p.1 

OAR Box 1415 

Prepped by Ollie Stewart 

Document Number: 

5) IV-E-5 

Docket Number: 

A-94-52 

Printed 7/15/2008 9:38:25 AM Sheet 5 of 130 
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r\r<W-S7. 

\\i-es 

John Schweitzer 

< jschwtzr@gte.net > 

01/28/2002 04:02 PM 

Please respond to John 

Schweitzer 

To: Keith Barnett/RTP/USEPA/US@EPA 

cc: 

Subject: meeting on affordability 

Keith, on Thursday, Jan. 31, at 10am, Chuck Elkins, Stuart Sessions and I are meeting with Keith Mason, 

who is with the policy office (OPAR?) at Office of Air and Radiation, in Washington. 

The subject of the meeting will be EPA's affordability analysis for the above-the-floor 95% C&C 

requirement. 

FYI, I've attached the handout we will use for the meeting. 

I'll be in my office most of tomorrow (Tuesday), and then on my cell phone on Wednesday 

(734.604.9095). 

FROM=============== 

John Schweitzer 

Sr. Director of Gov't. Affairs 

Composites Fabricators Assoc. 

voice 734.622.0162 

fax 734.622.0122 

jschwtzr@ate.net 

m& 

www.cfa-hq.ora briefing on affordability 31jan0 

EPA AIR DOCKET 
P.3 

Composites Fabricators Association - January 31,2002 

Summary of Industry Concerns Regarding 

Affordability of the Proposed Reinforced Plastic/Composites NESHAP1 

EPA must consider the affordability of any proposed above-the-floor MACT standard 

• EPA has correctly determined that the technology that best characterizes the MACT 

floors for the composites industry is a set of pollution prevention techniques. 

• However, EPA has proposed an above-the-floor requirement for larger existing composites operations. EPA proposes that existing facilities emitting more than 100 tons of HAP 

per year (or more than 250 tpy if owned by a small business) must capture and control at 

least 95% of their emissions. Using EPA's figures, about 65% ofthe total cost for all 

existing sources to comply with the rule will fall on the estimated 34 plants subject to the 

above-the-floor requirement; these plants account for only 15% of industry output. 

• To justify an above-the-floor requirement, the Clean Air Act requires EPA to show that 

the control passes a number of tests.3 

• In particular, the above-the-floor control must be affordable. 

EPA's economic analysis fails to credibly analyze the affordability of the controls 

• The Economic Impact Analysis EPA prepared in support ofthe proposed rule assumes 

that: a) the large majority of sources potentially subject to the above-the-floor requirement sell their products directly to a corporate parent (i.e., they are captive producers, 

rather than merchant producers who must compete in an open marketplace), and b) their 

parent companies will simply pay for the required controls and absorb their costs, whatever their magnitude. 

• By making these two assumptions - both of which are wrong - EPA's EIA completely 

fails to analyze the affordability ofthe proposed above-the-floor requirements. 

• While EPA's analysis could be somewhat improved by correctly assuming that the affected sources are merchant rather than captive, CFA nevertheless believes that EPA's 

EIA model represents a fundamentally inappropriate methodology for evaluating economic impacts for the composites industry facilities facing the capture and control requirement. 

EPA's economic model is not appropriate for assessing the affordability ofthe controls 

• EPA's modeling approach demands a vast amount of data on every facility in the industry (e.g., market prices, supply functions), virtually none of which EPA has. In the absence of data, EPA makes unjustified and, we believe, incorrect assumptions. 

• This means that the economic impact estimates generated by the model are nearly entirely a function ofthe chosen assumptions. Different assumptions, which are equally or 

more plausible, would lead to different analytical conclusions. 

^ 
P.4 

Composites Fabricators Association - January 31, 2002 

EPA's own data, subject to rational analysis, show significant affordability concerns 

• Using a simpler analysis that does not rely on unproven assumptions, EPA's own data 

show that the facilities facing the capture and control requirement will incur a much 

higher compliance cost than the remainder ofthe industry, and would be unable to recover those costs through higher market prices.4 

• EPA's data further suggest that compliance costs for 95% capture and control will consume an average oi 23 percent of profits for the affected producers.5 

• This degree of impact poses serious affordability concerns for an already low profitability 

industry, and at least several ofthe facilities are likely to close rather than comply with 

the capture and control requirement. 

Analysis of 10 representative facilities shows that at least 6 will close rather than comply 

• Stuart Sessions, of Environomics, Inc., has conducted a detailed affordability analysis for 

10 representative facilities that will be subject to the proposed capture and control requirement. Using financial data provided by each facility, Environomics judged whether 

each facility will be able to afford to comply by comparing the projected compliance 

costs for the facility against measures of its economic strength. 

• Environomics concluded that at least 6 ofthe 10 plants are more likely to close than to 

pay the costs of capture and control, and the requirements would pose significant affordability concerns for the remaining plants.6 

EPA should develop an accurate and reliable estimate of affordability 

• EPA's October, 2001 EIA may lead the Agency to mistakenly believe that the proposed 

above-the-floor 95% capture and control requirement will be affordable. To the contrary, 

this requirement will cause most ofthe affected facilities to close rather than comply.7 

• To avoid this tragic and unlawful outcome, EPA should analyze affordability using both 

accurate data and a model that is a reasonable fit for the affected sources in this industry. 

• Any conclusions drawn by EPA must be consistent with the industry analysis based on 

actual data from the 10 representative affected facilities. The detailed data submissions 

from the facilities and our analysis of this data have been provided to EPA on a CBI basis. 

1

 Proposed August 2,2001 (66 FR 40324). 

2

 The proposed rule also requires larger new sources to achieve 95% control. Our concern that this requirement is 

based on sources that are fundamentally dissimilar to most likely new sources is addressed in our comments. 

3

 We believe that the proposed approach fails several of these tests; see the attached Summary of Major Concerns. 

4

 CFA believes that EPA has both significantly overestimated the degree of control that could feasibly be achieved 

by composite manufacturers, and underestimated the cost of achieving such control. CFA estimates that 76% capture and control is the maximum that could practically be achieved (on average). We estimate that this 76% control 

will cost 1.45 times more per unit of production that what EPA estimates 95% capture and control will cost. 

5

 Using what we believe to be our more accurate data on compliance costs and product prices, we estimate instead 

that the proposed requirement will consume a devastating 63 percent on average of these facilities' profits. 

6

 Again, for each plant in the analysis, we assume maximum practical control of 76% on average. The impact of 

EPA's proposed requirement of 95% control would be much greater. 

7

 The proposed 95% control requirement will also effectively prevent the construction of any larger new plants. 

3