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4.4. Synthetic Organic Chemical NESHAP

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The Regulatory Impact Analysis for the National Emissions Standards for Hazardous Air Pollutants for Source Categories: Organic Hazardous Air Pollutants from the Synthetic Organic Chemical Manufacturing Industry and Other Processes Subject to the Negotiated Regulation for Equipment Leaks deals with emissions from the Synthetic Organic Chemical Manufacturing Industry, called SOCMI in the document. Petroleum refineries are excluded.

Section 112 of the Clean Air Act Amendments of 1990 altered the way EPA regulates hazardous air pollutants (HAP):


The regulation is applied to five types of emission points at each source (plant):

The leak standard also applies to seven other non-SOCMI chemical industries. Ibid., p. 5-80.

Because the 1990 Amendments require quantitative emission regulation but do not set control levels, EPA has determined those control levels for the first four emission points:

The control levels thus set are deemed Maximum Achievable Control Technology (MACT). The regulation requires use of designated reference technologies or an approved alternative. Ibid., p. 5-82.

MACT is the floor level of control consistent with the statute. In fashioning the regulation, EPA also considered more stringent standards for each of the emission points. For example, for large storage vessels, the MACT floor would controls tanks storing HAPs with vapor pressure above 0.75 psia. The next more stringent option would control tanks storing HAPs with vapor pressure above 0.1 psia. The latter was chosen. Ibid., p. 6-118.

Costs

The document analyzes costs in a number of dimensions. In one dimension, the compliance cost and cost-effectiveness of controlling each emission point category and several sub-categories are tabulated. Ibid., Tables 6-8 through 6-19. Each table shows cost and cost-effectiveness for an emission point for the MACT option and for the set of increasingly stringent options that were considered for that point. For each option, average cost-effectiveness and incremental cost-effectiveness are shown. Incremental cost-effectiveness tends to increase with more stringent options. For one option, incremental cost-effectiveness was $336,000 per megagram of HAP abated. Ibid., Table 6-15. This option was not the regulatory choice.

In another dimension, the costs of monitoring, record keeping and reporting are tallied. Ibid., p. 6-105. These total $69 million annually and include costs borne by the regulated firms and the federal government.

The document totals the compliance costs for the for the regulatory options chosen and incorporates the monitoring costs. For the fifth year following the proposal, by which time all affected sources will come into compliance, the total annual cost is $227 million. Ibid., p. 6-105 and Table 6-23. This figure includes the cost of abating equipment leaks under the negotiated agreement. In addition to the annual cost, there is a capital cost of $450 million. Both existing sources and new sources constructed in the first five years are included in the totals. The cost-effectiveness is $350 per megagram of HAP and $170 per megagram of VOC (volatile organic compounds).

In addition to the foregoing cost estimates, an attempt was made to project the effect of the regulation on chemical production costs. Chemicals made in regulated plants are made from other chemicals also made in regulated plants. A chemical tree, a kind of input-output matrix, was constructed in an attempt to capture the ripple effect. Ibid., p. 6-100ff. In each instance, the most stringent of the regulatory options considered was incorporated rather than the chosen option. Most chemicals see their costs rise modestly but some small volume chemicals experience such sharp rises that the overall increase averages more than 1,000%! Ibid., Table 6-7.

The regulation provides for averaging within a source, a type of economic instrument:


Because the cost analysis does not examine the possibility of averaging, it may tend to overstate actual compliance cpsts.

Benefits

Chapter 8 of the document is a discussion of benefits but the authors acknowledge its limits:

What the document offers instead is an extensive review of the literature on the benefits of air pollution abatement citing more than two dozen works. Conceivably, an attempt at benefits transfer could have made relying on that literature search. However, that was not done, perhaps because the literature does not quantify or monetize benefits “on an individual chemical basis” for 150 toxics but rather tends to do so for broader groups such as VOCs.

Chapter 9 of the document is a two-page discussion of benefit-cost analysis. It begins:

There is, however, a suggestion that the HON regulation has the potential to yield real resource economies:
Finally, the document considers the impact of the regulation on small business to determine if a regulatory flexibility analysis (RFA) is required as provided by statute. Ibid., p. 7-142ff. It notes that each of the affected SICs is listed in a reference as “Large-Business Dominated” although firms small by some definition may comprise 15% of the industry. It concludes:

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