### Economic Impact Analysis for the Secondary Aluminum Supplemental Proposal

September 8, 2014

1. Background

This report is the economic impact analysis for the supplemental proposal for the Secondary

A luminum NESHAP

. In this supplemental proposal, we are soliciting comment on revisions to certain rule corrections and clarifications that were in the 2012 proposal as well as alternative compliance options related to sweat furnaces. These proposed amendments would:

• Revise the limit on the number of allowed furnace operating mode changes per year (i.e., frequency) in proposed section 63.1514(e) of four times in any 6 month period, with an
abi lity of sources to apply to the permitting authority, ( for major sources ) , or the Administrator, ( for area sources )

, f or additional furnace operating mode changes;

• Revise wording in proposed section 63.1511(b)(1) related to testing under worst

- case scenario clarifying under what conditions the performance tests are to be conducted ;

• Revise requirements to account for fugitive emissions during performance testing of uncontrolled group 1 furnaces, including installation of hooding according to ACGIH guidelines or use of a 67 percent capture/control efficiency. In certain cases where installing ACGIH hooding is impractical, the facility may petition the permitting authority, ( for major sources ) , or the Administrator, ( for area sources )

, to use alternative testing procedures that will minimize fugitive emissions;

• Revise the requirement that emission sources comply with the emission limits at all times including periods of startup and shutdown. A definition of startup and shutdown is being proposed as well as an alternative method for demonstrating compliance with emission
li mits;

• Revise monitoring requirements in section 63.1510(d)(2) that require annual inspection of capture/collection systems;

• Revise compliance dates of 180 days for certain requirements and 2 y ears for other requirements;

• Remov e proposed affirmative defe nse to civil penalties for violations caused by malfunctions; and

• Revise operating and monitoring requirements to provide a lternative compliance options
for sweat furnaces.

Details on th is supplemental proposal can be found in the preamble contained in the publ ic docket for this rulemaking.

1

### The EPA defined the Secondary Aluminum source category in 1992 as any establishment using
clean charge, aluminum scrap, or dross from aluminum production, as the raw materia l and
performing one or more of the following processes: scrap shredding, scrap
drying/delacquering/decoating, thermal chip drying, furnace operations (i.e., melting, holding,
sweating, refining, fluxing, or alloying), recovery of aluminum from dross, in

- l ine fluxing, or
dross cooling. The Secondary Aluminum Production source category includes facilities that
produce aluminum from scrap aluminum material and consists of the following operations: (1)
Preprocessing of scrap aluminum, including size reduction and removal of oils, coatings, and

other contaminants; (2) Furnace operations including melting, in

- furnace refining, fluxing, and
tapping; (3) Additional refining, by means of in

- line fluxing; and (4) Cooling of dross.

Table 1

. NESHAP and Industrial Source Cate gories Affected By This Final Action

Source Category NESHAP NAICS
code 1 Secondary Aluminum Production Primary aluminum production facilities Aluminum sheet, plate, and foil manufacturing facilities
Aluminum extruded product manufacturing facilities Other aluminum rolling and drawing facilities Aluminum die casting facilities Aluminum foundry facilities Secondary
Aluminum
Production 331314
331312
331315
331316
331319
331521
331524

1 North American Industry Classification System



### The secondary aluminum industry consists of approximately 161 secondary aluminum
production facilities, of which the EPA estimates 53 to be major sources of HAP. Several of the
secondary aluminum facilities are co

- located with primary aluminum, coil coating, and possibly
other source category facilities.

The revisions of the supplemental proposal impose no costs. Therefore

, there is no economic
impact. The rest of this document focuses on the economic imp act of the 2012 amendment s.

T he requirements for the uncontrolled furnaces are the only part of the 2012 amendments that
impose cost

. The elements that impose costs are the following:

• require uncontrolled furnaces to install testing hooding that meets Ame rican Council of

Government Industrial Hygienists (ACGIH) guidelines,

• require uncontrolled furnaces to test for hydrogen fluoride (HF) in addition to hydrogen

chloride (HCl), and

2

### • allow furnaces to switch designations, such as from a controlled Group 1 furn ace to

uncontrolled Group 2 furnace.

The costs of the rule, and the economic and small b usiness impacts associated with the rule, can
be found in Section 3. Section 2 below provides a profile for the secondary aluminum industry.

2. Industry Profile

This section introduces the secondary aluminum industry and provides aggregate statistics on the
amount of secondary aluminum produced and other economic data about the secondary
aluminum industry.

The secondary aluminum industry is based around recovery of alu minum, or production of
aluminum from recycled aluminum (scraps). Recovered aluminum, along with primary
aluminum, is used for: containers (such as aluminum cans) and packaging (which in 2010

accounted for 22.4 percent of end

- use shipments in the United St ates and Canada), buildings and
construction (10.2 percent), and transportation (28.2 percent) (Bray, 2011, 5.1). 1



### From 2006 to 2010 secondary recovery of aluminum, on average, accounted for 64 percent of
total aluminum production in the United States. In 2010, 2,800 metric tons of aluminum were
recovered in the U.S. (Table 1

- 1). Secondary recovery decreased by 36 perc ent from 2006 to
2010. The annual decreases became progressively severe until the industry, at least temporarily,

stabilized from 2009 to 2010.

Table 2

. Salient Aluminum Statistics (Thousands of Metric Tons)

2006 2007 2008 2009 2010

Primary Production 2,284 2,554 2,658 1,727 1,726

Secondary Recovery Total: 4,380 4,110 3,630 2,820 2,800

New Scrap 2,800 2,450 2,130 1,570 1,550

Old Scrap 1,580 1,660 1,500 1,260 1,250

Note: New Scrap is generated in the manufacturing of primary aluminum and semi

- fabricated aluminum mill,

finished industrial and consumer products (EPA, 1999 , 6). New scrap that is recycled by the same company that generated it is generally not counted in scrap consumption and secondary production data. Old scrap comes from recycled aluminum products (products recovered after their useful lives) such as used beverage cans (UBC) (EPA,
1999 , 7).

1 Primary aluminum is produced from alumina/bauxite (EPA 1999, 7)



### 3Source: Bray, Lee. 2011 . “Minerals Yearbook: Aluminum [Advanced Re lease]” USGS. Table 1. <http://minerals.usgs.gov/minerals/pubs/commodity/aluminum/myb1

- 2010

- alumi.pdf>



### Secondary Aluminum is produced by several di fferent types of firms (Table 3 ). The principal
manufacturers of recovered aluminum are Secondary Smelters and Independent Mill Fabricators.
To simplify, this industry profile now focuses on firms whose sole purpose is to

Table 3

. U.S. Consumption and Recovery from Purchased New and Ol d Aluminum Scrap, by Class (Metric Tons)

Calculated Recovery a

Class Consumption Aluminum Metallic

2009

Secondary smelters 1,450,000 1,020,000 1,090,000

Independent mill fabricators 1,620,000 1,390,000 1,470,000

Foundries 74,800 61,200 65,400

Other Consumers 6,870 6,330 6,350

Total 3,160,000 2,470,000 2,630,000

Estimated full Industry Coverage 3,390,000 2,650,000 2,820,000

2010

Secondary Smelters 1,610,000 1,150,000 1,230,000

Independent mill fabricators 1,450,000 1,240,000 1,320,000

Foundries 50,700 41,400 44,200

Other Consumers 6,290 6,290 6,290

Total 3,120,000 2,430,000 2,590,000

Estimated full Industry Coverage 3,370,000 2,620,000 2,800,000

a Metallic Recovery includes both aluminum recovery and alloying metals, Aluminum Recovery is the aluminum

content of the recovered metals.

Source: Bray, Lee. 2011 . “Minerals Yearbook: Aluminum [Advanced Release]” USGS. Table 3.

< http://minerals.usgs.gov/minerals/pubs/commodity/aluminum/myb1

- 2010

- alumi.pdf>



### process aluminum scrap into molten aluminum or aluminum ingot. The Secondary Smelting and
Alloying of Aluminum industry (NAICS 331314) “comprises establishments primarily engage d in
(1) recovering aluminum and aluminum alloys from scrap and/or dross (i.e., secondary smelting)
and making billet or ingot (except by rolling) and/or (2) manufacturing alloys, powder, paste, or
flake from purchased aluminum” (U.S. Census Bureau, 2007). Secondary Smelters were
responsible for 44 percent of total aluminum recovery in 2010.

4

### 2 .1 Key Statistics

The Secondary Smelting industry’s shipments (output) expanded by 35 percent fr om 2005 to

2007. T his expansion not only stalled but was overwhelmed by a 57 percent decrease in output
from 2007 to 2009, likely due to the overall economic recession during that period. There was an
overall decrease in output of 43 percent from 2005 to 2009 (Table 4 ). Other indicators (payroll
and number of employees) lik ewise exhibit this pattern of industry expansion from 2005 to 2007
followed by drastic contraction from 2007 to 2009. Payroll increased by 10 percent and the
number of employees increased by 12 percent from 2005 to 2007 but fell by 46 percent and

43 percen t from 2007 to 2009.

Table 4

. Key Statistics: Secondary Aluminum Manufacturing (North American Industry Classification [NAICS] 331314) ($2009)

2005 2007 2009

Shipments ($1,000) 6,037,839 8,149,043 3,440,336

Annual payroll ($1,000) 366,891 404,999 217,198

Employees 6,727 7,524 4,224

Sources: U.S. Census Bureau: generated by RTI International; using American Factfinder; “Sector 31: Annual

Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 2009 and 2008, 2008 and 2007, 2006 and 2005.” <http://factfinder.census.gov>; (December 13, 2011 ).



### The average shipments per employee and shipments per dollar of payroll followed the same
pattern as the aggregate statistics but the fluctuations were mostly less extreme. Average
shipments per employee increased from 2005 to 2007 only to fall below the 2005 level by 2009.
There was an overall decrease in average shipments per employee of 9 percent. Average
shipments per dollar of payroll expanded by 25 percent from 2005 to 2007 only to fall back to
the 2005 level by 2009. The average annual payroll per employee was unique as it did not
increase before decreasing, but rather decreased slightly (1.3 percent) from 2005 to 2007 and

dec reased slightly more (4.5 percent) fro m 2007 to 2009 (Table 5 ).

5

### Table 5

. Industry Data: Secondary Aluminum (NAICS 331314) ($2009)

Industry Data 2005 2007 2009

Total Shipments ($1,000) 6,037,839 8,149,043 3,440,336

Average Shipments per employee 898 1,083 814

Average Shipments per $ of payroll 16 20 16

Average Annual payroll per employee 54,540 53,827 51,420

Source: U.S. Census Bureau: generated by RTI International; using American Factfinder; “Sector 31: Annual

Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 2009 and 2008, 2008 and 2007, 2006 and 2005.” <http://factfinder.census.gov>; (December 13, 2011 ).



### 2 .2 Supply and Demand Characteristics:

Secondary aluminum demand is determined by the industries that use secondary aluminum as an
input into their manufacturing process. Historically, data on the use of aluminum in product
markets has not differentiated between the demand of primary and secondary (EPA, 1999 , 41).
Conversely, there is more detailed data available for the supply and inputs used in secondary
production.

2 .2.1 Goods and Services Used in Secondary Aluminum

Material cost consistently accounted for the lion’s share (aroun d 80 percent) of the value of
shipments in secondary aluminum manufacturing from 2005 to 2009. This suggests that the cost
of aluminum scrap has a major influence on the cost of secondary aluminum manufacturing.
Total employee compensation took up a much s maller amount

— an average of 7.3 percent of the
value of shipments. About half of total compensation went to production workers’ wages.
Purchased electricity (ranging from 3 to 4.7 percent) and purchased fuel (1.7 to 3.2 percent)

accounted for small but not insignificant portions of the total value of shipmen ts through the
period (Table 6 ).

2 .3 Firm and Market Characteristics

2 .3.1 Location

The concentration of the Secondary aluminum industry has been attributed to the cost of
transportation which causes establishments to locate near scrap supplies and consumers of
secondary aluminum. “A cursory look at the distribution of secondary smelters in the U.S.
reveals a heavy concentration of smelters in the automotive and appliance manufacturing areas

of the cou ntry” (EPA, 1999 , 19). The secondary aluminum industry was concentrated in the
central U.S. in 1997 and remained that way through 2007. In 2007, Indiana had the most

6

### secondary aluminum establishments, followed by Texas, Tennessee, Mi chigan and California.
Similarly, Indiana had the highest concentration of establishments, followed by Tennessee,

Kentu cky and New Hampshire (Table 7 ).

Table 6

. Cost of Goods and Services Used in Secondary Aluminum Manufacturing (NAICS 331314) ($2009)

Indu stry Ratios 2005 Share 2007 Share 2009 Share

Total shipments ($1,000) 6,037,839 100.0% 8,149,043 100.0% 3,440,336 100.0%

Total compensation ($1,000) 487,199 8.1% 533,852 6.5% 280,485 8.6%

Annual payroll ($1,000) 366,891 6.1% 404,999 5.0% 217,198 6.3%

Fringe benefits ($1,000) 120,308 2.0% 128,853 1.6% 63,287 1.8%

Total employees 7,390 7,785 4,224

Total production workers’ wages

($1,000)

— 2007 nonleased 246,744 4.1% 267,385 3.3% 125,503 3.7%

Average production workers per year 5,513 5,798 3,082

Total production hours (thousands) 12,603 14,066 6,429

Total cost of materials ($1,000) 4,793,596 79.4% 6,404,830 78.6% 2,840,494 82.6%

Materials, parts, packaging etc. used

($1,000) 4,360,670 72.0% 5,697,489 70.0% 2,537,663 73.8%

cost of resales ($1,000) 134,966 1.6% 62,094 1.8%

Purchased electricity ($1,000) 114,150 1.9% 262,814 3.2% 59,873 1.7%

Cost of purchased fuel ($1,000) 260,314 4.3% 241,124 3.0% 162,076 4.7%

Source: U.S. Census Bureau: generated by RTI International; using American Factfinder; “Sector 31: Annual

Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 2009 and 2008, 2008 and 2007, 2006 and 2005.” <http://factfinder.census.gov>; (December 13, 2011 ).



### 7

### Table 7

. Establishment and Employee Concentration in Secondary Aluminum Manufacturing (NAICS 331314) (2007)

Geography Number of

Establishments Average Number

of Paid Employees per

Pay Period Population/ Employees Average

Number of Employees per Establishment Population/

Establishments

United States 134 7,468 40,388 56 2,250,904

Alabama 4

— — — 1,156,963

Arkansas 2

— — — 1,417,399

California 10 473 77,280 47 3,655,322

Florida 6 228 80,049 38 3,041,874

Georgia 3

— — — 3,181,583

Illinois 9 369 34,831 41 1,428,061

Indiana 15 898 7,066 60 423,019

Kentucky 7 454 9,342 65 605,925

Michigan 11 515 19,557 47 915,620

Minnesota 1

— — — 5,197,621

Missouri 4 165 35,627 41 1,469,604

New Hampshire 2

— — — 657,914

New York 6 901 21,418 150 3,216,288

Ohio 9 329 34,854 37 1,274,102

Pennsylvania 4 127 97,896 32 3,108,198

Tennessee 11

— — — 559,702

Texas 12

— — — 1,992,032

Wisconsin 3

— — — 1,867,213

Source: U.S. Census Bureau: generated by RTI International; using American Factfinder; “Table 1: Selected

Industry Statistics for the U.S. and States: 2007.” <http://factfinder.census.gov>; (December 13, 2011 ).



### 2 .3.2 Employment

Secondary aluminum manufacturing employment and the concentration of employment by state
follows that of establishments fairly closely with the exception of New York which had
relatively large amount of employees per establishment (Table 7 ). Indiana had the highest
concentration of employees, followed closely by Kentucky, and less closely by Michigan and

New York.

8

### 2 .3.3 Energy Use

The U.S. Energy Informati on Administration has not typically published energy consumption
data disaggregated enough to build a time trend of the secondary aluminum industry’s energy
use. However, energy consumption data specific to the secondary aluminum was published in
2006 ( Tab le 8 ). This shows that the industry almost entirely uses natural gas to fuel aluminum
production.

Table 8

. Energy Use by Fuel Type, NAICS 331314

Fuel Type (Unit: Trillion Btu) 2006

Total 21

Net electricity 2

Residual Fuel Oil

—

Distillate Fuel Oil

—

Natural Gas 18

LPG and NGL

—

Coal

—

Coke and Breeze 0

Other

—

Source: U.S. Department of Energy, Energy Information Administration. 2009. “First Use of Energy for All

Purposes (Fuel and Nonfuel), 2006” < http://www.eia.gov/emeu/mecs/mecs2006/2006tables.html >



### 2

. 3.4 Size Distribution

The Small Business Administration defines any Secondary Smelting and Alloying of Aluminum
firm with less than 750 employees as small. 2 

### As only 13 of 110 secondary smelting firms had
more than 500 employees, it is fair to say that most firms in the industry will be classified as
small. In spite of the high proportion of firms being classified as small, only a slight majority
(56 percent) of the employees worked for firms with less than 500 ( Table 9 ).

2 U.S. Small Business Administration, Table of Size Standards. November 5, 2010. Found on the Internet at http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf

.



### 9

### Table 9

. Distribution of Economic Data by Enterprise Size in Secondary Aluminum Manufacturing (NAICS 331314)

Enterprises with

Variable Total 1 to 20 Employees 20 to 99 Employees 100 to 499 Employees 500+ Employees

Firms 110 55 32 10 13

Establishments 133 55 35 14 29

Employment 4,683 305 1,413 927 2,038

Source: U.S. Census Bureau. 2011. “Number of Firms, Number of Establishments, Employment, and Annual

Payroll by Enterprise Employment Size for the United States, All Industries: 2009” <http://www.census.gov/econ/susb/ >



### The industry’s Concentration Ratios emphasize the relative dominance of large companies.
While 108 companies were documented in 2007, the largest 50 companies accounted for

95.9 percent of the total value of shipments and the largest 4 companies accounted for

54.8 percent (Table 10 ). Also shown in Table 10 is the Herfindahl

- Hirshman Index (HHI) for
NAICS 331314, which is 930.8. This HHI is at the upper end of the unconcentrated range (HHIs

over 1,000 are co nsidered moderately concentrated).

Table 1 0

. Secondary Aluminum Manufacturing (NAICS 331314) Concentration Ratios

Companies Total Value

of Shipments Percent of Total

Value of Shipments (5) Herfindahl

Hirschman Index

All companies 108 7,823,492 100.0 930.8

4 largest companies

— 4,287,274 54.8

8 largest companies

— 5,132,211 65.6

20 largest companies

— 6,470,028 82.7

50 largest companies

— 7,502,729 95.9

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 31:

Manufacturing: Subject Series: Concentration Ratios: Share of Value of Shipments Accounted for by the 4, 8, 20 and 50 Largest Companies for Industries: 2007.” <http://factfinder.census.gov>: (December 20, 2011 ).



### 10

### 2 .3.5 Production and Capacity Utilization

Capacity utilization of secondary aluminum manufacturing increased from 2004 until 2007
before starting a steep decline which left the industry well below the 2004 level by 2010
(Ta ble 11 ).

Table 1 1

. Capacity Utilization for Aluminum Manufacturing (NAICS 3313)

2005 2006 2007 2008 2009 2010

Capacity Utilization 86.7% 83.7% 78.8% 74.1% 59.3% 63.8%

Source: Charles Gilbert, Senior Economist, Federal Reserve Board. Capacity Utilization data for NAICS 3313.

Personal Communication with Christopher Sichko, RTI International, January 5, 2012.



### 2 .3.6 Profitability

While Total and Business receipts increased slightly from 2006 to 2008, Net Income, and Profit
Margins decreased slig htly from 2006 to 2007 then collapsed in 2008. It should be noted that
these statistics are for the Metal Manufacturing Industry not the secondary aluminum industry
specifically because more disaggregated data is not available (Table 12 ).

Table 1 2

. Corpora te Income and Profitability for Secondary Aluminum Manufacturing (NAICS 331) ($2009)

2006 2007 2008

Total receipts 298,104,481 305,773,370 312,467,335

Business receipts 286,730,514 292,550,057 302,877,203

Net income 22,503,070 21,519,223 13,694,559

Before

- tax profit margin 7.8% 7.4% 4.5%

After

- tax profit margin 5.6% 5.1% 2.9%

Source: Internal Revenue Service, U.S. Department of Treasury, 2008 (1), 2007 (1), 2006 (1) “Corporation Source

Book of Statistics of Income: Primary Metal Manufacturing” < http://www.irs.gov/taxstats/article/ 0,,id=168246,00.html>; (December 14, 2011 )



### 2 .3.7 International Trade

The U.S. consistently (from 2005

– 2010) was a net importer of aluminum. Imports for
consumption fell fairly constantly each year for an overall decreas e of 23 percent. Exports
increased by 38 percent from 2005 to 2008 before decreasing by 17 percent from 2008 to 2009,
then increasing again in 2010 (Table 13 ). While imports were more than double the volume of

11

### exports in 2005, imports exceeded exports by a smaller fraction, about one

- third, in 2010. Note
that the international trade data is for all aluminum production, not just secondary.

Table 13

. U.S. Imports and Exports of Aluminum (Metric Tons)

2005 2006 2007 2008 2009 2010

Imports for consumption 5,330,000 5,180,000 4,490,000 4,200,000 4,110,000 4,120,000

Exports 2,370,000 2,820,000 2,840,000 3,280,000 2,710,000 3,040,000

Source: Bray, Lee. 2011 . “Minerals Yearbook: Aluminum” USGS. 2006 Tables 8 and 11; 2008 Tables 9 and 11;

2010 Tables 10 and 12. <http://minerals.usgs.gov/minerals/pubs/commodity/aluminum>



### 2 .4 2011 and Future Trends

Fueled by low

- cost power contracts and recovering aluminum prices, productive capacity shut

down in 2008 and 2009 was scheduled to restart in late 2010 and early 2011. Still, this is a small
step and capacity use likely remained low through 2011. “World demand for aluminum in 2011
was expected to remain at levels lower than in 2008 owing to depressed lev els in automobile
manufacturing and home construction” (Bray, 2011, 5.7).

Low demand for aluminum in U.S. domestic industries and other developed economies is likely
to persist for several more years, as these economies have not recovered from the 2008

dow nturn. However, the demand for aluminum in emerging economies is likely to increase more
rapidly in the near future (Bray, 2011, 5.7). Table 13 shows that in 2010 aluminum exports were
heading back towards their 2008 level, and this trend seems likely to c ontinue.

12

### 3. Impact Results

Section 2 provides information on the entire Secondary Aluminum industry. In this section, we
provide the economic and small business impacts associated with the 2012 amendments . This
analysis is focused on th ose businesses that will incur costs associated with the 2012

amendments

.

Based on informatio n in the cost memo, there are 28 parent companies that are expected to incur

costs associated with this rule. Nine of these companies have fewer than 750 employees, and
thus are small businesses according to the Small Business Administration (SBA) size standards
for the predominant NAIC S code for companies subject to this rule (331314).

The total annualized costs (TAC) of the rule for each parent owner company, which includes the
annualized control, monitoring and recordkeeping costs as taken from the cost memo prepared

for US EPA 3 

### , are in Table 14. A negative TAC denotes an estimated cost savings to the firm

associated with the rule. Small businesses are ident ified in the table. The nationwide total

annual ized costs of the 2012 amendments are about $1.7 million. All costs are in 2011 dollars

, and are based on the estimates presented in the cost memo for the rule

.

Table 14

. TAC for each Parent Owner

Parent Company TAC per Owner Small Business? (N=

No, Y=Yes) Number of

Employees in 2011

Alcoa $ 9328 00 N 59,000
Aleris 1668 00 N 6,500 Aluminum Recovery Technologies

- 12000 Y 20

Aluminum Shapes, LLC 433 00 N 1,100

Beveridge Packaging (owner of Reynolds Foil) 11005 0 N 25,500

Metal Exchange Corporation (owner of
Continental Aluminum and Electro Cycle )

- 2 4 000 Y 201 to 500 Hydro (owner of Hydro 439 00 N

3 U.S. Environmental Protection Agency, Office of Air Quality Planning and Standards. “Updated Cost Estimate for Rule Changes to Secondary Aluminum NESHAP .” Prepared by RTI, Inc. for Rochelle Boyd, U.S. Environmental Protection Agency, Office of Air Quality Planning and Standards. July 10, 2014.



### 13Aluminum Wells North
America ) 23,000 J.L. French Corp.

- 12000 N 2,000 Jupiter Aluminum

- 3 6 0 00 Y 200
JW Aluminum

- 480 00 N 772

Kaiser Aluminum

- 12000 N 2,470 Logan Aluminum 433 00 N 1,000 Metalico (owner of
Metalico Aluminum Recovery )

- 12000 N 800 Toyota Tsusho (owner of Most, Inc. )

- 12000 N 31,081 Quanex (owner of
Nichols Aluminum )

- 3 6 0 00 N 2,340
Noranda 1515 00 N 2,400
Novelis 7225 0 N 11,000 Owl's Head Alloys

- 12000 Y 50

- 100 Rio Tinto (owner of Alcan) 2165 00 N 77,000 Ritchey Metals

- 12000 Y 80 Orkla ASA (owner of Sapa Extrusion) 10925 0 N 30,000 Scepter

- 48000 Y 250
Smelter Service

- 24000 Y 10
Southwire 4 37 00 N 4,180 Superior Aluminum Alloys

- 12000 Y 5

- 9

Tennessee Aluminum
Processors

- 24000 Y 180 Tredegar (owner of William L. Bonnell) 64950 N 2,000 Wise Metals Group 626 00 N 1,000

a 

### A negative sign denotes a cost savings to the parent owner.

Of the n ine small businesses expected to incur costs associated with this rule, all of them are
expected to experience negative cost s (or cost savings), based on estimates from the cost memo.

We do not provide impact estimates for these businesses, and the large businesses with cost
savings, since these estimates are positive. These cost savings are a result of the change in
proposal to allow facilities to switch furnace designations from Group 1 to Group 2. In the cost
memo, EPA presumed that one

- fourth of the 200 affected furnaces would switch. For each of the 50 furnaces that switch, the cost savings is estimated at $12,000 annually. This cost savings
is a result of shutting off a furnace th at is controlled and the following effects:

14

### • Fan power is approximately 50 kW

• Control device shut off 4000 hours per year

• Electricity cost of 10 cents/kWh.

More information on the cost estimation procedure is available in the cost memo for the final

rule.

This analysis identified the businesses that will be affected by this rule and provides an analysis
at a screening level to assist in determining whether this rule is likely to impose a significant
economic impact on affected businesses. The analysis empl oyed here is a “sales test” that
computes the annualized compliance costs as a share of sales for each company. The annualized
cost per sales for a company represents the maximum price increase in affected product needed
for the company to completely recov er the annualized costs imposed by the regulation.

The “sales test” is the impact methodology EPA employs in economic impact analysis such as
this one as opposed to a “profits test”, in which annualized compliance costs are calculated as a
share of profi ts. 4 

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

Economic impac t estimates are shown in Table 15 below. The table lists the ultimate parent
companies impacted by the rule that have positive or negative costs , the costs of the rule for each
company basis, the annual revenues for these companies, and then the impact to the company on

a cost to sales basis . Revenues are for the ultimate parent owners, and are for 2011 to be
consistent with the year for the cost estimates. Applying such a calculation yields the following

results as shown below . Impacts are only shown for those companies estimated to experience a
positive c ost as a result of the final rule.

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

- 00

- 06.pdf , pp. 32

- 33.



### 15

### Table 15

. Economic Impacts to Parent Companies

Parent

Company TAC per

Owner

(2011

dollars) Total Annual

Re venues for

Parent Owners Small

Business?

(N= No,

Y=Yes) Impact

Estimates

(Annualized

Compliance

Cost/Revenue

s in % Terms) Reference for

Economic

Data a

Alcoa $ 9328 00 $21,013,000,000 N 0.0018 http://www.sec.go v/Archives/edgar/
data/4281/000119
312511039230/d1
0k.htm http://www.elkem .com/eway/default .aspx?pid=242&tr g=MainLeft_6886 &Main_7127=688 6:0:4,4130:1:0:0::
:0:0 &MainLeft_6
886=6271:33029::
1:7126:1:::0:0

Aleris 1668 0 0 3,000,000,000 N 0.0013 Reference USA http://www.aleris.
com/about

- aleris
and http://www.forbes
.com/lists/2010/21 /private

companies

10_Aleris

International_IDN
6.html

Aluminum Recovery Technologies

- 12000 10,460,000 Y <0 b Reference USA
Aluminum Shapes, LLC 433 00 175,000,000 N 0.01 9 Reference USA

Beveridge Packaging (owner of Reynolds Foil) 11 0 050 N http://www.reyn oldsgroupholdin gs.com/Financia
ls/2011/28Mar2
011

- RGHL



### 169,972,000,000 0.0005 7 2010

- Results

- Presentation.pdf , p. 4.

Metal Exchange Corp.

- 2 4 000 99,400,000 Y <0 http://www.meta lexchangecorp.c
om/cf/metal/SN A.asp?asm=sna &tmp=C011&x
=714&sid=714
&t=About%20U

s and http://www.insid
eview.com/direc tory/metal

- exchange

- corporation

Hydro 439 00 17,977,000,000 N 0.000126 http://www.hydr
o.com/en/Invest

or

- relations/Reporti ng/2010/Key

- figures/
J.L. French Corp.

- 12000 550,447,000 N <0 Reference USA Jupiter
Aluminum

- 3 6 0 00 50,000,000 Y <0 Reference USA

JW Aluminum

- 480 00 250,000,000

- 500,000,000 N <0 http://www.zoo
minfo.com/com pany/JW+Alumi num+Company

- 33687486
Kaiser
Aluminum

- 12000 1,079,100,000 N <0 Reference USA Logan 433 00 1,140,000,000 N 0.00 2 Reference USA
Metalico

- 12000 291,733,000 N <0 Reference USA

Toyota Tsusho (owner of Most, Inc.)

- 12000 54,839,454,000 N <0 http://www.toyo

ta

- tsusho.com/engl ish/ir/report/ann ual/uploadfiles/s ection03_E.pdf Quanex

- 3 6 0 00 798,314,000 N <0 Reference USA
Noranda 15155 0 1,226,400,000 N 0.0065 Reference USA

Hindalco (owner
of Novelis ) 72250 N http://www.hind
alco.com/invest



### 1712,800,000,000 0.0001 5 ors/downloads/ Hindalco_Annu al_Report_2009

- 10.pdf
Owl's Head Alloys

- 12000 22,550,000 Y <0 Reference USA

Rio Tinto (owner of Alcan) 2165 00 14,324,000,000 N 0.0007 6 http://www.rioti
ntoalcan.com/E
NG/media/medi a_releases_1717

.asp

Ritchey Metals

- 12000 80,080,000 Y <0 Reference USA

Orkla ASA (owner of Sapa Extrusion) 109250 9,822,000,000 N 0.00056 http://markets.ft.
com/research/M
arkets/Tearsheet
s/Financials?s=
ORK:OSL&sub
view=IncomeSta tement&period=

a Scepter

- 48000 54,700,000 Y <0 Reference USA

Smelter Service

- 24000 28,100,000 Y <0 Reference USA
Southwire 4 37 00 1,340,000,000 N 0.001 8 Reference USA Superior
Aluminum Alloys

- 12000 7,980,000 Y <0 Reference USA

Tennessee
Aluminum
Processors

- 24000 81,180,000 Y <0 Reference USA

Tredegar (owner
of William L. Bonnell) 6495 0 740,000,000 N 0.004 http://www.tred

egar.com

Wise Metals Group 62600 618,000,000 N 0.0032 http://www.usatod ay.com/printeditio
n/news/20110125/ states25_st.art.ht

m

a Economic data includes revenues and employee siz e for each affected firm in 2011

.

b <0 = cost impact of less than zero, since the costs for the firm will be less than zero (cost savings).



### 18

### As shown in this table , no firm will experience an annualized compliance cost of greater than

0.02 percent of its sales, according to this analysis, as a result o f this rule.

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

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

- 1.0 5 

### , and the price elasticity of supply for
secondary aluminum is 0.6. 6 

### Based on this information, one can conclude that demand will
respond 1:1 with a change in secondary lead price, and that supply is inelastic (i.e., will respond
less than 1:1) with a change in secondary lead price. Thus, the direct impact of this r ule appears
quite minor, and thus it is reasonable to infer that the impact on secondary aluminum consumers

from this rule should also be minor. The TAC is taken from the cost memorandum mentioned

earlier that was pr epared by U.S. EPA for the final rule a nd in that memorandum can be found
more information on the cost analysis.

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

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

6 Broda, C., N. Limao, and D. Weinstein. 200 8a. “Export Supply Elasticities.” http://faculty.chicagobooth.edu/christian.broda/website/research/unrestricted/TradeElas ticities/TradeElastic
ities.html . Accessed September 2009.



### 19