1 **Economic Impact Analysis for the Secondary Lead**  **NESHAP** This report is the economic impact ana ly sis for the final Secondary L ead NESHAP, which will be signed as per a court

- ordered schedule on December 16 , 2011

. Implementation of the rule is required b y 3 years after promulgation of the final rule. The standard is the MACT floor of control for each source t ype controlled. Details on the rule can be found in the preamble contained in the public docket for this rulemaking. Th e Second ary

L ead Smelting source category is defined as any

facility at which lead

bearing scrap materials (including, but not limited to lead acid batteries) are recycled by smelting into elemental lead or lead alloy s . For more information on the source category definition, please refer to the preamble. S econdary lead smelters can be found worldwide. In fact, secondary lead now accounts for more than half of all lead produced around the world. In the U.S., more than 8 0 percent of all lead comes from secondary production. 1 Fourteen smelters can be found in the U.S. Production of secondary lead totaled 1.15 million tons in 2010, an amount equivalent to 82 percent of reported domestic lead consumption. Nearl y all of it was recovered from old (post

- consumer) scrap. 2 In the U.S., a new secondary lead smelter being built b y Johnson Controls, Inc. (JCI ) will be completed in Florence, SC in 2012, and an existing EnviroFocus facility

in Tampa, FL will expand by 400% in 2012

. 3 There are eight parent owner companies affected by the rule. These companies ar e found in NAI CS 331492

– Secondary L ead Smelting

. Two of these firms, Gopher Resources, LLC, and Battery

Recycling Company , are small business es as defined b y the Small Business Administration (SBA) for this industry

– 75 0 employ ees or less for a parent owner in the secondary smelting and refining of nonferrous metal (except copper and aluminum) industry

. 4 A separate memo provides the impacts of the rule on these small companies , and concludes that

1 Obtained from the International Lead Association’s web site found at http://www.ldaint.org/lead

- information/lead

production , downloaded on November 15, 2011. 2 U.S. Geological Survey, Mineral Commodity Summaries, Lead. January 2011. Found on the Internet at http://minerals.usgs.gov/minerals/pubs/commodity/lead/mcs

- 2011

- lead.pdf

. 3 Paul White, International Zinc and Lead Study Group, October 14, 2011. Presentation f ound on the Internet at http://www.ilzsg.org/pages/438/document.aspx?page=14&ff_aa_document_type=P&from=2 . Slide 12. EnviroFocus is a subsidiary of Gopher Res ources, LLC. 4 U.S. Small Business Administration, Table of Size Standards. November 5, 2010. Found on the Internet at http://www.sba.gov/idc/groups/public /documents/sba_homepage/serv_sstd_tablepdf.pdf

.2

there is no significant economic impact on a substantial number of small entities (SI SNOSE) as a result of this rule. 5 The total annualized costs (TAC) of the rule for each parent owner company , which includes the annualized control, monitoring and recordkeeping costs as taken from the cost and emission reductions memo prepared for US EPA 6 , are in Table 1

. The nationwide total annuali zed costs of this rule are $ 13

. 2 million. All costs are in 2009 dollars.

**Table 1. TAC for Each Parent Owner** Parent Owner and Subsidiary Total Annualized Costs per Parent Owner Exide Technologies (owner of Exide Electronics) $ 4,920,00 0 Quexco (owner of Revere Smelting and Refining

– RSR and Quemetco ) $ 150 , 000 The Renco Group (owner of Doe Run Resources ) $ 3,600 , 00 0 East Penn Manufacturing $ 300 , 000 Sanders Lead $ 2, 490 , 000 Gopher Resources, LLC (owner of EnviroFocus) $ 6 00 , 000 Battery Recycling Company $700,000 Johnson Controls, Inc. (JCI ) $ 420,000 Total: $ 1 3,180 , 000 This analy sis identified the businesses that will be affected by this rule and provides an anal ys is at a screening level to assist in determining whether this rule is likely to impose a significant economic impact on affected businesses. The anal ys is employ ed 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 compan y represents the maximum price increase in affected

5 U.S. Environmental Protection Agency, Office of Air Quality Planning and Standards. “Draft Small Business Evaluation for the Secondary Lead Smelting Source Category.” Prepar ed by ERG, Inc. for Nathan Toph am , U.S. Environmental Protection Agency, Office of Air Quality Planning and Standards. October , 2011. 6 U.S. Environmental Protection Agency, Office of Air Quality Planning and Standards. “Cost and Emission Reductions of the MACT Floor Level of Control for the Secondary Lead Smelting Source Category.” Prepar ed by ERG, Inc. for Nathan Topham , U.S. Environmental Protection Agency, Office of Air Quality Planning and Standards. December , 2011.3

product needed for the company to completely

recover the annualized costs imposed by the regulation. The “sales test” is the impact methodology EPA employ s in economic impact anal ys is such as this one as opposed to a “profits test”, in which annualized compliance costs are calculated as a share of profits. 7 This is because revenues or sales data is commonly available data for entities normally impacted b y EPA regulations and profits data normally made available is often not the true profits earned b y firms due to accounting and tax conside rations. Firms and entities often have way s legally available 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 anal ys es are often employ ed to estimate impacts to small business or entities as part an analy sis in compliance with the Regulatory

Flexibility

Act (RFA) as amended by the Small Business Regulatory Enforcement Fa irness Act (SBREFA), a screening level anal ys is can also be employ ed in an economic impact analy sis such as this one whose focus is on the regulated companies. Economic impact estimates are shown in Table 2 below. The table lists the 8 ultimate parent companies impacted by the rule, the costs of the rule for each company basis, the annual revenues for these companies, and then the impact to the company on a cost to sales basis

. Revenues ar e for the ultimate parent owners, and are for 2 009 to be consistent with the y ear for the cost estimates. Applying such a calculation yields the following results as shown below: **Table 2: Economic Impact Results by Parent Owner**  **for the Secondary Lead NESHAP**  Parent Owner and Subsidiary Total Annualize d Costs per Parent Owner Total Revenues in

20 0 9 per Parent Owner (billions US dollars) Annualized Costs

per Revenues for Each Parent Owner (in %) Exide Technologies (owner of Exide Electronics) $4,920,00 0 $3.32 a 0. 1 52 Quexco (owner of Revere Smelting and Refining and Quemetco ) $ 150 ,0 00 $ 0.44 b 0.0 32 The Renco Group ( owner of Doe Run Resources) $3,600 , 000 $4

. 75 c 0.0 7 6

7 More information on sales 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

- 33.4

East Penn Manufacturing $300 , 000 $1. 1 d 0.0 27 Sanders Lead Company (part of Wiley

Sanders Truck Lines and KW Plastics) $2,490 , 000 $0. 10 e

2.40 Gopher Resources, LLC $ 600,000 N/A <1% f Battery Recycling Company $700,000 $0.03 g 2.33% Johnson Controls, Inc. ( JCI ) $420,000 $28.50 h 0.015 a Exide Tec hnologies annual revenue for 20 0 9 is found in the Annual Report for 2009 at http://www.annualreports.com/HostedData/AnnualReports/PDFArchive/xide2009.pdf ., p. 2.
b Quexco’s revenue estimated for 200 9 can be found at http://www.hoovers.com/company/Quexco_Incorporated/hkhyki

- 1.html

.
c The Renco Group (Doe Run Resources)’s revenue e stimated for 200 9 can be found at http://www.forbes.com/lists/2010/21/private

- com panies

- 10_Renco

- Group_QQ4T.html

. dEast Penn Manufacturing’s revenue in 200 9 can be found at http://www.indeed.com/cmp/East

- Penn

Manufacturing

.
e The Sanders’s companies’s revenue in 20 09 is the sum of the revenues for Wiley Sanders Truck Lines, KW Plastics, and the Sanders Lead Company as taken from lower

- bound estimates of revenues for each company found at www.manta.com
. f Gopher Resources, LLC’s rev e nue is such that the TAC of this proposed rule is less than 1% of its revenues in 2009. See U.S. Environmental Protection Agency, Office of Air Quality Planning and Standards. “ Small Business Evaluation for the Secondary Lead Smelting Source Category” fo r more details.
g Revenue data for the Battery Recycling Company is found in the “Small Business Evaluation for the Secondary Lead Smelting Source Category”.
h JCI’s revenues in 2009 can be found at http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=JCI:US

.
On a firm b y firm basis, the results show that two parent owner s affected by this rule will experience an annualize d compliance cost of more than 2 percent of its sales. One of these companies is the Battery

Recycling Company , located in Puerto Rico, and is a small business as mentioned earlier in the report. The other is the Sanders Lead Compan y of Troy , Alabama, a compan y that is part of a business that includes the Wiley Sanders Truck Lines and KW Plastics. The impact on the small business , while not trivial, does not qualify as a significant impact and thus doe s not change the conclusion of the Agency that there is no SI SNOSE for this rule. It should be noted that this compan y , and Johnson Controls, Inc. were not included in the Agency ’s anal ys is for the proposed rule.5

It should also be noted that this anal ys is does not presume any incidence of th e costs on the consumers of secondary lead and other products made by these companies. Thus, no estimate of the impact of this rule on secondary lead consumers , for intermediate or end

- use, is included in this report. However, it should be noted that available estimates show that the price elasticity of demand for secondary lead is

- 1.0 8 , and the price elasticity of supply for secondary lead is 0.6. 9 Based on this information, one can conc lude that demand will respond 1:1 with a change in secondary

lead pric e, and that suppl y is inelastic (i.e., will respond less than 1:1) with a change in secondary

lead price. Thus, the direct impact of this rule appears quite minor, and thus it is reason able to infer that the impact on secondary lead consumers from this rule should also be minor. The TAC is taken from the cost memorandum mentioned earlier that was pr epared b y U.S. EPA for the rule and in that memorandum can be found more information on the cost anal ys is.

8 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/Publicationdetails.Aspx?. Publicationid=20680. Accessed August 2009. Table 8.A.6.

9 Broda, C., N. L imao, and D. Weinstein. 2008a. “Export Supply Elasticities.” http://faculty.chicagobooth.edu/christian.broda/website/resear ch/unrestricted/TradeElasticities/TradeElastic ities.html . Accessed September 2009.