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OAR Box 1394 

Prepped by Ollie Stewart 

Document Number: 

4) ll-A-17 

Docket Number: 

A-94-52 

Printed 7/3/2008 7:22:10 AM Sheet 4 of 57 
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CELCAII 

United States 

Environmental Protection 

Agency 

Office Of Air Quality 

Planning And Standards 

Research Triangle Park, NC 27711 

EPA-452/R-00-007 

May 2001 

FINAL REPORT 

Air 

Economic Impact Analysis of 

Proposed Reinforced Plastics NESHAP 

Final Report 

JM26 2M 

EPA Ain LOCKET 
Economic Impact Analysis of 

Proposed Reinforced Plastics NESHAP 

U.S. Environmental Protection Agency 

Office of Air Quality Planning and Standards 

Innovative Strategies and Economics Group, MD-15 

Research Triangle Park, NC 27711 

Prepared Under Contract By: 

Research Triangle Institute 

Center for Economics Research 

Research Triangle Park, NC 27711 

May 2001 

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This report has been reviewed by the Emission Standards Division ofthe Office of Air Quality Planning and 

Standards of the United States Environmental Protection Agency and approved for publication. Mention 

of trade names or commercial products is not intended to constitute endorsement or recommendation for use. 

Copies ofthis report are available through the Library Services (MD-35), U.S. Environmental Protection 

Agency, Research Triangle Park, NC 27711, or from the National Technical Information Services 5285 Port 

Royal Road, Springfield, VA 22161. 
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CONTENTS 

Section Page 

1 Introduction 1-1 

1.1 Organization ofthe Report 1-1 

2 Industry Profile 2-1 

2.1 Production 2-3 

2.1.1 Material Inputs 2-5 

2.1.1.1 Plastic Resins 2-5 

2.1.1.2 Reinforcements 2-6 

2.1.1.3 Nonreinforcing Fillers 2-8 

2.1.1.4 Additives 2-9 

2.1.2 Production Processes 2-10 

2.1.2.1 Open Molding Processes 2-11 

2.1.2.2 Closed Molding Processes 2-15 

2.2 Products 2-20 

2.3 Cost of Production 2-20 

2.4 Uses and Consumers of Reinforced Plastics 2-22 

2.5 Manufacturing Facilities '. 2-29 

2.5.1 Location 2-31 

2.5.2 Employment 2-31 

2.6 Facility Ownership 2-31 

2.6.1 Size Distribution 2-33 

2.6.2 Issues of Vertical and Horizontal Integration 2-33 

2.7 Small Businesses 2-36 

2.7.1 Identifying Small Businesses 2-36 

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Engineering Costs 3-1 

3.1 Identifying Regulated Entities 3-1 

3.2 National Control Cost Estimates 3-1 

Economic Impact Analysis 4-1 

4.1 Reinforced Plastic Composite Markets 4-2 

4.2 Producers, Costs, and Supply 4-6 

4.3 Consumers, Value, and Demand 4-8 

4.4 Baseline and With-Regulation Equilibrium 4-10 

4.5 Results 4-10 

4.5.1 Market-Level Impacts 4-12 

4.5.2 Industry-Level Impacts 4-16 

4.5.2.1 Changes in Operating Profit 4-16 

4.5.2.2 Product-Line and Facility-Level Impacts 4-20 

4.5.2.3 Changes in Employment 4-21 

4.6 Social Costs 4-21 

4.7 Sensitivity Analysis for Profit Rate 4-25 

4.8 New Source Analysis 4-26 

Initial Regulatory Flexibility Analysis 5-1 

5.1 Identifying Small Businesses 5-2 

5.2 Screening-Level Analysis 5-2 

5.2.1 Recommended Alternative 5-3 

5.2.2 MACT Floor Alternative 5-6 

5.2.3 Above-the-MACT Floor Alternative 5-6 

5.3 Economic Analysis 5-6 

5.4 Assessment 5-12 

5.5 Projected Reporting and Recordkeeping Requirements 5-13 

5.6 Other Federal Rules That May Impact Reinforced Plastic Composite 

Production Facilities 5-14 

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5.7 Alternatives to the Proposed Rule 5-14 

References R-l 

Appendix A Summary Data for Companies Owning Reinforced 

Plastic Composite Facilities A-l 

Appendix B Economic Model ofthe Merchant Sector ofthe U.S. Reinforced 

Plastic Composites Industry B-1 
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LIST OF FIGURES 

Number Page 

2-1 Production Flows for Reinforced Plastic Composites 2-4 

2-2 Hand Lay-up Processing 2-12 

2-3 Spray-up Processing 2-13 

2-4 Filament Winding 2-14 

2-5 Pultrusion 2-16 

2-6 Injection Molding 2-19 

2-7 Consumption of Reinforced Plastic Composites by Market Segment: 

1997 2-27 

2-8 Geographic Distribution of Major Source Facilities 2-32 

2-9 Alternative Chains of Ownership ; 2-34 

2-10 RPC Firms by Size 2-37 

4-1 Supply Curve for a Representative Directly Affected Merchant Facility 4-7 

4-2 Demand Curve for RPCs 4-9 

4-3 Market Equilibrium Without and With Regulation 4-11 

4-4 Sensitivity of Changes in Consumer Surplus to the Elasticity of 

Demand 4-25 

4-5 Baseline Equilibrium without Regulation 4-27 

4-6 With-Regulation Equilibrium Case 1: New Sources Added 4-29 

4-7 With-Regulation Equilibrium Case 2: No New Sources Added 4-29 

5-1(a) Distribution of Cost-to-Sales Ratios for Small Companies: Recommended 

Alternative 5-5 

5-1(b) Distribution of Cost-to-Sales Ratios for Large Companies: Recommended 

Alternative 5-5 

5-2(a) Distribution of Cost-to-Sales Ratios for Small Companies: MACT 

Floor Alternative 5-8 

5-2(b) Distribution of Cost-to-Sales Ratios for Large Companies: MACT 

Floor Alternative 5-8 

5-3(a) Distribution of Cost-to-Sales Ratios for Small Companies: Above-theMACT-Floor Alternative ". 5-10 

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5-3(b) Distribution of Cost-to-Sales Ratios for Large Companies: Above-theMACT-Floor Alternative 5-10 

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LIST OF TABLES 

Number Page 

2-1 SIC Codes for Potentially Affected Products 2-2 

2-2 Consumption of Reinforced Plastics by Resin Type: 1991-1993 2-7 

2-3 Consumption of Fibrous Reinforcements in Plastics: 1990 2-8 

2-4 Consumption of Nonreinforcing Fillers in Plastics: 1990 2-9 

2-5 Consumption of Plastics Additives: 1990 2-10 

2-6 Reinforced Plastics Shipments by Production Process: 1990 2-11 

2-7 Compatibility of RPC Production Processes with Shape Characteristics 

and Specific Products 2-21 

2-8 Plastic Resin Prices: 1996-1999 2-23 

2-9 Selected Plastic Reinforcement and Filler Prices: 1997 2-24 

2-10 Demand for Reinforced Plastic Composites: Some Examples 2-26 

2-11 Consumption of Reinforced Plastic Composites by End Use: 1984-

1997 (IO6 lbs) 2-28 

2-12 Consumption of Reinforced Unsaturated Polyester by End Use: 1984-

1993 (IO6 lbs) 2-30 

2-13 Distribution of Major Source Facilities by Employment 2-33 

2-14 Distribution of Potentially Affected Firms by Employment 2-35 

2-15 Distribution of Potentially Affected Firms By Sales 2-35 

2-16 Small Business Administration Size Standards for RPC—Companies 

by SIC 2-38 

4-1 Reinforced Plastics Composites Shipments by End-Use Market: 

1997 (IO6 lbs) 4-4 

4-2 Estimated Market Quantities and Prices for Reinforced Plastics 

Composites by Product Group: 1997 4-5 

4-3 Market-Level Impacts ofthe Reinforced Plastic Composites NESHAP 

Regulatory Alternatives: 1997 . . ; 4-13 

4-4 Summary of Compliance Costs and Market Price Changes: 1997 

($/lb) 4-15 

4-5 Industry-Level Impacts of Reinforced Plastic Composites NESHAP 

Regulatory Alternatives: 1997 4-17 

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4-6 Distributional Impacts on Merchant Thermoset Producers Associated 

with Reinforced Plastic Composites NESHAP Regulatory 

Alternatives: 1997 4-19 

4-7 Social Costs with Reinforced Plastic Composites NESHAP Regulatory 

Alternatives: 1997 4-23 

4-8 Summary of Economic Impacts Under Range of Industry Profit Rates: 

Recommended Alternative 4-27 

4-9 New Source Analysis of Unit Production and Compliance Costs 

($1997) 4-30 

4-10 Changes in Facility Construction Under the Proposed NESHAP: 

2000-2005 4-32 

5-1 Summary Statistics for SBREFA Screening Analysis: Recommended 

Alternative 5-4 

5-2 Summary Statistics for SBREFA Screening Analysis: MACT Floor 

Alternative 5-7 

5-3 Summary Statistics for SBREFA Screening Analysis: Above-the-MACTFloor Alternative 5-9 

5-4 Summary of Small Business Impacts of Reinforced Plastic Composites 

NESHAP 5-11 

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SECTION 1 

INTRODUCTION 

The Clean Air Act's (CAA's) purpose is to protect and enhance the quality ofthe 

nation's air resources (Section 101(b)). Under the authority of Section 112 ofthe CAA as 

amended in 1990, the U.S. Environmental Protection Agency (EPA or the Agency) is 

currently developing a National Emission Standard for Hazardous Air Pollutants (NESHAP) 

to reduce emissions generated during the production of reinforced plastic composites (RPCs). 

This report evaluates the economic impacts of three regulatory alternatives that are designed 

to control these releases. 

1.1 Organization of the Report 

This report is divided into four sections and two appendices that describe the industry 

and economic methodology and present results ofthis economic impact analysis (EIA): 

• Section 2 provides a summary profile for the manufacture of RPCs. It presents 

data on manufacturing plants and the companies that own and operate these 

plants. 

• Section 3 reviews the regulatory control alternatives and associated costs of 

compliance. This section will be included in the final EIA and will be based on 

EPA's engineering analysis conducted in support ofthe proposed NESHAP as 

described in the Background Information Document (BID). 

• Section 4 details the methodology for assessing the economic impacts ofthe 

proposed NESHAP and the results ofthe analysis, which include market, industry, 

and social welfare impacts. 

• Section 5 provides the Agency's screening and economic analyses ofthe 

regulation's impact on affected small businesses. 

• Appendix A provides a list of companies that own directly affected facilities and 

includes sales, employment, and size classification. 

• Appendix B provides a detailed description ofthe Agency's economic model. 

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SECTION 2 

INDUSTRY PROFILE 

Plastics are one ofthe most used materials in U.S. industrial and commercial 

activities and contribute to virtually all products consumed from packaging to motor vehicles. 

Plastics can be divided into two major groups by resin type: thermoset or thermoplastic. 

When additional strength is required, many plastics can be reinforced with structural 

materials to produce RPCs. 

In the production of RPCs, polymers and reinforcing materials can be compounded 

with a variety of fillers to minimize resin requirements and additives that change the physical 

properties ofthe desired composite. The polymer is most often a thermosetting resin and the 

typical reinforcement is glass fiber. Compounding consists of mixing these various materials 

(sometimes in several stages) and reforming the homogeneous mass into a usable form such 

as pellets, flakes, or sheets for processing into the final product. A wide variety of RPC 

processes have evolved to facilitate efficient production of many different types of 

composites with different physical properties. The fundamental characteristics ofthe 

resulting composites include lightweight, high strength-to-weight ratio, nonconductivity, 

various degrees of corrosion-resistance, and dimensional stability. 

In 1997, 3.4 billion pounds of RPCs were consumed in the United States. The RPC 

market is divided into a number of segments according to its end use. The market segments 

include general aviation, aerospace, appliances, business equipment, construction, consumer 

goods, corrosion-resistant products, electrical/electronics, marine, and land transportation 

(e.g., motor vehicles, trucks, buses). The transportation segment was the largest consumer of 

RPCs with 1,095 million pounds, or 32 percent ofthe total consumed in 1997. The 

construction segment followed with 700 million pounds of reinforced plastics consumed in 

1997 (SPI, 1998). 

Reinforced plastics are used in the production of many different products, as indicated 

by the involvement of 42 different SIC codes, as Table 2-1 shows. The SIC codes were 

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Table 2-1. SIC Codes for Potentially Affected Products 

SIC Definition 

2434 Wood Kitchen Cabinets 

2519 Household Furniture, NEC 

2522 Office Furniture, Except Wood 

2541 Wood Office and Store Fixtures, Partitions, Shelving, and Lockers 

2599 Furniture and Fixtures, NEC 

2821 Plastics Material and Synthetic Resins, and Nonvulcanizable Elastomers 

3082 Unsupported Plastics Profile Shapes 

3083 Laminated Plastics Plate, Sheet, and Profile Shapes 

3084 Plastics Pipe 

3087 Custom Compounding of Purchased Plastics Resins 

3088 Plastics Plumbing Fixtures 

3089 Plastics Products, NEC 

3281 Cut Stone and Stone Products 

3296 Mineral Wool 

3299 Nonmetallic Mineral Products, NEC 

3431 Enameled Iron and Metal Sanitary Ware 

3499 Fabricated Metal Products, NEC 

3531 Construction Machinery and Equipment 

3533 Oil and Gas Field Machinery and Equipment 

3546 Power-Driven Handtools 

3561 Pumps and Pumping Equipment 

3564 Industrial and Commercial Fans and Blowers and Air Purification Equipment 

3589 Service Industry Machinery, NEC 

3612 Power, Distribution, and Specialty Transformers 

3613 Switchgear and Switchboard Apparatus 

3621 Motors and Generators 

3647 Vehicular Lighting Equipment 

3663 Radio and Television Broadcasting and Communications Equipment 

3679 Electronic Components, NEC 

3711 Motor Vehicles and Passenger Car Bodies 

3713 Truck and Bus Bodies 

3714 Motor Vehicle Parts and Accessories 

3715 Truck Trailers 

3716 Motor Homes 

3728 Aircraft 

3743 Aircraft Parts and Equipment, NEC 

3792 Travel Trailers and Campers 

3799 Transportation Equipment, NEC 

3821 Laboratory Apparatus and Furniture 

3949 Sporting and Athletic Goods, NEC 

3993 Signs and Advertising Specialties 

3999 Manufacturing Industries, NEC 

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obtained from the updated 1993 EPA survey and subsequent screening for potentially 

affected reinforced plastics producers. 

The remainder ofthis section provides a brief introduction to the reinforced plastics 

industry. Although the reinforced plastics source category includes only thermoset materials, 

this profile provides a broader picture ofthe RPC industry. Section 2.1 provides an overview 

ofthe RPC production processes, including a description ofthe major inputs to production 

and directly affected production processes. Section 2.2 characterizes the resulting reinforced 

plastics products and presents historical data on their consumption across various end uses. 

Section 2.3 details the costs of production. Section 2.4 describes uses and consumers of 

reinforced plastics. Section 2.5 summarizes U.S. production facilities, and Section 2.6 

describes the firms that own these facilities. 

2.1 Production 

The basic stages of production for RPCs are compounding and processing, as 

Figure 2-1 illustrates. Polymers and reinforcing materials are compounded with a variety of 

fillers to minimize resin requirements and additives that change the physical properties ofthe 

desired composite. The polymer is most often a thermosetting resin such as polyester 

(unsaturated), vinyl ester, phenolic, or epoxy; however, thermoplastic resins such as nylons 

and polyolefins are increasingly being utilized. Compounding consists of mixing these 

various materials (sometimes in several stages) and then reforming the homogeneous mass 

into a usable form such as pellets, flakes, or sheets for processing into the final product. 

Processing involves shaping and/or molding the compounded plastic material into the 

desired final product. A wide variety of RPC processes have evolved to facilitate efficient 

production of many different types of composites with different physical properties. RPC 

production processes can be separated into two broad categories: open molding and closed 

molding. Open molding refers to processes where the plastic resins, polymers, 

reinforcements, and other additives are exposed to the air during the shaping and/or curing 

stages of processing. This category includes such manual contact molding processes as hand 

lay-up and spray-up, as well as processes with a greater degree of automation, such as 

centrifugal casting, filament winding, pultrusion, and continuous lamination. Closed 

molding processes isolate the input materials inside closed molds during the mixing and 

curing stages. These include more capital-intensive production methods such as match die 

molding, reaction injection molding, rotational molding, and thermoforming. 

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Polymers 

(thermoset resins, 

thermoplastic resins) 

Fillers, 

Reinforcements, and 

Additives 

•r V 

Compounding 

Compounded 

Plastic 

Material 

Processing 

i f 

% 

>VOCs 

Reinforced Plastic 

Composite 

Figure 2-1. Production Flows for Reinforced Plastic Composites 

Pollution releases can occur throughout the production processes. Spills of additives 

and plastic pellets can occur during transport to the facility. Leaks of chemical additives can 

occur while the additives are being incorporated into the plastic. Volatile organic compounds 

(VOCs), fugitive emissions, and wastewater discharge are released during the actual 

processing ofthe reinforced plastic part. The finishing operations of cleaning can also 

release VOCs, fugitive emissions, and wastewater discharge (EPA, 1995). 

The result ofthe processing stage is the final part or product referred to as a RPC. 

RPCs range from small parts for toys or automotive uses to composite structures such as boat 

hulls, automobile panels, or the fuselage ofan aircraft. Thus, some RPCs constitute a final 

product such as a bathtub or shower stall, whereas others are intermediate products such as 

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panels, pipes, and molding compounds that serve as inputs to manufacturing processes and 

construction activities. 

The remainder ofthis section describes the manufacture of RPCs in terms ofthe input 

materials used, the production processes employed, and the types of products ultimately 

produced. 

2.1.1 Material Inputs 

This section describes the different types of plastic resins, reinforcements, fillers, and 

additives that are most commonly used in the production of RPCs. It includes a discussion of 

both thermoset and thermoplastic materials; however, EPA's RPC source category only 

includes thermoset materials. 

2.1.1.1 Plastic Resins 

There are two broad categories of plastic resins: thermoplastics and thermosets. 

Thermoplastic resins become soft when heated and may be shaped or molded while in a 

heated semi-fluid state. Once the thermoplastic resin is molded to the proper state, it is 

cooled until hardened. In contrast, thermoset resins are usually liquids or low melting point 

solids in their initial form. When used to produce finished goods, these thermosetting resins 

are "cured" by the use ofa catalyst, heat, or a combination ofthe two. Once cured, thermoset 

resins cannot be converted back to their original liquid form. Unlike thermoplastic resins, 

cured thermosets will not melt and flow when heated and once formed they cannot be 

reshaped. 

Thermoplastics have certain advantages as substitutes for thermoset resins. 

Thermoplastics have faster processing than thermosets because there is no curing necessary; 

they have low toxicity and can be remelted and recycled. Improvements in thermoplastic 

resins over the past 20 years have increased the advantages over thermoset resins. 

Thermoplastics have high delamination, chemical, and damage resistance, and low moisture 

absorption (Berglund, 1998). The damage resistance of thermoplastics is due to high impact 

strength and fracture resistance. Thermosets have better resistance to matrix microcracking 

in the composite laminate, while thermoplastics have higher strains to failure (Schwartz, 

1997). Differences in the characteristics and strengths between thermosets and 

thermoplastics lead to less than perfect substitution and a gradual increase in the use of 

thermoplastics for reinforced plastics. Thermoplastics' share of all resins used for reinforced 

plastics increased by 1 percent from 1991 to 1993. 

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From 1991 to 1993, thermoset and thermoplastic use for reinforced plastics increased, 

with thermosets accounting for consistently more than twice the quantity of thermoplastics, 

as Table 2-2 shows. These figures include the weight of resins, reinforcements, and fillers. 

Thermoset unsaturated polyesters accounted for roughly 60 percent ofthe total reinforced 

plastics shipped during each of these years. Other thermosets, mainly epoxies and phenolics, 

accounted for an additional 7 to 10 percent of total usage. Recent innovations in 

thermoplastic resin formulation have improved both their performance properties and 

cost-effectiveness to the point that their use for RPC production is increasing. 

Thermoplastics are widely used because of their ability to model complex shapes, their ease 

of fabrication, and their cost-effective performance characteristics. As shown in Table 2-2, 

polypropylene, thermoplastic polyester, and nylon account for 80 percent ofthe 848 million 

pounds of thermoplastic resins used for reinforced plastics in 1993. 

The average annual growth rate for unsaturated polyester, the most commonly used 

thermoset in reinforced plastics, was 8.5 percent for the period 1991 to 1997. Over the same 

period, the average annual growth rate for polypropylene, the most commonly used 

thermoplastic in reinforced plastics as of 1993, was 10 percent. 

2.1.1.2 Reinforcements 

Most reinforcing materials used in RPC production are fibers, rovings, fabrics, or 

mats. Fiberglass is the most common material used for mats, but they can also be made from 

asbestos, paper, metals, sisal, nylon, or cotton. Reinforcements are used in four basic forms: 

(1) premixed compounds in injection molding and extrusion; (2) woven mats in laminates; 

(3) preformed woven mats in spray-up or press mold processing; and (4) prepregs, which are 

semi-cured woven mats impregnated with resins. The amount of fiber reinforcement varies 

by resin and reinforcing fiber (e.g., fiberglass varies from 5 to 45 percent by weight, cloth 

from 30 to 70 percent, and carbon and other expensive fibers from 30 to 65 percent) (Rauch, 

1991). Using reinforcing fibers provides the following attributes to composites: 

• improved tensile and flexural strength, stiffness, modulus, and impact resistance; 

• resistance to crazing and cracking; and 

• reduced shrinkage (Rauch, 1991). 

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Table 2-2. Consumption of Reinforced Plastics by Resin Type: 1991-1993" 

Plastics Resins 

Thermosetting resins 

Unsaturated polyesters 

Epoxies, other 

Thermoplastic resins 

Polypropylene 

Polyesters 

Nylon 

Styrenicsb 

Polycarbonate 

Otherc 

Reinforced plastics, total 

1991 

1,641 

1,467 

174 

719 

205 

187 

173 

51 

65 

38 

2,360 

Quantity (IO6 lbs) 

1992 

1,792 

1,552 

240 

757 

220 

195 

183 

51 

70 

38 

2,549 

1993 

1,878 

1,613 

265 

848 

246 

230 

206 

54 

73 

39 

2,726 

a

 Reflects weight of resins, fillers, reinforcements, and other additives. 

b

 Includes SMA, ABS, SAN, etc. 

c

 Includes modified PPE, PPS, LCP, ketones, etc. 

Sources: Society ofthe Plastics Industry, Inc. Facts and Figures ofthe U.S. Plastics Industry. Washington, 

DC. September 1994. 

Modern Plastics. "Resin Supply: What's in the Pipeline for '93?" January 1993. 

Modern Plastics. "Resin Supply: Plotting a Course for Global Supply." January 1994. 

The relative improvement in each of these parameters is a function ofthe type of fiber, 

amount of fiber, orientation of fiber, fiber surface treatment, and the characteristics of the 

matrix polymer. 

Fiberglass is the most widely used reinforcement for plastics, with carbon the least 

used, as Table 2-3 shows. Most reinforcement materials were made of inorganic materials, 

such as fiberglass (roughly 87 percent of all fibrous reinforcements), asbestos (2.9 percent), 

and carbon and other high performing/high cost fibers (1 percent). Cellulose is the major 

natural organic used as a reinforcement. It represented about 9 percent of all fibrous 

reinforcements in 1990. A 1989 EPA ruling that will eventually ban the manufacture, 

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Table 2-3. Consumption of Fibrous Reinforcements in Plastics: 1990 

Quantity 

Reinforcement (IO6 lbs) 

Fiberglass 900 

Cellulose 90 

Asbestos 30 

Carbon and other high performance . 10 

Total 1,030 

Source: Rauch Associates, Inc.. The Rauch Guide to the U.S. Plastics Industry. Bridgewater, NJ: 1991. 

Table 2-12. 

processing, and distribution of most products that contain asbestos, has and will continue to 

reduce the consumption of asbestos as a reinforcement agent and thereby alter the distribution 

of reinforcement materials used to make composites (Rauch, 1991). 

2.1.1.3 Nonreinforcing Fillers 

Nonreinforcing fillers not only reduce the cost of composites but frequently impart 

performance improvements that might not otherwise be achieved by the reinforcement and 

resin ingredients alone. Performance enhancements offered by some nonreinforcing fillers 

include easier processing characteristics; improved mechanical, electrical, thermal, and 

aesthetic properties; and resistance to shrinkage (Rauch, 1991). Fillers that do not offer 

performance improvements are sometimes referred to as extenders. In comparison to resin 

and reinforcements, fillers are the least expensive ofthe major ingredients. In general, fillers 

are nonmetallic minerals, metallic powders, and organic materials added in fairly high 

percentages, usually more than 5 percent in terms of volume, and in some cases several times 

the weight of the polymer. 

As Table 2-4 shows, the majority of nonreinforcing fillers used in reinforced plastics 

are inorganic, particularly calcium carbonate. In 1990, roughly 4.2 billion pounds of fillers 

were used in plastics products. Nonmetallic minerals account for 90 percent ofthe total 

consumption in 1990; calcium carbonate is the dominant mineral filler, with roughly 

3.17 billion pounds used, or 75 percent of all fillers consumed that year. Calcium carbonate 

is by far the most commonly used mineral filler in RPC production. Kaolin clay offers 

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Table 2-4. Consumption of Nonreinforcing Fillers in Plastics: 1990 

Quantity 

Product (IO6 lbs) 

Inorganics 

Minerals 

Calcium carbonate 3,170 

Kaolin 185 

Talc 145 

Mica 34 

Other minerals 450 

Other Inorganic 

Glass spheres 23 

Natural 203 

Total 4,210 

Source: Rauch Associates Inc. The Rauch Guide to the U.S. Plastics Industry. Bridgewater, NJ: 1991. 

Table 2-7. 

several advantages including low water absorption, chemical resistance, and improved 

electrical properties. Some calcined grades of kaolin even offer additional reinforcement ' 

when added to a matrix of nylon or polyolefin resins (Rauch, 1991). 

2.1.1.4 Additives 

A wide variety of additives are used in composites to modify materials properties and 

performance. Although these materials are generally used in relatively low quantities as 

compared to resins, reinforcements, and fillers, they perform critical functions including air 

release, color, fire resistance, lubricity, speed curing, static reduction, surface smoothness, 

thermal conductivity, and others (SPI Composites Institute, 1995). 

Plasticizers are the most common additive to plastics, as Table 2-5 shows. In 1990, 

roughly 3.5 billion pounds of fillers, were used in plastics products. Plasticizers accounted 

for 52 percent of additive consumption in 1990 followed by flame retardants and colorants 

with 19 and 13 percent, respectively. Plasticizers are essential for producing RPCs in some 

applications. 

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Table 2-5. Consumption of Plastics Additives: 1990 

Quantity 

Additive (106lbs) 

Plasticizers 1,810 

Flame Retardants 661 

Colorants 456 

Impact Modifiers 160 

Lubricants 112 

Stabilizers 99 

Organic Peroxides 47 

Blowing Agents 14 

Antistats 9 

Others1 130 

Total 3,498 

a

 Includes viscosity depressants, mold release agents, surfactants, slip agents, biocides, antiblocking agents and 

catalysts. 

Source: Rauch Associates Inc. The Rauch Guide to the U.S. Plastics Industry. Bridgewater, NJ: 1991. 

Table 2-6. 

2.1.2 Production Processes 

Application development in the production of composites requires careful selection 

not only of which materials to use but also ofthe production process that can combine these 

inputs into the desired form most efficiently. Table 2-6 provides data on the distribution of 

the volume of reinforced plastics by process for 1990. In 1990, approximately 2.6 billion 

pounds of RPCs were shipped from RPC facilities in the United States. Approximately 

1.04 billion pounds of RPCs, or 65 percent ofthe total, were produced using open molding 

processes. Hand lay-up, spray-up, and continuous lamination processes accounted for about 

62 percent ofthe RPCs produced with open molding processes. Approximately 900 million 

pounds of RPCs were produced using closed molding processes in 1991. About two-thirds of 

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Table 2-6. Reinforced Plastics Shipments by Production Process: 1990 

Processing Method 

Open molding 

Hand lay-up, spray-up and continuous laminating 

Filament winding, pultrusion, and centrifugal casting 

Closed molding 

Compression 

Injection 

Other 

Total 

Quantity 

(106lbs) 

1,674 

1,038 

636 

901 

360 

523 

18 

2,575 

Share of Total 

(%) 

65 

40 

25 

35 

14 

20 

1 

100 

Source: Rauch Associates Inc. The Rauch Guide to the U.S. Plastics Industry. Bridgewater, NJ: 1991. 

this total were produced using injection molding processes, with compression molding 

processes accounting for most ofthe remaining RPCs made using closed molding processes. 

This section provides a more detailed description of these processes with special attention 

given to the five processes that contribute most to emissions at RPC facilities. As presented 

below, these processes can be segregated into open and closed molding categories. 

2.1.2.1 Open Molding Processes 

Open molding processes can be broken down into those that are simple, with minimal 

capital requirements, and those that are more heavily automated, with higher tooling, start-up, 

and other capital costs. Hand lay-up and spray-up are two contact molding processes that fit 

the first category of open molding processes. These two production processes use the 

simplest materials, technology, and manufacturing methods and are ideally suited for low-tomedium volume production of larger, more complex structural shapes. Other open molding 

processes, such as centrifugal and rotational casting, lamination, filament winding, and 

pultrusion processes, have much higher start-up capital costs, often in the millions of dollars. 

These processes have relatively low labor costs per unit output. Open molding 

processes typically only are cost-efficient when used in mass production of uniform RPCs 

because of high capital costs (SPI Composites Institute, 1995). The following sections 

provide more detailed descriptions of four open molding processes that contribute to 

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hazardous air pollutant (HAP) and VOC emissions at the RPC production facilities—hand 

lay-up, spray-up, filament winding, and pultrusion (LeFlam and Proctor, 1995). 

Hand Lay-Up. Hand lay-up is one ofthe most common low-to-medium volume RPC 

production processes. It typically involves manual application of general polyester liquid 

resins to a reinforcement, such as glass fiber mats or woven roving, that are laid against the 

smooth surface of an open mold. Serrated rollers or squeegees drawn across the preparation 

help to release any air that may be entrapped in the reinforcement material. Chemical curing, 

often induced by a catalyst additive, hardens the resin and reinforcement into a structural 

form that is exceptionally strong for its weight. The resin offers a uniform matrix for the 

reinforcing material in much the same way that concrete does when used in conjunction with 

reinforcing bars made of steel (SPI Composites Instimte, 1995). 

The mold is the primary piece of equipment necessary for the hand lay-up process, as 

Figure 2-2 illustrates. Prior to hand lay-up production, the mold (which is often itself a 

composite) is sprayed with a tinted gel-coat and allowed to partially cure. The gel-coat side 

ofthe final product takes on the color ofthe pigment used to tint the gel-coat and has a 

smooth surface and decorative finish, much like that provided by a high quality paint. The 

appearance and texture ofthe other side is rough and abrasive, unless corrective measures, 

such as applying a tightly woven sail cloth to the back surface prior to curing, or sanding the 

back-surface after curing are performed. In most applications of hand lay-up, only a single 

finished side is required (SPI Composites Instimte, 1995). 

Resin Reinforcement 

Figure 2-2. Hand Lay-up Processing 

Source: SPI Composites Institute. Introduction to Composites. Society of the Plastics Industry, Inc. 

Washington, DC: 1995. 

2-12 
P.25 

Spray Up. The spray-up process is very similar to hand lay-up processing. It too is 

best suited to low-to-medium volume production of larger composites with complex shapes. 

Unsaturated polyesters are also the most commonly used polymer, although isophthaltic 

polyesters and vinyl esters may also be used. As with hand lay-up, the polymers, 

reinforcements, fillers, and additives are applied to an open mold that has been sprayed with a 

pigmented gel-coat and allowed to partially cure. 

The primary difference from hand lay-up is that the input materials in the spray-up 

process are applied to the mold simultaneously, using either an air-atomized or airless 

spray-up gun. Both types of spray-up guns are designed to automatically chop a continuous 

feed of glass fiber in lengths ranging from 0.5 to 1.5 inches and then mix both the fiber and a 

user-determined amount of catalyst into a fan-shaped spray of polymer or polymer/filler 

mixture (SPI Composites Instimte, 1995). This process is illustrated in Figure 2-3. 

Spray-Up Gun 

I -Catalyst 

^_ Open Mold / 

-Continuous 

Roving 

Reinforcement 

Figure 2-3. Spray-up Processing 

Source: SPI Composites Institute. Introduction to Composites. Society of the Plastics Industry, Inc. 

Washington, DC: 1995. 

For some applications requiring added structural strength, more fiber reinforcement 

mats or rovings can be hand laid-up between applications ofthe sprayed mixture. Rollers or 

brushes are generally used to remove entrapped air from the mixture after it has been applied 

to the mold. Twenty-five to 30 pounds of laminate can be applied per minute using some 

types of spray-up equipment. This speed of application can lessen the labor input 

requirements relative to hand lay-up but is somewhat offset by the need for a skilled spray-up 

gun operator to ensure product quality (SPI Composites Institute, 1995). 

2-13 
P.26 

Filament Winding. Filament winding is a highly automated RPC production process 

suited to high volume production of strong surface-of-revolution composites, be they open 

(e.g., springs), cylindrical (e.g., pipes), or closed (e.g., storage tanks and pressure bottles). 

This process is extremely versatile, offering a wide choice of input materials. Traditional 

polymer choices have been dominated by thermoset resins (e.g., polyesters, vinyl esters, 

bisphenol A fumarate resins, furanes, and epoxies), but the use of thermoplastic resins (e.g., 

nylon, polycarbonates, and acrylic) is under development and gaining popularity. Figure 2-4 

offers a simple schematic of a sample filament winding process. The basic steps involve 

drawing a continuous strand of reinforcing material through a resin bath and then wrapping 

the impregnated reinforcement around a revolving mold, called a mandrel. Depending on the 

shape ofthe intended RPC, the mandrel can advance in one direction as it rotates (for springs 

and tubular shapes) or can rotate on two axes (for closed cylinders or spheres) (SPI 

Composites Instimte, 1995). 

Laminate 

Continuous Strand Roving 

Mandrel 

Figure 2-4. Filament Winding 

Source: SPI Composites Institute. Introduction to Composites. Society ofthe Plastics Industry, Inc. 

Washington, DC: 1995. 

The most common reinforcement material used is direct processed rovings of glass 

fiber; however, the choice of reinforcement fibers is virtually unlimited and numerous 

reinforcement application methods are commonly used. In fact, two or more different 

reinforcements can be applied in different patterns to a single composite. The ability to vary 

the type, form, quantity, and orientation of reinforcement materials as filament-wound RPCs 

are produced allows production designers to optimize the trade-off between input costs and 

2-14 
P.27 

performance requirements of composites intended for a given application. This is because 

they can limit the use of more costly, higher performance reinforcements to strategic 

locations in the composite strucmre and substitute lower cost fibers elsewhere. The use of 

hybrid reinforcement methods is increasingly common in filament winding processes. 

Limitations of filament winding include relatively high VOC emissions and capital 

investment requirements (SPI Composites Instimte, 1995). 

Pultrusion. The pultrusion process, shown in Figure 2-5, creates profile shapes like 

rods, plates, beams, and channels by pulling continuous strands of reinforcements through a 

resin bath, one or more pre-shaping guides, and ultimately through a heated shaping die 

where the pultruded RPC is cured into its permanent cross-sectional shape. The last stage in 

the process is the cutoff where equipment is used to cut the pultruded profile to its intended 

length. Pulling is achieved using either intermittent or continuous pulling devices. While 

development is underway to incorporate the use of thermoplastic resins in pultrusion 

processes, at present most applications are limited to the use of thermoset resins, primarily 

polyester, but phenolics, epoxies, and esters are also used. Commonly used reinforcement 

materials include continuous fiber glass rovings, surfacing mats, graphite fibers, chopped and 

continuous strand mats, and woven tapes (SPI Composites Instimte, 1995). Advantages of 

pultrusion include greater reinforcement orientation, a necessary attribute for some RPC 

applications, and lower capital equipment costs than most other high-volume RPC production 

processes. The primary limitations ofthe process are an inability to vary the cross-sectional 

characteristics along the length ofthe pultruded composite and stress resistance that is limited 

to the direction ofthe reinforcement material (SPI Composites Instimte, 1995). 

2.1.2.2 Closed Molding Processes 

Closed molding processes, such as the many variants of compression molding, use 

pre-prepared molding compounds like sheet molding compounds (SMC), bulk molding 

compounds (BMC), and reinforced thermoplastic sheets as feedstocks to their production 

processes. These molding compounds are prepared to facilitate mass production ofa wide 

variety of composites, each with its own special physical attributes. These compounds have 

the advantage of an extended shelf-life. Each compound is produced using fixed proportions 

ofthe appropriate polymers, reinforcements, fillers, and other additives needed to impart the 

specific physical properties and appearance to the composite produced (SPI Composites 

Instimte, 1995). This section provides more detailed descriptions ofthe most common 

compression molding processes as well as a closed molding process called injection molding. 

2-15 
P.28 

Heat Source 

Continuous Strand Roving -— , „ I 

Mat or Cloth C l M H 

Resin Applicator 

mw? 

Pulling Device 

Figure 2-5. Pultrusion 

Source: SPI Composites Institute. Introduction to Composites. Society of the Plastics Industry, Inc. 

Washington, DC: 1995. 

Compression Molding. There are four primary high-volume RPC production 

processes commonly called compression molding processes (and many variations of these 

processes): 

• Sheet Molding Compound (SMC), 

• Bulk Molding Compound (BMC), including Transfer Molding, 

• Wet System Compression Molding, and 

• Reinforced Thermoplastic Sheet Compression Molding. 

For each of these processes, the chosen composite materials, including all resins, 

reinforcements, filler, and additives, are compressed into a desired shape in a matched die 

hydraulic press under pressure ranging from 250 to 3,000 psi (SPI Composites Institute, 

1995). The composite feedstock is then held in place while the resin matrix quickly cures 

into its permanent hardened shape. Significant differences among these processes determine 

their suitability for a given application. The following sections offer brief descriptions of 

each of the main high-volume molding processes. 

2-16 
P.29 

Sheet Molding Compound. SMC is produced by mixing all ofthe composite 

materials, except for the reinforcing fibers, into a paste. The paste is then uniformly spread 

onto two separate "carrier films" that are fed through an SMC machine where the paste is 

compounded with the reinforcements. The carrier films are held apart, one above the other, 

while reinforcements, cut from continuous strand rovings, are uniformly distributed on the 

lower carrier film and then forced together like a fiber reinforcement sandwich as they are fed 

through a system of rollers that compact and consolidate the SMC. The SMC, with the 

carrier film still in place, is then rolled up and encased in a nylon sleeve that prevents 

evaporation of volatiles from the resin matrix that would allow the compound to finish 

curing. After a period of storage in a climate controlled area, the SMC is thickened to the 

desired viscosity for its intended application and then taken to a molding press where it is cut 

to its desired shape. The carrier films are then removed and the SMC permanently 

compressed into its ultimate shape in a heated matched die mold (SPI Composites Instimte, 

1995). 

SMC molding has high start-up capital costs associated with it. However, while the 

tooling costs of SMC compression molding are much higher than for most other RPC 

production processes, they are still generally lower than would be required to produce equally 

strong shapes from metal inputs. Retooling an SMC process to modify the design ofa 

composite is much quicker than in metal stamp molding operation. Other advantages include 

the ability to consolidate many parts into a single RPC. These attributes make SMC molding 

very attractive to such high-volume end users as producers of automobiles, appliances, 

construction, and electrical product industries. SMC compression molding is used to produce 

more composites of greater value than any other RPC production process (SPI Composites 

Instimte, 1995). 

Bulk Molding Compound. Bulk molding compound, like SMC, is more a material 

than a process. BMC generally consists of approximately 20 percent reinforcement, 

50 percent fillers and additives, and 30 percent resin matrix. The compound can be tinted to 

a desired color and, through strategic selection of input materials, can be prepared to afford 

exceptional mechanical and fire retardant properties. The basic process entails combining the 

desired composite materials into a molding compound that resembles putty and then placing 

the compound into a compression mold. Molding typically takes place at temperatures 

between 250 and 350 °F and at pressures ranging from 350 to 2,000 psi (SPI Composites 

Instimte, 1995). BMC is also used in transfer molding and injection molding processes to 

2-17 
P.30 

produce more complex shapes with closer mold tolerances than can be achieved using 

matched die compression molds. 

The advantages of BMC include reduced costs and improved stiffness and fire 

retardance due to lower reinforcement loadings and increased filler loadings. BMC can also 

be molded into intricately detailed, precise shapes with inserts affixed during the molding 

process. 

Wet System Compression Molding. Wet system compression molding differs from 

SMC and BMC compression molding in that a matrix of liquid resin mixed with fillers and 

additives is pumped or poured onto dry reinforcement mats that have been placed inside of 

the matched die mold. Thus, unlike SMC and BMC processing, the resin is not introduced to 

the reinforcements prior to molding. Hydraulic pressure is exerted on the mold, forcing the 

resin to permeate the reinforcement materials and fixing, and the composite remains under 

pressure until it has fully cured. Typical curing temperatures are 250 to 350 °F, much like 

SMC and BMC molding, but the pressure requirements are much lower, in the range of 250 

to 1,000 psi (SPI Composites Instimte, 1995). 

Like SMC and BMC, wet system molding can produce RPCs with two finished 

surfaces. Other advantages ofthis process include equipment and tooling savings, due to the 

reduced pressure requirements, and higher reinforcement loading, which affords superior 

mechanical properties. The disadvantages of wet system molding include an inability to 

provide undercuts or reinforcing ribs to add strength to the composite, higher labor costs, and 

more process waste than is typical with BMC and SMC molding processes. 

Reinforced Thermoplastic Sheet Molding. Reinforced thermoplastic sheet molding is 

quite similar to SMC, in that the composite materials are all combined and shaped into sheets 

prior to molding, but as the name implies, this process is designed for use with thermoplastic 

resins. Another difference is that the sheet is cut to fit entirely within the mold and is 

preheated prior to placement in the mold. When the mold is closed and pressure is applied, 

the thermoplastic resins start to flow and conform to the shape ofthe mold. The temperature 

ofthe mold is then controlled for 30 to 90 seconds to permit the molded sheet to solidify and 

permit removal ofthe RPC from the mold (SPI Composites Instimte, 1995). This process is 

sometimes called stamping, because the mold used is similar to a steel stamping press. 

Advantages ofthis process include unlimited shelf life for the input sheets, fast 

molding cycles, recyclable scrap, and potential for parts consolidation relative to metals. 

2-18 
P.31 

Capital costs are comparable to SMC molding. There are, as yet, few suppliers ofthe input 

sheets because this process is new. 

Injection Molding. Injection molding is perhaps the most versatile and widely applied 

process for mass producing fairly complex composites of absolute dimensional accuracy. It 

can be used for parts of any size for which a mold can be built and is ideally suited to highvolume applications. Each compression molding machine is capable of producing thousands 

of detailed RPCs per hour. As illustrated in Figure 2-6, the same equipment can be used to 

mold both thermoplastic resins and thermoset resins into RPCs. The only difference is the 

temperamre at which the resin is kept during the curing stage ofthe process within the mold. 

This process is most commonly used to shape RPCs from thermoplastic resins (e.g., nylon, 

acetal, PVC, polyethylene, SAN, polycarbonate, and ABS), which require cooler curing 

temperatures, but compression molding of thermoset resins (e.g., polyester, phenolic, epoxy 

and urethane) is gaining popularity (SPI Composites Instimte, 1995). 

• Injection Chamber (Hot) 

r— Hopper 

Mold 

(Cool) *— Screw or Plunger 

Thermoplastic Injection Machine 

Injection Chamber (Cool) 

Hopper 

pssreft 

'— Screw or Plunger 

Thermoset Injection Machine 

Figure 2-6. Injection Molding 

Source: SPI Composites Institute. Introduction to Composites. Society of the Plastics Industry, Inc. 

Washington, DC: 1995. 

2-19 
P.32 

The basic steps in the standard injection molding process consist of conveying 

granular or pelietized thermoplastic resin from a supply hopper to an opening at the opposite 

end ofa heated metal chamber, using an auger to control the rate that the resin advances to 

the tip. The resin is thus heated to a semi-fluid state melting or plasticizing the resin and can 

be injected into the mold at the tip ofthe chamber with a twist ofthe auger. The mold is kept 

at a cool temperamre and held closed while the resin cools down and solidifies. Once the 

resin has solidified, the mold is opened to eject the composite from the mold and the whole 

process can be restarted. 

2.2 Products 

There is great diversity in the types of products made using most of these processes. 

Among the open molding processes, product diversity is especially extensive in the hand 

lay-up, spray-up, and filament winding processes. Among closed molding processes, product 

diversity is greatest for the compression and injection molding processes. Table 2-7 

describes the basic shape characteristics that are best produced by each RPC production 

process and lists examples of composite products that result from each process. 

2.3 Costs of Production 

There are three variable inputs in reinforced plastic production: raw materials, labor, 

and energy. Raw materials include plastic resins, reinforcing materials, and fillers. Labor 

and energy are used throughout production as well as for final product transport. 

Prices for thermoset resins have increased since 1996, while most thermoplastic 

prices have fallen over the same period, as Table 2-8 shows. Among thermoset resins, 

unsaturated polyester and phenolics are close in price, while epoxy has a higher price than 

both. PVC and polypropylene are the least expensive thermoplastics, while the price of nylon 

is more than four times greater than these two. Table 2-9 provides prices for fibrous 

reinforcing materials. For 1997, the price of fiberglass, the most common reinforcement, is 

approximately $1.11 per pound. The price of carbon is the most expensive and is primarily 

used in high performance applications ($10 to $30 per pound). 

Many producers use fillers in order to minimize the amount of higher-cost resins 

needed per unit output (see Table 2-9). RPC manufacmrers frequently select calcium 

carbonate because of its relative low cost ($0.08 per pound). Other popular low cost fillers 

include kaoline and alumina trihydrate ($0.05 and $0.13 per pound respectively). As noted in 

2-20 
P.33 

Table 2-7. Compatibility of RPC Production Processes with Shape Characteristics and 

Specific Products 

Process Shape Characteristic Product Examples 

Open molding processes 

Hand lay-up and spray-up 

Filament winding 

Pultrusion 

Continuous laminating 

Centrifugal casting 

Closed molding processes 

Compression molding 

SMC compression 

molding 

BMC compression 

molding 

Reinforced thermoplastic 

sheet molding 

Large, complex 

Round, rigid 

Uniform cross-section 

Thin, flat, or curved profiles 

Uniform wall thickness 

Large or small shapes can be 

smoothly ribbed, embossed, or 

high complex 

Smaller complex 

Simple, thinwall 

Boat hulls, auto and truck body parts, 

swimming pools, tanks, corrosion 

resistant equipment, furniture, duct 

work, and equipment housings 

Pressure bottles, airplane bodies, 

underground storage tanks, drive shafts 

for cars and trucks, sailboat masts, and 

gun barrels 

Corrosion resistant rods, beams, 

channels, and plates . 

Flat and corrugated paneling, panels 

for truck trailers, road signs, and 

refrigerator liners 

Larger pipes, tanks 

Automotive body panels and front end 

assemblies, appliances, air conditioner 

base, office equipment housing 

Air conditioner components, pump 

housings, computer components, 

power tools, motor parts, gear cases, 

circuit board covers, garbage disposal 

housings 

Material handling pellets, tray, and 

shelving; automotive bumper beams, 

floor pans, battery trays, radiator 

supports; helmets; flooring; concrete 

pouring forms; and chair shells 

(continued) 

2-21 
P.34 

Table 2-7. Compatibility of RPC Production Processes with Shape Characteristics and 

Specific Products (Continued) 

Process Shape Characteristic Product Examples 

Closed molding processes (continued) 

Wet system compression Contoured, medium-wall 

molding thickness 

Transfer molding Simple configurations 

Bag molding Simple, large, contoured 

Reaction injection molding Large, intricate, high 

(RIM) performance, solid or cellular 

Rotational molding Hollow bodies, complex 

Trays, outboard motor shrouds, 

appliances, automotive applications, 

and sinks 

Body components for trucks, sports car 

bodies, automotive body panels, 

marine parts, small boats, plumbing 

components, equipment housings, and 

electrical components 

High performance aircraft parts, and 

aerospace components 

Automobile and truck body panels, 

bumper beams for cars and trucks, 

floor pans for cars and trucks, and 

pick-up truck beds 

Water pressure tanks, water softener 

tanks, and filters 

Sources: Rauch Associates Inc. The Rauch Guide to the U.S. Plastics Industry. Bridgewater, NJ: 1991. 

SPI Composites Institute. Introduction to Composites. Society ofthe Plastics Industry, Inc. 

Washington, DC: 1995. 

Section 2.1.1.4, additives are also used in relatively low quantities to enhance particular 

properties of RPCs . The Agency computed a weighted average price for additives in 1997 of 

$0.88 per pound. 

2.4 Uses and Consumers of Reinforced Plastics 

RPCs are an input into the production ofa variety of products ranging from children's 

toys to aerospace components and bathmbs to boat hulls. Therefore, the demand for RPCs is 

derived from the demand for these products, which can be found within one ofthe following 

major segments ofthe market for RPCs: 

2-22 
P.35 

Table 2-8. Plastic Resin Prices: 1996-1999 

Resin 

Thermosets 

Epoxy" 

Unsaturated Polyester" 

Phenolic" 

Thermoplastics 

ABSb 

Polypropylene" 

Polystyrene" 

PVC" 

Nylon0 

1996 

1.25-1.37 

,73-.84 

,72-.82 

.96-1.01 

,42-.44 

.48-.50 

.39-.40 

1.28-1.38 

Price ($/lb) 

1997 

1.30-1.42 

.75-.86 

J4-.84 

.88-.91 

.39-.41 

.38-.40 

.38-.41 

1.28-1.38 

1998 

1.30-1.42 

.75-.86 

J4-.84 

.68-.71 

.29-.31 

.38-.40 

.27-.30 

1.39-1.49 

1999 

1.30-1.42 

J5-.86 

.74-.84 

.64-.67 

.28-30 

.41-.43 

.29-.32 

1.29-1.39 

" General purpose. 

b

 Medium-impact. 

c

 Type 6. 

Source: Plastics News. "Resin Pricing." Updated May 13, 1999. As obtained on May 17, 1999. 

<http://www.plasticsnews.com>. 

• Aircraft/Military: flight surfaces, cabin interiors, aerospace components, military 

helmets, armament, rocket launchers. 

• Appliances/Business Machines: refrigerators, freezers, ranges, microwave ovens, 

power tools, small appliances, computer housings, calculators. 

• Constmction: swimming pools, rain gutters, molds for concrete, bathmbs, shower 

stalls, whirlpools, spas, highway signs, cooling tower components, paneling for 

greenhouses, patios, railings and other architectural components. 

• Consumer Products: fishing rods, golf clubs, skis, tennis rackets, furniture, 

campers, snowmobiles, exercise equipment, seating, counter tops, serving trays, 

boxes and containers, microwave cookware. 

• Corrosion Resistant Products: pipe fittings, ducts, hoods, tanks, pumps, filtration 

equipment, and a wide variety of other chemical resistant products for use in the 

waste/wastewater treatment, chemical processing, semiconductor, and 

petrochemical industries. 

2-23 
P.36 

Table 2-9. Selected Plastic Reinforcement and Filler Prices: 1997 

Input Price ($/lb) 

Reinforcements 

Fiberglass 

Cellulose 

Carbon 

Average 

Fillers 

Calcium carbonate 

Kaolin 

Alumina trihydrate 

Talc 

Mica 

Other minerals 

Glass spheres 

Natural 

Average 

Additives 

Average 

$1.11 

$0.52° 

$10-30 

$1.25 

$0.08" 

$0.05" 

$0.13 

$0.30 

$0.21" 

$0.08" 

$0.78" 

$0.05" 

$0.09 

$0.88 

" Price computed by dividing value by quantity and adjusting by a producer price index (PPI) where 

appropriate. 

Sources: U.S. Geological Survey. 1997. Minerals Yearbook: Clays, [online] <http://minerals.usgs.gov/ 

minerals/pubs/commodity/myb>. Obtained January 21, 2000. 

U.S. Geological Survey. 1997. Minerals Yearbook: Mica, [online] <http://minerals.usgs.gov/ 

minerals/pubs/commodity/myb>. Obtained January 21, 2000. 

Rauch Associates. 1991. The Rauch Guide to the U.S. Plastics Industry. Bridgewater, NJ: Rauch 

Associates, Inc. 

Murphy, John. 1994. The Reinforced Plastics Handbook. Oxford, UK: Elsevier Advanced 

Technology. 

U.S. Bureau of Labor Statistics. 2000. Producer Price Index—Commodities: WPUSOP9200, 

Intermediate Materials Less Food and Energy, 1990-2000. [online] <http://www.bls.gov>. Obtained 

January 20, 2000. 

Shearer, Brent. April 15, 1996. "Carbon Fibers Adjusting to Changes." Chemical Marketing 

Reporter. 

2-24 
• Electronic/Electrical: rods, tubes, circuit breaker boxes, molded parts, housings, 

substation equipment, electronic connections, pole line hardware, microwave 

antennas, and many other electrical and electronic applications. 

• Marine: boat hulls, motor covers, marine docks, moorings, floats, buoys, canoes, 

kayaks, and other components and hardware for naval, pleasure, and commercial 

water craft. 

• Transportation: body panels for cars, buses, and tractor trailers, tmck cabs, 

boxcar doors, subway seating, heater housings, front end assemblies, drive shafts, 

wind deflectors, grill opening panels, tail light housings, fender liners, instmment 

panels, and other diverse parts and accessories for land transportation and utility 

vehicles. 

• Other: all other composites applications. One significant new category of 

applications the repair/replacement of components ofthe civil infrastructure. 

Product examples include: guardrails, sign posts, and structural supports for 

highways and bridges. 

Over time, the need for lightweight structural materials that meet strength, stiffness, 

and other mechanical property requirements for high performance applications has prompted 

major developments in production practices in the end-use markets. The characteristics 

demanded vary by the market (e.g., constmction, transportation, consumer goods, or other 

product manufacmrer). For example, the ability to replace an assembly of several metal parts 

with a single molded composite is very appealing to manufacmrers of appliances and 

transportation equipment. The chemical resistance properties of RPCs allow users in the 

constmction and marine market segments to avoid the higher maintenance costs associated 

with the metal and wood materials that they traditionally used. 

The strength-to-weight ratios for composites are typically greater than those of metals. 

As an example, phenolic composites have greater yield strengths than steel or aluminum, 

although resistance to bending and the resistance to elongation may be superior in metals 

depending on the type of reinforcement in the plastic (Murphy, 1994). Composites have low 

flammability properties, which make composites superior to wood for applications 

susceptible to fire. Table 2-10 provides some examples of these desired demand 

characteristics for selected end uses and associated products. 

2-25 
P.38 

Table 2-10. Demand for Reinforced Plastic Composites: Some Examples 

End-User Industries and 

Product Markets Demand Characteristics Product Examples 

Aircraft/aerospace/military 

Appliances/business equipment 

Construction 

Marine 

Transportation 

Lightweight, moldability, and 

versatile nature 

Parts consolidation, design 

flexibility, and high strength to 

weight ratios 

Corrosion resistance, high strength 

to weight ratio, custom finishing, 

longer life-cycle and/or fewer 

maintenance requirements 

Large, rigid, continuous shapes 

with smooth, corrosion-resistant 

finishes and high strength to 

weight ratios 

Parts consolidation, light weight, 

continuous shapes with smooth 

corrosion-resistant finishes 

Structures and interiors of both 

military and commercial planes 

Dishwasher panels, freezers, small 

appliances, computer housings, 

and radios 

Beams, columns, roof trusses, 

soffit, siding, flooring, bathtubs, 

sinks, shower stalls, whirlpools 

and spas 

Boat hulls, jet skis, and other 

marine craft 

Body panels, front ends, bumpers, 

and interior dashboards for 

automobiles, mobile homes, buses, 

and trucks. 

Source: Society of the Plastics Industry, Inc. Introduction to Composites. 2nd ed. Washington, DC. The 

Composites Institute. 1992. 

Land transportation products consumed the most reinforced plastics in 1997, followed 

by construction, as Figure 2-7 illustrates. The land transportation segment alOne used 

1,095 million pounds, which accounts for 32 percent ofthe 3.4 billion pounds of RPCs 

consumed in 1997. Constmction applications, the second largest end-use category, 

consumed 700 million pounds of composites during 1997. Other significant market segments 

are marine and electrical products. Producers serving the marine segment will not be subject 

to the proposed controls; they will be separately addressed by the Agency. 

2-26 
P.39 

Reinforced Plastics Shipments = 3,422 million lbs. 

Aircraft/ 

Aerospace/ 

Military Appliances/ 

Miscellaneous 

3.2% 

0.7% 

Land 

Transportation 

32.0% 

Marine 

10.3% 

Business 

Equipment 

5.4% 

Electrical/ 

Electronic 

10.2% 

Construction 

20.5% 

Consumer 

Products 

6.1% 

CorrosionResistant 

Equipment 

11.6% 

Figure 2-7. Consumption of Reinforced Plastic Composites by Market Segment: 1997 

"Includes reinforced thermoset and thermoplastic resins, reinforcements, and fillers. 

Source: Society of the Plastics Industry, Inc. 1998. Facts and Figures of the U.S. Plastics Industry. 

Washington, DC: SPI. 

Table 2-11 indicates that consumption has risen from 1989 levels in all end-use 

categories except for aviation/aerospace/military, which has declined because of the recent 

reductions in U.S. government spending on defense. Total shipments have increased every 

year since 1991. The growth rate for consumption by land transportation was highest for the 

period 1984-1997, followed by electrical applications. Causes for aggregate growth vary : 

2-27 
Table 2-11. Consumption of Reinforced Plastic Composites by End Use: 1984-1997 (IO6

 lbs)a 

2-28 

End Use 

Aircraft/ 

aerospace/ 

military 

Appliances/ 

business 

equipment 

Construction 

Consumer 

products 

Corrosionresistant 

equipment 

Electrical/ 

electronic 

Marine 

Land 

transportation 

Miscellaneous 

Total" 

1984 

29 

123 

430 

143 

310 

189 

309 

540 

80 

2,153 

1985 

32 

133 

445 

142 

295 

191 

335 

563 

82 

2,218 

1986 

37 

137 

456 

149 

291 

201 

340 

585 

83 

2,279 

1987 

36 

141 

506 

167 

329 

214 

413 

656 

75 

2,536 

1988 

39 

150 

495 

169 

349 

230 

452 

695 

80 

2,658 

1989 

41 

151 

470 

158 

335 

229 

405 

677 

76 

2,542 

1990 

39 

153 

468 

165 

350 

241 

375 

705 

79 

2,575 

1991 

39 

135 

420 

149 

.355 

231 

275 

682 

74 

2,360 

1992 

32 

143 

483 

162 

332 

260 

304 

750 

83 

2,549 

1993 

25 

148 

530 

166 

352 

275 

319 

822 

89 

2,726 

1994 

24 

161 

597 

175 

376 

299 

364 

946 

102 

3,043 

1995 

24 

167 

627 

184 

395 

315 

375 

984 

107 

3,176 

1996 

24 

170 

643 

192 

405 

328 

383 

1,009 

111 

3,263 

1997 

24 

185 

700 

210 

396 

348 

353 

1,095 

111 

3,422 

Average 

Annual 

Growth Rate 

(1984-1997) 

-3.4% 

2.3% 

3.2% 

2.3% 

2.3% 

4.7.% 

0.1.% 

5.3% 

2.8% 

3.2% 

a

 Includes thermosetting and thermoplastic resins, reinforcements, and fillers. 

b

 Parts may not sum to totals due to independent rounding. 

Sources: Lindsay, Karen F. 1996. "State of the Industry: 1995-96." Composites Design and Application. February. 

Rauch Associates. 1991. The Rauch Guide to the U.S. Plastics Industry. Bridgewater, NJ: Rauch Associates, Inc. 

Society ofthe Plastics Industry, Inc. 1994. Facts and Figures of the U.S. Plastics Industry. Washington, DC: SPI. 

Society ofthe Plastics Industry, Inc. (SPI). 1998. Facts and Figures of the U.S. Plastics Industry. Washington, DC: SPI. 
P.41 

across individual market segments. Growth may be driven by advances in RPC production 

processes or increased demand for specific final products. Demand in some end-use 

categories is strongly influenced by flucmations in consumer confidence or by changes in 

government spending priorities. 

The growth for particular RPC processes and resins may differ from the observed 

aggregate rates of growth for the markets they serve, which is significant because the RPC 

source category to be regulated includes only thermosetting resins—mainly unsaturated 

polyesters. Table 2-12 presents information on consumption of reinforced unsaturated 

polyesters based on consumption data by end use for 1984 through 1993 from Predicasts 

Basebook and Modern Plastics. In contrast to the aggregate growth rates across end-use 

markets, Table 2-12 shows that growth for reinforced unsaturated polyesters was positive in 

electrical/electronic (0.7 percent), aircraft/aerospace/military (0.6 percent), appliances/ 

business equipment (0.4 percent annually), and corrosion resistant equipment (0.2 percent). 

It appears that reinforced unsaturated polyesters are losing market share in many end uses as 

technological advances allow thermoplastic resins to be used in a wider range of processes 

and applications. 

Some RPC processes may serve multiple end-use markets and, thus, have a different 

growth rate than those listed in Tables 2-11 and 2-12. In particular, industry sources cited in 

Modern Plastics state that pultruded parts using reinforced polyesters are replacing 

aluminum, wood, and polyvinyl chloride in various markets and are expected to have a 15 to 

25 percent growth rate over the next 5 years {Modern Plastics, 1993). Pultrusion is a fully 

automated fabrication process with low tooling and labor costs that produces continuous, 

cross-sectional composite profiles, all of which are expected to allow it to continue its strong 

growth and penetration of traditional material profile markets in the 1990s. Growth is 

expected to be particularly significant in the electrical and corrosion-resistant markets, with 

opportunities increasing in the constmction and aerospace markets (Modern Plastics, 1994). 

2.5 Manufacturing Facilities 

The information provided in this section is based on EPA's 1993 survey ofthe 

reinforced plastics industry (EPA, 1993). Although roughly 700 facilities participated in the 

survey, only 433 facilities were determined to be potential major sources of HAP emissions 

from the production of reinforced plastics. Thus, this section focuses on those 433 facilities 

likely to be subject to the proposed air regulations. 

2-29 
Table 2-12. Consumption of Reinforced Unsaturated Polyester by End Use: 1984-1993 (IO6

 lbs)" 

K> 

1>J 

O 

End Use 

Aircraft/aerospace/ 

military 

Appliances/business equipment 

Construction 

Plumbing fixtures 

Panels and siding 

Glazing and skylights 

Pipe, fittings, conduit 

Consumer products 

Corrosion-resistant equipment 

Electrical/electronic 

Marine 

Land transportation 

Miscellaneous 

Total' 

Predicast 

Code 

30752-20 

30754-00 

30760-00 

30765-00 

30761-00 

30761-40 

30766-00 

30770-00 

NA 

30755-00 

30752-40 

30752-00 

NA 

1984 

26 

86 

420 

109 

125 

45 

141 

130 

310 

NA 

308 

200 

NA 

1,592 

1985 

28 

85 

400 

101 

122 

41 

136 

132 

320 

48 

320 

220 

52 

1,605 

1986 

32 

87 

402 

102 

123 

40 

137 

130 

322 

52 

324 

200 

50 

1,599 

1987 

33 

90 

393 

100 

115 

39 

139 

130 

326 

55 

350 

195 

50 

1,622 

1988 

34 

93 

414 

112 

117 

42 

143 

135 

338 

53 

375 

207 

51 

1,700 

1989 

35 

93 

426 

115 

125 

50 

.158 

138 

350 

53 

353 

221 

52 

1,721 

1990 

34 

93 

384 

106 

109 

36 

139 

127 

336 

53 

300 

215 

48 

1,590 

1991 

36 

84 

337 

88 

99 

24 

126 

120 

329 

50 

221 

185 

45 

1,407 

1992 

31 

88 

387 

94 

108 

27 

122 

122 

299 

53 

243 

190 

52 

1,552 

1993 

25 

91 

418 

96 

116 

29 

122 

124 

NA 

55 

255 

207 

NA 

1,613 

Average 

Annual 

Growth Rate 

('84-'93)b 

0.6% 

0.4% 

-0.7% 

-1.3% 

-1.6% 

-5.8% 

-1.4% 

-0.9% 

0.2% 

0.7% 

-3.7% 

-0.5% 

-0.7% 

-0.5% 

* Includes weight of resin, reinforcements, and fillers. 

b

 Or widest range of available years. 

c

 Parts may not sum to totals due to independent rounding. 

Sources: Modern Plastics. "Resin Supply: Plotting a Course for Global Supply." January 1994. 

Predicasts Basebook. November 1992. Foster City, CA: Information Access Corporation. 
P.43 

2.5.1 Location 

Based on the 1993 updated industry screening survey, Figure 2-8 identifies the 

location ofthe 433 major source facilities producing reinforced plastics in 1993. Ohio, 

Indiana, California, Texas, and Pennsylvania are the top five states in order of number of 

major source facilities. 

2.5.2 Employment 

The 1993 survey data indicate that employment at these major source facilities ranged 

from 2 to 1,250 per facility in 1997 with an average of 84 employees for those facilities 

reporting their employment level. Table 2-13 provides the distribution of major source 

facilities reporting employment data. Over 80 percent ofthe 389 facilities reporting 

employment data had 100 employees or fewer. The vast majority ofthe remaining facilities 

reported employment levels between 101 and 500. Less than 3 percent of facilities reporting 

employment reported have more than 500 employees. 

2.6 Facility Ownership 

Facilities comprise a site of land with plant and equipment that combine inputs (raw 

materials, fuel, energy, and labor) to produce outputs (reinforced plastics). Companies that 

own these facilities are legal business entities that have the capacity to conduct business 

transactions and make business decisions that affect the facility. The terms facility, 

establishment, plant, and mill are used synonymously in this analysis and refer to the physical 

location where products are manufactured. Likewise, the terms company and firm are used 

synonymously and refer to the legal business entities that own the facilities. As seen in 

' Figure 2-9, the chain of ownership may be as simple as one facility owned by one company 

or as complex as multiple facilities owned by subsidiary companies. 

Potentially affected firms include entities that own facilities manufacturing reinforced 

plastics. In 1993, 356 companies owned the 433 major source facilities, according to the 

EPA industry survey (EPA, 1993). Annual sales data were available for 314 of these 

companies (88 percent). Based on the available small company sales and employment 

observations, the Agency also estimated sales for 39 ofthe 42 remaining companies by 

calculating the ratio of sales to employment for each SIC code and applying the appropriate 

ratio to the number of employees for each company without sales data. Appendix A lists 

these companies and their sales and employment figures where available. 

2-31 
P.44 

Figure 2-8. Geographic Distribution of Major Source Facilities 

2-32 
P.45 

Table 2-13. Distribution of Major Source Facilities by Employment 

Employment Range Number of Facilities Share of Reporting Facilities (%) 

0-100 313 80.5 

101-250 46 11.8 

251-500 20 5.1 

501-750 4 1.0 

751-1,000 5 1.3 

> 1,000 1 0.3 

Total reporting 389 100.0 

Not Available 44 

2.6.1 Size Distribution 

Firm size is likely to be a factor in the distribution ofthe regulatory action's financial 

impacts. The 356 firms owning the 433 manufacturing facilities range in size from 3 to 

647,000 employees. Table 2-14 shows the size distribution of potentially affected firms by 

total employment. The majority of firms (78 percent of those with employment data) have 

500 employees or fewer. Only 5 percent report employment between 500 and 1,000, while 

18 percent report employment over 1,000. Thus, it appears that this industry is composed of 

a large number of very small and very large firms, which likely results from a large number 

of smaller specialty product manufacturers and larger integrated manufacmrers of durable 

products. 

The majority of firms (82 percent of those with sales data) generated less than 

$100 million in annual sales, as Table 2-15 shows. Nine percent report annual sales between 

$100 million and $1 billion, and 9 percent report sales over $1 billion annually. The 

distribution of sales appears to be less skewed than the distribution of employment across 

firms. 

2.6.2 Issues of Vertical and Horizontal Integration 

Vertical integration is a potentially important dimension in analyzing firm-level 

impacts because the regulation could affect a vertically integrated firm on more than one 

2-33 
P.46 

Parent Company Parent Company 

Parent Company 

(Direct Owner) 

Other Companies 

or Legal Entities 

Subsidiary 

Company 

(Direct Owner) 

Subsidiary 

Company 

(Direct Owner) 

A B C 

Figure 2-9. Alternative Chains of Ownership 

level. For example, the regulation may affect companies for whom reinforced plastic 

production is only one of several processes in which the firm is involved. A company that 

produces reinforced plastics for example may also be involved in manufacturing automobiles, 

aircraft, sporting goods, and appliances. This firm would be considered vertically integrated 

because it is involved in more than one level of production including reinforced plastics. A 

regulation that increases the cost of manufacturing reinforced plastics 

2-34 
P.47 

Table 2-14. Distribution of Potentially Affected Firms by Employment 

Employment Range 

0-100 

101-250 

251-500 

501-750 

751-1,000 

> 1,000 

Total 

Not Available 

Number of Firms 

194 

55 

22 

10 

7 

61 

349 

7 

Table 2-15. Distribution of Potentially Affected Firms By Sales 

Company Sales 

Less than $5M 

$5Mto$10M 

$10MtoS25M 

S25M to S50M 

$50MtoS100M 

$100Mto$250M 

S250M to S500M 

S500Mto$lB 

$1B or greater 

Total 

Not Available 

Number of Firms 

127 

65 

52 

27 

20 

12 

13 

6 

31 

353 

3 

2-35 

Share of Total 

(%) 

55.6 

15.8 

6.3 

2.9 

2.0 

17.5 

100.0 

Share of Total (%) 

36.0 

18.4 

14.7 

7.6 

5.7 

3.4 

3.7 

1.7 

8.8 

100.0 
P.48 

will also affect the cost of producing the final products that use reinforced plastics in the 

production process. 

Horizontal integration is also a potentially important dimension in firm-level impact 

analysis. This is because a diversified firm may own facilities in unaffected industries, giving 

them resources to spend on complying with this regulation—if they so choose. The 

potentially affected firms in Appendix A demonstrate some diversification as evidenced by 

the number of subsidiaries and divisions listed. Most are part of larger firms or holding 

companies that are involved in several different industries. 

2.7 Small Businesses 

The Regulatory Flexibility Act (RFA) of 1980 as amended by the Small Business 

Regulatory Enforcement Fairness Act (SBREFA) of 1996 requires that the Agency give 

special consideration to small entities affected by Federal regulation. This section focuses on 

identifying the small businesses affected by the proposed NESHAP. 

2.7.1 Identifying Small Businesses 

The following secondary sources were used to obtain data for the 433 affected 

manufacmrers identified in the industry screening survey (EPA, 1993): 

Business and Company ProFile (Information Access Corporation, 1998) 

Dun and Bradstreet Market Identifiers (Dun & Bradstreet, 1998) 

Ward's Business Directory of U.S. and Private and Public Companies (Gale 

Research, 1998) 

Worldscope (Disclosure Inc., 1998) 

Standard & Poor's Corporations (Dialog Information Service, 1997) 

Manufacturing USA (Gale Research, 1996) 

Company 10-K Reports 

We identified the ultimate parent company and obtained sales and employment data for 

companies for which data are available. Based on available secondary data, the Agency has 

determined that 356 parent companies are affected by the regulation. Employment data could 

be obtained from the above sources for 349 of these parent companies (98 percent). 

2-36 
P.49 

The Small Business Administration (SBA) defines small businesses based on industry 

size standards (SBA, 1996). Table 2-16 presents the size standards for the SIC codes covered 

by the industry survey. As shown, the small business definition for the RPC industry ranges 

from 500 to 1,000 employees. We developed a company's size standard based on the 

reported SIC code for its facilities. In determining the companies' SIC, we made the 

following assumptions: 

• In cases where companies own facilities with multiple SICs, the most 

conservative SBA definition was used. For example, if a company owned 

facilities within SICs 3714 (size standard = 750 employees) and 3089 (size 

standard = 500 employees), we assumed the size standard to be 750 employees. 

• Thirty-eight facilities report an SIC code of 3079. To our knowledge, this SIC 

code is not currently used. Therefore, we assigned SIC 3089 to these facilities. 

• Twenty-four facilities report no SIC code. We assigned these facilities the most 

conservative size standard of 1,000 employees. 

Based on the SBA's definitions, 278 companies out of 356 (78 percent) were identified as 

small, as Figure 2-10 shows. These companies own 302 facilities (70 percent of all RPC 

facilities). Appendix A lists the companies identified as small for this analysis. 

J^^H^^^^^^H^^ \ Large 

Business l^^H^^^^^^M ^ ] Business 

78% H^^^^^^^H^. J 22% 

Figure 2-10. RPC Firms by Size 

2-37 
P.50 

Table 2-16. Small Business Administration Size Standards for RPC—Companies 

by SIC 

SIC 

2434 

2519 

2522 

2541 

. 2599 

2821 

3082 

3083 

3084 

3087 

3088 

3089 

3281 

3296 

3299 

3431 

3499 

3531 

3533 

3546 

3561 

Small Business 

Standard 

500 

500 

500 

500 

500 

750 

500 

500 

500 

500 

500 

500 

500 

750 

500 

750 

500 

750 

500 

500 

500 

SIC 

3564 

3589 

3612 

3613 

3621 

3647 

3663 

3679 

3711 

3713 

3714 

3715 

3716 

3728 

3743 

3792 

3799 

3821 

3949 

3993 

3999 

Small Business 

Standard 

500 

500 

750 

750 

1,000 

500 

750 

500 

1,000 

500 

750 

500 

1,000 

1,000 

1,000 

500 

500 

500 

500 

500 

500 

Source: U.S. Small Business Administration. Size Standards by SIC Industry. 1996. Available 

<http://www.sba.govgopher/Government-Contracting/Size/sizeall.txt>. 

2-38 
P.51 

SECTION 3 

ENGINEERING COST ANALYSIS 

During the production of RPCs, a portion ofthe monomers (i.e., styrene, methyl 

methacrylate) used to transform plastic resin into a durable product are released into the 

environment. To control these emissions, EPA has developed national emission standards 

for these HAPs under the authority of Section 112 ofthe CAA. This section presents the 

Agency's estimates ofthe national compliance costs associated with three regulatory 

alternatives developed to reduce HAP emissions. A detailed discussion ofthe methodologies 

used to develop these estimates is provided in the BID. 

3.1 Identifying Regulated Entities 

Based on information provided from EPA's 1993 survey ofthe reinforced plastics 

industry, 433 facilities were determined to be potential major sources of HAP emissions from 

the production of reinforced plastics. Ohio, Indiana, California, Texas, and Pennsylvania are 

the top five states in order of number of major source facilities. Based on available data on 

firm ownership, 302 facilities (69 percent) are owned by small businesses. Additional 

information on these facilities and their ownership is provided in Section 2. 

3.2 National Control Cost Estimates 

The Agency developed facility-specific estimates of annual compliance costs for each 

ofthe following three regulatory alternatives: 

• the MACT floor applied to all existing sources, 

• above-the-floor controls applied to all sources, and 

• the recommended alternative that applies control costs as follows: 

/ sources that emit less than 100 tons of HAPs per year—MACT floor controls; 

/ sources owned by small firms (as classified by the SBA definitions) that emit 

less than 250 tons of HAPs per year—MACT floor controls; and 

3-1 
P.52 

/ sources owned by large firms (as classified by SBA definitions) that emit more 

than 100 tons of HAP per year—above-the-floor controls. 

The engineering analysis provided estimates of total annual compliance costs 

associated with the required pollution control equipment or less pollution intensive method 

that brings each facility into compliance with the proposed standards. Note, however, that 

this cost estimate does not account for behavioral responses (i.e. changes in price and output 

rates). Instead these estimates are inputs to the economic model as described in Section 4 and 

include the following: 

• the capital costs associated with new control equipment as appropriately 

annualized over the equipment lifetime at a 7 percent discount rate, and 

• variable costs associated with the operation maintenance of pollution control 

equipment, cost of energy required to operate control equipment, materials 

replacement costs (replacement of existing resins/gelcoats with a low HAP 

resin/gel coat), and other administrative costs associated with monitoring, 

recordkeeping, and reporting. 

The nationwide compliance cost estimates for the required controls under each regulatory 

alternative are as follows:1 

• recommended alternative—$26.1 million; 

• MACT floor—$16.3 million; and 

• above-the-MACT floor—$67.4 million. 

'All dollar amounts are expressed in $1997. 

3-2 
P.53 

SECTION 4 

ECONOMIC IMPACT ANALYSIS 

The proposed NESHAP requires producers of RPCs that use selected thermosetting 

resins to meet emission standards for releases of HAPs to the atmosphere. To meet these 

standards, most producers will have to install equipment designed to capmre pollutants now 

released to the environment or to change production to less pollution-intensive methods. 

These actions will have financial implications for the affected producers. They will have 

broader societal implications because these effects' are transmitted through market 

relationships to other producers and consumers. These potential economic impacts are the 

subject ofthis section. 

EPA is examining three regulatory alternatives for addressing the problem of HAP 

releases from these sources: 

1) the MACT floor applied to all sources, 

2) above-the-floor controls applied to all sources, and 

3) the recommended,alternative that applies control costs as follows: 

• sources that emit less than 100 tons of HAPs per year—MACT floor controls; 

• sources owned by small firms (as classified by the SBA definitions) that emit 

less than 250 tons of HAP per year—MACT floor controls; and 

• sources owned by large firms (as classified by SBA definitions) that emit more 

than 100 tons of HAP per year—above-the-floor controls. 

This section provides results for each alternative. 

To measure the size and distribution of the economic impacts of these alternatives, 

EPA compared baseline conditions of RPC markets in 1997 with those for the counterfacmal 

or with-regulation conditions expected to result from implementing each alternative. The 

main elements ofthis analysis are 

4-1 
P.54 

• identification of markets for RPC products and description of firm behavior 

within these markets; 

• economic characterization ofthe regulated facilities in terms of whether they are a 

commercial or captive producer, commodity produced, and cost of production; 

• characterization of baseline demand for each product; 

• development of an economic model that evaluates behavioral responses to 

additional costs of regulation in a market context; and 

• presentation and interpretation of economic impact estimates developed by the 

model. 

4.1 Reinforced Plastic Composite Markets 

RPCs are consumed as inputs in the production of a wide variety of products that can 

be found within the following broad market segments: 

• Aircraft/Military: flight surfaces, cabin interiors, aerospace components, military 

helmets, armament, rocket launchers, etc. 

• Appliance/Business: refrigerators, freezers, ranges, microwave ovens, power 

tools, small appliances, computer housings, calculators, etc. 

• Constmction: swimming pools, rain gutters, molds for concrete, bathmbs, shower 

stalls, whirlpools, spas, highway signs, cooling tower components, paneling for 

greenhouses, patios, railings and other architectural components 

• Consumer Products: fishing rods, golf clubs, skis, tennis rackets, furniture, 

campers, snowmobiles, exercise equipment, seating, counter tops, serving trays, 

boxes and containers, microwave cookware, etc. 

• Corrosion Resistant Products: pipe fittings, ducts, hoods, tanks, pumps, filtration 

equipment, and a wide variety of other chemical resistant products for use in the 

waste/wastewater treatment, chemical processing, semiconductor, and 

petrochemical industries 

• Electronic/Electrical: rods, tubes, circuit breaker boxes, molded parts, housings, 

substation equipment, electronic connections, pole line hardware, microwave 

antennas, and many other electrical and electronic applications 

• Land Transportation: body panels for cars, buses, and tractor trailers, tmck cabs, 

boxcar doors, subway seating, heater housings, front end assemblies, drive shafts, 

wind deflectors, grill opening panels, tail light housings, fender liners, instmment 

4-2 
P.55 

panels, and other diverse parts and accessories for land transportation and utility 

vehicles 

• Other: all other composites applications, including the repair/replacement of 

components ofthe civil infrastructure such as guardrails, sign posts, and structural 

supports for highways and bridges 

Some ofthe directly affected operations are performed as part of larger integrated 

process. These captive producers do not engage in commercial transactions involving the 

RPC product. They produce and sell a product (e.g., appliances) that incorporates the RPC 

product that they also produce. Other RPC producers do sell their products in the market 

where the RPC product is used as an input to another product, which also could be appliance 

manufacture. Presumably, each producer has conducted a "make or buy" decision, some 

deciding to buy the RPC commodity, others to self-produce it. 

Each ofthe product groups above is taken as a separate composite commodity with a 

single price and unique supply and demand characterization. In addition to these segments, 

sufficient market information is available to separate the constmction segment into three 

distinct end-use markets—general constmction, plumbing fixtures, and panels. Operating at 

this broad level of product aggregation when there are literally thousands of specific products 

obviously masks baseline price differences and market shifts within each segment. However, 

without substantial additional data further disaggregation is not possible. 

As shown in Table 4-1, more than 3.1 billion pounds of RPC products were shipped 

in 1997 to domestic and foreign consumers in these markets. Based on industry survey 

responses and historical average growth rates, EPA estimated that 1.4 billion pounds of 

RPCs, or 45 percent ofthe total shipments, were manufactured by facilities directly affected 

by the regulation. Facilities using unaffected resins (i.e., thermoplastics or unaffected 

thermosets) produced 1.7 billion pounds of RPCs. 

Both segments include "in-house" production of RPCs by captive facilities and 

merchant production by commercial RPC suppliers. The captive facilities are likely to be 

owned by larger integrated firms manufacturing durable products, while the commercial 

facilities are typically smaller specialty firms. Given limited data on the type of facility, the 

Agency approximated this distribution by using the SBA criteria for large and small 

businesses. In the directly affected segment, facilities owned by large businesses are assumed 

to be captively owned and operated. Facilities owned by small businesses are assumed to be 

4-3 
P.56 

Table 4-1. Reinforced Plastics Composites Shipments by End-Use Market: 1997 

(IO6 lbs)a 

End-Use Market 

Aircraft/aerospace 

Appliances/business equip. 

General construction 

Plumbing fixtures 

Panels 

Consumer products 

Corrosion-resistant products 

Electrical/electronic 

Land transportation 

Miscellaneous 

Total 

Total 

24.0 

185.0 

163.5" 

403.3 

202.6" 

210.0 

396.0 

348.0 

1,095.0 

111.0 

3,138.4 

Directly 

Merchant 

0.5 

12.0 

44.6 

172.7 

22.7 

31.0 

120.7 

18.0 

112.2 

21.3 

555.6 

Affected" 

Captive 

5.3 

8.5 

71.9 

230.6 

100.7 

56.0 

30.9 

81.2 

255.2 

19.3 

859.8 

Indirectly Affected' 

Merchant 

1.6 

96.1 

18.0 

0.0 

14.5 

43.8 

194.5 

45.2 

222.2 

36.9 

672.9 

Captive 

16.6 

68.4 

29.0 

0.0 

64.6 

79.2 

49.9 

203.6 

505.4 

33.4 

1,050.1 

a

 Includes weight of resin, reinforcements, and fillers. Totals may not sum due to independent rounding. 

b

 Estimates based on projected facility data developed from ICR survey responses and historical average 

annual output rates. The merchant/captive distribution was determined by the size of the owning company 

(i.e., large = captive and small = merchant). • 

c

 Computed as the difference between total shipments and directly affected shipments. Merchant/captive 

quantities were calculated using the same merchant/ captive ratio observed for the affected segment. 

d

 EPA estimate. 

Source: Society of Plastics Industry, Inc. 1998. Facts and Figures of the U.S. Plastic Industry. 1998 Edition. 

SPI, Washington, DC: September 1998. 

merchant producers. For the unaffected segment, the Agency computed the merchant/captive 

distribution using the ratio observed for the regulated segment. 

Following the above approach, EPA estimated that 555.6 million pounds of regulated 

thermoset RPCs were exchanged in markets during 1997, or 39 percent ofthe directly 

affected segment of 1,415.4 million pounds. Captively produced resins that are directly 

affected by the regulation accounted for the remaining 859.8 million pounds. As shown in 

Table 4-1, the same merchant/captive proportions are applied to the indirectly affected 

segment. The directly and indirectly affected merchant supply then constitutes the market 

quantity for each RPC product as shown in Table 4-2. 

Publicly available data on market prices for RPCs at this level of aggregation does not 

exist. Absent these data, EPA computed market prices for each market segment by taking the 

4-4 
P.57 

Table 4-2. Estimated Market Quantities and Prices for Reinforced Plastics Composites 

by Product Group: 1997 

Product Group 

Aircraft/aerospace 

Appliances/business equip. 

General construction 

Plumbing fixtures 

Panels 

Consumer products 

Corrosion-resistant products 

Electrical/electronic 

Land transportation 

Miscellaneous 

Totals/Average 

Directly 

Affected 

0.51 

11.98 

44.61 

172.66 

22.67 

30.95 

120.66 

18.04 

112.22 

21.34 

555.64 

Quantity (IO6 lbs/yr) 

Indirectly 

Affected 

1.57 

96.11 

17.99 

0.00 

14.55 

43.77 

194.47 

45.23 

222.22 

36.95 

672.86 

Total 

Market 

02.08 

108.09 

62.59 

172.66 

37.23 

74.72 

315.13 

63.27 

334.44 

58.29 

1,228.50 

Price ($/lb)° 

$38.35 

$2.37 

$3.46 

$3.48 

$3.24 

$3.41 

$3.77 

$3.29 

$3.44 

$3.41 

$3.48 

a

 Computations based on multiplying the per-unit estimates ofthe facility-specific costs of materials (i.e., 

resins, fillers, and reinforcements) by the U.S. Census estimate ofthe average ratio of sales to costs-ofmaterials for NAICS code 326199A (reinforced and fiberglass plastics products, nee), which was 2.28. The 

unit cost ofthe highest cost supplier in each market was assumed to be equal to the commodity price for that 

market segment. 

highest values that result from the multiplication ofthe facility-specific costs of materials 

(i.e., resins, fillers, and reinforcements)1 by the U.S. Census Bureau estimate ofthe average 

ratio of sales to costs-of-materials for NAICS code 326199A (reinforced and fiberglass 

plastics products, nee), which was 2.28. Assuming perfect competition for this analysis, the 

resulting sales estimate is deemed as the best approximation of facility-specific pricing with 

the highest (or marginal) supplier in each market determining market price. Table 4-2 

presents the estimated prices for RPCs in 1997 for each RPC product grouping as well as the 

directly and indirectly affected market quantities. 

'Given the limited data on use of these materials by market, the Agency computed a weighted average price 

($1.00 per pound resin, $1.25 per pound reinforcement, and $0.09 per pound for filler) and applied it to 

estimate material costs for each producer with the exception of aerospace/military. In that case, EPA used 

data on carbon reinforcement prices only. 

4-5 
P.58 

Market impacts ofthe regulation are conditional on the behavior of firms. For this 

analysis, firms are viewed as a price-takers; that is, each firm takes the market price as given. 

This assumption of "perfect competition" seems appropriate given the number and 

distribution of buyers and sellers of RPCs across the United States and the reasonably 

homogeneous namre of RPC products. Therefore, the Agency modeled ten national, 

perfectly competitive markets based on the product groups identified above. 

4.2 Producers, Costs, and Supply 

As described above, RPC facilities are classified into two types of producers: captive 

or merchant. Several factors would suggest that the impact of the regulation on the choices 

of captive producers (i.e., the use of "in-house" RPCs production methods, substitute 

materials, and RPC output levels) is small because RPCs typically represent a small cost 

share of their final products. In addition, quality and control issues may preclude these 

operations from obtaining RPCs from outside suppliers. Therefore, the market analysis 

focuses only on the merchant segment of RPC production. 

Two types of merchant suppliers operate in these markets: 

• facilities directly affected by the regulation because they face additional costs with 

the implementation of the NESHAP and 

• facilities indirectly affected by the regulation because they produce a close 

substitute for the products produced by the regulated entities. 

Although this second type of supplier does not incur additional control costs, it will be 

affected by any changes in market prices that occur with the regulation. The engineering 

analysis projected each directly affected facility's 1997 product-line quantities based on the 

Information Collection Request (ICR) survey data and historical industry average annual 

output growth rates. Each individual merchant facility is included in the economic model. 

The output from indirectly affected producers is the difference between total merchant 

shipments produced and that from affected producers (see Table 4-1). Absent a detailed 

characterization of these producers and because they are not subject to the regulation, this 

component of supply was included in the economic model as a single representative supplier 

with a general functional form that allows for increases in their production in response to 

price increases (see Appendix B for details). 

For affected facilities, the Agency developed unit cost curves for each RPC product 

line based on the reported production and the associated market price from Table 4-2 (see 

4-6 
P.59 

Appendix B for details). Given fixed factors of production (i.e., plant and equipment), each 

RPC product line at a directly affected facility is characterized by an upward-sloping supply 

function, as shown in Figure 4-1. In this case, the supply function is that portion ofthe 

marginal cost curve bounded by zero and the technical capacity at the facility with production 

costs being measured as the area under the curve up to their output level. Suppliers select 

their output level according to this schedule as long as the market price is sufficiently high to 

cover average variable costs (i.e., greater than C0 in Figure 4-1) and the resulting revenue 

surplus is large enough to cover any fixed costs. If the market price falls below the minimum 

average variable costs, then the firm's best response is to cease production because total 

revenue does not cover the total variable costs of production. These individual supply 

decisions are then aggregated (i.e., horizontally summed) to develop the market supply curve. 

Once we apply this characterization ofthe supply function to each affected producer, we 

derive their production costs by taking the integral ofthe area under the curve corresponding 

to their production rate and market price. 

$/lb 

a 

lbs/year 

Figure 4-1. Supply Curve for a Representative Directly Affected Merchant Facility 

4-7 
P.60 

As detailed in Appendix B, this analysis employs an "intermediate" mn analysis in 

which some factors are fixed (capital) and others are variable (labor, materials, etc.). This 

allows us to avoid the consequences of assuming the very short mn or the long mn. The very 

short run is a case in which all factors of production are fixed and producers are unable to 

respond and, thus, incur a one-to-one reduction in profits due to regulation, while the long 

mn is a case in which all factors are variable and all regulatory costs are passed on to 

consumers. Therefore, our modeling approach addresses economic viability for both the 

short-mn criteria (i.e., product-line revenues cover all variable costs) and the long-mn criteria 

(i.e., facility revenues cover total costs). 

4.3 Consumers, Value, and Demand 

Two types of consumers use RPC products: 

• "in-house" consumers of RPCs produced by captive producers, and 

• other firms that purchase RPCs from merchant producers. 

Large integrated firms consume RPCs manufactured within the firm, and no explicit RPC 

demand is revealed through a market transaction. Rather, the decision to consume RPCs 

produced "in-house" is the result ofa "make or buy" decision that considers the value to the 

firm of manufacturing these inputs as opposed to purchasing them offsite. Although these 

choices are not explicitly addressed in the economic model, it is likely that these consumers 

are less responsive to changes in RPC costs because the cost share of total production is small 

and their supply options may be limited for corporate or technical reasons. As a result, the 

impacts on these producers are determined using a full-cost absorption approach with the 

estimated regulatory costs causing a dollar for dollar reduction in their profits. 

A variety of consumers purchase RPC products commercially and incorporate them 

into other higher-order products. For example, automobile manufacmrers use RPC bumpers 

and interior components; electrical appliances and electronic products use RPCs as internal 

components and external housings. The value of these products depends on the availability 

and cost of substitution for the product (i.e., metal instead of plastic), the features ofthe 

alternative product that affect its degree of substitutability in higher-order products, and the 

price ofthe higher-order product. 

For the economic analysis, each commodity market was modeled as having a single 

aggregate consumer with a downward-sloping market demand curve (see Figure 4-2). The 

4-8 
P.61 

$/lb 

D 

lbs/year 

Figure 4-2. Demand Curve for RPCs 

Agency constmcted this curve for each RPC commodity using baseline quantity, price data, 

and assumptions about the responsiveness to changes in price (derived demand elasticity). 

Factors that influence the magnimde ofthis price responsiveness include the 

• price-responsiveness ofthe end product made with RPCs, 

• cost share ofthe RPC input in total production ofthe end product, and 

• ease of substitution between this input arid other inputs in production. 

Although data limitations prevent estimation of these parameters, knowledge about the 

relationships of these factors makes it possible to develop informed assumptions about RPC 

consumer responsiveness to price changes in commercial markets. If we assume or expect 

that the 

• demand elasticity ofthe final commodity is one (i.e., a 1 percent increase in price 

results in a 1 percent decrease in quantity demanded), 

• cost share of RPCs in total production cost is small, and 

• ease of substitution between inputs difficult, then 

4-9 
P.62 

the elasticity of demand for RPCs would be inelastic (i.e., less than one). For this analysis, 

the Agency used a demand elasticity of-0.5 (i.e., a 1 percent increase/decrease in the price of 

RPCs would result in a 0.5 percent decrease/increase in the quantity of RPC products 

demanded). Appendix B provides a detailed description ofthe equations that characterize the 

market demand curves. 

4.4 Baseline and With-Regulation Equilibrium 

The competitive model of price formation, as shown in Figure 4-3 (a), posits that 

market prices and quantities are determined by the intersection ofthe market supply and 

demand curves. Under the baseline scenario, a market price and quantity (P,Q) are 

determined by the downward-sloping market demand curve (DM) and the upward-sloping 

market supply curve (SM) that reflects the sum ofthe individual supply curves of directly 

affected and indirectly affected facilities that produce a given product. 

With the regulation, the cost of production increases for suppliers using regulated 

thermoset resins. These additional costs include a variable component consisting ofthe 

operating and maintenancecosts and a fixed component that does not vary with output (i.e., 

expenditures for control-related capital equipment to comply with the regulatory alternative). 

The imposition ofthe regulatory control costs is represented as an upward shift in the supply 

curve for each directly affected facility. As a result ofthe upward shift in these individual 

supply curves, the market supply curve for RPC products will shift upward as shown in 

Figure 4-3(b) to reflect the increased costs of production at facilities using thermoset resins. 

In baseline without the proposed standards, the industry produces total output, Q, at 

price, P, with directly affected facilities producing the amount qd and indirectly affected 

facilities accounting for Q minus qd, or q;. With the regulation, the market price increases 

from P to P' and market output (as determined from the market demand curve, DM) declines 

from Q to Q'. This reduction in market output is the net result of reductions at directly 

affected facilities and increases at indirectly affected facilities. 

4.5 Results 

The simple analytics presented above suggest that, when faced with higher costs of 

RPC product production, producers will attempt to mitigate their impacts by making 

adjustments to shift as much ofthe burden on other economic agents as market conditions 

allow. The adjustments available to facility operators include changing production processes, 

changing inputs, changing output rates, or even closing the facility. This analysis focuses on 

4-10 
P.63 

3d 

Facilities 

Directly Affected 

+ P 

Facilities 

Indirectly Affected 

Market 

a) Baseline Equilibrium 

\cc 

§M'y CM. 

! ! D M 

i i 

q' q 

Facilities 

Directly Affected 

q q' 

Facilities 

Indirectly Affected 

Q' Q 

Market 

b) With-Regulation Equilibrium 

Figure 4-3. Market Equilibrium Without and With Regulation 

the last two options because they appear to be the most viable for RPC facilities, at least in 

the near-term. A large segment ofthe RPC industry is affected by the regulation, and we 

would expect upward pressure on prices as producers facing higher costs reduce output rates 

in response to these costs. Changes in market prices and, through the impact of price on 

4-11 
P.64 

quantity demanded, output for each product will lead to changes in the profitability of 

product lines, facilities, and firms. These market and industry adjustments will also 

determine the social costs ofthe regulation. 

To estimate these economic impacts, the concepmal model described above was 

operationalized in a multiple spreadsheet model, as detailed in Appendix B. In summary, this 

model characterizes producers and consumers of each RPC product and their behavioral 

responses to the imposition ofthe regulatory compliance costs. These costs are expressed per 

pound of RPC product for each facility and serve as the input to the market model, or "costshifters" ofthe baseline supply curves at the facility. Given these costs for directly affected 

facilities, the model determines a new equilibrium solution in a comparative static approach 

with higher market prices and reductions in output for each RPC product. 

The following sections provide the Agency's estimates of these economic impacts for 

the recommended alternative and compare and contrast these results with the projected 

impacts under the MACT floor and above-the-MACT floor alternatives. 

4.5.1 Market-Level Impacts 

The increased cost of production due to the regulation is expected to slightly increase 

the price of composites and marginally reduce their production/consumption from baseline 

levels. As shown in Table 4-3, the recommended alternative is projected to increase the 

average price of RPC products by 0.3 percent, or $0.01 per pound. The price impacts are 

attenuated by the existence of a perfect substitute for the regulated RPC products. This 

substitute is RPC products made from thermoplastic resins, which are not subject to the 

regulation. With higher RPC product prices, they are expected to increase production by 0.3 

percent. The combined effect of higher costs due to regulation and substitution to unaffected 

RPC products is expected to cause a 0.8 percent reduction in production at regulated 

facilities. The net result of these reductions at affected facilities and the increases at 

unaffected facilities is a market decline in output of 0.2 percent. 

The size ofthe projected price increase for each commodity is primarily determined 

by the level and distribution of compliance costs incurred by the facilities manufacturing 

these commodities. In general, markets with higher per-unit compliance costs are expected to 

experience the most significant price changes. As shown in Table 4-4, market prices are 

projected to increase at or above the industry average for five ofthe ten markets. An 

additional factor in determining the changes in market prices across the products is the 

4-12 
Table 4-3. Market-Level Impacts ofthe Reinforced Plastic Composites NESHAP Regulatory Alternatives: 1997 

Aircraft/Aerospace 

Market Price (per lb) 

Market Quantity (Millions lbs/yr) 

Thermosets (Directly Affected) 

Thermosets/Thermoplastics (Indirectly Affected) 

Appliances/Business Equipment 

Market Price (per lb) 

Market Quantity (Millions lbs/yr) 

Thermosets (Directly Affected) 

Thermosets/Thermoplastics (Indirectly Affected) 

General Construction 

Market Price (per lb) 

Market Quantity (Millions lbs/yr) 

Thermosets (Directly Affected) 

Thermosets/Thermoplastics (Indirectly Affected) 

Plumbing Fixtures 

Market Price (per lb) 

Market Quantity (Millions lbs/yr) 

Thermosets (Directly Affected) 

Thermosets/Thermoplastics (Indirectly Affected) 

Panels 

Market Price (per lb) 

Market Quantity (Millions lbs/yr) 

Thermosets (Directly Affected) 

Thermosets/Thermoplastics (Indirectly Affected) 

Consumer Products 

Market Price (per lb) 

Market Quantity (Millions lbs/yr) 

Thermosets (Directly Affected) 

Thermosets/Thermoplastics (Indirectly Affected) 

Baseline 

$38.35 

2.08 

0.51 

1.57 

$2.37 

108.09 

11.98 

96.11 

$3.46 

62.59 

44.61 

17.98 

$3.48 

172.66 

172.66 

— 

$3.24 

37.23 

22.67 

14.55 

$3.41 

74.72 

30.95 

43.77 

MACT Floor 

Absolute 

Change 

<$0.01 

<-0.01 

<-0.01 

<0.01 

<$0.01 

-0.02 

-0.07 

0.04 

$0.02 

-0.21 

-0.43 

0.21 

$0.01 

-0.29 

-0.29 

— 

<$0.01 

-0.04 

-0.08 

0.04 

$0.01 

-0.17 

-0.39 

0.22 

Relative 

Change 

<0.1% 

<-0.1% 

<-0.1% 

<0.1% 

<0.1% 

<-0.1% 

-0.6% 

<0.1% 

0.5% 

-0.2% 

-1.0% 

0.5% 

0.3% 

-0.2% 

-0.2% 

NA 

0.1% 

-0.1% 

-0.3% 

0.1% 

0.4% 

-0.2% 

-1.3% 

0.4% 

Recommended Alternative 

Absolute 

Change 

<$0.01 

<-0.01 

<-0.01 

<0.01 

<$0.01 

-0.02 

-0.07 

0.04 

$0.02 

-0.22 

-0.43 

0.21 

$0.01 

-0.29 

-0.29 

— 

<$0.01 

-0.04 

-0.08 

0.04 

$0.01 

-0.17 

-0.39 

0.22 

Relative 

Change 

<0.1% 

<0.1% 

<0.1% 

<0.1% 

<0.1% 

<-0.1% 

-0.6% 

<0.1% 

0.5% 

-0.2% 

-1.0% 

0.5% 

0.3% 

-0.2% 

-0.2% 

NA 

0.1% 

-0.1% 

-0.3% 

0.1% 

0.4% 

-0.2% 

-1.3% 

0.4% 

Above-the-MACT-Floor 

Absolute 

Change 

$0.01 

<-0.01 

<-0.01 

<0.01 

<$0.01 

,-0.12 

-0.33 

0.21 

$0.06 

-0.52 

-1.29 

0.77 

$0.05 

-1.28 

-1.28 

— 

$0.01 

-0.06 

-0.12 

0.07 

$0.03 

-0.46 

-1.07 

0.61 

Relative 

Change 

<0.1% 

<0.1% 

-0.1% 

<0.1% 

0.2% 

-0.1% 

-2.7% 

0.2% 

1.7% 

-0.6% 

-2.9% 

1.7% 

1.5% 

-0.7% 

-0.7% 

NA 

0.2% 

-0.1% 

-0.5% 

0.2% 

1.0% 

-0.5% 

-3.5% 

1.0% 

(continued) 
Table 4-3. Market-Level Impacts ofthe Reinforced Plastic Composites NESHAP Regulatory Alternatives: 

(continued) 

1997 

Corrosion-Resistant 

Market Price (per Ib) 

Market Quantity (Millions lbs/yr) 

Thermosets (Directly Affected) 

Thermosets/Thermoplastics (Indirectly Affected) 

Electrical/Electric 

Market Price (per lb) 

Market Quantity (Millions lbs/yr) 

Thermosets (Directly Affected) 

Thermosets/Thermoplastics (Indirectly Affected) 

Land Transportation 

Market Price (per lb) 

Market Quantity (Millions lbs/yr) 

Thermosets (Directly Affected) 

Thermosets/Thermoplastics (Indirectly Affected) 

Miscellaneous 

Market Price (per lb) 

Market Quantity (Millions lbs/yr) 

Thermosets (Directly Affected) 

Thermosets/Thermoplastics (Indirectly Affected) 

Total 

Market Price (per lb) 

Market Quantity (Millions lbs/yr) 

Thermosets (Directly Affected) 

Thermosets/Thermoplastics (Indirectly Affected) 

Baseline 

$3.77 

315.13 

120.66 

194.47 

$3.29 

63.27 

18.04 

45.23 

$3.44 

334.44 

112.22 

222.22 

$3.41 

58.29 

21.34 

36.95 

$3.48 

1,228.50 

555.64 

672.86 

MACT Floor 

Absolute 

Change 

$0.02 

-0.78 

-1.77 

0.99 

<$0.01 

-0.04 

-0.09 

0.05 

$0.01 

-0.55 

-1.34 

0.78 

$0.01 

-0.09 

-0.20 

0.11 

$0.01 

-2.20 

^1.66 

2.46 

Relative 

Change 

0.4% 

-0.2% 

-1.5% 

0.4% 

0.1% 

<-0.1% 

-0.5% 

0.1% 

0.3% 

-0.1% 

-1.2% 

0.3% 

0.2% 

-0.1% 

-0.9% 

0.2% 

0.3% 

-0.2% 

-0.8% 

0.3% 

Recommended Alternative 

Absolute 

Change 

$0.02 

-0.78 

-1.77 

0.99 

<$0.01 

-0.04 

-0.09 

0.05 

$0.01 

-0.55 

-1.34 

0.78 

$0.01 

-0.09 

-0.20 

0.11 

$0.01 

-2.20 

-4.66 

2.46 

Relative 

Change 

0.4% 

-0.2% 

-1.5% 

0.4% 

0.1% 

<-0.1% 

-0.5% 

0.1% 

0.3% 

-0.1% 

-1.2% 

0.3% 

0.2% 

-0.1% 

-0.9% 

0.2% 

0.3% 

-0.2% 

-0.8% 

0.3% 

Above-the-MACT-Floor 

Absolute 

Change 

$0.04 

-1.92 

^t.38 

2.46 

$0.01 

-0.09 

-0.23 

0.14 

$0.02 

-1.46 

-3.58 

2.11 

$0.03 

-0.32 

-0.75 

0.43. 

$0.03 

-6.23 

-13.04 

6.81 

Relative 

Change 

1.1% 

-0.6% 

-3.6% 

1.1% 

0.2% 

-0.1% 

-1.3% 

0.2% 

0.7% 

-0.4% 

-3.2% 

0.7% 

0.9% 

-0.5% 

-3.5% 

0.9% 

0.9% 

-0.4% 

-2.3% 

0.8% 
Table 4-4. Summary of Compliance Costs and Market Price Changes: 1997 ($/lb) 

Aircraft/ 

Aerospace 

Appliances/ 

Business 

Equipment 

General 

Construction 

Plumbing 

Fixtures 

Panels 

Consumer 

Products 

CorrosionResistant 

Electrical/ 

Electric 

Land 

Transportation 

Miscellaneous 

Total 

Directly 

Affected 

Share 

25% 

11% 

71% 

100% 

61% 

41% 

38% 

29% 

34% 

37% 

45% 

MACT Floor 

Incremental Compliance 

Cost 

Mean 

$0.03 

$0.02 

$0.06 

$0.07 

$0.02 

$0.07 

$0.09 

$0.03 

$0.07 

$0.06 

$0.07 

Max 

$0.03 

$0.06 

$0.38 

$4.22 

$0.15 

$0.29 

$0.45 

$0.15 

$0.28 

$0.16 

$4.22 

Standard 

Deviation 

NA 

$0.03 

$0.07 

$0.44 

$0.04 

$0.08 

$0.12 

$0.04 

$0.05 

$0.05 

$0.19 

Market Price 

Change 

Absolute 

<$0.0I 

<$0.01 

$0.02 

$0.01 

<$0.01 

$0.01 

$0.02 

<$0.01 

$0.01 

$0.01 

$0.01 

Relative 

<0.1% 

<0.1% 

0.5% 

0.3% 

0.1% 

0.4% 

0.4% 

0.1% 

0.3% 

0.2% 

0.3% 

Recommended Alternative 

Incremental Compliance 

Cost 

Mean 

$0.03 

$0.02 

$0.06 

$0.07 

$0.02 

$0.07 

$0.09 

$0.03 

$0.07 

$0.06 

$0.07 

Max 

$0.03 

$0.06 

$0.38 

$4.22 

$0.15 

$0.29 

$0.45 

$0.15 

$0.28 

$0.16 

$4.22 

Standard 

Deviation 

NA 

$0.03 

$0.07 

$0.44 

$0.04 

$0.08 

$0.12 

$0.04 

$0.05 

$0.05 

$0.19 

Market Price 

Change 

Absolute 

<$0.01 

<$0.01 

$0.02 

$0.01 

<$0.01 

$0.01 

$0.02 

<$0.01 

$0.01 

$0.01 

$0.01 

Relative 

<0.1% 

<0.1% 

0.5% 

0.3% 

0.1% 

0.4% 

0.4% 

0.1% 

0.3% 

0.2% 

0.3% 

Above-the-MACT-Floor 

Incremental Compliance 

Cost 

Mean 

$0.24 

$0.12 

$0.34 

$0.92 

$0.13 

$0.46 

$0.37 

$0.17 

$0.35 

$0.32 

$0.52 

Max 

$0.24 

$0.36 

$1.45 

$69.27 

$0.85 

$3.26 

$2.46 

$0.92 

$1.66 

$1.33 

$69.27 

Standard 

Deviation 

NA 

$0.20 

$0.38 

$7.21 

$0.23 

$0.64 

$0.46 

$0.21 

$0.34 

$0.35 

$2.51 

Market Price 

Change 

Absolute 

$0.01 

<$0.01 

$0.06 

$0.05 

$0.01 

$0.03 

$0.04 

$0.01 

$0.02 

$0.03 

$0.03 

Relative 

<0.1% 

0.2% 

1.7% 

1.5% 

0.2% 

1.0% 

1.1% 

0.2% 

0.7% 

0.9% 

0.9% 

NA: Not applicable. Only one facility is affected in this market. 
P.68 

•*~~*"~i 

market share of substitute products (i.e., thermoplastic RPCs). As discussed above, suppliers 

of these products are expected to limit the ability of affected producers to increase prices in 

these markets. As shown in Table 4-4, the price increases in markets where these suppliers 

account for greater shares of total output are less than those markets with a smaller presence 

of these suppliers. The general constmction market shows the highest percentage increases in 

prices (0.5 percent) because they have higher average per-unit compliance costs ($0.06 per 

pound) and a high market share of affected products (71 percent). 

The other regulatory alternatives have similar directional effects on price and quantity 

(i.e., higher price, declines in output). The expected price and quantity adjustments under the 

recommended and MACT floor alternatives are very similar because many of these facilities 

emit less than 100 tons of HAPs annually and, as a result, do not require the above-the-floor 

controls under the recommended alternative. However, subjecting all facilities to the 

above-the-MACT floor alternative is projected to heighten the increase in RPC market prices 

(i.e., 0.9 percent increase vs. 0.3 percent under the recommended alternative) and the decline 

in market quantity (i.e., 0.4 percent decline vs. 0.2 percent under the recommended 

alternative). Furthermore, the above-the-MACT floor alternative shows greater displacement 

of market production with affected producers reducing output by 2.3 percent as opposed to 

the 0.8 percent decline projected under the recommended alternative. 

4.5.2 Industry-Level Impacts 

Industry revenues, costs, and profitability change as RPC prices and production levels 

adjust to the imposition ofthe regulation. As a result of these changes, the recommended 

alternative is projected to decrease RPC industry pre-tax earnings by $12 million (see 

Table 4-5). In addition, 29 facilities and 73 product lines are projected to close with the mle, 

and the losses in employment attributable to the mle total 809 employees. The less stringent 

MACT floor alternative projects similar results, while the economic impacts ofthe more 

stringent alternative are significantly higher. The following sections discuss these 

industry-level impacts in detail with additional emphasis on the rule's distributional impacts. 

4.5.2.1 Changes in Pre-Tax Earnings 

The projected change in pre-tax earnings is the net result of changes for directly and 

indirectly affected merchant facilities plus changes for directly affected captive facilities. 

After accounting for market adjustments, the directly affected merchant producers are 

4-16 
Table 4-5. Industry-Level Impacts of Reinforced Plastic Composites NESHAP Regulatory Alternatives: 1997 

4-=-

i 

Merchant Thermoset Producers (Directly Affected) 

Revenues ($106/yr) 

Costs ($106/yr) 

Compliance 

Production 

Pre-tax earnings ($106/yr) 

Operating Entities 

Product Lines 

Facilities 

Employment 

Captive Thermoset Producers 

Pre-tax earnings ($106/yr)" 

Employmentb 

Thermoset/Thermoplastic Producers 

(Indirectly Affected) 

Pre-tax earnings ($106/yr) 

Employment 

All Producers 

Pre-tax earnings (S106/yr) 

Employment 

Baseline 

$1,957 

$1,869 

— 

$1,869 

$87 

471 

299 

18,223 

NA 

20,263 

NA 

30,668 

NA 

69,153 

MACT Floor 

Absolute 

Change 

-$10 

-$9 

$7 

-$16 

-$1 

-73 

-29 

-900 

-$9 

NA 

$7 

91 

-Sl 

-809 

Percentage 

Change 

-0.5% 

-0.5% 

NA 

-0.8% 

-0.7% 

15.5% 

-9.7% 

-4.9% 

NA 

NA 

NA 

0.3% 

NA 

-1.2% 

Recommended Alternative 

Absolute 

Change 

-$10 

-$9 

$7 

-$16 

-$1 

-73 

-29 

-900 

-$18 

NA 

$7 

91 

-$12 

-809 

Percentage 

Change 

-0.5% 

-0.5% 

NA 

-0.8% 

-0.7% 

15.5% 

-9.7% 

-4.9% 

NA 

NA 

NA 

0.3% 

NA 

-1.2% 

Above-the-MACT-Floor 

Absolute 

Change 

-$22 

-$14 

$28 

-$42 

-$8 

-162 

-90 

-2,285 

-$31 

NA 

$21 

265 

-$19 

-2,021 

Percentage 

Change 

-1.1% 

-0.7% 

NA 

-2.2% 

-9.8% 

34.4% 

-30.1% 

-12.5% 

NA 

NA 

NA 

0.9% 

NA 

-2.9% 

a

 Change in profit is equal to the engineering cost estimate. 

b

 Although these producers incur compliance costs, EPA did not project changes in employment. 
P.70 

expected to incur $7 million annually in regulatory compliance costs. As shown in Table 4-5, 

based on projected individual and market responses, the economic analysis estimates the net 

effect of revenue and cost changes for these producers to result in a decline in pre-tax 

earnings of $1 million per year. This reduction in profits is less than the regulatory costs they 

incur because these producers reduce their production, resulting in higher market prices for 

each RPC product, which effectively shifts a portion ofthe regulatory burden onto 

consumers. 

As shown in Table 4-5, unaffected merchant producers increase their production in 

response to the higher market prices and, thereby, experience gains in pre-tax earnings of $7 

million per year. Thus, the aggregate increase in merchant industry profits of $6 million is a 

result ofthe net change in profits at affected and unaffected merchant producers, thereby 

highlighting an important distributional impact ofthis mle that unaffected merchant 

producers, mainly thermoplastic producers, unambiguously gain at the expense of affected 

merchant producers and consumers of RPC products. Lastly, although not included in the 

market analysis, the Agency projects directly affected captive facilities to incur a loss in pretax earnings of $18 million annually, which is assumed to be equal to the aggregate 

engineering estimate of compliance costs, reflecting the Agency's inability to predict higher 

prices for their end products and, thus, shift costs to their ultimate consumers. 

Additional distributional impacts ofthe mle within the directly affected merchant 

producers are not apparent from the reported decline in their aggregate pre-tax earnings. The 

regulation creates both gainers and losers within the directly affected merchant segment. As 

shown in Table 4-6, a substantial subset ofthe merchant facilities are projected to experience 

profit increases under the recommended alternative (i.e., 93 facilities representing 31 percent 

ofthe sector total of 299 facilities). Their gain in operating profit is projected to be $3.9 

million annually. However, the majority of directly affected merchant facilities (i.e., 177 

facilities, or 59 percent ofthe sector total) are projected to lose pre-tax earnings of $4.7 

million per year. The remaining 29 facilities are projected to cease operations and, thus, 

forego $0.3 million in baseline pre-tax earnings. The merchant facilities with profit gains 

tend to have higher output rates (average of 4.2 million pounds per facility) and lower 

per-unit compliance costs (<$0.01 per pound) than the negatively affected facilities. 

Facilities that experience profit losses or shutdown are generally lower-volume facilities 

(average of 0.8 million pounds per year) and have higher per-unit compliance costs (average 

ranging from $0.04 to $0.25 per pound). 

4-18 
Table 4-6. Distributional Impacts on Merchant Thermoset Producers Associated with Reinforced Plastic 

Composites NESHAP Regulatory Alternatives: 1997 

4^ 

I 

Facilities 

Production 

Total 

(IO6 lbs/yr) 

Average 

(lbs/facility) 

Compliance 

Costs 

Total 

($10<7yr) 

Average 

($/lb) 

Change in 

Pre-tax 

earnings 

($106/yr) 

Change in 

Employment 

More 

Profitable 

94 

393 

4.2 

$0.9 

<$0.01 

$4.1 

16 

MACT Floor 

Less 

Profitable 

176 

160 

0.9 

$6.1 

$0.04 

-$4.3 

-272 

Closure 

29 

3 

0.1 

$0.6 

$0.25 

-$0.3 

-644 

Total 

299 

556 

1.9 

$7.7 

$0.01 

-$0.6 

-900 

Recommended Alternative 

More 

Profitable 

93 

387 

4.2 

$1.1 

<$0.01 

$3.9 

16 

Less 

Profitable 

177 

166 

0.9 

$6.4 

$0.04 

-$4.7 

-271 

Closure 

29 

3 

0.1 

$0.6 

$0.25 

-$0.3 

-644 

Total 

299 

556 

1.9 

$8.1 

$0.01 

-$1.1 

-900 

Above-the-MACT-Floor 

More 

Profitable 

47 

325 

6.9 

$4.3 

$0.01 

$10.2 

22 

Less 

Profitable 

162 

217 

1.3 

$23.6 

$0.11 

-$15.7 

-37 

Closure 

90 

14 

0.2 

$8.5 

$0.61 

-$2.9 

-2,270 

Total 

299 

556 

1.9 

$36.4 

$0.07 

-$8.4 

-2,285 

Notes: More profitable—includes facilities with higher pre-tax earnings with the regulatory alternatives. 

Less profitable—includes facilities with lower pre-tax earnings with the regulatory alternatives. 

Closure—includes facilities that would cease production with the regulatory altematives. 
P.72 

As with the market-level results, there is little difference in the industry-level 

profitability and the distribution of profit changes between the recommended and less 

stringent MACT floor alternative. However, the same conclusion cannot be drawn when 

examining the above-the-MACT floor alternative. Eighty-four percent ofthe affected 

merchant producers become less profitable or close (profit losses of $18.6 million), and 

estimates of captive producer profit losses increase to $31.0 million. Fifteen percent ofthe. 

affected merchant producers become more profitable ($10.2 million), while suppliers of 

thermoplastic RPCs experience a large increase in profits ($21.0 million) because they 

benefit from higher prices and increased output. 

4.5.2.2 Product-Line and Facility-Level Impacts 

In the face of higher production costs, some facilities may find that their most 

economic response is to prematurely close the facility (presumably every current production 

facility will eventually close as new technologies replace old and current methods become 

economically unviable). Such a choice is optimal with regulation conditions when the 

facilities' projected revenues fall short of their variable costs (production and compliance). 

Under the recommended alternative, 29 merchant facilities are projected to close, or 10 

percent ofthe total directly affected merchant facilities. As shown in Table 4-6, facilities 

expected to close have extremely low baseline output rates (average of 0.1 million pounds per 

facility) and significantly higher per-unit compliance costs ($0.25 per pound). 

A less severe response is available to producers with multiple production lines: close 

lines that are expected to be unprofitable with the regulation. This analysis projects that 73 

product lines at directly affected merchant facilities (15 percent ofthe total) are expected to 

close with the recommended alternative. The product lines most affected by the regulation 

are the manual and mechanical resin applications because these processes typically have 

higher compliance costs. Ninety-seven percent ofthe product line closures employ these 

processes. 

The number of projected closures does not decrease under the less stringent MACT 

floor alternative. However, the projected closures increase significantly under the above-the 

floor alternative. The number of facility closures triples to 90 (30 percent ofthe total), and 

the number of product line closures more than doubles to 163 (35 percent ofthe total). 

These impact estimates should be considered upper-bound estimates because the 

facilities may not cease operations for various reasons. For example, facility operators may 

4-20 
P.73 

believe that market demand conditions may change and allow the facility to become 

profitable in the fumre. In addition, the terms of contractual agreements for independent 

suppliers may require them to continue operations or may allow the supplier to pass on a 

greater portion of these additional costs than the market model projects. 

4.5.2.3 Changes in Employment 

In response to the decreased levels of output, aggregate employment in the merchant 

segment ofthe RPC industry is projected to decrease by 1.2 percent, or 809 employees, under 

the recommended alternative. This is the net result of employment losses for merchant 

thermoset producers (900 employees) and employment gains for unaffected (i.e., 

thermoplastic) producers (91 employees). Although captive producers incur compliance 

costs that will likely influence levels of employment, EPA did not attempt to project changes 

in employment for these facilities. Employment changes for the MACT floor alternative are 

identical (809 employees, or 1.2 percent) but more than double under the more stringent 

above-the-floor alternative (2,021 employees, or 2.9 percent). 

4.6 Social Costs 

The value of a regulatory action is traditionally measured by the change in economic 

welfare that it generates. Welfare impacts, or the social costs required to achieve the 

environmental improvements, resulting from this regulatory action will extend to the many 

consumers and producers of RPC products. Consumers will experience welfare impacts due 

to changes in market prices and consumption levels associated with imposition ofthe 

regulation. Producers will experience welfare impacts resulting from changes in their 

revenues associated with imposition ofthe regulation and the corresponding changes in 

production and market prices. However, it is important to emphasize that this measure does 

not include benefits that occur outside the market, that is, the value of reduced levels of air 

pollution with the regulation. 

For this analysis, based on applied welfare economics principles, social costs as 

described above are measured as the sum of the expected changes in consumer and producer 

surplus (see Appendix B for a more complete discussion). Consumers experience reductions 

in consumer surplus because of increased market prices. Producers may experience either 

increases or decreases in producer surplus (i.e., profits) as a result of increased market prices 

and changes in production and compliance costs. 

4-21 
P.74 

The national estimate of compliance costs is often used as an approximation ofthe 

social cost ofthe mle. Under the recommended alternative, the engineering analysis 

estimated annual costs of $26.1 million. However, this estimate does not account for 

behavioral responses by producers or consumers to imposition ofthe regulation (e.g., shifting 

costs to other economic agents, shutting down product lines or facilities). Accounting for 

these responses results in a social cost estimate that differs from the engineering estimate as 

well as provides insights on how the regulatory burden is distributed across society (i.e., the 

many consumers and producers of RPC products). Therefore, based on the market analysis 

described above, the annual social costs ofthe recommended alternative are projected to be 

$25.7 million. The slight difference between the two estimates is due to the reductions in 

RPC product output triggered by the mle. 

For the national compliance cost estimate, the regulatory burden falls solely on 

affected facilities, whose owners experience a profit loss exactly equal to that amount. In this 

case, this is entirely a loss in producer surplus with no change (by assumption) in consumer 

surplus. However, the Agency's economic analysis demonstrates that these costs are 

allocated between consumers and producers based on the market positions of each.2 

Table 4-7 provides the social costs and their distribution across stakeholders for each 

regulatory alternative. 

On the producer side, suppliers using regulated thermosetting resins incur compliance 

costs. Some of these costs are passed on to consumers through higher prices, with the 

remainder absorbed by the owners ofthe directly affected facilities. As shown, for the 

recommended alternative, the loss in producer surplus for these suppliers is $19.1 million 

annually. However, producers using unregulated resins will also sell their RPC products at 

the same (higher) price because these products are assumed to be perfect substimtes for those 

produced using thermosets. Because they do no incur any compliance costs, the owners of 

these facilities will have profit increases of $7.1 million annually. On net, RPC suppliers' 

2 In the long run, we would expect that all costs ofthe rule would be passed on to consumers in the form of 

higher product prices. This is because investors will not invest in new plants and equipment unless they 

expect to cover all their costs of production and earn a return on investment appropriate for the risk they are 

incurring. However, currently fixed assets specific to RPC product production are the result of past 

investment decisions that cannot be reversed today. Thus, over the next 10 to 20 years owners of these 

facilities will have to decide how best to use these resources. The economic model developed for this 

analysis has attempted to capture these decisions. 

4-22 
Table 4-7. Social Costs with Reinforced Plastic Composites NESHAP Regulatory Alternatives: 1997 

Social Cost Component 

Consumer Surplus Loss/Gain ($106/yr) 

Aircraft/Aerospace 

Appliances/Business Equipment 

General Construction 

Plumbing Fixtures 

Panels 

Consumer Products 

Corrosion-Resistant 

Electrical/Electric 

Land Transportation 

Miscellaneous 

Producer Surplus Loss/Gain ($ 106/yr) 

Thermosets (Directly Affected) 

Merchant 

Captive 

Thermosets/Thermoplastics (Indirectly Affected) 

Social Costs of Regulation ($106/yr) 

MACT Floor 

-$13.75 

-$0.01 

-$0.10 

-$1.26 

-$1.79 

-$0.21 

-$1.03 

-$5.24 

-$0.21 

-$3.37 

-$0.52 

-$2.11 

-$9.23 

-$0.60 

-$8.63 

$7.12 

-$15.85 

Recommended Alternative 

-$13.73 

-$0.01 

-$0.10 

-$1.26 

-$1.78 

-$0.21 

-$1.03 

-$5.24 

-$0.21 

-$3.37 

-$0.52 

-$11.95 

-$19.08 

-$1.05 

-$18.03 

$7.12 

-$25.69 

Above-the-MACT-Floor 

-$43.29 

-$0.01 

-$0.54 

-$4.61 

-$8.57 

-$0.36 

-$3.02 

-$13.83 

-$0.59 

-$9.70 

-$2.08 

-$18.73 

-$39.34 

-$8.37 

-$30.96 

$20.61 

-$62.02 
P.76 

profits are expected to decrease by $12 million because the losses ofthe directly affected 

sector outweigh the gains ofthe indirectly affected sector. 

It is important to point out that by modeling these products as perfect substimtes, the 

Agency has unambiguously overstated both the profit loss by affected producers and profit 

gain by unaffected producers. If modeled separately with interaction measured through a 

cross-price demand elasticity (inelastic or moderately elastic), then the projected price 

increase would be higher for affected products and lower for unaffected products. In 

addition, these differentiated price changes would cause the consumer surplus changes 

described below to understate impacts on the consumers of directly affected RPC products 

and overstate impacts on consumers of unaffected products. 

On the consumer side, welfare losses are critically dependant on consumers' ability to 

find substimtes for RPC products and on the terms they can purchase those products. 

Because RPC products made from thermoplastics are assumed here to be perfect substimtes 

for those produced by the regulated entities, consumers are indifferent in their source of 

supply for these products, and there is a single market price for each RPC product regardless 

ofthe input used in its production. Thus, just as producers ofthe indirectly affected sector 

can be expected to gain with the mle, their customers will experience losses in economic 

welfare due to the higher prices for RPC products. Under the recommended alternative, the 

loss in consumer welfare is $13.7 million annually. Consumers of corrosion-resistant and 

land transportation are expected to experience the largest consumer surplus losses (see Table 

4-7). 

An important model parameter affecting the estimated consumer surplus losses is the 

elasticity of demand for the RPC products. As discussed above, the Agency believes that a 

value of-0.5 is warranted based on a review ofthe impacted factor demand elasticities. 

However, as shown in Figure 4-4, if the value is larger (smaller), the consumer surplus losses 

estimate would be more (less). 

Thus, in returning to the social costs ofthe recommended alternative, it is simply 

Directly affected producers -$19.1 million 

Indirectly affected producers +$7.1 million 

Consumers -$13.7 million 

Social cost $25.7 million 

In comparison, the social costs ofthe MACT floor alternative are about $15.9 million, those 

ofthe above MACT floor alternative, $62.0 million. 

4-24 
P.77 

Loss in 

Consumer Surplus -• 

($106/yr) 

30-1 

20-

10-

-0.1 -0.5 

Elasticity of Demand 

i— 

1.0 

- 1 

-2.0 

Figure 4-4. Sensitivity of Changes in Consumer Surplus to the Elasticity of Demand 

(Elasticity of Supply = 1.0) 

4.7 Sensitivity Analysis for Profit Rate 

The baseline profitability of producers is a key parameter in the Agency's economic 

modeling. However, obtaining profit data for firms that produce reinforced plastic 

composites is difficult because these firms are most often privately owned and, thus, do not 

publish the requisite financial information. In lieu of firm-specific profit rates, the Agency 

applied an industry average profit rate of 4.4 percent for each facility. As applied for this 

analysis, this rate reflects the maximum profit rate for an individual facility, i.e., a threshold 

level of profitability. Those facilities whose total revenue minus production costs resulted in 

a return of less than 4.4 percent of revenues used the lower rate for determination of 

economic viability or regulation induced closure. 

In 1997, the baseline year ofthe economic analysis, the industry average profit rate 

was 6.5 percent as reported for SIC 30 by the Census Bureau's Quarterly Financial Report 

(QFR). This profit rate reflects income before income taxes as a share of sales for firms with 

less than $25 million in assets. However, this analysis must address the impacts on many 

firms that have less than $25 million in assets which often have lower profit rates. The pretax earnings for plastic companies with less than $5 million in sales was on average two4-25 
P.78 

Industry Average 

4.7% 

6.0% 

6.5% 

5.5% 

5.2% 

Adiusted Average 

3.0% 

4.0% 

4.4% 

3.7% 

3.5% 

thirds of that for plastic companies with between $10 and $25 million in sales (SPI, 1998). 

Thus, to better reflect the profit rates for smaller companies for our analysis, the Agency used 

this two-thirds ratio to adjust the QFR reported industry average profit rates for firms less 

than $25 million in assets, i.e., 

Year 

1999 

1998 

1997 

1996 

1995 

As shown, the profitability measures range over this time period from 3 to 6.5 percent 

of sales. Therefore, as a sensitivity, the Agency evaluated the economic impacts for the 

recommended alternative for this broader range of baseline profitability scenarios. As shown 

in Table 4-8, the market impacts are slightly greater (lower) under the lower (higher) profit 

rate scenario with very slight differences in social costs. However, the estimated number of 

product-line and facility closures is affected by the change in profit rate scenarios with more 

(less) product-lines and facilities closing under the lower (higher) profit rate scenario. 

Interestingly, the closing of less profitable product-lines and facilities under the 3 percent 

scenario results in an aggregate profit gain by merchant facilities that continue to operate with 

regulation. This aggregate gain results from their increased revenues associated with their 

gain in market share and the higher prices with regulation. 

4.8 New Source Analysis 

New suppliers of RPCs have an investment decision: whether to commit to a new 

facility of a given scale. They have no fixed factors and thus may select any technically 

feasible facility configuration. Of course, they may also elect not to make an investment in 

this industry. Economic theory suggests investors are expected to invest in a project when 

the discounted value ofthe expected stream of profits over the lifetime ofthe investment 

exceeds the costs ofthe investment, or alternatively when the internal rate of return (IRR) is 

greater than the opportunity cost of capital. Commodity prices and production costs are 

central to this decision. 

The competitive model of price formation is provided in Figure 4-5. In the figure, the 

willingness of existing suppliers to produce alternative rates of RPCs is represented by SE and 

the demand for RPCs is shown as D0. The equilibrium market price, P0, is determined by the 

intersection of these curves. If this price exceeds the annualized capital costs discounted at 

4-26 
P.79 

Table 4-8. Summary of Economic Impacts Under Range of Industry Profit Rates: 

Recommended Alternative 

Economic Impact Measure 

All Composites 

Market price (percent change) 

Market output (percent change) 

Directly affected producers 

Indirectly affected producers 

Change in Pre-tax earnings (S106/yr) 

Merchant facilities 

Captive facilities 

Closures 

Product lines 

Facilities 

Social costs ($106/yr) 

3.0% 

0.5% 

-0.3% 

-1.2% 

0.5% 

$2.6 

-S18.0 

97 

45 

$25.3 

Industry Profit Rate 

4.4% 

0.3% 

-0.2% 

-0.8% 

0.3% 

-Sl.l 

-$18.0 

73 

29 

$25.7 

6.5% 

0.2% 

-0.1% 

-0.6% 

0.3% 

-$2.1 

-$18.0 

33 

17 

$25.8 

$/lb 

= P 

0

 r l 

/ S B 

\ / \ n 

\

 D 

D

0 

Qo Q, 

Figure 4-5. Baseline Equilibrium without Regulation 

lbs/year 

4-27 
P.80 

the opportunity cost of capital for an investment in this risk class divided by the profitmaximizing output rate plus the unit cost of other inputs, the producer commits to a new 

facility; otherwise no investment occurs. Figure 4-5 shows a constant cost industry where 

market price is exactly equal to the unit cost of new facilities, SN. 

In a growing industry, the demand for the commodity is shifting outward (e.g., to D,), 

placing upward pressure on prices and providing the incentive for investors to add new 

productive capacity.3 As new capacity enters the market, the new equilibrium price is P,, 

which is exactly equal to the unit cost of supply from new facilities. In this example, it is the 

same value as the old price, P0. The new equilibrium quantity, Q,, includes the additional 

output supplied by new sources: (Q--Qo)-

The NESHAP will increase existing suppliers' costs of producing RPCs if they use 

thermosetting resins by shifting existing supply, Sc, up. It will also increase the costs of 

supply from new facilities using these resins. These increases in costs will place upward 

pressure on prices. As shown in Figure 4-6, with demand curve, D,, prices would be 

expected to increase with shifts in supply until the price of RPCs, P,', is equal to the unit cost 

of supply from new facilities including the cost ofthe NESHAP. However, as shown in 

Figure 4-7, no new capacity expansion will take place in the fumre time period (1) if the perunit compliance costs at new facilities exceeded, P,'. Thus, the simple analytics presented 

suggest that the mle will likely cause investors to delay constmction of new facilities until the 

price increases just enough to cover all the costs of production. 

Given the uncertainty about new facility unit costs (production and compliance) and 

fumre market conditions, the Agency is limited to general assessments ofthe mle's impact on 

the rate of new facility constmction. To inform these assessments, the Agency performed the 

following analysis: 

• computed a test ratio for each ofthe ten affected RPC markets. The numerator of 

this ratio is the engineering estimate ofthe unit costs of compliance for new 

sources ($0.02 per pound for a new facility subject to the MACT floor standard 

and $0.06 for a facility subject to the above-the-MACT floor standard). The 

denominator for this ratio is the unit cost ofa new supplier, which is assumed to 

be equal to the baseline market price. As shown in Table 4-9, this ratio is small 

under the MACT floor standard (less than 1 percent) and increases to 

approximately 1.7 percent under the above-the-floor standard. 

For simplicity, impacts are considered for one future time period. 

4-28 
P.81 

Q', Q, lbs/year 

Figure 4-6. With-Regulation Equilibrium Case 1: New Sources Added 

$/lb 

P,' 

/ y 

S' E 

c 

\ 

S'x 

Q', Q, lbs/year 

Figure 4-7. With-Regulation Equilibrium Case 2: No New Sources Added 

4-29 
Table 4-9. New Source Analysis of Unit Production and Compliance Costs ($1997) 

o 

Market 

Aircraft/aerospace 

Appliances/business equipment 

General construction 

Plumbing fixtures 

Panels 

Consumer products 

Corrosion-resistant 

Electrical/electric 

Land transportation 

Miscellaneous 

Total 

New Source Unit 

Costs ($/lb)a 

$38.35 

$2.37 

$3.46 

$3.48 

$3.24 

$3.41 

$3.77 

$3.29 

$3.44 

$3.41 

$3.48 

MACT Floor 

New Source Unit 

Compliance 

Costs ($/lb) 

$0.02 

$0.02 

$0.02 

$0.02 

$0.02 

$0.02 

$0.02 

$0.02 

$0.02 

$0.02 

$0.02 

Cost Share 

(%) 

0.04% 

0.68% 

0.47% 

0.47% 

0.50% 

0.48% 

0.43% 

0.49% 

0.47% 

0.48% 

0.47% 

Above-the-MACT Floor 

New Source Unit 

Compliance 

Costs ($/lb) 

$0.06 

$0.06 

$0.06 

$0.06 

$0.06 

$0.06 

$0.06 

$0.06 

$0.06 

$0.06 

$0.06 

Cost Share 

(%) 

0.15% 

2.46% 

1.68% 

1.67% 

1.80% 

1.71% 

1.54% 

1.77% 

1.69% 

1.71% 

1.67% 

a

 Equal to the baseline market price by assumption. 
P.83 

projected percentage changes in facility construction with regulation for a future 

time period (2005). Using the concepmal approach presented in Figures 4-5 and 

4-6, the Agency estimated the change in facility constmction for the period 2000 

to 2005 as follows: 

AFacilities = -^2 1 = n d * Q2005 - ^ (4.1) 

where 

n.d = Elasticity of demand (-0.5) 

Z = Average size of anew facility (2.4 million lbs/yr) 

C2005 

AP 

P 

= For 2000, the Composite Fabricators Association (CFA, 2000) estimated an 

RPC composite demand of 3.5 billion pounds.4 For the period 2000 to 

2005, the engineering analysis independently projected resin growth of 

123.9 million pounds. Using a composite-to-resin weight ratio of 1.6, the 

Agency estimated a RPC composite growth of 198.3 million pounds. Thus, 

the quantity for the baseline year of 2005 was estimated to be 

approximately 3.7 billion pounds. 

= Calculated using the ratio of average new source per-unit control costs to 

baseline price for each alternative (0.47 percent for the MACT floor 

alternative and 1.67 percent for the above-the-floor alternative) 

Using this approach, the Agency estimated a 5 percent reduction in facility constmction 

under the MACT floor alternative and a 15 percent reduction under the above-the-floor 

alternative over the 2000 to 2005 time period (see Table 4-10). 

These results suggest minimal impacts on facility constmction under the MACT floor 

alternative. However, facility constmction impacts would increase significantly if all new 

producers were subject to the above-the-floor standard. As described earlier in this section, 

the appropriate control standard under the recommended alternative is determined by the size 

ofthe new source: Thus, the control costs influence the decision to enter the market and, 

perhaps, the producer's selection of plant size. Since the unit control costs are smaller for 

facilities with low output rates, it is possible that the average size of new facilities may tend 

to be smaller to be subject to the MACT floor rather than above-the-MACT floor standards. 

4Excludes marine uses. 

4-31 
P.84 

Table 4-10. Changes in Facility Construction Under the Proposed NESHAP: 

2000-2005 

Number of 

Facilities 

Without 

Regulation 

New sources 84 

MACT Floor Change 

Absolute Relative 

-5 -4.8% 

Above-the-MACT Floor 

Change 

Absolute Relative 

-13 -15.5% 

~3i 

4-32 
P.85 

SECTION 5 

INITIAL REGULATORY FLEXIBILITY ANALYSIS 

Section 112 ofthe CAA requires the Agency to list categories and subcategories of 

major sources and, in some cases, area sources of HAP and to then establish national 

emission standards. Reinforced Plastic Composites (RPC) production facilities that were 

major sources were included on the initial list of source categories. Major sources of HAP 

are those that have the potential to emit 10 tons per year (tpy) or more of any one HAP or 25 

tpy or more of any combination of HAP. The HAP emitted by sources in this source category 

include styrene, methyl methacrylate, and methylene chloride. These HAP have been 

demonstrated to cause adverse health effects. Therefore, the proposed mle protects air 

quality and promotes public health by reducing the current emission levels of these HAP. 

The objective ofthis proposed mle is to apply standards based on maximum 

achievable control technology to all major sources in this source category. The criteria used 

to establish MACT are contained in section 112 (d) ofthe CAA. 

This regulatory action will potentially affect the economic welfare of owners of RPC 

facilities. These individuals may be owners/operators who directly conduct the business of 

the firm (i.e., "mom and pop shops" or partnerships) or, more commonly, investors or 

stockholders who employ others to conduct the business ofthe firm on their behalf (i.e., 

privately held or publicly traded corporations). The individuals or agents who manage these 

facilities have the capacity to conduct business transactions and make business decisions that 

affect the facility. The legal and financial responsibility for compliance with a regulatory 

action ultimately rests with these agents; however, the owners must bear the financial 

consequences ofthe decisions. Environmental regulations like this mle potentially affect all 

businesses, large and small, but small businesses may have special problems in complying 

with such regulations. 

The Regulatory Flexibility Act (RFA) of 1980 requires that special consideration be 

given to small entities affected by federal regulation. The RFA was amended in 1996 by the 

Small Business Regulatory Enforcement Fairness Act (SBREFA) to strengthen the RFA's 

analytical and procedural requirements. Under SBREFA, the Agency implements the RFA as 

5-1 
P.86 

written with a regulatory flexibility analysis required only for mles that will have a 

significant impact on a substantial number of small entities. 

In accordance with Section 603 ofthe RFA, the Agency has prepared this initial 

regulatory flexibility analysis (IRF A) that examines the impact ofthe proposed mle on small 

entities within this source category along with regulatory alternatives that could reduce that 

impact. As detailed in this section, EPA identified the businesses that this proposed mle will 

affect and conducted an economic analysis to determine whether this mle is likely to impose 

a significant impact on a substantial number ofthe small businesses within this industry. The 

analysis employed here is a "sales test," which computes the annualized compliance costs as 

a share of sales for each company. In addition, it provides information about the impacts on 

small businesses after accounting for producer responses to the regulation and the resulting 

changes in market prices and output for RPC products. 

As required by Section 609(b) ofthe RFA, as amended by SBREFA, the Agency 

convened a Small Business Advocacy Review (SBAR) panel to obtain advice and 

recommendations of representatives ofthe small entities that potentially would be subject to 

the mle's requirements. Prior to convening the SBAR panel, EPA conducted a "sales test" 

for small businesses based on a earlier provisions considered for inclusion in the proposed 

mle. The results of that analysis indicated much more significant impacts on small entities 

than the mle as it is currently being proposed. The reduction in impacts is a direct result of 

the SBAR panel's recommendations incorporated in this proposed mle. 

5.1 Identifying Small Businesses 

As described in Section 2 ofthis report, the Agency identified a substantial number of 

small businesses potentially affected by the proposed NESHAP. Based on SBA definitions, 

278 companies are classified as small, or 78 percent ofthe total. These companies own 302 

facilities, or 70 percent, of all RPC facilities. 

5.2 Screening-Level Analysis 

For the purposes of assessing the potential impact ofthis mle on these small 

businesses, the Agency considered the recommended alternative, the MACT floor, and an 

above-the-MACT-floor alternative and calculated the share of annual compliance cost 

relative to baseline sales for each company. When a company owns more than one affected 

facility, the costs for each facility it owns are summed to develop the numerator of the test 

ratio. For this screening-level analysis, annual compliance costs were defined as the 

5-2 
P.87 

engineering control costs imposed on these companies; thus, they do not reflect the changes 

in production expected to occur in response to imposing these costs and the resulting market 

adjustments. The results ofthis initial screening analysis are discussed below. 

5.2.1 Recommended Alternative 

As shown in Table 5-1, the aggregate compliance costs ofthe recommended 

alternative for small businesses total $8.1 million, or 31 percent ofthe total industry costs of 

$26.1 million. The average total annual compliance cost was projected at roughly $30,000 

per small company as compared to the average of 230,000 per large company. The annual 

compliance costs for small businesses range from 0.01 to 7.50 percent of sales. The average 

(median) compliance cost-to-sales ratio (CSR) is 0.66 (0.40) percent for the identified small 

businesses with sales data and 0.07 (<0.01) percent for the large businesses with sales data. 

As shown, 46 small companies (17 percent) are affected at the 1 percent to 3 percent level 

and 7 (3 percent) companies are affected at or above the 3 percent level. Thus, a total of 53 

small companies, or 19 percent, are expected to incur costs greater than 1 percent of their 

sales. Furthermore, the distribution ofthe CSRs, as shown in Figures 5-1(a) and (b), 

demonstrate that small companies are disproportionally affected relative to large companies. 

Similar analysis of earlier provisions under consideration for inclusion in this mle 

indicated greater impacts on small businesses than this proposed mle. Almost 42 percent of 

the total industry compliance costs were expected to be incurred by small businesses based on 

requirements ofthe draft versions ofthis mle. The average total annual compliance cost was 

projected at roughly $50,000 per small company, which represented close to 1 percent of 

sales. The Agency estimated that 22 percent of small businesses (or 60 firms) would 

experience an impact greater than 1 percent of sales, and 7 percent of small businesses (or 19 

firms) would experience impacts greater than 3 percent of sales. The reduction in small 

business costs between earlier versions ofthis mle and the proposed mle are attributable to 

EPA's outreach and accommodation for small firms, which includes the conduct ofthe Small 

Business Advocacy Panel. 

5-3 
Table 5-1. Summary Statistics for SBREFA Screening Analysis: Recommended Alternative 

Small Large All Companies 

Total Number of Companies 

Total Annual Compliance Costs (TACC) ($106) 

Average (TACC) per company ($106) 

278 

$8.1 

$0.03 

78 

$18.0 

$0.23 

356 

$26.1 

$0.07 

Number Share Number Share Number Share 

Companies with Sales Data" 275 100% 78 100% 353 100% 

Compliance costs are <1% of sales 222 81% 77 99% 299 85% 

Compliance costs are :>1 to 3% of sales 46 17% 0 0% 46 13% 

Compliance costs are ^ 3% of sales 7 3% 1 1% 8 2% 

Compliance Cost-to-Sales Ratios 

Average 0.66% 0.07% 0.53% 

Median 0.40% <0.01% 0.21% 

Maximum 7.50% 3.53% 7.50% 

Minimum 0.01% <0.01% <0.01% 

" Annual sales data were unavailable for three ultimate parent companies. CSRs cannot be computed for these companies. 

Note: Assumes no market responses (i.e., price and output adjustments) by regulated entities. 
P.89 

100% 

90% 

80% 

_ 70% 

-*-*; 60% 

g 50% 

| 40% 

"" 30% 

20% 

10% 

0% 

0% >0-0.5% >0.5-1% >1-3% >3-5% >5-7% >7-10% >10-15% >15-20% >20% 

Cost-to-Sales Ratios Range 

Figure 5-1 (a). DistHbution of Cost-to-Sales Ratios for Small Companies: 

Recommended Alternative 

100% 

90% 

80% 

70% 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

0 >0-0.5% >0.5-1% >1-3% >3-5% >5-7% >7-10% >10-15% >15-20% >20% 

Cost-to-Sales Ratios Range 

Figure 5-l(b). Distribution of Cost-to-Sales Ratios for Large Companies: 

Recommended Alternative 

5-5 
P.90 

5.2.2 MACT Floor Alternative 

As shown in Table 5-2, the aggregate compliance costs ofthe MACT floor alternative 

for small businesses total $7.7 million, which is nearly half (47 percent) ofthe total industry 

costs of $16.3 million. The annual compliance costs for small businesses range from 0.01 to 

7.50 percent of sales. The average (median) compliance CSR is 0.66 (0.40) percent for the 

identified small businesses with sales data and 0.03 (<0.01) percent for the large businesses 

with sales data. As shown, 45 small companies (16 percent) are affected at the 1 percent to 3 

percent level and 7 companies (3 percent) are affected at or above the 3 percent level. A total 

of 52 small companies, or 19 percent, are affected above the 1 percent test ratio, representing 

a decrease of only one company as compared to the recommended alternative. As shown in 

Figures 5-2(a) and (b), the relative impacts between small and large companies are similar to 

the recommended alternative. 

5.2.3 Above-the-MA CT Floor A Iter native 

As shown in Table 5-3, the aggregate compliance costs ofthe above-the-MACT floor 

alternative for small businesses total $40.2 million, or 60 percent ofthe total industry costs of 

$67.4 million. The annual compliance costs for small businesses range from 0.01 to 25.89 

percent of sales. The average (median) compliance CSR is 3.97 (2.65) percent for the 

identified small businesses with sales data and 0.15 (0.03) percent for the large businesses 

with sales data. As shown, 88 small companies (32 percent) are affected at the 1 percent to 3 

percent level and 126 companies (46 percent) are affected at or above the 3 percent level. 

Thus, a total of 214 small companies incur costs greater than 1 percent of their sales, which is 

four times the number affected under the recommended alternative. Figures 5-3(a) and (b) 

show that the disproportionate relative impact between small and large companies is even 

more pronounced than under the recommended alternative. 

5.3 Economic Analysis 

The Agency also analyzed the economic impacts on small businesses under withregulation conditions expected to result from implementing the proposed NESHAP. Unlike 

the screening-level analysis described above, this approach examines small business impacts 

in light ofthe expected behavioral responses of producers and consumers to the regulation. 

As shown in Table 5-4, operating profits for facilities owned by small businesses are 

projected to decline by $1 million under the recommended alternative. In addition, 73 

product lines and 29 facilities are projected to close under the MACT floor atlemative 

5-6 
Table 5-2. Summary Statistics for SBREFA Screening Analysis: MACT Floor Alternative 

Small Large All Companies 

Total Number of Companies 

Total Annual Compliance Costs (TACC) ($106) 

Average TAAC per company ($106) 

278 

$7.7 

$0.03 

78 

$8.6 

$0.11 

356 

$16.3 

$0.05 

Number Share Number Share Number Share 

Companies with Sales Data" 

Compliance costs are <1% of sales 

Compliance costs are s 1 to 3% of sales 

Compliance costs are ^3 % of sales 

275 

223 

45 

7 

100% 

81% 

16% 

3% 

78 

77 

1 

0 

100% 

99% 

1% 

0% 

353 

300 

46 

7 

100% 

85% 

13% 

2% 

Compliance Cost-to-Sales Ratios 

Average 

Median 

Maximum 

Minimum 

0.66% 

0.40% 

7.50% 

0.01% 

0.03% 

<0.01% 

1.25% 

<0.01% 

0.52% 

0.20% 

7.50% 

<0.01% 

a

 Annual sales data were unavailable for three ultimate parent companies. CSRs cannot be computed for these companies. 

Note: Assumes no market responses (i.e., price and output adjustments) by regulated entities. 
P.92 

>> o 

c 

o 

3 

O* 

o 

100% 

90% 

80% 

70% 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

0 >0-0.5% >0.5-1% >1-3% >3-5% >5-7% >7-10% >10-15% >15-20% >20% 

Cost-to-Sales Ratios Range 

Figure 5-2(a). Distribution of Cost-to-Sales Ratios for Small Companies: MACT Floor 

Alternative 

100% 

90% 

80% 

70% 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

>0-0.5% >0.5-1% >1-3% >3-5% >5-7% >7-10% >10-15% >15-20% >20% 

Cost-to-Sales Ratios Range 

Figure 5-2(b). Distribution of Cost-to-Sales Ratios for Large Companies: MACT Floor 

Alternative 
Table 5-3. Summary Statistics for SBREFA Screening Analysis: Above-the-MACT-FIoor Alternative 

Small Large All Companies 

Total Number of Companies 

Total Annual Compliance Costs (TACC) ($106) 

Average TACC per company ($106) 

278 

$40.2 

$0.1 

78 

$27.2 

$0.3 

356 

$67.4 

$0.2 

Number Share Number Share Number Share 

Companies with Sales Data3 275 100% 78 100% 353 100% 

Compliance costs are <1% of sales 61 22% 76 97% 137 39% 

Compliance costs are *>1 to 3% of sales 88 32% 1 1% 89 25% 

Compliance costs ares 3% of sales 126 46% 1 1% 127 36% 

Compliance Cost-to-Sales Ratios 

Average 3.97% 0.15% 3.13% 

Median 2.65% 0.03% 1.75% 

Maximum 25.89% 3.68% 25.89% 

Minimum 0.01% <0.01% <0.01% 

a

 Annual sales data were unavailable for three ultimate parent companies. CSRs cannot be computed for these companies. 

Note: Assumes no market responses (i.e., price and output adjustments) by regulated entities. 
P.94 

*» 

o 

c 

o 

3 

o* 

a> 

100% 

90% 

80% 

70% 

60% 

50% 

40% 

30% 

20% 

10% 

0% fci 

0% >0-0.5% >0.5-1% >1-3% >3-5% >5-7% >7-10% >10-15% >15-20% >20% 

Cost-to-Sales Ratios Range 

Figure 5-3(a). Distribution of Cost-to-Sales Ratios for Small Companies: Above-theMACT-FIoor Alternative 

100% 

90% 

80% 

~. 70% 

>; 60% 

g 50% 

g 40% 

"" 30% 

20% 

10% 

0% 

0 >0-0.5% >0.5-1% >1-3% >3-5% >5-7% >7-10% >10-15% >15-20% >20% 

Cost-to-Sales Ratios Range 

Figure 5-3(b). Distribution of Cost-to-Sales Ratios for Large Companies: Above-theMACT-FIoor Alternative 

-m~= 

5-10 
Table 5-4. Summary of Small Business Impacts of Reinforced Plastic Composites NESHAP 

Thermoset Producers 

(Directly Affected) 

Revenues ($106/yr) 

Costs ($106/yr) 

Compliance 

Production 

Operating Profit ($106/yr) 

Operating Entities 

Product Lines 

Facilities 

Employment 

Baseline 

$1,957 

$804 

— 

$804 

$1,152 

471 

299' 

18,223 

MACT Floor 

Alternative 

Absolute Relative 

Change Change 

-$10 -0.5% 

-$9 -1.2% 

$7 NA 

-$16 -2.0% 

-$1 -0.1% 

-73 15.5% 

-29 -9.7% 

-916 -5.0% 

Recommended 

Alternative 

Absolute Relative 

Change Change 

-$10 -0.5% 

-$9 -1.1% 

$7 NA 

-$16 -2.0% 

-$1 -0.1% 

-73 15.5% 

-29 -9.7% 

-916 -5.0% 

Above-the-MACT- Floor 

Alternative 

Absolute Relative 

Change Change 

-$25 -1.3% 

-$15 -1.9% 

$28 NA 

-$43 -5.3% 

-$10 -0.9% 

-163 34.6% 

-90 -30.1% 

-2,310 -12.7% 

Note: These estimates incorporate the expected market (i.e., price and output) adjustments ofthe regulated entities. 

'Three ofthe 302 facilities owned by small companies are excluded from the market analysis. They are treated as captive producers because they 

perform only intermediate operations such as compounding. 
P.96 

and the recommended alternative, while 163 product lines and 90 facilities are projected to 

close under the above-the-MACT-floor alternative. 

5.4 Assessment 

Although any facility closures are cause for concern, the number of facilities at risk 

for closure would be the same if this proposed mle required only the MACT floor level of 

control for all facilities. The MACT floor is the least stringent level allowed by stamte. As a 

result ofthe SBAR panel, this mle contains a significant number of accommodations for 

small business. The results presented here confirm that the mitigating measures employed by 

the Agency have minimized the potential negative impacts ofthe proposed mle on small 

businesses while still satisfying the objectives ofthe CAA. The share of small companies 

affected at less than 1 percent exceeds 80 percent under both the recommended alternative 

and the MACT floor alternative. Furthermore, only 3 percent of small companies are 

projected to be affected at or above the 3 percent level for both the recommended and MACT 

floor alternative, while 46 percent ofthe small companies exceed this level under the abovethe-MACT-floor alternative. 

The economic analysis, which includes market responses to the regulation, provides 

the following results: 29 facilities (10 percent) owned by small businesses are projected to 

close under the recommended alternative and the MACT floor alternative. The number of 

facilities increases to 90 (30 percent) under the more stringent above-the-floor MACT 

alternative. These results are consistent with the industry's profitability and characterization 

of cost curves and engineering costs provided in earlier sections. This industry is 

characterized by average profit margins of 3 to 4 percent (Dun and Bradstreet, 1997). Under 

baseline conditions, small facilities have higher per-unit costs of production, reflecting 

economies of scale in the production of RPC. In addition, analysis ofthe engineering costs 

shows that these facilities also have higher per-unit compliance costs under with-regulation 

alternatives. Therefore, the economic impacts are likely to fall disproportionately on small 

facilities. However, as noted in Section 4, these entities may have contractual obligations 

that allow them to continue operation and potentially mitigate these impacts through terms 

that deal with contingencies. 

The economic analysis also shows that producers using resins not directly affected by 

the regulation experience profit gains (e.g., $8.7 million gain under the recommended 

alternative). This occurs because the prices ofthe commodities they produce will increase, 

but they do not incur compliance costs. Given the distribution of small and large entities 

5-12 
P.97 

identified in the regulated segment, it is likely that a significant number of these producers 

may be small. Thus, a complete analysis ofthe small business impacts ofthe proposed mle 

would compute a net effect using the projected impacts on both directly (thermoset) and 

indirectly affected (thermoplastic) producers. Data limitations on the distribution of small 

businesses across the indirectly affected segment do not allow for quantitative estimates of 

net impacts. However, the qualitative analysis does suggest that small businesses using 

resins not directly affected by the mle will experience offsetting gains under with-regulation 

conditions. 

We do not anticipate any impacts ofthe proposed NESHAP on small governments or 

small nonprofit organizations. We have no evidence that either small governments or 

nonprofit organizations own or operate sources that will be impacted by this proposed 

NESHAP. 

5.5 Projected Reporting and Recordkeeping Requirements 

The projected reporting and recordkeeping for these small businesses include initial 

notifications, startup notifications and compliance reports. We estimate that 302 existing 

facilities owned by small businesses will be impacted by these requirements, and 53 new 

facilities will be impacted in the first three years. The professional skills required to 

complete these reports include the ability to calculate emissions and resin use and read and 

follow report format guidance. All facilities impacted by this proposed mle should have 

personnel with the necessary skills because they would need these skills to comply with other 

regulatory requirements such as Toxic Release Inventory (TRI) reporting. 

These recordkeeping and reporting requirements are specifically authorized by section 

114 ofthe CAA (42 U.S.C. 7414) and are consistent with the General Provisions of 40 CFR 

part 63. All information submitted to us for which a claim of confidentiality is made will be 

safeguarded according to our policies in 40 CFR part 2. 

Provisions to minimize the reporting and recordkeeping requirements on small 

business have been incorporated into this proposed mle. These provisions include allowing: 

the facility to substantiate resin and gel coat HAP contents with Material Safety Data Sheets 

rather then requiring testing of each resin and gel coat; use of resin purchase records to 

determine resin use; and exemption of facilities that can demonstrate that all their resin and 

gel coats comply with the required HAP content limits from the requirement to keep records 

5-13 
P.98 

of resin use and calculate point value averages. These provisions have also been extended to 

all companies subject to the proposed NESHAP. 

5.6 Other Federal Rules That May Impact Reinforced Plastic Composite Production 

Facilities 

These facilities may also be subject to the NESHAP being developed for plastic parts 

and products. There should be no duplication of effort as a result ofthis proposed mle and 

the Plastic Parts and Products NESHAP being developed because these NESHAP will cover 

different operations. Facilities subject to this proposed mle are also subject to emissions 

estimate reporting under the TRI requirements. In this proposed mle, we could determine no 

ways to combine TRI and the reporting requirements ofthe proposed NESHAP because the 

objectives and stamtory authorities of these requirements are different. 

5.7 Alternatives to the Proposed Rule 

We have incorporated significant alternatives into the proposed mle to minimize the 

impact on small business but still meet the objectives ofthe CAA. 

As required by section 609(b) ofthe RFA, EPA conducted outreach to small entities 

and convened a SBAR panel to review advice and recommendations from representatives of 

the small entities that potentially would be subject to the proposed mle requirements. The 

panel convened on April 6, 2000 and was comprised of representatives from OMB, the SBA 

Office of Advocacy, the EPA Small Business Advocacy Chair, and the Emission Standards 

Division ofthe Office of Air Quality Planning and Standards of EPA. The panel solicited 

advice from 17 small entity representatives (SER) from a cross-section ofthe different 

industry sectors likely to be directly regulated by this action. On April 18, 2000, the panel 

distributed a package of descriptive and technical materials explaining the mle-in-progress to 

the SER. On May 2, 2000, the panel met with the SER to hear their comments on 

preliminary options for regulatory flexibility and related information. The panel also 

received written comments from the SER in response to both the outreach materials and the 

discussions at the meeting. 

Consistent with RFA/SBREFA requirements, the panel evaluated the assembled 

materials and small-entity comments on issues related to the elements ofthe IRFA. A copy 

ofthe panel report is included in the docket for this proposed mle. 

5-14 
P.99 

The panel considered numerous regulatory flexibility options in response to concerns 

raised by the SER. The major concerns included the affordability and technical feasibility of 

add-on controls, the resin and gel coat HAP contents required to meet some ofthe MACT 

floors, and the regulatory treatment of speciality products. 

These are the major panel recommendations and EPA's response. 

• Recommend setting higher thresholds than EPA had initially considered for 

requirements to use add-on controls. 

Response: In the recommended regulatory alternative, EPA proposes to allow 

facilities owned by small firms to emit 250 tpy (as distinct from the 100 tpy limit 

for facilities owned by large firms) before installing add-on controls. 

• Recommend setting the new source floor for small-owned sources at the level of 

the existing source floor. 

Response: The recommended regulatory alternative includes this provision. 

• Recommend establishing separate floors for speciality products. 

Response: The recommended regulatory alternative includes this provision. 

• Explore pollution-prevention alternatives to add-on controls. 

Response: The EPA did explore this possibility with industry sources. Although 

we could not devise a workable pollution-prevention alternative to include in the 

recommended regulatory alternative, the Agency is requesting comment on how 

such a mechanism might be structured within the requirements of the CAA. 

• Recommend allowing individual facilities to use the same resin in all resin 

application processes. 

Response: The recommended regulatory alternative includes this provision. 

• Reconsider the resin HAP content requirement for tooling resins. 

Response: The recommended regulatory alternative includes a revised provision. 

• Recommend separate floors for white and non-white gel coats. 

Response: The recommended regulatory alternative includes this provision. 

• Reconsider the Agency's estimates of the cost of add-on controls. 

Response: Even though the recommended regulatory alternative eliminates the 

likelihood that existing small-owned facilities will be subject to add-on controls, 

5-15 
p.1 

EPA has reconsidered its cost estimates in light of those offered by the industry. 

As discussed elsewhere in this preamble, EPA continues to believe our estimates 

are realistic. 

• Recommend grouping high-strength applications with corrosion-resistant 

operations. 

Response: The recommended regulatory alternative includes this provision. 

Detailed information on all these recommendations is contained in the panel report in the 

docket for this proposed rule. 

5-16 
P.2 

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New York: Chapman and Hall. 

Composite Fabricators Association (CFA). 2000. "Industry Composites Demand for 

1999-2000." <http://www.cfa-hq.org>. As obtained on July 29, 2000. 

Dialog Information Service. 1997. Standard and Poor's Corporations [computer file]. Palo 

Alto, CA: Dialog Information Service. 

Disclosure Incorporated. 1998. Worldscope [computer file]. Bethesda, MD: Disclosure 

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Dun & Bradstreet. 1998. Industry Norms & Key Business Ratios, Desk-Top Edition 1996-

97. Murray Hill, NJ: Dun & Bradstreet. 

Dun & Bradstreet. 1998. Dun's Market Identifiers [computer file]. New York, NY: Dialog 

Corporation. 

Dun & Bradstreet. 1999. Million Dollar Directory: America's Leading Public and Private 

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Gale Research, Inc. 1996. Manufacturing USA. Detroit, MI: Gale Research, Inc. 

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Information Access Corporation. 1998. Business & Company ProFile [computer file]. 

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LeFlam, Greg, and Melanie Proctor, PES Inc., memorandum to Madeleine Strum, U.S. 

Environmental Protection Agency. Industry Description Memorandum. October 17, 

1995: 

R-l 
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Lindsay, Karen F. 1996. "State of the Industry: 1995-96." Composites Design and 

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Modern Plastics. "Resin Supply: What's in the Pipeline for '93?" January 1993. 

Modern Plastics. "Resin Supply: Plotting a Course for Global Supply." January 1994. 

Murphy, John. 1994. The Reinforced Plastics Handbook. Oxford, UK: Elsevier Advanced 

Technology. 

Plastics News. "Resin Pricing." Updated May 13, 1999. <http://www.plasticsnews.com>. 

As obtained on May 17, 1999. 

Predicasts Basebook. November 1992. Foster City, CA: Information Access Corporation. 

Rauch Associates. 1991. The Rauch Guide to the U.S. Plastics Industry. Bridgewater, NJ: 

Rauch Associates, Inc. 

Schwartz, Mel. 1997. Composite Materials: Processing, Fabrication, and Applications. 

Upper Saddle River, NJ: Prentice Hall. 

Shearer, Brent. April 15, 1996. "Carbon Fibers Adjusting to Changes." Chemical 

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Society ofthe Plastics Industry, Inc. (SPI). 1994. Facts and Figures ofthe U.S. Plastics 

Industry. Washington, DC: SPI. 

Society ofthe Plastics Industry, Inc. (SPI). 1998. Facts and Figures ofthe U.S. Plastics 

Industry. Washington, DC: SPI. 

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Composites. Second Edition. Washington, DC: Society of the Plastics Industry, Inc. 

Society ofthe Plastics Industry (SPI) Composites Institute. 1995. Introduction to 

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U.S. Bureau of Labor Statistics. 2000. Producer Price Index—Commodities: 

WPUSOP9200, Intermediate Materials less food and energy. 1990-2000. [online] 

<http://www.bls.gov>. Obtained January 20, 2000. 

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R-2 
P.4 

U.S. Environmental Protection Agency, Office of Enforcement and Compliance Assurance. 

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R-3 
P.5 

Appendix A 

Summary Data for Companies Owning Reinforced 

Plastic Composite Facilities 
P.6 

Table A-l. Summary Data for Companies Reinforced Plastic Composite Facilities 

Company Name 

20th Century Fiberglass Inc. 

A. R. E., Inc. 

A.F.P. Imaging 

A.O. Smith Corporation 

A-l Fiberglass Inc. 

ABC Industries, Inc. 

Accent Marble Company Inc. 

Accra Industries Inc. 

Accurate Glass Inc. 

Acme Fiberglass Inc. 

Acme Reinforced Plastics Inc. 

Aero Transportation Corporation 

Aeroquip Inoac Company 

Agco Inc. 

Aker Plastics Company Inc. 

Alco Industries, Inc. 

Allen Group (The) 

Alliance Equipment Company Inc. 

Allied Moulded Prods. Inc. 

Altec Industries Inc. 

American Acrylic Corporation 

American Bluegrass Marble Company 

American Marble Company Inc. 

American Reinforced Plastics, Inc. 

American Slate & Marble of Hickory, Inc. 

American Standard Companies 

Americh Corporation 

Ameron International Corporation 

Facilities Sales 

(#) ($106) 

1 $95.0 

2 S19.1 

1 S37.0 

2 $1,645.7 

1 $5.1 

3 $8.0 

1 $5.0 

1 $1.9 

1 $3.0 

1 $2.5 

1 $3.1 

1 $5.8 

1 $65.0 

1 $2,317.5 

3 $36.0 

1 $225.0 

1 $369.5 

1 $1.2 

1 $17.7 

1 $250.0 

1 $3.5 

1 $2.9 

1 $0.9 

1 $1.2 

1 $1.7 

1 $5,805.0 

2 $10.0 

1 $533.5 

Employment 

800 

175 

190 

13,000 

50 

75 

100 

15 

35 

25 

15 

76 

560 

7,800 

400 

2,000 

2,900 

20 

240 

1,800 

36 

63 

19 

25 

33 

44,000 

50 

2,761 

Small 

Business 

No 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

No 

Yes 

No 

No 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

No 

(continued) 

A-l 
P.7 

Table A-l. Summary Data for Companies Rei 

(continued) 

Facilit 

Company Name (#) 

Amsted Industries 

An-Cor Indl. Plastics Inc. 

Appalachian Plastics Inc. 

Applied Composites, Corporation 

Aqua Bath 

Aqua-Air Manufacturers, Inc. 

Arjo Holding Company 

Armorcast Prods. Company 

Arrow Dynamics, Inc. 

Arrowhead Plastic Eng. Inc. 

Ashworth Bros. Inc. 

Athena Marble Inc. 

Attbar Plastics Inc. 

Austin Countertops Inc. 

Avnet 

Bailey Corporation 

Baja Products Ltd. 

Baltek Corporation 

Bathcraft Inc. 

Beden-Baugh Products Inc. 

Bedford Reinforced Plastics 

Beetle Plastics Inc. 

Belding Tank Technology 

Bertch Cabinet Manufacturing Inc. 

Bittner Industries Inc. 

Blue Dolphin Fiberglass Pools 

Bolfing Brothers Marble Inc. 

nforced Plastic 

ies Sales 

($106) 

1 $1,200.0 

1 $7.5 

1 $2.5 

1 $10.0 

1 $15.0 

1 $0.5 

1 $16.0 

1 $2.8 

1 $18.0 

1 $10.0 

1 $64.3 

1 $2.0 

1 $8.0 

1 $4.9 

1 $5,390.6 

1 $79.0 

2 $4.5 

1 $48.6 

1 $14.0 

1 $1.4 

1 $5.1 

1 $5.3 

1 $7.1 

1 $42.9 

1 $2.5 

1 $6.3 

1 $2.2 

Composite Facilities 

Employment 

9,000 

150 

39 

200 

35 

15 

150 

40 

50 

199 

600 

26 

150 

50 

NA 

1,245 

42 

1,131 

170 

20 

80 

44 

50 

375 

15 

50 

55 

Small 

Business 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

No 

No 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

(continued) 

A-2 
P.8 

Table A-l. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Facilities Sales 

Company Name (#) 

Bowie Mfg. Inc. 

Bradley Specialty Corporation 

Bremen Glas Inc. . 

Bristol Fiberlight Industries 

Builders Marble Inc. 

Bulk Molding Compounds Inc. 

C & K Plastics Inc. 

Cambridge Industries 

Canadian Pacific Ltd . 

Capital Marble Creations 

Capon Valley Marble Inc. 

Carolina Counters 

Carsonite Intl. Corporation 

CDR Systems Corporation ; 

Central Marble Products Inc. 

Century Marble Company Inc. 

Chance Industries, Inc. 

Charloma Fiberglass Inc. 

Clark Mfg. 

Coastal Engineered Products, Inc. 

Compagnie De Saint-Gobain S.A. 

Composites, USA, Inc. 

Comtech Telecommunications Corporation 

Concept Plastics Inc. 

Conley Corporation 

Contemporary Products Inc. 

Continental Camper Company Inc. 

Core Materials Corporation 

($106) 

$3.9 

$1.1 

$16.0 

$16.0 

$1.0 

$15.0 

$1.5 

$346.0 

> $9,560.0 

$1.7 

$5.2 

$0.8 

$17.0 

1 $38.0 

$0.5 

$1.7 

$50.0 

$5.1 

$63.0 

NA 

$91,384.0 

$3.0 

$20.9 

$12.0 

$12.3 

I $6.1 

1 $10.9 

$52.5 

Employment 

44 

18 

145 

160 

35 

45 

20 

3,831 

33,600 

40 

50 

12 

120 

200 

12 

40 

405 

50 

300 

NA 

101,094 

40 

192 

250 

120 

90 

95 

419 

Small 

Business 

Yes 

. Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

(continued) 

A-3 
P.9 

Table A-l. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Company Name 

Covermaster Inc. 

CR/LP Limited Partnership 

Crane Corporation 

Creative Pultrusions, Inc. 

Cultured Marble Products Ltd. 

Custom Fibreglass Mfg. Company 

Custom Fiberglass Moldings, Inc. 

Custom Marble Inc. 

Cytec Industries 

Dasco Pro, Inc. 

Delta Fiberglass & Environmental Products 

Delta Fiberglass Structures 

Denali Inc. 

Diamond Coach Corporation 

Diamond Fiberglass Fabricators, Inc. 

Dixie-Pacific Manufacturing Company 

Dom-Fab, Inc. 

Dow Chemical 

Dyson-Kissner-Moran Corporation 

Eagle Craft Inc. 

Eagle-Picher Industries Inc. 

Ebonite International 

Eckler Industries 

Ed Industries, Inc. 

Electric-Glass Inc. 

Eljer Industries 

Elmore Industries 

Facilities 

(#) 

1 

4 

4 

2 

3 

3 

2 

1 

Sales 

($106) 

$2.8 

$86.0 

$1,847.7 

$1.8 

$1.0 

$18.0 

$0.8 

$1.0 

$1,290.6 

$7.9 

$7.5 

$9.3 

$71.1 

$10.0 

$12.0 

$27.0 

$6.4 

$20,018.0 

$500.0 

$1.8 

$848.5 

$16.0 

$12.0 

$5.6 

$2.7 

$397.4 

$1.2 

Employment 

26 

1,182 

10,000 

270 

13 

150 

26 

29 

5,200 

70 

50 

90 

743 

100 

85 

250 

50 

40,289 

4,500 

26 

7,500 

250 

110 

60 

27 

3,700 

12 

Small 

Business 

Yes 

No 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

No 

No 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

(continued) 

A-4 
P.10 

Table A-l. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Company Name 

Emsig Mfg. Corporation 

Enuro Fiberglass Systems, Inc. 

Epoch Industries 

Escalade Inc. 

Essef Corporation 

Esteriine Technologiies Corporation 

E-T-M Ents. Inc. 

Evans Industries 

Evelands Inc. 

Faball USA, Lie 

Falcon Building Products 

Fedders Corporation 

FG Products, Inc. 

Fiber Pad, Inc. 

Fiber Pro 

Fibercast Company 

Fiberdome Inc. 

Fiberflex Inc. 

Fiberglass & Plastic Fab, Inc. 

Fiberglass Engineering Corporation 

Fiberglass Forms Inc. 

Fiberglass Industries Inc. 

Fiberglass Plus Recreational 

Fiberglass Products, Inc. 

Fiberglass Specialties Inc. 

Fiberglass Systems 

Celstar Group, The 

Facilit 

(#) 

ies Sales 

($106) 

$25.0 

5 $35.0 

$6.4 

$93.2 

$306.1 

1 $391.0 

$24.0 

$42.0 

I $2.4 

$7.3 

1 $633.2 

1 $314.1 

1 $7.0 

1 $2.9 

1 $2.0 

1 $22.7 

1 $3.2 

1 $6.2 

1 $1.0 

1 $42.0 

1 $1.5 

1 $5.1 

1 $0.7 

1 $2.8 

1 $4.6 

1 $5.0 

1 ' $20.0 

Employment 

300 

1,500 

50 

700 

2,100 

3,360 

400 

400 

15 

50 

4,100 

2,700 

55 

49 

15 

200 

60 

80 

20 • 

420 

25 

50 

10 

35 

80 

80 

180 

Small 

Business 

Yes 

No 

Yes 

No 

No 

No 

Yes 

Yes 

Yes 

Yes 

No 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

(continued) 

A-5 
P.11 

Table A-l. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Company Name 

Fibre Body Industries, Inc. 

Fibrenetics Inc. 

Fibrex Corporation 

Fleetwood Enterprises, Inc. 

Florida Line of Astatula Inc. 

For Better Living, Inc. 

Foremost Interiors Inc. 

Formica Corporation 

Fowler Mfg. Inc. 

G. W. Fiberglass Inc. 

Gencorp Inc. 

General Electric Company 

General Motors Corporation 

Gesmar Corporation 

GHM Inc. 

Gibbon Fiberglass 

Glas Master Inc. 

Glasforms Inc. 

Glasgo Plastics Inc. 

Global Glass Inc. 

Goodyear Tire & Rubber Company 

Gorman-Rupp Company 

Gould Inc. 

GPI Corporation 

Gpm Industries, Inc. 

Grayson Tool Company 

Gruber Sys. Inc. 

Facilities 

(#) 

2 

2 

2 

2 

Sales 

($106) 

$12.7 

$1.0 

$30.0 

$2,874.4 

$1.9 

$81.5 

$1.4 

$338.0 

$6.1 

$38.1 

$1,568.0 

$90,840.0 

$164,000.0 

$4.1 

$1.0 

$1.2 

$5.5 

$11.0 

$15.0 

$8.2 

$13,155.0 

$150.8 

$157.4 

NA 

$6.3 

$2.5 

$20.0 

Employment 

120 

14 

250 

18,000 

24 

522 

26 

3,284 

50 

375 

9,460 

276,000 

647,000 

50 

50 

18 

50 

110 

35 

90 

95,302 

960 

1,500 

NA 

50 

35 

160 

Small 

Business 

Yes 

Yes 

Yes 

No 

Yes 

No 

Yes 

No 

Yes 

Yes 

No 

No 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

No 

No 

Yes 

Yes 

Yes 

Yes 

(continued) 

A-6 
P.12 

Table A-l. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Facilities Sales 

Company Name (#) 

H & R Ind. Inc. 1 

Harsco Corporation 

Hartzell Fan Inc. 

Hasbrouck Plastics Inc. 

Hella North America Ltd 

Hemco Corporation 

Henderson, Black and Green, Inc. 

Heritage Marble of Ohio Inc. 

Hess Company Ind. Inc. 

Hood Manufacturing 

Hydro Systems, Inc. 

Hy-Tec Fiberglass Inc. 

I. M. Pena, Inc. 

Images Products Corp 

Imco Reinforced Plastics Inc. 

Industrial Dielectrics Inc. 

Industrial Fiberglass Specialties 

Industrial Linings Inc. 

International Grating Inc. 

International Marble And Granite Supply 

International Paper . 

North American Filtration Inc. 

Iten Ind. 

Jason Ind. Inc. 

Jason International 

Johnson Truck Bodies 

Jones Plastic And Engineering Corporation 

($106) 

$5.7 

$1,629.0 

$38.0 

$1.3 

$68.7 

$3.0 

$17.5 

$2.4 

$18.4 

$2.5 

$8.0 

$1.0 

$1.4 

$5.7 

$4.6 

$50.0 

$7.0 

$1.7 

$4.5 

$8.0 

I $20,143.0 

$3.0 

$27.2 

$9.0 

$5.7 

$31.0 

$98.6 

Employment 

45 

14,200 

250 

10 

550 

30 

NA 

25 

175 

40 

70 

12 

15 

50 

50 

250 

28 

30 

44 

15 

87,000 

50 

250 

125 

50 

270 

1,310 

Small 

Business 

Yes 

No 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

(continued) 

A-7 
P.13 

Table A-l. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Company Name 

Facilities 

(#) 

Sales 

($106) Employment 

K2Inc. 

Keller Products, Inc. 

Kerrico Corporation 

Kivett's Inc. 

Kobe Steel Ltd. 

Kohler Company 

Kreider Mfg. Inc. 

Krueger International Inc. 

Laminated Products, Inc. 

Larson Company 

GLNV Holdings 

Lawrence Wittman & Company, Inc. 

Leer Inc. 

Lehigh Cultured Marble Inc. 

Leucadia National Corporation 

Liberty Polyglas Inc. 

Lippert Corporation 

Ll Cultured Marble 

Louisville Tile Distributors 

Lund International Holding Inc. 

M. C. Gill Corporation 

Mac Molding Company Inc. 

Magnum Moldings 

Marbelite Corporation 

Marble Creations 

Marble Designs Inc. 

Marble Works 

$302.7 

$37.0 

$2.0 

$6.2 

$1,533.5 

$155.6 

$2.6 

$345.0 

$12.2 

NA 

$21.9 

$6.4 

$70.0 

$5.2 

$5,193.9 

$5.0 

$8.0 

$2.6 

$12.0 

$46.4 

$39.0 

$4.3 

$0.5 

$3.4 

$2.0 

$1.3 

$1.0 

Small 

Business 

4,600 

350 

10 

100 

13,437 

1,800 

40 

3,000 

150 

NA 

205 

50 

500 

50 

3,919 

50 

100 

• 30 

150 

267 

195 

75 

9 

40 

35 

19 

16 

No 

Yes 

Yes 

Yes 

No 

No 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

(continued) 

A-8 
P.M 

Table A-l. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Facilities Sales 

Company Name (#) 

Marblecast Products Inc. 

Marmon Group 

Masco Corporation . 

McClarin Plastics Inc. 

McClure Ind. Inc. 

Melcher Mfg. Company Inc. 

Menasha Corporation . 

Mesa Fiberglass, Inc. 

Mesa Fully Formed Inc. 

Michiana Fiberglass Inc. 

Micro-Fab Inc. 

Miles Fiberglass & Plastics 

Millennium Products Inc. 

Mincey Marble Mfg. Inc. 

Miracle Recreation Equipment Company 

Molded Fiber Glass Company ( 

Monaco Coach Corporation 

Monarch Ltd 

Morrison Molded Fiber Glass '. 

Mr. Tubs Inc. 

Murphy Body Company 

National Fiber Glass Products 

New England Plastic Coated Products 

New York Blower Company (The) 

Newport Laminates 

Niagara Fiberglass Inc. 

($106) 

$2.1 

$6,100.0 

I $2,927.0 

$13.5 

$1.0 

$1.7 

> $915.0 

$3.0 

$13.5 

$4.9 

$2.0 

$6.0 

$19.1 

$4.8 

1 $50.0 

5 $60.0 

$441.9 

$9.0 

3 $100.0 

1 $9.9 

$24.0 

$9.3 

$7.5 

I $82.0 

I $2.0 

1 $2.4 

Employment 

35 

30,000 

20,500 

98 

11 

17 

. 5,500 

32 

220 

50 

30 

70 

175 

105 

300 

900 

2,400 

87 

900 

85 

135 

80 

80 

700 

40 

45 

Small 

Business 

Yes 

No 

No 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

No 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

(continued) 

A-9 
P.15 

Table A-l. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Facili 

Company Name (#] 

Non Metallic Resources, Inc. 

Nordic Fiberglass Inc. 

Northwest Bodies Inc. 

Nova Group, Inc. 

Nova Marble Products 

Oasis Industries 

Odom Fiberglass Inc. 

Olympic Fiberglass Ind. Inc. 

Omega Polymer Technologies 

Osborne Ind. Inc. 

Owens-Corning 

Oxford Cmp, Inc. 

P & J Partnership 

Pacific Tank Limited 

Parkson Corporation 

Parthenon Marble Products, Inc. 

Pearl Baths Inc. 

Perma Grain Products, Inc. 

Peterson Prods. 

Phil Carter System, Inc. (The) 

Phillips Electronics North America Corporation 

PI US Holdings Inc 

Picken's Plastics Inc. 

Piedmont Composites 

Piedmont Fiberglass 

Pillings F.R.P. 

Pinta's Cultured Marble Inc. 

Plas/Steel Prods. 

ties Sales 

($106) 

I • $4.7 

I $6.9 

1 $5.0 

1 $54.0 

1 $6.4 

1 $5.0 

1 $1.1 

1 $3.9 

1 $49.1 

1 $12.0 

5 $4,373.0 

1 $2.8 

1 $4.5 

1 $0.9 

1 $50.0 

1 $1.7 

1 $15.0 

1 $22.0 

1 $6.0 

1 $5.1 

1 $7,000.0 

1 $6.6 

1 $5.5 

1 $22.2 

1 $0.7 

1 $3.7 

1 $1.3 

1 $17.5 

Employment 

40 

111 

75 

50 

40 

75 

20 

NA 

380 

140 

18,100 

55 

92 

15 

160 

30 

90 

200 

49 

50 

30,000 

50 

68 

175 

15 

NA 

25 

300 

Small 

Business 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

(continued) 

A-10 
P.16 

Table A-l. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Company Name 

Plas-Tech, Ltd. 

Plastic Composites Corporation 

Plastic Development Company 

Plasti-Fab 

Poly Foam International 

Polymer Concrete Corporation 

Polyply, Inc. 

Premix, Inc. 

Prestigious Accessories Inc. 

Primero, Inc. 

Prodelin Corporation 

Prototype Concepts Inc. 

R &D Marble Inc. 

R V National Holdings 

Radiant Marble Company 

Raven Industries, Inc. 

Red Ewald Inc. 

Retterbush Injection Molded 

Robroy Industries, Inc. 

Rockwell International Corporation 

Rocor Transportation Cos. 

Roma Marble Inc. 

RPM Inc 

Rubber & Plastic Applicators 

Rynone Mfg. Corporation 

Ryobi North America 

S. R. Smith, Inc. 

Facilities 

(#) 

2 

3 

2 

2 

Sales 

($10') 

$12.7 

$2.8 

$5.0 

$3.3 

$37.4 

$1.4 

$2.0 

$124.0 

$11.1 

$1.3 

$50.0 

$2.7 

$2.5 

$137.1 

$5.2 

$120.4 

$7.0 

$1.3 

$130.0 

$7,762.0 

$60.0 

$1.8 

$1,350.5 

$1.7 

$9.1 

$600.0 

$14.9 

Employment 

100 • 

45 

50 

42 

542 

16 

25 

520 

54 

20 

250 

50 

53 

1,387 

50 

1,368 

100 

20 

1,000 

45,000 

650 

27 

6,651 

30 

200 

3,800 

120 

Small 

Business 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

No 

Yes 

Yes 

No 

No 

No 

Yes 

No 

Yes 

Yes 

No 

Yes 

(continued) 

A-ll 
P.17 

Table A-l. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Facilities Sales 

Company Name (#) 

Schmitt Marble Prods. Inc. 

Scm Container Machinery Ltd 

Seal Reinforced Fiberglass 

Seymour Manufacturing Company Inc. 

Shenandoah Fiberglass Prods. 

Sherman Utility Structures, Inc. 

SMC Corporation 

Southeast Marble Inc. 

Space Tables 

Spears Manufacturing 

Specialty Plastics Associates, Inc. 

Specialty Plastics, Inc. 

Square D Company '. 

St. Croix of Park Falls Ltd. 

St. Mary's Marble, L.L.C. 

Standard Glas, Inc. 

Sunrise Fiberglass Corporation 

Sunset Plastics Inc. 

Superior Home Prods. Inc. 

Syn-Mar, Inc. 

Takara Belmont Usa 

Taylor Ind. Inc. 

Teco Inc. 

Tecton Products 

The Alpha Corporation 

($106) 

$2.5 

$208,152.0 

$1.6 

' $22.0 

$2.0 

$110.9 

$200.8 

$2.2 

$2.5 

$89.0 

$3.9 

$3.0 

> $1,856.0 

$12.0 

$4.3 

$1.8 

$2.5 

1 $3.0 

$35.0 

$0.7 

$42.0 

1 $1.8 

1 $22.0 

1 $2.0 

1 $150.0 

Employment 

50 

2,399 

19 

160 

26 

875 

1,400 

35 

12 

875 

53 

65 

16,000 

130 

65 

15 

30 

35 

175 

12 

98 

17 

180 

20 

325 

Small 

Business 

Yes 

No 

Yes 

Yes 

Yes 

No 

No 

Yes 

Yes 

No 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

(continued) 

A-12 
P.18 

Table A-l. Summary Data for 

(continued) 

Company Name 

Thyssen Ag 

Tiffany Marble Mfg. Inc. 

Tom Smith Fiberglass Inc. 

Tompkins Ind. Inc. 

Trail Wagons Inc. 

Tri City Marble 

Trinity Industries 

TRW Inc. 

U.S. Fiberglass Prods. Inc. 

Ultra/Glas of Lakeville Inc. 

United States Marble Inc. 

United Technologies Corporation 

Universal Plastics Inc. 

Vendura Industries, Inc. 

Venetian Marble 

Vertex Plastics Inc. 

Viatec, Inc. 

VMC Fiberglass Products, Inc. 

W. H. Brady Company 

Walnut Investigation Company 

Warminster Fiberglass Company 

Wayne Mfg Company 

Werner Ladder Company 

Western Recreational Vehicles, Inc. 

Wexco, Inc. 

William Kreysler & Associates, Inc. 

Wilson Marble Company 

Companies Reinforced Plastic Composite Facilities 

Facilities Sales 

(#) ($10') 

4 $40,753.4 

1 $1.0*. 

1 $0.7 

9 $1,400.0 

1 $3.8 

1 $5.0 

1 $2,234.7 

1 $1,000.0 

1 $10.3 

1 $1.5 

1 $4.0 

1 $22,802.0 

1 $3.4 

1 $1.5 

2 $0.8 

1 $2.3 

2 $16.0 

1 $14.0 

2 $426.1 

1 $6.3 

2 $7.0 

1 $6.0 

1 $253.1 

1 $20.0 

1 $46.1 

1 $2.0 

1 $0.8 

Employment 

127,873 

21 

9 

14,000 

50 

15 

16,300 

79,700 

50 

15 

40 

170,600 

55 

24 

20 

19 

150 

250 

2,500 

50 

100 

150 

2,700 

400 

275 

20 

20 

Small 

Business 

No 

Yes 

Yes 

No 

Yes 

Yes 

No 

No 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

(continued) 

A-13 
P.19 

Table A-l. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Company Name 

Xenon Company, Inc. 

Xeres 

Yankee Plastic Company 

Zane's Fiberglass Shop, Inc. 

Zehrco Plastics, Inc. 

Facilities 

(#) 

1 

6 

1 

1 

2 

433 

Sales 

($106) 

$1.0 

$54.0 

$0.8 

$5.7 

$20.1 

$763,429.6 

Employment 

9 

493 

8 

50 

190 

2,126,586 

Small 

Business 

Yes 

Yes 

Yes 

Yes 

Yes 

278 

NA = not available 

Sources: American Business Information (ABI). 1999. American Business Disc [computer file]. 

Disclosure Inc. 1998. Worldscope [computer file]. Bethesda, MD: Disclosure Inc.. 

Dun & Bradstreet. 1998. Dun's Market Identifiers [computer file]. New York, NY: Dialog 

Corporation. 

Dun & Bradstreet. 1999. Million Dollar Directory: America's Leading Public and Private 

Companies. Bethlehem, PA: Dun & Bradstreet Corporation. 

Gale Research, Inc. 1998. Ward's Business Directory of U.S. Private and Public Companies. 

Detroit, MI. Gale Research, Inc. 

Gale Research, Inc. 1996. Manufacturing USA. Detroit, MI. Gale Research, Inc. 

Information Access Corporation. 1998. Business & Company ProFile [computer file]. Foster City, 

CA: Information Access Corporation. 

Selected Company 10-K Reports. 

A-14 
P.20 

Appendix B 

Economic Model of the Merchant Sector of the 

U.S. Reinforced Plastic Composites Industry 
P.21 

Implementation ofthe proposed NESHAP will affect the costs of production in the 

U.S. RPC industry for producers that use thermoset resins. Responses at the facility level to 

these additional costs collectively determine the market impacts ofthe regulation. 

Specifically, the cost ofthe regulation may induce some facilities to alter their current level 

of production or even to close. These choices affect, and in turn are affected by, the market 

price for each product. The economic impact analysis employs standard concepts in 

microeconomics to model the supply of each product and the impacts ofthe regulation on 

production costs and the output decisions of merchant facilities.1 The main elements ofthe 

analysis are as follows: 

• characterize production of each product at the individual facility and market 

levels, 

• characterize demand for each product, and 

• develop the solution algorithm to determine the with-regulation equilibrium. 

The following sections provide the supply.and demand specifications for each product market 

as implemented in the EIA model and summarize the model's solution algorithm. 

B.l Supply of Reinforced Plastics Products 

Cost curves were constructed for each product line at existing RPC facilities using 

thermosetting resins. Facilities using thermoplastic resins are not subject to the proposed 

regulations and are treated as an aggregate producer. Therefore, for a particular end-use 

market, the market supply of RPCs can be expressed as 

Q

s

 = qD + q'. (B.l) 

where qD is the supply from directly affected thermosetting facilities and q1 is the supply from 

indirectly affected thermosetting and thermoplastic facilities. 

B. 1.1 Thermosetting Facilities (q°) (Directly Affected) 

Existing merchant producers of RPCs have the ability to vary output in the face of 

production cost changes. Economic theory provides the rationale for believing that supply 

functions for existing suppliers are upward sloping. For this analysis, the generalized 

Leontief technology is assumed to characterize the production of RPCs at each facility. This 

technology is appropriate given the fixed-proportion material inputs (resins, filler, and 

1

 As noted in Section 4, the impact ofthe regulation on captive producers is determined through a full-cost 

absorption approach that does not incorporate market changes and results in profits being reduced by the 

estimated compliance costs for these producers. 

B-1 
P.22 

reinforcements) and the primary variable-proportion inputs of labor and energy. Applying 

Hotelling's lemma to the generalized Leontief profit function produced the following general 

form ofthe supply function for each RPC product line: 

+ 1 

2 

(B.2) 

where p is the market price for the reinforced plastic product, ->• and p are model parameters, 

and j indexes producers (i.e., individual existing facilities). The theoretical restrictions on the 

model parameters that ensure upward-sloping supply curves are Yj > 0 and P < 0. 

Figure B-1 illustrates the theoretical supply function of Eq. (B.2). As shown, the 

upward-sloping supply curve is specified over a productive range with a lower bound of zero 

ii 

that corresponds with a shutdown price equal to 2

 and an upper bound given by the 

4YJ 

productive capacity of aTM that is approximated by the parameter Yj- The curvature ofthe 

supply function is determined by the p parameter. 

n * v = n-V1 Q./1 

I j i Yj Q j

 MJ 

Figure B-1. Theoretical Supply Function for Existing Facilities 

To specify the supply function of Eq. (B.2) for this analysis, the P parameter is 

computed by substituting an assumed market supply elasticity, (c;), for a particular reinforced 

B-2 
P.23 

plastic product, the market price ofthe product (p), and the production-weighted average 

annual production level of existing facilities (q) into the following equation:2 

P ="^4q (B.3) 

Absent literature estimates, the market-level supply elasticities were assumed to be 1 (unitary 

elasticity) (i.e., a 1 percent change in price leads to a 1 percent change in output). The 1997 

market prices of each product were derived as described in Section 4, and the average annual 

production level of each product for each facility was derived from the facility database. The 

P parameter for each product was calculated by incorporating these values into Eq. (B.3). 

The parameter, Yj, approximates the productive capacity and varies across product 

lines at each facility. This parameter does not influence the facility's production 

responsiveness to price changes as does the P parameter. Thus, the parameter Yj was used to 

calibrate the model so that each existing facility's supply equation is consistent with the 

baseline production data. 

Production decisions at the individual facilities are affected by the total annual 

variable compliance costs, cj; which are expressed per pound of reinforced plastics product. 

Each supply equation will be directly affected by these regulatory control costs, which enter 

as a net price change (i.e., Pj - Cj). Thus, with the regulation the supply function for each 

existing facility from Eq. (B.2) above becomes: 

, • 1 

' 2 

1 

p-c 

. J J . 

q = Y + - — (B.4) 

' 2 p.-c.

 y ' 

. J J . 

The total annual variable compliance costs per pound are projected given the annual 

production per facility and the regulatory cost estimates for each facility provided by the 

engineering analysis. 

2

 Equation B.3 is determined by 1) taking the derivative ofthe supply function (B.2) with respect to price, 2) 

multiplying the expression by p/q to yield a term for the supply elasticity, and 3) solve the resulting equation 

for the P parameter. 

B-3 
P.24 

In evaluating the impacts ofthe proposed rule, we shift the individual supply curves 

by the variable portion ofthe compliance costs and then evaluate the closure decision with 

the total compliance costs (fixed, or annual capital, costs plus variable costs associated with 

new production level). Therefore, our modeling approach addresses the economic viability of 

the product-line and evaluates whether it continues to cover variable costs with regulation as 

well as the economic viability ofthe plant and evaluates whether it continues to cover total 

costs (variable plus fixed) with regulation. 

In order to evaluate the economic viability ofthe plant, the Agency determined 

baseline estimates of variable and fixed production costs. As noted above, applying the 

supply function specification to each directly affected producer generates an estimate of 

production, or variable, costs by taking the integral of the area under the curve corresponding 

to their production rate and market price. Lacking direct information from each facility, to 

approximate plant-level fixed costs, the Agency applied an industry average profit rate of 4.4 

percent for each facility.3 Thus, fixed costs at each facility i were then derived as: 

Fixed CostSj = Salesj - Variable Costs, - ProfitSi 

where Profits; = 4.4% * SaleSj. Given this baseline characterization of each facility, the 

Agency evaluated their economic viability with regulation and predicted a facility closures if 

profits were not positive, i.e., total revenues did not exceed total production costs and total 

regulatory costs. 

B.l.2 Thermosetting and Thermoplastic Facilities (q1) (Indirectly Affected) 

Because this industry segment is not directly affected by the regulation it was not 

necessary to model their supply at an individual facility level as was necessary for directly 

affected thermosetting facilities. EPA specified a single representative function to express 

the supply of RPCs from indirectly affected facilities, which allows them to increase their 

production in response to higher prices, i.e., 

q'=A'[p] * (B.5) 

3

 As applied for this analysis, this rate reflects the maximum profit rate for an individual facility, i.e., a 

threshold level of profitability. Those facilities whose total revenue minus production costs resulted in a 

return of less than 4.4 percent of revenues used the lower rate for determination of economic viability or 

regulation induced closure. 

B-4 
P.25 

where q1 is the quantity supplied from indirectly unaffected facilities, A1 is a positive 

constant, and £' is the supply elasticity. Absent literature or econometric estimates, the 

supply elasticity was assumed to have a value of one. The multiplicative supply parameter, 

A

1

, is determined for each product by back solving Eq. (B.5) given the supply elasticity and 

baseline values for the market price and quantity supplied in each market segment. 

The resulting RPC products from these facilities are modeled as perfect substitutes for 

RPC products from thermosetting facilities. Therefore, they supply at the same price for each 

end-use market which serves to dampen the ability ofthe directly affected producers to 

increase prices in response to regulation. Although it may be more appropriate to model as 

imperfect substitutes with cross-price elasticities, the Agency did not have sufficient 

information to provide those model parameters and chose an option that would be a worstcase scenario for affected industry segment (i.e., conservative modeling approach). 

B.2 Demand for Reinforced Plastics Products 

A single equation expresses the demand for each reinforced plastic composites 

product, 

Q

 D

 = B D [p]11" (B.6) 

where QD is the quantity demanded, BD is a positive constant, and nD is the demand elasticity. 

Absent literature or econometric estimates, the demand elasticity was assumed to have a 

value of-0.5. The multiplicative demand parameter, BD, was determined for each product by 

back solving Eq. (B.6) given the demand elasticity and baseline values for the market price 

and quantity demanded in each market segment. 

B.3 With-Regulation Market Equilibrium Determination 

Facility responses and market adjustments can be conceptualized as an interactive 

process. Facilities face increased production costs due to compliance, which causes facilityspecific production responses (i.e., output reduction). The cumulative effect of these 

responses leads to an increase in the market price that all producers (directly and indirectly 

affected) and consumers face, which leads to further responses by producers (directly and 

indirectly affected) as well as consumers and thus new market prices, and so on. The new 

equilibrium after imposing the regulation is the result ofa series of iterations between 

producer and consumer responses and market adjustments until a stable market price arises 

where total market supply equals total market demand, that is Qs = QD. 

B-5 
P.26 

The algorithm for deriving the post-compliance equilibria in all markets can be 

generalized to five recursive steps: 

1) Impose the control costs on each affected facility, thereby shifting inward their 

supply curve and reducing their production level at the given market price. 

2) Recalculate the market supply of each reinforced plastic product by horizontal 

summation across all suppliers. 

3) Determine the new prices for all product markets. 

4) Recalculate the supply functions of all facilities with the new prices, resulting in a 

new market supply of each product. Evaluate market demand at the new prices. 

5) Go to Step 3, resulting in new prices for each product. Repeat until equilibrium 

conditions are satisfied in all markets. 

B.4 Economic Welfare Impacts 

The economic welfare implications ofthe market price and output changes with the 

regulation can be examined using two slightly different tactics, each giving a somewhat 

different insight but the same implications: changes in the net benefits of consumers and 

producers based on the price changes and changes in the total benefits and costs of these 

products based on the quantity changes. This analysis focuses on the first measure—the 

changes in the net benefits of consumers and producers. Figure B-2 depicts the change in 

economic welfare by first measuring the change in consumer surplus and then the change in 

producer surplus. In essence, the demand and supply curves previously used as predictive 

devices are now being used as a valuation tool. 

This method of estimating the change in economic welfare with the regulation divides 

society into consumers and producers. In a market environment, consumers and producers of 

the good or service derive welfare from a market transaction. The difference between the 

maximum price consumers are willing to pay for a good and the price they actually pay is 

referred to as "consumer surplus." Consumer surplus is measured as the area under the 

demand curve and above the price ofthe product. Similarly, the difference between the 

minimum price producers are willing to accept for a good and the price they actually receive 

is referred to as "producer surplus" or profits. Producer surplus is measured as the area above 

the supply curve and below the price ofthe product. These areas can be thought of as 

consumers' net benefits of consumption and producers' net benefits of production, 

respectively. 

B-6 
P.27 

$/Q 

P, 

P, 

_A . ,_ ^y^^ 

S' 

/ / s 

^ - D 

Q2 Q, Q/t 

(a) Change in Consumer Surplus with Regulation 

$/Q 

Pn 

P, 

- B ^v^> 

S' 

^ - D 

Q2 Q, Q/t 

(b) Change in Producer Surplus with Regulation 

$/Q 

Pn 

P, 

.^l** -

-=^-T^> 

\\ 

CO CO 

^ ^ D 

Q2 Q, Q/t 

(c) Net Change in Economic Welfare with Regulation 

Figure B-2. Economic Welfare Changes with Regulation: Consumer and Producer 

Surplus 

B-7 
P.28 

In Figure B-2, baseline equilibrium occurs at the intersection ofthe demand curve, D, 

and supply curve, S. Price is P, with quantity Q,. The increased cost of production with the 

regulation will cause the market supply curve to shift upward to S'. The new equilibrium 

price ofthe product is P2. With a higher price for the product, there is less consumer welfare, 

all else being unchanged as real incomes are reduced. In Figure B-2(a), area A represents the 

dollar value ofthe annual net loss in consumers' benefits with the increased price. The 

rectangular portion represents the loss in consumer surplus on the quantity still consumed, 

Q2, while the triangular area represents the foregone surplus resulting from the reduced 

quantity consumed, Q*-Q2. 

In addition to the changes in consumer welfare, producer welfare also changes with 

the regulation. With the increase in market price, producers receive higher revenues on the 

quantity still purchased, Q2. In Figure B-2(b), area B represents the increase in revenues due 

to this increase in price. The difference in the area under the supply curve up to the original 

market price, area C, measures the loss in producer surplus, which includes the loss 

associated with the quantity no longer produced. The net change in producer welfare is 

represented by area B-C. 

The change in economic welfare attributable to the compliance costs of the regulation 

is the sum of consumer and producer surplus changes, that is, - (A) + (B-C). Figure B-2(c) 

shows the net (negative) change in economic welfare associated with the regulation as area 

D. However, this analysis does not include the benefits that occur outside the market (i.e., 

the value ofthe reduced levels of air pollution with the regulation). Including this benefit 

may reduce the net cost ofthe regulation or even make it positive. 

B-8 
P.29 

TECHNICAL REPORT DATA 

(Please read Instructions on reverse before completing) 

L REPORT NO. 

EPA-452/R-00-007 

2. 

4. TITLE AND SUBTITLE 

Economic Impact Analysis of Proposed Reinforced Plastics NESHAP 

7.AUTH0R(S) 

Tayler H. Bingham, Brooks M. Depro, and Mark C. Buckley RTI 

9. PERFORMING ORGANIZATION NAME AND ADDRESS 

Research Triangle Institute (RTI) 

Center for Economics Research, Hobbs Bldg. 

Research Triangle Park, NC 27709 

12. SPONSORING AGENCY NAME AND ADDRESS 

John Seitz, Director 

Office of Air Quality Planning and Standards 

Office of Air and Radiation 

U.S. Environmental Protection Agency 

Research Triangle Park, NC 27711 

3. RECIPIENTS ACCESSION NO. 

5. REPORT DATE 

May 2001 

6. PERFORMING ORGANIZATION CODE 

8. PERFORMING ORGANIZATION REPORT NO. 

RTI Project Number 7647-140 

10. PROGRAM ELEMENT NO. 

11. CONTRACT/GRANT NO. 

68-D-99-024 

13. TYPE OF REPORT AND PERIOD COVERED 

Final 

14. SPONSORING AGENCY CODE 

EPA/200/04 

15. SUPPLEMENTARY NOTES 

16. ABSTRACT 

This report evaluates the economic impacts ofthe proposed NESHAP for reinforced plastics manufacturing. 

The industry impact and social costs ofthe rule are estimated by incorporating the expected costs of 

compliance to a partial equilibrium model ofthe U.S. industry and projecting the market impacts for the 

various end-use markets. The report also provides the initial regulatory flexibility analysis (IRFA) that 

evaluates small business impacts. 

17. KEY WORDS AND DOCUMENT ANALYSIS 

a. DESCRIPTORS 

economic impacts 

small business impacts 

social costs 

18. DISTRIBUTION STATEMENT 

Release Unlimited 

b. IDENTIFIERS/OPEN ENDED TERMS 

Air Pollution control 

Economic Impact Analysis 

Regulatory Flexibility Analysis 

19. SECURITY CLASS (Report) 

Unclassified 

20. SECURITY CLASS (Page) 

Unclassified 

c. COSATI Field/Group 

21. NO. OF PAGES 

22. PRICE 

EPA Form 2220-1 (Rev. 4-77) PREVIOUS EDITION IS OBSOLETE