p.1 

OAR Box 1415 

Prepped by Ollie Stewart 

Document Number: 

30) V-B-1 

Docket Number: 

A-94-52 

Printed 7/15/2008 9:38:26 AM Sheet 30 of 130 
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United States 

Environmental Protection 

Agency 

Office Of Air Quality 

Planning And Standards 

Research Triangle Park, NC 27711 

August 2002 

FINAL REPORT 

Air 

Economic Impact Analysis of 

the Final Reinforced Plastics NESHAP 

Final Report 

'.- .v.r.c. 
P.3 

EPA452/R-02-007 

August 2002 

Economic Impact Analysis of 

the Final Reinforced Plastics NESHAP 

By: 

Brooks M. Depro 

Mark C. Buckley 

Tayler H. Bingham 

Center for Regulatory Economics and Policy Research 

RTI 

Research Triangle Park, NC 27709 

Prepared for: 

Tyler J. Fox 

U.S. Environmental Protection Agency 

Office of Air Quality Planning and Standards 

Innovative Strategies and Economics Group 

(MD-C339-01) 

Research Triangle Park, NC 27711 

EPA Contract No. 68-D-99-024 

RTI Project No. 7647.003.271 

Tom Curran, Director 

U.S. Environmental Protection Agency 

Office of Air Quality Planning and Standards 

Office of Air and Radiation 

Research Triangle Park, NC 27711 
P.4 

This report has been reviewed by the Emission Standards Division of the 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 of this report are available through the Library Services (MD-C267-01), 

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 2-7 

2.1.1.4 Additives 2-8 

2.1.2 Production Processes 2-10 

2.1.2.1 Open Molding Processes 2-10 

2.1.2.2 Closed Molding Processes 2-14 

2.2 Products 2-19 

2.3 Cost of Production 2-19 

2.4 Uses and Consumers of Reinforced Plastics 2-19 

2.5 Manufacturing Facilities 2-29 

2.5.1 Location 2-29 

2.5.2 Employment 2-29 

2.6 Facility Ownership : 2-29 

2.6.1 Size Distribution 2-31 

2.6.2 Issues of Vertical and Horizontal Integration 2-34 

2.7 Small Businesses 2-34 

2.7.1 Identifying Small Businesses 2-34 

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Engineering Cost Analysis 3-1 

3.1 Identifying Regulated Entities 3-1 

3.2 National Control Cost Estimates 3-1 

Economic Impact Analysis J.. 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 Pre-Tax Earnings 4-18 

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

4.5.2.3 Changes in Employment 4-22 

4.6 Social Costs 4-22 

4.7 Sensitivity Analysis for Profit Rate 4-26 

4.8 New Source Analysis 4-27 

Final Regulatory Flexibility Analysis .' ,5-1 

5.1 Statement of Need and Objectives of the Rule 5-2 

5.2 Identifying Small Businesses 5-3 

5.3 Screening-Level Analysis 5-3 

5.3.1 Recommended Alternative 5-3 

5.3.2 MACTFloorAlternative 5-5 

5.3.3 Above-the-MACT Floor Alternative 5-5 

5.4 Economic Analysis 5-11 

5.5 Assessment 5-11 

5.6 Projected Reporting and Recordkeeping Requirements 5-13 

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5.7 Other Federal Rules That May Impact Reinforced Plastic Composite 

Production Facilities 5-14 

5.8 Alternatives to the Proposed Rule 5-14 

References R-l 

Appendix A Summary Data for Companies Owning Reinforced 

Plastic Composite Facilities i A-l 

Appendix B Economic Model of the Merchant Sector of the U.S. Reinforced 

Plastic Composites Industry >. B-l 
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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 2-12 

2-4 Filament Winding '. 2-13 

2-5 Pultrusion 2-15 

2-6 Injection Molding 2-18 

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

, 1997 , 2-26 

2-8 Geographic Distribution pf Major Source Facilities 2-30 

2-9 Alternative Chains of Ownership 2-32 

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 4-28 

4-6 With-Regulation Equilibrium Case 1: New Sources Added 4-30 

4-7 With-Regulation Equilibrium Case 2: No New Sources Added 4-30 

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

Alternative 5-6 

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

Alternative 5-6 

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 

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 2-6 

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 2-9 

2-6 Reinforced Plastics Shipments by Production Process: 1990 2-10 

2-7 Compatibility of RPC Production Processes with Shape 

Characteristics and Specific Products 2-20 

2-8 Plastic Resin Prices: 1996-1999 2-22 

2-9 Selected Plastic Reinforcement and Filler Prices: 1997 2-23 

2-10 Demand for Reinforced Plastic Composites: Some Examples , 2-25 

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

1997 (IO6 lbs) 2-27 

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

1993 (106lbs) 2-28 

2-13 Distribution of Major Source Facilities by Employment 2-31 

2-14 Distribution of Potentially Affected Firms by Employment 2-33 

2-15 Distribution of Potentially Affected Firms By Sales 2-33 

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

by SIC 2-36 

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

1997 (10s 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 of the 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 

4-6 Distributional Impacts on Merchant Thermoset Producers Associated 

with Reinforced Plastic Composites NESHAP Regulatory 

Alternatives: 1997 4-19 

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4-7 Social Costs with Reinforced Plastic Composites NESHAP Regulatory 

Alternatives: 1997 4-24 

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) 4-31 

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

2000-2005 4T32 

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 5-12 

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SECTION 1 

INTRODUCTION 

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

nation's air resources (Section 101(b)). Under the authority of Section 112 of the 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 die industry 

and economic methodology and present results of this 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 diese 

plants. 

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

compliance. These costs are based on EPA's engineering analysis conducted in 

support of the proposed NESHAP as described in the Background Information 

Document (BID). 

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

proposed NESHAP and the results of the analysis, which include market, 

industry, and social welfare impacts. 

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

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 of the 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 product RPCs. 

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

variety of fillers to minimize resin requirements and additives diat change the physical properties 

of the 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 of the resulting composites include 

lightweight, high strengtii-to-weight ratio, nonconductivity, various degrees of 

corrosion-resistance, and dimensional stability. 

In 1997, 3.4 billion pounds of RPCs were consumed in die 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 of the 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 

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

from the updated 1993 EPA survey and subsequent screening for potentially affected reinforced 

plastics producers. 

The remainder of this section provides a brief introduction to die reinforced plastics 

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

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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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profile provides a broader picture of the RPC industry. Section 2.1 provides an overview of the 

RPC production processes, including a description of the major inputs to production and directiy 

affected production processes. Section 2.2 characterizes the resulting reinforced plastics 

products and presents historical data on dieir consumption across various end uses. Section 2.3 

details me 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. 

i 

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 widi a variety of fillers to 

minimize resin requirements and additives that change the physical properties of the 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 diese various materials (sometimes 

in several stages) and tiien reforming die homogeneous mass into a usable form such as pellets, 

flakes, or sheets for processing into die final product. 

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

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

production of many different types of composites widi 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 odier additives are exposed to die air during die 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 widi a greater degree of automation, such as centrifugal casting, filament 

winding, pultrusion, and continuous lamination. Closed molding processes isolate die input 

materials inside closed molds during the mixing and curing stages. These include more capitalintensive production metiiods such as match die molding, reaction injection molding, rotational 

molding, and thermoforming. 

Pollution releases can occur throughout die production processes. Spills of additives and 

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

while die additives are being incorporated into the plastic. Volatile organic compounds (VOCs), 

fugitive emissions, and wastewater discharge are released during die actual processing of die 

reinforced plastic part. The finishing operations of cleaning can also release VOCs, fugitive 

emissions, and wastewater discharge (EPA, 1995). 

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Polymers 

(thermoset resins, 

thermoplastic resins) 

Fillers, 

Reinforcements, and 

Additives 

Compounding 

Compounded 

Plastic 

Material 

Reinforced Plastic 

Composite 

• VOCs 

Figure 2-1. Production Flows for Reinforced Plastic Composites 

The result of die 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 of an aircraft. Thus, some RPCs constitute a final product 

such as a batiitub or shower stall, whereas others are intermediate products such as panels, pip?s, 

and molding compounds diat serve as inputs to manufacturing processes and construction 

activities. 

The remainder of diis section describes die manufacture of RPCs in terms of die input 

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

produced. 

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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 

diermoset materials. 

2.1.1.1 Plastic Resins 

There are two broad categories of plastic resins: dierrhoplastics and tiiermosets. 

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

semi-fluid state. Once the tiiermoplastic 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 dieir 

initial form. When used to produce finished goods, these thermosetting resins are "cured" by the 

use of a catalyst, heat, or a combination of die two. Once cured, diermoset resins cannot be 

converted back to their original liquid form. Unlike tiiermoplastic resins, cured thermosets will 

not melt and flow when heated and once formed they cannot be reshaped. 

Thermoplastics have certain advantages as substitutes for diermoset resins! 

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

have low toxicity and can be remelted and recycled. Improvements in tiiermoplastic resins over 

die past 20 years have increased die advantages over diermoset resins. Thermoplastics have high 

delamination, chemical, and damage resistance, and low moisture absorption (Bergiund; 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 die characteristics 

and strengdis 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 i 991 to 1993. 

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 of die 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 tiiermoplastic 

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 

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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 

Other* 

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 

* 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. 

their ability to model complex shapes, their ease of fabrication, and dieir cost-effective 

performance characteristics. As shown in Table 2-2, polypropylene, thermoplastic polyester, and 

nylon account for 80 percent of the 848 million pounds of thermoplastic resins used for 

reinforced plastics in 1993. 

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

diermoset 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 tiiermoplastic 

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 die most common material used for mats, but they can also be made from asbestos, 

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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, clotii 

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

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

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

• resistance to crazing and cracking; and 

• reduced shrinkage (Rauch, 1991). 

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

fiber, orientation of fiber, fiber surface treatment, and the characteristics ofthe 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, processing, and distribution of most 

products that contain asbestos, has and will continue to reduce die 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 of the major ingredients. In general, fillers are 

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

usually more tiian 5 percent in terms of volume, and in some cases several times the weight of 

the polymer. 

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

Quantity 

Reinforcement (10* lbs) 

Fiberglass 900 

' Cellulose 90 

Asbestos 30 

Carbon and other high performance ,1 0 , 

TotaJ L030 

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

Table 2-12. 

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 of the total consumption 

in 1990; calcium carbonate is the dominant mineral filler, widi 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 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. Altiiough diese materials are generally used in relatively low quantities as 

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

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

thermal conductivity, and odiers (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 additives, 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 2-4. Consumption of Nonreinforcing Fillers in Plastics: 1990 

Quantity 

Product (10* 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. 

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 

Others" 130 

Total 3,498 

* 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. 

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2.1.2 Production Processes 

Application development in the production of composites requires careful selection not 

only of which materials to use but also of the production process that can combine these inputs 

into the desired form most efficiently. Table 2-6 provides data on die distribution of die 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 1.67 billion pounds of 

RPCs, or 65 percent of the total, were produced using open molding processes. Hand lay-up, 

spray-up, and continuous lamination processes accounted for about 62 percent of die RPCs 

produced widi open molding processes. Approximately 900 million pounds of RPCs were 

produced using closed molding processes in 1991. About two-thirds of this total were produced 

using injection molding processes, with compression molding processes accounting for most of 

the 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 diat contribute 

most to emissions at RPC facilities. As presented below, these processes can be segregated into 

open and closed molding categories. 

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 

(10* lbs) 

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. 

2.1.2.1 Open Molding Processes 

Open molding processes can be broken down into those diat are simple, witii minimal 

capital requirements, and diose 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 diat fit the 

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

materials, technology, and manufacturing methods and are ideally suited for low-to-medium 

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 die 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 tiiat contribute to 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 of die 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 die smoodi 

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

release any air diat may be entrapped in die reinforcement material. Chemical curing, often 

induced by a catalyst additive, hardens the resin and reinforcement into a structural form diat is 

exceptionally strong for its weight. The resin offers a uniform matrix for the reinforcing material 

in much the same way tiiat concrete does when used in conjunction widi reinforcing bars made of 

steel (SPI Composites Institute, 1995). 

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

Figure 2-2 illustrates. Prior to hand layrup 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 of 

the final product takes on die color of die 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 of the 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 Institute, 1995). 

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 die most commonly used polymer, although isophtiialtic 

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

2-11 
P.23 

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. 

fillers, and additives are applied to an open mold that has been sprayed witii 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 tiien mix botii the fiber and a user-determined 

amount of catalyst into a fan-shaped spray of polymer or polymer/filler mixture (SPI Composites 

Institute, 1995). This process is illustrated in Figure 2-3. 

Spray-Up Gun 

Resin 

-Continuous 

Roving 

Reinforcement 

Figure 2-3. Spray-up Processing 

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

DC: 1995. 

2-12 
P.24 

For some applications requiring added structural strengtii, more fiber reinforcement mats 

or rovings can be hand laid-up between applications of the sprayed mixture. Rollers or brushes 

are generally used to remove entrapped air from the mixture after it has been applied to die 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 die need for a skilled spray-up gun operator to ensure product 

quality (SPI Composites Institute, 1995). 

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 botdes). This 

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

choices have been dominated by diermoset resins (e.g., polyesters, vinyl esters, bisphenol A 

fumarate resins, furanes, and epoxies), but die use of tiiermoplastic 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 tiien wrapping die impregnated 

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

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 Institute, 

1995). 

Laminate 

Continuous Strand Roving 

Mandrel 

Resin Applicator-J 

Figure 2-4. Filament Winding 

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

DC: 1995. 

2-13 
P.25 

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 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 die composite structure 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 Institute, 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 batii, 

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 die process is the cutoff 

where equipment is used to cut die pultruded profile to its intended length. Pulling is achieved 

using either intermittent or continuous pulling devices. While development is underway to 

incorporate die 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 Institute, 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 of the process are an 

inability to vary die cross-sectional characteristics along the length of the pultruded composite 

and stress resistance diat is limited to the direction of the reinforcement material (SPI 

Composites Institute, 1995). 

2.1.2.2 Closed Molding Processes 

Closed molding processes, such as die many variants of compression molding, use preprepared 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 of a 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 of die appropriate 

2-14 
P.26 

Heat Source 

Continuous Strand Roving ,—, -.< 

Mat or Cloth [ J J 

Resin Applicator 

Q 

LTW? 

Pulling Device 

Figure 2-5. Pultrusion 

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

DC: 1995. 

polymers, reinforcements, fillers, and other additives needed to impart die specific physical 

properties and appearance to the composite produced (SPI Composites Institute, 1995). This 

section provides more detailed descriptions of die most common compression molding processes 

as well as a closed molding process called injection molding. 

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

commonly called compression molding processes (and many variations of diese 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 tiiese 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 die 

main high-volume molding processes. 

2-15 
P.27 

Sheet Molding Compound. SMC is produced by mixing all of the composite materials, 

except for die reinforcing fibers, into a paste. The paste is then uniformly spread onto two 

separate "carrier films" tiiat are fed dirough an SMC machine where die 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 tiiat compact and consolidate die 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 die compound to finish curing. After a period of storage in a 

climate controlled area, the SMC is thickened to die 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 men 

removed and the SMC permanently compressed into its ultimate shape in a heated matched die 

mold (SPI Composites Institute, 1995). 

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

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

processes, diey are still generally lower than would be required to produce equally strong shapes 

from metal inputs. Retooling an SMC process to modify the design of a 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 (SPl Composites Institute, 1995). 

Bulk Molding Compound. Bulk molding compound, like SMC, is more a material man 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 die 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 Institute, 1995). BMC is also used in 

transfer molding and injection molding processes to produce more complex shapes witii 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. 

2-16 
P.28 

Wet System Compression Molding. Wet system compression molding differs from SMC 

and BMC compression molding in diat 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 

die pressure requirements are much lower, in the range of 250 ito 1,000 psi (SPI Composites 

Institute, 1995). 

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

Other advantages of diis 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 tiian 

is typical widi 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 widi tiiermoplastic 

resins. Another difference is diat die sheet is cut to fit entirely within the mold and is preheated 

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

tiiermoplastic resins start to flow and conform to the shape of the mold. The temperature of die 

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

removal of the RPC from the mold (SPI Composites Institute, 1995). This process is sometimes 

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

Advantages of diis process include unlimited shelf life for die input sheets, fast molding 

cycles, recyclable scrap, and potential for parts consolidation relative to metals. Capital costs are 

comparable to SMC molding. There are, as yet, few suppliers of the input sheets because diis 

process is new. 

Injection Molding. Injection molding is perhaps die 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 high-volume 

applications. Each compression molding machine is capable of producing diousands of detailed 

RPCs per hour. As illustrated in Figure 2-6, die same equipment can be used to mold both 

thermoplastic resins and thermoset resins into RPCs. The only difference is the temperature at 

2-17 
P.29 

f Injection Chamber (Hot) 

|—• Hopper 

Mold 

(Cool) '— Screw or Plunger 

Thermoplastic Injection Machine 

f— Injection Chamber (Cool) 

Hopper 

Mold 

(Hot) 

• 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. 

which the resin is kept during the curing stage of the process widiin 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 Institute, 1995). 

The basic steps in die standard injection molding process consist of conveying granular or 

pelletized tiiermoplastic resin from a supply hopper to an opening at the opposite end of a heated 

metal chamber, using an auger to control the rate that the resin advances to die 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 of the chamber with a twist of the auger. The mold is kept at a cool temperature 

and held closed while die 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. 

2-18 
P.30 

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 diree 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 man four 

times greater than these two. Table 2-9 provides prices for fibrous reinforcing materials. For 

1997, die 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 manufacturers 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 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 of a variety of products ranging from children's 

toys to aerospace components and bathtubs to boat hulls. Therefore, die demand for RPCs is 

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

major segments of the market for RPCs: 

2-19 
P.31 

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 

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 

BMC compression molding Smaller complex 

Reinforced thermoplastic 

sheet molding 

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; arid chair shells 

(continued) 

2-20 
P.32 

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 

molding 

Contoured, medium-wall 

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 of the Plastics Industry, Inc. Washington, 

DC: 1995. 

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. 

Construction: swimming pools, rain gutters, molds for concrete, batiitubs, 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. 

2-21 
P.33 

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

Resin 

Thermosets 

Epoxy" 

Unsaturated Polyester* 

Phenolic" 

Thermoplastics 

ABS" 

Polypropylene* 

Polystyrene" 

PVC" 

Nylon' 

* General purpose. 

b

 Medium-impact. 

c

 Type 6. 

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 

.74-.84 , 

.88-.91 

.39-.41 

.38-.40 

.38-.41 

1

 1 

1.28-1.38 

1998 

1.30-1.42 

.75-.86 

.74-.84 

.68-.71 

.29-.31 

.38-.40 

.27-.30 

1.39-1.49 

1999 

1.30-1.42 

.75-.86 

> .74-.84 

.64-.67 

.28-30 

.41-.43 

.29-.32 

1.29-1.39 

• 

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

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

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

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

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. 

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

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

water craft. 

Transportation: body panels for cars, buses, and tractor trailers, truck cabs, boxcar 

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

deflectors, grill opening panels, tail light housings, fender liners, instrument panels, 

and other diverse parts and accessories for land transportation and utility vehicles. 

2-22 
P.34 

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

Input Price ($/lb) 

Reinforcements 

i 

Fiberglass $1.11 

Cellulose $0.52* 

Carbon $10-30 

Average , $1.25 

Fillers 

Calcium carbonate $0.08* , 

Kaolin $0.05", 

Alumina trihydrate $0,13 

Talc $0.30 

Mica $0.21" 

Other minerals $0.08" 

Glass spheres , $0.78' 

Natural $0.05" 

Average $0.09 

Additives 

• Average $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. 

2-23 
P.35 

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

applications the repair/replacement of components of the 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., construction, transportation, consumer goods, or other product 

manufacturer). For example, the ability to replace an assembly of several metal parts with a 

single molded composite is very appealing to manufacturers of appliances and transportation 

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

marine market segments to avoid die 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 die 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. 

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 of tiie 3.4 billion pounds of RPCs consumed in 1997. 

Construction appUcations, 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. 

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 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 

2-24 
P.36 

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. 

influenced by fluctuations 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 die 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 growtii 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 conosion 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. 

2-25 
P.37 

Reinforced Plastics Shipments = 3,422 million lbs. 

Aircraft/ 

Aerospace/ 

Military Appliances/ 

Miscellaneous 

3 

0.7% 

Land 

Transportation 

32.0% 

Marine 

10.3% 

Business 

Equipment 

5, 

Construction 

20.5% 

Consumer 

Products 

6.1% 

Electrical/ 

Electronic 

10.2% 

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. 

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 tiiat 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 

2-26 
Table 2-11. Consumption of Reinforced Plastic Composites by End Use: 1984-1997 (10* lbs)" 

End Use 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 

Average Annual 

Growth Rate 

(1984-1997) 

to 

to 

Aircraft/ 

aerospace/ 

military 

Appliances/ 

business 

equipment 

Construction 

Consumer 

products 

Corrosionresistant 

equipment 

Electrical/ 

electronic 

Marine 

Land 

transportation 

29 32 37 36 39 41 39 39 32 25 24 24 24 24 -3.4% 

123 133 137 141 150 151 153 135 143 148 161 167 170 185 2.3% 

430 445 456 506 495 470 468 420 483 530 597 627 643 700 3.2% 

143 142 149 167 169 158 165 149 162 166 175 184 192 210 2.3% 

310 295 291 329 349 335 350 355 332 352 376 395 405 396 2.3% 

189 191 201 214 230 229 241 231 260 275 299 315 328 348 4.7.% 

309 335 340 413 452 405 375 275 304 319 364 375 383 353 0.1.% 

540 563 585 656 695 677 705 682 750 822 946 984 1,009 1,095 5.3% 

Miscellaneous 

Totalb 

80 

2,153 

82 

2,218 

83 

2,279 

75 

2,536 

80 

2,658 

76 

2,542 

79 

2,575 

74 

2,360 

83 

2,549 

89 

2,726 

102 

3,043 

107 

3,176 

111 

3,263 

111 

3,422 

2.8% 

3.2% 

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

Society of the Plastics Industry, Inc. (SPI). 1998. Facts and Figures ofthe U.S. Plastics Industry. Washington, DC: SPI. 
Table 2-12. Consumption of Reinforced Unsaturated Polyester by End Use: 1984-1993 (10* lbs)8 

t to 

OO 

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 

Totalc 

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 Annua] 

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: Infonnation Access Corporation. 
P.40 

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 construction 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 die survey, only 

438 facilities were determined to be potential major sources of HAP emissions from the 

production of reinforced plastics. Thus, this section focuses on diose 438 facilities likely to be 

subject to the proposed air regulations. 

2.5.1 Location 

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

die 438 major source facilities producing reinforced plastics in 1993.1 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 with an average of 84 employees for those facilities reporting their 

employment level. Table 2-13 provides die distribution of major source facilities reporting 

employment data. Over 80 percent of the 389 facilities reporting employment data had 

100 employees or fewer. The vast majority of the remaining facilities reported employment 

levels between 101 and 500. Less tiian 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 

'Three facilities have closed since 1997, the basehne year of the economic analysis. 

2-29 
P.41 

Figure 2-8. Geographic Distribution of Major Source Facilities 

2-30 
P.42 

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 03 

Total repoiting 389 100.0 

Not Available 49 

manufactured. Likewise, the terms company and firm are used synonymously and refer to die 

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. 357 companies own the 438 major source facilities and annual sales data were available 

for 315 ofthe firms.2 Based on the available small company sales and employment observations, 

the Agency also estimated sales for 39 of the 42 remaining companies by calculating the ratio of 

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

employees for each company without sales data. Appendix A lists tiiese companies and their 

sales and employment figures where available. 

2.6.1 Size Distribution 

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

impacts. The 357 firms owning the 438 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 

2Three facilities (firms) have closed since 1997, the baseline year of the economic analysis. 

2-31 
P.43 

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

Company Sales 

Less than $5M 

$5Mto$10M 

$10Mto$25M 

$25Mto$50M 

$50Mto$100M 

$100Mto$250M 

$250Mto$500M 

$500Mto$lB 

$1B or greater 

Total 

Not Available 

Number of Firms 

127 

65 

52 

28 

20 

12 

13 

6 

31 

354 

3 

Share of Total (%) 

36.0 

18.4 

14.7 

7:9 

5.6 

3.4 

3.7 

1.7 

8.8 

100.0 

, 

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 438 affected 

manufacturers 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) 

2-34 
P.44 

• 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 357 parent companies are affected by the regulation. Employment data could be 

obtained from the above sources for 350 of these parent compames (98 percent). 

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 

die 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 die 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 die most 

conservative size standard of 1,000 employees. 

Based on die SBA's definitions, 279 companies out of 357 (78 percent) were identified as small, 

as Figure 2-10 shows. These companies own 305 facilities (70 percent of all RPC facilities). 

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

2-35 
P.45 

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>. 

2-36 
P.46 

Small 

Business 

78% 

Large. 

Business 

22% 

Figure 2-10. RPC Firms by Size 

2-37 
P.47 

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 final 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 otiier 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—$21.5 million; 

• MACT floor—$20.8 million; and 

• above-the-MACT floor—$216.8 million. 

'All dollar amounts are expressed in $1997. 

3-2 
P.48 

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 capture 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 of this section. 

EPA examined three regulatory alternatives for addressing die problem of HAP releases 

from tiiese 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: 

In the proposed rule there were different emission thresholds above which an existing 

facility had to comply with more stringent above-the-floor requirements of 95 percent capture 

and control. This threshold was 250 tpy of HAP emissions for small businesses and only 100 tpy 

for large businesses. In this final rule, we have removed die above-the-floor capture and control 

requirements for existing facilities except for centrifugal casting and continuous 

lamination/casting and we have established a threshold of 100 tpy for all facilities. This section 

provides results for each alternative. 

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

compared baseline conditions of RPC markets in 1997 with those for the counterfactual or 

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

elements of this analysis are 

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

these markets; 

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

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

4-1 
P.49 

• 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. 

• Construction: swimming pools, rain gutters, molds for concrete, bathtubs, 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, truck cabs, 

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

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

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

vehicles 

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

components of the civil infrastructure such as guardrails, sign posts, and structural 

supports for highways and bridges 

4-2 
P.50 

Some of the 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) tiiat 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 of the 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 construction segment into three distinct 

end-use markets—general construction, 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 growtii rates, EPA estimated that 1.4 billion pounds of RPCs, or 45 

percent of the total shipments, were manufactured by facilities directiy affected by the 

regulation. Facilities using unaffected resins (i.e., thermoplastics or unaffected thermosets) 

produced 1.7 bilUon 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, die 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 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 559.9 million pounds of regulated 

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

segment. Captively produced resins that are directiy affected by the regulation accounted for die 

remaining 859.8 milhon pounds. As shown in Table 4-1, the same merchant/captive proportions 

4-3 
P.51 

Table 4-1. Reinforced Plastics Composites Shipments by End-Use Market: 1997 (10* 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 

163.5a 

403.3 

202.6" 

210.0 

396.0 

348.0 

1,095.0 

111.0 

3,138.4 

Directly Affected1" 

Merchant 

0.5 

12.0 

44.6 

172.7 

22.7 

31.0 

120.6 

18.0 

116.6 

21.3 

559.9 

Captive 

5.3 

8.5 

71.9 

230.6 

100.7 

56.0 

30.9 

81.2 

255.2 

19.3 

859.8 

Indirectly Affected0 

Merchant 

1.6 

96.1 

18.0 

0.0 

14.5 

43.8 

194.6 

45.2 

226.8 

36.9 

677.6 

Captive 

16.6 ' 

68.4 

29.0 

0.0 

64.6 

79.2 

49r9 

203.6 

496.4 

33.4 

1,041.1 

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

b

 Estimates based on projected facihty 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. ' 

6

 EPA estimate. 

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

Washington, DC: September 1998. 

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 

highest values that result from the multiplication of the facility-specific costs of materials (i.e., 

resins, fillers, and reinforcements)1 by the U.S. Census Bureau estimate of the average ratio of 

sales to costs-of-materials for NAICS code 326199A (reinforced and fiberglass plastics products, 

1

 Given the Umited 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. 

4-4 
P.52 

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 of the facility-specific costs of materials (i.e., resins, 

fillers, and reinforcements) by the U.S. Census estimate ofthe average ratio of sales to costs-of-materials for 

NAICS code 326199A (reinforced and fiberglass plastics products, nee), which was 2.28. The unit cost bf the 

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

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 witii 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 die directiy and indirectly 

affected market quantities. 

The Agency acknowledges the limitations of this method and its potential to under or 

over state industry-level revenues. Therefore, we performed a consistency check using Census ' 

data to determine whetiier these prices provide a reasonable first approximation of industry 

revenues. Using the prices and shipment data provided in Tables 4-1 and 4-2, the implied 

industry revenue is approximately $11.4 billion dollars. Unfortunately, there is no directiy 

comparable Census industry code that provides similar revenue data. Instead, we generate a 

proxy Census revenue estimate using average shipments per employee ($164,000) for NAICS 

code 326199A (reinforced and fiberglass products, nee) and EPA estimates of total industry 

employment based on ICR survey responses (69,000 employees). This proxy is approximately 

4-5 
P.53 

$11.2 billion dollars, which is the same order of magnitude as our revenue estimate generated 

from the computed market prices. 

Market impacts of the 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 nature 

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 

1

 i 

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 directiy affected by the regulation because they face additional.costs witii 

the implementation of the NESHAP and 

• facilities indirectiy 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 tiiat occur with the regulation. The engineering analysis 

projected each directiy affected facihty'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 indirectiy 

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.54 

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 of the 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 of the supply function to each affected producer, we derive their production 

costs by taking the integral of the area under the curve corresponding to their production rate and 

market price. 

$/lb 

lbs/year 

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

4-7 
P.55 

As detailed in Appendix B, this analysis employs an "intermediate" run 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 run or the long run. 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 run 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-run criteria (i.e., product-line 

revenues cover all variable costs) and the long-run 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 of a "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 manufacturers 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 of the alternative 

product that affect its degree of substitutability in higher-order products, and the price of die 

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 

Agency constructed this curve for each RPC commodity using baseline quantity, price data, and 

4-8 
P.56 

$Ab 

D 

lbs/year 

Figure 4-2. Demand Curve for RPCs 

assumptions about the responsiveness to changes in price (derived demand elasticity). Factors 

that influence the magnitude of this price responsiveness include the 

• price-responsiveness of the end product made with RPCs, 

• cost share of the RPC input in total production of the end product, and 

• ease of substitution between this input and 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 of the 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 

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 

4-9 
P.57 

would result in a 0.5 percent decrease/increase in the quantity of RPC products demanded). 

Appendix B provides a detailed description of the 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 of the 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 of the 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 maintenance costs 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 of die regulatory control costs is represented as an upward shift in the supply 

curve for each directiy affected facility. As a result of the 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 directiy affected facilities producing the amount qd and indirectly affected facilities 

accounting for Q minus qd, or cjj. 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 indirectiy 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 of the 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 the last two 

options because they appear to be the most viable for RPC facilities, at least in the near-term. A 

large segment of the 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 quantity demanded, output for each 

4-10 
P.58 

+ P." 

Id 

Facilities 

Directly Affected 

= P -

l i 

Facilities 

Indirectly Affected 

Market 

a) Baseline Equilibrium 

P' 

P 

a

d /

 ad J 

____/ / Y 

y\y\ + p 

i i 

/ ^ 

s\ 

"l?i i 

q' q q q' 

Facilities Facilities 

Directly Affected Indirectly Affected 

P' 

= P r

_ 

. SMV SM/ 

— yC / 

~*^ 1 i Dw 

1-4-1 

i ' i 

Q' Q 

Market 

b) With-Regulation Equilibrium 

Figure 4-3. Market Equilibrium Without and With Regulation 

4-11 
P.59 

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 of the regulation. 

To estimate these economic impacts, the conceptual 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 dieir behavioral 

responses to the imposition of the 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" of the 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, die recommended alternative is projected to increase the average price of 

RPC products by 0.7 percent, or $0.03 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 0.7 percent. The combined effect of 

higher costs due to regulation and substitution to unaffected RPC products is expected to cause a 

1.7 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 0.4 

percent. 

The size of the 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, we would expect markets with higher per-unit variable compliance 

costs to experience the most significant price changes. As shown in Table 4-4, the two markets 

with the highest average per-unit compliance costs (corrosion-resistant, general construction) 

also see the most significant price changes (1.6 and 0.6 percent, respectively). An additional 

factor in determining the changes in market price is the market share of substitute products (i.e., 

thermoplastic RPCs). As discussed above, these unaffected suppliers are expected to limit the 

• ability of affected producers to pass along costs to consumers and thereby increase market price. 

4-12 
Table 4-3. Market-Level Impacts of the 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 (Indirectiy Affected) 

5^J 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 

2.1 

0.5 

1.6 

$2.37 

108.1 

12 

96.1 

$3.46 

62.6 

44.6 

18 

$3.48 

172.7 

172.7 

— 

$3.24 

37.2 

22.7 

14.6 

$3.41 

74.7 

31 

43.8 

MACT Floor 

Absolute 

Change 

$0,003 

0 

0 

0 

$0,001 

-0.02 

-0.07 

0.04 

$0,020 

-0.31 

-0.41 

0.11 

$0,015 

-0.37 

-0.37 

— 

$0,007 

-0.04 

-0.08 

0.03 

$0,017 

-0.19 

-0.41 

0.22 

Relative 

Change 

0.01% 

0.01% 

-0.04% 

0.01% 

0.04% 

-0.02% 

-0.57% 

0.04% 

0.59% 

-0.49% 

-0.93% 

0.59% 

0.42% 

-0.21% 

-0.21% 

NA 

0.23% 

-0.12% 

-0.34% 

0.23% 

0.51% 

-0.25% 

-1.32% 

0.51% 

Recommended Alternative 

Absolute 

Change 

$0,003 

0 

0 

0 

$0,001 

-0.02 

-0.07 

0.04 

$0,020 

-0.31 

-0.41 

0.11 

$0,015 

-0.37 

-0.37 

— 

$0,007 

-0.04 

-0.08 

0.03 

$0,017 

-0.19 

-0.41 

0.22 

Relative 

Change 

0.01% 

0.00% 

-0.04% 

0.01% 

0.04% 

-0.02% 

-0.57% 

0.04% 

0.59% 

-0.49% 

-0.93% 

0.59% 

0.42% 

-0.21% 

-0.21% 

NA 

0.23% 

-0.12% 

-0.345 

0.23% 

0.51% 

-0.25% 

-1.32% 

0.51% 

Above-the-MACT-Floor 

Absolute 

Change 

$0,033 

0 

0 

0 

$0,005 

-0.12 

-0.33 

0.21 

$0,404 

-2.61 

^t.71 

2.1 

$0,313 

-7.27 

-7.27 

— 

$0.0182 

-1.00 

-1.82 

0.82 

$0,263 

-2.73 

-6.11 

3.38 

Relative 

Change 

0.09% 

-0.04% 

-0.44% 

0.09% 

0.22% 

-0.11% 

-2.74% 

0.22% 

11.66% 

-4.17 

-10.56% 

11.66% 

8.99% 

-4.21% 

—4.21% 

NA 

5.60% 

-2.69% 

-8.01% 

5.60% 

7.72% 

-3.65% 

-19.73% 

7.72% 

(continued) 
Table 4-3. Market-Level Impacts ofthe Reinforced Plastic Composites NESHAP Regulatory Alternatives: 1997 

(continued) 

r—a 

Corrosion-Resistant 

Market Price (per lb) 

Market Quantity (Millions lbs/yr) 

Thermosets (Directiy Affected) 

Thermosets/Thermoplastics (Indirectly Affected) 

Electrical/Electric 

Market Price (per lb) 

Market Quantity (Millions lbs/yr) 

Thermosets (Directly Affected) 

Thermosets/Thennoplastics (Indirectly Affected) 

Land Transportation 

Market Price (per lb) 

Market Quantity (Millions lbs/yr) 

Thermosets (Directly Affected) 

Thermosets/Thennoplastics (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 

315.2 

120.6 

194.6 

$3.29 

63.3 

18 

45.2 

$3.44 

343.4 

116.6 

226.8 

$3.41 

58.3 

21.3 

36.9 

$3.48 

1237.5 

559.9 

677.6 

MACT Floor 

Absolute 

Change 

$0,061 

-2.61 

-5.78 

3.17 

$0,005 

-0.05 

-0.13 

0.07 

$0,017 

-0.88 

-2.03 

1.14 

$0,012 

-0.10 

-0.23 

0.13 

$0,025 

-4.59 

-9.51 

4.92 

Relative 

Change 

1.63% 

-0.83% 

-4.79% 

1.63% 

0.16% 

-0.08% 

-0.71% 

0.16% 

0.50% 

-0.26% 

-1.74% 

0.50% 

0.34% 

-0.18% 

- -1.07% 

0.34% 

0.72% 

-0.37% 

-1.70% 

0.73% 

Recommended Alternative 

Absolute 

Change 

$0,061 

-2.61 

-5.78 

3.17 

$0,005 

-0.05 

-0.13 

0.07 

$0,017 

-0.88 

-2.03 

1.14 

$0,012 

-O.10 

-0.23 

0.13 

$0,025 

^1.59 

-9.51 

4.92 

Relative 

Change 

1.63% 

-0.83% 

-4.79% 

1.63% 

0.16% 

-0.08% 

-0.71% 

0.16% 

. 0.50% 

-0.26% 

-1.74% 

0.50% 

0.34% 

-0.18% 

-1.07% 

0.34% 

0.72% 

-0.37% 

-1.70% 

0.73% 

Above-the-MACT-Floor 

Absolute 

Change 

$0,213 

-8.42 

-19.40 

10.98 

$0,166 

-1.94 

-4.22 

2.29 

$0,231 

-11.27 

-26.48 

15.21 

$0,196 

-4.90 

-7.02 

2.12 

$0,220 

-40.25 

-77.36 

37.1 

Relative 

Change 

5.64% 

-2.67% 

-16.08% 

5.64% 

5.06% 

-3.06% 

-23.42% 

5.06% 

6.71% 

-3.28% 

-22.72% 

6.71% 

5.74% 

-8.41% 

-32.89% 

5.74% 

6.34% 

-3.25% 

-13.82% 

5.48% 
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 

MisceUaneous 

Total 

Directly 

Affected 

Share 

24% 

11% 

71% 

100% 

61% 

41% 

38% 

29% 

34% 

37% 

45% 

MACT Floor 

Incremental Variable 

Compliance Cost 

Mean 

$0.02 

$0.01 

$0.06 

$0.02 

$0.01 

$0.04 

$0.13 

$0.02 

$0.05 

$0.04 

$0.06 

Max 

$0.02 

$0.04 

$0.48 

$0.46 

$0.05 

$0.15 

$1.08 

$0.07 

$0.20 

$0.07 

$1.08 

Standard 

Deviation 

NA 

$0.02 

$0.10 

$0.05 

$0.01 

$0.04 

$0.20 

$0.02 

$0.04 

$0.02 

$0.12 

Market Price 

Change 

Absolute 

<$0.01 

<$0.01 

$0.02 

$0.02 

<$0.01 

$0.02 

$0.06 

<$0.01 

$0.02 

$0.01 

$0.03 

Relative 

<0.1% 

<0.1% 

0.6% 

0.4% 

0.2% 

0.5% 

1.6% 

0.2% 

0.5% 

0.3% 

Recommended Alternative 

Incremental Variable 

CompUance Cost 

Mean 

$0.02 

$0.01 

$0.06 

$0.02 

$0.01 

$0.04 

$0.13 

$0.02 

$0.05 

$0.04 

0.7% | $0.06 

Max 

$0.02 

$0.04 

$0.48 

$0.46 

$0.05 

$0.15 

$1.08 

$0.07 

$0.20 

$0.07 

$1.08 

Standard 

Deviation 

NA 

$0.02 

$0.00 

$0.05 

$0.01 

$0.04 

$0.20 

$0.02 

$0.04 

$0.02 

$0.12 

Market Price 

Change 

Absolute 

<$0.01 

<$0.01 

$0.02 

$0.02 

<$0.01 

$0.02 

$0.06 

<$0.01 

$0.02 

$0.01 

$0.03 

Relative 

<0.1% 

<0.1% 

0.6% 

0.4% 

0.2% 

0.5% 

1.6% 

0.2% 

0.5% 

0.3% 

0.7% 

Above-the-MACT-Floor 

Incremental Variable 

CompUance Cost 

Mean 

$0.20 

$0.09 

$0.27 

$0.68 

$0.16 

$0.35 

$0.47 

$0.13 

$0.25 

$0.25 

$0.40 

Max 

$0.20 

$0.26 

$0.96 

$51.85 

$1.20 

$2.04 

$2.20 

$0.49 

$1.08 

$0.76 

$51.85 

Standard 

Deviation 

NA 

$0.15 

$0.25 

$5.40 

$0.31 

$0.46 

$0.42 

$0.12 

$0.22 

$0.22 

$2.42 

Market Price 

Change 

Absolute 

$0.03 

$0.01 

$0.40 

$0.31 

$0.18. 

$0.26 

$0.21 

$0.17 

$0.23 

$0.20 

$0.22 

Relative 

<0.1% 

0.2% 

11.7% 

9.0% 

5.6% 

7.7% 

5.6% 

5.0% 

6.7% 

5.7% 

6.3% 

NA: Not applicable. Only one facility is affected in this market 
P.63 

As shown in Table 4-4, the smaller price changes occur in markets where the share of affected 

supply is small (i.e., less than 25 percent). Finally, the number and distribution of projected 

closures also influences the size of the market price increases. If facilities that are projected to 

close account for significant shares of baseline market production, we would expect to see higher 

price increases (all else equal). 

A review of the results under the recommended alternative shows the projected market 

impacts in the corrosion resistant market are consistent with our expectations. First, the facilities 

in this market have higher average per-unit variable compliance costs, i.e., $0.13 per pound 

compared to industry average of $0.06 per pound. Second, the market share of affected products 

is low (38 percent compared to an industry average of 45 percent). As a result, affected 

producers in this market face more competition from unaffected sources which limits their 

ability to pass on costs to consumers. It follows that the model projects 48 potential product line 

closures in the corrosion resistant market (54% of total projection of 89). These lines accounted 

for approximately 2 percent of total baseline market output arid are produced at 33 facilities 

nationwide. 

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 most of these facilities 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., 6.3 percent increase vs. 0.7 percent under the recommended 

alternative) and the decline in market quantity (i.e., 3.3 percent decline vs. 0.4 percent under the 

recommended alternative). Furthermore, the above-the-MACT floor alternative shows greater 

displacement of market production with affected producers reducing output by 13.8 percent as 

opposed to the 1.7 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 of the regulation. As a result of these changes, we project a net increase 

in RPC industry pre-tax earnings by $12 million (see Table 4-5) under the recommended 

alternative because the gains of the unregulated resin producers (totaling $18 million) outweigh 

the losses of the regulated producers (totalling $6 million). In addition, 36 facilities and 89' 

product lines are projected to prematurely close due to the rule with losses in employment 

totaling 1,297 employees. The net loss in employment would be 1,075 as unaffected producers 

hire additional workers. The less stringent MACT floor alternative projects similar results, while 

the economic impacts of the more stringent alternative are significantly higher. The following 

4-16 
Table 4-5. Industry-Level Impacts of Reinforced Plastic Composites NESHAP Regulatory Alternatives: 1997 

4*. i 

O 

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)b 

Operating Entities 

Facilities 

Employment' 

Thermoset/Thermoplastic Producers 

(Indirectly Affected) 

Pre-tax earnings ($106/yr) 

Employment 

All Producers 

Pre-tax earnings ($10°/yr) 

Employment 1 

Baseline 

-

$1,970 

$1,883 

— 

$1,883 

$86 

466 

301 

18,420 

NA 

133 

20,263 

NA 

30,668 

NA 

69.351 

MACT Floor 

Absolute 

Change 

-$21 

-$25 

$8.1 

-$33 

-$4 

-89 

-36 

-1,297 

-$10 

-10 

NA 

NA 

222 

$12 

-1.075 

Percentage 

Change 

-1.07% 

-1.33% 

NA 

-1.76% 

-4.6% 

-19.10% 

-11.96% 

-7.04% 

-

NA 

-7.5% 

NA 

NA 

0.73% 

NA 

-1.55% 

Recommended Alternative 

Absolute 

Change 

-$21 

-$25 

$8.1 

-$33 

-$4 

-«9 

-36 

-1,297 

-$10 

-10 

NA 

$18 

222 

-$12 

-1.075 

Percentage 

Change 

-1.07% 

-1.33% 

NA 

-1.76% 

-4.62% 

19.10% 

-11.96% 

-7.04% 

. NA 

-7.5% 

"NA 

NA 

0.73% 

NA 

-1.55% 

Above-the-MACT-Floor 

Absolute 

Change 

-$146 

-$207 

$49.4 

-$256 

$61 

-315 

-179 

-5,975 

-$83 

-63 

NA 

$135 

1,679 

$113 

-4,296 

Percentage 

Change 

-7.39% 

-10.96% 

NA 

-13.59% 

-70.59% 

-«7.60% 

-59.47% 

-32.44% 

NA 

-47.0% 

NA 

NA 

NA 

NA 

5.48% 

' Four of the 305 facihties owned by small companies are excluded from the market analysis. They are either treated as captive producers because they perform only 

intermediate operations such as compounding or they have insufficient data to include in the market model. 

b

 Change in profit is equal to the engineering cost estimate. 

c

 Although these producers incur compliance costs, EPA did not project changes in employment 
P.65 

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 expected to 

incur $8:1 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 increase in pre-tax earnings of $4 

million per year. This net gain results from increased revenues associated with their gajn in 

market share and the higher prices associated with the regulation. Indirectly affected producers 

also see increases in pre-tax earning of $18 million per year. Given the Agency's inability to 

predict higher prices for captive producer end products and, thus, shift costs to their ultimate 

consumers, we assume captive producer profits dechne by the aggregate engineering estimate of 

compliance costs ($10 million). 

We emphasi2£ the projected $4 million increase in'for directly affected merchant 

producers does not suggest all of these thermoset producers will benefit with the regulation. To ' 

the contrary, the economic analysis shows the regulation creates both gainers and losers within 

the directly affected merchant segment. As shown in Table 4-6, a substantial subset of the 

merchant facilities are projected to experience profit increases under the recommended 

alternative (i.e., Ill facilities representing 37 percent of the sector total of 301 facilities). Their 

gain in pre-tax earnings is projected to be $10 million annually. However, the majority of 

directly affected merchant facilities (i.e., 154 facilities, or 51 percent of the sector total) are 

projected to experience pre-tax earnings losses of $5 million per year. The remaining 36 

facilities are projected to cease operations and, thus, forego $1 million in baseline pre-tax 

earnings. 

Based on this distributional analysis, EPA concludes the directly affected merchant 

facilities with profit gains will tend to have higher output rates (average of 3.6 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 $0.05 to $0.33 per pound). 

4-18 
Table 4-6. Distributional Impacts on Merchant Thermoset Producers Associated with Reinforced Plastic 

Composites NESHAP Regulatory Alternatives: 1997 

MACT Floor 

More Less 

Profitable Profitable Closure Total 

Recommended Alternative 

More Less 

Profitable Profitable Closure Total 

Above-the-MACT-Floor 

More Less 

Profitable Profitable Closure Total 

Facilities' 

Production 

Total 

(IO6 lbs/yr) 

Average 

(lbs/facility) 

111 

402.8 

3.6 

154 

152 

36 301 

5.1 560 

0.1 1.9 

Ul 

402.8 

3.6 

154 

152 

36 301 

5.1 560 

0.1 1.9 

88 34 

409.3 71.2 

4.7 2.1 

179 

79.4 

0.4 

301 

560 

1.9 

Compliance 

Costs 

Total 

($106/yr) 

Average 

($/lb) 

Change in 

Pre-tax 

earnings 

($106/yr) 

Change in 

Employment 

$1.52 

$0,004 

$10 

39 

$8.12 

$0,053 

-$5 

-338 

$1.67 

$0,327 

-$1 

-999 

$11.3 

$0,020 

$4 

-1,297 

$1.52 

$0,004 

$10 

39 

$8.12 

$0,053 

-$5 

-338 

$1.67 

$0,327 

- -$1 

-999 

$11.3 

$0,020 

$4 

-1,297 

$31.14 

$0,076 

$79 

187 

$23.99 

$0,337 

-$6 

-156 

$79.11 

$0,996 

-$12 

-6,006 

$134.2 

$0,240 

$61 

. -5.975 

' Four of the 305 facilities owned by small companies are excluded from the market analysis. They are either treated as captive producers because they perform 

only intermediate operations such as compounding or they have insufficient data to include in the market model. 

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 alternatives. 
The other important distributional impact of the rule that merits discussion is the 

unambiguous benefits unregulated resin producers experience at the expense of affected 

merchant producers and consumers of RPC products. As shown in Table 4-5, these unaffected 

merchant producers, mainly thermoplastic producers, increase their production in response to the 

higher market prices and, thereby, experience gains in pre-tax earnings of $18 million per year. 

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. Seventy-one percent of the affected merchant producers 

become less profitable or close (profit losses of $18 million), and estimates of captive producer 

profit losses increase to $83 million. Only 29 percent of the affected merchant producers 

become more profitable ($79 million), while suppliers of thermoplastic RPCs experience a large 

increase in profits ($135 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 best economic 

response is to prematurely close the facility (presumably every current production facihty 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). Using the approaches 

described in detail below, the recommended and MACT floor may result in 89 merchant product 

line closures, 36 merchant facility closures, and 10 captive facility closures. This number 

increases dramatically with the Above-the-MACT floor—315 merchant product lines, 179 

merchant facilities, and 63 captive facilities may cease operations under this alternative. 

It is important to point out that these estimates of facility and product-line closures are 

sensitive to the accuracy of the baseline characterization of these entities. These impact 

estimates should be considered and upper-bound estimate because the facilities may not cease 

operations for various reasons. For example, facility operators may believe that market demand 

conditions may change and allow the facility to become profitable in the future. 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. Our model does not explicitly account for these factors. 

Merchant Producer Analysis. In the economic model, we limit the assessment of 

potential for closures to small merchant producers after accounting for the behavioral responses 

of producers and consumers to changing equilibrium conditions. Under the recommended 

4-20 
P.68 

alternative, 36 merchant facilities are projected to close, or 12 percent of the 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 ($0.33 per pound). 

As noted above, 36 facilities cease all of their product line operations in response to the 

regulation. These facilities account for 62 of the 89 product line closures projected by the 

economic model (70 percent). However, a less severe response is also available to producers , 

with multiple production lines: close lines that are expected to be unprofitable with the 

regulation. We project 23 facilities choose this option and close 27 unprofitable lines 

(30 percent). The product lines most affected by the regulation are the manual and mechanical 

resin applications because these processes typically have higher compliance costs. Over ninety 

percent of the 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 is nearly 5 times higher (179 facilities or 60 percent 

of the total, and the number of product line closures more than triples to 315 (68 percent of the 

total). 

Captive Producer Analysis. The Agency also developed a method of identifying captive 

plant closure decisions using industry measures of profitability. The approach assumes affected 

captive producers have very limited choices and cannot adjust production rates in response to 

higher production'costs. They fully absorb these costs resulting in a one-to-one reduction in 

profits.2 If the additional compliance costs associated with the rule exceed the plants pre-tax 

earnings, the captive producer is expected to cease their operations. If producers were unable to 

pass forward increased costs to final product producers (and therefore their customers), then this 

approach offers a tractable way to provide closure estimates for the 30 percent of the affected 

RPC facilities considered captive in our analysis. Using this method, we conclude that 10 

captive facihties would be potentially at risk of closure under the recommended and MACT 

floor alternatives. This number increases to 63 facilities under the Above-the-MACT floor 

alternative. 

The Agency also consider a less restrictive assumption by allowing total revenue to vary based on partialcost pass through and the associated demand response. These analyses did not significantly vary from the 

full cost absorption conclusions. 

4-21 
_P_.69 

4.5.2.3 Changes in Employment 

In response to the decreased levels of output, aggregate employment in the merchant 

segment of the RPC industry is projected to decrease by 1.6 percent, or 1,075 employees, under 

the recommended alternative. This is the net result of employment losses for merchant 

thermoset producers (1,297 employees) and employment gains for unaffected (i.e., 

thermoplastic) producers (222 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 (1,075 employees, or 1.6 percent) but are four times higher under the more stringent 

above-the-floor alternative (4,296 employees, or 6.0 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 of the regulation. 

Producers will experience welfare impacts resulting from changes in their revenues associated 

with imposition of the 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 appUed 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. 

The national estimate of compliance costs is often used as an approximation of the social 

cost of the rule. Under the recommended alternative, the engineering analysis estimated annual 

costs of $21.5 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 

4-22 
P.70 

costs of the recommended alternative are projected to be $19.9 million. The slight difference 

between the two estimates is due to the reductions in RPC product output triggered by the rule. 

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.3 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 of the directly affected facilities. As shown, for the recommended 

alternative, the loss in producer surplus for these suppliers is $6.2 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 substitutes for those produced using 

thermosets. Because they do no incur any compliance costs, the owners of these facilities will 

have profit increases of $18.0 million annually. On net, RPC suppliers' profits are expected to 

increase by $12 million because the gains ofthe unregulated resin producers outweigh the losses 

of the regulated resin producers. 

It is important to point out that by modeling these products as perfect substitutes, 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. 

In the long run, we would expect that all costs of the 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 

facihties will have to decide how best to use these resources. The economic model developed for this 

analysis has attempted to capture these decisions. 

4-23 
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/Thennoplastics (Indirectly Affected) 

Social Costs of Regulation ($10*/yr) 

MACT Floor 

-$31.7 

$0.0 

-$0.1 

-$1.3 

-$2.5 

-$0.3 

-$1.3 

-$19.3 

-$0.3 

-$5.9 

-$0.7 

$12.5 

-$5.5 

$4.0 

-$9.5 

$18.0 

-$19.2 

Recommended 

-$31.7 

$0.0 

-$0.1 

-$1.3 

-$2.5 

-$0.3 

-$1.3 

-$19.3 

-$0.3 

-$5,9 

-$0.7 

$11.8 

-$6.2 

$4.0 

-$10.1 

$18.0 

-$19.9 

Above-the-MACT-Floor 

S 

-$269.6 

-$0.1 

-40.6 

-$24.7 

-$52.9 

-$6.7 

-$19.3 

-$66.1 

-$10.4 

-$77.9 

-$10.9 

$113.1 

-$21.6 

$61.0 

-$82.6 

$134.7 

-$156.5 
P.72 

On the consumer side, welfare losses are critically dependant on consumers' ability to 

find substitutes for RPC products and on the terms they can purchase those products. Because 

RPC products made from thermoplastics are assumed here to be perfect substitutes 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 of the input used in 

its production. Thus, just as producers of die indirecdy affected sector can be expected to gain 

with the rule, 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 $31.7 

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 of the impacted factor demand elasticities. However, as 

shown in Figure 4-4, if demand is less (more) elastic, the consumer surplus losses estimate 

would be more (less). 

Loss in 

Consumer Surplus 50_. 

($106/yr) 

40i 

30 

20 

10-

0 —f— 

-0.1 -0.5 -1.0 

Elasticity of Demand 

•1.5 

Figure 4-4. Sensitivity of Changes in Consumer Surplus to the Elasticity of Demand 

(Elasticity of Supply = 1.0) 

4-25 
P.73 

Thus, in returning to the social costs of the recommended alternative, it is simply 

Directly affected producers -$6.2 million 

Indirectly affected producers +$18.0 million 

Consumers -$31.7 million 

Social cost $19.9 million 

In comparison, the social costs of the MACT floor alternative are about $19.2 million, those of 

the above MACT floor alternative, $156.5 million. 

. ' i 

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 appUed 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 pre-tax earnings for 

plastic companies with less than $5 million in sales was on average two-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 

4-26 

Industry Average 

4.7% 

6.0% 

6.5% 

5.5% 

5.2% 

Adjusted Average 

3.0% 

4.0% 

4.4% 

3.7% 

3.5% 
P.74 

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 productline 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 lower profit scenario results in 

higher aggregate profit gains by merchant facilities that continue to operate with regulation.4 

This net gain results from their increased revenues associated with their gain in market share and 

the higher prices with regulation. 

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 ($106/yr) 

Merchant facihties 

Captive facihties 

Closures 

Merchant product lines 

Merchant facihties 

Captive facihties 

Social costs ($106/yr) 

, 

3.0% 

1 

0.8% 

-0.4% 

-1.8% 

0.8% 

$6.0 

-$10.0 

96 

44 

17 

$19.5 

Industry Profit Rate 

4.4% 

0.7% 

-0.4% 

-1.7% 

0.7% 

$4.0 

-$10.0 

89 

36 

10 

$19.8 

6.5% 

• 

0.6% 

1

 -0.3% 

-1.4% 

0.6% 

$2.0 

-$10.0 

81 

35 

6 

$20.2 

4.8 New Source Analysis 

New suppUers 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 

Again, we emphasize this increase does not suggest all of these producers gain. To the contrary, the 

regulation creates winners and losers (see Section 4.5.2.1). 

4-27 
P.75 

value ofthe expected stream of profits over the lifetime ofthe investment exceeds the costs of 

the 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 the 

opportunity cost of capital for an investment in this risk class divided by the profit-maximizing 

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. 

$/lb 

P =P 

r

o

 r l 

\ s \ o 

\

 D 

D0 

Qo Q, 

Figure 4-5. Baseline Equilibrium without Regulation 

lbs/year 

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.5 As new capacity enters the market, the new equilibrium price is P„ which 

is exacdy equal to the unit cost of supply from new facilities. In this example, it is the same 

5

For simplicity, impacts are considered for one future time period. 

4-28 
P.76 

value as the old price, P0. The new equilibrium quantity, Q,, includes the additional output 

supplied by new sources: (Qi~Q0)-

The NESHAP will increase existing suppliers' costs of producing RPCs if they use 

thermosetting resins by shifting existing supply, Se, 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, widi 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 of the NESHAP. However, as shown in Figure 4-7, no new capacity 

expansion will take place in the future time period (1) if the per-unit compliance costs at new 

facilities exceeded, P,'. Thus, the simple analytics presented suggest that the rule will likely 

cause investors to delay construction 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 

future market conditions, the Agency is limited to general assessments ofthe rule's impact on 

the rate of new facility construction. To inform these assessments, the Agency peiformed the 

following analysis: 

• computed a test ratio for each ofthe ten affected RPC markets. The numerator of this 

ratio is the engineering estimate of the unit costs of compliance for new sources 

($0.04 per pound for a new facility subject to the MACT floor standard and $0.22 for 

a facility subject to the above-the-MACT floor standard). The denominator for this 

ratio is the unit cost of a new supplier, which is assumed to be equal to the baseline 

market price. As shown in Table 4-9, the average ratio is 1.1 percent under the 

MACT floor standard and increases to approximately 6.2 percent under the abovethe-floor standard. 

• projected percentage changes in facility construction with regulation for a future 

time period (2005). Using the conceptual approach presented in Figures 4-5 and 4-6, 

the Agency estimated the change in facility construction for the period 2000 to 2005 

as follows: 

/SFacilities==¥m-= E- (4.1) 

4-29 
P.77 

Q', Q, lbs/year 

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

Q'j Qj lbs/year 

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

4-30 
Table 4-9. New Source Analysis of Unit Production and Compliance Costs ($1997) 

u> 

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)" 

$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) 

$0.04 

$0.04 

$0.04 

$0.04 

$0.04 

$0.04 

$0.04 

$0.04 

$0.04 

$0.04 

$0.04 

Cost Share 

(%) 

0.10% 

1.68% 

1.15% 

1.14% 

1.23% 

1.17% 

1.05% 

1.21% 

1.16% 

1.17% 

1.14% 

Above-the-MACT Floor 

New Source Unit 

Compliance 

Costs ($/lb) 

$0,215 

$0,215 

$0,215 

$0,215 

$0,215 

$0,215 

$0,215 

$0,215 

$0,215 

$0,215 

$0,215 

Cost Share 

(%) 

0.56% 

9.07% 

6.22% 

6.17% 

6.63% 

6.31% 

5.70% 

6.54% 

6.25% 

6.31% 

6.17% 

* Equal to the baseline market price by assumption. 
P.79 

where 

T)d = Elasticity of demand (-0.5) 

Z = Average size of a new facility (2.4 million lbs/yr) 

QJOOJ = For 2000, the Composite Fabricators Association (CFA, 2000) estimated an 

RPC composite demand of 3.5 billion pounds.6 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 

baseUne year of 2005 was estimated to be approximately 3.7 billion pounds. 

AP 

— = Calculated using the ratio of average new source per-unit control costs to 

baseline price for each alternative (1.1 percent for the MACT floor alternative 

and 6.2 percent for the above-the-floor alternative) 

Using this approach, the Agency estimated an 11 percent reduction in facility construction under 

me MACT floor alternative and a 60 percent reduction under the above-the-floor alternative, over 

the 2000 to 2005 time period (see Table 4-10). 

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 

-9 -10.7% 

Above-the-MACT Floor 

Change 

Absolute Relative 

-48 -57.1% 

These results suggest facility construction 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 and 

type of 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. In 

addition, the rule may influence the producer's choice of processing method. 

Excludes marine uses. 

4-32 
P.80 

SECTION 5 

FINAL REGULATORY FLEXIBILITY ANALYSIS 

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 of the 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 uie financial 

consequences of the decisions. Environmental regulations like this rule 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 ih 1996 by the 

Small Business Regulatory Enforcement Fairness Act (SBREFA) to strengthen the RFA's 

analytical and procedural requirements. Under SBREFA, the Agency must perform a 

regulatory flexibility analysis required for rules that will have a significant impact on a 

substantial number of small entities. 

In accordance widi Section 603 of the RFA, the Agency prepared an initial regulatory 

flexibility analysis (IRFA) that examined me impact of the proposed rule on small entities 

within this source category along widi regulatory alternatives mat could reduce these 

impacts. As required by Section 609(b) of the RFA, as amended by SBREFA, the Agency 

also convened a Small Business Advocacy Review (SBAR) panel to obtain advice, and 

recommendations of representatives of the small entities that potentially would be subject to 

die rule's requirements. 

As discussed in 66 FR 40341, the proposed rule contained a significant number of 

accommodations for small business. These accommodations have been retained in this final 

rule widi one exception. In the proposed rule there were different emission thresholds above 

which an existing facility had to comply with more stringent above-the-floor requirements of 

5-1 
P.81 

95 percent capture and control. This threshold was 250 tpy of HAP emissions for small 

businesses and only 100 tpy for large businesses. In this final rule, we have removed the 

above-the-floor capture and control requirements for existing facilities except for centrifugal 

casting and continuous lamination/casting and we have established a direshold of 100 tpy for 

all facilities. Based on our analysis, setting the direshold at 100 tpy for all facilities, ratiier 

man 100 tpy for large businesses and 250 tpy for small businesses, for these two 

process/product groupings does not result in any additional impacts on small business. 

However, it does simplify the rule. 

As required by section 604 of the RFA, we prepared a final regulatory flexibility 

analysis (FRFA) for the final rule. The analysis includes: 

• a statement of need and objectives of me rule, 

• a description and estimate of die number of small businesses to which me rule 

will apply, ' ' > 

• an economic analysis to determine whether this rule is Ukely to impose a 

significant impact on a substantial number of the small businesses within diis 

industry. The analysis employed is a "sales test," which computes the annuaUzed 

compliance costs as a share of sales for each company. In addition, we provide 

information about die impacts on small businesses after accounting for producer 

responses to the regulation and the resulting changes in market prices and output 

for RPC products. 

• A description of the projected reporting, recordkeeping requirements and odier 

federal rules that may apply to affected entities, and 

• A summary of significant issues raised by me SBAR panel, me Agency's 

responses, and changes made to minimize the impacts of the final rule. 

5.1 Statement of Need and Objectives of the Rule 

Section 112 of die CAA requires die Agency to list categories and subcategories of 

major sources and, in some cases, area sources of HAP and to tiien 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 diose that have die 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 diis source 

category include styrene, metiiyl methacrylate, and methylene chloride. These HAP have 

5-2 
P.82 

been demonstrated to cause adverse healdi effects. Therefore, die proposed rule protects air 

quality and promotes public health by reducing the current emission levels of these HAP. 

The objective of tius proposed rule 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) of the CAA. 

5.2 Identifying Small Businesses 

As described in Section 2 of this report, the Agency identified a substantial number of 

small businesses potentially affected by die proposed NESHAP. Based on SBA definitions, 

279 companies are classified as small, or 78 percent of die total. These companies own 305 

facilities, or 70 percent, of all RPC facilities1 in 1997. 

S3 Screening-Level Analysis 

For me purposes of assessing die potential impact of this rule on these small 

businesses, the Agency considered die recommended alternative, die MACT floor, and an 

above-die-MACT-floor alternative and calculated die share of annual compliance cost 

relative to baseline sales for each company. When a company owns more man one affected 

facility, the costs for each facility it owns are summed to develop die numerator of die test 

ratio. For diis screening-level analysis, annual compliance costs were defined as die 

engineering control costs imposed on diese companies; dius, diey do not reflect die changes 

in production expected to occur in response to imposing these costs and die resulting market 

adjustments. The results of dus initial screening analysis are discussed below. 

5.3.1 Recommended Alternative 

As shown in Table 5-1, the aggregate compliance costs of die recommended 

alternative for small businesses total $11.4 million, or 53 percent ofthe total industry costs of 

$21.5 million. The average total annual compliance cost was projected at roughly $40,000 

per small company as compared to die average of 130,000 per large company. The annual 

compliance costs for small businesses range from 0.01 to 9.60 percent of sales. The average 

(median) compliance cost-to-sales ratio (CSR) is 0.83 (0.47) percent for the identified small 

1

 One facility owned by a small firm has closed since 1997. This firm has been excluded from the sales test 

analysis. 

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) 

279 

$11.4 

$0.04 

78 

$10.1 

$0.13 

357 

$21.5 

$0.06 

Number Share Number Share Number Share 

Companies with Sales Data" 276 

Compliance costs are <1 % of sales 208 

Compliance costs are * 1 to 3% of sales 53 

Compliance costs are *3% of sales 14 

76% 

19% 

5% 

78 

75 

1 

0 

100% 

96% 

1% 

354 

283 

54 

14 

100% 

80% 

15% 

4% 

Compliance Cost-to-Sales Ratios 

Average 

Median 

Maximum 

Minimum 

0.83% 

0.47% 

9.60% 

0.01% 

0.05% 

0.01% 

1.59% 

<0.01% 

0.66% 

0.31% 

9.60% 

<0.01% 

* Annual sales data were unavailable for three ultimate parent companies. CSRs cannot be computed for these companies. Three of these firms 

have also closed since 1997. All six firms have been excluded from this sales test analysis. 

Note: Assumes no market responses (i.e., price and output adjustments) by regulated entities. 
P.84 

businesses with sales data and 0.05 (<0.01) percent for die large businesses with sales data. 

As shown, 53 small companies (19 percent) are affected at the 1 percent to 3 percent level 

and 14 (5 percent) companies are affected at or above die 3 percent level. Thus, a total of 67 

small compames, or 24 percent, are expected to incur costs greater than 1 percent of their 

sales. Furthermore, die distribution of die CSRs, as shown in Figures 5-1(a) and (b), 

demonstrate diat small companies are disproportionally affected relative to large companies. 

5.3.2 MACT Floor Alternative 

As shown in Table 5-2, the aggregate compliance costs of die MACT floor alternative 

for small businesses total $11.4 million, which is (55 percent) of die total industry costs of 

$20.8 million. The annual compliance costs for small businesses range from 0.01 td 9.6 

percent of sales. The average (median) compliance CSR is 0.83 (6.47) percent for the 

identified small businesses widi sales data and 0.05 (<0.01) percent for die large businesses 

widi sales data. As shown, 53 small companies (19 percent) are affected at the 1 percent to 3 

percent level and 14 companies (5 percent) are affected at or above the 3 percent level. A 

total of 67 small companies, or 24 percent, are affected above die 1 percent test ratio. As 

shown in Figures 5-2(a) and (b), the relative impacts between small and large companies are 

similar to the recommended alternative. ' 

5.3.3 Above-the-MACT Floor Alternative 

As shown in Table 5-3, die aggregate compliance costs of the above-die-MACT floor 

alternative for small businesses total $135.8 million, or 63 percent of the total industry costs 

of $216.8 million. The annual compliance costs for small businesses range from 0.01 tp 

79.18 percent of sales. The average (median) compliance CSR is 12.03 (8.73) percent for die 

identified small businesses with sales data and 0.58 (0.07) percent for the large businesses 

widi sales data. As shown, 34 small companies (12 percent) are affected at the 1 percent to 3 

percent level and 216 companies (78 percent) are affected at or above die 3 percent level. , 

Thus, a total of 250 small companies incur costs greater man 1 percent of dieir sales, which 

is four times the number affected under the recommended alternative. Figures 5-3 (a) and (b) 

show that die disproportionate relative impact between small and large companies is even 

more pronounced tiian under die recommended alternative. 

5-5 
P.85 

100% 

>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). Distribution of Cost-to-Sales Ratios for Small Companies: 

Recommended Alternative 

>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 

5-6 
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) 

279 

$11.4 

$0.04 

78 

$9.4 

$0.12 

357 

$20.8 

$0.06 

Number Share Number Share Number Share 

Companies with Sales Data8 

Compliance costs are <1% of sales 

Compliance costs are z 1 to 3% of sales 

Compliance costs are z 3% of sales 

276 

208 

53 

14 

100% 

75% 

19% 

5% 

78 

75 

1 

0 

100% 

96% 

1% 

0% 

354 

283 

54 

14 

100% 

80% 

15% 

4% 

<-^ 

Compliance Cost-to-Sales Ratios 

Average 

Median 

Maximum 

Minimum 

0.83% 

0.47% 

9.60% 

0.01% 

0.05% 

0.01% 

1.59% 

<0.01% 

0.66% 

0.31% 

9.60% 

<0.01% 

" Annual sales data were unavailable for three ultimate parent companies. CSRs cannot be computed for these companies. Three of these firms 

have also closed since 1997. All six firms have been excluded from this sales test analysis. 

Note: Assumes no market responses (i.e., price and output adjustments) by regulated entities. 
P.87 

>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 

>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 

5-8 
Table 5-3. Summary Statistics for SBREFA Screening Analysis: Above-the-MACT-Floor Alternative 

Small Large All Companies 

Total Number of Companies 

Total Annual Compliance Costs (TACC) ($106) 

Average TACC per company ($106) 

279 

$135.8 

$0.5 

78 

$81.0 

$1.0 

357 

$216.8 

$0.6 

i 

VO 

Number Share Number Share Number Share 

Companies with Sales Data8 276 100% 78 100% 354 100% 

Compliance costs are <1% of sales 25 9% 68 87% 93 26% 

Compliance costs are ;>1 to 3% of sales 34 12% 4 5% 38 11% 

Compliance costs are *3% of sales 216 78% 4 5% 220 . 62% 

Compliance Cost-to-Sales Ratios 

Average 

Median 

Maximum 

Minimum 

12.03% 

8.73% 

79.18% 

0.01% 

0.58% 

0.07% 

15.57% 

<0.01% 

9.55% 

5.45% 

79.18% 

<0.01% 

8

 Annual sales data were unavailable for three ultimate parent companies. CSRs cannot be computed for these companies. Three of these firms 

have also closed since 1997. All six firms have been excluded from this sales test analysis. 

Note: Assumes no market responses (i.e., price and output adjustments) by regulated entities. 
P.89 

100% 

90% 

80% 

^ 70% 

60% 

•equency 

UL 

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

>0-0.5% >0.5-1% >1-3% >3-5% >5-7% >7-10% >10-15% >15-20% 

Cost-to-Sales Ratios Range 

>20% 

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

5-10 
P.90 

5.4 Economic Analysis 

The Agency also analyzed die economic impacts on small businesses under witiiregulation conditions expected to result from implementing the proposed NESHAP. Unlike 

die screening-level analysis described above, diis approach examines small business impacts 

in light of the expected behavioral responses of producers and consumers to the regulation. 

As shown in Table 5-4, net operating profits increase by $4 million. This is a result of two 

effects: 111 small facilities with lower per unit costs experience increase in profits ($10 

milUon) due to price increases. The remaining 190 facilities experience profit losses of $6 

million. Eighty-nine product lines and 36 facilities are projected to close under the MACT 

floor alternative and die recommended alternative, while 315 product lines and 179ifacilities 

are projected to close under die above-tiie-MACT-floor alternative. 

5.5 Assessment 

Although any facility closures are cause for concern, the number of facilities at risk 

for closure would be die same if this proposed rule required only the MACT floor level of 

control for all facilities. The MACT floor is die least stringent level allowed by statute. As a 

result of the SBAR panel, diis rule contains a significant number of accommodations for 

small business. The results presented here confirm mat the mitigating measures employed 

by die Agency have minimized the potential negative impacts of the proposed rule on small 

businesses while still satisfying the objectives of the CAA. The share of small companies 

affected at less than 1 percent exceeds 75 percent under both the recommended alternative 

and die MACT floor alternative. Furthermore, only 5 percent of small companies are 

projected to be affected at or above the 3 percent level for bodi die recommended and MACT 

floor alternative, while 78 percent of die small companies exceed diis level under die abovethe-MACT-floor alternative. 

The economic analysis, which includes market responses to the regulation, provides 

die following results: 36 facihties (12 percent) owned by small businesses are projected to 

close under die recommended alternative and die MACT floor alternative. The number of 

facihties increases to 179 (60 percent) under the more stringent above-the-floor MACT 

alternative. These results are consistent with the industry's profitabiUty 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 die production of RPC. In addition, analysis of die engineering costs 

5-11 
Table 5-4. Summary of SmaU Business Impacts of Reinforced Plastic Composites NESHAP 

U\ 

to 

Thermoset Producers 

(Directly Affected) 

Revenues ($106/yr) 

Costs ($106/yr) 

Compliance 

Production 

Operating Profit ($106/yr) 

Operating Entities 

Product Lines 

Facilities 

Employment 

Baseline 

$1,970 

$1,883 

$0 

$1,883 

$86 

466 

301' 

18,420 

MACT Floor 

Alternative 

Absolute 

Change 

-$21 

-$25 

$8.1 

-$33 

-$4 

-89 

-36 

-1,297 

Relative 

Change 

-1.07% 

-1.33% 

NA 

-1.76% 

4.62% 

19.10% 

-11.96% 

-7.04% 

Recommended 

Alternative 

Absolute 

Change 

-$21 

-$25 

$8.1 

-$33 

-$4 

-

-89 

-36 

-1,297 

Relative 

Change 

-1.07% 

-1.33% 

NA 

-1.76% 

4.62% 

19.10% 

-11.96% 

-7.04% 

Above-the-MACT- Floor 

Alternative 

Absolute 

Change 

-$146 

-$207 

$49.4 

-$256 

-$61 

-315 

-179 

-5,975 

Relative 

Change 

-7.39% 

-10.96% 

NA 

-13.59% 

70.59% 

67.60% 

-59.47% 

-32.44% 

Note: These estimates incorporate the expected market (i.e., price and output) adjustments of the regulated entities. 

'Four of the 305 facihties owned by small companies are excluded from the market analysis. They are either treated as captive producers because 

they perform only intermediate operations such as compounding or they have insufficient data to include in the market model.. 
P.92 

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 

die regulation experience profit gains (e.g., $18.0 million gain under the recommended 

alternative). This occurs because the prices of die commodities they produce will increase, 

but diey do not incur compliance costs. Given the distribution of small and large entities 

identified in the regulated segment, it is likely that a significant number of tiiese producers 

may be small. Thus, a complete analysis of the small business impacts of the proposed rule 

would compute a net effect using the projected impacts on bodi directly (diermoset) and 

indirectly affected (tiiermoplastic) producers. Data limitations on the distribution of small 

businesses across the indirectiy affected segment do not allow for quantitative estimates of 

net impacts. However, the qualitative analysis does suggest that small businesses using 

resins not directiy affected by die rule will experience offsetting gains under with-regulation 

conditions. , • • 

We do not anticipate any impacts of die proposed NESHAP on small governments or 

small nonprofit organizations. We have no evidence diat eidier small governments or 

nonprofit organizations own or operate sources that will be impacted by diis proposed 

NESHAP. 

5.6 Projected Reporting and Recordkeeping Requirements 

The proposed reporting and recordkeeping requirements for tiiese small businesses 

include initial notifications, startup notifications and compliance reports. These 

requirements were discussed in more detail under the discussion of die Paperwork Reduction 

Act above. We estimate that 304 existing facilities owned by small businesses will be 

impacted by these requirements, and 53 new facilities will be impacted in die first three 

years. The professional skills required to complete these reports include die ability to 

calculate emissions and resin use and read and follow report format guidance. All facilities 

impacted by this final rule should have personnel with the necessary skills because they 

would need these skills to comply with odier regulatory requirements, such as Toxic Release 

Inventory (TRI) reporting. 

5-13 
P.93 

Provisions to minimize the reporting and recordkeeping requirements on small 

business have been incorporated into this final rule. These provisions include allowing: die 

facility to substantiate resin and gel coat HAP contents widi 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 

of resin use and calculate emission factor averages. These provisions have also been 

extended to all companies subject to today's proposed NESHAP. 

5.7 Other Federal Rules That May Impact Reinforced Plastic Composite Production 

Facilities 

i i 

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 of this proposed rule and 

the Plastic Parts and Products NESHAP being developed because these NESHAP will cover 

different operations. Facilities subject to this final rule are also subject to emissions estimate 

reporting under die TRI requirements. In this final rule, we could determine no ways to 

combine TRI and the reporting requirements of the proposed NESHAP because die 

objectives and statutory autiiorities of these requirements are different. 

5.8 Alternatives to the Proposed Rule 

We have incorporated significant alternatives into die proposed rule to minimize the 

impact on small business but still meet the objectives of the CAA. 

As required by section 609(b) of die RFA, EPA conducted outreach to small entities 

and convened a SBAR panel to review advice and recommendations from representatives of 

the small entities tiiat potentially would be subject to the proposed rule requirements. 

Consistent with RFA/SBREFA requirements, the panel evaluated die assembled 

materials and small-entity comments on issues related to the elements of the IRFA. A copy 

of the panel report is included in the docket as item H-J-27. 

The panel considered numerous regulatory flexibility options in response to concerns 

raised by die 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 of the MACT 

floors, and the regulatory treatment of speciality products. 

5-14 
P.94 

These are the major panel recommendations arid EPA's response in the final rule: 

• Recommend setting higher thresholds than EPA had initially considered for 

requirements to use add-on controls. 

Response: EPA has removed the requirements for add-on controls for existing 

open molding, pultrusion, SMC and BMC manufacturing, and mixing operations. 

We are retaining the requirement for centrifugal casting and continuous 

lamination/casting operations and setting a threshold of 100 tpy for all facilities. 

Setting a common threshold at 100 tpy does not increase die impacts on any small 

business. Also, the original reason for setting different thresholds were die 

impacts of the capital cost of add-on controls for open molding, pultrusion, SMC 

and BMC manufacturing, and mixing. Because existing facilities that have diese 

operations are no longer subject to any add-on control requirements at any 

threshold, the original reason for the different thresholds no longer exists. 

• Recommend setting the new source floor for small-owned sources at the level of 

the existing source floor. 

Response: The final rule includes this provision. 

• Recommend establishing separate floors for speciality products. . 

Response: The final rule includes provisions for special products. 

• Explore pollution-prevention alternatives to add-on controls. 

-Response: The EPA did explore this possibility widi industry sources. We could 

not devise a workable pollution-prevention alternative to include in the proposed 

rule and requested comment. The only comments received on a pollutionprevention alternative were for the pultrusion process/product grouping. In this 

final rule, we have incorporated a new pollution-prevention technology , 

recommended in the comments as a compliance alternative for pultrusion 

operations. 

• Recommend allowing individual facilities to use the same resin in all resin 

application processes. 

Response: The final rule includes this provision. 

• Reconsider the resin HAP content requirement for tooling resins. 

Response: We requested additional information on tooling resins subsequent to 

proposal. Based on information we received, die floor for manual application of 

tooling resins was made less stringent. The available data still indicate that the 

floor for mechanical tooling resins in the proposed rule was appropriate. 

5-15 
P.95 

• Recommend separate floors for white and non-white gel coats. 

Response: The final rule includes this provision. 

• Reconsider the Agency's estimates of the cost of add-on controls. 

Response: We conducted a thorough review of the, Agency's costs for add-on 

controls and made significant revisions to the cost estimates. As a result, the addon control requirements have been removed for existing open molding, 

pultrusion, SMC and BMC manufacturing and mixing operations. 

, ' i 

• Recommend grouping high-strength applications with corrosion-resistant 

operations. 

Response: The final rule includes diis provision. 

Detailed information on all these recommendations is contained in the panel report in the 

docket for this proposed rule. 

5-16 
P.96 

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Composite Fabricators Association (CFA). 2000. "Industry Composites Demand fpr 

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 

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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 

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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. 

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

Application February. 

R-l 
P.97 

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 of the Plastics Industry, Inc. (SPI). 1994. Facts and Figures ofthe U.S. Plastics 

Industry. Washington, DC: SPI. 

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Industry. Washington, DC: SPI. 

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Composites. Second Edition. Washington, DC: Society of the Plastics Industry, Inc. 

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

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R-2 
P.98 

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R-3 
P.99 

Appendix A 

Summary Data for Companies Owning Reinforced 

Plastic Composite Facilities 
P.1 

Table A-1. Summary Data for Companies Reinforced Plastic Composite Facilities 

Company Name 

20th Century Fiberglass Inc. 

A. R. E., Inc. 

A.F.P. Imaging 

i 

A.O. Smith Corporation 

A-1 Fiberglass Inc. 

ABC Industries, Inc.. 

Able Body Corporation 

Accent Maible 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 

(#) 

1 

2 

1 

2 

1 

3 

2 

1 

1 

1 

1 

1 

1 

1 

1 

3 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

2 

1 

Sales 

($106) 

$95.0 

$19.1 

$37.0 

$1,645.7 

$5.1 

$8.0 

$35.0 

$5.0 

$1.9 

$3.0 

$2.5 

$3.1 

$5.8 

$65.0 

$2,317.5 

$36.0 

$225.0 

$369.5 

$1.2 

$17.7 

$250.0 

$3.5 

$2.9 

$0.9 

$1.2 

$1.7 

$5,805.0 

$10.0 

$533.5 

Employment 

800 

175 

190 

13,000 

1 

50 

75 

475 

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 

Yes 

No 

No 

Yes 

No 

No 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

No 

(continued) 

A-1 
P.2 

Table A-1. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Facilities Sales 

Company Name (#) 

Amsted Industries 1 

An-Cor Indl. Plastics Inc. 1 

Appalachian Plastics Inc. 1 

Applied Composites, Corporation 1 

Aqua Bath 1 

Aqua-Air Manufacturers, Inc. 1 

Arjo Holding Company 1 

Armorcast Prods. Company 1 

Arrow Dynamics, Inc. 

Arrowhead Plastic Eng. Inc. 

Ashworth Bros. Inc. ] 

Athena Marble Inc. 1 

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. 

Bowie Mfg. Inc. 

Bradley Specialty Corporation 

($10') 

$1,200.0 

$7.5 

$2.5 

$10.0 

$15.0 

$0.5 

$16.0 

$2.8 

$18.0 

$10.0 

$64.3 

$2.0 

, $8.0 

I $4.9 

$5,390.6 

I $79.0 

I $4.5 

I $48.6 

I $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 

1 $3.9 

1 $1.1 

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 

44 

18 

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 

Yes 

Yes 

(continued) 

A-2 
P.3 

Table A-1. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Facilit 

Company Name , (#) 

Bremen Glas Inc. 2 

Bristol Fiberlight Industries 1 

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 

Covermaster Inc. 

CR/LP Limited Partnership 

Crane Corporation 

ies Sales 

($10') 

$16.0 

$16.0 

$1.0 

$15.0 

$1.5 

$346.0 

I $9,560.0 

1 $1.7 

I . • . $5.2 

1 $0.8 

1 $17.0 

3 $38.0 

1 $0.5 

1 $1.7 

1 $50.0 

1 $5.1 

1 $63.0 

1 NA 

1 $91,384.0 

1 $3.0 

1 $20.9 

1 $12.0 

1 $12.3 

1 $6.1 

1 $10.9 

1 $52.5 

1 $2.8 

4 $86.0 

4 $1,847.7 

Employment 

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 

26 

1,182 

10,000 

SmaU 

Business 

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 

Yes 

No 

No 

(continued) 

A-3 
P.4 

Table A-1. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Facilities Sales 

Company Name (#) 

Creative Pultrusions, Inc. 2 

Cultured Marble Products Ltd. 1 

Custom Fibreglass Mfg. Company 1 

Custom Fiberglass Moldings, Inc. 1 

Custom Marble Inc. ] 

Cytec Industries ] 

Dasco Pro, Inc. 1 

Delta Fiberglass & Environmental Products ] 

Delta Fiberglass Structures 1 

Denali Inc. 2 

Diamond Coach Corporation 1 

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 

Emsig Mfg. Corporation 

Enuro Fiberglass Systems, Inc. 

Epoch Industries 

Escalade Inc. 

($10') 

$1.8 

$1.0 

$18.0 

$0.8 

$1.0 

$1,290.6 

$7.9 

$715 

' $9.3 

$71.1 

$10.0 

$12.0 

$27.0 

$6.4 

I $20,018.0 

I $500.0 

1 $1.8 

3 $848.5 

1 $16.0 

1 $12.0 

1 $5.6 

1 $2.7 

2 $397.4 

1 $1.2 

1 $25.0 

3 $35.0 

1 $6.4 

1 $93.2 

Employment 

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 

300 

1,500 

50 

700 

Small 

Business 

' Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes ' 

1

 No 

No 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

No 

Yes 

No 

(continued) 

A-4 
P.5 

Table A-1. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Facilities Sales 

Company Name (•#) 

Essef Corporation 1 

Esterline Technologiies Corporation 1 

E-T-M Ents. Inc. 1 

Evans Industries 1 

Evelands Inc. 1 

Faball USA, Lie 1 

Falcon Building Products 1 

Fedders Corporation 1 

FG Products, Inc. 1 

Fiber Pad, Inc. 1 

Fiber Pro 

Fibercast Company ] 

Fiberdome Inc. 

Fiberflex Inc. 1 

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 

Fibre Body Industries, Inc. 

Fibrenetics Inc. 

Fibrex Corporation 

Fleetwood Enterprises, Inc. 

Florida Line of Astatula Inc. 

For Better Living, Inc. 

($10«) 

$306.1 

$391.0 

$24.0 

i $42.0 

$2.4 

$7.3 

$633.2 

$314.1 

$7.0 

$2.9 

$2.0 

$22.7 

$3.2 

$6.2 

I $1.0 

I $42.0 

1 $1.5 

1 $5.1 

1 $0.7 

1 $2.8 

1 $4.6 

1 $5.0 

1 $20.0 

1 $12.7 

1 $1.0 

1 $30.0 

2 $2,874.4 

1 $1.9 

1 $81.5 

, 

Employment 

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 

120 

14 

250 

18,000 

24 

522 

SmaU 

Business 

No 

No 

Yes 

Yes 

Yes 

,. Yes 

No 

No 

Yes 

Yes 

Yes 

Yes 

Yes , 

, Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

No 

(continued) 

A-5 
P.6 

Table A-1. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Facilities Sales 

Company Name (#) 

Foremast Interiors Inc. 1 

Formica Corporation 1 

Fowler Mfg. Inc. 1 

G. W. Fiberglass Inc. 1 

Gencorp Inc. 2 

General Electric Company 1 

General Motors Corporation 1 

Gesmar Corporation 1 

GHMInc. 1 

Gibbon Fiberglass 1 

Glas Master Inc. 2 

Glasforms Inc. 2 

Glasgo Plastics Inc. 1 

Global Glass Inc. 1 

Goodyear Tire & Rubber Company 1 

Gorman-Rupp Company 1 

Gould Inc. 1 

GPI Corporation ] 

Gpm Industries, Inc. 

Grayson Tool Company 

Gruber Sys. Inc. 

H& Rind. Inc. 

Harsco Corporation 

Hartzell Fan Inc. 

Hasbrouck Plastics Inc. 

Hella North America Ltd 

Hemco Corporation 

Henderson, Black and Green, Inc. 

Heritage Marble of Ohio Inc. 

($10*) 

$1.4, 

$338.0 

$6.1 

, $38.1 

$1,568.0 

$90,840.0 

$164,000.0 

$4.1 

i $ L 0 

$1.2 

$5.5 

$11.0 

$15.0 

$8.2 

$13,155.0 

$150.8 

$157.4 

NA 

$6.3 

$2.5 

1 $20.0 

I $5.7 

1 $1,629.0 

I $38.0 

I $1.3 

1 $68.7 

1 $3.0 

1 $17.5 

1 $2.4 

Employment 

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 

45 

14,200 

250 

10 

550 

30 

NA 

25 

SmaU 

Business 

Yes 

No 

Yes 

Yes 

No 

No 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

No 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

(continued) 

A-6 
P.7 

Table A-1. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Facilities Sales 

Company Name (#) 

Hess Company Ind. Inc. ] 

Hood Manufacturing 1 

Hydro Systems, Inc. 1 

Hy-Tec Fiberglass Inc. 1 

I. M. Pena, Inc. ] 

Images Products Corp 1 

Imco Reinforced Plastics Inc. E 

Industrial Dielectrics Inc. 

Industrial Fiberglass Specialties 

1 

Industrial Linings Inc. 

International Grating Inc. 1 

International Marble And Granite Supply 

International Paper T\ 

North American Filtration Inc. 

Iten Ind. 

Jason Ind. Inc. 

Jason International 

Johnson Truck Bodies 

Jones Plastic And Engineering Corporation 

K2Inc. 

Keller Products, Inc. 

Kerrico Corporation 

Kivett's Inc. 

Kobe Steel Ltd. 

Kohler Company 

Kreider Mfg. Inc. 

Krueger International Inc. 

($10«) 

$18.4 

$2.5 

$8.0 

$1.0 

$1.4 

$5.7 

$4.6 

, $50.0 

$7.0 

$1.7 

$4.5 

$8.0 

> $20,143.0 

1 $3.0 

I $27.2 

I $9.0 

1 $5.7 

1 $31.0 

1 $98.6 

1 $302.7 

1 $37.0 

1 $2.0 

1 $6.2 

2 $1,533.5 

3 $155.6 

1 $2.6 

1 $345.0 

Employment 

175 

40 

70 

12 

15 

50 

50 

250 

28 

30 

44 

15 

87,000 

50 

250 

125 

50 

270 

1,310 

4,600 

350 

10 

100 

13,437 

1,800 

40 

3,000 

Small 

Business 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

No 

Yes 

Yes 

Yes 

No 

No 

Yes 

No 

(continued) 

A-7 
P.8 

Table A-1. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Facilities Sales 

Company Name (#) 

Laminated Products, Inc. 1 

Larson Company 1 

GLNV Holdings 1 

Lawrence Wittman & Company, Inc. ] 

Leer Inc. 2 

Lehigh Cultured Marble Inc. 1 

Leucadia National Corporation 3 

Liberty Polyglas Inc. ] 

Lippert Corporation 

Ll Cultured Marble 1 

Louisville Tile Distributors 1 

Lund International Holding Inc. 

M. C. Gill Corporation 

Mac Molding Company Inc. 

Magnum Moldings 

Marbelite Corporation 

Marble Creations 

Marble Designs Inc. 

Marble Works 

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. 

($10') 

$12.2 

NA 

$21.9 

$6.4 

$70.0 

$5.2 

$5,193.9 

$5.0 

$8.0 

$2.6 

$12.0 

$46.4 

I $39.0 

$4.3 

I $0.5 

I $3.4 

I $2.0 

I $1.3 

1 $1.0 

1 $2.1 

1 $6,100.0 

3 $2,927.0 

1 $13.5 

1 $1.0 

1 $1.7 

2 $915.0 

1 $3.0 

1 $13.5 

1 $4.9 

Employment 

150 

NA 

205 

50 

500 

50 

3,919 

50 

100 

30 

150 

267 

195 

75 

9 

40 

35 

19 , 

16 

35 

30,000 

20,500 

98 

11 

17 

5,500 

32 

220 

50 

SmaU 

Business 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

l 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes ', 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

No, 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

(continued) 

A-8 
P.9 

Table A-1. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

FacUities Sales 

Company Name (#) 

Micro-Fab Inc. ] 

Miles Fiberglass & Plastics 1 

Millennium Products Inc. 1 

Mincey Marble Mfg. Inc. ] 

Miracle Recreation Equipment Company 1 

Molded Fiber Glass Company 6 

Monaco Coach Corporation 1 

Monarch Ltd 

Morrison Molded Fiber Glass 2 

Mr. Tubs Inc. 

Murphy Body Company ] 

National Fiber Glass Products 1 

New England Plastic Coated Products 

New York Blower Company (The) 

Newport Laminates 

Niagara Fiberglass Inc. 

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-Coming 

Oxford Cmp, Inc. 

($10') 

$2.0 

$6.0 

$19.1 

' $4.8 

$50.0 

$60.0 

$441.9 

$9.0 

1 $100.0 

$9.9 

$24.0 

$9.3 

$7.5 

1 $82.0 

I $2.0 

1 $2.4 

1 $4.7 

2 $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 

Employment 

30 

70 

175 

105 

300 

900 

2,400 

87 

900 

85 

135 

80 

80 

700 

40 

45 

40 

111 

75 

50 

40 

75 

20 

NA 

380 

140 

18,100 

55 

SmaU 

Business 

Yes 

Yes 

Yes, 

Yes 

Yes 

,' No 

No 

Yes 

No 

Yes 

Yes 

Yes 

Yes , 

, Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yds 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

(continued) 

A-9 
P.10 

Table A-1. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

FacUil 

Company Name (#) 

P &J Partnership ] 

Pacific Tank Limited 

Parkson Corporation 

Parthenon Marble Products, Inc. 

Pearl Baths Inc. 1 

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. 

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. 

ties Sales 

($10') 

, $4.5 

$0.9 

$50.0 

$1.7 

$15.0 

$22.0 

I $6.0 

I $5.1 

I $7,000.0 

1 $6.6 

1 $5.5 

1 $22.2 

1. $0.7 

1 $3.7 

1 $1.3 

1 $17.5 

1 $12.7 

1 $2.8 

1 $5.0 

1 $3.3 

1 $37.4 

1 $1.4 

1 $2.0 

2 $124.0 

1 $11.1 

1 $1.3 

1 $50.0 

1 $2.7 

1 $2.5 

Employment 

92 

15 

160 

30 

90 

200 

49 

50 

30,000 

50 

68 

175 

15 

NA 

25 

300 

100 

45 

50 

42 

542 

16 

25 

520 

54 

20 

250 

50 

53 

SmaU 

Business 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

• Yes 

Yes 

(continued) 

A-10 
P.11 

Table A-1. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Facilities Sales 

Company Name (#) 

R V National Holdings 1 

Radiant Marble Company 1 

Raven Industries, Inc. 3 

Red Ewald Inc. 1 

Retterbush Injection Molded 1 

Robroy Industries, Inc. 2 

Rockwell International Corporation 2 

Rocor Transportation Cos. 

Roma Marble Inc. ] 

RPM Inc 1 

Rubber & Plastic Applicators 

Rynone Mfg. Corporation 1 

Ryobi North America 

S. R. Smith, Inc. 

Schmitt Marble Prods. Inc. 

Sem 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. 

($10') 

$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 

I $14.9 

I $2.5 

1 $208,152.0 

1 $1.6 

I $22.0 

I $2.0 

1 $110.9 

1 $200.8 

1 $2.2 

1 $2.5 

1 $89.0 

1 $3.9 

1 $3.0 

2 $1,856.0 

1 $12.0 

1 $4.3 

Employment 

1,387 

50 

1,368 

100 

20 

1,000 

45,000 

650 

27 

6,651 

30 

200 

3,800 

120 

50. 

2,399 

19 

160 

26 

875 

1,400 

35 

12 

875 

53 

65 

16,000 

130 

65 

SmaU 

Business 

No 

Yes 

No, 

Yes 

Yes 

,' No 

No 

No 

Yes 

No 

Yes 

Yes 

No , 

, Yes 

Yes 

No 

Yes 

Yes 

Yes 

NO 

No 

Yes 

Yes 

No 

Yes 

Yes 

No 

Yes 

Yes 

(continued) 

A-ll 
P.12 

Table A-1. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

1 

Company Name 

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 

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 

Faciliti 

(#) 

, 

es Sales 

($10«) 

$1.8 

$2.5 

$3.0 

* $35.0 

$0.7 

$42.0 

$1.8 

$22.0 

, , $2.0 

$150.0 

1 $40,753.4 

$1.0 

$0.7 

) $1,400.0 

$3.8 

I $5.0 

I $2,234.7 

I $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 

Employment 

15 

30 

35 

175 

12 

98 

17 

180 

20 

325 

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 

SmaU 

Business 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

No 

Yes 

Yes 

No 

No 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

(continued) 

A-12 
P.13 

Table A-1. Summary Data for Companies Reinforced Plastic Composite Facilities 

(continued) 

Company Name 

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 

Xenon Company, Inc. 

Xerxes 

Yankee Plastic Company 

Zane's Fiberglass Shop, Inc. 

Zehrco Plastics, Inc. 

Facilities 

(#) 

1 

2 

1 

, 

, 7 

2 

438 

Sales 

($10') 

$6.3 

$7.0 

$6.0 

1

 $253.1 

$20.0 

$46.1 

$2.0 

$0.8 

* • $1.0 

$54.0 

$0.8 

$5.7 

$20.1 

$763,429.6 

Employment 

50 

100 

150 

2,700 

400 

275 

20 

20 

9 

493 

8 

50, 

190 

2,126,586 

SmaU 

Business 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

279 

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 

Compames. 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. 

Infonnation Access Corporation. 1998. Business & Company ProFile [computer file]. Foster City, 

CA: Infonnation Access Corporation. 

Selected Company 10-K Reports. 

A-13 
P.M 

Appendix B 

Economic Model of the Merchant Sector of the 

U.S. Reinforced Plastic Composites Industry 
P.15 

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 of the regulation. 

Specifically, the cost of the 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 of the regulation on 

production costs and the output decisions of merchant facilities.1 The main elements of the 

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 die supply 

from indirectly affected thermosetting and diermoplastic facilities. 

B.l.l 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 

reinforcements) and the primary variable-proportion inputs of labor and energy. Applying 

1

 As noted in Section 4, the impact of the 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-l 
P.16 

Hotelling's lemma to the generalized Leontief profit function produced the following general' 

form of the supply function for each RPC product line: 

* " Y, • | (B.2) 

where p is the market price for the reinforced plastic product, Yj 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 ar»d p < 0. 

1

 i 

Figure B-l 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 

JL 

that corresponds widi a shutdown price equal to ? and an upper bound given by die 

productive capacity of <^f that is approximated by the parameter Yj. The curvature of me 

supply function is determined by me p parameter. 

qf 

Figure B-l. 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, (5), for a particular reinforced 

B-2 
P.17 

plastic product, themarket price of the product (p), and die production-weighted average 

annual production level of existing facilities (q) into the following equation:2 

P ="54q (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 die facility's production 

responsiveness to price changes as does the p parameter. Thus, the parameter Yj was used td 

calibrate the model so mat each existing facility's supply equation is consistent with the 

baseline production data. 

Production decisions at die 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 diese regulatory control costs, which enter 

as a net price change (i.e., Pj - Cj). Thus, with the regulation die supply function for each 

existing facility from Eq. (B.2) above becomes: 

v-*-i 1 

PrS 

(B.4) 

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. 

In evaluating die impacts of the proposed rule, we shift the individual supply curves 

by the variable portion of die compliance costs and men evaluate the closure decision with 

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.18 

die total compliance costs (fixed, or annual capital, costs plus variable costs associated widi • 

new production level). Therefore, our modeling approach addresses die economic viability 

ofthe product-line and evaluates whedier it continues to cover variable costs widi regulation 

as well as the economic viability of the plant and evaluates whedier it continues to cover 

total costs (variable plus fixed) with regulation. 

In order to evaluate die economic viability of the plant, the Agency determined, 

baseline estimates of variable and fixed production costs. As noted above, applying die 

supply function specification to each directly affected producer generates an estimate of 

production, or variable, costs by taking the integral of the area under die curve corresponding 

to dieir 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 Costs, = Sales-, - Variable Costs-, - PfofitSj 

where Profits-, = 4.4% * Sales-,. Given this baseline characterization of each facility, the 

Agency evaluated dieir 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. 

* i 

B.1.2 Thermosetting and Thermoplastic Facilities (q1) (Indirectly Affected) 

Because this industry segment is not direcdy affected by die regulation it was hot 

necessary to model their supply at an individual facility level as was necessary for direcdy 

affected thermosetting facilities. EPA specified a single representative function to express 

the supply of RPCs from indirectiy affected facilities, which allows them to increase dieir 

production in response to higher prices, i.e., 

q

1

 = A1 pf (B.5) 

where q1 is the quantity supplied from indirecdy unaffected facihties, A1 is a positive 

constant, and -S1 is the supply elasticity. Absent literature or econometric estimates, die 

supply elasticity was assumed to have a value of one. The multiplicative supply parameter, 

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.19 

A

1

, is determined for each product by back solving Eq. (B.5) given die 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 tiiermosetting facilities. Therefore, they supply at die same price for 

each end-use market which serves to dampen die ability of the direcdy affected producers to 

increase prices in response to regulation. Although it may be more appropriate to model as 

imperfect substitutes widi cross-price elasticities, the Agency did not have sufficient 

information to provide diose model parameters and chose an option diat 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^ (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 die market price mat all producers (direcdy and indirecdy 

affected) and consumers face, which leads to further responses by producers (direcdy and 

indirecdy affected) as well as consumers and dius new market prices, and so oh. The new ' 

equilibrium after imposing the regulation is die result of a 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, diat is Qs = QD. 

The algorithm for deriving die post-compliance equilibria in all markets can be 

generalized to five recursive steps: 

B-5 
P.20 

1) Impose me 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 die supply functions of all facilities widi the new prices, resulting in a 

new market supply of each product. Evaluate market demand at die 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 of the 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 die net benefits of consumers and 

producers based on the price changes and changes in die total benefits and costs of these, 

products based on die quantity changes. This analysis focuses on the first measure—the 

changes in die net benefits of consumers and producers. Figure B-2 depicts die change in 

economic welfare by first measuring the change in consumer surplus and dien 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 die change in economic welfare with die 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 die maximum price consumers are willing to pay for a good and die price diey 

actually pay is referred to as "consumer surplus." Consumer surplus is measured as die area 

under die demand curve and above die price of the product. Similarly, the difference 

between the minimum price producers are willing to accept for a good and die price diey 

actually receive is referred to as "producer surplus" or profits. Producer surplus is measured 

as the area above the supply curve and below die price of 

B-6 
P.21 

$/Q 

Pn 

Pi 

S" 

^ \ ^ \A yS 

^"V^ ^r . ^r 

Js^ jy\^^m ' 

^^y^ ^ i i ^^ D 

CL, Q, QA 

(a) Change in Consumer Surplus with Regulation 

$/Q 

Q, Q, Q/t 

(b) Change in Producer Surplus with Regulation 

$/Q 

Pn 

Pi 

S' 

\ v / sS 

^^•^^ ^ I I ^^ D 

Qj Q, QA 

(c) Net Change in Economic Welfare with Regulation 

Figure B-2. Economic Welfare Changes with Regulation: Consumer and Producer 

Surplus 

B-7 
P.22 

die product. These areas can be thought of as consumers' net benefits of consumption and 

producers' net benefits of production, respectively. 

In Figure B-2, baseline equilibrium occurs at die intersection of the demand curve, D, 

and supply curve, S. Price is P, with quantity Q,. The increased cost of production widi die 

regulation will cause the market supply curve to shift upward to S'. The new equilibrium 

price of the 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 of the annual net loss in consumers' benefits with the increased price. The 

rectangular portion represents die loss in consumer surplus on the quantity still consumed,, 

Qj, while the triangular area represents the foregone surplus resulting from the reduced 

quantity consumed, Q1-Q2. 

In addition to die changes in consumer welfare, producer welfare also changes widi 

die regulation. With die increase in market price, producers receive higher revenues on die 

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 die area under die supply curve up to the original 

market price, area C, measures the loss in producer surplus, which includes die 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 widi the regulation as area 

D. However, this analysis does not include die benefits that occur outside die market (i.e., 

die value of the reduced levels of air pollution with die regulation). Including diis benefit 

may reduce die net cost of die regulation or even make it positive. 

B-8 
P.23 

TECHNICAL REPORT DATA 

(Please read Instructions on reverse before completing) 

1. REPORT NO. 

EPA-452/R-02-007 

3. RECIPIENTS ACCESSION NO. 

4. TITLE AND SUBTITLE 

Economic Impact Analysis of Final Reinforced Plastics NESHAP 

5. REPORT DATE 

August 2002 

6. PERFORMING ORGANIZATION CODE 

7. AUTHOR(S) 

Brooks M. Depro, Mark C. Buckley, and Tayler H. Bingham RTI 

International 

8. PERFORMING ORGANIZATION REPORT NO. 

RTI Project Number 7647.003.271 

9. PERFORMING ORGANIZATION NAME AND ADDRESS 

Research Triangle Institute (RTI) 

Center for Economics Research, Hobbs Bldg. 

Research Triangle Park, NC 27709 

10. PROGRAM ELEMENT NO. 

11. CONTRACT/GRANT NO., 

68-D-99-024 

12. SPONSORING AGENCY NAME AND ADDRESS 

Tom. Curran, Director 

Office of Air Quality Planning and Standards 

Office of Air and Radiation 

U.S. Environmental Protection Agency 

Research Triangle Park, NC 27711 

13. TYPE OF REPORT AND PERIOD COVERED 

Final 

14. SPONSORING AGENCY CQDE 

EPA/200/04 

15. SUPPLEMENTARY NOTES 

16. ABSTRACT 

This report evaluates the economic impacts of the final NESHAP for reinforced plastics manufacturing. The 

industry impacts and social costs ofthe rule are estimated by incorporating the expected costs of compliance 

to a partial equilibrium model of the U.S. industry and projecting the market impacts for the various end-use 

markets. The report also provides the final regulatory flexibility analysis (FRFA) that evaluates small 

business impacts. 

17. KEY WORDS AND DOCUMENT ANALYSIS 

DESCRIPTORS b. IDENTIFIERS/OPEN ENDED TERMS c. COSAT1 Field/Group 

economic impacts 

small business impacts 

social costs 

Air Pollution control 

Economic Impact Analysis 

Regulatory Flexibility Analysis 

18. DISTRIBUTION STATEMENT 

Release Unlimited 

19. SECURITY CLASS (Report) 

Unclassified 

21. NO. OF PAGES 

20. SECURITY CLASS (Page) 

Unclassified 

22. PRICE 

EPA Form 2220-1 (Rev. 4-77) PREVIOUS EDITION IS OBSOLETE 
CM 

United States 

Environmental Protection 

Agency 

Office of Air Quality Planning and Standards 

Air Quality Strategies and Standards Division 

Research Triangle Park, NC 

Publication No. EPA 452/R-02-007 

August 2002