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MEMORANDUM


TO:	Steam Electric Rulemaking Record

FROM:	TJ Finseth, ERG
	
DATE:	19 April 2013

SUBJECT:	Discussion of Costs and Cost Savings Associated with Impoundment Operations

ERG is providing technical support to the U.S. Environmental Protection Agency's Office of Water, Engineering and Analysis Division (EAD) for development of effluent limitations guidelines and standards (ELGs) for the Steam Electric Power Generating Point Source Category.  EPA, with the support of ERG, developed an approach to identify combustion residual surface impoundments that will likely realize no change in waste inputs, receive less combustion residuals, or cease receiving combustion residuals based on the regulatory options considered as part of the proposed rule. EPA developed this approach to determine which plants are expected to incur compliance costs for the best management practices (BMPs) under consideration by EPA.  For more information regarding this methodology, see the memorandum entitled, "Steam Electric Effluent Guidelines  -  Methodology for Identifying Surface Impoundment Closures Based on Regulatory Options" (DCN SE02125).  Table 1 identifies the technology options evaluated for each of the regulatory options considered as part of the rulemaking. This memorandum describes EPA's analysis of the costs and cost savings associated with changes in impoundment operations, which potentially include closure of impoundments that cease receiving combustion residuals.

Table 1. Steam Electric Regulatory Options

                                 Wastestreams
          Technology Basis for BAT/NSPS/PSES/PSNS 
Regulatory Options
                                       
                                       1
                                       2
                                       3
                                       4
                                       5
FGD
Wastewater
Chemical Precipitation
Chemical Precipitation + Biological Treatment
Chemical Precipitation + Biological Treatment
Chemical Precipitation + Biological Treatment
Chemical Precipitation + Evaporation
Fly Ash Transport Water
Impoundment
(Equal to BPT)
Impoundment
(Equal to BPT)
Dry handling
Dry handling
Dry handling
Bottom Ash Transport Water
Impoundment (Equal to BPT)
Impoundment (Equal to BPT)
Impoundment (Equal to BPT)
Dry handling/
Closed loop
Dry handling/
Closed loop
Leachate
Impoundment (Equal to BPT)
Impoundment (Equal to BPT)
Impoundment (Equal to BPT)
Chemical Precipitation
Chemical Precipitation
FGMC
Wastewater
Impoundment (Equal to BPT)
Impoundment
(Equal to BPT)
Dry handling
Dry handling
Dry handling
Gasification
Wastewater
Evaporation
Evaporation
Evaporation
Evaporation
Evaporation
Nonchemical Metal Cleaning Wastes
Chemical Precipitation (Equal to BPT)
Chemical Precipitation (Equal to BPT)
Chemical Precipitation (Equal to BPT)
Chemical Precipitation (Equal to BPT)
Chemical Precipitation
(Equal to BPT)

The proposed ELGs do not include requirements that will force plants to close surface impoundments.  Therefore, there is no guarantee that plants will close the surface impoundments that EPA is projecting will close once they cease receiving combustion residuals. Although it is reasonable to anticipate that would occur, due to the cost of continuing to maintain these impoundments and the risks and potential liability associated with spills and structural failures of surface impoundments containing legacy wastes.  EPA's methodology for estimating impoundment closures for the purpose of best management practices (BMP) costs, as described in DCN SE02125, assumed that impoundments will close in cases where all the combustion residual wastestreams that are transferred to the impoundment under baseline conditions are no longer transferred to the impoundment after implementation of the regulatory option.  For example, an impoundment that receives both fly ash and bottom ash transport water is expected to close under Regulatory Option 4, but would remain open under Regulatory Option 3.  For the compliance costs that were developed for the proposed rule, EPA included costs associated with implementation of the BMPs under consideration for all impoundments that are expected to remain open. EPA did not include any BMP costs for impoundments that are expected to close.  

EPA did not include impoundment closure costs in the compliance cost estimates for those impoundments expected to close. EPA determined that it was not necessary to include impoundment closure costs as part of the proposed ELG compliance costs because plants will dewater and close these impoundments eventually, even in the absence of the proposed ELG. EPA made this determination because in the absence of the proposed ELG, plants will continue to transfer the combustion residual wastewater to the impoundment.  At some point, the impoundment will reach its operating capacity and the plant will have to make one of the following decisions:

    1)       Dredge the impoundment and continue with current operations;
    2)       Build a new impoundment and continue with current operations; or
    3)       Convert to a dry ash handling system or transfer the wastewater to a tank-based treatment system.

For scenario 1, the plant will continue to incur occasional dredging expenses to continue operating the impoundment, which the plant would not have to incur if they converted to a dry ash handling system or began transferring the wastewater to a tank-based system.  EPA did not take credit for plants no longer incurring these occasional dredging expenses as part of the compliance cost estimates.  For scenario 2, the plant would incur a significant expense (potentially more than once) to build the new impoundment(s), which the plant would not have to incur if they converted to a dry ash handling system or began transferring the wastewater to a tank-based system.  For scenario 3, the plant would incur the costs that are estimated as part of the compliance costs for this proposed rule; therefore, the proposed rule only results in these plants incurring the costs earlier than they would have in the absence of the ELG.  EPA included the full cost of these conversions in its cost estimates.

None of the three scenarios identified above guarantee that plants will close the impoundment.  In fact, for scenario 1, it is likely that the plant would continue to dredge the impoundment until the plant retires or the impoundment reaches the end of its service life.  However, EPA still expects that plants will eventually close these impoundments, likely at the time the plant is retired, to reduce the potential liability associated with impoundment failures or overflows resulting from leaving the impoundment open and unmanaged. EPA's approach is supported by statements from industry announcing impoundment closures at the time of plant retirement, such as Duke Energy's Vice President of Environmental Services stating, "As older coal plants are retired, we will prepare to close ash basins in accordance with state regulations. This would follow a prescribed process with state oversight and approval." (DCN SE02944) 

In summary, EPA calculated the costs associated with the BMPs under consideration for the proposed ELG based on EPA's estimation of whether the impoundment will close; however, EPA did not include impoundment closure costs in the estimated compliance costs developed for the proposed ELG for the following reasons:

   * The ELG does not require the closure of impoundments as part of the proposed rule;
   * The installation of the technology options associated with the proposed ELG will result in plants not needing to incur additional expenses associated with the operation of impoundments, for which EPA did not take credit in the estimation of compliance costs; and
   * Companies/plants anticipate closing the impoundments at the appropriate time in their service life (e.g., plant retirement), and therefore, expect to incur the closure costs in the future, regardless of the proposed rule.



