1

U.S. Environmental Protection Agency Office of Air Quality Planning and Standards

October 201 4
Economic Impact and Small Business Analysis

– Mineral Wool and Wool Fiberglass RTRs and Wood Fiberglass Area Source NESHAP

1. Introduction
This report is the economic impact analysis for the supplemental proposal of the Mineral Wool Production and Wool Fiberglass Manufacturing Risk and Technology Review (RTR) standard s and also the Wool Fiberglass Area Source NESHAP

. Pro posal of these standards is scheduled to occur under court

- order on October 15 , 2014. Promulgation of these standards is scheduled to occur under court

- order on June 18, 2015. The report presents impacts to firms affe cted by the requirements in the rule s and their consumers. Results are presented individually for each proposed rule, and a discussion of cumulative impacts is presented at the end of the report. Impacts to small firms are accounted for in adherence to the Regulatory Flexibility Act as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA). The industries affected by this rulemaking are found in NAICS 327993.

This action is the culmination of a reproposal . On November 25, 2011 the EPA proposed revisions to the Mineral Wool and the Wool Fiberglass Manufacturing NESHAP, 40 CFR part 63, subparts DDD and NNN, respectively, to address the results of the RTR that the EPA is required to conduct under sections 112(d)(6) and 112(f)(2)(7 6 FR 72812). The limits in those proposed amendments would apply only to major sources, that is, sources emitting at least 10 tons per year of a single HAP or 25 tons per year of any combination of HAP; area sources emit less than this amount.

This action proposes chromium emission limits for gas

- fired glass

- melting furnaces used to make wool fiberglass that are located at area sources (to become subpart NN) . It also adds these sources to the source category list for the Urban Air Toxics Strategy of the Cle an Air Act. Finally, it proposes amendments to the existing major source rules for Mineral Wool Production and Wool Fiberglass Manufacturing.

1.A. Sum mary of November 2011 revisions

On November 25, 2011 (76 FR 72770) the EPA proposed revisions to the Mineral Wool and the Wool Fiberglass Manufacturing NESHAP, 40 CFR part 63, subparts DDD and NNN,2

respectively, to address the results of the residual risk and technology review (RTR) that the EPA is required to conduct under sections 112(d)(6) and 112(f)(2)(at 76 FR 72812). In the November 25, 2011 notice, we proposed several amendments to both NESHAP and announced our intention to list and regulate area sources in the wool fiberglass area source category pending the collection of new test data.
The agency also noted that since promulgation of the 1999 NESHAP, at least 20 of the existing 30 wool fiberglass facilities are now exempt from the rule due to elimination of phenol

formaldehyde bi nders and are also area sources. As noted previously, a facility that no longer uses phenol

- formaldehyde binders does not meet the definition of “wool fiberglass facility” under Subpart NNN

. However, the glass

- melting furnaces at these sources continue to emit chromium and other HAP metal compounds, and are completely separate and independent from emissions from the bonding portion of the process. Further, while replacement of phenol

formaldehyde binders with non

- HAP binders is an environmentally responsibl e, or ‘green’ choice within the wool fiberglass manufacturing industry, recent data from industry show that
gas
- fired glass

- melting furnaces specifically continue to emit chromium and other HAP metal compounds, and for furnaces located at area sources thes e emissions are not currently regulated pursuant to CAA section 112. We are now including regulation of wool fiberglass area sources in this supplemental proposal as a new subpart, NN.

1. B. Summary of the April 15, 2013 supplemental proposal. On April 15, 2013, the EPA published a supplemental proposal to the RTR. The supplemental proposal made corrections to the November 2011 proposal for both source categories, responded to comments, and proposed first time standards for gas

- fired glass

melting furna ces at area sources in the wool fiberglass source category under EPA’s urban air toxics strategy (Strategy) as required by CAA Sections 112(c)(3) and 112(k)(3)(B)(ii).

1. C. What is the purpose of this supplemental proposal?

Today’s notice also proposes se veral revisions and clarifications to those proposals, including, but not limited to:

 clarification of the upper predictive limit (UPL) approach3

 changes to requirements affecting both source categories as a result of the affirmative

defense vacatur

 revise d startup and shutdown standards for both source categories

 changes to previously proposed mineral wool production emission limits

 changes to previously proposed standards for wool fiberglass manufacturing at both
major and area sources

We are proposing changes to both the Mineral Wool Production and Wool Fiberglass Manufacturing NESHAPs to eliminate the SSM exemption. These changes would revise Table 1 in 40 CFR part 63, subpart DDD and Table 1 in 40 CFR part 63, subpart NNN to indicate that several requ irements of the 40 CFR part 63 General Provisions are no longer applicable.
Specifically, we are proposing to add provisions to the Mineral Wool Production and Wool Fiberglass Manufacturing NESHAPs requiring that facilities comply with work practice stand ards during periods of startup and shutdown, remove the SSM Plan requirement requiring affected sources to calculate their emissions during startup and shutdown, and remove the requirement to maintain records of the startup and shutdown emission calculatio ns. Finally, we are proposing to revise the SSM

- associated monitoring, recordkeeping and reporting requirements to require reporting and recordkeeping for periods of malfunction. The work practice standards for startup and shutdown are being incorporated i nto the first

- time GACT standards for wool fiberglass area sources.
Emission limits for cupolas and for bonded lines are changing as a result of new representative detection level ( RDL ) values, new source test data and as a result of our reconsideration of small data set

- derived emission limits, as introduced in the proposal notice. We are proposing revised COS emission limits for new and reconstructed closed

- top cupolas based on the use of the RDL for source test values returned below the detection level (BDL) of the test method. We are seeking and accepting comments on the proposed revisions to COS emission lim its for closed top cupolas. The revised COS emission limits being proposed in this action are summarized in Table 2 of th e preamble. In addition, the proposed limits for formaldehyde, phenol, and methanol emissions from horizontal collection/curing lines are4

changing from previously proposed limits (April 15, 2013 (78 FR 22370 at 22386)) due to new test data we received from industry on this process.
We are proposing several changes based on comments we received to our April 15, 2013 proposed rules for g as
- fired glass

- melting furnaces. These changes include new options and greater flexibility to achieve chromium emission reductions, explanation of the most cost effective option, annual performance tests, extended compliance deadlines and changes to previo usly proposed emission limits based on small data sets.
We also are proposing work practice standards for HF and HCl emissions from all furnaces subject to subpart NNN.
We estimate the economic impacts of these proposed standards in this report for all of the different rules covered in this rulemaking.

2. The Mineral Wool Industry

2.A. Background on Mineral Wool Industry ?

Mineral wood often is defined as any fibrous glassy substance made from minerals or mineral products such as slag and glass. The chemical composition of mineral wool can vary widely. The basic materials for glass wool manufacture include sand, soda ash, dolomite, limestone, sodium sulfate, sodium nitrate, and minerals containing boron and alumina. Traditional stone wool production involves melting a combination of alumino

- silicate rock (usually basalt), blast furnace slag, and limestone or dolomite. In addition, for both glass and stone wool the batch may contain recycled process or product waste. For glass wool, other forms of waste glass (cullet) are also used as feedstock.
These materials are processed into insulation and other fibrous building ma terials that are used for structural strength and fire resistance. Generally, these products take one of four forms: “blowing” wool or “pouring” wool, which is put into the structural spaces of buildings; batts, which may be covered with a vapor barrier of paper or foil and are shaped to fit between the structural members of buildings; industrial and commercial products such as high

- density fiber felts and blankets, which are used for insulating boilers, ovens, pipes, refrigerators, and other process equi pment; and bulk fiber, which is used as a raw material in manufacturing other products, such as ceiling tile, wall board, spray

- on insulation, cement, and mortar.5

Glass wool and stone wool production make use of different proprietary technologies, inclu ding melting, fiberi z ing and curing. Production of mineral wool is a high temperature, energy intensive process. Mineral wool plants use a mix of technologies and fuels: a total of 11 propri etary fiberizing technologies are employed worldwide. Glass w ool furnaces are predominantly gas fired, but there are a substantial number of furnaces that are electrically heated.
In the production of mineral wool products that do not require high rigidity, oil is typically applied to suppress dust and add some s trength to the fiber; the fiber is then sized and bagged or baled. This is known as a “nonbonded” product which is manufactured on a “nonbonded” production line.
For mineral wool products requiring a higher structural rigidity, a HAP

- based (phenol/formal dehyde) binder may be applied to the fiber. This is known as a “bonded” product made on a bonded production line. The binder

- laden fiber mat is then thermoset in a curing oven and cooled. The major differences between the “nonbonded” and bonded production lines are the application of binder during the collection process followed by the curing oven. Four facilities only manufacture nonbonded products, while the other 3 facilities operate both bonded and nonbonded production lines. A total of 11 cupolas and 3 curing ovens are operated by the facilities in this source category.

2.B. Economic Impact Estimates
As mentioned previously, m ineral wool manufacturing facilities are included in NAICS 327993. The industry’s revenue for 201 2 was reported at $5. 6 billion, and the estimated gross profit was 32

. 07 %. Exports from US mineral wool firms exceeded imports by about $ 60 0 million in 201 2

. 1 The year 2012 is the most recent year for which we are able to obtain economic data for NAICS 327993. According to t he size definition applied to this industry by the U.S. Small Business Administration (SBA) ( 750 company emplo yees or less) 2 , five of the

seven parent firms in this industry affected by this final rule are classified as small businesses. Of the five sma ll firms, their average number of employees is 108. All of these firms are U.S.

1 Mineral Wood Manufacturing Industry in the U.S. and its International Trade (2014 Edition). LLC Supplier Relations US. Available on February 17, 2014. Can be found at http://www.marketresearch.com/Supplier

Relations

- US

- LLC

- v3418/Mineral

- Wool

- Manufacturing

- International

- Trade

- 8033092/

. 2 Found at the web site for the U.S. Small Business Administration ( http://www.sba.gov/size ), with small business size standards updated as of July 14, 2014.6

owned except for Roxul USA. Roxul USA is a subsidiary of a Danish company, Rockwool International, which is the world’s largest producer of mineral wool insulation

. Roxul USA’s facility is located in Byhalia, Mississippi

. This new production facility is in the construction permit review stage and we have included it as part of the estimated cost impacts. Based on the emissions test data provided by the industry, non e of the existing facilities will have install additional control equipment to comply with the proposed rule requirements.
We estimate that all 8 of the mineral wool production facilities will incur additional testing costs to demonstrate compliance with the new carbonyl sulfide (COS), hydrochloric acid (HCl), and hydrofluoric acid (HF) emission limits for cupolas. We also estimate that the 3 existing facilities with bonded product lines will incur additional testing costs to demonstrate compliance with the revised formaldehyde and new phenol and methanol emission limits that will apply to collection and curing operations combined. We only have general information on the planned new facility but to estimate costs conservatively, we assume in the cost est imation that it would operate two cupolas and two bonded product lines that would be subject to the proposed limits of the rule. All of the new testing associated with the proposed rule requirements is based on a 5

- year frequency. Therefore, the initial ( first year) testing costs were divided by 5 to come up with “annualized” testing costs.

This economic analysis identified the businesses that will be affected by this rule and provides an analysis at a screening level to assist in determining whether thi s rule is likely to impose a significant economic impact on affected businesses. The analysis employed here is a “sales test” that computes the annualized compliance costs as a share of sales for each company. The annualized cost per sales for a company r epresents the maximum price increase in affected product needed for the company to completely recover the annualized costs imposed by the regulation. A partial equilibrium analysis, a type of economic impact analysis that estimates changes in prices and o utput for the regulated sector resulting from a rule’s implementation, is deemed more than necessary for this proposal given the expected size of the impacts.
The “sales test” is the impact methodology EPA employs in economic impact analysis such as this one as opposed to a “profits test”, in which annualized compliance costs are calculated as a share of profits. 3 This is because revenues or sales data are commonly available data for entities normally impacted by EPA regulations and profits data normally made

3 More information on sales and profit tests as used in an alyses done by U.S. EPA can be found at http://www.epa.gov/sbrefa/documents/rfaguidance11

- 00

- 06.pdf , pp. 32

- 33.7

available are often not the true profits earned by firms due to accounting and tax considerations. Firms and entities often have ways legally availabl e in the tax code to minimize their reported profits; thus, using reported profits may lead to a less than accurate estimate of the economic impact of a regulation to an affected firm or entity and their consumers. While screening level analyses are ofte n employed to estimate impacts to small business or entities as part an analysis in compliance with the Regulatory Flexibility Act (RFA) as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA), a screening level analysis can also be

e mployed in an economic impact analysis such as this one whose focus is on the regulated companies. The costs used as input to the economic impact and small business analysis include the cost of emissions control and the costs of monitoring, recordkeeping, reporting and testing. The compliance costs by mineral wood facility are shown below in Table 1 , and all compliance costs are in 2013$ . More details on the compliance costs can be found in the mineral wool RTR cost memo prepared for this rulemaking. 4

4 Memo from David Reeves, RTI, to Susan Fairchild, US EPA. Estima ted Cost Impact for Mineral Wool Production Industry to Comply with Proposed Residual Risk and Technology Review (RTR) Amendments. August 29, 2014.8



### Table 1. Mineral Wool Production Facilities Costs to Comply with RTR Amendm en ts
- Summary

Cupolas a Combined Collection/Curing

# Cupolas Annualized

(New) COS Testing Cost b # Bonded Lines Annualized

(New) Testing Cost c Facility Location Annualized (New) HCl/HF Testing Cost b Total Facility Incremental Annualized (New) Costs Industrial Insulation Group (IIG) Phenix City, AL 1 $ 2,800 $ 800 1 $ 800 $4,400

Thermafiber Wabash IN 2 5,200 1,600 1 800 7,600
USG Interiors Red Wing, MN 2 5,200 1,600 0 0 6,800 USG Interiors Walworth, WI 1 2,800 800 0 0 3,600 Amerrock Products Nolanville, TX 2 5,200 1,600 0 0 6,800
Isolatek Int’l Huntington, IN 2 5,200 1,600 0 0 6,800 Rock Wool Mfg Leeds, AL 1 2,800 800 1 800 4,400 Roxul USA Byhalia, MS 2 5,200 1,600 2 1,600 8,400

SubTotal 13 $34,400 $10,400 5 $4,000 $ 48,800

a – 8 of the 13 cupolas currently have (or will have) incineration/afterburner controls. None of the facilities are expected to have any additional equipment or material cost impacts to meet the proposed emission limits. b

– Cupola testing costs reflect incremental (new) costs for COS, HF, and HCl testing; current test requirements for PM not included.
c – Collection/curing costs reflect incremental costs for phenol and methanol testing; current test requirements for formaldehyde not included.9

For these mineral wool firms, the impacts of the proposed rule range from 0.0 0 6 percent to 0

. 1 percent, expressed as annual compliance costs as a percent of sales. 5 The price elasticity of demand for the mineral wool industry is estimated at

- 0.8 6 , and the price elasticity of supply for the industry is estimated at

- 0.7. 7 With the responsivene ss of mineral wool demand and supply to be less in percentage terms than the change in product price as approximated by the cost to revenue ratio, since this ratio is the maximum price change that producers may face, and with this ratio at or below 1 percent for the majority of production from this industry, it is expected that mineral wool price and output changes in response to this final rule will be less than 1 percent. 8 The total annual compliance costs of the ru le for this industry are $ 4 8 , 8 00 (201 3 dollars) as shown in Table 1

. 9 Since confidential business information (CBI) , particularly revenue data, received from the subject firms has been used to estimate these impacts, we will not provide provide econom i c impact estimates by firm.

3. T he Wool Fiberglass Industry

3.A. Background

Wool fiberglass is a thick, fluffy material made from discontinuous fibers, is used for thermal insulation and sound absorption. It is commonly found in ship and submarine bulkheads and hulls; automobile engine compartments and body panel liners; in furnaces and air conditio ning units; acoustical wall and ceiling panels; and architectural partitions. Fiberglass can be tailored for specific applications such as Type E (electrical), used as electrical insulation

5 Use of this metric for economic impacts when small businesses are prevalent in an industry affected by a regulation is consistent with the EPA guidance on SBREFA compliance ( http: //www.epa.gov/sbrefa/documents/Guidance

- RegFlexAct.pdf ), chapters 2 and 3.

6 Ho, M. S, R. Morgenstern, and J. S. Shih. 2008. “Impact of Carbon Price Policies on US Industry.” RFF Discussion Paper 08

- 37. Http://Www.Rff.Org/Publications/Pages/Publicationdet ails.Aspx?. Publicationid=20680 Accessed August 2009. Table 8.A.6.

7 Broda, C., N. Limao, and D. Weinstein. 2008b. “Export Supply Elasticities.” <http://faculty. chicagobooth.edu/christian.broda/website/research/unrestricted/TradeElasticities/ TradeElastic ities.html

.

8 This conclusion is consistent with perfect competition for this industry. This conclusion may change somewhat to the extent that this industry is imperfectly competitive.

9 For more information on the costs of the rule, please refer to the cost memo prepared for this industry as part of this rule, which is a m emo from David Reeves, RTI, to Susan Fairchild, US EPA. Estimated Cost Impact for Mineral Wool Production Industry to Comply with Proposed Residual Risk and Technology Review (RTR) Amendments. August 29, 2014.10

tape, textiles and reinforcement; Type C (chemical), which has sup erior acid resistance, and Type T, for thermal insulation.

The basic raw materials for fiberglass products are a variety of natural minerals and manufactured chemicals. The major ingredients are silica sand, limestone, and soda ash. Other ingredients ma y include calcined alumina, borax, feldspar, nepheline syenite, magnesite, and kaolin clay, among others. Silica sand is used as the glass former, and soda ash and limestone help primarily to lower the melting temperature. Other ingredients are used to imp rove certain properties, such as bor ides for chemical resistance and ductability . Waste glass, also called cullet, is also used as a raw material and may be ‘internal’ from the production of fiberglass or may be ‘external’ from glass recycling . The raw mat erials must be carefully weighed in exact quantities , their chemical compositions evaluated, and thoroughly mixed together (called batching) before being melted into glass for the manufacture of fiberglass

.
3.B. Impacts for Wool Fiberglass RTR Proposed Rule

Based on the information provided by the wool fiberglass manufacturing industry and their primary trade association, North American Insulation Manufacturers Association (NAIMA), there are currently 30 facilities in the U.S. producing wool fiberglass. A letter from NAIMA dated June 8, 2011, stated “non

- formaldehyde binder products represent the vast majority of the industry” and “all major sources have already converted or have announced plans to convert to

non
- phenol formaldehyde binders.” Based on a review of the current permit status of all sources and recent information provided by industry, 10 facilities are major sources (subject to the existing MACT rule, subpart NNN) and 20 facilities are area source facilities. These 30 facilities operate a tot al of 54 glass

- melting furnace and 31 manufacturing lines that will have to comply with the RTR amendments to the NESHAP (subpart NNN) requirements.

Industry comments on the proposed major source rule amendments (76 FR 72770) stated that some of the majo r source facilities have already switched some or most of their lines to non

- HAP binders and would no l onger be subject to subpart NNN . With the phase

- out of phenol

- formaldehyde binders, those sources will also be redesignated as area sources. While indus try sources also predicted before proposal of the RTR amendments that no major sources would exist by the end of 2012, we now believe this to be inaccurate. The following cost impacts are based on the estimated 10 facilities that were identified as major s ources in the most recent industry information provided in December 2012.11

We estimate that there are currently eight gas

- fired furnaces located at five facilities designated as major sources. We also estimate that there are currently three gas

- fired furn aces located at two facilities that emit chromium compounds above the proposed chromium emission limit. We have estimated the cost impact for those facilities based on the assumption that those furnaces will have a shortened operational life cycle and be r ebuilt (or replaced) earlier than they might have been otherwise. The associated costing of this scenario is referred to as the net present value (NPV) approach which is described in the EPA Air Pollution Control Cost Manual (EPA/452/B

- 02

- 001), January 200 2. 10

The furnace age and chromium emissions data show that furnaces may operate into their 10 th year and still emit chromium at levels below the proposed chromium emission limit. The data also show that all furnaces older than 10 years emitted chromium at levels exceeding the proposed emission limit. We considered basing the NPV on an expected 12

- year furnace life and an early rebuild at 10 years. While supported by the available data and resulting in a lower cost estimate (i.e., NPV Incremental Cost = $64 3,000 and Capital Recovery Cost = $119,000 per furnace), we decided to use a more conservative (i.e., more likely to overstate than understate cost estimates) approach and based our costs on an expected 10

- year furnace life and an early rebuild at 7 years

. We use the conservative approach because w e estimate that there are currently three gas

- fired furnaces located at two facilities that emit chromium compounds above the proposed chromium emission limit. We have estimated the cost impact for those faciliti es based on the assumption that those furnaces will have a shortened operational life cycle and be rebuilt (or replaced) earlier than they might have been otherwise. The associated costing of this scenario is referred to as the net present value (NPV) appr oach which is described in the EPA Air Pollution Control Cost Manual

. More information on the furnace life cycle cost estimation can be found in the cost memo for the wood fiberglass RTR proposal. 11

Using this more conservative approach, the total annualized cost per furnace is estimated at $212,000. The total cost for the five facilities to comply with the area source rule is estimated to be $716,000 per year with an overall cost effectiveness of $13,500 per pound of chromium compounds reduced . The annualized control costs for the gas

- fired furnaces ($716,000) divided by the emission reduction (567 pounds of chromium compounds) results in a cost effectiveness of $1,300 per pound of chromium compounds reduced (2013 d ollars).

10 The EPA Air Pollution Control Cost Manual is available at http://epa.gov/ttn/catc/products.html#cccinfo

. 11 Memo from David Reeves, RTI, to Susan Fairchild, US EPA. Costs and Emission Reductions for the Proposed Wool Fiberglass Manufacturing NESHAP

- Residual Risk and Technology Review (RTR) Amendments12

As noted previously, several facilities have already switched all or most of their rotary spin (RS) manufacturing lines to non

- PF binders. Based on the most recent information provided by industry, we estimate that there will be 10 facilities su bject to the proposed rule requirements with 18 RS manufacturing lines making bonded product. Two of those facilities also have 13 bonded flame attenuation (FA) lines producing heavy density products and/or pipe insulation. Based on facility information c ollected in the survey responses, most facilities currently have thermal oxidizers and we assumed that the estimated 6 facilities currently not meeting the proposed emission limits have thermal oxidizers (or scrubbers) on their bonded product lines. Theref ore, there are no additional capital costs to comply with the new RS emission limits and we estimated operation and maintenance (O & M) costs for a thermal oxidizer at each facility to be $125,000 annually. All 10 major source facilities with bonded lines will incur additional testing costs to demonstrate compliance with the new phenol and methanol emission limits for forming and curing operations.

The annualized control costs for the RS manufacturing lines ($774,800) divided by the total emission reduct ion (123 tons of organic HAP) results in a cost effectiveness of $6,300 per ton of organic HAP reduced (2013 dollars). On an individual facility basis, the cost effectiveness for the RS and FA manufacturing lines ranged from $1,132 to $14,000 per pound of organic HAP reduced. In sum, t he total annualized costs to the industry for this proposed rule are $1.49 million (2013 dollars).

This economic impact analysis identified the businesses that will be affected by this rule and provides an analysis at a screening level to assist in determining whether this rule is likely to impose a significant economic impact on affected businesses. The analysis employed here is a “sales test” that computes the annualized compliance costs as a share of sales for each

co mpany. The annualized cost per sales for a company represents the maximum price increase in affected product needed for the company to completely recover the annualized costs imposed by the regulation. This is the same methodology employed for economic im pact analysis for the mineral wool industry, shown earlier in this report.
The “sales test” is the impact methodology EPA employs in economic impact analysis such as this one as opposed to a “profits test”, in which annualized compliance costs are calculat ed as a share of profits. 12 This is because revenues or sales data are commonly available

12 More information on s ales and profit tests as used in analyses done by U.S. EPA can be found at http://www.epa.gov/sbrefa/documents/rfaguidance11

- 00

- 06.pdf , pp. 32

- 33.13

data for entities normally impacted by EPA regulations and profits data normally made available are often not the true profits earned by firms due to accounting and tax considerations. Firms and entities often have ways legally available in the tax code to minimize their reported profits; thus, using reported profits may lead to a less than accurate est imate of the economic impact of a regulation to an affected firm or entity and their consumers. While screening level analyses are often employed to estimate impacts to small business or entities as part an analysis in compliance with the Regulatory Flex ibility Act (RFA) as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA), a screening level analysis can also be employed in an economic impact analysis such as this one whose focus is on the regulated companies.

As mentioned earlie r, w ool fiberglass facilities are also included in NAICS (North American Industrial Classification System) 327993 along with mineral wool facilities . There are five parent firms owning these faciliti es with HAP sources affected by th e major source RTR
pr oposal, and these firms are shown in Table 2

. N one of these firms is a small business as defined by the SBA ( 75 0 employees or less for an ultimate parent company , as mentioned earlier for the relevant NAICS code )

. Each of t hese firms ha s revenues in excess of $ 3 billion in 201 3 , as shown in Table 2

. All of the firms are owned by parent companies based in the U.S

. except for CertainTeed, which is owned by Sain t

- Gobain, a French conglomerate , and Knauf, Inc., which is owned by the Knauf G roup, Inc. ) , a German conglomerate

. Table 2 provides the annualized costs and economic impacts to the affected firms from this major source rule. All estimates of annualized costs are taken from the cost memo for the wool fiberglass RTR. EPA used no CBI in generating economic impacts for this industry.14

Table 2 : Wool Fiberglass Firms t hat Are Affected by the Proposed Major Source R TR , their
Revenues and Costs Incurred from the Major Source R TR , and Economic Impacts from this Major Sou rce R TR

Wool Fiberglass Firm Annual Revenues
in 201 3 (billions) Total Annualized

Costs (201 3 dollars) f Annualized Costs as a

Percentage of Annual
Revenues in 201 3
Owens Corning $5. 3 0 a $ 493 , 6 00 0.00 93
Johns Manville (owned by
Berkshire

- Hathaway) $1 82

. 15 b 294 , 4 00 0.000 16
Certain Teed (owned by Saint

Gobain) $ 31

. 64 c 444 , 8 00 0.00 1 4
Guardian, Inc. $ 5

. 60 d 2 54 , 8 00 0.00 45 Knauf , Inc. (owned by the Knauf Group) $ 4

. 7 2 e 3 , 2 00 0.00000 68

a Taken from http://investor.owenscorning.com/financial

- news/financial

- news
- details/2014/Owens

- Corning

Reports

- Fourth

- Quarter

- and

- Full

- Year

- 2013

- Results/default.aspx

.

b Taken from the 201 3 Berkshire

- Hathaway annual report at http://www.berkshirehathaway.com/2013ar/2013ar.pdf , p. 2 6

.

c Taken from the 201 3 annual report for Saint

- Gobain, Inc

. http://www.saint

- gobain.com/files/DDR_2013_GB.pdf , p. 6. Conversion from euros uses euro to U.S. dollar value as an average for 201 3 using estimates from the U.S. Federal Reserve found at http://www.federalreserve.gov/releases/G5a/current/default.htm . The value is 1.3281.

d Revenues available at http://www.forbes.com/companies/guardian

- industries/

.

e Taken from https://www.linkedin.com/company/knauf

. Conversion from euros uses euro to U.S. dollar value as an average for 201 3 using estimates from the U.S. Federal Reserve found at http://www.federalreserve.gov/releases/G5a/current/default.htm . The value is 1.3281.
The economic impact on these wool fiberglass firms as result of the major source RTR rule , measured in annual compl iance costs as a percent of sales or revenue s, is less than 0.00 5 percent for each of the affected parent firms based on using available revenue data for 201 3 to be consistent with the year for the cost estimates

. The price elasticity of demand for the wool15

fiberglass industry is estimated at

- 0.8 13 , and the price elasticity of supply for the wool fiberglass industry is estimated at

- 0.7. 14 With the responsiv eness of wool fiberglass demand and supply at less than 1:1 compared to a price change of 1 percent , and with the change in product price as approximated by the cost to revenue ratio at less than 0.1 percent, for this ratio is the maximum price change that producers may face, it is expected that wool fiberglass price and output changes will be clearly less than 0.1 percent. 15 Hence, the overall economic impact of this rule should be low on the affected industry and its consumers.

4. Wool Fiberglass Area Source Proposed Rule 4.A. Background

Based on the information provided by the wool fiberglass manufacturing industry and their primary trade association, North American Insulation Manufacturers Association (NAIMA), there are currently 30 facilities in the U.S. producing wool fiberglass. A let ter from NAIMA dated June 8, 2011, stated “non

- formaldehyde binder products represent the vast majority of the industry” and “all major sources have already converted or have announced plans to convert to

non
- phenol formaldehyde binders.” Based on a revie w of the current permit status of all sources and recent information provided by industry, 10 facilities are major sources (subject to the existing MACT rule, subpart NNN) and 20 facilities are area source facilities. These 30 facilities operate a total of 54 glass

- melting furnaces. Five of the area source facilities operate eight furnaces which meet the applicability requirements in the proposed area source NESHAP (subpart NN). Based on our current emissions data, two of the area source facilities, operati ng a total of three furnaces will be required by the rule to reduce chromium compound emissions.
Industry comments on the proposed major source rule amendments (76 FR 72770) stated that some of the major source facilities have already switched some or mo st of their lines to non

- HAP binders and would no longer be subject to subpart NNN. With the phase

- out of phenol

- formaldehyde binders, these sources will also be redesignated as area sources. While

13 Ho, M. S, R. Morgenstern, and J. S. Shih. 2008. “Impact of Carbon Price Policies on US Industry.” RFF Discussion Paper 08

- 37. http://www. rff.org/Publications/Pages/Pulbicationdetails.as px publicationid=20680

. Accessed August 2009. Table 8.A.6.

14 Broda, C., N. Limao, and D. Weinstein. 2008b. “Export Supply Elasticities.” http://faculty. chicagobooth.edu/christian.broda/website/research/unrestricted/TradeElasticities/ TradeElasticities.html.

15 This conclusion is consistent with perfect competition for this industry. This conclusion may change somewhat to the extent that this industry is imperfectly competitive.16

industry sources also predicted before proposal of the RT R amendments to NNN that no major sources would exist by the end of 2012, we now believe this to be inaccurate. Table 2 provides further information on wool fiberglass furnaces by furnace type and whether furnaces would currently be subject to the area sou rce rule under subpart NN. The following cost impacts are based on the estimated five facilities and eight gas

- fired glass

- melting furnaces that would be subject to the proposed area source rule requirements.

4.B. Economic Impact Estimates

We estimate t hat there are currently eight gas

- fired furnaces located at five facilities designated as area sources. We also estimate that there are currently three gas

- fired furnaces located at two facilities that emit chromium compounds above the proposed chromium

em ission limit. We have estimated the cost impact for those facilities based on the assumption that those furnaces will have a shortened operational life cycle and be rebuilt (or replaced) earlier than they might have been otherwise. The associated costing o f this scenario is referred to as the net present value (NPV) approach which is described in the EPA Air Pollution Control Cost Manual

.
The furnace age and chromium emissions data show that furnaces may operate into thei r 10 th year and still emit chromium at levels below the proposed chromium emission limit. The data also show that all furnaces older than 10 years emitted chromium at levels exceeding the proposed emission limit. We considered basing the NPV on an expected 12

- year furnace life and an early rebuild at 10 years. While supported by the available data and resulting in a lower cost estimate (i.e., NPV Incremental Cost = $643,000 and Capital Recovery Cost = $119,000 per furnace), we decided to use a more conserva tive (i.e., more likely to overstate than understate cost estimates) approach and based our costs on an expected 10

- year furnace life and an early rebuild at 7 years. More information on the furnace life cycle cost estimation can be found in the cost memo for the wood fiberglass area source proposal. 16

Using this more conservative approach, the total annualized cost per furnace is estimated at $212,000. The total cost for the five facilities to comply with the area source rule

16 Memo from David Reeves, RTI, to Susan Fairchild, US EPA Costs and Emission Reductions for the Wool Fiberglass Manufacturing NESHAP

- Area Sources . August 27, 2014.17

is estimated to be $716,000 per year with an overall cost effectiveness of $13,500 per pound of chromium compounds reduced.

The annualized control costs for the gas

- fired furnaces ($716,000) divided by the emission reduction (54 pounds of chromium compounds) results in a cost effect iveness of $13,300 per pound of chromium compounds reduced (2013 dollars).

We prepared a similar economic impact analysis for the wool fiberglass area source proposal as that for the proposed RTR. As mentioned earlier, wool fiberglass facilities are also included in NAICS (North American Industrial Classification System) 327993 along with mineral wool facilities. There are three parent firms owning these facilities with HAP sources affected by the area source proposal, and these firms are shown in Table 3 . None of these firms is a small business as defined by the SBA (750 employees or less for an ultimate parent company, as mentioned earlier for the relevant NAICS code). Each of these firms has revenues in excess o f $3 billion in 2013, as shown in Table 3 . All of the firms are owned by parent companies based in the U.S. except for CertainTeed, which is owned by Saint

- Gobain, a French conglomerate, and Knauf, Inc., which is owned by the Knauf Group , a German conglo merate . Table 3 provides the annualized costs and economic impacts to the affected firms from this area source proposed rule. All estimates of annualized costs are taken from the cost memo for the wool fiberglass area source proposed rule. EPA used no C BI in generating economic impacts for this industry. It should be noted that Guardian, Inc. and Johns Manville do not have area sources that are subject to this proposal. Thus, the cost to each of these firms as a result of this area source NESHAP proposa l is zero.18

Table 3 : Wool Fiberglass Firms that Are Affected by the Proposed Area Source Rule, their Revenues and Costs Incurred from the Area Source Rule, and Economic Impacts from this Are
Source Rule

Wool Fiberglass Firm Annual Revenues
in 201 3 (billions) Total Annualized

Costs (2013 dollars) Annualized Costs as a

Percentage of Annual
Revenues in 2013
Owens Corning $5.30 a $ 252 , 0 00 0.00 5
Certain Teed (owned by Saint

Gobain) $ 31.64 b $ 2 0 ,000 0.000 06
Knauf, Inc. (owned by The
Knauf Group) $ 4

. 7 2 c $ 444 , 8 00 0.00 94

a Taken from http://investor.owenscorning.com/financial

- news/financial

- news
- details/2014/Owens

- Corning

Reports

- Fourth

- Quarter

- and

- Full

- Year

- 2013

- Results/default.aspx

.
b Taken from 201 3 annual report for Saint

- Gobain, Inc

. http://www.saint

- gobain.com/files/DDR_2013_G B.pdf , p. 6. Conversion from euros uses euro to U.S. dollar value as an average for 201 3 using estimates from the U.S. Federal Reserve found at http://www.federalreserve.gov/ releases/G5a/current/default.htm . The value is 1.3281.

c Taken from https://www.linkedin.com/company/knauf

. Conversion from euros uses euro to U.S. dollar value as an average for 201 3 using estimates from th e U.S. Federal Reserve found at http://www.federalreserve.gov/releases/G5a/current/default.htm . The value is 1.3281.

The economic impact on these wool fiberglass firms as result of the area source rule, measured in annual compliance costs as a percent of sales or revenues, is less than 0.0 1 percent for each of the affected parent firms based on using available revenue data for 2013 to be consistent with the year for the cost estimates. The price elasticity of demand for the wool fiberglass industry is estimated at

- 0.8 17 , and the price elas ticity of supply for the wool fiberglass industry is estimated at

- 0.7. 18 With the responsiveness of wool fiberglass demand

17 Ho, M. S, R. Morgenste rn, and J. S. Shih. 2008. “Impact of Carbon Price Policies on US Industry.” RFF Discussion Paper 08

- 37. http://www. rff.org/Publications/Pages/Pulbicationdetails.aspx publicationid=20680

. Accessed August 2009. Table 8.A.6.

18 Broda, C., N. Limao, and D. Weinstein. 2008b. “Export Supply Elasticities.” http://faculty. chicagobooth.edu/christian.broda/website/research/unrestricted/TradeElasticities/ TradeElasticities.html.19

and supply at less than 1:1 compared to a price change of 1 percent , and with the change in product price as approximated by the cos t to revenue ratio at less than 0.1 percent, for this ratio is the maximum price change that producers may face, it is expected that wool fiberglass price and output changes will be less than 0.1 percent. 19 Hence, the overall economic impact of this rule sh ould be low on the affected industry and its consumers.

5. Conclusion

– Summary of Impacts Across Rules

The total annualized costs of the RTR and area source rule s for the mineral wool and wool fiberglass manufacturing categories combined are $ 2, 25 6 , 4 00 (201 3 dollars). For more information on the annualized compliance costs (i.e., the costs of control + the costs of monitoring, testing, and other administrative costs), please refer to the cost memos f or this rule for these industries

. We also see that no firm is expected to experience an impact of more than 0.15 percent of annualized costs as a percent of sales from the cumulative costs of these rules.

For the rule s , we find that we can certify that there is not a significant impact on a substantial number of small entities (or SISNOSE). This is based on no small firm being significantly impacted by this rule as shown in the impact results presented in this economic impact and small business impact analysis. We include all small fir ms affected by this rule in the determination of this conclusion. Of the eleven firms affected by these t hree rule s , five mineral wool companies are small firms, and n one of the small firms is affected significantly. All of these small firms are mineral wool manufacturers ; no wool fiberglass manufacturer is a small business

. Since the major and area source rule s for wool fiberglass manufacturing does not impact small businesses, the Agency can provide a certification of no SISNOSE for the entire rulemaking in today’s action.
Although these proposed rules would not have a significant economic impact on a substantial number of small entities, the EPA nonetheless has tried to reduce the impact that these rules would have on small entities. The actions we are tak ing to reduce impacts on small businesses include less frequent compliance testing for the entire mineral wool industry and subcategorizing the Mineral Wool Production Source Category in developing the COS, HF and HCl emissions limits.

19 This conclusion is consistent with perfect competition for th is industry. This conclusion may change somewhat to the extent that this industry is imperfectly competitive.20