UNFUNDED
MANDATES
REFORM
ACT
ANALYSIS
FOR
THE
RECIPROCATING
INTERNAL
COMBUSTION
ENGINE
NESHAP
UNDER
THE
CLEAN
AIR
ACT
(
February,
2004)

This
document
provides
an
analysis
of
the
effects
of
the
U.
S.
Environmental
Protection
Agency's
("
EPA")
final
reciprocating
internal
combustion
engine
(
RICE)
maximum
achievable
control
technology
(
MACT)
rulemaking
under
Title
III
of
the
Clean
Air
Act
on
State,
local,
and
tribal
governments,
and
the
public
sector
as
required
by
the
Unfunded
Mandates
Reform
Act
of
1995
("
UMRA").
The
Agency
has
determined
that
an
UMRA
analysis
is
required
because
the
RICE
MACT
rulemaking
will
affect
units
operated
by
State
and
local
governments,
and
will
impose
a
cost
on
the
private
sector
greater
than
$
100
million
in
any
one
year.

This
UMRA
analysis
examines
the
impacts
of
the
rule
on
units
that
are
owned
by
State,
local,
tribal
governments,
and
the
private
sector.
This
analysis
is
drawn
from
the
regulatory
impact
analysis
conducted
for
the
rule.
The
regulatory
impact
analysis
(
RIA)
prepared
for
this
rule,
including
the
Agency's
assessment
of
costs
and
benefits,
is
detailed
in
the
"
Regulatory
Impact
Analysis
for
the
RICE
NESHAP"
in
the
docket.

Four
categories
of
engines
will
incur
compliance
costs
under
the
final
RICE
standard:


spark
ignition,
two­
stroke
lean
burn
(
2SLB);


spark
ignition,
four­
stroke
lean
burn
(
4SLB);


spark
ignition,
four­
stroke
rich
burn
(
4SRB);


compression
ignition
(
CI,
either
two­
stroke
lean
burn
or
four­
stroke
lean
burn)

Engines
are
excluded
from
compliance
with
the
rule
if
they
have
a
brake
power
less
than
500
horsepower
of
if
they
are
emergency
or
back­
up
units.
The
regulation
will
affect
both
existing
sources
and
new
sources,
but
the
only
category
of
existing
sources
that
is
affected
is
the
4SRB
engine
category.
Projections
of
existing
and
new
sources
by
unit
type
and
compliance
cost
estimates
by
unit
type
were
used
to
determine
the
economic
impact
of
the
regulation.

The
economic
impact
analysis
(
or
EIA)
indicates
that
prices
of
petroleum,
natural
gas,
electricity,
and
coal
will
all
increase
as
a
result
of
the
regulation,
but
these
changes
are
relatively
small.
The
largest
impacts
occur
in
the
natural
gas
market
because
the
majority
of
the
regulation's
costs
fall
on
the
natural
gas
industry.
The
petroleum
industry
is
also
directly
affected,
but
to
a
much
larger
extent
than
the
natural
gas
industry.
Results
from
the
EIA
reveal
that
the
largest
price
change
is
projected
in
the
natural
gas
market,
where
the
equilibrium
price
is
expected
to
increase
by
0.300
percent
as
a
result
of
the
rule.
The
prices
of
petroleum
products,
electricity,
and
coal
are
projected
to
increase
by
0.015
percent,
0.04
percent,
and
0.008
percent,
respectively.
Unlike
the
projected
price
changes,
the
projected
changes
in
output
are
not
in
the
same
direction
for
all
four
of
the
energy
markets.
The
quantities
of
petroleum
products
and
natural
gas
output
are
expected
to
decline
slightly
(
by
0.002
percent
and
0.04
percent,
respectively),
while
the
quantities
of
electricity
and
coal
produced
are
projected
to
increase
by
0.009
percent
and
0.008
percent,
respectively.

The
observed
pattern
of
changes
in
price
and
quantity
implies
that
there
have
been
increases
in
electricity
and
coal
demand
that
have
outweighed
the
decreases
in
supply
in
these
markets
resulting
from
increased
input
costs
(
i.
e.,
higher
costs
of
natural
gas
and
petroleum
products
used
in
electricity
and
coal
production).
Increase
in
demand
in
these
markets
occur
sas
some
consumers
change
their
fuel
usage
in
response
to
higher
natural
gas
and
petroleum
prices
by
switching
towards
electricity
and
coal.
As
a
result,
both
price
and
quantity
increase
in
these
markets
and
producers
of
these
products
experience
a
gain
in
producer
surplus
as
a
result
of
the
regulation.

Based
on
estimated
compliance
costs
associated
with
this
rule
and
the
predicted
change
in
prices
and
production
in
the
affected
existing
and
new
facilities,
the
estimated
social
costs
of
this
rule
are
$
248
million
(
in
1998
dollars).

It
is
estimated
that
5
years
after
implementation
of
this
rule,
HAP
will
be
reduced
by
5,600
tons
per
year
due
to
reductions
in
formaldehyde,
acetaldehyde,
acrolein,
methanol
and
other
HAPs
from
existing
and
new
internal
combustion
engines.
Formaldehyde
and
acetaldehyde
have
been
classified
as
"
probable
human
carcinogens."
Acrolein,
methanol
and
the
other
HAPs
are
not
considered
carcinogenic,
but
produce
several
other
toxic
effects.
The
rule
will
also
achieve
in
the
same
year
reductions
in
criteria
pollutant
such
as
carbon
monoxide
(
CO),
volatile
organic
compounds
(
VOC),
particulate
matter
(
PM)
and
approximately
167,900
tons
of
NOx
per
year.
Exposure
to
CO
can
effect
the
cardiovascular
system
and
the
central
nervous
system.
Emissions
of
NOx
can
transform
into
particulate
matter
(
PM),
which
can
result
in
fatalities
and
many
respiratory
problems
(
such
as
asthma
or
bronchitis);
and
NOx
can
also
transform
into
ozone
causing
several
respiratory
problems
to
affected
populations.

At
the
present
time,
the
Agency
cannot
provide
a
monetary
estimate
for
the
benefits
associated
with
the
reductions
in
HAPs,
CO,
and
VOC.
We
are
unable
to
provide
a
monetized
estimates
of
the
benefits
from
the
reduction
of
HAP,
CO,
and
VOC
emissions
associated
with
this
rule
due
to
a
lack
of
scientific
knowledge
of
the
links
between
the
reductions
in
incidence
of
the
health
and
environmental
effects
listed
and
a
value
that
can
be
placed
on
them.
The
Agency
currently
has
research
going
on
to
provide
such
benefit
estimates.
For
NOx,
we
estimated
the
benefits
associated
with
health
effects
of
PM,
but
were
unable
to
quantify
all
categories
of
benefits
of
NOx
(
particularly
those
associated
with
ecosystem
and
environmental
effects).
Total
monetized
benefits
are
is
$
280
million
(
1998
dollars).
The
methodology
to
valuing
benefits
is
discussed
in
more
detail
in
the
preamble
and
in
the
RIA.
These
monetized
benefits
should
be
considered
along
with
the
many
categories
of
benefits
that
we
are
unable
to
place
a
dollar
value
on
to
consider
the
total
benefits
of
this
rule.

Our
analysis,
as
part
of
compliance
with
the
Regulatory
Flexibility
Act
as
amended
by
the
Small
Business
Regulatory
Enforcement
Fairness
Act,
also
evaluates
the
economic
impacts
on
small
entities.
To
better
examine
the
compliance
costs
as
a
percentage
of
total
revenues
at
small
entities,
we
first
identified
the
small
entities
that
may
be
affected
by
the
rule.
As
is
mentioned
in
previous
sections
of
this
preamble,
only
4SRB
units
will
have
requirements
on
existing
units,
while
all
other
types
of
engines
will
only
have
requirements
on
new
engines
rather
than
existing
units.
Thus,
in
our
database
of
approximately
26,800
engines,
we
determined
that
about
10,100
units
operate
below
500
hp
or
are
used
for
emergency/
temporary
purposes
only,
so
they
would
be
excluded
from
the
regulatory
requirements
and
costs
of
this
rule.
Of
the
remaining
16,700
engines,
we
were
able
to
identify
for
2,645
units:
(
1)
the
engine
type
(
and
associated
control
costs),
and
(
2)
whether
they
were
located
at
an
affected
major
source
of
HAP
emissions.
All
other
units
had
insufficient
information
to
link
them
to
specific
facility
locations
(
and
thus
definition
of
parent
firm
size
was
not
possible).

Using
the
subset
of
2,645
units,
we
determined
these
engines
operate
at
834
facilities
owned
by
153
parent
firms.
Of
these
firms,
47
were
defined
as
small
entities.
Only
13
of
these
small
firms
operate
existing
4SRB,
of
which
two
firms
have
compliance
cost
that
represent
slightly
above
three
percent
of
firm
revenues.
Four
other
small
firms
owning
4SRB
engines
have
impacts
between
one
and
three
percent
of
revenues.

To
determine
if
these
impacts
are
significant,
we
considered
typical
profit
margins
in
the
affected
industries.
The
engines
included
in
the
database
are
owned
and
operated
in
more
than
25
different
industries,
but
a
large
majority
of
the
engines
(
88%)
are
located
in
the
following
industries:
oil
and
gas
exploration,
natural
gas
transmission,
electric
and
gas
services,
and
mining
and
quarrying
of
non­
metallic
minerals.
The
average
profit
margin
in
these
industries
is
approximately
five
percent.
Given
that
none
of
the
small
entities
evaluated
have
impacts
that
exceed
the
five
percent
profit
margin,
and
only
two
firms
have
impacts
around
three
percent
of
total
revenues,
we
conclude
that
this
action
will
not
have
a
significant
impact
on
a
substantial
number
of
small
entities.

For
new
sources,
it
can
be
reasonably
assumed
that
the
investment
decision
to
purchase
a
new
engine
may
be
slightly
altered
as
a
result
of
the
regulation.
In
fact,
for
the
entire
population
of
affected
engines
(
approximately
20,000
new
engines
over
a
5­
year
period),
only
19
fewer
engines
(
0.09
of
one
percent)
may
be
purchased
due
to
changes
in
costs
of
the
engines
and
market
responses
to
the
regulation.
It
is
not
possible,
however,
to
determine
future
investment
decisions
at
the
small
entities
in
the
affected
industries,
so
we
cannot
link
these
19
engines
to
any
one
firm
(
small
or
large).
Overall,
it
is
very
unlikely
that
a
substantial
number
of
small
firms
who
may
consider
purchasing
a
new
engine
will
be
significantly
impacted
because
the
decision
to
purchase
new
engines
is
not
altered
to
a
large
extent.

Government
entities
may
also
be
affected
by
this
rule
as
well
as
private
firms.
There
are
seven
cities
and
three
States
identified
as
owners
of
potentially
affected
engines.
The
State
of
Connecticut
owns
two
facilities
according
to
the
RICE
database,
while
all
of
the
other
government
entities
have
only
one.
Three
of
the
four
State
facilities
identified
are
public
hospitals.
Six
of
the
cities
are
small
communities
(
defined
by
the
Small
Business
Administration
as
communities
with
a
population
of
less
than
50,000
people).
However,
only
three
of
the
government
entities
in
the
RICE
database
own
4SRB
engines
(
one
small
and
two
large
governments),
so
these
three
governments
are
the
only
ones
that
will
incur
costs
under
the
RICE
NESHAP.
A
screening
analysis
conducted
as
part
of
the
economic
analysis
shows
that
these
government
entities
are
expected
to
have
annual
compliance
costs
that
are
less
than
one
percent
of
their
revenues.

In
addition,
the
rule
is
likely
to
also
increase
profits
at
the
many
small
firms
in
the
natural
gas
industry
that
are
not
affected
by
the
rule
by
increasing
their
revenues
from
the
estimated
increase
in
prices
of
natural
gas
in
the
industry.

Although
this
rule
will
not
have
a
significant
impact
on
a
substantial
number
of
small
entities,
EPA
nonetheless
has
tried
to
reduce
the
impact
of
this
rule
on
small
entities.
In
this
rule,
we
are
applying
the
minimum
level
of
control
(
i.
e.
the
MACT
floor),
and
the
minimum
level
of
monitoring,
record
keeping,
and
reporting
to
affected
sources
allowed
by
the
CAA.
In
addition,
as
mentioned
earlier
in
the
preamble,
new
RICE
units
with
capacities
under
500
hp
and
those
that
operate
as
emergency/
temporary
units
are
not
covered
by
this
rule.
This
provision
should
reduce
the
level
of
small
entity
impacts.

This
rule
provides
the
minimum
level
of
control
and
paperwork
burden
to
new
combustion
turbines
that
is
consistent
with
the
requirements
of
the
Clean
Air
Act.
Other
alternatives
considered
that
provided
more
than
the
minimum
level
of
control
were
deemed
as
not
cost­
effective
for
the
Agency
to
implement.
Hence,
the
Agency
has
tried
to
keep
the
impacts
from
compliance
with
this
rule
to
a
minimum
for
the
affected
sources,
including
government
entities.
For
an
explanation
of
the
choice
of
regulatory
alternatives
for
the
final
rule,
refer
to
the
preamble.

It
is
expected
that
the
impacts
to
government
entities
resulting
from
this
proposed
rule
should
be
a
small
proportion
of
the
impacts
to
affected
entities.

References
1.
U.
S.
Environmental
Protection
Agency,
Office
of
Air
Quality
Planning
and
Standards.
"
Regulatory
Impact
Analysis
for
the
Reciprocating
Internal
Combustion
Engine
NESHAP."
Research
Triangle
Park,
North
Carolina.
December,
2003.

2.
U.
S.
Environmental
Protection
Agency,
Office
of
Air
Quality
Planning
and
Standards.
"
Economic
Impact
Analysis
for
the
Reciprocating
Internal
Combustion
Engine
NESHAP."
Research
Triangle
Park,
North
Carolina.
December,
2003.

3.
U.
S.
Department
of
Energy,
Energy
Information
Administration.
Obtained
on
June
1,
2000
at
http://
www.
eia.
doe.
gov/
emeu/
cabs/
use.
html.,
