**Memorandum**

**Subject:** Economic Impact Analysis for Risk and Technology Review: Off
- site Waste and

Recovery Operations Source Category **Date:** February 10, 2015 **From:** Amanda Curry Brown

Economist Air Economics Group (C504

-04 ) **To:** Paula Hirtz

Environmental Engineer RCG (E143

-01) This document addresses the economic impacts of the Risk and Technology Review for the Off
site Waste and Recovery Operations (OSWRO) source category. The total capital and total ann ualized costs for the a mendments a re estimated to be $4. 1 million and $1. 1 million p er year, respectively. Detailed information on these cost estimates can be found in the docket. The OSWRO source category includes facilities that operate waste management and recovery processes for materi als received from off
- site. These facilities are not categorized as a single industry and, as a result, cannot be classified under a single NAICS code category. During the development of these amendments, EPA identified 49 facilities with emissions data. T he se 49 facilities represent 29 firms in 21 industries. These industries are shown in Table 1
. **Table 1**  **. Industries Represented in OSWRO Source Category**

**NAICS Description**  211111 Crude Petroleum and Natural Gas Extraction 221310 Water Supply and Irrigation Systems 237310 Highway, Street, and Bridge Construction 324110 Petroleum Refineries 325180 Other Basic Inorganic Chemical Manufacturing 325194 Cyclic Crude, Intermediate, and Gum and Wood

Chemical Manufacturing 325199 All Other Basic Organic Chemical Manufacturing 325211 Plastics Material and Resin Manufacturing 327310 Cement Manufacturing 331313 Alumina Refining and Primary Aluminum Production 325320 Pesticide and Other Agricultural Chemical Manufacturing 333316 Photographic and Photocopying Equipment Manufacturing 336411 Aircraft Manufacturing 424690 Other Chemical and Allied Products Merchant Wholesalers**Table 2**  **. Industries Represented in OSWRO Source Category, continued** 561110 Office Administrative Services 562111 Solid Waste Collection 562211 Hazardous Waste Treatment and Disposal 562213 Solid Waste Combustion and Incinerators 562219 Other Nonhazardous Waste Treatment and Disposal 562920 Materials Recovery Facilities 928110 National Security a
a One facility is operated by the U.S. Department of Defense. **Small Business Impacts Analysis** The Regulatory Flexibility Act, as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA) , generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute, unless the agency certifies that the rule will not have a significant economic impact on a substa ntial number of small entities. Small entities include small businesses, small governmental jurisdictions, and small not
-for
- profit enterprises. T he Small Business Administration (SBA) established size standards classified by NAICS category to use in ident ifying small businesses . The SBA size standards apply to an establishment’s “ultimate parent company” and were based on either total receipts or total employment for the industries included in this analysis
. For this analysis, we identified the ultimate p arent company (firm) for each facility and obtained firm
- level employment and revenues using various sources, including the American Business Directory, Hoovers, corporate websites, and publically available financial reports. Based on this information, we identified four firms that are small businesses based on the SBA size
- standards. Table 3 shows the average revenue and employment for small and large firms. **Table 3**  **. Average Revenue and Employment by Firm Size All Firms**  **Small Firms**  **Large Firms**  Number of Firms 2 9 4 2 5 Average Revenue $ 25 billion $ 110 million $ 29 billion Average Employment 25,000 390 29,000 *All figures rounded to 2 significant digits. For this analysis, we assume that each firm will incur an annual cost per unit of approximately $ 2 3 ,000 in order to meet the requirements at each of the facilities it operates. Table 4 present s descriptive statistics for the number of facilities and total annual cost per firm.**Table 4**  **. Number of Facilities and Annual Cost by Firm Size All Firms**  **Small Firms Large Firms**  **Number of Facilities**  **Average** 1. 7 1 .3 1. 8

**Min** 1 1 1 **Max** 10 2 10 **Median** 1 1 1 **Total Annual Firm**  **Cost Average**  $ 40,000 $ 29 ,000 $ 4 1 ,000

**Min** $ 2 3 ,000 $ 2 3 ,000 $ 2 3 ,000 **Max** $ 2 3 0,000 $ 4 6,000 $ 2 3 0,000 **Median** $ 2 3 ,000 $ 2 3 ,000 $ 2 3 ,000 The cost
-to - revenue ratio, or the “sales test,” is the impact methodology EPA employs in analyzing small entity impacts. The sales test is often used because revenues or sales data are commonly available for entities impacted by EPA regulations. Revenues are typically more reliably reported than profit data, which may be impacted by accounting or tax considerations. The use of a “sales test” for estimating small business impacts is consistent with EPA guidance on compliance with SBREFA 1 and is con sistent with guidance published by SBA’s Office of Advocacy. 2 As shown in Table 5 , t he cost
-to - sales ratio for all small firms in this analysis is significantly less than 1 percent
. **Table 5**  **. Summary of Small Entity Impacts**

**Firm NAICS**  **Revenue Total Firm Cost**  **Cost -** **to -** **Sales Ratio** EQ Holdings 562219 $26,500,000 $4 6, 000 0. 1 7 % FutureFuel Corporation 325199 $351,830,000 $2 3 , 000 0.01% Ross Inc ineration Services, Inc. 562213 $ 31,100,000 $2 3,000 0.0 7 % WRR Environmental Services 562920 $13,800,000 $2 3,000 0.1 7 % **Industry Impact Analysis** Both the magnitude of control costs needed to comply with a regulation and the distribution of these costs among affected facilities can have a role in determining how the market will change in response to that regulation
. Total annualized costs for the amendments are estimated to be about $ 1. 1 million . The average annual cost per facility is estimated to be about $ 2 3 ,000
. Without detailed industry data, it is not possible to conduct a complete quantitative analysis of economic impacts. However, prior analysis suggests the impacts of these amendments will be minimal. The Economic Impact Analysis for the Final Off
-Site Waste and Recovery Operations

1 The SBR EFA compliance guidance to EPA rule writers regarding the types of small business analysis that should be considered can be found at http://www.epa.gov/rfa/documents/Guidance

- RegFlexAct.pdf
. 2 U.S. SBA, Office of Advocacy. A Guide for Government Agencies, How to Comply with the Regulatory Flexibility Act, Implementing the President’s Small Business Agenda an d Executive Order 13272, June 2010.NESHAP 3 found that demand for off
- site waste services was highly inelastic. This means that

suppliers are predominantly able to pass along cost increases to consumers through hig her prices with little, if any, decrease in the quantity of service demanded. While we do not have specific information on prices charged or the quantity of service provided, company revenues are a function of both these factors. The cost
-to - sales ratio is less than .20 percent for all of the 2 9 firms included in this analysis, suggesting any increase in price would be minimal. **Conclusions** Our screening analysis shows that four of the 2 9 firms that own facilities in the OSWRO source category can be class ified as small firms using the SBA size standards for their respective industries. Based on the sales test screening methodology, all affected facilities will experience minimal impact, or a cost
-to - sales ratio of significantly less than 1 percent. We conc lude that these amendments will not have a significant economic impact on a substantial number of small entities. Although there is not sufficient data to complete a full quantitative analysis of economic impacts, we do not anticipate the amendments to result in firm closures or substantial profit loss because these facilities are likely to be able to pass cost increases through to their customers . While we do not have data on current prices charged or quantities provided, the relatively low cost compared to firm revenues suggests any price increase would be minimal.

3 EPA. June 1996.