionate. EPA developed guidance, both in its Guidelines for Preparing
Economic Analyses (U.S. EPA, 2010) and Technical Guidance for Assessing Environmental Justice in
Regulatory Analyses (U.S. EPA, 2016) to provide recommendations for how to consider distributional impacts of
rules on vulnerable populations.
4-2
-------
Hassett et al., 2009; Williams et al., 2015). However, compliance costs will not be solely passed
on in the form of higher energy prices, but also through lower labor earnings and returns to
capital in the sector. Changes in employment associated with lower labor earnings can have
distributional consequences depending on a number of factors (Section 3.5 discusses
employment effects further). Capital income tends to make up a greater proportion of overall
income for high income households. As result, the costs passed through to households via lower
returns to capital tend to be progressive, placing a greater share of the burden on higher income
households in these instances (Rausch et al., 2011; Fullerton et al., 2011).
The ultimate distributional outcome will depend on how changes in energy prices and
lower returns to labor and capital propagate through the economy and interact with existing
government transfer programs. Some literature using an economy-wide framework finds that the
overall distribution of compliance costs could be progressive for some policies due to the
changes in capital payments and the expectation that existing government transfers indexed to
inflation will offset the burden to lower income households64 (Fullerton et al., 2011; Blonz et al.,
2012). However, others have found the distribution of compliance costs to be regressive due to a
dominating effect of changes in energy prices to consumers (Fullerton, 2011; Burtraw et al.,
2009; Williams et al., 2015). There may also be significant heterogeneity in the costs borne by
individuals within income deciles (Rausch et al., 2011; Cronin et al., 2017). Different
classifications of households, such as on the basis of lifetime income rather than
contemporaneous annual income, may provide notably different results (Fullerton and Metcalf,
2002; Fullerton et al., 2011). Furthermore, there may be important regional differences in the
incidence of regulations. There are differences in the composition of goods consumed, regional
production methods, the stringency of a rule, as well as the location of affected labor and capital
ownership (the latter of which may be foreign-owned) (e.g., Caron et al., 2017; Hassett et al.,
2009).
4.3.2 Distributional Aspects of the Forgone Health Benefits
64 The incidence of government transfer payments (e.g., Social Security) is generally progressive because these
payments represent a significant source of income for lower income deciles and only a small source for high
income deciles. Government transfer programs are often, implicitly or explicitly, indexed to inflation. For
example, Social Security payments and veterans' benefits are adjusted every year to account for changes in
prices (i.e., inflation).
4-3
-------
This section discusses the distribution of forgone health benefits that result from the
proposed action. EPA guidance directs analysts to first consider the distribution of impacts in the
baseline, prior to any regulatory action (see U.S. EPA (2016)). Often the baseline incidence of
health outcomes is greater among low-income or minority populations due to a variety of factors,
including a greater number of pollution sources located where low-income and minority
populations live, work and play (Bullard et al., 2007; United Church of Christ, 1987); greater
susceptibility to a given exposure due to physiology or other triggers (Akinbami, 2012); and pre-
existing conditions (Schwartz et al., 2011). EPA (2016) then recommends analysts examine the
distribution of health outcomes under the policy scenarios being considered. Finally, this can be
followed by an examination of the change between the baseline and policy scenario, taking note
of whether the action ameliorates or exacerbates any pre-existing disparities.
Because the way the health benefits of a rulemaking are distributed is based on the
correlation of housing and work locations to changes in atmospheric concentrations of pollutants,
it is difficult to fully know the distributional impacts of a rule. Air dispersion models provide
some information on changes in pollution, but it may be difficult to identify the characteristics of
populations in those affected areas, as well as to perform local air dispersion modeling
nationwide. Furthermore, the overall distribution of health benefits will depend on whether and
how any households change their housing location choice in response to air quality changes
(Sieg et al., 2004).
4.4 Small Business Impacts
The Regulatory Flexibility Act (REA; 5 U.S.C. §601 et seq.), as amended by the Small
Business Regulatory Enforcement Fairness Act (Public Law No. 104121), provides that
whenever an agency publishes a proposed rule, it must prepare and make available an initial
regulatory flexibility analysis (IRFA), unless it certifies that the rule, if promulgated, will not
have a significant economic impact on a substantial number of small entities (5 U.S.C. §605[b]).
Small entities include small businesses, small organizations, and small governmental
jurisdictions. An IRFA describes the economic impact of the rule on small entities and any
significant alternatives to the rule that would accomplish the objectives of the rule while
minimizing significant economic impacts on small entities.
4-4
-------
An agency may certify that a rule will not have a significant economic impact on a
substantial number of small entities if the rule relieves regulatory burden, has no net burden or
otherwise has a positive economic effect on the small entities subject to the rule. As described in
Section 2 of this RIA, this proposed action proposes to remove requirements on all sources in the
transmission and storage sector and will not change the stringency on the remaining sources
affected by the 2016 NSPS OOOOa. Relative to the 2018 Proposed Regulatory baseline, the
reduction in EAV over the 2019-25 time frame is about $18 million per year without including
the forgone value of product recovery (about $4 million per year), or $14 million per year when
the forgone value of product recovery is included. As a result, EPA expects that this deregulatory
action, if finalized as proposed, would lessen the impacts estimated for the final NSPS in the
2016 NSPS RIA. We have therefore concluded that this action will be neutral or will relieve
regulatory burden for all directly regulated small entities.
4.5 Employment Impacts
In this section, EPA presents a qualitative discussion of the impacts of this rulemaking on
employment.65 E.O. 13777 directs federal agencies to consider a variety of issues regarding the
characteristics and impacts of regulations, including the effect of regulations on jobs (E.O.
13777). Employment impacts of environmental regulations are composed of a mix of potential
declines and gains in different areas of the economy over time. Regulatory employment impacts
can vary across occupations, regions, and industries; by labor demand and supply elasticities;
and in response to other labor market conditions. Isolating such impacts is a challenge, as they
are difficult to disentangle from employment impacts caused by a wide variety of ongoing,
concurrent economic changes.
Environmental regulation "typically affects the distribution of employment among
industries rather than the general employment level" (Arrow et al., 1996). Even if they are
mitigated by long-run market adjustments to full employment, many regulatory actions have
transitional effects in the short run (OMB, 2015). These movements of workers in and out of jobs
in response to environmental regulation are potentially important distributional impacts of
65 The employment analysis in this RIA is part of EPA's ongoing effort to "conduct continuing evaluations of
potential loss or shifts of employment which may result from the administration or enforcement of [the Act]"
pursuant to CAA section 321(a).
4-5
-------
interest to policy makers. Transitional job losses experienced by workers operating in declining
industries, exhibiting low migration rates, or living in communities or regions where
unemployment rates are high are of concern.
A discussion of partial employment impacts for affected entities in the oil and gas
industry was completed in the 2016 NSPS RIA using detailed engineering information on labor
requirements for each of the control strategies identified in the rule.66 These bottom-up,
engineering-based estimates represented only one portion of potential employment impacts
within the regulated industry, and did not represent estimates of the net employment impacts of
the rule. Labor changes may be required as part of an initial effort to comply with a regulation or
required as a continuous or annual effort to maintain compliance. In the 2016 analysis, EPA
estimated up-front and continual annual labor requirements by estimating hours of labor required
and converting this number to full-time equivalents (FTEs) by dividing by 2,080 (40 hours per
week multiplied by 52 weeks). Overall, the 2016 NSPS OOOOa estimated the one-time labor
requirement for the affected sector to be about 270 FTEs in 2020 and 2025, and the annual labor
requirement was estimated to be about 1,100 FTEs in 2020 and 1,800 FTEs in 2025. Due to data
and methodology limitations, other potential employment impacts in the affected industry and
impacts in related industries were not estimated.
As the proposed action is likely to cause little change in oil and natural gas exploration
and production, and many aspects of the 2016 NSPS OOOOa requirements are not affected by
the proposed action, demand for labor employed in exploration and production and associated
industries is unlikely to change greatly. For the affected oil and natural gas entities, some
reductions in labor from 2016 NSPS OOOOa-related requirements may be expected under the
proposed action. EPA expects there will be slight reductions in the labor required for
compliance-related activities associated with the 2016 NSPS OOOOa requirements relating to
sources in transmission and storage. However, due to uncertainties associated with how the
proposed action will influence the portfolio of activities associated with fugitive emissions-
related requirements, EPA is unable to provide quantitative estimates of compliance-related labor
changes. EPA continues to explore the relevant theoretical and empirical literature and to seek
66 EPA did not estimate the labor required to perform the professional engineer certification requirements in the
2016 NSPS OOOOa.
4-6
-------
public comments to ensure that the way EPA characterizes the employment effects of its
regulations is valid and informative.
4.6 References
Akinbami, L.J., J.E. Mooreman, C. Bailey, H. Zahran, M. King, C. Johnson, and X. Liu. 2012.
Trends in Asthma Prevalence, Health Care Use, and Mortality in the United States, 2001-
2010. NCHS data brief no. 94. Hyattsville, MD: National Center for Health Statistics.
Available at . Accessed April 4,
2019.
Arrow, K. J., M. L. Cropper, G. C. Eads, R. W. Hahn, L. B. Lave, R. G. Noll, Paul R. Portney,
M. Russell, R. Schmalensee, V. K. Smith, and R. N. Stavins. 1996. "Benefit-Cost
Analysis in Environmental, Health, and Safety Regulation: A Statement of Principles."
American Enterprise Institute, the Annapolis Center, and Resources for the Future; AEI
Press. Available at
. Accessed April 4, 2019.
Blonz, J., Burtraw, D. & Walls, M. 2010. "Climate Policy's Uncertain Outcomes for Households:
The Role of Complex Allocation Schemes in Cap-and-Trade." The B.E. Journal of
Economic Analysis & Policy, 10(2): 1935-1682.
Bullard, R.D., P. Mohai, R. Saha, and B. Wright. 2007. Toxic Wastes and Race at Twenty: 1987-
2007 Grassroots Struggles to Dismantle Environmental Racism in the United States.
Cleveland, OH: United Church of Christ Justice and Witness Ministries. Available at
. Accessed April 4, 2019.
Burtraw, D., R. Sweeney, and M. Walls. 2009. "The Incidence of U.S. Climate Policy:
Alternative Uses of Revenues from a Cap-and-Trade Auction." National Tax Journal,
62(3), 497-518.
Cronin, J. A., D. Fullerton, S. Sexton. 2019. "Vertical and Horizontal Redistributions from a
Carbon Tax and Rebate." Journal of the Association of Environmental and Resource
Economists, 6(S1): S169-S208.
Executive Order 13777. 2017. Presidential Executive Order on Enforcing the Regulatory Reform
Agenda.
Fullerton, D., G. Heutel, G. Metcalf. 2012. "Does the Indexing of Government Transfers Make
Carbon Pricing Progressive?" American Journal of Agricultural Economics, 94(2):347-
353.
4-7
-------
Fullerton, D. 2011. "Six Distributional Effects of Environmental Policy." Risk Analysis, 31(6):
923-929.
Hassett, K., A. Mathur, G. Metcalf. 2009. "The Incidence of a U.S. Carbon Tax: A Lifetime and
Regional Analysis". Energy Journal, 30(2): 155-177.
Rausch, S., G. Metcalf, J.M. Reilly. 2011. "Distributional Impacts of Carbon Pricing: A General
Equilibrium Approach with Micro-Data for Households" Energy Economics, 33: S20-
S33.
United Church of Christ. 1987. Toxic Waste and Race in the United States: A National Report on
the Racial and Socio-Economic Characteristics of Communities with Hazardous Waste
Sites. United Christ Church, Commission for Racial Justice.
U.S. Office of Management and Budget. 2003. "Circular A-4, Regulatory Analysis". Available at
.
Accessed April 4, 2019.
U.S. Office of Management and Budget. 2015. 2015 Report to Congress on the Benefits and
Costs of Federal Regulations and Agency Compliance with the Unfunded Mandates
Reform Act. Available at
. Accessed April 4, 2019.
Williams, R.C., H. Gordon, D. Burtraw, J.C Carbone, and R.D. Morgenstern. 2015. "The Initial
Incidence of a Carbon Tax across Income Groups," National Tax Journal, 68(1): 195—
214.
4-8
-------
5 COMPARISON OF BENEFITS AND COSTS
5.1 Comparison of Benefits and Costs Across Regulatory Options
In this section, we present a comparison of the benefits and costs of this proposed
regulation across the alternative baselines. To be more consistent with traditional net benefits
analysis, we modify the relevant terminology in the following tables, which present the costs,
benefits and net benefits for this proposed action. In this section, we refer to the cost savings as
presented in Section 2 as the "benefits" of this proposed action and the forgone benefits as
presented in Section 3 as the "costs" of this proposed action. The net benefits are the benefits
(cost savings) minus the costs (forgone benefits). As explained in the previous sections, all costs
and benefits outlined in this RIA are estimated as the change from the alternative baseline.
All benefits, costs, and net benefits shown in this section are presented as the PV of the
costs and benefits of the proposed action from 2019 through 2025 discounted back to 2016 under
both a 7 percent and a 3 percent discount rate, and their associated EAV. Table 5-1 shows the
estimated benefits, costs and net benefits for the proposed action relative to the 2018 Proposed
Regulatory baseline. Table 5-2 shows the estimated benefits, costs and net benefits for the
proposed action relative to the 2018 Proposed Regulatory baseline.
Table 5-1 Summary of the Present Value (PV) and Equivalent Annualized Value
(EAV) of Forgone Monetized Benefits, Cost Savings, and Net Benefits for the Proposed
Option, 2019 through 2025, relative to the 2018 Proposed Regulatory Baseline (millions,
2016$)
7 percent
3 percent
PV
EAV
PV
EAV
Benefits (Total Cost Savings)
$81
$14
$103
$16
Cost Savings
$104
$18
$133
$21
Forgone Value of Product Recovery
$23
$4.0
$29
$4.6
Costs (Forgone Domestic Climate Benefits)1
$13
$2.2
$49
$7.7
Net Benefits2
$69
$12
$54
$8.4
1 The forgone benefits estimates are calculated using estimates of the social cost of methane (SC-CH4). SC-CH4
values represent only a partial accounting of domestic climate impacts from methane emissions.
2 Estimates may not sum due to independent rounding.
5-9
-------
Table 5-2 Summary of the Present Value (PV) and Equivalent Annualized Value
(EAV) of Forgone Monetized Benefits, Cost Savings, and Net Benefits for the Proposed
Option, 2019 through 2025, relative to the Current Regulatory Baseline (millions, 2016$)
7 percent
3 percent
PV
EAV
PV
EAV
Benefits (Total Cost Savings)
$97
$17
$123
$19
Cost Savings
$122
$21
$155
$24
Forgone Value of Product Recovery
$25
$4.4
$32
$5.0
Costs (Forgone Domestic Climate Benefits)1
$13
$2.3
$52
$8.1
Net Benefits2
$83
$14
$70
$11
1 The forgone benefits estimates are calculated using estimates of the social cost of methane (SC-CH4). SC-CH4
values represent only a partial accounting of domestic climate impacts from methane emissions.
2 Estimates may not sum due to independent rounding.
Table 5-3 provides a summary of the direct increase in emissions for the proposed action
relative to both baselines.
Table 5-3 Summary of Total Increase in Emissions of the Proposed Action, 2019
through 2025, compared to Alternative Baselines
Pollutant
Increase in Emissions
Relative to the 2018 Proposed
Regulatory Baseline
Increase in Emissions
Relative to the Current
Regulatory Baseline
Methane (short tons)
350,000
370,000
VOC (short tons)
9,700
10,000
HAP (short tons)
290
300
Methane (metric tons)
Methane (million metric tons CO2 Eq.)
320,000
7.9
330,000
8.4
5.2 Uncertainties and Limitations
Throughout the RIA, we considered several sources of uncertainty, both quantitatively
and qualitatively, regarding emissions increases, forgone benefits, and cost savings of the
proposed rule. We summarize the key elements of our discussions of uncertainty here:
• Projection methods and assumptions: As discussed in Section 2.3.2, over time, more
facilities are newly established or modified in each year, and to the extent the facilities
remain in operation in future years, the total number of facilities subject to the NSPS
accumulates. We assume one hundred percent compliance with the rule, starting from
when the source becomes affected. If sources are not complying with the rule, at all or as
written, the cost savings may be overestimated. In addition, the impacts of this rule are
based on projections based on historical estimates in the Greenhouse Gas Inventory and
5-10
-------
do not account for modifications or turnover, just the estimated number of new sources.67
To the extent actual counts of new facilities in transmission and storage diverge from the
historical average annual increases, the projected regulatory impacts estimated in this
document will diverge. It is possible that, though the number of sources remains constant
over a time period, sources are retired at the same rate new sources subject to 2016 NSPS
OOOOa are built. This means that the number of sources affected by 2016 NSPS
OOOOa, and this proposed action, may be underestimated.
• Years of analysis: The years of analysis are 2019, to represent the first-year facilities are
affected by this reconsideration, through 2025, to represent impacts of the rule over a
longer period, as discussed in Section 2.3.2. While it is desirable to analyze impacts
beyond 2025 in this RIA, EPA has chosen not to do this largely because of the limited
information available on the turnover rate of emissions sources and controls. Extending
the analysis beyond 2025 would introduce substantial and increasing uncertainties in
projected impacts of the proposed regulation.
• State regulations in the baselines for this analysis: In preparing the impacts analysis,
EPA reviewed state regulations and permitting requirements. With the information we
currently have available, we are unable to determine where newly affected sources in the
transmission and storage segments are expected to locate. Though there are states with
similar requirements to those of the 2016 NSPS OOOOa, as amended in the technical
reconsideration, we are unable to account for them in this action.68 Applicable facilities in
these states with similar requirements will still be expected to follow state regulations.
This analysis likely overestimates the cost savings from sources in transmission and
storage because it includes estimates of incrementally affected facilities with similar state
67 As noted in the preamble of this proposed rule, EPA is interested in determining whether information in NSPS-
related compliance reports may prove useful for estimating turnover rates of affected facilities. EPA will use this
information in future analyses if it is useful and appropriate.
68 For this proposed action and for the technical reconsideration proposal, EPA projected affected facilities using a
combination of historical data from the U.S. GHG Inventory, DI Desktop, and projected activity levels taken
from the Energy Information Administration's Annual Energy Outlook. Because oil and natural gas well
locations are identified in DI Desktop, we can forecast well drilling activities by state. As a result, we can
estimate the effects of state regulations on future affected facilities that draw upon state-specific information in
their projection. However, projections of affected facilities that draw upon U.S. GHG Inventory, such as sources
in the transmission and storage segment, are national-scale and, hence, we are unable to account for state-level
regulations in our projected impacts in this proposed RIA.
5-11
-------
level requirements to those in the 2016 NSPS OOOOa, as amended by the technical
reconsideration.
• Wellhead natural gas prices used to estimate forgone revenues from natural gas
recovery: The compliance cost savings estimates presented in this RIA include the
forgone revenue associated with the decrease in natural gas recovery resulting from the
decrease in emissions reductions. As a result, the national compliance cost savings
depends on the price of natural gas. As explained in Section 2.3.4, natural gas prices used
in this analysis are from the projection of the Henry Hub price in the 2018 AEO. To the
extent actual natural gas prices diverge from the AEO projections, the projected
regulatory impacts estimated in this document will diverge.
• Monetized forgone methane-related climate benefits: EPA considered the uncertainty
associated with the social cost of methane (SC-CH4) estimates, which were used to
calculate the forgone domestic social benefits of the increase in methane emissions
expected as a result of this reconsideration. Some uncertainties are captured within the
analysis, while other areas of uncertainty have not yet been quantified in a way that can
be modeled. Chapter 3 and the accompanying Appendix provides a detailed discussion of
the ways in which the modeling underlying the development of the SC-CH4 estimates
used in this analysis addresses quantified sources of uncertainty and presents a sensitivity
analysis to show consideration of the uncertainty surrounding discount rates over long
time horizons.
• Non-monetized forgone benefits: Numerous categories of forgone health, welfare, and
climate benefits are not quantified and monetized in this RIA. These unquantified
forgone benefits, including forgone benefits from increases in emissions of methane,
VOCs and HAP, are described in detail in Chapter 3.
5-12
-------
A. APPENDIX: UNCERTAINTY ASSOCIATED WITH ESTIMATING THE
SOCIAL COST OF METHANE
A.l Overview of Methodology Used to Develop Interim Domestic SC-CH4 Estimates
The domestic SC-CH4 estimates rely on the same ensemble of three integrated
assessment models (IAMs) that were used to develop the IWG global SC-CH4 (and SC-CO2)
estimates: DICE 2010, FUND 3.8, and PAGE 2009.® The three IAMs translate emissions into
changes in atmospheric greenhouse concentrations, atmospheric concentrations into changes in
temperature, and changes in temperature into economic damages. The emissions projections used
in the models are based on specified socio-economic (GDP and population) pathways. These
emissions are translated into atmospheric concentrations, and concentrations are translated into
warming based on each model's simplified representation of the climate and a key parameter,
equilibrium climate sensitivity. The effect of these Earth system changes is then translated into
consumption-equivalent economic damages. As in the IWG exercise, these key inputs were
harmonized across the three models: a probability distribution for equilibrium climate sensitivity;
five scenarios for economic, population, and emissions growth; and discount rates.70 All other
model features were left unchanged. Future damages are discounted using constant discount rates
of both 3 and 7 percent, as recommended by OMB Circular A-4.
The domestic share of the global SC-CH4—i.e., an approximation of the climate change
impacts that occur within U.S. borders71—is calculated directly in both FUND and PAGE.
However, DICE 2010 generates only global estimates. Therefore, EPA approximates U.S.
damages as 10 percent of the global values from the DICE model runs, based on the results from
a regionalized version of the model (RICE 2010) reported in Table 2 of Nordhaus (2017).72
Although the regional shares reported in Nordhaus (2017) are specific to SC-CO2, they still
provide a reasonable interim approach for approximating the U.S. share of marginal damages
69 The full model names are as follows: Dynamic Integrated Climate and Economy (DICE); Climate Framework for
Uncertainty, Negotiation, and Distribution (FUND); and Policy Analysis of the Greenhouse Gas Effect (PAGE).
70 See the IWG's summary of its methodology in the docket, document ID number EPA-HQ-OAR-2015-0827-5886,
"Addendum to Technical Support Document on Social Cost of Carbon for Regulatory Impact Analysis under
Executive Order 12866: Application of the Methodology to Estimate the Social Cost of Methane and the Social
Cost of Nitrous Oxide (August 2016)". See also National Academies (2017) for a detailed discussion of each of
these modeling assumptions.
71 Note that inside the U.S. borders is not the same as accruing to U.S. citizens, which may be higher or lower.
72 Nordhaus, William D. 2017. Revisiting the social cost of carbon. Proceedings of the National Academy of
Sciences of the United States, 114(7): 1518-1523.
A-l
-------
from methane emissions. Direct transfer of the domestic share from the SC-CO2 may understate
the U.S. share of the IWG global SC-CH4 estimates based on DICE due to the combination of
three factors: a) regional damage estimates are known to be highly correlated with output shares
(Nordhaus, 2017; 2014), b) the U.S. share of global output decreases over time in all five EMF-
22 based socioeconomic scenarios used for the model runs, and c) the bulk of the temperature
anomaly (and hence, resulting damages) from a perturbation in emissions in a given year will be
experienced earlier for CH4 than CO2 due to the shorter lifetime of CH4 relative to CO2.
The steps involved in estimating the social cost of CH4 are similar to that of CO2. The
three integrated assessment models (FUND, DICE, and PAGE) are run using the harmonized
equilibrium climate sensitivity distribution, five socioeconomic and emissions scenarios,
constant discount rates described above. Because the climate sensitivity parameter is modeled
probabilistically, and because PAGE and FUND incorporate uncertainty in other model
parameters, the final output from each model run is a distribution over the SC-CH4 in year l
based on a Monte Carlo simulation of 10,000 runs. For each of the IAMs, the basic
computational steps for calculating the social cost estimate in a particular year t are: 1.) calculate
the temperature effects and (consumption-equivalent) damages in each year resulting from the
baseline path of emissions; 2.) adjust the model to reflect an additional unit of emissions in year
t.; 3.) recalculate the temperature effects and damages expected in all years beyond t resulting
from this adjusted path of emissions, as in step 1; and 4.) subtract the damages computed in step
1 from those in step 3 in each model period and discount the resulting path of marginal damages
back to the year of emissions. In PAGE and FUND step 4 focuses on the damages attributed to
the US region in the models. As noted above, DICE does not explicitly include a separate US
region in the model and therefore, EPA approximates U.S. damages in step 4 as 10 percent of the
global values based on the results of Nordhaus (2017). This exercise produces 30 separate
distributions of the SC-CH4 for a given year, the product of 3 models, 2 discount rates, and 5
socioeconomic scenarios. Following the approach used by the IWG, the estimates are equally
weighted across models and socioeconomic scenarios to consolidate the results into one
distribution for each discount rate.
A-2
-------
A.2 Treatment of Uncertainty in Interim Domestic SC-CH4 Estimates
There are various sources of uncertainty in the SC-CH4 estimates used in this analysis.
Some uncertainties pertain to aspects of the natural world, such as quantifying the physical
effects of greenhouse gas emissions on Earth systems. Other sources of uncertainty are
associated with current and future human behavior and well-being, such as population and
economic growth, GHG emissions, the translation of Earth system changes to economic
damages, and the role of adaptation. It is important to note that even in the presence of
uncertainty, scientific and economic analysis can provide valuable information to the public and
decision makers, though the uncertainty should be acknowledged and when possible taken into
account in the analysis (National Academies, 2013).73 OMB Circular A-4 also requires a
thorough discussion of key sources of uncertainty in the calculation of benefits and costs,
including more rigorous quantitative approaches for higher consequence rules. This section
summarizes the sources of uncertainty considered in a quantitative manner in the domestic SC-
CH4 estimates.
The domestic SC-CH4 estimates consider various sources of uncertainty through a
combination of a multi-model ensemble, probabilistic analysis, and scenario analysis. We
provide a summary of this analysis here; more detailed discussion of each model and the
harmonized input assumptions can be found in the 2017 National Academies report. For
example, the three IAMs used collectively span a wide range of Earth system and economic
outcomes to help reflect the uncertainty in the literature and in the underlying dynamics being
modeled. The use of an ensemble of three different models at least partially addresses the fact
that no single model includes all the quantified economic damages. It also helps to reflect
structural uncertainty across the models, which stems from uncertainty about the underlying
relationships among GHG emissions, Earth systems, and economic damages that are included in
the models. Bearing in mind the different limitations of each model and lacking an objective
basis upon which to differentially weight the models, the three integrated assessment models are
given equal weight in the analysis.
73 Institute of Medicine of the National Academies. 2013. Environmental Decisions in the Face of Uncertainty. The
National Academies Press.
A-3
-------
Monte Carlo techniques were used to run the IAMs many times. In each simulation the
uncertain parameters are represented by random draws from their defined probability
distributions. In all three models the equilibrium climate sensitivity is treated probabilistically
based on the probability distribution from Roe and Baker (2007) calibrated to the IPCC AR4
consensus statement about this key parameter.74 The equilibrium climate sensitivity is a key
parameter in this analysis because it helps define the strength of the climate response to
increasing GHG concentrations in the atmosphere. In addition, the FUND and PAGE models
define many of their parameters with probability distributions instead of point estimates. For
these two models, the model developers' default probability distributions are maintained for all
parameters other than those superseded by the harmonized inputs (i.e., equilibrium climate
sensitivity, socioeconomic and emissions scenarios, and discount rates). More information on the
uncertain parameters in PAGE and FUND is available upon request.
For the socioeconomic and emissions scenarios, uncertainty is included in the analysis by
considering a range of scenarios selected from the Stanford Energy Modeling Forum exercise,
EMF-22. Given the dearth of information on the likelihood of a full range of future
socioeconomic pathways at the time the original modeling was conducted, and without a basis
for assigning differential weights to scenarios, the range of uncertainty was reflected by simply
weighting each of the five scenarios equally for the consolidated estimates. To better understand
how the results vary across scenarios, results of each model run are available in the docket.
The outcome of accounting for various sources of uncertainty using the approaches
described above is a frequency distribution of the SC-CH4 estimates for emissions occurring in a
given year for each discount rate. Unlike the approach taken for consolidating results across
models and socioeconomic and emissions scenarios, the SC-CH4 estimates are not pooled across
different discount rates because the range of discount rates reflects both uncertainty and, at least
in part, different policy or value judgements; uncertainty regarding this key assumption is
discussed in more detail below. The frequency distributions reflect the uncertainty around the
input parameters for which probability distributions were defined, as well as from the multi-
model ensemble and socioeconomic and emissions scenarios where probabilities were implied
74 Specifically, the Roe and Baker distribution for the climate sensitivity parameter was bounded between 0 and 10
with a median of 3 °C and a cumulative probability between 2 and 4.5 °C of two-thirds.
A-4
-------
by the equal weighting assumption. It is important to note that the set of SC-CH4 estimates
obtained from this analysis does not yield a probability distribution that fully characterizes
uncertainty about the SC-CH4 due to impact categories omitted from the models and sources of
uncertainty that have not been fully characterized due to data limitations.
Figure A-l presents the frequency distribution of the domestic SC-CH4 estimates for
emissions in 2020 for each discount rate. Each distribution represents 150,000 estimates based
on 10,000 simulations for each combination of the three models and five socioeconomic and
emissions scenarios.75 In general, the distributions are skewed to the right and have long right
tails, which tend to be longer for lower discount rates. To highlight the difference between the
impact of the discount rate on the SC-CH4 and other quantified sources of uncertainty, the bars
below the frequency distributions provide a symmetric representation of quantified variability in
the SC-CH4 estimates conditioned on each discount rate. The full set of SC-CH4 results through
2050 is available as part of the RIA analysis materials.
75 Although the distributions in Figure A-l are based on the full set of model results (150,000 estimates for each
discount rate), for display purposes the horizontal axis is truncated with 0.001 to 0.013 percent of the estimates
lying below the lowest bin displayed and 0.471 to 3.356 percent of the estimates lying above the highest bin
displayed, depending on the discount rate.
A-5
-------
c/)
c
o
C/)
c
o
o
CD
LO
CO
O
O
CO
LO
CM
O
O
C\l
O
LO
T—
d
o
d
LO
o
o
o
7% Average = $55
Discount Rate
~ 7%
~ 3%
3% Average = $180
in
j glh _ ggtn percen^j|g
J of Simulations
T
T
T
T
100 200 300 400 500 600 700
Interim U.S. Domestic Social Cost of Methane in 2020 [2016$ / metric ton CH4]
800
Figure A-l Frequency Distribution of Interim Domestic SC-CH4 Estimates for 2020 (in
2016$ per metric ton C'H4)
As illustrated by the frequency distributions in Figure A-l, the assumed discount rate
plays a critical role in the ultimate estimate of the social cost of methane. This is because CHU
emissions today continue to impact society far out into the future,76 so with a higher discount
rate, costs that accrue to future generations are weighted less, resulting in a lower estimate.
Circular A-4 recommends that costs and benefits be discounted using the rates of 3 percent and 7
percent to reflect the opportunity cost of consumption and capital, respectively. Circular A-4 also
recommends quantitative sensitivity analysis of key assumptions,n and offers guidance on what
sensitivity analysis can be conducted in cases where a rule will have important intergenerational
benefits or costs. To account for ethical considerations of future generations and potential
16 Although the atmospheric lifetime of CH4 is notably shorter than that of CO;* the impacts of changes in
contemporary CH4 emissions are also expected to occur over long time horizons that cover multiple generations.
For more discussion, see document ID number EPA-HQ-OAR-2015-0827-5886, "Addendum to Technical
Support Document on Social Cost of Carbon for Regulatory Impact Analysis under Executive Order 12866:
Application of the Methodology to Estimate the Social Cost of Methane and the Social Cost of Nitrous Oxide
(August 2016)".
77 "If benefit or cost estimates depend heavily on certain assumptions, you should make those assumptions explicit
and carry out Sensitivity analyses using plausible alternative assumptions." (OMB 2003, page 42).
A-6
-------
uncertainty in the discount rate over long time horizons, Circular A-4 suggests "further
sensitivity analysis using a lower but positive discount rate in addition to calculating net benefit
using discount rates of 3 and 7 percent" (page 36) and notes that research from the 1990s
suggests intergenerational rates "from 1 to 3 percent per annum" (OMB, 2003). We consider the
uncertainty in this key assumption by calculating the domestic SC-CH4 based on a 2.5 percent
discount rate, in addition to the 3 and 7 percent used in the main analysis. Using a 2.5 percent
discount rate, the average domestic SC-CH4 estimate across all the model runs for emissions
occurring in 2019 is $220 per metric ton of CH4 (2016$);78 in this case the forgone domestic
climate benefits of the proposed action relative to the 2018 Proposed Regulatory Baseline are
$5.7 million in 2019 under a 2.5 percent discount rate. By 2025, the average domestic SC-CH4
using a 2.5 percent discount rate is $250 per metric ton of CH4 (2016$), and the corresponding
forgone domestic climate benefits of the proposed action increase to $13 million. The PV of the
forgone domestic climate benefits under a 2.5 percent discount rate is $64 million, with a
corresponding EAV of $9.9 million per year. Using the same discount rate, the PV and EAV of
the forgone domestic climate benefits of the proposed action relative to the Current Regulatory
Baseline are $68 million and $10 million, respectively.
In addition to the approach to accounting for the quantifiable uncertainty described
above, the scientific and economics literature has further explored known sources of uncertainty
related to estimates of the social cost of carbon and other greenhouse gases. For example,
researchers have examined the sensitivity of IAMs and the resulting estimates to different
assumptions embedded in the models (see, e.g., Hope (2013), Anthoff and Tol (2013), Nordhaus
(2014), and Waldhoff et al. (2011, 2014)). However, there remain additional sources of
uncertainty that have not been fully characterized and explored due to remaining data limitations.
Additional research is needed to expand the quantification of various sources of uncertainty in
estimates of the social cost of carbon and other greenhouse gases (e.g., developing explicit
probability distributions for more inputs pertaining to climate impacts and their valuation). On
the issue of intergenerational discounting, some experts have argued that a declining discount
rate would be appropriate to analyze impacts that occur far into the future (Arrow et al., 2013).
However, additional research and analysis is still needed to develop a methodology for
78 The estimates are adjusted for inflation using the GDP implicit price deflator and then rounded to two significant
digits.
A-7
-------
implementing a declining discount rate and to understand the implications of applying these
theoretical lessons in practice. The 2017 National Academies report also provides
recommendations pertaining to discounting, emphasizing the need to more explicitly model the
uncertainty surrounding discount rates over long time horizons, its connection to uncertainty in
economic growth, and, in turn, to climate damages using a Ramsey-like formula (National
Academies, 2017). These and other research needs are discussed in detail in the 2017 National
Academies' recommendations for a comprehensive update to the current methodology, including
a more robust incorporation of uncertainty.
A.3 Forgone Global Climate Benefits
In addition to requiring reporting of impacts at a domestic level, OMB Circular A-4 states
that when an agency "evaluate[s] a regulation that is likely to have effects beyond the borders of
the United States, these effects should be reported separately" (page 15).79 This guidance is
relevant to the valuation of damages from GHGs, given that most GHGs (including CH4)
contribute to damages around the world independent of the country in which they are emitted.
Therefore, in this section we present the forgone global climate benefits from this rulemaking
using the global SC-CH4 estimates—i.e., reflecting quantified impacts occurring in both the U.S.
and other countries—corresponding to the model runs that generated the domestic SC-CH4
estimates used in the main analysis. The average global SC-CH4 estimate across all the model
runs for emissions occurring over the years analyzed in this RIA (2019-2025) range from $350 to
$450 per metric ton of CH4 emissions (in 2016 dollars) using a 7 percent discount rate, and
$1,300 to $1,600 per metric ton of CH4using a 3 percent discount rate.80 The domestic SC-CH4
estimates presented above are approximately 15 percent and 13 percent of these global SC-CH4
79 While Circular A-4 does not elaborate on this guidance, the basic argument for adopting a domestic only
perspective for the central benefit-cost analysis of domestic policies is based on the fact that the authority to
regulate only extends to a nation's own residents who have consented to adhere to the same set of rules and
values for collective decision-making, as well as the assumption that most domestic policies will have negligible
effects on the welfare of other countries' residents (EPA, 2010; Kopp et al., 1997; Whittington et al., 1986). In
the context of policies that are expected to result in substantial effects outside of U.S. borders, an active literature
has emerged discussing how to appropriately treat these impacts for purposes of domestic policymaking (e.g.,
Gayer and Viscusi (2016, 2017); Anthoff and Tol (2010); Fraas et al. (2016); Revesz et al. (2017)). This
discourse has been primarily focused on the regulation of greenhouse gases (GHGs), for which domestic policies
may result in impacts outside of U.S. borders due to the global nature of the pollutants.
80 The estimates are adjusted for inflation using the GDP implicit price deflator and then rounded to two significant
digits.
A-8
-------
estimates for the 7 percent and 3 percent discount rates, respectively. Applying these estimates to
the forgone CH4 emission reductions relative to the 2018 Proposed Regulatory Baseline results
in estimated forgone global climate benefits ranging from $8.1 million in 2019 to $15 million in
2025, using a 7 percent discount rate. The PV of the forgone global climate benefits using a 7
percent discount rate is $83 million, with an associated EAV of $14 million per year. The
estimated forgone global climate benefits are $35 million in 2019 and increase to $76 million in
2025 using a 3 percent rate. The PV of the forgone global climate benefits using a 3 percent
discount rate is $389 million, with an associated EAV of $61 million per year. Under the
sensitivity analysis considered above using a 2.5 percent discount rate, the average global SC-
CH4 estimate across all the model runs for emissions occurring in 2019-2025 ranges from $1,800
to $2,100 per metric ton of CH4 (2016$). The forgone global climate benefits are estimated to be
$47 million in 2019 and $103 million in 2025 using a 2.5 percent discount rate. The PV of the
forgone global climate benefits using a 2.5 percent discount rate is $525 million, with an
associated EAV of $81 million per year. Using the same discount rate, the PV and EAV of the
forgone global climate benefits of the proposed action relative to the Current Regulatory
Baseline are $554 million and $85 million, respectively. All estimates are reported in 2016
dollars.
References
Anthoff, D. and R.S.J. Tol. 2013. "The uncertainty about the social cost of carbon: a
decomposition analysis using FUND." Climatic Change 117: 515-530.
Anthoff, D., and R. J. Tol. 2010. On international equity weights and national decision making
on climate change. Journal of Environmental Economics and Management 60(1): 14-20.
Arrow, K., M. Cropper, C. Gollier, B. Groom, G. Heal, R. Newell, W. Nordhaus, R. Pindyck, W.
Pizer, P. Portney, T. Sterner, R.S.J. Tol, and M. Weitzman. 2013. "Determining Benefits and
Costs for Future Generations." Science 341: 349-350.
Fraas, A., R. Lutter, S. Dudley, T. Gayer, J. Graham, J.F. Shogren, and W.K. Viscusi. 2016.
Social Cost of Carbon: Domestic Duty. Science 351(6273): 569.
Gayer, T., and K. Viscusi. 2016. Determining the Proper Scope of Climate Change Policy
Benefits in U.S. Regulatory Analyses: Domestic versus Global Approaches. Review of
Environmental Economics and Policy 10(2): 245-63.
A-9
-------
Gayer, T., and K. Viscusi. 2017. The Social Cost of Carbon: Maintaining the Integrity of
Economic Analysis—A Response to Revesz et al. (2017). Review of Environmental
Economics and Policy, 11(1): 174-5.
Hope, C. 2013. "Critical issues for the calculation of the social cost of C02: why the estimates
from PAGE09 are higher than those from PAGE2002." Climatic Change 117: 531-543.
Institute of Medicine of the National Academies. 2013. Environmental Decisions in the Face of
Uncertainty. National Academies Press. Washington, DC.
Kopp, R.J., A.J. Krupnick, andM. Toman. 1997. Cost-Benefit Analysis and Regulatory Reform:
An Assessment of the Science and the Art. Report to the Commission on Risk Assessment and
Risk Management.
National Academies of Sciences, Engineering, and Medicine. 2017. Valuing Climate Damages:
Updating Estimation of the Social Cost of Carbon Dioxide. National Academies Press.
Washington, DC. Available at . Accessed February 26, 2019.
Nordhaus, W. 2014. "Estimates of the Social Cost of Carbon: Concepts and Results from the
DICE-2013R Model and Alternative Approaches." Journal of the Association of
Environmental and Resource Economists, 1(1/2): 273-312.
Nordhaus, W.D. 2017. "Revisiting the social cost of carbon." Proceedings of the National
Academy of Sciences of the United States, 114 (7): 1518-1523.
Revesz R.L., J.A. Schwartz., P.H. Howard Peter H., K. Arrow, M. A. Livermore, M.
Oppenheimer, and T. Sterner Thomas. 2017. The social cost of carbon: A global imperative.
Review of Environmental Economics and Policy, 11(1): 172-173.
Roe, G., and M. Baker. 2007. "Why is climate sensitivity so unpredictable?" Science 318:629-
632.
U.S. Environmental Protection Agency (U.S. EPA). 2010. Guidelines for Preparing Economic
Analyses. Office of the Administrator. EPA 240-R-10-001 December 2010. Available at
.
Waldhoff, S., D. Anthoff, S. Rose, and R.S.J. Tol. 2011. The marginal damage costs of different
greenhouse gases: An application of FUND (Economics Discussion Paper No. 2011-43).
Kiel: Kiel Institute for the World Economy.
Waldhoff, S., D. Anthoff, S. Rose, and R.S.J. Tol. 2014. The Marginal Damage Costs of
Different Greenhouse Gases: An Application of FUND. The Open-Access, Open Assessment
E-Journal 8(31): 1-33. http://dx.doi.org/10.5018/economics-ejournal.ja.2014-31.
Whittington, D. and D. MacRae. (1986). The Issue of Standing in Cost-Benefit Analysis. Journal
of Policy Analysis and Management 5(4): 665-682.
A-10
-------
United States Office of Air Quality Planning and Standards Publication No. EPA-452/R-19-001
Environmental Protection Health and Environmental Impacts Division August 2019
Agency Research Triangle Park, NC
------- |