Appendix A for DOA Form 2049
For
NR111 Rule Background:
Annualized Costs of Compliance to Regulated Entities
April 2019
Background
The department currently regulates impingement and entrainment at cooling water intake structures by requiring use of the best technology available (BTA), as determined using best professional judgment (BPJ) and on a case-by-case basis. This authority is granted under s. 283.31(6), Wis. Stats. In 2002 and 2014, respectively, the EPA promulgated rules that specify requirements for New Facilities and Existing Facilities that address impingement and entrainment at cooling water intake structures. The department is working on rule development to adopt the new facilities and existing facilities rules (40 CFR 122-125) as a state rule. The department made estimates by assuming typical costs of compliance with the Federal rule. For example, the department assumed that many permittees will comply by installing submerged passive screen intakes or traveling screens with fish return and that a small number of permittees will need to install cooling towers. Some permittees in the state might choose to install technologies different than assumed here. To the extent that permittees install different technologies and to the extent costs are significantly different from the assumed technologies, estimates of costs on the statewide basis will be higher or lower than assumed. As a further example, the department estimated costs for traveling screens based on a design intake flow of 90 MGD (the average design intake flow for facilities not currently in compliance with the 0.5 fps standard that are <125 MGD). To the extent that permittees have flow rates greater or less than the assumed flow, estimates of costs on the statewide basis will be higher or lower than assumed.
Summary
This proposed State rule does not add any additional compliance cost to impacted facilities beyond what Federal EPA standards require. The cost analysis presented below is for the cost of compliance with the Federal regulations.
The long term annual costs as a low or least costly estimate are $13 million per year for all facilities in the state (2019 dollars).
Procedures:
This document shows calculation of costs for two scenarios:
- Maximum Annual Costs per Year for any Permittees
- Long term Annualized Costs per Year for All Permittees
Costs of compliance, in general, consist of capital costs and cost of operation and maintenance (O&M). The permittees that are subject to these requirements will in almost all cases annualize the capital costs over a period estimated to be 10 to 30 years. Note that EPA in various rule development documents refers to useful life of 10 to 30 years. The useful life will depend on specifics of the facility and on the technology and actions taken to comply (as shown below, the department used 20 years an average useful life). Therefore, the annual costs are the total of annual capital costs and O&M cost per year.
Cost per year = annual capital cost + O&M cost per year
The cost of compliance for a specific individual permittee will in most cases start when the department issues the permit requiring compliance with the regulation. The details will depend on the permittee’s size and impacts on the fish and shellfish in the location where the intake is located. Note that the specific requirements will be based on a case-by-case permittee specific determination in the permit based on standards for minimizing impingement and Best Professional Judgment (BPJ) for minimizing entrainment. For this analysis, the department observed permittees’ intake flow rates and velocities and, based on these, separated permittees into four categories. Associated with each category is an estimate of costs of compliance based on the technical and regulatory complexity of each scenario. It is important to note that these are estimates; some permittees in one category may experience compliance costs more closely commensurate with compliance costs projected for a facility of a different category due to site specific factors. Also, these projections should not be interpreted as a department indication as to whether a specific facility is or is not in compliance with best technology available requirements; these site-specific decisions will be made during each facility’s permitting process. Flow rates and through screen velocities were taken from fact sheets, permit applications, and application attachments where the values were available.
Four Categories Showing Qualitative Requirements
Category of Facility | Count of Facilities in State (#) | Status | Capital Requirements | O&M Requirements |
1 | 3 | Currently in compliance with 0.5 fps standard; smaller intake (<12 MGD DIF) | Not needed | O&M is assumed to be ½ of EPA’s average O&M estimates because these are smaller facilities. |
2 | 9 | Currently in compliance with 0.5 fps standard; larger intake (>12 MGD DIF) | Not needed | O&M is assumed to be at EPA average O&M estimates because these facilities have a larger intake relative to smaller facilities. |
3 | 14 | Not in compliance with 0.5 fps standard; smaller intake (<125 MGD AIF) or compliance is expected to have low costs. | Less expensive technology required: Examples include passive screens or fish return. | O&M is assumed to be at EPA’s average O&M estimates. |
4 | 2 | Not in compliance with 0.5 fps standard; larger intake (>125 MGD AIF) or expected to have high costs | More expensive technology required: Most likely technology to be used will be a closed cycle recirculating system (cooling tower), where offshore intakes do not already exist. | O&M is assumed to be at EPA’s average O&M estimates. |
As noted above, capital costs will typically be annualized. The main result of this is that the maximum costs in a two-year period will probably occur in the long term when all facilities have received permits and have started both payment of debt and O&M cost per year.
Maximum Total Annual Costs per Year in any = Long Term Annual Costs per Year
Two Year Window for All Permittees for All Permittees
To estimate annual capital cost and O&M cost per year, the department estimated costs for each category. Capital costs were annualized based on 20 years and 5% discount rate. Note that EPA in various rule development documents refers to useful life of 10 to 30 years (the department used 20 years as an average useful life).
Annualized Capital Cost Factor (20 years at 5% discount rate) = 0.08
O&M COST PER YEAR
The department used estimates for O&M cost per year that EPA prepared for the rule (see References below).
The maximum cost a facility is estimated to incur for its monitoring, record keeping, and reporting activities is approximately $84,361/facility/year to $99,900/facility/year in 2002 dollars ($119,902 to $141,988 in 2019 dollars) for Freshwater River/Stream, Lake, and Great Lake.
Using the mean of the range or $131,000/facility/year for all of the categories except category 1: for category 1, the department assumed costs would be one half of EPA’s estimate because costs are expected to be smaller for less complicated compliance options.
O&M cost per year (2019 dollars) = $131,000/facility/year for all groups except category 1
O&M cost per year (2019 dollars) = $65,500/facility/year for category 1
ANNUAL CAPITAL COST
The department considered submerged passive screen intakes and traveling screens with fish return as two examples of less expensive technology and considered recirculating systems as a more expensive technology.
