### September 2011



# Economic Impacts of Proposed

NSPS for Nitric Acid

Draft Report

Prepared for

Larry Sorrels U.S. Environmental Protection Agency Office of Air Quality Planning and Standards (OAQPS) Air Economics Group (MD

- C439

- 02) Research Triangle Park, NC 27711

Prepared by

Katherine Heller Brooks Depro Stephanie Norris Tony Lentz RTI International 3040 Cornwallis Road Research Triangle Park, NC 27709

RTI Project Number 0209897. 00 4

. 0 94_________________________________ RTI International is a trade name of Research Triangle Institute

. RTI Project Number 0209897. 00 4

. 0 94



# Economic Impacts of Proposed

NSPS for Nitric Acid

Draft Report

September 2011

Prepared for

Larry Sorrels U.S. Environmental Protection Agency Office of Air Quality Planning and Standards (OAQPS) Air Economics Group (MD

- C439

- 02) Research Triangle Park, NC 27711

Prepared by

Katherine Heller Brooks Depro Stephanie Norris Tony Lentz RTI International 3040 Cornwallis Road Research Triangle Park, NC 27709iii CONTENTS

Section Page

1 Background

................................ ................................ ................................ ............... 1

- 1

2 Industry Profile

................................ ................................ ................................ ......... 2

- 1

2.1 Supply o f Nitric Acid

................................ ................................ ....................... 2

- 1
2.1.1 Nitric Acid Production Process

................................ ............................. 2

- 1
2.1.2 Product Types

................................ ................................ ....................... 2

- 2
2.1.3 Materi als and Costs of Production

................................ ......................... 2

- 2
2.1.4 Nitric Acid and Materials Transportation

................................ .............. 2

- 3

2.2 Demand for Nitric Acid

................................ ................................ .................... 2

- 5
2.2. 1 Nitric Acid Applications

................................ ................................ ....... 2

- 5
2.2.2 Influential Factors

................................ ................................ ................. 2

- 6

2.3 Market Characteristics

................................ ................................ ...................... 2

- 7
2.3.1 Competition and Entry

................................ ................................ .......... 2

- 7
2.3.2 Concentration

................................ ................................ ....................... 2

- 9
2.3.3 Price

- Responsiveness of Supply and Demand

................................ ..... 2

- 11

2.4 Market Trends

................................ ................................ ................................ 2

- 11
2.4.1 Derived Demand for Nitric Acid

................................ ......................... 2

- 11
2.4.2 International Trade in the Sectors that Consume Nitric Acid

............... 2

- 12
2.4.3 Industry Trends and Projections for Sectors Usin g Nitric Acid as an Input

................................ ................................ ............................... 2

- 13
2.4.4 Projected Production of Nitric Acid

................................ .................... 2

- 14

2.5 Overview of Businesses Potentially Affected by the Rule

............................... 2

- 15
2.5.1 Parent Companies

................................ ................................ ............... 2

- 15
2.5.2 Parent Company Sales and Employment

................................ ............. 2

- 18

2.6 References for Section 2

................................ ................................ ................. 2

- 20iv

3 Engineering Cost analysis

................................ ................................ ......................... 3

- 1

3.1 Emission Limit of 0.5 lb NO X /ton

................................ ................................ ..... 3

- 2

3.2 References for Section 4

................................ ................................ ................... 4

- 8

4 Economic Impacts on New Sources in the Nitric Acid Industry

................................ . 4

- 1

4.1 Modeling Approach to Estimating the Impacts on the Market for Nitric Acid

................................ ................................ ................................ ................. 4

- 1

4.2 Possible Impacts on Market for Nitric Acid

................................ ...................... 4

- 4

4.3 Estimated Impacts on Markets for Products Using Nitric Acid as an Input

........ 4

- 5

4.5 Impacts on Small Entities of the NSPS Review of Nitric Acid for NO X on New Sources

................................ ................................ ................................ .... 4

- 7

4.6 References for Section 4

................................ ................................ ................... 4

- 8

5 Conclusions

................................ ................................ ................................ .............. 5

- 1

Appendix

A Industry Data and Projections for NAICS 32521

................................ ............. A

- 1v LIST OF FIGURES

Number Page

4

- 1 2010 Market for Nitric Acid

................................ ................................ ...................... 4

- 2 4

- 2 Mar ket Supply of Nitric Acid, including New Source

................................ ................ 4

- 2 4

- 3 Increased Demand for Nitric Acid at Baseline

................................ ........................... 4

- 3 4

- 4 Market for Nitric Acid, With Proposed NSPS

................................ ........................... 4

- 4vi LIST OF TABLES

Number Page

2

- 1 Cost Comparisons for Labor and Materials across Several NAICS Codes

................. 2

- 4 2

- 2 Concentration Ratios for Sectors Using Nitric Acid as an Input, 2002

..................... 2

- 10 2

- 3 Market Price

- Elasticities of Supply and Demand

................................ ..................... 2

- 11 2

- 4 Exports of Sectors that Consume Nitric Acid (FAS Value, 10 3 $2009)

.................... 2

- 12 2

- 5 Imports for Consu mption of Sectors that Consume Nitric Acid (Customs Value, 10 3 $2009)

................................ ................................ ................................ ............... 2

- 13 2

- 6 Projected Nitric Acid Production

................................ ................................ ............. 2

- 14 2

- 7 Parent Companies with Facilities Potentially Covered Under the Rule

.................... 2

- 16 2

- 8 Annual Revenue and Employment Dat a for Each of the Parent Companies

............. 2

- 19

3

- 1 Normalized NO X Control Costs by Model Plant

................................ ........................ 3

- 1 3

- 2 NO X Control Costs for All New Production Trains in 2016

................................ ....... 3

- 2 3

- 3 NO X Control Efficiencies

................................ ................................ .......................... 3

- 2 3

- 4 NO X Emission Reductions for All New Production Trains with SCR Control in 2016

................................ ................................ ................................ .......................... 3

- 3 3

- 5 Incremental Costs in the Fifth Year after Promulgation for All New Production Trains

................................ ................................ ................................ ........................ 3

- 3 3

- 6 I ncremental Cost Effectiveness in the Fifth Year after Promulgation for All New Production Trains

................................ ................................ ................................ ...... 3

- 4

4

- 1 Market Impacts of the Proposed Rule: Market for Nitric Acid

................................ ... 4

- 5 4

- 2 Estimated Impacts of Nitric Acid NSPS on Sectors Using Nitric Acid as an Input

................................ ................................ ................................ ......................... 4

- 6 4

- 3 Employment and Revenue of Existing Small Entities

................................ ................ 4

- 8 4

- 4 Cost

- to

- Sales Ratios for Model Small Firms Owning New 300 tpd and 1,000 t pd Plants

................................ ................................ ................................ ........................ 4

- 81

- 1 SECTION 1
BACKGROUND

New Source Performance Standards (NSPS), mandated under Section 111 of the Clean
Air Act (CAA) , are directly enforceable federal regulations issued for categories of sources that cause, or contribute significantly to, air pollution that may reasonably be anticipated to endanger public health or welfare. Section 111 of the CAA require s tha t NSPS reflect the “degree of emissions limitation achievable through application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any non

- air quality health and environmental impact and energy re quirements) the Administrator determines has been adequately demonstrated.” This level of control is commonly referred to as best demonstrated technology (BDT). By requiring BDT for new , modified, and reconstructed sources, the NSPS program seeks to attain and maintain ambient air quality as the industrial infrastructure is modernized. Since 1970, the NSPS have been successful in achieving long

- term emissions reductions in numerous industries by en suring that cost

- effective controls are installed on such

so urces.

The Environmental Protection Agency ( EPA ) is required by S ection 111(b)(1)(B) of the CAA to review and, if appropriate, revise existing NSPS at least every 8 years. The purpose of
an NSPS review is to determine if the standards reflect BDT. The nitr ic acid NSPS (part 60, subpart G) has been reviewed in the past

, but the last review was more than 8 years ago. As a result of this, EPA has received a citizen suit from Sierra Club and Environmental Integrity Project prompting a review of the standards.

S ection 111(b)(1)(B) of the CAA requires EPA to periodically review and revise the standards of performance, as necessary, to reflect improvements in methods for reducing
emissions. EPA is currently reviewing the nitric acid manufacturing NSPS and has noted that improvements in technology allow emissions to be better controlled than the current NSPS requires. In light of this review, EPA is proposing revisions to the current NSPS. These revisions would include tightening the current nitrogen oxides (NO x ) limit set back in 1971 for plants that
manufacture nitric acid

.
Following legislative and administrative requirements, EPA conducts economic analy ses of its regulatory actions. EPA ’ s Air Economics Group is responsible for conducting such economic analyses in support of residual risk and national emission standards for hazardous air1

- 2

pollutants (NESHAP), NSPS, and national ambient air quality standards (NAAQS) for criteria pollutants.

This economic impact analysis ( EIA ) contains four other sections. S ection 2 is a profile
of the nitric acid manufacturing industry. It provides the reader with a basic understanding of the
structure of the nitric acid production process, and characterizes nitric acid suppliers and
demanders. Section 3 describes the estimated cos ts that the nitric acid industry would incur with
the promulgation of the revised regulations for the industry. Section 4 analyzes the impacts of these costs on the industry , including potential impacts on small businesses owning nitric acid production fac ilities . Section 5 provides conclusions

.2

- 1 SECTION 2
INDUSTRY PROFILE

EPA has developed this industry profile to provide the reader with a general understanding of the technical and economic aspects of the nitric acid industry. We begin by examining the supply of nitric acid by discussing the nitric acid production process and the
associated costs . We then examine the demand for nitric acid and the end products for which it
serves as an intermediate. We then address t he characteristics that define the nitric acid market and profile the companies owning nitric acid production facilities.

2.1 Supply of Nitric Acid
Nitric acid is an inorganic chemical with a variety of productive applications

, including nitrogen

- based fe rtilizers, explosives, and many specialty chemicals including polyurethane intermediates, dyes, and pharmaceuticals (Dow, 2008 ). Although there is a small direct market for nitric acid, many producers share the role of supplier and consum er by using nitric acid internally as an input to final market goods.

2.1.1 Nitric Acid Production Process
Nitric acid is produced through chemical reactions in two main phases: oxidation and absorption. Specifically, it is produced through a series of chemical reactions stemming from the oxidation of ammonia with air over an alloy catalyst (EFMA, 2000 ). In the oxidation phase, ammonia (NH 3 ) is oxidized at a high temperature over the catalyst, which is usually a platinum

alloy gauze

- li ke structure, into nitric oxide (NO) (EFMA, 2000). As the gases cool, the nitric oxide is oxidized into nitrogen dioxide (N 2 O) (EFMA, 2000). Nitrous oxide, water, and nitrogen are also formed in secondary reactions during this phase (EFMA, 2000). In the ab sorption phase, the nitrogen dioxide (N 2 O) reacts with water to form nitric acid (HNO 3 ) :

4NH 3 + 5O 2 à 4 NO + 6H 2 O

2NO + O 2 à 2NO 2

3NO 2 + H 2 O à 2HNO 3 + NO

In addition to the composition and efficiency of the platinum

- alloy catalyst, the pressure and temperature in the oxidation environment can influence the yield of nitric oxide recovered from the catalytic reaction (EFMA, 2000). The first reaction of ammoni a into nitric oxide is more efficient at a high temperature and low pressure, whereas the reaction of nitric oxide to2

- 2

nitrogen dioxide and the oxidation to nitric acid are more conducive to low temperatures and high pressure (EFMA, 2000). Production plants may be designed as dual

- pressure or single

pressure plants. Dual

- pressure plants separate the oxidation and absorption phases and use lower pressure for oxidation than absorption; single

- pressure plants us e the same degree of pressure throughout productio n (EFMA, 2000).

2 .1.2 Product Types

Nitric acid is a water

- soluble liquid that can range in color from clear to yellow and has a pungent acidic odor (Dow, 2008 ). Most of the chemical is used as weak, or industrial

- grade,
nitric acid and tends to range from a 50 % to 70 % concentration of nitric acid in water (Dow, 2008). Fuming or concentrated nitric acid ranges from 85 % to 100 % in concentration (Dow, 2008).

2 .1.3 Materials and Costs of Production
Ammonia is the chief raw material required for nitric acid production, and many nitric acid producers also manufacture their own ammonia supplies to vertically integrate production. Although some producers fuel ammonia production with coal, the majority of world ammonia production is based on natu ral gas (PotashCorp, 2010 ). As an example, one affected fertilizer company, CF Industries, notes that natural gas purchases represented over 50 % of total 2009 cost of sales in the nitrogen production segment (CF Industries, 2010 ). Securing an affordable fuel supply in a volatile natural gas market is pivotal for a company ’ s competitiveness and sustainability in the industry (PotashCorp, 2010 ). One affe cted entity, Coffeyville R esources, is the only nitrogen plant in the United States to use lower cost petroleum coke instead of natural gas (CVR, 2009 ). Because of the unpredictable nature of natural gas prices, some other smaller facilities are also looking into alternative fuel options (REMC, 2010 ).

Since the shift toward deregulation in the natural gas market in the 1980s, natural gas prices have played an increasingly significant role in ammonia production. In the period immediately followin g deregulation (1985 to 1999), natural gas prices remained relatively stable (Huang, 2007 a ). There was little correlation between natural gas prices and ammonia prices until 2000, when natural gas prices began to fluctuate erratically. Between 2000 and 2006, the correlation between natural gas and ammonia prices was 0.8 (Huang, 2007a ). Further analysis suggests that the long

- run price elasticity of ammonia with respect to natural gas is 0.79 (Huang,
2007b ).

Ammonia producers use a variety of purchasing options to manage the inherent volatility of natural gas prices. Since natural gas is traded as a commodity, companies can buy natural gas2

- 3

at real

- time spot prices or under contract in the futures market (NGSA, 2004 ). In contrast to the immediate purchase of natural gas at its daily spot price, buying into a future contract involves an agreement between buyer and seller on a physical transaction at a later date (NGSA, 2004).
Natur al gas is traded in the United States at market hubs around the country, the largest of which is Henry Hub in Louisiana (NGSA, 2004). Roughly 30 hubs are strategically located at major natural gas pipeline intersections (NGSA, 2004). 1 The natural gas futur es prices that are used for futures trading on the New York Mercantile Exchange (NYMEX) are the Henry Hub contract prices and illustrate the price of the physical delivery of natural gas from this hub (NGSA, 2004).
The “ location differential ” is the variat ion between prices at Henry Hub and another market hub, which arises from different supply and demand dynamics between the different hubs (NGSA, 2004). Heavy users of natural gas, including ammonia producers, benefit from building facilities
close to these market hubs.

Table 2

- 1 illustrates the cost comparisons for labor and materials across the North American Industry Classification System ( NAICS ) codes in which the affected entities are
classified. Both nitric acid production and the production activities of facilities and firms that use nitric acid as an input are classified within NAICS 325, Chemical Manufacturing. Most nitric acid is used in making ammonium nitrate (AN), the majority of which is u sed in nitrogenous fertilizer production, NAICS 325311. Other consumers of nitric acid fall within NAICS 325211, 325510, and 325920. In all of these NAICS industries, the cost of materials, including nitric acid, represents approximately half of the value of shipments in a typical year. The cost of materials is typically several times higher than the payroll costs (or cost of labor) for these affected
industries.

An additional capital cost to consider in nitric acid production is that of the catalyst used in ammonia oxidation, which is typically made primarily with platinum and supplemented with other metals (EFMA, 2000 ). Catalyst costs could thereby be influenced by variation in metals supply and pricing.

2 .1.4 Nitric Acid and Materials Transportation
Since the majority of nitric acid is consumed in the facility or complex in which it is produced, transporting the product is not of paramount concern. However, some companies do sell nitric acid to industrial customers or potentially need to transfer between facilities, so the

1 For a map of the major market hubs and pipeline distribution network, see http://www.eia.doe.gov/pub/oil_gas/natural_gas/analysis_publications/ngpipeline/MarketCenterHubsMap.html

.2-4 Table 2

- 1. Cost Comparisons for Labor and Materials a cross Several NAICS Codes

Geographic Area Name NAICS

Based Code Meaning of NAICS

Based Code Year Number of Employees Annual

Payroll ($1,000) Production

Workers Average per Year Total Cost

of Materials ($1,000) Materials,

Parts, Containers, Packaging, etc. Used ($1,000) Cost of

Purchased Fuels ($1,000) Cost of

Purchased Electricity ($1,000) Total

Value of Shipments ($1,000)

United States 325 Chemical manufacturing 2008 780,127 50,766,204 448,790 396,684,686 322,593,772 17,055,845 9,898,041 751,029,562

United States 325 Chemical manufacturing 2007 803,904 50,643,442 465,557 362,244,062 297,388,193 14,368,287 8,908,756 724,080,627

United States 325211 Plastics material and resin manufacturing 2008 67,410 4,261,853 44,809 60,505,056 55,097,538 2,141,353 1,840,588 83,802,525

United States 325211 Plastics material and resin manufacturing 2007 70,514 4,360,808 47,312 57,459,312 52,197,817 2,000,583 1,637,878 85,069,731

United States 325311 Nitrogenous fertilizer manufacturing 2008 3,818 275,321 2,481 4,456,195 3,539,303 575,847 191,581 8,272,625

United States 325311 Nitrogenous fertilizer manufacturing 2007 3,997 269,249 2,709 3,465,718 2,724,769 455,402 193,225 6,157,614

United States 325510 Paint and coating manufacturing 2008 40,407 2,108,485 22,924 11,556,743 10,527,160 68,649 108,754 22,418,425

United States 325510 Paint and coating manufacturing 2007 42,021 2,193,104 23,876 12,177,643 11,090,399 70,723 110,149 23,636,807

United States 325920 Explosives manufacturing 2008 6,042 312,208 4,183 958,319 828,569 19,829 13,168 1,934,663

United States 325920 Explosives manufacturing 2007 6,532 321,152 4,348 857,000 728,615 16,530 12,316 1,745,029

Source: U.S

. Census Bureau . 2010. American Fact Finder. Sector 31: Annual Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 2008 and 2007

. http://factfinder.census.gov

. Ac cessed April 20, 2010.2

- 5

costs and dangers of moving the hazardous chemical can play a role in the supply side of the market. Nitric acid can be shipped via tanker truck, rail, and

, in fewer cases, barge.

More important than nitric acid transportation may be the transportation costs as sociated with the final products. Ammonium nitrate, the primary end product of nitric acid, can be particularly dangerous if not handled carefully. Suppliers are responsible for taking all necessary precautions to avoid mishaps and for complying with feder al regulations for shipping hazardous
materials.

2.2 Demand for Nitric Acid
Although some nitric acid is sold to outside customers, the majority of nitric acid is used by its producer s in the vertically integrated production of a wide range of chemical pro ducts. Roughly 90 % of nitric acid is manufactured for on

- site consumption within the facility, so the retail nitric acid market represents only 10 % of total nitric acid production (ICIS, 2008 a ). Because it is an intermediate good, the d emand for nitric acid is largely contingent on the demand for the end products for which it serves as an input. The total U.S. nitric acid demand in
2007 was 8.9 million tons

, and this was projected to grow to 10.1 million tons in 2011 (ICIS,
2008 a ).

2

. 2 .1 Nitric Acid Applications
Ammonium nitrate production represents the largest demand market for nitric acid, accounting for roughly 76 % of total U

. S

. demand in 2007 (ICIS 2008 a ). About 9 % of nitric acid
demand is for adipic acid, which is used for nylon 6,6 polymers and resins, polyester polyols for polyurethane resins, and other related fibers and resins (ICIS, 2007 ). Toluene di

- isocyanate (TDI) and nitrobenzene each account for 6 % of nitric acid de mand, with the remaining 3 % going toward metal nitrate and other miscellaneous applications.

Of ammonium nitrate produced from nitric acid , the majority (86 %) is used in the nitrogen

- based fertilizer industry, either as a direct fertilizer or in the produc tion of alloy

fertilizer blend s like urea ammonium nitrate (UAN) (ICIS, 2008 a ). The balance of the ammonium nitrate derived from nitric acid is used mainly for manufacturing explosives.

Because the majority of nitric acid is consumed b y ammonium nitrate producers, the demand for ammonium nitrate products, especially fertilizer, is the main driver of nitric acid demand. The dominance of ammonium nitrate demand is also reflected in the production and sales for the companies affected by th e rule, so the market discussion in this profile is focused on the fertilizer industry and, to a lesser extent, ammonium nitrate

- based explosives.2

- 6

2 .2.2 Influential Factors

Fertilizer
As noted in the previous section, the nitric acid market is driven chiefly by the demands of the fertilizer industry. In the United States, the agricultural industry consumes 80 % of the
country ’ s fertilizer demand (Richardson, 2010 a ). Within the agricultural demand side, corn production is the lar gest nitrogenous fertilizer consumer, followed by wheat, soybeans, and cotton (Richardson, 2010 ). Nurseries, golf courses, and landscaping projects are small

- scale fertilizer consumers (Richardson, 2010 a ).

The U.S. farm economy and income within the sector is the main force behind fertilizer
demand. U npredictable weather conditions are probably the most important determinant in fertilizer needs. In poor weather seasons, fertilizer demand declines as farmers reduce or abandon crop fields and pastures (Richardson, 2010 a ). Demand is also seasonal and increases during planting season. Global food demand also plays a role in determining the crop needs and
thus contributes to fertilizer needs. Food security is a concern for policy makers as the global population increases, and the demand for fertilizer may increas e in the coming years (IFA,
2009 ).

Explosives

Because industrial explosives are mainly used in the mining an d mineral industries, the
demand for coal and basic metals drive s the demand for these products (IBISWorld, 2009 ). Coal mining is the main use for industrial explosives in the U nited S tates , accounting for around two

thirds of explo sives consumption. Stone quarrying and construction are also industries that consume the blasting agents and oxidizers provided by the industry (IBISWorld, 2009 ). One key factor in maintaining the level of demand for explosive produ cts is the relative affordability of coal as a fuel source compared to its alternatives (IBISWorld, 2009 ).

Chemicals and Resins
Adipic acid and TDI are the other main chemical products in which nitric acid is used,
both of which ha ve a wide variety of applications and tend to follow gross domestic product ( GDP ) trends in terms of demand. Nylon 6,6 fibers and resins represent 84 % of adipic acid demand (ICIS, 2007 ). Although historically

, nylon 6,6 has been used mai nly in industrial carpeting, the demand for nylon 6,6 resins has been driven by automobile and truck parts as the industry has trended toward replacing metal parts with plastic. It is often used for exterior body pieces, internal components under the hood, and various mechanical parts (ICIS, 2007 ). The2

- 7

demand for automobiles and the growing acceptance of nylon as a viable replacement for metal is likely to influence market conditions.

TDI is used mainly in the production of flexible ureth ane foams, which are used across several industries. Transportation, furniture, carpet underlay, bedding, packaging, and other miscellaneous applications of the flexible foams make up 88 % of total TDI consumption in the
United States (ICIS, 2008b ). The remaining demand for TDI is used in the production of rigid urethane forms and polyurethane products like adhesives, sealants, coatings, and elastomers (ICIS, 2008b ). Demand for these products is expected to grow in the future (ICIS, 2008b ).

2.3 Market Characteristics
A review and description of market characteristics (i.e., geography, product differentiation, product transportation, entry barriers, and degree of concentration) can enhance
our underst anding of the mechanisms underlying the market for nitric acid and its end products. These characteristics provide indicators of a firm ’ s ability to influence market prices by varying the quantity of product it sells. For example, in markets with large num bers of sellers and identical products, firms are unlikely to be able to influence market prices via their production decisions (i.e., they are “ price takers ” ). However, in markets with few firms, significant barriers to entry (e.g., licenses, legal restri ctions, or high fixed costs), or products that are similar but can be differentiated, a firm may have some degree of market power (i.e., to set or significantly influence market prices). In addition, if a product is difficult to transport over long distanc es (because of weight or its hazardous nature), then the market size may be more restricted than one might expect, ceteris paribus

.
Nitric acid producers are mainly involved in the suppl ying nitrogenous fertilizer, industrial explosives, and specialty che micals and resins. Each of these markets has a set of distinct characteristics and is discussed individually below.

2 .3.1 Competition and Entry

Fertilizer
The environments in which the targeted companies participate are extremely competitive, driven mainly by the firms ’ ability to control production costs rather than differentiate their products. This is especially true in the fertilizer industry where companies have individual fertilizer solution formulas, but the basic chemical properties are consistent. Firms with larger production facilities have the advantage of using economies of scale to become low

- cost supplier s relative to their competitors (Richardson, 2010 a ). Comprehensive vertical integration2

- 8

of the entire production pro cess is another tool that larger firms, like Agrium, use to control costs (Richardson, 2010 a ).

Because fertilizer is generally treated as a commodity, prices are determined at a global level (Richardson, 2010 a ). Agrium, Koch, and CF Industries are among the dominant domestic forces in the fertilizer market, but in 2006, more than 60 % of nitrogen

- based fertilizer consumed
in the United States was purchased internationally (Richardson, 2010 a ). Not only do U.S. companies face steep domestic competition, they also must compete with foreign companies that might face lower fuel prices and production costs. With many firms vying for a global consumer base and selling nearly identical pro ducts, the nitrogenous fertilizer industry provides individual companies with very little market power.

In addition to the fierce market competition, other significant barriers to entry into the fertilizer industry exist . Initial capital expenses to purch ase fertilizer manufacturing equipment can be very high; building a nitrogenous fertilizer plant with a 1 million metric ton capacity can cost between $700 million and $1 billion and can take several years to construct (Richardson,
2010 a ). Maintaining ammonia and natural gas inputs is also costly and prevent s easy entry into
the market. Because the industry is dominated by a few global firms, nascent companies also must compete with established product identification and brand name s (Richardson, 2010 a ).

Explosives
As in the fertilizer industry, explosives products are essentially similar in their basic structure and content. Competition in this industry is based more on price than product differentiation (I BISWorld, 2009 ). However, recent years have seen an increase in the role of customer service and specializing explosives for customers as a means of competition (IBISWorld, 2009 ). Firms are gradually shifting away from providing basic commodity explosives and more toward becoming comprehensive demolition and blast solution providers (IBISWorld, 2009 ). Entry into the market is difficult because the market in the United States is
dominate d by two major companies with name recognition and ongoing customer relationships. The technical requirements, capital costs, and pricey raw materials essential to success in the industry also prohibit new companies from gaining market share (IBISWorld, 20 09 ).

Chemicals and Resins

Because of the wide range of chemical products derived from nitric acid

, the network of markets in which they are sold is extensive . Compared to fertilizer and explosives, there is also a greater degree of product differentiation between products like coatings and adhesives, so the market as a whole is likely to be less competitive than that of nitrogenous fertilizers.2

- 9

2 .3.2 Concentr

ation

Table 2

- 2 provides information about the concentration of sectors using nitric acid as an input. The most recent industry concentration data compiled by the Census Bureau ( U.S. Censu s Bureau , 2006 ) are based on Economic Census da ta from 2002. Thus, the data reflect conditions
in these sectors in 2002. As noted in the sector

- specific sections below, many of these sectors have recently become increasingly concentrated.

Table 2

- 2 shows the total number of companies in each sector po tentially affected by the rule and the total value of shipments for all companies in the sector. Next, it shows the percentage of sector value of shipments for the largest 4, 8, 20, and 50 companies. Finally, it provides the Herfindahl

- Herschman Index (HHI ) for the sectors. The HHI is a commonly accepted measure of market concentration. It is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. The HHI takes into
account the relative size and d istribution of the firms in a market and approaches zero when a market consists of a large number of firms of relatively equal size. The HHI increases both as the number of firms in the market decreases and as the disparity in size between those firms
incr eases. Markets in which the HHI is between 1,000 and 1,800 points are considered to be moderately concentrated, and those in which the HHI is in excess of 1,800 points are considered
to be concentrated. Two of the sectors in Table 2

- 2, nitrogenous fertiliz er manufacturing and explosives manufacturing, had HHI values between 900 and 1,000 (approaching moderate concentration values) in 2002.

Fertilizer

Alt hough many entities operate in the fertilizer and ammonia products industries, the market is dominated by the larger firms that can secure low

- cost raw materials and gain market share by pricing below their competitors. F our major firms have over 50 % of th e entire global
fertilizer market share (Richardson, 2010 a ). Recently, there has been even more of a trend toward increased concentration. Agrium submitted a $5.43 billion takeover bid for CF Industries but let the offer expire in early 2010 after CF Industries refused to engage in discussions (Agrium, 2010 ; Katz, 2010 ). CF I ndustries in turn acquired competitor Terra Industries in March
2010 after a bitter yearlong battle (Katz, 2010 ). With this move, CF Industries became one of the
world ’ s largest fertilizer producers and increased its customer diversity by acquiring Terra ’ s industrial customers (CF Industries, 2010 ).2-10 Table 2

- 2. Concentration Ratios for Sectors U sing Nitric Acid as an Input, 2002

NAICS Code Industry Description Total Companies Total Value of

Shipments ($1000), 2002 Percentage,

4 Largest Companies Percentage,

8 L argest Companies Percenta ge,

20 L argest Companies Percentage,

50 L argest Companies HHI

325 Chemical manufacturing 9,659 462,438,453 13.7 21.8 36.8 54.3 99.9

325211 Plastics material and resin manufacturing 445 46,846,851 32.4 45.8 67.9 87.8 442.5

325311 Nitrogenous fertilizer manufacturing 116 3,291,075 53.9 78.8 94.6 98.2 976.9

325510 Paint and coating manufacturing 1,149 19,917,828 37.3 54.5 69.9 78.6 505.0

325920 Explosives manufacturing 57 1,027,797 54.2 77.8 93.4 99.9 991.3

Source: http://www.census.gov/prod/ec02/ec0231sr1.pdf2

- 11

Explosives
The explosives manufacturing industry is highly concentrated around the two largest
manufacturers in the United States : Orica and Dyno Nobel ( IBISWorld, 2009 ). These two companies maintain ed 30 % and 40 % of the market share, respectively, through 2009 (IBISWorld, 2009 ). In recent years, the industry has witnessed further concentration as companies h ave engaged in acquisitions to reinforce their market positions (IBISWorld, 2009 ). Between 1998 and 2005, the number of active companies in the industry declined by 16 % (IBISWorld, 2009 ).

Chemicals and Resin s

M ultiple markets sell nitric acid

– based products, each with its own dynamics. For example, the market for adipic acid in the United States seems to be concentrated around INVISTA (owned by Koch) and Solutia (ICIS, 2007 ). Because of the diversity in adipic acid and TDI end products, there is less concentration of market power relative to the other two industries.

2.3.3 Price

- Responsiveness of Supply and Demand

EPA used elasticities of demand and supply estimated for use in its Multi

- Market Model to characterize the responsiveness of supply and demand to changes in price, in each affected
market. These elasticities are shown in Table 2

- 3.

Table 2

- 3. Market Price

- Elasticities of Suppl y and Demand

Sector NAICS Supply Demand
Nitrogenous fertilizer 3253 0.7

- 1.0

Other chemicals (nitric aci d) 3259 0.6

- 1.0

Plastics 3252 0.7

- 1.0
Explosives 3259 0. 6

- 1.0

2.4 Market Trends
This section provides an overview of conditions in the sectors that consume nitric acid as an input. The projected trends for these sectors will affect future demand for nitric acid.

2 .4.1 Derived Demand for Nitric Acid
Nitric acid is an intermediate good that is used in the production of fertilizers, explosives, pla stics and resins, and paints and coatings, among other products. Because it is an intermediate2

- 12

good, nitric acid is valued because it is needed to produce those products; thus, the demand for nitric acid is driven by the demand for the products it is used to produce. These, in turn, are generally intermediate goods, whose demand depends on the demand for the final products they are used to produce. For example, demand for fertilizers depends on the demand for agricultural products, the supply of other input s to agriculture, and the ability to substitute fertilizer for other inputs. Similarly, nitrate

- based explosives are used in mining (especially coal mining) and construction. The demand for explosives thus depends on the demand for coal and other minerals and the demand for new buildings and infrastructure.

2 .4.2 International Trade in the Sectors that Consume Nitric Acid

Table 2

- 4 presents historical data on exports for the four sectors that dominate demand for nitric acid. Export values were converted fro m current

- year dollars to 2009 dollars using the GDP deflator. Each of the sectors grew during the period 2005 through 2007. Beginning in 2008,
several of the sectors ’ exports contracted, and all of them fell from 2008 to 2009, reflecting the
contraction o f the world economy.

Table 2

- 4

. E xports of Sectors that Consume Nitric Acid (FAS Value, 10 3 $2009 )

Sector 2005 2006 2007 2008 2009 Percentage Change, 2008

– 2009

325211 Plastics and Resins 20,719,115 23,153,733 26,189,230 27,796,054 21,891,848 -21.2
325311 Fertilizer Mfg 1,900,234 2,080,653 2,126,120 2,087,632 1,820,042 -12.8
325510 Paint and Coating 460,977 520,502 543,554 535,996 487,616 -9.0
325920 Explosives Mfg 3,214,101 3,140,175 3,482,423 693,429 444,080 -36.0

Total 26,294,427 28,895,064 32,341,327 31,113,109 24,643,585 -20.8

Source: http://dataweb.usitc.gov/

.

Ta ble 2

- 5 pres ents historical data on these sectors ’ imports for consumption into the United States. In each sector, imports generally display an upward trend through 2007; imports of fertilizers, the major user of nitric acid, increased through 2008. In 2008, and even more in 2009, the imports of these com modities declined, reflecting the contraction of the U.S. economy.2

- 13

Table 2

- 5

. Imports for Consumption of Sectors that Consume Nitric Acid (Customs

Value, 10 3 $2009 )

Sector 2005 2006 2007 2008 2009 Percentage Change, 2008

– 2009

325211 Plastics and Resins 10,964,777 11,452,755 10,735,086 11,040,286 7,281,554 -34.0

325311 Fertilizer Mfg 4,829,611 4,348,070 5,739,289 8,120,624 3,264,581 -59.8

325510 Paint and Coating 796,634 898,904 923,868 850,706 589,295 -30.7

325920 Explosives Mfg 303,669 366,150 378,236 355,657 306,703 -13.8

Total 16,894,691 17,065,878 17,776,479 20,367,273 11,442,132 -43.8

Source: http://dataweb.usitc.gov/

.
2 .4.3 Industry Trends and Projections for Sectors Using Nitric Acid as an Input
Appendix A presents industry data and projections for four of the sectors that demand nitric acid as an input: 32521, Plastics and Resins Manufacturing; 32531, Fertilizer Manufacturing; 32551, Paint Manufacturing ; and 32592, Explosives Manufacturing, compiled by industry analysts IBISWorld (IBISWorld, 2009, 2010a and 2010b, and Richardson, 2010b ).

NAICS 32521, Plastics and Resins Manufacturing, is closely tied to the automo bile manufacturing and housing industries. During the period 2005 to 2010, these industries experienced volatility that was reflected in their demand for plastics (and thus, nitric acid). Nevertheless, IBISWorld (2010b ) projects gr owth in revenue of approximately 3% per year for the period 2010 to 2015.

NAICS 32531, Fertilizer Manufacturing, depends largely on crop production decisions and fertilizer prices. In the short run, IBISWorld (2010a ) notes that dem and levels are influenced by grain prices, weather patterns, world economic conditions, and international trade variables. In the longer term, population growth, living standards, and food consumption patterns also
influence demand. IBISWorld notes that in puts, specifically nitrogen and potash, are sourced internationally (60% of nitrogen and 88% of potash for fertilizer production are supplied by imports), so the strength of the U.S. dollar affects costs. In addition, approximately 30% of
domestic demand f

or fertilizer is met by imports. Although domestic and international economic conditions resulted in a reduction in output and revenue in 2009, both are expected to increase from 2010 through 2015.2

- 14

Demand for the coatings and paints covered under NAICS 325 51, Paint Manufacturing, is contingent on the demand for downstream products in the housing and automobile industries. Domestic demand dropped in 2008 and 2009 because of the downturn in the housing market and declines in automobile sales but is expected t o increase in 2010 and continue to grow through 2015 (Richardson, 2010b ).

NAICS 32592, Explosives Manufacturing, is projected to experience moderate growth. Demand for blasting agents (99% of explosives) is driven by demand levels for energy and minerals. Coal mining accounted for 66% of product consumption in 2007. Overall, IBI SWorld (2009 ) projects continued moderate growth (about 3% per year) over the 2010 to 2015 period.

2.4.4 Projected Production of Nitric Acid
To estimate the number of new sources that might be affected by the proposed rule, EPA proj ected production of nitric acid through 2016. Nitric acid production was estimated for 2006 (TSD for Greenhouse Gas Reporting Rule), using the production growth of 6.5% from 2006 to 2007 (ICIS). For the period 2007 through 2016, EPA used a predicted produc tion growth rate of 3% for 2007 through 2016 (ICIS). These estimates are shown in Table 2

- 6

. In the period from
201 0 to 2016, the growth was approximately 1.6 million tons of nitric acid.

Table 2

- 6

. Projected Nitric Acid Production

Year Nitric Acid Produc ed

Increase (tons)

M etric tons T ons

2006 6,446,767 7,107,560 461,991

2007 6,865,806 7,569,552 227,087

2008 7,071,781 7,796,638 233,899

2009 7,283,934 8,030,537 240,916

2010 7,502,452 8,271,453 248,144

2011 7,727,526 8,519,597 255,588

2012 7,959,351 8,775,185 263,256

2013 8,198,132 9,038,441 271,153

2014 8,444,076 9,309,594 279,288

2015 8,697,398 9,588,882 287,666

2016 8,958,320 9,876,548

—
201 0

– 2016 1,605,0952

- 15

2.5 Overview of Businesses Potentially Affected by the Rule
The proposed regulation may affect up to 40 nitric acid facilities owned by 18 different parent companies. Table 2

- 7 lists the parent companies with facilities potentially covered under the rule and summarizes the nitric acid products that may be affected by the rule

. In addition to producing nitric acid, the affected facilities and firms produce a variety of products using nitric
acid.

To give the reader a better understanding of the specific characteristics that define each of
the potentially affected ent ities, the following section gives a brief overview of each parent

company.

2. 5 .1 Parent Companies

Agrium (3 facilities)
Agrium produces and markets a range of potash

- , phosphate

- , and nitrogen

- based fertilizer products. In addition to the seven major ni trogen facilities worldwide, Agrium also
operates five facilities in North America that upgrade ammonia to fertilizer products

, including urea, nitric acid, and ammonium nitrate. Agrium ’ s output serves a customer base that is roughly
75 % agricultural and 2 5 % industrial.

Air Products and Chemicals (1 facility)
Air Products and Chemicals produce s an extensive range of chemical products

, including gases, equipment, and performance materials for a variety of industries. At its Pasadena, Texas

, facility, Air Pro ducts and Chemicals uses nitric acid to produce dinitrotoluene (DNT), which is
converted to toluene diamine and sold to industrial customers as an intermediate for polyurethane products.

Apache Nitrogen (1 facility)
Apache Nitrogen is a small firm producin g nitric acid and ammonium nitrate

– based products for agricultural, mining, and industrial customers

. CF Industries (4 facilities)
After the acquisition of Terra Industries in 2010, CF Industries became one of the largest fertilizer companies in the world. CF produces nitrogen fertilizers, phosphate products, and custom fertilizer solutions. The company manufactures 900,000 tons of nitric acid annually

, mainly for internal ammonium nitrate production.2-16 Tabl e 2

- 7

. Parent Companies with Facilities Potentially Covered Under the Rule

Parent Company Number of Affected Facilities Small

Business Sells Nitric

Acid as an End Product Nitrogenous

Fertilizer (Uses Nitric Acid as Intermediate) Ammonia

(Industrial Grade , for Market, for Internal Use ) Explosives

(Uses Nitric Acid as Intermediate) Polyurethane

Intermediates, Polymers, Nylon Fibers, Coatings, Resins, and Other
Agrium 3 No x
Air Products and Chemicals, Inc. 1 No x Apache Nitrogen 1 Yes x x x x

CF Industries 4 No x x x

Incitec Pivot Ltd

. 1 No x x x x CVR Energy 1 No x x

DuPont 1 No x

LSB Industries 2 No x J.R. Simplot 1 No x x

Koch Industries 3 No x x x Potash Corp

. 2 No x
Rentech, Inc

. 1 Yes x x x

Solutia Inc

. 1 No x TradeMark Nitrogen 1 Yes x

Total 232

- 17

CVR Energy (1 facility : Coffeyville Resources)

CVR Energy produces nitrogen

- based fertilizers at its Coffeyville Resources facility. Instead of natural gas, the facility uses petroleum coke from its adjacent petroleum refining plant to produce ammonia products.

DuPont ( 1 facility )

DuPont is another well

- known ch emical conglomerate with operations worldwide. At its U.S. facilities affected by the rule, DuPont manufactures a variety of polymer, aniline, and specialty chemical products. It also produces agricultural seed at its Victoria location.

Incitec Pivot

, Ltd. ( 1 facility )
Incitec Pivot Ltd. acquired Dyno Nobel in June 2008. Dyno Nobel offers a range of explosives products and blasting solutions and is the largest explosives company in the United
States . Incitec Pivot is an Australian

- based fertilizer company.

J.R. Simplot (1 facility )
J.R. Simplot is one of the largest privately held companies in the United States. In addition to sell varying grades of nitric acid, the company also manufactures fertilizers, turf, and a variety of other products.

Koch Industri es ( 3 facilities)
As one of the largest private companies in the world, Koch Industries offers a range of
services

, including commodity trading, ranching, refining, polymers, and fertilizers. In 2004, Koch acquired INVISTA, which is a leading producer in n ylon fibers and adipic acid. Through Koch Fertilizers, LLC, the company operates a number of nitrogenous fertilizer facilities throughout the central United States.

LSB Industries ( 2 facilities: El Dorado Nitrogen/El Dorado Chemical)

LSB Industries is an O klahoma City

– based company providing customers with agricultural products, industrial chemicals, and explosives. Through its El Dorado Nitrogen subsidiary, LSB is the largest domestic merchant supplier of nitric acid.

PotashCorp ( 2 facilities)
PotashCorp is a major player in all areas of agricultural fertilizer production. At its nitrogenous fertilizer plants, the company produces ammonia, nitric acid, urea

, and other agricultural solutions.2

- 18

Rentech, Inc. (1 facility : Rentech Energy Midwest Corporation)
Rentech produces nitrogen products

, including anhydrous ammonia, ammonium nitrate, urea solutions, and nitric acid. It currently uses natural gas as a feedstock but is considering the transition to coal gasification. Rentech sells the majority of its produ cts to customers within 150 miles of the facility.

Solutia (1 facility)

Solutia ’ s primary business is specialty chemicals and it conducts business across the globe. Solutia produces window coatings and films at its Martinsville plant.

Trademark Nitrogen (1 facility)
Trademark Nitrogen is a small Florida company that manufactures nitrogen

- based fertilizer products.

2

. 5 .2 Parent Company Sales and Employment
To supplement the qualitative company profiles in the previous section, Table 2

- 8 displays annual revenue and employment data for each of the parent companies. This data is the most recent we are able to obtain for each parent company. The data reflect annual revenue and employment for either 2009 or 2010. Firms producing plastics and resins (NAICS 325 211) are classified as small by the Small Business Administration (SBA, 2008 ) if they have fewer than 750 employees. Firms producing nitrogenous fertilizers (NAICS 325311) are considered small if they have fewer than 1,000 employees. Firm s producing paints and coatings (NAICS 325510) are considered small if they have fewer than 500 employees. Based on these criteria and the data presented in Table 2

- 8

, three firms producing nitric acid are classified as small businesses.2-19 Table 2

- 8

. Annual Revenue and Employment Data for Each of the Parent Companies

Facility Name State Parent Company Headquarters Parent Company
Sales (millions $) Employees Agrium US WA Agrium Canada 9,129.00 10,000 Agrium US OH Agrium Canada 9,129.00 10,000 Agrium US CA Agrium Canada 9,129.00 10,000
Air Products TX Air Products and Chemicals, Inc. United States 8,256.20 18,900 Apache Nitrogen Products AZ Apache Nitrogen United States 31.70 82 CF Industries LA CF Industries United States 2,608.40 1,500
CF Industries OK CF Industries United States 2,608.40 1,500
CF Industries MS CF Industries United States 2,608.40 1,500
CF Industries IA CF Industries United States 2,608.40 1,500 Coffeyville Resources KS CVR Energy United States 3,136.30 667 Dyno Nobel WY Incitec Pivot Ltd Australia 3,418.90 4,500 El Dorado Nitrogen TX LSB Industries United States 531.84 1,179 El Dorado Nitrogen AR LSB Industries United States 531.84 1,179
First Chemical MS DuPont United States 26,109.00 60,000 Geneva Nitrogen UT Geneva Nitrogen United States 5,400,000 32
INVISTA TX Koch Industries United States 100,000.00 80,000
INVISTA TX Koch Industries United States 100,000.00 80,000 JR Simplot CA J.R. Simplot United States 4,500.00 10,000 Koch Nitrogen IA Koch Industries United States 100,000.00 80,000 PCS Nitrogen GA Potash Corp Canada 3,976.70 5,136 PCS Nitrogen LA Potash Corp Canada 3,976.70 5,136 Rentech Energy Midwest Corporation IL Rentech, Inc United States 183.00 250
Solutia FL Solutia Inc United States 1,667.00 3,400 TradeMark Nitrogen FL TradeMark Nitrogen United States NA NA

NA = no information available

.2

- 20

2.6 References for Section 2 Agrium, Inc. 2010. 2009 Annual Report. http://www.agrium.com/investors/2009_annual_report.jsp

.
CF Industries. 2010. Profile: History. CF Industries

. http://www.cfindustries.com/profile_history.html

.
CVR

. 2009. CVR Energy Nitrogen Fertilizer Operations. CVR Energy Website. 2009. http://www.cvrenergy.com/NitrogenFertilizerOperations/index.html

. Dai, R. June 2010. IBISWorld Industry Report 32521. Plastic, Resin, & Rubber Manufa cturing in the US. http://www.ibisworld.com

.
Dow Chemi cal Company . 2008

. Product Safety Assessment: Nitric Acid. Accessed April 21, 2010. http://www.dow.com/Publish edLiterature/dh_0131/0901b80380131028.pdf?filepath=pro ductsafety/pdfs/noreg/233

- 00312.pdf&fromPage=GetDoc

. European Fertil izer Manufacturers’ Association ( EFMA ). 2000. “ European Fertilizer Manufacturers ’ Association. ” Best Available Techniques for Pollutio n Prevention and Control in the European Fertilizer Industry: Production of Nitric Acid, Booklet No. 2 of 8

. Accessed April 26, 2010. http://www.efma.org/PRODUCT%2 0STEWARDSHIP%20PROGRAM%2008/images/E FMABATNIT.pdf

. Huang, W

- Y. 2007a. Impact of Rising Natural Gas Prices on U.S. Ammonia Supply/WRS

- 0702

. U.S. Department of Agriculture, Economic Research Service. http://www.ers.usda.gov/publications/WRS0702/wrs0702.pdf

. Huang, W

- Y. 2007b. “ Influence of Natural Gas Price on the Ammonia price, 2000 to 2006. ” Paper presented at annual meetings of the Southern Agricultural Economics Association, Mobil e , AL . February 3

- 6. http://ageconsearch.umn.edu/bitstream/34929/1/sp07hu05.pdf

.
IBISWorld. 2009. “Explosives Manufacturing in the U.S.: 32592.” http://www.ibisworld.com.www.lib.ncsu.edu:2048/industryus/default.aspx?indid=502

.
IBISWorld. 20 10a

. “Fertilizer Manufacturing in the U.S.: 32531.” http://www.ibisworld.com.www.lib.ncsu.edu:2048/industryus/default.aspx?indid=502

.
IBISWorld. 2010b

. “Plastic, Resin, and Rubber Manufacturing in the U.S.: 32521.” http://www.ibisworld.com.www.lib.ncsu.edu:2048/industryus/default.aspx?indid=502

.
ICIS

. 2007. “ Adipic Acid. ” ICIS Chemical Business Online. http://www.icis.com/Articles/2007/07/06/4503569/Adipic

- acid.html

.
ICIS

. 2008a. “ Chemical Profile: Nitric Acid. ” ICIE Chemical Business Online. http://www.ici s.com/Articles/2008/05/19/9124327/chemical

- profile

- nitric

- acid.html

.2

- 21

ICIS

. 2008b. “ Chemical Profile: Toluene Di

- isocyanate. ” ICIS Chemical Business Online. http://www.icis.com/Articles/2008/04/07/9113516/Chemical

- profile

- Toluene

- di

isocyanate.html

.
International Fertilizer Assoc i ation ( IFA ). December 2009. Short

- Term Fertilizer Outlook 2009

- 2010 . Prepared by Patrick Heffer and Michel Prud ’ homme. http://www.fertilizer.org/ifa/Home

- Page/FERTILIZERS

- THE

- INDUSTRY/Market

outlooks.html

.

Katz . J. April 15, 2010. “ IW 50 Best: CF Industries and Terra Together At Last.” Indu stryweek.com

. http://www.industryweek.com/articles/iw_50_best_cf_industries_and_terra_together_at_l ast_21609. aspx

. Natural Gas Supply Association (NGSA). 2004. “Marketing.” NaturalGas.org. Accessed June 29, 2010. http://www.naturalgas.org/naturalgas/marketing.asp

. PotashCorp

. 2010. 2009 Financial Re view Annual Report. http://www.potashcorp.com/media/POT_2009_AR_Financial_Review.pdf

.
REMC

. 2010. Ren tech Energy Midwest Corporation

. http://www.rentechinc.com/remc.php

. Richardson, A. September 2009. IBISWorld Industry Report 32592. Explosives Manufacturing in the US. http://www.ibisworld.com

. Richardson, A. 2010 a . IBISWorld Industry Report 3 2531: Fertilizer Manufacturing in the U.S

. http://www.ibisworld.com.www.lib.ncsu.edu:2048/industryus/default.aspx?indid=480

. Richardson, A. 2010b. IBISWorld Indu stry Report 32551: Paint Manufacturing in the U.S. http://www.ibisworld.com.www.lib.ncsu.edu:2048/industryus/default.aspx?indid=492

. U.S. Census Bureau. May 2006. Concentration Ratios: 2002. http://www.census.gov/prod/ec02/ec0231sr1.pdf

.
U.S

. Census Bureau . 2010. American Fact Finder. Sector 31: Annual Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 2008 and 2007 . A ccessed April 20, 2010.

U.S. Interna tional Trade Commission. 2010. http://dataweb.usitc.gov/

.
U.S. Small Business Administration. November 5, 2010 . Table of Small Business Size Standards Matched to North American Industry Classification Codes. http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf

.3

- 1 SECTION 3
ENGINEERING COST ANA LYSIS

This sectio n presents EPA ’ s estimated cost impacts for new , modified, and reconstructed

sources to comply with a standard of 0.5 b NO X /ton nitric acid.

To gather data for the cost estimation, EPA issued an Information Collection Request (ICR) under Section 114 authority to obtain NO X emissions data using EPA Methods 7, 7A, 7B, 7C, 7D, 7E (modified version), or 320. The ICR also collected cost data for NO X abatement technologies, including nonselective catalytic reduction (NSCR), selective catalytic reduction (SC R), and hydrogen peroxide ( H 2 O 2 ) injection

. Cost data w ere received from 9 facilities with a total of 12 nitric acid production trains. This information was summarized in Summary of Cost Data Received from Section 114 ICR (NO X Summary) dated November 22, 2 010

. The capital recovery factor was based on 7% interest and a 15

- year useful life.

The NO X Summary memo contained production data ranging from 40 tons per day (tpd) to 1,600 tpd of nitric acid. The data support the use of two model plants to represent th e nitric acid production industry. The first model plant is 300 tpd

, and the second model plant is 1,000 tpd. In the NO X Summary memo, the cost data were normalized based on the production rate at the facility (cost per ton of nitric acid produced). Table 3

- 1 shows the results of the cost data analysis for NO X control.

Table 3

- 1. N ormalized NO X Control Costs by Model Plant

Control 300 tpd ($/ton) 1,000 tpd ($/ton)

NSCR $ 20.02 $ 7.80
SCR $ 3.93 $ 1.10
H 2 O 2 $ 2.06 $ 1.36

As described in Section 2, EPA projected growth in nitric acid production for the period
201 1 through 2016 to be approximately 1.6 million tons. Assuming 350 days per year, this equals approximately 4,586 tpd of nitric acid production during the period

. Us ing the model plants, the estimate of 4,586 tpd corresponds to two production trains that produce 300 tpd and
four production trains that produce 1,000 tpd over the 5

- year period after promulgation.

For the six new production trains predicted from 2011 to 2016, the annualized costs of controlling NO X emissions for the three types of control equipment outlined in The NO X3

- 2

Summary were calculated using the costs in Table 3

- 1. The control costs are shown in Table 3

- 2

. These are the costs for each of the control devices in the fifth year after promulgation of these
standards.

Table 3

- 2

. NO X Control Costs for All New Production Trains in 2016

Model Plant (tpd) Number of Plants Nitric Acid (tons) NSCR SCR H 2 O 2
300 2 210,000 $4,204,200 $825,300 $432,600

1,000 4 1,400,000 $10,920,000 $1,540,000 $1,904,000

The production trains could use any of the three control types to control NO X emissions,
as shown by the control efficiencies in Table 3

- 3 , but in estimating cost impacts, EPA assumed that SCR would be universally applied. Although hydrogen peroxide injection has the lowest potential costs, this control may not be feasible for all new production trains

.
Table 3

- 3

. NO X Control Efficiencies

Control Efficiency

NSCR 99 %

SCR 98 %

H 2 O 2 95 %

3.1 Emission Limit of 0.5 lb NO X /ton
Using the control efficiency for SCR, the potential NO X emission reductions were
calculated in Table 3

- 4

. The baseline emissions were calculated as 3.0 lb NO X /ton acid produced (the level of the existing NSPS). The controlled emissions were calculated as 0.5 lb NO X /ton acid produced (the recommended proposed level for the revised NSPS)

.
The last step in calculating impacts for affected sources to meet the revised standard of
0.5 lb NO X

/ton acid is to calculate the costs and reductions per year over the 5

- year period after promulgation. In addition to control equipment, each new production train will also be required to install a stack gas flow monitor. The annualized cost of a stack gas flow monito r is $15,019 for the second quarter of 2010. The requirement of a NO X Continuous Emissions Monitoring System (CEMS) was included in the existing NSPS, so its cost is not included in this analysis.3

- 3

Table 3

- 4

. NO X Emission Reductions for All New Production T rains with SCR Control in

2016

Model Plant (tpd) Days per

year Number

of Plants Nitric

Acid (t ons ) Baseline

NO X (lb/ton) Controlled

NO X (lb/ton acid) Controlled

NO X Emissions (t ons ) NO X

Emission reductions (t ons )

300 350 2 210,000 3

. 0 0.6 63 252

1,000 350 4 1,400,000 3

. 0 0.6 420 1,6 80

SCR is already being employed to control NO X emissions to the current NSPS level of
3.0 lb NO X

/ton acid. As shown in Summary of Test Data Received from Section 114 ICR , dated August 25, 2010 , there are five production trains using SCR that already meet the pr oposed
revised NSPS level of 0.5 lb NO X /ton acid. The control device costs are based on current usage where sources are only required to meet 3.0 lb NO X /ton. Sources are not likely to spend
additional mo ney to meet a limit of 0.5 lb NO X /ton acid that is not mandatory. Therefore, we
believe that the lower limit is achievable without incremental cost impacts.

Accordingly, EPA projects no incremental control costs to control NO X emissions from
the current NS PS limit of 3.0 lb NO X /ton acid t o the proposed NSPS limit of 0.5 lb NO X /ton
acid. The costs of adding stack flow monitors in the fifth year after promulgation are shown in
Table 3

- 5

.
Table 3

- 5

. Incremental Costs in the Fifth Year after Promulgation for All New

Production Trains

Model Plant (tpd) Number of

Plants $2010

— 2 nd Q uarter

SCR Cost Stack Flow Monitor Cost Total Annualized Costs

300 2 $ 0 $ 30,038 $ 30,038
1,000 4 $ 0 $ 60,076 $ 60,076

Using the total costs of SCR costs and monitoring costs, the cost

- effectiveness was also
calculated. These numbers are shown in Table 3

- 6

.
For the 300 tpd model plant, national total annualized costs in the fifth year after promulgation are $ 30,038

. The amount of NO X reductions expected in the fifth year after promulgation is 252 tpy. This results in a cost

- effectiveness of approximately $ 120.3

- 4

Table 3

- 6

. Incremental Cost Effectiveness in the Fifth Year after Promulgation for All

New Production Trains

Model Plant (tpd) Number of

Plants Total Annualize d Costs

($2010

— 2 nd quarter) NO X Emission R eductions (tpy) Cost

- E ffectiveness ($/ton NO X )

300 2 $ 30,038 252 $ 119.20
1,000 4 $ 60,076 1,680 $ 35.76

For the 1,0 00 tpd model plant, national total annualized costs in the fifth year after promulgation are $ 60 ,0 76

. The amount of NO X reductions expected in the fifth year after promulgation is 1,680 tpy. This results in a cost

- effectiveness of approximately $ 36 /ton of NOx
reduced

.

3.2 References for Section 3

CEMS Cost Model. Updated March 2007. Accessed Novembe r 17, 2010.

Memorandum from M. Icenhour, RTI International, to B. Neuffer, EPA. Summary of Cost Data Received from Section 114 ICR

. November 22 , 2010.

Memorandum from M. Icenhour, RTI International, to B. Neuffer, EPA. Summary of Test Data Received from Section 114 ICR

. August 2 5 , 2010.

U. S. EPA. January 22, 2009

. Technical Support Document for the Nitric Acid Production Sector: Proposed Rule for Mandatory Reporting of Greenhouse Gases

. http://www.epa.gov/climatechange/emissions/archived/downloads/tsd/TSD%20Nitric%2 0Acid%20_EPA%201

- 22

- 09.pdf

.4

- 1 SECTION 4
ECONOMIC IMPACTS ON NEW SOURCES IN THE NITRIC ACID I NDUSTRY

The propo sed rule will increase the cost of investing in new nitric acid production capacity, which in turn will increase the cost of producing nitric acid. As noted above, only a small share of nitric acid is sold (approximately 10 % ); the rest is consumed on site to produce other chemical products, including fertilizer, plastics and resins, and explosives. Thus, the proposed nitric acid NSPS may result in market impacts in the market for nitric acid or in the markets for the other products that nit ric acid is used to produce.

4.1 Modeling Approach to Estimating the Impacts on the Market for Nitric Acid

EPA ’ s analysis of impacts on the market for nitric acid employs a model that recognizes that the decision facing a firm considering investing in new nitric acid production capacity is an investment decision. Investment decisions differ from operating decisions in that they involve whether the firm should put in place new plant and equipment. The investment decision is thus a long

- run decision, since th e time frame is sufficiently long that all inputs, including capital, can be varied. A firm will invest in new capital only if the current and future expected market price is sufficient to cover both the cost of operating the new capital and the annualized cost of purchasing and installing it.

To analyze the possible impacts of the proposed NSPS on the market for nitric acid, EPA assumes that existing nitric acid production lines are operating more or less at capacity, and the market for nitric acid begins the period of analysis (2011 through 2016) in long

- run equilibrium. Figure 4

- 1 shows the market for nitric acid in 2010; demand is shown by D 1 , and is downward sloping. Equilibrium quantity is shown by Q 1 and equilibrium market price is shown by P 1

.

Howeve r, as demand for nitric acid grows over time, the market price increases. Existing producers would like to produce more nitric acid to meet this demand but are unable to do so, given their plant capacity. Thus, new product lines must be installed to meet t he increased demand. Producers will be willing to invest in new nitric acid production capacity as long as the price of nitric acid is sufficient to cover the per

- ton cost of operating the product lines plus the

per

- ton annualized cost of purchasing and in stalling the equipment. Figure 4

- 2 shows a long

- run supply curve for nitric acid. Existing suppliers produce Q e ; new suppliers face a per

- ton cost (average total cost) that includes both the average variable cost of producing the nitric acid (a)
and the av erage fixed cost of purchasing and installing the new capital equipment (f), for an average total cost of t , and produce Qn

.4

- 2

Figure 4

- 1. 2010 Market for Nitric Acid

Figure 4

- 2. Market Supply of Nitric Acid, including New Source

Figure 4

- 3 shows the baseline market conditions in 2016. In 2016, demand for nitric acid
has increased to D2. In the new market equilibrium, Q1 would be produced by existing suppliers, and Q2

- Q1 would be produced by newly installed nitric acid product line s. $ / ton

Tons nitric acid D 1

Q 1 P 1 S 14

- 3

Figure 4

- 3

. Increased Demand for Nitric Acid at Baseline

The revised nitric acid NSPS standard will increase the cost of producing nitric acid, resulting in an upward shift in the supply curve for new facilities in the amount of the per

- ton
costs of compliance . S 3 in Figure 4

- 4 shows the with

- regulation supply. Note that in this figure, D1 has been omitted for simplicity. As a result of the new higher costs, the equilibrium quantity of nitric acid is projected to decline slightly from Q2 to Q3

.4

- 4

Figure 4

- 4. Market for Nitric Acid, With Proposed NSPS

4.2 Possible Impacts on Market for Nitric Acid
To implement the modeling approach described above, EPA gathered information on the estimated market quantity and market price for nitric acid. Over the period 2011 through 2016,
EPA projects that nitric acid production will increase by 1.6 million. Historically, approximately 10% of nitric acid production has been marketed, with the remaining 90% used in house to produce other commodities. For simplicity, EPA modeled the impacts in the market for nitric acid under the assumption that one of the 300 tpd (105,000 t py ) product lines is a new commercial facility. This is a simplification, because not all marketed nitric acid is produced in exclusively commerci al facilities. We thus assign ed the per

- facility cost ($15,019) to this new facility and compute d the per

- ton increase in their cost of approximately $0.14 per ton. The social cost of the proposed rule was computed as the costs borne by producers of nitric acid and the costs borne by consumers of nitric acid. These are shown by areas labeled A, B, and C in Figure 4

- 4. The costs borne by producers include the compliance costs paid on the (remaining) quantity produced by new sources (Area A), and the producti on cost savings due to the reduction in output (

- area B

— a cost savings). The costs facing consumers include the loss in consumption (areas B plus C) due to the reduction in equilibrium market quantity. Summing these areas, the social cost of the propose d rule = A

– B + B + C, or A + C.4

- 5

Table 4

- 1 shows the market impacts and estimated social costs for this scenario. The
baseline quantity of nitric acid sold is approximately 932,000 tons, including 105,000 tons produced by a new product line. With the pro posed rule, the market price increases by approximately $0.14 per ton or about 0.07% , and the market quantity declines. After the market has adjusted to these increased costs, the equilibrium output falls by approximately 600 tons or 0.6% ; thus, the new facility produces not 105,000 tons but 104,400 tons.

Table 4

- 1. Market Impacts of the Proposed Rule: Market for Nitric Acid

Baseline With

Regulation Percent age

Change
Quantity (tons) 932,145 931,539

- 0.07%
Existing producers 827,145 827,145 0.00%
New producers 105,000 104,394

- 0.58%
Price ($/ton) $220.00 $220.14 0.07%

Social cost
Change in producers ’ surplus $ 118,398
Change in consumers ’ surplus

- $133,373

Total social cost

- $14,975

The engineering cost of the rule (assuming one new commercial production train is affected) is $15,019; taking into account market adjustments, the social cost of the rule is estimated to be $14,975 , about 0.3% less than the engineering cost

.
4.3 Estimated Impacts on Markets for Products Using Nitric Acid as an Input
Next, EPA estimated the economic impacts on three markets that use nitric acid as a production input: nitrogenous fertilizer, explosives, and plastics and resins. If producers in these sectors invest in new nitric acid product lines or purchase nitric acid from commercial suppliers that invest in new nitric acid product lines , the cost s of complying with the proposed NSPS would increase the cost of producing the final products that use nitric acid as an input. In each of these markets, EPA estimated the economic impacts using industry

- level data for value of shipm ents at baseline. EPA used this dollar value to represent baseline market quantity and assigned a normalized price of $1. The impacts are thus measured against the baseline of domestic value of shipments in each market with no change in international trade in the final4

- 6

goods. This is a simplification, but because the costs and thus the estimated impacts are very small, it is not unrealistic.

To assess th e maximum potential impact in each market, EPA assign ed all the compliance costs to each of the markets (reflecting the possibility that all the new sources may be supplying nitric acid to that industry). Using the demand and supply elasticities for these
markets show n previously in Table 2

- 3, EPA then estimated the percentage change in market output in each market and computed the associated change in market quantity.

Table 4

- 2 shows the market impacts and estimated social costs in the markets for each of
these nitric acid

– using products. Even assuming that all the affected new sources are within a given sector and thus all the costs are incurred by that sector, market quantity is estimated to change by a small fraction of a percentage. Thus, if the costs of complying with the proposed NSPS are incurred by new nitric acid product lines in the sectors that use nitric acid as an input, there will be extremely small impacts on the markets for their products , even if all the costs are assumed to be incurred by a single sector

.
Table 4

- 2. Estimated Impacts of Nitric Acid NSPS on Sectors Using Nitric Acid as an

Input a

Nitrogenous Fertilizer Production ( 325311 ) Explosives ( 325920 ) Plastics and Resins ( 325211 )
Market impact analysis

Baseline value of shipments ($10 3 ) $8,437,377 $1, 973,192 $85,471,475
Cost of compliance ($10 3 ) $ 90.114 $ 90.114 $ 90.114

Percent age change in value of shipments - 0.000 46 % 0.00 171 % 0.0000 4 %

Social cost
Change in consumers’ surplus ($10 3 ) - $38.531

- $3 3.660

- $38. 083

Change in producers’ surplus ($10 3 )

- $51.583

- $ 56.452

- $ 52.031
Change in total surplus ($10 3 )

- $90.113 4

- $90.111 8

- $90.1139

a Impacts on each sector are estimated assuming that all the new sources are within that sector and thus all compliance costs are incurred by that sector.4

- 7

4.5 Impacts on Small Entities of the NSPS Review of Nitric Acid for NO X on New Sources
Under the RFA as amended by SBREFA, EPA must evaluate potential impacts to small entities resulting from its actions. Small entities may be defi ned as (1) a small business, as defined by SBA ’ s regulations at 13 CFR Part 121.201 (SBA, 2008 ); (2) a small governmental jurisdiction that is a government of a city, county, town, school district, or special district with a population of less than 50,000; or (3) a small organization that is any not

- for

- profit enterprise that is independently owned and operated and is not dominant in its field.

EPA assessed the possible impacts of the NSPS Review of N itric A cid controls for NO X on small entities with n ew sources of production . To analyze the economic impacts on small
entities with new sources, EPA first gathered data on f acilities producing nitric acid and then identified those facilities that could be affected by the proposed r egulation. In total, EPA
identified 40 nitric acid facilities owned by 18 different parent companies

. Of the 18 owner firms, four qualif

y as small entities based on guidance from the SBA and EPA ’ s 2006 Final SBREFA Guidance (EPA, 2006 ) an d sales/revenue data collected. Three of the entities, Apache Nitrogen

, TradeMark Nitrogen , and Rentech Energy Midwest Corporation , are manufacturers of nitrogen

- based fertilizers (NAICS 32531)

, and the fourth entity, Geneva Nitrogen, engage s in
manufactur ing explosives (NAICS 32592)

. According to the SBA’s small business size standards, a small entity in each of these industries is a parent company with 1,000 employees or
less.

To measure the size of the potential impacts on small entities of complying wit h the NSPS, EPA developed cost

- to

- sales ratios (CSR s) for a 300 tpd and 1 ,000 tpd new source model plant. EPA assumes that the model plants ’ operating costs and r evenues are similar to the four existing small entities described above. Using the estimated t otal annualized compliance cost for a new source model plant and the most recent available revenue data for the existing small entities (Table 4

- 3 )

, EPA generated mean and median CSR s.4

- 8

Table 4

- 3

. Employment and Revenue of Existing Small Entities

Parent Company Employment Revenue ($2010)
Apache Nitrogen 82 $ 63,580,000
Geneva Nitrogen 32 $ 5,400,000
TradeMark Nitrogen 32 $ 35,000,000

Rentech 252 $ 130,600,000

Based on the model small firm CSR s, expected impacts to small entities are characterized
in Table 4

- 4

. C SR s for both plants are identical, because total annualized compliance costs are the same, and do not exceed 0. 1 %. Based on these low expected impacts to small entities

, EPA
does not ex pect the proposed NSPS to have a significant impact on a substantial number of small
entities (SISNOSE) owning new , modified, or reconstructed sources that produce nitric acid

.
Table 4

- 4

. Cost

- to

- Sales Ratios for Model Small Firms Owning New 300 tpd and 1 , 000

tpd Plants

Summary Statistic Employment Revenue ($2010) Cost

- to

- Sales Ratio
300 tpd Plant 1 , 000 tpd Plant

Mean small entity d ata 100 $ 58,645,000 0.0 3 % 0.0 3 %

Median small entit y data 57 $ 49,290,000 0.0 3 % 0.0 3 %

4.6 References for Section 4

U.S. Environmental Protection Agency (EPA). 2006. “ Final Guidance for EPA Rulewriters: Regulatory Flexibility Act as amended by the Small Business Regulatory Enforcement Fairness Act. ” http://www.epa.gov/sbrefa/documents/rfaguidance11

- 00

- 06.pdf

U.S. Small Busin ess Administration. November 5, 2010

. “ Table of Small Business Size Standards Matched to North American Industry Classification System Codes. ” http://www.sba. gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf5

- 1 SECTION 5
CONCLUSIONS

This document has analyzed the economic impacts of the proposed New Source Performance Standards for Nitric Acid Producers. The proposed rule imposes mor e stringent
limits on NO X emissions from new , modified, or reconstructed sources in the nitric acid indu stry.

EPA estimates that there will be six new nitric acid production trains during the years following promulgation (2011 through 2016), two with production capacity of 300 tpd and four with production capacity of 1

, 000 tpd. To comply with the proposed NSPS, EP A estimates that new sources would not incur incremental control costs, but new sources would be required to undertake enhanced monitoring, recordkeeping, and reporting at a cost of $15,019 per new product line. (National total annualized cost of complianc e for the six new sources is estimated to be $90,114

. )

EPA examined the potential impacts of the proposed NSPS on a new source in the commercial nitric acid sector and on new sources owned by facilities that produce nitrogenous fertilizers, explosives, or plastics and use nitric acid as an input in their production processes. Overall, EPA estimates that market impacts in all of the markets will be extremely small.

EPA also examined the potential for significant impacts on small businesses that invest in

ne w nitric acid product lines. EPA used the characteristics (firm employment and firm sales revenues) for the four small entities that currently produce nitric acid to create model small firms in the affected industry. Using the mean and median sales revenue s for the existing small firms as typical company sales for small entities that produce nitric acid, EPA estimates that the CSR s would be less than 0.1%. Thus, EPA does not expect the proposed NSPS to impose a significant impact on a substantial number of small entities (or SISNOSE)

.APPENDIX A:
INDUSTRY DATA AND PR OJECTIONS FOR NAICS 32521A-1 Table A

- 1. Industry Data and Projections for NAICS 32521, Plastic, Resin, and Rubber Manufacturing ($2010)

Year Revenue

($m) In dustry

Value Added ($m) Establish

ments Enterprises Employment Exports ($M) Imports ($m) Wages($m) Domestic Demand ($m) Production

($m)

2001 62,790 20,902 783 494 68,363 17,367 8,294 4,889 53,717 39,200

2002 62,599 22,778 965 630 76,817 17,542 8,210 5,264 53,267 41,600

2003 66,034 23,941 954 664 72,032 18,659 9,147 4,973 56,522 41,000

2004 74,768 29,040 944 653 65,408 22,108 10,409 4,703 63,068 43,500

2005 92,193 34,367 976 686 67,539 25,090 13,089 4,954 80,192 41,300

2006 91,756 34,756 944 669 62,612 27,887 13,427 4,624 77,296 41,500

2007 90,750 34,000 949 660 62,000 31,417 12,643 4,582 71,976 41,200

2008 87,500 33,000 915 645 60,300 33,139 13,374 4,486 67,736 38,750

2009 80,530 31,000 875 630 55,000 25,450 10,180 4,174 65,260 35,500

2010 83,052 31,750 865 625 56,000 27,000 10,750 4,100 66,802 N/A

2011 85,070 32,300 867 627 56,750 29,500 12,000 4,150 67,570 N/A

2012 88,565 33,200 868 629 56,250 31,000 12,950 4,125 70,515 N/A

2013 92,510 34,500 865 628 55,000 32,550 13,750 4,085 73,710 N/A

2014 94,250 34,750 863 627 54,500 34,000 14,500 4,075 74,750 N/A

2015 96,520 35,450 860 625 54,000 35,300 15,250 4,050 76,470 N/A

Source: Dai, R. June 2010. IBISWorld Industry Report 32521. Plastic, Resin, & Rubber Manufa cturing in the US. h ttp://www.ibisworld.com

.A-2 Table A

- 2. Industry Data and Projections for NAICS 32531, Fertilizer Manufacturing ($2010)

Year Revenue ($m) Industry

Value Added ($m) Establish

ments Enterprises Employment Exports ($M) Imports ($m) Wage ($m) Domestic Demand ($m) Production

($m)

2001 12,281 2,491 704 492 21,405 2,850 3,412 1,180 12,843 19,000

2002 12,287 4,077 727 511 20,718 2,809 2,778 1,127 12,256 18,000

2003 13,207 4,338 679 478 19,688 3,100 4,097 1,076 14,204 N/A

2004 14,704 5,345 674 474 17,843 3,360 4,907 1,009 16,251 N/A

2005 14,084 5,137 659 474 17,076 3,665 6,656 979 17,074 N/A

2006 14,430 5,517 664 482 16,054 3,517 6,063 926 16,976 N/A

2007 16,805 5,894 665 503 17,777 4,012 7,814 1,031 20,607 N/A

2008 21,075 7,000 670 489 17,350 8,268 12,919 1,000 25,726 N/A

2009 18,000 6,300 660 486 16,500 4,500 6,500 950 20,000 N/A

2010 19,200 6,625 656 485 16,550 4,800 8,150 955 22,550 N/A

2011 19,700 6,755 653 483 16,250 5,085 8,800 940 23,415 N/A

2012 20,150 7,000 652 483 15,850 5,300 9,250 920 24,100 N/A

2013 20,700 7,200 651 481 15,300 5,600 9,900 895 25,000 N/A

2014 21,200 7,400 650 480 14,750 5,900 10,500 870 25,800 N/A

2015 21,750 7,600 650 480 14,500 6,225 11,100 855 26,625 N/A

Source: Richardson, A. March 2010 a . IBISWorld Industry Report 32531. Fertilizer Manufacturing in the U

. S. h ttp://www.ibisworld.com

.A-3 Table A

- 3. Industry Data and Projections for NAICS 32551, Paint Manufacturing ($2010)

Year Revenue ($m) Industry

Value Added ($m) Establish

ments Enterprises Employment Exports ($m) Imports ($m) Wages($m) Domestic Demand ($m) Production

(gallons)

2001 24

, 447.8 12

, 043.8 1

, 463 1

, 192 51

, 084 1

, 851.4 902 2

, 677.2 23

, 498.4 N/A

2002 24

, 219 11

, 592.3 1

, 363 1

, 107 46

, 347 1

, 813.3 719.8 2

, 495 23

, 125.5 N/A

2003 23

, 954.2 12

, 217.1 1

, 371 1

, 114 44

, 852 1

, 835.1 742.5 2

, 244.7 22

, 861.6 N/A

2004 25

, 595.8 13

, 516.7 1

, 374 1

, 115 41

, 547 1

, 857.9 773.1 2

, 352.5 24

, 511 N/A

2005 25

, 847.2 13

, 360.3 1

, 365 1

, 105 40

, 073 1

, 939 812.9 2

, 296.4 24

, 721.1 N/A

2006 25

, 338.1 13

, 039.7 1

, 344 1

, 095 39

, 006 2

, 155.9 917.3 2

, 207.6 24

, 099.5 N/A

2007 24

, 861.5 12

, 130.6 1

, 369 1

, 131 41

, 893 2

, 203 942.7 2

, 308.5 23

, 601.2 N/A

2008 23

, 750 11

, 500 1

, 325 1

, 090 40

, 000 2

, 170.7 868.1 2

, 225 22

, 447.4 N/A

2009 22

, 000 10

, 800 1

, 290 1

, 060 37

, 500 1

, 892 599.9 2

, 125 20

, 707.9 N/A

2010 22

, 550 11

, 000 1

, 280 1

, 055 36

, 250 2

, 000 675 2

, 050 21

, 225 N/A

2011 23

, 200 11

, 350 1

, 283 1

, 060 36

, 350 2

, 175 825 2

, 055 21

, 850 N/A

2012 23

, 900 11

, 750 1

, 278 1

, 057 36

, 200 2

, 325 910 2

, 050 22

, 485 N/A

2013 24

, 650 12

, 100 1

, 270 1

, 053 36

, 000 2

, 450 990 2

, 040 23

, 190 N/A

2014 25

, 400 12

, 450 1

, 265 1

, 050 35

, 850 2

, 550 1

, 035 2

, 035 23

, 885 N/A

2015 26

, 150 12

, 775 1

, 260 1

, 045 35

, 700 2

, 650 1

, 080 2

, 030 24

, 580 N/A

Source: Richardson, A. 2010b. IBISWorld Industry Report 32551: Paint Manufacturing in the U.S. http://www.ibisworld.com.www.lib.ncsu.edu:2048/industryus/default.aspx?indid=492

.A-4 Table A

- 4. Industry Data and Projections for NAICS 32592, Explosives Manufacturing ($2010)

Year Revenue ($m) Industry

Value Added ($m) Establish

ments Enterprises Employment Exports ($M) Imports ($m) Wages($m) Domestic Demand ($m) Production

($m)

2001 1,322 737 100 63 6,473 256 195 312 1,261 2,376

2002 1,230 718 92 61 5,721 300 200 277 1,129 2,510

2003 1,193 712 89 57 5,534 413 233 263 1,013 2,287

2004 1,212 659 84 53 5,234 480 288 266 1,019 2,523

2005 1,330 571 82 54 5,617 463 305 285 1,171 3,200

2006 1,506 710 82 53 6,018 536 368 302 1,338 3,160

2007 1,807 939 83 56 6,000 581 381 324 1,607 3,120

2008 1,950 1,035 81 55 5,970 573 358 320 1,734 3,115

2009 1,850 950 79 53 5,950 500 275 300 1,625 3,100

2010 1,875 970 78 N/A 5,930 N/A N/A N/A N/A N/A

2011 1,950 1,015 78 N/A 5,900 N/A N/A N/A N/A N/A

2012 2,050 1,075 79 N/A 5,925 N/A N/A N/A N/A N/A

2013 2,100 1,100 79 N/A 5,920 N/A N/A N/A N/A N/A

2014 2,150 1,130 78 N/A 5,920 N/A N/A N/A N/A N/A

2015 2,200 1,155 78 N/A 5,915 N/A N/A N/A N/A N/A

Source: Richardson, A. September 2009. IBISWorld Industry Report 32592. Explosives Manufacturing in the US. h ttp://www.ibisworld.com