E.O. 12866 NSPS For Stationary Internal Combustion Engines RIA 2060-AQ58 Proposal 20120522

Regulatory Impact Analysis (RIA) for Proposed Reconsideration of Existing Stationary Compression Ignition (CI) Engines
NESHAP

                                                            Final Report

                       This page is intentionally blank.

                                                                        May2012

Regulatory Impact Analysis (RIA) for Proposed Reconsideration of Existing Stationary Compression Ignition Engines NESHAP

                                     By:
                 Paramita Sinha, Brooks Depro, and Fern Braun
                               RTI International
                    Research Triangle Park, North Carolina

                                 Prepared for:
                                 Larry Sorrels

                           Contract No. EP-D-06-003

                     U.S. Environmental Protection Agency
                 Office of Air Quality Planning and Standards
                   Health and Environmental Impacts Division
                              Air Economics Group
                          Research Triangle Park, NC

Regulatory Impact Analysis (RIA) for Proposed Reconsideration of Existing Stationary Compression Ignition Engines NESHAP

Final Report

May 2012

Prepared for

Larry Sorrels
U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards (OAQPS)
Air Economics Group (AEG)
(MD-C439-02)
Research Triangle Park, NC 27711

Prepared by

Paramita Sinha
Brooks Depro
Fern Braun
RTI International
3040 Cornwallis Road
Research Triangle Park, NC 27709

Contents
Section	Page
Section 1	Executive Summary	1-1
	ES.1  Summary of Impacts for CI RICE NESHAP Reconsideration Proposal............1-1
	ES.2  Comparison with Results from 2010 Final CI RICE NESHAP......................1-2
Section 2	Introduction	2-1
2.1	Organization of this Report	2-1
Section 3	Industry Profile	3-2
3.1.1	Overview	3-2
3.1.2	Goods and Services Used	3-4
3.1.3	Business Statistics	3-5
3.2	Oil and Gas Extraction	3-7
3.2.1	Overview	3-7
3.2.2	Goods and Services Used	3-10
3.2.3	Business Statistics	3-11
3.3	Pipeline Transportation of Natural Gas	3-16
3.3.1	Overview	3-16
3.3.2	Goods and Services Used	3-17
3.4	General Medical and Surgical Hospitals	3-21
3.4.1	Overview	3-21
3.4.2	Goods and Services Used	3-21
3.4.3	Business Statistics	3-23
3.5	Irrigation Sets and Welding Equipment	3-26
3.5.1	Overview	3-26
3.5.2	Irrigation and Welding Services	3-26
3.5.3	Business Statistics	3-32
Section 4	Regulatory Alternatives, Costs, and Emission Impacts	4-1
4.1	Background	4-1
4.2	Summary of the Proposed Reconsideration Rule	4-2
4.2.2	What Are the Pollutants Regulated by this Proposed Reconsideration Rule?	4-15
4.3	Cost Impacts	4-17
4.3.1	Introduction	4-17
4.3.2	Major Sources	4-20
4.3.3	Area Sources	4-22
Section 5	Economic Impact Analysis, Energy Impacts, and Social Costs	5-1
5.1	Compliance Costs of the Final Rule	5-1
5.2	Social Cost Estimate	5-4
5.3	How Might People and Firms Respond? A Partial Equilibrium Analysis	5-5
5.3.1	Changes in Market Prices and Quantities	5-5
5.3.2	Regulated Markets: The Electric Power Generation, Transmission, and Distribution Sector	5-7
5.3.3	Partial Equilibrium Measures of Social Cost: Changes Consumer and Producer Surplus	5-8
5.4	Energy Impacts	5-9
5.5	Unfunded Mandates	5-10
5.5.1	Future and Disproportionate Costs	5-11
5.5.2	Effects on the National Economy	5-11
5.6	Environmental Justice	5-12
	   5.7	Employment Impacts
		5.7.1	Employment Impacts from Pollution Control Requirements.................................................................................5-14
5.7.2	Employment Impacts within the Regulated Industry	5-17
Section 6	Small Entity Screening Analysis	6-1
6.1	Small Entity Data Set	6-1
6.2	Small Entity Economic Impact Measures	6-2
6.2.1	Model Establishment Receipts and Annual Compliance Costs	6-2
6.3	Small Government Entities	6-12
Section 7	Human Health Benefits of Emissions Reductions	7-1
7.1	Calculation of PM2.5-Related Human Health Co-Benefits	7-1
7.2	Unquantified Benefits	7-15
7.2.1 HAP Benefits	7-15
7.2.2	Ozone Co-Benefits	7-26
7.2.3	Carbon Monoxide Co-Benefits	7-26
7.2.4	Visibility Impairment Co-Benefits	7-26
7.3	Characterization of Uncertainty in the Monetized Co-Benefits	7-27
7.4	Comparison of Co-Benefits and Costs	7-32
7.5	References	7-36
Section 8	References for RIA	8-1

List of Figures
Number	Page
   0-1.  Breakdown of Total Monetized PM2.5 Co-Benefits of Proposed CI RICE Reconsideration by Engine Size.............................................................1-7
   0-2. Total Monetized PM2.5 Co-Benefits Estimates for the CI RICE Reconsideration Proposal in 2013...............................................................................1-8
   3-1.	Industrial Production Index (NAICS 2211)	3-3
   3-2.	Internal Combustion Generators by State: 2006	3-4
   3-3.	2002 Regional Distribution of Establishments: Electric Power Generation, Transmission, and Distribution Industry (NAICS 2211)	3-5
   3-4.	Industrial Production Index (NAICS 211)	3-1
   3-5.	Distribution of Establishments within Pipeline Transportation (NAICS 486)	3-17
   3-6.	Distribution of Revenue within Pipeline Transportation (NAICS 486)	3-17
   3-7.	Share of Establishments by Legal Form of Organization in the Pipeline Transportation of Natural Gas Industry (NAICS 48621): 2002	3-19
   3-8.	Share of Establishments by Legal Form of Organization in the General Medical and Surgical Hospitals Industry (NAICS 6221): 2002	3-24
   3-9.	Industrial Production Index (NAICS 333111)	3-28

   5-1.	Distribution of Annualized Direct Compliance Costs by Industry: 2013	5-2
   5-2.	Distribution of Engine Population by Horsepower Group: 2013	5-3
   5-3.	Average Annualized Cost per Engine by Horsepower Group: 2013 ($2007)	5-3
   5-4.	Market Demand and Supply Model: With and Without Regulation	5-6
   5-5.	Electricity Restructuring by State	5-9

   7-1.	Breakdown of Monetized PM2.5 Health Co-benefits using Mortality Function from Pope et al. (2002)	7-10
   7-2.	Total Monetized PM2.5 Co-Benefits of Proposed CI RICE NESHAP Reconsideration in 2013	7-14
   7-3.	Breakdown of Total Monetized Co-benefits for Proposed CI RICE NESHAP Reconsideration by Engine Size...................................................7-15

7-4.	Estimated Chronic Census Tract Carcinogenic Risk from HAP exposure from outdoor sources (2005 NATA) 	7-17
   7-5.	Estimated Chronic Census Tract Noncancer (Respiratory)Risk from HAP exposure from outdoor sources (2005 NATA).............. 	7-17
   7-6.	Percentage of Adult Population by Annual Mean PM2.5 Exposure in the Baseline..............................................................................7-29
   7-7	Cumulative Distribution of Adult Population by Annual Mean PM2.5 Exposure in the Baseline........................................................................7-29
   7-8.     Net Benefits for Proposed CI RICE NESHAP Reconsideration
           at 3% discount rate..................................................................7-33
   7-9.     Net Benefits for Proposed CI RICE NESHAP Reconsideration
           at 7% discount rate..................................................................7-34
List of Tables
Number	Page

   1-1.	Summary of the Annualized Monetized Benefits, Social Costs, and Net Benefits for the Proposed Reconsidered CI RICE NESHAP in 2013 (millions of 2010$)	1-2
   0-2. Comparison of Benefits and Costs for 2020 CI RICE Final Rule and 2012 Proposed Reconsideration CI RICE Rule...............................................................1-3
   0-3. Summary of Monetized Co-Benefits Estimates for CI RICE Reconsideration Proposal in 2013..........................................................................................1-5
   0-4. Summary of Estimated Reductions in Health Incidences from PM2.5 for the CI RICE Reconsideration Proposal in 2013...........................................................1-6
   0-5. Summary of Estimated Social Costs and Benefits for the 2010 Final CI RICE Rule and the Proposed Reconsideration (millions of 2010 dollars)...........................1-9

   3-1.	Key Statistics: Electric Power Generation, Transmission, and Distribution (NAICS 2211) ($2007)	3-2
   3-2.	Direct Requirements for Electric Power Generation, Transmission, and Distribution (NAICS 2211): 2007	3-5
   3-3.	Firm Concentration for Electric Power Generation, Transmission, and Distribution (NAICS 2211): 2002	3-7
   3-4.	United States Retail Electricity Sales Statistics: 2008	3-8
   3-5.	FY 2010 Financial Data for 70 U.S. Shareholder-Owned Electric Utilities	3-10
   3-6.	Aggregate Tax Data for Accounting Period 7/07 - 6/08: NAICS 2211	3-10
   3-7.	Key Enterprise Statistics by Receipt Size for Electric Power Generation, Transmission, and Distribution (NAICS 2211): 2007	3-11
   3-8.	Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111): ($2007)	3-11
   3-9.	Key Statistics: Natural Gas Liquid Extraction (NAICS 211112) ($2007)	3-12
   3-10.	Direct Requirements for Oil and Gas Extraction (NAICS 211): 2002	3-12
   3-11.	Key Statistics for Crude Petroleum and Natural Gas Extraction (NAICS 211111): 2007	3-13
   3-12.	Key Statistics for Crude Natural Gas Liquid Extraction (NAICS 211112): 2007	3-13
   3-13.	Aggregate Tax Data for Accounting Period 7/07 - 6/08: NAICS 211	3-14
   3-14.	Key Statistics: Pipeline Transportation of Natural Gas (NAICS 48621) ($2007)	3-15
   3-15.	Direct Requirements for Pipeline Transportation (NAICS 486): 2002	3-17
   3-16.	Aggregate Tax Data for Accounting Period 7/07 - 6/08: NAICS 486	3-19
   3-17	Key Enterprise Statistics by Employee  Size for Pipeline Transportation of Natural Gas (NAICS 48621): 2007	3-20
   3-18.	Key Statistics: General Medical and Surgical Hospitals (NAICS 6221) ($2007)	3-23
   3-19.	Direct Requirements for Hospitals (NAICS 622): 2002	3-23
   3-20.	Data  for General Medical and Surgical Hospitals (NAICS 6221): 2007	3-24
   3-21.	Hospital Statistics: 2010	3-25
   3-22.	Aggregate Tax Data for Accounting Period 7/05 - 6/06: NAICS 622-4	3-25
   3-23.	Key Enterprise Statistics by Receipt Size for General Medical and Surgical Hospitals (NAICS 6221): 2007 ($2007)	3-27
   3-24.	Key Statistics: Farm Machinery and Equipment Manufacturing (NAICS 333111) ($2007)	3-28
   3-25.	Key Statistics: Welding and Soldering Equipment Manufacturing (NAICS 333992) ($2007)	3-29
   3-26.	Expenses per Acre by Type of Energy: 2008	3-30
   3-27.	Number of On-Farm Pumps of Irrigation Water by Type of Energy: 2003 and 2008	3-30
   3-28.	Aggregate Tax Data for Accounting Period 7/05 - 6/06: NAICS 3331 and 3339	3-31
   3-29.	Key Enterprise Statistics by Receipt Size for Heavy Construction: 2007	3-34

   4-1.	CI RICE Control Technologies and Costs	4-9
   4-2.	Summary of Major Source and Area Source Costs for the CI RICE NESHAP	4-25
   4-3.	Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP	4-26
   4-4.	Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP  -  by Size	4-27
   4-5.	Summary of Major Source and Area Source NAICS Costs for the CI RICE NESHAP  -  by Number of Engines	4-30
   4-6.    Summary of Major Source and Area Source Baseline Emissions for the CI RICE     NESHAP  -  2013 ...........................................................................4-36

   4-7.    Summary of Major Source and Area Source Emission Reductions for the CI RICE     NESHAP  -  by 2013 ...........................................................................4-36

   5-1.	Selected Industry-Level Annualized Compliance Costs as a Fraction of Total Industry Revenue: 2008	5-4
   5-2.	Hypothetical Price Increases for a 1% Increase in Unit Costs	5-7
   5-3.	Hypothetical Consumption Decreases for a 1% Increase in Unit Costs	5-8
   5-4.	U.S. Electric Power[a] Sector Energy Consumption (Quadrillion BTUs): 2013	5-11
   5-5	Labor-based Employment Estimates for Reporting and Recordkeeping and Installing, Operating, and Maintaining Control Equipment Requirements for Proposed Reconsideration CI RICE NESHAP......................................................5-16

   6-1.	Final NESHAP for Existing Stationary Reciprocating Internal Combustion Engines (RICE): Affected Sectors and SBA Small Business Size Standards	6-3
   6-2.	Average Receipts for Affected Industry by Enterprise: 2007 ($2008 Million/establishment)	6-5
   6-3.	Average Receipts for Affected Industry by Enterprise Receipt Range: 2007 ($2008 /establishment)	6-6
   6-4.	Representative Establishment Costs Used for Small Entity Analysis ($2008)	6-8

   7-1.	Human Health and Welfare Effects of PM2.5	7-1
   7-2.	Summary of Monetized Co-benefits Estimates for RICE NESHAP for Compression Ignition in 2013 (2008$)	7-11
   7-3.	Summary of Reductions in Health Incidences from PM2.5 Co-benefits for RICE NESHAP in 2013	7-12
   7-4	All PM2.5 Co-benefits Estimates for the RICE NESHAP at discount rates of 3% and 7% in 2013 (in millions of 2008$)	7-13
   7-5.	Summary of the Monetized Benefits, Compliance Costs and Net benefits for the 2010 Rule with the Proposed Amendments to the Stationary CI Engine NESHAP in 2013 (millions of 2010 dollars)a	7-32

Executive Summary
ES.1. 	Summary of Impacts for CI RICE NESHAP Reconsideration Proposal
The EPA estimates that complying with the proposed reconsideration of the stationary compression ignition (CI) reciprocating internal combustion engine (RICE) rule will have an annualized cost of approximately $372 million per year (2008 dollars) or $373 million per year (2010 dollars) in the year of full implementation of the rule (2013). Using these costs, EPA estimates in its economic impact analysis that the NESHAP will have limited impacts on the industries affected and their consumers. Using sales data obtained for affected small entities in an analysis of the impacts of this proposal on small entities, EPA expects that the NESHAP will not result in a SISNOSE (significant economic impacts for a substantial number of small entities). EPA also does not expect significant adverse energy impacts based on Executive Order 13211, an Executive Order that requires analysis of energy impacts for rules such as this one that are economically significant under Executive Order 12866.  All of these analysis results are practically identical to the results for the CI RICE NESHAP when it was promulgated in March 2010.
The RICE rule is also considered subject to the requirements of the Office of Management and Budget's (OMB's) Circular A-4 because EPA expects that either the benefits or the costs are potentially $1 billion or higher. EPA estimates the total monetized co-benefits of the NESHAP to be $770 million to $1.9 billion (2010$) at a 3% discount rate and $690 million to $1.7 billion at a 7% discount rate in the year of full implementation of the rule (2013). The net benefits of the proposed CI RICE reconsideration are therefore $400 million to $1.5 billion at a 3% discount rate and $320 million to $1.3 billion at a 7% discount rate (in 2010$) in 2013.  These estimates are shown in Table 1-1.  These co-benefit estimates are lower than those for the rule promulgated two years ago.  The previous co-benefit estimates were $940 million to $2,300 million (2008 dollars) at a 3-percent discount rate and $850 million to $2,100 million (2008 dollars) at a 7-percent discount rate. The previous estimates will be greater in a nominal (not inflation-adjusted) sense if shown in 2010 dollars, and thus the reduction in the benefits for the reconsidered rule compared to the benefits for the 2010 final rule will therefore be greater.  EPA believes that the benefits are likely to exceed the annualized costs by a substantial margin under this rulemaking even when taking into account uncertainties in the cost and benefit estimates.  These estimates are "snapshots" of benefits and costs at year 2013.

 Table 1-1.	Summary of the Annualized Monetized Benefits, Social Costs, and Net Benefits for the Proposed Reconsidered CI RICE NESHAP in 2013 (millions of 2010$)[1]

                               3% Discount Rate
                               7% Discount Rate

Total Monetized Benefits[2]
                                     $770
                                      to
                                    $1,900
                                     $690
                                      to
                                    $1,700
Total Compliance Costs[3]
                                     $373
                                     $373
Net Benefits
                                     $400
                                      to
                                    $1,500
                                     $320
                                      to
                                    $1,300
Non-monetized Benefits
Health effects from HAP exposure

Health effects from PM2.5 exposure from VOC emissions

Ecosystem effects

Visibility impairment
[1]All estimates are for the implementation year (2013), and are rounded to two significant figures.
[2] The total monetized benefits reflect the human health benefits associated with reducing exposure to PM2.5 through reductions of PM2.5 precursors such as directly emitted fine particles. Human health benefits are shown as a range from Pope et al. (2002) to Laden et al. (2006). These models assume that all fine particles, regardless of their chemical composition, are equally potent in causing premature mortality because the scientific evidence  is not yet sufficient to allow differentiation of effects estimates by particle type. Because these estimates were generated using benefit-per-ton estimates, we do not break down the total monetized benefits into specific components here.   See Figure 7-1 for an illustration of the breakdown, or the RIA for the final Cross-States Air Pollution Rule (EPA, 2011) for more information.
[3] The annual compliance costs serve as a proxy for the annual social costs of this rule given the lack of difference between the two. The engineering compliance costs are annualized using a 7 percent discount rate. These costs are $372 million in 2008 dollars.  Costs are updated to 2010 dollars using the Marshall & Swift (M&S) Annual Cost Index.  The update is done by multiplying the 2008 costs by the ratio of the 2010 annual M&S index value (1,457.4), and the 2008 annual M&S index value (1,449.3).

ES-2.  Comparison with Results from 2010 Final CI RICE NESHAP

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

Table 1-2.  Summary of the Monetized Benefits and Compliance Costs for the 2010 Rule with the Proposed Amendments to the Stationary CI Engine NESHAP in 2013 (millions of 2010 dollars)

                          Monetized Benefits in 2013
                       Annual Engineering Costs in 2013
CI RICE Final Rule (May 2010)
                            $0.940 to $2.3 billion
                                 $373 million
Changes due to the proposed amendments to the final CI RICE rule
                           -$0.170 to $0.400 billion
                                 -$0.7 million
Proposed CI RICE  rule (2012)
                            +$0.770 to $1.9 billion
                                 $372 million
* Monetized benefits are shown at a 3% discount rate and are from reductions in PM2.5 emissions.  These benefits do not include benefits associated with reduced exposure to HAP, visibility impairment, or ecosystem effects.  Monetary estimates are in 2010 dollars.

      The results for the economic impacts are essentially unchanged from those for the CI final rule.  This outcome is due to the minor changes in compliance costs associated with the proposed amendments in this proposal.  All of the results for this proposed rule are found in Section 5 in this RIA.
      The results for sales tests (i.e. annual cost/sales analysis) for small businesses are also essentially unchanged from those calculated for the final CI RICE rule.  This outcome is also due to the overall minor changes in compliance costs.   All of the results for this proposed rule are found in Section 6 in this RIA.
      We estimate changes in employment for this CI RICE proposed rule.  These estimates reflect the employment impacts associated with installation and operation of monitoring equipment, and also activities for recordkeeping, reporting, and testing.  We estimate that 1,300 full-time equivalents (FTEs) will be required as one-time labor for installation of equipment, and 2,000 FTEs will be required as ongoing labor for compliance with the proposed rule. The results are presented and explained in detail in Section 5 of this RIA.   We did not estimate changes in employment for the 2010 final CI RICE rule.
      The benefits estimates decreased for the proposal. The range for the 2010 final CI RICE RIA was $940 million (2008$) to $2.3 billion (2008$) at 3 percent discount rate. The range for this proposal is $770 million (2010$) to $1.9 billion (2010$) at 3 percent discount rate.  The range for the 2010 final SI RICE RIA was $850 million (2008$) to $2.1 billion (2008$) at 7 percent discount rate.  The range for the proposal was $690 million (2010$) to $1.7 billion (2010$) at 7 percent discount rate.
      The health benefits were calculated using a methodology described in the 2010 final CI RICE RIA, using the revised emission reductions estimated for the reconsideration proposal and accounting for other changes discussed in detail in Section 7 of this RIA. We were unable to estimate the benefits from reducing exposure to HAPs, ecosystem impairment, and visibility impairment, including reducing 14,000 tons of carbon monoxide and 1,000 tons of HAPs.  Please refer to the full description later in this RIA of the unquantified benefits as well as technical details of the analysis and its limitations and uncertainties. These monetized benefits are approximately 21% lower than the 2010 final CI RICE rule due to the decrease in direct PM2.5 emission reductions.  These benefit-per-ton estimates were calculated for a 2013 analysis year (i.e., using population and income growth for 2013). See Tables 1-3 and 1-4 for the updated benefits results. The benefits analysis for the 2010 final rules applied out-dated benefit-per-ton estimates compared to the updated estimates described in this preamble and reflected monetized co-benefits for VOC emissions, which limits direct comparability with the monetized co-benefits estimated for these proposed rules. In addition, these estimates have been updated from their original currency years to 2010$, so the rounded estimates for the 2010 final rules may not match the original RIAs.

Table 1-3: Summary of Monetized Co-Benefits Estimates for CI RICE Reconsideration Proposal in 2013
                                   Pollutant
                          Emissions Reductions (tons)
                          Benefit per ton (Pope, 3%)
                          Benefit per ton (Laden, 3%)
                          Benefit per ton (Pope, 7%)
                          Benefit per ton (Laden, 7%)
                Total Monetized Benefits (millions 2010$ at 3%)
                Total Monetized Benefits (millions 2010$ at 7%)
Direct PM2.5
                                     2,818
                                   $270,000
                                   $670,000
                                   $240,000
                                   $610,000
                                                                           $770
                                      to
$1,900
                                                                           $690
to
$1.700

                                     Total
                                                                           $770
                                                                             to
$1,900
                                                                           $690
                                                                             to
$1,700
*All estimates are for the implementation year (2013), and are rounded to two significant figures so numbers may not sum across columns.   It is important to note that the monetized benefits do not include reduced health effects from direct exposure to NO2, ozone exposure, ecosystem effects, or visibility impairment. All fine particles are assumed to have equivalent health effects, but the benefit per ton estimates vary because each ton of precursor reduced has a different propensity to form PM2.5.    Confidence intervals are unavailable for this analysis because of the benefit-per-ton methodology.

Table 1-4: Summary of Estimated Reductions in Health Incidences from PM2.5 for the
                   CI RICE Reconsideration Proposal in 2013

                                Proposed Option
Avoided Premature Mortality

Pope et al.

                                      85

  Laden et al.

                                      220

Avoided Morbidity

Chronic Bronchitis

                                      59

 Emergency Room Visits, Respiratory

                                      66

Hospital Admissions, Respiratory

                                      16

Hospital Admissions, Cardiovascular

                                      35

 Acute Bronchitis

                                      130

 Lower Respiratory

                                     1,700

Upper Respiratory

                                     1,300

 Minor Restricted Activity Days

                                    68,000

Work Loss Days

                                    12,000

Asthma Exacerbation

                                     2,800

Acute Myocardial Infarction

                                      94

* All estimates are for the analysis year (2013) and are rounded to whole numbers with two significant figures.  All fine particles are assumed to have equivalent health effects because the scientific evidence is not yet sufficient to allow differentiation of effects estimates by particle type. Confidence intervals are unavailable for this analysis because of the benefit-per-ton methodology.

	Figure 1-1 provides a breakdown of the total monetized co-benefits from reductions of PM2.5 emissions by engine size associated with the reconsideration proposal.  Figure 1-2 provides a visual representation of the range of PM2.5-related benefits estimates using concentration-response functions supplied by experts.

Figure 1-1: Breakdown of Total Monetized PM2.5 Co-Benefits of Proposed CI RICE Reconsideration by Engine Size

Figure 1-2: Total Monetized PM2.5 Co-Benefits Estimates for the CI RICE Reconsideration Proposal in 2013

*This graph shows the estimated benefits at discount rates of 3% and 7% using effect coefficients derived from the Pope et al. study and the Laden et al study, as well as 12 effect coefficients derived from EPA's expert elicitation on PM mortality.  The results shown are not the direct results from the studies or expert elicitation; rather, the estimates are based in part on the concentration-response function provided in those studies.
Table 1-5 shows the estimated costs and benefits for the 2010 final CI Rule and the reconsideration proposal. The estimated net benefits for the reconsideration proposal are smaller than the range for the 2010 final CI RICE rule RIA, which was $480 million to $1.7 billion at a 7 percent discount rate and was $520 million to $1.9 billion at 3 percent (in 2010 dollars).

Table 1-5. Summary of the Monetized Benefits, Compliance Costs and Net benefits for the 2010 Rule with the Proposed Amendments to the Stationary CI Engine NESHAP in 2013 (millions of 2010 dollars)a

                               3% Discount Rate
                               7% Discount Rate
                           2010 Final CI RICE NESHAP
Total Monetized Benefits
                                     $940
                                      to
                                    $2,300
                                     $850
                                      to
                                    $2,100
Total Social Costs
                                     $373
                                     $373
Net Benefits
                                     $520
                                      to
                                    $1,900
                                     $480
                                      to
                                    $1,700
                    Proposed Reconsideration CI RICE NESHAP
Total Monetized Benefits
                                     $770
                                      to
                                    $1,900
                                     $690
                                      to
                                    $1,700
Total Social  Costs
                                     $373
                                     $373
Net Benefits
                                     $400
                                      to
                                    $1,500
                                     $320
                                      to
                                    $1,300
[1]All estimates are for the implementation year (2013), and are rounded to two significant figures. All monetized benefits are from reductions of PM2.5 emissions, a co-benefits of this proposal.  The annual ized compliance costs are $373 million in 2010$ as noted earlier in this RIA, and are annualized using a 7% interest rate.  Compliance costs are used as an approximation for social costs in this RIA.

Introduction
EPA is proposing reconsideration of national emission standards for hazardous air pollutants (NESHAP) for existing stationary compression ignition (CI) reciprocating internal combustion engines (RICE) that either are located at area sources of hazardous air pollutant (HAP) emissions or that have a site rating of less than or equal to 500 brake horsepower (HP) and are located at major sources of HAP The proposed amendments to the CI RICE NESHAP are provided in detail in Section 4 of this RIA.
The rule is economically significant according to Executive Order 12866. As part of the regulatory process of preparing these standards, EPA has prepared a regulatory impact analysis (RIA). This analysis includes an analysis of impacts to small entities as part of compliance with the Small Business Regulatory Enforcement Fairness Act (SBREFA) and an analysis of impacts on energy consumption and production to comply with Executive Order 13211 (Statement of Energy Effects).   An analysis of economic impacts, along with an analysis of impacts on employment, is also included in this RIA.  Finally, an analysis of the benefits of the rule is included in this RIA. It should be noted that the data that supports the analyses listed above have been updated where possible and appropriate from the data used in the RIA for the CI RICE NESHAP promulgated in March 2010.
Organization of this Report
The remainder of this report supports and details the methodology and the results of the RIA:
Section 3 presents a profile of the affected industries.
Section 4 presents a summary of the proposed amendments to the proposed rule, and provides the compliance costs and emission reductions estimated for the rule.
Section 5 describes the estimated costs of the regulation and describes the EIA methodology and reports market, welfare, energy, and employment impacts.
Section 6 presents estimated impacts on small entities.
Section 7 presents the benefits and net benefits (benefits  -  costs) estimates.

Industry Profile
      Stationary CI engines almost always operate as lean burn engines. They can be configured as either two-stroke lean burn (2SLB) or 4-stroke lean burn (4SLB); the distinction is that CI engines are fueled by distillate fuel oil (diesel fuel), not by natural gas or any other gaseous fuel. Industries in which stationary CI engines are found are:

electric power generation, transmission, and distribution (NAICS 2211),
oil and gas extraction (including marginal wells) (NAICS 211111),
pipeline transportation of natural gas (NAICS 211112),
general medical and surgical hospitals (NAICS 622110), and
irrigation sets and welding equipment (NAICS 335312 and 333992).
This section provides an introduction to the industries affected by the proposed reconsidered rule. The purpose is to give the reader a general understanding of the economic aspects of the industry; their relative size, relationships with other sectors in the economy, trends for the industries, and financial statistics.
3.1	Electric Power Generation, Transmission, and Distribution
3.1.1	Overview
Electric power generation, transmission, and distribution (NAICS 2211) is an industry group within the utilities sector (NAICS 22). It includes establishments that produce electrical energy or facilitate its transmission to the final consumer.
From 2002 to 2007, revenues from electric power grew about 18% to over $440 billion ($2007) (Table 3-1). At the same time, payroll rose about 7.6% and the number of employees decreased by over 6%. The number of establishments rose by a little more than 2%, resulting in a increase in average establishment revenue of almost 24%. Industrial production within NAICS 2211 has increased 25% since 1997 (Figure 3-1).
Electric utility companies have traditionally been tightly regulated monopolies. Since 1978, several laws and orders have been passed to encourage competition within the electricity market. In the late 1990s, many states began the process of restructuring their utility regulatory framework to support a competitive market. Following market manipulation in the early 2000s, however, several states have suspended their restructuring efforts. The majority (58%) of diesel power generators controlled by combined heat and power (CHP) or independent power producers are located in states undergoing active restructuring (Figure 3-2).
Table 3-1.	Key Statistics: Electric Power Generation, Transmission, and Distribution (NAICS 2211) ($2007)

                                     2002
                                     2007
Revenue ($10[6])
373,309
440,342
Payroll ($10[6])
40,842
43,266
Employees
535,675
503,134
Establishments
9,394
9,611
Source: U.S. Census Bureau; Number of Firms, Number of Establishments, Employment, Annual Payroll, and Estimated Receipts by Enterprise Receipt Size for the United States, All Industries:  2007.  Statistics for U.S. Businesses. Found at  http://www.census.gov/econ/susb/data/susb2007.html.

Figure 3-1.	Industrial Production Index (NAICS 2211)
 Source: The Federal Reserve Board. "Industrial Production and Capacity Utilization: Industrial Production" Series ID: G17/IP_MINING_AND_UTILITY_DETAIL/IP.G2211.S <http://www.federalreserve.gov/datadownload/>. (January 27, 2010).
3.1.2	Goods and Services Used
In Table 3-2, we use the latest detailed benchmark input-output data report by the Bureau of Economic Analysis (BEA) (2002) to identify the goods and services used in electric power generation. As shown, labor and tax requirements represent a significant share of the value of

Figure 3-2.	Internal Combustion Generators by State: 2006
Source: U.S. Department of Energy, Energy Information Administration. 2007. "2006 EIA-906/920 Monthly Time Series."
power generation. Extraction, transportation, refining, and equipment requirements potentially associated with reciprocating internal combustion engines (oil and gas extraction, pipeline transportation, petroleum refineries, and turbine manufacturing) represent around 10% of the value of services.
3.1.3	Business Statistics
The U.S. Economic Census and Statistics of U.S. Businesses (SUSB) programs provide national information on the distribution of economic variables by industry, location, and size of business. Throughout this section and report, we use the following definitions:
Establishment: An establishment is a single physical location where business is conducted or where services or industrial operations are performed.
Table 3-2.	Direct Requirements for Electric Power Generation, Transmission, and Distribution (NAICS 2211): 2002
                                   Commodity
                             Commodity Description
                      Direct Requirements Coefficients[a]
                                    V00100
Compensation of employees
                                                                         20.52%
                                    V00200
Taxes on production and imports, less subsidies
                                                                         13.71%
                                    211000
Oil and gas extraction
                                                                          6.16%
                                    212100
Coal mining
                                                                          5.86%
                                    482000
Rail transportation
                                                                          3.01%
                                    230301
Nonresidential maintenance and repair
                                                                          2.83%
                                    486000
Pipeline transportation
                                                                          1.70%
                                    722000
Food services and drinking places
                                                                          1.40%
                                    52A000
Monetary authorities and depository credit intermediation
                                                                          1.39%
                                    541100
Legal services
                                                                          1.13%
[a]	These values show the amount of the commodity required to produce $1.00 of the industry's output. The values are expressed in percentage terms (coefficient x100).
Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table, Use Table and Direct Requirements Table. Tables 4 and 5.
Receipts: Receipts (net of taxes) are defined as the revenue for goods produced, distributed, or services provided, including revenue earned from premiums, commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all revenue collected for local, state, and federal taxes.
Firm: A firm is a business organization consisting of one or more domestic establishments in the same state and industry that were specified under common ownership or control. The firm and the establishment are the same for single-establishment firms. For each multiestablishment firm, establishments in the same industry within a state are counted as one firm; the firm employment and annual payroll are summed from the associated establishments.
Enterprise: An enterprise is a business organization consisting of one or more domestic establishments that were specified under common ownership or control. The enterprise and the establishment are the same for single-establishment firms. Each multiestablishment company forms one enterprise; the enterprise employment and annual payroll are summed from the associated establishments. Enterprise size designations are determined by the summed employment of all associated establishments.
In 2002, Texas had almost 1,000 power establishments, while California, Georgia, and Ohio all had between 400 and 500 (Figure 3-3). Hawaii, Nebraska, and Rhode Island all had fewer than 20 establishments in their states.

Figure 3-3.	2002 Regional Distribution of Establishments: Electric Power Generation, Transmission, and Distribution Industry (NAICS 2211)
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 22: Utilities: Geographic Area Series: Summary Statistics: 2002." <http://factfinder.census.gov>; (November 10, 2008).
As shown in Table 3-3, the four largest firms owned over 1,200 establishments and accounted for about 16% of total industry receipts/revenue. The 50 largest firms accounted for almost 6,000 establishments and about 78% of total receipts/revenue.
Investor-owned energy providers accounted for 67.5% of retail electricity sold in the United States in 2006 (Table 3-4). In 2010, less regulated investor-owned electric utility companies were on average more profitable than companies with greater regulation (Table 3-5). In 2006, enterprises within NAICS 2211 had a pre-tax profit margin of only 0.9% (Table 3-6).
 Oil and Gas Extraction
3.2.1	Overview
Oil and gas extraction (NAICS 211) is an industry group within the mining sector (NAICS 21). It includes establishments that operate or develop oil and gas field properties
Table 3-3.	Firm Concentration for Electric Power Generation, Transmission, and Distribution (NAICS 2211): 2002
                                   Commodity
                                Establishments
                               Receipts/Revenue
                              Number of Employees
                          Employees per Establishment

                                Amount ($10[6])
                              Percentage of Total

All firms
9,394
$325,028
100.0%
535,675
57
4 largest firms
1,260
$52,349
16.1%
68,432
54
8 largest firms
2,566
$95,223
29.3%
151,575
59
20 largest firms
3,942
$173,207
53.3%
271,393
69
50 largest firms
5,887
$253,015
77.8%
408,021
69
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 22: Utilities: Subject Series -- Estab & Firm Size: Concentration by Largest Firms for the United States: 2002." <http://factfinder.census.gov>; (November 21, 2008).
through such activities as exploring for oil and gas, drilling and equipping wells, operating on-site equipment, and conducting other activities up to the point of shipment from the property.
Oil and gas extraction consists of two industries: crude petroleum and natural gas extraction (NAICS 211111) and natural gas liquid extraction (NAICS 211112). Crude petroleum and natural gas extraction is the larger industry; in 2007, it accounted for 93% of establishments and 75% of oil and gas extraction revenues.
Industrial production in this industry is particularly sensitive to hurricanes in the Gulf Coast. In September of both 2005 and 2008, production dropped 14% from the previous month.
From 2002 to 2007, revenues from crude petroleum and natural gas extraction (NAICS 211111) nearly doubled to $194 billion ($2007) (Table 3-8). At the same time, payroll increased   55% and the number of employees dropped by almost 40%. The number of establishments increased only slightly (1%); as a result, the average establishment revenue nearly doubled%.
From 2002 to 2007, revenue from natural gas liquid extraction (NAICS 211112) grew over 19% to about $40 billion (Table 3-9). At the same time, payroll increased by only 1% and the number of employees dropped by almost 14%. The number of establishments dropped by over 59%, resulting in an increase of revenue per establishment of about 85%.

Table 3-4.	United States Retail Electricity Sales Statistics: 2008

                            Full-Service Providers
                                Other Providers

Item
                                Investor-Owned
                                    Public
                                    Federal
                                  Cooperative
                                   Facility
                                    Energy
                                   Delivery
                                     Total
Number of entities
                                                                             3
                                                                            62
                                                                             1
                                                                            25
                                                                             1
                                      NA
                                      NA
                                                                            92
Number of retail customers
                                                                        46,985
                                                                     2,160,220
                                                                            36
                                                                       940,697
                                                                             1
                                      NA
                                      NA
                                                                     3,147,939
Retail sales (10[3] megawatthours)
                                                                         2,257
                                                                        70,303
                                                                         9,625
                                                                        21,868
                                                                           117
                                      NA
                                      NA
                                                                       104,170
Percentage of retail sales
                                                                             2
                                                                            67
                                                                             9
                                                                            21
                                                                             0
                                       --
                                       --
                                                                           100
Revenue from retail sales ($10[6])
                                                                           113
                                                                         5,934
                                                                           473
                                                                         1,994
                                                                             6
                                      NA
                                      NA
                                                                         8,520
Percentage of revenue
                                                                          1.33
                                                                         69.65
                                                                          5.55
                                                                         23.41
                                                                          0.07
                                       --
                                       --
                                                                           100
Average retail price (cents/kWh)
                                                                          5.01
                                                                          8.44
                                                                          4.91
                                                                          9.12
                                                                          5.25
                                      NA
                                      NA
                                                                          8.18
Source: U.S. Department of Energy, Energy Information Administration. 2009. "State Electricity Profiles 2008." DOE/EIA-0348(01)/2. p. 260. < http://www.eia.doe.gov/cneaf/electricity/st_profiles/sep2008.pdf>.

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

                                 Profit Margin
                                  Net Income
                              Operating Revenues
Investor-Owned Utilities
4.81%
$27,728
$371,545
 Regulated[a]
6.80%
$12,341
$158,657
 Mostly regulated[b]
8.50%
$17,815
$175,218
 Diversified[c]
-16.78%
-$2,429
$37,671

[a]	80%+ of total assets are regulated.
[b]	50% to 80% of total assets are regulated.
[c]	Less than 50% of total assets are regulated.
 Source: Edison Electric Institute. "Income Statement: Q4 2010 Financial Update.  Quarterly Report of the U.S. Shareholder-Owned Electric Utility Industry." <http://www.eei.org>.
Table 3-6.	Aggregate Tax Data for Accounting Period 2009: NAICS 2211
Number of enterprises[a]
                                                                          1,187
Total receipts (10[3])
                                               $323,522,443
Net sales(10[3])
                                                                   $328,017,143
Profit margin before tax
                                                                           3.1%
Profit margin after tax
                                                                           2.0%
[a]	Includes corporations with and without net income.
Source: Internal Revenue Service, U.S. Department of Treasury. 2010. "Corporation Source Book: Data Files 2000 - 2009." <http://www.irs.gov/taxstats/article/0,,id=167415,00.html>; (May 2, 2010).

3.2.2	Goods and Services Used
The oil and gas extraction industry has similar labor and tax requirements as the electric power generation sector. Extraction, support, power, and equipment requirements potentially associated with reciprocating internal combustion engines (oil and gas extraction, support activities, electric power generation, machinery and equipment rental and leasing, and pipeline transportation) represent around 8% of the value of services (Table 3-10).
3.2.3	Business Statistics
The U.S. Economic Census and SUSB programs provide national information on the distribution of economic variables by industry, location, and size of business. Throughout this section and report, we use the following definitions:
Establishment: An establishment is a single physical location where business is conducted or where services or industrial operations are performed.

Table 3-7.  Key Enterprise Statistics by Employee Size for Electric Power Generation, Transmission, and Distribution (NAICS 2211): 2007

                                   Variable
                                All Enterprises
                               <20  Employees
                              20 - 99 Employee s
                              100 - 499 Employees
                                500+ Employees
Firms
                                                                          1,687
                                                                            630
                                                                            670
                                                                            251
                                                                            136
Establishments
                                                                          9,611
                                                                            687
                                                                          1,110
                                                                            999
                                                                          6,815
Employment
                                                                        503,134
                                                                          3,622
                                                                         31,455
                                                                         42,527
                                                                        425,530
Receipts ($10[3])
                                                                   $440,342,284
                                                                     $8,364,773
                                                                    $21,825,969
                                                                    $41,370,375
                                                                   $368,781,167
Receipts/firm ($10[3])
                                                                       $261,021
                                                                        $13,277
                                                                        $32,576
                                                                       $164,822
                                                                     $2,711,626
Receipts/establishment ($10[3])
                                                                        $45,817
                                                                        $12,176
                                                                        $19,663
                                                                        $41,412
                                                                        $54,113
Receipts/employment ($)
                                                                           $875
                                                                         $2,309
                                                                           $694
                                                                           $973
                                                                           $867
Source: U.S. Census Bureau. 2010. "Firm Size Data from the Statistics of U.S. Businesses: U.S. All Industries Tabulated by Receipt Size: 2007." <http://www.census.gov/csd/susb/susb07.htm>.

Figure 3-4.	Industrial Production Index (NAICS 211)
 Source: The Federal Reserve Board. "Industrial Production and Capacity Utilization: Industrial Production" Series ID: G17/IP_MINING_AND_UTILITY_DETAIL/IP.G211.S <http://www.federalreserve.gov/datadownload/>. (January 27, 2010).
Table 3-8.	Key Statistics: Crude Petroleum and Natural Gas Extraction (NAICS 211111): ($2007)

                                     2002
                                     2007
Revenue ($10[6])
                                                                         98,667
                                                                        194,107
Payroll ($10[6])
                                                                          5,785
                                                                          8,988
Employees
                                                                         94,886
                                                                        133,286
Establishments
                                                                          7,178
                                                                          7,221
Source: U.S. Census Bureau; Factfinder Series:  "2002 and 2007." <http://factfinder.census.gov>; (February 23, 2012).
Receipts: Receipts (net of taxes) are defined as the revenue for goods produced, distributed, or services provided, including revenue earned from premiums, commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all revenue collected for local, state, and federal taxes.
Firm: A firm is a business organization consisting of one or more domestic establishments in the same state and industry that were specified under common ownership or control. The firm and the establishment are the same for single-
Table 3-9.	Key Statistics: Natural Gas Liquid Extraction (NAICS 211112) ($2007)

                                     2002
                                     2007
Revenue ($10[6])
33,579
39,978
Payroll ($10[6])
607
617
Employees
9,693
8,523
Establishments
511
321
Source: U.S. Census Bureau; 2002 and 2007." <http://factfinder.census.gov>; (February 23, 2012).
Table 3-10.	Direct Requirements for Oil and Gas Extraction (NAICS 211): 2002
                                   Commodity
                             Commodity Description
                      Direct Requirements Coefficients[a]
                                    V00200
Taxes on production and imports, less subsidies
                                     8.93%
                                    V00100
Compensation of employees
                                     6.67%
                                    230301
Nonresidential maintenance and repair
                                     6.36%
                                    211000
Oil and gas extraction
                                     1.91%
                                    213112
Support activities for oil and gas operations
                                     1.51%
                                    221100
Electric power generation, transmission, and distribution
                                     1.47%
                                    541300
Architectural, engineering, and related services
                                     1.24%
                                    532400
Commercial and industrial machinery and equipment rental and leasing
                                     1.20%
                                    33291A
Valve and fittings other than plumbing
                                     1.10%
                                    541511
Custom computer programming services
                                     0.99%
[a]	These values show the amount of the commodity required to produce $1.00 of the industry's output. The values are expressed in percentage terms (coefficient x100).
Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table, Use Table and Direct Requirements Table. Tables 4 and 5.
          establishment firms. For each multiestablishment firm, establishments in the same industry within a state are counted as one firm; the firm employment and annual payroll are summed from the associated establishments.
Enterprise: An enterprise is a business organization consisting of one or more domestic establishments that were specified under common ownership or control. The enterprise and the establishment are the same for single-establishment firms. Each multiestablishment company forms one enterprise; the enterprise employment and annual payroll are summed from the associated establishments. Enterprise size designations are determined by the summed employment of all associated establishments.

      As of 2007, there were 6,563 firms within the NAICS 211111 code, of which 6427 (98 percent) were considered small businesses (Table 3-11).  Within NAICS 211111, large firms compose about 2 percent of the firms, but account for 59 percent of employment and generate about 80 percent of estimated receipts listed under the NAICS.   Within NAICS 211112, there are 139 firms, of which 95 (71 percent) were considered small businesses (Table 3-12).  As shown in this table, large firms compose 29 percent of the firms, but account for 78 percent of employment and generate about 95 percent of estimated receipts.
Enterprises within NAICS 211111 generated $194 billion in total receipts in 2007. Enterprises within NAICS 211112 generated nearly $40 billion in total receipts in 2007.  Including those enterprises without net income, NAICS 211 averaged an after-tax profit margin of 8.5% in 2008 (Table 3-13).
Table 3-11.	Key Statistics for Crude Petroleum and Natural Gas Extraction (NAICS 211111): 2007
                                     NAICS
                               NAICS Description
                              SBA Size Standard
                                  Small Firms
                                  Large Firms
                                  Total Firms
Number of Firms by Firm Size

Crude Petroleum and Natural Gas Extraction
                                      500
                                                                          6,329
                                                                             95
                                                                          6,424
Total Employment by Firm Size

                                                                         55,622
                                                                         77,664
                                                                        133,286
Estimated Receipts by Firm Size ($1000)

                                                                     44,965,936
                                                                    149,141,316
                                                                    194,107,252

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

Table 3-12.	Key Statistics for Crude Natural Gas Liquid Extraction (NAICS 211112): 2007

                               NAICS Description
                              SBA Size Standard
                                  Small Firms
                                  Large Firms
                                  Total Firms
Number of Firms by Firm Size

Natural Gas Liquid Extraction
                                      500
                                                                             98
                                                                             41
                                                                            139

Total Employment by Firm Size

                                                                          1,875
                                                                          6,648
                                                                          8,523

Estimated Receipts by Firm Size ($1000)

                                                                      2,164,328
                                                                     37,813,413
                                                                     39,977,741
Note: *The counts of small and large firms in NAICS 486210 is based upon firms with less than $7.5 million in receipts, rather than the $7 million required by the SBA Size Standard.  We used this value because U.S. Census reports firm counts for firms with receipts less than $7.5 million.  **Employment and receipts could not be split between small and large businesses because of non-disclosure requirements faced by the U.S. Census Bureau.
Source: U.S. Census Bureau. 2010. "Number of Firms, Number of Establishments, Employment, Annual Payroll, and Estimated Receipts by Enterprise Receipt Size for the United States, All Industries:  2007." <http://www.census.gov/econ/susb/>

Table 3-13.	Aggregate Tax Data for Accounting Period 7/07 - 6/08: NAICS 211
Number of enterprises[a]
                                                                         19,441
Total receipts (10[3])
                                                                   $193,230,241
Net sales(10[3])
                                                                   $166,989,539
Profit margin before tax
                                                                          12.9%
Profit margin after tax
                                                                           8.5%

[a]	Includes corporations with and without net income.
Source: Internal Revenue Service, U.S. Department of Treasury. 2010. "Corporation Source Book: Data Files 2004-2007." <http://www.irs.gov/taxstats/article/0,,id=167415,00.html>; (May 2, 2010).

Pipeline Transportation of Natural Gas
3.3.1	Overview
Pipeline transportation of natural gas (NAICS 48621) is an industry group within the transportation and warehousing sector (NAICS 48-49), but more specifically in the pipeline transportation subsector (486). It includes the transmission of natural gas as well as the distribution of the gas through a local network to participating businesses.
From 2002 to 2007, natural gas transportation revenues fell by 10% to just under $21 billion ($2007) (Table 3-15). At the same time, payroll decreased by 18%, while the number of paid employees decreased by nearly 32%. The number of establishments decreased by 13% from 1,701 establishments in 2002 to 1,479 in 2007.
3.3.2	Goods and Services Used
The BEA reports pipeline transportation of natural gas only for total pipeline transportation (3-digit NAICS 486). In addition to pipeline transportation of natural gas (NAICS 4862), this industry includes pipeline transportation of crude oil (NAICS 4861) and other pipeline transportation (NAICS 4869). However, the BEA data are likely representative of the affected sector since pipeline transportation of natural gas accounts for 68% of NAICS 486 establishments and 72% of revenues (Figures 3-5 and 3-6).

Table 3-14.	Key Statistics: Pipeline Transportation of Natural Gas (NAICS 48621) ($2007)
Year
                                     2002
                                     2007
Revenue ($10[6])
22,964
20,797
Payroll ($10[6])
2,438
2,064
Employees
32,542
24,683
Establishments
1,701
1,479

Source:  U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 48: EC0748I1: Transportation and Warehousing: Industry Series: Preliminary Summary Statistics for the United States: 2002 and 2007." http://factfinder.census.gov (January 27, 2010).
In Table 3-15, we use the latest detailed benchmark input-output data report by the BEA (2002) to identify the goods and services used by pipeline transportation (NAICS 486). As shown, labor, refineries, and maintenance requirements represent significant share of the cost associated with pipeline transportation. Power and equipment requirements potentially associated with reciprocating internal combustion engines (electric power generation and commercial and industrial machinery and equipment repair and maintenance) represent less than 2% of the value of services.

Figure 3-5.	Distribution of Establishments within Pipeline Transportation (NAICS 486)
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 48: Transportation and Warehousing: Industry Series: Summary Statistics for the United States: 2002" <http://factfinder.census.gov>; (December 12, 2008).

Figure 3-6.	Distribution of Revenue within Pipeline Transportation (NAICS 486)
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 48: Transportation and Warehousing: Industry Series: Summary Statistics for the United States: 2002" <http://factfinder.census.gov>; (December 12, 2008).

Table 3-15.	Direct Requirements for Pipeline Transportation (NAICS 486): 2002
                                   Commodity
                             Commodity Description
                      Direct Requirements Coefficients[a]
                                    V00100
Compensation of employees
                                                                         14.78%
                                    324110
Petroleum refineries
                                                                         13.55%
                                    230301
Nonresidential maintenance and repair
                                                                          6.07%
                                    211000
Oil and gas extraction
                                                                          4.94%
                                    333415
Air conditioning, refrigeration, and warm air heating equipment manufacturing
                                                                          4.40%
                                    561300
Employment services
                                                                          4.26%
                                    5416A0
Environmental and other technical consulting services
                                                                          3.04%
                                    541300
Architectural, engineering, and related services
                                                                          3.04%
                                    420000
Wholesale trade
                                                                          2.79%
                                    332310
Plate work and fabricated structural product manufacturing
                                                                          2.72%
                                    5419A0
All other miscellaneous professional, scientific, and technical services
                                                                          2.48%
                                    524100
Insurance carriers
                                                                          2.38%
                                    531000
Real estate
                                                                          2.33%
                                    52A000
Monetary authorities and depository credit intermediation
                                                                          1.76%
                                    V00200
Taxes on production and imports, less subsidies
                                                                          1.41%
                                    541100
Legal services
                                                                          1.19%
                                    221100
Electric power generation, transmission, and distribution
                                                                          1.13%
[a]	These values show the amount of the commodity required to produce $1.00 of the industry's output. The values are expressed in percentage terms (coefficient x100).
Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table, Use Table and Direct Requirements Table. Tables 4 and 5.
According to 2007 U.S. Census data, about 86% of transportation of natural gas establishments were owned by corporations and about 8% were owned by individual proprietorships. About 6% were owned by partnerships (Figure 3-7).
Enterprises within pipeline transportation (NAICS 486) generated $11.1 billion in total receipts in 2007. Including those enterprises without net income, the industry averaged an after-tax profit margin of 9.6% (Table 3-16).
The 2007 SUSB shows that about half of all firms have fewer than 20 employees, but only 1% of all employees in this industry.  Firms with more than 500 employees generate 89% of all receipts in this industry (Table 3-17).

Figure 3-7.	Share of Establishments by Legal Form of Organization in the Pipeline Transportation of Natural Gas Industry (NAICS 48621): 2002
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 48-49: Transportation and Warehousing: Subject Series -- Estab & Firm Size: Legal Form of Organization for the United States: 2002" <http://factfinder.census.gov>; (December 12, 2008).

Table 3-16.	Aggregate Tax Data for Accounting Period 7/07 - 6/08: NAICS 486
Number of enterprises[a]
                                                                            321

Total receipts (10[3])
                                                                    $11,062,608

Net sales (10[3])
                                                                    $10,210,083

Profit margin before tax
                                                                          13.2%
Profit margin after tax
                                                                           9.6%
[a]	Includes corporations with and without net income.
Source: Internal Revenue Service, U.S. Department of Treasury. 2010. "Corporation Source Book: Data Files 2004-2007." <http://www.irs.gov/taxstats/article/0,id=167415,00.html>; (May 2, 2010).

Table 3-17.	Key Enterprise Statistics by Employee Size for Pipeline Transportation of Natural Gas (NAICS 48621): 2007

                                   Variable
                                All Enterprises
                               <20 Employees
                               20 - 99 Employees
                              100 - 499 Employees
                                500+ Employees
Firms
                                                                            126
63
12
9
42
Establishments
                                                                          1.479
66
26
70
1,317
Employment
                                                                         24,683
241
382
1,479
22,581
Receipts ($10[3])
                                                                    $20,796,681
N/A
$518,341
$1,448,020
$18,498,143
Receipts/firm ($10[3])
                                                                       $165,053
N/A
$43,195
$160,891
$440,432
Receipts/establishment ($10[3])
                                                                        $14,061
N/A
$19,936
$20,686
$14,046
Receipts/employment ($)
                                                                           $843
N/A
$1,357
$979
$819
Source: U.S. Census Bureau. 2011. Firm Size Data from the Statistics of U.S. Businesses, U.S. All Industries Tabulated by Employee Size:  2007. http://www2.census.gov/csd/susb/2007/usalli_r07.xls.

General Medical and Surgical Hospitals
3.4.1	Overview
General medical and surgical hospitals (NAICS 6221) is an industry group within the health care and social assistance sector (NAICS 62). It includes hospitals engaged in diagnostic and medical treatment (both surgical and nonsurgical) for inpatients with a broad range of medical conditions. They usually provide other services as well, including outpatient care, anatomical pathology, diagnostic X-rays, clinical laboratory work, and pharmacy services.
From 2002 to 2007, hospital revenues grew about 21% to over $650 billion ($2007) (Table 3-18). At the same time, payroll rose about 15%, while the number of employees increased by only 6%. The number of establishments increased during this period by almost 4%, resulting in an increase in revenue per establishment of almost 16%.
3.4.2	Goods and Services Used
The BEA reports hospital expenditures only for hospitals (3-digit NAICS 622). In addition to general hospitals (NAICS 6221), this industry includes psychiatric and substance abuse hospitals (NAICS 6222) and specialty hospitals (NAICS 6223). However, these data should be representative of the affected sector since in 2007, general medical and surgical hospitals accounted for 92% of NAICS 622 establishments and 94% of revenues.
In Table 3-19, we use the latest detailed benchmark input-output data report by the BEA (2002) to identify the goods and services used by hospitals (NAICS 622). As shown, labor and land requirements represent a significant share of the value of hospital services. Power and equipment requirements potentially associated with reciprocating internal combustion engines (electric power generation and commercial and industrial machinery and equipment repair and maintenance) represent less than 2% of the value of services.

Table 3-18.	Key Statistics: General Medical and Surgical Hospitals (NAICS 6221) ($2007)

                                     2002
                                     2007
Revenue ($10[6])
                                                                        539,502
                                                                        651,639
Payroll ($10[6])
                                                                        209,063
                                                                        240,638
Employees
                                                                      4,772,422
                                                                          5,042
Establishments
                                                                          5,193
                                                                          5,404
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 62: Health Care and Social Assistance: Geographic Area Series: 2002 and 2007." <http://factfinder.census.gov>; (February 22, 2012).
Table 3-19.	Direct Requirements for Hospitals (NAICS 622): 2002
                                   Commodity
                             Commodity Description
                      Direct Requirements Coefficients[a]
                                    V00100
Compensation of employees
                                                                         51.90%
                                    531000
Real estate
                                                                         10.76%
                                    550000
Management of companies and enterprises
                                                                          4.02%
                                    621B00
Medical and diagnostic labs and outpatient and other ambulatory care services
                                                                          2.22%
                                    561300
Employment services
                                                                          1.90%
                                    325412
Pharmaceutical preparation manufacturing
                                                                          1.86%
                                    325413
In-vitro diagnostic substance manufacturing
                                                                          1.66%
                                    524100
Insurance carriers
                                                                          1.66%
                                    420000
Wholesale trade
                                                                          1.62%
                                    221100
Electric power generation, transmission, and distribution
                                                                          1.14%
[a]	These values show the amount of the commodity required to produce $1.00 of the industry's output. The values are expressed in percentage terms (coefficient x100).
Source: U.S. Bureau of Economic Analysis. 2002. 2002 Benchmark Input-Output Accounts: Detailed Make Table, Use Table and Direct Requirements Table. Tables 4 and 5.
3.4.3	Business Statistics
In 2010, the United States had 5,754 hospitals (Table 3-20).   As shown in Table 3-1, nongovernmental not-for-profit hospitals accounted for 2,904 (or 50%) of these hospitals, and State and local government hospitals accounted for 1,068 (or 19%) of these hospitals.
 General medical and surgical hospitals (NAICS 6221) generated $652 billion in total receipts in 2007. Including those enterprises without net income, the industry averaged an after-tax profit margin of 3.1% (Table 3-22).  Also, each firm in this industry had an average of about $202 million in revenue and a great majority of these firms had more than 500 employees in 2007 (Table 3-23).

Figure 3-8.	Share of Establishments by Legal Form of Organization in the General Medical and Surgical Hospitals Industry (NAICS 6221): 2002
Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 62: Health Care and Social Assistance: Subject Series -- Estab & Firm Size: Legal Form of Organization for the United States: 2002" <http://factfinder.census.gov>; (November 21, 2008).
Table 3-20.	Data for General Medical and Surgical Hospitals (NAICS 6221): 2007

                                   Commodity
                                Establishments
                                Amount ($10[6])
                              Number of Employees
                          Employees per Establishment
All firms
5,404
                                                                       $651,639
                                                                     5,041,848
933
Source: U.S. Census Bureau, 2011; Statistics for U.S. Businesses (SUSB), 2007.

Table 3-21.	Hospital Statistics: 2010
                                   Hospitals
                                    Number
Total
                                                                          5,754
Nongovernment not-for-profit
                                                                          2,904
Investor-owned (for-profit)
                                                                          1,013
State and local government
                                                                          1,068
Federal government
                                                                            213
NA = Not available
Source: American Hospital Association. 2011. "AHA Hospital Statistics: 2010 Edition." Health Forum.
Table 3-22.	Aggregate Tax Data for Accounting Period 7/05 - 6/06: NAICS 622-4
Number of enterprises[a]
                                                                         18,263
Total receipts (10[3])
                                                                  $108,074,793
Net sales(10[3])
                                                                  $102,300,229
Profit margin before tax
                                                                           4.4%
Profit margin after tax
                                                                           3.1%
[a]	Includes corporations with and without net income.
Source: Troy, Leo. 2008. "Almanac of Business and Industrial Financial Ratios: 2009 Edition." CCH.

Table 3-23.	Key Enterprise Statistics by Employee Size for General Medical and Surgical Hospitals (NAICS 6221): 2007 ($2007)

                                   Variable
                                All Enterprises
                               <20  Employees
                                20-99 Employees
                               100-499 Employees
  500+ Employees
Firms
                                                                          3,225
                                                                            170
                                                                            277
                                                                          1,227
                                                                          1,551
Establishments
                                                                          5,404
                                                                            173
                                                                            282
                                                                          1,286
                                                                          3,663
Employment
                                                                      5,041,848
                                                                            606
                                                                         18,718
                                                                        294,247
                                                                      4,728,277
Receipts ($10[3])
                                                                   $651,639,328
                                                                        346.216
                                                                      1,553,004
                                                                    $27,889,532
                                                                   $621,850,576
Receipts/firm ($10[3])
                                                                       $202,059
                                                                          2,037
                                                                          5,607
                                                                        $22,730
                                                                       $400,935
Receipts/establishment ($10[3])
                                                                       $120,585
                                                                          2,001
                                                                          5,508
                                                                        $21,687
                                                                       $169,766
Receipts/employment ($)
                                                                           $129
                                                                           $571
                                                                            $83
                                                                            $95
                                                                           $132
Source: U.S. Small Business Administration (SBA). 2010. "Firm Size Data from the Statistics of U.S. Businesses: U.S. All Industries Tabulated by Receipt Size: 2007." <http://www.census.gov/csd/susb/susb07.htm>.

Irrigation Sets and Welding Equipment
3.5.1	Overview
The U.S. Economic Census classifies irrigation equipment under the farm machinery and equipment manufacturing industry group (NAICS 333111). This U.S. industry comprises establishments primarily engaged in manufacturing agricultural and farm machinery and equipment and other turf and grounds care equipment, including planting, harvesting, and grass-mowing equipment (except lawn and garden type).
From 2002 to 2007, farm machinery and equipment manufacturing revenues increased  by $8 billion from $15 billion to $23 billion (Table 3-24). At the same time, payroll increased by 21% and the number of paid employees increased by nearly 9%. The number of establishments dropped by 2% from 1,214 establishments in 2002 to 1,191 in 2007. Industrial production in the industry has been increasing since 1997 (Figure 3-9).
The U.S. Economic Census classifies welding equipment under the welding and soldering equipment manufacturing industry group (NAICS 333992). This U.S. industry comprises establishments primarily engaged in manufacturing welding and soldering equipment and accessories (except transformers), such as welding electrodes, welding wire, and soldering equipment (except handheld).
From 2002 to 2007 welding and soldering equipment manufacturing revenue increased  by about 53% to nearly $6 billion (Table 3-25). At the same time, payroll increased by 12% and the number of paid employees increased by nearly 9%. The number of establishments increased by 31% from 250 establishments in 2002 to 303 in 2007.
3.5.2	Irrigation and Welding Services
The demand for equipment is derived from the demand for the services the equipment provides. We describe uses and industrial consumers of this equipment.
<IP_ADDRESS>	Irrigation
Demand for irrigation equipment is driven by farm operation decisions, optimal replacement considerations, and climate and weather conditions. The National Agriculture Statistics Service (NASS) 2008 Farm and Ranch Irrigation Survey (USDA-NASS, 2010) shows

Table 3-24.	Key Statistics: Farm Machinery and Equipment Manufacturing (NAICS 333111) ($2007)

                                     2002
                                     2007
Revenue ($10[6])
                                                                       $15,006
                                                                       $23,009
Payroll ($10[6])
                                                                        $2,132
                                                                        $2,580
Employees
                                                                         53,817
                                                                         58,838
Establishments
                                                                          1,214
                                                                          1,191
Source: U.S. Census Bureau, Statistics of U.S. Business (SUSB), 2007.

Figure 3-9.	Industrial Production Index (NAICS 333111)

Table 3-25.	Key Statistics: Welding and Soldering Equipment Manufacturing (NAICS 333992) ($2007)

                                     2002
                                     2007
Revenue ($10[6])
$3,880
$5,935
Payroll ($10[6])
$811
$910
Employees
16,128
17,529
Establishments
231
303
Source: U.S. Census Bureau; using American FactFinder; "Sector 31: Manufacturing: Industry Series: Historical Statistics for the Industry: 2002 and 2007" <http://factfinder.census.gov>; (February 15, 2012).
that the top five states ranked by total acres irrigated are Nebraska, California, Texas, Arkansas, and Idaho.  Virtually all of the irrigated areas in the U.S. are west of the Mississippi River.
The survey reported that approximately 546,000 pumps were used on U.S. farms in 2008 with energy expenses totaling approximately $2.7 billion. Electricity is the dominant form of energy expense for irrigation pumps, accounting for 59% of total energy expenses. Diesel fuel is second (25%), followed by natural gas (17%) and other forms of energy such as gasoline (2%).
Per-acre operating costs for these irrigation systems vary by fuel type, and natural gas was the most expensive in 2008 ($93 per acre for well systems and $44 per acre for surface water systems) (Table 3-26). Systems using diesel fuel were operated at approximately half of these per-acre costs ($54 per acre for well systems and $42 per acre for surface water systems). Gasoline- and gasohol-powered systems offered the least expensive operating costs for well systems ($39 per acre)  and electricity-power systems offered the least expensive operating costs for surface water systems ($45 per acre).  As shown in Table 3-27, the number of on-farm pumps increased to 546,308 from 489,434 (12%) between 2003 and 2008. The use of electric- and diesel-powered pumps increased during this period (21% and 3%, respectively), while other fuel sources such as liquid petroleum (LP) gas, propane, and butane declined significantly (31%). It should be noted that the acreages included in Table 3-27 incorporate both irrigated and non-irrigated land.
Table 3-26.	Expenses per Acre by Type of Energy: 2008
                                   Fuel Type
                         Irrigated by Water from Wells
                          Irrigated by Surface Water
Electricity
                                    $57.80
                                    $35.07
Natural gas
                                    $93.03
                                    $43.85
LP gas, propane, butane
                                    $38.72
                                    $45.40
Diesel fuel
                                    $54.20
                                    $41.94
Gasoline and gasohol
                                    $84.98
                                    $39.24
Total
                                    $60.90
                                    $36.13
Source: U.S. Department of Agriculture, National Agricultural Statistics Service. 2010. "2008 Farm and Ranch Irrigation Survey." Washington, DC: USDA-NASS. Table 20.  Found on the Internet at http://www.agcensus.usda.gov/Publications/2007/Online_Highlights/Farm_and_Ranch_Irrigation_Survey/fris08_1_20.pdf.
Table 3-27.	Number of On-Farm Pumps of Irrigation Water by Type of Energy: 2003 and 2008
                                   Fuel Type
                                     2003
                                     2008
                               Percentage Change
Electricity
312,145
377,492
21%
Natural gas
41,768
36,176
 - 13%
LP gas, propane, butane
17,786
12,203
 - 31%
Diesel fuel
112,133
115,249
3%
Gasoline and gasohol
5,602
5,188
 - 7%
Total
489,434
546,308
12%
Source: U.S. Department of Agriculture, National Agricultural Statistics Service.  2010. "2008 Farm and Ranch Irrigation Survey." Washington, DC: USDA-NASS. Table 20.  Found on the Internet at http://www.agcensus.usda.gov/Publications/2007/Online_Highlights/Farm_and_Ranch_Irrigation_Survey/fris08_1_20.pdf
No information is available on the use and construction of on-farm pumps specifically. USDA reports that planted acres of the eight major crops hit a 5-year high of 252 million acres in 2008 but will fall and level off to around 244 million acres over the next 2 to 4 years (USDA, 2008).
<IP_ADDRESS>	Welding
Welding is used in a wide variety of applications. One of the biggest manufacturers of welding products identifies the following key end-user segments:
general metal fabrication;
infrastructure including oil and gas pipelines and platforms, buildings, bridges, and power generation;
transportation and defense industries (automotive, trucks, rail, ships, and aerospace);
equipment manufacturers in construction, farming, and mining;
retail resellers; and
rental market (Lincoln Electric Holdings, 2006).
Lincoln Electric further describes the following key applications: power generation and process industries, offshore production of oil and gas, pipelines/pipemills, and heavy fabrication (earthmoving and construction equipment and agricultural and farm equipment.
3.5.3	Business Statistics
Enterprises within agriculture, construction, and mining machinery manufacturing (NAICS 3331) generated $88 billion of total receipts in 2007, while those in other general purpose machinery manufacturing (NAICS 3339) generated $85.7 billion. The average after-tax profit margin in these two industries was 6.9% and 4.7%, respectively (Table 3-28).
Table 3-28.	Aggregate Tax Data for Accounting Period 7/05 - 6/06: NAICS 3331 and 3339

        Agriculture, Construction, & Mining Machinery Manufacturing
                 Other General Purpose Machinery Manufacturing
Number of enterprises[a]
                                                                          3,064
                                                                          6,231
Total receipts (10[3])
                                                                   $88,255,496
                                                                    $85,653,046

Profit margin before tax
                                                                           9.1%
                                                                           6.1%
Profit Margin after tax
                                                                           6.9%
                                                                           4.7%
[a]	Includes corporations with and without net income.
Source: Troy, Leo. 2008. "Almanac of Business and Industrial Financial Ratios: 2009 Edition." CCH.
As noted earlier, welding equipment is used in heavy fabrication such as earthmoving and construction equipment. We focus on the size distribution for a representative sector in this section (NAICS 237, Heavy and Civil Engineering Construction); other subsections in Section 3 cover other sectors that potentially use equipment powered by diesel engines (e.g., power generation and offshore gas distribution). As shown in Table 3-29, SUSB data suggest that more than 80% of firms are below the Small Business Administration (SBA) small business size standard for this industry.  However, it is not clear what fraction of these firms use stationary diesel engines.

Table 3-29.	Key Enterprise Statistics by Receipt Size for Heavy Construction: 2007[a]

                                   Variable
                                All Enterprises
                               <20 Employees
                               20 - 99 Employees
                              100 - 499 Employees
                                     500+
Firms
                                                                         49,228
                                                                         40,654
                                                                          6,793
                                                                          1,422
                                                                            359
Establishments
                                                                         51,421
                                                                         40,670
                                                                          6,947
                                                                          1,847
                                                                          1,987
Employment
                                                                      1,016,407
                                                                        183,487
                                                                        273,867
                                                                        238,342
                                                                        320,711
Receipts ($10[3])
                                                                   $263,941,774
                                                                    $46,766,241
                                                                    $68,078,765
                                                                    $69,190,739
                                                                    $79,906,029
Receipts/firm ($10[3])
                                                                         $5,362
                                                                         $1,150
                                                                        $10,022
                                                                        $48,657
                                                                       $222,579
Receipts/establishment ($10[3])
                                                                         $5,133
                                                                         $1,150
                                                                         $9,800
                                                                        $37,461
                                                                        $40,214
Receipts/employment ($)
                                                                           $260
                                                                           $255
                                                                           $249
                                                                           $290
                                                                           $249
[a]	2007 SUSB. The most comparable 2007 NAICS code for this industry is 237.
Source: U.S. Census Bureau. 2012b. Firm Size Data from the Statistics of U.S. Businesses, U.S. All Industries Tabulated by Receipt Size: 2007. http://www2.census.gov/csd/susb/2007/usalli_r07.xls.

Regulatory Alternatives, Costs, and Emission Impacts
Background
This section of the RIA includes a discussion of the regulatory alternatives considered for the proposed reconsidered rule, the costs associated with these regulatory alternatives, and the impacts on affected emissions (both HAP and non-HAP). All impacts presented are for the year of full implementation, 2013.   Costs in the chapter are in 2008$.  Costs in 2010$ shown in other parts of the RIA are updated values of these 2008$.   Although the estimates presented are annualized, they should be understood as a "snapshot" in analyzing costs. Annualized costs are estimated as equal for each year that control equipment is operated.
After promulgation of the 2010 RICE NESHAP amendments, the EPA received several petitions for reconsideration, legal challenges, and other communications raising issues of practical implementability, and certain factual information that had not been brought to the EPA's attention during the rulemaking. The EPA has considered this information and believes that amendments to the rule to address certain of these issues are appropriate. Therefore,the EPA is proposing amendments to NESHAP for stationary RICE signed in March 2010 for CI engines and August 2010 for SI engines under section 112 of the Clean Air Act. This proposal was developed to address certain issues that have been raised by different stakeholders through lawsuits, several petitions for reconsideration of the 2010 RICE NESHAP amendments and other communications. The proposed amendments include alternative testing options for certain large spark ignition (generally natural gas-fueled) stationary reciprocating internal combustion engines, management practices for a subset of existing spark ignition stationary reciprocating internal combustion engines in sparsely populated areas, and alternative and less burdensome monitoring and compliance options for the same engines in populated areas. The EPA is also proposing to include a limited temporary allowance for existing stationary emergency area source engines to be used for peak shaving and non-emergency demand response as part of the pre-existing allowance for such engines to be used for non-emergency use for 50 hours annually. In addition, the EPA is proposing, in both the NESHAP and in the new source performance standards for stationary internal combustion engines to increase the hours that stationary emergency engines may be used for emergency demand response. The proposed amendments also correct minor mistakes in the pre-existing regulations.
EPA has taken several actions over the past several years to reduce exhaust pollutants from stationary diesel engines, but believes that further reducing exhaust pollutants from stationary diesel engines, particularly existing stationary diesel engines that have not been subject to federal standards, is justified. Therefore, EPA is issuing this rulemaking that reconsiders the 2010 final rule requiring emissions reductions from existing stationary diesel engines. The full preamble for the final CI RICE NESHAP and the rule itself can be reviewed at http://www.epa.gov/ttn/atw/rice/fr03mr10.pdf.

Summary of the Proposed Reconsideration Rule

4.2.1 Proposed Amendment - Emergency Demand Response/Peak Shaving
<IP_ADDRESS> Background
	This action proposes to amend provisions in the RICE NESHAP that currently allow owners and operators to operate stationary emergency engines for up to 15 hours per year as part of a demand response program if the RTO or equivalent balancing authority and transmission operator have determined there are emergency conditions that could lead to a potential electrical blackout, such as unusually low frequency, equipment overload, capacity or energy deficiency, or unacceptable voltage level. The final rule did not allow emergency engines to be used for purposes of peak shaving or other non-emergency purposes as part of a financial arrangement. These provisions were included in the RICE NESHAP when requirements for existing stationary CI engines were finalized on March 3, 2010 (75 FR 9648). Following the completion of that portion of the rule, the EPA received three main petitions for reconsideration. One petition was from CPower, Inc., EnergyConnect, Inc., EnerNOC, Inc., and Innoventive Power, LLC. (EnerNOC et al.)(EPA-HQ-OAR-2008-0708-0404). Another petition was received from the Delaware Department of Natural Resources and Environmental Control (DE DNREC) (EPA-HQ-OAR-2008-0708-0400). The third petition was from the National Rural Electric Cooperative Association (NRECA) (OAR-2008-0708-0580). In addition to these main petitions the EPA received a substantial number of letters from others in the electric generation industry.
	The petition from EnerNOC, et al., asked that EPA increase the period of time permitted for emergency demand response operation in the rule to 60 hours per year, or the minimum number of hours required by the emergency demand response program. By contrast, the DE DNREC petition asked EPA to reconsider the emergency demand response provision because of the adverse effects that it believes would result from increased emissions from these engines. The petition from NRECA requested that the EPA eliminate the restriction on the use of stationary emergency engines for demand response purposes. The EPA granted the petitions from EnerNOC, et al., DE DNREC and NRECA, and issued a notice on December 7, 2010 (75 FR 75937), requesting comments on whether to amend the 15 hours per year limitation on the operation of stationary emergency RICE participating in emergency demand response programs.
      The EPA received more than 120 comments from a number of different entities including various state agencies, utilities, electric cooperatives and industry organizations. Many commenters expressed that 15 hours per year is not sufficient to meet current emergency demand response requirements for participation. For example, several emergency demand response programs have ISO tariff requirements greater than 15 hours per year, including the Electric Reliability Council of Texas emergency demand response program, which has a tariff requirement of 24 hours per year; the Pennsylvania Jersey Maryland ("PJM") Interconnection, known as the Emergency Load Response Program, which has a tariff requirement of 60 hours per year; and the ISO New England ("ISO-NE"), which forecasts that backup resources would be expected for 55 hours over a 12-month period. Tariff requirements are developed to specify the mandatory time load resources (engines) must be willing and able to operate if the units are enrolled in the program. Conversely, some commenters urged the EPA to allow stationary emergency engines to only operate during true emergencies or when voltage or frequency varies beyond specified parameters.
	Based on the EPA's review of the petitions and comments that the EPA has received, the EPA has found it appropriate to propose to amend the current rule to increase the allowance for stationary emergency engine participation in emergency demand response programs to up to 100 hours per year, which would be included as part of the pre-existing allowance of 100 hours for owners of emergency engines to test and maintain their emergency engines. The EPA believes that the emergency demand response programs that exist across the country are important programs that protect the reliability and stability of the national electric service grid. Allowing stationary emergency engines to operate as part of emergency demand response programs can help prevent grid failure or blackouts, by allowing these engines to be used in circumstances of grid instability prior to the occurrence of blackouts. Preventing stationary emergency engines from being able to qualify and participate in emergency demand response programs without having to apply aftertreatment could force owners and operators to leave their engines out of these programs, which will impair the ability of ISOs and RTOs to use these relatively small, quick-starting and reliable sources of energy to protect the reliability of their systems. The EPA does not wish to potentially jeopardize electrical reliability or create a disincentive for stationary emergency engines to participate in these programs. The circumstances during which the EPA would allow stationary emergency engines to operate for emergency demand response purposes include periods during which the regional transmission authority or equivalent balancing authority and transmission operator has declared an Energy Emergency Alert Level 2 (EEA Level 2) as defined in the North American Electric Reliability Corporation Reliability Standard EOP-002-3, Capacity and Energy Emergency, plus during periods where there is a deviation of voltage or frequency of 5 percent or more below standard voltage or frequency. During EEA Level 2 alerts there is insufficient energy supply and a true potential for electrical blackouts. System operators must call on all available resources during EEA Level 2 alerts in order to stabilize the grid to prevent failure. Therefore, this situation is a good indicator of severe instability on the system. Consistent normal voltage provided by the utility is often called power quality and is an important factor in local electric system reliability. Reliability of the system requires electricity being provided at a normal expected voltage. The American National Standards Institute standard C84.1-1989 defines the maximum allowable voltage sag at below 5 percent. On the local distribution level local voltage levels are therefore important and a 5 percent or more change in the normal voltage or frequency is substantial and an indication that additional resources are needed to ensure local distribution system reliability. This situation would be indicative of severe instability on the system.
      Emergency demand response programs rely on agreements under which owners of engine agree to make their engines available to be called upon for a specific number of hours per year, as required by the relevant ISO or RTO tariff, under specified circumstances considered to indicate emergencies. In order to be enrolled in an emergency demand response program, participants must qualify their engines and must be able to use their emergency engines for the number of hours the program requires. Engines are not generally called upon for the maximum hours required by the tariffs. However, even though the engine may not be called at all or may run for fewer hours than the program requires it to be available in a particular year, the engine must still be available for those theoretical number of hours in order to join the program. Demand response contracts require more hours than the 15 hours per year that is currently in the regulations, and the commenters state that the 15 hours per year is not a sufficient amount of time to ensure the reliability of the program; some programs require up to 60 hours per year, as discussed earlier. For these reasons, the EPA believes it is appropriate to allow additional hours for emergency demand response operation in order for such programs to be accessible to stationary emergency engines. Consequently, the EPA is proposing amendments to the rule to increase the limitation on emergency demand response operation to 100 hours per year for stationary emergency engines. It is expected that owners and operators of stationary emergency engines that seek to qualify their units as demand resources would with the proposed increase to 100 hours per year be able to meet the operational and qualification requirements of the different ISOs and RTOs in the country.
      As stated, stationary emergency engines that participate in demand response programs may not be called upon at all, but must nonetheless be available to operate for the required amount stipulated by the specific program. The purpose of the limited allowance for demand response is to respond to emergencies, and the EPA is persuaded by the information that has been submitted that 15 hours per year is an insufficient amount of time to allow for emergency demand response needs, given past experience. The EPA believes 100 hours per year is sufficient to cover any potential demand response operation as well as the required maintenance and testing that is also included within the 100 hours of operation.
      The EPA has previously determined that stationary emergency engines typically operate well below 50 hours per year and more commonly about 1 to 2 hours per month. A survey conducted by the California Air Resources Board (CA ARB) indicated the average yearly operation for emergency diesel engines was 31 hours over a period of 3 years. The majority of those hours were for the purpose of maintenance and testing; less than 5 hours was for interruptible service contracts, and the remaining amount for emergency/standby operation (EPA-HQ-OAR-2005-0029-0011). Data from demand response programs in ISO-NE and PJM territories show that backup generation was dispatched for less than 30 hours during the summers of 2008, 2009 and 2010.
      However, again, emergency units must be available to operate more than that in most cases to qualify for demand response programs. For instance, PJM requires a minimum ISO tariff of 60 hours per year of engine availability for program participation. Consequently, in order to ensure that a sufficient amount of operating time is available for maintenance and readiness testing, and for demand response operation, the EPA is proposing 100 hours of operation. A number of commenters requested that an allowance of 100 hours per year be allowed in order to provide adequate hours consistent with minimum required hours that customers must be available to operate and to address local distribution system emergencies. For instance, in Hawaii, the emergency demand response program operated by the Hawaiian Electric Company requires that emergency engines be able to operate for 100 hours per year in the event of an emergency in order to participate in the program. In order to provide a sufficient amount of time to cover annual maintenance and testing, which is typically more than 20 hours per year according to the survey conducted by CA ARB (see EPA-HQ-OAR-2005-0029-0011), plus to cover hours necessary for qualifying for emergency demand response programs or local distribution system emergencies, EPA believes an allowance of 100 hours per year would be appropriate for these activities. Taking into account that there may be situations where annual maintenance and testing could exceed the typical 1 to 2 hours per month and accounting for other emergency demand response programs that require more than 60 hours per year for program participation (e.g., the Hawaiian Electric Company), the EPA believes that 100 hours per year is appropriate for emergency demand response plus maintenance and testing.
      The proposed amendment to the rule would mean that stationary emergency engines could operate for a total of 100 hours per year for emergency demand response operation as part of the 100 hours already permitted for maintenance and readiness testing while maintaining their status as emergency units, rather than non-emergency units, and continue to meet the requirements that apply to emergency engines.
	On the issue of peak shaving and non-emergency demand response, the EPA is proposing to include a temporary limited allowance for peak shaving and other types of non-emergency use as part of a financial arrangement for existing stationary emergency engines at area sources of HAP, if the peak shaving is done as part of a peak shaving (or load management) program with the local distribution system operator. The power generated under this allowance can only be used at the facility or towards the local system.
	The EPA has determined that it is appropriate to include the option for existing stationary emergency engines at area sources to operate for a small number (50) of hours per year for any non-emergency reason to generate income locally and not be penalized or considered a non-emergency engine and subsequently required to install aftertreatment that could be prohibitively costly for these sources in the near term. The EPA is proposing that the 50-hour allowance for peak shaving for emergency engines at area sources be allowed for a limited period of time, but then removed after April 16, 2017. The peak shaving would also be limited to operation as part of a peak shaving (load management program) with the local distribution system operator. Owners would still have the pre-existing 50 hours per year allowance for non-emergency operation after April 16, 2017, but those 50 hours could no longer be used for peak shaving. The temporary allowance for peak shaving would give sources time to address reliability issues and develop solutions to reliability issues while facilities are coming into compliance with the National Emission Standards for Hazardous Air Pollutants From Coal and Oil-Fired Electric Utility Steam Generating Units, which were promulgated on February 16, 2012 (77 FR 9304).  This limited allowance would allow the owners and operators of these engines more flexibility to run reliability critical units in order to minimize potential grid-related interruptions as coal- and oil-fired baseload power plants may be temporarily shut down to install emission controls to comply with the NESHAP From Coal and Oil-Fired Electric Utility Steam Generating Units.