Memorandum

Subject: Economic Impact Analysis for Risk and Technology Review: Off-site Waste and 

Recovery Operations Source Category

Date: November 5, 2013

From: Amanda Curry Brown

Economist, Air Economics Group (C439-02)

To: Mary Tom Kissell

Environmental Engineer, RCG (E143-01)

This document addresses the economic impacts of the Risk and Technology Review for the Offsite Waste and Recovery Operations (OSWRO) source category. The total capital and total 

annualized costs for the proposed amendments are estimated to be $3.7 million and $800,000

per year, respectively. Detailed information on these cost estimates can be found in the docket.

The OSWRO source category includes facilities that operate waste management and recovery 

processes for materials received from off-site. These facilities are not categorized as a single 

industry and, as a result, cannot be classified under a single NAICS code category. During the 

development of these proposed amendments, EPA identified 45 facilities subject to the 

emissions standards and annual monitoring, reporting and recordkeeping requirements of the

regulation. These 45 facilities represent 27 firms in 20 industries. These industries are shown in 

Table 1. 

Table 1. Industries Represented in OSWRO Source Category

NAICS Description

211111 Crude Petroleum and Natural Gas Extraction

221310 Water Supply and Irrigation Systems

237310 Highway, Street, and Bridge Construction

324110 Petroleum Refineries

325180 Other Basic Inorganic Chemical Manufacturing

325194 Cyclic Crude, Intermediate, and Gum and Wood 

Chemical Manufacturing

325199 All Other Basic Organic Chemical Manufacturing

325211 Plastics Material and Resin Manufacturing

327310 Cement Manufacturing

331313 Alumina Refining and Primary Aluminum Production

333316 Photographic and Photocopying Equipment Manufacturing

336411 Aircraft Manufacturing

424690 Other Chemical and Allied Products Merchant Wholesalers
561110 Office Administrative Services

Table 2. Industries Represented in OSWRO Source Category, continued

562111 Solid Waste Collection

562211 Hazardous Waste Treatment and Disposal

562213 Solid Waste Combustion and Incinerators

562219 Other Nonhazardous Waste Treatment and Disposal

562920 Materials Recovery Facilities

928110 National Securitya

a One facility is operated by the U.S. Department of Defense.

Small Business Impacts Analysis

The Regulatory Flexibility Act, as amended by the Small Business Regulatory Enforcement 

Fairness Act (SBREFA), generally requires an agency to prepare a regulatory flexibility analysis of 

any rule subject to notice and comment rulemaking requirements under the Administrative 

Procedure Act or any other statute, unless the agency certifies that the rule will not have a 

significant economic impact on a substantial number of small entities. Small entities include 

small businesses, small governmental jurisdictions, and small not-for-profit enterprises. The 

Small Business Administration (SBA) established size standards classified by NAICS category to 

use in identifying small businesses. The SBA size standards apply to an establishment’s 

“ultimate parent company” and were based on either total receipts or total employment for 

the industries included in this analysis.

For this analysis, we identified the ultimate parent company (firm) for each facility and 

obtained firm-level employment and revenues using various sources, including the American 

Business Directory, Hoovers, corporate websites, and publically available financial reports. 

Based on this information, we identified four firms that are small businesses based on the SBA 

size-standards. Table 3 shows the average revenue and employment for small and large firms.

Table 3. Average Revenue and Employment by Firm Size

All Firms Small Firms Large Firms

Number of Firms 27 4 23

Average Revenue $25 billion $106 million $29 billion

Average Employment 23,596 386 28,017

For this analysis, we assume that each firm will incur an annual cost per unit of approximately 

$24,000 in order to meet the proposed requirements at each of the facilities it operates. Table 

4 presents descriptive statistics for the number of facilities and total annual cost per firm.
Table 4. Number of Facilities and Annual Cost by Firm Size

All Firms Small Firms Large Firms

Number of 

Facilities

Average 1.7 1.3 1.8

Min 1 1 1

Max 10 2 10

Median 1 1 1

Total Annual 

Firm Cost

Average $41,000 $30,000 $43,000

Min $24,000 $24,000 $24,000

Max $240,000 $49,000 $240,000

Median $24,000 $24,000 $24,000

The cost-to-revenue ratio, or the “sales test,” is an impact methodology EPA employs in 

analyzing small entity impacts. The sales test is often used because revenues or sales data are 

commonly available for entities impacted by EPA regulations. Revenues are typically more 

reliably reported than profit data, which may be impacted by accounting or tax considerations. 

The use of a “sales test” for estimating small business impacts is consistent with EPA guidance 

on compliance with SBREFA1 and is consistent with guidance published by SBA’s Office of 

Advocacy.2 As shown in Table 5, the cost-to-sales ratio for all small firms in this analysis is 

significantly less than 1 percent.

Table 5. Summary of Small Entity Impacts

Firm NAICS Revenue Total Firm Cost Cost-to-Sales Ratio

EQ Holdings 562219 $26,500,000 $48,690 0.18%

FutureFuel Corporation 325199 $351,830,000 $24,345 0.01%

Ross Incineration Services, Inc. 562213 $31,100,000 $24,345 0.08%

WRR Environmental Services 562920 $13,800,000 $24,345 0.18%

Industry Impact Analysis

Both the magnitude of control costs needed to comply with a regulation and the distribution of 

these costs among affected facilities can have a role in determining how the market will change 

in response to that regulation. Total annualized costs for the proposed amendments are 

estimated to be about $800,000. The average annual cost per facility is estimated to be about 

$24,000.

Without detailed industry data, it is not possible to conduct a complete quantitative analysis of 

economic impacts. However, prior analysis suggests the impacts of these proposed 

amendments will be minimal. The Economic Impact Analysis for the Final Off-Site Waste and 

 

1 The SBREFA compliance guidance to EPA rule writers regarding the types of small business analysis that should

be considered can be found at http://www.epa.gov/rfa/documents/Guidance-RegFlexAct.pdf. 

2 U.S. SBA, Office of Advocacy. A Guide for Government Agencies, How to Comply with the Regulatory

Flexibility Act, Implementing the President’s Small Business Agenda and Executive Order 13272, June 2010.
Recovery Operations NESHAP3

found that demand for off-site waste services was highly 

inelastic. This means that suppliers are predominantly able to pass along cost increases to 

consumers through higher prices with little, if any, decrease in the quantity of service 

demanded. While we do not have specific information on prices charged or the quantity of 

service provided, company revenues are a function of both these factors. The cost-to-sales ratio 

is less than .20 percent for all of the 27 firms included in this analysis, suggesting any increase in 

price would be minimal. 

Conclusions

Our screening analysis shows that four of the 27 firms that own facilities in the OSWRO source 

category can be classified as small firms using the SBA size standards for their respective 

industries. Based on the sales test screening methodology, all affected facilities will experience 

minimal impact, or a cost-to-sales ratio of significantly less than 1 percent. We conclude that 

these amendments will not have a significant economic impact on a substantial number of 

small entities.

Although there is not sufficient data to complete a full quantitative analysis of economic 

impacts, we do not anticipate the proposed amendments to result in firm closures or 

substantial profit loss because these facilities are likely to be able to pass cost increases through 

to their customers. While we do not have data on current prices charged or quantities 

provided, the relatively low cost compared to firm revenues suggests any price increase would 

be minimal.

 

3 EPA. June 1996.