Regulatory Impact Statement Summary 6 NYCRR Subpart 225-1 and Part 200
The New York State Department of Environmental Conservation (Department) is proposing to revise 6 NYCRR Subpart 225-1, "Fuel Composition and Use - Sulfur Limitations" and 6 NYCRR Part 200, "General Provisions." Subpart 225-1 imposes limits on the sulfur content of distillate oil, residual oil, and coal fired in stationary sources. The Department is proposing these changes to both implement a statutory requirement and meet our obligations to reduce air pollution. The revisions to Subpart 225-1 will be a component of the State Implementation Plan (SIP) for New York State (NYS) directed at attainment of the particulate matter less than or equal to 2.5 microns in diameter (PM-2.5) national ambient air quality standard (NAAQS), the sulfur dioxide (SO2) NAAQS and the Department's obligations under the regional haze SIP submitted to U.S. Environmental Protection Agency (EPA) on March 15, 2010. This is a requirement flowing from the State's obligations under the Clean Air Act. This is not a mandate on local governments. It applies to any entity that owns or operates a subject stationary source. This proposal will not regulate transportation fuel.
The revisions to Part 200 incorporate references to federal rules and add a definition for "waste oil". The revisions to Subpart 225-1 primarily include the lowering of the sulfur-in-fuel limits for all distillate and residual oils sold, purchased, and/or used in portable (not including non-road engines) or stationary sources in New York State. These revisions will also include the removal of "out-of-date" sulfur-in-fuel tables, expired source specific variances, and the correction of typographical errors. In addition, the Department is removing the variance for emission sources with a maximum operating heat input greater than one million Btu per hour (mmBtu/hr) heat input rate that fire coal and coke in New York City, Nassau, Rockland, and Westchester Counties.
The following Sections of the Environmental Conservation Law (ECL) allow the Department to promulgate and implement the proposed regulation: Section 1-0101, Section 3-0301, Section 19-0103, Section 19-0105, Section 19-0301, Section 19-0303, Section 19-0305, Section 19-0325, Section 71-2103, and Section 71-2105.
Article 19 of the ECL was adopted for the purpose of safeguarding the air resources of New York from pollution. To facilitate this purpose, the Legislature bestowed specific powers and duties on the Department including the power to formulate, adopt, promulgate, amend, and repeal regulations for preventing, controlling or prohibiting air pollution. This authority also specifically includes promulgating rules and regulations for preventing, controlling or prohibiting air pollution in such areas of the State as shall or may be affected by air pollution, and provisions establishing areas of the State and prescribing for such areas (1) the degree of air pollution or air contamination that may be permitted therein, and (2) the extent to which air contaminants may be emitted to the air by any air contamination source. In addition, this authority also includes the preparation of a general comprehensive plan for the control or abatement of existing air pollution and for the control or prevention of any new air pollution recognizing various requirements for different areas of the State. The legislative objectives underlying the above statutes are directed toward protection of the environment and public health. The proposed rulemaking will further the goals of the above referenced statutes by reducing air pollution, specifically SO2 emissions, a criteria pollutant and a precursor to PM-2.5 which in turn is a precursor to visibility-impairing haze from the majority of oil firing stationary sources throughout New York. These reductions will reduce the health impacts of said pollutants by providing cleaner air.
Needs and Benefits
Regional haze refers to the presence of light-inhibiting pollutants in the atmosphere. These particles and gases scatter or absorb light to cause a net effect referred to as "light extinction." This scattering and absorbing occurs across the sight path of an observer, thus leading to a hazy condition. Emissions of pollutants such as SO2, PM-10, and PM-2.5 are the primary contributors to visibility problems. These pollutants lend themselves to being transported great distances once they enter the atmosphere. Accordingly, sources contribute to visibility impairment in Class I areas far downwind of their locations, thereby necessitating a regional approach to solving the haze issue.
There are many environmental benefits inherent in the reductions of PM and SO2 that do not explicitly relate to visibility improvement. These reductions will lead to advances in health protection as well. Although downwind rural and urban areas within NYS were not specifically targeted through the Regional Haze Rule, these areas can expect to benefit from improved air quality. In addition to experiencing improved visibility, forested areas such as the Adirondack Park will benefit from reduced PM acid deposition impacts, which are described below. These environmental impacts could also be expected to translate into economic benefits from increased public use of a cleaner and visibly healthier park.
Elevated PM levels are of concern for the New York City metropolitan area, which has been designated as non-attainment for the annual and 24-hour PM-2.5 NAAQS. PM consists of microscopic solid or liquid particles, and is the major cause of the regional haze issue. PM can be emitted directly from stationary sources, or comprised of nitrate and sulfate particles formed through reactions involving NOx and SO2 in the atmosphere. These particles are small enough to be inhaled into the lungs, and can even enter the bloodstream. Ongoing scientific studies show that particulate inhalation, similarly to ozone, leads to health problems such as coughing, difficulty breathing, aggravated asthma, and a higher likeliness for other respiratory disorders. Studies have also shown that elevations in PM concentrations are associated with such cardiovascular threats as irregular heartbeat and non-fatal heart attacks. Increased PM exposure may even cause premature death in those with existing heart or lung disease.
The proposed changes to Subpart 225-1 are intended to reduce the emission of SOx that are the precursors of PM below the present levels. Existing regulations and emission control programs have been successful in the past at reducing these emissions. Regulatory efforts such as the Acid Rain program, past state and federal fuel sulfur limitations for stationary and mobile sources, and efforts like the Clean Air Interstate Rule have had a significant effect on air quality and health. The proposed sulfur-in-fuel limits in this rule are expected to further reduce monitored values of SOx, and to enable and maintain attainment of the NAAQS.
The Department held two stakeholder meetings to discuss its proposed revisions to Subpart 225-1. The first stakeholder meeting was held on June 24, 2010 and the second on November 21, 2011. The Department solicited comments on the proposed rule from the stakeholders. Both stakeholder meetings consisted of attendees from the regulated community (oil manufacturers, oil distributors, and end users) to be affected by the proposed regulation, consultants (both technical and legal), and interested environmental groups. There were two primary concerns raised at the stakeholder meetings. The first involved timing because of the statute. Stakeholders were concerned that the Department would be unable to promulgate a regulation prior to the compliance date contained in the statute. The second also concerned compliance dates. Stakeholders were concerned about phase in of compliance dates for the remainder of distillate oil. Many subject facilities use distillate as back up fuel and fire it very infrequently. These facilities requested time to be able to use and/or blend down their reserve fuel. Based upon these comments the Department proposed a phased in compliance approach. While the July 1, 2012 compliance date for number 2 heating oil is in statute and therefore may not be changed by regulation, the regulation requires a July 1, 2014 compliance date for the purchase of complying oil and a July 1, 2016 compliance date for the firing of these oils.
Costs to Regulated Parties and Consumers:
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 500ppm 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.
The Department evaluated the availability and production cost of distillate oil with sulfur-by-weight specifications of 500 ppm (low sulfur distillate oil) in 2014 and 15 ppm (ultra-low sulfur distillate oil) in 2018 for the northeast U.S. that corresponds to the MANE-VU Region. The Department based this analysis on currently available refinery studies conducted for the National Oil Heat Research Alliance (NORA) and American Petroleum Institute (API), Energy Information Agency (EIA) data, and a public health benefits study conducted by Northeast States for Coordinated Air Use Management (NESCAUM). The NORA report concludes that as the demand for low and ultra-low sulfur distillate oil increases, the sources of supply and refining capacity for low and ultra-low sulfur distillate oil will be reconfigured for greater production capability. The API report projects that sufficient supplies of low sulfur distillate oil will be available to meet the demand that will be generated from the implementation of a low sulfur distillate oil standard in 2010 for New York State. The NESCAUM report determined overall health care savings from the implementation of both low and ultra-low sulfur distillate oil standards. (Public Health Benefits of Reducing Ground-level Ozone and Fine Particle Matter in the Northeast U.S., A Benefits Mapping and Analysis Program (BENMAP) Study, NESCAUM, January 15, 2008). The Department also conducted a cost analysis based on information from this report in addition to the NORA and API reports and EIA data. Additionally, the Department considered the study conducted by the New York State Energy Research and Development Authority (NYSERDA) and Brookhaven National Laboratories (Low sulfur Home Heating Oil Demonstration Project Summary Report, Energy Research Center, Inc., and Brookhaven National Laboratories, BNL-74956-2005-IR, June 2005 (NYSERDA Report)). The NYSERDA report finds overall savings to consumers in terms of reduced heating equipment service and maintenance costs from using low sulfur distillate oil.
In addition to the above referenced report NYSERDA publishes a weekly "Heating Fuels Report". This report contains the cost difference and oil stock pile figures for both high sulfur and 15 ppm oil. NYSERDA has published this report for about 15 years. NYSERDA also published a report in January 2011 titled "Patterns and Trends - New York State Energy Profiles: 1995-2009"1. These reports show some important trends. First, the amount of number 2 heating oil used in New York State has been steadily decreasing since 2005 after its peak usage from 2000 through 2005. The report shows that the amount of number 2 heating oil used between 2005 and 2009 dropped by 40 percent. Preliminary number 2 heating oil use data from 2010 and 2011 show the trend of lower oil usage in the Northeast has continued. Second, price trends show that the difference between 15 ppm and high sulfur oil was as low as a penny per gallon prior to the shutdown of several oil refineries in the Northeast between October 2011 and April 2012. Since the shutdown of these refineries the price difference between 15 ppm and high sulfur oil has once again risen to approximately five cents per gallon.
Costs to State and Local Governments:
State and local governments may incur increased fuel oil costs associated with this proposed regulation because they are required by Section 19-0325 of Chapter 203 of the ECL to purchase and fire 15 ppm sulfur content number 2 heating oil. However, no new recordkeeping, reporting, or other requirements will be imposed on state and 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). Using the cost per gallon figures from the above reports in combination with the fuel use data and fuel use assumptions, the Department was able to estimate the cost or cost range increase for the State and local government facilities. The four State and local government facilities with Title V permits that fire residual oil will 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 will 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 will 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 will incur a fuel cost increase of between 9,000 to 10,000 dollars per year per facility. The 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.
Costs to the Regulating Agency:
The Department will face some initial administrative costs associated with the application review and permitting of the new sulfur-in-fuel limits. No additional monitoring, recordkeeping, or reporting requirements are being proposed under this rule-making. Therefore, no additional costs will be incurred by the regulating agency based on these factors.
LOCAL GOVERNMENT MANDATES
This is not a mandate on local governments. Local governments have no additional compliance obligations as compared to other subject entities. Also, no additional monitoring, recordkeeping, reporting, or other requirements will be imposed on local governments under this rulemaking.
The proposed changes to Subpart 225-1 will create no additional paperwork for the facilities subject to the requirements of this rule.
The proposed revisions to Subpart 225-1 do not duplicate, overlap, or conflict with any other State or federal requirements.
The Department evaluated the following alternatives:
(1) Take no action: This alternative could prevent New York State from complying with its obligations under the CAA. If the Department does not implement this regulation, it would not be able to meet its obligations to achieve attainment in the PM-2.5 non-attainment areas throughout New York State. Also, without the promulgation of Subpart 225-1, the State would not be reducing its regional haze impacts in the northeast. The reduction in sulfur-in-fuel limitations will directly result in reductions of SO2, PM-10, and PM-2.5. Reductions of these air contaminants will definitively aid New York in meeting both its attainment goals for PM-2.5 and reduce the State's regional haze impact. Therefore, the "Take no action" alternative has been rejected.
(2) Partial implementation of sulfur-in-fuel standards: The Department could revise Subpart 225-1 to only include the sulfur-in-fuel requirements of Section 19-0325 of the ECL for number 2 heating oil. These revisions would also correct any existing typographical errors and update the regulation to match the permitting nomenclature of Part 201. During the June 24, 2010 stakeholder meeting for Subpart 225-1 the oil manufacturers and distributors expressed concerns that the Department would create added burdens by only including the provisions in ECL Section 19-0325. The oil manufacturers stated that they would need to reconstruct their facilities to be able to manufacture the 15 ppm sulfur content distillate oil. They stated that the manufacturing process was different for distillate oil that has a sulfur content of less than 500 ppm than for distillate oil that has a sulfur content of greater than or equal to 500 ppm. They expressed that the reconstruction was fine as long as they could totally commit and not have to divide their manufacturing between several fuel sulfur contents (which would entail maintenance of multiple processes and equipment). The oil distributors expressed concerns that a partial implementation would require them to maintain multiple fuel oil storage tanks which could result in cross contamination problems. Therefore, based on the stakeholder concerns the "Partial implementation of sulfur-in-fuel standards" alternative has been rejected.
The proposed revisions to Subpart 225-1 do not exceed any minimum federal standards. The proposed reductions will lower the standards to the point where they would be equivalent to the sulfur-in-fuel standards of both 40 CFR 60 NSPS and 40 CFR 63 National Emission Standards for Hazardous Air Pollutants.
The Department proposes to promulgate the revisions to Subpart 225-1 by early 2013. The provisions of this rule will take effect based on a phased approach. The initial compliance date, for purchase of number 2 heating oil, is July 1, 2012, in accordance with section 19-0325 of the ECL, for emission sources that fire number 2 heating oil for residential, commercial, or industrial heating applications. The secondary compliance dates are July 1, 2014 for the purchase of all remaining distillate oil and residual oil in New York State and July 1, 2016 for the firing of all distillate oil and residual oil in New York State.
1 This report can found at: http://www.nyserda.ny.gov/~/media/Files/Publications/Energy-Analysis/1995_2009_patterns_trends_rpt.ashx?sc_database=web