Regulatory Flexibility Analysis for Small Businesses and Local Governments Subpart 225-1 and Part 200
Effect of Rule on Small Businesses and Local Goverments
The Department proposes to change Subpart 225-1. The proposed rulemaking will apply statewide. Small businesses are those that are independently owned, located within New York State, and that employ 100 or fewer persons. The proposed changes to the subpart 225-1 requirements flow from the State's obligations under the federal Clean Air Act. Therefore, the proposed revisions do not constitute a mandate on local governments. The Subpart 225-1 requirements apply equally to every stationary source that fires oil in New York State. The proposed changes to Subpart 225-1 will not affect small businesses or local governments differently from any other source subject to this rule.
The proposed rule will lower sulfur-in-fuel limits for distillate oil, residual oil, and waste oil. However, no changes will be made in the monitoring, recordkeeping, or reporting requirements in the current version of Subpart 225-1. Therefore, no new compliance requirements will be incurred by small businesses or local governments subject to the provisions of the proposed rule.
The proposed rule will lower sulfur-in-fuel limits for distillate oil, residual oil, and waste oil. No changes will be made in the monitoring, recordkeeping, or reporting requirements in the current version of Subpart 225-1. Facilities subject to this rule are simply required to purchase compliant fuels. Therefore, the Department does not expect small businesses or local governments will need to hire additional professional services to comply with the provisions of the proposed rule.
Stationary sources subject to the Subpart 225-1 provisions may incur increased fuel oil costs associated with this proposed regulation. There are several factors that may affect fuel oil prices. These factors include but are not limited to fuel availability, price of crude oil, production costs, storage costs, increase in taxes on oil, overall demand based on weather conditions, and natural gas availability and price. The refining process used to produce lower sulfur content oils (less than 500 ppm sulfur content oils) is different from the refining process currently used to manufacture oil with a sulfur content greater than 500 ppm. There will be an initial cost to the oil manufacturers associated with conversion of the current refining process to the new refining process. Therefore, the Department anticipates that production costs will increase. However, based on all of the above listed factors there may or may not be an increase in oil prices (there is the possibility that oil prices could decrease). Setting aside the other factors, the Department conducted a cost analysis based solely upon the increase in production costs and availability of oil to the consumer.
Local governments may incur increased fuel oil costs associated with this proposed regulation. However, no new monitoring, recordkeeping, reporting, or other requirements will be imposed on local governments based on this proposed rule-making. Based on the Department's permitting data, there are 50 State and local government facilities that have Title V permits and 75 State and local government facilities that have state facility permits (please note that some of these facilities fire both distillate and residual oil and that the facilities that fire residual oil that reside in New York City, Nassau, Rockland, and Westchester counties will not be affected by the proposed sulfur-in-fuel standards). The four State and local government facilities with Title V permits that fire residual oil may incur an average fuel cost increase of 14,000 dollars per year per facility. The 48 State and local government facilities with Title V permits that fire distillate oil may incur a fuel cost increase of between 21,000 to 24,000 dollars per year per facility. The 24 State and local government facilities with state facility permits that fire residual oil may incur an average fuel cost increase of 1,200 dollars per year per facility. The 56 State and local government facilities with state facility permits that fire distillate oil may incur a fuel cost increase of between 9,000 to 10,000 dollars per year per facility. Any projected fuel cost increases will be partially offset by the gain in efficiency and lower maintenance costs that are directly attributable from the use of lower sulfur fuels.
Minimizing Adverse Impacts
The Department does not expect any particular adverse impacts on small businesses and local governments throughout New York State. Subpart 225-1 is a statewide regulation. Its requirements are the same for all facilities. The Department does not anticipate small businesses or local governments to be impacted differently than other sources subject to the proposed changes to Subpart 225-1.
Small Business and Local Government Participation
During the drafting of Subpart 225-1, the Department held stakeholder meetings on June 24, 2010 and November 21, 2011. The meetings were held to give representatives from the oil companies, oil distributors, and end users (which included the small business and local government stakeholders), an opportunity to meet with Department staff and discuss various issues during the rulemaking process. Finally, the Department will hold public hearings on Subpart 225-1 throughout New York State and will notify small business and local government representatives of this proposed rulemaking.
Economic and Technological Feasibility
For distillate oil, the Department used information from the NORA, API, NESCAUM reports and EIA data to determine the costs and benefits of implementing the proposed low and ultra-low sulfur distillate oil standards including appropriate compliance dates. The average amount of distillate oil consumed in New York between 2004 and 2008 was 1.73 billion gallons per year. The majority of the distillate oil fired during this time period was considered to be high sulfur distillate oil (approximately 95 percent). Approximately 95 percent of the distillate oil used in New York State was considered, by the Department, to be high sulfur distillate oil. Therefore, the Department has calculated that New York State would achieve a SO2 emission reduction of 45,591 tons per year from the implementation of the ultra-low sulfur distillate oil standard in 2014.
The cost to manufacture the projected 1.73 billion gallons per year of high sulfur distillate oil to ultra-low sulfur distillate oil is estimated to between 173 million dollars and 197.2 million dollars. This is based on cost estimates of 10.0 to 11.4 cents per gallon for manufacturing high sulfur distillate oil to ultra-low sulfur distillate oil. This corresponds to a cost of between 3,795.00 and 4,326.00 dollars per ton of SO2 emission reductions, based on the total SO2 emission reductions stated above.
For residual oil, lowering the allowable sulfur content of residual oil to 0.5 percent (5,000 ppm) would affect all of New York State except for New York City, Nassau, Rockland, and Westchester counties. The average amount of residual oil consumed in New York between 2004 and 2008 was 1.39 billion gallons per year. The Department has calculated that New York State would achieve a SO2 emission reduction of 52,220 tons per year from the implementation of the 0.50 sulfur content residual oil standard in 2014.
The historical average price difference from August 30, 2004 to July 27, 2007 of residual fuel oil with sulfur-by-weight contents between 0.5 and 1.0 percent was 5.05 cents per gallon. Using this estimated price difference, the total economic impact of the proposed 2014 standard for New York State consumers on the affected 696.6 million gallons per year of residual oil is 35.2 million dollars. This corresponds to 674 dollars per ton SO2 removed as a result of the proposed decrease in sulfur content in residual oil.
Cure Period or Ameliorative Action
The Department is not including a cure period in this rulemaking. The purpose of this regulation is to provide timely emissions reductions, delaying enforcement of the regulation adversely affects such emissions reductions. In addition, there is a statutory mandate under ECL 19-0325 requiring the sulfur-in-fuel limit of #2 heating oil to be 15 ppm. The statute also includes a specific compliance date of July 1, 2012.