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 Off

site Waste and Recovery Operations (OSWRO) source category. The total capital and total

annualized costs for the proposed ame ndments are estimated to be $ 3. 7 million and $ 8 0 0,000

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 m aterials 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 . The se 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 Wholesalers561110 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 Security a

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 gover nmental jurisdictions, and small not

- for

- profit enterprises. T he

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

“ultimat e 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 revenu es 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 Sm all Firms Large Firms

Number of Firms 27 4 23

Average Revenue $ 25 billion $ 10 6 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 present s 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 $ 2 40,000 $ 49,000 $ 2 40,000

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 tes t” for estimating small business impacts is consistent with EPA guidance

on compliance with SBREFA 1 and is consistent with guidance published by SBA’s Office of

Advocacy. 2 As shown in Table 5

, t he 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 Inc ineration Services, Inc. 562213 $ 31,100,000 $24,345 0.0 8 %

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 p roposed amendments are

estimated to be about $ 8 0 0,000 . 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

- Si te Waste and

1 The SBR EFA 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

- RegFlexA ct.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 an d Executive Order 13272, June 2010.Recovery Operations NESHAP 3 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 t he 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 2 7 firm s included in this analysis , suggesting any increase in

price would be minimal.

Conclusions

Our screening analysis shows that four of the 2 7 firms that own facilities in the OSWRO source

category can be class ified 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 conc lude 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 no t anticipate the proposed amendme nts 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.