April 12, 2012

National Emission Standards for Hazardous Air Pollutants for Major Sources: Industrial, Commercial, and Institutional Boilers and Process Heaters; Proposed Reconsideration

Enviromental Protection Agency
Summary

Score: 29 / 60

Key materials
Additional details
Agency
Environmental Protection Agency
Regulatory Identification Number
2060-AR13
Rule Publication Date
12/23/2011
Comment Closing Date
02/21/2012
Dollar Year
2008
Time Horizon (Years)
For 2015

RULE SUMMARY

This proposed rule regulates hydrogen chloride (HCl) (as a surrogate for acid gas hazardous air pollutants [HAP]), total selected metals (TSM) or particulate matter (PM) (as a surrogate for non-mercury HAP metals), carbon monoxide (CO) (as a surrogate for non-dioxin/furan organic HAP), mercury (Hg), and dioxin/furan emissions from boilers and process heaters. The rule sets various emission standards for existing and new Industrial, Commercial, and Institutional Boilers and Process Heaters designed with a heat input capacity of ten million British thermal units per hour (MMBtu/hr) or greater and based on the sixteen different fuel types. Typically, each facility is required to (1) conduct initial and annual stack tests to determine compliance with the PM emission limits or conduct initial and annual stack tests to determine compliance with the TSM emission limits, (2) conduct initial and annual stack tests to determine compliance with the Hg emission limits, (3) conduct initial and annual stack tests to determine compliance with the HCl emission limits, (4) use EPA Method 19 to convert measured concentration values to pound per million Btu values, and (5) conduct initial and annual tests to determine compliance with the CO emission limits or install, operate, and maintain a CO continuous emission monitoring system. The standards were postponed during judicial review and are now resumed. Comments have been received, and further comments were elicited by the publication of the proposed rulemaking. Definitions are tightened for several CFR references.

COMMENTARY

Not badly modeled through simulation, but yet another regulatory initiative avoiding the required benefit-cost analysis. Lack of clarity over cost-benefit nature of foreign trade and employment changes (eg., reduction in trade with intact trade balance can be welfare reducing). The EPA could have done a more thorough job reporting the costs and benefits associated with the five alternative regulatory approaches presented. The EPA also dropped Appendix C: "Major Sources Cost and Emissions Memorandum" and Appendix D: "Area Sources Cost and Emissions Memorandum" from the RIA issued in Dec. 2011 and Feb. 2011. To view these appendices, one needs to review the RIA from April 2010.

MONETIZED COSTS & BENEFITS (AS REPORTED BY AGENCY)

Dollar Year
2008
 
Time Horizon (Years)
For 2015
 
Discount Rates
3%
7%
Expected Costs (Annualized)
$1,490
$1,490
Expected Benefits (Annualized)
$27,000 to $67,000
$25,000 to $61,000
Expected Costs (Total)
Not Reported by Agency
Not Reported by Agency
Expected Benefits (Total)
Not Reported by Agency
Not Reported by Agency
Net Benefits (Annualized)
$25,510 to $65,510
$23,510 to $59,510
Net Benefits (Total)
$0
$0

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion Score

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
The RIA and other relevant information can be found on regulations.gov using RIN or a keyword search. Additionally, the EPA website has a link to the rule, RIA, and additional information. The number of documents in support of the regulation did make the search more difficult than usual, however. Moreover, the RIA for this version of the proposed rule (Dec. 2011) is missing Appendix C and D which discuss the five regulatory alternatives for existing boilers and three alternatives for new boilers.
3/5
2. How verifiable are the data used in the analysis?
Sources for much of the data, including most of the significant data, are provided but not necessarily linked. The RIA aggregates price elasticity of supply data for over a thousand industries reported in Broda. et. al. (2008) for the hundred sector multimarket model used. Some cost data is simply estimated without references to any underlying source. Much of the proprietary data is identified, and evidence is given that those data are valid.
3/5
3. How verifiable are the models and assumptions used in the analysis?
Most aspects of models and assumptions are consistent with or based on cited literature or analyses, most of which are recent, cited works, such as Morgenstern, Pizer, and Shih (2002), in peer-reviewed scientific publications.
3/5
4. Was the analysis comprehensible to an informed layperson?
The results and conclusions are clear, though a lay person may find the jargon and acronyms difficult to follow. Most economists would be able to follow it.
3/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
3/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
The reduction in particulate, SO4, and CO emissions will reduce premature mortality, cardiovascular disease, and respiratory irritation. The rule discusses the improved visibility, improved habitat, and reductions in exposure to hazardous air pollutants, though it does not quantify these outcomes.
5/5
Does the analysis identify how these outcomes are to be measured?
Typically, each facility is required to conduct initial and annual stack tests to determine compliance with the PM emission limits or TSM emission limits, Hg emission limits, HCl emission limits, and CO emission limits or install, operate, and maintain a CO continuous emission monitoring system. However, there is little analysis on how these reductions will ultimately affect health outcomes.
2/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
The RIA and rule spends most of its time discussing the filters, scrubbers, alternative technology, and energy audits that will be used to reduce emissions. While it is plausible that these emission reductions will enhance health and visibility, the RIA does not fully define the theory nor does it define how one might test such theory.
2/5
Does the analysis present credible empirical support for the theory?
The RIA presents credible evidence that filters, scrubbers, and other technology can reduce emission, though often the RIA uses the term "literature suggests" without directly citing any research. Nor does the RIA seek to empirically estimate how such emissions reductions will directly enhance health and visibility.
3/5
Does the analysis adequately assess uncertainty about the outcomes?
The RIA does report variations in emission reductions based on 5 percent and 10 percent efficiency gains realized through energy audits. But not much on health. Though many of the outcomes are reported simply as point estimates. Lingering uncertainty is recognized, however.
2/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
2/5
Does the analysis identify a market failure or other systemic problem?
Market failure is assumed: finding a net benefit does not indicate a systemic problem, since (i) the analysis is imprecise and (ii) they need to make a case for preemptive regulation (compared with relying on nuisance law) but do not do so. There is no description as to why a firm might emit more than the socially efficient amount of pollutants when operating a boiler.
1/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
Although the rule does not state a theory as to why boiler operators may emit more than the socially efficient level of pollutants, the assumption that firms emit too much is supported by data showing the estimated benefits of reduced particulate emissions are greater than the costs. The RIA does not quantify the co-benefits from the associated reductions in carbon monoxide and sulfur dioxide that also take place.
2/5
Does the analysis present credible empirical support for the theory?
The RIA and the rule do not discuss the theory, but the RIA does present empirical support for the scale of the damages associated with such level of emissions.
2/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
The EPA recognizes the uncertainty of the entire analysis, but it focuses all its efforts on the uncertainty of the benefits and none on the uncertainty of the size of the problem.
2/5
7. How well does the analysis assess the effectiveness of alternative approaches?
3/5
Does the analysis enumerate other alternatives to address the problem?
The RIA, presented with an earlier version of the rule in 2010, lists five regulatory options for existing boilers and three for new boilers. The rule simply lists emission reduction requirements by type of fuel used. As an alternative to CO stack testing and oxygen monitoring, the rule proposes a compliance option that allows the use of CO continuous emission monitoring systems.
4/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
The range of alternatives is quite narrow. For hazardous air pollutants, the EPA lists five regulatory options for existing boilers and three for new. For existing boilers, the options include: (1) all boilers of all fuel types meeting particulate, HCl, mercury, CO, and dioxin/furan emissions; (2) all boilers of all fuel types meeting particulate, HCl, mercury, CO, and dioxin/furan emissions except those units exceeding the MACT limit for dioxin/furan; (3) boilers that are equal to ten mmBtu/hr or greater must meet particulate, HCl, mercury, CO, and dioxin/furan emission levels along with an annual tune-up, without energy audits; (4) all boilers of all fuel types meeting particulate, HCl, mercury, CO, and dioxin/furan emissions; boilers (except gas/refinery gas and metallurgical process furnaces) that are equal to ten mmBtu/hr or greater must meet particulate, HCl, mercury, CO, and dioxin/furan emission levels along with an annual tune-up, and energy audits for all types of boilers; (5) all boilers of all fuel types meeting particulate, HCl, CO, and dioxin/furan emissions; boilers (except gas/refinery gas and metallurgical process furnaces) that are equal to ten mmBtu/hr or greater must meet particulate, HCl, mercury, CO, and dioxin/furan emission levels along with an annual tune-up, while big and small boilers have energy audits, and gas/refinery gas units have a separate emission limit for mercury.
2/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
Each version of the rule and RIA fails to fully evaluate the alternative approaches presented. However, each version of the rule does report a slightly different preferred method and how this preferred regulatory approach might lower the level of emissions.
1/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
The RIA provides a baseline that includes a number of final and proposed rule changes, including the proposed Transport Rule, cement kiln NESHAP, RICE NESHAP, gold mine NESHAP, and various consent decrees. The baseline presented assumes continued future federal regulation.
3/5
8. How well does the analysis assess costs and benefits?
3/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
The rule and RIA use many assumptions. Some assumptions are traceable with much work, although many claims are left qualitative and speculative. The RIA and rule only quantify the costs associated with the chosen regulatory alternative. For the subcategory of boilers that use solid waste, the rule does report one alternative regulatory standard and the associated costs.
2/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
The RIA includes the total capital and annual costs for control devices, work practices, testing and monitoring but not recordkeeping and reporting costs. Table 3-1 of this shows the capital and annual cost impacts for each subcategory.
3/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
The RIA does estimate the price effects for various industries. See 4-2 of RIA.
4/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
Many responses are analyzed. The RIA uses over a thousand inverse elasticities provided by Broda et. al. (2008) and reported by industry using the North American Industry Classification System as an empirical basis for the multimarket model supply elasticities. The RIA uses Morgenstern, Pizer, and Shih (2002): "Jobs Versus the Environment: An Industry-Level Perspective" to determine how the rule impacts the number of jobs. Using this paper, however, will always result in a positive number of jobs. The rule only includes industries directly affected, not the industries indirectly related.
3/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
Most costs reported in the RIA are modeled reasonably well. However, most are listed as point estimates, though a few, such as the energy audits, are listed as a range of costs.
3/5
Does the analysis identify the alternative that maximizes net benefits?
The costs and benefits of alternative approaches are not reported, therefore the reader cannot ascertain whether the required level of emission reductions maximizes net benefits or not.
1/5
Does the analysis identify the cost-effectiveness of each alternative considered?
The rule includes a few small variations in the proposed standard for a small subset of boiler types. These are identified in the analysis (dismissed as less cost effective) but are not significant if looking more globally at alternatives.
1/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
The RIA does identify industries that will be affected by the high boiler operating costs.
3/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
According to the RIA, the EPA was unable to "monetize the benefits associated with reducing HAPs, all monetized benefits reflect improvements in ambient PM2.5 and ozone concentrations." There is an analysis of transfers and impacts in the RIA and some concern with small firms and gainers and losers in employment.
3/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
The RIA states that several provisions in the rule and the data used to generate regulatory impacts analysis appears to have changed between proposal and the final rule. As a result, the costs of the RIA analysis decreased from the proposal to final analysis. Some of these changes are directly due to comments while others came about through the RIA. The changes are reported beginning on page 3-1 of the RIA.
3/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
While this version of the proposed rule increases the net benefits relative to the most previous version of the proposed rule, the EPA only reports the net benefits for one regulatory option for each fuel type. Thus, it is impossible for the reader to know whether net benefits are maximized. Moreover, the rule does not even attempt to calculate health, visibility, and habitat benefits.
1/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
RIA contains analysis that could readily be used to establish goals for future emissions when assessing the results of the regulation in the future. The rule does little in the way of measuring health, habitat, or visibility.
1/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
Although the RIA and final rule demonstrate that the agency has access to data that could be used to assess some aspects of the regulation’s performance in the future, there is no evidence that the EPA will do so in the future.
1/5
 
Total 29 / 60